Foreign Participation in the U.S. Telecommunications Market

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 43, 63, and 64

[IB Docket No. 97-142, FCC 97-398]

Foreign Participation in the U.S. Telecommunications Market

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: On November 25, 1997, the Federal Communications Commission

adopted a Report and Order that creates a new regulatory framework for

international telecommunications. This action is a result of the recent

World Trade Organization agreement on basic telecommunications services

recently concluded wherein 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. Due to these changed circumstances, the Commission

initiated a proceeding to revisit its rules governing foreign

participation in the U.S. telecommunications market. In addition, the

Commission's order addresses related issues raised in petitions for

reconsideration of the Foreign Carrier Entry Order. The new rules will

have significant benefits for consumers. Entry by foreign suppliers of

telecommunications services will stimulate the U.S. market for

international services, creating incentives for carriers to offer

existing services at lower prices and adopt innovative new services to

attract residential and small business customers. Further opening the

U.S. market to foreign carrier entry, along with U.S. carrier entry

into foreign markets, will allow carriers to capitalize on newly found

efficiencies by offering one-stop shopping, which allows customers to

have a single service provider in multiple markets, thereby reducing

administrative costs to users.

This final rule contains information collections subject to the

Paperwork Reduction Act of 1995 (PRA), Pub. L. No. 104-13. It will be

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

the PRA. OMB, the general public and other Federal agencies are invited

to comment on the information collections contained in the final rule.

DATES: The amendments to Secs. 43.51(d) and 64.1001(b) are effective

January 8, 1998. All other regulations contain information collection

requirements and are not effective until approved by the Office of

Management and Budget (OMB), subject to 5 U.S.C. Sec. 801(a)(3). A

document announcing the effective date of these regulations will be

published in the Federal Register.

The agency reserves the right to reconsider the effective date of

this decision if the WTO Basic Telecom Agreement does not take effect

on January 1, 1998. If these final rules are postponed, the agency will

give timely notice in the Federal Register.

Written comments by the public on the information collection

requirements are due February 9, 1998.

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ADDRESSES: A copy of any comments on the information collections

contained herein should be submitted to Judy Boley, Federal

Communications Commission, Room 234, 1919 M Street, N.W., Washington,

D.C. 20554, or via the Internet to [email protected].

FOR FURTHER INFORMATION CONTACT: Douglas A. 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 Order 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 the Matter of Rules and Policies on Foreign Participation

in the U.S. Telecommunications Market, IB Docket No. 97-142 (62 FR

32966, June 17, 1997). The Notice proposed changes to the rules and

policies governing foreign participation in the U.S. market for basic

telecommunications services that had been previously adopted by the

Commission in the Foreign Carrier Entry proceeding. The Commission

initiated this proceeding to consider more appropriate rules 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.

2. The order removes the effective competitive opportunities (ECO)

test and replaces it with an open entry standard. In its Foreign

Carrier Entry Order, the Commission adopted the ECO test as part of an

overall public interest analysis for both international Section 214

authorizations and indirect foreign ownership of common carrier radio

licenses under Section 310(b)(4). (See 60 FR 67332, December 29, 1995.)

The Commission replaces the ECO test with a rebuttable presumption that

applications for Section 214 authority from carriers from WTO countries

do not pose concerns that would justify denial of an application on

competitive grounds. The Commission also adopts a rebuttable

presumption that WTO country applicants filing cable landing license

applications, as well as applications to exceed the 25 percent foreign

ownership benchmark in a common carrier radio licensee under Section

310(b)(4) of the Act, similarly do not pose such competitive concerns.

The Commission finds that adopting a presumption in favor of entry will

have significant public interest benefits.

3. The Commission recognizes, however, that in exceptional

circumstances, entry into the U.S. market by an applicant affiliated

with a foreign telecommunications carrier from a WTO country may pose

competitive risks by virtue of the applicant's ability to exercise

market power in a relevant foreign market. In such exceptional

circumstances, the Commission will have the ability to attach

additional conditions to or even deny a particular application. The

Commission believes this approach provides protection against possible

competitive harms while favoring neither foreign nor domestic

applications.

4. The Commission also intends to apply its new open entry policies

to cable landing license applicants. The Commission will continue,

however, to analyze each application while seeking the approval of the

State Department as required by Executive Order 10530. The Commission

will no longer routinely impose a restriction on foreign ownership of

cable landing stations. Should the Department of State, pursuant to

Executive Order 10530, condition its approval of a particular cable

landing license on such a restriction, the Commission will include a

condition to that effect in the particular cable landing license. Any

such restriction would be necessary to protect the national security of

the United States.

5. In the Foreign Carrier Entry Order, the Commission adopted an

ECO test as part of the public interest analysis under Section

310(b)(4) for applicants seeking authority to acquire greater than 25

percent indirect foreign ownership in a common carrier radio licensee.

In this Order, the Commission replaces the current ECO test as applied

to foreign investment from WTO Member countries in common carrier radio

licenses with its new open entry policies. The Commission retains its

general requirement that such licensees seek Commission approval before

they accept foreign ownership that would put them over the 25 percent

benchmark under Section 310(b)(4). The Commission will also continue to

require licensees who have already received approval to exceed the 25

percent benchmark up to a certain level of indirect foreign ownership

to seek further approval in order to increase that level of indirect

foreign ownership. The Commission will continue to use the ``principal

place of business'' test to determine the nationality or ``home

market'' of foreign investors, but it will consider other means of

determining an applicant's nationality if requested to do so by an

applicant or if so advised by the Executive Branch.

6. The Commission will treat aeronautical enroute and aeronautical

fixed services in the same manner as it treats common carrier services

under Section 310(b)(4) and not apply an ECO test to indirect foreign

ownership by entities from WTO Member countries. The Commission

declines to address the rule limiting the number of aeronautical

enroute licenses to one per location because the rule is beyond the

scope of this proceeding. The Commission does, however, suggest several

options for parties seeking to provide aeronautical services in the

United States.

7. The Commission will continue to apply the ECO and equivalency

tests to non-WTO Member countries. The Commission believes that

continuing to apply the ECO test to non-WTO Member countries may

encourage some of those countries to take unilateral or bilateral steps

toward opening their markets to competition and may provide incentives

for them to join the WTO. In the case of Section 214 applications to

provide facilities-based, resold switched, and resold non-

interconnected private line services, the Commission will continue to

apply the ECO test as part of the public interest inquiry when

presented with an application from a foreign carrier or a carrier

affiliated with a foreign carrier where the foreign carrier is from a

non-WTO Member country and has market power in the destination

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market. The ECO test will be applied in a similar manner as part of the

Commission's analysis under Section 2 of the Submarine Cable Landing

License Act. The Commission will maintain the equivalency test as part

of its standard for permitting the provision of switched services over

private lines, whether facilities-based or through resale, for non-WTO

Member countries. The ECO test will be applied as part of the

Commission's general public interest analysis under Section 310(b)(4)

regarding foreign investment by entities from non-WTO Member countries

in common carrier radio licensees. The Commission will retain the ECO

test as the threshold standard for permitting accounting rate

flexibility with carriers from countries that are non-WTO Members.

8. In the Notice, the Commission noted that there were outstanding

petitions for reconsideration of the Foreign Carrier Entry Order. In

light of the WTO Agreement, the Commission requested comment on whether

it should, for purposes of countries that are not WTO Members, apply

the ECO test to U.S. carriers that own more than 25 percent of, or

control, a foreign carrier from a non-WTO country. In the Order, the

Commission recognizes that in the more liberalized environment that

will result from the WTO Basic Telecom Agreement it will become

increasingly difficult to define a ``U.S. carrier'' for the purpose of

distinguishing between U.S.-carrier and foreign-carrier ownership of

carriers. In addition, the GATS principle of National Treatment

obligates the U.S. Government to treat investments by carriers from WTO

Member countries no less favorably than it treats investments by

domestic carriers. Thus, the Commission modifies its conclusion in the

Foreign Carrier Entry Order and it will apply the ECO test where a U.S.

carrier, or a company that owns more than 25 percent of a U.S. carrier,

owns a controlling interest in a foreign carrier that has market power

in a non-WTO country.

9. Given the new open entry approach, the Commission found it

necessary to revise the competitive safeguards governing foreign-

affiliated carrier provision of basic telecommunications services in

the U.S. market and, more broadly, U.S. carrier dealings with foreign

carriers. The Commission establishes a regulatory framework that

modifies or eliminates rules that could hamper competition while

balancing a need to monitor and detect anticompetitive behavior in the

U.S. market without imposing burdensome regulations. For the purposes

of applying the dominant carrier safeguards and No Special Concessions

rule, the Commission creates a rebuttable presumption that a foreign

carrier with less than 50 percent market share in each of the relevant

markets on the foreign end of a U.S. international route lacks

sufficient market power to affect competition adversely in the U.S.

market. The Commission states that this presumption is rebuttable.

Carriers may file petitions with the Commission seeking a declaratory

ruling on whether a foreign carrier with a market share of 50 percent

or more in any relevant market should be allowed to grant a special

concession or be regulated as non-dominant because it lacks the ability

to affect competition adversely in the U.S. market.

10. The Commission narrows its No Special Concessions rule to allow

U.S. carriers to accept special concessions granted by foreign carriers

that do not possess market power in a relevant foreign market without

first obtaining specific approval from the Commission. The Commission

concludes that its No Special Concessions rule should be limited to

exclusive dealings involving services, facilities, or functions on the

foreign end of a U.S. international route that are necessary for the

provision of U.S. basic international service. The Commission did not

adopt its proposal to specify a prohibition on special concessions

involving the joint handling of basic U.S. traffic originating or

terminating in third countries.

11. The Commission prohibits U.S. carriers from receiving

proprietary or confidential information obtained by any foreign carrier

in the course of its regular business dealings with a competing U.S.

carrier, unless the competing U.S. carrier provides its specific

permission in writing. Where a U.S. carrier is affiliated with a

foreign carrier, the proprietary or confidential information of other

U.S. carriers obtained by that foreign affiliate may not be used for

any purpose other than for conducting the correspondent relationships

with the carriers from whom the information was obtained. This rule

will serve as a general requirement on all existing, pending, and

future authorizations to provide U.S. international services.

