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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 Re Petitions of ) ) AT&T Corp. ) File No. ISP-97-PDR-399 ) MCI Telecommunications Corp. ) File No. ISP-97-PDR-503 ) Sprint Communications Company, L.P. ) File No. ISP-97-PDR-512 ) For Declaratory Ruling Regarding an ) Alternative Accounting Rate Arrangement) for Services between the United States ) and Australia ) DECLARATORY RULING AND ORDER Adopted: November 24, 1997 Released: November 24, 1997 By the Chief, Telecommunications Division: 1. On June 27, 1997, August 7, 1997, and August 12, 1997, AT&T Corporation, on behalf of itself and AT&T Alascom (AT&T), MCI Telecommunications Corporation (MCI), and Sprint Communications Company, L.P. (Sprint) respectively (hereinafter "Applicants") filed Petitions for Declaratory Ruling seeking a waiver of the Commission's International Settlements Policy (ISP) and a ruling that their alternative settlement arrangements with Optus Networks (Optus) for services to and from Australia are consistent with the public interest. Specifically, the Applicants seek authorization to provide facilities-based service to Australia in correspondence with Optus, settling their traffic at a settlement rate of $.15. Pursuant to this agreement, AT&T would send no less than 15 million minutes of traffic to Optus and Optus would return no less than 10 million minutes in the same period. Similarly, MCI would send no less than 11.25 million minutes of traffic to Optus, while Optus would return no less than 7.5 million minutes in the same period. Sprint would send no less than 9 million minutes of traffic to Optus with Optus returning no less than 6 million minutes in the same period. 2. AT&T's Petition was placed on public notice on July 9, 1997. MCI and Sprint's Petitions were placed on public notice on August 20, 1997. On July 30, 1997, and September 10, 1997, Telstra Inc., the dominant Australian international carrier, filed Petitions to Deny for each of the Applicants' Petitions and, in the alternative, requested that the Commission delay action on Applicants' Petitions until it has disposed of Telstra's and other carriers' Section 214 applications for authority to provide international simple resale (ISR) service between the United States and Australia. AT&T responded to Telstra's Petition to Deny on August 11, 1997. MCI and Sprint filed responses to Telstra's Petition to Deny on September 22, 1997. 3. International communications service markets are undergoing rapid and profound change as more and more national markets begin to open, new carriers enter the global marketplace, a variety of new services become available, and technology continues to advance. Continued reliance on historic settlement procedures in all situations can impede these developments. In order to foster competitive market conditions, the Commission adopted in its Flexibility Order a policy that allows U.S. carriers to negotiate settlement arrangements that depart from the traditional ISP under certain conditions. In brief, U.S. carriers can negotiate arrangements that depart from the ISP with all carriers in another country if that country passes the Commission's effective competitive opportunities (ECO) test adopted in the Foreign Carrier Entry Order. A U.S. carrier may also negotiate an alternative settlement arrangement with a foreign carrier based in a country that has not passed the ECO test, particularly if the foreign carrier is non-dominant, and submit it to the Commission. To get approval, however, the U.S. carrier must submit sufficient evidence in its petition for declaratory ruling to show that the proposed arrangement will promote market-oriented pricing and competition while precluding abuses of market power by the foreign carrier. 4. Telstra argues that the Commission should deny the Applicants' Petitions because they fail to disclose the extent to which their alternative arrangements involve disproportionate routing of inbound and outbound traffic. Telstra states that the Applicants' alternative settlement arrangements with Optus do not comply with the ISP requirement that carriers bargain for proportionate shares of inbound and outbound traffic. Our Flexibility Order, however, set out a new policy, different from the ISP, which encourages a separate competitive market for inbound and outbound termination service in international traffic. In the Flexibility Order, we noted that agreements for proportionate shares of inbound and outbound traffic can discourage competition. Applicants' arrangements with Optus are consistent with the Commission's goal of encouraging "innovative terms for terminating international traffic." 5. Telstra also argues that we should deny Applicants' Petitions because they fail to demonstrate that the agreements will not affect more than 25% of either inbound or outbound traffic between the U.S. and Australia. Telstra establishes that Optus controls 26.4% of the outgoing Australian market and can, therefore, potentially affect more than 25% of the traffic. In its reply, AT&T clarifies that the figure Telstra provides accounts for all of Optus's outgoing traffic; however, AT&T states that Optus controls approximately 20% of the traffic between Australia and the United States. Therefore, even if Optus sent all its U.S. traffic through one carrier, it would not exceed the 25% limit. Applicants also note that their agreements with Optus are non-exclusive and do not envision Optus sending all its traffic to the United States through a single carrier. Because this agreement will not affect more than 25% of the outbound and inbound traffic between the United States and Australia and contains no discriminatory terms, we do not accept Telstra's argument. 6. Furthermore, we deny Telstra's alternative request that the Commission delay action on Applicants' Petitions until it has disposed of Telstra's and other carriers' Section 214 applications for authority to provide ISR on the U.S.-Australia route. There is no requirement that the Commission process Telstra's or other pending Section 214 applications prior to considering Applicants' Petitions. We find that Applicants' proposals will "promote market-oriented pricing and competition, while precluding abuse of market power by the foreign correspondent." Moreover, we note that the proposed settlement rate of $.15 complies with the benchmark rate established by our Benchmark Order for U.S. carriers on the U.S.-Australia route. We therefore find that Applicants' alternative settlement arrangements serve the public interest. 7. Accordingly, it is ORDERED that AT&T's alternative settlement arrangement with Optus for services to and from Australia, File No. ISP-97-PDR-399, is consistent with the Commission's Flexibility Order and the public interest. AT&T's Petition is therefore GRANTED. 8. It is further ORDERED that MCI's alternative settlement arrangement with Optus for services to and from Australia, File No. ISP-97-PDR-503, is consistent with the Commission's Flexibility Order and the public interest. MCI's petition is therefore GRANTED. 9. It is further ORDERED that Sprint's alternative settlement arrangement with Optus for services to and from Australia, File No. ISP-97-PDR-503, is consistent with the Commission's Flexibility Order and the public interest. Sprint's petition is therefore GRANTED. 10. It is further ORDERED that Telstra's Petitions to Deny AT&T's, MCI's and Sprint's Petitions for Declaratory Ruling are DENIED. 11. This Order is issued under Section 0.261 of the Commission's rules and is effective immediately. 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 the public notice of this Order (see Section 1.4(b)(2) of the Commission's rules). FEDERAL COMMUNICATIONS COMMISSION Diane J. Cornell Chief, Telecommunications Division