The telecoms watchdog -- Office of Utilities Regulation (OUR) -- says that earnings from international telephone calls from the US to Jamaica has plummeted to US$40 million from a high of US$150 million only four years ago.

The reason for the nearly 64 per cent decline in revenues: American long distance carriers now pay far less than they used to for local companies to deliver to foreign consumers, telephone calls that originate in the United States.

"The settlement fees dropped from US$0.57 to less than US$0.10 per minute in just over four years," said Maurice Charvis, director of analysis and research at the OUR. "We are getting US$100 million less from international calls since 1999."

The rates began to drop in the late 1990s when local telecoms companies -- like other international telephone operators -- fell under pressure from the US Federal Communications Commission (FCC) to lower their settlement rates -- the price and which companies agree to deliver international calls -- to bring them closer to what is charged by American long-distance carriers.

The Americans argued that because developing countries like Jamaica kept the cost of their international service to US users artificially high, it meant that more calls were made from the United States to other countries -- leaving the Americans with annual deficit of over US$5 billion.

In the past, third world telephone companies used their high earnings from the international service to subsidise their domestic operation, helping to keep rates on domestic calls relatively low. But in recent years these companies, including Cable & Wireless, have been engaged in what they call rebalancing -- increasing the cost of domestic services to help offset the falling income from international calls.

With the decline in the settlement rates, the OUR had at one stage considered the idea of imposing what is called an access deficit charge to help compensate for the falling inflows of foreign revenue from the settlement rate. Under this scheme, the OUR would have imposed the charge on local telecoms companies who would then recoup it from foreign long distance carriers.

The OUR initially backed away from the idea after it faced legal challenges, but in the meantime the settlement rates continued to plunge -- a fact that the regulators now say would make it difficult to implement a higher compensatory charge.

"It would be difficult for the OUR to approve an access deficit charge -- a compensatory charge -- higher than the present US$0.02 as that would mean that our international carriers would have to renegotiate their deals with their overseas counterparts or have to squeeze their own margins," Charvis told the Business Observer. "... If it did, the FCC would perhaps instruct their carriers not to pay as they would see it as an unfair targeting of US citizens."

Last year roughly 500 million telephone call minutes came to Jamaica while roughly 130 million minutes left Jamaica. The US accounts for over 80 per cent of the total traffic.

In the past this would have meant big bucks for the local carriers. But not anymore.

"The rates are dropping like stones," says Lawrence McNaughton vice president of carriers and services at C&W. "It is safe to say that incoming revenues from international calls has been reduced by 50 per cent since 1999."

Domestic telephone consumers have felt the impact through rebalancing.

Since November 2002, domestic land line rates have increased by 100 per cent. But C&W says that the local service is still more than 50 per cent below cost. At the same time C&W's land-line customers dropped by roughly 4.5 per cent to 450,000 as at June 2003 when compared with June 2002.

McNaughton added: "Are customers willing to pay $1,400 for residential line rental and if not who will pay for it?"

Line rentals are now $400 for residents and $1,000 for businesses.

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