12. The Commission concludes that safeguards are necessary given

the privacy and anticompetitive effects that may result from the use of

foreign-derived U.S. customer proprietary network information (CPNI).

Under Section 222(a) of the Communications Act, every

telecommunications carrier has a duty to protect the confidentiality of

customer information. The Commission finds that if a U.S. carrier

desires to make use of foreign-derived CPNI pertaining to a specific

U.S. customer, it must first obtain appropriate consent from that

customer. In doing so, the U.S. carrier also must notify the customer

that he or she may require the U.S. carrier to disclose the CPNI to

unaffiliated third parties upon written request by the customer. The

Commission finds that these procedures will balance Section 222's

privacy and competitive issues while not burdening or preventing U.S.

carriers from offering one-stop shopping options.

13. The Commission declines to address issues raised by parties

concerning the benchmark authorization conditions imposed on

facilities-based carriers in the Benchmarks Order (62 FR 45758, August

29, 1997). The Commission will condition a carrier's facilities-based

authorization to serve an affiliated market on the foreign carrier

offering U.S.-licensed international carriers a settlement rate for the

affiliated market at or below the relevant benchmark adopted in the

Benchmarks Order.

14. The Commission addresses the issue of whether to apply its

benchmark condition to authorizations to provide switched resale

service from the United States to an affiliated market, which was not

resolved in the Benchmarks Order. The Commission declines to apply the

settlement rate benchmark condition to switched resale providers. The

Commission finds that a switched reseller is less likely to attempt a

predatory price squeeze. The Commission also finds here that it would

be easier to detect a price squeeze in the switched resale context than

in the facilities-based contest. The easier detection should deter

switched resellers from attempting a price squeeze and will allow the

Commission to take action in the event a carrier does attempt a price

squeeze. The Commission will monitor the switched resale market

carefully, and if it finds substantial evidence of anticompetitive

behavior that causes harm to competition and consumers in the U.S.

market, it may reconsider its decision not to apply the benchmark

condition to the provision of switched resale. The Commission also

adopts a quarterly traffic and revenue reporting requirement that

applies to switched resellers that possess market power on the foreign

end of the route and that have settlement rates with U.S. carriers.

15. The Commission adopts a dominant carrier regulatory framework

aimed at detecting and deterring anticompetitive behavior in the U.S.

market by foreign carriers and their

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affiliated U.S. carriers. It will retain a single-tier dominant carrier

regulatory approach and classify any U.S.-licensed carriers as dominant

on a particular route if it is affiliated with a foreign carrier that

possesses market power in a relevant market on the foreign end of that

route. The Commission did not adopt its proposal to ban exclusive

arrangements involving joint marketing, customer steering, and the use

of foreign market telephone customer information. The Commission adopts

its tentative conclusion to continue its current regulatory treatment

of co-marketing and other non-equity business arrangements between U.S.

carriers and their foreign counterparts that affect the provision of

U.S. international services. The Commission also found that it would be

an unnecessary burden to apply dominant classification to all non-

equity arrangements absent a finding of substantial risk of competitive

harm. The Commission also declined to adopt a filing requirement for

non-equity business relationships.

16. The Commission adopts a number of competitive safeguards as

part of its dominant carrier regulatory framework. Dominant foreign-

affiliated carriers will be permitted to file tariffs on one day's

notice with a presumption of lawfulness rather than the current

fourteen-day advance notice. The Commission also eliminates its prior

approval requirement for circuit additions and discontinuances on the

dominant route. The Commission declines to adopt a quarterly

notification of circuit additions or discontinuances requirement. If

the Commission finds that an affiliated carrier is engaged in

anticompetitive behavior, it may apply the prior approval requirement

on that route.

17. Although the Commission currently has in place a number of

safeguards to prevent anticompetitive behavior, it finds that a minimal

level of structural separation for dominant carriers is necessary. The

Commission will require a foreign-affiliated U.S. international carrier

regulated as dominant to provide service in the U.S. market through a

corporation that is separate from the foreign affiliate, maintain

separate books of account, and not jointly own switching and

transmission facilities with its foreign carrier affiliate.

18. The Order imposes a number of reporting requirements to assist

the Commission in monitoring and detecting anticompetitive behavior.

Foreign-affiliated dominant carriers will be required to file quarterly

traffic and revenue reports for their dominant routes. The Commission

requires that each dominant foreign-affiliated carrier file quarterly

reports summarizing the provisioning and maintenance of all basic

network facilities and services it procures from its foreign affiliate,

including, but not limited to, correspondent or other basic facilities

procured on behalf of customers of joint venture offerings. Although

the Commission does not dictate the format for the provisioning and

maintenance reports, the Commission describes the information that it

requires. The Commission directs the International Bureau to adopt a

standard reporting manual if it feels that one would be helpful, and

permits the Bureau to modify the contents of the filing requirements as

necessary. Carriers subject to this requirement will be able to seek a

protective order to ensure that parties to whom confidential

information is made available limit the persons who will have access to

the information and the purposes for which the information will be

used.

19. All dominant foreign-affiliated facilities-based carriers will

file quarterly circuit status reports. Although the Commission proposed

quarterly notifications of circuit changes, the quarterly circuit

status reports will provide information that can be more readily

compared to the information provided by all U.S. international carriers

on an annual basis under Section 43.82 of our rules. The Commission

does not require dominant foreign-affiliated private line resale

carriers to file quarterly circuit status reports, given that they rely

on underlying U.S. facilities-based carriers to make arrangements with

their affiliated carriers. The Commission directs the International

Bureau to modify the Section 43.82 reporting manual as necessary to

accommodate these changes. The Commission recognizes that the quarterly

circuit status reports contain commercially sensitive information

similar to the provisioning and maintenance reports. Thus, the

Commission will allow dominant foreign-affiliated carriers to request

the standard protective order for the three quarterly circuit status

reports that dominant foreign-affiliated carriers must file.

20. The Commission does not adopt an expedited procedure to prevent

competitive harm in the U.S. market. Rather, the Commission will rely

on the various remedies currently available for addressing

anticompetitive conduct. The Commission does, however, adopt a general

rule that would enable it to impose additional requirements on U.S.

international carriers in circumstances where it appears that harm to

competition is occurring on one or more U.S. international routes. The

Commission notes that it is presently reviewing its rules to ensure

that the Commission provides a forum for the prompt resolution of all

formal complaints against telecommunications carriers involving claims

of unreasonably discriminatory or otherwise unlawful conduct in

violation of the Communications Act or its rules.

21. In the Flexibility Order (62 FR 5535, February 6, 1997), the

Commission developed a new approach for permitting alternative

settlement arrangements. In this proceeding, the Commission will no

longer apply the ECO test as a threshold standard for determining when

to permit accounting rate flexibility. Instead, it will apply a

rebuttable presumption that flexibility is permitted for carriers from

WTO Member countries. In order to rebut this presumption, a party

opposing a flexible arrangement must demonstrate that the foreign

carrier is not subject to competition in its home market from multiple

(more than one) facilities-based carriers that possess the ability to

terminate international traffic and serve existing customers in the

foreign market. The Commission also makes minor changes to conform its

procedures for U.S. carriers to enter into an alternative payment

arrangements, and it will apply the new policies and procedures to all

flexibility petitions pending before the Commission in any procedural

status at the time the new rules become effective. The Commission will

continue to apply the safeguards developed in the Flexibility Order (62

FR 5535, February 6, 1997). The Commission will continue to allow the

proponent of an alternative settlement arrangement with a carrier from

a WTO Member country to make an alternative showing where the

presumption in favor of flexibility can be rebutted.

22. The Order streamlines the Section 214 applications of carriers

that demonstrate clearly and convincingly that the foreign carrier

affiliate has less than a 50 percent market share in reach relevant

terminating market in the destination foreign country (international,

intercity, and local exchange access). Streamlined processing of

Section 214 applications will be available to any applicant whose

foreign affiliate is from a WTO Member country if the applicant

requests authority only to serve that country solely by reselling the

switched services of unaffiliated U.S. international carriers.

Streamlining will be available for foreign-affiliated carriers not

otherwise eligible for streamlined processing as long as the applicant

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certifies that it will comply with the dominant carrier regulations of

the Order. In addition, the Commission will streamline applications for

assignments and transfers of control of Section 214 authorizations in

circumstances where an initial Section 214 application filed by the

assignee or transferee would be eligible for streamlined processing.

The Commission will streamline Section 310(b)(4) requests when they

meet the criteria described in the Order. In all circumstances,

Commission staff will have discretion to deem an application ineligible

for streamlined processing either because it raises market power

concerns or because an Executive Branch agency raises concerns with

respect to issues within its expertise. In such cases the Commission

will issue a public notice that the application has been removed from

the streamlined process, and within ninety days of the public notice it

will either issue an order acting upon the application or provide

public notice that, because the application raises issues of

extraordinary complexity, an additional 90-day period for review is

needed. Each successive 90-day period may be so extended.

23. The Commission amends its rules to raise the level of foreign

ownership that requires prior notification from 10 percent to greater

than 25 percent. This change will eliminate the requirement that

authorized carriers notify the Commission before accepting foreign

carrier investments of 25 percent or less. An authorized carrier will,

however, be required to notify the Commission sixty days before it, or

a company that owns more than 25 percent of it, acquires a direct or

indirect controlling interest in a foreign carrier.

24. The Commission dismisses arguments that the Commission's public

interest analysis is invalid under the General Agreement on Trade in

Services (GATS). The Commission states that the Order establishes the

parameters for reviewing applications to provide international

services. The Commission also found that its safeguards are consistent

with the GATS.

25. Finally, the Commission disposes of the pending petitions for

reconsideration of the Foreign Carrier Entry Order because of their

close relationship with the substance of this proceeding.

