PREFACE
BY THE SECRETARY - GENERAL - GENERAL
I am extremely pleased to introduce the Report of the Seventh Colloquium on the
Changing Role of Government in an Era of Telecom Deregulation (known in short as the
Regulatory Colloquium), which was held at ITU Headquarters in Geneva on 3-5 December
1997.
The Colloquium represents an important continuing initiative to consider, in an
informal, expert and practical way, some of the fundamental issues of telecommunications
regulation that arise from today’s fast-changing telecommunications environment. The
Colloquium is non-governmental in nature, privately financed, and brings together, in
their individual capacities, high level telecom officials and experts from a diverse range
of countries. The participants meet in Geneva for three days to formulate practical advice
designed to be of immediate benefit to policy makers, regulators and business communities
in developed and developing countries alike.
The Seventh Colloquium had as its topic the present crisis in the international system
by which payments are made between countries for international telecommunications services
(known as the accounting rate system). The Colloquium’s main conclusion is that the
accounting rate system, and the level of accounting rates, is not the real problem: as the
Chairman’s Report indicates, the real problem is the lack of telecommunications
development in many countries due to such causes as inadequate investment, inefficient
pricing policies, monopolistic industry structures, and a lack of clear and effective
regulation.
To address this underlying problem, the Colloquium has formulated a series of
conclusions and practical recommendations. We hope that they will be of value to the
Second World Telecommunications Policy Forum (WTPF) as it formulates its advice to ITU
members.
The funding for the meeting was provided on a collaborative basis by the Friedrich
Ebert Foundation of Germany (FES) and The World Bank, through its infoDev program.
Both organizations had funded earlier Colloquia, both separately and cooperatively. For
their critical help, I am most appreciative to Dr. Erich Vogt of the FES and to James
Bond, Bjorn Wellenius and Carlos Braga of The World Bank.
As noted in my Introduction to the Report of the First Colloquium, the concept of the
Colloquia originated with David Leive when he was Chairman of the ITU’s Telecom
’91 Regulatory Symposium in Geneva in October 1991. An extensive round of informal
consultations with experts from many countries led Mr. Leive, Ambassador Gerald
Helman, who provided critical assistance, and me to conclude that the Colloquium would
meet a significant need and be of great practical value to many countries. This forecast
has been more than borne out by the success of the seven Colloquia and the widespread use
of its Reports.
In view of his outstanding leadership of the Colloquia, I asked David Leive after the
Second Colloquium to continue as permanent Chairman.
The results of the Seventh Colloquium are reflected in the following Chairman’s
Report by Mr. Leive. Together with several of my senior colleagues, I participated
throughout the three day session, just as I had at the first six Colloquia. In addition,
we were fortunate to have with us Mr. Neil McMillan, of the UK, prospective Chairman of
the Second WTPF and Mr. Tsunekazu Matsudaira of Japan, Chairman of ITU Study Group 3.
The Report describes the consensus of the participants on the principal issues
discussed, but does not represent individual participants’ views.
This publication also includes the executive summary of the Briefing Report prepared by
an independent consultant, Michael Tyler, which was presented to the Colloquium in draft
form to serve as a basis of the discussions. The full Briefing Report will be translated
and distributed to all administrations later this winter. Both the executive summary and
the Briefing Report reflect Mr. Tyler’s own research and views, and are not products
of the Colloquium discussions themselves.
Planning is now underway for subsequent meetings. The Eighth Colloquium will take place
in the last quarter of 1998, on a topic still to be selected.
In view of the Colloquium’s underlying mission to provide practical advice for
policy makers and regulators, a program is being developed with World Bank help for a more
active, intense and pervasive dissemination program, particularly employing websites and
the Internet in an interactive fashion. The project should be underway shortly.
Finally, I want to reiterate the importance I place on innovative methods such as the
Colloquia that can provide practical help to the telecommunications community throughout
the world which must deal with the complex challenges that arise from changing industry
structures, evolving economic policies and new technologies.
