Falling through the cracks: International accounting rate reform at the ITU and WTO

Heightened attention to international accounting rates at the ITU and the WTO has led some observers to conclude that carriers soon will impose cost-based termination charges. This article concludes that while accounting rates have declined on some routes, many incumbent carriers can and will delay or thwart progress. The article examines the FCC's unilateral regulatory initiative as evidence of a growing schism between governments keen on immediate progress and those that fear a ‘free fall’ in accounting rates and a quick end to settlement surpluses. The article also considers technological innovations like call-back and Internet telephony with an eye toward assesssing whether and how widespread accounting rate reductions will occur.     

Interconnection in international telecommunications: An empirical investigation of United States settlement rates

Several national governments have expressed concern at the inability of carriers to negotiate lower accounting rates. Ergas and Patterson (1991) and Frieden (1997) argue that it is only on bilateral markets with facilities-based competition at both ends that conditions favour accounting rates reductions. In the absence of facilities-based competition, Frieden also suggests that service providers, such as resellers, may provide a second best opportunity to place downward pressure on accounting rates. This study extends the work of Ergas and Patterson by developing an econometric model of settlement rate pricing. The model is estimated on data for 27 US bilateral telephone markets for the period 1985 to 1995. Parameter estimates are used to identify settlement rate determinants, and so highlight impediments to efficient international telecommunications pricing. A novel feature of the model is the inclusion of a resale market structure variable.     

Vertical Integration in International Telecommunication System

The process of liberalization and privatization is drastically altering the links among international telecommunications carriers. The model presented in this paper analyses the international telecommunications market illustrating the effects of vertical mergers, under symbiotic production conditions, when vertically integrated and unintegrated carriers coexist. The effect of competition is analysed both in the final market and in the intermediate one where carriers compete over tariffs to get an appropriate distribution of profits. In particular, the results show the relations between final market prices, intermediate tariffs and market dimensions and their implications on profits.     

Trade policies and variability in international grain markets

Increased instability in international market prices has created new problems for trade participants, particularly developing countries. However, it seems that importing country policies are primarily responsible for market variability. In most cases, a trade-reliant strategy appears more effective than an alternative policy of self-sufficiency. As long as countries continue to subsidize domestic consumption, international market controls appear likely to remain as key components of grain policy in importing countries.     

ITU Plenipotentiary Conference and beyond : A case for serious foreign policy

The ITU Plenipotentiary Conference held in Nairobi in the Fall of 1982 was a significant international instrument for the conduct of telecommunication foreign policy. Growing demand for telecommunication services and products coupled with the economic and sociocultural impact of new technologies have resulted in greater global interest in the problems, issues and technical complexities of maintaining order in global telecommunication. A major theme of this article is that ITU deliberations and decisions are all part of the growing telecommunication foreign policy agenda and that the benefits of successful diplomancy are usually worth the costs of effective and coordinated domestic and international policy development.     

International Telecom Settlements: Gaming Incentives, Carrier Alliances and Pareto-Superior Reform

Liberalized countries that allow competition in international telecommunications favor traffic re-routing practices as arbitrage against foreign monopolists. This view is seriously incomplete. Monopolists, allied with carriers in liberalized countries, can use these practices to reduce termination payments to nonalliance carriersöthereby harming also consumers in liberalized countriesöby gaming regulations that require equal termination rates at both ends and 'proportional return' (the monopolist's traffic is allocated among carriers in proportion to their shares of traffic to its country). We also present a simple bilateral settlements reform that eliminates gaming incentives and other proportional-return distortions, yet benefits both countries.     

Regulation and investment behaviour in the telecommunications sector: policies and patterns in US and Europe

This paper reports the results of the quantitative analysis of international experience of the relationship between infrastructure investment in the deployment of capacity that can carry large volumes of voice and data traffic and regulatory policy changes in the telecommunications sectors. It looks at the relationship between infrastructure investment for these infrastructure assets and the access pricing régimes for local exchange carriers in the United States and Europe. It then looks at the relationship between various aspects of regulatory and institutional policy changes in Europe and how they affect access prices.The paper finds that a lower access price promotes greater deployment of digital technology among US incumbent local exchange carriers (ILECs). Based on this finding, it suggests that it is in the ILECs interest to have access to their networks encouraged.The European data for interconnection are recent and far reaching conclusions are not feasible, but the findings, however, suggest that competition has worked by facilitating new entry through decreasing interconnection prices, although path dependencies, of existing and traditional concepts, in the mindsets of operators as well as regulators, may account for these findings.     

The US communications consumer and FCC policies: The AT & T position on the proposed legislation

Recent FCC decisions constitute a threat to the traditional principles of US telecommunications policy. Having outlined those principles, the author considers the issue of competition, stresses the need for a unified system, and describes the economic effects of a continuation of FCC policies. Division of responsibility, duplication of facilities, and increases in rates for basic telephone service are seen as consequences which will militate against the efficiency and availability of US telecommunications.     

