International accounting rate reform: The role of international organizations and implications for developing countries

Because telecommunications has traditionally been a monopoly-controlled industry, liberalization requires adjustments to the existing market structure. One such modification is a reform of the current accounting rate system. Members of both the WTO and the International Telecommunication Union (ITU) advocate remodeling the current accounting rate system with the goal of progressing to cost-oriented accounting rates. The transition to competition, however, has potential implications for developing countries that lack the financing or network infrastructure to compete globally. This Note will first provide a brief explanation of the accounting rate system and current reform proposals. The ITU's role, both historically and in light of the recent WTO agreement, is explained. The WTO agreement on telecommunications services and the potential impact on developing countries is discussed. And finally, the consequences of international accounting rate reform on developing countries and the possible impact of a new competition-based marketplace on infrastructure development and universal service funding are explored.