As this developed, local telcos with existing call settlement agreements with AT&T and WorldCom have already reportedly terminated their agreements due to the US carriers’ refusal to agree to the new Philippine termination/settlement rate of 12 cents per minute for calls terminating in Philippine landlines and 16 cents for cellular calls.
Settlement rates refer to the share of Philippine telcos of total revenues from international calls. From the US to Philippines call rate of around 40 cents a minute, local telcos were getting only between eight to 9.5 cents a minute. They have increased this to 12 cents a minute but AT&T and WorldCom filed a case with the US Federal Communications Commission (FCC) to oppose said increase.
The increase was made not only from calls originating from the US, but also from other countries. At least 15 US carriers, including Sprint, have already accepted the new rates.
"We see absolutely no reason why we should bow to the pressure of AT&T and MCI WorldCom and bring our rates down. We could have increased our rates to as much as 23 cents per minute but decided to just bring it up to 12 cents. This is obviously a reasonable and fair rate increase. But more importantly, we have to stand by our partners represented by over 100 of the biggest telcos in the world which have agreed to our rates," a top PLDT executive said.
One of the companies that have severed ties with AT&T is Gokongwei-owned Digital Telecommunications Phils. Inc. (Digitel). Sources said the company has already sent a letter to formally terminate its bilateral agreement with AT&T. Other telcos are expected to follow suit very soon.
Those whose agreements with AT&T and Worldcom expired Dec. 31, 2002 have not entered into a new agreement until the latter agree to the new rates.
In the case of BayanTel, the company hopes that with the increased rates, the local exchange (landline business) will finally turn around this year.
BayanTel chief finance officer Gary Olivar told The STAR that their settlement agreements with AT&T and WorldCom expired end of 2002. "We have not cut their switches for the sake of the national interest but we will insist that they pay the new rates if they send calls despite the lack of a new agreement," he said.
Local telcos believe that AT&T and WorldCom’s complaints have no strong legal basis. "This is all bullying tactics and harassment and we will not allow it," they said.
AT&T and WorldCom are said to be fast losing their share of the international long distance (ILD) market to RBOCs or regional bell operating companies in the US. Thus, in order to protect their bloated overhead expenses, the Big Bells like AT&T ‘bullied’ the small regional telcos by not allowing them the right to offer ILD. But recently, the US FCC allowed the RBOCs to engage in ILD traffic. And now, the RBOCs are fast eating up market share from the US telco giants.
"This seems to be another reason why AT&T and WorldCom are bullying the local telcos in the Philippines to drop their rates. Their business in the US is dying and they want to bring Filipino telcos to the grave with them," a PLDT source said.
On the other hand, these US-based RBOCs are quick to agree to the increased rates of the Filipino telcos and sources in the US claim that they are aggressively moving to gain market share from the big telcos which cannot decide what to do and in the meantime are pressuring the Philippine government to convince local telcos to bow to their demands.
Sprint, another major US telco, is also aggressively gaining ground against AT&T and WorldCom. Informed sources claim that more and more international traffic from the US is coming in through the Sprint network.