RP telcos prepare for legal battle over US FCC ruling

The country’s leading telecommunications companies are preparing to take legal action against a recent order of the US Federal Communications Commission (FCC) finding them guilty of ‘whipsawing’ when they unilaterally raised last year the termination rates they charge American carriers for calls landing in the Philippines.

The US FCC en banc affirmed recently the findings of its international bureau that Philippine telecommunication companies engaged in ‘whipsawing’. Among those involved are the Philippine Long Distance Telephone Co. (PLDT), Globe Telecom, Bayan Telecommunications (Bayantel), Smart Communications Inc., Digital Telecommunications Phils. Inc. (Digitel), and Subic Telecom.

Whipsawing is defined by the FCC as a broad range of anti-competitive behavior by foreign carriers possessing market power in which the foreign firms exploit that market power in negotiating settlement rates with competing US telco carriers. If a US carrier does not pay the said cost settlement rate for terminating its international traffic, it will lose business to a US rival that is willing to pay the higher rate.

PLDT said its US counsels are now evaluating possible legal action that the company may take in the light of the US FCC order.

Smart Communications legal counsel Rogelio Quevedo, for his part, said they "will not issue any official position on the FCC order since they do not recognize the US jurisdiction over local telcos in the first place."

Digitel, meanwhile, maintains that it does not agree with the decision of the US FCC that Philippine telecommunication companies ‘whipsawed’ US carriers.

Benpres Holdings Corp., for its part, said the order has no effect on the operations of its subsidiary BayanTel since interim arrangements with US carriers remain in place

Local carriers said they will either appeal the order to the FCC itself or to the regular US courts. Globe Telecom, for its part, revealed that it is currently evaluating all options available to it and will take whatever legal action is necessary to protect its interests in this matter.

In March last year, the FCC’s international bureau headed by Donald Abelson ruled in favor of complainants AT&T and Worldcom and found Philippine carriers guilty of ‘whipsawing,’ thereby harming US consumers.

AT&T and Worldcom claimed that Philippine carriers conspired to unilaterally increase their termination rates, or the amount that they charge US telcos for calls landing in the Philippines, from eight to 12 cents for landline calls and from 12 to 16 cents for mobile calls effective Feb. 1 of last year.

Abelson also ordered US carriers to stop making payments to Philippine telcos until the rates are rolled back to pre-Feb. 1, 2003 levels.

Philippine carriers appealed the international bureau’s decision to the FCC en banc. They claimed there could have been no whipsawing because the Philippine market is competitive; the order violated the principles of comity and treaty obligations and was arbitrary and capricious; and that the bureau exceeded the bounds of its delegated authority.

The FCC, in its latest decision, said its bureau was correct in finding that there was market failure notwithstanding the existence of competing Philippine carriers. It pointed out that the fact that the parties have entered into interim agreements and service has been restored on the US- Philippines route does not moot the finding of the March 10, 2003 order that there was ‘whipsawing.’

"Further, it is not clear that the commercial dispute between US and Philippine carriers has been brought to conclusion. AT&T and MCI have interim agreements with the Philippine carriers. Any future final agreements are subject to continued negotiation," the FCC emphasized.