FCC sees telecom challenge failing

The Federal Communications Commission (FCC), the United States telecoms regulator, believes any legal challenge to its move to impose cuts in fees paid between international phone companies will probably fail, a former high ranking official of the organisation says.

Last month, Hongkong Telecom and nine other Asian carriers began legal efforts to stop the FCC taking a unilateral decision to cut these so-called settlement rates.

'The view of the FCC's legal counsel is that there is a very good likelihood that any legal challenge would be turned back and not sustained,' former chief of the FCC's international bureau, Pete Cowhey, said.

Mr Cowhey, who left the FCC last month, was speaking at an Institute of International Research conference in Hong Kong.

Settlement rates are the fees international phone companies pay one another for handling each other's calls.

The FCC is proposing to go ahead with swingeing cuts in the settlement rates it pays to the rest of the world.

In the case of Hong Kong, it wants to cut the figure from about 37 US cents a minute to what it terms a benchmark of about 15 cents a minute by the start of 1999.

The US pays out much more than it receives in these settlement fees.

In the case of Hong Kong, the US sends nine times as much traffic into the SAR as it receives back. This is largely the result of discounted call-back services, which take advantage of cheap bulk capacity on offer from US carriers and reverse the routing of traffic.

Mr Cowhey said that if a legal challenge were successful, it probably would not be the end of the story, as the FCC move, which would help cut the US trade deficit, had widespread political support.

'The benchmarks are enormously popular in Congress, and legislative action is possible,' he said.

Hongkong Telecom director of regulatory affairs Keith Bernard, also addressing the conference, said the FCC had been subject to a similar legal challenge before from inside the US and it had lost.

'We have a very good case,' he said.

The basis of the legal challenge is that the FCC has no right to set itself up as the global policeman on settlement rates. The companies believe such decisions should be taken multinationally.