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                                   Before the

                       Federal Communications Commission

                             Washington, D.C. 20554


                                         )                               
                                                                         
                                         )                               
                                                                         
                                         )                               
     In the Matter of                        File No. EB-07-IH-5149      
                                         )                               
     IDT Corporation                         NAL/Acct. No. 200832080092  
                                         )                               
     Apparent Liability for Forfeiture       FRN No. 0003-7900-37        
                                         )                               
                                                                         
                                         )                               
                                                                         
                                         )                               


                  NOTICE OF APPARENT LIABILITY FOR FORFEITURE

   Adopted:  July 9, 2008    Released:  July 10, 2008

   By the Commission:

   I. INTRODUCTION

    1. In this Notice of Apparent Liability for Forfeiture ("NAL"), we find
       that IDT Corporation ("IDT" or "the Company"), has apparently violated
       section 220 of the Communications Act of 1934, as amended (the "Act"),
       and section 43.51 of the Commission's rules by willfully and
       repeatedly failing to file with the Commission, within thirty days of
       execution, a copy of an agreement with Telecommunications D'Haiti
       S.A.M. ("Teleco Haiti") and each of four amendments thereto governing,
       among other things, the exchange of services, routing of traffic,
       accounting rates, and division of tolls on the U.S.-Haiti route. We
       further find that IDT has violated sections 43.51 and 64.1001 of the
       Commission's rules by failing to file a modification request for each
       of its four amendments to rate schedules under the terms of its
       agreement with Teleco Haiti, and by failing to obtain Commission
       approval prior to implementing such amendments. Based on our review of
       the facts and circumstances surrounding this matter, we find that IDT
       is apparently liable for a total forfeiture of $1.3 million.

   II. BACKGROUND

    2. The Commission's International Settlements Policy ("ISP") is a
       longstanding regulatory framework that governs how U.S. carriers
       negotiate with foreign carriers for the exchange of international
       telecommunications traffic. The ISP is the structure by which the
       Commission has sought to respond to concerns that foreign carriers
       with market power are able to take advantage of the presence of
       multiple U.S. carriers serving a particular market. The Commission
       established the ISP to prevent foreign carriers with market power from
       discriminating, or using threats of discrimination or other
       anticompetitive actions against competing U.S. carriers as a strategy
       to obtain pricing concessions regarding the exchange of international
       traffic, a practice known as "whipsawing." The Commission thus adopted
       the ISP to ensure a competitive playing field among providers of
       international services due to the possibility that dominant carriers
       on the foreign end of a U.S.-international route could leverage their
       market power to the detriment of U.S. carriers and, ultimately, U.S.
       consumers.

    3. The ISP establishes three conditions on the ability of U.S. carriers
       to execute agreements with foreign carriers for the exchange of
       international traffic: (1) all U.S. carriers must be offered the same
       effective accounting rate, and same effective date for the rate
       ("nondiscrimination"); (2) U.S. carriers must receive a proportionate
       share of U.S.-inbound, or return, traffic based upon their proportion
       of U.S.-outbound traffic ("proportionate return"); and (3) the
       accounting rate must be divided evenly (i.e., 50-50) between U.S. and
       foreign carriers for U.S. inbound and outbound traffic ("symmetrical
       settlement rates"). Together, these components are intended to create
       a unified bargaining position among U.S. carriers in their
       negotiations with foreign carriers possessing market power.

    4. To detect instances in which U.S. and foreign carriers have entered
       into arrangements that violate the Commission's International
       Settlements Policy, the Commission adopted, among other safeguards,
       section 43.51 of its rules, which imposes on U.S. carriers specific
       filing obligations relating to contracts and other arrangements
       between U.S. and foreign carriers for the exchange of international
       telecommunications traffic. In particular, the Commission required
       that certain U.S. carriers who execute agreements with foreign
       carriers concerning the exchange of services, routing of traffic, rate
       and other matters, timely file such agreements with the Commission,
       and further directed that such carriers file a "modification request"
       prior to implementing any arrangement that offered terms different
       from those made available to any other carrier serving the same
       U.S.-international route. In section 64.1001 of its rules, the
       Commission, among other things, barred subject carriers from
       implementing any such arrangement absent prior Commission approval,
       and further required that such carriers notify all other carriers
       providing service on the same international route of its modification
       request, concurrently with the filing of such request with the
       Commission. Collectively, the obligations imposed by sections 43.51
       and 64.1001 were intended to enable the Commission to identify
       potential instances of anticompetitive conduct and enforce compliance
       with the International Settlements Policy.

    5. As the U.S.-international market and foreign markets for
       telecommunications services have become more competitive, the
       Commission has increasingly relaxed its application of the ISP. Most
       recently, the Commission, in 2004, lifted the ISP and certain
       associated requirements for all U.S.-international routes where U.S.
       carriers had negotiated termination rates that fell below certain
       thresholds, or "benchmarks" previously established by the Commission
       in order to reduce international settlement rates by bringing them
       closer to cost. The Commission determined that, in such cases, market
       forces were sufficiently competitive to justify removing the ISP as it
       applied to U.S. carriers. The Commission further found that removing
       the ISP requirements from benchmark-compliant routes would simplify
       the Commission's current regulatory regime and facilitate the
       expansion of opportunities for flexible, commercial arrangements on
       more routes, to the benefit of U.S. competition and U.S. consumers.
       Pursuant to the procedures established in the ISP Reform Order, the
       Commission began to identify U.S.-international routes that were
       considered exempt from the ISP. On November 4, 2004, the Commission
       lifted the ISP as it applied to the route between the United States
       and Haiti, among others.

    6. IDT is a publicly-traded, New Jersey-based company that provides a
       range of telecommunications services domestically and internationally,
       including local, long distance, wireless, a range of voice over
       Internet protocol services, and pre-paid calling cards. IDT offers
       services to retail and wholesale markets in more than 230 countries
       and territories worldwide. In 2007, IDT's telecommunications division
       generated revenues of approximately $1.73 billion.

