croll@wonder.enet.dec.com (10/24/90)
TELEPHONE SERVICES: A GROWING FORM OF `FOREIGN AID'
Keith Bradsher, {The New York Times}, Sunday, October 21, 1990
(Business section, page 5)
Americans who make international telephone calls are paying extra to
subsidize foreign countries' postal rates, local phone service, even
schools and armies.
These subsidies are included in quarterly payments that American
telephone companies must make to their counterparts overseas, most of
these are state-owned monopolies. The net payments, totaling $2.4
billion last year, form one of the fastest-growing pieces of the
American trade deficit, and prompted the Federal communications
Commission this summer to begin an effort that could push down the
price that consumers pay for an international phone call by up to 50
percent within three years.
The imbalance is a largely unforeseen side effect of the growth of
competition in the American long-distance industry during the 1980's.
The competition drove down outbound rates from the United States,
while overseas monopolies kept their rates high.
The result is that business and families spread among countries try
to make sure that calls originate in the United States. Outbound
calls from the United States now outnumber inbound calls by 1.7-to-1,
in minutes -- meaning American phone companies have to pay fees for
the surplus calls. The F.C.C. is concerned that foreign companies are
demanding much more money than is justified, given the steeply falling
costs of providing service, and proposes to limit unilaterally the
payments American carriers make.
Central and South American countries filed formal protests against
the F.C.C.'s plan on Oct. 12. Although developed countries like
Britain and Japan account for more than half of United States
international telephone traffic, some of the largest imbalances in
traffic are with developing countries, which spend the foreign
exchange on everything from school systems to weapons. The deficit
with Columbia, for example, soared to $71 million last year.
International charges are based on formulas assigning per-minute
costs of receiving and overseas call and routing it within the home
country. But while actual costs have dropped in recent years, the
formulas have been very slow to adjust, if they are adjusted at all.
For example, while few international calls require operators, the
formulas are still based on such expenses.
Furthermore, the investment required for each telephone line in an
undersea cable or aboard a satellite has plummeted with technological
advances. A trans-Pacific cable with 600,000 lines, announced last
Wednesday and scheduled to go into service in 1996, could cost less
than $1,000 per line.
Yet the phone company formulas keep charges high. Germany's Deutsche
Bundespost, for example, currently collects 87 cents a minute from
American carriers, which actually lose money on some of the off-peak
rates they offer American consumers.
MORE CALLS FROM THE U.S. ARE GENERATING A GROWING TRADE DEFICIT
U.S. telephone companies charge less for 1980 0.3 (billions of
overseas calls than foreign companies 1981 0.5 U.S. dollars)
charge for calls the United States. So 1982 0.7
more international calls originate in the 1983 1.0
United States. But the U.S. companies pay 1984 1.2
high fees to their foreign counterparts for 1985 1.1
handling those extra calls, and the deficit 1986 1.4
has ballooned in the last decade. 1987 1.7
1988 2.0
1989 2.4 (estimate)
(Source: F.C.C.)
THE LONG DISTANCE USAGE IMBALANCE
Outgoing and incoming U.S. telephone traffic, in 1988, the latest year
for which figures are available, in percent.
Whom are we calling? Who's calling us?
Total outgoing traffic: Total incoming traffic:
5,325 million minutes 3,155 million minutes
Other: 47.9% Other: 32.9%
Canada: 20.2% Canada: 35.2%
Britain: 9.1% Britain: 12.6%
Mexico: 8.8% Mexico: 6.2%
W. Germany: 6.9% W. Germany: 5.4%
Japan: 4.4% Japan: 4.3%
France: 2.7% France: 3.4%
(Source: International Institute of Communications)
COMPARING COSTS: Price range of five-minute international calls between
the U.S. and other nations. Figures do not include volume discounts.
Country From U.S.* To U.S.
Britain $2.95 to $5.20 $4.63 to $6.58
Canada (NYC to $0.90 to $2.25 $1.35 to $2.26
Montreal)
France $3.10 to $5.95 $4.72 to $7.73
Japan $4.00 to $8.01 $4.67 to $8.34
Mexico (NYC to $4.50 to $7.41 $4.24 to $6.36
Mexico City)
West Germany $3.10 to $6.13 $10.22
* For lowest rates, callers pay a monthly $3 fee.
(Source: A.T.&T.)
WHERE THE DEFICIT FALLS: Leading nations with which the United States
has a trade deficit in telephone services, in 1989, in millions of
dollars.
Mexico: $534
W. Germany: 167
Philippines: 115
South Korea: 112
Japan: 79
Dominican Republic: 75
Columbia: 71
Italy: 70 (Source: F.C.C.)
Israel: 57
Britain: 46
THE RUSH TOWARD LOWER COSTS: The cost per telephone line for laying
each of the eight telephone cables that now span the Atlantic Ocean,
from the one in 1956, which held 48 lines, to the planned 1992 cable
which is expected to carry 80,000 lines. In current dollars.
1956 $557,000
1959 436,000
1963 289,000
1965 365,000
1970 49,000
1976 25,000
1983 23,000 (Source, F.C.C.)
