As part of the new pricing regime, call rates within Jamaica will be increased, in some instances, by 66 per cent to closer reflect what C&W says are their actual costs and the removal of the long-standing subsidy on local rates from the revenue generated from international calls.

Digicel promises to rev up competition.

C&W began to rebalance its rates in the late 1990s as it, like other international telephone operators, fell under pressure from the US Federal Communications Commission (FCC) to lower rates to bring them closer to what is charged by American long-distance carriers.

Under the system for international telephone transmission, a US firm and Cable & Wireless agree on a cost for delivery of a call from one destination to another. But the company originating the call takes it to a theoretical mid-way point, after which the company at the receiving end, takes over and is paid half the revenue.

But the Amercans argued that because developing countries like Jamaica kept the cost of their international service to the domestic users artificially high, it meant that more calls were made from the the United States to other countries.

The upshot is that American firms pay out far more in settlement to foreign firms than they receive -- creating an imbalance in trade.

The Americans have been demanding re-balancing at a pace more aggressive than what most countries undertook to do.

Lower international telephone rates, the Americans say, will not hurt other countries but will have the impact of stimulating business all round.

C&W's new flat rate - applicable for direct dialing from fixed residential or business lines - will translate into a 30 per cent reduction for calls made to the USA and Canada, and 64 per cent fall on calls to far-away destinations like China, India and Australia.

On average, international call rates will be cut by 25 per cent from November 1, C&W disclosed through newspaper advertisements and a press statement yesterday.

"International calls (are) being reduced by approximately 25 per cent across the board," said C&W. "The....cost for calls to far away places like Australia, India and China will be reduced by approximately 64 per cent."

Cable & Wireless did not spell out in its advertisements or press statements the percentage rate movements for local calls. But a calculation by the Business Observer based on the intra-parish rates direct dialing, on a standard payment plan revealed the following:

Direct full rate

Old new increase

24c per m 40c 66%

Direct reduced rate

Old new increase

21c per m 35c 66%

Direct weekend

Old new increase

19c per m 30c 57.8%

The once telephone provider monopoly which faces unrestrained competition with full market liberalisation on March 1 next year, has for several years been rebalancing its rate, to conform with the standard rate structure of international telephone companies. That process will be accelerated on November 1.

"The new rates which were approved by the Office of Utilities Regulation (OUR) continues the trend began by Cable & Wireless five years ago to rebalance its revenue stream," said the company in its press statement. As part of this process, domestic rates will move "closer to the actual cost of providing these services" noted C&W.

Cable & Wireless says it will also reduce the rates for international calls to those customers using its World Talk cards - but these rate will still be above the $18 per minute flat fee that will be applicable on direct dialing from fixed lines telephones.

As part of the revision of its domestic rate structure, C&W will also increase its monthly line rental charge, and domestic World Talk rates. There will however, be no increase in installation charges.

With the more competitive pricing structure for international calls, Cable & Wireless is apparently also bracing for fierce competition in that lucrative end of the market, competition that will be in full force once the market is fully liberalised in March.

Already Digicel Jamaica, C&W's main competitor in the cellular end of the market, has telegraphed its intention to drive down international rates next year. Currently, Digicel and other phone service providers must route their international telephone calls though C&W, limiting the extent to which they can now impact the price of international calls.

But Digicel is spending US$12 million to set up its own earth satellite station that will give it the ability to route calls to and from overseas without passing through Cable and Wireless.

Digicel's chief operating officer, Semus Lynch told the Business Observer weeks ago that it would chop international call rates by some 30 per cent below current levels once it began providing the service using its own assets.

It is not clear how the changes now taking place will eventually impact C&W's overall revenue and profitability.

With the high fee charged by C&W to international carriers for terminating their calls on its network in Jamaica, the local telephone provider made billions of dollars from these carriers.

More recently, the situation has partially reversed with the entry of two cellular operators in the Jamaican market. With their entry, C&W has been paying out millions of dollars more in connectivity fees than it collects from these two operators. For example for the three-month period April 1 to June 30, 2002, C&W paid out $1.24 billion to overseas telephone providers and local cellular operators for interconnectivity fees. For the comparable period last year, the pay out was $500 million - the sharp increase largely attributable to the growth of Digicel as a cellular service provider.

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