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International Calling Rates: A Case of Market Failure?

47 USC § 151. Purposes of chapter; Federal Communications Commission created

For the purpose of regulating interstate and foreign commerce in communication by wire and radio so as to make available, so far as possible, to all the people of the United States, without discrimination on the basis of race, color, religion, national origin, or sex, a rapid, efficient, Nation-wide, and world-wide wire and radio communication service with adequate facilities at reasonable charges, for the purpose of the national defense, for the purpose of promoting safety of life and property through the use of wire and radio communications, and for the purpose of securing a more effective execution of this policy by centralizing authority heretofore granted by law to several agencies and by granting additional authority with respect to interstate and foreign commerce in wire and radio communication, there is created a commission to be known as the “Federal Communications Commission”, which shall be constituted as hereinafter provided, and which shall execute and enforce the provisions of this chapter.

The above are the stated goals of the Communications Act of 1934, as amended. While originally these goals were met mainly through regulation, both the Commission and Congress have found that in most cases competition is more effective in regulation in meeting these goals. Thus § 203 tariff regulation is generally a historic relic. Although my copy of the Act still states in § 201:

“All charges, practices, classifications, and regulations for and in connection with such communication service, shall be just and reasonable, and any such charge, practice, classification, or regulation that is unjust or unreasonable is declared to be unlawful”.

Let me be clear, I think competition has been generally more effective than regulation, but market failure is always a possibility that makes competition ineffective in protecting the public interest and the goals of the Act. There are clear indications that in the international telephony market there has been market failure and that both the wired and wireless carriers are exploiting this to frustrate the goals of the Act.

Let’s focus on the wireless case. I recently was in Singapore and bought a prepaid SIM card from the store closest to my hotel which turned out to be M1 Ltd. (Being Singapore, one of many countries where anonymous prepaid cards are illegal, they sensibly and quickly made a copy of my passport as a prerequisite for buying the card.) The pricing of call was quote interesting: 8¢/minute for both domestic calls and international calls to India, Macau, Bangladesh, Brunei, China, Vietnam, Malaysia, Australia, Thailand, Laos, Hong Kong, New Zealand, Taiwan, Puerto Rico, USA, Russia, Canada, United Kingdom and South Korea. Philippines, Indonesia, and Saudi Arabia were somewhat higher at 22 - 45¢/minute. (These prices are in Singapore currency which is worth about 70% of US currency.)

Now I can see that the cellular network in compact Singapore is very different than that in the US with thousands of miles to cover and lots of rural areas, but I am having trouble seeing how that would affect international calling rates.

So what do US carriers charge? They all have a 2 tier system that pressures you to buy a monthly or annual plan for the privilege of paying market-based rates. If you do not subscribe to their “plan” and make a call in a rush here’s what you pay per minute for calls to the UK:

AT&T $1.29
Sprint $1.59
T-Mobile $1.49
VZW $1.49

(I should note that Tracfone, the prime trafficker of anonymous prepaid phones and the only carrier that does not even ask you for a name and address [very convenient for criminal elements - making up fake names and addresses for dozens of throw away phone is really just a drag isn’t it?], offers calling to 60 countries at their normal domestic rate which is 17-35¢/minute depending on how many minutes you prepay for.)

So, big 4 US carriers: Do the goals of the 1934 Act apply to you?

FCC: How long will you look the other way while these carriers, and their landline counterparts, charge 1980s AT&T monopoly rates for international calling where the real cost has fallen close to zero and where truly competitive pricing confirm that?

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