DNTA

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.

• Bahamas:  This study found that the Bahamas depends less upon revenue from international settlements than most developing countries, because of high outgoing traffic demand, mostly to the United States.  Also, present settlement rates are already quite low by global standards.  At the same time, the cost structure of the Bahamas Telecommunications Corporation is highly oriented toward international service, and thus the country cannot readily absorb large reductions in either settlements or call tariffs.  Impending changes in the sector, especially the privatization of BaTelCo, along with increasing competition, might help to reduce costs in the future.

• Colombia:  This study demonstrated that Colombia has made aggressive moves to liberalize its telecommunications sector, introducing competition in both local and long distance services.  Settlement rates have been consistently declining for several years, also. A drastic reduction in settlements, however, would be counter-productive for the Colombian industry, discouraging further market opening.  Costs for international services are not as low as the FCC benchmark analysis suggests, although costs have been decreasing.  Given time to develop further, the sector should realize greater efficiencies, and lower prices.
  

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.

Download a complete copy (MS Word 95), 101 Kbytes

Download a summary (MS Powerpoint 95), 267 Kbytes

Conditions: Documents may be downloaded for private, non-profit use.  All copyright remains the property of David N. Townsend.  Downloaded reports may be printed, copied, and redistributed, as long as there are no changes or deletions to any text or other contents.  Any copies of reports should clearly designate the DNTA copyright, and identify the source of the report.  Contact us if there are any questions.

David N. Townsend & Associates Home Page

©1998 David N. Townsend