International telephone service imbalances : Accounting rates and regulatory policy

The USA suffers a large and growing balance of payments deficit in the telecommunications sector, a phenomenon often blamed on the international accounting rate system. The experience of other countries suggests that this explanation is too simple, however. This article concludes from a new econometric analysis that the underlying problem is that regulatory and licensing policies globally have inhibited competition in international markets and in so doing have buttressed high and static accounting rates. The appropriate solution will be full encouragement of competitive and market pressures, supplemented by well considered political and regulatory interventions.