Pekka TARJANNE
Secretary-General
Geneva, January 1998
CHAIRMAN’S REPORT
TRANSFORMING ECONOMIC RELATIONSHIPS
IN INTERNATIONAL TELECOMMUNICATIONS
I. INTRODUCTION AND
SUMMARY
The Colloquium initially reviewed issues concerning the traditional international
framework for payments among telecom operators for international services, often called
the "accounting rate system". It did so because of widespread recognition that
the accounting rate system is seriously, if not fatally, undermined, and may not be
sustainable; that it urgently requires reform and/or replacement; that international
traffic is increasingly flowing outside it; and that the system is further put into
question by the WTO Basic Telecommunications Agreement.
The reasons for the crisis are not hard to find: the accounting rate system is near
collapse because it evolved as part of an industry structure based on monopoly providers
in different countries dealing with one another bilaterally. It is now increasingly being
undermined by technology and the market forces unleashed by the entry of competition.
After more in-depth review, the Colloquium’s principal conclusion is that the
accounting rate system, and the level of accounting rates, is not the fundamental problem
to be addressed, but only part of the problem, and should not be seen out-of-context as
major policy issues in themselves. The Colloquium identified as a principal policy and
social goal the need to preserve and expand telecommunications systems so as to meet the
growing needs of all peoples at reasonable and affordable prices. The fundamental problem
is the lack of network development in many developing countries, which makes it difficult
to achieve this goal. This lack of development in turn is due to inadequate investment,
inappropriate pricing policies, monopolistic industry structures and the absence of clear
and effective regulation. These systemic deficiencies have partly been masked by the high
settlement payments flowing under the existing accounting rate system to some telecoms
operators, especially in developing countries. Understandably, governments and telecoms
operators in these countries are reluctant to change the current arrangement on their own
initiative.
In addressing this broader issue the Colloquium recognised that the forces which are
driving the changes and causing instability in the traditional industry structure (greater
reliance on competition and market forces, technology innovation and convergence, and
economic arbitrage) were likely to continue and accelerate. It was also, therefore,
important to act quickly.
Addressing these fundamental issues would still be urgent even if the accounting rate
system did not exist; in effect, the accounting rate issue serves as a
"catalyst" for timely consideration of them. Put another way, the focus needs to
be not only on wholesale rates (the accounting and settlement rates) but primarily on
competitive retail rates – what the ultimate consumer is charged for communications
services, and on issues of development.
Structural changes in the accounting rate system, accelerated reductions in settlement
rates, and the large-scale carriage of traffic outside that system, are all occurring.
Such changes will continue, with different countries or groups of countries selecting
different solutions. The effects will necessarily result in a redistribution of economic
benefits between operators and between countries. They will present some operators and
some countries with severe problems of adjustment, especially in the case of many
developing countries, and above all in some of the least developed countries.
The Colloquium recognised that major efforts are already underway in a variety of
forums to reform the accounting rate system; ITU Study Group 3 is a principal focus,
as reflected in the Report of its December 1997 meeting. The reformed system will probably
continue to be used to an extent that cannot yet be foreseen, alongside the new modes of
operation. It is likely to embody substantially reduced accounting rates, and may be based
on uniform "termination charges". The Colloquium therefore did not focus on such
changes "within the system", but on the broader issues. Its conclusions may be
helpful in the preparation of the Second ITU World Telecommunications Policy Forum, which
will consider these issues in March 1998, as well as to the Second World
Telecommunications Development Conference.
Solutions that effectively
serve global telecommunications development can be found by linking the restructuring of
the international payment system with the restructuring of other aspects of the
international economic relationships in telecommunications, and also some aspects of
broader telecommunications policy as well. Key elements include:
- fresh approaches to investment in the public telecommunication network.
- restructuring of pricing to reflect cost.
- exploitation by operators in developing countries of the positive possibilities offered
by "new modes of operation" in international telecommunications.
- the orientation of telecom regulation to promote competition, investment and new
technologies.
Policy makers and regulators in many countries often are still not aware of how
profoundly, and rapidly, technology and market forces are transforming the telecom
landscape, that this rate of change will continue if not accelerate, and that
corresponding regulatory changes are imperative. There is an urgent need to increase their
awareness of the actual trends, issues, and policy alternatives. A suitable, targeted and
urgent transition process is needed through which this can take place.
