US long-distance telephone companies, AT&T and Sprint, lashed out against Jamaica's implementation of a levy on in-coming telephone calls for its universal access fund and slapped local telephone companies for collecting the tax.

In comments to Federal Communications Commission (FCC) - the US telecoms regulator - which has opened a preliminary inquiry into Jamaica's action, AT&T insisted that neither the two major telphone providers - Digicel and Cable & Wireless (C&W) - nor the government, justified targeting international calls terminating in Jamaica to fund universal access, and suggested the cess was discriminatory.

American regulators want their government to put pressure on Jamaica to stop collecting the cess, which technoloigy minister Phillip Paulwell has said will be used to finance computers and IT development in Jamaican schools.

"Jamaican law places an upper limit of five per cent of the projected eligible revenues derived by licensees from provision of the relevant services on universal service obligations recommended by the regulator," said AT&T in its response to initial comments. "In contrast, the levy on international-inbound fixed-terminated call revenues is greater than 100 per cent and the levy on international-inbound mobile-terminated call revenues is approximately 15 per cent.

"The Commission (FCC) expressly rejected claims that foreign termination services from certain countries should be required to finance a disproportionate share of network costs, and refused to revise the benchmarks methodology to take into account discriminatory local access charges or universal service subsidies aimed solely or disproportionately at international termination services," AT&T asserted.

"The Commission and US carriers should not be required to "respect" such rate increases, as requested by C&W, and threats or actual circuit disruption to enforce such increases are not exempt from the Commission's anti-whipsaw rules and procedures," AT&T added.

"Both the Commission and the Executive Branch made clear in the ISP Reform proceeding that Commission intervention may be necessary where foreign governments mandate rate increases."

Cable and Wireless still insisted that the action "is not whipsawing", and expressly stated that the blockages, which drew the attention of the US regulator, did not "pose any threat of anticompetitive conduct, when one or more foreign carriers seek to raise settlement or termination rates to comply with a law or rule adopted by the foreign government".

In the initial round of comments, which ended October 7, three firms - AT&T, MCI and Sprint - urged their government to immediately prevent the Jamaican authorities from collecting any of the surcharge they imposed in June this year on foreign carriers terminating calls into the island.

The 'universal service charge' as it is called, became effective June 1, 2005, doubling, in some instances, the cost for Americans to make calls to Jamaica. The fee at US$0.03 per minute on all incoming international calls terminating on fixed wire networks, and US$0.02 per minute for mobile networks, is intended to raise $1 billion over three years to fund Jamaica's e-learning development.

The government has already raised $160 million from the surcharge, with Colin Campbell, chairman of the Universal Service Fund Company, anticipating a rapid increase in inflow after the end of October.

Importantly, on June 1, the effective date of the cess, the circuits to five US carriers were blocked by local carriers because of their failure to comply with the government's mandate to pay the surcharge.
These carriers subsequently agreed to pay the surcharges, and most had service to Jamaica restored within days.
But C&W believes the reactions of the US carriers are far-fetched and overreaching.

"Several US carriers have asked the Commission to regard virtually all circuit blockages and other types of service disruptions as presumptively anti-competitive conduct by foreign carriers," C&W said.

"These requests should be rejected as overbroad, and they confirm C&W's fears that US carriers will seek to manipulate the Commission's procedures to exert commercial leverage over foreign carriers in situations where no real whipsawing behaviour has occurred or been threatened."

Added C&W: "C&W is particularly concerned by the US carriers' arguments that the Commission should launch a pre-emptive economic strike against a foreign carrier without giving the foreign carrier, its government, or other interested parties a meaningful opportunity to participate in the Commission's proceedings."
Sprint rejected C&W's argument outright.

"Sprint rejects the argument that the interim relief contemplated in the Notice could be utilised as an "offensive" weapon to give US carriers an "unfair advantage" in commercial negotiations," Sprint Nextel instructed. "In its dealings with foreign carriers, Sprint has been willing to negotiate with those carriers seeking rate increases based on cost considerations, government policies, or competitive circumstances."

But Sprint maintains its position that the commission should "initiate a rulemaking to establish procedures for immediate injunctive relief for US carriers subjected to whipsawing tactics by foreign carriers or governments", and essentially put in place a mechanism under which the FCC can order US carriers not to compensate foreign carriers when US carrier circuits are being blocked "as part of a whipsawing strategy".

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