Path: utzoo!attcan!uunet!van-bc!ubc-cs!news-server.csri.toronto.edu!cs.utexas.edu!wuarchive!usc!ucselx!bionet!hayes.ims.alaska.edu!accuvax.nwu.edu!nucsrl!telecom-request From: croll@wonder.enet.dec.com Newsgroups: comp.dcom.telecom Subject: Telecom in the News, Part 1 Message-ID: <13989@accuvax.nwu.edu> Date: 23 Oct 90 22:49:47 GMT Sender: news@accuvax.nwu.edu Organization: TELECOM Digest Lines: 138 Approved: Telecom@eecs.nwu.edu X-Submissions-To: telecom@eecs.nwu.edu X-Administrivia-To: telecom-request@eecs.nwu.edu X-Telecom-Digest: Volume 10, Issue 759, Message 2 of 7 TELEPHONE SERVICES: A GROWING FORM OF `FOREIGN AID' Keith Bradsher, {The New York Times}, Sunday, October 21, 1990 (Business section, page 5) Americans who make international telephone calls are paying extra to subsidize foreign countries' postal rates, local phone service, even schools and armies. These subsidies are included in quarterly payments that American telephone companies must make to their counterparts overseas, most of these are state-owned monopolies. The net payments, totaling $2.4 billion last year, form one of the fastest-growing pieces of the American trade deficit, and prompted the Federal communications Commission this summer to begin an effort that could push down the price that consumers pay for an international phone call by up to 50 percent within three years. The imbalance is a largely unforeseen side effect of the growth of competition in the American long-distance industry during the 1980's. The competition drove down outbound rates from the United States, while overseas monopolies kept their rates high. The result is that business and families spread among countries try to make sure that calls originate in the United States. Outbound calls from the United States now outnumber inbound calls by 1.7-to-1, in minutes -- meaning American phone companies have to pay fees for the surplus calls. The F.C.C. is concerned that foreign companies are demanding much more money than is justified, given the steeply falling costs of providing service, and proposes to limit unilaterally the payments American carriers make. Central and South American countries filed formal protests against the F.C.C.'s plan on Oct. 12. Although developed countries like Britain and Japan account for more than half of United States international telephone traffic, some of the largest imbalances in traffic are with developing countries, which spend the foreign exchange on everything from school systems to weapons. The deficit with Columbia, for example, soared to $71 million last year. International charges are based on formulas assigning per-minute costs of receiving and overseas call and routing it within the home country. But while actual costs have dropped in recent years, the formulas have been very slow to adjust, if they are adjusted at all. For example, while few international calls require operators, the formulas are still based on such expenses. Furthermore, the investment required for each telephone line in an undersea cable or aboard a satellite has plummeted with technological advances. A trans-Pacific cable with 600,000 lines, announced last Wednesday and scheduled to go into service in 1996, could cost less than $1,000 per line. Yet the phone company formulas keep charges high. Germany's Deutsche Bundespost, for example, currently collects 87 cents a minute from American carriers, which actually lose money on some of the off-peak rates they offer American consumers. MORE CALLS FROM THE U.S. ARE GENERATING A GROWING TRADE DEFICIT U.S. telephone companies charge less for 1980 0.3 (billions of overseas calls than foreign companies 1981 0.5 U.S. dollars) charge for calls the United States. So 1982 0.7 more international calls originate in the 1983 1.0 United States. But the U.S. companies pay 1984 1.2 high fees to their foreign counterparts for 1985 1.1 handling those extra calls, and the deficit 1986 1.4 has ballooned in the last decade. 1987 1.7 1988 2.0 1989 2.4 (estimate) (Source: F.C.C.) THE LONG DISTANCE USAGE IMBALANCE Outgoing and incoming U.S. telephone traffic, in 1988, the latest year for which figures are available, in percent. Whom are we calling? Who's calling us? Total outgoing traffic: Total incoming traffic: 5,325 million minutes 3,155 million minutes Other: 47.9% Other: 32.9% Canada: 20.2% Canada: 35.2% Britain: 9.1% Britain: 12.6% Mexico: 8.8% Mexico: 6.2% W. Germany: 6.9% W. Germany: 5.4% Japan: 4.4% Japan: 4.3% France: 2.7% France: 3.4% (Source: International Institute of Communications) COMPARING COSTS: Price range of five-minute international calls between the U.S. and other nations. Figures do not include volume discounts. Country From U.S.* To U.S. Britain $2.95 to $5.20 $4.63 to $6.58 Canada (NYC to $0.90 to $2.25 $1.35 to $2.26 Montreal) France $3.10 to $5.95 $4.72 to $7.73 Japan $4.00 to $8.01 $4.67 to $8.34 Mexico (NYC to $4.50 to $7.41 $4.24 to $6.36 Mexico City) West Germany $3.10 to $6.13 $10.22 * For lowest rates, callers pay a monthly $3 fee. (Source: A.T.&T.) WHERE THE DEFICIT FALLS: Leading nations with which the United States has a trade deficit in telephone services, in 1989, in millions of dollars. Mexico: $534 W. Germany: 167 Philippines: 115 South Korea: 112 Japan: 79 Dominican Republic: 75 Columbia: 71 Italy: 70 (Source: F.C.C.) Israel: 57 Britain: 46 THE RUSH TOWARD LOWER COSTS: The cost per telephone line for laying each of the eight telephone cables that now span the Atlantic Ocean, from the one in 1956, which held 48 lines, to the planned 1992 cable which is expected to carry 80,000 lines. In current dollars. 1956 $557,000 1959 436,000 1963 289,000 1965 365,000 1970 49,000 1976 25,000 1983 23,000 (Source, F.C.C.) 1988 9,000 1992 5,400 (estimate)