Telecom to blast US fee cut

PUBLISHED : Monday, 20 January, 1997, 12:00am
UPDATED : Monday, 20 January, 1997, 12:00am

Hongkong Telecom (HKT) will today accuse the powerful United States telecoms regulator, the Federal Communications Commission (FCC), of trying to undermine its revenues in a bid to aid US telecom companies.

In a speech to the Pacific Telecommunications Council in Hawaii later today, HKT director of regulatory affairs Keith Bernard will spell out its strong opposition to an FCC plan to cut lucrative fees paid to HKT and other international companies for handling incoming calls from the US.

The FCC wants a drastic reduction in the so-called accounting rate, the fee it gives to all international operators, because it pays out billions more dollars than it collects.

Mr Bernard will say unilateral moves to cut accounting rates will create opposition as they benefit only US telecom companies.

'The current approach can only serve to generate resistance for such a change, as the financial flows to any given US correspondent [receiving telecom company] are not neutralised by other reductions but merely transferred to US carriers,' he will say in his address.

The rapid growth of call-back services in Hong Kong, which use the US as a hub, means the territory receives seven times as many calls from the US as it sends.

This imbalance earns HKT considerable revenue and supports the system of payments to rival competitors in the territory designed to foster competition.

Mr Bernard will lay the blame for the problem at the FCC's door.

'The FCC has continually supported the creation of the US as a call-back hub,' he will tell the council meeting.

'In the last two years the FCC has legitimised call-back and implicitly supported carrier re-file by refusing to act upon complaints filed by AT&T.' Mr Bernard will also dismiss a second argument put by the FCC that lowering accounting rates will enable US carriers to lower their prices to the customer.

'US international direct dial prices have actually been rising at a time when [during the past four years] accounting rates are being reduced, or at a minimum they are not falling as fast.' It was last December that the FCC announced that it was planning to revise downward the benchmark for accounting rate fees to all international call destinations.

HKT now receives 47 US cents (about HK$3.63) per minute for handling a US to Hong Kong call. The FCC proposed cutting this to 15 cents, a 70 per cent reduction. HKT is still in the early phase of a three-year contract with US carriers which would have to be broken if the FCC continues with its proposals.

HKT has said previously it had no objections to opening talks on cutting accounting rates as long as it was done through multilateral discussions.

Mr Bernard will build on that approach, arguing that countries work through the global body, the International Telecommunications Union (ITU).

'An ITU multilateral model can work so that the financial pressures on carriers are mitigated as accounting rates are simultaneously reduced,' he will tell the council.

It is unlikely Americans will decide to come to the table with the US keen to reduce the US$5.5 billion added to its trade deficit every year by operation of the accounting rates at current levels.

Instead, many industry watchers believe the US move will prompt a piecemeal lowering of rates.

HKT has until next month to give its formal response to the FCC proposals.

The FCC is unlikely to finalise its policy for another six months and there may be another year before any cuts are implemented.