Cable and Wireless Jamaica met last week with representatives of the US Federal Communications Commission (FCC) as part of an ongoing effort to prevent America from retaliating against a tax that was imposed by the Jamaican government on calls coming into the island from the USA.

At the meeting, the high-powered C&W legal team told directors of the US regulatory agency that the penalties being sought by American carriers against Jamaica, if imposed, would make it difficult for American phone companies to negotiate terms with foreign carriers.

C&W attempted to convince the US FCC not to move forward to another stage of the enquiry into the Jamaican cess - the stage that would involve the drafting of new rules that would allow for the imposition of penalties against Jamaica for the cess that was unilaterally imposed on June 1 this year.

Last week Wednesday, C&W filed on the FCC website, elements of the arguments its lawyers made at the previous day's meeting with the FCC directors.

"(C&W) underscored its view that moving forward with a Notice of Proposed Rulemaking in this proceeding would be harmful to the commercial negotiation process between US and foreign carriers" said the local telecoms. "Proposed rules, such as those recommended by the US carriers, would make it more difficult for parties to freely negotiate commercial terms and conditions."

The visit to the FCC by C&W's legal team led by the Washington law firm of Kelly Drye & Warren, followed the proceeding that the American regulator calls Notice of Inquiry - in which several of the long distance carriers in the USA were asked to comment on the cess and its potential impact on their operations and American customers. The Jamaican government as well as C&W and Digicel Jamaica also submitted comments as part of that enquiry.

The US carriers had asked that the FCC block the payment of the cess.

The 'universal service charge' as it is called, is US$0.03 per minute on all incoming international calls terminating on fixed wire networks in Jamaica, and US$0.02 per minute for mobile networks. It is a move by technology minister Phillip Paulwell to raise $1 billion over three years to fund Jamaica's e-learning development.

But based on the rates charged by some US carriers for calls to Jamaica, that surcharge would translate into a doubling, in some instances, of the cost for Americans to make calls to Jamaica.

The tax was resisted by American telecoms, and on June 1, the date of implementation, the circuits to five US carriers that refused to agree to it were blocked by local carriers - with the green light from the Jamaican government.

The American firms subsequently agreed to pay the surcharge - apparently under protest - leading to the restoration of theirt service to Jamaica.

In justifying the surcharge, both the Jamaican government and C&W argued at the time that it was not anti-competitive, with C&W making the case that blocking calls originating from non-compliant carriers did not "pose any threat of anti-competitive 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".

However, while agreeing to pay the surcharge, the US carriers took their complaint to the FCC for the agency to use its powers to have it reversed, and set in motion a process that could lead to the Notice of Proposed Rulemaking. It is this phase of the enquiry that the Jamaican government and local telecoms apparently fear, because at this stage, the FCC could in fact impose rules that would require compensation to the American carriers.

At Tuesday's meeting with the FCC, C&W made it clear that it considered the reaction of the American carriers farfetched and overreaching.

"C&WJ is particularly concerned by the US carriers arguments that the FCC should adopt procedures that would enable it to launch a preemptive economic strike against a foreign carrier (at the request of the US carriers) without giving the foreign carrier, its government or other interested parties a meaningful opportunity to participate in the FCC's proceedings," said the Jamaican carrier.

"The comments filed in this proceeding illustrate that the FCC cannot be assured of receiving a full and accurate statement of relevant facts unless it gives all parties a meaningful opportunity to participate."

Said the C&W lawyers in their letter to Marlene Dortch, secretary of the FCC:

"In C&WJ's view, the Jamaican government's decision to establish a mandatory universal service surcharge earlier this year does not embody whipsawing or other anti-competitive conduct by foreign carriers, and therefore does not create a sufficient basis for any actions by the FCC.

"Specifically, in the case of this government-mandated surcharge, where the role of the Jamaican carriers is to act as collection agents to obtain and remit the surcharge to the Jamaican government, the surcharge embodies neither an increase in the rate paid to C&WJ for terminating US-originated international calls nor a commercial term subject to negotiation between the parties.

"Moreover, C&WJ does not profit from the surcharge, and in fact has lost, and continues to lose, substantial monies due to the surcharge. C&WJ loses money because it does not recover its administrative expenses of implementing the surcharge.

"C&WJ also loses money each month because the higher rates resulting from the surcharge have resulted in less traffic, due both to an increase in unlawful bypass and a reduction in demand caused by the pass-through of the increase in payment for terminating calls to customers originating calls. C&WJ also suffered a significant loss of revenues from the traffic that normally would have been terminated during the period when circuits were blocked.
"To the extent that the FCC has concerns about any country's establishment of a mandatory universal service surcharge, the US."

The Jamaican government raised $260 million from the surcharge between June and September, with Colin Campbell, chairman of the Universal Service Fund Company, saying that he was expecting a rapid increase in inflow from November.

No order has been made by the FCC to move to rulemaking proceeding.

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