Report No. IN 98-61              INTERNATIONAL ACTION                 November 24, 1998

INTERNATIONAL BUREAU ACTS ON SPRINT'S INTERNATIONAL SETTLEMENT RATE
                MODIFICATION REQUEST FOR MEXICO

     The International Bureau acted today on a request filed by Sprint Communications, L.P.
(Sprint) for modification of the settlement rate for international switched voice service with T‚lefonos
de M‚xico, S.A. de C.V. (Telmex) for U.S.-Mexico traffic.  Telmex and Sprint are joint venture
partners in Telmex/Sprint Communications, L.L.C. (TSC), which provides international service in the
United States pursuant to a 214 authorization issued on October 30, 1997.  The Bureau denied the
proposed interim settlement rate of 37.5 cents per minute effective January 1, 1998, and 34.5 cents per
minute effective January 1, 1999.  The Bureau approved the proposed settlement rate of 19 cents to
become effective on January 1, 2000.  Sprint's previous agreement with Telmex, which included an
average settlement rate of 39.5 cents per minute, expired on December 31, 1997.   As a result of the
Bureau action, Telmex will be required to negotiate lower rates interim rates with Sprint and with other
U.S. carriers. 

     The Bureau noted that the proposed settlement rate of 19 cents for 2000 is the benchmark rate
for Mexico mandated by the Commission in the 1997 Benchmarks Order, and therefore found it to be
in the public interest.  On the other hand, the Bureau found the proposed settlement rates for the
interim years 1998 and 1999 to be contrary to the public interest because they make inadequate
progress towards achieving cost-based settlement rates.  The Bureau found that the Sprint Modification
Request proposed settlement rate reductions of 2 cents in 1998 and 3 cents in 1999 unduly delay
settlement rate reductions on the U.S.-Mexico route.  Under the rates proposed, 75 percent (15.5 cents)
of the aggregate reductions required in order to achieve the benchmark rate of 19 cents would be
delayed until 2000.  In addition, the Bureau found that denying the request as to the interim rates was
necessary to prevent Telmex from taking advantage of its market dominance in Mexico, and its affiliate
relation with Sprint.  

     The Bureau also denied claims that it found the Sprint Modification request for the interim rates
to be in the public interest in its October 30, 1997, Order authorizing TSC to enter the U.S. market. 
The October TSC Order made no finding with respect to the interim rates.  Moreover, both Chairman
Kennard and the International Bureau have repeatedly stated that the interim rates proposed by Sprint
remain too far above cost to be acceptable, and have encouraged carriers to negotiate lower interim
rates for 1998 and 1999 (see Chairman Kennard Statements of February 25, 1998 and August 7, 1998). 
In today's Order, the Bureau repeated the TSC Order finding that only Telmex's agreement to reduce
its rates to 19 cents in 2000 was found to be in the public interest, not the interim rates.  The Bureau
order encouraged U.S. carriers to negotiate lower settlement rates than those contained in the Sprint
Modification request for 1998 and 1999.


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     In a separate action, the Bureau also released today an order directing TSC to show cause why
the Commission should not find TSC and Telmex to have failed to comply with conditions attached to
TSC's Section 214 authorization to provide service in the United States.

     Action by the Chief, International Bureau, November 24, 1998, by Memorandum Opinion  and
Order (DA 98-2401).

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     International Bureau contacts: Peter Pappas at (202) 418-0746 and Diane Cornell at (202) 418-
1470.

     News Media contact: Rosemary Kimball at (202) 418-0500.