Regulatory Watch : U.S. Carriers Fight for Interconnection Equity

For years, U.S. regulators and trade experts have talked about the “per-minute trade imbalance” and the high rates foreign carriers and PTTs charge for terminating U.S. traffic. Carriers have been complaining to the FCC and foreign governments for years and blame high interconnection fees for the high rates Americans pay to call overseas.

But anti-competitive behavior overseas may be changing, and the FCC is taking another look at its policies surrounding international calls and rates. In an effort to gauge the status of international routing and settlement rates, the FCC’s International Bureau has been reviewing international agreements policy and examining its guidelines for interconnection rates. It wants to know if it can start loosening some rules or whether it should tighten other policies in the face of growing competition and falling settlement rates in other countries. It also wants to know if it’s applying enough pressure on the growing number of overseas mobile carriers that may be charging excessive rates to U.S. carriers sending traffic to their networks.

“We’ve been examining almost all of our policies regarding interconnection with foreign carriers with an eye to reforming our international settlements policy,” says Mark Uretsky, industry economist with the FCC’s International Bureau. “Because rates for termination are high, calling out from the U.S. means that U.S. consumers are paying above-cost rates every minute that they call.”

The FCC historically has instilled rules and policies to protect U.S. carriers (and, by extension, U.S. consumers) from anti-competitive markets overseas, especially if a U.S. carrier had to compete against a state-owned monopoly carrier. U.S. carriers in the past have been at a disadvantage when trying to get updated dialing code lists. They’ve also been kept in the dark about special discounts that host carriers offer to other carriers but don’t want their U.S. partners to know about.

The team at the International Bureau believe it may loosen the limitations it imposes on foreign carriers, such as price caps for interconnection rates with U.S. carriers, now that rates have come down in many countries. Competition is healthier in many parts of the world, as local competitors spring up in Europe, Latin America and the Pacific Rim. In some countries, especially those in Europe, governments have ordered wireless carriers to lower their rates.

In 1996, the average settlement rate for calls from the United States to foreign nations was 43 cents a minute, while U.S. phone customers paid 74 cents a minute for those calls. By 2001, because of liberalization and competition in other countries, the outbound settlement rate for carriers dropped to an average of 14 cents a minute, and callers paid an average of 33 cents a minute.

“The tendency is toward greater competition in foreign countries,” Uretsky says. “We need to determine whether the markets [have] grown so competitive that we no longer need to keep the same rules in place to protect them from the exercise of market power,” he says. The bureau is also looking at whether it will continue a rate cap for carriers based on their country’s income status. “We need to know whether our benchmarks are so high above costs that carriers can act anti-competitively by raising prices yet still remain below cap,” Uretsky says. The FCC and other trade groups will continue to exert pressure on countries that overcharge. In Singapore recently, government-owned incumbent SingTel was forced to lower its interconnection rates for data lines to the rest of the world. U.S. trade negotiators, as well as industry groups pressured the Infocomm Development Authority of Singapore to act on the carrier by ordering SingTel to offer wholesale prices for data interconnection at prices 30 percent to 50 percent below retail prices.

Verizon to Pay MCI for ISP Calls

Verizon is poised to settle a six-year dispute with MCI over Internet dial-up calls made by Verizon customers; all it has to do is pay the long-distance carrier $169 million. At issue in the dispute was whether Verizon should pay MCI so-called reciprocal compensation on phone calls by Verizon customers to ISPs that are MCI customers.

The Verizon settlement resolves a slew of cases both parties have in state and federal courts, as well as proceedings before the FCC. In the same case, Verizon and MCI disagreed on the amount of money in dispute. As a condition to giving its OK to MCI’s reorganization plan, Verizon got MCI to agree to the $169 million figure.