US telcos may now pay arrears with Smart — FCC

The long drawn dispute between Philippine and US carriers may finally be over after the US Federal Communications Commission (FCC) finally lifted the order of its international bureau issued more than eight months ago and gave American telcos the go-signal to pay Smart Communications, Inc. unpaid settlement rates amounting to about $10 million, The STAR learned yesterday.

The commission, however, has yet to issue a ruling in the case of other Philippine telcos similarly affected like the Philippine Long Distance Telephone Co. (PLDT) and Globe Telecom.

The FCC lifted the controversial March 10, 2003 stop-payment order issued by its bureau head Donald Abelson but only in the case of Smart. The said March 10 order found Philippine carriers guilty of ‘whipsawing,’ or unduly pitting one US carrier against the other when the RP telcos unilaterally raised their termination rates effective Feb. 1, 2003 from eight cents a minute to 12 cents in the case of calls to landlines in the Philippines and from 12 cents to 16 cents in the case of calls terminating in RP mobile phones.

Termination rates refer to the amount which US carriers have to pay Philippine carriers for landing US calls in the latter’s network, and vice-versa. Philippine carriers maintain that the increased rates were still low compared to benchmarks set by the International Telecommunications Union (ITU) of 24 cents a minute and that of FCC itself which is 19 cents for countries like the Philippines.

Abelson, in his March 10 directive, said no payments should be made by US facilities-based carriers to Philippine telcos until the rates are rolled back to their pre-Feb. 1 levels. The stop-payment order still remains in the case of the Philippine Long Distance Telephone Co. (PLDT), Globe Telecom, and Subic Telecom.

The March 10 ruling was a result of a case for whipsawing filed by AT&T and Worldcom last Feb. 7 against the Philippine carriers.

Smart officials said the lifting of the FCC bureau order came after the country’s leading mobile phone service provider ceased blocking traffic or calls coming from MCI-Worldcom, one of the largest US carriers following an agreement on interim rates. An interim rate agreement has likewise been reached with AT&T.

They added that the FCC bureau move also due to earlier discussions between FCC chairman Michael Powell and National Telecommunications Commission (NTC) chief Armi Jane Borje as well as those between Trade Undersecretary Tomas Aquino and his American counterparts on the matter of arriving at an amicable settlement of the long-drawn dispute.

"This is an acknowledgement of US carriers that Smart as the leading telecom provider in the Philippines can set rates commercially with them on the basis of bilateral negotiations," Smart carrier relations head and legal counsel Rogelio Quevedo told The STAR in an overseas call.

Quevedo said he expects payment of about $10 million to come from the US carriers within this week, which includes $6s million from MCI and AT&T, and the rest from Sprint and other smaller carriers.

The STAR reported Tuesday that MCI asked the FCC bureau in a letter dated Nov. 14, 2003 to lift the suspend-payment requirement contained in the March 10 order with regard to Smart as well as PLDT as quickly as possible so that MCI may resume making payments to the two carriers.

MCI notified the international bureau that its bilateral circuits with Smart and PLDT have now been restored and that the two carriers have ceased blocking MCI’s traffic destined for these carriers’ network in the Philippines. Separate representations were made by AT&T with the FCC.

It will be recalled that Philippine carriers blocked traffic coming from US carriers following the March 10 FCC bureau order in order to prevent the accumulation of unpaid settlement rates. Because of Abelson’s order, US carriers ceased paying termination rates, including those that were owed before March 10. As a result of the blocking, US carriers had to use third party carriers in other countries and pay additional charges just to land traffic in the Philippines.

The Feb. 1 rates have been accepted by a majority of the largest telecommunication carriers worldwide such as those in Canada (Teleglobe and Teless), Singapore, Hong Kong, United Kingdom, Japan, Australia, Germany, Malaysia, Indonesia and Portugal, among others.

The interim rate agreements with MCI and AT&T are expected to be applied until commercial rates are arrived at although sources said the interim rates will possibly be the same as the commercial rates.