Market Entry and Regulation of Foreign-affiliated Entities

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 63

[IB Docket No. 95-22, FCC 95-475]

Market Entry and Regulation of Foreign-affiliated Entities

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: This Report and Order contains information collections subject

to the Paperwork Reduction Act of 1995 (PRA). It has been submitted to

the Office of Management and Budget (OMB) for review under section

3507(d) of the PRA, OMB, the general public, and other Federal agencies

are invited to comment on the information collections contained in this

proceeding

On November 28, 1995, the Federal Communications Commission adopted

a Report and Order in response to a Notice of Proposed Rulemaking which

the Commission adopted on February 7, 1995, that establishes a market

entry standard for foreign carriers seeking to provide basic

international telecommunications services under section 214 of the

Communications Act of 1934, a amended (``the Act''). The Report and

Order also establishes a standard by which the Commission will review

whether it is in the public interest to permit foreign investment in

licensees of common carrier radio facilities in excess of the

benchmarks contained in section 310(b)(4) of the Act. The Report and

Order was adopted. The Report and Order makes additional changes to the

Commission's regulations of international common carriers.

In reviewing applicants for international section 214 authority

filed by a foreign carrier or its U.S. affiliate (collectively

``foreign carrier''), the Commission will examine, as an important part

of its public interest analysis, whether competitive opportunities

exist for U.S. carriers in destination markets in which the foreign

carrier has market power. The Commission will apply a similar analysis

in reviewing indirect foreign investment in licensees of common carrier

radio facilities under section 310(b)(4), but it will limit its review

to the ``home market'' of the foreign investor. In addition to

considering effective competitive opportunities, the Commission will

examine additional public interest factors that might weigh in favor

of, or against, approving the foreign carrier's international section

214 application, or permitting the indirect foreign investment in a

common carrier radio licensee to exceed the section 310(b)(4)

benchmark.

In taking this action, the Commission's primary goal is to advance

the public interest by promoting effective competition in the U.S.

telecommunications services market, particularly the market for

international services. The action also reaffirms the Commission's

goals to prevent anticompetitive conduct in the provisions of

international services or facilities, and to encourage foreign

governments to open their communications markets.

EFFECTIVE DATE: The rules adopted in this Report and Order will become

effective January 29, 1996. However, if OMB has not approved the

information collections contained in these rules by this date, the

Commission will publish a document to delay the effective date of these

rules.

Written comments by the public on the information collections are

due January 10, 1996.

ADDRESSES: Submit all comments concerning the Paperwork Reduction Act

to Dorothy Conway, Federal Communications Commission, Room 234, 1919 M

Street, NW., Washington, DC 20554, or via the Internet to [email protected]

gov, and to Timothy Fain, OMB Desk Officer, 10236 NEOB, 725-17th

Street, NW., Washington, DC 20503 or via the Internet to fain_

[email protected].

FOR FURTHER INFORMATION CONTACT: For additional information concerning

the information collections contained in this Report and Order contact

Dorothy Conway at 202-418-0217, or via the Internet as [email protected].

For further information on the Report and Order contact: Susan

O'Connell, Attorney, International Bureau, (202) 418-1484, Ken

Schagrin, Attorney, International Bureau, (202) 418-1407, or Robert

McDonald, Attorney, International Bureau, (202) 418-1467.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report

and Order adopted on November 28, 1995, and released November 30, 1995

(FCC 95-475). The full text of this Report and Order is available for

inspection and copying during normal hours in the FCC Reference Center

(Room 239), 1919 M St., NW., Washington, DC. The complete text also may

be purchased from the Commission's Copy contractor, International

Transcription Service, Inc., (202) 857-3800, 2100 M Street, NW., Suite

140, Washington, DC 20037

Paperwork Reduction Act

The Commission, as part of its continuing effort to reduce

paperwork burdens, invites the general public and the Office of

Management and Budget (OMB) to comment on the information collections

contained in this Report and Order. Comments should address: (a)

Whether the collection of information is necessary for the proper

performance of the functions of the Commission, including whether the

information shall have practical utility; (b) the accuracy of the

Commission's burden estimates; (c) ways to enhance the quality,

utility, and clarity of the information collected; and (d) ways to

minimize the burden of the collection of information on the

respondents, including the use of automated collection techniques or

other forms of information technology.

This Report and Order contains information collection requirements.

Written comments by the public on the information collections are due

January 10, 1996. Written comments must be submitted by OMB on the

information collections on or before January 15, 1996.

OMB Approval Number: New Collection.

Title: Market Entry and Regulation of Foreign-affiliated Carriers.

Type of Review: New collection.

Respondents: Business or other for-profit.

Number of Respondents: 431 per year.

Estimated Time Per Response: 9.5 hours.

Total Annual Burden: 4127 hours.

Needs and Uses: The collections of information for which approval

is here sought are contained in amendments to part 63 and in the Report

and Order adopting such amendments. These information collections are

authorized and necessary for the Commission to carry out its statutory

mandate, pursuant to sections 4, 214, 219, 303(r) and 403 of the

Communications Act, 47 U.S.C. 154, 214, 219, 303(r) and 403.

The information collections contained in amendments to Secs. 63.01

(r) and (s) and 63.11 and 63.17(b)(4) of the Commission's rules are

necessary to determine whether, and under what conditions, the public

interest, convenience, and necessity will be served by authorizing

particular foreign carriers, or their U.S. affiliates, to provide

international common carrier services between the United States and

countries where these foreign carriers have market power, i.e., the

ability to

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discriminate against unaffiliated U.S. carriers through control of

``bottleneck services or facilities'' on the foreign end of a U.S.

international route. ``Bottleneck services or facilities'' are those

that are necessary to terminate U.S. international traffic.

