[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
