Rules and Policies on Foreign Participation in the U.S. Telecommunications Market, Order and Notice of Proposed Rulemaking

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 63

[IB Docket No. 97-142, FCC 97-195]

Rules and Policies on Foreign Participation in the U.S.

Telecommunications Market, Order and Notice of Proposed Rulemaking

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: On June 4, 1997, the Federal Communications Commission

(Commission) released a Notice of Proposed Rulemaking (NPRM) that

proposes changes to the effective competitive opportunities (ECO) test

and related rules adopted in the Foreign Carrier Entry Order, 60 FR

67332 (December 29, 1995). The NPRM also proposes conforming changes to

the Commission's framework for permitting flexible settlement

arrangements between U.S. and foreign carriers. The Commission believes

that it is time to revisit its rules in light of an agreement by the

United States and 68 other countries negotiated under the auspices of

the World Trade Organization (WTO) to open markets for basic

telecommunications services.

DATES: Comments are due on or before July 9, 1997, and reply comments

are due on or before August 12, 1997. Written comments by the public on

the proposed and/or modified information collections are due August 18,

1997.

ADDRESSES: Federal Communications Commission, 1919 M Street, N.W., Room

222, Washington, D.C. 20554.

FOR FURTHER INFORMATION CONTACT: Doug Klein, Attorney-Advisor, Policy

and Facilities Branch, Telecommunications Division, International

Bureau, (202) 418-0424; Susan O'Connell, Attorney-Advisor, Policy and

Facilities Branch, Telecommunications Division, International Bureau,

(202) 418-1484. For additional information concerning the information

collections contained in this NPRM contact Judy Boley at 202-418-0214,

or via the Internet at [email protected].

SUPPLEMENTARY INFORMATION:

1. On June 4, 1997, the Commission released a Notice of Proposed

Rulemaking in Rules and Policies on Foreign Participation in the U.S.

Telecommunications Market, IB Docket No. 97-142 (FCC 97-195) (NPRM)

that proposes changes to the rules and policies governing foreign

participation in the U.S. market for basic telecommunications services.

These rules and policies were adopted by the Commission in the Foreign

Carrier Entry proceeding, 60 FR 67332 (December 29, 1995). The NPRM

also proposes changes to the Commission's framework for permitting

flexible settlement arrangements between U.S. and foreign carriers.

2. The NPRM proposes rules that the Commission believes would be

more appropriate in the liberalized competitive environment that will

exist when the recent World Trade Organization (WTO) agreement on basic

telecommunications services takes effect on January 1, 1998. The WTO

agreement was concluded on February 15, 1997, when 69 countries,

including the United States and virtually all of its major trading

partners, agreed to open their markets for basic telecommunications

services to competition from foreign carriers. This agreement covers 95

percent of the global market for basic telecommunications services.

Sixty-five of these countries, including the United States, have

committed to enforce fair rules of competition for basic

telecommunications services that are modeled on U.S. law and

regulations. Fifty-two of these countries, which account for

approximately 90 percent of telecommunications revenues in WTO Member

countries, have granted market access for international services. Thus,

most of the world's major trading nations have made binding commitments

to transition rapidly from monopoly provision of basic

telecommunications services to open entry and procompetitive regulation

of these services. Due to these changed circumstances, the Commission

believes that it is time to revisit its rules governing foreign

participation in the U.S. telecommunications market. The Commission

seeks comments on a number of tentative conclusions and proposals.

3. The NPRM tentatively concludes that it is no longer necessary to

apply an ``effective competitive opportunities'' (ECO) analysis to

Section 214 applications filed by carriers from WTO Member countries

that seek to provide U.S. international services. The NPRM proposes to

afford streamlined processing to these applications. The NPRM also

proposes to adopt measures to improve the Commission's ability to

detect, deter and remedy anticompetitive conduct by foreign carriers

that have market power in particular destination countries.

4. The NPRM also tentatively concludes that it is no longer

necessary to apply an equivalency analysis as the basis for authorizing

all U.S. carriers to provide switched services over resold or

facilities-based private lines between the United States and WTO Member

countries. In addition, the NPRM tentatively concludes that it is no

longer necessary to apply an ECO test for cable landing licenses for

cables between the United States and other WTO Member countries. The

NPRM also tentatively concludes that the Commission should eliminate

the ECO test as part of its Sec. 310(b)(4) public interest analysis of

Title III applications for common carrier radio licenses filed by

carriers with indirect foreign ownership from WTO Member countries.

