KDD Files a Petition with U.S. Court for Review of FCC Order on International Settlement Rate Benchmark

KDD believes that international settlement rates should be based on costs. An appropriate way to reach this end is to address the settlement rate reform through multilateral fora such as the ITU (*2), and to make international rules on cost-based settlement rates. Bilateral negotiations should then be carried out in accordance with the rules.

On the contrary, the FCC order forces upon other countries the international settlement rate benchmarks arbitrarily set by the U.S. government agency. The FCC grouped countries by income and set a benchmark level and a transition period for each group.

According to the order, even when a foreign carrier does not agree to lower its international settlement rate to the benchmark level within the transition period, the FCC will enforce American carriers to settle at the benchmark level anyhow.

In addition, the FCC intends to use the attainment of the benchmark as a condition for foreign carriers' entry into the U.S. market. In essence, the order is a unilateral action imposed without the agreement of foreign carriers.

In the petition for review, KDD will ask the Court to invalidate the FCC order primarily for the reasons that: (1) The FCC has no jurisdiction under international law and U.S. telecommunications laws to tell foreign carriers what rates they may charge to terminate international calls over their own networks in their own countries; and (2) the FCC specified rates for foreign carriers without data and based upon a flawed methodology in violation of U.S. telecommunications and administrative laws prohibiting arbitrary and capricious decision making.

After announcing the Notice of Proposed Rule Making on international settlement rate benchmark on December 19 last year that led to the recent order, the FCC has accepted comments on the order for review from foreign governments and carriers. KDD has submitted comments opposing the order three times. Likewise, many other governments and carriers have expressed their objections.

*1 FCC: Federal Communications Commission
*2 ITU: International Telecommunication Union

(Reference)

1. Course of events
- December 19, 1996 : FCC announces the Notice of Proposed Rule Making on international settlement rate benchmarks.
- February 7, 1997 : KDD submits comments to the FCC on the Notice of Proposed Rule Making.
- March 31 : KDD issues replies to comments the FCC received from foreign governments and carriers.
- June 5 : KDD submits additional comments.
- August 7 : The FCC adopts and announces the benchmark rule.
- August 29 : The FCC order is registered in the Federal Register.
- October 28 : Deadline for petition for review (U.S. time).

2. Principal contents of the FCC order
- Effective : January 1, 1998
- Benchmark levels and transition periods

Classification	Principal countries	Benchmark level (cents)	Transition deadline
Upper income	Japan, Singapore, U.K.	15	Jan. 1, 1999
Upper middle income	Korea, Mexico, Brazil	19	Jan. 1, 2000
Lower middle income	Indonesia, Thailand, Russia	19	Jan. 1, 2001
Lower income	China, India, Vietnam	23	Jan. 1, 2002
Teledensity less than one	Cambodia, Myanmar	(*)	Jan. 1, 2003

* The benchmark level is set based on the income classification of the country in question.