Local telcos in talks with AT&T, MCI on call rates

Telecommunications leader Philippine Long Distance Telephone Co. (PLDT) is currently in talks with major US carriers AT&T and MCI-WorldCom on the possibility of agreeing on the rates that will be charged the two giant telecom firms for calls from the United States to the Philippines.

A top PLDT official told The STAR that officials of MCI were in the country the other day as part of the continuing negotiations on termination rates.

The official said that arriving at a commercial agreement on settlement rates and payment of past dues to PLDT by both AT&T and MCI is necessary before PLDT starts unblocking the circuits and allowing calls from the two US giant carriers to pass through.

"In the case of MCI, we are currently developing a scheme to arrive at a net settlement rate considering that there is an exchange of traffic between us although the volume of calls from the US to here is bigger. As far as AT&T is concerned, I can say that we are already gaining ground," the official explained.

AT&T owes PLDT around $6 to $7 million Local telcos while MCI has around $3 to $4 million in unpaid termination charges. During the negotiations with AT&T and MCI, PLDT officials will also ask for prepayment with terms of 30 to 60 days, unlike before when payments were made only after nine months.

The National Telecommunications Commission (NTC) earlier revealed that the US Federal Communications Commission (FCC) has already agreed to allow American carriers to pay their Philippine counterparts in exchange for the NTC lifting its order which allowed Philippine telcos to stop servicing traffic from US carriers which refuse to pay higher Philippine termination fees.

It will be recalled that effective Feb. 1 this year, Philippine carriers including PLDT, Globe Telecom, Smart Communications, Digitel, BayanTel and SubicTel increased the termination rates for calls from the US to the Philippines to 12 cents a minute for landline calls and 16 cents for mobile calls. Before Feb. 1, the rates were at eight and 12 cents, respectively.

In retaliation, AT&T and WorldCom filed a case with the US FCC which subsequently found Philippine carriers guilty of "whipsawing" and ordered US carriers not to make any payments until the rates are rolled back to pre-Feb. 1 levels. The controversial order, issued on March 31, 2003 by FCC international bureau chief Donald Abelson, was questioned before the FCC en banc by the Philippine telcos.

However, the US carriers may have realized later on that the FCC order worked against them. Because the Philippine carriers started blocking the circuits, the American telcos had to use third party carriers and had to incur additional costs just to terminate their calls to the Philippines. On the one hand, the Philippine carriers even saved on costs by utilizing "baby bells" in the US who were charging lower rates.

The PLDT official said unlike before, the American carriers appear to be more willing to arrive at an agreement.

"But we would not want to open our circuits to them now because in the absence of an agreement on the rates, what are we going to charge them? While it is possible to come up with an interim agreement, we prefer that we finalize the commercial terms," the official added.

For his part, PLDT board member and chief legal counsel Ray Espinosa said that while they yet have to receive confirmation regarding the outcome of NTC head Armi Jane Borje and FCC’s Michael Powell’s meeting in Washington "the matter regarding the termination rates is still a private commercial one as far as PLDT is concerned.’

"US and Philippine telcos should still come to commercial agreement on rates. But hopefully, there will now be a more conducive atmosphere for negotiations to take place," he told The STAR.