Phone company enters pact with another US carrier
- warns of higher local rates if FCC ruling applied
By Gitanjali Singh
January 11, 2000
The local phone company has entered into an operational contract with MCI, the second largest carrier in the US, to route calls directly into Guyana at a settlement rate of US$0.85 cents per minute and talks are on with Sprint, another US carrier.
Cornelius Prior, Chairman of Atlantic Tele Network (ATN), the parent company of the Guyana Telephone and Telegraph Company Limited (GT&T) yesterday told a press conference at the GTV-11 Studios that the agreement with MCI is similar to the one the company had with AT&T, providing for one year's notice in the event of termination.
Briefing reporters on the accounting rate spat between GT&T and AT&T which led to AT&T terminating its operating agreement with GT&T on December 31 last, Prior confirmed that GT&T terminated the direct circuit between the two companies as was expected by both parties.
He also reported that incoming calls from the US are back to normal as customers have become aware of the situation and have re-routed their calls through another carrier. He also suggested that AT&T might now be re-routing calls through MCI to Guyana as he, an AT&T customer, was able to contact Guyana using his phone.
AT&T had proposed to GT&T - in keeping with a US Federal Communication Commission ruling - lowering the settlement rate from US$85 cents to US$23 cents in a phased manner. However, GT&T was opposed to the lowered accounting rate which would have impacted negatively on its revenue stream. If the accounting rate was lowered it would severely deflate GT&T's revenues and would require a substantial hike in local rates and costs for other services to compensate.
AT&T had given a year's notice of termination of the contract and with the impasse widening, AT&T carried through its threat to terminate the service.
However, Prior said what GT&T did not bargain for was AT&T placing a block on customers attempting to get through to Guyana with busy signals instead of re-routing customers through other carriers in or out of the US.
"They actually blocked those calls and did not permit customers to make calls at all. I picked up my phone on January 1 (in the) morning and was advised that all circuits were busy. But in the meantime, MCI was sending traffic through and other carriers using MCI were sending traffic to Guyana," Prior stated. He noted that this was foolhardy on the part of AT&T as it stood not to lose customers for a day but in the long run if it had continued.
GT&T through the regional Caribbean telecommunications organisation, CANTO, is challenging the FCC ruling which becomes fully effective in 2001.
Asked what happens after 2001 when all US carriers would be expected to comply with the FCC ruling and its implications for revenues for GT&T, Prior indicated that this is not certain.
"It is not clear that MCI will comply with the FCC ruling (and) reduce rates in 2001.... it is not clear that MCI will comply if the government of Guyana ordered GT&T not to give in to the AT&T rate. "We continue to explore with our lawyers in Washington what action we can take to keep our rates as they are," said Prior.
He indicated that there is another year of negotiations and MCI does not seem to be in any particular rush as the firm has put no pressures on GT&T for reduced rate.
Prior said it was this FCC ruling which had prompted GT&T to file a case for rate increases with the local Public Utilities Commission in 1995 and 1997. Prior said rates would have to move from US$1.50 per minute in Guyana to US$5 per minute and this is what the company applied for, among a host of other rate increases.
He noted that with incoming rates coming down from US$0.85 to US$0.23 cents, for GT&T to maintain its 15 per cent return on investment it would have to increase domestic rates significantly.
He restated that the local rates are heavily subsidised and the US FCC is opposed to offering subsidies. However, Prior noted that the rate hearing cases have been pending for two years.
But should for any reason arrangements with MCI fall through, Prior indicated that GT&T is talking to Sprint. Sprint is not a direct carrier to Guyana out of the US. The two direct carriers to Guyana from the US are MCI and AT&T.
The GT&T chairman does not see AT&T changing its mind on the rate issue and reopening negotiation between the two companies.
About two-thirds of GT&T's revenue comes from international, inbound, long distance traffic from the world over and 50 per cent of this comes from the US. Prior said reductions in these rates will put the company under tremendous pressure for increases in local rates.
He noted that to date GT&T has invested US$115M in plant and this commitment does not change with AT&T terminating its contract. For expansion to be sustained increases will have to be made in local rates.
Prior also expects that if the US is successful in lowering the accounting rates, other countries will bring pressure to do the same and alluded to sporadic pressure from British Telecoms to lower rates as well from Teleglobe in Canada which now has a lower tariff.
Asked about the Cable & Wireless response to AT&T's pressures, Prior said that to some extent that company has given in, partly because it wants to open up and expand its operation into the US and wants to be on friendly terms with the FCC.
But he noted that Cable and Wireless will have to increase rates in the region to sustain its operation. Prior agreed that while the disruption had a minimal impact on GT&T's operation, in hindsight, it would have been better if GT&T had forewarned customers of a possible shut off by AT&T because of the spat and to provide the re-routing numbers before January 5.
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