Before the

**Federal Communications Commission**

**Washington, D.C. 20554**

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| In re Applications of            | *  | **IB Docket 02-50**          |
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| XO COMMUNICATIONS, INC.          | ** |                              |
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| for Consent to Transfer Control  | *  |                              |
| of Licenses and Authorizations   | *) |                              |
| Pursuant to Sections 214 and     | ** |                              |
| 310(d) of the Communications Act |    |                              |
| and Petition for Declaratory     | *  |                              |
| Ruling Pursuant to Section       | *) |                              |
| 310(b)(4) of the Communications  | ** |                              |
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**MEMORANDUM OPINION, ORDER AND AUTHORIZATION**

**Adopted: October 3, 2002 Released: October 3, 2002**

By the Chief, International Bureau; Chief, Wireless Telecommunications
Bureau; Chief, Wireline Competition Bureau

# INTRODUCTION

1.  In this Memorandum Opinion and Order, we grant six applications for
    consent to transfer control of certain Commission licenses and
    authorizations held by XO Communications, Inc. ("XO") and its
    wholly-owned subsidiaries from Craig O. McCaw and the existing
    shareholders of XO to the new shareholders of XO. These shareholders
    will include, as 10 percent or greater shareholders, Forstmann
    Little & Co. Equity Partnership-VII, L.P. ("Forstmann Little Equity
    VII") and Forstmann Little & Co. Subordinated Debt and Equity
    Management Buyout Partnership-VIII, L.P. ("Forstmann Little MBO
    VIII" and, together with Forstmann Little Equity VII, "Forstmann
    Little"), and Teninver, S.A. de C.V. ("Teninver"), an indirect
    wholly-owned subsidiary of Teléfonos de México, S.A. de C.V.
    ("Telmex," and, together with Forstmann Little, the "New
    Shareholders"). We will refer collectively to all of these parties
    as the Applicants. The licenses and authorizations to be transferred
    include licenses and authorizations to provide domestic and
    international telecommunications services pursuant to parts 63, 90,
    and 101 of the Commission's rules.[^1]

2.  As discussed below, we conclude, pursuant to our review under
    sections 214(a) and 310(d) of the Communications Act of 1934, as
    amended (the "Communications Act" or "Act"),[^2] that approval of
    the applications at issue, subject to conditions specified herein,
    will serve the public interest, convenience, and necessity. In
    addition, with respect to the application to transfer control of the
    LMDS and 39 GHz licenses held by XO LMDS, we conclude that the
    public interest would not be served by denying those applications
    because of proposed indirect foreign ownership of XO LMDS in excess
    of 25 percent.[^3]

# BACKGROUND

## The Applicants

3.  **XO.** XO is authorized, pursuant to section 214(a) of the Act, to
    provide local, domestic interstate, interexchange and international
    services. It also holds 91 LMDS and ten 39 GHz licenses[^4] pursuant
    to section 308 of the Act.[^5] XO is incorporated in Delaware and
    headquartered in Reston, Virginia. XO is currently controlled by
    Craig O. McCaw through his ownership interest in Eagle River
    Investments LLC, through other direct and indirect holdings of XO
    securities, and pursuant to various voting arrangements.[^6] XO's
    Class A common stock currently trades on the OTC-Bulletin Board.
    According to the Applicants, XO is a full service provider of
    communication and information services to business customers.[^7] XO
    delivers these services over its own network of metropolitan fiber
    rings and long haul fiber optic facilities and through the use of
    facilities and services leased or purchased from incumbent local
    exchange carriers.[^8] Its network also includes fixed wireless
    licenses (LMDS and 39 GHz) covering 95 percent of the top U.S.
    business markets.[^9]

4.  **Forstmann Little.** Forstmann Little Equity VII and Forstmann
    Little MBO VIII are affiliated with Forstmann Little & Company, a
    private equity company that was formed in 1978. Both are Delaware
    limited partnerships. The general partner of Forstmann Little Equity
    VII is FLC XXXII Partnership, L.P., New York limited partnership,
    and the general partner of Forstmann Little MBO VIII is FLC XXXIII
    Partnership, L.P., also a New York limited partnership (together,
    the "Intermediate General Partners" or "Intermediate General
    Partnerships"). The Forstmann Little partnerships are part of a
    family of affiliated private investment funds. The general partners
    of each of the Intermediate General Partnerships are: Theodore J.
    Forstmann, Sandra J. Horace, Winston W. Hutchins, Thomas H. Lister,
    Jamie C. Nicholls, each of whom is a U.S. citizen, and Gordon A.
    Holmes, a citizen of the Republic of Ireland. As of the date of the
    applications, funds associated with Forstmann Little have made
    investments in XO, and in the aggregate hold approximately 22.4
    percent of XO's outstanding shares of common stock, on a fully
    diluted, as-converted basis. Under the contemplated restructuring,
    these investments would be treated similarly to other existing
    equity holdings in XO. Forstmann Little funds also hold investments
    in two other FCC-regulated businesses, Citadel Communications
    Corporation and McLeod Incorporated.

5.  **Telmex.** Telmex is a publicly traded Mexican corporation
    providing telecommunications services in Mexico through a 68,000-km
    fiber optic digital network.[^10] According to the Applicants, the
    offerings of Telmex and its subsidiaries include a range of advanced
    telecommunications, data and video services, and Internet service
    for corporate customers.[^11] Telmex is controlled by Carso Global
    Telecom, S.A. de C.V. ("CGT"), a Mexican holding company, which
    holds 31 percent of the stock of Telmex.[^12] Approximately 67
    percent of the shares of CGT are held in trust for investment
    purposes for Carlos Slim Helu and his family members, all of whom
    are Mexican citizens.[^13] Telmex indirectly owns 100 percent of the
    capital stock of Teninver, the Mexican entity through which Telmex
    proposes to make its investment in XO.[^14] Telmex's indirect,
    wholly-owned subsidiary, Telmex USA, L.L.C. ("Telmex USA"), is
    authorized, pursuant to section 214 of the Act, to provide
    international switched resale services in the United States.[^15]
    Aside from Telmex USA, Applicants state that Telmex has no other
    FCC-regulated investments in the United States.

6.  According to the Applicants, Telmex is affiliated under the
    Commission's rules with America Movil, S.A. de C.V. ("America
    Movil"). America Telecom, S.A. de C.V., a holding company sharing
    the same ownership as CGT, controls America Movil, a Mexican
    telecommunications company that provides wireless communications
    services in Mexico and has investments in Guatemala, Ecuador,
    Argentina, Brazil, Colombia, and Venezuela.[^16] America Movil
    controls Telecomunicaciones de Guatemala ("Telgua"), a Guatemalan
    telecommunications company, and Techtel LMDS Comunicaciones
    Interactivas, S.A. ("Techtel"), a new Argentine competitor.[^17]
    America Movil's U.S. investments include Tracfone Wireless, Inc. (a
    prepaid cellular reseller), Arbros Communications, Inc. (a provider
    of voice, data, and other telecommunications services to small and
    medium sized businesses and wholesale customers in the northeastern
    United States), and Comm South Companies, Inc. (a prepaid local
    wireline service provider controlled by Arbros).[^18]

## The Proposed Transaction

7.  XO filed the transfer of control applications on February 21,
    2002.[^19] The Transfer Applications include a request for a
    declaratory ruling, pursuant to section 310(b)(4) of the Act, to
    allow indirect foreign ownership of XO LMDS, XO's common carrier
    licensee, in excess of the 25 percent statutory benchmark for common
    carrier radio licensees. XO states that the proposed corporate
    restructuring is critical to the company's financial survival.[^20]
    The Applicants intend to negotiate certain agreements and complete
    certain transactions with holders of XO senior notes and lending
    institutions under XO's secured credit facility that will result in
    XO having no more than \$1 billion of senior secured debt in
    addition to other existing capital lease and secured
    obligations.[^21] The restructuring contemplates the elimination of
    XO's existing stockholders' equity, including that of current
    controlling shareholder, Craig O. McCaw, and the prior investments
    by Forstmann Little funds[^22] in exchange for a substantial
    infusion of capital from investors. To this end, XO proposes to
    issue new voting common shares to each of Telmex and Forstmann
    Little in exchange for \$400 million in cash, for a total aggregate
    investment in XO of \$800 million. XO states that upon consummation
    of the transaction, Forstmann Little and Telmex will each hold a
    non-controlling minority interest of approximately 40 percent in
    XO.[^23] According to the Applicants, no single shareholder will
    control XO, and it is not anticipated that any other shareholder
    will hold more than a 10 percent interest in the company.[^24]

8.  Applicants assert that the transaction will produce significant
    public interest benefits, including greater competition in the
    provision of local telecommunications services.[^25] XO asserts that
    the proposed transaction and the debt restructuring associated with
    it will provide critical funding for XO and a substantial reduction
    in its debt that will preserve and strengthen the company.[^26] XO
    maintains that without additional funding, XO may be forced to
    decrease services and investment, and perhaps cease operations
    altogether.[^27] XO also submits that the proposed transaction will
    have no adverse effect on competition in any of the
    telecommunications markets in which XO provides services.[^28]

9.  On March 11, 2002, the Commission sought comment on the proposed
    transaction.[^29] RCN Corporation ("RCN"), a U.S. telecommunications
    company with operations in Mexico,[^30] filed a petition to deny the
    XO applications.[^31] RCN's petition to deny the Transfer
    Applications opposes grant of XO's requested foreign ownership
    ruling. RCN urges the Commission to deny the applications and the
    requested ruling or, at the very least, to condition any approval on
    Telmex not acquiring any interest in XO.[^32] The gravamen of RCN's
    opposition is that Telmex, a foreign carrier, will use its market
    power in Mexico to harm competition in the U.S. market.

