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Telecommunications Investment and Traffic in Developing Countries: The Effects of International Settlement Rate Reforms

Scott J Wallsten

Journal of Regulatory Economics, 2001, vol. 20, issue 3, 307-23

Abstract: In 1997 the FCC ordered sharp decreases in international settlement rates (bilaterally negotiated telecommunication rates) between the U.S. and other countries. Developing countries, which received about $35 billion in net settlement payments from U.S. carriers between 1985 and 1998, claim that payments finance telecom investment and that reduced rates, and therefore payments, will harm investment. Using a panel dataset of 179 countries from 1985-1998, I find settlement rates negatively correlated with international telecom traffic, suggesting that reduced rates will stimulate traffic. I also find no evidence that payments finance investment as measured by telephone penetration and telecommunications equipment imports. Copyright 2001 by Kluwer Academic Publishers

Date: 2001
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