Mar 13, 1998

 

ITU PUSHING FOR COST-BASED ACCOUNTING RATES

 

Geneva, 12 Mar (Ravi Kanth) -- The International Telecommunications Union (ITU) is urging its 188 member-states to consider replacing the current system of bilateral agreements among national carriers on accounting rates for international telephone calls by a cost-based tariff system.  

The ITU, if it succeeds in this move, will be expanding the scope of liberalisation in international telecom services -- even beyond the World Trade Organisation's basic telecom services agreement last year.  

The United States and some other leading industrial countries attempted during the Uruguay Round services negotiations (that resulted in the GATS accord in the WTO), and the subsequent basic telecoms sectoral negotiations to provide for a rule that the charges for various services, mainly for international phone calls and other connections, should be based on costs. 

This failed, with developing countries insisting that this was beyond the WTO remit, and that this issue was governed by the ITU and bilateral agreements sanctioned under the ITU system.  

The only provision now in the WTO's basic telecom accord is one that countries would ensure competitive conditions in respect of inter-connection charges that the monopoly carriers in a country would be allowed to charge.

But even in developed countries the interpretation of this is running into problems - proving the point of many economists that in the case of natural monopolies a state-owned monopoly, subject to public scrutiny and regulation and accountability, is better than a private one.  

The ITU is now seem to be attempting to persuade its members, and thus in effect the developing countries, to accept a cost-based system.  

An ITU expert group that was named last year has not been able to reach a consensus on this issue.  

The over a century-old ITU has been a technical and standard setting group, with private manufacturers and others increasingly influencing its work and decisions.  

The ITU is justifying its incursion into promoting a multilateral agreement for accounting rates on the ground that the WTO accord, concluded last year and which entered into force this year, has not resolved all the issues.  

The reform of telecom services now hinges on a multilateral agreement on accounting rates, an ITU spokesman said Wednesday. 

This, and a few other issues like modes of delivery of telecom services, such as calling cards, re-origination of calls, movement of consultancy personnel, are among the issues where a global consensus is needed, according to the spokesman. 

Some of these questions will figure at a three-day international meet, "1998 World Telecommunications Policy Forum: Trade in Telecommunications Services" which begins on 16 March.  

Some 500 delegates from about 112 countries and 42 private telecommunication companies are expected to participate and focus on the implications of the WTO agreements and ITU's strategic plan.  

To be opened and addressed by the ITU Secretary-General P. Tarjanne and WTO Director-General Renato Ruggiero, the forum will hold three policy sessions on: implementing the WTO agreement on basic telecoms; accounting rates - towards year 2000, and country case studies. 

The ITU has prepared nine country studies in this regard.  

The United States has since tried to introduce unilaterally accounting rates and levels that its carriers must keep as a guideline in their agreements, but has sought to win over atleast some of the developing countries by a graduated rate and time-period for phase out. 

The US argument has been that it has been paying out more money to foreign countries and operators under the current ITU-sanctioned bilateral system.  

However, critics have pointed out that partly this is because of the proliferation of US-based call-back services, under which a telephone call from country 'A' to country 'B' via a call-back service in the US, becomes a call from the US connecting the two ends. Also, with a large number of migrants from the developing world, mostly affluent sections,

calling their families back home, the traffic from the US has increased, and the resulting outgo from the United States cannot be blamed on the accounting charges.  

Some analysts say that the issues sought to be raised, and negotiated at the ITU, are beyond remit of the ITU -- established to set technical standards in the telecom sector, share radio frequencies etc. 

In raising the accounting rate issue, the ITU is seen by these as focusing on issues of interest to the rich industrial nations, rather than the priorities of the developing world, namely, building an infrastructure and getting basic services within the reach of the population.  

When it failed to get an accord at the WTO on this question, the United States and its Federal Communications Commission (FCC) announced that they were acting on their own to set guidelines for the fees that its carriers pay to telecom enterprises in foreign countries for the calls. 

A number of countries with state-owned telecommunication enterprises and/or monopoly operators have been already under pressure to lower their fees as a result of the mushrooming of a number of socalled call-back services.  

As a result the old accounting rate system, by which two carriers reached an accord on the rates to be charged, and settling the accounts on an annual basis in terms of the calls originated and received, has already come under strain.

 

Developing countries have been arguing that by charging a higher rate than the actual costs of the call, they are using the surplus to expand basic services inside the country - a route that the developed country carriers adopted till they reached the present stage. 

Without a functioning domestic system, the international calls cannot be completed, and it would be unfair to them to be asked to charge on a cost-basis for one service, is the argument that national telecommunication enterprises and authorities have been using. 

But within many developing countries this argument has been running into trouble - partly from the city elites and the business community, as also others who point out that factually, the telecom administrations have not been using the surplus to expand their domestic reach, but that they have been going to the general treasury.