Second, the information collections contained in amendments to

Sec. 63.10 of the Commission's rules are necessary for the Commission

to maintain effective oversight of U.S. carriers that are affiliated

with, or involved in certain co-marketing or similar arrangements with,

foreign carriers that have market power.

Third, the information collections contained in amendments to

Sec. 63.01(k) of the Commission's rules are necessary to protect the

U.S. public interest in cost-based international telecommunications

services.

Fourth, the information collections under section 310(b)(4) of the

Act are necessary to determine, under that section, whether a greater

than 25 percent indirect foreign ownership interest in a U.S. common

carrier radio licensee would be inconsistent with the public interest.

The Order adopts a requirement that section 214 applicants amend

their pending applications to the extent they are inconsistent with the

new rules. Applications pending as of the effective date of the new

rules must be amended within thirty days of the effective date of the

new rules. This information will be used to process pending

applications under the Commission's public interest standard enunciated

in the Order.

The information will be used by the Commission staff in carrying

out its duties under the Communications Act. Common carrier applicants

providing or seeking to provide international service under part 63 of

the Commission's rules must comply with our rules.

Summary of Report and Order

In response to the Notice of Proposed Rulemaking (60 FR 11644

(March 2, 1995)), the Commission adopted a decision to further the goal

of promoting effective competition in the U.S. telecommunications

market, particularly the market for international services. In order to

promote effective competition in this market, the Commission's new

rules are designed to prevent anticompetitive conduct in the provision

of international services or facilities, and to encourage foreign

governments to open their communications markets.

With this Report and Order, the Commission adopts standards for

regulating the entry of foreign carriers into the United States market

for international telecommunications services. This Report and Order

explicitly sets forth the entry criteria necessary to promote effective

competition in the U.S. market for these services, including global,

seamless network services. As an important part of the Commission's

overall public interest analysis under Section 214 of the

Communications Act, it will examine whether effective competitive

opportunities exist for U.S. carriers in the destination markets of

foreign carriers seeking to enter the U.S. international services

market either directly or through an affiliation with a new or existing

U.S. carrier.

Similarly, in deciding whether it is in the public interest to

permit indirect foreign investment in licensees of common carrier

wireless facilities in excess of the benchmarks contained in section

310(b)(4) of the Act, the Commission will examine whether foreign

markets offer effective competitive opportunities to U.S. entities.

This approach is fully consistent not only with the Commission's

existing jurisdiction under section 310, but also with

telecommunications bills currently pending in Congress which would

specifically incorporate an effective competitive opportunities

analysis as part of a section 310(b)(4) determination.

The New Entry Standard

The Commission's effective competitive opportunities analysis under

section 214 of the Act will focus first on whether U.S. carriers have

the legal right to provide international basic services in the

destination markets where the foreign applicant has market power. If

there are no legal barriers to entry, the Commission also will consider

the practical ability for U.S. carriers to compete in those markets.

The Commission considers several factors essential to viable

competition. These factors include: First, whether there are reasonable

and nondiscriminatory terms and conditions for interconnection to a

foreign carrier's facilities; second, whether there are competitive

safeguards to protect against anticompetitive conduct; and third,

whether there is an effective regulatory framework to implement and

enforce these conditions and safeguards. The Commission will apply the

effective competitive opportunities analysis to foreign carriers

seeking to provide facilities-based or resale service in the United

States. The public interest analysis under section 214 also will

continue to consider additional public interest factors, including the

general significance of the proposed entry to the promotion of

competition in the U.S. communications services market, the presence of

cost-based accounting rates, as well as national security, law

enforcement issues, foreign policy, or trade concerns raised by the

Executive Branch.

The analysis under section 310 is similar to that under section

214, but with some important distinctions. Most notably, the

Commission's determination will focus on the foreign investor's ``home

market'', and will be applied to the specific service in which the

foreign entity seeks to invest in the United States, e.g., cellular

service. If the services in the U.S. and home markets are not precisely

matched, the Commission will use the most closely substitutable

wireless service in the home market, as determined from the consumer's

perspective. The Commission also will examine additional public

interest factors that might weigh in favor of, or against, allowing a

foreign investor to exceed the 25 percent benchmark contained in

section 310(b)(4). In determining a foreign investor's ``home market'',

the Commission will identify (1) the country of its incorporation,

organization, or charter; (2) the nationality of all investment

principals, officers, and directors; (3) the country in which its world

headquarters is located; (4) the country in which the majority of its

tangible property, including production, transmission, billing,

information, and control facilities, is located; and (5) the country

from which it derives the greatest sales and revenues from its

operations. If all five of these factors indicate that the same country

should be considered to be the entity's home market, it will be

presumed to be so, subject only to rebuttal based on clear and

convincing evidence to the contrary. If these five factors yield

inconsistent results, however, the Commission will balance them, as

well as any other information that is particularly relevant to the

case, to determine the appropriate home market under the totality of

the circumstances.