    7. On October 22, 2003, IDT entered into a Carrier Service Agreement
       ("agreement") with Teleco Haiti that established the terms and
       conditions for the provision and purchase of wholesale
       telecommunications services on the U.S.-Haiti route, including the
       rates for such services. During the time period beginning February 5,
       2004, until November 4, 2004, when the ISP was lifted from the
       U.S.-Haiti route, IDT and Teleco Haiti ("the parties") amended the
       agreement by establishing or amending four times the rates that would
       apply to Teleco Haiti's termination of U.S.-originated traffic. The
       four rates became effective on February 5, February 23, May 12, and
       August 1, 2004. On March 1, 2007, IDT filed its Carrier Service
       Agreement with the Commission at the request of Commission staff, and,
       on May 23, 2007, IDT identified the rates established under the
       agreement, again at the request of Commission staff.

   III. DISCUSSION

    8. Pursuant to section 220 of the Act, the Commission may "prescribe the
       forms of any and all accounts, records, and memoranda to be kept by
       carriers subject to [the Act]," and "may classify [such] carriers and
       prescribe different requirements . . . for different classes of
       carriers," including international telecommunications carriers. In
       addition, section 220 makes it unlawful for subject carriers "to keep
       the accounts in any other manner than that prescribed or approved by
       the Commission." In cases where a carrier fails to keep its accounts
       and records as required, or "to submit such accounts, records,
       memoranda, documents, papers, and correspondence . . . to the
       inspection of the Commission," section 220 imposes a forfeiture of
       "$6,000 for each day of the continuance of each such offense." To
       impose such a forfeiture penalty, the Commission must issue a notice
       of apparent liability, and the person against whom the notice has been
       issued must have an opportunity to show, in writing, why no such
       penalty should be imposed. The Commission will then issue a forfeiture
       if it finds, by a preponderance of the evidence, that the person has
       violated the Act or a Commission rule. As set forth in greater detail
       below, we conclude under this standard that IDT is apparently liable
       for forfeiture for its apparent violations of section 220 of the Act,
       and sections 43.51 and 64.1001 of the Commission's rules.

    9. The fundamental issues in this case are whether IDT apparently
       violated the Act and the Commission's rules by: (1) failing to file,
       within thirty days of execution, a copy of its Carrier Service
       Agreement with Teleco Haiti, and four subsequent amendments to the
       agreement; (2) failing to file a "modification request" for Commission
       authorization for each of four rate amendments to the agreement that
       established terms and conditions different from equivalent terms
       provided to another carrier serving the same U.S.-international route;
       and (3) failing to obtain Commission authorization prior to
       implementing such rate amendments. We answer these questions
       affirmatively. Based on a preponderance of the evidence, therefore, we
       conclude that IDT is apparently liable for a forfeiture of $1.3
       million for apparently violating section 220 of the Act, and sections
       43.51 and 64.1001 of the Commission's rules.

   10. Specifically, we propose the following forfeitures for IDT's apparent
       violations: (1) a total of $500,000 for IDT's failure to file, within
       thirty days of execution, a copy of its Carrier Service Agreement with
       Teleco Haiti, and four subsequent amendments to the agreement; (2) a
       total of $400,000 for IDT's four failures to file a modification
       request with the Commission prior to establishing, or amending,
       contractual termination rates for Haiti-bound traffic; and (3) a total
       of $400,000 for IDT's implementation of rate terms on four occasions
       that varied from equivalent rates provided to another carrier serving
       the same U.S.-international route, prior to receiving Commission
       approval.

    A. Filing of Agreements

   11. Based on a preponderance of the evidence, we conclude that IDT has
       apparently violated section 220 of the Act, and section 43.51(a) of
       the Commission's rules by failing to file with the Commission a copy
       of its Carrier Service Agreement with Teleco Haiti, as well as four
       amendments to such agreement, from November 22, 2003 to November 4,
       2004, when the Commission lifted the ISP and its implementing rules
       from the U.S.-Haiti route. IDT's failure to satisfy its obligations
       under section 43.51(a) constitutes a clear violation of a vital
       Commission requirement. As noted above, the 2003 version of section
       43.51(a) unambiguously required that all subject carriers file with
       the Commission, within thirty days of execution, "a copy of each
       contract, agreement . . . or other arrangement to which it is a party
       and amendments thereto with respect to . . . the exchange of services
       and the interchange or routing of traffic and matters concerning
       rates, accounting rates, division of tolls, or the settlement of
       traffic balances." With certain exceptions, section 43.51(a) applied,
       by its terms, to all carriers "engaged in foreign communications [that
       enter] into a contract, agreement . . . or other arrangement and
       amendments thereto with a foreign carrier that does not qualify for
       the presumption . . . that it lacks market power on the foreign end of
       one or more of the international routes included in the contract."

   12. At the time that IDT and Teleco Haiti executed their agreement, and
       for a period when the Agreement was effective, Teleco Haiti was a
       telecommunications provider presumed to possess market power on a
       route that was subject to the ISP. Although section 43.51(a) thus
       obligated IDT to file its Carrier Service Agreement with the
       Commission by November 22, 2003 -- thirty days after its execution --
       IDT failed to do so. In addition, IDT only apprised the Commission of
       its four contractual amendments relating to termination rates for the
       first time on May 23, 2007, in response to a Commission staff request.

   13. IDT contends that it did not file its Carrier Service Agreement with
       Teleco Haiti in accordance with section 43.51(a) because it "believed
       [the agreement] fell under the Commission's policy of not requiring
       the filing of interim agreements under the International Settlements
       Policy." To buttress its assertion, IDT points to a 2004 Order on
       Review in which the Commission stated that it "does not require
       carriers to file interim agreements under the ISP." We reject IDT's
       claim that its agreement with Teleco Haiti constituted an "interim
       agreement" not subject to the requirements of section 43.51(a). First,
       IDT puts forth no evidence to support its assertion that the Carrier
       Service Agreement was interim in nature. Indeed, the agreement on its
       face strongly suggests otherwise, and nowhere purports to establish
       terms, including rates, that were intended by the parties to be merely
       interim. We find that the establishment of sequential, short-term
       rates that IDT has now provided to the Commission does not constitute
       an interim arrangement, particularly where, as here, such rates were
       established pursuant to the terms of an agreement that was clearly
       intended to be final, and there is no evidence to the contrary. We
       also find disingenuous IDT's reliance on the Commission's statement
       that it "does not require carriers to file interim agreements under
       the ISP" in justifying its failure to file, given that IDT and Teleco
       Haiti executed the agreement prior to the Commission's June 2004 Order
       on Review.

