Reform of accounting rate system

1
The 1998 Telecommunications Revolution One month
to go ...
Dr Pekka Tarjanne, Secretary-General
International Telecommunication Union,
Study Group 3 Meeting, 2 December 1997
2
Agenda

• 1998 One month to go ...
• Implementation of WTO agreement
• What has happened since May 1997?
• EU interconnect regime
• FCC Benchmark Order
• Rise of resale / Internet Telephony
• What has the ITU been doing?
• Rapporteurs Group
• Preparations for WTPF 98
• Country Case Studies
• Conclusion Times almost up ...

3
Likely impact of the Basic Telecoms Agreement

• Significance of the agreement
• More than 90 of international telecom traffic
• Binding multilateral agreement
• Shrinkage of gap between international and
  national telecommunication tariffs
  
• Interconnect payments not settlements
• Self-termination of international traffic
• Co-existence of different settlement regimes
• Competitive market entry, not joint-provision of
  service

4
Within EU, an interconnect regime is being
implemented which will be asymmetric
1.74
Proposed and Recommended national interconnect
rates, selected EU countries, in ECU/100 per
minute, Sept. 1997
UK
2.22
Denmark
2.52
Neth.
2.55
France
Recommended fees, 1.5-2.6 ECU/100
EU
2.61
Germany
Source European Commission. Notes Rates not
approved by National Regulatory Authority.
The rates quoted relate to Double transit
national interconnection.
Sweden
2.98
3.62
Belgium
4.20
Finland
4.22
Spain
Austria
8.41
5
Concerns about US commitment to liberalisation

• Benchmarks
• Continuing application of proportionate return
• anti-competitive practice
• creates incentives for below-cost selling of
  wholesale capacity to call-back operators
  
• New restrictions on international simple resale
• prevents spread of price competition
• creates incentives for incumbent carriers to keep
  settlement rates high

6
Growth of resale trafficPercentage of US
switched traffic resold, 1991-96
34.0
15.4
9.9
6.4
5.5
5.5
1991
1992
1993
1994
1995
1996
Source FCC, TeleGeography Inc.
7
ITU activities on telecoms trade

• Preparations for World Telecom Policy Forum,
  1998
  
• Secretary-Generals report (1st draft, Sept)
• Country case studies Bahamas, Colombia, India,
  Lesotho, Mauritania, Senegal, Sri Lanka Uganda
  
• website at http//www.itu.int/wtpf98
• Other activities
• WTAC
• 7th Regulatory Colloquium

8
Priorities for Study Group 3

• Rapporteurs group proposals
• Are they cost-oriented?
• Are they non-discriminatory?
• Will they be transparent?
• Co-existence of regimes
• bilateral settlement rates
• multilateral termination rates
• Potential conflicts between International
  Telecommunication Regulations and WTO

9
Principles for reform

• Continued viability of international service
• Transparency
• Non-discrimination
• Cost-orientation
• Competition
• Benefits of rate reductions passed on to
  end-users
  
• Ease of transition for developing countries
• Co-existence of multiple regimes