Affiliation

For purposes of implementing this entry standard, the Commission

adopts a new definition of ``affiliation''. It now defines affiliation

as an ownership interest of greater than 25 percent, or a controlling

interest at any level, in a U.S. carrier by a foreign carrier. The

Commission also will apply its effective competitive opportunities

analysis to foreign carrier investments of 25 percent or less if the

investment presents a significant potential impact on competition in

the U.S. market for

[[Page 67334]]

international telecommunications services. In addition, the Commission

will aggregate investments of two or more foreign carriers where they

are likely to act in concert and the combined interests either exceed

25 percent or constitute a controlling interest.

This definition of affiliation will apply both for purposes of

determining when to apply the effective competitive opportunities

analysis and of determining the regulatory status of all affiliated

carriers, including U.S.-based carriers that have a greater than 25

percent investment, or a controlling interest, in a foreign carrier.

The Commission also is adopting a prior notification and approval

requirement to determine whether a particular investment in a U.S.

carrier by a foreign carrier constitutes an affiliation with that

foreign carrier, and to determine whether the investment serves the

public interest, convenience and necessity. A U.S. international

carrier is required to notify the Commission 60 days prior to

acquisition by a foreign carrier of a 10 percent or greater interest in

that U.S. carrier.

Amendment of Pending Applications

The Report and Order adopts a requirement that section 214

applicants amend their pending applications to the extent they are

inconsistent with the new rules. The Report and Order requires that

applications pending as of the effective date of the new rules be

amended within thirty days of the effective date of the new rules.

Dominant Carrier and Other Operating Safeguards

This Report and Order also modifies the safeguards that apply to

foreign-affiliated carriers regulated as dominant under Sec. 63.10 of

the Commission's rules, 47 CFR 63.10, as amended in the Report and

Order. The modified dominant carrier safeguards also will apply to U.S.

carriers on particular routes where they are engaged in a co-marketing

or other arrangement with a dominant foreign carrier, and such

arrangement presents a substantial risk of anticompetitive effects in

the U.S. market for international telecommunications services.

The Commission has modified these safeguards to reduce regulatory

burdens while maintaining effective oversight over foreign-affiliated

or allied carriers. It allows dominant, foreign-affiliated or allied

carriers to file tariffs on 14 days notice instead of the previous 45

days and relieves those carriers of the burden of filing cost support

information. It also requires that a dominant, foreign-affiliated or

allied carrier maintain complete records of the provisioning and

maintenance of service and facilities it procures from its foreign

carrier affiliate or ally. The Order maintains the existing requirement

that a dominant foreign-affiliated carrier (and, under the new rules, a

dominant, allied carrier) receive specific section 214 authorization

before adding or removing circuits on routes where it is regulated as

dominant, and file quarterly traffic and revenue reports.

The Order also conforms the Commission's ``no special concessions''

prohibition and ``no exclusive arrangements'' condition that have

regularly been placed in section 214 authorizations and applies a ``no

special concessions'' prohibition to all U.S. international carriers.

This means that no U.S. carrier is allowed to accept a special

concession directly or indirectly from any foreign carrier with respect

to traffic or revenue flows between the United States and any foreign

country for which the U.S. carrier is authorized to provide service.

Additional Matters

The Order additionally adopts new rules relating to the provision

of international switched basic service via facilities-based and resold

private lines. These rules apply to all U.S. carriers, both those that

are affiliated and unaffiliated with a foreign carrier. And, it adopts

a modified definition of a U.S. international facilities-based carrier.

Final Regulatory Flexibility Act Analysis

Pursuant to section 603 of Title 5, United States Code, 5 U.S.C.

603, an initial Regulatory Flexibility Analysis was incorporated in the

Notice of Proposed Rulemaking in CC Docket No. 95-22. Written comments

on the proposals in the Notice, including the Regulatory Flexibility

Analysis, were requested.

A. Need and Purpose of this Action

This rulemaking proceeding establishes an effective competitive

opportunities analysis as an important public interest factor in the

Commission's overall public interest analysis of applications filed by

foreign carriers to enter the U.S. international telecommunications

market pursuant to section 214 of the Communications Act. It also

adopts a similar analysis for determining whether the public interest

would be disserved by permitting indirect foreign investment in common

carrier licensees in excess of the benchmarks contained in section

310(b)(4) of the Act. In addition, this proceeding modifies existing

rules and policies relating to the definition of a U.S. international

facilities-based carrier, the regulation of certain dominant carriers

in the provision of international service, and other rules governing

the provision of switched services over international private lines.

B. Issues Raised by the Public Comments in Response to the Regulatory

Flexibility Analysis

There were no comments submitted in response to the Regulatory

Flexibility Analysis. The Notice of Proposed Rulemaking offered a

number of alternatives for each issue raised. The Commission responded

to commenters' concerns and significantly altered the proposed market

entry standard. The new approach under section 214 is designed to focus

on foreign carrier entry that poses a substantial risk of

anticompetitive effects in the provision of international services. In

addition, the Commission is adopting a standard that is clear and

administratively feasible.

C. Significant Alternatives Considered

The Commission has attempted to balance all the commenters'

concerns with our public interest mandate under the Act in order to

adopt a clear and administratively feasible approach to market entry by

foreign carriers. Instead of examining whether effective competitive

opportunities exist for U.S. carriers in every primary market where a

foreign carrier operates, regardless of whether the foreign carrier

seeks to serve such market, the Commission will focus its analysis

under section 214 only on destination countries where the foreign

carrier holds market power. Our route-by-route approach reduces the

regulatory burden on all U.S. carriers seeking an affiliation with a

foreign carrier. The Commission has not adopted the suggestion of some

parties to exempt small U.S. carriers from the market entry rules.