26. The Commission states that it will largely rely on reporting

requirements, rather than restrictions on capacity changes or service

options, to prevent carriers from causing competitive harm in the U.S.

market. The Commission declines to adopt its proposal for a

supplemental tier of dominant carrier safeguards for U.S. carriers

affiliated with foreign carriers that do not face facilities-based

competition on the foreign end of a particular route. The Commission

retains authority to impose sanctions, in the event it finds evidence

of anticompetitive conduct.

Final Regulatory Flexibility Analysis

27. As required by the Regulatory Flexibility Act (RFA), an Initial

Regulatory Flexibility Analysis (IRFA) was included in the Notice of

Proposed Rulemaking in this proceeding. The Commission sought written

public comment on the proposals in the Notice, including comment on the

IRFA. This Final Regulatory Flexibility Analysis (FRFA) conforms to the

RFA. This analysis also serves as the FRFA for the issues disposed of

here on reconsideration of the Foreign Carrier Entry Order.

Need for, and Objectives of, the Rules and Policies Adopted Here

28. This Report and Order and Order on Reconsideration adopts a

liberalized standard for participation by foreign and foreign-

affiliated entities in the U.S. telecommunications markets. This open

entry standard will apply to the provision of international

telecommunications services under Section 214 of the Communications

Act, indirect foreign ownership of common carrier radio licensees under

Section 310(b)(4), and cable landing licenses under the Submarine Cable

Landing License Act. It also revises the Commission's regulatory

safeguards governing the provision of international telecommunications

services in light of recent changes in the world's telecommunications

market and the Commission's liberalized standard for participation by

foreign and foreign-affiliated entities. The Commission has deemed

these changes appropriate in light of the recent World Trade

Organization (WTO) Basic Telecommunications Services Agreement and the

worldwide trend toward deregulation and competition in the provision of

telecommunications services. Our objective is to increase competition

in the U.S. telecommunications markets while minimizing the risk of

anticompetitive harm and encouraging foreign governments to open their

telecommunications markets. In light of the changed circumstances that

will result from the WTO Basic Telecom Agreement and our nearly two

years of experience with our current rules on market entry and

regulation of foreign-affiliated entities, we find 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 it is no longer necessary to apply the

``effective competitive opportunities'' (ECO) test developed in the

1995 Foreign Carrier Entry Order to countries that are Members of the

WTO. Instead, we will rely primarily on regulatory safeguards and

benchmark settlement rates to reduce the potential for anticompetitive

conduct in the U.S. market. We revise some of those safeguards in this

Order.

Summary of Significant Issues Raised by Public Comments in Response to

the IRFA

29. No comments were submitted specifically in response to the

IRFA. Nevertheless, we have considered, in developing these rules and

policies, any potential significant economic impact on small entities.

We have attempted to minimize the burdens imposed on all entities,

including small entities, in order to promote participation by new

entrants in the U.S. telecommunications markets.

30. NextWave raised comments in response to the Notice specific to

the impact of our policy toward indirect foreign investment in C-block

and F-block licensees. Those blocks, known as ``entrepreneur'' blocks,

are reserved for small businesses and entrepreneurs. NextWave states

that it and other entrepreneurial carriers are dependent on financing

from a variety of sources, including foreign investment, and that

access to foreign capital is vital to their financial viability.

NextWave argues that indirect foreign investment in C-block and F-block

licensees presents ``no conceivable risk to competition'' because those

licenses are held by entrepreneurs who are new entrants into the

markets. NextWave proposes that, for that reason, the Commission should

conclude that indirect foreign investment in C-block and F-block

personal communications systems (PCS) licensees by any entity whose

home market is a WTO Member country serves the public interest and

should not be subject to prior Commission approval. NextWave also urges

the Commission, in the alternative, to establish an expedited process

and timetable for addressing applications to exceed the 25 percent

benchmark for indirect foreign ownership of common carrier wireless

licensees.

31. Telephone and Data Systems (TDS) proposed that the Commission

permit without prior approval any amount of indirect foreign ownership

of common carrier radio licensees held in the form of registered

securities when

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the foreign investor is not a carrier and comes from one of the 64

other WTO Member countries that has committed to enforce fair rules of

competition for basic telecommunications. Under TDS's proposal, the

Commission would continue to require prior approval for investors from

other WTO Member countries, for investors from non-WTO countries, and

from all foreign carriers. TDS suggested that we scrutinize filings

with the Securities and Exchange Commission to monitor foreign

ownership of registered securities and that we rely on revocation,

instead of prior approval, to protect the public interest pursuant to

Section 310(b)(4). TDS states that adoption of its proposal would

significantly reduce burdens on common carrier radio licensees, who

currently must research the nationalities of their individual

shareholders in order to remain in compliance with the restrictions on

foreign ownership.

Description and Estimate of the Number of Small Entities to Which the

Rules Will Apply

32. We received no comments in response to our estimates in the

IRFA of the number of small entities to which the proposed rules would

apply. We conclude that the IRFA's estimates are the best available

estimates of the number of small entities that the rules we adopt here

will affect and that those estimates are sufficiently useful in

enabling us to attempt to minimize the economic impact of our rules on

small entities.

33. 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 section 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).

34. The rules adopted in this Order 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, aeronautical enroute, or aeronautical fixed

services under Section 309 of the Act; and entities licensed to

construct and operate submarine cables under the Cable Landing License

Act.

35. 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

FRFA, 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.''

Section 214 International Common Carrier Services

36. 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 adopted in this Order.

37. 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.

b. Title III Common Carrier Services

38. 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.

39. 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 1,000 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.

40. 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. Because the SBA has not yet

approved this definition for paging services, we will utilize the SBA's

definition

[[Page 64747]]

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.

41. 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.

42. 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.

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

narrowband PCS licenses will be 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 FRFA, 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 FRFA,

that all the remaining narrowband PCS licenses will be awarded to small

entities.

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

definition of small business specific to the Rural Radiotelephone

Service, which is defined in Section 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 Sections 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.

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

definition of small business specific to the Air-Ground Radiotelephone

Service, which is defined in Section 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.

46. Specialized Mobile Radio Licensees (SMR). Pursuant to Section

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.

47. 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.

48. 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

[[Page 64748]]

time to estimate the number of licensees that would qualify as small

under the SBA's definition.

49. 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.

50. 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.

51. 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.

52. 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.

c. Aeronautical Enroute and Aeronautical Fixed Licenses

53. The Commission has not adopted a definition of small business

specific to the aeronautical enroute and aeronautical fixed services.

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

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

persons. There are 45 licensees providing aeronautical enroute and

aeronautical fixed services, including Aeronautical Radio Inc. (ARINC)

and its affiliates. All of the licensees are small businesses except

ARINC, which has approximately 2,000 employees. We therefore conclude

that there are 44 small businesses providing aeronautical enroute and

aeronautical fixed services.

d. Submarine Cable Landing Licenses

54. The new rules and policies adopted in this Order will affect

all holders of and future applicants for cable landing licenses,

whether or not they operate their cables as common carriers. It is

difficult to estimate 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 for

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

approximately 40 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.

Description of Projected Reporting, Recordkeeping, and Other Compliance

Requirements

55. The rules and policies adopted in this Report and Order and

Order on Reconsideration will affect large and small entities. We will

require that U.S. carriers whose foreign affiliates have market power

maintain or provide certain records regarding their foreign affiliates.

Our rules will in most cases reduce the burdens that are currently

imposed on such carriers, and we anticipate that the remaining

requirements will not impose a significant economic burden,

particularly 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 Section 310(b)(4), most of which will be

simplified by the rules and policies we adopt here.

56. An applicant for a Section 214 authorization or a cable landing

license will no longer be required to show either that an affiliated

foreign carrier lacks market power or that the destination country

provides effective competitive opportunities (ECO) to U.S. carriers so

long as it shows that the destination country is a Member of the World

Trade Organization. Similarly, entities holding or seeking to hold

common carrier wireless licenses or aeronautical enroute or

aeronautical fixed licenses that have more than 25 percent indirect

foreign investment will not need to demonstrate that the home markets

of the foreign investor or investors from WTO Members offer effective

competitive opportunities for U.S. investors in the analogous service

sector.

57. Authorized international common carriers will no longer be

required to notify the Commission before accepting investments by

foreign carriers (or their affiliates) between 10 percent and 25

percent. We have retained a requirement that authorized carriers notify

the Commission before accepting investment greater than 25 percent. We

have added a requirement that authorized carriers notify the Commission

before they (or their affiliates) acquire a direct or indirect

controlling interest in a foreign carrier; previously, those interests

were subject only to a post hoc notification requirement. We continue

to require authorized carriers to notify the Commission within 30 days

after acquiring a direct or indirect interest greater than 25 percent

in a foreign carrier if the acquisition of that interest has not

otherwise been reported.

58. We have narrowed the application of our ``No Special

Concessions'' rule, which prohibits carriers from entering into

exclusive arrangements with foreign carriers. That rule will now apply

only to carriers' dealings with foreign carriers that have sufficient

market power in their home markets to adversely affect competition in

the U.S. market. Carriers wishing to enter into alternative settlement

arrangements with foreign carriers operating in WTO Member countries

will presumptively be allowed to do so. That presumption may be

overcome where an opponent demonstrates that there are not multiple

facilities-based carriers operating in the foreign carrier's market.

[[Page 64749]]

59. To ensure fair competition among authorized carriers and to be

consistent with our policy governing the confidentiality of competing

carrier information, all U.S. carriers will be prohibited from

receiving proprietary or confidential information about competing U.S.

carriers obtained by any foreign carrier in the course of its regular

business dealings with the competing U.S. carrier, unless the U.S.

carrier provides specific written permission. We will also require U.S.

carriers desiring to make use of foreign-derived customer proprietary

network information (CPNI) pertaining to a specific U.S. customer to

first obtain approval from that customer and notify that customer that

the customer may require the carrier to disclose the CPNI to

unaffiliated third parties.

