Regulation of International Accounting Rates

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 43 and 64

[CC Docket No. 90-337, FCC 96-459]

Regulation of International Accounting Rates

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: The Commission adopted a Report and Order that will permit

flexibility in its accounting rate polices. The Commission concluded

that U.S. carriers should be permitted to negotiate alternative

settlement payment arrangements that deviate from the International

Settlements Policy (ISP) with foreign correspondents in

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countries that satisfy the Commission's economic competitive

opportunity (ECO) test. In addition, the Commission will consider

alternative settlement arrangements between a U.S. carrier and a

foreign correspondent in a country that does not satisfy the ECO test

where the U.S. carrier can demonstrate that deviation from the ISP will

promote market-oriented pricing and competition, while precluding abuse

of market power by the foreign correspondent. The Commission also

adopted safeguards to ensure that its new flexibility policy does not

have anticompetitive effects in the international market. The

safeguards that are alternative arrangements between affiliated

carriers and those involved in non-equity joint ventures must be filed

with the Commission and made public, and alternative arrangements

affecting more than twenty-five percent of the inbound or twenty-five

percent of the outbound traffic on a particular route must be filed

with the Commission and made public, and not contain unreasonably

discriminatory terms and conditions. The Commission's action will

encourage the development of competitive market conditions in other

countries and lead to more economically efficient contractual

arrangements for terminating service that ultimately will benefit U.S.

consumers through lower calling prices.

DATES: The amendments to Secs. 43.51 and 64.1001 will become effective

March 10, 1997. The amendments to Secs. 43.61 and 64.1002 take effect

either upon approval by the Office of Management and Budget (OMB) or

March 10, 1997, whichever occurs later. When approval is received, the

agency will publish a document announcing the effective date.

FOR FURTHER INFORMATION CONTACT: Kathryn O'Brien, Attorney-Advisor,

Policy and Facilities Branch, Telecommunications Division,

International Bureau, (202) 418-1470.

SUPPLEMENTARY INFORMATION This is a summary of the Commission's Fourth

Report and Order in CC Docket 90-337, Phase II, adopted on November 26,

1996, and released on December 3, 1996 (FCC 96-459). The full text of

the decision is available for inspection and copying during normal

business hours in the FCC's Docket Reference Center, Room 239, 1919 M

Street, NW., Washington, DC 20554. Copies also may be obtained from the

Commission's contractor for public service records duplication: ITS,

Inc., 2100 M Street, N.W., Suite 140, Washington, D.C. 20037, (202)

857-3800.

Summary of Fourth Report and Order

1. For years, U.S. carriers have been required to comply with the

Commission's International Settlements Policy (ISP) in their bilateral

accounting rate negotiations with monopoly foreign carriers. The ISP

prevents foreign carriers from discriminating among U.S. carriers and

requires: (1) The equal division of accounting rates; (2)

nondiscriminatory treatment of U.S. carriers; and (3) proportionate

return of inbound traffic. On January 31, 1996, the Commission issued a

Policy Statement (61 FR 11163, March 19, 1996) that set forth a new

approach for regulating accounting rates that could, when appropriate,

rely on competitive forces to determine termination costs and efficient

resource allocation. This was one of the Commission's initial steps to

lower international telephone costs by reforming the international

accounting rate system. In light of the Policy Statement the Commission

reopened the record in CC Docket No. 90-337, Phase II, In the Matter of

Regulation of International Accounting Rates (Second Further Notice of

Proposed Rulemaking) (58 FR 3522, January 11, 1993) for the submission

of supplemental comments and reply comments. (Public Notices Seeking

Additional Comments, 61 FR 11172 (March 19, 1996) and 61 FR 11173

(March 19, 1996).

2. On December 3, 1996, the Commission released the Fourth Report

and Order (FCC 96-459) adopting rules to permit flexibility in

international accounting rate policies. With this additional step to

reform the accounting rate system, the Commission created a framework

for competition in the market for U.S. international telecommunications

services that is more closely patterned on the competitive market for

domestic long distance services. The Commission concluded that the new

rules should increase options for U.S. carriers to negotiate

arrangements to terminate their international traffic and result in

lower prices and greater choices for U.S. consumers. In its decision,

the Commission fully describes the differences between the new flexible

approach and the current accounting rate policies.

3. The Commission rejected arguments to delay adopting a more

flexible regulatory framework until effectively competitive markets

exist. The Commission concluded that creating a more flexible

regulatory framework at this time will serve its objectives to promote

competitive behavior, improve economic performance, and rely on

competitive market forces to determine call termination charges to the

maximum extent permitted by market conditions. The new framework for

flexibility permits carriers to deviate from the ISP only with carriers

in markets where the legal, regulatory, and economic conditions support

competition and in certain other limited circumstances. The Commission

adopted competitive safeguards to ensure that where it permits

flexibility, it does not lead to anticompetitive effects in the U.S.

market for international services.