The evolving 5G case study in United States unilateral spectrum planning and policy

This paper tracks increasingly aggressive initiatives by the United States government to reallocate spectrum on an expedited and unilateral basis well before conclusion of inter-governmental coordination. Rather than embrace the customary commitment to achieve consensus on global spectrum allocations at the International Telecommunication Union (“ITU”), the Federal Communications Commission (“FCC”) has auctioned off large blocks of frequencies for the next generation (“5G”) of wireless services.The FCC might have framed its first 5G auction, reassigning Ultra High Frequency (“UHF”) spectrum, as a one-time deviation from compliance with long standing, intergovernmental coordination procedures. These frequencies have ideal signal propagation characteristics and the Commission could use financial incentives—unavailable in most nations—to expedite “repacking” by incumbent broadcasters willing to move, share or abandon spectrum in exchange for ample financial compensation. However, the FCC has continued to auction off 5G spectrum on grounds that it must find ways to abate an acute shortage of wireless bandwidth and doing so will regain or maintain global leadership in wireless technologies. This paper offers a critical rebuke to unilateral spectrum management, because the short-term benefits expected by the U. S. government likely will be offset by countervailing harms to 5G manufacturers, carriers and consumers. The paper tracks fractious preparation for the ITU's 2019 World Radio Conference by the U.S. delegation and the mixed record achieved there. Additionally, the paper explains how injecting trade, industrial policy and national security issues at the ITU can trigger more delays and disputes, including possible retaliation by nations displeased with U.S. efforts to subvert traditional technology optimization goals.A worst case scenario has the ITU deadlocked and unable to reach closure on “mission critical” spectrum planning issues at World Radio Conferences, convened every four years. The paper concludes that costs and likely challenges to the efficacy and legitimacy of the ITU will reduce the benefits accruing from the FCC's unilateral, spectrum planning campaign.     

The future role of international telecommunications institutions

The telecommunications world is being swept by technological and national regulatory changes. The international telecommunication institutions — the ITU, INTELSAT and CEPT — were founded in times when technological trends were more stable and national regulation was more homogeneous. How will they cope with these new changes? In an era of growing heterogeneity, the ITU may need to look increasingly beynd itself to maintain its centrality. Meanwhile, INTELSAT faces challenges from new market entrants and a more flexible approach to new technological and commercial imperatives in satellite and cable services. The EEC is awakening to the need for institutional change within Europe and this is already having an impact on CEPT. It is concluded that to survive and to maintain relevance the existing international institutions will need to initiate changes or face a loss of authority to other institutions such as OECD and EEC.     

International telephony revenue settlement reform

The method preferred by the majority of carriers for revenue settlement in international telephony is the Accounting Revenue Division Procedure (ARDP). It was developed for a monopoly environment, and it is becoming less suitable in an increasingly competitive global environment. This paper presents a model to relate the ARDP to revenue settlement in a free economy. We conclude that, in general, cost-oriented accounting rates cannot exist, that symmetrical settlement rates are likely to benefit carriers of developed countries, and that policies intended to adapt the ARDP to a competitive environment, cannot succeed unless it is recognized that accounting rate reductions must go hand in hand with the modification of the 50/50 revenue sharing principle of the ARDP.     

The imbalances of telephone traffic for the United States

The US posts a large and growing deficit in international telephone services, a phenomenon often blamed on the accounting rate system. Using data for international calls between the US and 148 foreign destinations between 1991 and 1997, this paper finds that the increasing payment deficit for the US is associated with decreasing accounting rates. In other words, the international revenue settlement is related more to imbalances in telephone traffic than to accounting rates. The econometric model shows that growing asymmetries in teledensity, market concentration, and income levels between the US and the rest of the world explain the imbalances. Therefore, the appropriate solution to the payment deficit in telephone services is to focus on long-term economic factors that determine the flow of traffic.     

Reducing the level of switching costs in mobile communications: The case of Mobile Number Portability

Switching costs are one of the most important economic forces that affect market competition in mobile communications. Both theoretical and empirical studies have shown that switching costs reduce market competition leading to higher prices, lower product and service quality, and lower customer welfare. Given their negative consequences, national regulatory authorities have designed policies aimed at reducing switching costs and fostering competition. One of the most important of these, in the mobile communications industry, is mobile number portability (MNP). The aim of this paper is to investigate the effect of MNP on switching costs in mobile phone services. First, a hierarchical Bayes model is proposed to measure switching costs at the customer level and to investigate the impact of MNP on them. Second, this study examines the drivers of MNP adoption by customers using a binary logit specification. The results reveal that this regulatory policy has significantly reduced the cost of switching and that MNP adoption partially depends on customer-related variables.     

