Biennial Review of the Reform of the International Settlements Policy and Associated Filing Requirements

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 0, 43, 63, and 64

[IB Docket Nos. 98-148, 95-22, CC Docket No. 90-337 (Phase II), FCC 99-

73]

Biennial Review of the Reform of the International Settlements

Policy and Associated Filing Requirements

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: This document removes outdated rules that govern the manner in

which U.S. international telecommunications carriers relate to foreign

carriers that provide service in competitive markets. The Commission

concludes that it should remove the existing international settlements

policy (ISP): for settlement arrangements between U.S. carriers and

foreign telecommunications carriers that lack market power; and for all

settlement arrangements on routes where U.S. carriers are able to

terminate at least 50 percent of their U.S. billed traffic in the

foreign market at rates that are at least 25 percent below the

applicable benchmark settlement rate.

The Commission believes that the new rules will create greater

incentives for U.S. carriers to adopt business strategies that will

enable them to obtain low rates to terminate U.S. traffic in foreign

markets.

DATES: These rules contain information collections that have not been

approved by OMB. The Commission will publish a document in the Federal

Register announcing the effective date of these rules. Public and

agency comments are due on the information collections August 30, 1999.

FOR FURTHER INFORMATION CONTACT: Robert McDonald, Policy and Facilities

Branch, Telecommunications Division, International Bureau, (202) 418-

1470.

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

and Order, FCC 99-73, adopted on April 15, 1999, and released on May 6,

1999. The full text of this document is available for inspection and

copying during normal business hours in the FCC Reference Center (Room

CY-A257) of the Federal Communications Commission, 445 12th Street, SW,

Washington, DC 20554. The document is also available for download over

the Internet at http://www.fcc.gov/bureaus/international/orders/1999/

fcc99073.wp. The complete text of this Order also may be purchased from

the Commission's copy contractor, International Transcription Service,

Inc., 1231 20th Street, N.W., Washington, D.C. 20036, (202) 857-3800.

This document contains information collections subject to the

Paperwork Reduction Act of 1995 (PRA). 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 will be invited to

comment on the modified information collections contained in this

proceeding.

Summary of Report and Order

1. In August 1998, the Commission issued a Notice of Proposed

Rulemaking (63 FR 44224, August 18, 1998) in which it proposed

substantial changes in the way it regulates international

telecommunications carriers' relations with their foreign counterparts.

The Commission initiated this proceeding pursuant to Section 11 of the

Telecommunications Act of 1996, 47 U.S.C.161, which directs the

Commission to undertake a review on every even-numbered year of all

regulations that apply to operations or activities of any provider of

telecommunications service and to repeal or modify any regulation it

determines to be no longer necessary in the public interest. In this

proceeding the Commission adopts most of the proposals contained in the

Notice and implements procedures that will grant regulatory relief to

carriers while increasing the efficiency of the Commission.

2. The Commission finds that removing the ISP and related filing

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requirements between U.S. carriers and foreign carriers that lack

market power in foreign markets would remove unnecessary regulatory

burdens on U.S. carriers and at the same time future competition in the

U.S. international services market. The vast majority of commenting

parties support this change in Commission policy.

3. The Commission adopted the ISP and related filing requirements

to prevent whipsawing by a foreign monopoly carrier. Where the carrier

in the foreign market lacks market power, however, its ability to

whipsaw U.S. carriers is substantially diminished, if not eliminated.

Except in unusual circumstances, a U.S. carrier that is faced with an

attempt at whipsawing by a foreign carrier that lacks market power on

the foreign end of a particular route may respond by entering an

agreement with a different foreign carrier on the route. The Commission

thus concludes that the ISP is not necessary to prevent whipsawing for

settlement arrangements with foreign carriers that lack market power.

4. The Commission will no longer require U.S. carriers that

conclude arrangements with foreign carriers that lack market power in

the foreign market to comply with the terms of the ISP or its contract

filing requirements. Instead, the Commission finds that a policy that

promotes the conclusion of unrestricted commercial arrangements between

U.S. carriers and foreign carriers that lack market power in the

foreign market will best further our goal of promoting competition in

the international services market. The Commission finds that its 47 CFR

43.51 contract filing requirement should no longer apply to any U.S.

carrier arrangement with a foreign carrier that lacks market power.

5. In determining whether it should continue to apply the ISP, the

Commission adopts a presumption that a foreign carrier lacks market

power when it possesses less than a 50 percent market share in each of

the relevant foreign markets.

6. The Commission finds that it is necessary to adopt a mechanism

to ensure that carriers enter into arrangements that deviate from the

ISP only with carriers that lack market power in the foreign market,

and that a relaxation of the ISP would not enable U.S. carriers to

enter into arrangements that deviate from the ISP with foreign carriers

that could exercise their market power to the detriment of U.S.

consumers. The Commission will therefore make an affirmative finding to

determine which carriers possess market power in specific foreign

markets, and make a list of such carriers public. Carriers would thus

be precluded from exchanging traffic outside of the ISP with carriers

on the list unless otherwise allowed. The Commission finds that this

approach will best advance its policy of allowing U.S. carriers to

enter into arrangements with foreign carriers that lack market power

with a minimum of regulatory oversight, while maintaining the ISP for

certain arrangements with foreign carriers that possess market power in

the foreign market. The Commission's rules include a presumption that a

foreign carrier does not possess market power in a foreign market if it

possesses less than 50 percent market share in each of the relevant

foreign markets. The Commission thus issues, concurrently with the

release of this Order, a public notice containing a list of foreign

carriers that it believes do not qualify for this presumption, for the

purposes of identifying arrangements that are not required to comply

with the ISP and the Commission's No Special Concessions rule. This

list is based on publicly available information, compiled from official

sources, including the International Telecommunication Union (ITU).

(Public Notice, DA 99-809, published elsehwere in this issue.)