4. The Commission adopted a framework for alternative payment

arrangements that affords U.S. carriers maximum flexibility to take

advantage of competitive pressures in foreign markets to negotiate

alternative arrangements that will enhance competition. At the same

time, this framework continues to safeguard against anticompetitive

behavior of foreign carriers that favors one correspondent U.S. carrier

at the expense of its U.S. competitors.

5. The Commission concluded U.S. carriers will be allowed to

negotiate alternative settlement arrangements that deviate from the ISP

with foreign correspondents in countries that satisfy the ECO test set

forth in Section 63.18(h)(6) of the Commission's regulations. The

Commission stated that, where the ECO test has been satisfied, the

ability of foreign carriers to exercise market power is constrained by

the existence, or potential for, competitive entry. Where the FCC

permits flexibility in its ISP, new entrants in foreign markets will

have both the incentive and the opportunity to compete with the

incumbent foreign carrier to terminate U.S.-originated traffic. The

Commission will consider alternative settlement arrangements between a

U.S. carrier and a foreign correspondent in a country that does not

satisfy the ECO test where the U.S. carrier can demonstrate that

deviation from the ISP will promote market-oriented pricing and

competition, while precluding abuse of market power by the foreign

correspondent.

6. The Commission declined to limit its ISP flexibility policy to

certain categories of carriers, such as non-dominant foreign and U.S.

carriers or ``small'' carriers. Instead, it concluded that, subject to

certain safeguards, any U.S. carrier should be allowed to negotiate

alternative payment arrangements with any carrier in a foreign country

that satisfies the ECO test. This conclusion is consistent with the

policy of allowing market forces, where possible, to determine the

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allocation of resources. Moreover, allowing flexibility in the ISP is

the best support for development of more competitive market structures

and therefore should not be unduly restricted. In addition, the

Commission rejected MFSI's proposal to preclude U.S. carriers with

market shares of greater than five percent of U.S.-outbound traffic

from entering into alternative settlement arrangements because the

proposal could impede the effectiveness in reducing U.S. carrier costs

to terminate traffic.

7. Although it declined to preclude dominant or large carriers from

negotiating alternative arrangements, the Commission adopted

competitive safeguards to protect against potential anticompetitive

actions by foreign and U.S. carriers with a significant share of their

markets, and to provide a ``safety net'' for possible unanticipated

consequences of its ISP flexibility policy. In particular, it will

require that a copy of all alternative settlement arrangements

affecting more than either twenty-five percent of the outbound traffic

on a particular route or twenty-five percent of the inbound traffic on

a particular route be filed with the Commission and made public. Also,

the Commission will require that any alternative arrangement that

affects more than twenty-five percent of the outbound traffic or

twenty-five percent of the inbound traffic on a particular route not

contain unreasonably discriminatory terms and conditions. This

safeguard will require carriers that negotiate innovative price and

return traffic terms in agreements that affect more than twenty-five

percent of either the inbound or outbound traffic on a given route to

demonstrate that the terms are not unreasonably discriminatory, or to

offer such terms on a nondiscriminatory basis to competing carriers.

This safeguard will apply whether the arrangement is between separate

carriers on the U.S. and foreign ends, between two affiliates, or when

a carrier is self-corresponding. The Commission will not permit

carriers to circumvent this twenty-five percent threshold by

negotiating two or more agreements with one individual correspondent

carrier or its affiliate, each of which affects less than twenty-five

percent of the inbound or outbound traffic on a particular route.

Carriers will be required to file a summary of the terms and conditions

of all arrangements that do not trigger the Commission's safeguards and

a full copy of all alternative arrangements that do trigger these

safeguards. The Commission reserved the right to request a full copy of

arrangements that do not trigger its safeguards in order to detect any

potential circumvention of the safeguards by carriers.

8. As an additional measure to guard against unintended market

disruptions as a result of the new policy, the Commission will not

permit U.S.-inbound traffic that still is subject to the ISP (i.e.,

traffic from a foreign carrier with whom a U.S. carrier does not have

an alternative payment arrangement) to be routed through a foreign

carrier that has an alternative payment arrangement with a U.S.

carrier. The Commission reserved the right to impose additional

safeguards on a case-by-case basis as a condition of granting approval

to enter an alternative payment arrangement if it finds that such

safeguards are necessary to prevent market distortions in the U.S. IMTS

market or to prevent significant adverse results on net settlements

payments with a foreign country. If alternative settlement arrangements

indicate a need, the Commission will consider additional safeguards in

the future.

