Report No. IN 99-1                INTERNATIONAL ACTION                 January 4, 1999

 INTERNATIONAL BUREAU AUTHORIZES ISR BETWEEN THE UNITED STATES
                         AND HONG KONG

     The Telecommunications Division of the FCC's International Bureau has approved,
effective January 1, 1999, two carriers' requests to provide switched, basic services over  private
lines that are interconnected to the public switched network (also known as International Simple
Resale or ISR) between the United States and Hong Kong.  As a result of this approval, all duly-
authorized carriers may now provide switched services over their facilities-based or resold private
lines between the United States and Hong Kong.  This action will permit carriers in the United
States and Hong Kong to route traffic between these two markets outside the traditional
settlements system, enabling carriers to offer international service at lower rates.  Because Hong
Kong is among the largest U.S. routes to Asia and serves as a major traffic hub for the region, this
action will dramatically increase competitive pressures on rates for international
telecommunications services to all parts of Asia.

     The Commission's rules permit ISR on a U.S.-World Trade Organization Member route,
such as the U.S.-Hong Kong Route, if (1) settlement rates for at least 50 percent of the settled
U.S.-billed traffic between the United States and the WTO Member are at or below the relevant
benchmark settlement rate adopted in the FCC's Benchmarks Order, or (2) the WTO Member
provides U.S.-authorized carriers opportunities to resell private lines for the provision of
switched, basic services that are equivalent to those available under U.S. law.  AT&T and MCI
WorldCom have each filed notifications with the Commission of accounting rate reductions
negotiated with Hong Kong Telecommunications International (HKTI) that provide for a per
minute settlement rate of 6.9 cents, well below the relevant benchmark rate of 15 cents.  These
reductions have an effective date of January 1, 1999 and cover more than 50 percent of the settled
U.S.-billed traffic on the U.S.-Hong Kong route.  As a result, the Telecommunications Division
found the benchmark settlement rate condition for ISR satisfied, and consequently approved the
requests of AT&T and Hong Kong Telecommunications (Pacific) Ltd., an HKTI affiliate, to
provide switched services on an ISR basis between the United States and Hong Kong. 

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     This action adds Hong Kong to the list of seventeen other countries to and from which
U.S. carriers can use ISR as a means to route any switched, basic telecommunications service,
including voice service.  With the addition of Hong Kong to the list, U.S. carriers can now send
45 percent of all U.S. international traffic outside of the traditional settlements system.  Benefits
to U.S. and Hong Kong consumers include reduced prices, greater services options, increased
demand and technological innovation.              

   

Action by Chief, Telecommunications Division, International Bureau, December 31, 1998, by
Order, Authorization and Certificate (DA 98-2654).

                            - FCC -

     News Media contact:  Rosemary Kimball at (202) 418-0500.
     International Bureau contact: Robert McDonald at (202) 418-1470.