Revenue Sharing Rules for International Telephony

The method for settling telecommunications payments between operators in different countries is the reciprocal accounting rate system. This is a discriminatory system, because different operators pay different prices to access the same national network and these price differences are not related to different costs of providing the service. Reforms of the accounting rate system are currently under discussion in international organizations. In this paper we study the effects of the existing regime and of the main alternative proposal, the international traffic terminating fee, on the retail price of international telephone calls. Our main result is that the current regime of reciprocal accounting rates may determine lower prices than the proposed alternative system.