9. Because the new policy has an impact on the ``no special

concessions'' policy which was established in the Foreign Carrier Entry

Order, the Commission created an exception to that rule. This exception

applies only to alternative payment arrangements that between U.S.

carriers and foreign carriers in countries that satisfy the ECO test,

or foreign carriers in countries that do not satisfy the ECO test where

the U.S. carrier can demonstrate that deviation from the ISP will

promote market-oriented pricing and competition. Where these criteria

have not been met, the Commission will continue to enforce vigorously

its no special concessions policy. The Commission amended Section 63.14

of its rules to reflect this limited exception to the no special

concessions policy.

10. The Commission determined that the issue of tailoring

settlement policies to address the special circumstances presented by

developing countries, would be better considered in the context of a

separate proceeding. Thus, the Commission transferred the record on

this issue to its future benchmarks proceeding.

11. To ensure that U.S. carriers are not faced with undue delay in

implementing alternative payment arrangements, the Commission

established an expedited process whereby U.S. carriers may obtain

approval to enter an alternative payment arrangement by filing a

detailed petition for declaratory ruling that the alternative payment

arrangement is permitted under the criteria for deviating from the ISP.

Each petition for declaratory ruling will be placed on public notice

and interested parties will be allowed to file a formal opposition to

the petition within twenty-one days of the date of public notice. If no

formal opposition is filed and the Commission's International Bureau

has not notified the carrier that grant of the petition may not serve

the public interest and that implementation of the alternative

arrangement must await formal staff action on the petition, the

petition will be deemed granted and the alternative settlement

arrangement may be implemented as of the twenty-eighth day after the

date of public notice without any formal staff action being taken. If a

formal opposition is filed, the requesting carrier may file a response

pursuant to Sec. 1.45 of the Commission's rules, and implementation of

the alternative payment arrangement must await formal action by the

FCC's International Bureau.

12. A U.S. carrier may seek approval to enter an alternative

payment arrangement with a foreign carrier in a country that has

already been found to satisfy the ECO test in the context of a prior

Section 214 facilities application to serve that country. When a U.S.

carrier seeks approval to enter an alternative payment arrangement with

a carrier in a foreign country where the Commission has not yet made an

ECO determination, the carrier must submit sufficient evidence to

support a finding that either the ECO test has been satisfied, or that

deviation from the ISP will promote market-oriented pricing and

competition, while precluding abuse of market power by the foreign

correspondent. In all cases, a petitioning carrier must state whether

the alternative arrangement triggers our safeguards, either because the

arrangement affects more than twenty-five percent of the inbound or

twenty-five percent of the outbound traffic on the affected route, or

because the U.S. carrier and its foreign correspondent are affiliated

or involved in a non-equity joint venture affecting the provision of

basic services on the affected route.

13. The Commission required that a full copy of all negotiated

alternative arrangements that trigger its safeguards be filed with each

petition. Where an alternative arrangement does not trigger the

safeguards, a summary of the terms and conditions must be filed with

each petition, and the Commission reserved the right to request a copy

of the arrangement. Where an alternative arrangement does not trigger

the safeguards, the Commission's review generally will focus on whether

the criteria for allowing flexibility have

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been met, rather than on the specific terms of the alternative

arrangement. The Commission reserved the right to review and, if need

be, reject the terms and conditions of all alternative arrangements,

regardless of whether they trigger the safeguards, to ensure that they

meet the FCC's policy objectives and will not have a significant

adverse impact on U.S. net settlement payments and resulting traffic

volumes.

14. The Commission will conduct periodic reviews of alternative

settlement arrangements to ensure that the arrangements meet the

objectives of creating a competitive market for IMTS and achieving

cost-based accounting rates. The Commission will monitor the operating

results of alternative arrangements along with foreign market

conditions to ensure that the arrangements fulfill its objective of

achieving market-determined terms and conditions of payment that

approximate competitive levels. As part of the evaluation of

alternative arrangements, the Commission will compare the results of

each individual arrangement with other alternative arrangements and

with its benchmark accounting rates.

15. The Commission will monitor the operating results of approved

alternative arrangements to ensure that they do not have significant

adverse impacts on traffic volumes and U.S. net settlement payments. In

their annual report of international telecommunications traffic filed

pursuant to Section 43.61, U.S. carriers will be required to include

the number of minutes of outbound and inbound traffic settled pursuant

to each alternative arrangement. In the event an alternative

arrangement causes significant increases in net settlement payments

with a foreign country, the Commission will consider appropriate

action, including unilaterally ordering an end to the arrangement and

reinstituting traditional settlement practices. The Commission

emphasized its concern about increases in net settlement outpayments

that result from distortions in market competition that harm consumer

interests.

16. The Commission amended Secs. 43.51 and 64.1001 of its rules to

refer to ``waiver requests'' submitted under Sec. 64.1001 as

``modification requests''. This change conforms its rules to the

historic practice of treating waiver requests filed under Sec. 64.1001

as non-restricted proceedings, in the same manner as Section 214(a)

proceedings are treated under the Commission's ex parte rules. Because

this rule change involves agency practice and procedure, the notice and

comment provisions of the Administrative Procedure Act are

inapplicable.