Interested parties may challenge the inclusion or exclusion of any

carrier on the list by submitting a petition for declaratory ruling and

the appropriate supporting documentation to demonstrate that a carrier

included on the list lacks market power or that a carrier excluded from

the list has market power. The Commission may also amend the list on

its own motion. The list will be updated periodically and posted on the

Commission's web page at http://www.fcc.gov/ib. Carriers are

responsible for ensuring that arrangements they enter into outside of

the ISP comply with the Commission's rules in the event of additions to

the list.

7. The Commission amends Sections 43.51 and 64.1001 to remove the

ISP and related contract filing requirements for arrangements between

U.S. carriers and foreign carriers that lack market power. Section

43.51 will also specify procedures for modifying the list of foreign

carriers that do not qualify for the presumption that they lack market

power. The Commission also amends its No Special Concessions Rule,

Section 63.14, to eliminate the requirement that a carrier seeking to

enter into an exclusive arrangement with a foreign carrier that lacks

market power submit with the Section 43.51 contract filing (which the

Commission here eliminates) information to demonstrate that the foreign

carrier lacks market power. This rule change will permit carriers to

rely on the Commission's published list of foreign carriers for

purposes of determining which foreign carriers are the subject of the

prohibitions contained in Section 63.14.

8. The Commission concludes that it would serve the public interest

to remove the ISP completely on certain routes, including for

arrangements with foreign carriers that possess market power in the

foreign market. The Commission finds that lifting the ISP has

significant merits where the potential harm due to a foreign carrier's

abuse of market power is limited. The Commission declines, however, to

adopt the standard proposed in the Notice to remove the ISP on all

routes where it currently allows international simple resale (ISR).

Instead, the Commission removes the ISP completely only on those routes

where U.S. carriers have the ability to settle U.S. traffic at rates

that are 25 percent below the benchmark, or less. The Commission

believes this provides the proper balance between, on the one hand, its

goal in this proceeding of eliminating regulations that impede the

development of competition, and, on the other hand, the longstanding

goal of the ISP of preventing anticompetitive behavior that can harm

U.S. consumers. The Commission also finds that on those routes where

U.S. carriers have the ability to settle U.S. traffic at rates that are

25 percent below the benchmark, or less, the ISP is no longer

necessary, regardless of whether the foreign country is a WTO Member or

a non-WTO Member country. The Commission therefore repeals this rule,

as applied in such cases, as it is no longer in the public interest.

9. The Commission further finds that it is not necessary to require

all traffic that is terminated in a foreign market to be settled at 25

percent below the applicable benchmark settlement rate, or less, in

order to lift the ISP. Rather, the Commission finds that removing the

ISP where at least 50 percent of U.S.-billed traffic is terminated at

such rates will ensure that the ISP is maintained only where it is

necessary. The Commission finds that the ability of U.S. carriers to

terminate at least 50 percent of the U.S.-billed traffic in the foreign

market at rates that are 25 percent below the benchmark rate or less is

convincing evidence that competitive pressures exist in the foreign

market to constrain the market power of the foreign carrier. The

Commission thus finds that where at least 50 percent of traffic is

terminated at rates 25 percent lower than the

[[Page 34736]]

benchmark, or less, a foreign carrier is unlikely to have the ability

to exercise market power to harm U.S. consumers and that the ISP is

thus unnecessary.

10. The Commission will amend its rules establishing procedures for

carriers seeking to enter into an arrangement that does not comply with

the ISP with a foreign carrier that possesses market power on a route

for which the ISP has not previously been lifted. Such carriers must

file a petition for declaratory ruling that at least 50 percent of

U.S.-billed traffic on the route is terminated in the foreign market at

rates that are 25 percent below the benchmark settlement rate, or less.

For upper income routes, 25 percent below the benchmark rate is 11.25

cents; for upper middle income routes, 25 percent below the benchmark

rate is 14.25 cents; and for lower income routes, 25 percent below the

benchmark rate is 17.25 cents. Carriers filing such petitions should

include the appropriate supporting documentation demonstrating that the

route qualifies for exemption from the ISP. Such documentation may

include settlement rate or other data published by the Commission. The

Commission will issue a public notice upon the filing of such a

petition and may, in each case, determine an appropriate deadline for

filing comments. Unopposed requests may be granted by public notice.

The Commission will publish and periodically update a list of

international routes exempt from the ISP on the Commission's web page

at http://www.fcc.gov/ib.

11. The Commission also concludes here that it should amend its

filing requirements to allow that settlement rate information and

copies of contracts required to be filed under Section 43.51 be filed

confidentially for arrangements with foreign carriers that possess

market power on routes where it removes the ISP. The Commission finds

that requiring carriers to file copies of arrangements entered into

with foreign carriers that possess market power in the relevant foreign

telecommunications markets provides a valuable tool to ensure that U.S.

carriers do not enter into arrangements that would allow the foreign

carrier to exercise its market power to the detriment of U.S.

consumers. The Commission will therefore amend Sections 43.51 and

64.1001 of the Commission's rules to require carriers that exchange

traffic with foreign carriers that possess market power on routes where

it has lifted the ISP to file information on rates paid for the

origination and/or termination of international traffic and copies of

their contracts with these foreign carriers with the Commission. Such

information may be filed with the Commission under confidential seal.

This filing requirement covers all arrangements between U.S. and

foreign carriers that possess market power, including arrangements

currently classified as ISR arrangements and alternative settlement

arrangements. The Commission finds that a confidential filing

requirement will adequately deter the kind of anticompetitive conduct

in which affiliated carriers or joint venture partners could engage.