Whether a dominant foreign carrier makes a significant investment in a

small U.S. carrier or a large one, there is a substantial risk of

anticompetitive effects. Therefore, the Commission declines to exempt

small U.S. carriers from these rules.

The Commission proposed to modify its standard for determining when

a U.S. carrier is affiliated with a foreign carrier for purposes of

both the market entry analysis and post-entry regulation. The

Commission considered investment levels ranging from greater than ten

percent to controlling interests at any level. It also considered

adopting an affiliation standard based on: The dollar amount of the

investment; the percentage of the investment; or the

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amount of traffic carried by the U.S. carrier in correspondence with

the foreign carrier. The Commission additionally considered adopting a

reciprocal affiliation standard. Based on the record, the Commission

has modified its definition of affiliation and will now consider

affiliated any U.S. carrier with either: (1) A greater than 25 percent

interest (or a controlling interest at any level) held by a foreign

carrier; or (2) a greater than 25 percent interest in, or control of, a

foreign carrier.

The Commission will apply its effective competitive opportunities

analysis to the first category of affiliated U.S. carriers on routes

where the affiliated foreign carrier has market powers in the

destination country. It will apply its dominant carrier safeguards to

all affiliated U.S. carriers on routes where the affiliated foreign

carrier has market power. These safeguards will also now apply to U.S.

carriers on routes for which they have formed a non-exclusive co-

marketing arrangement or other joint venture with a dominant foreign

carrier, where such arrangements present a substantial risk of

anticompetitive effects.

The Commission has eliminated the requirement that dominant,

foreign-affiliated carriers file cost support with their tariffs. This

will reduce burdensome filing requirements. The Commission also adopts

its proposed 14-day notice period (currently 45 days) for the filing of

international service tariffs by dominant, foreign-affiliated carriers.

The Commission adopts a new recordkeeping requirement that a dominant,

foreign-affiliated carrier maintain complete records of the

provisioning and maintenance of network facilities and services it

procures from its foreign affiliate or ally. The Commission found that

although this requirement is a minor burden, its benefit in preventing

anticompetitive conduct outweighs such a burden. The Commission adopts

new rules related to the provision of switched services using

international private lines. These rules will enhance opportunities for

U.S. carriers to serve U.S. consumers more efficiently. The Commission

also adopts a definition of ``U.S. international facilities-based

carrier'' that may facilitate the ability of smaller U.S. carriers to

obtain operating agreements.

Ordering clauses

Accordingly, it is ordered that the policies, rules, and

requirements adopted herein, except those needing OMB approval, will

become effective January 29, 1996.

Matters subject to OMB approval, pursuant to the Paperwork

Reduction Act of 1995, Public Law 104-13, will become effective upon

such approval.

This action is taken pursuant to sections 4, 214, 219, 303(r) and

403 of the Communications Act of 1934, as amended, 47 U.S.C. 154, 214,

219, 303(r) and 403.

It is further ordered That this proceeding is hereby terminated.

List of Subjects in 47 CFR Part 63

Communications common carriers, Reporting and recordkeeping

requirements, Telegraph, Telephone.

Federal Communications Commission,

LaVera Marshall,

Acting Secretary.

Final Rules

Part 63 of Title 47 of the Code of Federal Regulations is amended

as follows:

PART 63--EXTENSION OF LINES AND DISCONTINUANCE, REDUCTION, OUTAGE

AND IMPAIRMENT OF SERVICE BY COMMON CARRIERS; AND GRANTS OF

RECOGNIZED PRIVATE OPERATING AGENCY STATUS

1.The authority citation for part 63 continues to read as follows:

Authority: Secs. 1, 4(i), 4(j), 201-205, 218, and 403 of the

Communications Act of 1934, as amended, and sec. 613 of the Cable

Communications Policy Act of 1984, 47 U.S.C. secs. 151, 154(i),

15(j), 201-205, 218, 403, and 533 unless otherwise noted.

2. Section 63.01 is amended by revising paragraphs (k)(5) and (r),

redesignating paragraph (k)(6) as paragraph (k)(7), and adding new

paragraphs (k)(6), (s) and Notes 1 through 4 to paragraph (r) to read

as follows:

Sec. 63.01 Contents of applications.

* * * * *

(k) * * *

(5) The procedures set forth in this section are subject to

Commission policies on resale of international private lines in CC

Docket No. 90-337 as amended in IB Docket No. 95-22. If proposed

facilities are to be acquired through the resale of private lines for

the purpose of providing international switched basic services,

applicant shall demonstrate for each country to which it seeks to

provide such services that the country affords resale opportunities

equivalent to those available under U.S. law. In this regard, applicant

shall:

(i) State whether the Commission has previously determined that

equivalent resale opportunities exist between the United States and the

subject country; or

(ii) Include other evidence demonstrating that equivalent resale

opportunities exist between the United States and the subject country,

including any relevant bilateral agreements between the administrations

involved. Parties must demonstrate that the foreign country at the

other end of the private line provides U.S. carriers with:

(A) The legal right to resell international private lines,

interconnected at both ends, for the provision of switched services;

(B) Nondiscriminatory charges, terms and conditions for

interconnection to foreign domestic carrier facilities for termination

and origination of international services, with adequate means of

enforcement;

(C) Competitive safeguards to protect against anticompetitive and

discriminatory practices affecting private line resale; and

(D) Fair and transparent regulatory procedures, including

separation between the regulator and operator of international

facilities-based services.

