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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).
| FOR IMMEDIATE RELEASE: June 3, 1999 |
News Media Contact: Rosemary Kimball at (202) 418-0500 |
INTERNATIONAL BUREAU ENFORCES COMMISSION'S 1997 BENCHMARKS ORDER; DIRECTS U.S. CARRIERS TO PAY THE BENCHMARK RATE TO TERMINATE TRAFFIC TO CYPRUS AND KUWAIT
The International Bureau today adopted two orders directing all U.S. carriers to pay the benchmark rate of 15 cents per minute to terminate traffic on the U.S.-Cyprus and U.S.-Kuwait routes. These companion orders were issued in response to petitions from U.S. carriers seeking enforcement of the Commission's 1997 Benchmarks Order on these routes. Under the Benchmarks Order, the primary mechanism for enforcement is through complaints filed by U.S. carriers.
The Benchmarks Order, adopted in August 1997, established benchmark settlement rates and directed U.S. carriers to negotiate settlement rates that comply with the benchmarks within prescribed transition periods. Settlement rates are the per-minute fees paid by U.S.-licensed carriers to foreign carriers for terminating U.S.-originated calls. The benchmark rates, which vary with a country's level of economic development, are: 15¢ for upper income countries, 19¢ for upper- and lower-middle countries, and 23¢ for lower income countries. The transition period for achieving these rates ranges from one year for upper income countries to five years for lower income countries which also have very low levels of telephone penetration.
Pursuant to the Benchmarks Order, U.S. carriers are required to negotiate a rate with carriers in all upper income countries, including Cyprus and Kuwait, that complies with the applicable 15¢ benchmark effective January 1, 1999. AT&T, MCI WorldCom, and Sprint filed petitions requesting enforcement of the Benchmarks Order on the Cyprus and Kuwait routes because they were unable to negotiate a 15¢ settlement rate with the carriers in those countries. The current settlement rate on the U.S.-Kuwait route is approximately 78¢, and has not changed in at least 15 years. The current settlement rate on the U.S.-Cyprus route is approximately 37¢. The Bureau orders find that the U.S. carriers engaged in good faith efforts to negotiate a benchmark rate with carriers in Cyprus and Kuwait, but were unable to do so. As a result, the Bureau orders direct all U.S. carriers to pay a settlement rate that does not exceed the benchmark rate of 15¢ for service provided as of January 1, 1999 on the Cyprus and Kuwait routes.
The Commission established the settlement rate benchmarks because, in most cases, existing settlement rates greatly exceed foreign carriers' actual costs for terminating calls originating from the United States. The goal of the Benchmarks Order is to reduce U.S. settlement rates with foreign carriers to more cost-based levels and thereby lower the cost of international long distance service. Since the Benchmarks Order took effect on January 1, 1998, the Commission has made substantial progress in achieving this goal. When the Commission adopted the Benchmarks Order in 1997, the U.S. net settlement payment to foreign carriers was approximately $5.4 billion, at least 70% of which represented an above-cost subsidy from U.S. consumers to foreign carriers. In 1998, the year the Benchmarks Order took effect, there was a substantial reduction in the U.S. net settlement payment, to about $4.4 billion. These reductions in settlement payments have contributed to lower international calling prices for U.S. consumers. The average price for an international call from the United States decreased from 70¢ the year before the Commission adopted the Benchmarks Order, to 60¢ in 1998. On routes such as the United Kingdom, where there is substantial competition and settlement rates are well below the benchmark levels, calling prices are even lower. For example, discount prices as low as 10¢ per minute, equivalent to domestic long distance prices, are available to the United Kingdom.
Since the Commission adopted the Benchmarks Order, U.S. carriers have negotiated settlement rate agreements that commit to bring rates down to or below the benchmarks levels, according to the transition schedule, with carriers in 47 countries. This represents over 62 percent of all U.S. net settlement minutes. Settlement rates are already at or below the benchmarks levels with carriers in 30 countries, representing over 38 percent of total U.S. net settlement minutes.
Action by the Chief, Telecommunications Division, International Bureau by Orders (DA 99-1052, 1053) adopted June 3, 1999.
International Bureau contacts: Kathryn O'Brien 418-0439 and Ken Stanley 418-1486.
Report No. IN 99-22 INTERNATIONAL ACTION