The FCC giveth and the FCC taketh away as it proposes elimination of International Settlements Policy while continuing to monitor competitiveness, possibly through new or expanded reporting requirements

The FCC has proposed to eliminate its 80-year-old International Settlements Policy (ISP) (except as it applies to Cuba – that would require the State Department’s blessing). The ISP is intended to prevent monopolistic foreign carriers from charging U.S. carriers non-competitive rates for the termination of foreign traffic, leading to high international rates for U.S. consumers.

In its very simplest terms, the policy dictates a uniform bargaining position for U.S. carriers: they must accept the same rates as other carriers on that route, are entitled to terminate their proportionate share of incoming traffic from a foreign carrier, and have to split termination rates (a/k/a/ “accounting rates”) 50/50 with the foreign carrier.

The ISP does not apply where carriers pay below a certain set benchmark rates for that route. There are only a few dozen routes to which the ISP still applies, so it’s no longer an active key component of international regulation. The Commission is concerned that the policy itself may be preventing carriers from negotiating benchmark or lower rates on ISP routes because foreign carriers have little incentive to negotiate symmetric rates when they can re-originate traffic at lower rates.

After elimination of the ISP, the Commission proposes to continue to monitor the competitiveness of international rates by requiring that U.S. carriers file agreements – or at least notice of agreements – involving any above-benchmark rate. The Commission notes that it will retain alternative ways of combating anticompetitive behavior by foreign carriers – for instance, by ordering all U.S. carriers to suspend payments until the situation resolves (as it did a couple of years ago in Tonga, a situation described in the ISP order). The Commission is nevertheless interested in receiving comments on additional measures it can take to identify and remedy anticompetitive behavior.  Also, on a limited, case-by-case basis, it proposes applying benchmark rates to indirect routing arrangements as a remedy to high anticompetitive rates passed on through intermediary countries.

In a separate but related order, the FCC has also taken steps to lighten the regulatory load on international telecom carriers by eliminating certain “outdated and unnecessary” reporting requirements, including: (1) quarterly international traffic and revenue reports (that were required for large and foreign-affiliated carriers); (2) annual circuit-addition reports; and (3) telegraph toll division reports. (We wonder how many telegraph toll division reports have been filed in the last few decades.)   Also eliminated: separate reporting requirements for U.S. offshore points.

The Commission will continue to require annual international Traffic and Revenue Reports and Circuit Status Reports (including for resale), but it intends to reduce the amount of information required on each form and the number of carriers required to file. It proposes to establish a revenue cutoff point, below which carriers would have to file basic information only, in an annual “Services Report.” The Commission proposes a universal deadline and consolidated instruction manual for all three reports.

However, even as it relaxes certain reporting requirements, the FCC also proposes to extend the remaining requirements to international VoIP services and non-common carrier circuit services. As a “significant and growing component of the U.S. international voice traffic market,” the Commission reasons that it needs data on international VoIP traffic to effectively protect U.S. consumers and carriers from harm caused by insufficient competition in the U.S. international telecommunications markets. Likewise, it considers non-common carrier international circuits to be “generally fungible” with common carrier circuits and therefore an essential part of the international telecommunications market. Accordingly, the Commission is looking for input on the various possible statutory bases for asserting ancillary jurisdiction over these services.

The two orders have now been published in the Federal Register (the ISP order here and the reporting requirements order here), which in turn has set identical comment and reply comment deadlines for both proceedings. If you want to comment, you have until August 18, 2011; reply comments are due by September 2, 2011.