Phillip Paulwell

Overseas telecom firms that were last week blocked by technology minister Phillip Paulwell from sending calls to Jamaica have all agreed - some under protest - to pay the tax that was imposed on calls directed into the island via their network.

Paulwell, through a ministerial edict, had ordered the three main local phone companies - C&W, Digicel, and MiPhone - to block the international firms that had not agreed to pay the fee from terminating calls on their network - a decision that led to a dramatic fall-off in calls coming into the island.

But yesterday, sources within the telecoms industry told the Business Observer that the two carriers that were still holding out had by late afternoon agreed to pay the fee - US$0.03 or J$1.86 per minute to fixed wire networks, and US$0.02 or J$1.24 to cellular phones. The tax became effective on June 1.

AT&T, one of the firms that had been initially barred from landing calls into Jamaica, has signed, according to our sources, but its executives remained angry about the charge.

"The Jamaican Universal Service Fund is discriminatory because it unfairly targets international carriers and their customers to pay for Jamaican programmes," Robert Cruz, consumer affairs director for AT&T, told the Business Observer yesterday. Cruz noted, however, that AT&T was "working with the appropriate parties and authorities to resolve the issue quickly and to allow the people of Jamaica to receive inbound international calls".

Cruz was essentially echoing the concerns that had been raised by the other large carrier - MCI and British Telecommunications - that objected to the tax.

The tax, aimed at raising $1 billion per year over the next three years, to help develop Jamaica's telecommunications infrastructure, will raise the price of some calls from the USA to Jamaica by more than 80 per cent.

In his address to parliament last week, Paulwell tried to put the best face on the virtual shutdown on incoming calls that ensued, beginning Wednesday and continuing into Thursday and Friday.

"There are a few international carriers who are not fully on board with Jamaica's objectives and our right as a sovereign country to impose the universal service levy based only on income generated by incoming international traffic," Paulwell told parliament on Wednesday.

He added: "Some feel it is discriminatory, as the income from domestic services have been excluded, but they fail to recall that since 2003, a higher percentage of GCT has been applied to local telephone bills, while international incoming services were specifically exempt from taxation."

Local telephone service attracts GCT of 20 per cent, compared with 16.5 per cent for most goods and services.
The concept of cross-subsidising telecoms services via the fund being created by Paulwell is not unique to Jamaica.
Indeed, America has what it calls a Universal Service Fund (USF), but the funding source is much broader than Jamaica's.

Hence, since 1996, all of America's telecommunications companies which provide service between states, including long-distance companies, local telephone companies, wireless telephone companies, paging companies, and payphone providers, are required to contribute to the Federal Universal Service Fund. Local carriers providing international services must also contribute to the fund.

In the past, only long-distance companies were required to pay fees to support the Federal USF, but this was changed by the intervention of the US Congress in 1996.

The objective of the fund in the USA is similar to what Paulwell says he is trying to achieve in Jamaica. America's fund, administered by the Federal Communications Commission (FCC), is used to subsidise telecommunications services in deep rural areas, thus ensuring access in these remote places.

Additionally, through the fund:

. low income households in the USA have access to inexpensive lifeline service;

. schools and libraries receive e-rate discounts for service, equipment, wiring and Internet connectivity;

. rural health-care providers receive telecom discounts for tele-medicine applications.

Telecommunications carriers that provide service between states, and internationally, pay contributions to the fund based on long-distance revenues.

Paulwell, in making his case for the local fund, argued that foreign providers continued to charge exorbitant rates, despite the reduction over the years, in the fees they are charged by Jamaican telecom firms to terminate their customers' calls here.

"Settlement rates have fallen from over US$1 to now US$0.025 (per minute)... consumers have not seen the benefits of those falling rates and the expected increase in international traffic has not materialised," the minister argued.
"FCC figures show that the average international call in 2003 cost US$0.27 per minute when the settlement rate was US$0.08."

Jamaica's Telecommunications Act 2000, under which the tax was imposed, makes provision for the imposition of a universal service charge to a maximum five per cent of the gross revenues of the telecommunications providers.

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