Summary

• Traffic Trends: Trading Telecom Minutes
• The International Telecommunications Environment in Transition
• Transitional Arrangements Towards Cost-Oriented
• Cost and Price Trends
• Developing Country Concerns
• Transit Charges
• Profits and Losses

3. Transitional Arrangements Towards Cost-Oriented

It has long been accepted that the logic of the competitive marketplace will dictate a shift from the traditional regime of revenue-sharing for the settlement for international telecommunication services to one based on cost-orientation. Accounting rates have been declining worldwide, especially since ITU-T Recommendation D.140 was approved in 1992 (Figure 4). But it is widely felt that, until recently, these reductions have not been moving fast enough to catch up with declining cost trends. Consequently, most rates remain significantly above costs. Recent events, especially the WTO Agreement on Basic Telecommunications and the FCC Benchmark Order, have brought the issue to a head.

The reform of the accounting rate regime constitutes one the main challenges that the membership of the ITU is facing today, especially for developing countries. In March 1998, ITU held a World Telecommunication Policy Forum on the topic of trade in services. As a result of this meeting, a Focus Group was created with a mandate to develop proposals for "transitional arrangements towards cost orientation beyond 1998, including ranges of indicative target rates". The Focus Group completed its work in November 1998 and its proposals were accepted, with minor modifications, by ITU-T Study Group 3 at its June 1999 meeting. They should be formally adopted as part of ITU-T Recommendations D.140 before the end of 1999.

The "indicative target rates" proposed by the Focus Group are different from the Benchmarks put forward by the FCC (see Table, 2 and 3).

• For the majority of traffic, generated by developed countries, the target rates proposed by the Focus Group are lower than the FCC Benchmarks: for countries with a teledensity above 50, a target rate of 6 US cents per minute is proposed compared with the 15 US cents per minute benchmark for high income economies proposed by the FCC.
• For the majority of countries, especially in the developing world, the target rates proposed by the Focus Group are higher than the FCC Benchmarks: for countries with a teledensity of below 1, a target rate of 44 US cents per minute is proposed compared with the 23 US cents per minute benchmark proposed by the FCC.