5. The NPRM tentatively concludes that the Commission should retain

the existing ECO test for Section 214, Title III common carrier, and

cable landing license applications from entities from non-WTO Member

countries. The NPRM proposes that the Commission deny Section 214,

Title III common carrier, and cable landing license applications from

entities from WTO Member countries if a grant of the application would

pose a very high risk to competition in the U.S. telecommunications

market that could not be addressed by conditions that we could impose

on the authorization.

6. The NPRM tentatively concludes that, if the Commission

eliminates the ECO test for Section 214 purposes, it should also

eliminate the test as the basis for permitting U.S. carriers to

negotiate alternative settlement arrangements with carriers from WTO

Member countries. The NPRM proposes to adopt a presumption in favor of

permitting flexibility for carriers from WTO Member countries. The NPRM

proposes that this presumption may be rebutted by a showing that market

conditions in the country in question are not sufficient to prevent a

carrier with market power in that country from discriminating against

U.S. carriers. The NPRM also proposes to continue to apply the ECO test

as the threshold standard for permitting flexibility with carriers that

are from countries that are not WTO Members.

7. The NPRM proposes changes to the Commission's regulation of U.S.

carriers classified as dominant on particular U.S. international routes

due to an affiliation with a foreign carrier that has market power in

the destination country. The NPRM proposes to adopt dominant carrier

safeguards that would apply to dominant foreign-affiliated carriers

depending on the risk of competitive harm the carrier poses. The basic

dominant carrier regulations would consist of a minimal set of

safeguards that would apply to U.S.

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carriers affiliated with foreign carriers that have market power in a

destination country that has eliminated legal barriers to international

facilities-based entry and authorized multiple international

facilities-based carriers. The supplemental safeguards provide for

greater oversight of carrier conduct and would apply to foreign

carriers with market power that cannot meet this standard.

8. The proposed basic dominant carrier safeguards would require

such carriers to notify the Commission quarterly of the addition of

circuits on the dominant route, specifying the joint owner of the

circuit. Such carriers would also be required to file with the

Commission quarterly traffic and revenue reports for the dominant

route. They would also be required to maintain complete records of the

provisioning and maintenance of basic network facilities and services

they procure from the foreign carrier affiliate. The NPRM also seeks

comment on whether the Commission should require some level of

structural separation between such carriers and their affiliated

foreign carriers.

9. The Commission proposed that carriers subject to supplemental

dominant carrier regulation on particular routes would be required to

obtain Section 214 approval to add circuits on the affiliated route.

These carriers would also be required to file quarterly circuit status

reports for that route with the Commission, which would be made

publicly available. In addition, they would be required to file an

electronic summary of contracts submitted under Sec. 43.51 of the

Commission's rules, 47 CFR 43.51. They would also be required to file

quarterly reports summarizing their records on the provisioning and

maintenance of basic network facilities and services procured from

their affiliated foreign carriers. These U.S. carriers would also be

required to comply with stricter limits on certain arrangements for the

sharing of information, customers and joint marketing. The basic

dominant carrier safeguards would also apply to carriers that are

subject to supplemental safeguards, to the extent the basic safeguards

do not conflict with them. The NPRM also seeks comment on whether the

Commission should require some level of separation between a carrier

subject to supplemental dominant carrier regulation and its affiliated

foreign carrier. The Commission expresses the belief that it may be

appropriate to apply stricter separation requirements to these U.S.

carriers than to carriers with foreign affiliates that face competition

in their markets. The NPRM proposes to allow all U.S. carriers

regulated as dominant due to an affiliation with a foreign carrier to

file tariffs on one days' notice and to accord such tariffs a

presumption of lawfulness.

10. The NPRM also proposes to delineate the types of arrangements

the Commission considers to be prohibited by the Sec. 63.14 ``no

special concessions'' rule, which applies generally to arrangements

between U.S. and foreign carriers. It additionally proposes to modify

the rule to apply only to concessions granted to U.S. carriers by

foreign carriers with market power in a destination country, as opposed

to all foreign carriers.

11. Finally, the Commission proposes changes to its rules that

afford streamlined processing to certain international Section 214

applications.

