KDD supports establishing cost-oriented settlement rates and moving towards a new system of remuneration. An appropriate way to reach this end is to address the accounting rate reform through multilateral fora such as ITU^*3, and to make rules on cost-based accounting rate. Bilateral negotiations should be carried out in accordance with the relevant rules and recommendations. KDD believes that it is inappropriate for the FCC to unilaterally set accounting rate benchmarks and targets for countries around the world and threaten to take retaliatory measures, such as suspending settlement of accounts, and conditioning the benchmark on foreign carriers' market entry in U.S. Therefore, KDD will submit comments strongly opposing the NPRM.

The gist of the comments is as follows:
(1) FCC lacks jurisdiction to prescribe the settlement rate to be charged by foreign carriers.
The FCC is attempting to go beyond its jurisdiction by unilaterally prescribing the settlement rates to be charged by foreign carriers. Further, the FCC's proposed unilateral enforcement policies show the extent to which the FCC is seeking to exert extraterritorial jurisdiction by imposing settlement rate benchmarks upon foreign carriers. The FCC's proposed mandatory benchmarks are contrary to the letter and spirit of governing international telecommunications regulations, which require that the rates and terms of operating relationships be established by "mutual agreement" and "mutual consent".

(2) The FCC's NPRM would be a step backwards in the global effort to make all countries open to competitive new entry.
The NPRM discriminately sets and applies overseas side terminal shares, by classifying countries according to their degree of economic development, for instance. This would be inconsistent with the spirit of the WTO. By requiring foreign carriers to comply with settlement benchmarks as a condition of entering the U.S. market, the FCC's proposal will add another barrier against the new entry.

(3) All countries should address settlement rate reform through the appropriate international fora.
So far, the ITU has led a successful effort with the cooperation of carriers and administrations around the world to review international settlement rates and practice toward cost-oriented accounting rates. The settlement reform should be pursued on a multilateral rather than an unilateral basis. Extensive multilateral discussions should be sought as the course of action. Accounting rates must be agreed upon between the carriers concerned based on such multilateral consensus.

(4) The FCC's proposal does not specify the cost-based settlement rates on U.S. side.
The FCC is proposing to establish and impose the benchmark only on foreign carriers without clarifying the settlement rates benchmarks on U.S. side, which is not fair.

The FCC plans to disclose comments received from governments and telecommunications carriers from around the world by February 7 and request the reply comments by March 10, 1997. The FCC will make its decision afterwards taking into account the comments.

*1 FCC: Federal Communication Commission
*2 NPRM: Notice of Proposed Rule Making
*3 ITU: International Telecommunication Union

The accounting rates negotiation between KDD and U.S. telecommunication carriers has been held since around the fall of 1995. The negotiation is unrelated to the FCC's NPRM on benchmark, and KDD has not agreed to the benchmark level.