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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of ) ) GTE Hawaiian Tel International Inc. ) ARC-MOD-20000326-00063 ) Petition for Waiver of the ) International Settlements Policy ) to Change the Accounting Rate ) for Switched Voice Service with ) Vietnam ) ORDER Adopted: March 20, 2001 Released: March 21, 2001 By the Chief, Telecommunications Division: Introduction 1. In this Order we deny the petition of GTE Hawaiian Tel International ("GTE Hawaiian") to waive the Commission's International Settlements Policy (ISP) to change the accounting rate for switched voice service with Vietnam. The International Bureau had previously suspended this modification request because the foreign carrier in Vietnam, Vietnam Telecom International ("VTI") offered a higher accounting rate at a later effective date to GTE Hawaiian than it negotiated with other U.S. carriers. 2. The Commission has a longstanding policy of protecting U.S. consumers from the effects of harmful discrimination by foreign carriers with market power by strictly enforcing its ISP. We find that the agreement between VTI and GTE Hawaiian violates the ISP because it would result in a significant disparity in the accounting rates among U.S. carriers. Therefore, to enforce our ISP, to ensure equitable treatment of U.S. carriers, and to protect U.S. consumers, we deny GTE Hawaiian's modification request and direct it to negotiate a nondiscriminatory agreement with VTI. Until GTE Hawaiian negotiates a nondiscriminatory rate with VTI, we direct GTE Hawaiian to settle with VTI on an interim basis at the lowest rates VTI has negotiated with other U.S. carriers for service on the U.S.- Vietnam route. Background 3. GTE Hawaiian filed a petition for modification of the Commission's ISP for service with VTI that would reduce its accounting rate from 2.2 Special Drawing Rights ("SDR") per minute to 1.2 SDR per minute on January 1, 2000. The International Bureau suspended GTE Hawaiian's modification request because VTI previously entered into agreements with AT&T, MCI WorldCom, and Sprint to implement an accounting rate of 1.15 SDR per minute with an effective date of January 1, 1999. Subsequently, VTI agreed to an accounting rate of 1.0 SDR with Concert to take effect on January 1, 2000. Discussion 4. The purpose of the ISP is to prevent foreign carriers with market power, like VTI, from taking advantage of their market positions vis-a-vis U.S. carriers in accounting rate negotiations by engaging in discriminatory behavior that favors some carriers at the expense of others. The Commission has stated that the ISP requires accounting rate changes to be made available to all U.S. carriers with the same effective date. We have before us clear evidence of unfair discrimination by VTI against a U.S. carrier. VTI has refused to offer the same accounting rate to GTE Hawaiian that it negotiated with other U.S. carriers and the higher rate VTI offered to GTE Hawaiian would take effect later than the rate negotiated with the other U.S. carriers. Different effective dates for accounting rate reductions among U.S. carriers, unrelated to underlying costs, raise the costs of one or several U.S. carriers above the costs of others. These disparities impair the ability of those U.S. carriers that are the target of discrimination to compete on an equal footing in the U.S. market for international services. Approval of the modification request at issue would perpetuate this discrimination and distortion of competition in our market, and give the mistaken impression that the Commission condones such behavior by foreign carriers. 5. The Commission's policy is to enforce the ISP in order to protect the U.S. market from competitive distortions. We find that the refusal of VTI to negotiate comparable terms and conditions with all U.S. carriers for service on the U.S.-Vietnam route violates the ISP. We therefore deny GTE Hawaiian's modification request and direct it to negotiate a nondiscriminatory agreement with VTI. Pending the conclusion of negotiations with VTI to establish a nondiscriminatory rate for all carriers, we direct GTE Hawaiian to settle on an interim basis at the lowest rates VTI has negotiated with a U.S. carrier on the U.S.-Vietnam route since January 1, 1999. 6. We also note that although recent changes in the accounting rate for service on the U.S.-Vietnam route have moved the rate toward costs, it significantly exceeds the benchmark settlement rate we expect U.S. carriers to negotiate with carriers in low-income countries, like Vietnam, by January 1, 2002. High accounting rates artificially inflate U.S. carriers' costs, which places upward pressure on U.S. calling prices and thereby harms U.S. consumers. To avoid harm to U.S. consumers and to comply with the Commission's Benchmarks Order, we expect U.S. carriers to continue to negotiate actively with VTI in order to reduce the accounting rate on the U.S.-Vietnam route. Ordering Clauses 7. Accordingly, IT IS ORDERED that GTE Hawaiian's modification request IS DENIED. 8. IT IS FURTHER ORDERED that GTE Hawaiian negotiate a nondiscriminatory accounting rate arrangement with VTI for service on the U.S.-Vietnam route. 9. IT IS FURTHER ORDERED that GTE Hawaiian shall, pending the conclusion of negotiations with VTI to establish a nondiscriminatory rate for all U.S. carriers, settle on an interim basis at the lowest rates VTI has negotiated with any U.S. carrier for service on the U.S.-Vietnam route since January 1, 1999. 10. This order 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 C.F.R. Section 1.4(b)(2)). FEDERAL COMMUNICATIONS COMMISSION Rebecca Arbogast Chief, Telecommunications Division International Bureau