60. An authorized carrier affiliated with a foreign carrier will be

subject to additional requirements. Its authorization to serve the

affiliated market will be conditioned on the foreign affiliate's

offering to all U.S.-licensed carriers a settlement rate at or below

the benchmark adopted for that country in the Commission's recent

Benchmarks Order. Foreign-affiliated carriers classified as dominant

are subject to additional reporting, recordkeeping, and compliance

requirements. In this Order, we substantially reduce the initial

showing that a foreign-affiliated carrier must make in order to be

presumptively classified as non-dominant by adopting a presumption that

a foreign carrier with less than 50 percent market share in certain

relevant terminating markets does not have sufficient market power to

affect competition adversely in the U.S. market. We remove existing

dominant carrier requirements that we find to be unnecessarily

burdensome and adopt a narrowly tailored dominant carrier framework

designed to address specific concerns of anticompetitive behavior. We

replace the requirement that dominant carriers file tariffs on fourteen

days' advance notice with a one-day advance notice requirement, and we

will accord these tariff filings a presumption of lawfulness. We will

no longer require foreign-affiliated carriers to obtain Commission

approval before adding or discontinuing circuits on the dominant route.

We require dominant carriers to provide service on the affiliated route

through a corporation that is separate from its foreign affiliate,

maintain separate books of account, and not jointly own switching or

transmission facilities with its foreign affiliate. Carriers regulated

as dominant will be required to file quarterly traffic and revenue

reports, provisioning and maintenance reports, and circuit status

reports on the dominant affiliated route. We decline to adopt the

proposal in the Notice to ban exclusive arrangements involving joint

marketing, customer steering, and the use of foreign market telephone

customer information.

61. Finally, we impose a reporting requirement on switched

resellers that are affiliated with a foreign carrier that has

sufficient market power on the foreign end of a route to affect

competition adversely in the U.S. market. We will require these

resellers to file quarterly traffic and revenue reports for their

switched resale traffic on the affiliated route.

Federal Rules That May Duplicate, Overlap, or Conflict With the Rules

Adopted Here

62. None.

Steps Taken To Minimize Significant Economic Impact on Small Entities,

and Significant Alternatives Considered

63. We have taken significant steps to minimize the procedural

burdens imposed on all affected entities. The application of the rules

we adopt in this Order does not vary depending on the size of the

entities involved. Some regulations may be more burdensome on large

carriers than on small carriers because large carriers may be more

likely to be dominant or to operate on a facilities basis than are

small carriers. That is, small carriers may be more likely to operate

as resellers of switched international services, which are less likely

to be subject to our most stringent regulation.

64. The revisions to our policies toward evaluating Section 214 and

cable landing license applications will significantly reduce burdens on

many current and potential international common carriers. A foreign-

affiliated carrier seeking to serve an affiliated route will no longer

be required to show either that its affiliate lacks market power or

that the destination country provides effective competitive

opportunities (ECO) to U.S. carriers so long as it shows that the

destination country is a Member of the World Trade Organization. We

believe this to be a minimal burden for most small entities and a

significantly lesser burden than the detailed showings required to

demonstrate either that the affiliate lacks market power or that the

destination country provides ECO. The ECO test, in particular, has

proven to be unusually burdensome both on applicants and on the

Commission.

65. Similarly, the revisions to our policy toward evaluating

Section 310(b)(4) requests by common carrier radio licensees and

aeronautical licensees to accept indirect foreign investment greater

than 25 percent will significantly reduce the burdens on licensees (and

prospective licensees) seeking to accept investment from entities in

WTO Member countries. Those applicants will no longer be required to

show that the home market of the investor offers effective competitive

opportunities for U.S. investors in the analogous service sector. This

will make those applications much simpler and less time-consuming and,

more importantly, will make it much easier for licensees to accept

foreign investment and for prospective licensees to plan their business

affairs. Common carrier radio licensees will continue to be required to

seek Commission approval before accepting indirect foreign investment

above a level for which they have previously received Commission

approval.

66. We have taken steps to facilitate entry into the U.S. market

for international telecommunications services by small carriers. Small

carriers often enter the market, at least initially, by reselling the

switched services of other authorized international carriers. In this

Order, we change our procedural rules to afford streamlined processing

to any applicant whose foreign affiliate is from a WTO Member country

if the applicant requests authority to serve that country solely by

reselling the switched services of unaffiliated U.S. international

carriers. We also will streamline process the Section 214 application

of any foreign-affiliated applicant whose affiliate is from a WTO

Member and that demonstrates clearly and convincingly that the foreign

affiliate has less than a 50 percent market share in certain relevant

terminating markets in the destination foreign country. In addition, we

will streamline process the Section 214 application of any applicant

whose affiliate is from a WTO Member and is not otherwise eligible for

streamlined processing if the applicant certifies that it will comply

with our dominant carrier regulations. Streamlined applications, unless

they are removed from the streamlined process, are granted 35 days from

the date they are placed on public notice.

67. In revising our regulations that apply to authorized

international common carriers, we have developed a targeted approach

designed to monitor and detect anticompetitive behavior in the U.S.

market without imposing regulations that are more burdensome than

necessary. In doing so, we have

[[Page 64750]]

attempted to minimize burdens on entities that are unlikely to pose a

threat to competition. We also have removed restrictions on whole

categories of activities that we have concluded do not pose a threat to

competition in the developing competitive marketplace. Our approach

relies in large part on reporting requirements, rather than

restrictions on capacity changes or service options, to prevent

affiliated carriers from causing competitive harms in the U.S.

international services market.

68. We have significantly reduced the scope of our rule that

prohibits carriers from entering into certain exclusive arrangements

with foreign carriers. Our ``No Special Concessions'' rule will now

prohibit accepting certain specified arrangements only from foreign

carriers that have sufficient market power in their home markets to

adversely affect competition in the U.S. market. We adopt a presumption

that foreign carriers with less than 50 percent market share in the

relevant terminating markets do not have such sufficient market power.

We anticipate that delineating those arrangements that are subject to

the prohibition and adopting this presumption will significantly

clarify the circumstances in which authorized carriers will be

permitted to accept special concessions from foreign carriers. This

more targeted rule also will allow authorized carriers substantially

more flexibility in arranging their business affairs.

69. Carriers wishing to enter into alternative settlement

arrangements with foreign carriers operating in WTO Member countries

will presumptively be allowed to do so. This presumption may be

overcome by a demonstration that there are not multiple facilities-

based carriers operating in the foreign carrier's market. We expect to

allow alternative settlements more as a rule than as an exception, and

the issue of whether there are multiple facilities-based carriers

operating in the foreign market will be less burdensome than the issue

of whether the foreign market offers effective competitive

opportunities, which is the standard being replaced.

70. We have declined, in this Order, to adopt certain proposals in

the Notice that would have restricted the business strategies of

carriers classified as dominant. Instead, we will impose reporting

requirements that will enable us to detect and deter anticompetitive

behavior. We have declined to adopt proposals in the Notice to ban

exclusive arrangements involving joint marketing, customer steering,

and the use of foreign market telephone customer information. We have

found that such proscriptive safeguards would be unduly burdensome and

could unnecessarily impede business activities. We choose to rely

instead on the general prohibition on accepting special concessions

combined with additional reporting and disclosure requirements, instead

of proscriptive safeguards, for carriers with foreign affiliations. We

have also relieved carriers of the requirement to notify the Commission

of investments by foreign carriers of 10 percent or more; they now must

report an investment by a foreign carrier only when that investment

exceeds 25 percent. We conclude that none of the safeguards we impose

specifically on carriers classified as dominant will impose significant

economic burdens.

71. We have also declined to impose on switched resellers a

condition that their foreign affiliates maintain settlement rates at or

below the benchmark settlement rates we adopted in the Benchmarks

Order. We find that such a condition would be unnecessarily burdensome

inasmuch as resellers have less ability to engage in anticompetitive

conduct than facilities-based carriers and we have a greater ability to

detect anticompetitive conduct by switched resellers. Imposing a

benchmark condition on switched resellers would impose significant

economic impact on resellers, many of whom are small entities, that

could prevent some new entrants from entering the U.S. market and

affect the ability of existing carriers to provide service. To address

concerns about traffic distortions related to resale, however, we have

decided to impose a requirement on switched resellers that are

affiliated with a carrier that has sufficient market power to affect

competition adversely in the U.S. market. We will require those

resellers to file quarterly traffic and revenue reports for their

traffic on the affiliated route in order to enable the Commission to

determine whether switched resellers are engaging in anticompetitive

conduct.

72. In the Notice, we sought comment on whether to adopt, as an

additional dominant carrier safeguard, some level of structural

separation between a U.S. carrier and its affiliated foreign carrier.

We adopt here a requirement that a foreign-affiliated U.S.

international carrier regulated as dominant provide service in the U.S.

market through a corporation that is separate from the foreign

affiliate, maintain separate books of account, and not jointly own

switching and transmission facilities with its foreign carrier

affiliate. We find that, without such separation, discrimination, cost-

misallocation, and the possibility of a predatory price squeeze by such

a foreign-affiliated carrier would have the potential to cause

substantial harm to consumers, competition, and production efficiency

in the U.S. international services market. These requirements will not

impose a significant burden on such carriers because most foreign-

affiliated carriers operating in the United States do so in a manner

that is consistent with the requirements we adopt here. We have

considered imposing more stringent structural separation requirements

but have found them to be unnecessary and to potentially impose a

significant burden on foreign-affiliated carriers that operate in the

U.S. market.

73. We are unable to adopt NextWave's proposal to state that

indirect foreign investment in C-block and F-block PCS licensees by any

entity whose home market is a WTO Member country serves the public

interest and will not be subject to prior Commission approval. We have

found that prior approval is necessary in all instances of indirect

foreign investment in excess of 25 percent because of the need to

review such investments for national security, law enforcement, foreign

policy, and trade concerns as well as for the exceptional case that

poses a very high risk to competition. We do, however, adopt NextWave's

alternative proposal to establish an expedited process and timetable

for addressing those applications: These applications will generally be

added to the International Bureau's streamlined process and usually

granted within 35 days from the date the International Bureau places

the application on public notice. We expect that application of our

open entry standard and streamlined process will both minimize

procedural burdens on small entities and present substantial new

opportunities for obtaining foreign capital.