(6) Except as otherwise provided in this paragraph, any carrier

authorized under this part to acquire and operate international private

line facilities other than through resale shall, for each country for

which it seeks to provide switched basic service over its authorized

private lines facilities, request such authority by formal application.

Such application shall be accompanied by a demonstration that that

country affords resale opportunities equivalent to those available

under U.S. law. In this regard, applicant shall include the information

required by paragraph (k)(5) of this section.

(i) No formal application is required under this paragraph in

circumstances where the carrier's previously authorized private line

facility is interconnected to the public switched network only on one

end--either the U.S. or the foreign end--and where the carrier is not

operating the facility in correspondence with a carrier that directly

or indirectly owns the private line facility in the foreign country at

the other end of the private line.

* * * * *

(r) A certification as to whether or not the applicant is, or has

an affiliation with, a foreign carrier.

(1) The certification shall state with specificity each foreign

country in which the applicant is, or has an affiliation with, a

foreign carrier. For purposes of this certification:

(i) Affiliation is defined to include;

(A) A greater than 25% ownership of capital stock, or controlling

interest at

[[Page 67336]]

any level, by the applicant, or by any entity that directly or

indirectly controls or is controlled by it, or that is under direct or

indirect common control with it, in a foreign carrier or in any entity

that directly or indirectly controls a foreign carrier; or

(B) A greater than 25% ownership of capital stock, or controlling

interest at any level, in the applicant by a foreign carrier, or by any

entity that directly or indirectly controls or is controlled by a

foreign carrier, or that is under direct or indirect common control

with a foreign carrier; or by two or more foreign carriers investing in

the applicant in the same manner in circumstances where the foreign

carriers are parties to, or the beneficiaries of, a contractual

relation (e.g., a joint venture or market alliance) affecting the

provision or marketing of basic international telecommunications

services in the United States. A U.S. carrier also will be considered

to be affiliated with a foreign carrier where the foreign carrier

controls, is controlled by, or is under common control with a second

foreign carrier already found to be affiliated with that U.S. carrier

under this section.

(ii) Foreign carrier is defined as any entity that is authorized

within a foreign country to engage in the provision of international

telecommunications services offered to the public in that country

within the meaning of the International Telecommunication Regulations,

see Final Acts of the World Administrative Telegraph and Telephone

Conference, Melbourne, 1988 (WATTC-88), Art 1.

(2) In support of the required certification, each applicant shall

also provide the name, address, citizenship and principal businesses of

its 10 percent or greater direct and indirect shareholders or other

equity holders and identify any interlocking directorates.

(3) Each applicant that proposes to acquire facilities through the

resale of the international switched or private line services of

another U.S. carrier shall additionally certify as to whether or not

the applicant has an affiliation with the U.S. carrier(s) whose

facilities-based service(s) the applicant proposes to resell (either

directly or indirectly through the resale of another reseller's

service). For purposes of this paragraph, affiliation is defined as in

paragraph (r)(1)(i) of this section, except that the phrase ``U.S.

facilities-based international carrier'' shall be substituted for the

phrase ``foreign carrier.''

(4) Each applicant that certifies under this section that it has an

affiliation with a foreign carrier and that proposes to acquire

facilities through the resale of the international private line

services of another U.S. carrier shall additionally certify as to

whether or not the affiliated foreign carrier owns or controls

telecommunications facilities in the particular country(ies) to which

the applicant proposes to provide service (i.e., the destination

country(ies)). For purposes of this paragraph, telecommunication

facilities are defined as the underlying telecommunications transport

means, including intercity and local access facilities, used by a

foreign carrier to provide international telecommunications services

offered to the public.

(5) Each applicant and carrier authorized to provide international

communications service under this part is responsible for the

continuing accuracy of the certifications required by paragraphs (r)(3)

and (4) of this section. Whenever the substance of any such

certification is no longer accurate, the applicant/carrier shall as

promptly as possible and in any event within 30 days file with the

Secretary in duplicate a corrected certification referencing the FCC

File No. under which the original certification was provided. This

information may be used by the Commission to determine whether a change

in regulatory status may be warranted under Sec. 63.10.

(6) Each applicant that certifies that it is, or that it has an

affiliation, a foreign carrier, as defined in paragraphs (r)(1)(i)(B)

and (r)(1)(ii) of this section, in a named foreign country and that

desires to operate as a U.S. facilities-based international carrier to

that country from the United States shall provide information in its

application filed under this part to demonstrate that either:

(i) The named foreign country (i.e., the destination foreign

country) provides effective competitive opportunities to U.S. carriers

to compete in that country's international facilities-based market; or

(ii) Its affiliated foreign carrier does not have the ability to

discriminate against unaffiliated U.S. international carriers through

control of bottleneck services or facilities in the destination

country.

(A) The demonstration specified by paragraph (r)(6)(i) of this

section should address the following factors:

(1) The legal, or de jure, ability of U.S. carriers to enter the

foreign market and provide facilities-based international services, in

particular, international message telephone service (IMTS);

(2) Whether there exist reasonable and nondiscriminatory charges,

terms and conditions for interconnection to a foreign carrier's

domestic facilities for termination and origination of international

services;

(3) Whether competitive safeguards exist in the foreign country to

protect against anticompetitive practices, including safeguards such

as:

(i) Existence of cost-allocation rules in the foreign country to

prevent cross-subsidization;

(ii) Timely and nondiscriminatory disclosure of technical

information needed to use, or interconnect with, carriers' facilities;

(iii) Protection of carrier and customer proprietary information;

and

(4) Whether there is an effective regulatory framework in the

foreign country to develop, implement and enforce legal requirements,

interconnection arrangements and other safeguards; and

(5) Any other factors the applicant deems relevant to its

demonstration.

