On May 12, 2011, the Federal Communications Commission (“FCC”) released a Notice of Proposed Rulemaking advocating the elimination of the FCC’s International Settlements Policy (ISP) from all remaining international routes, with the exception of Cuba. In addition, the FCC seeks comment on proposals regarding the application of the Commission’s benchmark policy to select international routes and if the FCC should revamp regulation of anti-competitive behavior in the international telecommunications marketplace.
Background
The ISP was established to prevent foreign carriers with market power from taking anti-competitive actions against competing U.S. carriers as a strategy to obtain pricing concessions in the international marketplace. Pursuant to the ISP, the FCC imposed benchmarks and non-discrimination rules aimed at capping the cost of certain international routes deemed non-competitive by the FCC.
Since the inception of the ISP, the cost of international telecommunications has dropped dramatically. For example, the FCC indicates that average settlement rates have decreased from $0.35 per minute (1997) to $0.05 per minute (2009) and average international revenue per minute has decreased from $0.67 per minute (1997) to $0.08 per minute (2009). As settlement rates decreased to benchmark rates or below, the Commission has exempted certain international routes from the ISP. To date only 38 U.S. international routes remain subject to the ISP. These 38 routes constitute 1.8% of total minutes worldwide in 2009.
Proposed Rulemaking
Due to the small percentage of routes subject to the ISP, the FCC proposes elimination of the ISP, except for routes to Cuba (which are subject to the U.S. embargo). Instead, the FCC proposes that U.S. carriers either notify the FCC or file agreements, amendments to agreements (whether written or oral), and rates for the provision of services when the agreed-upon rates are above benchmark. This requirement would apply to all U.S. international routes involving a foreign correspondent, dominant or non-dominant, for which U.S. outbound rates are above benchmark — regardless of whether the ISP previously had been removed from that route or benchmarks had been temporarily achieved at some point in the past.
Further, even though the FCC is considering amendments to the ISP, the FCC will not eliminate or amend the “No Special Concessions” rule which prohibits certain exclusive arrangements between a U.S. carrier and a foreign carrier with market power. The FCC reserves the right to require the filing of particular contracts when presented with evidence of a violation of the “No Special Concessions” rule or other anti-competitive behavior related to these matters on a particular route.
Finally, the FCC solicits comment on whether any additional regulations to reduce anti-competitive should be adopted. For example, what acts, if any, should constitute anticompetitive behavior? Should the presumption of anti-competitive behavior be limited to foreign carriers with market power or apply to all foreign carriers? What procedural rules should the FCC impose to determine what constitutes anti-competitive behavior?
Comments on the Proposed Rules are due 30 days after publication in the Federal Register. Reply comments are due 45 days after publication in the Federal Register. Parties interested in submitting comments, or have general questions about international telecommunications issues, should contact Jonathan Marashlian at jsm@commlawgroup.com, or their assigned regulatory attorney.