The Colloquium’s work proceeded in two stages:
- An assessment of the forces of change, the likely pace of change, and the likely impact
of change
- A discussion of how operators, regulators and governments, assisted by the ITU, and
using all available ITU mechanisms, can best ensure a successful adaptation to the new
environment.
II. FORCES OF
CHANGE, THE PACE OF CHANGE, AND THE IMPACT OF CHANGE
The accounting rate system is the product of a world that is rapidly
vanishing, in which international telecommunications traffic was exchanged between
national monopoly providers, through correspondent relations. There are three key factors
hastening the break-up of the old system:
1. The rapid introduction of new technologies and new modes of operation. The
industry is being restructured with global networks and systems and a host of new private
players. Increasingly, providers of communications and related services are
shareholder-owner companies.
2. The 1997 WTO Basic Telecommunications Agreement and the application of the basic
GATS disciplines to the global telecoms market through that Agreement. The key
elements include the so-called Most Favoured Nation principle (MFN) requiring
non-discriminatory treatment of foreign operators and superseding "reciprocity"
policies; commitments to provide market access for foreign operators; national treatment (i.e.,
treating foreign operators the same as national operators); and the comprehensive set of
regulatory principles included in a large number of countries’ WTO commitments
through the Reference Paper. All this is backed up by the WTO’s Dispute Settlement
procedure. These features of the 1997 Agreement have established new rules of the game for
over 90% of the world’s international telecommunications traffic.
3. The emergence of even more open competitive conditions within certain pairs of
countries with competitive industry structures; among the countries of the EU; and as
between the most liberalised WTO members. These conditions have been characterised by
some as a "Single Market". For traffic among these countries (which account for
over 80% of the world’s international telecommunications traffic) there is likely in
future to be relatively little difference in price between international and long distance
domestic calls. In numerous instances (in the EU for example) international calls will be
terminated at the same interconnect charge as domestic long-distance calls; in other
words, operator A can get into country B at country B’s domestic rates.
These three key factors deserve some elaboration:
The emergence of "new modes of operation" for international telecom services,
effectively bypassing the accounting rate regime, is one of the stronger forces for
change. The "new modes" include leased-line resale; the carriage of traffic
within international global alliances such as Concert, Global One, or Unisource;
"alternative calling procedures" such as refile, hubbing and re-origination; and
the extension of an operator’s network to include Points of Presence (PoPs) in other
countries, interconnected to the public switched network there at a local interconnect
rate rather than the international accounting rate. These new modes of operation
increasingly are provided by operators which are new players; some are not even ITU
members (though they may be Sector members); some will never use the old settlement
system.
The WTO Agreement has very far-reaching implications that are now only beginning to be
fully understood. Certain countries (including a few developing countries) have made
commitments in the WTO Agreement for very extensive dismantling of barriers against
cross-border competition; these include removal of foreign-ownership restrictions. By
committing themselves to the provisions of the Reference Paper on regulation, they have
also committed themselves to extensive regulatory safeguards assuring fair treatment of
foreign operators. In addition, there was an "understanding" among parties to
the WTO Agreement that the application of the accounting rate system would not give rise
to action by Members via the dispute settlement machinery. This understanding is to be
reviewed not later than the start of the further round of WTO negotiations on services
that is due to begin not later than 1 January 2000. This "understanding" was
necessary to accommodate concerns that the current bilateral accounting rate system is
fundamentally at odds with the multilateral principles upon which the GATS is based.
There are also implications that go beyond the group of WTO members that have made
these far-reaching open-market commitments. These are more difficult to analyse. The
combined effect of MFN and the Reference Paper commitments appears to give operators from any
WTO country certain rights to employ new modes of operation for traffic between that
country and those WTO countries (for example, most of the EU countries) where extensive
market-opening commitments have been made. These rights are, it is true, counterbalanced
by provisions designed to prevent anti-competitive behaviour. Telecoms operators from the
open-market countries are likely to fight back if the market access permitted by the WTO
Agreement to their home markets is not matched by the opportunity to pursue "new
modes of operation" such as leased-line resale or Internet telephony in the other
direction. The exact balance, and the consequent extent of the new opportunities for
telecom operators from WTO countries generally (including developing countries) will have
to be discovered in each country by trial and error, but there may be major positive
opportunities for developing countries.