(B) The demonstration specified in paragraph (r)(6)(ii) of this

section should include the same information requested by paragraph

(r)(8) of this section.

(7) Each applicant that certifies that it is, or that it has an

affiliation with, a foreign carrier, as defined in paragraphs

(r)(1)(i)(B) and (r)(1)(ii) of this section, in a named foreign country

and that desires to resell the international switched or non-

interconnected private line services, respectively, of another U.S.

carrier for the purpose of providing international communications

services to the name foreign country from the United States shall

provide information in its application filed under this part to

demonstrate that either.

(i) The named foreign country (i.e., the destination foreign

country) provides effective competitive opportunities to U.S. carriers

to resell international switched or noninterconnect private line

services, respectively; or

(ii) Its affiliated foreign carrier does not have the ability to

discriminate against unaffiliated U.S. international carriers through

control of bottleneck services or facilities in the destination

country.

(A) The demonstration specified by paragraph (r)(7)(i) of this

section should address the following factors:

(1) The legal, or de jure, ability of U.S. carriers to enter the

foreign market and provide resold international switched services (for

switched resale applications) or non-interconnected private line

services (for non-interconnected private line resale applications;

(2) Whether there exist reasonable and nondiscriminatory charges,

terms and conditions for the provision of the relevant resale service;

[[Page 67337]]

(3) Whether competitive safeguards exist in the foreign country to

protect against anticompetitive practices, including safeguards such

as:

(i) Existence of cost-allocation rules in the foreign country to

prevent cross-subsidization;

(ii) Timely and nondiscriminatory disclosure of technical

information needed to use, or interconnect with, carriers' facilities;

(iii) Protection of carrier and customer proprietary information;

and

(4) Whether there is an effective regulatory framework in the

foreign country to develop, implement and enforce legal requirements,

interconnection arrangements and other safeguards; and

(5) Any other factors the applicant deems relevant to its

demonstration.

(B) The demonstration specified in paragraph (r)(7)(ii) of this

section should include the same information requested by paragraph

(r)(8) of this section.

(8) Each applicant that certifies that it has an affiliation with a

foreign carrier in a named foreign country and that desires to be

regulated as non-dominant for the provision of international

communications service to that country may provide information in its

application filed under this part to demonstrate that its affiliated

foreign carrier does not have the ability to discriminate against

unaffiliated U.S. international carriers through control of bottleneck

services or facilities in the named foreign country. See Sec. 63.10,

Regulatory Classification of U.S. International Carriers.

(i) Such a demonstration should address the factors that relate to

the scope or degree of the foreign affiliate's bottleneck control, such

as:

(A) The monopoly, oligopoly or duopoly status of the destination

country; and

(B) Whether the foreign affiliate has the potential to discriminate

against unaffiliated U.S. international carriers through such means as

preferential operating agreements, preferential routing of traffic,

exclusive or more favorable transiting agreements, or preferential

domestic access and interconnection arrangements.

(ii) Such a demonstration may also address other factors the

applicant deems relevant to its demonstration, such as the

effectiveness of public regulation in the destination country.

(s) Each applicant shall certify that the applicant has not agreed

to accept special concessions directly or indirectly from any foreign

carrier or administration with respect to traffic or revenue flows

between the U.S. and any foreign country which the applicant may serve

under the authority granted under this part and will not enter into

such agreements in the future.

(1) For purposes of this paragraph, and of Secs. 63.11(c)(2)(iii),

63.13(a)(4), and 63.14, special concession is defined as any

arrangement that affects traffic or revenue flows to or from the U.S.

that is offered exclusively by a foreign carrier or administration to a

particular U.S. international carrier and not also to similarly

situated U.S. international carriers authorized to serve a particular

route.

(2) The special concessions certification required by this

paragraph and by Secs. 63.11(c)(2)(iii) and 63.13(a)(4) shall be viewed

as an ongoing representation to the Commission, and applicants/carriers

shall immediately inform the Commission if at any time the

representations in their certifications are no longer true. Failure to

so inform the Commission will be deemed a material misrepresentation to

the Commission.

Note 1 to paragraph (r): The word ``control'' as used herein is

not limited to majority stock ownership, but includes actual working

control in whatever manner exercised.

Note 2 to paragraph (r): The term ``U.S. facilities-based

international carrier'' means one that holds an ownership,

indefeasible-right-of-user, or leasehold interest in bare capacity

in an international facility, regardless of whether the underlying

facility is a common or noncommon carrier submarine cable, or an

INTELSAT or separate satellite system.

Note 3 to paragraph (r): The assessment of ``capital stock''

ownership will be made under the standards developed in Commission

case law for determining such ownership. See, e.g., Fox Television

Stations, Inc., 10 FCC Rcd 8452 (1995). ``Capital stock'' includes

all forms of equity ownership, including partnership interests.

