$//O&A, AT&T, Petition for Waiver Intl. Settlements, DA 95-47//$ $/63.01 Contents of Applications/$ $/64.1001 International Settlements Policy & Waivers/$ $/300.214 Extension of Lines/$ ///newjob/// $///DA 95-47,1/20/95///$ DA 95-47 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of American Telephone & ) File No. USP-94-W-210 Telegraph Company ) ) Petition For Waiver of the ) International Settlements Policy ) for a Change in the Accounting ) Rate for Switched Voice Service ) with Canada ) ORDER AND AUTHORIZATION Adopted: January 11, 1995 Released:January 25, 1995 By the Chief, Telecommunications Division I. INTRODUCTION 1. American Telephone and Telegraph Company (AT&T) has filed a petition for waiver of the Commission's International Settlements Policy (ISP) to introduce and establish an accounting rate for International 800 service (I-800) between the United States and its correspondent in Canada, Unitel Communications ("Unitel"). The Commission staff sent a letter to AT&T stating that it must await formal staff action before the proposed accounting rate could be implemented. In this decision, we approve the accounting rate for I-800 service between AT&T in the United States and Unitel in Canada. II. SUMMARY OF WAIVER REQUEST 2. AT&T seeks to introduce and establish an accounting rate for I-800 service with Unitel of $0.26 per minute during the "Full" period and $0.22 per minute during the "Reduced" period, and to include a surcharge of $0.005 for each such message. The effective date would be January 29, 1994 and coincide with the initiation of I-800 service between AT&T in the United States and Unitel in Canada. The accounting rate would be divided equally between AT&T and Unitel and the surcharge would be paid to the non-billing administration. No opposition to the proposal has been filed. III. DISCUSSION 3. In its Phase I Report and Order, the Commission delegated authority to the Common Carrier Bureau "to consider, on a case-by-case basis, granting ISP waiver requests that include a lower, more economically efficient, cost-based, international accounting rate when supported by sound analysis of the benefits that will result from the implementation of that rate." The Commission stated that the Bureau should approve accounting rate changes if the changes result in a) a more cost-based accounting rate, and b) either a commitment to lower calling prices or some other public interest benefit. In this context, we must decide under the ISP whether the proposed accounting rate is in the public interest. Specifically, we must determine whether a surcharge on I-800 service between the United States and Canada, in addition to the basic settlement payment that is owed for each minute of service, is justified to compensate a carrier for the cost it incurs to originate an I-800 call and, whether the particular surcharge proposed by AT&T in its petition for waiver is a reasonable one if we determine that a surcharge is justified. 4. With this proposal, AT&T would initiate I-800 service with Unitel. The two carriers have an agreement to provide switched telephone service at an accounting rate of $0.26 per minute during the "Full" period and $0.22 per minute during the "Reduced" period but that agreement does not include I-800 service. AT&T, however, has an agreement with Stentor, another Canadian carrier providing service with U.S. carriers, to provide I-800 service and the accounting rate that is in effect is $0.36 per minute during the "Full" period and $0.30 per minute during the "Reduced" period. There is no surcharge for I-800 service provided by AT&T and Stentor. 5. The accounting rate for service between the United States and Canada, while probably higher than the average cost and surely greater than the incremental cost, is the lowest U.S. accounting rate. This proposal would bring the accounting rate for I-800 service even closer to the cost of service, thus promoting our goal of lower, more cost-based accounting rates. We are, therefore, encouraged by the proposal to reduce the accounting rate per minute for I-800 service below the rate that is currently used to settle accounts for I-800 service between the United States and Canada. In addition, the proposal incorporates the notion that costs are lower during off-peak hours than during the peak period, thereby advancing the achievement of economically efficient accounting rates. We expect that the combination of a lower I-800 accounting rate and the peak/off-peak accounting rate structure will result in net settlement payments to Canada being lower than they would have been otherwise, particularly if, as we believe, the reduction encourages others to adopt a similar I-800 accounting rate with U.S. carriers. We are also reassured by the step to bring the rate per minute for I-800 service into alignment with the accounting rates per minute for IMTS between the United States and Canada because it is consistent with our policy to discourage the introduction of higher, non-uniform, international accounting rates that exceed the cost of service. In short, we approve AT&T's proposal to introduce an accounting rate per minute for I-800 service with Unitel at the same level as its IMTS accounting rate. 6. We now address that portion of the waiver proposing to include a surcharge for each I-800 message that would be paid to the non-billing administration. Several features of I-800 service between the United States and Canada distinguish it from I-800 service with other countries and from other IMTS calls. Unlike most international calls that originate and are billed in the same country, an I-800 call from Canada to the United States originates in Canada but is billed in the United States. The U.S. carrier bills its 800 customer in the United States for the call and owes a settlement payment to its Canadian correspondent for that call. Since several carriers provide 800 service in the United States and Canada, the local exchange carrier (LEC) in the country where the 800 call originates needs to identify the correct interexchange carrier (IXC) in that country to direct an 800 call to, which then identifies the call as an international call and routes it to the international IXC in the other country serving the 800 customer. 