These three developments have the effect of increasing the pressure on the accounting
rate system. The operative reality is that twenty of the most liberal countries
representing more than 80% of international telecommunication traffic have decided to play
(and have already begun to do so) under new rules that effectively allow foreign operators
to enter the market and terminate international calls at domestic interconnect rates,
bypassing not only the present accounting rates but the accounting rate system itself for
the traffic between themselves. Low rates for termination and the size of the networks
involved in these countries will irresistibly attract hubbing traffic from outside. While
these countries may still need to utilise the accounting rate system to pass traffic to
the rest of the world, the reality is that a majority of countries is left with the
minority of traffic passing under the existing accounting rate system, with much of this
traffic subject to a degree of refile.
How should the countries which have not made such a radical commitment to open markets
-- numerically a majority -- react? Many developing countries rely on settlement revenues
to meet a variety of needs, not all telecom-related. In many cases, though by no means in
all developing countries, settlements constitute a major percentage of telecom revenues.
The continuing flow of settlement payments under the old system is no longer assured from
operators in some net payer countries. The prospect of reduced settlement payments
highlights other more systemic problems facing the telecommunications industry, especially
(but not exclusively) in developing countries: low telephone penetration; unsatisfactory
market structures; lack of diversity in revenue sources; high prices to users;
economically inefficient pricing; monopoly providers (whether state or privately owned);
uncompetitive services; and either inadequate regulation or the complete absence of
explicit and structured regulatory rules, processes and institutions.
It is these underlying issues that need to be addressed urgently
III. ADAPTING SUCCESSFULLY TO
THE NEW ENVIRONMENT
What follows are some suggested specific means by which these issues may
be addressed, particularly though not exclusively by developing countries. These are not
mutually exclusive but can be deployed in combination. In many cases the problems
addressed are not new, but the issues are still far from being resolved. The current
accounting rate controversies simply bring them to the fore. Given the rapid and
increasing pace of change, it is urgent that policy makers and regulators focus on these
issues, and that remedial actions be taken as soon as possible.
What choices do developing countries have? The structural deficiencies described above
are not simply a case of being solvable by infusions of money. In any event, the public
funds budgeted by relevant international institutions (e.g., the World Bank, the
ITU) are not available, and not sufficient, to materially reduce the adverse impacts of a
major decline in settlement revenues. So developing countries have to look to other means.
For example, operators in developing countries can exploit the new modes of operation.
This will require a high degree of initiative in such countries, and cooperation, by
operators and regulators, policy makers and other elements of government, to insist upon
and make effective use of the rights granted by the WTO Agreement.
We address five specific areas of challenge and opportunity, in turn:
- investment and telecommunications development;
- pricing policy;
- new modes of operation;
- role of the national regulator;
- transition issues.
We conclude, in Section 6, by discussing the role of the ITU and how it can best
contribute to a successful outcome: that is, successful adaptation by operators,
regulators and national governments to the new environment.
1. Investment and
Telecommunications Development
Investment in telecommunications is a prerequisite for broad based
economic development. More and more governments are concluding that investment
requirements are best met by tapping market sources, including foreign private equity
investment, most often in partnership with local domestic investment. However, attracting
such investment and securing good results from it is a challenge; international exchange
of expertise and experience in meeting this challenge could be very valuable. Key factors
which can contribute include:
- Choice of a coherent and economically appropriate pricing policy, as discussed below.
- A stable, transparent and non-discriminatory regulatory system for telecommunications
(as envisaged in the WTO Reference Paper and in the work of previous ITU Regulatory
Colloquia).
- A stable and appropriate regulatory and legal regime (including taxation) for investment
generally, and for foreign investment in particular, while ensuring that national
priorities (e.g., telephone penetration, retention of a reasonable proportion of
revenues in the host market) are met through regulatory supervision.
- Encouraging locally-based private investment, which gives confidence to foreign
investors.
- Full use of modern methods of project finance as well as equity investment.
