Telstra Corp., Australia's government-owned telephone company, said it asked a US Appeals Court to review a government decision that forces international carriers to pay the full cost of Internet calls to and from the US.
In an August decision, the Federal Communications Commission approved benchmark fees that limit the settlement payments US carriers make to foreign companies for international telephone traffic. Telstra said foreign carriers are subsidizing telephone traffic originating in the U.S. by about US$300 million.
The commission "totally failed to investigate the above-cost fees that US carriers charge foreign carriers for international capacity needed to service the burgeoning growth in Internet traffic," Telstra said.
Telstra wants US carriers to adopt the traditional payment sharing arrangements for voice service, where US carriers pay half the cost of calls to and from the US, while foreign carriers pay the other half. The arrangement forcing foreign carriers to pay the full cost of the calls arose because international Internet traffic was previously almost 100 percent to the US., Telstra said. Now, about 30% of the U.S.-Australia Internet traffic originates in the U.S., leaving Telstra with a US$15 million bill, the company claims.
"US carriers need to recognize the Internet is not a one-way street," said John Stanton, Telstra regional director for the Americas.
A spokesman for Australia's Communications Minister Richard Alston said he would welcome lower consumer costs to access the Internet. While he said other countries are concerned about the issue, Telstra is the only company involved in legal action.
One-third of Telstra will be sold to the public in November for about A$14.2 billion (US$8.6 billion).

The Federal Communications Commission has dismissed complaints from Australia's top international carrier that its unilateral rewriting of international settlement rates is unfair in excluding the cost of carrying Internet traffic.
In Telstra's submission to US courts, the Australian company said the US should take into account the burden to overseas operators of supplying capacity to transport Internet traffic - the majority of which is inbound to the US. But FCC officials said Telstra is wrong to link the two issues.
Telstra is one of a clutch of mainly Asian carriers, including Japan's KDD, Singapore Telecom and PLDT from the Philippines, which have lodged appeals with a Washington DC court against the FCC's August decision to impose settlement rates from 1999 onwards. The new rates, which one telco pays to another to terminate its international calls, would start at 15 cents a minute for wealthy countries, undercutting the existing average by about 60%.
Unlike its Asian colleagues, Telstra's main complaint, repeated at an accounting rate conference in Singapore last week, is not the level - it shares the FCC's view that the International Telecom Union has not done enough to bring rates down - but the scope.
Given that the new benchmarks are designed to reflect costs, Telstra said, they should be extended to cover the fact that Asian carriers must pay the entire cost of connectivity to the US - still the location of most Internet sites - themselves, giving US users a $300 million free ride in the opposite direction.
But FCC officials said the question was a distraction from the main point: that promises, by the ITU and others, to bring settlement rates down had not been kept. "[The settlement rate issue] is the real problem, and people should address that," one staffer commented. "We're not saying whether we agree or disagree with Telstra [on the Internet connectivity question]."
According to another official, settlement rates, which only apply to switched traffic, and the whole debate about how to grow the Internet were "two separate issues. We weren't even thinking about the Internet when we put the proposal out," he said. "The Internet isn't something we're looking to regulate anyway. The FCC's position is that it ought to be left to the private sector."
A Telstra spokeswoman said one reason for the court case was precisely to get the issue onto the agenda. "We're saying to the court that it should make the FCC review this," she said.

The FCC is discriminating in favor of US operators by forcing down the cost to US carriers of international calls while washing its hands of the US's "free ride" on the international Internet infrastructure, according to Australia's number one carrier Telstra.
The telco's decision to challenge the FCC's recent order mandating low settlement rates, the payment by one carrier to another for landing an international call, stems from the fact that although nowadays Internet traffic flows both in and out of the US, for historical reasons the cost of lines is often borne by the outsiders, said Telstra's regional director for the Americas, John Stanton.
"We find it somewhat strange that the FCC is ignoring the Internet, just as the demarcation liines between the PSTN and the Internet are blurring," he said. "We've got voice migration. We've got fax and email traffic. So if the FCC wants to address the question of subsidies in the telecoms networks then that has to include the Internet - but instead they're saying, we will impose our views on the world, but we will ignore the fact that traffic is migrating and the implications that brings."
The history of the Net was that initially, all the content had been in the US, so carriers in Australia and elsewhere were happy to pay for lines, Stanton said. "But the Web is globalized now. When US Internet users download content, they could just as easily be getting it from Australia or Europe as from the US, but as it stands they're getting a free ride. The model we've had up to now is wrong, and the financing ought to reflect the flow of traffic just as it does on accounting rates and the PSTN."
He stressed, though, that as far as settlement rates for voice traffic were concerned, Telstra was right behind the FCC. "The FCC has addressed the question of international settlement rates, the fact that they are above cost, and we say fair enough to that. We're a net outbound country as well, as is the UK, and we support the thrust of what the FCC is doing."
On this point Telstra's stance on settlement rates differs from that of the other companies contesting the FCC's order in a Washington court , Philippines Long-Distance Telecom, SingTel and KDD among them.
They contend that the FCC has no right unilaterally to set settlement rates, although Australian sources suggested that Telstra had been trying to persuade them to translate their private support for its position into public condemnation.
However, Telstra has joined with KDD, Hong Kong Telecom and Korea's Dacom to form the Asia Pacific Internet Community (APIC), which intends to explore how Asia can reduce its dependence on the US as a transit point and to set what the group called "more equitable and commercially sustainable" arrangements for carrying Internet traffic.
The core problem was that the FCC was being one-sided, Stanton said, and was trying to brush differing views put to it under the carpet. "We have made detailed comments, and we've explained our reasoning to them face to face. Yet in all the 151 pages of the FCC order there's absolutely no mention of the discussions anywhere, or even a recognition that they took place at all. If they have an alternative way of proceeding, they should have expressed it."
There was no reason, he said, why a genuinely cost-based model for Internet traffic couldn't exist. "We have got high net penetration. There's a lot of capacity we are paying for. And it's just us that is paying, even though the traffic goes both ways. There's no reason why the cost based rules of the PSTN, where we each pay half way, shouldn't apply."
FCC officials said earlier this week that the Internet was a "separate issue", adding: "The Internet isn't something we're looking to regulate anyway. The FCC's position is that it ought to be left to the private sector."
Meanwhile, the August order mandating US carriers to negotiate voice traffic settlement rates of 15 cents a minute or less for wealthy countries by 1999, and of under 23 cents a minute for the poorest nations, remains intact. "We will enforce the benchmarks," an official said, while avoiding specifics of just how that would be done.