******************************************************** NOTICE ******************************************************** This document was converted from WordPerfect to ASCII Text format. Content from the original version of the document such as headers, footers, footnotes, endnotes, graphics, and page numbers will not show up in this text version. All text attributes such as bold, italic, underlining, etc. from the original document will not show up in this text version. Features of the original document layout such as columns, tables, line and letter spacing, pagination, and margins will not be preserved in the text version. If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** DA 97-1281 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of) ) MCI Telecommunications Corp.)File Nos. ISP-96-W-356 AT&T Corp.) ISP-96-W-372 ) Petitions for Waiver of the) International Settlements Policy) to Change the Accounting Rate) for Switched Voice Service with) Ecuador) ORDER AND AUTHORIZATION Adopted: June 19, 1997Released: June 23, 1997 By the Chief, Telecommunications Division Introduction 1.We have before us petitions by MCI Telecommunications Corporation ("MCI") and AT&T Corporation ("AT&T") to waive the Commission's International Settlements Policy (ISP) to change the accounting rate for switched voice service with Ecuador. AT&T's petition was opposed by WorldCom because the monopoly foreign carrier in Ecuador, Instituto Ecuatoriano de Telecommunicaciones (EMETEL), offered WorldCom a later effective date than AT&T's for the new, lower accounting rate. The International Bureau suspended the petition filed by MCI involving EMETEL because it too had a later effective date than AT&T's. 2.We reiterate that this Commission will no longer tolerate accounting rate discrimination among U.S. carriers and the adverse impact it has on the ability of U.S. carriers to compete in the international telecommunications service market in the United States. This exercise of monopoly power by EMETEL has produced a disparity in accounting rates among U.S. carriers, and thus violates the Commission's ISP. To enforce our law, to ensure equitable treatment of U.S carriers, and to protect U.S. consumers, we approve the waivers, but direct all U.S. carriers to negotiate a nondiscriminatory agreement with EMETEL at the lowest rate and the earliest effective date negotiated with any U.S. carrier. In the interim, we order all U.S. carriers to settle at the lowest rate in effect between any carrier and EMETEL until the discrimination is eliminated. Finally, having addressed the discrimination issues raised by WorldCom, we dismiss its opposition to AT&T's waiver. Background 3.MCI filed a waiver of the Commission's ISP to reduce its accounting rate of $1.39 per conversation minute with EMETEL to $1.10 effective July 1, 1996. AT&T also filed a waiver of the Commission's ISP for service with EMETEL which would extend its accounting rate of $1.39 per minute from January 1, 1995 through May 31, 1996, and then reduce that rate to $1.10 for the period June 1, 1996 through December 31, 1996. 4.The International Bureau suspended the MCI waiver because AT&T had been offered an earlier effective date for the lower accounting rate with EMETEL than MCI proposed in its waiver. WorldCom opposes the AT&T waiver because EMETEL refuses to offer the same effective date to WorldCom that it negotiated with AT&T. Discussion 5.The Commission's policy is clear: it expects accounting rates to be cost-based, nondiscriminatory and transparent. The two waivers under consideration in this order would move the accounting rate with EMETEL in the right direction. While the accounting rate of $1.10 per minute would finally bring the rate for service with Ecuador within the benchmark range we adopted for countries like Ecuador in 1992, it would still be at the upper end of the range, and significantly higher than the range we have proposed for Ecuador in our recent notice to update the benchmark figures. High accounting rates artificially inflate U.S. carriers' costs which puts upward pressure on U.S. calling prices and this has a detrimental effect on U.S. consumers. Therefore, we expect U.S. carriers to continue to negotiate actively with EMETEL to bring about further, substantial reductions in the accounting rate towards cost. 6.Of even greater concern to us here is the disparity in accounting rate proposals offered to U.S. carriers by EMETEL, and its refusal to make the same accounting rate and effective date available to all U.S. carriers. The purpose of the ISP is to prevent monopoly carriers such as EMETEL from exercising market power against U.S. carriers in accounting rate negotiations by engaging in discriminatory behavior that favors selected carriers at the expense of others. As part of the ISP, the Commission has stated that it expects an accounting rate revision to be made available to all U.S. carriers. This includes both the accounting rate level and its effective date. Discriminatory treatment of U.S. carriers needs to be eliminated, not merely reduced. 7.We have before us clear evidence of a pattern of unfair discrimination by EMETEL against a U.S. carrier. Although EMETEL negotiated an accounting rate reduction with WorldCom to reduce the rate to $1.10, it offered the same rate to AT&T with an effective date that preceded the WorldCom effective date by one month. Similarly, EMETEL offered the same terms and conditions to MCI it negotiated with WorldCom. Different accounting rates among U.S carriers, unrelated to costs, that are the result of discriminatory behavior by foreign monopoly carriers arbitrarily raise the costs of some U.S. carriers above the costs of others. These cost disparities impair the ability of those U.S. carriers that are the target of discrimination to compete in the U.S. market for international services. The situation is aggravated if the target is an emerging, small U.S. carrier or a new entrant into the marketplace. The waiver proposals filed with the Commission would, if approved without additional action, perpetuate this discrimination and distortion of competition in our market, and give the mistaken impression that we condone such behavior by foreign monopoly suppliers. 8.The Commission has made clear that it will aggressively enforce the ISP in order to protect the U.S. market from competitive distortions, particularly when those distortions are the result of discriminatory treatment of U.S. carriers by foreign monopoly suppliers. We find that EMETEL's refusal to negotiate comparable rates with all U.S. carriers for service with Ecuador is inconsistent with our ISP. This discrimination must be eliminated. To achieve this result, we approve AT&T's waiver to extend its accounting rate of $1.39 per conversation minute for the period January 1, 1996, through May 31, 1996, and to introduce a lower rate of $1.10 for the period June 1, 1996, through December 31, 1996. We also approve MCI's accounting rate of $1.10 per conversation minute. We direct, however, all U.S. facilities-based carriers which have an operating agreement with EMETEL for direct service between the United States and Ecuador to negotiate a settlement arrangement with EMETEL at the lowest accounting rate in effect with any U.S. carrier at the earliest effective date of that rate. Pending further negotiations with EMETEL to establish this nondiscriminatory accounting rate, we order all U.S. carriers to conduct settlements using an accounting rate of $1.10 for service beginning June 1, 1996. Ordering Clauses 9.Accordingly, IT IS ORDERED that U.S. facilities-based carriers negotiate nondiscriminatory settlement arrangements with EMETEL. 10.IT IS FURTHER ORDERED that MCI's request to establish an accounting rate with EMETEL at $1.10 per conversation minute is APPROVED but the effective date of July 1, 1996 is DENIED. 11.IT IS FURTHER ORDERED that AT&T's request to extend its accounting rate of $1.39 per conversation minute with EMETEL from January 1, 1996, through May 31, 1996 is APPROVED. 12.IT IS FURTHER ORDERED that AT&T's request to establish an accounting rate of $1.10 per conversation minute with EMETEL effective June 1, 1996, through December 31, 1996 is APPROVED. 13.IT IS FURTHER ORDERED that all U.S. carriers shall conduct settlements with EMETEL for all service beginning on June 1, 1996, at an accounting rate of $1.10 per conversation minute. 14.IT IS FURTHER ORDERED that all U.S. carriers shall continue their efforts to achieve significantly lower, nondiscriminatory accounting rates with EMETEL that fall within the prevailing Commission benchmark range applicable to Ecuador. 15.IT IS FURTHER ORDERED that WorldCom's opposition to the AT&T filing is dismissed. 16.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 Diane J. Cornell Chief, Telecommunications Division International Bureau