Europe puts pressure on FCC over accounting rate moves

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                Telecoms Newsline

        A News Service for Telecoms Professionals
             Sponsored by Hewlett-Packard
              Issue 48: 2 September 1997
           http://www.telecomsnewsline.com

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Europe puts pressure on FCC over accounting rate moves
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The European Commission (EC) has warned the US regulator, the Federal
Communications Commission (FCC), that its unilateral action (see TN
46) could jeopardise the World Trade Organisation agreement on
telecoms. The FCC has rejected the WTO agreements sanctioned by the
ITU, and intends to impose its own cost-based accounting tariff for
international call terminations.

The US suffers an enormous trade deficit in telecoms services
because its international calls are much cheaper than those in many
other countries. This means that far more traffic originates in the
US for termination overseas than comes in from abroad, resulting in
American international operators paying out more than US$5 billion
per year to foreign carriers for the termination of calls.

The FCC has come up with its own benchmarking scheme which will be
introduced over the next five years. This has enraged many nations
who view it as dictatorial; it is also against the multilateral
approach of the WTO agreement. Furthermore, in the absence of
accurate data, the FCC has used countries1/4 GDP (rather than how much
it costs overseas operators to handle calls) to set the settlement
rates that US operators will be obliged to pay overseas carriers in
future. At the moment the FCC feels that many countries1/4 accounting
rates are inflated and bear no relation to the actual cost of
providing the service.

Poorer countries claim that it costs them much more to handle calls
because they struggle with antiquated infrastructure and that they
need the revenue from high accounting rates to cover the cost of
modernising their networks. In addition, for less developed
economies, the monies they receive in settlement rates are a precious
source of hard currency. The debate looks set to run and run with the
International Telecommunication Union (ITU) stuck between a rock and
hard place, trying to find a compromise that is acceptable to all
parties.

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Telecoms Newsline       {c} 1997 Hewlett-Packard Co.

 Editor:      Peter Judge
 Contributor: Annie Turner

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-------------------------------------------------------------------------
Bill Frantz       | The Internet was designed  | Periwinkle -- Consulting
(408)356-8506     | to protect the free world  | 16345 Englewood Ave.
frantz@netcom.com | from hostile governments.  | Los Gatos, CA 95032, USA

At 10:52 PM -0700 9/2/97, Bill Frantz wrote:
>#######################################################
...
>Europe puts pressure on FCC over accounting rate moves
>------------------------------------------------------
>The European Commission (EC) has warned the US regulator, the Federal
>Communications Commission (FCC), that its unilateral action (see TN
>46) could jeopardise the World Trade Organisation agreement on
>telecoms. The FCC has rejected the WTO agreements sanctioned by the
>ITU, and intends to impose its own cost-based accounting tariff for
>international call terminations.
>
>The US suffers an enormous trade deficit in telecoms services
>because its international calls are much cheaper than those in many
>other countries. This means that far more traffic originates in the
>US for termination overseas than comes in from abroad, resulting in
>American international operators paying out more than US$5 billion
>per year to foreign carriers for the termination of calls.
...

The basic flaw in all of these analyses stems from lumping all of these
market transactions together into national bins.

The whole "trade deficit" talk, on all sides, suffers from this fatal flaw.
If Company A in nominal nation AA gets more business than Company B in
nominal nation BB, the pundits call this "imbalanced trade." I call it
knowing where the bargains are.

Can't we spare one of our nukes for Brussels? And another for Cherbourg, or
wherever it is the EC has its other HQ?

(Note to Greg Broiles: You will undoubtedly claim that I should check my
facts more thoroughly before sending this message. When you start paying me
$150 an hour (cheap by attorney's inflated fee schedules) I will promise to
spend an extra 10-20 minutes per post doing Web searches to verify trivial
details.)

--Tim May

There's something wrong when I'm a felon under an increasing number of laws.
Only one response to the key grabbers is warranted: "Death to Tyrants!"
---------:---------:---------:---------:---------:---------:---------:----
Timothy C. May              | Crypto Anarchy: encryption, digital money,
tcmay@got.net  408-728-0152 | anonymous networks, digital pseudonyms, zero
W.A.S.T.E.: Corralitos, CA  | knowledge, reputations, information markets,
Higher Power: 2^1398269     | black markets, collapse of governments.
"National borders aren't even speed bumps on the information superhighway."