Initial Regulatory Flexibility Analysis

12. Pursuant to the Regulatory Flexibility Act of 1990, 5 U.S.C.

Secs. 601-612, the Commission's Initial Regulatory Flexibility Analysis

with respect to the NPRM is as follows:

13. Reason for Action. The Commission is issuing this Notice of

Proposed Rulemaking to seek comment on possible changes to our rules

and policies for allowing foreign-affiliated entities to participate in

the U.S. telecommunications market. In light of the recent agreement

reached by Members of the World Trade Organization to liberalize the

provision of basic telecommunications services, we believe it is

appropriate to relax our scrutiny of applications filed by affiliates

of entities from WTO Member countries for authority pursuant to

Sec. 214 of the Communications Act, 47 U.S.C. Sec. 214, and the Cable

Landing License Act, 47 U.S.C. Secs. 34-39; and to relax our scrutiny

of indirect foreign investment in holders of common carrier radio

licenses under Sec. 310(b)(4) of the Communications Act, 47 U.S.C.

Sec. 310(b)(4). We also believe that other changes to our regulation of

foreign-affiliated entities are appropriate in light of the WTO

agreement and our experience applying our current rules.

14. Objectives. The objective of this proceeding is to increase

competition in the U.S. market for basic telecommunications services

while minimizing the risk of anticompetitive harm. In light of the

changed circumstances that will result from the WTO agreement on basic

telecommunications and our nearly two years of experience with our

current rules on market entry, we believe that reducing entry barriers

for applicants affiliated with entities from WTO Member countries is

the appropriate way to accomplish that objective. The Commission

believes that the ``effective competitive opportunities'' test

developed in its Foreign Carrier Entry Order is no longer necessary as

applied to countries that are members of the WTO. Instead, we propose

to rely primarily on regulatory safeguards and settlement-rate

benchmarks to prevent anticompetitive conduct in the U.S.

telecommunications marketplace. We propose some revisions to those

regulatory safeguards in this Notice.

15. Legal basis. This Notice of Proposed Rulemaking is adopted

pursuant to Secs. 1, 4(i), 201(b), 214, 303(r), 307, 309(a), 310 of the

Communications Act of 1934, as amended, 47 U.S.C. Secs. 151, 154(i),

214, 303(r), 307, 309(a), 310.

16. Description, potential impact, and number of small entities

affected. The RFA generally defines small entity as having the same

meaning as the terms small business, small organization, and small

governmental jurisdiction and defines small business as having the same

meaning as the term small business concern under Sec. 3 of the Small

Business Act unless the Commission has developed one or more

definitions that are appropriate for its activities. The Small Business

Act defines small business concern as one that (1) is independently

owned and operated; (2) is not dominant in its field of operation; and

(3) satisfies any additional criteria established by the Small Business

Administration (SBA).

17. The rules proposed in this Notice apply only to entities

providing international common carrier services pursuant to Section 214

of the Communications Act; entities providing domestic or international

wireless common carrier services under Sec. 309 of the Act; and

entities licensed to construct and operate submarine cables under the

Cable Landing License Act.

18. Because the small incumbent local exchange carriers (LECs)

subject to these rules are either dominant in their fields of

operations or are not independently owned and operated, consistent with

our prior practice, they are excluded from the definitions of small

entity and small business concern. Accordingly, our use of the terms

small entities and small businesses does not encompass small incumbent

LECs. Out of an abundance of caution, however, for the purposes of this

initial regulatory flexibility analysis, we will consider small

incumbent LECs to be within this analysis, where a small incumbent LEC

is any incumbent LEC that arguably might be defined by the SBA as a

``small business concern.''

[[Page 32968]]

19. Section 214 International Common Carrier Services. Entities

providing international common carrier service pursuant to Section 214

of the Act fall into the SBA's Standard Industrial Classification (SIC)

categories for Radiotelephone Communications (SIC 4812) and Telephone

Communications, Except Radiotelephone (SIC 4813). The SBA's definition

of small entity for those categories is one with fewer than 1,500

employees. We discuss below the number of small entities falling within

these two subcategories that may be affected by the rules proposed in

this Notice.

20. The most reliable source of information regarding the number of

international common carriers is the data that we collect annually in

connection with the Telecommunications Industry Revenue:

Telecommunications Relay Service Fund Worksheet Data (TRS Worksheet).

