Phillip Paulwell speaking in Parliament yesterday.

TELEPHONE calls into Jamaica from the United States dwindled to a trickle yesterday as three of America's major carriers - AT&T Wireless, Sprint and MCI - pulled the plug on the island to protest a special Government tax on international telephone calls foreign companies deliver to local networks.

The new arrangement, which came into force on midnight Tuesday, calls for foreign carriers to pay three US cents to the Government for every call they terminate on Jamaica's fixed-line networks and two US cents for those that go to mobile phones.

"We have been attempting to make calls to Jamaica all day, but with little luck and great difficulty," a Miami-based spokesman for a large Jamaican company with significant operations across the United States told the Observer last night.

"Our carrier is one of those which is involved in the dispute," he said. "It is a major humbug to our business. We have been getting our Jamaica offices to call us and patch us to other people we want to talk to."

Phillip Paulwell, the science and technology minister, whose portfolio includes the technology sector, expected the situation to improve today as other carriers that are willing to pay the tariff come onboard and the hold-outs break rank.

"Our ambassador in Washington (Professor Gordon Shirley) is having meetings with all the parties," Paulwell said. ".We are seeing a breaking of the rank by some of the companies."
Last night it appeared that Jamaica's major telecommunications service providers - Cable & Wireless, Digicel and MiPhone - shared Paulwell's optimism, despite the disruption to their operations yesterday.
"In a late development this evening. some of the carriers who initially refused to sign the agreement indicated a willingness to comply," the companies said in a joint statement.
There were no immediate comments from the US carriers, but they had complained that the levy did not apply to calls leaving Jamaica and that they were being forced into a contract by a foreign jurisdiction.
Paulwell himself recently held talks in Washington with officials of the US Department of Commerce, the Office of the US Trade Representative and the FCC. "Nobody objected to what Jamaica was doing although they all warned that some of the carriers may be unwilling to accept the arrangement," he told the Observer.

Paulwell argued that the boycott by the three US telecommunications giants was "a short-term price that we have to pay" to bring needed cash for the Government's universal access fund to widen and deepen the availability of modern telecommunications services across Jamaica.

"We know that we are right," the minister said last night.

Paulwell hopes, this fiscal year, to raise J$1 billion from the levy for the fund, whose initial focus is to ensure that more Jamaicans have access to broadband technology and the delivery of computers in schools.

Over the past decade, developing countries, including Jamaica, have been pressed into accepting sharply reduced settlement rates - what telecommunications companies in one country pay to deliver calls on networks in another - by US regulators on the grounds that existing high rates stifled businesses. The Americans, who were also eager to reduce the imbalance they had with other countries for telephone calls, also argued that a liberalised market with cheaper calls would lead to more calls on both ends.

But the Jamaican Government has said that it hasn't worked that way, since the American Federal Communication Commission (FCC) in the mid-1990s embarked on its project to lower the settlement rates from nearly US$1 to a benchmark 19 US cents per minute. The settlement rate is now closer to three US cents per minute for calls terminating in Jamaica.

A major part of the problem, Paulwell has argued, is that US carriers have not passed on the savings to consumers as promised.

For instance, while the declared settlement rate for major US carriers for calls landed in Jamaica was eight US cents a minute in 2003, the average retail cost to American consumers was 27 US cents.

At the same time, the number of telephone lines - fixed and mobile - increased threefold between 2000 and 2003 to a little over two million lines, but there has not been a commensurate increase in telephone call time to Jamaica.
In 2000, Americans made 289.3 million minutes of telephone calls to Jamaica and three years later this had reached 438.9 million minutes.

"In fact, Mr Speaker, the traffic volume fell from 524 million minutes in 2002," Paulwell told Parliament yesterday.
"Whereas declining settlement rates should be incentivising calls to Jamaica, the volumes are falling because the lower rates are not being passed on," he said.

The economic impact of this, and the FCC's policy of driving for a rebalancing of rates in developing countries - raising subsidised domestic rates and lowering those for international - have been significant for many countries and, in some cases, businesses.

In the case of Jamaica, for instance, the country netted US$166.8 million from the 289.3 million minutes of calls landed on domestic networks from the United States. By 2003, the earning was down to US$119.5 million from nearly 439 million minutes of calls.

Moreover, current earnings have to be shared between the three local service providers, against the early days when C&W held a monopoly and its international telephone call business grossed, in the early 1990s, in the region of US$500 million.

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