Smart threatens to sever ties with MCI/WorldCom

Leading wireless company Smart Communications has threatened to sever relations with American carrier MCI/WorldCom after the latter refused to pay the former more than $1 million in unpaid settlement rates.

Smart legal and carrier relations head Rogelio Quevedo told The STAR that they are all set to block calls coming from MCI unless the US telco settles what it owes the Philippine mobile company.

Smart and MCI have earlier entered into an interim agreement covering termination rates for calls from the US carrier. Another agreement was forged with AT&T which led the US Federal Communications Commission to finally give the go-signal for American telcos to pay Smart unpaid settlement rates amounting to about $10 million.

Quevedo said one of the reasons why Smart decided to enter into an interim agreement is a commitment made by MCI to settle what it owes the Philippine carrier. "MCI owes Smart more than $1 million. Now, MCI is saying that we owe them $100,000 and that unless we pay this amount, they will not pay us what they owe Smart. And they refuse to offset the $100,000 with what they owe us," he told The STAR.

He said it has become very difficult to deal with MCI especially since it is in the middle of receivership proceedings in the US.

AT&T has paid Smart over $2 million. "We at Smart are thinking of giving AT&T additional circuits and even volume discounts as a show of appreciation. On the other hand, due to the bad faith MCI has shown, we are thinking of totally severing relations with it," he said.

Quevedo pointed out that this time, MCI cannot rely on the US FCC to take the cudgels for it, saying that this is a matter for the international arbitration courts.

The FCC earlier lifted a 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 rate refers 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 are 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.

The FCC’s decision to lift the order of its bureau was also an offshoot of a request made by MCI to the commission in a letter dated Nov. 14, 2003 to lift the suspend-payment requirement contained in the March 10 order with regards to Smart as well as PLDT as expeditiously 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.