David N. Townsend & Associates

Communications Economics, Policy, Regulation

DNTA conducts Case Studies for ITU
on International Settlements Reform

DNTA has had the honor of assisting the International Telecommunication Union in the analysis of the vital issues surrounding reform of international settlements policies worldwide.  This process, which was the focus of the second World Telecommunications Policy Forum in Geneva, included the conduct of a series of Case Studies on the potential impact of alternatives to the present system of inter-carrier compensation for international calls.  DNTA was engaged to perform two of the Case Studies, in Colombia and the Bahamas.  The Case Studies represent an important element of the ITU's plans to continue studying the settlements issue, and to move toward a new, market-based system of international telecommunications payments.

Following is a brief summary of the study findings.  For complete information on these and the other ITU Case Studies, contact the ITU.

Cost issues in international settlements:
Toward a new theoretical framework

As part of the review of issues and data for the Case Studies, DNTA developed this paper on the underlying theoretical issues relating to the cost structure of international telephone traffic. Accurate measurement of these is vital to the development of economically appropriate, and fair, compensation methods.  The paper reviews the cost methodologies developed by the ITU, and by the U.S. Federal Communications Commission in support of its controversial "Benchmarks" proposal to reduce settlement rates between the U.S. and other countries.  It then proposes an alternative methodology for calculating "National Extension" costs, based upon fundamental economic theory.  A follow-up paper on specific data analysis methods is under preparation, and DNTA is pursuing further country-specific cost studies in support of revising settlements policies.

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