Paulwell...said he had sympathy of FCC

The American government has taken steps that may lead to a tax on telephone calls originating from Jamaica into that country, as a retaliation against the cess recently imposed by technology minister, Phillip Paulwell on calls coming into Jamaica from abroad - including the USA.

The US administration, through its telecommunications regulator - the Federal Communications Commission (FCC) - says it may also direct US carriers to withhold the cess from local telephone companies, and ultimately the Jamaican government, if it is so guided by a probe it is now undertaking on the new charge.

The cess was introduced by Paulwell on June 1 to raise, over a three-year period, $1 billion which he said would be used to develop Jamaica's Internet and technology infrastructure.

But it immediately created a firestorm not only among US carriers which in some instances, would have to double their charge to Americans placing calls to Jamaica, but some small local telecoms which said it would be a final blow to their operation.

The US FCC apparently in response to a June 29 formal complaint from a congressman, took up the issue, and on Monday formally launched what the Americans call a 'notice of inquiry' into the matter.

In that notice, the FCC invited the response of affected phone companies, arguing that "if US carriers and other parties can demonstrate harm to US competition or US customers" the commission would rule the cess to be anti-competitive.
There are consequences.

"The commission may direct US carriers to re-negotiate, withhold payments to foreign carriers, or restrict US carriers from paying a specific rate," said the FCC in outlining a series of remedies that may be pursued.

The FCC identified Jamaica, Nicaragua, and Ecuador as targets of its inquiry, charging that in some instances the anti-competitive behaviour was conducted "with the alleged support and endorsement of their respective governments and regulators".

In the case of Jamaica, those American carriers that resisted paying the cess in the early days of its introduction, were barred from terminating calls into the island - an action which the FCC describes as "a negotiation tactic to obtain higher interconnection rates from US carriers".

But yesterday, Colin Cambell, the former minister in the Patterson administration who has been placed in charge of the company that will manage the fund, tried to portray those actions as being initiated by the individual local carriers, and without government coercion.

"What has happened is that in the case of the fixed line network, the termination rates that were being paid by the US carriers to the Jamaican carriers were between 2.5 to 2.7 US cents, which cannot pay a levy of three cents," said Campbell.

"So the Jamaican carriers had to enter into negotiations with these carriers to establish new rates that would allow them to terminate the calls and pay the government levy. In the negotiations, they settled with all the carriers, except four: AT&T, Sprint, MCI and BT."

Added Campbell: "They did not want to agree to new termination rates with the Jamaican carriers. So the Jamaican carriers were forced in the position where they either allowed the traffic and 'eat the cost' or they would do something to prevent the traffic and cut down on their liabilities to the Jamaica government."

However, the government's own pronouncements on the issue suggest a slightly different explanation from the one advanced by Campbell.

The fact is, the Jamaica carriers were specifically instructed by Paulwell through a ministerial order dated April 19, 2005, on how the levy would be imposed, and how to proceed, should international carriers terminating on their networks, decide to withhold payment.

Said the order: "The levy will be added to the OUR approved and/or contracted termination rates for international inbound calls payable by third parties to the domestic network operations (terminating carriers), and will be collected by those terminating carriers in accordance with the billing and payment terms of the prevailing interconnection or other agreements between the respective parties."

It continued: "In the event that any party fails to pay a terminating carrier the necessary levy, the terminating carrier shall be entitled to suspend the provision of termination services in accordance with the approved procedure.
Furthermore, the failure of a defaulting carrier to give reasons, in writing shall be grounds for the suspension or termination of the carrier's licence."

Moreover, in a statement at a news conference in May, Paulwell stressed that the charge was intended to be paid by US and other overseas carriers, and that it would not impact Jamaican consumers.

"The payments will be made by all carriers terminating international voice traffic on networks in Jamaica," he said. "I would like to emphasize that the levy will not be a charge on the services provided to Jamaican consumers as it will only be applied to incoming international calls."

Additionally, in a letter to AT&T Wireless dated May 24, 2005, Paulwell's ministry warned that, "it [was] likely that [Jamaican] carriers who fail to secure rate changes before June 1, 2005, will block the international circuits in order to ensure that their licences are not placed at risk".

In reviewing the developments in Jamaica, the FCC acknowledged that the commission itself had in the past exempted many international routes from rigid settlement regime, thus allowing American carriers "greater flexibility to negotiate market-based arrangements on US-international routes". It argued, however, that "certain safeguards are necessary to allow it to respond to anti-competitive conduct".

In fact, it is this protocol that allows for bi-lateral negotiation, that Colin Campbell suggested was evoked by Jamaica when it introduced the cess.

Campbell said that all carriers except for AT&T, Sprint, MCI and British Telecommunications (BT) had agreed to the cess, through negotiation.

"All the other carriers that didn't have an issue, negotiated, got a new rate and proceeded," he charged. "It was only in relation to those four."

It was apparent from the FCC statement that AT&T was among the complainants. Wrote the FCC: "According to AT& T, Jamaican carriers began blocking circuits in June 2005 and maintained such blockage until US carriers acceded to the demands of Jamaican carriers."

Nevertheless, within days of the cess, Paulwell was able to announce that all the carriers had agreed to the Universal Service Levy as it is called - which amounts to US$0.003 per minute on all incoming international calls terminating on fixed lines, and US$0.002 on cellular network.

The FCC said it was strongly opposed to the circuit disruptions that forced the compliance.

"They undermine the benefits that we sought to achieve by reforming our policies," argued the agency. "Our expectations were that giving US carriers greater flexibility in negotiating dissimilar settlement arrangements would benefit US consumers. This cannot happen when foreign carriers disrupt commercial negotiations with threats or actual circuit disruption."

Among the policy reforms referred to by FCC was the 2004 adoption of the International Settlement (ISP) Policy Reform Order that was aimed at increasing competition on many US -international routes, and lowering settlement rates.

The ISP governs the manner in which US carriers negotiate with foreign carriers for the exchange of international traffic and requires that:

. All US carriers are offered the same effective accounting rate and same effective date for the rate;

. All US carriers are entitled to a proportionate share of US in-bound, or return traffic based upon their proportion of US out-bound traffic;

. Settlement rates for US in-bound and out-bound traffic are symmetrical.

It is not clear why this case is being aggressively pursued several weeks after Paulwell assured Jamaica that he had discussed the issue with the FCC and had the sympathy of the agency.

"I recently led a delegation to the United States of America, as the country with the highest number of international minutes into Jamaica, to discuss the imposition of the Universal Service charge," said the minister weeks ago.
"Consultations were held with the State Department, the Department of Commerce, US Trade Representative, the Federal Communication Commission (FCC) and the major carriers of international traffic into Jamaica.

"We received sympathetic understanding and no adverse reaction, as the US authorities were satisfied with our intention to apply the levy in a non-discriminatory manner and to abide by the spirit and intent of WTO rules."

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