   14. We view IDT's failure to file its Carrier Service Agreement with
       Teleco Haiti, and four subsequent amendments, as a serious dereliction
       of IDT's obligations under the Act and our rules. As the Commission
       has noted, "[t]he primary purpose for requiring the filing of
       contracts between carriers is to assist the Commission in monitoring
       whether carriers are following the Commission's rules or are otherwise
       acting in an anti-competitive manner." The Commission adopted section
       43.51(a) in recognition that foreign carriers who possess market power
       on the foreign end of a route can adversely affect competition in the
       U.S. market by entering into exclusive arrangements, "whipsawing," or
       engaging in other such practices. The obligations imposed by section
       43.51(a) thus were designed to reduce or eliminate the potential for
       such competitive harm by "enabl[ing] the Commission to enforce the
       International Settlements Policy and maintain regulatory oversight of
       accounting rate agreements. . . ."

   15. A carrier's compliance with section 43.51(a) is critical to
       enforcement of the ISP and related policies because it enables the
       Commission to monitor the existence of arrangements that could
       undermine competition in the market for telecommunications services on
       a particular international route, in this case, the U.S.-Haiti route.
       By failing to file its Carrier Service Agreement with Teleco Haiti in
       accordance with section 43.51(a), IDT fundamentally undermined
       the Commission's implementation of the ISP on the U.S.-Haiti route.
       In particular, IDT's failure deprived the Commission of any
       opportunity to review the agreement and possibly seek clarifications
       about its terms and conditions. More significantly, IDT's failure
       prevented the Commission from judging the agreement's overall
       compliance with the ISP and taking any steps needed to ensure the
       agreement was consistent with the Commission's pro-competitive rules
       and policies.

    B. Accounting Rate Modifications

   16. Based on a preponderance of the evidence, we further conclude that IDT
       apparently has violated section 220 of the Act and sections 43.51(e)
       and 64.1001(b) of the Commission's rules by failing to file a
       modification request for Commission approval for four separate
       amendments to its Carrier Service Agreement that established terms and
       conditions different from equivalent terms provided to another carrier
       serving the same U.S.-international route.

   17. Although the parties amended their agreement four times after its
       execution to establish different termination rates, IDT failed to file
       with the Commission the requisite modification requests seeking
       approval for such amendments, in accordance with sections 43.51(e) and
       64.1001(b). As noted above, section 43.51(e) of the Commission's rules
       required the filing of a modification request where a carrier has
       executed an agreement, or amendment, with a foreign carrier
       establishing terms different from "the equivalent terms and conditions
       in the operating agreement of another carrier providing . . . similar
       service between the U.S. and the same foreign point." At the time that
       IDT entered into its agreement with Teleco Haiti, another carrier,
       AT&T, was providing service on the U.S.-Haiti route pursuant to an
       agreement with Teleco Haiti that established an accounting rate
       different from the rate negotiated between IDT and Teleco Haiti.
       Because AT&T had filed a modification request with the Commission on
       April 22, 2003 disclosing its new accounting rates for the exchange of
       traffic with Teleco Haiti, IDT was, or should have been, aware that
       AT&T's rate was different from - indeed, higher than - the rate that
       IDT had negotiated with Teleco Haiti, and thus triggered IDT's
       obligation to file its own modification request, pursuant to sections
       43.51(e) and 64.1001(b) of the Commission's rules.

   18. We view IDT's failure to file a modification request for each of the
       four rate amendments to its Carrier Service Agreement with Teleco
       Haiti as a serious offense. As the Commission has noted, "[t]he
       requirement for filing accounting rate modification requests . . . is
       intended to prevent harm to U.S. consumers resulting from the exercise
       of market power by foreign carriers. . . . [and] assists the
       Commission in ensuring compliance with the ISP and the Commission's
       benchmarks . . . [policy]." As we noted above, one of the underlying
       purposes of the ISP is to protect against discriminatory treatment by
       assuring U.S. carriers access to the same rate with the foreign
       carrier considered to have market power on the U.S.-international
       route. To that end, modification requests filed pursuant to section
       64.1001 serve as a means by which to alert other U.S. carriers of rate
       changes and other arrangements on the U.S.-international route to
       which they are entitled access under the ISP, and thus are critical to
       enforcement of the ISP.

   19. The failure of a carrier such as IDT to abide by its filing obligation
       under section 64.1001 undermines enforcement of the ISP by allowing
       the carrier, among other things, to enter into an exclusive or
       anticompetitive arrangement absent any scrutiny or oversight by its
       competitors or the Commission. Moreover, the Commission and
       competitors are denied any opportunity to raise objections or concerns
       relating to the new arrangements, as contemplated by section 64.1001.
       The harm resulting from such failure ultimately falls on U.S.
       consumers because competing U.S. carriers are deprived access to the
       newly negotiated arrangement. In this case, IDT failed to file a
       modification request for each of four amendments to its agreement with
       Teleco Haiti that established rates different from those in effect
       between Teleco Haiti and AT&T.

    C. Implementation of Rate Amendments Absent Commission Approval

   20. Based on a preponderance of the evidence, we further conclude that IDT
       apparently has violated section 220 of the Act, and section 64.1001(e)
       of the Commission's rules by implementing four amendments to its
       Carrier Service Agreement with Teleco Haiti absent prior Commission
       approval. Despite section 64.1001(e)'s clear prohibition, IDT and
       Teleco Haiti, on February 5, February 23, May 12 and August 1, 2004,
       effectuated amendments to their operating agreement that established
       rates for Teleco Haiti's termination of U.S.-Haiti traffic.

