COUNTRY CASE STUDIES OF THE CHANGING INTERNATIONAL TELECOMMUNICATIONS ENVIRONMENT

The signing of the WTO basic telecommunications services agreement in Geneva on 15 February 1997 marked a new departure from the traditional rules and transactions of international telecommunications. The resulting accelerated liberalization of telecommunication services markets is expected to expose more than 90 per cent of the world’s international telephone traffic to increased competition. As competition increases, governments and operators are seeking to lower costs and make international telecommunication settlement rates – traditionally bilaterally-agreed and somewhat arbitrarily set in some cases – more transparent and cost-oriented.

The benefits of lower cost and better quality international telecommunications services are clear for consumers. However, it is feared that competition and rate-cutting may undermine the network expansion and service improvement efforts of some operators, particularly in low-teledensity developing countries. Many governments have concerns about how such market-driven initiatives will affect the abilities of incumbent national operators, and economies that depend on international telecommunication services revenues, to fund universal service efforts.

The agenda of the second World Telecommunication Policy Forum (WTPF) includes discussion of "actions to assist Member States and Sector Members in adapting to the changes in the telecommunications environment including analysing the current situation (e.g., by case studies) and formulating possible co-operative actions ... to facilitate adaptation to the new environment." The Policy Forum is invited to consider the "evolution of the international telecommunications environment, particularly the accounting and settlement system." In preparation for the WTPF, and in accordance with Council Decision 475, the ITU has commisioned a series of  case studies of a representative range of economies likely to be affected by changes to the international telecommunications environment. Funded by the ITU/BDT and the Commonwealth Telecommunications Organization (CTO), in association with the World Bank’s InfoDev program, the case studies explore the impact of the changing international telecommunications environment on the economies of Bahamas, Colombia, India, Lesotho, Mauritania, Samoa, Senegal, Sri Lanka, and Uganda.

Costs, Settlement Rates, and Universal Service

Historically, settlement rates have been negotiated bilaterally between government-owned operators and are loosely based on estimates of the cost of terminating international telecommunication traffic.

net settlement payments, 1996

144.65

1.55

1.0%

162.75

3'088.0

389.0

12.5%

12.8

(0.412)

-3.0%

27.4

0.2

0.8%

7.1

2.9

40.8%

121.5

35.6

29.3%

166.4

62.3

37.3%

47.0

3.0

6.3%

The case studies explore the sensitivity of operators in each of the nine countries to a reduction in international settlements in relation to income, network capacity, investment, network development plans, universal service obligations, provision of various services, quality of service, debt servicing, maintenance, employment, tax payments, etc.

The Demands of Liberalization

The ability of a country to leverage the changing international telecommunications environment to its benefit is largely dependent on the ability of its telecommunications operator(s) to respond effectively to increased competition,as well as the effectiveness of the national regulatory authority to implement and control a "level playing field" for both incumbent operators and new market entrants. The case study project analyzes the effects of possible scenarios for settlement rate reform on countries at various stages of liberalization: from those who are well on their way to implementing WTO agreement commitments, to non-signatories taking the initial steps to establish an independent telecommunications regulator and to implement cost accounting and regulatory frameworks.

Scenarios for analysis

The case study exercise examines the potential impact of implementing different proposed settlement rate reform schemes in each of the countries studied:

• Benchmarks
• Staged reductions
• Termination charges
• Very low rates or sender-keeps-all
• Revenue stabilisation measures

Summary of the Telecommunications Environment in the Countries Studied