12. Removing the ISP could exacerbate the concern about

anticompetitive behavior by allowing a foreign carrier to adopt a

strategy that would raise the costs of its U.S. affiliate's rivals and

thus improve the position of the joint enterprise. The Commission finds

that on routes where it removes the ISP, the danger of harm from such

action, generally, is significantly reduced. Due to heightened concern

about anticompetitive arrangements between U.S. carriers and their

affiliates and joint venture partners, however, the Commission finds it

necessary to adopt an additional safeguard to deter such arrangements.

The Commission adopts a safeguard that prohibits U.S. carriers that are

affiliated or non-equity joint venture partners with foreign carriers

that possess market power in the foreign market from entering into

arrangements that may present a significant adverse impact on

competition on the international route. If the Commission finds that

carriers have entered into such arrangements, the Commission reserves

the right to take appropriate action to remedy the situation, including

reimposing the ISP on the route.

13. In 1996, the Commission adopted the Flexibility Order (62 FR

5535, February 6, 1997), which established a framework for permitting

flexibility in its accounting rate policies where appropriate market

and regulatory conditions exist. Under the flexibility policy, the

Commission maintains a presumption in favor of allowing flexible

settlement arrangements with carriers in WTO Member markets that can be

rebutted only by a showing that the foreign carrier that is a party to

the flexible settlement arrangement does not face competition from

multiple facilities-based carriers. The Commission finds here, that the

changes it makes in this Order to exempt from the ISP arrangements

between U.S. and foreign carriers that lack market power, and between

U.S. and all foreign carriers on routes that allow U.S. carriers to

terminate at least 50 percent of their traffic at rates that are at

least 25 percent below the applicable benchmark settlement rate largely

supersede the policies adopted in the Flexibility Order. The Commission

therefore finds that maintaining the flexibility policies and

procedures would needlessly complicate its accounting rate policies.

The Commission eliminates the flexibility policy and therefore removes

Section 64.1002 of its rules.

14. The Commission finds, however, that there may be unforeseen

circumstances in which it may be in the public interest to allow an

arrangement with a foreign carrier with market power to deviate from

the ISP, even though the standard for removing the ISP has not been

met. The Commission will therefore entertain waivers of the ISP for

individual settlement arrangements. Among the factors the Commission

will consider are whether granting such a waiver would promote the

public interest in achieving cost-based rates for terminating

international traffic, while precluding the abuse of foreign market

power.

15. The Commission finds that there is no valid reason to apply the

No Special Concessions rule to the terms and conditions under which

traffic is settled, including the allocation of return traffic, on a

route where the Commission removes the ISP. It makes no sense for the

No Special Concessions rule to impose a nondiscrimination requirement

for settlement arrangements on routes where it removes the ISP. The

point of removing the ISP is to allow market forces to determine the

types of arrangements into which carriers enter. The Commission

therefore will amend Section 63.14 of the Commission's rules to clarify

that the No Special Concessions rule does not apply to the terms and

conditions under which traffic is settled, including the allocation of

return traffic, on routes where the Commission removes the ISP. The

Commission also finds that the No Special Concessions rule should apply

to interconnection of international facilities, private line

provisioning and maintenance, and quality of service on routes where

the Commission removes the ISP. The Commission finds that there is

still a risk of anticompetitive conduct for arrangements with foreign

carriers that possess market power, even on routes where the Commission

removes the ISP. The Commission therefore will maintain the No Special

Concessions rule, as modified above, on all routes, regardless of

whether the ISP applies.

16. In the Notice, the Commission sought comment on whether

removing the ISP and related filing requirements may allow carriers to

enter into

[[Page 34737]]

arrangements that may have anticompetitive effects. In particular, the

Commission noted that U.S. carriers have, in the past, expressed

concern regarding whether their competitors may negotiate arrangements

to accept ``groomed'' traffic, i.e. traffic that terminates in

particular geographic regions. The Commission finds that the danger of

anticompetitive effects of grooming arrangements are unlikely. The

Commission therefore finds that a prohibition against incumbent local

exchange carriers accepting ``groomed'' international traffic is

unnecessary.

17. Given its conclusion that grooming arrangements are not a cause

for concern on routes where it has removed the ISP, the Commission

hereby removes the condition imposed on Bell Operating Company

international Section 214 certificates, which required these carriers

to obtain prior Commission approval of grooming arrangements.

18. The Commission sought comment in the Notice on whether it

should continue to afford carriers the option of filing either a

notification or a modification notice for simple changes in accounting

rates negotiated with foreign carriers. The Commission finds that

adopting a single procedure for accounting rate changes will simplify

its regulatory structure and avoid confusion for parties seeking to

make the required filings with the Commission. The Commission therefore

adopts its proposal to remove the option of filing a notification and

require that all accounting rate filings be governed under the existing

procedures for accounting rate modifications.

19. The Commission also sought comment on the extent to which it

should continue to require that carriers making accounting rate filings

serve every carrier that provides service on the international route

with a copy of the filing. The Commission noted that the number of

international carriers is growing on many routes and sought comment on

whether another approach is warranted. The Commission also noted that

it had been urged to require that accounting rate filings be placed on

public notice, as is required for petitions seeking approval of

flexible settlement arrangements. Further, the Commission noted that it

has introduced an electronic filing mechanism for accounting rate

filings, and that information contained in such filings would be

available on the Commission's web site at http://www.fcc.gov/ib. The

Commission's electronic filing system for accounting rate filings was

introduced very recently, however, and the Commission has not had

sufficient experience with the system to determine whether the

information available on the Commission's web site will be an adequate

substitute for the existing service requirement. The Commission

therefore declines to remove the existing service requirement at this

time. The Commission anticipates, however, that it may remove the

service requirement in the near future, as it continues to implement

the new electronic filing system. The Commission will therefore

eliminate the existing service requirement within 3 months of the

release of this Order. The Commission delegates to the Chief,

International Bureau the authority to implement this change and direct

the International Bureau to issue a Public Notice at that time to make

this change in the Commission's rules.

