The U.S. has highlighted the wholesale rates charged by mobile carriers in the European Union and Japan as one of its chief areas of concern in the telecommunication sector, and said U.S. consumers could soon be losing billions of dollars per year in overcharging by foreign carriers.
Those rates, along with leased line costs in the E.U. and Switzerland, and interconnection rates in Mexico, are highlighted in the annual "Section 1377" review on operation and effectiveness of U.S. telecommunication trade agreements, which was published this week by the Office of the United States Trade Representative (USTR).
The USTR is concerned about the wholesale charges levied by the cell-phone operator on the fixed-line carrier. Under the calling-party-pays system used outside of the U.S., the caller pays the full price of the call and this money is collected by the caller's telephone company. When the call is passed to the mobile carrier, the originating carrier pays a fee to have the wireless carrier complete the call. This charge, called the interconnection rate, is normally invisible to consumers as a separate charge but is included in the price the caller pays when making the call.
Outlining its complaint, the USTR said it has found growing evidence that charges levied by mobile carries in the E.U. and Japan are "significantly above cost" and said "the burden of these above-cost charges on U.S. operators and consumers may soon reach into the billions of dollars annually."
The mobile carriers are not standing still. Some, such as those in the U.K. and France, are already studying lower rates, and Japan's NTT DoCoMo recently proposed lower charges. However, the USTR wants other nations to follow suit and said it will keep the pressure on.
The USTR's call to action comes less than two years after it signed a comprehensive telecommunication interconnection agreement with Japan. The two nations had been negotiating, and sometimes arguing, about the interconnection rates of Japan's local-loop provider NTT Corp. for several years, and finally signed a deal in July 2000 -- but that agreement covered fixed-line charges only and failed to include mobile operator NTT DoCoMo Inc.
Instead, the Japanese government agreed to study whether NTT DoCoMo should be subjected to stricter control. The carrier has a 59 percent share of the mobile market in Japan. The result was a deal that fell short of officially labeling DoCoMo as a dominant carrier, although it has pressured the company into publishing its rates -- something other mobile carriers are not obliged to do.
DoCoMo revised its rates at the end of March. The company cut interconnection rates for calls to mobile phones by 14 percent, to ¥0.218 per second, and applied the cuts retroactively to March 2001.
The USTR's accusations are nothing new, according to Keiji Tachikawa, president and chief executive officer of NTT DoCoMo Inc.
"They always comment on how expensive Japan's access charges are every year, don't they?" he said at a news conference in Tokyo on Thursday. "In terms of access charges, it is cheaper in Japan than in Europe, and it is not appropriate to compare the U.S. access charge to the others because they have different charging systems."
The USTR is also involved in an ongoing dispute with Mexico over interconnection rates. Several issues were resolved last year, although Teléfonos de México SA de CV (Telmex), Mexico's major carrier, came in for criticism in the new report. Earlier this year the U.S. asked the World Trade Organization (WTO) to mediate in the dispute.
The report card on foreign governments also took issue with carriers, often the former state-monopoly carriers, in the E.U. and Switzerland for their high leased-line charges. It said U.S. operators had faced "serious difficulties" in obtaining leased lines from carriers in the E.U. and singled out Germany as the worst offender. There, it said, carriers sometimes had to wait up to six months for an order to be fulfilled. It also said U.S. operators have complained about high prices in Belgium, France, Ireland, Spain and Switzerland that make it difficult for them to offer competitive services.
The full report can be found on the USTR's web site at http://www.ustr.gov.
(Kuriko Miyake in Tokyo contributed to this report.)