- Aggregation of investment, whereby several countries might act together to create an
attractive investment project.
It is very questionable whether the granting of monopoly privileges, or exclusive
licences for lengthy periods of time, does in fact encourage sustained investment or
efficient utilisation of capital employed, rather than producing the contrary result, even
though privileges of this kind have sometimes been granted in the hope of such favourable
results. It is also important to recognise that changes in the accounting rate regime may
affect both the value of assets in the industry and privatisation prospects.
2. Pricing Policy
The focus of public policy about pricing should be not only on "wholesale" (i.e.,
accounting and settlement rates) but on collection, or "retail" rates -- what
consumers pay for communications services. What the new situation requires is a rational
pricing policy applicable to access lines and to domestic traffic (local and long
distance) as well as international traffic. Developing such a policy for any country,
developed or developing, requires three preconditions:
- Clear objectives, and logical adaptation of pricing policies and practices to those
objectives.
- Assembly of adequate information on costs, and analysis of how to allocate them, with
explicit identification of any cross-subsidies intentionally built into the pricing
system. Transparency is needed to accomplish this.
- Recognition of changing technology and market realities.
A pricing policy successfully adapted to the new environment will vary from country to
country, reflecting different goals and pricing approaches, but several features are
likely to recur:
- The policy will reflect the importance of providing widespread access to
telecommunications. This includes access to public, shared means of access (which can
range from pay-phones to "Internet cafés") as well as access lines for
individual households and business premises.
- Modified pricing structures which go beyond mere rebalancing through across-the-board
increases in local pricing. Pricing structure is likely to change, for example with new or
improved features to encourage off-peak traffic (for which the incremental costs are often
very low, even for international calls).
- Measures to reduce costs where the simple transfer of costs from the competitive market
sector (e.g., international) to a less competitive (local) market is politically or
economically impractical.
Such a "restructuring" of prices should reduce dependence on one or a few
sources of revenue, such as international settlements, in favour of developing, so far as
possible, a more robust and diverse "mix" of revenues. It will take into account
demand and market conditions as well as costs.
In sum, getting the pricing policy right is one of the keys to adapting to the new
environment, especially in developing countries. The new policy about telecoms pricing
should provide a clear roadmap and a clear timetable. It is also directly related to
foreign investment: by giving off the right signals, a pricing policy can encourage
foreign investment in domestic as well as international facilities.
3. New Modes of Operation
The new modes of operation are diverse, but share one characteristic:
they involve the movement of traffic outside the accounting rate system, with its
traditional correspondent relationships. The new modes of operation comprise:
- leased line resale (also known as private-line resale or International Simple Resale
(ISR));
- refile, hubbing and re-origination;
- international alliances of operators to provide service to multinational corporations;
- the extension of networks from one country into another using end-to-end international
circuits (not half-circuits) with Points of Presence (PoPs) at the distant end,
interconnected to the PSTN ("Foreign PoPs", in short);
- Internet telephony.
The case of "foreign PoPs" shows how far-reaching the new modes of operation
can be. In this case, the telecoms operator provides service directly to another country,
terminating calls (often via interconnect arrangements) in that country in the same way a
domestic carrier would. When coupled with the market opening commitments built into the
WTO regime (especially for certain countries which have made particularly far reaching
commitments) the new modes of operation offer major opportunities for vast and profitable
expansion of the international services business.
For operators in developing countries, the new modes of operation, combined with
improved access to industrialised-country markets in countries which have made extensive
WTO commitments, open up opportunities to greatly increase their traffic, especially
outbound traffic between their "home" countries and these markets. Initiatives
based on the new modes of operation could substantially offset, or even more than offset,
the revenues lost as a result of lower settlement rates within the traditional
correspondent arrangements. Operators in developing countries could undertake such
initiatives either independently or in combination with other operators, perhaps in
neighbouring countries; in practice, the second possibility will often be more realistic.
But in exploiting such opportunities, they will have to recognise that operators in the
"open market" countries may press for conditions to be imposed on their use of
the new modes of operation (such as the conditions concerning the reduction of settlement
rates to "benchmark" levels that the FCC has decided upon in the United States),
and/or for similar opportunities to be made available to them in the developing countries.
