August 7, 1997

Re: International Settlement Rates in IB Docket No. 96-261

That current settlement rates are significantly higher than the actual cost of terminating international long distance telephone service is widely accepted. Even the foreign carriers who benefit by receiving these large annual subsidies from U.S. carriers -- and ultimately U.S. consumers -- have generally acknowledged that current settlement rates are disproportionate to actual costs. Therefore, a multilateral consensus exists -- and has existed for several years now -- that the settlement rate imbalance should be remedied.

It was in 1992 that the ITU adopted Recommendation D. 140, which called for a reduction in these rates within five years, or by 1997. While progress has been made during that time, the pace of reform in settlement rates thus far has been inadequate. Thus, despite general international agreement that a remedy has long been in order, we have been unable to reach consensus internationally as to how to achieve more cost-based rates in a timely manner.

The need to achieve meaningful accounting rate reform has taken on greater urgency in light of the WTO Basic Telecommunications Services Agreement, which will take effect on January 1 of next year. In the context of the market opening commitments that will soon take effect under the WTO Agreement, the current inflated settlement rate structure has even greater potential for market distortion and anti-competitive effects.

The WTO Telecom Services Agreement is a landmark in trade liberalization, and the international community is to be commended for taking this great leap forward. The time is due, however, for the international community to give full effect to the great promise of this Agreement by remedying the accounting rate imbalance. The ITU is to be commended for its efforts in this regard, and I commend the work of Study Group 3, in which the United States will continue to participate vigorously. But the time to act is upon us and that is why the FCC takes this action today. I would like to point out that the Commission has thoroughly reviewed the comments it has received from over 90 foreign governments and foreign carriers relative to this proceeding, and has taken these comments into account in issuing this Order.

I would emphasize, however, that the Order we adopt today specifically provides that the Commission may forbear from enforcment if a multilateral agreement is reached which achieves substantially equivalent results in a timely manner. So the FCC does not by its action today foreclose a multilateral solution. Rather it invites one -- and it is my personal hope that this Order may spur timely multilateral action to achieve our common goals.