FCC addresses exchange rate woes Commission's benchmark rates aim to level the international playing field >BY CAROLYN HIRSCHMAN, Special to Telephony

More and cheaper international calls will result if the Federal Communications Commission's changes to agreements between domestic and foreign long-distance carriers pan out, say government and industry sources.

Long-distance companies hailed the agency's proposed benchmark rates, announced last month, as a step toward lowering the ceiling prices that U.S. carriers pay foreign peers for terminating their calls overseas. Related rules adopted in November give U.S.-based carriers more flexibility in negotiating rate agreements.

Together, the changes could save U.S. telephone companies about $5 billion, the amount they "overpaid" in 1995, according to the FCC. Telephone service in many foreign countries is controlled by monopolies run by either governments or private companies. This control gives them the power to determine how much U.S. carriers will pay to complete their U.S.-originated international calls.

As a result, charges are as much as four times higher than actual costs, and much of the profit from the $55 billion global market in international calling ends up overseas.

"Above-cost accounting rates have helped to artificially curtail the growth of international service by raising rates to consumers," Sprint said in a statement.

The FCC took action to establish a more level playing field for American carriers, whose customers generate $15 billion in international calls.

The new rules, to take effect in early 1997, permit flexibility in so-called accounting rate policies. Carriers can enter "more economically efficient" arrangements for terminating international calls.

AT&T and other telephone companies should be able to pay lower charges to foreign carriers, said an AT&T spokesman. As a result, consumer rates will drop and the volume of international calls will rise, he predicted.

However, the rules apply only to carriers in countries with competitive telephone markets-a relative rarity. Only a handful of countries will be immediately affected by the change, including Canada, the United Kingdom, Sweden and Chile. But an increasing number of countries are moving toward competition, said Kathryn O'Brien, an attorney at the FCC's International Bureau.

Although international rates are set privately, the FCC plays a role by suggesting how much U.S. carriers should pay foreign carriers for terminating international calls. The FCC suggested three ranges for new rates, depending on whether the country has a high-, middle- or low-income average, as defined by the World Bank.

The highest rates would be about 23¢ per minute; the lowest rates would be about 6¢ to 9¢. That compares with current guidelines, set in 1992, of 23¢ to 39¢ in Europe and 39¢ to 60¢ in Asia and the rest of the world.

The FCC is asking for public comment on how rates should be calculated, how long the transition period should last, what enforcement mechanisms are needed and whether benchmark rates can be used to address competitive problems in the U.S. market for international services. Final rates aren't expected until next spring.

GTE returns to court One week after GTE filed the telecom industry's first lawsuit against a state regulatory body's arbitration ruling, the carrier returned to court-this time in the state of Washington. GTE is challenging the latest arbitration order because it would require GTE to offer AT&T wholesale discounts of 18.8% and provide its network elements to AT&T at an effective discount of about 70%. GTE claims the prices are based on "a fantasy statistical model unrelated to GTE's network" rather than on cost, as the Telecommunications Reform Act of 1996 requires. Carrier realigns public policy advocates U S West is reshuffling its public policy group by assigning one executive to each of its major operating units. Its goal is to streamline decision-making so it can address the many legislative and regulatory issues raised by the Telecom Reform Act of 1996. Mark Roellig, currently vice president of regulatory law, will be the public policy point man for U S West Communications. Frank Eichler, now vice president of law and human resources, will do the same for U S West Media Group.