4. Role of the National Regulator
Telecom regulation is not an end in itself but rather a tool to achieve
national goals.
Effective management of the policy issues addressed in this Report requires a national
regulatory agency (NRA) with adequate powers, transparent decision-making, and clear and
stable policies. (See the Chairman’s Report of the First ITU Regulatory Colloquium
and the associated Briefing Report for a detailed description of the options for
regulatory reform.) Since telecommunications in one country is more and more affected by
regulatory decisions in other countries, effective and responsible management by the
government and NRA in one country of their relations with NRAs in other countries is
necessary. This could not be more clearly demonstrated than by the impact of the recent
"benchmark" decision on accounting rates by the FCC, although the FCC is not the
only regulatory agency which makes unilateral decisions which broadly impact carriers from
other countries. Decisions with far-reaching international effects should be made only
after extensive bilateral or multilateral consultation. (Similar problems might arise if,
as a substitute for the accounting rate system, an administration unilaterally imposed
specified termination charges for international traffic.)
5. Transition Issues
There has been extensive discussion about the time developing countries
may require to undertake a transition to new operational and financial arrangements
adapted to the new global telecommunications environment. The key questions are:
transition by whom, to what, and when? What are the rules of the game and what are the
techniques employed to help manage the transition effectively? There is no one answer, as
countries are not all alike. The EU countries, and other countries that have made
far-reaching market-opening commitments in the WTO agreement, have broadly similar
"road maps" and timescales. The most demanding transition issues concern
developing countries (other than those few, such as Chile or the Dominican Republic, which
are among the countries committed to a far-reaching market opening by their WTO
commitments). Here quite different "road maps" will usually be appropriate.
The issue of transition is not just a matter of timescales, but also of timely creation
of policies responding realistically to the new, and still changing, environment:
- timescales should be reasonable in relation to the experience of other countries (mainly
industrialised countries) which have previously made comparably major changes in telecoms
policy and industry structure; but also fast enough to realistically respond to challenges
of the new environment;
- there should be a defined transition plan and a specified end-point, as in the case of
Mexico’s price rebalancing program;
- transition policy and strategies should include proactive exploitation of the
opportunities discussed in Section 3, as well as other measures to mitigate the adverse
impact of reduced settlement payments. Such "other measures" might, for example,
include extensive restructuring of end-user pricing for both domestic and international
telecommunications services.
Achieving all this will require a strengthened regulatory capability. The massive
changes now taking place in markets that represent the majority of global traffic make
this more urgent than ever.
Even a well-conceived transition will not change the end result but will instead buy
time, during which telecom operators, governments and regulators can take steps to correct
systemic deficiencies such as uneconomic pricing of domestic telecommunications services,
and then adapt to the new environment. The accounting system, at least as it currently
operates, cannot be sustained in a market economy in the long term, so what is needed is a
national market-oriented plan for economically viable operation and expansion in the
absence of high settlement rates. Stretching out the transition time to cushion the shock,
if possible, will only be truly beneficial if the time is used effectively to plan and
implement structural change. A "soft landing" -- at the end of the transition
period -- may not be very "soft" and the transition period itself may not be
very long. An approach which faces the rigors of the new environment realistically from
the outset may nevertheless lead to a successful outcome.
6. The Role of the ITU
The ITU’s role in addressing these issues, beyond the important
continuing work of Study Group 3, should be further developed and defined. On issues like
this, where interests conflict, the role of the ITU as an impartial body trusted by a wide
range of parties in both developed and developing countries can contribute significantly
to finding solutions beneficial and acceptable to as wide a range of participants as
possible.
The forthcoming Policy Forum provides a timely opportunity for it to do so.
At the same time, the inherent limits of the ITU’s role needs to be kept in mind.
National pricing policy, on which so much depends, is made by the market (with some
intervention by national regulators), not by the ITU.
It is not at all clear, however, that comprehensive multilateral solutions are possible
or desirable, whether under the aegis of the ITU or another organisation, nor is it clear
what the elements of such a solution might be.
There is ample scope for the ITU to play a supporting and catalytic role.
