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                Federal Communications Commission      DA 99-1052



                            Before the
                Federal Communications Commission
                      Washington, D.C. 20554





In the Matter of                   )
                              )
AT&T Corp.                         )                   IB Docket No. 96-261
MCI WorldCom, Inc.                 )
Sprint Communications Co. L.P.          )
                              )
Petition for Enforcement of International    ) 
Settlements Benchmark              )
Rates for Service with Kuwait           )


                              ORDER

     Adopted: June 3, 1999                             Released: June 3, 1999

By the Chief, Telecommunications Division:

                           Introduction

     1.   In this Order, we approve the petition of AT&T Corp. ("AT&T"), MCI WorldCom, Inc.
("MCI WorldCom"), and Sprint Communications Company L.P. ("Sprint") (hereinafter referred to as
("Petitioners") requesting enforcement of the benchmark settlement rate of 15› that the Commission
adopted in its Benchmarks Order for international message telephone service with Kuwait.  Petitioners
request this action so that they will be in compliance with the rules adopted by the Commission in the
Benchmarks Order.

     2.   In the Benchmarks Order, the Commission adopted benchmark settlement rates and a
schedule of effective dates for these rates governing U.S. carriers in their settlement arrangements with
foreign carriers.  The settlement rates and their scheduled effective dates are based primarily on country
income levels.  For the upper income category, which includes Kuwait, the benchmark rate is 15› per
minute.  Thus, the Commission's Benchmarks Order requires U.S. facilities-based carriers to negotiate a
settlement rate with the carrier in Kuwait, the Ministry of Communications ("MOC"), that does not exceed
15› per minute.  The rate applies to service provided from January 1, 1999.  The settlement rate now in
effect for service with Kuwait is 0.575 SDR (approximately 78› per minute), and it has not changed in
fifteen years.  We find that the Petitioners have been unsuccessful in their efforts to negotiate a settlement
rate with MOC that complies with the Benchmarks Order.  Therefore, to enforce the Benchmarks Order
and ensure compliance by U.S. carriers, we grant the Petitioners' request.  We direct all U.S. facilities-
based carriers that provide service to Kuwait to conduct settlements with MOC for international message
telephone service at a rate that does not exceed 15› per minute for service provided as of January 1, 1999. 
We also direct U.S. international carriers to use their best efforts to negotiate a settlement agreement with
MOC that complies with the Commission's Benchmarks Order.

                            Background

     3.   In its Benchmarks Order, the Commission set forth its enforcement policy to ensure
compliance with the benchmark settlement rates and their effective dates.  As part of the enforcement
effort, the Commission stated that it would take appropriate steps to ensure compliance by U.S. carriers
with the requirements of the Benchmarks Order. The enforcement effort includes the Commission
identifying foreign carriers that are "reluctant" to make meaningful progress in reducing their settlement
rates to benchmark levels.  Once the Commission identifies such carriers, it will notify responsible foreign
government authorities about its concern with continued high settlement rates and the lack of meaningful
progress in achieving lower rates, and seek their support in bringing about settlement rate reductions.  The
Commission also provided procedures that U.S. carriers may follow in cases where foreign carriers fail to
respond to a U.S. carrier's efforts to negotiate settlement rates that comply with the requirements of the
Benchmarks Order.  As outlined in the Benchmarks Order, a U.S. international carrier seeking relief may
file a petition with the Commission demonstrating that it has not been able to negotiate a settlement rate
that complies with the rules and policies adopted in the Benchmarks Order.  The U.S. carrier may request
that the Commission take enforcement measures to ensure that no U.S. carrier pays the foreign carrier an
amount exceeding the lawful benchmark settlement rate.

     4.     In the case of Kuwait, the International Bureau wrote a letter to MOC in which the
Bureau reiterated its support for reform of the international accounting rate system through multilateral
discussions and requested MOC's urgent assistance in lowering the settlement rate for service between the
United States and Kuwait.  The Bureau noted the wide disparity between Kuwait's settlement rate and the
Commission's benchmark rate and informed MOC that the Commission would be required to take
appropriate enforcement measures against U.S. international carriers if the settlement rate exceeded 15› on
January 1, 1999.  In response to this letter, MOC informed the Bureau that it had already rejected the
Commission's benchmarks policy and therefore "cannot act in accordance with the reductions proposed
under Benchmark rules."

