In the Matter of International Settlements Policy Reform and International Settlement Rates

AGENCY:

Federal Communications Commission.

ACTION:

Final rule.

SUMMARY:

This document is a summary of the Report and Order adopted by the Commission in this proceeding. The Commission exempted the application of the International Settlements Policy (ISP) from U.S.-international routes that complied with its Benchmarks Policy. The Commission also eliminated its International Simple Resale (ISR) Policy. The Commission maintained the application of its Benchmarks Policy to all U.S.-international routes. The Commission committed to developing and releasing a Notice of Inquiry regarding the nature and effect of high foreign mobile termination rates on U.S. consumers.

DATES:

Effective May 28, 2004 except for §§ 43.51(d), 43.51(e), 64.1001, and 64.1002(c) which contain information requirements that have not yet been approved by Office of Management and Budget (OMB). The Commission will publish a document in the Federal Register announcing the effective date of those sections. OMB, the general public, and other Federal agencies are invited to comment on the information collection requirements on or before June 28, 2004.

ADDRESSES:

In addition to filing comments with the Secretary, a copy of any comments on the information collections contained herein should be submitted to Judith B. Herman, Federal Communications Commission, Room 1-C804, 445 12th Street, SW., Washington, DC 20554, or via the Internet to Judith-B.Herman@fcc.gov, and to Kristy L. LaLonde, OMB Desk Officer, Room 10236 NEOB, 725 17th Street, NW., Washington, DC 20503 or via the Internet to Kristy_L._LaLonde@omb.eop.gov.

FOR FURTHER INFORMATION CONTACT:

James Ball, Chief, Policy Division, International Bureau, or Alexandra Field, Assistant Chief, Policy Division, International Bureau at (202) 418-1460. For additional information regarding the Paperwork Reduction Act information collections contact Judith B. Herman at 445 12th Street SW., Rm. 1-C804, Washington, DC, 20554 or via internet at Judith-B.Herman@fcc.gov; phone (202) 418-0214.

SUPPLEMENTARY INFORMATION:

This is a summary of the Commission's Report and Order in IB Docket No. 96-261 & 02-324; FCC 04-53, adopted March 11, 2004 and released on March 30, 2004. The full text of this Commission decision is available for inspection and copying during normal business hours in the FCC Reference Center (Room CY-A257), 445 12th Street, SW., Washington, DC 20554. The document is also available for download over the Internet at http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-04-53A1.pdf. The complete text may also be purchased from the Commission's copy contractor, Qualex International, in person at 445 12th Street, SW., Room CY-B402, Washington, DC 20554, via telephone at (202) 863-2893, via facsimile at (202) 863-2898, or via e-mail at qualexint@aol.com. This Report and Order contains new or modified information collections subject to the Paperwork Reduction Act of 1995 (PRA), Public Law 104-3. It will be submitted to the Office of Management and Budget (OMB) for review under section 3507(d) of the PRA. OMB, the general public, and other Federal agencies are invited to comment on the modified information collections contained in this proceeding.

Summary of Report and Order

On October 10, 2002, the Commission adopted a Notice of Proposed Rulemaking in this proceeding 67 FR 65527 (Oct. 25, 2002) to obtain comment on proposals to modify the application of its International Settlements Policy (ISP), the competitive status of the U.S.-international telecommunications market, the success and effectiveness of Benchmarks Policy, and the issue of foreign mobile termination rates. On March 11, 2004 the Commission adopted a Report and Order in this proceeding. In the Report and Order, the Commission finds that the U.S.-international telecommunications market has been undergoing changes in recent years. There has been increasing competition on many U.S.-international routes accompanied by lower settlement rates and calling prices to U.S. customers. There also exists the potential for further development of competition as a result of emerging means of routing international traffic that do not involve the traditional carrier settlement process. At the same time, settlement rates on most routes continue to be above cost and there exists the continued potential for anticompetitive conduct and other forms of market failure. On balance, the Commission finds that the changes now unfolding in the U.S.-international market permit us to adopt a more limited application of our regulatory framework accompanied by competitive safeguards to protect U.S. customers against anticompetitive behavior. The Commission stated that, where there is vigorous competition, market forces are causing international termination rates to move toward cost on many routes.

The Commission concludes that reforming our rules to remove our International Settlements Policy (ISP) from benchmark-compliant routes will give U.S. carriers greater flexibility to negotiate arrangements with foreign carriers. The Commission finds that doing so will encourage market-based arrangements between U.S. and foreign carriers that will further our long-standing policy goals of greater competition in the U.S.-international market and more cost-based rates for U.S. customers. Furthermore, in view of the Commission action removing the ISP from benchmark-compliant routes, this Report and Order eliminates the Commission's International Simple Resale (ISR) policy and associated filing requirements. The Commission also retains and clarifies the applicability of certain regulatory safeguards to protect U.S. customers from anticompetitive conduct should it occur in the future. Moreover, it retains its benchmarks policy but plans to subject it to further evaluation as to whether future modifications are warranted. Finally, the Commission is concerned about the increasingly high mobile termination rates that are being charged to U.S. carriers and their effect on U.S. consumers. Accordingly, the Commission decided to continue to evaluate the nature and effect of mobile termination rates on U.S. customers and commits to issuing a Notice of Inquiry seeking detailed information on the issue and what responses are available to the Commission. In addition, the Commission will continue to respond to carrier complaints in this area if foreign mobile termination rates charged to U.S. carriers are not consistent with its general accounting rate principles.

