OUTLINE FOR COUNTRY CASE STUDIES OF
THE CHANGING INTERNATIONAL TELECOMMUNICATIONS ENVIRONMENT
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
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
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
- 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
- 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
ITUs "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
- 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
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
(Suggested: 2 pages).
2. Telecommunication policy and
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 countrys possible commitments under the
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
(Suggested: 6 pages).
3. Evolution of international
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
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:
- A system of "benchmarks"
or price caps for accounting rates as proposed by
the US regulator, the FCC.
- 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
- A move away from bilaterally
negotiated rates towards call termination charges
under two scenarios:
- a single charge applied to
all incoming traffic under a traditional
half-circuit regime, applied in a
cost-oriented, non-discriminatory and
- an unbundled termination
charge broken down into the basic cost
elements of international transmission,
international gateway and national
extension, and possibly an element of
- The range of charges calculated
for call termination would be based on the study
carried out in section 4 above.
- 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.
- 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
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 countrys existing
and planned commitments to market liberalisation under
the WTO basic telecommunications agreement.
(Suggested: 4 pages; Total = 40 pages).