Impact of interconnection on settlements for international telecoms
The European Commission, ISPO, has published a study, conducted by external consultants, on the impact of interconnection on financial settlement arrangements for international telecommunications traffic. The study aims to examine the effects of increased telecoms liberalization on the traditional accounting rate system used by telecoms operators to settle international telephone calls. The increase in numbers of operators, as monopoly providers face growing competition, coupled with technological advances mean that the accounting rates no longer reflect the true costs of the calls made. Consequently, new operators have made efforts to circumvent these charges in certain circumstances. When the EU market is fully liberalized, the accounting rate system will be replaced by cost-oriented interconnection charges for intra-Community traffic. This will result in charges significantly lower than at present. According to the study, liberalization will mean large reductions in the existing operators' margins on international traffic. However, it suggests that loss of revenue will be compensated, at least to an extent, by a higher volume of international traffic, if reductions are passed on to users. The study notes that long-distance tariffs could be reduced by as much as 50-60%, however reductions of this level will only occur in markets where competition develops strongly.