   21. Section 64.1001 of the Commission's rules sets out a detailed and
       comprehensive framework for notification and approval of arrangements
       between a U.S. and foreign carrier that are different from those the
       foreign carrier has brokered with competing U.S. carriers. That
       framework establishes a specific time period for deliberation and
       comment on modification requests by competitors and the Commission,
       and provides a vehicle for possible objections to, or denial of, such
       requests. Where, as here, a carrier implements an agreement with a
       foreign correspondent prior to requesting, and receiving, the
       requisite approval, it circumvents the Commission's process for
       ensuring that arrangements between U.S. and foreign carriers are
       consistent with the ISP and otherwise serve the public interest.
       Moreover, it deprives competing carriers an opportunity to raise
       competitive concerns or to opt in to more favorable arrangements, as
       contemplated by section 64.1001.

   D. Proposed Forfeiture Amount

   22. In light of IDT's apparent violations of section 220 of the Act, and
       sections 43.51 and 64.1001 of the Commission's rules, we find that a
       proposed forfeiture is warranted pursuant to section 220(d). The rules
       that IDT apparently violated in this case -- sections 43.51 and
       64.1001 -- prescribe the manner in which certain carriers, including
       IDT, must maintain their records, and direct that such carriers submit
       specified documents to the inspection of the Commission and other
       interested parties. Indeed, the Commission expressly relied upon
       section 220, among other provisions, as a statutory basis for its
       adoption of sections 43.51 and 64.1001 of the rules. Accordingly, we
       find that IDT is apparently liable for forfeiture, pursuant to section
       220(d) of the Act, for violating these provisions.

   23. Based on our review of the facts and circumstances of this case, we
       find that IDT is apparently liable for a forfeiture of $1.3 million.
       We find IDT apparently liable for a total of thirteen discrete
       offenses, including five violations of section 43.51(a), four
       violations of sections 43.51(e) and 64.1001(b), and four violations of
       section 64.1001(e). As noted above, apparent violations of section 220
       of the Act, such as those at issue here, carry a
       statutorily-prescribed per day penalty pursuant to section 220(d).
       Such penalties are then subject to mitigation or remission in
       accordance with section 504 of the Act. Section 220 violations thus
       stand in contrast to other infractions for which the Act establishes
       no specific forfeiture amount. The inflation-adjusted statutory
       forfeiture that was effective for violations of section 220(d) in 2003
       was $7,600 for each day in which a violation continued, and $8,600 per
       day in 2004.

   24. Our review of the record indicates that IDT's thirteen violations,
       which varied in duration, continued for a minimum of approximately two
       weeks, to almost one year. If we were to apply strictly the per day
       forfeiture dictated by section 220(d) to each of IDT's apparent
       violations, our calculation would yield an amount that we find
       excessive under the circumstances. Given the totality of the
       circumstances, including IDT's overall history of compliance and
       ability to pay, we find IDT liable for a penalty of $100,000 per
       violation. We believe this amount reasonably reflects our commitment
       to ensure compliance with the Commission's International Settlements
       Policy and its implementing rules, yet is not unduly burdensome to a
       large and highly profitable company such as IDT. Given the central
       importance of sections 43.51 and 64.1001 in the Commission's
       pro-competitive regulatory framework governing international
       telecommunications services, we find that this amount represents an
       appropriate balance. Our proposed per violation forfeiture of
       $100,000, multiplied by IDT's thirteen apparent continuing violations,
       results in a total proposed penalty of $1.3 million.

   IV. ORDERING CLAUSES

   25. ACCORDINGLY, IT IS ORDERED THAT, pursuant to section 220(d) of the
       Communications Act of 1934, as amended, 47 U.S.C. S 220(d), and
       section 1.80 of the Commission's rules, 47 C.F.R. S 1.80, that IDT is
       hereby NOTIFIED of its APPARENT LIABILITY FOR A FORFEITURE in the
       amount of $1.3 million for willfully and repeatedly violating the Act
       and the Commission's rules.

   26. IT IS FURTHER ORDERED THAT, pursuant to section 1.80 of the
       Commission's Rules, within thirty days of the release date of this
       NOTICE OF APPARENT LIABILITY, IDT SHALL PAY the full amount of the
       proposed forfeiture or SHALL FILE a written statement seeking
       reduction or cancellation of the proposed forfeiture.

   27. Payment of the forfeiture must be made by check or similar instrument,
       payable to the order of the Federal Communications Commission.  The
       payment must include the NAL/Acct. No. and FRN No. referenced above.
       Payment by check or money order may be mailed to Federal
       Communications Commission, P.O. Box 358340, Pittsburgh, PA
       15251-8340.  Payment by overnight mail may be sent to Mellon
       Bank/LB 358340, 500 Ross Street, Room 1540670, Pittsburgh, PA 15251.
       Payment by wire transfer may be made to ABA Number 043000261,
       receiving bank Mellon Bank, and account number 9116229.

   28. The response, if any, to this NOTICE OF APPARENT LIABILITY must be
       mailed to Hillary DeNigro, Chief, Investigations and Hearings
       Division, Enforcement Bureau, Federal Communications Commission, 445
       12^th Street, S.W., Room 4-C330, Washington, D.C. 20554 and must
       include the NAL/Acct. No. referenced above.

   29. The Commission will not consider reducing or canceling a forfeiture in
       response to a claim of inability to pay unless the petitioner submits:
       (1) federal tax returns for the most recent three-year period; (2)
       financial statements prepared according to generally accepted
       accounting practices (GAAP); or (3) some other reliable and objective
       documentation that accurately reflects the petitioner's current
       financial status. Any claim of inability to pay must specifically
       identify the basis for the claim by reference to the financial
       documentation submitted.