10. On June 17, 2002, XO voluntarily filed for bankruptcy under Chapter
    11 of the Bankruptcy Code in order to effectuate the proposed
    transaction and the debt restructuring associated therewith.[^33] XO
    filed with the Commission the requisite applications and
    notifications for the *pro forma* transfers or assignments of
    licenses and authorizations to XO as debtor-in-possession on June
    19, 2002. On July 3, 2002, Applicants amended the pending transfer
    of control applications.[^34] On August 26, 2002, the United States
    Bankruptcy Court for the Southern District of New York approved XO's
    third amended plan for reorganization, which, *inter alia*, approved
    the proposed investment by Forstmann Little and Telmex which is the
    subject of these applications.[^35]

# PUBLIC INTEREST ANALYSIS

## Framework for Analysis 

11. In considering the proposed transfer, the Commission must determine,
    pursuant to section 214(a) and section 310(d) of the Act, whether
    grant of the applications would serve the public interest,
    convenience, and necessity.[^36] In addition, because of the foreign
    ownership interests presented in this case, we must also determine
    whether Forstmann Little's and Telmex's proposed ownership interests
    in XO licenses and authorizations is permissible under the foreign
    ownership provisions of section 310(b) of the Act.

12. The legal standards that govern our public interest analysis for
    transfers of control of licenses and authorizations under sections
    214(a) and 310(d) require that we weigh the potential public
    interest harms against the potential public interest benefits to
    determine whether, on balance, the proposed transaction will serve
    the public interest, convenience, and necessity. Our analysis
    considers the likely competitive effects of the proposed transfer
    and whether such transfer raises significant anti-competitive
    issues.[^37] In addition, we consider the efficiencies and other
    public interest benefits that are likely to result from the
    transfer.[^38] Further, we consider whether the proposal presents
    national security, law enforcement, foreign policy, or trade policy
    concerns.[^39]

## Qualifications of Applicants

13. As a threshold matter, we must determine whether the Applicants have
    the requisite qualifications to hold and transfer control of
    licenses under section 310(d) of the Act and the Commission's rules.
    In general, when evaluating transfer of control applications under
    section 310(d), we do not re-evaluate the qualifications of the
    transferor.[^40] The exception to this rule occurs where issues
    related to basic qualifications have been designated for hearing by
    the Commission or have been sufficiently raised in petitions to
    warrant the designation of a hearing.[^41] This is not the case
    here, and no issues have been raised that would require us to
    re-evaluate the basic qualifications of the transferor, XO
    Communications.

14. Section 310(d) of the Act requires that the Commission consider the
    qualifications of proposed transferees as if the transferees were
    applying for a license directly under section 308 of the Act.[^42]
    We note that no party has challenged the basic qualifications of the
    transferee in this transaction, the reorganized XO Communications,
    and our independent review finds no evidence to suggest that the
    reorganized XO Communications or its proposed shareholders lack the
    requisite financial, technical, legal, or other basic
    qualifications.[^43] Thus, we find that XO Communications, as
    reorganized, possesses the basic qualifications to be the transferee
    of the subject licenses and authorizations.

## Foreign Ownership Review

15. In this section, we address issues relevant to our public interest
    inquiry under the foreign ownership provisions of section 310 of the
    Act. XO requests a ruling, pursuant to section 310(b)(4) of the Act,
    that it would not serve the public interest to prohibit indirect
    foreign ownership of its common carrier wireless subsidiary, XO
    LMDS, in excess of the statutory 25 percent foreign ownership
    benchmark by Telmex and a general partner of Forstmann Little,
    Gordon A. Holmes.[^44] Specifically, XO requests that the
    ruling: (1) permit the requested indirect foreign ownership by
    Telmex and Mr. Holmes; and (2) allow XO LMDS to accept up to and
    including an additional, aggregate 25 percent indirect equity and/or
    voting interests from other unnamed foreign investors, except that
    no single foreign investor or entity, with the exception of Telmex
    and Mr. Holmes, may acquire indirect foreign ownership of XO in
    excess of 25 percent without Commission approval under section
    310(b)(4).[^45] In support of its requested ruling, XO asserts that
    the proposed investments by Telmex and Gordon A. Holmes in XO are
    attributable to World Trade Organization ("WTO") Member countries --
    Mexico and Ireland, respectively -- and, therefore, XO is entitled
    to a rebuttable presumption that such interests do not raise
    competitive concerns.

16. Based on the record before us, we conclude that it would not serve
    the public interest to deny the applications to transfer control of
    the XO LMDS licenses because of the proposed foreign ownership of
    XO. We therefore grant XO's petition for declaratory ruling under
    section 310(b)(4) to the extent specified below.

17. Section 310(b)(4) of the Act establishes a 25 percent benchmark for
    indirect, attributable investment by foreign individuals,
    corporations, and governments in U.S. common carrier radio
    licensees, but grants the Commission discretion to allow higher
    levels of foreign ownership if it determines that such ownership is
    not inconsistent with the public interest.[^46] The calculation of
    foreign ownership interests under section 310(b)(4) is a two-pronged
    analysis in which the Commission examines separately the equity
    interests and the voting interests in the licensee's parent.[^47]
    The Commission calculates the equity interest of each foreign
    investor in the parent and then aggregates these interests to
    determine whether the sum of the foreign equity interests exceeds
    the statutory benchmark. Similarly, the Commission calculates the
    voting interest of each foreign investor in the parent and
    aggregates these voting interests.[^48] The presence of aggregated
    alien equity or voting interests in a common carrier licensee's
    parent in excess of 25 percent triggers the applicability of section
    310(b)(4)'s statutory benchmark.[^49] Once the benchmark is
    triggered, section 310(b)(4) directs the Commission to determine
    whether the "'public interest will be served by the refusal or
    revocation of such license.'"[^50] In its request, XO identifies
    proposed foreign ownership in XO that would exceed the 25 percent
    benchmark set by section 310 (b)(4). We therefore must consider the
    proposed transfer of control of the XO LMDS common carrier licenses
    under this section of the Act.[^51]

18. In the *Foreign Participation Order*, the Commission concluded that
    the public interest would be served by permitting greater investment
    by entities from WTO Member countries in U.S. common carrier and
    aeronautical fixed and *en route* radio licensees.[^52] Therefore,
    with respect to indirect foreign investment from WTO Members, the
    Commission replaced its "effective competitive opportunities," or
    "ECO," test with the rebuttable presumption that such investment
    generally raises no competitive concerns.[^53] With respect to
    non-WTO Member countries, the Commission continues to apply the ECO
    test in order to preserve the goals of: (i) promoting effective
    competition in the global market for communications services; (ii)
    preventing anti-competitive conduct in the provision of
    international services or facilities; and (iii) encouraging foreign
    governments to open their communications markets.[^54] In evaluating
    an applicant's request for approval of foreign ownership interests
    under section 310(b)(4), the Commission uses a "principal place of
    business" test to determine the nationality or "home market" of
    foreign investors.[^55]

19. In light of the policies adopted in the *Foreign Participation
    Order*, we begin our evaluation of XO's petition for declaratory
    ruling under section 310(b)(4) by calculating the proposed
    attributable, indirect foreign equity and voting interests in XO
    LMDS. We then determine whether these foreign interests properly are
    ascribed to individuals or entities whose home markets are WTO
    Member countries. The Commission has stated, in the *Foreign
    Participation Order*, that it will deny an application if we find
    that more than 25 percent of the ownership of an entity that
    controls a common carrier radio licensee is attributable to parties
    whose principal place(s) of business are in non-WTO Member countries
    that do not offer effective competitive opportunities to U.S.
    investors in the particular service sector in which the applicant
    seeks to compete in the U.S. market, unless other public interest
    considerations outweigh that finding.[^56]

