U.S. Carriers to Contribute to Internet Costs

SYDNEY (05/31/2000) - The U.S. has agreed in principle that its telecommunications carriers should share the costs of Internet traffic with Australia and other countries, a potential windfall worth many millions of dollars to Australian ISPs (Internet service providers).

The "user pays" basis was approved at the Fourth APEC (Asia-Pacific Economic Cooperation) Ministerial Meeting on Telecommunications and Information Technologies held over the weekend in Cancun, Mexico.

Under existing international charging arrangements, non-U.S. providers have had to shoulder the entire cost of network connections between their countries and the U.S. According to the Department of Communications, this means Australian Internet users have been subsidising American ISPs to the tune of some A$500 million (US$288 million).

In his speech to the Cancun meeting, Richard Alston, Australia's Minister for Communications, Information Technology and the Arts, said: "If one economy's ISPs and internet users are paying to subsidise another economy's ISPs, international competitiveness is bound to be affected."

The principles adopted by APEC state that while governments should keep out of most commercial arrangements, intervention to remove anti-competitive practices may be necessary, and that commercially negotiated arrangements should reflect each network's contribution, each party's use of the interconnected network resources and the end-to-end costs of international transport link capacity.

According to the minister's office, this is a significant "win" for Australia in that the U.S. government has now officially acknowledged the inequity of the current environment. Alston confidently predicts that renegotiated contracts will produce savings for Australian carriers, which should eventually trickle down to the consumer in the form of cheaper internet access.

Telstra spokesman Martin Ratia pointed out that the accord, like all APEC agreements, is not binding. "All we're saying is, let's have an acknowledgement of the fair trading principle that there is some value in everybody's network," he said.

But according to Alan Horsley, managing director of the Australian Telecommunications Users Group, this is more than just a moral victory.

"Of course a recalcitrant U.S. carrier might choose to ignore these principles," he said. "As a consequence I guess you would envisage a World Trade Organization dispute, and some severe penalties. Or a call to the U.S.'s very robust anti-competitive conduct rules for intervention.

"Now that the principles have been endorsed by the leaders of 17 governments, I think you'll find that there'll be tough negotiations, but a willingness to accept them."

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