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Country Case Studies, World Telecommunication Policy Forum '98




The agenda of the Second World Telecommunication Policy Forum, due to be held in Geneva 16-18 March 1998, 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". This document defines an outline for the case studies, including the objective, time frame, and an annotated table of contents of the case studies. Annex 2 to this document defines the data requirements for the case studies which would need to be met by participating countries.


The Informal Group of Experts on reform of the international settlements system, which met in Geneva 24-26 March 1997, noted that "the historical level of settlement rates is unsustainable in a competitive environment" and that "settlement rates will be reduced towards costs". Furthermore, some 80 countries attending the last Study Group 3 meeting in May 1997 have also recognized that the move toward cost-oriented accounting rates is inevitable. However, many developing countries have pointed out that the impact of moving toward cost-oriented rates needs to be better understood, in particular in the context of the new telecommunications environment which is likely to result in asymmetrical market structures.

The ITU Council has proposed that a series of neutral and objective case studies be carried out illustrating the conditions in which developing countries could implement cost-oriented accounting rates. The purpose of the proposed case studies would be to consider some of the developing countries likely to be the most vulnerable to changes in the international accounting rate system, to examine likely scenarios and to evaluate possible responses, both at the policy-making and commercial levels. The case studies would be directed by a working group comprising experts from Member States and Sector Members and representatives from the ITU-T, the ITU-D and the ITU Strategic Planning Unit.

Guidelines for selection of countries

In selecting countries for the case studies, two main pre-selection criteria would be applied:

  • Willingness on the part of the countries to take part in the study. So far, formal requests to the ITU have been received from the following countries: Bahamas, Colombia, India, Lesotho, Mauritania, Senegal, Sri Lanka and Uganda.
  • Willingness to provide data required for the study in sufficient detail (see Annex 2) and to assist the consultants/experts. Much of this data is already available in the ITU’s "World Telecommunication Indicators Database" but other data, in particular on the level of settlement rates, is not available and would need to be supplied by the Member States and Sector Members themselves. Data can be supplied either on a confidential or an open basis at the choice of the country concerned.
  • Beyond these two pre-selection criteria, it is planned that there should be a regional balance with at least one country from major sub-regions. Preference would be given to countries least able to cope with significant reductions in settlement revenues, such as the Least Developed Countries (LDCs), other countries with a low telephone penetration rate and/or low income economies with small population size.

Time frame and financing of case studies

In order to fit with the time scale dictated by the implementation of the WTO Basic Telecommunications Agreement (on January 1st 1998) and the ITU World Telecommunication Policy Forum (March 16-18th 1998), it is desirable that the case-studies begin by mid-October 1997 and finish before the end of January 1998. It is envisaged that the funding for case studies would come principally from ITU, EU, the Commonwealth Telecommunications Organisation, the World Bank InfoDev Programme and other multilateral organisations. Case studies may be conducted by experts or consultants familiar with the countries to be studied and the topic under consideration, and according to the principles of the sponsoring organisations. It is anticipated that the studies would be made available to participants in the World Telecommunication Policy Forum and presented at an information session. The case studies would also provide an input document to ITU-T Study Group 3 and the ITU-D World Telecommunication Development Conference, 1998. The case studies would be published by the ITU, with the exception of any material regarded as confidential by the countries concerned.

Annotated Table of Contents

1. General socio-economic situation of country

Brief review of the macro-economic, social, geographical and demographic status of the country, and general plans for future development. In particular, this review would highlight the value of net settlement payments as a form of foreign exchange to the national economy as a whole, as well as to telecommunication development

(Suggested: 2 pages).

2. Telecommunication policy and network development

a) General regulatory and policy-making structure of the country including a review of recent and planned policy changes, especially those made in line with the country’s possible commitments under the WTO process;

b) Brief description of the telecommunication network of the country, both fixed and mobile. The description should include the following components: status of network development, plan for future development, implementation of new technologies, financing plan for network investment, a listing of the major public telecommunication operators, plans for introduction of new services and a review of relevant telecommunication indicators including tariff structure (see Annex 2);

c) A description of the major gateways for international traffic (e.g., submarine cables, earth stations etc.) and the providers of international telecommunication services.

(Suggested: 6 pages).

3. Evolution of international telecommunications environment

A review of the regulatory status of international services, including the legal status of call-back, International Simple Resale and Internet telephony (voice over the Internet).

A detailed analysis of trends in international telephone traffic and prices over the period 1990-1996, focusing on the top 20 destinations defined by traffic flow (outgoing and incoming). The review should include an assessment of growth prospects to year-end 2002, an estimation of the size of call-back and refile traffic, and an evaluation of elasticity of demand in relation to price changes.

A detailed analysis of trends in accounting and settlement rates with major destinations and also the direction net settlement payments. This would include a measurement of the level of imbalance of traffic on major routes.

(Suggested: 8 pages).

4. Cost evaluation of international telecommunication services

This chapter would provide a review of the available data on the costs of providing international telephone service, with a view to estimating the relative costs of originating and terminating each minute of traffic and the degree of cross-subsidy from international to domestic services. Where such cost data is not available, or cannot be derived, the expert/consultant should make cost estimates based on a consideration of published prices for international private leased lines and for domestic call termination and origination.

Cost models, such as those defined by ITU regional tariff groups (TAS/TEUREM) and defined in relevant ITU-T D Series Recommendations, may prove useful in this regard.

(Suggested 8 pages).

5. Scenarios for changes in the international accounting system

This chapter would review the impact that alternative scenarios for the evolution of the international accounting rate system might have on the country concerned. Scenarios might include:

  1. A system of "benchmarks" or price caps for accounting rates as proposed by the US regulator, the FCC.
  2. A staged reduction in accounting rates to major destinations, for instance by 10 per cent per year over a five year period, as foreseen in ITU-T Recommendation D.140, or a move to bilaterally agreed settlement rates on the same basis.
  3. A move away from bilaterally negotiated rates towards call termination charges under two scenarios:
    1. a single charge applied to all incoming traffic under a traditional half-circuit regime, applied in a cost-oriented, non-discriminatory and transparent manner;
    2. an unbundled termination charge broken down into the basic cost elements of international transmission, international gateway and national extension, and possibly an element of subsidy.
  4. The range of charges calculated for call termination would be based on the study carried out in section 4 above.
  5. Other settlement regimes which anticipate very low settlement payments, or none at all, such as sender-keeps-all, least-cost routing and hubbing, or end-to-end service provision in a competitive market environment.
  6. A "price cap" on the settlement rate combined with revenue stabilisation measures designed to assist the least developed countries, as proposed by the TAF regional tariff group for Africa.

The review would assess the ability of the country to maintain its network development programme and its universal service obligations under the different scenarios.

6. Conclusions

In the light of the foregoing analysis, the final chapter would present a brief qualitative review of the possible options for the country concerned for tariff rebalancing and diversification of revenue sources. It would also review the country’s existing and planned commitments to market liberalisation under the WTO basic telecommunications agreement.

(Suggested: 4 pages; Total = 40 pages).


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