   30. Requests for payment of the full amount of this NOTICE OF APPARENT
       LIABILITY FOR FORFEITURE under an installment plan should be sent to
       Deputy Chief Financial Officer, Federal Communications Commission,
       Room 1-A637, 445 12th Street, S.W., Washington, D.C. 20554.

   31. IT IS FURTHER ORDERED that a copy of this NOTICE OF APPARENT LIABILITY
       FOR FORFEITURE shall be sent by certified mail, return receipt
       requested, to Troy F. Tanner, Counsel for IDT, Bingham McCutchen, LLP,
       2020 K St., N.W., Washington, DC 20006-1806.

   FEDERAL COMMUNICATIONS COMMISSION

   Marlene H. Dortch

   Secretary

   47 U.S.C. S 220(g). Section 220 of the Act gives the Commission discretion
   to "prescribe the forms of any and all accounts, records, and memoranda to
   be kept by carriers subject to this Act," 47 U.S.C. S 220(a)(1), and
   provides that

   [a]fter the Commission has prescribed the forms and manner of keeping
   accounts, records, and memoranda to be kept by any person as herein
   provided, it shall be unlawful for such person to keep any other accounts,
   records or memoranda than those so prescribed or such as may be approved
   by the Commission or to keep the accounts in any other manner than that
   prescribed or approved by the Commission.

   47 U.S.C. S 220(g).

   47 C.F.R. S 43.51(a)(1) (2003).

   47 C.F.R. SS 43.51(e)(2), 64.1001(b) (2003). The amendment of a rate
   schedule established pursuant to the terms of a contract constitutes a
   contract amendment for which a party must file a modification request in
   accordance with section 64.1001 of the Commission's rules.

   47 C.F.R. S 64.1001(e) (2003).

   See International Settlements Policy Reform, Notice of Proposed
   Rulemaking, 17 FCC Rcd 19954, 19956-60 (2002), PP 2-6 ("ISP Reform NPRM").
   The ISP was formerly termed the Uniform Settlements Policy ("USP"). The
   USP initially applied to telegraph and telex services and evolved through
   Commission decisions and practices. The intent of the USP was to ensure
   that U.S. carriers were treated fairly and that U.S. customers received
   the benefits that result from the provision of international services on a
   competitive basis. Among other things, the policy required uniform
   accounting rates and uniform terms for sharing of tolls. See, e.g., Mackay
   Radio and Telegraph Co., 2 F.C.C. 592 (Telegraph Committee 1936), aff'd
   sub nom. Mackay Radio v. FCC, 97 F.2d 641 (D.C. Cir. 1938) (In the 1936
   decision, the Commission denied an application for section 214 authority
   to serve Norway because the settlement terms would have permitted the
   Norwegian carrier to "whipsaw," or engage in anticompetitive behavior
   against, U.S. carriers by manipulating traffic flows and retaining a
   greater percentage of the accounting rate); Modifications of Licenses in
   the Fixed Public and Fixed Public Press Services, 11 F.C.C. 1445 (1946);
   Mackay Radio and Telegraph Co., 25 F.C.C. 690 (1951), rev'd on other
   grounds sub nom. RCA Communications, Inc. v. FCC, 210 F.2d 694 (D.C. Cir.
   1952), vacated and remanded, 346 U.S. 86 (1953); TRT Telecommunications
   Corp., 46 F.C.C. 2d 1042 (1974). In 1986, the Commission termed the USP
   the "ISP" and extended its application to International Message Telephone
   Service ("IMTS") in response to significantly greater reported instances
   of "whipsawing." The Commission also streamlined the filing of accounting
   rate modifications and chose not to apply the ISP to enhanced services.
   See Implementation and Scope of the Uniform Settlements Policy for
   Parallel International Communications Routes, Report and Order, 2 FCC Rcd
   1118 (1987) ("ISP Order"), modified in part on recon., Order on
   Reconsideration, 2 FCC Rcd 1118 (1987) ("ISP Recon Order"); Further
   Reconsideration, 3 FCC Rcd 1614 (1988) ("ISP Further Recon").

   In general, "whipsawing" is the abuse of market power by a foreign
   carrier, or a combination of carriers, within a foreign market that is
   intended to play U.S. carriers in foreign markets against each other in
   order to gain unduly favorable terms in arrangements for the exchange of
   traffic. ISP Reform NPRM, 17 FCC Rcd at 19956-57, P 2. This practice
   occurs where a foreign carrier has the ability, through pressure on
   multiple U.S. carriers, to extract higher termination rates from a U.S.
   carrier than the foreign carrier is required to pay to terminate traffic
   on the U.S. end. Id. Thus, the goal of the ISP is to address this
   asymmetry in market power. If "whipsawing" were to occur, U.S. carriers
   would be paid at or near cost for terminating U.S.-international traffic
   on the U.S. end, while paying above-cost settlement rates for termination
   of U.S.-international services on the foreign end, thereby forcing the
   U.S. carriers to recover those additional costs from U.S. ratepayers in
   the form of higher calling prices. Id.

   47 C.F.R. S 64.1002(a)(1).

   47 C.F.R. S 64.1002(a)(2).

   The international accounting rate system evolved as part of a regulatory
   tradition in which international telecommunications services were supplied
   through a bilateral relationship between national monopoly carriers. An
   accounting rate is the price a U.S. facilities-based carrier negotiates
   with a foreign carrier for handling one minute of international telephone
   service. Each carrier's portion of the accounting rate is referred to as
   the settlement rate. 2000 Biennial Regulatory Review, Report and Order, 16
   FCC Rcd 10647, 10657 (2001), P 15 n.44 ("2000 Biennial Review").

   47 C.F.R. S 64.1002(a)(3).

   ISP Reform NPRM, 17 FCC Rcd at 19957, P 3.

   See 47 C.F.R. S 43.51; Rules and Policies on Foreign Participation in the
   U.S. Telecommunications Market, Report and Order and Order on
   Reconsideration, 12 FCC Rcd 23891, 24007 (1997), P 259 ("[O]ur contract
   filing requirement in section 43.51 of the Commission's rules enables us
   to detect instances where carriers enter into arrangements that are
   inconsistent with our rules and policies.") ("Foreign Participation
   Order").