Procedural Matters

Paperwork Reduction Act

This Report and Order contains modified information collections. The Commission, as part of its continuing effort to reduce paperwork burdens, invites the general public to comment on the information collections contained in this Report and Order as required by the Paperwork Reduction Act of 1995, Public Law 104-13. Public and agency comments are due June 28, 2004. PRA comments should address: (a) Whether the proposed collection of information is necessary for the proper performance of the function of the Commission, including whether the information shall have practical utility; (b) the accuracy of the Commission's burden estimates; (c) ways to enhance the quality, utility, and clarity of the information collected; and (d) ways to minimize the burden of the collection of information on the respondents, including the use of automated collection techniques or other forms of information technology.

OMB Approval Number: 3060-0454.

Title: Regulation of International Accounting Rates.

Form No.: N/A.

Type of Collection: Revision of a currently approved collection.

Respondents: Business or other for-profit.

Number of Respondents: 5.

Estimated Time for Response: 1 hour.

Frequency of Reponse: On Occasion, annual reporting requirement.

Total Annual Burden: 150 hours.

Total Annual Cost: $7,000.

Needs and Uses: The information will be used by the Federal Communications Commission (FCC) and interested members of the public to monitor the international accounting rates to ensure that the public interest is being served and also to enforce Commission policies and rules.

Final Regulatory Flexibility Act Certification

The Regulatory Flexibility Act of 1980, as amended (RFA), requires that a regulatory flexibility analysis be prepared for notice-and-comment rule making proceedings, unless the agency certifies that “the rule will not, if promulgated, have a significant economic impact on a substantial number of small entities.” See 5 U.S.C. 601-612, the RFA has been amended by the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA), Public Law No. 104-121, Title II, 110 Stat. 857 (1996). The RFA generally defines the term “small entity” as having the same meaning as the terms “small business,” “small organization,” and “small governmental jurisdiction.” In addition, the term “small business” has the same meaning as the term “small business concern” under the Small Business Act. See 5 U.S.C. 601(3) (incorporating by reference the definition of “small-business concern” in the Small Business Act, 15 U.S.C. 632). Pursuant to 5 U.S.C. 601(3), the statutory definition of a small business applies “unless an agency, after consultation with the Office of Advocacy of the Small Business Administration and after opportunity for public comment, establishes one or more definitions of such term which are appropriate to the activities of the agency and publishes such definition(s) in the Federal Register.” A “small business concern” is one which: (1) Is independently owned and operated; (2) is not dominant in its field of operation; and (3) satisfies any additional criteria established by the U.S. Small Business Administration (SBA). See 15 U.S.C. 632.

Pursuant to the RFA, the Commission incorporated an Initial Regulatory Flexibility Analysis (IRFA) into the Notice of Proposed Rulemaking. (17 FCC Rcd at 19982 & 19986-89 paragraphs 53 & 68-78.) We received no comments in response to the IRFA. For the reasons described below, we now certify that the policies and rules adopted in the present Report and Order will not have a significant economic impact on a substantial number of small entities.

The Report and Order finds that the changes now unfolding in the U.S.-international market permits it to adopt a more limited application of our regulatory framework accompanied by competitive safeguards to protect U.S. customers against anticompetitive behavior. The Commission continues to believe that, where there is vigorous competition, market forces are causing international termination rates to move toward cost on many routes. It concludes that reforming its rules to remove the International Settlements Policy (ISP) from benchmark-compliant routes will give U.S. carriers greater flexibility to negotiate arrangements with foreign carriers. The Commission believes that doing so will encourage market-based arrangements between U.S. and foreign carriers that will further its long-standing policy goals of greater competition in the U.S.-international market and more cost-based rates for U.S. customers. The Commission has decided to retain the benchmarks policy subject to evaluation as to future modifications. It similarly will continue to evaluate the nature and effect of high foreign mobile termination rates on U.S. customers. It concludes that the record before us regarding future benchmarks policy and on foreign mobile termination rates is insufficient to warrant specific Commission action at this time.

The Report and Order requires that the ISP be removed from all U.S.-international routes that are benchmark-compliant and affirms, adopts, or modifies certain competitive safeguards to prevent potential anticompetitive harm on such routes. The rules and policies contained in the Report and Order apply to all carriers providing facilities-based international common carrier service pursuant to section 214 of the Act. It is uncertain as to the number of small entities that will be affected by the proposals. Agency data indicate the number of section 214 applications filed with the Commission continues to increase each year. The total number of licensees is difficult to determine, because many licenses are jointly held by several licensees. The Report and Order will reduce the administrative burden on all carriers, both small and large, of complying with the ISP and contract and accounting rate filing costs. The Report and Order reduces the filing of carrier-to-carrier contracts contained in section 43.51. The Report and Order clarifies that section 43.51 applies solely to U.S. carrier contracts for international common carrier service involving dominant foreign carriers on routes where the ISP applies. The Commission narrows the contract filing requirement and clarifies that rate filings need not be made for routes removed from the ISP. These modified filing requirements will eliminate many current-required contract filings and rate filings currently made by all U.S.-international facilities-based carriers, including small entities, in the normal course of business; and therefore, do not impose a significant economic impact on these small entities. In this Report and Order, we adopt one of the proposals set forth in the NPRM and determine that removing the ISP from additional U.S.-international routes will give U.S.-international facilities-based carriers the flexibility necessary to respond to dynamic price and service changes in the marketplace and will best protect U.S. customers from the rates, terms and conditions that violate the Communications Act.

