Resale of int'l private lines allowed in 23 countries

While the Philippine Long Distance Telephone Co. (PLDT) claims that it is losing billions of pesos from the rampant practice of international simple resale (ISR), at least 23 countries worldwide have already legalized the activity.

ISR is the practice of routing calls to and from a foreign destination via international private lines instead of passing through the gateway facility of a carrier.

It essentially involves leasing transmission capacity in bulk and offering it for resale, normally, at a lower price than what a customer would pay directly to the telecom operator for the same service.

The US International Bureau has already approved the provision of switched services over private lines interconnected to the public switched network, between the United States and various countries.

As a result of ISR authorization, American carriers can now send 46 percent of all US international traffic outside of the traditional settlements system, thereby, benefiting consumers by reducing prices, encouraging greater service options, stimulating demand and spurring technological innovation.

Aside from US, other countries which have approved ISR are Canada, United Kingdom, Sweden, New Zealand, Australia, Netherlands, Luxembourg, Norway, Denmark, France, Germany, Belgium, Austria, Switzerland, Japan, Italy, Ireland, HongKong, Israel and Singapore.

Since ISR is still prohibited in the Philippines, a number of local carriers providing international toll services are forced to tolerate the practice to avoid paying high access charges to PLDT.

At present, the players pay PLDT $0.17 for every minute of international call that passes through the latter's network. The arrangement is one-way.

A highly-reliable industry source who requested anonymity said that they have identified a least five telecom firms which are ignoring the suspected ISR operations of their customers.

The source said that private groups or individuals engaging in ISR are easy to detect due to the unusually heavy volume of call traffic passing through the leased circuits.

Yet, he said, telecom companies choose not to monitor the illegal practice since they not only earn more from leasing out the circuits but also avoid paying PLDT the $0.17 access charge. Each leased in costs P20,000-30,000 a month.

Meanwhile, the Organization for Economic Cooperation and Development (OECD) said the profitability of ISR derives from the potential it offers to by-pass the accounting rate mechanism.

Accounting rate is the amount equally shared between the foreign and local carriers for every minute of international call made. The amount is paid by the party from which the call originated.

The OECD noted that the greater the divergence is in access charges and accounting rates, the greater the incentive to participate in ISR.

Equal access and non-discrimination would imply that new entrants in the market for international telecom services pay for access.

By not unbundling access, OECD warned that carriers are in fact leaving themselves open to ISR opportunities.

"The solution is, therefore, not to try and limit these services but rectify the pricing problem," OECD said.