17. The Commission codified its proportionate return policy as a

rule. The issue of whether to codify the policy was initially raised in

the Foreign Carrier Entry proceeding, but the record was transferred to

this proceeding. The proportionate return requirement has long been a

cornerstone of the Commission's ISP, and the Commission contends that

by codifying this requirement, it is sending a strong signal to foreign

carriers that the FCC does not allow U.S. carriers to be whipsawed.

18. The Commission decided not to apply the ISP to the global MSS

industry. Based on the record, the Commission found no clear evidence

that the global MSS market necessarily shares the anticompetitive

characteristics addressed by the ISP. The Commission encouraged the MSS

industry to adopt an approach to terminating international traffic that

leads to more cost-based results than the current accounting rate

regime. The Commission reserved the authority to apply the ISP or other

safeguards to the MSS industry in the future if it finds that market

conditions merit such actions.

Final Regulatory Flexibility Act Analysis

As required by Section 603 of the Regulatory Flexibility Act, 5

U.S.C. 603 (``RFA''), an Initial Regulatory Flexibility Analysis

(``IRFA'') was incorporated into the Second Report and Order and Second

Further Notice of Proposed Rulemaking (``Second Further NPRM'') in CC

Docket No. 90-337, Phase II. The Commission sought written public

comments on the proposals in the Second Further NPRM, including the

IRFA. The Commission's Final Regulatory Flexibility Analysis (``FRFA'')

in this Report and Order conforms to the RFA, as amended by the

Contract With America Advancement Act of 1996 (CWAAA), Public Law 104-

121, 110 Stat. 847 (1996).

A. Need For and Objective of the Rules

This Report and Order: (1) Permits U.S. carriers to deviate from

the requirements of the Commission's International Settlements Policy

(ISP) where appropriate market conditions exist; and (2) codifies the

Commission's preexisting proportionate return policy, which is one of

the requirements of the ISP, as a rule of general applicability to all

facilities-based carriers.

With respect to our action permitting U.S. carriers to deviate from

the requirements of the Commission's ISP where appropriate market

conditions exist, our objective is to create a more flexible framework

for regulating international accounting rates that permits U.S.

carriers to take advantage of competitive market conditions in foreign

countries to negotiate more economically efficient settlement rates.

This action is an important step toward a transition from the

traditional accounting rate system to competitive markets for

originating and terminating international traffic. A more flexible

approach to the accounting rate system will enable U.S. carriers to

respond more rapidly to changing conditions in the global

telecommunications market, reduce their call termination costs and the

U.S. net settlement payments, and provide for lower calling prices for

U.S. consumers.

With respect to our action codifying the Commission's preexisting

proportionate return policy, our objective is to restrict the ability

of foreign carriers to manipulate the allocation of return traffic and

whipsaw U.S. carriers. This policy has long been a cornerstone of our

ISP, and codifying it will send a strong signal to foreign carriers

that we will not allow U.S. carriers to be whipsawed. We note, however,

the flexible regulatory framework we adopt in this Report and Order

permits carriers to deviate from this requirement where appropriate

market conditions exist.

B. Summary of Issues Raised by the Public Comments in Response to the

IRFA

No comments were submitted in direct response to the IRFA. We also

reviewed the general comments for potential impact on small business.

Some commenters raised the concern that allowing flexibility for large

and/or dominant carriers would put smaller carriers at a disadvantage.

These commenters contend that larger carriers will be able to negotiate

more favorable terms and conditions than smaller carriers due to their

greater traffic volumes. We believe that these concerns are addressed

by the safeguards we adopt in this Report and Order.

C. Description and Estimate of Small Entities Subject to Which Rules

Will Apply

The Commission has not developed a definition of small entities

applicable to international facilities-based common carriers.

Therefore, the applicable definition of small entity is the definition

under the Small Business Administration (SBA) rules applicable to

Communications Services, Not Elsewhere Classified. This definition

provides that a small entity is expressed

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as one with $11.0 million or less in annual receipts. Based on

preliminary 1995 data, at present there are 29 international

facilities-based common carriers that qualify as small entities

pursuant to the SBA's definition. The number of small international

facilities-based common carriers has been growing significantly, and by

the end of 1996 that number could increase to approximately 50. The

flexibility rules adopted in this decision will apply to these carriers

only if they enter an alternative accounting rate arrangement with a

foreign carrier, and the proportionate return rules codified in this

Report and Order apply to all these carriers that enter into an

operating agreement that provides for return traffic with a foreign

carrier.

The IRFA and a Public Notice seeking supplemental comments were

issued in November 1992 and January 1996, respectively. Therefore, the

record in this proceeding was closed prior to the effective date of

SBREFA. The Commission was thus unable to request information regarding

the number of international facilities-based common carriers that

qualify as small entities.