In 1995, 445 toll carriers filed TRS fund worksheets. We believe that

between 50 and 200 carriers failed to file TRS fund worksheets. We

believe also that fewer than 10 toll carriers had 1,500 or more

employees. Thus, at most 635 international carriers would be classified

as small entities. Many TRS filers, however, are affiliated with other

carriers, and therefore the number of aggregated carriers is far fewer

than the preceding estimate. Of the 445 toll filers, 239 reported no

carrier affiliates. Adding 50 non-filers gives a lower estimate of 289

international carriers that would be classified as small entities.

Thus, our best estimate of the total number of small entities is

between 289 and 635. We are unable at this time to estimate with

greater precision the number of international carriers that would

qualify as small business entities under the SBA's definition. While

not all of these entities may have provided international service in

1995, we expect that many of these entities will seek to do so in the

future, as will additional entrants into the market.

21. Title III Common Carrier Services. Cellular licensees. Neither

the Commission nor the SBA has developed a definition of small entities

applicable to cellular licensees. The closest applicable definition of

small entity is the definition under the SBA rules applicable to

radiotelephone (wireless) companies (SIC 4812). The most reliable

source of information regarding the number of cellular services

carriers nationwide of which we are aware appears to be the data that

the Commission collects annually in connection with the TRS Worksheet.

According to the most recent data, 792 companies reported that they

were engaged in the provision of cellular services. Although it seems

certain that some of these carriers are not independently owned and

operated, or have more than 1,500 employees, we are unable at this time

to estimate with greater precision the number of cellular services

carriers that would qualify as small business concerns under the SBA's

definition. Consequently, we estimate that there are fewer than 792

small cellular service carriers.

22. 220 MHz Radio Services. Because the Commission has not yet

defined a small business with respect to 220 MHz radio services, we

will utilize the SBA's definition applicable to radiotelephone

companies--i.e., an entity employing less than 1,500 persons. With

respect to the 220 MHz services, the Commission has proposed a two-

tiered definition of small business for purposes of auctions: (1) for

Economic Area (EA) licensees, a firm with average annual gross revenues

of not more than $6 million for the preceding three years, and (2) for

regional and nationwide licensees, a firm with average annual gross

revenues of not more than $15 million for the preceding three years.

Since this definition has not yet been approved by the SBA, we will

utilize the SBA's definition applicable to radiotelephone companies.

Given the fact that nearly all radiotelephone companies employ fewer

than 1,500 employees, with respect to the approximately 3,800 incumbent

licensees in this service, we will consider them to be small businesses

under the SBA definition.

23. Common Carrier Paging. The Commission has proposed a two-tier

definition of small businesses in the context of auctioning licenses in

the Common Carrier Paging services. Under that proposal, a small

business would be either (1) an entity that, together with its

affiliates and controlling principals, has average gross revenues for

the three preceding years of not more than $3 million, or (2) an entity

that, together with affiliates and controlling principals, has average

gross revenues for the three preceding calendar years of not more than

$15 million. Since the SBA has not yet approved this definition for

paging services, we will utilize the SBA's definition applicable to

radiotelephone companies, i.e., an entity employing fewer than 1,500

persons. At present, there are approximately 74,000 Common Carrier

Paging licensees. We estimate that the majority of common carrier

paging providers would qualify as small businesses under the SBA

definition.

24. Mobile Service Carriers. Neither the Commission nor the SBA has

developed a definition of small entities specifically applicable to

mobile service carriers such as paging companies. The closest

applicable definition under the SBA rules is for radiotelephone

(wireless) companies. The most reliable source of information regarding

the number of mobile service carriers nationwide of which we are aware

appears to be the data that the Commission collects annually in

connection with the TRS Worksheet. According to the most recent data,

117 companies reported that they were engaged in the provision of

mobile services. Although it seems certain that some of these carriers

are not independently owned and operated, or have more than 1,500

employees, we are unable at this time to estimate with greater

precision the number of mobile service carriers that would qualify

under the SBA's definition. Consequently, we estimate that fewer than

117 mobile service carriers are small entities.

