OPINION B - The implications of the GATS with respect to basic telecommunications for developing countries and cooperative actions between ITU Member States and Sector Members to facilitate adaptation to the new telecommunication environment

The Second World Telecommunication Policy Forum (Geneva, 1998),

considering

a) the mission handed down to the Union under the ITU Constitution (Geneva, 1992), in particular in Nos. 3, 4, 9 and 16 of Article 1;

b) that the International Telecommunication Regulations and various ITU Recommendations constitute a framework, agreed among Member States of the Union, governing tariffs and accounting in international telecommunications;

c) that the General Agreement on Trade in Services (GATS) and the successful conclusion in February 1997 of the landmark agreement among 69 WTO member countries to progressively liberalize their basic telecommunication markets confer a new status on telecommunication services, which are now viewed by many as a tradable commodity, while still remaining a means of delivery for other valuable services;

d) that many developing countries, which have the right under the GATS to exercise appropriate flexibility in making market access commitments, were party to this agreement and that the effects of the agreement will be widely felt in all countries that made market access commitments to progressively liberalize their basic telecommunication markets, as well as in the countries with which they trade;

e) that the application of the provisions of the GATS with respect to basic telecommunications were agreed against a backdrop of other regulatory, technical, commercial and financial changes sweeping the telecommunication sector;

f) that developed and developing country operators benefit from network expansion and performance improvement in developing countries,

recognizing

a) that many countries have liberalized their telecommunication markets and that traffic is flowing to a growing extent outside the traditional settlement arrangements;

b) that liberalization of the global telecommunication market can be expected to lead to a lowering of settlement rates and reform of the international settlement system;

c) that the arrival of new entrants can attract new investment resources, particularly in developing countries, subject to possible economic constraints in those markets, and that sustainable competition can, in the medium term, lower tariffs, making telecommunication services more accessible and less costly;

d) that the situations regarding telecommunication regulation are different from one country to another and that their evolution will take into account each country's GATS commitments;

e) that private stakeholding in the equity capital of incumbent operators in a number of developing countries has in the past often been accompanied by an agreed period of exclusivity;

 f) that many administrations, particularly in developing countries, are currently dependent on net settlement payments for a significant proportion of overall revenues to support infrastructure development and universal service goals, and that a sudden reduction in these resources could slow investment, in the absence of alternative sources of financing;

noting

that the case studies in respect of the nine countries studied indicate that termination costs and charges differ from country to country,

believing

a) that these developments in the global telecommunication marketplace will prompt changes in policy with respect to telecommunication regulation in developing countries and that a new, market-oriented approach to financial, policy and regulatory strategies will serve to ease the transition from the existing situation to the new environment within which their economies will operate;

b) that settlement rates between liberalized and non-liberalized markets will increasingly tend to be dictated by effectively competitive markets, and that sources of financing supplementary to settlement revenues should be sought for infrastructure development and universal access;

c) that ITU, and in particular ITU-D, is ideally placed to assist developing countries in managing this transition,

invites ITU Member States and Sector Members, including those in developing countries

1 in conformity with national realities and national development goals, to continue taking appropriate steps to ease the transition to the new telecommunication environment, by considering the progressive liberalization of their telecommunication markets and by encouraging private investment for instance by developing effective policies that are transparent, non-discriminatory and competitively neutral for the funding of universal service obligations;

2 to share experience with one another in the adaptation of national policies, including implementation of the GATS with respect to basic telecommunication services and of the reference paper principles and methods of ensuring that any new investment, domestic or foreign, leads to the mutual benefit of investors, the national economy and consumers;

3 to further develop appropriate cooperation, particularly during any transitional period, to support developing countries in adjusting to the new trade in telecommunication services environment by gradually implementing tariff policies with a view to reducing dependence on revenues from accounting rates;

4 to mitigate the effects of settlement rate reform on developing countries, and in particular on the least developed countries, inter alia by encouraging competition for transit traffic and a substantial reduction in transit rates as a result of the significant decrease in accounting rates;