20. In this case, the indirect foreign equity and voting interests in XO
    LMDS will be held through its corporate parent, XO. Following
    consummation of the transactions contemplated in the Stock Purchase
    Agreement (entered into between XO, Forstmann Little and Telmex),
    Telmex will hold approximately 40 percent of the equity and voting
    interests in XO indirectly through Teninver and an intermediate
    holding company, Controladora de Servicios de Telecommunicaciones,
    S.A. de C.V. ("Consertel").[^57] Telmex, Teninver, and Consertel are
    foreign corporations organized under the laws of Mexico.[^58]
    Forstmann Little also will hold approximately 40 percent of the
    equity and voting interests in XO.[^59] Specifically, Forstmann
    Little Equity VII and Forstmann Little MBO VIII, both of which are
    domestically organized limited partnerships, will hold 25 percent
    and 15 percent of the shares of XO, respectively. The general
    partners of Forstmann Little Equity VII and Forstmann Little MBO
    VIII are themselves domestically organized limited partnerships: FLC
    XXXII Partnership, L.P. and FLC XXXIII Partnership, L.P.,
    respectively. Gordon A. Holmes, a citizen of Ireland, is a general
    partner of each of these Intermediate General Partnerships.
    Forstmann Little states that foreign limited partners hold an
    aggregate interest of 11.32 percent in Forstmann Little Equity VII
    and 14.8 percent in Forstmann Little MBO VIII.[^60] XO represents
    that neither Telmex nor Forstmann Little would have a controlling
    interest in XO.[^61]

21. In *Wilner & Scheiner* and its progeny, the Commission set forth a
    standard for calculating both alien equity and voting interests held
    in a licensee, or, as here, in the licensee's parent, where such
    interests are held through intervening entities, including
    partnerships.[^62] In calculating attributable alien equity
    interests in a parent company, the Commission uses a multiplier to
    dilute the percentage of each investor's equity interest in the
    parent company when those interests are held through intervening
    companies. The multiplier is applied to each link in the vertical
    ownership chain, regardless of whether any particular link in the
    chain represents a controlling interest in the company positioned in
    the next lower tier.[^63] Once the *pro rata* equity interests of
    each alien investor are calculated, these interests are then
    aggregated to determine whether the sum of the interests exceeds the
    statutory benchmark.[^64]

22. By contrast, in calculating alien voting interests in a parent
    company, the multiplier is not applied to any link in the vertical
    ownership chain that constitutes a controlling interest in the
    company positioned in the next lower tier.[^65] Similarly, where
    alien voting interests in a parent company are held through one or
    more intervening partnerships, the Commission does not apply the
    multiplier to dilute any general partnership interest or any limited
    partnership interest in a company positioned in the next lower tier
    of the vertical ownership chain, *unless* the licensee can
    demonstrate, in the case of a limited partner, that the partner
    effectively is insulated from active involvement in partnership
    affairs.[^66]

23. We first calculate the attributable equity and voting interests in
    XO that would be held by Gordon A. Holmes, a citizen of Ireland. As
    discussed above, Mr. Holmes is a general partner of the Intermediate
    General Partnerships that serve as the general partners of Forstmann
    Little Equity VII and Forstmann Little MBO VIII, which collectively
    would acquire 40 percent of the equity and voting shares of XO.
    Applicants do not specify Mr. Holmes' partnership interests in
    either of the Intermediate General Partners (FLC XXXII Partnership,
    L.P. and FLC XXXIII Partnership, L.P.) but state generally that "Mr.
    Holmes' partnership interest in both FLC XXXII Partnership, L.P. and
    FLC XXXIII Partnership, L.P. is less than 20 percent."[^67] They
    further state that FLC XXXII Partnership, L.P. holds a 2.56 percent
    interest in Forstmann Little Equity VII[^68] and FLC XXXIII
    Partnership, L.P. holds a less than one percent interest in
    Forstmann Little MBO VIII.[^69] In the absence of more precise
    information as to Mr. Holmes' interest in each of the Intermediate
    General Partners, we assume that his interest in each is 20 percent.
    Applying the Commission's attribution principles, we attribute to
    Mr. Holmes a 0.13 percent equity interest in XO through Forstmann
    Little Equity VII (.25 x .0256 x .20) and a 0.03 percent equity
    interest in XO through Forstmann Little MBO VIII (.15 x .01 x .20)
    for a total equity interest of 0.16 percent.

24. We attribute to Mr. Holmes a higher voting interest in XO due to his
    position as a general partner of the Intermediate General Partners
    of Forstmann Little Equity VII and Forstmann Little MBO VIII. The
    Applicants state for the record that, under the partnership
    agreements governing the Intermediate General Partnerships, the
    management of the business and affairs of those partnerships is
    vested exclusively in the partner designated as the Senior Partner,
    Theodore J. Forstmann. The Senior Partner has the right to delegate
    to any other general partner those of his duties and
    responsibilities as he sees fit in his sole discretion. No general
    partner may take any action to commit the partnership on any
    transaction without the approval of the Senior Partner.[^70] Because
    the Senior Partner has the right to delegate his duties and
    responsibilities to any other general partner, however, we find that
    Mr. Holmes may, without prior Commission approval, exercise voting
    control over the Intermediate General Partnerships and, in turn,
    over the 40 percent voting interest in XO to be held by Forstmann
    Little Equity VII and Forstmann Little MBO VIII. We therefore
    attribute to Mr. Holmes a 40 percent voting interest in XO. Because
    Mr. Holmes is a citizen of Ireland, which is a WTO Member country,
    we presume that his 40 percent voting and 0.16 percent equity
    interests in XO raise no competitive concerns. Moreover, we are
    aware of no countervailing risk to competition in the U.S. market as
    a result of his interest in XO to rebut this presumption.

25. We next calculate the attributable equity and voting interests in XO
    that would be held by foreign limited partners of the Intermediate
    Partnerships. XO states that the aggregate percentages of equity and
    voting interests that would be held by foreign limited partners of
    Forstmann Little Equity VII and Forstmann Little MBO VIII are 11.32
    percent and 14.8 percent, respectively.[^71] In attributing equity
    interests, we apply the multiplier to dilute the percentage of the
    foreign limited partners' equity interests in Forstmann Little
    Equity VII and Forstmann Little MBO VIII by 25 percent and 15
    percent, respectively (*i.e*., the percentage of equity that each
    partnership would hold in XO). We attribute to XO an aggregate 5.05
    percent foreign equity interest from the Forstmann Little limited
    partners.[^72] We also attribute to XO a total 5.05 percent foreign
    voting interest from the Forstmann Little limited partners. In
    contrast to the rights of the Intermediate General Partnerships and
    their respective general partners, including Mr. Holmes, the foreign
    limited partners of Forstmann Little Equity VII and Forstmann Little
    MBO VIII are prohibited by the relevant partnership agreements from
    participating in the day-to-day management of the partnerships, and
    only the usual and customary investor protections are contained in
    each limited partnership agreement.[^73] XO also represents that
    Forstmann Little's 40 percent interest in XO would not allow
    Forstmann Little to control the company.[^74] We therefore apply the
    multiplier to dilute the voting interests held by the foreign
    limited partners in Forstmann Little Equity VII and Forstmann Little
    MBO VIII by 25 percent and 15 percent, respectively, for a total
    foreign voting interest of 5.05 percent.[^75] XO does not identify
    for the record the citizenship or principal place of business of
    Forstmann Little's foreign limited partners.[^76] Therefore, in
    contrast to our record findings that Mr. Holmes' attributable equity
    and voting interests in XO are properly ascribed to an investor from
    a WTO Member country, we make no such findings as to any Forstmann
    Little foreign limited partner. As a result, the foreign ownership
    ruling that we issue to XO would require that it count the
    unidentified 5.05 percent foreign equity and voting interests
    attributable to these limited partners as part of the additional,
    aggregate 25 percent foreign ownership amount that XO generally may
    accept from unnamed foreign investors without first seeking
    Commission approval.[^77] XO may of course at any time in the future
    request a new foreign ownership ruling, properly substantiated, in
    the event it seeks to increase its foreign ownership above the level
    permitted under the ruling issued here.