25. Broadband Personal Communications Services (PCS). The broadband

PCS spectrum is divided into six frequency blocks designated A through

F, and the Commission has held auctions for each block. The Commission

has defined small entity in the auctions for Blocks C and F as an

entity that has average gross revenues of less than $40 million in the

three previous calendar years. For Block F, an additional

classification for ``very small business'' was added and is defined as

an entity that, together with its affiliates, has average gross revenue

of not more than $15 million for the preceding three calendar years.

These regulations defining small entity in the context of broadband PCS

auctions have been approved by the SBA. No small business within the

SBA-approved definition bid successfully for licenses in Blocks A and

B. There were 90 winning bidders that qualified as small entities in

the Block C auctions. A total of 93 small and very small businesses won

approximately 40 percent of the 1,479 licenses for Blocks D, E, and F.

However, licenses for Blocks C through F have not been awarded fully;

therefore, there are few, if any, small businesses currently providing

PCS services. Based on this information, we conclude that the number of

small broadband PCS licensees will include the 90 winning bidders and

the 93 qualifying bidders in the D, E, and F Blocks, for a total of 183

small PCS providers as defined by the SBA and the Commission's auction

rules.

26. Narrowband PCS. The Commission does not know how many

narrowband PCS licenses will be

[[Page 32969]]

granted or auctioned, as it has not yet determined the size or number

of such licenses. Two auctions of narrowband PCS licenses have been

conducted for a total of 41 licenses, out of which 11 were obtained by

small businesses owned by members of minority groups and/or women.

Small businesses were defined as those with average gross revenues for

the prior three fiscal years of $40 million or less. For purposes of

this initial regulatory flexibility analysis, the Commission is

utilizing the SBA definition applicable to radiotelephone companies,

i.e., an entity employing less than 1,500 persons. Not all of the

narrowband PCS licenses have yet been awarded. There is therefore no

basis to determine the number of licenses that will be awarded to small

entities in future auctions. Given the facts that nearly all

radiotelephone companies have fewer than 1,000 employees and that no

reliable estimate of the number of prospective narrowband PCS licensees

can be made, we assume, for purposes of the evaluations and conclusions

in this Initial Regulatory Flexibility Analysis, that all the remaining

narrowband PCS licenses will be awarded to small entities.

27. Rural Radiotelephone Service. The Commission has not adopted a

definition of small business specific to the Rural Radiotelephone

Service, which is defined in Sec. 22.99 of the Commission's Rules. A

significant subset of the Rural Radiotelephone Service is BETRS, or

Basic Exchange Telephone Radio Systems (the parameters of which are

defined in Sec. Sec. 22.757 and 22.759 of the Commission's Rules).

Accordingly, we will use the SBA's definition applicable to

radiotelephone companies, i.e., an entity employing fewer than 1,500

persons. There are approximately 1,000 licensees in the Rural

Radiotelephone Service, and we estimate that almost all of them have

fewer than 1,500 employees.

28. Air-Ground Radiotelephone. The Commission has not adopted a

definition of small business specific to the Air-Ground Radiotelephone

Service, which is defined in Sec. 22.99 of the Commission's Rules.

Accordingly, we will use the SBA's definition applicable to

radiotelephone companies, i.e., an entity employing fewer than 1,500

persons. There are approximately 100 licensees in the Air-Ground

Radiotelephone Service, and we estimate that almost all of them qualify

as small under the SBA definition.

29. Specialized Mobile Radio Licensees (SMR). Pursuant to

Sec. 90.814(b)(1) of our rules, the Commission awards bidding credits

in auctions for geographic area 800 MHz and 900 MHz Specialized Mobile

Radio (SMR) licenses to firms that had revenues of less than $15

million in each of the three previous calendar years. This regulation

defining ``small entity'' in the context of 800 MHz and 900 MHz SMR has

been approved by the SBA. We do not know how many firms provide 800 MHz

or 900 MHz geographic area SMR service pursuant to extended

implementation authorizations or how many of these providers have

annual revenues of less than $15 million. We do know that one of these

firms has over $15 million in revenues. We assume that all of the

remaining existing extended implementation authorizations are held by

small entities, as that term is defined by the SBA. The Commission

recently held auctions for geographic area licenses in the 900 MHz SMR

band. There were 60 winning bidders who qualified as small entities in

the 900 MHz auction. Based on this information, we conclude that the

number of geographic area SMR licensees affected includes these 60

small entities.

