Bermuda’s Ministry of the Environment, Telecommunications and ECommerce (METEC) is proposing wide-ranging reform of its telecommunications regulatory framework. METEC’s goals in implementing these reforms are to increase competition in the Bermuda telecommunications marketplace, and to encourage convergence, which will, among other things, benefit consumers by allowing them to purchase all telecommunications services from a single provider.

Earlier this year, METEC issued a consultancy document on its proposed regulatory changes, and it is currently engaged in a rulemaking proceeding to implement them. These changes include: (a) creation of a new independent regulator; (b) restructuring of the licensing system; (c) foreign investment and fees; and (d) regulation of dominant carriers and consumer protections.

New Regulatory Authority

Currently, Bermuda’s telecommunications industry is overseen completely by METEC, which develops, implements, and supervises telecommunications policy and legislation. METEC intends to create a new, independent Regulatory Agency (RA) that will implement and oversee the policies and legislation created by METEC.

The RA will be headed by a three-person commission, which will make all the major decisions required by the RA. The RA’s core responsibilities will include the regulation of licensing, access and interconnection, universal service, domestic spectrum management, retail prices for dominant carriers, numbering, and competition management. The main idea behind the RA is that it will be independent from the political process, and work with transparent powers, objectives, and responsibilities. In order to ensure the agency’s independence, it is proposed that decisions made by the RA should be subject to appeal to the courts. At present, decisions of the current Telecommunications Commission are subject to appeal to the METEC.

Licensing Restructuring

Bermuda’s telecommunications industry is now divided into four licensing categories: (a) Class A licenses for international carriers; (b) Class B licenses for domestic wireline and wireless licensees; (c) Class C licenses for Internet service providers; and (d) cable TV licenses. Licensees are not allowed into each other’s markets, which has stunted technological development and stymied investments in new technologies. METEC proposes that all domestic licensees should be offered a Unified Domestic License (UDL) that will allow a licensee to offer a full service portfolio. METEC anticipates that UDLs will encourage licensees to use technology investments to offer a wide range of services and increase incentives to invest in advanced technologies and services.

Regarding Class A international licensees, METEC proposes that they retain their existing rights and obligations, and that one new international license be available to a firm or consortium that builds a new international cable facilities. METEC and the RA will evaluate bids for this license based on transparent and objective criteria.

Foreign Investment and Fees

Telecommunications providers in Bermuda are now subject to the foreign ownership rule which requires 60% Bermudian ownership and a maximum of 40% foreign ownership. Many providers have obtained exemptions to the 60/40 rule, mainly due to the lack of available funds in Bermuda for investment and expansion, and, if such funds are available, financing in Bermuda is generally more expensive than in international financial markets.

In accordance with the UDL proposal, METEC plans to do away with the 60/40 rules. Specifically, all telecommunications providers will receive a full exemption from the 60/40 rule, in order to create a level playing field for the anticipated new converged services market.

Regarding fees, current regulations provide for them to vary according to license classes. Under the proposed reforms, fees would be standardized and subject to a sliding scale. The sliding scale will be linked: (a) direct foreign investment (e.g., if a company has more than 40% foreign investment, it will pay a higher fee); and (b) employment of Bermudians (e.g., if a carrier employs a high percentage of non-Bermudans, it would pay a higher fee).

Regulation of Dominant Carriers and Consumer Protection

METEC proposes that only telecommunications providers that are deemed to be dominant through analyses by the RA should be subject to direct regulation by the RA. Dominance will be determined though a series of tests, mainly focusing on the market share a provider has in an individual market. If a provider is found to be dominant, it may be subject to direct regulation in areas such as retail price controls and interconnection. 

Under the proposed reforms, all carriers will be required to comply with relevant consumer protection requirements (e.g., customer data protection laws), and provide the RA with information about the market and the quality of service it provides. The RA will issue regular data requests for all providers to complete, and will publish summary data for consumers to help them make informed choices when selecting telecommunications providers.