Apr 16, 1998

TELECOM LIBERALISATION - A BENEFIT FOR ALL?

 

Malta, Apr 13 (IPS-PANOS/James Deane) - Concerns over liberalisation and reduced revenues marked two recent conferences on trade in telecommunications.

The conferences were designed in part to 'celebrate' the World Trade Organisation (WTO) agreement to liberalise basic telecommunications, which came into force in February.  

This has been endorsed by the International Telecommunication Union -- a United Nations body that helps developing countries build their telecommunications capacities -- which announced a formal agreement with the WTO to work on liberalisation.  

But many developing countries were in no mood to celebrate. Instead, they expressed concerns at the potential negative fall-out of liberalisation, particularly through reductions in revenue from international telephone calls.

The harsh realities of today's 'information gap' were highlighted in the World Telecommunication Development Report launched at one of the conferences.

It showed that 43 countries have less than one telephone line per 100 people; that Estonia has more Internet hosts than the whole of Africa; and worse still, "those with the highest existing levels of teledensity are accelerating fastest."

The WTO agreement has been signed by 72 countries who together control 93% of telecommunications revenues worldwide. The remaining seven percent of revenues is controlled by over 100 mainly developing countries, none of whom have signed the agreement.  

"Privatisation is being pushed too far, too fast, too soon," argued Sam Pitroda, a long time advocate of liberalisation and President of WorldTel, which raises private investment for telecom development in poor countries. "Privatisation is a process, not product - it is not an end. I am not against privatisation, but countries need to be properly prepared for it," he added.

However most of the countries speaking at the conferences acknowledged that liberalisation was here to stay, and some welcomed the opportunities of investment that liberalisation could bring.  

"We are not a member of the WTO but we are studying the case and hope to resolve all problems and accept the agreement," said a representative from Iran, one of 30 developing countries aiming to join the WTO agreement.

The World Bank estimates that Ghana stands to attract around 500 dollars million worth of investment into its telecommunications infrastructure over the next five years following liberalisation.

But developing countries are facing another major problem: reduced revenue from international telephone calls. 

Developing countries receive up to $10 billion in revenues for completing calls from other countries. For some of the poorest countries these revenues -- which are determined by a complex 'accounting rate' or 'settlement rate' system -- are their largest single source of foreign exchange.

"To put that into perspective, if you add up all the lending programmes in telecommunications of all the development banks around the world, the total sum they invested during the first half of the 1990s would still amount to less than that generated in just one year under the accounting rate system," said Dr Pekka Tarjanne, secretary general of the International Telecommunication Union (ITU).  

Since 1992, the ITU has tried to move towards 'cost-based' accounting rates, but little agreement has been reached to date between its member states. Many developing countries fear that this, coming on top of the WTO agreement, would reduce accounting rates too quickly.  

"Too rapid a reduction in settlement rates will lead to substantial increases in local telephone charges. This will lead to service disconnections and will mean that our ability to meet network development targets will be reduced," said Jamaica's Anthony Hill. Jamaica earns around $150 million per year from accounting rates, according to Hill.

It was the US which attracted most criticism from developing countries through its so-called 'benchmarks' policy which insists that US operators can only pay operators in other countries a fixed amount for completing calls from the US.

In some cases this is less than half the amount that some developing country operators have traditionally charged.

Several delegates argued that the policy was unjust. "If the winner of a 100 metre race runs it in 9.9 seconds, it would be very difficult to set that as the pace at which all the losers should run," said John Prince from Trinidad and Tobago.

The US argues that it loses almost six billion dollars a year in 'above-cost subsidies' to countries who charge exaggerated prices to US companies for completing their calls.

Despite these concerns, signs have begun to emerge of some progress towards a compromise. The ITU has recently secured an agreement by more than 70 developing countries to set their own limit on accounting rates at 75 cents per minute. This would still b e well in excess of the highest US benchmark of 23 cents per minute.

The US itself hinted at a greater prospect of compromise. Diane Cornell of the Federal Communication Commission (FCC) told Panos Features: "The benchmark policy remains in place but I am hopeful that a multilateral solution can be found." The US continues to insist, however, that accounting rates need to be cost-based for that to happen.

One of the most sensitive issues is to determine who decides what are the real costs incurred by developing countries. Many argue that their costs of completing telephone calls are genuinely more expensive than those in industrialised countries. Nine case studies of the impact of accounting rate reductions appeared to support this.

"The settlement rate in Colombia is around 50 cents per minute -- more than twice that of rates proposed by the FCC. Accounting rates set at the FCC benchmarks would have very severe negative impact on the Colombian telecommunications sector -- in fact Colombian operators would lose money on every call," says David Townsend, a consultant who has carried out a Colombian case study.  

Well-known communications expert Sir Donald Maitland, who highlighted the gap between the information rich and poor in the 1980s, argued that "the process of liberalisation on accounting rates systems could inadvertently prejudice revenue flows and, in consequence, the prospects for investment in developing countries."

Whatever the costs, the ITU clearly believes that time for reaching an agreement is running out.

"If we don't succeed in reaching an agreement, we will see in the next few years chaos and anarchy in telecommunications and many people in the developing countries will suffer tremendously," said Tarjanne, adding: "So will customers in the developed world."