Farm subsidies and obesity in the United States: National evidence and international comparisons

Many commentators have claimed that farm subsidies have contributed significantly to the “obesity epidemic” by making fattening foods relatively cheap and abundant. But U.S. farm policies have generally small and mixed effects on farm commodity prices, which in turn have even smaller and still mixed effects on the relative prices of more- and less-fattening foods. Other factors have had much more influence on reducing the farm prices of food commodities and the consumer prices of food such that any effects of U.S. farm policies on U.S. obesity patterns must have been negligible. Moreover, while many arguments can be made for changing U.S. farm subsidies, even entirely eliminating the current programs could not be expected to have a significant influence on obesity rates. International evidence reinforces this finding. The countries that support their farmers most strongly tend to have relatively low obesity rates. In these countries the main support for farmers comes through trade barriers and higher consumer prices, which—like U.S. policies for sugar, dairy, orange juice, and beef—discourage consumption and reduce obesity. In contrast with agricultural subsidies, agricultural R&D has had a significant effect in the past on the relative price of food commodities and food, and has the potential to influence obesity patterns in the future, but R&D policy is a very blunt instrument for pursuing public health policy objectives.     

Accounting rates in the Caribbean: Finding a balance

This Comment examines the issue of telecommunications accounting rates in order to gain an understanding of the current relationship between the USA and the Caribbean nations. The initiative taken by the Federal Communications Commission on this issue will either increase the region's dependency status or protect US telecommunications carriers that handle Caribbean traffic. The present status of FCC accounting rate policy is restrained. This works in favor of Caribbean nations. If the USA and the nations of the Caribbean work together a more reasonable accounting rate will result for both.     

The cost of telephone service: An international comparison of rates in major countries

An exhaustive analysis of all 1979 telephone calls in the US Bell System determines market baskets of telephone services consumed by residential subscribers and by business subscribers. Individual calls are classified according to duration, distance, hour and day of week, and type of service. The annual cost of purchasing these market baskets is evaluated using the complete rate structures of nine countries. Telephone service is least expensive in the US and only slightly higher in Canada. Costs in Sweden, the UK and Italy are moderately higher than the USA. The highest rates are found in Japan, the FRG, France and Australia.     

QUANTIFYING MARKET POWER IN THE GERMAN WHOLESALE ELECTRICITY MARKET USING A DYNAMIC MULTI‐REGIONAL DISPATCH MODEL*

This paper quantifies the degree of market power in the German wholesale electricity market. A dispatch model simulates competitive marginal costs. In addition to common input factors like plant capacities, fuel prices and load structures, the model also incorporates international power exchange and dynamic effects like start‐up costs and hydro storage plant dispatch. The simulated prices are subsequently used as a benchmark for observed electricity prices. The analysis reveals significant market power in the German electricity market, mainly exhibited during peak periods. Producer surplus is also increased significantly due to strategic behavior.     

Link between termination rates and retail prices in Namibia,Kenya and South Africa

This paper analyses the link between mobile termination rate reductions and retail prices. It draws on in-depth case studies of South Africa, Namibia and Kenya where regulators have reduced termination rates towards the cost of an efficient operator. To varying degrees these have all led to lower retail prices and significant market expansion. While retail prices in both Namibia and Kenya dropped following substantial termination rate reductions, the South African case demonstrates that termination rate reductions are not always passed on to consumers as is hoped by such regulatory interventions. In South Africa, it was only after the second reduction in March 2012 that smaller operators were able to reduce their off-net prices to a level that could tempt the subscribers to dominant operators to switch. All the case studies confirm nevertheless that retail prices do not go up in response to termination rates going down as contended by dominant mobile operators around the world. This is in contrast to a body of literature stating that termination rates and mobile retail prices constitute a two-sided market and that termination rate reductions will lead to a so-called “waterbed effect”.     

Local number portability and local loop competition. Critical issues

Local telephone number portability (LNP), the ability of a telephone subscriber to change local exchange carriers, location or type of service without changing telephone numbers, is an essential feature of a competitive local loop market. This article describes these three types of portability and then examines the implications for local loop competition of specific LNP issues: implementation techniques; E-911 emergency services delivery; neutrality of subscriber database and number administration; infrastructure cost allocation and cost recovery. Evolution of number portability policy in the US, including jurisdictional complications, is reviewed.     

GM-free private standards and their effects on biosafety decision-making in developing countries

We provide a comprehensive review of international cases where GM-free private standards set up by food companies in developed countries have influenced biosafety policymaking in developing countries. We find 29 cases where private importers have directly or indirectly affected policy decisions in 21 countries. Most of the cases relate irrational fear of export losses to excessively precautionary decisions. These cases are based on two generally misleading premises: the belief that Europe or Japan represents the only market for exports, and the perception that non-GM segregation is infeasible or prohibitively costly in all situations. Our study also demonstrates the importance of information asymmetries across countries and agents and the role of risk aversion in seemingly irrational decision-making. The combination of these four factors helps us explain why presumed but unproven expected commercial losses still represents a significant impediment to biosafety policymaking in developing countries.