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Chairman's Report





Chairman’s Report of the Seventh
3-5 December 1997, Geneva


Preface by the Secretary-General of the ITU
Dr. Pekka Tarjanne

Report of the Colloquium Chairman
David M. Leive

Executive Summary of Briefing Report





1. Investment and Telecommunications Development

2. Pricing Policy

3. New Modes of Operation

4. Role of the National Regulator

5. Transition Issues

6. The Role of the ITU


ATTACHMENT 1 – List of participants

ATTACHMENT 2 – Colloquium Discussion Outline




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.


Geneva, January 1998






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.


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


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.


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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