Billing World Standards Watch Reforming International Accounting Standards

Geneva, Switzerland. As nontraditional telecommunication services spring up around the globe, the old rules of accounting no longer apply. But rules of the marketplace do, according to the newly elected chairman of the International Telecommunications Union's Study Group on charging, accounting and settlement principles.

Chairman Tsunekazu Matsudaira from KDD, Japan, is putting a high priority on improving the existing international accounting rate system, according to a report issued by Earl Barbely, U.S. State Department representative to the ITU. For the United States, this could be a chance to keep more money than is now possible. "The United States has some serious bucks at stake here," says Barbely. Currently, there is about a $5 billion payout to other countries in settlements for telecommunications services, according to industry experts working for U.S. government agencies. The FCC considers about 75% of this $5 billion as a subsidy to other countries and not reimbursement for costs, says one source.

Currently, the U.S. international settlement policy requires U.S. carriers to enter nondiscriminatory accounting rate arrangements, available to all U.S. carriers at the same rates and terms. The policy also requires carriers to agree not to accept more than their proportionate amount of return traffic, and to split settlements, for instance, on a 50/50 basis. For a one-minute call, for example, from the United States to Great Britain, where the accounting rate is $2 per minute, AT&T and British Telecom each would receive $1.

The accounting rate is the rate by which one country settles its accounts with another, and directly relates to the settlement rates. If 1,000 minutes of calls were sent to the United States from Great Britain, and 1,000 minutes of calls were sent the opposite direction, the settlement would be zero, assuming the accounting rate is 50/50. According to the current rules, however, if 1,000 minutes of calls came into Great Britain from the United States, but only 500 minutes of calls came into the United States from Great Britain then AT&T would have to send British Telecom 50% of the agreed-upon rate for 500 calls. This case-with twice as much traffic flowing out of the United States as in-is the rule worldwide rather than the exception.

The new FCC order, however, could remove both the requirement of proportionate return of traffic among U.S. carriers and the requirement for nondiscriminatory accounting rates among U.S. carriers. The FCC is developing flexible policies that will not "hinder competition in international telecommunications with countries that have introduced competition in their domestic and international markets," stated FCC representative Thomas Wasilewski. Some safeguards, however, would remain in place, he stated.

The FCC conducted a study that estimates prices in relation to the costs for handling traffic between the United States and various countries from all regions and at various stages of development, according to the report. The agency proposed that these findings could be used to develop benchmarks for charges on international phone services.

Some representatives, however, were not pleased with the proposal. "There is no way...anyone could accept FCC benchmarks. If the United States and the FCC have any intention to impose a unilateral decision in this way, it will not succeed," stated the delegate representing China at the most recent meeting. The delegate representing KDD, the largest Japanese international carrier, agreed, stating "no unilateral actions." However, the representative from the Japanese government made no comment.

Yet, other members may be thinking similarly to the United States: Secretary General Pekka Tarjanne also proposed that the collection and accounting rates be reduced in all countries to foster competition. Tarjanne suggested that a transition path be delineated to help international operators bring their accounting rates and collection charges closer to cost.

In the end, the group's new international accounting rate guidelines will come from consensus and will be based, in part, on contributions by members of group three-the ITU subcommittee charged with developing guidelines on charging, accounting and settlement principles.

Chairman Matsudaira has asked group members to study the cost components of new mobility service issues such as global mobile PCS by satellite. The resulting guidelines would apply to companies such as Iridium, ICO and Globalstar, among others. The group's goal is to develop "an umbrella recommendation to cover accounting and settlement of maritime, land and aeronautical mobile services and future public land mobile telecommunications services," states the report.

Group three's agenda for 1997-2000 includes developing charging, accounting and settlement principles for international land-line telephone services, international mobile services and the development of such principles in the nonmobile international telecommunications arena, such as for satellite services and in data and message communication services.

The agenda also includes work on the charging and accounting principles for B-ISDN services and multimedia telecommunication services, including those supported by ATM or offered in conjunction with global information infrastructures. The group will conduct regional cost studies, as well, for the development of cost models. Also, the group will compile terms and definitions for the recommendations dealing with charging and accounting principles. The group's next meeting will be held in May.