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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 DA 97-1882 In the Matter of ) ) AT&T Corp. ) File No. ISP-96-W-184 MCI International, Inc. ) ISP-96-W-488 ) Petition for Waiver of the ) International Settlements Policy ) to Change the Accounting Rate ) Arrangement for Switched Voice) Service with Vietnam ) MEMORANDUM OPINION, ORDER and AUTHORIZATION Adopted: August 28, 1997Released: September 2, 1997 By the Chief, Telecommunications Division: Introduction 1. We have before us petitions by AT&T Corporation ("AT&T") and MCI International, Inc. ("MCI") to waive the Commission's International Settlements Policy ("ISP") to introduce an accounting rate for "Home Country Direct" service with their correspondent in Vietnam, Vietnam Telecom International ("VTI"). As explained below, we deny these petitions because the difference between the accounting rates for Home Country Direct service and international message telephone service ("IMTS"), as well as the surcharge on Home Country Direct service when provided by MCI, is discriminatory and therefore violates the Commission's ISP. 2. We cannot tolerate such accounting rate discrimination among U.S. carriers because of the adverse impact it has on the ability of U.S. carriers to compete in the international telecommunications service market in the United States. To enforce our law, to ensure equitable treatment of U.S. carriers, and to protect U.S. consumers, we not only deny these waivers, but direct U.S. carriers to negotiate a nondiscriminatory agreement with VTI that is consistent with U.S. policy and ITU recommendations. In the interim, we also order all U.S. carriers to include Home Country Direct calls with other IMTS calls, and to conduct settlements at the volume sensitive accounting rates previously negotiated with VTI. Background 3. AT&T and MCI propose to introduce an accounting rate for Home Country Direct service between the United States and Vietnam different than the rate for IMTS. The IMTS rate declines in four steps from a high rate of $2.30 per minute for a monthly imbalance less than 125,000 minutes to a low rate of $1.70 for an imbalance greater than 1,500,000 minutes. Both carriers propose a rate of $2.30 per minute for all Home Country Direct calls, regardless of the minute imbalance. The MCI waiver also contains a surcharge of $1.70 for each Home Country Direct call,but AT&T's does not. Discussion 4. 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 do not propose to lower the basic accounting rate for service between the United States and Vietnam. In fact, they propose to establish a higher accounting rate for a particular service classification than is used for others, and one adds a surcharge. High accounting rates such as these artificially inflate U.S. carriers' costs which put upward pressure on U.S. calling prices, hurting U.S. consumers. The rates with VTI, which became effective in 1992 and have not changed since that time, are among the highest rates with any country. Therefore, we expect U.S. carriers to continue to negotiate actively with VTI to bring about substantial reductions in the accounting rate towards cost or at least to our proposed benchmark level. 5. Of equal concern to us here is the disparity in accounting rate proposals offered to AT&T and MCI by VTI, and the suggestion that another U.S. carrier, Sprint, has accepted such a proposal for Home Country Direct service. The purpose of the ISP is to prevent monopoly carriers such as VTI 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 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. 6. We have before us clear evidence of unfair discrimination by VTI against one U.S. carrier and an effort to extract concessions from another U.S. carrier by alleging that a third U.S. carrier has agreed to a higher accounting rate for Home Country Direct calls. AT&T agreed to a rate for Home Country Direct service that differs from the IMTS rate based on its understanding that VTI negotiated a rate of $2.30 with Sprint for this service classification. Without such an agreement, VTI would not have permitted AT&T to offer Home Country Direct service in Vietnam. Subsequently, MCI accepted the high accounting rate for Home Country Direct and, in addition, a surcharge on each Home Country Direct call. Sprint informed AT&T that it has no agreement with VTI for Home Country Direct service. Although Sprint provides the service to its customers, Home Country Direct calls are included with other IMTS calls and its settlements with VTI are based on the IMTS accounting rate agreement all three carriers have negotiated with VTI. Thus, Sprint's Home Country Direct calls are treated no differently than its other calls. 7. The Commission has found no basis for approving different accounting rates for Home Country Direct service and IMTS. In this regard, the Commission agrees with the ITU which recommends the same accounting rate for Home Country Direct service as for other international automatic telephone service. Neither AT&T nor MCI present a persuasive reason to treat Home Country Direct service differently than other IMTS calls by using the highest accounting rate to determine settlement payments for it. Nor does MCI provide a reason for the additional surcharge for these calls. Although we have approved a surcharge for Home Country Direct service with some countries, we required a showing that additional time is required to establish such calls. Moreover, in contrast with the waivers under consideration here, those surcharges were accompanied by significant reductions in the basic accounting rate from levels that were much lower than the rates for service with Vietnam. 8. We find that VTI's attempt to use the highest accounting rate for Home Country Direct service, its attempt to negotiate different settlement arrangements for the same service classification with different U.S. carriers, and its attempt to whipsaw U.S. carriers violates our ISP. 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. 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 other U.S. carriers. These cost disparities impair the ability of those carriers that are the target of discrimination to compete in the U.S. market for international services. The waiver proposals filed with the Commission would, if approved, perpetuate this discrimination and distortion of competition in our market, and give the mistaken impression that we condone such behavior by foreign monopoly suppliers. 9. This discrimination must be eliminated. To achieve this result, we deny the waivers filed by AT&T and MCI for an accounting rate of $2.30 for Home Country Direct service, and we deny MCI's request for a surcharge of $1.70 for each Home Country Direct call. We direct all U.S. facilities-based carriers providing Home Country Direct service with VTI to negotiate a settlement arrangement which has the same accounting rates as IMTS and includes Home Country Direct calls with other IMTS calls in settlement calculations. Pending further negotiations with VTI to establish nondiscriminatory, uniform rates for Home Country Direct service, we order all U.S. carriers to include Home Country Direct calls with other IMTS calls, and to conduct settlements at the volume sensitive accounting rates previously negotiated with VTI. Ordering Clauses 10. Accordingly, IT IS ORDERED that AT&T's waiver for service between the United States and Vietnam, File No. ISP-97-W-184, is DENIED. 11. IT IS FURTHER ORDERED that MCI's waiver for service between the United States and Vietnam, File No. ISP-97-W-488, is also DENIED. 12. IT IS FURTHER ORDERED that all U.S. carriers shall calculate settlement payments by combining Home Country Direct service and other IMTS. 13. IT IS FURTHER ORDERED that all U.S. carriers shall continue their efforts to achieve significantly lower, nondiscriminatory accounting rates with VTI that move toward the Commission's proposed benchmark level that applies to Vietnam. 14. 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 if this Order (see C.F.R. Section 1.4(b)(2)). FEDERAL COMMUNICATIONS COMMISSION Diane J. Cornell Chief, Telecommunications Division International Bureau