   Pursuant to the 2003 version of section 43.51(a) of the Commission's
   rules, certain common carriers generally must file with the Commission,
   within thirty days of execution:

   a copy of each contract, agreement, concession, license, authorization,
   operating agreement or other arrangement to which it is a party and
   amendments thereto with respect to the following: (i) the exchange of
   services; and, (ii) the interchange or routing of traffic and matters
   concerning rates, accounting rates, division of tolls, or the basis of
   settlement of traffic balances. . . .

   47 C.F.R. S 43.51(a)(1) (2003). This version of section 43.51(a) applied
   to any carrier that was:

   engaged in foreign communications and enters into a contract, agreement,
   concession, license, authorization, operating agreement or other
   arrangement . . . with a foreign carrier that does not qualify for the
   presumption . . . that it lacks market power on the foreign end of one or
   more of the U.S.-international routes included in the contract.

   47 C.F.R. S 43.51(b)(2) (2003).

   47 C.F.R. S 43.51(e) (2003). The 2003 version of section 43.51(e)
   provided, in pertinent part:

   [I]f a carrier files an operating or other agreement with a foreign
   carrier pursuant to [section 43.51(a)] to begin providing switched voice,
   telex, telegraph, or packet-switched service between the United States and
   a foreign point and the terms and conditions of such agreement relating to
   the exchange of services, interchange or routing of traffic and matters
   concerning rates, division of tolls, the allocation of return traffic, or
   the basis of settlement of traffic balances, are not identical to the
   equivalent terms and conditions in the operating agreement of another
   carrier providing the same or similar service between the United States
   and the same foreign point, the carrier must also file with the
   International Bureau a modification request under section 64.1001 [of the
   Commission's rules].

   47 C.F.R. S 43.51(e) (2003). The 2003 version of section 64.1001 similarly
   stated that:

   [i]f the international settlement arrangement in the operating agreement
   or amendment referred to in [section 43.51(e)] differs from the
   arrangement in effect in the operating agreement of another carrier
   providing service to or from the same foreign point, the carrier must file
   a modification request under this section unless the international route
   is exempt from the international settlements policy under [section
   43.51(e)].

   47 C.F.R. S 64.1001(b) (2003). Section 43.51(e)(2) of the Commission's
   rules similarly required carriers to file a modification request where
   such carriers amended an existing operating agreement with a foreign
   carrier. See 47 C.F.R. S 43.51(e)(2) (2003).

   47 C.F.R. S 64.1001(e), (f) (2003). In particular, section 64.1001(e) of
   the Commission's rules provided that "[a]n operating agreement or
   amendment filed under a modification request cannot become effective until
   the modification request has been granted. . . ." 47 C.F.R. S 64.1001(e)
   (2003).

   Section 64.1002 of the Commission's rules, which codifies the
   International Settlements Policy, directs that carriers subject to the ISP
   "must . . . duly comply with the requirements in S 43.51 and S 64.1001 [of
   the Commission's rules]." 47 C.F.R. S 64.1002.

   International Settlements Policy Reform, First Report and Order, 19 FCC
   Rcd 5709, 5723 (2004), P 27 ("ISP Reform Order"). As early as 1992, the
   Commission adopted benchmarks for international settlement rates that were
   applicable to specific U.S.-international routes. See Regulation of
   International Accounting Rates, CC Docket No. 90-337 (Phase II), Second
   Report and Order and Second Further Notice of Proposed Rulemaking, 7 FCC
   Rcd 8040 (1992). These benchmark settlement rates served as guidelines for
   what constituted the maximum just and reasonable amount that U.S. carriers
   should pay foreign carriers for the termination of U.S.-international
   traffic.

   ISP Reform Order, 19 FCC Rcd at 5723, P 27.

   Id., 19 FCC Rcd at 5771, Appendix D; Additional U.S.-International Routes
   Exempted from the International Settlements Policy, Public Notice, 19 FCC
   Rcd 22032 (2004).

   Additional U.S.-International Routes Exempted from the International
   Settlements Policy, Public Notice, 19 FCC Rcd 22032, 22035 (2004).

   http://idt.net (as of June 17, 2008).

   [1]http://idt.net (as of June 17, 2008).

   [2]http://idt.net (as of June 17, 2008).

   Letter from Troy F. Tanner, Bingham McCutchen, Counsel for IDT Corp., to
   Marlene H. Dortch, Secretary, Federal Communications Commission, dated
   March 1, 2007 (attaching Carrier Service Agreement between IDT and
   Telecommunications D'Haiti S.A.M., October 22, 2003) ("Tanner March 1
   Letter").

   Letter from Troy F. Tanner, Bingham McCutchen, Counsel for IDT Corp., to
   Helen Domenici, Chief, International Bureau, Federal Communications
   Commission, dated May 23, 2007, at 2 ("Domenici May 23 Letter").

   Id. at 2.

   Tanner March 1 Letter, Attachment.

   Domenici May 23 Letter, at 2.

   47 U.S.C. S 220(a)(1).

   47 U.S.C. S 220(h). By establishing certain filing and notification
   requirements to implement the ISP, the Commission has deemed certain
   international carriers to be a "class of carriers" necessitating
   "different requirements" to satisfy the main purpose of section 220 of the
   Act.

   47 U.S.C. S 220(g).

   47 U.S.C. S 220(d). The inflation-adjusted forfeiture that was effective
   in 2003 for violations of section 220 was $7,600 per day. 47 C.F.R. S
   1.80(b)(4), Note, Section III (2003).

   47 C.F.R. S 1.80(f).

   See, e.g., SBC Communications, Inc., Apparent Liability for Forfeiture,
   Forfeiture Order, 17 FCC Rcd 7589, 7591, P 4 (2002) (forfeiture paid).