20. The Commission also has pending two remaining issues on

reconsideration of the Foreign Carrier Entry Order (60 FR 6732,

December 29, 1995; 61 FR 4937, February 9, 1996). In that order, the

Commission adopted the requirement that U.S. facilities-based carriers

obtain separate Section 214 authority and demonstrate that equivalency

exists when such carriers seek to provide ISR over their facilities-

based U.S. international private lines. The Commission adopted an

exception to this general rule, however, to permit a carrier to use its

U.S. facilities-based private lines to carry switched traffic without

demonstrating equivalency where two conditions are met: (1) the private

line is interconnected to the public switched network on one end only--

either the U.S. end or the foreign end; and (2) the foreign

correspondent with which the U.S. facilities-based carrier is

interchanging switched traffic is not the owner of the underlying

foreign private line half-circuit. The Commission finds above that

there are significant public interest benefits to permitting U.S.

facilities-based carriers to provide switched services, without

limitation, outside the ISP in correspondence with foreign carriers

that lack market power. In light of this conclusion, the provision the

Commission adopted in the Foreign Carrier Entry Order permitting one-

end interconnection by U.S. facilities-based carriers is superfluous.

The Commission's decision to lift the ISP for all U.S. carrier

arrangements with foreign carriers that lack market power thus

effectively subsumes the rule that permits one-end interconnection by

U.S. facilities-based carriers. The Commission therefore eliminates

that rule.

21. British Telecommunications North America (BTNA) seeks

reconsideration of the Commission's decision not to allow resellers on

the U.S. end to offer one-end interconnection services. The Commission

finds merit to BTNA's argument that U.S. private line resellers should

be accorded the same regulatory freedom as U.S. facilities-based

carriers to exchange switched traffic in correspondence with foreign

carriers that lack market power. The Commission therefore modifies its

rules to permit U.S.-authorized private line resellers to interconnect

their private lines to the public switched network, at one or both

ends, for the provision of switched basic services, and thus, to engage

in ISR in either of the following circumstances: (1) on any route where

the resale carrier exchanges switched traffic with a foreign carrier

that lacks market power; or (2) on any route for which the Commission

has authorized the provision of ISR. This rule supersedes the condition

that appears in the Section 214 authorizations of private line

resellers that limits their ability to resell interconnected private

lines to routes for which the Commission have authorized ISR.

22. The Commission also directs all U.S. private line carriers to

amend their international private line tariffs to track the policy and

rules the Commission adopts in this Order. In particular, the

Commission shall require that a carrier's tariff explicitly state the

Commission's policy that the private line user may engage in resale of

the international private line for the provision of a switched, basic

telecommunications service upon authorization from the Commission under

Section 214 of the Communications Act of 1934, as amended, and provided

that the private line is used only on a route where the resale carrier

exchanges switched traffic with a foreign carrier that the Commission

has determined lacks market power; or on any route for which the

Commission has authorized the provision of switched services over

private lines. Carriers will be required to amend their international

private line tariffs within ten days after the effective date of the

rules adopted in this order.

Final Regulatory Flexibility Certification

23. The Regulatory Flexibility Act (RFA), 5 U.S.C. 601 et seq.,

requires that a regulatory flexibility analysis be prepared for notice-

and-comment rulemaking proceedings, unless the agency certifies that

``the rule will not, if promulgated, have a significant economic impact

on a substantial number of small entities.'' The RFA generally defines

``small entity'' as having the same meaning as the terms

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``small business,'' ``small organization,'' and ``small governmental

jurisdiction.'' In addition, the term ``small business'' has the same

meaning as the term ``small business concern'' under the Small Business

Act. A small business concern is one which: (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).

24. In the Notice in this proceeding, the Commission certified that

the proposed rules ``[would] not, if promulgated, have a significant

economic impact on a substantial number of small entities.'' No

comments were received concerning this certification. The purposes of

this proceeding are to eliminate some regulatory requirements and to

simplify and clarify other existing rules. These rule changes will

affect facilities-based international telecommunications carriers

exclusively--in particular, approximately 10 facilities-based

international telecommunications carriers. Neither the Commission nor

SBA has developed a small business definition specifically applicable

to such international carriers; therefore, the Commission will utilize

the definition under the SBA rules for Communications Services, Not

Elsewhere Classified (NEC). Under this definition, a small business is

one with $11.0 million or less in annual receipts. Based on information

filed with the Commission, the subject facilities-based international

telecommunications carriers do not fall within the above definition of

``small business'' because they each have more than $11.0 million in

annual receipts. The rule modifications at issue do not impose any

additional compliance burden on persons dealing with the Commission,

including small entities. Rather, this action removes filing

requirements in scaling back application of the Commission's

International Settlements policy. Accordingly, the Commission

certifies, pursuant to the RFA, that the rules adopted herein will not

have a significant economic impact on a substantial number of small

entities. The Commission will send a copy of the Report and Order and

Order on Reconsideration, including a copy of this final certification,

in a report to Congress pursuant to the Small Business Regulatory

Enforcement Fairness Act of 1996, see 5 U.S.C. 801(a)(1)(A). In

addition, the Report and Order and Order on Reconsideration and this

certification will be sent to the Chief Counsel for Advocacy of the

Small Business Administration, and will be published in the Federal

Register. See 5 U.S.C. 605(b).

Supplemental Final Regulatory Flexibility Analysis

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

Regulatory Flexibility Analysis (IRFA) was incorporated in the Notice

in IB Docket No. 95-22, and a Final Regulatory Flexibility Analysis

(FRFA) was incorporated into the Report and Order in that docket. The

Order contains a Supplemental Final Regulatory Flexibility Analysis

(Supplemental FRFA) which conforms to the RFA.

