Regional carriers plan legal fight against unilateral US bid to set phone call

PUBLISHED : Wednesday, 24 September, 1997, 12:00am
UPDATED : Wednesday, 24 September, 1997, 12:00am

Hongkong Telecom and nine other Asian carriers are mounting a legal challenge to a bid by the United States Federal Communications Commission (FCC) to impose heavily reduced rates on overseas telephone calls throughout the world.

Lawyers for the 10 Asian companies - including Singapore Telecommunications (SingTel) and Japan's Kokusai Denshin Denwa (KDD) - are meeting in Washington to discuss the suit.

They are understood also to be considering a complaint to the disputes panel of the World Trade Organisation.

The seven other Asian telecommunications companies taking part in the action have not been named.

The FCC ruling - which would become legally binding in January 1999 - would slash benchmark settlement rates for calls between the US and other countries by as much as 65 per cent.

Settlement rates are the wholesale prices agreed between carriers for dealing with each other's international calls.

Overseas carriers had no say in setting the rates for US traffic and have until October 28 to appeal.

Asian carriers are angry the US regulatory body appears to be attempting to become a global telecommunications policeman and say it is exceeding its jurisdiction.

KDD president Tadashi Nishimoto said: 'The US has no right to set international accountancy rates for Japan.

'The matter [of Japan's accountancy rates] is obviously outside the jurisdiction of the US Government.' Asian carriers say Washington's argument on the issue of artificially inflated settlement rates should be addressed by an international body such as the International Telecommunications Union in Geneva, rather than by the FCC alone.

Hongkong Telecom's director of regulatory affairs, Keith Bernard, confirmed legal action was being considered and the group might be joined by South American telecommunications firms.

The FCC's move would produce substantial cost savings for big US international traffic carriers such as AT&T, MCI, Sprint and MFS WorldCom.

Companies such as Hongkong Telecom and SingTel, however, which rely on revenue from international calls to subsidise domestic networks, would be hit.

New FCC rates would range from 15.4 US cents per minute for countries with higher levels of GDP per capita to 23.5 cents for economies with the lowest GDP.

Hong Kong, Japan and Singapore are in the highest of four GDP categories and would have to charge at the lowest rate.

Hongkong Telecom International - Hong Kong's international gateway provider - says it would lose money every time it handled a call to the US for any of Hong Kong's other three operators - Hutchison Telecom, New T&T and New World Telephone.

Mr Bernard said this would mean losing 14 US cents a minute on every call.

At yesterday's Merrill Lynch Asia-Pacific Telecommunications Conference in Singapore, Mr Bernard said the legal challenge by Asian carriers would concentrate on two fronts.

It would contest whether the FCC had the jurisdiction to set rates that were revenues for foreign carriers, and it would challenge the ruling's factual basis, seeking to show that regardless of jurisdiction, the FCC had come to the wrong conclusion.

'We are looking for support from the Hong Kong Government. It is difficult for a carrier to conduct a one-to-one negotiation with a government,' Mr Bernard said.

A senior assistant director at the Office of the Telecommunications Authority, Au Man-ho, said the action was by a company and did not directly involve the Government.

'The Government's concern is to protect the interests of Hong Kong, so we will keep all options open,' he said.

If Hongkong Telecom lost its legal fight, the rates for the other local operators in Hong Kong might have to be reviewed.

Outgoing FCC chairman Reed Hundt said a multilateral solution would be best, but insisted a multilateral agency would come to the same conclusion as the US regulatory body.

'We would like to see more enlightenment,' Mr Bernard said.