Ordering Clauses

Pursuant to Sections 1, 4(i)-4(j), 201-205, 214, 303(r), and 309 of the Communications Act of 1934, as amended, 47 U.S.C. 151, 154(i)-154(j), 201-205, 214, 303(r), 309, the policies, rules, and requirements discussed herein are adopted and parts 43 and 63 of the Commission's rules, 47 CFR 0, 43, 63, and 64 are amended as specified in the rule changes, effective May 28, 2004. Except for §§ 43.51(d), 43.51(e), 64.1001 and 64.1002(c) which contain information requirements that have not yet been approved by Office of Management and Budget (OMB). The Commission will publish a document in the Federal Register announcing the effective date of those sections.

The Commission's Consumer and Government Affairs Bureau, Reference Information Center, SHALL SEND a copy of this Report and Order, including the Final Regulatory Flexibility Certification, to the Chief Counsel for Advocacy of the Small Business Administration in accordance with section 603(a) of the Regulatory Flexibility Act, 5 U.S.C. 601 et seq.

The policies, rules, and requirements established in this decision shall take effect thirty days after publication in the Federal Register or in accordance with the requirements of 5 U.S.C. 801(a)(3) and 44 U.S.C. 3507.

List of Subjects in 47 CFR Parts 0, 43, 63, and 64

• Communications and common carriers; reporting and recordkeeping requirements; Telecommunications

Final Rules

Parts 0, 43, 63, and 64 of the Commission rules are amended as follows:

PART 0—COMMISSION ORGANIZATION

1. The authority citation for part 0 continues to read as follows:

Authority: Sec. 5, 48 Stat. 1068, as amended; 47 U.S.C. 155.

2. Section 0.457 is amended by removing paragraph (d)(1)(vi).

PART 43—REPORTS OF COMMUNICATION COMMON CARRIERS AND CERTAIN AFFILIATES

3. The authority citation for part 43 continues to read as follows:

Authority: 47 U.S.C. 154; Telecommunications Act of 1996; Pub. L. 104-104, secs. 402(b)(2)(B), (c), 110 Stat. 56 (1996) as amended unless otherwise noted. 47 U.S.C. 211, 219, 220, as amended.

4. Section 43.51 is amended by revising paragraphs (b)(2), (b)(3), (d) and (e), and adding Note 4 to § 43.51 to read as follows:

Note 4 to § 43.51:

The Commission's list of international routes exempted from the international settlements policy is available on the International Bureau's World Wide Web site at http://www.fcc.gov/ib .

PART 63—EXTENSION OF LINES, NEW LINES AND DISCONTINUANCE, REDUCTION, OUTAGE AND IMPAIRMENT OF SERVICE BY COMMON CARRIERS; AND GRANTS OF RECOGNIZED PRIVATE OPERATING AGENCY STATUS

5. The authority citation for part 63 continues to read as follows:

Authority: Sections 1, 4(i), 4(j), 10, 11, 201-205, 214, 218, 403 and 651 of the Communications Act of 1934, as amended, 47 U.S.C. 151, 154(i), 154(j), 160, 201-205, 214, 218, 403, and 571, unless otherwise noted.

6. Section 63.12 is amended by removing paragraph (c)(3) and redesignating (c)(4) as paragraph (c)(3).

7. Section 63.14 is amended by revising paragraph (c) to read as follows:

8. Section 63.16 is removed.

9. Section 63.17 is amended by revising paragraphs (b) introductory text, (b)(1), and (b)(2) to read as follows:

10. Section 63.22 is amended by removing paragraph (e) and redesignating paragraphs (f) and (g) as paragraphs (e) and (f).

11. Section 63.23 is amended by revising paragraph (d) to read as follows:

PART 64—MISCELLANEOUS RULES RELATING TO COMMON CARRIERS

12. The authority citation for part 64 continues to read as follows:

Authority: 47 U.S.C. 154, 254(k); secs. 403(b)(2)(B), (c), Public Law 104-104, 110 Stat. 56. Interpret or apply 47 U.S.C. 201, 218, 225, 226, 228, and 254(k) unless otherwise noted.

13. Section 64.1001 is amended by revising the section heading, paragraphs (a) and (b), by removing paragraphs (c) and (e), and by redesignating paragraphs (d), (f), and (g) as paragraphs (c), (d), and (e), to read as follows:

14. Add § 64.1002 to subpart J to read as follows: