DRAFT OPINION B

The implications of the WTO Agreement for developing countries and cooperative actions between ITU Member States and Sector Members to facilitate adaptation to the new telecommunication environment

The second World Telecommunication Policy Forum (Geneva, 1998),

• the mission handed down to the Union under the ITU Constitution (Geneva, 1992), in particular in Nos. 3, 4, 9 and 16 of Article 1;
• that the International Telecommunication Regulations and various ITU Recommendations constitute a framework, agreed among Member States of the Union, governing tariffs and accounting in international telecommunications;
• that the General Agreement on Trade in Services (GATS) and the successful conclusion in February 1997 of the landmark agreement among 69 WTO member countries to liberalize their basic telecommunication markets confers a new status on telecommunication services, which are now viewed by many as a tradable commodity, while still remaining a means of delivery for other valuable services;
• that many developing countries were party to this agreement and that the effects of the agreement will be widely felt in all countries that made market access commitments to liberalize their basic telecommunication markets, as well as in the countries with which they trade;
• that the WTO agreement on basic telecommunications was agreed against a backdrop of other regulatory, technical, commercial and financial changes sweeping the telecommunication sector;
• that developed and developing country operators benefit from network expansion in developing countries,

• that many countries have liberalized their telecommunication markets and that significant volumes of traffic now flow outside the traditional settlement arrangements;
• that liberalization of the global telecommunication market is leading to a lowering of settlement rates and reform of the international settlement system;
• that the arrival of new entrants can attract new investment resources, particularly in developing countries, and that sustainable competition can, in the medium term, lower tariffs, making telecommunication services more accessible and less costly;
• that the situations regarding telecommunication regulation are different from one country to another and that their evolution must take into account each country’s GATS commitments;
• that private stakeholding in the equity capital of incumbent operators in a number of developing countries has in the past been accompanied by an agreed period of exclusivity;
• that, as demonstrated by the case studies carried out for this Forum, some administrations are currently dependent on net settlement payments, which account for a significant proportion of overall revenues to support of infrastructure development and in universal service goals, and that a sudden reduction in these resources could slow investment, in the absence of alternative sources of financing;

• that these developments in the international telecommunication marketplace will require significant changes in attitudes towards telecommunication regulation in developing countries and a new, market-oriented approach to financial, policy and regulatory strategies to ease the transition from the old order to the new environment within which their economies must now operate;
• that settlement rates between liberalized and non-liberalized markets will inevitably move towards levels dictated by effectively competitive markets and dependence on settlement revenues for infrastructure development and universal service cannot be sustained, and that new sources of financing are necessary;
• that ITU is ideally placed to assist developing countries in managing this transition,

• to continue taking appropriate steps to ease the transition to the new international telecommunication environment, by actively considering the liberalization of their telecommunication markets, and encouraging private investment, in a manner that respects their national realities and national economic development goals, for instance by rebalancing national tariffs, and developing effective policies that are transparent, non-discriminatory and competitively neutral, for the funding of universal service obligations;
• to share experience with one another in the adaptation of national policies, including implementation of WTO commitments and of the reference paper principles and methods of ensuring that any new investment, domestic or foreign, leads to the mutual benefit of investors and the national economy;
• to further develop appropriate cooperation, particularly during any transitional period, to support developing countries in adjusting to the new trade in telecommunication services environment by gradually implementing tariff policies with a view to reducing dependence on revenues from accounting rates;
• to seek to ensure that the growth of telecommunications is not hindered in countries which are likely to be severely affected by the changes and to take into consideration difficulties that may be experienced by developing countries with a view to reducing or eliminating their effects to the maximum extent possible;
• to mitigate the effects of settlement rate reform on developing countries, and in particular on the least developed countries, inter alia by encouraging competition for transit traffic;
• to avoid henceforth making any new decisions that are liable to introduce or perpetuate a situation of monopoly over any type of telecommunication service or network;
• to encourage telecommunication operators and service providers which are not Sector Members to apply the above,

invites the ITU Council

to take account of the concerns of developing countries and the general impact of the WTO basic telecommunications agreement when drafting the Strategic Plan of the ITU,

invites the ITU Secretary-General and the Sectors of the Union, each within its respective field of competence

1. to continue and expand its programmes and information seminars which outline the impact of the WTO basic telecommunications agreement for developing countries and provide practical guidance to developing countries which have made, or are contemplating making, WTO market access commitments;
2. to foster telecommunication development and reform by further facilitating effective collection and dissemination of data, from all sources, on a wide range of issues; this should include data with respect to levels and trends in payments made for terminating and delivering international traffic, and issues relating to tariff rebalancing, interconnection and universal service, and to support establishment of databases and Web pages for this purpose;
3. to develop partnerships for development and human resource training and, particularly in liaison with the Director of BDT:
   • to develop, on a regional and worldwide basis, information seminars and assistance plans relating to the implementation of principles identified in ITU-D Recommendation XXX [Document 1/193 Rev. 1)]—notably regarding transparency, investment, provision of universal service/access, establishment of fair competition, innovation and development of the network and establishment of an independent regulatory body—and Policy Forum opinions,
   • and to make use, inter alia, of the centres of excellence or other human development centres;
4. to make every necessary effort to facilitate the transition to a fully competitive trade in telecommunications regime, and to finalize and/or validate cost models which can be used to assist the transitional process;
5. to develop a programme of regional seminars to support Member States in establishing regulatory bodies independent from telecommunication operators in cooperation, where appropriate, with regional bodies;
6. to continue the use of case studies such as those carried out in connection with this Forum through detailed studies, including elasticity studies, and to develop possible models for progressively implementing cost-oriented tariffs;
7. to provide assistance to developing countries that wish to introduce analytical accounting and a cost-oriented tariff system;
8. to assist countries most in need in this transitional period by:
   • further facilitating relationships with the World Bank and other international and regional development agencies (international organizations, non-governmental organizations, and the private sector) on technical and financial assistance for developing countries during a specified transition period;
   • fostering the exchange of information on methods of privatization of national operators, promotion of private ownership and investment, and development of a competitive, multi-carrier environment with a view to facilitating access to private capital markets;

invites WTDC-98 and PP-98

to ensure that the above actions are incorporated in ITU work programmes.