26. We next calculate the attributable equity and voting interests in XO
    that Applicants state would be acquired by Telmex, a foreign
    corporation. We attribute a 40 percent equity and voting interest in
    XO to Telmex and to each of its subsidiaries through which Telmex
    would hold its investment in XO. We also find that Telmex has its
    principal place of business in Mexico, a WTO Member country.
    Applicants state that Telmex is organized under the laws of Mexico
    and has its headquarters in Colonia Cuauhtemoc, Mexico.[^78] They
    represent that the majority of Telmex's officers and directors are
    Mexican citizens.[^79] CGT, a Mexican corporation, holds
    approximately 31 percent of Telmex's total capital stock and
    controls the company. CGT is controlled by a trust for the benefit
    of Carlos Slim Helu and members of his immediate family, all of whom
    are Mexican citizens. Applicants state that there are no other ten
    percent or greater shareholders of Telmex's capital stock.[^80]
    Applicants further represent that Telmex derives the majority of its
    sales revenue from, and maintains the majority of its tangible
    property in, Mexico.[^81] Accordingly, we find that Telmex has its
    principal place of business in Mexico, a WTO Member country, and
    therefore is entitled to a rebuttable presumption that its proposed
    indirect ownership of XO does not pose a risk to competition in the
    U.S. market that would justify denial of the Transfer Applications.
    This presumption can be rebutted only if we find that grant of the
    applications would pose a very high risk to competition in the U.S.
    market, where our general safeguards and other conditions would be
    ineffective at preventing harm to U.S. consumers.[^82]

27. As we explain more fully below, we find that RCN has not carried its
    burden to demonstrate that the Telmex investment would pose a very
    high risk to competition in the U.S. market.[^83] Nor do we find
    other evidence in the record that would rebut this presumption. We
    therefore conclude that it will not serve the public interest to
    prohibit the proposed indirect foreign ownership of XO LMDS, XO's
    common carrier licensee. Specifically, this ruling permits XO LMDS
    to be owned indirectly by: Telmex**,** Teninver, and Consertel
    (collectively, the "Telmex Group") and by Telmex's Mexican
    shareholders, including CGT (up to and including 40 percent of the
    equity and voting interests); and Mr. Gordon A. Holmes (up to and
    including 0.16 percent of the equity and 40 percent of the voting
    interests). XO also may accept up to and including an additional,
    aggregate 25 percent indirect equity and/or voting interests from
    the above named foreign investors, or other foreign investors,
    without seeking further Commission approval under section 310(b)(4),
    subject to the following conditions: First, no single foreign
    investor, with the exception of the Telmex Group and its Mexican
    shareholders, including CGT, as well as Mr. Holmes (as to voting
    interests)**,** may acquire an indirect equity or voting interest in
    XO LMDS in excess of 25 percent without prior Commission approval
    under section 310(b)(4). Second, XO LMDS shall seek approval under
    section 310(b)(4) before it accepts any additional indirect equity
    and**/**or voting interest from Telmex or CGT, or any additional
    voting interest from Mr. Holmes, other than that specifically
    approved here. Compliance with this ruling requires XO to count, as
    part of the additional**,** aggregate 25 percent foreign ownership
    amount, any foreign ownership not specifically identified in this
    ruling, including non-Mexican foreign ownership of Telmex, ownership
    by the Forstmann Little limited partners, and any foreign owners of
    the 20 percent of XO shares not being acquired by either the Telmex
    Group or Forstmann Little.

## Competitive Effects

28. Our public interest analysis under sections 214(a) and 310(d)
    includes an evaluation of the competitive effects of the proposed
    transaction in the relevant product and geographic markets. For
    telecommunications service providers, the Commission has determined
    that the relevant product and geographic markets can include both
    U.S. domestic telecommunications service markets and
    telecommunications services between the United States and foreign
    points.[^84] We determine that the proposed transfer will not likely
    result in harm to competition in any relevant market and will likely
    yield tangible public interest benefits.

29. We find that the instant case does not pose a threat of a reduction
    in the number of potential competitors in the geographic and product
    markets served by XO. Indeed, the Applicants submit that the
    investment of Forstmann Little and Telmex in XO will enable XO to
    continue to compete in the U.S. domestic and international
    telecommunications markets and that without the critical financing
    from Forstmann Little and Telmex, XO would cease to exist, thus
    decreasing the number of competitive local exchange carriers in the
    applicable markets.[^85] The approval of the Applicants'
    restructuring insures that XO remains in the U.S. telecommunications
    market as a viable competitor.

30. In addition, no anticompetitive effects will result from this
    decision. Upon completion of the parties' restructuring plan,
    Forstmann Little will have interests in XO and two other
    communications companies, Citadel Communications Corporation and
    McLeod USA, Inc. Citadel does not provide telecommunications
    services. McLeod is a LEC in markets in which XO also operates.
    After investing \$175 million as part of McLeod's financial
    restructuring plan, Forstmann Little became a 58 percent
    stake-holder in the company. In the case at hand, Forstmann Little
    and Telmex will each hold a non-controlling 40 percent share (80
    percent total) in XO after the restructuring. Thus, Forstmann Little
    would not be in a position to control the operations of XO. Even if
    we assume that Forstmann Little would be able to control XO, any
    potential anticompetitive effects from combined operation of McLeod
    and XO would be diminished, as XO points out, by the fact that there
    are at least four other competitive LECs in addition to the
    incumbent local exchange carrier ("ILEC") in the states where XO and
    McLeod operate.[^86] Furthermore, XO and McLeod also operate in the
    highly competitive U.S. domestic and international long distance and
    Internet markets targeting small and medium sized business
    users.[^87] Thus, even assuming common control, it is highly
    unlikely that a combined entity would pose a threat to competition
    in the markets in which they operate. Instead, having XO and McLeod
    continuing to operate as telecommunications service providers in all
    of these markets, even with an element of common ownership, furthers
    competition rather than curtailing it.[^88]

## Foreign Carrier Entry and Regulation 

31. In the *Foreign Participation* Order, the Commission adopted an
    "open entry" standard with a rebuttable presumption that entry by
    carriers from WTO Member countries is in the public interest.[^89]
    To overcome this presumption, it must be shown that entry by a
    foreign carrier will pose a very high risk to competition in the
    United States.[^90] RCN has not shown that Telmex's facilities-based
    entry into the U.S. market through the purchase of XO will pose a
    very high risk to competition in the provision of U.S. international
    service. We find that our dominant carrier safeguards will protect
    sufficiently against any potential harms to U.S. customers on the
    routes where XO will be affiliated with the dominant carrier on the
    foreign-end of the route. Our conclusion takes into consideration
    whether, as a result of the transfer, XO would become affiliated
    with a foreign carrier that has market power on the foreign end of a
    U.S. international route that XO seeks to serve.[^91]

32. Telmex is considered to be affiliated with America Movil, a Mexican
    telecommunications company that controls Telgua, the incumbent
    Guatemalan telecommunications company, and Techtel, a new Argentine
    competitor. XO agrees to be classified as a dominant carrier under
    section 63.10 on both the U.S.-Mexico and the U.S.-Guatemala
    routes.[^92] We find no basis on this record to conclude that XO's
    affiliate in Argentina has market power on the foreign end of this
    route.[^93] Accordingly, we find that, upon consummation of the
    proposed transfer of control of XO to the New Shareholders of XO, XO
    warrants classification as a non-dominant U.S. international carrier
    on all of its authorized U.S. international routes except on the
    U.S.-Mexico and U.S.-Guatemala routes, where it will be classified
    as dominant.

33. A carrier classified as dominant for the provision of international
    services on particular routes is subject to dominant carrier
    safeguards on those routes.[^94] These safeguards are designed to
    address the possibility that a foreign carrier with control over
    facilities or services that are essential inputs for the provision
    of U.S. international services could discriminate against rivals of
    its U.S. affiliates (i.e., vertical harms).[^95] RCN alleges that
    its inability to negotiate fair and effective local interconnection
    agreements with Telmex, inaction by Mexican regulators, arguably
    unjust local interconnection rates, and poor service quality are
    examples of Telmex's ability to discriminate.[^96] While we are
    concerned about these allegations, we disagree with RCN's assertions
    that our dominant carrier safeguards and our enforcement authority
    would be ineffective to prevent any harm to U.S. competition that
    such alleged conduct might cause. The Commission has concluded that
    these safeguards, in conjunction with generally applicable
    international safeguards, are sufficient to protect against vertical
    harms by carriers from WTO countries in virtually all
    circumstances.[^97]

34. RCN fails to establish a nexus between the alleged discriminatory
    conduct in Mexico and harm to competition in the United States.[^98]
    RCN's reliance on the Notice of Apparent Liability ("NAL")[^99]
    issued against Telmex USA[^100] in 2000 as proof of Telmex's
    anticompetitive behavior is misplaced. The NAL was based on the
    alleged failure by Telmex USA to comply with a condition of its
    section 214 authorization and was cancelled without
    forfeiture.[^101] Thus, it does not prove that Telmex has any
    propensity to engage in anticompetitive behavior. Nor does it serve
    as proof that Telmex would fail to comply with the Commission's
    competitive safeguards and other rules. Mere allegations that a
    foreign carrier or its U.S. affiliate has failed to abide by FCC
    rules and policies are not enough to justify the denial of that
    foreign carrier's application for entry into the U.S.
    telecommunications market.[^102] Nevertheless, our decision to grant
    these applications should not be construed as condoning the conduct
    alleged by RCN. In any event, we retain the right to impose
    additional conditions on this transaction pursuant to section
    63.21(g) should the demonstrated need arise.[^103]

