ECUADORIAN PRESIDENT MAKES ACCUSATIONS ABOUT U.S. TELECOMS

UNCLAS QUITO 000455 SENSITIVE SIPDIS E.O. 12958: N/A TAGS: ECON EINV EINT ETRD EC SUBJECT: ECUADORIAN PRESIDENT MAKES ACCUSATIONS ABOUT U.S. TELECOMS ¶1. (SBU) Summary: In the May 30 presentation of his weekly radio address, Ecuadorian President Rafael Correa sharply criticized U.S. telecommunications companies ATT, MCI, and Sprint, accusing them of "swindling" Ecuador out of millions of dollars of long-distance fees. ATT maintains that the accusation is based upon a misreading of international communications records conducted by a small, auditing company looking for business with Ecuador. End Summary. ¶2. (SBU) In 2007, ATT, MCI (now Verizon),and Sprint received letters from Global Audit, a Virginia-based company, which suggested there were discrepancies in the amount of long-distance minutes to Ecuador reported by the FCC and the minutes the companies declared to Ecuador's state-owned telephone companies Andinatel, and Pacifictel. (Note: In September 2008 these two companies merged to form the GOE-owned company Corporacion Nacional de Telecomunicaciones (CNT). End Note.) ATT informed EmbOffs that company representatives met with a representative from Global Audit and sent a written reply to the query in 2007. ATT informed Global Audit that its analysis was flawed because it was "comparing apples and oranges." According to ATT, Global Audit's analysis categorized minutes as originating with ATT that, in fact, should have been put in the "re-file" category. The "re-file" category consists of third-party calls such as those routed through another country (say, Mexico or Brazil). In these cases, the re-file carrier settles with the Ecuadorian carrier. In its letter, ATT asserted that this error explained the supposed discrepancy in the FCC's reported minutes and the minutes reported to Ecuador. Global Audit sent a short reply to ATT in 2007 saying it would follow up on the matter, but ATT says it never did so. ¶3. (SBU) The issue did not arise again until President Correa mentioned it in his May 30 radio address. Correa acknowledged that the GOE had retained Global Audit's services, and the current accusations appear to be identical to the ones from 2007. Correa said that the total amount now owed was roughly $80 million. He claimed that ATT underreported 274 million minutes of calls, costing Ecuador $38 million dollars in missed fees; Sprint allegedly underreported 148 million minutes, costing Ecuador $23 million; and MCI allegedly underreported 138 million minutes, costing Ecuador $19 million. ¶4. (SBU) ATT representatives told EmbOffs they believe the current accusations are based on the same flawed analysis they saw in 2007. The company is currently negotiating a renewal of its Ecuadorian Value-Added Service (VAS) license, and does not want Correa's accusations to influence those discussions. ATT believes the billing issue will be resolved once it is better understood, so it is choosing to keep a low profile in this dispute. The company said it had not yet received any official communication from the GOE about this matter. The Embassy has been unsuccessful in getting feedback from Sprint or MCI (Verizon),but we believe their situations are similar to that of ATT. ¶5. (SBU) An Embassy contact who is knowledgeable about Ecuador's telecom industry told EmbOffs that he believed the charges were politically motivated. This contact is very familiar with the billing practices of Ecuadorian telephone firms, and he flatly denied that ATT or the other companies had done anything improper. According to this contact, the US and Ecuadorian companies jointly reconcile their statements every month. He also said that the GOE regulatory agency Supertel monitors monthly telephone traffic and quickly resolves any problems. This contact said that Supertel has started an audit that will be finished in June, which he is confident will exonerate the US carriers. ¶6. (SBU) Little is known about the audit company involved in these allegations. The Embassy telecom source believes that the company saw an opportunity in the perceived discrepancies in the data on the FCC website and offered its services to Andinatel in 2006. Andinatel/Pacifictel eventually signed a one year contract with Global Audit, which resulted in the 2007 letters to the companies. Global Audit's letters from 2007 have a Herndon, Virginia mailing address, but the Associated Press reported it was unable to find any listing for the company. EconOff was similarly unsuccessful in finding any records of its existence. ¶7. (SBU) Comment. Correa's radio address was the first that the Embassy had heard of this issue, which appears to be a misinterpretation generated by a U.S. auditing company looking to sell its services to Ecuadorian phone companies. It is characteristic of Correa to make a public pronouncement on an issue like this without doing sufficient research. HODGES