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Cost-recovery Given the declining resource level available to the ITU and the need to strengthen the organization’s financial base, the 1994 Kyoto Plenipotentiary recommended that the ITU Secretary-General undertake a study with a view to developing a cost attribution framework and methods of cost-recovery. In addition, the increased competition which the ITU must face from regional bodies and industry fora and the many new players involved in the sector that demand more results, faster is pressuring the ITU to review its policy of zero budgetary growth if it is to maintain its leading position in the telecommunication sector and changing environment. Cost recovery is in line with the "user-pays" principle which dictates that those who benefit most from a service, particularly a service that is of value to only a few, should bear the brunt of its cost. The introduction of greater private sector financial responsibility linked to greater powers as well as full cost attribution and cost recovery for specific products and services provided by the Union are considered by many as the best ways of maintaining funding for the Union’s important activities without increasing the financial burden on all Members across the board. ITU-2000 reaffirmed the general principle of implementing cost-recovery procedures for ITU services. The Council, in 1997, agreed to the principle of full cost recovery of the processing costs for the production of the special sections of the Weekly Circular for space radiocommunications services and asked for a report on procedures and costs and on the development of fee schedules based on full cost-allocation. It also asked that other candidate products and services for cost recovery be identified. One area where a marked growth in workload which benefit only a limited number of countries is satellite filings. The explosion in new kinds of satellite services using both the traditional geostationary orbit and new, lower non-geostationary orbits (for example, the new crop of LEO and MEO systems now being deployed) has meant that the work involved in processing satellite applications has dramatically increased in recent years. With demand for satellite services currently booming, over-filing is becoming increasingly prevalent, prompted by anxieties that some requested orbital positions will not survive the coordination process, or by a desire to hoard slots on the geostationary satellite orbit and their associated spectrum as a "reserve" for potential future applications or for lease or resale to the highest bidder. The resulting "paper satellites" have to be taken into account when analyzing the potential risk for interference in coordinating with other future satellite system, despite the fact that they do not represent real communication requirements and may never come into operation. This has an unnecessary negative effect on the interests of other administrations and slows down the entire process. Moreover, recent analysis undertaken by the ITU for the year 1995 has revealed that a mere 10 countries and five international satellite organizations currently account for some 80% of all satellite filings, while a full 130 Members make no use at all of the respective Radiocommunication Bureau’s services yet are still obliged to meet its costs. Many consider, therefore, that the adoption of a user-pays policy for satellite filings above a ‘given, reasonable threshold’ to be covered by the regular budget would both deter frivolous filing for unnecessary satellite slots, while at the same time providing the necessary resources to meet requests from heavy users and giving them better value for money through a faster, more responsive process. If the ITU is to continue to work within its tight budgetary constraints and provide efficient service to members in an environment of strong growth in demand for frequency spectrum and orbital positions to operate satellite systems, implementation of some kind of user-pays system whereby requirements beyond a level considered ‘reasonable’ are paid for by those generating the extra workload would seem to be the only equitable solution. Proposals were made, on the basis of a detailed cost-analysis of each process required in the notification of satellite networks, for processing charges to range from less than 200 CHF per page for straightforward advance publication requests about 340 CHF per page for simple coordination requests. More complex coordination requests such as those involving Resolution 46 would reach 630 CHF per page for coordination requests of geostationary-satellites and less than 1 000 CHF per page for non-geostationary satellites. Among the guiding principles was that the charges were to cover all the relevant costs generated by the processing of a satellite network filing and that none of the revenue from cost recovery be appropriated for any other purposes than the processing and publication of satellite network filings. The estimated revenue, as reflected in the draft financial plan of 2000-2003 could amount to some CHF 30 millions. This was one of the most debated issues of this year's Council. Several supported the general lines of the document but argued that the ITU was not a commercial organization and further detailed studies on cost attribution was required while others considered that cost-recovery had become necessary given the high costs involved in providing certain services to only a limited number of beneficiaries. For many, the time was ripe to move on without further delay. Others felt that the linkage between the introduction of the schedule of fees did not clearly show the impact on the contributory unit and some that cost recovery should not be used as a pretext to lower the contributory unit but as a means to auto-finance services that were not benefiting a majority of members. Some felt that the proposed schedule was not in conformity with the spirit of Resolution 39 of Kyoto on the strengthening the financial base of the ITU in which cost recovery was only one element to consider while others argued that the need to diversify the financial basis of the organization given the decline of resources was vital if the ITU was to have healthy foundations to continue effectively its work. It was also proposed that all ITU activities be categorized into three clusters: one that would be funded via the contributions of the regular budget, one that would be subject to partial cost recovery and one that would be fully cost-recovered. Another idea floated was that a certain amount of pages of filing per country could be free and additional pages above that amount would be chargeable to enable developing countries or small projects not to be unfairly affected. In the same vein, it was also proposed that incremental charges be used in which large projects should be subject to higher charges than smaller projects. The question of how to deal with submissions, for which payment would not be honoured, was also raised. Others thought that it was the simplification of the process that would lead to savings and would clear backlog and not cost recovery. The timescale of implementation was equally a hot issue given the fact that the date would affect those satellite notifications awaiting to be processed in the backlog and the fact that administrations had to establish mechanisms domestically to pass on the costs to the respective "owners" of each satellite project. Three possible dates were offered: 27 June 1997 which was the date at which Council closed last year. This meant that the charges would apply to all applications received by then; 1 June 1998 i.e. at the close of Council this year, in which case, charges would apply only to applications received as from now; and 1 January 1999 which would give more time to develop the recovery at the country level. Given the significant and as yet unevaluated impacts because of the proposed date of entry into force as well as their effect on government and commercial systems, the Council decided to refer the matter of the date of application to the Plenipotentiary Conference for decision. On the issue of other areas where cost recovery in general could be introduced, the Council could not reach a consensus on the scope of application (to what services or products it should apply), on the extent to which it would be applied (when it should be partial or total) or on the conditions needed to apply (how to determine whether it is of benefit to all membership or to a limited number of beneficiaries, when is it sought to a greater extent than normal). It therefore decided that although cost recovery should be applied as extensively as possible, criteria had to be adopted in order to determine transparently and in a non-discriminatory manner which services or products would be subject to total or partial cost recovery. The criteria being dependent on the type of services and products to be provided, it was agreed that, as a general rule, services and products that were sought by a limited number of Members or when they were requested to an extent that is significantly greater than the level of facilities generally provided or when it is chargeable primarily or exclusively to commercial entities rather than to governments or public entities, such services or products would be candidate for cost-recovery. The Council requested the Secretary-General with the Directors of the Bureaux to develop detailed criteria and identify possible products and services that would be subject to cost-recovery together with detailed information on each product and service such as their nature, costs, beneficiaries, the part for which cost recovery would apply and report back to PP-98.n |
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