26. Need for, and Objectives of, the Present Action. This action

creates greater opportunities for U.S. international private line

resellers to carry U.S. international traffic outside of the

settlements process. It also harmonizes the treatment of private line

resellers with that of facilities-based carriers.

27. Summary of Significant Issues Raised by Reconsideration

Petitions. No petitions were received in direct response to the FRFA in

the Report and Order, nor were small business issues raised.

28. Description and Estimate of the Number of Small Entities to

which the Rules Will Apply. As noted in the associated Final Regulatory

Flexibility Certification in IB Docket No. 98-148, supra, the RFA

directs agencies to provide a Regulatory Flexibility Analysis in

notice-and-comment rulemaking proceedings, unless the agency certifies

that ``the rule will not, if promulgated, have a significant economic

impact on a substantial number of small entities.'' The Commission's

action on reconsideration in IB Docket No. 95-22 will affect

telecommunications resellers, including resellers that are small

businesses; therefore, the Commission incorporates this present

Supplemental FRFA into its Report and Order and Order on

Reconsideration.

29. In light of the petitions for reconsideration in IB Docket No.

95-22, the Commission modifies its rules to allow U.S. international

private line resellers to carry switched traffic over international

private line circuits in correspondence with foreign carriers that lack

market power. The Commission expects that these changes will allow U.S.

private line resellers, including small entities, to take advantage of

new opportunities in the international telecommunications marketplace.

As noted in the associated certification, supra, in instances where

neither the Commission nor the SBA has developed a small business

definition specifically applicable to the entities potentially affected

by its action, the Commission utilizes the pertinent definition under

the SBA rules. Here, neither the Commission nor the SBA has developed a

definition of small entities specifically applicable to resellers. The

closest applicable SBA definition for a reseller is a telephone

communications company other than a radiotelephone (wireless) company.

The Commission describes available statistics for telecommunications

entities generally, including resellers, then give more particular

information on resellers.

30. The SBA has developed a small business definition for

establishments engaged in providing ``Telephone Communications, Except

Radiotelephone'' (wireless) to be such businesses having no more than

1,500 employees. The U.S. Bureau of the Census reports that there were

2,321 such telephone companies in operation for at least one year at

the end of 1992. All but 26 of the 2,321 non-radiotelephone companies

listed by the Census Bureau were reported to have fewer than 1,000

employees. Thus, even if all 26 of those companies had more than 1,500

employees, there would still be 2,295 non-radiotelephone companies that

might qualify as small entities. The Commission does not have data

specifying the number of these carriers that are not independently

owned and operated, and thus are unable at this time to estimate with

greater precision the number of wireline carriers and service providers

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

definition. Consequently, the Commission estimates that fewer than

2,295 small telephone communications companies other than

radiotelephone companies are small entities that may be affected by

present action.

31. The most reliable source of information regarding the total

numbers of certain common carrier and related providers nationwide, as

well as the numbers of commercial wireless entities, appears to be data

the Commission publishes annually in its Telecommunications Industry

Revenue report, regarding the Telecommunications Relay Service (TRS).

According to TRS data, 339 reported that they were engaged in the

resale of telephone service (including debit card providers). The

Commission does not have data specifying the number of these carriers

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

employees, and thus are unable at this time to estimate

[[Page 34739]]

with greater precision the number of resellers that would qualify as

small business concerns under the SBA's definition. Consequently, the

Commission estimates that there are fewer than 339 small entity

resellers that may be affected by the rules.

32. Steps Taken to Minimize Significant Economic Impact on Small

Entities, and Significant Alternatives Considered. In its

reconsideration of IB Docket No. 95-22, the Commission modifies its

rules to allow U.S. private line resellers to carry switched traffic

over international private line circuits in correspondence with foreign

carriers that lack market power. The Commission expects that these

changes will expand the ability of U.S. private line resellers,

including small entities, to reap economic benefits by taking advantage

of new opportunities in the international telecommunications

marketplace.

33. Description of Projected Reporting, Recordkeeping, and Other

Compliance Requirements. As discussed, in reconsideration of the

petitions in IB Docket No. 95-22, the Commission modifies its rules to

allow U.S. private line resellers to carry switched traffic over

international private line circuits in correspondence with foreign

carriers that lack market power. Authorized private line resellers will

be subject to no reporting, recordkeeping, or compliance requirements

in order to carry switched traffic over international private line

circuits in correspondence with foreign carriers that lack market

power.

34. Report to Congress. The Commission will send a copy of the

Report and Order and Order on Reconsideration, including this

Supplemental 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. 801(a)(1)(A). In addition, the Commission will send a copy of

the Report and Order and Order on Reconsideration, including this

Supplemental FRFA, to the Chief Counsel for Advocacy of the Small

Business Administration. A copy of the Report and Order and Order on

Reconsideration and Supplemental FRFA (or summaries thereof) will also

be published in the Federal Register. See 5 U.S.C. 604(b).

Paperwork Reduction Act of 1995 Analysis

35. This Order contains information collections which will be

submitted to the Office of. As part of our continuing effort to reduce

paperwork burdens, the Commission invites the general public and other

Federal agencies to take this opportunity to comment on the following

information collection, as required by the Paperwork Reduction Act of

1995, Public Law 104-13. Public and agency comments are due August 30,

1999. Comments should address the following: (a) whether the proposed

collection of information is necessary for the proper performance of

the functions of the Commission, including whether the information

shall have practical utility; (b) the accuracy of the Commission's

burden estimate; (c) ways to enhance the quality, utility, and clarity

of the information collected; and (d) ways to minimize the burden of

the collection of information on the respondents, including the use of

automated collection techniques or other forms of information

technology.

OMB Control Number: 3060-XXXX.

Title: Operating Agreements of Common Carriers & Affiliates.

Form Number: N/A.

Type of Review: New collection.

Respondents: Business and other for-profit entities.

Number of Respondents: 20.

Number of Responses: 1180.