Note 4 to paragraph (r): In applying the provisions of this

section, ownership and other interests in U.S. and foreign carriers

will be attributed to their holders and deemed cognizable pursuant

to the following criteria: Attribution of ownership interests in a

carrier that are held indirectly by any party through one or more

intervening corporations will be determined by successive

multiplication of the ownership percentages for each link in the

vertical ownership chain and application of the relevant attribution

benchmark to the resulting product, except that wherever the

ownership percentage for any link in the chain exceeds 50%, it shall

not be included for purposes of this multiplication. (For example,

if A owns 30% of company X, which owns 60% of company Y, which owns

26% of ``carrier,'' then X's interest in ``carrier'' would be 26%

(the same as Y's interest because X's interest in Y exceeds 50%),

and A's interest in ``carrier'' would be 7.8% (0.30 x 0.26). Under

the 25% attribution benchmark, X's interest in ``carrier'' would be

cognizable, while A's interest would not be cognizable.)

3. Section 63.10 is amended by revising paragraphs (a)(1) through

(a)(3), and adding paragraph (c) to read as follows:

Sec. 63.10 Regulatory classification of U.S. international carriers.

(a) * * *

(1) A U.S. carrier that has no affiliation with, and that itself is

not, a foreign carrier in a particular country to which it provides

service (i.e., a destination country) will presumptively be considered

non-dominant for the provision of international communications services

on that route;

(2) A U.S. carrier that is, or that has or acquires an affiliation

with a foreign carrier that is a monopoly in a destination country will

presumptively be classified as dominant for the provision of

international communications services on that route; and

(3) A U.S. carrier that is, or that has or acquires an affiliation

with a foreign carrier that is not a monopoly in a destination country

and that seeks to be regulated as non-dominant on that route bears the

burden of submitting information to the Commission sufficient to

demonstrate that its foreign affiliate lacks the ability to

discriminate against unaffiliated U.S. carriers through control of

bottleneck services or facilities in the destination country. Such a

demonstration should address the factors that relate to the scope or

degree of the foreign affiliate's bottleneck control, including those

listed in Sec. 63.01(r)(8).

* * * * *

(c) Any carrier classified as dominant for the provision of

particular services on particular routes under this section shall

comply with the following requirements in its provision of such

services on each such route:

(1) File international service tariffs on 14-days notice without

cost support;

(2) Maintain complete records of the provisioning and maintenance

of basic network facilities and services procured from its foreign

carrier affiliate or from an allied foreign carrier, including, but not

limited to, those it procures on behalf of customers of any joint

venture for the provision of U.S. basic or enhanced services in which

the U.S. and foreign carrier participate, which information shall be

made available to the Commission upon request;

(3) Obtain Commission approval pursuant to Sec. 63.01 before adding

or discontinuing circuits; and

(4) File quarterly reports of revenue, number of messages, and

number of

[[Page 67338]]

minutes of both originating and terminating traffic within 90 days from

the end of each calendar quarter.

4. Section 63.11 is revised to read as follows:

Sec. 63.11 Notification by and prior approval for U.S. international

carriers that have or propose to acquire ten percent investments by,

and/or an affiliation with, a foreign carrier.

(a) Any carrier authorized to provide international communications

service under this part that, as of the effective date of this rule as

amended in IB Docket No. 95-22, is, or has an affiliation with, a

foreign carrier within the meaning of Sec. 63.01(r)(1)(i)(A) or

(r)(1)(i)(B), or that as of such date knows of an existing ten percent

or greater interest, whether direct or indirect, in the capital stock

of the authorized carrier by a foreign carrier, or that after the

effective date of this rule becomes affiliated with a foreign carrier

within the meaning of Sec. 63.01(r)(1)(i)(A), shall notify the

Commission within thirty days of the effective date of this rule or

within thirty days of the acquisition of the affiliation, whichever

occurs later. For purposes of this section, ``foreign carrier'' is

defined as set forth in Sec. 63.01(r)(1)(ii).

(1) The notification shall certify to the information specified in

paragraph (c) of this section.

(2) Any carrier that has previously notified the Commission of an

affiliation with a foreign carrier, as defined by Sec. 63.01(r)(1)

immediately prior to the rule's amendment in IB Docket No. 95-22, need

not notify the Commission again of the same affiliation.

(b) Any carrier authorized to provide international communications

service under this part that knows of a planned investment by a foreign

carrier of a ten percent or greater interest, whether direct or

indirect, in the capital stock of the authorized carrier shall notify

the Commission within sixty days prior to the acquisition of such

interest. The notification shall certify to the information specified

in paragraph (c) of this section.

(c) The notification required under paragraphs (a) and (b) of this

section shall contain a list of all affiliated foreign carriers and

shall state individually the country or countries in which the foreign

carriers named in paragraphs (a) and (b) of this section are authorized

to provide telecommunications services offered to the public. It shall

additionally specify which, if any, of these countries the U.S. carrier

is authorized to serve under this part; what services it is authorized

to provide to each such country; and the FCC File No. under which each

such authorization was granted.

(1) The carrier should also specify, where applicable, those

countries named in paragraph (c) for which it provides a specified

international communications service solely through the resale of the

international switched or private line services of U.S. facilities-

based carriers with which the resale carrier does not have an

affiliation. Such an affiliation is defined as in Sec. 63.01(r)(1)(i),

except that the phrase ``U.S. facilities-based international carrier''

shall be substituted for the phrase ``foreign carrier.''

(2) The carrier shall also submit with its notification:

(i) The ownership information as required to be submitted pursuant

to Sec. 63.01(r)(2);

(ii) Where the carrier is authorized as a private line reseller on

a particular route for which it has an affiliation with a foreign

carrier, as defined in Sec. 63.01(r)(1)(i), a certification as required

to be submitted pursuant to Sec. 63.01(r)(4); and

(iii) A ``special concessions'' certification as required to be

submitted pursuant to Sec. 63.01(s).

