Overview of ITU work on tariff and accounting matters, international mobile roaming, international Internet connectivity, and taxation issues

1
Overview of ITU work on tariff and accounting
matters, international mobile roaming,
international Internet connectivity, and
taxation issues
APT-ITU workshop on the International
Telecommunications Regulations Bangkok, 6-8
February 2012 Richard Hill, ITU
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Presentation Outline

• Tariff and accounting matters
• International mobile roaming
• International Internet connectivity
• Taxation of ICT/Telecommunication services

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1) Tariff and accounting matters

• Background
• In 1885, an article consisting of five general
  paragraphs devoted to the international
  telephone service was added to the Telegraph
  Regulations.
• In 1932, the Telegraph Convention of 1875 and the
  Radiotelegraph Convention of 1927 were combined
  into a single convention embracing the three
  fields of telegraphy, telephony and radio.
• The 1932 and 1938 Telephone Regulations did not
  apply to all countries, but only to European
  countries and countries that voluntarily chose to
  join the European system. The actual tariffs
  agreed between countries were not included in the
  treaty, they were published elsewhere.
• In 1973 the Telegraph Regulations and the
  Telephone Regulations were last revised and
  drastically simplified focusing on general
  principles, more detailed operational provisions
  were moved to Recommendations.
• Throughout all these developments, the basic
  principles dealing with tariffs remained
  unchanged, including the rate for a communication
  between two countries.
• The Telegraph Regulations and Telephone
  Regulations were superseded in 1988 by the
  International Telecommunications Regulations
  (ITRs).

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The 1988 International Telecommunications
Regulations (ITRs)

• Background
• The ITRs contained a key provision in Article 9,
  Special Arrangements.
• It was only in 1988 that, private operators were
  explicitly allowed to use leased lines to provide
  services, including data services. Facilitating
  the expansion of networks (TCP/IP protocol) and
  the Internet services.
• Although tariffs were supposed to be based on
  costs, in practice they often were not high
  prices for international connections were used to
  subsidize national services.
• The privatization and liberalization of
  telecommunications markets were facilitated by
  the Global Agreement on Trade in Services (GATS)
  in 1994 and in 1996 (Reference Paper on Basic
  Telecommunications Services).

Provisions included requirements related to
interconnection Tariffs to be cost-oriented,
transparent, and reasonable
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Main difference between the traditional
accounting rate system and the new regime
Traditional system Accounting rates New regime International interconnection rates
Normally symmetric (accounting rate split 50/50) Asymmetric (charges may vary between countries)
Bilaterally negotiated Set unilaterally, but subject to trade discipline
Discriminatory (different rates with different correspondents) Non-discriminatory (same reference interconnect offer offered to all carriers)
Half-circuit regime (not normally unbundled) Full-circuit regime (can be unbundled)
A new regime for international interconnection
has become prevalent since the mid 1990s. The
main differences between the traditional
accounting rate system and the new regime is
summarized in this table.
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Average cost of one minute of fixed telephony

• The changes in national regulatory practices
  resulting from the general trends towards
  liberalization and privatization resulted in very
  significant decreases in the cost of
  international telecommunications.

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ITU work on tariff and accounting matters (1)

• In order to adapt the remuneration system to the
  new, more competitive telecommunication
  environment, and to respond to the growing
  expectations of the international community,
  Study Group 3 started an overall review of the
  remuneration system as from 1991.
• The topic has generated considerable interest
  and, delegates representing more than 80
  countries exchanged opinions and participated
  actively in the meetings. The following represent
  common objectives for the work
• to develop general principles and guidelines for
  the establishment of accounting rates
• to determine cost components to be included in
  the telephone accounting rates
• to expedite work on developing appropriate
  costing methodologies
• to establish a transition period to avoid drastic
  changes, particularly for the developing
  countries.

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ITU work on tariff and accounting matters (2)

• Study Group 3 developed ITU-T Recommendation
  D.140 on accounting rates principles for the
  international telephone service. Five principles
  were adopted
• cost-orientation of accounting rates and
  accounting rate shares
• application of the cost-orientation principles to
  all relations on a non-discriminatory basis
• implementation on a scheduled basis of one to
  five years, if a transitional timeframe is
  necessary
• periodical review of accounting rates by NRAs
• to survey and publish global accounting rates
  movement yearly.

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ITU work on tariff and accounting matters (3)

• Study Group 3 continued its work on reform of the
  accounting rate system to reflect the new
  telecommunication environment.
• In December 1998, Study Group 3 approved a
  revision to ITU-T Recommendation D.150.
• It agreed on three new procedures for
  remunerating the party that terminates
  international traffic

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ITU work on tariff and accounting matters (4)

• Study Group 3 also developed guidelines on
  transitional arrangements, as a new draft Annex
  to Recommendation D.140.
• The regional Tariff Groups made a number of
  useful cost studies related to the provision of
  international telephone services.
• During 2001, the ITU-D sector developed a cost
  model (COSITU)that takes in to consideration the
  above mentioned ITU-T Recommendations and
  methodologies.
• ITU-D, activities in this area largely focused on
  assisting Members to determine the cost of
  regulated services in light of changing market
  and technological developments through out
  workshops, training and direct assistance.

