In an apparent response to pressure from US regulators, the Jamaican technology ministry has agreed to conduct analysis on the fees the government charges overseas residents for calling Jamaica.

But once the study on the so-called universal service programme is completed, the government may be forced to also levy charges on Jamaicans making calls overseas.
The fund that is being built from the fees is supposed to be invested in infrastructure that will provide Internet access to public schools and libraries across Jamaica.

The possibility of the fee to locals was raised two weeks ago, when the technology ministry noted in its ministry paper on the Universal Access Fund Company - the agency which collects revenues from the universal service surcharge - that it would conduct the analysis.

"The fund will commence further analysis of existing contributions to universal service programmes by domestic consumers and the consultative process for determining in future funding obligations," said the document.

This decision came out of discussions between the ministry and Office of the US Trade Representative (USTR), which recently completed its assessment on the surcharge in its own investigation, called 2006 Section 1377 Review of Telecommunications Trade Agreements.

The USTR determined that it would "urge Jamaica... to consider more equitable alternatives to its new surcharge, including one that requires its own operators to pay the costs associated with Jamaica's e-learning project."

Since introducing the tax on incoming international calls on June 1, 2005 - US three cents per minute on calls terminating on fixed line networks and US three cents on those terminating on mobile phones - the Jamaican government has been under the scrutiny of at least two regulatory bodies in the US - the Federal Communications Commission (FCC) and the USTR.

The US telecoms regulator - the FCC - launched an inquiry on the matter, called a Notice of Inquiry (NOI), in August, to determine if uncompetitive behaviour was being practised by local telecoms.

During that process, the technology ministry and local telecoms drew fire from American firms, who pressed the US regulator to impose a similar tax on calls originating in Jamaica and terminating in the US.

The NOI comment cycle was completed in November, and the FCC, which declined to comment on the status of the inquiry when contacted yesterday by the Business Observer, noted that the matter was still on the table and that it could take as much as one more year before a decision was made.

But since November, when the consultation process appeared to be over, the Office of US Trade Representative (USTR) commenced its own proceedings. In January 2006, the agency began to review Jamaica's compliance with relevant WTO commitments and/or US telecommunications trade agreements.

In those proceedings, the local technology ministry had submitted that the imposition of the levy did not constitute a breach of Jamaica's WTO commitments, that it was nondiscriminatory, and that there were "no WTO commitments regarding the provision of interconnection services at cost oriented pricing".

But the USTR remains concerned that Jamaica is choosing to fund this programme predominantly, if not exclusively, through fees imposed on foreign operators.

Said the USTR: "Since the programme appears to be designed mainly for Jamaican users, levying charges primarily on Jamaican operators and users may be a more equitable approach, and one that would ensure that burdens of the programme are not disproportionately imposed on unrelated users. In any event, the programme appears to lack sufficient transparency to determine whether the extraordinarily large surcharge is necessary to accomplish Jamaica's goals."

USTR also expressed concern over the lack of information on how the funds are to be used, and the impact on mobile termination rates, which it deems to be "excessively high". On this basis, it called on the Jamaican government to provide accounting on the fund.

Said the USTR: "Jamaican authorities do not appear to have identified the actual costs of expanding broadband access for schools and libraries, nor have they provided details of how they plan to administer disbursal of funds. Given that these funds originate largely from US sources, USTR has a particular interest in seeing an accounting of the funds that have been collected, whether they are appropriate to the needs identified, and how they have been used."

The impact of the imposition of the surcharge on calls to mobile networks, which add to mobile termination rates that currently appear excessively high, could be addressed, according to the USTR, should the Office of Utilities Regulation (OUR) conduct its investigation on mobile termination rates, apparently promised to the US regulator last year.

"The OUR pledged to investigate these rates and consider appropriate penalties, but so far the OUR does not appear to have taken any action," the USTR said in its report. "The USTR will urge Jamaica to follow through on its pledge to investigate mobile termination rates."

According to the technology ministry, "there continues to be a need to ensure that our international trading partners understand and are generally supportive of the process.
Offers of cooperation and technical assistance that were made by the US regulators and the USTR have been accepted and steps will be taken to allow some level of participation so as to increase greater comfort levels on both sides."

The universal service levy, imposed by technology minister Phillip Paulwell last June, earned the government $1.3 billion in revenue for the first 11 months of its existence.

The ministry paper revealed that $1.08 billion had already been collected from the tax up to April 21, 2006, and another $288 million was due to the fund in the form of receivable.

The fund was aimed at raising $1 billion per year over the next three years, to help fund the development of Internet service in Jamaica, to provide access to individuals who would not ordinarily afford such services.

So far, $16.5 million has been disbursed from the fund to the e-learning company to cover administrative expenses, salaries and setting up of offices. The government expect to disburse another $135 million to that entity over the next 12 months.

According to the ministry paper, the fund faces two major challenges - The Federal Communications Commission inquiry into the fairness of the levy, and changes to technology which may affect the way appropriate sources of funding are determined.

The technology ministry is apparently concerned over potential difficulties that would be created by telecommunications technology and mediums, such as fibre-optic cable, which facilitate voice, video, Internet and high-value data services over the same facilities, affecting collection of a tax on international telephone calls.

Said the document: "The UAFCL must conduct studies on how to keep the fund relevant in this changing environment, and must develop the ability to evaluate and monitor the operations of these convergent networks, in order to understand how future funding requirements will be met."

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