30. Microwave Video Services. Microwave services includes common

carrier, private operational fixed, and broadcast auxiliary radio

services. At present, there are 22,015 common carrier licensees.

Inasmuch as the Commission has not yet defined small business with

respect to microwave services, we will utilize the SBA's definition

applicable to radiotelephone companies--i.e., an entity with less than

1,500 employees. Although some of these companies may have more than

1,500 employees, we are unable at this time to estimate with greater

precision the number of common carrier microwave service providers that

would qualify under the SBA's definition. We therefore estimate that

there are fewer than 22,015 small common carrier licensees in the

microwave video services.

31. Offshore Radiotelephone Service. This service operates on

several UHF TV broadcast channels that are not used for TV broadcasting

in the coastal area of the states bordering the Gulf of Mexico. At

present, there are approximately 55 licensees in this service. Some of

those licensees are common carriers. We are unable at this time to

estimate the number of licensees that would qualify as small under the

SBA's definition.

32. Local Multipoint Distribution Service (LMDS). The Commission

has so far licensed only one licensee in this service, and that

licensee is not providing service as a common carrier. There will be a

total of 986 LMDS licenses. Licensees will be permitted to decide

whether to provide common carrier service, and we have no way of

estimating how many will choose to do so. Because there will be no

restrictions on the number of licenses a given entity may acquire, we

have no way of estimating how many total licensees there will be. We

also cannot estimate the number of common carrier licensees that will

qualify as small entities.

33. Space Stations (Geostationary). Very few systems are currently

operated on a common carrier basis. Because we do not collect

information on annual revenue or number of employees of all these

licensees, we cannot estimate with precision the number of such

licensees that may constitute a small business entity. It is likely

that no more than one such entity that is currently operating as a

common carrier would constitute a small business entity. There may be a

small increase in the number of such entities in the future as a result

of recent licensing action in the Ka-band.

34. Space Stations (Non-geostationary). These systems by and large

do not operate as common carriers. Because we do not collect

information on annual revenue or number of employees, we cannot

estimate with precision whether any carrier that may choose to operate

on a common carrier basis constitutes a small business entity. The

trend is for such systems to operate on a non-common carrier basis.

These systems, of which there will be a limited number, by and large

are not yet operational and are still being licensed and constructed.

35. Earth Stations. The vast majority of earth stations licensed by

the Commission are not operated on a common carrier basis. Earth

stations that communicate with non-geostationary and Ka-band satellite

systems may operate on a common carrier basis but these systems are not

yet operational and are still being licensed and constructed. We are

unable to estimate at this time the number of earth stations

communicating with such systems that may operate on a common carrier

basis and, of those, the number that will be licensed to small business

entities.

36. Submarine Cable Landing Licenses. Our proposals would affect

all holders of and future applicants for cable landing licenses,

whether or not they operate their cables as common carriers. We have no

way of knowing how many applications for cable landing licenses will be

filed in coming years, but that number will likely increase if we adopt

our proposal to lower the barriers to granting licenses

[[Page 32970]]

for cables to WTO Member countries. Since 1992, there have been

approximately 35 applications for cable landing licenses. The total

number of licensees is difficult to determine, because many licenses

are jointly held by several licensees. Our rules will also permit more

current licensees to accept additional investment from entities from

WTO Member countries.

37. Reporting, recordkeeping, and other compliance requirements.

The actions contained in this Notice of Proposed Rulemaking may affect

large and small carriers. We propose to require that U.S. carriers

whose foreign affiliates have market power maintain or provide certain

records regarding their foreign affiliates. Our proposals would in most

cases reduce the burdens that are currently imposed on such carriers,

and we anticipate that the remaining requirements would not impose a

significant economic burden on small entities. A variety of skills may

be required to comply with the proposed requirements, but all of the

skills that may be required are of the type needed to conduct a

carrier's normal course of business. No additional outside professional

skills should be required, with the possible exception of preparing an

initial Section 214 or cable landing license application and of

preparing a submission for our consideration under Sec. 310(b)(4), all

of which would be simplified by our proposals.

38. Section 214 and the Cable Landing License Act. The proposed

revisions to our rules and policies pursuant to Section 214 and the

Cable Landing License Act would significantly reduce the burdens on

international common carriers. Our proposal would reduce the burden on

foreign-affiliated carriers seeking to enter the market by requiring

only that they show that their foreign affiliate is from a country that

is a Member of the World Trade Organization. We believe this to be a

minimal burden for most small entities and a significant reduction of

burdens relative to our current application requirements.

