KeyTech is taking legal advice over actions by Bermuda’s new telecommunications Regulatory Authority.

The statement, which was filed with the Bermuda Stock Exchange, said KeyTech understands the need for a level playing field but is “concerned by the approach being taken by the Regulator in the Consultation Paper as the Regulator appears to be attempting to regulate beyond the individual carrier level. KeyTech Limited is, accordingly, taking legal advice.”

KeyTech owns BTC, Logic and Cable Co and also has a minority interest in both CellOne and Bermuda CableVision.

Lloyd Fray, CEO of KeyTech Limited, said his company “was surprised and concerned to learn that the Regulatory Authority is proposing to conduct a separate consultation of the KeyTech Group when it received the Consultation: Obligations for Operators with Significant Market Power, given the lack of communication with KeyTech Limited beforehand and the fact that the KeyTech Group is not the only telecommunications group with multiple carrier subsidiaries.

“KeyTech Limited is a non-regulated entity. KeyTech Limited is an investment holding company which, in addition to its wholly owned subsidiaries, owns non-controlling interests with no management control of BDC/CellOne and Bermuda Cablevision.”

Mr Fray said KeyTech “has continued to develop and invest in Bermuda’s telecommunications industry for over 125 years. KeyTech Limited created or purchased separate companies because this was a requirement under the old regulatory regime that made it mandatory that we have a separate license for each company.

“In 2008, KeyTech Limited invested $27 million and built a submarine high-capacity cable system linking the US and Bermuda, which enabled Bermuda to diversify its previous reliance on international cable companies. This cable system has also allowed all Bermuda telecommunications entities to manage the cost of their off-island links.

“Over the last six years, through KeyTech Limited’s three wholly owned subsidiaries KeyTech Limited has made a substantial investment of over $100 million into the Bermuda telecommunications infrastructure.”

Mr Fray added that telecommunications is the backbone of international business and the high-quality infrastructure in this area is one of the key reasons that international companies continue to be attracted to doing business in Bermuda.

He said: “KeyTech Limited’s subsidiaries have always worked to maintain a good relationship with the Regulator and they will continue to work through the consultation process in good faith. Furthermore, we reiterate our understanding that the objective of the new Regulatory Authority is to provide a light touch with a view to regulating to the minimum extent necessary to promote and encourage continued investment in Bermuda’s telecommunications infrastructure.”

For immediate Release

Kent Stewart, chairman of the Regulatory Authority, told the Bermuda Sun: “The RA has not yet made any decision on what the correct course of action might be on any of the significant market players.”

“The RA is open to comments until the 21st June and then we will consider the views that have been shared with us and initiate a new separate consultation on potential solutions to the KeyTech ownership issues that pose potential competitive risks to the industry.  

"The RA is all about harnessing the market’s competitive forces to mutually benefit the industry and the public interest.”

In the RA’s paper “Consultation:  Obligations for Operators with Significant Market Power” it reported that a number of people at public forums, and in submissions to its Market review consultation, were concerned about KeyTech’s “cross-market ownership and the implications for competition.”

The RA said that even though KeyTech does not have the majority of shares in CableVision or CellOne, it understands that the company nominated the majority of the directors on CableVision’s board and that 50 per cent of CellOne’s directors are affliated with KeyTech.

The report said: We note that an equivalency of access obligation applies to three of KeyTech’s affiliates (BTC, BCV and BDC) pursuant to ICOL Condition 11.2(a), and that this includes an obligation not to discriminate in the provision of both services and information. We are concerned that the affiliates of KeyTech have the opportunity to gain access to information about each others’ customers and network operations that unaffiliated third party ICOL holders do not have. We are also concerned that KeyTech affiliates have the opportunity to inappropriately access (and share between themselves) data about their wholesale customers’ customers and networks that will have a discriminatory impact on such wholesale customers and their ability to compete in the market. As a provisional obligation and remedy, we therefore propose to obligate BTC, BCV and BDC to:

 

(a) submit a detailed schematic that maps the organizational, functional and personnel relationships between and among them (including at the Board, Management and staff levels), as well as with the Group level organization and with their other affiliates; and

 

(b) prepare for our approval a draft Code of Conduct establishing explicit internal rules that clearly prohibit, facilitate the detection of, and penalize the preferential, anticompetitive exchange of information about customers, networks or services within each company and as between and among affiliates of the KeyTech

Group.