74. We are unable to adopt TDS's proposal to disregard investments

in common carrier radio licensees by non-carriers held as publicly

traded securities. We accept the concerns of Executive Branch agencies

that a prior approval process is necessary for all investments and that

even small investments in publicly traded securities could, if

aggregated, nevertheless create a degree of control or influence over a

licensee that would be contrary to U.S. national security or law

enforcement issues.

75. We have also decided not to adopt a policy that a common

carrier radio licensee need not seek Commission approval before

accepting increases in indirect foreign ownership once they

[[Page 64751]]

have obtained Commission authority to exceed 25 percent indirect

foreign ownership. We have determined that every such increase requires

Commission review in order to consider the effect of the ownership on

national security and law enforcement interests.

76. We conclude that these steps we have taken to minimize

significant economic impact on small entities will advance the small

business goals of Section 257 of the Act, as added by the

Telecommunications Act of 1996.

Report to Congress

77. The Commission will send a copy of this Report and Order and

Order on Reconsideration, including this FRFA, in a report to be sent

to Congress pursuant to the Small Business Regulatory Enforcement

Fairness Act of 1996, see 5 U.S.C. Sec. 801(a)(1)(A). A summary of this

Report and Order and Order on Reconsideration, and a copy of this FRFA,

will also be published in the Federal Register, see 5 U.S.C.

Sec. 604(b), and will be sent to the Chief Counsel for Advocacy of the

Small Business Administration.

Paperwork Reduction Act of 1995 Analysis

78. This Report and Order contains a modified information

collection. 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 order, as required by the Paperwork Reduction Act of

1995, Pub. L. No. 104-13. Public and agency comments are due February

9, 1998. 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.

79. Public reporting burden for the collections of information is

estimated as follows:

OMB Control 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: 3,251.

Estimated Time Per Response: 2 hours.

Total Annual Burden: 145,895 hours.

Estimated costs per respondent: $3,192.

Needs and Uses: The information collections pertaining to Parts 1

and 63 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

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.

The information collected pursuant to part 61 of the rules 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.

80. 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.

81. We do not anticipate that the 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.

Ordering Clauses

82. Accordingly, it is ordered that, pursuant to Sections 1, 2,

4(i), 201, 203, 205, 214, 303(r), and 310 of the Communications Act of

1934, as amended, 47 U.S.C. Sections 151, 152, 154(i), 201, 205, 214,

303(r), 310, the policies, rules, and requirements discussed herein are

adopted and parts 43, 63, and 64, 47 CFR parts 43, 63, and 64 are

revised.

83. It is further ordered that authority is delegated to the Chief,

International Bureau as discussed in this Order.

84. It is further ordered that the petitions for reconsideration in

IB Docket No. 95-22 are granted in part, denied in part, and deferred

as discussed in this Order.

85. It is further ordered that the Commission's Office of Managing

Director shall send a copy of this Report and Order and Order on

Reconsideration, including the Final Regulatory Flexibility Analysis,

to the Chief Counsel for Advocacy of the Small Business Administration.

86. It is further ordered that the policies, rules, and

requirements established in this decision shall take effect January 8,

1998 or in accordance with the requirements of 5 U.S.C. 801(a)(3) and

44 U.S.C. 3507. The Commission will publish a document at a later date

announcing the effective date. The Commission reserves the right to

reconsider the effective date of this decision if the WTO Basic Telecom

Agreement does not take effect on January 1, 1998.

List of Subjects in 47 CFR Parts 43, 63, and 64

Communications common carriers, Reporting and recordkeeping

requirements.

Federal Communications Commission.

Magalie Roman Salas,

Secretary.

Final Rules

Parts 43, 63, and 64 of Title 47 of the Code of Federal Regulations

are amended as follows:

PART 43--REPORTS OF COMMUNICATION COMMON CARRIERS AND CERTAIN

AFFILIATES

1. The authority citation for Part 43 continues to read as follows:

Authority: 47 U.S.C. 154.

2. Sec. 43.51 is amended by revising paragraph (d) to read as

follows:

Sec. 43.51 Contracts and concessions.

* * * * *

(d) Any U.S. carrier that interconnects an international private

line to the U.S. public switched network, at its switch, including any

switch in which the carrier obtains capacity either through lease or

otherwise, shall file annually with the Chief of the International

Bureau a certified statement containing the number and type (e.g., a

64-kbps circuit) of private lines interconnected in such a manner. The

certified statement shall specify the number and type of interconnected

private lines on a country specific basis. The identity of the customer

need not be reported, and the Commission will treat the country of

origin information as confidential. Carriers need not file their

contracts for such interconnections, unless they are specifically

requested to do so. These reports shall be filed on a consolidated

basis on February 1 (covering international private lines

interconnected during the preceding January 1 to December 31 period) of

each year. International private lines to countries for which the

Commission has authorized the provision of switched

[[Page 64752]]

basic services over private lines at any time during a particular

reporting period are exempt from this requirement.

3. Sec. 43.61 is amended by revising paragraph (c) to read as

follows:

Sec. 43.61 Reports of international telecommunications traffic.

* * * * *

(c) Each common carrier engaged in the resale of international

switched services that has an affiliation with a foreign carrier that

has sufficient market power on the foreign end of an international

route to affect competition adversely in the U.S. market and that

collects settlement payments from U.S. carriers shall file a quarterly

version of the report required in paragraph (a) of this section for its

switched resale services on the dominant route within 90 days from the

end of each calendar quarter. For purposes of this paragraph,

``affiliation'' is defined in Sec. 63.18(h)(1)(i) of this chapter and

``foreign carrier'' is defined in Sec. 63.18(h)(1)(ii) of this chapter.

* * * * *

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: 47 U.S.C. 151, 154(i), 154(j), 201-205, 218, 403, 533

unless otherwise noted.

2. Sec. 63.10 is revised to read as follows:

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

(a) Unless otherwise determined by the Commission, any party

authorized to provide an international communications service under

this part shall be classified as either dominant or non-dominant for

the provision of particular international communications services on

particular routes as set forth in this section. The rules set forth in

this section shall also apply to determinations of regulatory status

pursuant to Secs. 63.11 and 63.13. For purposes of paragraphs (a)(1)

through (a)(3) of this section, ``affiliation'' and ``foreign carrier''

are defined as set forth in Sec. 63.18(h)(1)(i) and (ii), respectively.

For purposes of paragraphs (a)(2) and (a)(3) of this section, the

relevant markets on the foreign end of a U.S. international route

include: international transport facilities or services, including

cable landing station access and backhaul facilities; inter-city

facilities or services; and local access facilities or services on the

foreign end of a particular route.

(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) shall presumptively be considered

non-dominant for the provision of international communications services

on that route;

(2) Except as provided in paragraph (a)(4) of this section, a U.S.

carrier that is, or that has or acquires an affiliation with a foreign

carrier that is a monopoly provider of communications services in a

relevant market in a destination country shall 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 provider of

communications services in a relevant market 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 sufficient market power on

the foreign end of the route to affect competition adversely in the

U.S. market. If the U.S. carrier demonstrates that the foreign

affiliate lacks 50 percent market share in the international transport

and the local access markets on the foreign end of the route, the U.S.

carrier shall presumptively be classified as non-dominant.

(4) A carrier that is authorized under this part to provide to a

particular destination country a particular international

communications service, and that provides such service solely through

the resale of an unaffiliated U.S. facilities-based carrier's

international switched services (either directly or indirectly through

the resale of another U.S. resale carrier's international switched

services), shall presumptively be classified as non-dominant for the

provision of the authorized service. The existence of an affiliation

with a U.S. facilities-based international carrier shall be assessed in

accordance with the definition of affiliation contained in

Sec. 63.18(h)(1)(i) of this chapter, except that the phrase ``U.S.

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

phrase ``foreign carrier.''

(b) Any party that seeks to defeat the presumptions in paragraph

(a) of this section shall bear the burden of proof upon any issue it

raises as to the proper classification of the U.S. carrier.

(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 one day's notice without

cost support;

(2) Provide services as an entity that is separate from its foreign

carrier affiliate, in compliance with the following requirements:

(i) The authorized carrier shall maintain separate books of account

from its affiliated foreign carrier. These separate books of account do

not need to comply with Part 32 of this chapter; and

(ii) The authorized carrier shall not jointly own transmission or

switching facilities with its affiliated foreign carrier. Nothing in

this section prohibits the U.S. carrier from sharing personnel or other

resources or assets with its foreign affiliate;

(3) File quarterly reports on traffic and revenue, consistent with

the reporting requirements authorized pursuant to Sec. 43.61, within 90

days from the end of each calendar quarter;

(4) File quarterly reports summarizing the provisioning and

maintenance of all 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 authorized carrier and the foreign carrier

participate, within 90 days from the end of each calendar quarter.

These reports should contain the following: the types of circuits and

services provided; the average time intervals between order and

delivery; the number of outages and intervals between fault report and

service restoration; and for circuits used to provide international

switched service, the percentage of ``peak hour'' calls that failed to

complete;

(5) In the case of an authorized facilities-based carrier, file

quarterly circuit status reports within 90 days from the end of each

calendar quarter in the format set out by the Sec. 43.82 annual circuit

status manual, with two exceptions: activated or idle circuits must be

reported on a facility-by-facility basis; and the derived circuits need

not be specified in the three quarterly reports due on June 30,

September 30, and December 31. For purposes of this paragraph,

``facilities-based carrier'' is defined in Sec. 63.18 note 2 to

paragraph (h).

[[Page 64753]]

(d) A carrier classified as dominant under this section shall file

an original and two copies of each report required by paragraphs

(c)(3), (c)(4), and (c)(5) of this section with the Chief,

International Bureau. The carrier shall include with its filings

separate computer diskettes for the reports required by paragraphs

(c)(3) and (c)(5), in the format specified by the Sec. 43.61 and

Sec. 43.82 filing manuals, respectively. The carrier shall also file

one paper copy of these reports, accompanied by the appropriate

computer diskettes, with the Commission's copy contractor. The

transmittal letter accompanying each report shall clearly identify the

report as responsive to the appropriate paragraph of Sec. 63.10(c).

3. Sec. 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 an affiliation with a foreign

carrier.

