WHY IS THE INTERNATIONAL ACCOUNTING RATE SYSTEM IN TERMINAL DECLINE, AND WHAT MIGHT BE THE CONSEQUENCES

This paper looks at the incentives and opportunities existing in the p rovision of international telephony and argues that the present accoun ting rate system is unsustainable. The paper also provides a framework within which current or proposed regulations governing trade in inter national telecommunications services can be analysed. The enormous pro fits available in this sector, together with developments in digital a nd fibre optic technology are resulting in a breakdown of the implicit cartel arrangements which have largely prevented operators from on-se lling services (a type of arbitrage). However, liberalization by only part of the world will give rise to a potentially serious new problem - monopoly opportunism by operators in non-liberalized countries. The paper analyses this and other potential problems that can be expected to arise in the future. Copyright (C) 1996 Elsevier Science Ltd