39. The proposed ``basic dominant carrier safeguards'' would be

less burdensome to most international common carriers than our current

regulations. Carriers would no longer be required to obtain approval

before adding or discontinuing circuits. Instead, they would be

required only to file quarterly notification of additions of circuits.

We propose to eliminate the requirement that dominant carriers file

their international service tariffs on no less than 14 days' notice.

Instead, we would allow those carriers to file their international

service tariffs on one day's notice and accord them a presumption of

lawfulness. This change would reduce regulatory burdens and increase

the ability of carriers to innovate and efficiently respond to changes

in demand and cost. We propose to retain the requirements that carriers

file quarterly traffic and revenue reports and keep records of

provisioning and maintenance of basic network facilities and services

procured from the foreign affiliate. We anticipate that most of the

entities subject to dominant carrier regulation would not be small

entities, but we seek comment on that tentative conclusion.

40. This Notice proposes to impose supplemental dominant carrier

regulation on U.S. carriers whose foreign affiliates do not face

facilities-based competition for international services in the

destination countries in which they have market power. We believe that

additional regulation of those carriers is necessary to ensure that the

foreign carrier does not discriminate in favor of its U.S. affiliate.

These additional requirements may include stricter structural

separation between the U.S. carrier and its foreign affiliate; stricter

limits on certain arrangements for the sharing of information,

customers, and joint marketing; prior approval for addition of

circuits; quarterly circuit status reports; filing an electronic

summary of Sec. 43.51 contracts; and quarterly provisioning and

maintenance reports. We anticipate that few if any small entities would

be subject to supplemental regulation, but we seek comment on that

tentative conclusion.

41. The Notice also seeks comment on whether, in light of our

proposal to liberalize our rules on market entry, we need to impose as

a dominant carrier safeguard some level of structural separation

between the U.S. carrier and its foreign affiliate.

42. We have considered the impact on small and large entities in

developing these proposals, and we view these proposed regulations as

critical to preventing anticompetitive conduct. We also believe that

these safeguards would protect small entities from entities that are

affiliated with large foreign carriers by preventing foreign affiliates

from leveraging their market power to the disadvantage of small,

independent entities. We seek comment on whether we can further reduce

the burdens on small entities and still achieve our goal of preventing

anticompetitive behavior in the U.S. market.

43. Section 310(b)(4). We also propose to reduce the burdens on

common carrier licensees with foreign investment from WTO Member

countries. Section 310(b)(4) of the Communications Act has always

required that we make a finding about whether indirect foreign

investment in excess of 25 percent would serve the public interest. Our

proposal here would, in many cases, greatly simplify the required

showing by licensees or potential licensees. An applicant that could

show that its foreign investor's principal place of business is in a

country that is a Member of the WTO would in most cases have to make no

further showing. An applicant whose foreign investment comes from a

country that is not a WTO Member would still have to show that it

satisfies the effective competitive opportunities test, but that burden

would not be greater than that imposed by our current requirements.

44. This Notice asks for comment on whether we should adopt

specific criteria for denial of Title III common carrier (and Section

214) applications that present such an unusual danger of

anticompetitive effects that they should be denied even though the

foreign investment is from WTO Member countries. We also ask whether we

can further reduce regulatory burdens by eliminating our review of

increases in foreign ownership by licensees that already have more than

25 percent foreign ownership. We also seek comment on other ways in

which the consideration of foreign investment under Sec. 310(b)(4)

could be made less burdensome for small entities.

45. Accounting Rate Flexibility. We propose to reduce the burden on

U.S. carriers that seek approval of alternative settlement rate

arrangements with foreign carriers from WTO Member countries.

Currently, a carrier seeking such approval must file a detailed

petition for declaratory ruling showing that the alternative

arrangement is permitted under the criteria adopted in our Flexibility

Order, Regulation of International Accounting Rates, Docket No. CC 90-

337, Phase II, Fourth Report and Order, 62 FR 5535, February 6, 1997)

(Flexibility Order). We propose here to require only that an applicant

show that the foreign carrier is operating in a country that is a

Member of the WTO. An opposing party would have the burden of showing

that market conditions in the country in question are not sufficient to

prevent a carrier with market power from discriminating against U.S.

carriers.