     5.   Subsequently, the Petitioners jointly filed their petition requesting enforcement of the rules
and requirements of the Commission's Benchmarks Order on the U.S.-Kuwait route.  The Bureau issued a
public notice on this petition.  The Petitioners claim they have made good faith efforts to negotiate an
agreement with MOC that complies with the Benchmarks Order, but that their attempts have failed to
produce an agreement on a benchmark settlement rate.  The petition includes affidavits of AT&T and MCI
WorldCom employees with responsibility for their company's settlement arrangements with MOC. 
According to the affidavits, AT&T and MCI WorldCom notified MOC about the requirements that the
Commission's Benchmarks Order imposes upon U.S. carriers.  AT&T states that it informed MOC of the
benchmark obligations during a meeting that took place in May 1998, and MOC's response was to propose
a reduction in the settlement rate to 73.5›.  Additional efforts by AT&T to negotiate reductions with MOC
proved unsuccessful.  MCI WorldCom states that it was unable to negotiate a benchmark settlement
agreement with MOC, despite numerous contacts that included meetings and an exchange of letters. 
MOC has not disputed the claims in the affidavits and, in fact, did not file comments in response to the
petition.  Instead, MOC simply informed the Commission that "[I]n accordance with the Ministerial Decree
and on conformity with the decision taken during the recent Gulf Cooperation Council Minister's
conference, Kuwait Administration rejects the application of FCC's Benchmark order by the U.S. Carriers
in the USA-Kuwait telecommunications relations."
                                 

                            Discussion

     6.   The Commission's benchmark policy requires U.S. carriers to negotiate settlement rates
with foreign carriers that do not exceed specific benchmark levels after specific dates.  The Commission
adopted the benchmarks policy because, despite its concerted action and repeated expressions of concern,
as well as efforts by the International Telecommunication Union, accounting rates continue to exceed
foreign carriers' costs to terminate international message telephone service from the United States.  The
Commission remains committed to achieving more cost-based accounting rates because high accounting
rates inflate U.S. carriers' costs and, as a result, put upward pressure on the prices charged to U.S.
consumers.  The U.S. Court of Appeals for the D.C. Circuit upheld the Benchmarks Order and affirmed
the Commission's authority to prescribe the maximum settlement rates U.S. international carriers may pay
to foreign carriers.

     7.   Foreign carriers have had ample time to make reasonable adjustments in the settlement
rates they negotiate with U.S. international carriers.  The Commission initially proposed its benchmark
settlement rates in 1996.  After receiving comments from a wide range of interested parties, the
Commission adopted the Benchmarks Order on August 7, 1997.  Because the benchmark rate for upper
income countries such as Kuwait did not take effect until January 1, 1999, MOC had nearly two years
since the Commission adopted benchmark rates to make the transition from its settlement rate with U.S.
carriers in 1996 to the benchmark rate of 15›.  Many foreign carriers providing international service in
upper income countries made the transition to the benchmark rate during this period and several negotiated
settlement rates well below the 15› benchmark rate.  In fact, international carriers in twenty-nine
countries have settlement rates with U.S. international carriers that comply with the Benchmarks Order and
international carriers in another seventeen countries have negotiated settlement agreements with U.S.
international carriers that will bring them into compliance with the Benchmarks Order. 

     8.   We find that the Petitioners have made a good faith effort to negotiate settlement
agreements with MOC that would comply with the Commission's Benchmarks Order.  The affidavits filed
by the Petitioners establish that they: (1) informed MOC about the requirements the FCC's Benchmarks
Order imposes on U.S. carriers regarding the benchmark settlement rate for Kuwait and its effective date;
(2) exchanged letters with MOC on issues related to negotiating a new settlement rate agreement that would
comply with the Benchmarks Order; and (3) convened meetings with MOC in an attempt to negotiate a
new settlement agreement that would bring the U.S. carriers into compliance with the Benchmarks Order. 
MOC does not dispute the facts that are presented in the petition and, in response has simply informed the
Commission that it refuses to negotiate the benchmark rate of 15› with U.S. carriers. 

     9.   To enforce the Commission's Benchmarks Order and to ensure that U.S. international
carriers provide service with Kuwait under settlement terms that comply with the Commission's policy, we
direct all U.S. facilities-based carriers to conduct settlements with MOC for international message
telephone service at a rate that does not exceed 15› per minute for service provided as of January 1, 1999. 
We also direct U.S. international carriers to continue their efforts to negotiate a settlement agreement with
MOC that complies with the Commission's Benchmarks Order.

                         Ordering Clauses

     10.  Accordingly, IT IS ORDERED that the petition of AT&T, MCI WorldCom, and Sprint
for enforcement of the Commission's Benchmarks Order for service with MOC in Kuwait is GRANTED.

     11.  IT IS FURTHER ORDERED that all U.S. facilities-based international carriers providing
service with MOC in Kuwait shall conduct settlements for service provided on and after January 1, 1999 at
a rate that does not exceed the benchmark settlement rate of 15› per minute.

     12.  IT IS FURTHER ORDERED that U.S. facilities-based international carriers negotiate a
settlement rate with MOC in Kuwait that complies with the rules and requirements of the Commission's
Benchmarks Order.

     13.  This order is issued under Section 0.261 of the Commission's Rules and is effective upon
adoption.  Petitions for reconsideration under Section 1.106 or applications for review under Section 1.115
of the Commission's Rules may be filed within 30 days of the date of public notice of this Order (see 47
C.F.R. Section 1.4(b)(2)).


                         FEDERAL COMMUNICATIONS COMMISSION


                         Rebecca Arbogast
                         Chief, Telecommunications Division
                         International Bureau