[Federal Register Volume 61, Number 251 (Monday, December 30, 1996)]
[Proposed Rules]
[Pages 68702-68703]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-33142]


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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 63

[IB Docket No. 96-261, FCC 96-484]


International Settlement Rates

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: On December 19, 1996, the Federal Communications Commission 
released a Notice of Proposed Rulemaking (``NPRM'') that proposes 
changes to the Commission's international settlement benchmark rates 
that will move settlement rates closer to the underlying costs of 
providing international termination services. The Commission believes 
that proposals made in the NPRM are necessary in light of the 
significant changes that have occurred in the global telecommunications 
market in recent years. The NPRM represents the next step in an ongoing 
effort by the Commission, many foreign governments, and multilateral 
organizations such as the International Telecommunications Union 
(``ITU'') and the Organization for Economic Cooperation and Development 
(``OECD'') to lower international telephone costs by reforming the 
international accounting rate system.

DATES: Comments are due on or before February 7, 1997, and reply 
comments are due on or before March 10, 1997.

ADDRESSES: Federal Communications Commission, 1919 M Street, N.W., Room 
222, Washington, D.C. 20554.

FOR FURTHER INFORMATION CONTACT: Kathryn O'Brien, Attorney-Advisor, 
Policy and Facilities Branch, Telecommunications Division, 
International Bureau, (202) 418-1470.

SUPPLEMENTARY INFORMATION:

Summary of Notice of Proposed Rulemaking

    1. On December 19, 1996, the Commission released a Notice of 
Proposed Rulemaking in the Matter of International Settlement Rates, IB 
Docket No. 96-261 (FCC 96-484) that proposes options for revising 
international settlement rate benchmarks that will move settlement 
rates closer to the underlying costs of providing international 
termination services. The NPRM seeks comment on several alternate 
methods for calculating benchmark rates in the absence of reliable data 
on the costs foreign carriers incur to terminate international traffic. 
The method proposed in the NPRM relies on the three network elements 
identified by the ITU to provide international service: international 
transmission facilities, international switching facilities, and 
national extension (domestic transport and termination). Benchmarks 
would be developed using foreign carriers' tariffed prices to 
calculate, on a country-by-country basis, a price for each of these 
three network elements. The prices for each network element would be 
aggregated to calculate a ``tariffed components price'' for each 
country.
    2. The NPRM proposes three benchmark ranges, based on a country's 
level of economic development under the World Bank and ITU's 
classification scheme--high income countries (GNP per capita of $8,956 
or more); upper middle and lower middle income countries ($726-8,955); 
and low income countries ($726 or less). The NPRM combines the two 
middle income categories because the proposed method of calculating 
benchmark rates would result in benchmarks that are almost identical. 
The proposed rule would base the upper end of the range for each 
development category on an average of the prices of the three network 
elements (or the tariffed components prices) for all countries in that 
category. This would result in upper ranges of approximately 15 cents 
for carriers in high income countries; 19 cents for carriers in upper 
middle and lower middle income countries; and 23 cents for carriers in 
low income countries. For the lower end of each development category's 
benchmark, the NPRM proposes using an estimate of the incremental cost 
per minute of terminating international traffic. The NPRM estimates 
that this cost would be between 6 cents to 9 cents. The NPRM also asks 
for comment on other alternative methodologies for setting benchmark 
rates.
    3. The NPRM recognizes the potential adjustment problems for 
foreign carriers that could result from an immediate shift to more 
cost-based settlement rates. The NPRM therefore proposes a transition 
schedule for negotiating settlement rates within the benchmark ranges 
based on countries' levels of economic development. The NPRM proposes a 
one year transition schedule for U.S. carriers negotiating with 
carriers in upper income countries; a two year schedule for middle 
income countries; and a four year schedule for low income countries. 
The NPRM proposes, though, to consider additional flexibility in the 
application of the benchmarks beyond this transition schedule for U.S. 
carriers serving low income and middle income countries that 
demonstrate an actual commitment to introducing competitive reforms. 
Under the proposed rule, the Commission would consider carrier-
initiated requests for additional flexibility on a case-by-case basis.
    4. The NPRM proposes to place conditions on various types of 
authorizations to provide U.S. international services in order to 
address potential competitive distortions in the U.S. market for 
international services that could result from above-cost settlement 
rates. The NPRM first proposes to condition a carrier's authorization 
to provide facilities-based service to an affiliated market on the 
foreign affiliate offering all U.S. international carriers a settlement 
rate within the benchmark range. Under the proposed rule, the 
Commission could, if it subsequently learned that the carrier's service 
offering has caused a distortion of competition on the route in 
question, require that settlement rates on that route be no more than 
the lower end of the benchmark range, or could revoke the authorization 
of the carrier to serve the affiliated market. Second, the NPRM 
proposes to grant all carriers' applications for resale of private 
lines to provide switched service on the condition that accounting 
rates on the route or routes in question are within the benchmark 
range. The proposed rule would allow the Commission, if it learned that 
competition on the route was being distorted, to order all authorized 
U.S. private line resale international carriers not to use their 
authorization to provide international private line resale services 
until settlement rates on that route are at the low end of the 
benchmark range. The NPRM also seeks comment on whether the benchmark 
conditions should be used in conjunction with the

[[Page 68703]]

