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FCC to study foreign mobile termination fees

WASHINGTON-The Federal Communications Commission last week launched an inquiry to assess the impact of high foreign mobile termination fees on American consumers, dragging the United States further into a controversy that domestic and international wireless carriers would rather see settled by overseas regulators and the marketplace.

FCC members indicated they too are reluctant to intervene, but said they need to gather additional data and study the mobile termination fee issue in order to determine whether any regulatory action is necessary.

“An NOI [Notice of Inquiry] is the best way the commission has to gather information in the most transparent and open process possible,” said FCC Commissioner Jonathan Adelstein, a Democrat. “And I cannot emphasize enough that this NOI into foreign mobile termination rates is simply that-an inquiry. I have not prejudged an outcome and, indeed, my preferred outcome would be that the market resolves itself. I hope the record ultimately bears this out, but want to make sure we keep an eye on it in the meantime.”

In recent years, the FCC has successfully lowered the cost to U.S. consumers of international calls completed on landline telephone networks abroad. As such, U.S. long-distance giants AT&T Corp. and MCI WorldCom Inc., as well as the United Kingdom’s Cable & Wireless plc and others, claim foreign mobile termination fees could be reduced if a similar regulatory framework were applied to international traffic terminated on mobile-phone networks.

Indeed, the mobile termination fee was highlighted by long-distance carriers in an FCC proceeding otherwise designed to streamline regulations governing the process whereby U.S. carriers negotiate commercial agreements to exchange wireline traffic between the United States and other nations.

Global giant Vodafone Group plc, 45-percent owner of No. 1 U.S.-based Verizon Wireless, and other foreign mobile-phone carriers have aggressively lobbied the FCC not to meddle in mobile termination fees.

The Cellular Telecommunications & Internet Association, representing American mobile-phone firms, has argued U.S. officials are not in a good position to determine the costs to foreign mobile-phone carriers of terminating calls from overseas. Moreover, U.S. mobile-phone carriers-including those with overseas operations-do not want the Bush administration to set a precedent that could come back to hurt them.

The European Union and other governmental bodies around the world have pressed mobile-phone carriers to lower fees wireless operators charge consumers for calls completed on their networks. Indeed, there are signs some foreign mobile termination fees are coming down.

Late last year, the Netherlands signaled mobile termination fees would be halved by the end of 2005, beginning with a 20-percent reduction on Jan. 1 this year.

In its October 2002 proposal, the FCC said the highest mobile termination rates are charged in France (28 cents), Haiti (22 cents), Panama (32 cents), the United Kingdom (22 cents) and Uruguay (33 cents). Wireless carriers argue mobile termination fees are cost-based and inherently higher than older networks operated by carriers that did not have to spend billions of dollars on licenses and network buildout.

What constitutes cost-based mobile termination fees is unclear. Some say the charge should be about a penny. Others, especially Vodafone, disagree. Vodafone has stated mobile termination fees in some European markets might be too low, and may be distorting pricing. In addition, Vodafone insists termination fees are not being inflated to subsidize other operational functions.

Some wireless carriers have taken aim at U.S. long-distance carriers, claiming the latter are adding their own surcharges to bills and not passing any cost-savings to their customers.

High foreign mobile termination fees are mostly a problem for rank-and-file U.S. consumers who make international calls and not a major matter for the U.S. wireless industry.

In contrast, the controversy is huge in Europe, which like Japan, Europe, Japan, South America, the Caribbean and elsewhere, has a calling-party-pays regime. Not so in the U.S., where mobile subscribers pay for calls others make to them.

With mobile phone penetration rising in Europe and around the world, more and more U.S. international calls will be terminated on foreign wireless networks in the future. That is one reason U.S. policymakers have decided to keep an eye on the issue.

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