Estimated Time Per Response: 5 hours.

Frequency of Response: On Occasion.

Total Annual Burden: 5900.

Total Annual Costs: None.

Needs and Uses: The information contained in these reports will be

used by the Commission to determine whether the activities reported

have affected or are likely to affect adversely the carrier's service

to the public or whether these activities result in undue or

unreasonable increases in charges. If this information was not

reported, the Commission would not be able to ascertain the impact of

these activities on the just and reasonable rates as required by the

Act.

OMB Control Number: 3060-0454.

Title: Regulation of International Accounting Rates.

Form Number: N/A.

Type of Review: Revision of a currently approved collection.

Respondents: Business and other for-profit entities.

Number of Respondents: 20.

Estimated Time Per Response: l hour.

Frequency of Response: On occasion. We estimate that more carriers

will file for fewer markets (about 38). Third party disclosure.

Total Annual Burden: 760.

Total Annual Costs: $25,270.

Needs and Uses: The information is a method for the Commission to

monitor the international accounting rates to ensure that the public

interest is being served and also to enforce Commission policies.

OMB Control Number: 3060-0764.

Title: Regulation of International Accounting Rates.

Form Number: N/A.

Type of Review: Elimination of a currently approved collection.

Respondents: Business and other for-profit entities.

Number of Respondents: -30.

Estimated Time Per Response: 16 hours.

Total Annual Burden: -80 hours.

Total Annual Costs: -$180.000.

Needs and Uses: This Order removes Section 64.1002, and thus this

collection of information is no longer necessary.

Written comments by the public on the proposed information

collections are due on or before August 30, 1999. Direct all comments

to Les Smith, Federal Communications Commission, 445 12th Street, S.W.,

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

additional information or copies of the information collections contact

Les Smith at (202) 418-0217 or via the Internet at [email protected].

Ordering Clauses

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

4(i), 201, 203, 205, 214, 303(r), and 309 of the Communications Act of

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

303(r), 309, the policies, rules, and requirements discussed herein are

adopted and Parts 43 and 63 of the Commission's rules, 47 CFR Parts 43

and 63, are amended as set forth in the rule changes.

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

CC Docket No. 90-337 are denied.

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

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

discussed herein.

39. It is further ordered that the Commission's Office of Public

Affairs, Reference Operations Division, shall send a copy of this

Report and Order and Order on Reconsideration, including the Final

Regulatory Flexibility Certification and the Supplemental Final

Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of

the Small Business Administration.

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

requirements established in this decision shall take effect after the

Commission publishes a document in the Federal Register announcing the

effective date of these rules or in accordance with the

[[Page 34740]]

requirements of 5 U.S.C. 801(a)(3) and 44 U.S.C. 3507.

List of Subjects in 47 CFR Parts 0, 43, 63, and 64

Communications common carriers, Reporting and recordkeeping

requirements.

Federal Communications Commission.

Magalie Roman Salas,

Secretary.

Rule Changes

For the reasons discussed in the preamble, the Federal

Communications Commission amends 47 CFR parts 0, 43, 63, and 64 as

follows:

PART 0--COMMISSION ORGANIZATION

1. The authority citation for part 0 continues to read as follows:

Authority: Secs. 5, 48 Stat. 1068, as amended; 47 U.S.C. 155.

2. Section 0.457 is amended by adding paragraph (d)(1)(vi) to read

as follows:

Sec. 0.457 Records not routinely available for public inspection.

* * * * *

(d) * * *

(1) * * *

(vi) The rates, terms and conditions in any agreement between a

U.S. carrier and a foreign carrier that govern the settlement of U.S.

international traffic, including the method for allocating return

traffic, if the U.S. international route is exempt from the

international settlements policy under Sec. 43.51(g) of this chapter.

* * * * *

PART 43--REPORTS OF COMMUNICATION COMMON CARRIERS AND CERTAIN

AFFILIATES

3. The authority citation for part 43 continues to read as follows:

Authority: 47 U.S.C. 154; Telecommunications Act of 1996, Pub.

L. 104-104, secs. 402(b)(2)(B), (c), 110 Stat. 56 (1996) as amended

unless otherwise noted. 47 U.S.C. 211, 219, 220 as amended.

4. Section 43.51 is amended by revising paragraphs (a), (b) and

(e), and by adding paragraphs (f) and (g) to read as follows:

Sec. 43.51 Contracts and concessions.

(a) Any communications common carrier that: is engaged in domestic

communications and has not been classified as nondominant pursuant to

Sec. 61.3 of this chapter or, except as provided in paragraphs (f) and

(g) of this section, is engaged in foreign communications, and enters

into a contract with another carrier, including an operating agreement

with a communications entity in a foreign point for the provision of a

common carrier service between the United States and that point; must

file with the Commission, within thirty (30) days of execution, a copy

of each contract, agreement, concession, license, authorization,

operating agreement or other arrangement to which it is a party and

amendments thereto with respect to the following:

(1) The exchange of services;

(2) Except as provided in paragraph (c) of this section, the

interchange or routing of traffic and matters concerning rates,

accounting rates, division of tolls, or the basis of settlement of

traffic balances; and

(3) The rights granted to the carrier by any foreign government for

the landing, connection, installation, or operation of cables, land

lines, radio stations, offices, or for otherwise engaging in

communication operations.

(b) If the agreement referred to in this section is made other than

in writing, a certified statement covering all details thereof must be

filed by at least one of the parties to the agreement. Each other party

to the agreement which is also subject to these provisions may, in lieu

of also filing a copy of the agreement, file a certified statement

referencing the filed document. The Commission may, at any time and

upon reasonable request, require any communication common carrier not

subject to the provisions of this section to submit the documents

referenced in this section.