(a) Any carrier authorized to provide international communications

service under this part shall notify the Commission sixty days prior to

the consummation of either of the following acquisitions of direct or

indirect controlling interests in or by foreign carriers:

(1) acquisition of a direct or indirect controlling interest in a

foreign carrier (as defined in Sec. 63.18(h)(1)(ii)) by the authorized

carrier, or by any entity that directly or indirectly controls the

authorized carrier, or that directly or indirectly owns more than 25

percent of the capital stock of the authorized carrier; or

(2) acquisition of a direct or indirect interest in the capital

stock of the authorized carrier by a foreign carrier or by an entity

that directly or indirectly controls a foreign carrier where the

interest would create an affiliation within the meaning of

Sec. 63.18(h)(1)(i)(B).

(b) Any carrier authorized to provide international communications

service under this part that becomes affiliated with a foreign carrier

within the meaning of Sec. 63.18(h)(1) that has not previously notified

the Commission pursuant to this section or Sec. 63.18 shall notify the

Commission within thirty days after acquiring the affiliation. In

particular, acquisition by an authorized carrier (or by any entity that

directly or indirectly controls, is controlled by, or is under direct

or indirect common control with the authorized carrier) of a direct or

indirect interest in a foreign carrier that is greater than 25 percent

but not controlling is subject to this paragraph but not to paragraph

(a).

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

section shall contain a list of the affiliated foreign carriers named

in paragraphs (a) and (b) of this section and shall state individually

the country or countries in which the foreign carriers are authorized

to provide telecommunications services to the public. It shall

additionally specify which, if any, of these countries is a Member of

the World Trade Organization; 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. The notification shall

certify to the information specified in this paragraph.

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

countries named in paragraph (c) of this section for which it provides

a specified international communications service solely through the

resale of the international switched services of U.S. facilities-based

carriers with which the resale carrier does not have an affiliation.

Such an affiliation is defined in Sec. 63.18(h)(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. 63.18(h)(2); and

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

submitted pursuant to Sec. 63.18(i).

(d) In order to retain non-dominant status on the affiliated route,

the carrier notifying the Commission of a foreign carrier affiliation

under paragraph (a) or (b) of this section should provide information

to demonstrate that it qualifies for non-dominant classification

pursuant to Sec. 63.10.

(e) After the Commission issues a public notice of the submissions

made under this section, interested parties may file comments within 14

days of the public notice.

(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) 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 investment raises a substantial and material question, then the

carrier shall not consummate the planned investment until it has filed

an application under Sec. 63.18 and submitted the information specified

under Sec. 63.18(h)(5) or (6) as applicable, and Sec. 63.18(h)(7) and

(8), as applicable, and the Commission has approved the application by

formal written order.

(f) All authorized carriers are responsible for the continuing

accuracy of certifications with regard to affiliations with foreign

carriers made under this section and under Sec. 63.18. Whenever the

substance of any such certification is no longer accurate, the carrier

shall as promptly as possible, and in any event within thirty 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)(ii) of this

section or Sec. 63.18(i) are no longer true. See Sec. 63.18(i). This

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

in regulatory status may be warranted under Sec. 63.10.

Note to Sec. 63.11: ``Control'' as used in this section includes

actual working control in whatever manner exercised and is not limited

to majority stock ownership.

4. Sec. 63.12 is revised to read as follows:

Sec. 63.12 Processing of international Section 214 applications.

(a) Except as provided by paragraph (c) of this section, a complete

application seeking authorization under Sec. 63.18 shall be granted by

the Commission 35 days after the date of public notice listing the

application as accepted for filing.

(b) Issuance of public notice of the grant shall be deemed the

issuance of Section 214 certification to the applicant, which may

commence operation on the 36th day after the date of public notice

listing the application as accepted for filing, but only in accordance

with the operations proposed in its application and the rules,

regulations, and policies of the Commission.

(c) The streamlined processing procedures provided by paragraphs

(a) and (b) of this section shall not apply where:

[[Page 64754]]

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

Sec. 63.18(h)(1)(i) with a foreign carrier in a destination market, and

the Commission has not yet made a determination as to whether that

foreign carrier lacks sufficient market power in that destination

market to affect competition adversely in the U.S. market, unless the

applicant clearly demonstrates in its application at least one of the

following:

(i) The applicant qualifies for a presumption of non-dominance

under Sec. 63.10(a)(3);

(ii) The affiliated destination market is a WTO Member country and

the applicant qualifies for a presumption of non-dominance under

Sec. 63.10(a)(4); or

(iii) The affiliated destination market is a WTO Member country and

the applicant agrees to be classified as a dominant carrier to the

affiliated destination country under Sec. 63.10, without prejudice to

its right to petition for reclassification at a later date; or

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

Sec. 63.18(h)(1)(i) with a dominant U.S. 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), unless the applicant agrees to be classified as a

dominant carrier to the affiliated destination country under Sec. 63.10

(without prejudice to its right to petition for reclassification at a

later date); or

(3) The applicant seeks authority to provide switched basic

services over private lines to a country for which the Commission has

not previously authorized the provision of switched services over

private lines; or

(4) The application is formally opposed by a pleading meeting the

following criteria:

(i) The caption and text of the pleading make it unmistakably clear

that the pleading is intended to be a formal opposition;

(ii) The pleading is served upon the other parties to the

proceeding; and

(iii) The pleading is filed within the time period prescribed for

the filing of objections or comments; or

(5) The Commission has informed the applicant in writing, within 28

days after the date of public notice accepting the application for

filing, that the application is not eligible for streamlined processing

under this section.

(d) Any complete application that is subject to paragraph (c) of

this section will be acted upon only by formal written order, and

operation for which such authorization is sought may not commence

except in accordance with such order. The Commission will issue public

notice that the application is ineligible for streamlined processing.

Within 90 days of the public notice, the Commission will issue an order

acting upon the application or provide public notice that, because the

application raises questions of extraordinary complexity, an additional

90-day period for review is needed. Each successive 90-day period may

be so extended.

5. Sec. 63.13 is revised to read as follows:

Sec. 63.13 Procedures for modifying regulatory classification of U.S.

international carriers from dominant to non-dominant.

Any party that desires to modify its regulatory status from

dominant to non-dominant for the provision of particular international

communications services on a particular route should provide

information in its application to demonstrate that it qualifies for

non-dominant classification pursuant to Sec. 63.10.

6. Sec. 63.14 is revised to read as follows:

Sec. 63.14 Prohibition on agreeing to accept special concessions.

(a) Any carrier authorized to provide international communications

service under this part shall be prohibited from agreeing to accept

special concessions directly or indirectly from any foreign carrier

with respect to any U.S. international route where the foreign carrier

possesses sufficient market power on the foreign end of the route to

affect competition adversely in the U.S. market, as described in

paragraph (c) of this section, and from agreeing to accept special

concessions in the future. For purposes of this section, ``foreign

carrier'' is defined in Sec. 63.18(h)(1)(ii).

(b) For purposes of this section and Secs. 63.11(c)(2)(ii) and

63.18(i), a special concession is defined as an exclusive arrangement

involving services, facilities, or functions on the foreign end of a

U.S. international route that are necessary for the provision of basic

telecommunications services where the arrangement is not offered to

similarly situated U.S.-licensed carriers and involves:

(1) Operating agreements for the provision of basic services;

(2) Distribution arrangements or interconnection arrangements,

including pricing, technical specifications, functional capabilities,

or other quality and operational characteristics, such as provisioning

and maintenance times; or

(3) Any information, prior to public disclosure, about a foreign

carrier's basic network services that affects either the provision of

basic or enhanced services or interconnection to the foreign country's

domestic network by U.S. carriers or their U.S. customers.

(c) A U.S. carrier that seeks to enter a special concession with a

foreign carrier bears the burden of submitting information, as part of

the requirement to file the agreement with the Commission pursuant to

Sec. 43.51, sufficient to demonstrate that the foreign carrier lacks

sufficient market power on the foreign end of the route to affect

competition adversely in the U.S. market. If the U.S. carrier makes a

showing that the foreign carrier lacks 50 percent market share in the

international transport and the local access markets on the foreign end

of the route, the U.S. carrier will presumptively be allowed to agree

to accept the special concession.

(d) Any party that seeks to defeat the presumption in paragraph (c)

of this section shall bear the burden of proof upon any issue it raises

as to the ability of the foreign carrier to affect competition

adversely in the U.S. market.

7. Sec. 63.17 is amended by revising paragraph (b) to read as

follows:

Sec. 63.17 Special provisions for U.S. international common carriers.

* * * * *

(b) Except as provided in paragraph (b)(4) of this section, a U.S.

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

engage in ``switched hubbing'' to countries for which the Commission

has not authorized the provision of switched basic services over

private lines provided the carrier complies with the following

conditions:

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

carrier's authorized U.S. international private lines to a country for

which the Commission has authorized the provision of switched services

over private lines (i.e., the ``hub'' country), and then forwarded to

the third country only by taking at published rates and reselling the

international message telephone service (IMTS) of a carrier in the hub

country;

(2) U.S.-inbound switched traffic shall be carried to a country for

which the Commission has authorized the provision of switched services

over private lines (i.e., the ``hub'' country) as part of the IMTS

traffic flow from a third country and then terminated in the United

States over U.S. international private lines from the hub country;

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

switched hubbing shall tariff their service on a ``through'' basis

between the United States and the

[[Page 64755]]

ultimate point of origination or termination;

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

from a third country where it has an affiliation with a foreign carrier

unless and until it has received authority to serve that country under

Sec. 63.18(e)(1), (e)(2), or (e)(6).

8. Sec. 63.18 is amended to revise paragraphs (e), (h) and (i) and

to add new paragraph (k) to read as follows:

Sec. 63.18 Contents of applications for international common carriers.

* * * * *

(e) One or more of the following statements, as pertinent:

(1) If applying for authority to acquire interests in facilities

previously authorized by the Commission in order to provide

international basic switched, private line, data, television and

business services to all international points, the applicant shall:

(i) State that it is requesting Section 214 authority to operate as

a facilities-based carrier pursuant to the terms and conditions of

paragraph (e)(1) of this section.