35. Finally, RCN argues that granting the XO applications may seriously
    undermine any leverage that the United States Trade Representative
    (USTR) could derive from them to achieve its trade policy goal of
    addressing anticompetitive activity in Mexico, especially as a WTO
    panel investigation of Mexico is pending.[^104] In adopting its
    policies on foreign carrier participation in the U.S.
    telecommunications market, the Commission expressly rejected
    arguments that it should tie foreign carrier entry requirements to
    the extent to which a foreign country has implemented its market
    opening commitments under the WTO Basic Telecoms Agreement.[^105]
    Moreover, the USTR has the ability to enforce a WTO Member country's
    commitments through the WTO dispute resolution process.[^106] Hence,
    the WTO dispute resolution process provides the proper forum for
    redress. Appropriately, RCN has already petitioned the USTR to
    request that a WTO panel examine its claims that Telmex engages in
    anticompetitive conduct in violation of the WTO.[^107] At the
    request of USTR, the Dispute Settlement Body of the WTO recently
    established a dispute settlement panel to examine U.S. claims
    regarding Mexico's compliance with its WTO Basic Telecoms Agreement
    commitments.[^108]

## National Security, Law Enforcement, Foreign Policy and Trade Policy Concerns

36. In acting on applications pursuant to sections 214 and 310 (b)(4),
    we also consider any national security, law enforcement, foreign
    policy, and trade concerns raised by the Executive Branch.[^109] In
    this case, the Department of Justice ("DOJ") and the Federal Bureau
    of Investigation ("FBI") have advised the Commission that they have
    no objection to grant of the proposed applications provided that the
    Commission condition the grant on compliance with the terms of an
    agreement between the DOJ, the FBI, and XO ("the XO/DOJ/FBI
    Agreement").

37. Specifically, on September 16, 2002, the DOJ and FBI filed a
    Petition to Adopt Conditions to Authorization and Licenses
    ("Petition to Adopt Conditions") that attaches the XO/DOJ/FBI
    Agreement.[^110] The Petition to Adopt Conditions requests that the
    Commission condition grant of the instant applications on compliance
    with the terms of the XO/DOJ/FBI Agreement.

38. The XO/DOJ/FBI Agreement is intended to ensure that the DOJ, the FBI
    and other entities with responsibility for enforcing the law,
    protecting the national security and preserving public safety can
    proceed in a legal, secure and confidential manner to satisfy these
    responsibilities.[^111] The XO/DOJ/FBI Agreement provides, *inter
    alia*, that XO shall (i) direct its officials, agents, and employees
    in the United States to comply with U.S. legal process;[^112] (ii)
    make certain call and subscriber data available in the United
    States, if XO stores such data;[^113] (iii) take reasonable measures
    to monitor the use of facilities used in domestic telecommunications
    (specifically with respect to personnel holding sensitive
    positions), information storage and access to foreign
    entities;[^114] and (iv) not disclose domestic communications,
    transactional data, classified or sensitive information to any
    foreign government, agent, component or subdivision thereof without
    the express written consent of the Department of Justice or a court
    of competent jurisdiction.[^115]

39. In assessing the public interest, we take into account the record
    and afford the appropriate level of deference to Executive Branch
    expertise on national security and law enforcement issues.[^116] We
    recognize that, separate from our licensing process, XO has entered
    into the XO/DOJ/FBI Agreement, and that the Agreement expressly
    states that these agencies will not object to grant of the pending
    XO Transfer Applications, provided that the Commission conditions
    grant of the XO Transfer Applications on compliance with the
    Agreement.[^117] The Executive Branch has not otherwise commented on
    this proceeding.

40. Therefore, in accordance with the request of the Department of
    Justice and the Federal Bureau of Investigation, in the absence of
    any objection from the Applicants, and given the discussion above,
    we condition our grant of the XO Transfer Applications on compliance
    with the XO/DOJ/FBI Agreement.

# ConCLUSION

41. Based on the foregoing findings, we conclude, pursuant to section
    310(b)(4) and the Commission's "open entry" standard for indirect
    investment by WTO Members in U.S. common carrier licensees, that it
    will not serve the public interest to prohibit the proposed indirect
    foreign ownership of XO, which is in excess of 25 percent.
    Specifically, this ruling permits XO LMDS to be owned indirectly by:
    Telmex**,** Teninver, and Consertel (collectively, the "Telmex
    Group") and by Telmex's Mexican shareholders, including CGT (up to
    and including 40 percent of the equity and voting interests); and
    Mr. Gordon A. Holmes (up to and including 0.16 percent of the equity
    and 40 percent of the voting interests). XO also may accept up to
    and including an additional, aggregate 25 percent indirect equity
    and/or voting interests from the above named foreign investors, or
    other foreign investors, without seeking further Commission approval
    under section 310(b)(4), subject to the following conditions: First,
    no single foreign investor, with the exception of the Telmex Group
    and its Mexican shareholders, including CGT, as well as Mr. Holmes
    (as to voting interests), may acquire an indirect equity or voting
    interest in XO LMDS in excess of 25 percent without prior Commission
    approval under section 310(b)(4). Second, XO LMDS shall seek
    approval under section 310(b)(4) before it accepts any additional
    indirect equity and/or voting interest from Telmex or CGT, or any
    additional voting interest from Mr. Holmes, other than that
    specifically approved here. Compliance with this ruling requires XO
    to count, as part of the additional, aggregate 25 percent foreign
    ownership amount, any foreign ownership not specifically identified
    in this ruling, including non-Mexican foreign ownership of Telmex,
    ownership by the Forstmann Little limited partners, and any foreign
    owners of the 20 percent of XO shares not being acquired by either
    the Telmex Group or Forstmann Little.

42. We also conclude that the transfer of control is not likely to
    result in harm to competition in any relevant markets and will
    likely result in public interest benefits. The proposed
    reorganization plan in which the Applicants will increase their
    investment in XO will allow a large competitive LEC to remain as a
    valuable competitor and provider of telecommunications services**.**
    Accordingly, we approve the requested transfer of the domestic
    wireline section 214 authorization, the ninety-one LMDS licenses,
    the ten 39 GHz licenses, the international section 214
    authorizations, and the Industrial/Business Pool Conventional
    License.

# ORDERING CLAUSES

43. **IT IS ORDERED** that, pursuant to section 4(i) and (j), 214(a),
    309, and 310(d) of the Communications Act of 1934, as amended, 47
    U.S.C. §§ 154(i) and 154(j), 214(a), 309, and 310(d), the Applicants
    filed in the above-captioned proceeding ARE GRANTED to the extent
    specified in this Memorandum Opinion, Order and Authorization.

44. **IT IS FURTHER ORDERED** that, pursuant to section 310(b)(4) of the
    Communications Act of 1934, as amended, 47 U.S.C. § 310(b)(4), the
    Petition for Declaratory Ruling filed by XO Communications, Inc. IS
    GRANTED to the extent specified in the Memorandum Opinion and Order.

45. **IT IS FURTHER ORDERED** that, pursuant to sections 4(i) and (j),
    214(a) and (c), 309 and 310(b) and (d) of the Communications Act of
    1934, as amended, 47 U.S.C. §§ 154(i) and (j), 214(a) and (c), 309,
    310(b) and (d), that the Petition to Adopt Conditions to
    Authorization and Licenses filed by the Department of Justice and
    the Federal Bureau of Investigation, on September 16, 2002, IS
    GRANTED, and that the authorizations and licenses related thereto
    which are to be transferred as a result of this Memorandum Opinion,
    Order and Authorization are subject to compliance with provisions of
    the Agreement between XO Communications, Inc., on the one hand, and
    the Department of Justice and the Federal Bureau of Investigation on
    the other, effective on the date when the transfers have closed,
    which Agreement is designed to address national security, law
    enforcement, and public safety concerns of

    the Department of Justice and the Federal Bureau of Investigation
    regarding the authority granted herein, is fully binding upon XO
    Communications, Inc. and those subsidiaries, successors and assigns
    of both companies that provide telecommunications services within
    the United States. Nothing in the Agreement is intended to limit any
    obligation imposed by Federal law or regulation including, but not
    limited to, 47 U.S.C. §§ 222(a) and (c)(1) and the Commission's
    implementing regulations.