* * * * *

(e) International settlements policy. (1) Except as provided in

paragraph (g) of this section, if a carrier files an operating

agreement (whether in the form of a contract, concession, license,

etc.) referred to in paragraph (a) of this section to begin providing

switched voice, telex, telegraph, or packet-switched service between

the United States and a foreign point and the terms and conditions of

such agreement relating to the exchange of services, interchange or

routing of traffic and matters concerning rates, accounting rates,

division of tolls, the allocation of return traffic, or the basis of

settlement of traffic balances, are not identical to the equivalent

terms and conditions in the operating agreement of another carrier

providing the same or similar service between the United States and the

same foreign point, the carrier must also file with the International

Bureau a modification request under Sec. 64.1001 of this chapter.

Unless a carrier is providing switched voice, telex, telegraph, or

packet-switched service between the United States and a foreign point

pursuant to an operating agreement that is exempt from the

international settlements policy under paragraph (g) of this section,

the carrier shall not bargain for or agree to accept more than its

proportionate share of return traffic.

(2) Except as provided in paragraph (g) of this section, if a

carrier files an amendment to the operating agreement referred to in

paragraph (a) of this section under which it already provides switched

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

States and a foreign point, and other carriers provide the same or

similar service to the same foreign point, and the amendment relates to

the exchange of services, interchange or routing of traffic and matters

concerning rates, accounting rates, division of tolls, the allocation

of return traffic, or the basis of settlement of traffic balances, the

carrier must also file with the International Bureau a modification

request under Sec. 64.1001 of this chapter.

(f) Confidential treatment. (1) A carrier providing service on an

international route that is exempt from the international settlements

policy under paragraph (g)(2) of this section, but that is required by

paragraph (a) or (b) of this section to file a contract covering that

route with the Commission, may request confidential treatment under

Sec. 0.457 of this chapter for the rates, terms and conditions that

govern the settlement of U.S. international traffic.

(2) Carriers requesting confidential treatment under this paragraph

must include the information specified in Sec. 64.1001(c) of this

chapter. Such filings shall be made with the Commission, with a copy to

the Chief, International Bureau. The transmittal letter accompanying

the confidential filing shall clearly identify the filing as responsive

to Sec. 43.51(f).

(g) Exemption from the international settlements policy and

contract filing requirements.

(1) A carrier that enters into a contract, including an operating

agreement, for the provision of a common carrier service between the

United States and a foreign point with a carrier that lacks market

power in that foreign market is not subject to the requirements of

paragraphs (a), (b) or (e) of this section.

(i) A foreign carrier lacks market power for purposes of paragraph

(g)(1) of this section if it does not appear on the Commission's list

of foreign carriers that do not qualify for the presumption

[[Page 34741]]

that they lack market power in particular foreign points. The list of

foreign carriers that do not qualify for the presumption that they lack

market power in particular foreign points is available from the

International Bureau's World Wide Web site at http://www.fcc.gov/ib.

(ii) The Commission will include on the list of foreign carriers

that do not qualify for the presumption that they lack market power in

particular foreign points any foreign carrier that has 50 percent or

more market share in the international transport or local access

markets of a foreign point. A party that seeks to remove such a carrier

from the Commission's list bears the burden of submitting information

to the Commission sufficient to demonstrate that the foreign carrier

lacks 50 percent market share in the international transport and local

access markets on the foreign end of the route or that it nevertheless

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

competition adversely in the U.S. market. A party that seeks to add a

carrier to the Commission's list bears the burden of submitting

information to the Commission sufficient to demonstrate that the

foreign carrier has 50 percent or more market share in the

international transport or local access markets on the foreign end of

the route or that it nevertheless has sufficient market power to affect

competition adversely in the U.S. market.

(2) A carrier that enters into a contract, including an operating

agreement, with a carrier in a foreign point for the provision of a

common carrier service between the United States and that point is not

subject to the international settlements policy in paragraph (e) of

this section if the foreign point appears on the Commission's list of

international routes that the Commission has exempted from the

international settlements policy. The list of exempt routes is

available from the International Bureau's World Wide Web site at http:/

/www.fcc.gov/ib.

(i) A party that seeks to add a foreign market to the list of

markets that are exempt from the international settlements policy must

show that U.S. carriers are able to terminate at least 50 percent of

U.S.-billed traffic in the foreign market at rates that are at least 25

percent below the benchmark settlement rate adopted for that country in

IB Docket No. 96-261.

(ii) A party that seeks to remove a foreign market from the list of

markets that are exempt from the international settlements policy must

show that U.S. carriers are unable to terminate at least 50 percent of

U.S.-billed traffic in the foreign market at rates that are at least 25

percent below the benchmark settlement rate adopted for that country in

IB Docket No. 96-261.

Note to paragraph (g): The Commission's benchmark settlement

rates are available in International Settlement Rates, IB Docket No.

96-261, Report and Order, 12 FCC Rcd 19,806, 62 FR 45758 (August 29,

1997).

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

AND IMPAIRMENT OF SERVICE BY COMMON CARRIERS; AND GRANTS OF

RECOGNIZED PRIVATE OPERATING AGENCY STATUS

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

Authority: 47 U.S.C. 151, 154(i), 154(j), 160, 161, 201-205,

218, 403, 533 unless otherwise noted.

6. Section 63.14 is amended by revising paragraphs (a) and (c), and

by removing paragraph (d), 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, except as provided in

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

accept special concessions in the future.

Note to paragraph (a): Carriers may rely on the Commission's

list of foreign carriers that do not qualify for the presumption

that they lack market power in particular foreign points for

purposes of determining which foreign carriers are the subject of

the prohibitions contained in this section. The Commission's list of

foreign carriers that do not qualify for the presumption that they

lack market power is available from the International Bureau's World

Wide Web site at http://www.fcc.gov/ib.

