US embassy cable - 03ROME1119

UNCLAS ROME 001119 
 
SIPDIS 
 
DEPT PASS USTR FOR SCHAGRIN; EB/CIP - TFINTON; COMMERCE FOR 
NTIA SPECK 
 
E.O. 12958: N/A 
TAGS: ECPS, ETRD, IT 
SUBJECT: ANNUAL SECTION 1377 REVIEW OF TELECOMMUNICATIONS 
TRADE AGREEMENTS 
 
                       UNCLASSIFIED 
 
PAGE 02        ROME  01119  181741Z 
REF: SECSTATE 50683 
 
1. THE HIGH COST OF MOBILE TO FIXED TERMINATION RATES, WHICH 
IS THE FOCUS OF COMPTEL'S FILING UNDER SECTION 1377 OF THE 
TRADE ACT, WAS A THEME OF THE MARCH 6-7TH U.S./ITALY 
BILATERAL TALKS ON COMMUNICATIONS POLICY. THE GOI IS 
COMMITTED TO BRING RATES DOWN, BEGINNING WITH THE FIRST 
TRANCHE OF RATE CUTS EFFECTIVE JUNE 1, 2003.  VERIZON, THE 
U.S. MINORITY SHAREHOLDER IN OMNITEL-VODAFONE, ARGUES THAT 
THE HIGH COSTS ARE JUSTIFIABLE. 
 
2. COMPTEL'S JANUARY 9TH FILING IN USTR'S 1377 REVIEW 
PRE-DATED THE COMMUNICATIONS AUTHORITY'S (AGCOM - ITALY'S 
EQUIVALENT TO THE FCC) DECISION TO MANDATE LOWER TERMINATION 
RATES.  ON FEBRUARY 5TH, AGCOM ANNOUNCED THAT EFFECTIVE JUNE 
1, 2003, TERMINATION COSTS WILL BE 14.95 EURO CENTS AND 
RETENTION COSTS WILL 4.85 CENTS, A REDUCTION OF 12 PERCENT 
AND 14 PERCENT RESPECTIVELY.  REGULATORY OFFICIALS TOLD THE 
U.S. DELEGATION TO THE MARCH 6-7TH BILATERAL TALKS THAT THEY 
PLAN TO REDUCE TERMINATION COSTS FURTHER IN 2004 AND 2005, IN 
THE RANGE OF 20 PERCENT, AND WILL INTRODUCE A NEW BASKET OF 
FIVE SERVICES SUBJECT TO A PRICE CAP. 
 
3. WHILE AGCOM'S DECISION SHOULD ADDRESS THE CONCERNS OF 
FIXED-LINE OPERATORS, U.S. TELECOM COMPANY, VERIZON, TOLD THE 
U.S. DELEGATION THAT IT WOULD BE ADVERSELY AFFECTED BY THESE 
CAPS. VERIZON, WHICH OWNS 23 PERCENT OF ITALY'S SECOND 
LARGEST MOBILE CARRIER,  OMNITEL-VODAFONE, SAID THAT HIDDEN 
COSTS, SUCH AS THE DEVELOPMENT OF 3G SERVICES AND RESEARCH 
AND DEVELOPMENT, SHOULD BE TAKEN INTO ACCOUNT. 
 
                       UNCLASSIFIED 
 
PAGE 03        ROME  01119  181741Z 
4.  POST WILL CONTINUE TO MONITOR AND REPORT ON AGCOM'S 
RULE-MAKING ON MOBILE TO FIXED TERMINATION RATES. 
SEMBLER 
 
                       UNCLASSIFIED 
 
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 2003ROME01119 - Classification: UNCLASSIFIED