D. Projected Reporting, Recordkeeping and Other Compliance Requirements

of the Rules

International facilities-based common carriers must file a petition

for declaratory ruling and obtain Commission approval before

implementing an alternative settlement rate arrangement with a foreign

carrier that deviates from the regulatory requirements of the

Commission's ISP. In addition, carriers that implement such alternative

arrangements must include in their annual report of international

telecommunications traffic filed pursuant to Section 43.61 of the

Commission's rules the number of minutes of outbound and inbound

traffic settled pursuant to each alternative arrangement. Carriers

already are required to file this annual traffic report; this Report

and Order requires only that carriers that enter alternative

arrangements include in their annual traffic report a description of

the minutes settled pursuant to those arrangements. This reporting

requirement and the requirement that carriers obtain approval of

alternative arrangements are necessary to enable the Commission to

review and monitor alternative arrangements for possible adverse

effects on the U.S. market for international telecommunications

services. These rules apply only to those small entities that take

advantage of the opportunity to negotiate alternative settlement

arrangements that deviate from the regulatory requirements of the

Commission's ISP. Compliance with these rules may require the use of

accounting and legal skills.

A U.S. international facilities-based common carrier that enters

into an operating agreement with a foreign correspondent may not

receive an allocation of return traffic from the foreign correspondent

to the U.S. carrier that is not proportionate to the amount of traffic

that the U.S. carrier sends outbound to the foreign correspondent. This

requirement previously has applied to all carriers, including small

entities, as part of the Commission's ISP. This Report and Order also

adopts a flexible regulatory framework that permits carriers to deviate

from this requirement where appropriate market conditions exist.

Compliance with this rule may require the use of accounting and legal

skills.

E. Steps Taken to Minimize Significant Economic Impact on Small

Entities Consistent With Stated Objectives

We have not identified, and commenters have not provided, any

significant alternatives that may minimize the economic impact on small

entities consistent with the stated objectives. We recognize that all

carriers, including small entities, may have an increased paperwork

burden; however, this Report and Order will reduce regulatory

requirements on small entities that enter into operating agreements

with foreign correspondents that include a negotiated accounting rate.

Small entities entering alternative settlement arrangements pursuant to

this Report and Order will not have to comply with the requirements of

the Commission's ISP, including the proportionate return requirement

that is codified in this Report and Order.

Several parties raised concerns that allowing flexibility in our

ISP may harm smaller carriers because larger carriers may be able to

obtain more favorable alternative arrangements due to their large

market share. This Report and Order recognizes that there exists the

potential for anticompetitive behavior by large carriers. However,

rather than preclude large carriers from entering into alternative

arrangements or postpone our flexibility policy, this Report and Order

adopts competitive safeguards to help prevent potential anticompetitive

behavior. These safeguards address the concerns raised by commenters,

but at the same time enable the Commission to meet its objectives of

allowing U.S. carriers, including small entities, to respond more

rapidly to changing conditions in the global telecommunications market,

reduce their call termination costs and the U.S. net settlement

payments, and provide for lower calling prices for U.S. consumers.

The Commission shall send a copy of this Final Regulatory

Flexibility Analysis, along with this Report and Order, in a report to

Congress pursuant to the Small Business Regulatory Enforcement Fairness

Act of 1996, 5 U.S.C. 801(a)(1)(A). A copy of this FRFA will also be

published in the Federal Register.

Paperwork Reduction Act

The Report and Order revises an existing information collection and

imposes a new information collection. We recognize that the

implementation of these requirements will be subject to review and

approval of the Office of Management and Budget. Both the new and

revised information collections contained in these rules will be

submitted to the Office of Management and Budget for review under the

Paperwork Reduction Act of 1995. To obtain copies of the information

collections contact Dorothy Conway at (202) 418-0217 or via internet at

[email protected]. Persons wishing to comment on this collection of

information should direct their comments to Dorothy Conway, Federal

Communications Commission, Records Management Division, Room 234,

Paperwork Reduction Project (3060-0572), Washington, D. C. 20554. For

Further information Contact Dorothy Conway, (202) 418-0217.

Comments are invited on (a) whether the proposed collection of

information is necessary for the proper performance of the functions of

the agency, including whether the information shall have practical

utility; (b) the accuracy of the Commission's estimate of burden of the

proposed collection of information; (c) ways to enhance the quality,

utility, and clarity of the information to be collected and (d) ways to

minimize the burden of the collection of information on respondents,

including through the use of automated collection techniques or other

forms of information technology.

OMB Number: 3060-0106.

Title: Common Carrier International Telecommunications Services.

Type of Review: Revision of existing collection.

Respondents: U.S. common carriers providing international

telecommunications services.