(ii) Comply with the following terms and conditions:

(A) Authority to provide services to all international points under

this part extends to those countries for which the applicant qualifies

for non-dominant regulation as set forth in Sec. 63.10, except in the

following circumstance: If an applicant is affiliated with a foreign

carrier in a destination market and the Commission has not determined

that the foreign carrier lacks sufficient market power in the

destination market to affect competition adversely in the U.S. market

(see Sec. 63.10(a)), the applicant shall not commence service on any

such route until it receives specific authority to do so under

paragraph (e)(6) of this section.

(B) The applicant may only provide service using half-circuits on

appropriately licensed U.S. common and non-common carrier facilities

(under either Title III of the Communications Act of 1934, as amended,

or the Submarine Cable Landing License Act, 47 U.S.C. 34 et al.)

provided that these facilities do not appear on an exclusion list

published by the Commission and any necessary overseas connecting

facilities. Applicants may not use non-U.S. licensed facilities unless

and until the Commission specifically approves their use and so

indicates on the exclusion list, and only then for service to the

countries indicated thereon.

(C) The applicant may provide service to any country not included

on an exclusion list published by the Commission.

(D) The applicant may provide international basic switched, private

line, data, television and business services.

(E) The authority granted under this paragraph shall be subject to

all Commission rules and regulations and any conditions stated in the

Commission's public notice or order that serves as the applicant's

Section 214 certificate. See Sec. 63.12.

(2) If applying for authority to resell the international services

of authorized U.S. common carriers for the provision of international

basic switched, private line, data, television and business services to

all international points, the applicant shall:

(i) State that it is requesting Section 214 authority to operate as

a resale carrier pursuant to the terms and conditions of

Sec. 63.18(e)(2).

(ii) Comply with the following terms and conditions:

(A) Authority to provide resold services to all international

points under this part extends to those countries and services for

which the applicant qualifies for non-dominant regulation as set forth

in Sec. 63.10, except in the following circumstances, in which case an

applicant shall not commence service until it receives specific

authority to do so under paragraph (e)(6) of this section:

(1) An application to provide switched resold services to a non-WTO

Member country where the applicant is affiliated with a foreign

carrier; and

(2) An application to resell private line services to a destination

market where the applicant is affiliated with a foreign carrier and the

Commission has not determined that the foreign carrier lacks sufficient

market power in the destination market to affect competition adversely

in the U.S. market (see Sec. 63.10(a)).

(B) The applicant may resell the international services of any

authorized common carrier, except affiliated carriers regulated as

dominant on the route to be served, pursuant to that carrier's tariff

or contract duly filed with the Commission, for the provision of

international basic switched, private line, data, television and

business services to all international points;

(C) The applicant may resell private line services for the

provision of international switched basic services only in

circumstances where the Commission has specifically authorized the

provision of switched basic services over private lines to the

particular country at the foreign end of the private line. In making

determinations about particular destination countries, the Commission

will follow the policies adopted in IB Docket Nos. 96-261 and 97-142

(these documents are available at the FCC's Reference Operations

Division, Washington, D.C. 20554, and on the FCC's World Wide Web Site

at http://www.fcc.gov). The Commission will provide public notice of

its decisions to authorize the provision of switched basic services

over private lines to particular countries.

(D) The authority granted under this paragraph shall be subject to

all Commission rules and regulations, including the limitation in

Sec. 63.21 on the use of private lines for the provision of switched

services, and any conditions stated in the Commission's public notice

or order that serves as the applicant's Section 214 certificate. See

Secs. 63.12, 63.21.

(3) If applying for authority to provide international switched

basic services over resold private lines between the United States and

a WTO Member country for which the Commission has not previously

authorized the provision of switched services over private lines, the

applicant shall demonstrate either that settlement rates for at least

50 percent of the settled U.S.-billed traffic between the United States

and the country at the foreign end of the private line are at or below

the benchmark settlement rate adopted for that country in IB Docket No.

96-261 or that the country affords resale opportunities equivalent to

those available under U.S. law. If applying for authority to provide

international switched basic services over resold private lines between

the United States and a non-WTO Member country for which the Commission

has not previously authorized the provision of switched services over

private lines, the applicant shall demonstrate that settlement rates

for at least 50 percent of the settled U.S.-billed traffic between the

United States and the country at the foreign end of the private line

are at or below the benchmark settlement rate adopted for that country

in IB Docket No. 96-261 and that the country affords resale

opportunities equivalent to those available under U.S. law. With regard

to showing that a destination country affords resale opportunities

equivalent to those available under U.S. law, an applicant shall

include evidence demonstrating that equivalent resale opportunities

exist between the United States and the subject country, including any

relevant bilateral or multilateral agreements between the

administrations involved. Parties must demonstrate that the foreign

country at the other end of the private line provides U.S.-based

carriers with:

[[Page 64756]]

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

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

(ii) Reasonable and nondiscriminatory charges, terms and conditions

for interconnection to foreign domestic carrier facilities for

termination and origination of international services, with adequate

means of enforcement;

(iii) Competitive safeguards to protect against anticompetitive and

discriminatory practices affecting private line resale; and

(iv) Fair and transparent regulatory procedures, including

separation between the regulator and operator of international

facilities-based services.

(4) Any carrier authorized under this section to acquire and

operate international private line facilities other than through resale

may use those private lines to provide switched basic services only in

circumstances where the Commission has previously authorized the

provision of switched services over private lines to the particular

country at the foreign end of the private line. The Commission will

provide public notice of its decisions to authorize the provision of

switched services over private lines to particular countries pursuant

to its policies adopted in IB Docket Nos. 96-261 and 97-142. This

provision is subject to the following exceptions and conditions:

(i) The applicant shall not initiate such service on a particular

route absent a grant of specific authority under paragraph (e)(6) of

this section in circumstances where the applicant is affiliated with a

carrier in the country at the foreign end of the private line and the

Commission has not determined that the foreign carrier lacks sufficient

market power in the country at the foreign end of the private line to

affect competition adversely in the U.S. market. See Sec. 63.10(a).

(ii) The applicant is subject to all applicable Commission rules

and regulations, including the limitation Sec. 63.21 on the use of

private lines for the provision of switched services, and any

conditions stated in the Commission's public notice or order that

serves as the applicant's Section 214 certificate. See Secs. 63.12,

63.21.

(A) Except as provided in paragraph (e)(4)(ii)(B) of this section,

any carrier that seeks to provide international switched basic services

over its authorized private line facilities between the United States

and a WTO Member country for which the Commission has not previously

authorized the provision of switched services over private lines shall

demonstrate that settlement rates for at least 50 percent of the

settled U.S.-billed traffic between the United States and the country

at the foreign end of the private line are at or below the benchmark

settlement rate adopted for that country in IB Docket No. 96-261 or

that the country affords resale opportunities equivalent to those

available under U.S. law. With regard to showing that a destination

country affords resale opportunities equivalent to those available

under U.S. law, an applicant shall include the information required by

paragraph (e)(3) of this section.

(B) No formal application is required under paragraph (e)(4) of

this section 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.

(5) If applying for authority to acquire facilities through the

transfer of control of a common carrier holding international Section

214 authorization, or through the assignment of another carrier's

existing authorization, the applicant shall complete paragraphs (a)

through (d) of this section for both the transferor/assignor and the

transferee/assignee. Paragraph (g) of this section is not applicable,

and only the transferee/assignee needs to complete paragraphs (h)

through (k) of this section. At the beginning of the application, the

applicant should also include a narrative of the means by which the

transfer or assignment will take place. The Commission reserves the

right to request additional information as to the particulars of the

transaction to aid it in making its public interest determination.

(6) If applying for authority to acquire facilities or to provide

services not covered by Sec. 63.18(e) (1) through (5), the applicant

shall provide a description of the facilities and services for which it

seeks authorization. Such description also shall include any additional

information the Commission shall have specified previously in an order,

public notice or other official action as necessary for authorization.

Applicants for new submarine cable facilities also shall include a list

of the proposed owners of the cable, their voting interests and

ownership interests by segment in the cable.

* * * * *

(h) 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 percent ownership of capital stock, or

controlling interest at 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 percent 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, which includes entities

authorized to engage in the provision of domestic telecommunications

services if such carriers have the ability to originate or terminate

telecommunications services to or from points outside their country.

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

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

its ten 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

[[Page 64757]]

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 (h)(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 and carrier authorized to provide international

communications service under this part is responsible for the

continuing accuracy of the certifications required by paragraphs (h)(1)

through (3) 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 thirty days file with the

Secretary in duplicate a corrected certification referencing the FCC

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

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

in regulatory status may be warranted under Sec. 63.10.

(5) Any applicant that seeks to operate as a U.S. facilities-based

international carrier to a particular country and that is a foreign

carrier in that country, or directly or indirectly controls a foreign

carrier in that country, or has an affiliation within the meaning of

paragraph (h)(1)(i)(B) of this section with a foreign carrier in that

country shall provide the following information:

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

country) is a Member of the World Trade Organization; or

(ii) The applicant's affiliated foreign carrier lacks sufficient

market power in the named foreign country to affect competition

adversely in the U.S. market; or

(iii) The named foreign country provides effective competitive

opportunities to U.S. carriers to compete in that country's

international facilities-based market. An effective competitive

opportunities demonstration should address the following factors:

(A) The legal ability of U.S. carriers to enter the foreign market

and provide facilities-based international services, in particular

international message telephone service (IMTS);

(B) 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;

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

protect against anticompetitive practices, including safeguards such

as:

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

prevent cross-subsidization;

(2) Timely and nondiscriminatory disclosure of technical

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

and

(3) Protection of carrier and customer proprietary information;

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

foreign country to develop, implement and enforce legal requirements,

interconnection arrangements and other safeguards; and

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

demonstration.