46. **IT IS FURTHER ORDERED** that, pursuant to section 214 of the
    Communications Act of 1934, as amended, 47 U.S.C. § 214, this
    authorization to XO Communications, Inc. to transfer control of its
    international section 214 authorizations to the New Shareholders of
    XO Communications, Inc. is subject to the condition that said
    section 214 authorizations shall be subject to rules governing
    dominant carriers set forth in section 63.10 of the Commission's
    rules, 47 C.F.R § 63.10, on the U.S.-Mexico, and U.S.-Guatemala
    routes.

47. This Memorandum Opinion, Order and Authorization is issued pursuant
    to section 0.261, 0.291 and 0.331 of the Commission's rules on
    delegated authority, 47 C.F.R §§ 0.261, 0.291, and 0.331 and is
    effective upon release. Petitions for reconsideration under section
    1.106 or applications for review under section 1.115 of the
    Commission's rules, 47 C.F.R § 1.106, 1.115, may be filed within 30
    days of the date of the release of this Memorandum Opinion, Order
    and Authorization. *See* 47 C.F.R. § 1.4(b)(2).

FEDERAL COMMUNICATIONS COMMISSION

Donald Abelson, Chief

International Bureau

William F. Maher, Jr, Chief

Wireline Competition Bureau

Thomas J. Sugrue, Chief

Wireless Telecommunications Bureau

[^1]: *See* Applications of XO Communications, Inc. for Consent to
    Transfer Control, IB Docket No. 02-50 (filed February 21, 2002)
    (*Transfer Application*). The Transfer Application included the
    following six requisite filings: two applications to transfer
    control of international section 214 authorizations held by XO and
    XO Long Distance Services, Inc. ("XO Long Distance") (File Nos.
    ITC-T/C-20020221-00095; ITC-T/C-20020221-00096) (*International 214
    Applications*); an application to transfer control of XO, XO Long
    Distance, and other XO subsidiaries as holders of blanket domestic
    section 214 authority (*Domestic 214 Application*); applications to
    transfer control of 91 Local Multipoint Distribution Service
    ("LMDS") licenses (FCC File No 0000753828) and ten 39 GHz licenses
    (FCC File No. 0000772528), all held by XO LMDS Holdings No. 1, Inc.
    ("XO LMDS"); and an application to transfer control of one
    Industrial/Business Pool, Conventional License, held by XO (FCC File
    No. 0000774240).

[^2]: 47 U.S.C. §§ 214(a), 310(d).

[^3]: 47 U.S.C. § 310(b)(4).

[^4]: *See Transfer Application* at 4-5. *See also* supra note 1.

[^5]: 47 U.S.C. § 308.

[^6]: *See Transfer Application* at 5 and Annex E.

[^7]: *Id.* at 5.

[^8]: *Id.* at 5-6.

[^9]: *Id.* at 6.

[^10]: *Id.* at 8.

[^11]: *Id*.

[^12]: *Id*.

[^13]: *International 214 Application* at 4-5.

[^14]: *Id*. *See also* Letter from Joan M. Griffin, Counsel for XO, to
    Marlene H. Dortch, Secretary, FCC, dated September 19, 2002 ("*XO
    September 19 Letter*") and *infra* para. 20.

[^15]: See *Telmex/Sprint Communications, L.L.C. Application for
    Authority Under Section 214 of the Communications Act for Global
    Authority to Operate as an International Switched Resale Carrier
    Between the United States and International Points, Including
    Mexico*, Order, Authorization and Certificate, 12 FCC Rcd 17,551
    (1997) (FCC File No. ITC-97-127). On June 30, 1999, the Commission
    granted consent to the transfer of control of Telmex/Sprint
    Communications, L.L.C. to Telmex International Ventures USA, Inc.
    ("*Telmex International Ventures*"). *See* International
    Authorizations Granted, Public Notice, DA 99-137 (rel. July 1999).
    By letter filed December 10, 1999, Telmex International Ventures
    advised the Commission that, pursuant to 47 C.F.R.§ 63.24, it had
    assigned the Section 214 authorization to its parent, Telmex
    International, Inc., and that pursuant to 47 C.F.R. § 63.21(i),
    Telmex USA, L.L.C., a wholly owned subsidiary of Telmex
    International, would use the authorization.

[^16]: *See* *Transfer Application* at 9.

[^17]: *Id*.

[^18]: *Id*.

[^19]: *See* *supra* n.1.

[^20]: *Transfer Application* at 3.

[^21]: *Id.* at 10.

[^22]: Funds affiliated with Forstmann Little have made investments in
    XO of \$850 million in January 2000, \$400 million in July 2000, and
    \$250 million in the spring of 2001. As of the date of the
    applications, these Forstmann Little funds in the aggregate hold
    approximately 22.4 percent of XO's outstanding shares of common
    stock, on a fully-diluted, as-converted basis. Applicants state that
    under the contemplated restructuring, these investments will be
    treated similarly to other existing equity holdings in XO. *See*
    *Id.* at 7.

[^23]: *Id.* at 2. Forstmann Little Equity VII proposes to hold 25
    percent of XO's equity and voting stock, and Forstmann Little MBO
    VIII proposes to hold 15 percent of XO's equity and voting stock.
    *Id*. at 6.

[^24]: *Id*. *See also infra* para. 20 n.61.

[^25]: *Transfer Application* at 18.

[^26]: *Id*. at 2-3.

[^27]: *Id*. at 17.

[^28]: *Id*. at 19.

[^29]: Commission Seeks Comment on Applications for Consent to Transfer
    Control Filed by XO Communications, Inc., *Public Notice*, DA 02-579
    (rel. Mar. 11, 2002).

[^30]: RCN has invested in Megacable Comunicaciones de Mexico, S.A. de
    C.V. ("MCM Telecom"), a facilities-based local exchange carrier
    authorized to provide a variety of telecommunications services in
    Mexico. RCN owns approximately 40 percent of MCM Telecom, with the
    remainder ultimately owned by a group of Mexican investors. *See*
    RCN Petition to Deny Applications*,* filed April 22, 2002
    ("*Petition*") at 2.

[^31]: In addition to RCN's petition, we received approximately 130
    informal comments from individual shareholders of XO. The comments,
    by and large, raise concerns about the value of their investment in
    light of the proposed transaction. We agree with XO that these types
    of concerns are more appropriately addressed in other fora, such as
    at the Securities and Exchange Commission or in shareholder
    lawsuits. *See Opposition* at 11. To the extent that these informal
    comments raise issues similar to RCN's petition, we incorporate them
    into our discussion.

[^32]: *Petition* at 1.

[^33]: *See* Letter from Joan M. Griffin, Counsel for XO, to Marlene H.
    Dortch, Secretary, FCC, dated June 17, 2002 ("*June 17 Letter*").

[^34]: *See* Letter from Joan M. Griffin, Counsel for XO, to Marlene H.
    Dortch, Secretary, FCC, dated July 3, 2002 ("*July 3* *Letter*"). XO
    is considering an alternative plan that would give ownership of the
    company to the bank creditors, who have loaned the company \$1
    billion. *See also* Letter from Wayne D. Johnsen and John F.
    Papandrea, Counsel for Forstmann Little, to Marlene H. Dortch,
    Secretary, FCC, dated August 29, 2002 ("*August 29 Forstmann Little
    Letter*") (questioning prospects for transaction proposed in pending
    applications). Our decision herein applies only to the transaction
    proposed in the pending applications, and does not prejudge FCC
    action on applications to effectuate this or any other alternative
    plan.

[^35]: *XO Communications, Inc.*, Case No. 02-12947 (AJG) (Bankr. Ct.
    S.D.N.Y. Aug. 26, 2002).

[^36]: 47 U.S.C. §§ 214(a), 310(d).

[^37]: *See, e.g.*, *AT&T Corp., British Telecommunications, plc, VLT
    Co. L.L.C., Violet License Co. LLC and TNV \[Bahamas\] Limited*,
    Memorandum Opinion and Order, 14 FCC Rcd 19140, 19147 (1999)
    ("*AT&T/BT Order*").

[^38]: *See,* *e.g*., *Application of VoiceStream Wireless Corporation,
    Powertel, Inc. Transferors, and Deutsche Telekom AG, Transferee*,
    Memorandum Opinion and Order, 16 FCC Rcd 9779, 9789 (2001)
    ("*VoiceStream/Deutsche Telekom Order*").

[^39]: *See* *Rules and Policies on Foreign Participation in the U.S.
    Telecommunications Market*, Report and Order and Order on
    Reconsideration, 12 FCC Rcd 23891, 23919-21 (1997) ("*Foreign
    Participation Order*"), Order on Reconsideration, 15 FCC Rcd 18158
    (2000).

