Maltacom presents costings to regulator

Maltacom recently submitted to the Malta Communications Authority, the telecommunications regulator, a breakdown of the costs for the provision of fixed telephony. Was this exercise a form of camouflage by Maltacom for an eventual request to raise the rate for fixed telephony services? George Cini talked to Stephen Muscat, Maltacom's group chief executive officer about this and about the introduction of the controversial phonemail service.

Can Maltacom's submission of the costs breakdown to the Malta Communications Authority be considered as a claim to increase fixed telephony rates?

We have not made any call for an increase in the rates at this point in time. What we have passed on to the MCA is a breakdown of the costs Maltacom incurs to provide a fixed line telephone service.

This sounds very much as though you are pitching for an increase in the telephone rate.

We have presented the results of this exercise to the regulator who will now evaluate the details we presented to him. He can come back to us and query any detail and check whether our costs were calculated correctly before he takes certain decisions.

But it is premature to say that there will be an increase or reduction in fixed telephony rates. The law says that where a telecommunications provider is in a dominant position, which is the case with Maltacom and fixed telephony, the rates charged have to be cost-based.

Even mobile telephone operators have to go to the regulator in order to raise or lower their rates.

Would higher costs not mean that Maltacom is lobbying for a rise in the rates?

No, what we have done is an exercise in costing. We were obliged to carry out such an exercise because, as from January, 2003, the market will be liberalised. This means other operators will be able to tap the market.

If, let's say, an operator comes into the market and plans to offer fixed telephony services to residents in Rabat, that operator would need to know how much it would cost to offer such a service so he would know how much to charge.

Do the costings presented to the regulator indicate that Maltacom is not making profit from fixed telephony services?

The costing exercise split up the infrastructure costs in detail. In this type of exercise which will include a revision of rates, the regulator can ask for a period of consultation for those interested in such a revision, which includes operators as well as subscribers.

Don't you think it is highly unlikely that a new operator will enter the fixed line sector when one takes into consideration Maltacom's dominant position?

One has to bear in mind that new operators may not enter the market immediately on January 1, but they may do so at any time after that date.

What made Maltacom decide to introduce the mail box service? Why was there such a negative reaction to this service?

In 1998, Maltacom was given a licence to provide value added services to fixed line telephony. One of these services was the concept of the mailbox. Since 1998, Maltacom was offering a mailbox facility on an experimental basis. By 2000, the mailbox was made available to about 20,000 customers out of 200,000.

From this experimental stage, we realised that many customers - those who had a mailbox as well as those who phoned in - were making regular use of it. This encouraged us to offer the service on a national scale.

We carried out telephone surveys asking people whether they wanted the service. Last year we were going to upgrade our switching system and this included the option to have the mailbox facility for all 200,000 customers. Meanwhile, the caller line identification system had shown Maltacom that many customers wanted to know who had called them.

The heavy demand for caller line identification was such that Maltacom felt that the phone mail service would be welcomed by most customers. There was a negative reaction for various reasons, but more customers retained the mailbox service than we expected.

Maltacom has 160,000 customers who have the mailbox activated. But 20,000 customers using PABX who have a telephone hunting system do not need a mailbox and the facility for PABX customers was deactivated.

We are also finding that the majority of messages deposited in mail boxes are retrieved by those who get them.

Phonemail was one of the services whereby Maltacom could retain a high level of service on fixed telephony in the face of rising competition from mobile telephony.

The two mobile phone companies have about 250,000 customers. The majority of mobile phones have a mailbox facility which led Maltacom to confirm its initiative to offer the mailbox facility on fixed telephone lines. The stage has now been reached where Maltacom, Go Mobile and Vodafone are competing for traffic. During the World Cup, Maltacom offered a service to customers who wanted to know the kick off times of matches and the company used to get over 600 calls a day.

The adverse reaction against the introduction of the mailbox, however, cannot be denied.

Why was Maltacom investing more in fixed line telephony when there are already more mobile phone users than fixed line customers?

The fixed line telephony infrastructure can be used to relay much more than voice messages. In fact, it is a much more reliable system than mobile telephony for communicating data.

In experiments we carried out, it was possible to transmit four television channels at a time.

Fixed line operators whose set-up is similar to Maltacom's, have to see how they can utilise their infrastructure to generate more income for their company.

Another service is the provision of internet. Businesses need access to data speedily through the computer. Such data could include transmitting information on the stocks a company has at its warehouse or warehouses to a central office or retail outlets. This service is already being provided. The life of underground cables is 25 years.

In Malta, there are cables laid by the British services during the Second World War that are still being used.