(6) Any applicant that proposes to resell the international

switched or non-interconnected private line services of another U.S.

carrier for the purpose of providing international communications

services to the named foreign country and that is a foreign carrier in

that country, or directly or indirectly controls a foreign carrier in

that country, or has an affiliation within the meaning of paragraph

(h)(1)(i)(B) of this section with a foreign carrier in the destination

country shall provide the following information (see also paragraph

(h)(7) of this section):

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

country) is a Member of the World Trade Organization; or

(ii) The applicant's affiliated foreign carrier lacks sufficient

market power in the named foreign country to affect competition

adversely in the U.S. market; or

(iii) The named foreign country provides effective competitive

opportunities to U.S. carriers to resell international switched or non-

interconnected private line services, respectively. An effective

competitive opportunities demonstration should address the following

factors:

(A) The legal 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);

(B) Whether there exist reasonable and nondiscriminatory charges,

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

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

protect against anticompetitive practices, including safeguards such

as:

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

prevent cross-subsidization;

(2) Timely and nondiscriminatory disclosure of technical

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

and

(3) Protection of carrier and customer proprietary information;

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

foreign country to develop, implement and enforce legal requirements,

interconnection arrangements and other safeguards; and

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

demonstration.

(7) Any applicant that proposes to resell the international

switched services of an unaffiliated U.S. carrier for the purpose of

providing international communications services to the named foreign

country and that is a foreign carrier in that country or has an

affiliation with a foreign carrier in that country shall either provide

in its application a showing that would satisfy Sec. 63.10(a)(3) or

state that it will file the quarterly traffic reports required by

Sec. 43.61(c) of this chapter.

(8) With respect to regulatory classification under Sec. 63.10,

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 particular international

communications services to that country should provide information in

its application to demonstrate that it qualifies for non-dominant

classification pursuant to Sec. 63.10.

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

to accept special concessions directly or indirectly from any foreign

carrier with respect to any U.S. international route where the foreign

carrier possesses sufficient market power on the foreign end of the

route to affect competition adversely in the U.S. market and will not

enter into such agreements in the future. This certification 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. For purposes of this section, ``special concession'' is

defined in Sec. 63.14(b) and ``foreign carrier'' is defined in

paragraph (h)(1)(ii) of this section.

* * * * *

(k) If the applicant desires streamlined processing pursuant to

[[Page 64758]]

Sec. 63.12, a statement of how the application qualifies for

streamlined processing.

9. Sec. 63.21 is amended to revise paragraph (a); to redesignate

paragraph (e) as paragraph (h); and to add paragraphs (e), (f), and (g)

to read as follows:

Sec. 63.21 Conditions applicable to international Section 214

authorizations.

* * * * *

(a) Carriers may not use their authorized facilities-based or

resold international private lines for the provision of switched basic

services between the United States and a WTO Member country unless and

until the Commission has determined that the country at the foreign end

of the private line provides equivalent resale opportunities or that

settlement rates for at least 50 percent of the settled U.S.-billed

traffic between the United States and that country are at or below the

benchmark settlement rate adopted for that country in IB Docket No. 96-

261 (this document is available at the FCC's Reference Operations

Division, Washington, D.C. 20554, and on the FCC's World Wide Web Site

at http://www.fcc.gov). Carriers may not use their authorized

facilities-based or resold international private lines for the

provision of switched basic services between the United States and a

non-WTO Member country unless and until the Commission has determined

that the country at the foreign end of the private line provides

equivalent resale opportunities and that settlement rates for at least

50 percent of the settled U.S.-billed traffic between the United States

and that country are at or below the benchmark settlement rate adopted

for that country in IB Docket No. 96-261. (See Sec. 63.18(e)(3)-(4).)

If at any time the Commission finds, after an initial determination of

compliance for a particular country, that the country no longer

provides equivalent resale opportunities or that market distortion has

occurred in the routing of traffic between the United States and that

country, carriers shall comply with enforcement actions taken by the

Commission. This condition shall not apply to a carrier's use of its

authorized facilities-based private lines to provide service as

described in Sec. 63.18(e)(4)(ii)(B).

* * * * *

(e) Authorized carriers may not access or make use of specific U.S.

customer proprietary network information that is derived from a foreign

network unless the carrier obtains approval from that U.S. customer. In

seeking to obtain approval, the carrier must notify the U.S. customer

that the customer may require the carrier to disclose the information

to unaffiliated third parties upon written request by the customer.

(f) Authorized carriers may not receive from a foreign carrier any

proprietary or confidential information pertaining to a competing U.S.

carrier, obtained by the foreign carrier in the course of its normal

business dealings, unless the competing U.S. carrier provides its

permission in writing.

(g) The Commission reserves the right to review a carrier's

authorization, and, if warranted, impose additional requirements on

U.S. international carriers in circumstances where it appears that harm

to competition is occurring on one or more U.S. international routes.

* * * * *

PART 64--MISCELLANEOUS RULES RELATING TO COMMON CARRIERS

1. The authority citation of Part 64 is revised to read as follows:

Authority: 47 U.S.C. 154, 254(k). Interpret or apply 47 U.S.C.

201, 218, 226, 228, 254(k), 276 unless otherwise noted.

2. Sec. 64.1001 is amended by revising paragraphs (b), (c), and (d)

to read as follows:

Sec. 64.1001 International settlements policy and modification

requests.

* * * * *

(b) If the accounting rate referred to in Sec. 43.51(e)(1) of this

chapter is lower than the accounting rate in effect in the operating

agreement of another carrier providing service to or from the same

foreign point, and there is no modification in the other terms and

conditions referred to in Sec. 43.51(e)(1) of this chapter, the carrier

must file a notification letter under paragraph (e) of this section.

(c) If the amendment referred to in Sec. 43.51(e)(2) of this

chapter is a simple reduction in the accounting rate, and there is no

modification in the other terms and conditions referred to in

Sec. 43.51(e)(2) of this chapter, the carrier must file a notification

letter under paragraph (e) of this section.

(d) If the operating agreement or amendment referred to in

Secs. 43.51(e)(1) and (e)(2) of this chapter is not subject to

notification under paragraphs (b) and (c) of this section, the carrier

must file a modification request under paragraph (f) of this section.

* * * * *

3. Sec. 64.1002 is revised to read as follows:

Sec. 64.1002 Alternative settlement arrangements.

(a) A communications common carrier engaged in providing switched

voice, telex, telegraph, or packet switched service between the United

States and a foreign point may seek approval to enter into an operating

agreement with a foreign telecommunications administration containing

an alternative settlement arrangement that does not comply with the

requirements of Sec. 43.51(e)(1) and Sec. 63.14 of this chapter and

Sec. 64.1001 by filing a petition for declaratory ruling in compliance

with the requirements of this section.

(b) A petition for declaratory ruling must contain the following:

(1) Information to demonstrate that:

(i) The alternative settlement arrangement is on a route between

the United States and a World Trade Organization Member; or

(ii) For an alternative settlement arrangement on a route between

the United States and a non-World Trade Organization Member:

(A) The Commission has made a previous determination that the

effective competitive opportunities test in Sec. 63.18(h)(5)(iii) of

this chapter has been satisfied on the route covered by the alternative

settlement arrangement; or

(B) The effective competitive opportunities test in

Sec. 63.18(h)(5)(iii) of this chapter is satisfied on the route covered

by the alternative settlement arrangement; or

(iii) The alternative settlement arrangement is otherwise in the

public interest.

(2) A certification as to whether the alternative settlement

arrangement affects more than 25 percent of the outbound traffic or 25

percent of the inbound traffic on the route to which the alternative

settlement arrangement applies.

(3) A certification as to whether the parties to the alternative

settlement arrangement are affiliated, as defined in

Sec. 63.18(h)(1)(i) of this chapter, or involved in a non-equity joint

venture affecting the provision of basic services on the route to which

the alternative settlement arrangement applies.

(4) A copy of the alternative settlement arrangement if it affects

more than 25 percent of the outbound traffic or 25 percent of the

inbound traffic on the route to which the alternative settlement

arrangement applies, or if it is between parties that are affiliated,

as defined in Sec. 63.18(h)(1)(i) of this chapter, or that are involved

in a non-equity joint venture affecting the provision of basic services

on the route

[[Page 64759]]

to which the alternative settlement arrangement applies.

(5) A summary of the terms and conditions of the alternative

settlement arrangement if it does not come within the scope of

paragraph (b)(4) of this section. However, upon request by the

International Bureau, a full copy of such alternative settlement

arrangement must be forwarded promptly to the International Bureau.

(c) If the petition for declaratory ruling contains a certification

under paragraph (b)(1)(i) of this section that the proposed alternative

settlement arrangement is for service on a route between the United

States and a World Trade Organization Member, a party may oppose the

petition under paragraph (f) of this section with a showing that the

participating carrier on the foreign end of the route does not have

multiple (more than one) international facilities-based competitors. In

such a case, the petitioning party may make a showing under paragraph

(b)(1)(iii) of this section, pursuant to paragraph (g) of this section.

(d) An alternative settlement arrangement filed for approval under

this section cannot become effective until the petition for declaratory

ruling required by paragraph (a) of this section has been granted under

paragraph (f) of this section.

(e) On the same day the petition for declaratory ruling has been

filed, the filing carrier must serve a copy of the petition on all

carriers providing the same or similar service with the foreign carrier

identified in the petition.

(f) All petitions for declaratory ruling shall be subject to a 21-

day pleading period for objections or comments, commencing the day

after the date of public notice listing the petition as accepted for

filing. A petition for declaratory ruling shall be deemed granted as of

the 28th day without any formal staff action provided that:

(1) The petition is not formally opposed by a pleading meeting the

following criteria:

(i) The caption and text of the pleading make it unmistakably clear

that the pleading is intended to be a formal opposition;

(ii) The pleading is served upon the other parties to the

proceeding; and

(iii) the pleading is filed within the time period prescribed; or

(2) The International Bureau has not notified the filing carrier

that grant of the petition may not serve the public interest and that

implementation of the proposed alternative settlement arrangement must

await formal staff action on the petition.

(g) If objections or comments are filed, the petitioning carrier

may file a response pursuant to Sec. 1.45 of this chapter. Petitions

that are formally opposed must await formal action by the International

Bureau before the proposed alternative settlement arrangement may be

implemented.

[FR Doc. 97-32013 Filed 12-5-97; 10:03 am]

BILLING CODE 6712-01-P