8575: International Telephone Traffic between North America and Haiti (fwd)

[Bob Corbett <corbetre@webster.edu>]

Please do not publish my Name and address


International Telephone Traffic between North America and Haiti

International telephone carriers normally exchange traffic based on an
established “Accounting Rate” which is the published, official rate per
minute from one country to another.  This is the standard rate that a North
American carrier has to pay to a foreign country PTT for each minute of
traffic sent to that foreign country.
In the case of Haiti, a few years ago, the official Accounting Rate was
$0.60/minute, and was then lowered to $0.40/minute.  Major carriers like
AT&T, MCI/WorldCom and Sprint normally have to pay $0.40 to TELECO (the
Haitian Government owned telephone company), for each minute of telephone
traffic they send to Haiti.
In many foreign countries (including Haiti), there are some illegal
operators setting up their own satellite links and PBX’s to “leak”
international traffic into the country without paying the Accounting Rate to
the established PTT.  Typically, these “Leaky PBX Operations” as they are
called, have an agreement with some Telephone Calling Card Operators in
North America, to sell them the international minutes at a discounted rate,
well below the established Accounting Rate.
>From a US legal standpoint, it may not be illegal for a fully licensed
US-based Telephone Calling Card Operator to send international traffic to
whomever they want.  However, in the receiving countries, these Leaky PBX
Operators are clearly illegal.
In Haiti, in addition to small, isolated, Leaky PBX Operations, there are
also some semi-legal, US-based Privileged Operators that, thanks to Haitian
political backup and protection, are recognized by TELECO, the Haitian PTT,
but pay a heavily discounted per minute rate for international traffic sent
to Haiti, well below the established official Accounting Rate.
For the last few years, a couple of these Privileged Operators paid $0.15 to
$0.20 per minute to TELECO, instead of the $0.40 regular Accounting Rate.
They then resold these minutes to North American Calling Card Operators for
$0.35 to $0.38 per minute, making close to 100% profits!  Of course, they
had to split these huge profits with their local Haitian political partners.
It should be stressed that there is very little overhead involved for these
Privileged Operators.  A satellite earth station along with the
interconnection equipment costs less than $100,000, and once installed in
Haiti, there is minimal maintenance and practically no human intervention.
Only marketing/collection costs are involved to resell the minutes to North
America, and since the demand for southbound traffic is usually more than
the supply, even these marketing and collection costs are minimal.
This situation put major carriers like AT&T and MCI/WorldCom in a quite
unfavorable competitive situation because they still had to pay $0.40/minute
to TELECO.  Very quickly, these major carriers realized that it would be
more profitable to buy their minutes (at least for a big part of their
traffic) from the Privileged Operators instead of the Haitian PTT.
That resulted in even more profits for the Privileged Operators, but of
course, much less revenues for TELECO, the consequence being that the
Haitian PTT is now completely broke whereas the Privileged Operators and
their Haitian political allies have accumulated and shared enormous profits.
This situation, potentially embarrassing for some US-based Privileged
Operators, was recently exposed in the Wall Street Journal and through other
North American medias.  As a result, TELECO has extended the $0.15/minute
discounted rate to other operators as well, but of course the increased
competition have considerably lowered the profit margins and these minutes
are now resold for about $0.18 in North America.
Of course, more operators means less traffic for the original Privileged
Operators.  However, some of the new operators (as well as other sources)
now claim that the original Privileged Operators are “late” in their
payments to TELECO, and go even as far as saying that the Privileged
Operators pay only for a fraction of their traffic, or simply do not pay
TELECO at all (thanks to their political backup), which is another way to
continue making handsome profits in spite of a reduced market share.