FCC Initiates Sweeping Reforms to Modernize/Streamline Regulation of International Telecommunications Services

May 13, 2011

At its May Open meeting yesterday, the FCC acknowledged that longstanding regulations intended to promote competition and discourage anticompetitive conduct have become burdensome and offer less value in today's hypercompetitive market for international telecommunications services. To address this issue, the Commission announced a pair of items aimed at dramatically overhauling the regulation and reporting obligations for international telecommunications services. Specifically, the Commission announced the release of:

  1. a Notice of Proposed Rulemaking (“NPRM”) that seeks comment on a proposal eliminating the International Settlement Policy (“ISP”) on ALL international routes except U.S.-Cuba, and
  2. a First Report & Order (“First R&O”) that eliminates more than 25 outdated reporting requirements related to international common carrier traffic and revenue, and a Further Notice of Proposed Rulemaking (“FNPRM”) that seeks comment on additional reforms to streamline/modernize international data collections under Part 43 of the FCC’s rules

The release of the above items is a favorable development, particularly for international common carriers that have been subject to onerous reporting requirements that stopped generating meaningful data for the Commission to analyze many years ago. That said, during the FCC’s meeting, staff and multiple Commissioners heavily emphasized the importance of international data collection for evaluating mergers and determining relief for anticompetitive behavior by foreign carriers, among other critical Commission functions, and we do not expect the Commission to completely eliminate international reporting obligations. Instead, we expect the Commission to heavily deemphasize data collection obligations for traditional DS0-based switched voice services, but to weigh options for expanded information collection requirements concerning international VOIP and other contemporary international services and transmission facilities. Without industry input and advocacy to shape potential new reporting requirements, the Commission may seek to impose new data collection requirements that prove equally burdensome and unwieldy to different classes of service providers that might not have significant reporting obligations under the current rules.

The two items released yesterday are discussed in greater detail below.


With regard to international routes where a foreign carrier has market power, the ISP rules currently require that:

  1. all U.S. carriers must be offered the same effective accounting rate and same effective date for the rate (“nondiscrimination”);
  2. all U.S. carriers are entitled to a proportionate share of U.S.-inbound, or return traffic based upon their proportion of U.S.-outbound traffic (“proportionate return”); and,
  3. the accounting rate is divided evenly 50-50 between U.S. and foreign carriers for U.S.-inbound and outbound traffic so that inbound and outbound settlement rates are identical (“symmetrical settlement rates”).

The Commission took notice of the fact that increased global competition and alternative traffic routing have made the ISP “less relevant and necessary to ensure fair competition,” and that its “burdens now outweigh its benefits.” Accordingly, the NPRM proposes to eliminate the ISP on all international routes with one exception. The Commission will retain the ISP on the route between the U.S. and Cuba due to unspecified “outstanding policy concerns.”

The proposed elimination of the ISP is significant given that it has been in existence as a safeguard against anticompetitive practices by foreign carriers for decades. The immediate impact of the proposed elimination on rates, traffic patterns and carrier operations may be quite subtle, however, in light of the fact that the ISP currently only applies to 38 routes accounting for 2 percent of aggregate U.S. international traffic.

The Commission has indicated that it will seek comment on “measures to promote and protect competition on U.S.-international routes if the need arises.” We recommend that carriers with concerns about potential future threats to international telecommunications competition raise them with the Commission now in response to this NPRM.


The First R&O immediately eliminates a significant number of reporting obligations presently required under Part 43 of the Commission's rules. Staff disclosed the following partial list of eliminated reporting obligations at the Open Meeting.

Quarterly international traffic and revenue reports for large carriers

  • Quarterly international traffic and revenue reports for foreign-affiliated switched resale carriers
  • Annual circuit addition report
  • The telegraph and toll division report
  • The need to file separate international traffic and revenue report for U.S. offshore points

While the Commission recognized in the First R&O the need to streamline and modernize its international reporting obligations, it also acknowledged that the data yielded from these reports continues to be a critical tool that the Commission uses for merger analysis, to deregulate markets when they become sufficiently competitive, to respond to potentially anticompetitive behavior, to gauge the effect of policies and decisions on competition, and for purposes of participating in policy discussions and bilateral meetings with other international regulatory agencies. With that in mind, the FNPRM accompanying the First R&O broadly seeks comment on the possible elimination and/or expansion of additional data collection obligations, including:

Whether to consolidate Sections 43.61 and 43.82 into one rule and have a consolidated filing manual for both annual circuit status reports and annual traffic/revenue reports

  • Whether to eliminate the use of billing codes for 43.61/43.82 reports and have data submitted on filing schedules
  • Whether to eliminate the requirement to report the number of telephone messages on traffic/revenue reports
  • Whether to eliminate the need to report private line services based on service speed
  • Whether to eliminate the need to report circuits based on service category
  • Whether to establish a $5 million annual threshold below which a filing entity need not report information for resold services
  • Whether to establish a $5 million annual threshold below which a carrier need not report miscellaneous services
  • Whether to require all filing entities to file a “basic service report” that would include certain core information about the filer
  • Whether the growth of interconnected VOIP for international phone calls and the use of alternative non-common carrier facilities for international services prevents the Commission from obtaining an accurate picture of the international telecommunications market, and whether data should be collected on such services
  • How should data be treated that is accompanied with a request for confidentiality

The streamlining of annual traffic/revenue reports (filed pursuant to section 43.61) and international circuits reports (filed pursuant to section 43.82), will eliminate the need for larger carriers to dedicate hundreds of man-hours every year to the collection and processing of data that has been determined to be no longer relevant to evaluating international telecommunications competition.

The Commission“s request for comment on whether the growth of VOIP for international voice service and whether expanded use of non-common carrier international facilities has hindered its ability to obtain an accurate picture of the international telecommunications market, however, suggests the agency will undertake a fulsome evaluation of how international traffic is delivered in 2011. To the extent the Commission concludes its present picture of the international telecommunications market is incomplete, it is possible that it will extend international data collection requirements to entities that currently do not file circuit status or traffic/revenue reports (e.g., interconnected VOIP providers).

Existing carriers that want to encourage elimination of onerous reporting obligations should consider filing comments on this issue. We also encourage interconnected-VOIP providers, as well as other entities involved in the operation of non-common carrier international facilities, to evaluate what changes they would need to make to their respective networks and data collection practices if asked by the Commission to report voice traffic volumes on a country-by-country basis for each calendar year. What are the specific challenges associated with collecting this type of traffic data? For example, some providers may have difficulty generating calendar year reports for call and minute volume for individual routes or capturing revenue and cost data on a route-by-route basis.

The Commission has not yet released the full text of its Notice of Proposed Rulemaking regarding the International Settlements Policy or the First Report and Order eliminating certain international reporting requirements and the companion Further Notice of Proposed Rulemaking proposing further elimination of certain rules and possible extension of reporting requirements to new classes of entities. The Commission has not yet announced comment and reply comment dates.


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This article was originally published by Bingham McCutchen LLP.