[^40]: *See VoiceStream/Deutsche Telekom Order*, 16 FCC Rcd at 9790,
    para.19.

[^41]: *Id*. *See also Jefferson Radio Co. v. FCC*, 340 F.2d 781, 783
    (D.C. Cir. 1964); Stephen F. Sewell, Assignments and Transfers of
    Control of FCC Authorizations Under Section 310(d) of the
    Communications Act of 1934, 45 Fed. Comm. L.J. 277, 340 (1991)
    (explaining that the policy of not approving assignments or
    transfers of control when issues regarding the licensee's basic
    qualifications remain unresolved is intended to preserve the
    deterrent to licensee misconduct posed by the potential loss of the
    license through revocation or non-renewal, a deterrent that would be
    undermined if a licensee wrongdoer could assign or transfer the
    license with impunity).

[^42]: Applicants for Commission licenses must set forth such facts as
    the Commission may require as to citizenship, character, and
    financial, technical, and other qualifications. *See* 47 U.S.C. §
    308.

[^43]: Although RCN alleges that Telmex has engaged in anticompetitive
    and discriminatory conduct, it does not challenge the basic
    character qualifications of the reorganized XO Communications on
    that or any other basis. We address elsewhere in this Memorandum
    Opinion, Order and Authorization RCN's argument that the application
    should be denied because Telmex's ownership interest in XO
    Communications would permit Telmex to further leverage its market
    power in Mexico to the detriment of competition on the U.S.-Mexico
    route. *See infra* para. 34.

[^44]: *Transfer Application* at 2.

[^45]: *Id.* at 2, n.2.

[^46]: *See* 47 U.S.C. § 310(b)(4) (providing that "No broadcast or
    common carrier or aeronautical en route or aeronautical fixed radio
    station license shall be granted to or held by ... (4) any
    corporation directly or indirectly controlled by any other
    corporation of which more than one-fourth of the capital stock is
    owned of record or voted by aliens, their representatives, or by a
    foreign government, or representative thereof, or by any corporation
    organized under the laws of a foreign country, if the Commission
    finds that the public interest would be served by the refusal or
    revocation of such license.").

[^47]: *BBC License Subsidiary L.P*., Memorandum Opinion and Order, 10
    FCC Rcd 10968, 10973, para. 22 (1995).

[^48]: *See id.* at 10972, para. 20.

[^49]: *See, e.g*., *Sprint Corporation Petition for Declaratory Ruling
    Concerning Section 310(b)(4) and (d) and the Public Interest
    Requirements of the Communications Act of 1934, as amended*,
    Declaratory Ruling and Order, 11 FCC Rcd 1850, 1857, para. 47 (1995)
    ("*Sprint*"). *See also BBC License Subsidiary*, 10 FCC Rcd at
    10972, para. 20; *Request for Declaratory Ruling Concerning the
    Citizenship Requirements of Sections 310(b)(3) and (4) of the
    Communications Act of 1934, as amended*, Declaratory Ruling, 103 FCC
    2d 511, 520, para. 16, 523, para. 21 (1985) ("*Wilner & Scheiner
    I*"), *recon. in part*, 1 FCC Rcd 12 (1986) ("*Wilner & Scheiner
    II*").

[^50]: *Sprint*, 11 FCC Rcd at 1857, para. 47 (quoting section
    310(b)(4)). It is the licensee's obligation to inform the Commission
    before its indirect foreign ownership exceeds the 25 percent
    benchmark set forth in section 310(b)(4). *See Fox Television
    Stations, Inc.,* Order, 10 FCC Rcd 8452, 8474, para. 52 (1995).

[^51]: Section 310(a) of the Act prohibits any radio license from being
    "granted to or held by" a foreign government or its representative.
    *See* 47 U.S.C. § 310(a). The ownership structure proposed by XO is
    such that no foreign government or representative will hold any of
    the XO LMDS common carrier licenses. Section 310(b)(1)-(2) of the
    Act prohibits common carrier, broadcast and aeronautical fixed or en
    route radio licenses from being "granted to or held by" aliens or
    their representatives, or foreign corporations. *See* 47 U.S.C. §
    310(b)(1), (2). The ownership structure proposed by the Applicants
    is such that no alien or its representative, or foreign corporation
    will hold any of the XO LMDS licenses. Accordingly, we find that the
    proposed transaction is not inconsistent with the foreign ownership
    provisions of Section 310(a), (b)(1) and (b)(2) of the Act. *See
    VoiceStream/Deutsche Telekom Order*, 16 FCC Rcd at 9799-9800, paras.
    38-48 (issues related to indirect foreign ownership of common
    carrier licensees addressed under section 310(b)(4)). Additionally,
    because the proposed transaction does not involve direct foreign
    investment in XO LMDS, it does not trigger section 310(b)(3) of the
    Act, which places a 20 percent limit on direct alien, foreign
    corporate or government ownership of entities that hold common
    carrier, broadcast and aeronautical fixed or en route Title III
    licenses. *See* 47 U.S.C. § 310(b)(3).

[^52]: *Foreign Participation Order*, 12 FCC Rcd at 23896, para. 9,
    23913, para. 50, and 23940, paras. 111-12.

[^53]: *Id.* at 23896, para. 9, 23913, para. 50, 23940, paras. 111-12.

[^54]: *Id.* at 23894-95, para. 5.

[^55]: To determine a foreign entity's home market for purposes of the
    public interest determination under section 310(b)(4), the
    Commission will identify and balance the following factors: (1) the
    country of its incorporation, organization or charter; (2) the
    nationality of all investment principals, officers, and directors;
    (3) the country in which its world headquarters is located; (4) the
    country in which the majority of its intangible property, including
    production, transmission, billing, information, and control
    facilities, is located; and (5) the country from which it derives
    the greatest sales and revenues from its operations. *See* *Foreign
    Participation Order*, 12 FCC Rcd at 23941, para. 116 (citing *Market
    Entry and Regulation of Foreign-Affiliated Entities*, Report and
    Order, 11 FCC Rcd 3873, 3951, para. 207 (1995) ("*Foreign Carrier
    Entry Order*")).

[^56]: *Foreign Participation Order*, 12 FCC Rcd at 23946, para. 131.

[^57]: *Transfer Application* at 11 and Annex F. *See also id*. at 12-15
    (describing the voting rights of the Class C Common Stock to be
    issued to Telmex). According to XO, Consertel holds 99.99 percent of
    the common stock of Teninver, and Telmex holds 99.99 percent of the
    common stock of Consertel, which currently serves as an investment
    vehicle for Telmex. The remaining .01 percent of the common stock of
    each of Consertel and Teninver is held by other entities controlled
    by Telmex. *See XO September 19 Letter* at 1.

[^58]: *Transfer Application* at 8; *XO September 19 Letter* at 1.

[^59]: *Transfer Application* at 11 and Annex F. *See also id*. at 12-15
    (describing the voting rights of the Class A and Class D Common
    Stock to be issued to Forstmann Little).

[^60]: *See* Letter from Wayne D. Johnsen and John F. Papandrea, Counsel
    for Forstmann Little, to Marlene H. Dortch, Secretary, FCC, dated
    September 13, 2002 (*September 13 Forstmann Little Letter*).

[^61]: *Transfer Application* at 2 and 12, and *supra* para. 7. While we
    are prepared to accept XO's assertion that neither Telmex nor
    Forstmann Little would have a controlling interest in XO, we would
    be concerned if Forstmann Little attempted to use provisions in XO's
    Amended and Restated Certificate of Incorporation to force any
    action through XO's Executive Committee, and to block review of that
    action by XO's Board of Directors, where the action has been opposed
    by Telmex's Investor Designee to the Executive Committee prior to
    the "Board Representation Date" specified in the certificate of
    incorporation. We would consider whether there had been an
    unauthorized transfer of control of XO in the event we received
    evidence of such conduct by Forstmann Little. *See* Amended and
    Restated Certificate of Incorporation of XO Communications, Inc.
    (appended as Exhibit D to that certain Stock Purchase Agreement,
    dated as of January 15, 2002, among XO, the Intermediate
    Partnerships and Telmex) at 7-10.

[^62]: *See generally Wilner & Scheiner I*, 103 FCC 2d 511; *Wilner &
    Scheiner II*, 1 FCC Rcd 12; *BBC License Subsidiary*, 10 FCC Rcd at
    10973-74, paras 22-25; *Amendment of Parts 20, 21, 22, 24, 26, 80,
    87, 90, 100, and 101 of the Commission's Rules to Implement Section
    403(k) of the Telecommunications Act of 1996*, Order, 11 FCC Rcd
    13072 (1996) ("*Citizenship Requirements Order*").