1988 9,000
1992 5,400 (estimate)wnp@relay.eu.net (wolf paul) (10/27/90)
In article <13989@accuvax.nwu.edu> croll@wonder.enet.dec.com writes: >TELEPHONE SERVICES: A GROWING FORM OF `FOREIGN AID' >in minutes -- meaning American phone companies have to pay fees for >the surplus calls. The F.C.C. is concerned that foreign companies are >demanding much more money than is justified, given the steeply falling >costs of providing service, and proposes to limit unilaterally the >payments American carriers make. Would someone care to tell us how they might enforce this? Americans are much more dependent on international phone calls for their international business; Europeans and I suspect residents of other countries are much more likely to use correspondence and/or TELEX than intercontinental phone calls. So if the FCC limits how much AT&T can pay the German TELEKOM or the Austrian PTT, etc., and as a result these foreign phone companies simply suspend telephone service to the US, it would primarily affect U.S. businesses. I am not justifying the high rates charged in many places for phone service, I have to bear them myself, but the idea that the FCC can dictate to foreign phone companies how much they can charge for access to their networks is laughable. The mere thought is enough to bring forth the national pride of the bureaucrats running these phone companies, to resist any American attempt at interfering in their rate structures. Why should a European phone company be concerned with the effects on the American trade deficit of competition among U.S. carriers? Every call originating in the US instead of Europe is a loss of revenue to them, so why should they not try to recover that revenue by charging the U.S. carrier who lured away their customer by his lower rates? Mind you, it is a different matter if AT&T, MCI, Sprint, etc., told the foreign phone companies that they consider the rates too high, they are their business partners; but a U.S. government agency like the FCC is out of order when it tries to dictate foreign companies' prices. Wolf N. Paul, UNIX SysAdmin, IIASA, A - 2361 Laxenburg, Austria, Europe PHONE: +43-2236-71521-465 FAX: +43-2236-71313 UUCP: uunet!iiasa!wnp INTERNET: wnp%iiasa@relay.eu.net BITNET: tuvie!iiasa!wnp@awiuni01.BITNET
martinb@bottomdog.east.sun.com (Martin Baines - Sun UK - Technical Account Executive Cambridge) (10/31/90)
|> >TELEPHONE SERVICES: A GROWING FORM OF `FOREIGN AID' |> >in minutes -- meaning American phone companies have to pay fees for |> >the surplus calls. The F.C.C. is concerned that foreign companies are |> >demanding much more money than is justified, given the steeply falling |> >costs of providing service, and proposes to limit unilaterally the |> >payments American carriers make. |> Would someone care to tell us how they might enforce this? Americans |> are much more dependent on international phone calls for their |> international business; Europeans and I suspect residents of other |> countries are much more likely to use correspondence and/or TELEX than |> intercontinental phone calls. Come again? Exports from the US account for about 10% GDP, for the UK and Germany this figure is nearer 50%, so why should we us the phone less? |> So if the FCC limits how much AT&T can pay the German TELEKOM or the |> Austrian PTT, etc., and as a result these foreign phone companies |> simply suspend telephone service to the US, it would primarily affect |> U.S. businesses. It's worse than you think, all of the fixed cables across the atlantic terminate either in the UK (most of them) or France, so it only takes 3 companies to pull the plug (BT, France Telecom, Mercury) and the US is limited to satellite only comms to the rest of Europe. |> I am not justifying the high rates charged in many places for phone |> service, I have to bear them myself, but the idea that the FCC can |> dictate to foreign phone companies how much they can charge for access |> to their networks is laughable. The mere thought is enough to bring |> forth the national pride of the bureaucrats running these phone |> companies, to resist any American attempt at interfering in their rate |> structures. Why should a European phone company be concerned with the |> effects on the American trade deficit of competition among U.S. |> carriers? Every call originating in the US instead of Europe is a loss |> of revenue to them, so why should they not try to recover that revenue |> by charging the U.S. carrier who lured away their customer by his |> lower rates? This sort of action cause MAJOR politcal storms in the world outside the US: it's similar to when 3rd world countries unilaterally stoped paying their debts - the US banks sisn't like it one bit! |> Mind you, it is a different matter if AT&T, MCI, Sprint, etc., told |> the foreign phone companies that they consider the rates too high, |> they are their business partners; but a U.S. government agency like |> the FCC is out of order when it tries to dictate foreign companies' |> prices. Quite agree, business is business, politics is politics lets TRY and avoid mixing the two! Martin Baines Technical Account Wallah Sun Microsystems Ltd Cambridge UK UK: 0223 420421 JANET: Martin.Baines@uk.co.sun International: +44 223 420421 Other UK: Martin.Baines@sun.co.uk Internet: Martin.Baines@UK.sun.comNNNN
goudreau@dg-rtp.dg.com (Bob Goudreau) (11/01/90)
In article <14135@accuvax.nwu.edu>, iiasa!wnp@relay.eu.net (wolf paul) writes: > Mind you, it is a different matter if AT&T, MCI, Sprint, etc., told > the foreign phone companies that they consider the rates too high, > they are their business partners; but a U.S. government agency like > the FCC is out of order when it tries to dictate foreign companies' > prices. Given that most of the "foreign companies" are really just arms of their respective governments (granted, some are closer-held than others), why is it a surprise that the various US long distance companies are forced to rely on the US government in order to deal effectively with European PTTs? One could just as well ask why (say) American Airlines must seek approval from the French government for its Paris<-->US fares. (Answer: because the French government is trying to protect Air France from competition.) Bob Goudreau +1 919 248 6231 Data General Corporation 62 Alexander Drive goudreau@dg-rtp.dg.com Research Triangle Park, NC 27709 ...!mcnc!rti!xyzzy!goudreau USA