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Public Notice
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Federal Communications Commission
445 12th Street, S.W.
Washington, D.C. 20554
News media information 202 / 418-0500
Fax-On-Demand 202 / 418-2830
Internet: http://www.fcc.gov

This is an unofficial announcement of Commission action. Release of the full text of a Commission order constitutes official action. See MCI v. FCC. 515 F 2d 385 (D.C. Circ 1974).

April 15, 1999
Rosemary Kimball at (202) 418-0500
Report No. IN 99-16 INTERNATIONAL ACTION April 15, 1999

(IB DOCKET 98-148)

The Commission today approved sweeping reform of the longstanding international settlements policy, deregulating inter-carrier settlement arrangements between U.S. carriers and foreign non- dominant carriers on competitive routes.

The FCC's international settlements policy was originally designed to prevent monopoly foreign carriers from taking advantage of the competitive marketplace in the United States by playing one carrier off against another - a practice known as "whipsawing" - in order to extract higher rates for the completion of international calls originating in the United States. The international settlements policy attempts to prevent whipsawing by prohibiting U.S. carriers from accepting discriminatory terms and conditions for the termination of traffic in overseas markets.

The reforms to the international settlements policy adopted by the Commission today reflect the new realities that exist in the international telecommunications market. Under the 1997 World Trade Organization Agreement on Basic Telecommunications, 72 countries made commitments to open their markets to competition for telecommunications services. In many of those countries, new entrants are already providing service to customers at lower rates and higher standards of service than the former monopoly provider.

U.S. consumers have benefitted from these changes in the international telecommunications market. Settlement rates, the rates U.S. carriers pay to complete international calls, have declined by an average of 22 percent since 1998 and consumer prices have dropped precipitously on competitive routes. For example, discount rates for international calls to the United Kingdom have declined by about 80 percent, and rates to Germany and the Netherlands have decreased by about 50 percent since 1996.

While the international settlements policy has been a successful tool in preventing harmful discrimination against U.S. carriers by foreign monopoly carriers, the Commission's action today recognizes that the policy is not necessary on routes where there is competition on the foreign end of a call. In fact, continued application of the international settlements policy in such circumstances could impede the further development of competition by restricting the ability of U.S. carriers to seek lower cost, innovative arrangements for the termination of U.S. calls overseas.

Specifically, the Commission:

  • Eliminated the international settlements policy and contract filing requirements for arrangements with foreign carriers that lack market power;

  • Eliminated the international settlements policy for arrangements with all carriers on routes where rates to terminate U.S. calls are at least 25 percent lower than the relevant settlement rate benchmark previously adopted by the FCC in its Settlement Rate Benchmark Order (the text of the Settlement Rate Benchmark Order is available on the Commission's website at www.fcc.gov/ib);

  • Adopted changes to contract filing requirements to permit U.S. carriers to file arrangements on a confidential basis with foreign carriers with market power on routes where the international settlements policy is removed;

  • Adopted procedural changes to simplify accounting rate filing requirements;

  • Eliminated the flexibility policy in recognition that the reforms to the international settlements policy render the flexibility policy largely superfluous.
The Commission noted that the revisions to its rules will give greater opportunities to smaller carriers and will allow the market, rather than government regulation, to govern settlement arrangements between carriers in competitive markets. This reform was undertaken pursuant to the FCC's statutory mandate to modify or repeal rules no longer in the public interest as a result of meaningful economic competition.

Action by the Commission April 15, 1999, by Report and Order (FCC 99-73). Chairman Kennard, Commissioners Ness, Furchtgott-Roth, Powell and Tristani.

- FCC -

International Bureau contact: Robert McDonald at (202) 262-1198 (until April 19)
(202) 418-418-1476 (beginning April 19); Kathryn O'Brien at (202) 441-5164 (until April 19)
(202) 418-0439 (beginning April 19)