7. A comprehensive data base with information about 800 customers in the United States and Canada enables LECs in both countries to identify the appropriate IXCs in Canada and the United States in order to match carriers with their customers. The data base must be updated regularly because a customer can shift its 800 business from one carrier to another carrier but retain the same 800 number after the change. This is referred to as "portability." It is, therefore, necessary to keep track of customers who switch their 800 service from one carrier to another carrier. Thus, when an 800 call originates in either Canada or the United States, the LEC that receives the call queries the data base to ascertain the international IXC who serves the 800 customer in the country where the call originates. Then the call is routed to the appropriate international IXC in the other country and on to the 800 customer for completion. 8. An LEC that originates an 800 call in the United States or Canada charges the IXC in the country where the call originates a basic access rate for the service it provides based on rates approved by federal regulatory authorities. In the United States, the Commission approved the LECs' 800 data base access tariffs, containing the data base access service rates of U.S. LECs for 800 calls in the United States. The Commission found the industry mean rate to be $0.0044 per query with a standard deviation of $0.0023 per query. AT&T states in its petition for waiver that the authorized tariff rates of Bell Operating Companies and independent companies for data base access service range from $0.002 to $0.009 per query. 9. AT&T also states that the CRTC authorized Canadian LECs to charge Canadian IXCs Canada a rate of $C0.007 per message for the 800 data base access service. 10. The surcharge for each I-800 call would enable AT&T and Unitel to recover the charge each carrier is required to pay LECs for the service they provide to originate I-800 calls between the United States and Canada. Specifically, the surcharge would allow the non-billing correspondent to recover the 800 data base access charge it pays to the LEC by receiving an additional amount in the settlement payment from the carrier that bills its customer for an I-800 call. In this way, the data access charge for I-800 calls would be shifted from the international carrier in the country where the call originates to the international carrier in the country where the call is billed. 11. The proposed surcharge represents a discrete cost element for I-800 service between Canada and the United States resulting from changes in the way 800 service is provided in both countries, measures taken in response to these developments, and the fact that regulatory bodies in both countries have authorized their LECs to charge the international IXCs for the service the LECs provide. This proposal is unique to I-800 service between the United States and Canada and the surcharge is limited to such service. The surcharge proposed by AT&T, $0.005 per message, is slightly higher than the industry mean average data base access rate computed by the Commission for each data base query, $0.004 per query, but well within the threshold rate of $0.0067 per query we determined to be a reasonable rate for U.S. LECs during an interim period while the Commission conducts further investigation. We also recognize that an accounting rate is the result of negotiations between two carriers and, in the instant case, the proposed surcharge is approximately equal to the rate, perhaps somewhat lower depending on the exchange rate, Canadian LECs are authorized by the CRTC to charge for the service. Thus, we find the surcharge for I-800 service provided by AT&T and Unitel to be a reasonable rate that reflects new conditions of supply between Canada and the United States for this service classification. IV. CONCLUSION 12. We conclude that the accounting rate per minute for I-800 service proposed by AT&T is a reduction in the existing rate that will bring that rate closer to the cost of providing I-800 service between the United States and Canada, and it also brings the accounting rate for that service classification into alignment with the accounting rate for IMTS. The accounting rate for service between the United States and Canada is the lowest rate in effect for U.S. carriers and well below the benchmark ranges we established to guide U.S. carriers in their negotiations with foreign administrations. Therefore, the I-800 rate proposed by AT&T represents yet another step toward the achievement of more cost-based, economically efficient, non- discriminatory accounting rates. The lower accounting rate will result in net settlement payments to Canada being lower than they would have been at the current accounting rate. The alignment of the I-800 accounting rate with the rate for other IMTS classifications is also an important step in this direction because, as we noted in a recent decision concerning accounting rates, we have found no reason to distinguish I-800 accounting rates from other IMTS accounting rates. 13. We also conclude that the proposal to impose a surcharge of $0.005 per message for each I-800 call is a reasonable cost-based measure which reflects the feature of providing I-800 service between the United States and Canada. We believe it is reasonable to allow AT&T and Unitel to recover charges that are based explicitly on the costs they incur on behalf of their correspondent to provide I-800 service, costs which are incurred as a necessary part of providing the service. We have authorized LECs in the United States to charge IXCs for this service and note that the CRTC has also approved similar charges for service rendered by LECs in Canada. Moreover, the surcharge of $0.005 per message approximates an industry mean rate for data base query service provided by LECs in the United States and, therefore, is a reasonable rate. V. ORDERING CLAUSES 14. Accordingly, IT IS ORDERED that, AT&T's petition, File No. USP-94-210, for a waiver of the Commission's ISP to permit the proposed change in the accounting rate with Unitel in Canada is GRANTED, and AT&T is authorized to implement the proposed accounting rate for I-800 service, including a surcharge for data base query service provided by LECs. 15. This Order is issued under Section 0.261 of the Commission's Rules and is effective upon adoption. Petitions for reconsideration under Section 1.106 or applications for review under Section 1.115 of the Commission's Rules may be filed within 30 days of the date of public notice of this Order (see 47 C.F.R. Section 1.4(b)(2)). FEDERAL COMMUNICATIONS COMMISSION Diane J. Cornell Chief, Telecommunications Division International Bureau