Price row breaks out between regulator and JT

Wednesday 07 September 2016

JT is being told to substantially reduce its landline prices - and has responded by saying the regulator doesn't understand the local market.

From next January, the telecoms regulator, CICRA, is ordering JT to reduce its charges for using a landline by 6.5% above the annual cost of living, for each of the next two years, with a lower reduction in the year after that. It says that Islanders are paying 13% more for those services than they should be. The instruction covers most landline services, but not residential or business broadband.

The regulator argues that JT controls more than 80% of the market, so it needs to regulate prices, as "...without controls JT could raise prices or maintain them at higher levels than justified without regard to customers or its competitors."

CICRA Chief Executive, Michael Byrne, said: “This concern reduces when there is more effective competition to JT that delivers greater choice for consumers. The control is set on what is called a “price basket” approach - avoiding the more intrusive “bottom-up”, cost-based, product-by-product approach which would have placed an unnecessary regulatory burden on JT. It allows JT a greater degree of flexibility in its pricing across retail fixed line services should effective competition develop further."

However, JT has responded by saying that the regulator doesn't understand the local market, and is not taking into account the heavy discount which JT provides to senior citizens for their landlines - once that is accounted for, JT says its prices compare well with the UK and Guernsey. The company also says it is investing heavily in the local network, so comparisons with Guernsey are not 'like with like.'

Director of Corporate Affairs, Daragh McDermott commented:

“This notice fails to take vital points into account, which is both concerning and frustrating, since we have worked hard to detail the true nature of the landline market in Jersey to CICRA.

"In fact, the Notice specifically (p16) says that in reaching this decision, the regulator is totally disregarding the PrimeTalk tariff, which JT provides to more than 15,000 senior citizens, at a hugely discounted (83%) rate. That group makes up 28% of all customers who rent a landline from JT, and JT invests £1.3m every year to provide the discount - so to deliberately ignore the effect that has on pricing seems perverse.

"Finally, even before an extreme price control like this, JT already loses money on its landline services, a point confirmed in our independently audited accounts (by Deloitte). That is because in today’s market, JT’s main competitor for voice calls is not Sure or Airtel; it is actually the free communications services, such as Skype/Facetime/Whatsapp, enabled by the Internet."

JT says it is now considering its next step; previously disputes between JT and CICRA have gone all the way to the Royal Court to be settled.