Number of Respondents: 248 (based on number of international

carriers filing traffic reports in 1995).

Estimated Annual Burden: 8 hours including the time for reviewing

instructions, searching existing data

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sources, segregating the data needed, and completing and reviewing the

collection of information.

Total Annual Burden: 1,984 hours.

Estimated costs per respondent: None.

Needs and Uses: The collection of information for which approval is

here sought is contained in amendments to Part 43 in the Order adopting

such amendments. The information collections are authorized and

necessary for the Commission to carry out its statutory mandate,

pursuant to Sections 1, 4, 201-205, 211, 214, 218-220, and 303 of the

Communications Act of 1934, as amended, 47 U.S.C. Sections 151, 154,

201-205, 211, 214, 218-220, and 303, and Part 43 of the Commission's

Rules.

The information collections contained in amendments to Part 43 are

necessary to assist us in reviewing the impact, if any, that

alternative settlement agreements have on our international accounting

rate policies. The information collections will also enhance the

ability of the Commission and interested parties to monitor this policy

for anticompetitive effects in the U.S. market for international

service, thus increasing competitive options for U.S. carriers and

resulting in lower prices and greater choices for U.S. consumers. The

information collection will enable the Commission to promote

competitive behavior, improve economic performance, and preserve the

integrity of our accounting rate policies. The information collections

also will enable the Commission and interested parties to determine

whether or not the competitive safeguards are sufficient to protect

U.S. carriers and consumers against harmful discriminatory practices by

foreign carriers.

The information will be used by the Commission staff in carrying

out its duties under the Communications Act. Common carriers engaged in

providing international telecommunications service are required to file

annual reports of international telecommunications traffic. The new

rules require that the report shall include the number of minutes of

outbound and inbound traffic settled pursuant to each alternative

arrangement entered into pursuant to the new Section 64.1002.

OMB Number: 3060-0000.

Title: Common Carrier International Telecommunications Services.

Type of Review: New Collection.

Respondents: U.S. common carriers providing international

telecommunications services.

Frequency of Response: As needed basis.

Number of Respondents: 30. It is difficult to estimate the number

of respondents filing this information because the information will be

filed only by those carriers seeking permission to enter agreements

that do not comply with the Secs. 43.41(e)(1), 63.14, and 64.1001 of

our rules. Such agreements will only be permitted under certain

circumstances. Given the limitations on negotiating such agreements, we

estimate that no more than 30 such agreements will be negotiated, and

very likely, significantly fewer than that number.

Estimated Annual Burden: 16 hours including the time for reviewing

instructions, searching existing data sources, gathering and

maintaining the data needed, and completing and reviewing the

collection of information. It is difficult to estimate the estimated

annual burden for filing the information because it will depend on how

many agreements the carriers wish to enter.

Total Annual Burden: 480 hours.

Cost per respondent: $1,600. This amount is an estimate depending

on whether the respondents use in-house legal staff or professional law

firms to prepare the filing.

Needs and Uses: The collection of information for which approval is

here sought is contained in amendments to Part 64 in the Order adopting

such amendments. This information collection is authorized and

necessary for the Commission to carry out its statutory mandate,

pursuant to Sections 1, 4, 201-205, 211, 214, 218-220, and 303 of the

Communications Act of 1934, as amended, 47 U.S.C. Sections 151, 154,

201-205, 211, 214, 218-220, and 303, and Part 43 of the Commission's

Rules.

The information collection contained in amendments to Part 64 is

necessary to allow U.S. carriers to enter into alternative settlement

agreements that do not comply with Secs. 43.41(e)(1), 63.14, and

64.1001 of our rules. The information collected pursuant to this

section will enable the Commission to consider alternative agreements

that are outside the scope of its current rules. The information

collected will be used to monitor the alternative agreements to ensure

that competitive opportunities are available. The information collected

will also enable interested parties to monitor the alternative

agreements and determine potentially anticompetitive arrangements. In

addition, the information collected will be the only information

available to the Commission and interested parties on alternative

accounting settlement arrangements. This information collection will

provide the agency with sufficient data to review the impact, if any,

that the alternative settlement agreement will have on our

international accounting rate policies. The information collection will

also enhance the ability of the Commission and interested parties to

monitor for anticompetitive effects in the U.S. market for

international service, thus increasing competitive options for U.S.

carriers and resulting in lower prices and greater choices for U.S.

consumers. The information collection will enable the Commission to

promote competitive behavior, improve economic performance, and

preserve the integrity of our accounting rate policies. The information

collections also will enable the Commission and interested parties to

determine whether or not the competitive safeguards are sufficient to

protect U.S. carriers and consumers against harmful discriminatory

practices by foreign carriers.

The information will be used by the Commission staff in carrying

out its duties under the Communications Act.

