Dear Editor,

GT&T's application for rate adjustments, following its agreement with AT&T to reduce the settlement rate for the Guyana/U.S route does not cover the rates for its cellular service. This exclusion overlooks the fact that the agreement with AT&T affects both landline and cellular service to the U.S.A.. As with the cost of landline calls, the agreement means that GT&T's cost for cellular calls to the U.S.A has declined by U.S.$0.63 per minute, since January 1, 2002. By excluding cellular services from its application, GT&T stands to reap a windfall from the excessive rates paid since January 1, 2002 and would continue to be paid by cellular subscribers for calls to the U.S.A.

The windfall should be seen against the background of the high profitability of GT&T's cellular operations, which obviously explained its decision not to request increases in the rates for this service. The Commission has a duty to review GT&T's cellular rates as a matter of urgency with the aim of adjusting the rates for calls to the U.S.A to levels consistent with a 15% rate of return. GT&T's cellular rates should also be reviewed in light of any reductions in international accounting rates between Guyana and other countries, since 1991. The matter is very urgent since there are thousands of persons who signed up for cellular service because they did not have the option of a landline service.

A cost oriented approach to the pricing of cellular services (which is so strongly advocated by GT&T) requires that the rates for the services should be based on three cost components: (i) the cellular network cost, (ii) GT&T's landline connection and usage charges attributable to the cellular service and (iii) the settlement rate paid to the foreign carrier. For the landline component, GT&T's accounting system would have to provide a basis for establishing the cost of the menu of landline services used for making cellular international calls.

GT&T's licence provides a basis for the necessary cost breakdown in the accounting separation and transfer pricing (allocation) arrangement of Conditions 18 and 20. An essential feature of these two Conditions is the maintenance of separate accounts for GT&T's four businesses as categorized in Condition 18: (i) the Apparatus Supply Business (the sale, rental and maintenance of telecommunications equipment), (ii) its provision of Land Mobile Services (its cellular service business), (iii) the Supplemental Services Business (value added services) and (iv) its Systems Business or network transmission services.

In its current application for new rates for its landline services, GT&T's failure to maintain separate accounts for each of the four businesses, as required by Condition 18 and 20 of its licence, and to propose rates for each of the businesses on the basis of their respective accounts are in breach of its licence and the Telecommunications Act leaving the Commission with no basis whatsoever for the consideration of new rates for GT&T. Sections 18 and 20 of GT&T's licence is a faithful transcription of sections 18 and 20 of the licence granted to British Telecommunications in 1984.

There are ample precedents in the regulation of British Telecommunications to support the accounting separation requirements for the fixing of rates for GT&T. There are only two options open to the Commission. It must either reject GT&T's application on the ground that it does not comply with the law, or request GT&T to submit a new application that complies fully with the law.

The issue is one of law as well as of accounting and economics. With a former Judge of the Court of Appeal, the highest court of the land, as its Chairman, and with a legal expert on its staff, the Commission should not have any difficulty following the law or justifying its rejection of the separation requirement, if it finds that this requirement is not a legal necessity. I hasten to say that the latter would be indefensible from the point of view of economics.

As regards the cellular rates, the Commission is urged to call a hearing on its own motion at the earliest opportunity to require GT&T to show cause why the rates for cellular calls to the U.S.A should not be reduced, following the steep reduction in the settlement rate cost of such calls. The people's watchdog should not sit idly by and allow GT&T to demand exorbitant rates from cellular subscribers.