10:08 AM Feb 21, 1997

US TO SLASH PAYMENTS TO THIRD WORLD

London, Feb 19 (James Deane/PANOS) - In a move that could cost developing countries billions of dollars in foreign exchange, the United States government has said it will withdraw from the global system allocating telecommunications revenue.

The international system for dividing telephone revenue calls is known as the 'international accounting rate.'

Every time anyone makes a call to another country, the originating telephone company must pay the destination-country a fee for completing the call.

For some developing countries, these incoming calls are their single largest source of foreign exchange.

"We are bent on reforming the international accounting rates system," Reed E. Hunt, Chairman of the US government Federal Communications Commission (FCC), said last December, promising changes early in 1997.

The system, claims Hunt, is an "ancient, outmoded, pro-monopoly system of settlement payments between countries that has propped up overly-high charges to consumers for international calls and led to a huge outflow of money from the US to foreign countries."

The US has been pressing for years for changes to the system. Washington claims that in 1995 its companies paid 5 billion dollars to foreign companies for completing telephone calls - four billion dollars more than they received from foreign companies.

One study suggests that US telephone company payments for international calls to other countries equalled 35 percent of the entire US foreign aid budget annually in the early 1990s.

Opposition from developing countries is likely to be fierce - for many, the system provides one of the few sources of foreign exchange which operators can draw on to modernise their telecommunications systems.

And developing countries often pay disproportionately high prices for equipment purchased from Western manufacturers.

The International Telecommunications Union (ITU), the United Nations body which fixes and oversees accounting rates, has been seeking a compromise between the US and developing countries.

Around 25 percent of all international calls are made from the US.

However, Tim Kelly, the ITU's Head of Operations Analysis, says that US carriers have a huge advantage - "in 99.9% of their bilateral relations, they pay out rather than receive and are thus able to withhold payments."

The US move has disappointed the ITU.

According to Kelly, the US attitude can be summed up as " 'We [the US] have calculated what accounting rates ought to be and now we're going to impose them on the rest of the world.'

"The success of this approach depends on how big a stick the United States has," Kelly said recently.

The ITU argues that the current system does not deliver assistance to those who need it most - only 3.9 percent of US settlements go to Africa for instance.

Some critics say the big outflow of telecoms revenues from the US is not because of the actions of other countries, but those of US companies.

In particular, they cite the 'call-back' services started by a number of US companies.

This system enables subscribers in foreign countries to make international calls - from Manila to New York City for example - which will then be charged to their accounts in the US at the US rate or below. However, the US still has to pay completion charges to (in this case) the country operator for what is effectively a US call.

This, charges Maev Sullivan, an independent telecommunications consultant, is a practise that would be described as dumping if it had been employed in another industry by another country.

Sullivan points out that there are countries such as Hong Kong, who have higher per capita outpayment rates than the US and that, "the sheer size of the US population results in a comparatively low level of international traffic on a per capita basis."

Prof. Jill Hills, director of the International Institute of Telecoms Regulators in London, says that historically, the US has refused to be regulated by the ITU and when not able to get its own way, has resorted to "internationalising its domestic law."

"The FCC's threat follows this tradition," Hill says. "One has to remember that although the US is complaining about payments, its companies are active in call back services - and that increases the US deficit."

Some analysts expect African countries which rely the most on foreign exchange from international calls to be the hardest hit. It is these countries which also have the weakest bargaining power in international negotiations.

Cezley I Sampson, Director of the Mona Institute of Business, University of West Indies, maintains that traffic flow accounts, in any case, do not tell the full story of the overall balance of payments position in telecommunications.

"Developing countries operate huge negative imbalances with the US for telecommunications equipment, materials, software and consultancy services," he argues.

"Developing countries must, however, adjust to the reality that the market forces and technology development which have been unleashed will continue to result in further progressive decline in accounting rates."