This includes two critical functions: promoting telecom development in its
Member States, and helping its Members to set up effective regulatory processes and
institutions.
1. National telecom
development
The ITU, in conjunction with the World Bank Group and infoDev,
IFC and others, should seek to facilitate access to investment resources for funding of
network development, for example through advisory and consultative activities, and through
measures to mitigate investment risks, such as the guarantee arrangements of MIGA.
Three specific cases of suggested initiatives by the ITU particularly deserve further
consideration:
a) Working with the other relevant agencies named, the ITU should help concentrate the
existing scattered resources, and help to create a "one-stop shop" for funding
of network development, and support the establishment of a cadre of "salesmen"
to encourage countries to apply for, and to be aware of, both concessionary and commercial
funding available for network development, as well as sources of technical advice and
training. The role of innovative forms of commercial financing such as BOT deserve
particular consideration. Countries should be encouraged to diversify sources of network
finance while maintaining regulatory and policy control over the process of development.
b) In view of the critical role now performed by new players -- service providers not
traditionally part of the ITU family -- the ITU needs to find additional ways to integrate
the private sector into its activities.
c) The ITU should, through information and training, encourage entrepreneurial
behaviour in developing countries; for example, to take effective advantage of the new
modes of operation and adopt other policies which offer potential for revenue enhancement
and telecom development.
2. Regulatory processes and
institutions
An equally vital task for the ITU to perform is to assist countries to
set up effective regulatory regimes and systems, and to strengthen the capacity of
regulators, in the interests of stimulating telecommunications development. For example,
an independent regulator can provide the stability of policy potential investors seek,
while at the same time ensuring that national development objectives are met. The ITU,
World Bank Group and infoDev, and other international institutions as
appropriate should enhance and coordinate existing technical assistance activities in this
area, reinforcing local expertise on regulation through regional seminars, extended
in-country missions, and education and training services. A key objective would be to make
national governments, regulators and operators aware of the full range of policy options
specifically appropriate to the country’s individual requirements. One means to do so
is to facilitate access to information (laws, licenses, procedures, organisational
structures) on regulatory approvals in different countries.
IV. CONCLUSIONS
1. The accounting rate system, as it operates today, reflects a world that is rapidly
disappearing. The present breakdown in that system has focused attention on a series of
systemic deficiencies that have been present for a long time in the telecom development of
many countries. Many of these, such as economically unsustainable pricing of many domestic
telecommunications services, or failure to attract sufficient private investment on terms
mutually beneficial to both investors and telecom users, needed to be addressed in any
case. The crisis of the accounting rate system makes it much more urgent to tackle them
today. Attempts to preserve an uneconomic system will be achieved only at great costs to
economic development.
2. The dual impact of market forces (e.g., the impact of the new modes of
operation and of the 1997 WTO Basic Telecommunication Agreement will increasingly make the
accounting rate system (at least as it operates today) obsolete or irrelevant. Yet the
outlines of what will replace it are not clear -- it is unlikely to be a single solution
but several approaches co-existing at the same time. But it is equally clear that the old
approach -- in which countries try to hold on to their high settlement revenues under the
accounting rate scheme -- is no longer sustainable.
3. These very dramatic changes are not well understood by policy makers and telecom
regulators in many countries; nor are the options available to them to respond
successfully in the new environment. A systematic process of analysis, debate and
dissemination of ideas and experiences is urgently required.
4. There is an important opportunity for the ITU, particularly through the Second World
Telecommunications Policy Forum and the Second World Telecommunications Development
Conference, to:
(i) help intensify the sense of urgency among policy makers and regulators in
understanding the new environment, including the implications of the new WTO
commitments, and in reforming their regulatory regimes to facilitate successful adaptation
to an open market economy;
(ii) encourage "pro-active" responses especially in developing countries, to
the opportunities represented by more open markets and the "new modes of
operation", in addition to efforts to mitigate the adverse effects of reduced
settlement rates.
(iii) organise a program of help to countries without the necessary resources to
negotiate changes in international payment arrangements; establish the pricing policies
adapted to the new environment; create an effective regulatory regime; attract investment
funds for telecom development; and negotiate an appropriate transition period.
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