Ordering Clauses

19. Accordingly, Secs. 43.51 and 64.1001 will become effective

March 10, 1997. Sections 43.61 and 64.1002 take effect either upon

approval by the Office of Management and Budget (OMB) or March 10, 1997

whichever occurs later. When approval is received, the agency will

publish a document announcing the effective date.

20. This action is taken pursuant to Sections 4(i), 4(j), 303(r),

and 201-205 of the Communications Act of 1934, as amended, 47 U.S.C.

154(i), 154(j), 303(r) and sections 201-205, Constitution of the

International Telecommunications Union, Special Arrangements Article,

and International Telecommunications Regulations, Article 9. Special

Arrangements.

List of Subjects in 47 CFR Parts 43 and 64

Communications common carriers, Reporting and recordkeeping

requirements.

Federal Communications Commission.

William F. Caton,

Acting Secretary.

Rule Changes

Parts 43 and 64 of Title 47 of the Code of Federal Regulations are

amended as follows:

PART 43--REPORTS OF COMMUNICATION COMMON CARRIERS AND CERTAIN

AFFILIATES

1. The authority citation for Part 43 continues to read as follows:

[[Page 5541]]

Authority: Sec. 4, 48 Stat. 1066, as amended; 47 U.S.C. 154,

unless otherwise noted. Interpret or apply secs. 211, 219, 220, 48

Stat. 1073, 1077, as amended; 47 U.S.C. 211, 219, 220.

2. Section 43.51 is amended by revising paragraph (d) to read as

follows:

Sec. 43.51 Contracts and concessions.

* * * * *

(d) International settlements policy. (1) If a carrier files an

operating agreement (whether in the form of a contract, concession,

license, etc.) referred to in paragraph (a) of this section to begin

providing switched voice, telex, telegraph, or packet-switched service

between the United States and a foreign point and the terms and

conditions of such agreement relating to the exchange of services,

interchange or routing of traffic and matters concerning rates,

accounting rates, division of tolls, the allocation of return traffic,

or the basis of settlement of traffic balances, are not identical to

the equivalent terms and conditions in the operating agreement of

another carrier providing the same or similar service between the

United States and the same foreign point, the carrier must also file

with the International Bureau a notification letter or modification

request, as appropriate, under Sec. 64.1001 of this chapter. No carrier

providing switched voice, telex, telegraph, or packet-switched service

between the United States and a foreign point shall bargain for or

agree to accept more than its proportionate share of return traffic.

(2) If a carrier files an amendment to the operating agreement

referred to in paragraph (a) of this section under which it already

provides switched voice, telex, telegraph, or packet-switched service

between the United States and a foreign point, and other carriers

provide the same or similar service to the same foreign point, and the

amendment relates to the exchange of services, interchange or routing

of traffic and matters concerning rates, accounting rates, division of

tolls, the allocation of return traffic, or the basis of settlement of

traffic balances, the carrier must also file with the International

Bureau a notification letter or modification request, as appropriate,

under Sec. 64.1001 of this chapter.

3. Section 43.61 is amended by revising paragraph (b) to read as

follows:

Sec. 43.61 Reports of international telecommunications traffic.

* * * * *

(b) The information contained in the reports shall include actual

traffic and revenue data for each and every service provided by a

common carrier, divided among service billed in the United States,

service billed outside the United States, and service transiting the

United States. In addition, it shall include the number of minutes of

outbound and inbound traffic settled pursuant to each alternative

arrangement entered into pursuant to Sec. 64.1002 of this chapter.

* * * * *

PART 64--MISCELLANEOUS RULES RELATING TO COMMON CARRIERS

1. The authority citation for Part 64 continues to read as follows:

Authority: Secs. 4, 201-205, 211, 218-220, 303, 48 Stat. 1066,

1070, 1072-73, 1077-78, as amended; 47 U.S.C. 154, 201-205, 211,

218-220, 303.

2. Section 64.1001 is amended by revising the heading for Subpart

J, the section heading, paragraph (d), (e)(7), (f) introductory text,

(g) introductory text, and paragraphs (i), (j), (k), and (l) to read as

follows:

Subpart J--International Settlements Policy and Modification

Requests

Sec. 64.1001 International settlements policy and modification

requests.

* * * * *

(d) If the operating agreement or amendment referred to in

Secs. 43.51(d)(1) and (d)(2) of this chapter is not subject to

notification under paragraphs (b) and (c) of this section, the carrier

must file a modification request under paragraph (f) of this section.

(e) * * *

(7) A statement that there has been no other modification in the

operating agreement with the foreign correspondent regarding the

exchange of services, interchange or routing of traffic and matters

concerning rates, accounting rates, division of tolls, allocation of

return traffic, or the basis of settlement of traffic balances.