(3) The carrier is responsible for the continuing accuracy of the

certifications provided under this section. Whenever the substance of

any certification provided under this section is no longer accurate,

the carrier shall as promptly as possible, and in any event within 30

days, file with the Secretary in duplicate a corrected certification

referencing the FCC File No. under which the original certification was

provided, except that the carrier shall immediately inform the

Commission if at any time the representations in the ``special

concessions'' certification provided under paragraph (c)(2)(iii) of

this section are no longer true. See Sec. 63.01(s)(2). This information

may be used by the Commission to determine whether a change in

regulatory status may be warranted under Sec. 63.10.

(d) Unless the carrier notifying the Commission of a foreign

carrier affiliation under paragraph (a) of this section qualifies for

the presumption of non-dominant regulation pursuant to

Sec. 63.10(a)(4), it should submit the information specified in

Sec. 63.01(r)(8) to retain its non-dominant status on any affiliated

route.

(e) The Commission will issue public notice of the submissions made

under this section for 14 days.

(1) In the case of a notification filed under paragraph (a) of this

section, the Commission, if it deems it necessary, will by written

order at any time before or after the submission of public comments

impose dominant carrier regulation on the carrier for the affiliated

routes based on the provisions of Sec. 63.10.

(2) In the case of a planned investment by a foreign carrier of a

ten percent or greater interest, whether direct or indirect, in the

capital stock of the authorized carrier, the Commission will, unless it

notifies the carrier in writing within 30 days of issuance of the

public notice that the investment raises a substantial and material

question of fact as to whether the investment serves the public

interest, convenience and necessity, presume the investment to be in

the public interest. If notified that the acquisition raises a

substantial and material question, then the carrier shall not

consummate the planned investment until it has filed an application

under Sec. 63.01 and submitted the information specified under

paragraphs (r) (6) or (7), as applicable, and (8) of that section, and

the Commission has approved the application by formal written order.

5. Section 63.12 is amended by revising paragraph (c)(1) to read as

follows:

Sec. 63.12 Streamlined processing of certain international resale

applications.

* * * * *

(c) * * *

(1) The applicant has an affiliation within the meaning of

Sec. 63.01(r)(3), with the U.S. facilities-based carrier whose

international switched or private line services the applicant seeks

authority to resell (either directly or indirectly through the resale

of another reseller's services); or

* * * * *

6. Section 63.13 is amended by revising the last sentences of

paragraphs (a)(3) and (a)(5), and by revising paragraph (a)(4) to read

as follows:

Sec. 63.13 Streamlined procedures for modifying regulatory

classification of U.S. international carriers from dominant to

nondominant.

(a) * * *

(3) * * * For purposes of paragraph (a)(3), ``telecommunications

facilities'' are defined as in Sec. 63.01(r)(4).

(4) Any carrier filing a certified list pursuant to paragraph

(a)(2) of this section must also provide the ``special concessions''

certification as required to be submitted pursuant to Sec. 63.01(r)(3).

(5) * * * See Sec. 63.01(s)(2).

7. Section 63.14 is revised to read as follows:

Sec. 63.14 Prohibition on agreeing to accept special concessions.

Any carrier authorized to provide international communications

service

[[Page 67339]]

under this part shall be prohibited from agreeing to accept special

concessions directly or indirectly from any foreign carrier or

administration with respect to traffic or revenue flows between the

United States and any foreign country served under the authority of

this part and from agreeing to enter into such agreements in the

future. For purpose of this section, foreign carrier is defined as in

Sec. 63.01(r)(1)(ii); and special concession is defined as in

Sec. 63.01(s).

8. A new Sec. 63.17 is added to read as follows:

Sec. 63.17 Special Provisions For U.S. International Common Carriers.

(a) Unless otherwise prohibited by the terms of its Section 214

certificate, a U.S. common carrier authorized under this part to

provide international private line service, whether as a reseller or

facilities-based carrier, may interconnect its authorized private lines

to the public switched network on behalf of an end user customer for

the end user customer's own use.

(b) Except as provided in paragraph (b)(5) of this section, a U.S.

common carrier, whether a reseller or facilities-based, may engage in

``switched hubbing'' to countries not found to offer equivalent resale

opportunities under Sec. 63.01(k) (5) and (6) under the following

conditions:

(1) U.S.-outbound switched traffic shall be routed over the

carrier's authorized U.S. international private lines to an equivalent

country, and then forwarded to a third, nonequivalent country only by

taking at published rates and reselling the International Message

Telephone Service (IMTS) of a carrier in the equivalent country;

(2) U.S.-inbound switched traffic shall be carried to an equivalent

country as part of the IMTS traffic flow from a non-equivalent third

country and then terminated in the United States over U.S.

international private lines from the equivalent hub country;

(3) U.S. common carriers that route U.S.-outbound traffic via

switched hubbing through an equivalent country shall tariff their

service on a ``through'' basis from the United States to the ultimate

foreign destination.

(4) No U.S. common carrier may engage in switched hubbing under

this section to a country for which it has an affiliation with a

foreign carrier unless and until it receives specific authority to do

so under Sec. 63.01. For purposes of this paragraph, ``affiliation''

and ``foreign carrier'' are defined as set forth in Sec. 63.01(r)(1)

(i)(B) and (ii), respectively.

[FR Doc. 95-31099 Filed 12-28-95; 8:45 am]

BILLING CODE 6712-01-M