   47 U.S.C. S 220; 47 C.F.R. SS 43.51, 64.1001 (2003).

   47 U.S.C. S 220.

   47 C.F.R. SS 43.51, 64.1001.

   It is unclear, based upon the record, whether IDT and Teleco Haiti amended
   their Carrier Service Agreement through oral or written agreement. Even if
   the parties had amended their agreement orally, however, IDT still would
   have been obligated to file a "certified statement covering all the
   details of the arrangement," in accordance with section 43.51(a)(2) of the
   Commission's rules. 47 C.F.R. S 43.51(a)(2).

   Section 43.51(a) of the Commission's rules required that IDT file its
   agreement with the Commission by November 22, 2003, thirty days after the
   agreement was executed. See 47 C.F.R. S 43.51(a) (2003).

   Although we exercise our prosecutorial discretion and limit our finding of
   liability to the period of time from November 22, 2003 to November 4,
   2004, we note that IDT arguably is also subject to liability for failing
   to file its agreement and amendments until March 1, 2007, over three years
   after Commission rules required it to do so. In our view, the fact that
   section 43.51(a) no longer applied to carriers serving the U.S.-Haiti
   route as of November 4, 2004 arguably does not excuse the company from
   discharging an obligation that attached prior to that date.

   47 C.F.R. S 43.51(a)(1)(i), (ii) (2003).

   47 C.F.R. S 43.51(b)(2) (2003).

   See the International Bureau Revises and Reissues the Commission's List of
   Foreign Telecommunications Carriers that are Presumed to Possess Market
   Power in Foreign Telecommunications Markets, Public Notice, 18 FCC Rcd
   2438 (2003).

   As noted above, IDT ultimately filed its agreement with the Commission on
   March 1, 2007. The Commission has repeatedly stated, however, that
   subsequent corrective measures to address a violation do not eliminate a
   licensee's responsibility for the period during which the violation
   occurred. IDT's untimely filing thus neither excuses nor mitigates in any
   way its apparent violation of section 43.51(a). SBC Communications, Inc.,
   Order of Forfeiture, 16 FCC Rcd 5535, 5542, P 18 (2001); see also Coleman
   Enters., Inc. d/b/a Local Long Distance, Inc., Order of Forfeiture, 15 FCC
   Rcd 24385, 24388, P 8 (2000); American's Tele-Network Corp., Order of
   Forfeiture, 16 FCC Rcd 22350, 22355-56, P 15 (2001).

   Domenici May 23 Letter, at 2. Based upon the record, it is unclear
   precisely when IDT and Teleco Haiti executed the four rate amendments at
   issue. Irrespective of when they were executed, however, IDT was required
   by section 43.51(a) to apprise the Commission of such amendments in 2004,
   long before IDT saw fit to do so.

   See Tanner March 1 Letter, at 1; Tanner May 23 Letter, at 1-2.

   AT&T Corp. Emergency Petition for Settlements Stop Payment Order and
   Request for Immediate Interim Relief, Order on Review, 19 FCC Rcd 9993,
   9995 (2004), P 2 n.9.

   See Tanner March 1 Letter.

   See Carrier Service Agreement between IDT and Telecommunications D'Haiti
   S.A.M., October 22, 2003, PP 1, 3.1, 7.12, Annex A P 1.2 ("Carrier Service
   Agreement"); Domenici May 23 Letter, P 3. The Commission's practice
   regarding interim agreements is limited and intended largely to keep
   U.S.-international circuits open when a U.S. carrier and its foreign
   correspondent are renegotiating expired rate agreements. Once service is
   disrupted due to inconclusive or failed negotiations, it becomes
   increasingly difficult for the parties involved to reach agreement,
   particularly where there is an ongoing dispute concerning amounts owed.
   The Commission's practice regarding interim agreements allows parties to
   continue negotiations while exchanging traffic at an agreed-upon interim
   rate, often the rate that has just expired. Once final agreement is
   reached, the parties typically "true-up" any difference between the
   interim and final rate. In light of these industry practices, requiring
   that interim terms be publicly filed with the Commission is unnecessary,
   and could hamper negotiations for the exchange of telecommunications
   traffic. IDT has offered no evidence of ongoing negotiations with Teleco
   Haiti that support its characterization of the Carrier Service Agreement
   as "interim."

   See Carrier Service Agreement.

   Id., Section III, P 7.12.

   2000 Biennial Review, 16 FCC Rcd at 10678, P 68.

   Id.

   47 U.S.C. S 220; 47 C.F.R. SS 43.51(e), 64.1001(b) (2003). Although we
   find IDT apparently liable for its failure to file a modification request
   for each of the four amendments to its agreement with Teleco Haiti, we
   note that IDT arguably is also liable for failing to file its agreement
   and amendments until March 1, 2007, over three years after Commission
   rules required it to do so. As we stated above, that sections 43.51 and
   64.1001 no longer applied to carriers serving the U.S.-Haiti route as of
   November 4, 2004 arguably does not excuse the company from discharging an
   obligation that attached prior to that date.

   47 C.F.R. S 43.51(e) (2003); see also 47 C.F.R. S 64.1001(b) (2003). While
   the applicability of section 43.51(e) appears limited to carriers who have
   "file[d] an operating or other agreement with a foreign carrier," we
   interpret the section more broadly to apply to any carrier who is required
   to file an operating agreement pursuant to section 43.51(a). We find that
   a more restrictive interpretation would thwart detection of
   anticompetitive practices by U.S. and foreign carriers, and undermine
   enforcement of the ISP.

   See Application for Accounting Rate Change, filed by AT&T Corp., dated
   April 22, 2003 (reporting a change in the accounting rate for the exchange
   of traffic with Teleco Haiti from $.60 to $.46).

   2004 Biennial Regulatory Review, Staff Report, 20 FCC Rcd 343, 379 (2005),
   Appendix VII. As noted above, the Commission has established benchmarks
   that govern the international settlement rates that U.S. carriers may pay
   foreign carriers to terminate international traffic originating in the
   United States. See International Settlement Rates, IB Docket No. 96-261,
   Report and Order, 12 FCC Rcd 19806 (1997), aff'd sub nom. Cable and
   Wireless P.L.C. v. FCC, 166 F.3d 1224 (D.C. Cir. 1999), Report and Order
   on Reconsideration and Order Lifting Stay, 14 FCC Rcd 9256 (1999).

