SUNS  4331 Wednesday 25 November 1998



TELECOMMUNICATIONS: ITU VS WTO CONTEST OVER TELEPHONE REVENUES

London, Nov 23 (Panos/James Deane) -- The battle lines are being drawn on who governs our telephones. The outcome could determine the fate of telecommunications development in developing countries, and whether the information gap between the rich and poor will widen or narrow.

In one corner is the International Telecommunication Union (ITU), set up in 1865 to govern international telecommunications. Now a United Nations body, it is struggling to adapt to the furious pace of change in an industry increasingly dominated by the private sector.
In the other is the World Trade Organisation (WTO), which in its four short years of existence has assumed huge powers in the new global economic order. The king-makers are the firms who manufacture and operate the technology driving the information revolution.

Although the ITU and WTO have been working closely, a hint of rivalry came at a recent month-long ITU meeting in Minneapolis, United States.

At the top of the agenda was how the ITU could meet the demands both of its member-states and the private sector -- backed by industrialised countries - who are demanding more power over decisions made by the ITU.

"...Private fora [outside the ITU] have emerged and grown strong and represent industry better. The ITU must become quick and efficient in the conduct of industry business and change that pattern," says Yoshio Utsumi, the newly-elected Japanese head of the Union.

The conference saw private industry organisations being granted equal status to governments at the ITU for the first time.

The ITU is responsible for issues such as setting technical standards in telecommunications, allocating radio frequencies -- such as for mobile and satellite telecommunications -- and, most controversially of all, agreeing how payments between telephone operators in different countries should be made. That is no mean task in this trillion dollar-industry.

The WTO, on the other hand, looks after its Agreement on Liberalisation of Basic Telecommunications, which came into effect this year and commits its 72 signatories to open their domestic telecommunications markets to competition.

They include all industrialised nations and between them the 72 countries are responsible for almost 90 percent of all telecommunications traffic.

The contest is over who has the right to set payment rates for international telephone calls.

Many developing countries have traditionally charged a high rate -- called 'accounting rate' -- for connecting telephone calls from abroad. They have justified this by arguing that this is the only way they can plough investment into their domestic networks.

Developing countries earn up to $10 billion in foreign exchange from accounting rate revenues.
For some of the poorest countries such payments are their largest single source of foreign exchange. Although nearly all countries are reducing the rates, developing countries say they cannot afford to slash them as rapidly or deeply as industrialised countries.

Operators in industrialised countries, especially the US, argue that the intense competition let loose by the WTO agreement means that they can no longer afford such charges unless they are justified by the actual cost of connecting a call.

Earlier this year the US government's Federal Communications Commission (FCC) issued an ultimatum saying that unless agreement was reached by the end of 1998, it would unilaterally impose limits on the rates US companies can pay foreign operators.

The FCC argues that US operators lose more than $5 billion a year in what it calls "above cost" payments to foreign operators. Unless agreement is reached at the ITU, the ultimatum will come into force in January 1999.

Many developing countries protest that the costs of connecting a call are higher in their countries than in industrialised countries. And if they agreed to the US proposal, they would have to substantially increase the prices they charge to domestic customers. The poorest among them say they could face economic ruin.

The ITU has been trying to implement an agreement reached in 1992 to bring settlement rates closer to costs but has already exceeded a self-imposed deadline of end-1997. The WTO says that if no consensus is reached by 2000, the issue will pass to the WTO under its 'free trade' rules.

"If we don't reach agreement by December, then I am afraid we could have lost the opportunity to get a multilateral agreement," says Ambassador Anthony Hill of Jamaica, who chairs an ITU 'focus group' tasked with finding a consensus.

"The issue could then come off the ITU agenda and come onto the new services agreement of the WTO in 2000," Hill added.

If the issue is taken up at the WTO, the implications for developing countries could be grave, some experts say.

The choice, according to Vineeta Shetty of Communications International magazine, is "either the process of consensus used by the ITU -- which can take a long time but which gives developing countries some say in how the transition to cost-oriented rates takes place -- or a process of negotiation and bargaining at the WTO, which is more efficient but gives the richer countries much more leverage."

Developing countries have been accused of being slow to recognise that high accounting rates cannot be sustained in the face of the economic and technological changes sweeping the industry -- such as Internet telephony which effectively bypasses national telecoms systems.

While the WTO is not actively lobbying for such an outcome, the prospect is a real one. "I don't even want to contemplate failure to reach agreement (at the ITU)," says John Prince of the Trinidad and Tobago Prime Minister's office. But some poor countries argue that it is not they who are preventing a deal.

"Some countries are complaining that the US and Europe are deliberately sabotaging attempts to reach an agreement (at the ITU)," reports Shetty.
The charge is denied by Wyn Lucas, manager of international organisations at British Telecom (BT) who represented ETNO, a 41-member telecom operators association at Minneapolis. "We would not have put in the amount of effort we have done if we did not want to reach an agreement," he says.

ITU spokesman Tim Kelly says that abandoning a system based on consensus would give unacceptable power to the largest operators and harm those in developing countries.

"Delegates have a choice," Kelly adds. "They can either go for what the FCC has proposed, or what ITU is proposing, or what the market will dictate." The ITU's proposals are based on countries' levels of telecoms infrastructure -- the lower the teledensity (the number of telephone lines per person) the higher the rates they can charge.

What nobody disputes is that time is running out rapidly for an agreement.