The telecoms firm was not able to provide specific numbers when contacted by the Business Observer yesterday, but claimed in a report to the US Federal Communications Commission (FCC) that there had been a noticeable reduction in incoming traffic since the imposition of the cess.

The universal service charge which amounts to US$0.03 per minute on all incoming international calls terminating here on fixed wire networks, and US$0.02 for mobile, is paid exclusively by foreign carriers.

But the charge, which in many instances translates into a doubling of the cost of American residents calling Jamaica, has caused, according to C&W, callers to seek cheaper alternatives via illegal operators.

C&W's revelation to the FCC was not intended as a direct complaint about the cess, but to buffet its argument that it was not as a company, benefiting from the surcharge which is intended to raise $1 billion over the next three years to fund the government's e-learning programme.

"C&W does not profit from the surcharge, and in fact has lost, and continues to lose a substantial amount of monies due to the surcharge," the company's lawyers said in a letter to the FCC.  "C&W loses money because it does not recover its administrative expenses of implementing the surcharge."

The letter formed part of an important appeal process, in which C&W is trying to prevent the USA from penalising Jamaica for the surcharge.  US telecom carriers have asked the FCC to impose rules that would block the payment of the fee to the Jamaican government.

The letter was sent to the FCC last week, but yesterday C&W corporate communications vice president Errol Miller was unable to provide actuual numbers to substantiate the claim.

Miller however said that C&W disconnected the illegal operators "from time to time".

Yesterday, Colin Campbell, the chairman of the Universal Service Fund Company - the company formed in June to manage the collection of the surcharge -confirmed that the reports of unlawful terminations were being investigated.  "We have received complaints from the smaller carriers, as well as Cable and Wireless, that there has been bypasses," Campbell told the Business Observer.  "The matter is currently being investigated by the Office of Utilities Regulations (OUR)."

Executive director of the OUR, Courtney Jackson was said to be off the island when the Business Observer called his office yesterday.

The by-pass is effected by companies operating in Jamaica with an antenna that has the capacity to accept telephone calls from overseas without it being mediated through C&W's system.  The company which usually has several local lines, then directs the calls to recipients using C&W's land lines.  This illegal practice has been ongoing for several years, and there have been several well publised cases of C&W and the authorities raiding offices to seize equipment used in this operation.

But the situation apparently escalated during the first few days of June when several US carriers that refused to pay the cess were prevented from terminating calls into Jamaica.  Apparently, callers from overseas found alternatives to reaching friends and relatives in Jamaica - via by-pass operators.

Last week, C&W made the case to the FCC that it too was negatively affected by this development, and that the cess by the government was not anti-competitive because, as a local operator, it did not stand to benefit from it.

"C&W has also suffered a significant loss of revenues from the traffic that normally would have been terminated during the period when circuits were blocked," said the company.  "As a general matter, C&W submits that the commission has no basis for concern about possible 'whipsawing' (anti-competitive) conduct when the rate increase in question actually causes foreign carriers to lose money."

C&W's parent, Cable and Wireless plc, has hinted at the impact of the cess on revenues, though there was no specific numbers in its report.

The British parent noted in its financial statements that revenues from international voice calls for the six months to 30 September 2005 had declined by 19 per cent in its Caribbean operations.  It argued that the fall off was due to ongoing pressure on international rates across the region.  In particular, the decline in Jamaica, was a result of the regulatory reductions to international settlement rates implemented in June 2004.

http://www.jamaicaobserver.com/magazines/Business/html/20051206T220000-0500_94111_OBS_C_W_CLAIMS_REVENUE_LOSS_FROM_CESS.asp