Commission's effective competitive opportunities (``ECO'') test adopted 
in its Foreign Carrier Entry Order, should replace the ECO test, or 
whether the Commission should modify the ECO test in light of the 
benchmark conditions.
    5. The NPRM seeks comment on several measures to support U.S. 
carriers' efforts to negotiate lower settlement rates and identifies 
additional, stronger measures that may be necessary to reduce 
settlement rates with foreign carriers that have strongly resisted such 
reductions. The NPRM also asks how the Commission should encourage U.S. 
carriers to reflect any reductions they receive in their settlement 
rates. Initial Regulatory Flexibility Analysis

6. Initial Regulatory Flexibility Analysis

    Pursuant to the Regulatory Flexibility Act of 1990, 5 U.S.C. 
Secs. 601-612, the Commission's Initial Regulatory Flexibility Analysis 
with respect to the NPRM is as follows:

A. Reason for Action

    The NPRM seeks comment on possible changes in the benchmark ranges 
applied to settlement rates for international message telephone service 
between U.S. facilities-based carriers and foreign carriers and related 
issues. The Commission believes that its benchmark rates should be 
revised to reflect recent technological improvements, their associated 
cost reductions, and the market structure changes occurring in the 
global telecommunications market. The Commission also believes these 
revisions are necessary to move settlement rates closer to the actual 
costs incurred by foreign carriers to terminate international traffic.

B. Objectives

    The objective of this proceeding is to attain reform in the 
international accounting rate system and thereby help ensure lower 
international calling prices for consumers. In particular, this 
proceeding seeks to remove the primary obstacle to accounting rate 
reform--the anticompetitive effects of substantially above-cost 
settlement rates. The Commission would achieve this objective by 
revising its benchmark settlement rates so that they more closely 
resemble the underlying costs of providing international termination 
services.

C. Legal basis

    The NPRM is adopted pursuant to Sections 1, 4(i), 201-205 and 
303(r) of the Communications Act of 1934, as amended, 47 U.S.C. 
Secs. 151, 154(i), 201-205, and 303(r).

D. Description, Potential Impact, and Number of Small Entities Affected

    The Commission has not developed a definition of small entities 
applicable to international facilities-based common carriers. 
Therefore, the applicable definition of small entity is the definition 
under the Small Business Administration (``SBA'') rules applicable to 
Communications Services, Not Elsewhere Classified. This definition 
provides that a small entity is expressed as one with $11.0 million or 
less in annual receipts. Based on preliminary 1995 data, at present 
there are 29 international facilities-based common carriers that 
qualify as small entities pursuant to the SBA's definition. The number 
of small international facilities-based common carriers has been 
growing significantly, and by the end of 1996 that number could 
increase to approximately 50. The revised benchmark rates would apply 
to all international facilities-based common carriers, including small 
entities, that enter into an operating agreement with a foreign carrier 
that provides for the payment of settlement rates. The Commission notes 
that the revised benchmark rates should result in lower settlement 
rates for carriers. After evaluating the comments in this proceeding, 
the Commission will further examine the impact of any rule changes on 
small entities and set forth findings in the Final Regulatory 
Flexibility Analysis. The Secretary shall send a copy of the NPRM to 
the Chief Counsel for Advocacy of the Small Business Administration in 
accordance with Section 603(a) of the Regulatory Flexibility Act, 
Public Law No. 96-354, 94 Stat. 1164, 5 U.S.C. 601, et seq. (1981).

E. Reporting, Recordkeeping and Other Compliance Requirements

    None.

F. Federal Rules Which Overlap, Duplicate or Conflict With the 
Commission's Proposal

    None.

G. Any Significant Alternatives Minimizing Impact on Small Entities and 
Consistent With Stated Ojectives

    NPRM solicits comments on a variety of alternative methodologies 
for calculating benchmark settlement rates, but these have no impact on 
small entities. The NPRM also solicits comments on enforcement 
mechanisms that may be necessary to support U.S. carriers, including 
small entities, in their negotiations with foreign carriers. The 
Commission seeks comment on the impact of these alternatives on small 
entities.

H. Comments are Solicited

    Written comments are requested on this Initial Regulatory 
Flexibility Analysis. These comments must be filed in accordance with 
the same filing deadlines set for comments on the other issues in the 
NPRM, but they must have a separate and distinct heading designating 
them as responses to the Regulatory Flexibility Analysis. The Secretary 
shall send a copy of the NPRM to the Chief Counsel for Advocacy of the 
Small Business Administration in accordance with Section 603(a) of the 
Regulatory Flexibility Act, 5 U.S.C. Sec. 601, et seq.

Ordering clauses

    7. Accordingly, it is ordered that, pursuant to Sections 1, 4(i), 
201-205, and 303(r) of the Communications Act of 1994, as amended, 47 
U.S.C. Secs. 151, 154(i), 201-205, and 303(r) a notice of proposed 
rulemaking is hereby adopted.
    8. It is further ordered that the Secretary shall send a copy of 
this notice of proposed rulemaking, including the regulatory 
flexibility certification, to the Chief Counsel for Advocacy of the 
Small Business Administration, in accordance with paragraph 603(a) of 
the Regulatory Flexibility Act, 5 U.S.C. Sec. 601 et seq. (1981).

List of Subjects in 47 CFR Part 43

    Communications common carriers, Reporting and recordkeeping 
requirements.

Federal Communications Commission.
Shirley S. Suggs,
Chief, Publications Branch.
[FR Doc. 96-33142 Filed 12-27-96; 8:45 am]
BILLING CODE 6712-01-P