   See ISP Reform Order, 19 FCC Rcd at 5725, P 30 ("As the ISP provides that
   foreign carriers offer the same rates to all U.S. carriers, a showing that
   one U.S. carrier has negotiated a benchmark-compliant rate with the
   foreign carrier with market power triggers the ability for all other U.S.
   carriers to take the same rate. Once the foreign carrier with market power
   is under an obligation to provide services at benchmark rates to all U.S.
   carriers, we find it reasonable to conclude that the concerns underlying
   our use of the ISP on that route have been sufficiently alleviated to lift
   the ISP.").

   See Foreign Participation Order, 12 FCC Rcd at 24030, P 313 ("parties that
   might have concerns with the reductions, i.e., those with operating
   agreements with the same carrier, are given notice of the filing directly
   by the applicant. Therefore, a public notice would only prove to delay a
   procedure for approving modifications that is designed to allow
   expeditious grants in most cases while giving those parties potentially
   affected a chance to respond.").

   The 2003 version of section 64.1001(g) provided, in pertinent part, that:

   All modification requests will be subject to a twenty-one (21) day
   pleading period for objections and comments, commencing the date after the
   request is filed. If the modification request is not complete when filed,
   the carrier will be notified that additional information is to be
   submitted, and a new 21 day pleading period will begin when the additional
   information is filed. The modification request will be deemed granted as
   of the twenty-second (22^nd) day without any formal staff action being
   taken, provided (1) no objections have been filed; and (2) the
   International Bureau has not notified the carrier that grant of the
   modification request may not serve the public interest and that
   implementation of the proposed modification must await formal staff action
   on the modification request. If objections or comments are filed, the
   carrier requesting the modification request may file a response . . . .
   Modification requests that are formally opposed must await formal staff
   action by the International Bureau before the proposed modification can be
   implemented.

   47 C.F.R. S 64.1001(g) (2003).

   While the applicability of section 64.1001 as it existed in 2003 appears
   limited to an operating agreement or amendment "filed under a modification
   request," we interpret the provision more broadly to apply to any
   agreement or amendment for which a modification request must be filed,
   e.g., an agreement or amendment whose terms and conditions are not
   identical to the equivalent terms and conditions in the operating
   agreement of another carrier providing the same or similar service between
   the United States and the same foreign point. We find that a more
   restrictive interpretation would thwart detection of anticompetitive
   conduct by foreign carriers and undermine Commission enforcement of the
   ISP and related policies. Consistent with our interpretation, the
   Commission in 2004 revised section 64.1001 to state that "[a]ny operating
   agreement or amendment for which a modification request is required to be
   filed cannot become effective until the modification request has been
   granted. . . ." 47 C.F.R. S 64.1001(a) (2004) (emphasis added).

   Domenici May 23 Letter, at 2.

   See 47 C.F.R. S 64.1001 (2003).

   See 47 C.F.R. S 64.1001(g) (2003).

   See 47 C.F.R. SS 43.51, 64.1001 (2003).

   Section 1.80 of the Commission's rules, which governs forfeiture
   proceedings, provides that, "[i]n the case of a forfeiture imposed against
   a carrier under sections 202(c), 203(e) and 220(d), no forfeiture will be
   imposed if the violation occurred more than 5 years prior to the issuance
   of a notice of apparent liability." 47 C.F.R. S 1.80(c)(2). Each of the
   thirteen apparent violations in this case occurred within the five-year
   statute of limitations because they occurred in 2003 and 2004.

   IDT's apparent violations of section 43.51(a) include its failures to file
   with the Commission its Carrier Service Agreement with Teleco Haiti by
   November 22, 2003, and four subsequent rate amendments that became
   effective on February 5, February 23, May 12 and August 1, 2004.

   IDT's apparent violations of sections 43.51(e) and 64.1001(b) include its
   failures to file with the Commission a modification request for each of
   the four rate amendments to its Carrier Service Agreement with Teleco
   Haiti.

   IDT's apparent violations of section 64.1001(e) include its failures to
   obtain Commission approval prior to implementing each of the four rate
   amendments to its Carrier Service Agreement with Teleco Haiti.

   47 C.F.R. S 1.80(b)(4), Note, Section III. Pursuant to section 504, "[t]he
   forfeitures imposed by title II . . . shall be subject remission or
   mitigation by the Commission, under such regulations and methods of
   ascertaining the facts as may seem to it advisable. . . ." 47 U.S.C. S
   504(b). For convenience, the Commission treats such forfeitures as
   prescribed base amounts that are subject to downward adjustment, using the
   downward adjustment criteria applicable to section 503 forfeitures in
   section II of the note to section 1.80(b)(4). 47 C.F.R. S 1.80(b)(4),
   Note, Section III.

   In cases where there is no prescribed penalty, forfeiture determinations
   are governed by section 503 of the Act, which, among other things,
   establishes maximum forfeiture amounts that are subject further adjustment
   based upon the circumstances.

   47 C.F.R. S 1.80(b)(5) (2003). The statutory maximum amount of a
   forfeiture penalty assessed under section 1.80 of the Commission's rules
   is subject to inflation-based adjustments at least once every four years.
   47 C.F.R. S 1.80(b)(5). We note that some of IDT's apparent violations
   continued into 2004, when the applicable forfeiture penalty for section
   220(d) violations increased to $8,600 per day. Nevertheless, for
   simplicity, we will use the $7,600 amount effective in 2003 to calculate
   IDT's apparent liability.

   See 47 C.F.R. S 1.80.

   See 47 C.F.R. S 1.1914.

   (Continued from previous page)

                                                               (continued...)

   Federal Communications Commission FCC 08-165

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                                 Federal Communications Commission FCC 08-165

References

   Visible links
   1. http://idt.net/
   2. http://idt.net/