(f) A modification request must contain the following information:

* * * * *

(g) Notification letters and modification requests must contain

notarized statements that the filing carrier:

* * * * *

(i) If a carrier files a notification letter for an operating

agreement or amendment that should have been filed as a modification

request, the Bureau will return the notification letter to the filing

carrier and the Bureau will notify the carrier that, before it can

implement the proposed modification, it must file a modification

request under paragraph (f) of this section.

(j) An operating agreement or amendment filed under a modification

request cannot become effective until the modification request has been

granted under paragraph (l) of this section.

(k) On the same day the notification letter or modification request

is filed, carriers must serve a copy of the notification letter or

modification request on all carriers providing the same or similar

service to the foreign administration identified in the filing.

(l) All modification requests will be subject to a twenty-one (21)

day pleading period for objections or comments, commencing the date

after the request is filed. If the modification request is not complete

when filed, the carrier will be notified that additional information is

to be submitted, and a new 21 day pleading period will begin when the

additional information is filed. The modification request will be

deemed granted as of the twenty-second (22nd) day without any formal

staff action being taken: provided

(1) No objections have been filed, and

(2) The International Bureau has not notified the carrier that

grant of the modification request may not serve the public interest and

that implementation of the proposed modification must await formal

staff action on the modification request. If objections or comments are

filed, the carrier requesting the modification request may file a

response pursuant to Sec. 1.45 of this chapter. Modification requests

that are formally opposed must await formal action by the International

Bureau before the proposed modification can be implemented.

3. New Sec. 64.1002 is added to Subpart J to read as follows:

Sec. 64.1002 Alternative settlement arrangements.

(a) A communications common carrier engaged in providing switched

voice, telex, telegraph, or packet switched service between the United

States and a foreign point may seek approval to enter into an operating

agreement with a foreign telecommunications administration containing

an alternative settlement arrangement that does not comply with the

requirements of Sec. 43.51(e)(1) and Sec. 63.14 of this chapter and

Sec. 64.1001 by filing a petition for declaratory ruling in compliance

with the requirements of this section.

(b) A petition for declaratory ruling must contain the following:

(1) Information to demonstrate that either:

(i) The Commission has made a previous determination that the

[[Page 5542]]

effective competitive opportunities test in Sec. 63.18(h)(6)(i) of this

chapter has been satisfied on the route covered by the alternative

settlement arrangement; or

(ii) The effective competitive opportunities test in

Sec. 63.18(h)(6)(i) of this chapter is satisfied on the route covered

by the alternative settlement arrangement; or

(iii) The alternative settlement arrangement is otherwise in the

public interest.

(2) A certification as to whether the alternative settlement

arrangement affects more than 25 percent of the outbound traffic or 25

percent of the inbound traffic on the route to which the alternative

settlement arrangement applies.

(3) A certification as to whether the parties to the alternative

settlement arrangement are affiliated, as defined in

Sec. 63.18(h)(1)(i) of this chapter, or involved in a non-equity joint

venture affecting the provision of basic services on the route to which

the alternative settlement arrangement applies.

(4) A copy of the alternative settlement arrangement if it affects

more than 25 percent of the outbound traffic or 25 percent of the

inbound traffic on the route to which the alternative settlement

arrangement applies, or if it is between parties that are affiliated,

as defined in Sec. 63.18(h)(1)(i) of this chapter, or that are involved

in a non-equity joint venture affecting the provision of basic services

on the route to which the alternative settlement arrangement applies.

(5) A summary of the terms and conditions of the alternative

settlement arrangement if it does not come within the scope of

paragraph (b)(4) of this section. However, upon request by the

International Bureau, a full copy of such alternative settlement

arrangement must be forwarded promptly to the International Bureau.

(c) An alternative settlement arrangement filed for approval under

this section cannot become effective until the petition for declaratory

ruling required by paragraph (a) of this section has been granted under

paragraph (e) of this section.

(d) On the same day the petition for declaratory ruling has been

filed, the filing carrier must serve a copy of the petition on all

carriers providing the same or similar service with the foreign

administration identified in the petition.

(e) All petitions for declaratory ruling shall be subject to a 21

day pleading period for objections or comments, commencing the day

after the date of public notice listing the petition as accepted for

filing. The petition will be deemed granted as of the 28th day without

any formal staff action being taken: provided

(1) The petition is not formally opposed within the meaning of

Sec. 1.1202(e) of this chapter; and

(2) The International Bureau has not notified the filing carrier

that grant of the petition may not serve the public interest and that

implementation of the proposed alternative settlement arrangement must

await formal staff action on the petition. If objections or comments

are filed, the petitioning carrier may file a response pursuant to

Sec. 1.45 of this chapter. Petitions that are formally opposed must

await formal action by the International Bureau before the proposed

alternative settlement arrangement may be implemented.

[FR Doc. 97-2922 Filed 2-5-97; 8:45 am]

BILLING CODE 6712-01-P