In the last issue of Arabian Business, Batelco’s CEO questioned the motives and methods of Bahrain’s Telecoms Regulatory Authority. This week Alan Horne, general director of the TRA, answers back on behalf of his agency on consumers, competition and call prices.

Narrow minded? narrow minded? We’ve got a group of people here whose vision is about as open-minded as you can get,” retorts Alan Horne, caught halfway between a gape and a grin, frustrated and amused all in one expression.

“We are working very much on behalf of the consumer, to ensure that they have choice, at the best prices, with the best quality,” he continues, firmly. “Our responsibility is also to ensure that the consumer is protected from malpractice, and to ensure there are no anti-competitive practices in the marketplace.”

Horne is general director of Bahrain’s Telecoms Regulatory Authority (TRA), and the subject of his irritation is a familiar one; a conflagration that has flared frequently ever since the TRA was launched in 2003. The authority has since helped to establish Bahrain as one of the region’s most competitive telecoms markets. A host of WiMAX players jostle with VoIP providers for market share, while the two mobile operators, Batelco and Zain, will be joined by Saudi Telecommunications Co later this year.

However, Batelco argues that the lightning pace of the TRA’s reform programme is impeding innovation and investment in the country’s telecoms market. The authority is misinterpreting market leadership as market dominance, it says, offering undue protection to new entrants at the expense of the incumbent which has spent billions of dollars building an infrastructure network it is now forced to share with direct competitors.

In the last issue of Arabian Business, Batelco Group CEO Peter Kaliaropoulos fired the latest broadside in a battle that has seen the two sides tear strips off each other in the press, and even in court. He criticised the TRA as “unfair, biased and totally narrow-minded”, slammed the authority’s behaviour as “draconian”, and likened the contest to a boxing match in which Batelco was unable to fight back. Horne is less than impressed.

“The TRA is being open-minded, not narrow-minded,” he insists. “The 2030 Vision for Bahrain says that we must have competitive, international best practice, high speed internet access. The TRA is the lead in ensuring Bahrain has that and, as we know, in any business, competition leads to better services and prices for the consumer.

“Batelco is interested in its shareholders and maintaining its market share, whereas we’re interested in the kingdom as a whole,” he adds. “As a regulator we want to make sure the consumers have choice.”

While Horne admits there has been some “tough talking”, he insists that the two parties have largely been able to avoid arbitration or the courts.

“We’ve had several occasions where we’ve threatened fines and one occasion where we’ve actually implemented a fine, where Batelco failed to supply wholesale services to other operators,” he notes. “We imposed a BD400,000 ($1.06m) fine, but very rapidly they rectified their breach, and so we reduced the fine down to BD100,000 ($265,273).

“We’re not interested in fining,” clarifies Horne. “This is a failure as far as we’re concerned, but it’s also a fundamental weapon and the operator has that threat hanging over it, to help shape behaviour.”

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Horne does take umbrage at Batelco’s suggestion that the tussle is not a fair fight. “By nature our roles are to wear gloves, one in the red corner and one in the blue corner,” Kaliaropoulos told Arabian Business, complaining that the regulator was delivering ‘knockout’ blows the telco was powerless to resist.

“I believe that in a boxing match there are two players, both with their gloves,” says Horne. “I’ve never seen a boxing match where one player stands still.

“Batelco has a very clear licence and a very clear set of rights and obligations,” he continues. “The only time that we step in and maybe throw a punch, is when it’s clear the incumbent fails to meet the terms of its licence or its obligations.”

Horne insists that Batelco has adopted a defensive mindset; the firm must accept that it has not taken on board its responsibilities “in the most cooperative way”, and move towards greater collaboration with new telco operators.

“Since 2003 Batelco’s revenues have increased and its profits have increased; is that a man standing still, taking blows?” he asks. “What I hear said and what I see in reality are two very different things.”

A quick glance at the numbers would seem to support Horne’s stance. The combined revenues of the country’s telecoms operators soared to $796m last year, a rise of 6.3 percent from 2007. And within that, Batelco enjoyed a record 2008, with net profit for the 12 months up 2.7 percent at $276.4m.

“Batelco has actually achieved many positive things which we applaud them for,” offers Horne. “They have improved services, their quality of service, and pricing, and why have they done that? What’s stimulated them to do that? Competition.”

Nevertheless, Kaliaropoulos told Arabian Business that Batelco’s capital expenditure in its home market had dropped by as much as 20 percent in the first six months of 2009, compared to the same period last year. Accusing the TRA of “taking away the incentive to invest”, he suggested that the mobile market, with penetration of 131 percent at the end of 2008, had already reached saturation point.

“There is a truism of companies that fail, when they’ve taken their eye off the ball and their core competencies,” counters Horne. “This is Batelco’s own backyard, and when the company says, right, I’m not going to invest in infrastructure, what am I doing? Am I shooting myself in the foot? It seems so short-sighted.

“There’s still significant space for Batelco and the other operators to grow in Bahrain,” he continues. “We’ve got $40bn worth of investment in new islands; if the government is successful in attracting international businesses to Bahrain, then they will bring international traffic with them.”

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As a consequence, Horne argues that greater effort should be spent on improving international connectivity — another area in which he feels Batelco has failed to live up to its responsibilities.

“International prices are still too high, and we need greater diversity in the international capacity,” he says. “This is something we are tackling with Batelco, because in our view Batelco has not helped the industry or the kingdom as much as it should have done, because it’s held those international prices higher than we believe they should be.”

Horne insists that he is not concerned exclusively with Batelco’s alleged misdemeanors, however much the firm might cry victim. Success and failure is entirely down to the strength of each telecom operator’s business plan, he says, and to support consumers the TRA must back sustainable competition.

If a new entrant identifies a market that turns out not to exist, then it is that company’s problem; the regulator will not step in. And if any operator makes promises it cannot keep, then the TRA will step down hard.

“We are looking very closely at advertising, not just by Batelco, but by other operators,” Horne reveals. “We want to be sure that the messages given to the consumer are not misleading, and we have the ability to fine any operator misleading the public in order to win customers.

“We have introduced a quality of service reporting regulation, where all the operators have to report to us their performance in the last quarter, and we’re going to publish these so the consumer can compare them,” he continues.

“One of the issues we are particularly looking at is the average or the minimum speed that somebody gets when they subscribe to a broadband package,” he adds. “There are cases where the ad says 10mbps, but you go and buy the equipment and the box says ‘maximum 7mbps’.

“If you’re buying a two, four or 10mbps service, what do you actually get?”

As competition increases — and Horne admits that the TRA is “constantly” receiving applications for new licences — so operators will be forced to match promises with performance. And in so doing, the authority hopes that Bahrain will continues to lead the way as the region’s most dynamic telecoms market.

“At the TRA, we say ‘be creative, think laterally’,” he explains. “Let’s not stick ourselves in the mud here, because anybody who’s stuck in the mud in this business will fail.

“Batelco talks about saturation, but that’s narrow-mindedness, that’s old thinking,” he adds. “New thinking is how we use these arteries and offer more and better services to our customers. There’s so much more, and in five, six or seven years we’ll look back and consider ourselves to have been in the steam age today.”

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