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This is an unofficial announcement of Commission action. Release of the full text of a Commission order constitutes official action. See MCI v. FCC. 515 F 2d 385 (D.C. Circ 1974).
STATEMENT OF FCC CHAIRMAN WILLIAM E. KENNARD ON THE INTERNATIONAL BUREAU'S ACTIONS CONCERNING ACCOUNTING RATES ON THE UNITED STATES/MEXICO ROUTE AND POTENTIAL VIOLATIONS OF TELMEX/SPRINT COMMUNICATIONS' AUTHORIZATION TO SERVE MEXICO
I fully support the two Orders issued by the International Bureau today. They are both fully consistent with this Commission's important responsibility to protect aggressively American consumers of telecommunications services.
Because settlement rates on the U.S.-Mexico route continue to be significantly above cost, U.S. consumers have to pay much more than they should to talk to relatives and friends or to conduct business in Mexico. Lower settlement rates would mean consumers pay less. Mexican carriers are the recipients of by far the largest settlement payment subsidies from U.S. carriers, with payments to Mexican carriers exceeding $700 million in 1997. A subsidy by U.S. consumers on this order of magnitude is unacceptable. Carriers from several other countries in the Americas, such as the Dominican Republic, Guatemala and Venezuela, have agreed to more significant annual reductions in their settlement rates than Telmex. Moreover, Mexico is one of only a few members of the Organization for Economic Cooperation and Development (OECD) that have not already reduced settlement rates to the relevant benchmark.
The Bureau denied Sprint's settlement rate modification request for 1998 and 1999 because it entailed reductions of a mere 2 cents in 1998 and 3 cents in 1999, and would have delayed 75 percent (15.5 cents) of the aggregate reductions required to achieve the benchmark rate of 19 cents until 2000, forcing American consumers to pay higher calling rates until January 2000. I hope the International Bureau's Order will encourage Sprint and other U.S. carriers to negotiate expeditiously settlement rates with Telmex for 1998 and 1999 that are closer to cost-based rates and that will lead to lower calling prices for U.S. consumers.
I am also concerned by recent reports that Telmex may be failing to meet its commitments that the Bureau set as a condition of granting Telmex entry into the United States through the TSC venture. The allegations that Telmex may be stifling competition on the U.S.-Mexico route by denying facilities to, or discriminating against, U.S. carriers is a potentially serious development. I am also disappointed that Mexican carriers and the Mexican Government have yet to successfully conclude an agreement to resolve a number of key interconnection issues that stand in the way of increased competition.
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