5 to apply to transit rates the principles of transparency, non-discrimination and cost orientation in all situations in which the transit service provider holds a dominant position;

6 to utilize the opportunities for flexibility in scheduling commitments allowed for under the GATS, as these relate to the conditions for the increasing participation of developing countries,

further invites the ITU Member States and Sector Members, especially those in developed countries

1 to facilitate the transfer of technology and manufacturing know-how in developing countries on a partnership basis;

2 to promote cooperation among national, regional and global telecommunications operators and service providers in a mutually beneficial relationship;

3 to seek to ensure that the growth of telecommunications is not hindered in countries that are likely to be severely affected by the changes, and to take into consideration difficulties that may be experienced by developing countries with a view to reducing or eliminating their effects to the maximum extent possible;

4 to mitigate the effects of settlement rate reform on developing countries, and in particular on the least developed countries, inter alia by encouraging competition for transit traffic and a substantial reduction in transit rates as a result of the significant decrease in accounting rates;

5 to apply to transit rates the principles of transparency, non-discrimination and cost orientation in all situations in which the transit service provider holds a dominant position;

6 to encourage telecommunication operators and service providers which are not Sector Members to apply the above;

7 to support the development of Centres of Excellence in conformance with Council Resolution 1111,

invites the ITU Council and the ITU Secretary-General

to take account of the concerns of developing countries and the general impact of the GATS provisions with respect to basic telecommunications when drafting the ITU Strategic Plan,

invites the Director of BDT, in cooperation with the Secretary-General and the other Sectors of the Union

1 to continue and expand programmes and information seminars which outline the impact of the GATS provisions with respect to basic telecommunications services for developing countries and to provide those countries with practical guidance with a view to the possible opening of their markets to competition;

2 to foster telecommunication development and reform by further facilitating the effective collection and dissemination of data, from all sources, on a wide range of issues, to which end it would be useful to include data with respect to levels and trends in payments made for delivering international traffic, both terminal and transit, and issues relating to tariff rebalancing, interconnection, rural telephony and universal service obligations, and to support the establishment of databases and Web pages for this purpose;

3 to encourage and facilitate partnerships for development and human resource training and to develop, on a regional and worldwide basis, information seminars and assistance plans relating to the implementation of principles identified in relevant ITU-D recommendations - notably regarding transparency, investment, provision of universal service/access, establishment of fair competition, promotion of a culture of innovation, development of the network, and operation of an independent regulatory body - and Policy Forum opinions; and to make use, inter alia, of the centres of excellence or other human development centres;

4 to make every necessary effort to facilitate the transition to a fully competitive trade in telecommunications regime, and to finalize and/or validate cost models which can be used to assist the transitional process;

5 to develop a programme of regional seminars in collaboration, where appropriate, with regional bodies to support Member States in operation of regulatory bodies independent from telecommunication operators;

6 to continue the use of case studies such as those carried out in connection with this Forum through further detailed studies, including elasticity studies, and to develop possible models for progressively implementing cost-oriented tariffs;

7 to provide assistance to developing countries that wish to introduce analytical accounting and a cost-oriented tariff system;

8 to assist countries most in need in this transitional period by:

• further facilitating relationships with the World Bank and other international and regional development agencies (international organizations, non-governmental organizations and the private sector), with a view to providing technical and financial assistance for developing countries during a specified transitional period;

• fostering the exchange of information on methods of privatization of national operators, promotion of private ownership and investment, and development of a competitive, multi-carrier regulatory environment, with a view to facilitating access to private capital markets;

9 to continue to play a key role in assisting developing countries in implementing provisions of the GATS provisions with respect to basic telecommunications and in the processes of data collection, analysis and solutions, noting the intention of developing countries to make an effort to contribute constructively to their transition,

invites the World Telecommunication Development Conference (Valletta, 1998) and the Plenipotentiary Conference (Minneapolis, 1998)

to ensure that the above actions are taken into consideration and incorporated in ITU work programmes.