* * * * *

(c) This section shall not apply to the rates, terms and conditions

in an agreement between a U.S. carrier and a foreign carrier that

govern the settlement of international traffic, including the method

for allocating return traffic, if the international route is exempt

from the international settlements policy under Sec. 43.51(g)(2) of

this chapter.

7. Section 63.16 is amended by revising paragraph (a) to read as

follows:

Sec. 63.16 Switched services over private lines.

(a) Except as provided in Secs. 63.22 (e)(2) and 63.23(d)(2), a

carrier may provide switched basic services over its authorized private

lines if and only if the country at the foreign end of the private line

appears on a Commission list of destinations to which the Commission

has authorized the provision of switched services over private lines.

The list of authorized destinations is available from the International

Bureau's World Wide Web site at http://www.fcc.gov/ib.

* * * * *

8. Section 63.22 is amended by revising paragraph (e) to read as

follows:

Sec. 63.22 Facilities-based international common carriers.

* * * * *

(e)(1) Except as provided in paragraph (e)(2) of this section, the

carrier may provide switched basic services over its authorized

facilities-based private lines if and only if the country at the

foreign end of the private line appears on a Commission list of

countries to which the Commission has authorized the provision of

switched services over private lines. See Sec. 63.16. If at any time

the Commission removes the country from that list or finds that market

distortion has occurred in the routing of traffic between the United

States and that country, the carrier shall comply with enforcement

actions taken by the Commission.

(2) The carrier may use its authorized facilities-based private

lines to provide switched basic services in circumstances where the

carrier is exchanging switched traffic with a foreign carrier that

lacks market power in the country at the foreign end of the private

line.

(3) A foreign carrier lacks market power for purposes of paragraph

(e)(2) of this section if it does not appear on the Commission's list

of foreign carriers that do not qualify for the presumption that they

lack market power in particular foreign points. This list is available

from the International Bureau's World Wide Web site at

http://www.fcc.gov/ib.

* * * * *

9. Section 63.23 is amended by revising paragraph (d) to read as

follows:

Sec. 63.23 Resale-based international common carriers.

* * * * *

(d)(1) Except as provided in paragraph (d)(2) of this section, the

carrier may provide switched basic services over its authorized resold

private lines if and

[[Page 34742]]

only if the country at the foreign end of the private line appears on a

Commission list of countries to which the Commission has authorized the

provision of switched services over private lines. See Sec. 63.16. If

at any time the Commission removes the country from that list or finds

that market distortion has occurred in the routing of traffic between

the United States and that country, the carrier shall comply with

enforcement actions taken by the Commission.

(2) The carrier may use its authorized resold private lines to

provide switched basic services in circumstances where the carrier is

exchanging switched traffic with a foreign carrier that lacks market

power in the country at the foreign end of the private line.

(3) A foreign carrier lacks market power for purposes of paragraph

(d)(2) of this section if it does not appear on the Commission's list

of foreign carriers that do not qualify for the presumption that they

lack market power in particular foreign points. This list is available

from the International Bureau's World Wide Web site at

http://www.fcc.gov/ib.

* * * * *

PART 64 --MISCELLANEOUS RULES RELATING TO COMMON CARRIERS

10. The authority citation for part 64 continues to read as

follows:

Authority: 47 U.S.C. 10, 201, 218, 226, 228, 332 unless

otherwise noted.

11. Section 64.1001 is amended by revising paragraphs (b) through

(g) and by removing paragraphs (h) through (l) to read as follows:

Sec. 64.1001 International settlements policy and modification

requests.

* * * * *

(b) If the international settlement arrangement in the operating

agreement or amendment referred to in Sec. 43.51(e)(1) or (e)(2) of

this chapter differs from the arrangement in effect in the operating

agreement of another carrier providing service to or from the same

foreign point, the carrier must file a modification request under this

section unless the international route is exempt from the international

settlements policy under Sec. 43.51(g) of this chapter.

(c) A modification request must contain the following information:

(1) The applicable international service;

(2) The name of the foreign telecommunications administration;

(3) The present accounting rate (including any surcharges);

(4) The new accounting rate (including any surcharges);

(5) The effective date;

(6) The division of the accounting rate; and

(7) An explanation of the proposed modification(s) in the operating

agreement with the foreign correspondent.

(d) A modification request must contain a notarized statement that

the filing carrier:

(1) Has not bargained for, nor has knowledge of, exclusive

availability of the new accounting rate;

(2) Has not bargained for, nor has any indication that it will

receive, more than its proportionate share of return traffic; and

(3) Has informed the foreign administration that U.S. policy

requires that competing U.S. carriers have access to accounting rates

negotiated by the filing carrier with the foreign administration on a

nondiscriminatory basis.

(e) An operating agreement or amendment filed under a modification

request cannot become effective until the modification request has been

granted under paragraph (g) of this section.

(f) Carriers must serve a copy of the modification request on all

carriers providing the same or similar service to the foreign

administration identified in the filing on the same day a modification

request is filed.

(g) All modification requests will be subject to a twenty-one (21)

day pleading period for objections or comments, commencing the date

after the request is filed. If the modification request is not complete

when filed, the carrier will be notified that additional information is

to be submitted, and a new 21 day pleading period will begin when the

additional information is filed. The modification request will be

deemed granted as of the twenty-second (22nd) day without any formal

staff action being taken: provided

(1) No objections have been filed, and

(2) The International Bureau has not notified the carrier that

grant of the modification request may not serve the public interest and

that implementation of the proposed modification must await formal

staff action on the modification request. If objections or comments are

filed, the carrier requesting the modification request may file a

response pursuant to Sec. 1.45 of this chapter. Modification requests

that are formally opposed must await formal action by the International

Bureau before the proposed modification can be implemented.

Sec. 64.1002 [Removed]

12. Section 64.1002 is removed.

[FR Doc. 99-16032 Filed 6-28-99; 8:45 am]

BILLING CODE 6712-10-P