46. Federal rules that overlap, duplicate, or conflict with the

Commission's proposal. None.

47. Any significant alternatives minimizing impact on small

entities and consistent with stated objectives. In

[[Page 32971]]

developing the proposals contained in this Notice, we have attempted to

minimize the burdens on all entities in order to allow maximum

participation in the U.S. telecommunications markets while achieving

our other objectives. We seek comment on the impact of our proposals on

small entities and on any possible alternatives that could minimize the

impact of our rules on small entities. In particular, we seek comment

on alternatives to the reporting, recordkeeping, and other compliance

requirements discussed above. We also seek specific comment on the

impact on small entities of our proposals to modify our dominant

carrier safeguards.

48. Comments are solicited Written comments are requested on this

Initial Regulatory Flexibility Analysis. These comments must be filed

in accordance with the same filing deadlines set for comments on the

other issues in this Notice of Proposed Rulemaking, but they must have

a separate and distinct heading designating them as responses to the

Regulatory Flexibility Analysis. The Secretary shall send a copy of

this Notice to the Chief Counsel for Advocacy of the Small Business

Administration in accordance with Sec. 603(a) of the Regulatory

Flexibility Act.

Initial Paperwork Reduction Act of 1995 Analysis

49. This Notice of Proposed Rulemaking contains either a proposed

or a modified information collection. As part of our continuing effort

to reduce paperwork burdens, we invite the general public and the

Office of Management and Budget (OMB) to comment on the information

collections contained in this NPRM, as required by the Paperwork

Reduction Act of 1995, Public Law 104-13. Public and agency comments

are due August 18, 1997. Comments should address: (a) whether the

proposed 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.

50. We do not anticipate that the proposed rules will have any

impact on the paperwork burden imposed under the Commission's

Flexibility Policy established in the Fourth Report and Order, CC

Docket No. 90-337, Phase I [62 FR 5535, February 6, 1997]; [OMB Control

Nos. 3060-0160 and 3060-0764].

51. The rule changes proposed here have been analyzed with respect

to the Paperwork Reduction Act of 1980 and found to impose no new or

modified requirements or burdens on the public. Accordingly, their

implementation is not subject to approval by the Office of Management

and Budget under that Act.

OMB Approval Number: 3060-0686.

Title: Streamlining the International Section 214 Authorization

Process and Tariff Requirements.

Type of Review: Revision of existing collection.

Respondents: Business or other For-Profit.

Number of Respondents: 3,238.

Estimated Time Per Response: 14 hours.

Total Annual Burden: 23,603 hours.

Estimated costs per respondent: $263.

Needs and Uses: The information collections are necessary largely

to determine the qualifications of applicants to provide common carrier

international telecommunications services, or to construct and operate

submarine cables, including applicants that are affiliated with foreign

carriers, and to determine whether and under what conditions the

authorizations are in the public interest, convenience, and necessity.

The information collections 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. The information collected is

necessary for the Commission to ensure that rates, terms and conditions

for international service are just and reasonable, as required by the

Communications Act of 1934.

52. The information collections under Sec. 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

ratio licensee would be inconsistent with the public interest.

Ordering Clauses

53. Accordingly, it is ordered that, pursuant to Secs. 1, 4(i),

201(b), 214, 303(r), 307, 309(a), and 310 of the Communications Act of

1934, as amended, 47 U.S.C. Secs. 151, 154(i), 214, 303(r), 307,

309(a), 310, this notice of proposed rulemaking is hereby adopted.

54. The Commission's decision also included minor changes to part

63 of the Commission's rules, which are published elsewhere in this

issue.

55. It is further ordered that the Secretary shall send a copy of

this notice of proposed rulemaking, including the regulatory

flexibility certification, to the Chief Counsel for Advocacy of the

Small Business Administration, in accordance with paragraph 603(a) of

the Regulatory Flexibility Act, 5 U.S.C. Secs. 601 et seq.

List of Subjects in 47 CFR Part 63

Communications common carriers, Reporting and recordkeeping

requirements.

Federal Communications Commission.

William F. Caton,

Acting Secretary.

[FR Doc. 97-15703 Filed 6-16-97; 8:45 am]

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