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November 5, 1997


India sues FCC

An international rebellion is up against the US authority for unilaterally altering the 'telecom accounting rate'.

The Videsh Sanchar Nigam Limited has joined several other telecom companies in challenging the right of the United States telecom regulator, the Federal Communications Commission, to unilaterally determine telecom access rates to the US.

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"An intervener application has been filed by the VSNL in the ongoing case against the FCC," Chairman of the Telecom Commission and Communications Secretary A V Gokak has said.

Singapore Telecom, Britain's Cable and Wireless plc, Hong Kong Telecommunications Limited, Kokusai Denshin Denwa of Japan and Guyana Telephone have also filed similar suits.

Dubbed 'accounting rates', these bilaterally determined settlement rates are paid by the domestic telecom carrier to the one abroad to complete an international call.

Under the FCC's recent edict, access charges are to be lowered to 23 cents for low-income countries including India by January 1, 2002, against the present 79 cents access charge paid by India for a call from the US.

India, along with China and Mexico are the countries with which the US has a large telecom accounting deficit, thanks to the substantially higher number of calls made to India from the US than in the reverse direction.

FCC is trying to get all the developing countries to accept the new settlement rates on the argument that their cost of calling the US will drop and the lower international tariff will wipe out the subsidy element for local call traffic.

According to S Purwar of the DoT the reduced rates would force DoT to hike telephone rentals.

"If the FCC's unilateral order is implemented it will have a disastrous impact on telecom access for developing countries," International Telecom Union Director Ahmed Laouyane has warned.

While VSNL received $210 million last year from US carriers in settlement fees, the US says that it loses $5 billion a year because of the unrealistically high accounting rates. "Current access charges greatly exceed cost and represent a substantial subsidy from the US consumers and carriers to foreign monopoly carriers," the FCC said.

The big gainers from the FCC's move are expected to be the American companies such as AT&T Corporation, MCI, Sprint and WorldCom.

While there is a consensus on evolving a 'multilateral solution' under an international forum to the vexed issue of accounting rates, ongoing discussions under the aegis of the ITU have yielded little.

Ultimately, cost-based access charges seem to be the only solution. However, the determination of cost in different countries itself is a challenge, Laouyane explains. "The ITU is studying the impact of an alternative settlement regime which could replace the current accounting rate system on developing countries, including India," Laouyane said.

Meanwhile, some analysts have warned against the crumbling of the current accounting rate system under the impact of new technologies which completely bypass the accounting rate regime. For instance, Internet telephony. Internet telephony allows access to any part of the world at the mere cost of a local call.

Earlier: US companies promised lower telecom accounting rates

- Compiled from the Indian media

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