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5. Developing Country Concerns

Debate about the reform of the international accounting rates system has stirred immense concern among developing countries. While developing countries have been part of the gathering momentum towards the implementation of cost-oriented accounting rates, and many have made commitments to market opening under the WTO basic telecom-munications agreement, they continue to be concerned about the impact these changes will have on their telecommunication economies.

Most nations of the developing world are net receivers of international telephone traffic and hence recipients of settlement payments. Any change to the status quo could involve a reduction in these payments. In order to investigate the likely impact that changes in the inter-national telecommunications environment could have on developing countries, a series of country case studies were commissioned by the ITU, the Commonwealth Telecommunication Organisation, the World Bank’s InfoDev Programme and the European Union. The case studies looked at the impact of five main scenarios for accounting rate reform:/p>

  1. Implementation of the FCC benchmarks;
  2. Staged reductions of 6 or 10 per cent per year;
  3. Asymmetric settlement, for instance using a termination charge or a 60/40 split of the accounting rate;
  4. Very-low settlements rates or sender-keeps-all;
  5. Implementation of the Focus Group’s indicative target rates.

For the majority of countries, the worst scenario is the collapse of the accounting rate system (4), or implementation of FCC Benchmarks (1). Staged reductions (2) and the Focus Group’s recommendations (5) are relatively neutral in their revenue impact, presuming that traffic continues to grow at current levels. Asymmetric settlement (3) would bring positive benefits to some countries, though not to all. Figure 5 summarises the impact of the FCC Benchmark and Focus Group scenarios relative to a hypothetical "Baseline" scenario in which accounting rates remain unchanged at 1997 levels. Senegal and Sri Lanka are likely to be the most affected in both scenarios. That is because these countries have relatively high settlement rates and are dependant on net settlement payments for more than 30 per cent of their toal telcommunications revenue. At the other end of the scale Mauritania and the Bahamas are relatively unaffected by the changes.

Most nations of the developing world are net receivers of international telephone traffic and hence recipients of settlements payments

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Updated : 2007-08-28