BDT and TSB continue working together to study
the evolution of tariffs and accounting matters
in the changing market and technological
developments
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Proposals made to CWG-WCIT by the membership on
Tariff and accounting matters

• Leave the substance of the current ITRs
  unchanged the provisions are still valid and
  useful.
• Revise the current provisions to adapt them to
  the current telecommunications environment, which
  is very different from that of 1988 in
  particular, consider provisions that would give
  greater weight to ITU-T Recommendations and that
  would shorten the deadlines currently found in
  the ITRs.
• Replace the current provisions (which are quite
  detailed) with general principles related to the
  principles agreed in WTO, in particular introduce
  principles related to transparency and
  cost-orientation.
• Abrogate (delete) the current provisions they
  are no longer appropriate or applicable in the
  current privatized andliberalized
  telecommunications environment.

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2) International mobile roaming

• ITU work focused on
• Identify related work and to collect data
  (various reports developed by BDT and other
  organizations),
• Launch of a questionnaire to ITU members to
  collect information.
• On the basis of those reports, contributions from
  the membership, and discussions, many members
  take the view that
• rates are too high with respect to costs,
• competition does not seem to be driving down the
  prices charged for international mobile roaming,
• uncoordinated national measures are not likely to
  be effective, and
• regional or international solutions should be
  envisaged.

The text of a draft ITU-T Recommendation on
International Mobile Roaming has been agreed by
Study Group 3 and will be proposed for formal
approval in September 2012
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Proposals made to CWG-WCIT by the membership on
international roaming rates

• Ensure transparency of end-user prices
• Ensure that rates are cost-based

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3) International Internet connectivity (IIC)

• Work done by ITU
• After WTSA-2000, Study Group 3 decided to conduct
  further study on the technical and economic
  development related to IIC.
• Study Group 3 decided to establish two Rapporteur
  Groups
• The first Rapporteur Group on IIC is in charge of
  developing further guidelines for facilitating
  the implementation of Recommendation D.50,
• The second Rapporteur Group is in charge of
  examining the possibility of using traffic flow
  as a main factor of negotiation for IIC.
• Based on the proposals from those Rapporteur
  Groups, Study Group 3 adopted a guideline which
  complements Recommendation D.50.
• Study Group 3 also agreed the following problem
• The high costs of the international circuit for
  Internet connectivity between least developed
  countries and the Internet backbone networks,
• The development and use of the Internet in many
  developing and in particular in the LDCs,
• The lack of resources for using and producing
  local content.

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3) International Internet connectivity (IIC)

• Revisions to Recommendation D.50 were approved in
  October 2008 and April 2011.
• There was considerable work in SG3 after 2008
  regarding the use of measurement of IP traffic
  flows in connection with billing for
  International Internet connections.
• The matter was explored in some detail at a
  workshop on 24 March 2011 and in April 2011 a
  Supplement to Recommendation D.50 was adopted.
• In coordination with ITU-D, a study on
  International Internet Connectivity is being
  developed to discuss international and national
  interconnection.

Results from this study had been presented and
discussed in the ITU Workshop on Apportionment
of Revenues and International Internet
Connectivity (Geneva on 23-24 January 2012)
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Results from the ITU Workshop on International
Internet Connectivity

• During the discussions, several measures were
  noted which might facilitate increased internet
  connectivity,
• in particular (in no particular order)
• Increasing competition, in particular for
  international connectivity
• Generate an environment that encourages the
  investment and the implementation of innovative
  technical solutions and services
• Implementation of Internet Exchange Points (IXPs)
  at the national and regional level
• Implementation of national and regional cacheing
  for frequently accessed content
• Increase usage of national ccTLDs and national
  hosting of web sites
• Increasing provision of national and regional
  content
• Policies and programs to stimulate demand and
  increase usage of Internet
• Implementation of network nodes on the basis of
  observed traffic flows (this may require
  additional efforts to measure traffic flows)
• Transit infrastructure ownership and management
  model - development of business plan
• Coordination and participation of all the players
  (Government , ISP and Operators)
• Infrastructure sharing
• Sharing of the cost of International Internet
  Connectivity, for example based on traffic
  measurements, or on the basis of network
  externalities.
• Summary report ITU Workshop on Apportionment
• of Revenues and International Internet
  Connectivity
• www.itu.int/ITU-T/worksem/apportionment/201201/ind
  ex.html

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Proposals made to CWG-WCIT by the membership on
IIC

• No specific proposals have been made by the
  membership to CWG-WCIT but many proposals have
  been made in various other forums, including ITU
  workshops and ITU study groups, for example
• Encourage the development of competitive regimes
  at the national level for international internet
  connectivity (as opposed to monopoly regimes for
  international gateways).
• Encourage implementation of Internet Exchange
  Points (IXPs) at the national and regional
  levels.
• Encourage the development of high capacity
  regional and inter-regional backbones, in
  particular via submarine cables.
• Measure IP traffic flows and use the results in
  connection with billing.

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4) Taxation

• The issue of taxation of international
  telecommunications is covered in the current
  version of the ITRs, in article 6.1.3.
• CWG-WCIT/INF-3 presents the results from the ITU
  workshop held in 2011 on taxation of
  telecommunications services and related products.
• The situation of double taxation needs to be
  considered as a priority by Administrations, in
  order to mitigate its potential consequences and
  ensure that tax rules are applied consistently
  and fairly, a mechanism for avoiding double
  taxation should
• protect against the risk of double taxation in
  instances where the same income is taxable in two
  countries
• define which taxes are covered by the agreement
• provide a procedural framework for enforcement
  and dispute resolution
• protect each government's taxing rights and
• protect against attempts to avoid or evade tax
  liability.

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Proposals made to CWG-WCIT by the membership on
Taxation

• Leave the current text unchanged.
• Revise the current text to clarify that it is
  intended to prevent economic double taxation.
• Revise the current text to limit certain types of
  taxation, in particular so as to avoid specific
  taxes on incoming international traffic.
• Suppress the current text.