[^63]: For example, if foreign individuals or entities hold a 20 percent
    equity interest in Company A and Company A, in turn, holds a 40
    percent equity interest in Company B, but has voting control of
    Company B, the percentage of Company B's equity capital supplied by
    Company A is 40 percent even if Company A controls Company B. The
    Commission has stated that, in these circumstances, "the percentage
    of that 40 percent equity capital reasonably attributable to aliens
    is proportionate to the alien contribution to Company A. The use of
    the multiplier (40% x 20% = 8%) properly discounts the alien
    participation in Company B." *BBC License Subsidiary*, 10 FCC Rcd at
    10974, para. 25. *See also id*. at 10973-74, paras. 23-25
    (overruling *Wilner & Scheiner II* insofar as it established a
    method of calculating alien equity ownership or contributed capital
    interests which directly tracked that used to determine alien voting
    interests).

[^64]: *BBC License Subsidiary*, 10 FCC Rcd at 10973-74, para. 25.

[^65]: Thus, in the example in note 63 above, the 20 percent foreign
    voting interest in Company A, which has voting control of Company B,
    would flow entirely to the next tier, and be attributed to Company B
    (100% x 20%). Counting all of Company A's foreign voting interest is
    appropriate, because, as the Commission has found, "actual control
    over the business ... is unlikely to be significantly attenuated
    through intervening companies." *Id.* at 10973, para. 23. *See also*
    *Wilner & Scheiner* I, 103 FCC 2d at 522, para. 19.

[^66]: That is, in the example in note 63 above, if Company A holds a
    general partnership interest or an uninsulated limited partnership
    interest in Company B, the 20 percent foreign voting interest in
    Company A would flow entirely to Company B (100% x 20%). *See*
    *Wilner & Scheiner* I, 103 FCC 2d at 522-23, paras. 20-21. *See also
    Vodafone Americas Asia Inc. (Transferor) and Globalstar Corporation
    (Transferee)*, *Application for Authority to Transfer Control of
    Licenses and Section 214 Authorizations and Petition for Declaratory
    Ruling Allowing Indirect* Foreign Ownership, Order and
    Authorization,. DA 02-1557, (IB rel. July 1, 2002), at para. 26. 26.
    The Commission has stated that, while a licensee has flexibility in
    the manner in which it chooses to demonstrate insulation, an alien
    limited partner will be deemed to be effectively insulated from
    partnership affairs if the licensee can demonstrate that the alien
    limited partner conforms to the insulation criteria for exemption
    from attribution under the Commission's media cross-ownership rules.
    *Wilner & Scheiner I*. at 522, para. 20 n.50. The insulation
    criteria for limited partners under the cross-ownership rules are
    described in *Reexamination of the Commission's Rules and Policies
    Regarding the Attribution of Ownership Interests in Broadcast, Cable
    Television and Newspaper Entities*, MM Docket No. 83-46, Memorandum
    Opinion and Order, FCC 85-252 (rel. June 24, 1985), *as modified on
    reconsideration* in MM Docket No. 83-46, *Memorandum Opinion and
    Order*, FCC 86-410 (rel. Nov. 28, 1986). *See, e.g.*, 47 C.F.R. §
    21.912, Note 1 para. (g) (codifying the insulation criteria for
    purposes of attributing ownership and other interests in Multipoint
    Distribution Service licensees or cable television systems).

[^67]: *Transfer Application* at 21.

[^68]: *Transfer Application* at 20-21. The percentage is based on
    capital contribution, which is the relevant measure of equity
    interests in a partnership. *See Wilner & Scheiner* I, 103 FCC 2d at
    520, para. 16 n. 42, *recon. denied in pertinent part in* *Wilner &
    Scheiner II*, 1 FCC Rcd at 14, para. 17*.* FLC XXXII also has
    certain profit sharing incentives that reach 21.25 percent of
    partnership profits. *Transfer Application* at 21 n.24.

[^69]: *Transfer Application* at 21. XO states that this ownership
    percentage is the same in terms of either capital contribution or
    share of profits. *See* Letter from Brad E. Mutschelknaus, and Joan
    M. Griffin, Counsel for XO, to Marlene H. Dortch, Secretary, FCC,
    dated May 9, 2002 ("*May 9 Letter*") at Attachment 1, n. 3.

[^70]: *See* *May 9 Letter* at 7-8. Applicants also state that there is
    no formal management board. *Id*.

[^71]: *See* *September 13 Forstmann Little Letter* at 2. Forstmann
    Little confirms that there are no foreign limited partnership
    interests in the Intermediate General Partnerships. *Id*. It also
    represents that the foreign limited partners have no voting rights,
    except in extraordinary circumstances (such as the retirement or
    incapacity of the general partner or any proposed amendment to the
    respective partnership agreement). In such situations, the voting
    rights are the same as the limited partner's percentage of the
    overall capital commitments of the partnership. *Id.*

[^72]: We derive this percentage by calculating XO's attributable
    foreign limited partnership interests from Forstmann Little Equity
    VII (25% x 11.32% = 2.83%) and Forstmann Little MBO VIII (15% x
    14.8% = 2.22% ) and then aggregate these amounts for a total 5.05
    percent equity interest.

[^73]: *See September 13 Forstmann Little Letter* at 1-2.

[^74]: *See supra* para. 20.

[^75]: *See supra* para. 22.

[^76]: *See* Letter from Wayne D. Johnsen and John F. Papandrea, Counsel
    for Forstmann Little, to Marlene H. Dortch, Secretary, FCC, dated
    September 19, 2002 (public version).

[^77]: *See infra* para. 27. Generally, the section 310 (b)(4) rulings
    we issue to common carrier licensees under the *Foreign
    Participation Order* approve specific indirect equity and/or voting
    interests made by named foreign investors from WTO Member countries;
    and provide an allowance for an additional, aggregate 25 percent
    amount of unidentified foreign equity and/or voting interests,
    subject to certain limitations to ensure that no individual investor
    obtains an interest that exceeds 25 percent without prior Commission
    approval and that non-WTO Member investment does not exceed 25
    percent. *See, e.g., Lockheed Martin Global Telecommunications,
    Comsat Corporation, and Comsat General Corporation, Assignor, and
    Telenor Satellite Mobile Services, Inc., and Telenor Satellite,
    Inc., Assignee,* Order and Authorization, 16 FCC Rcd 22897, 22913,
    para. 36 (2001), *erratum*, 17 FCC Rcd 2147 (IB 2002), *recon.
    denied,* FCC 02-207 (rel. July 12, 2002); *Application of General
    Electric Capital Corporation and SES Global S.A.,* Supplemental
    Order, 16 FCC Rcd 18878, 18884, para. 11 (IB & WTB 2001); *Motient
    Services Inc. and TMI Communications and Company, LP, Assignors, and
    Mobile Satellite Ventures Subsidiary LLC, Assignee,* Order and
    Authorization, 16 FCC Rcd 20469, 20477, para. 22 (IB 2001)
    ("*Motient Services Order*").

[^78]: *Section 214 Transfer Application* at 3.

[^79]: *See May 9 Letter* at 8-9 and Attachment 2.

[^80]: *See* *Id.* at 10. Applicants note that SBC International, Inc.,
    a U.S. corporation and subsidiary of SBC Communications, Inc., holds
    approximately eight percent of Telmex's total capital stock. They
    further state that: "While it is believed that the vast majority of
    the remaining shares are in the hands of U.S. citizens, there is no
    data available as to the citizenship of the remaining shareholders."
    *Id*.

[^81]: *Id*. at 8.

[^82]: *Foreign Participation Order* , 12 FCC Rcd at 23913-14, para. 51.

[^83]: *See* Section III. E. *supra.*

[^84]: With respect to domestic telecommunications services, the
    Commission separately analyzes the impact on competition in the
    product market for local exchange and exchange access services, and
    the product market for interexchange services. *See, e.g.
    Application of WorldCom, Inc. and MCI Communications Corporation for
    Transfer of Control to MCI Communications Corporation of WorldCom,
    Inc.,* 13 FCC Rcd 18025, 18040 (1998) ("*MCI/WorldCom Order")*;
    *Application of GTE Corporation, Transferor, and Bell Atlantic
    Corporation, Transferee, for Consent to Transfer Control of Domestic
    and International Sections 214 and 310 Authorizations and
    Application to Transfer Control of a Submarine Cable Landing
    License,* 15 FCC Rcd 14032, 14088-89 (2000) *("Bell Atlantic/GTE
    Order")*. XO provides both types of services. *See May 9 Letter* at
    3. The Commission further distinguishes between services provided
    to: (1) residential consumers and small business (mass market); and
    (2) medium-sized and large business customers (large business
    market). *Bell Atlantic/GTE Order,* 15 FCC Rcd at 14088-89. The
    Commission similarly has distinguished between international
    services provided to mass market and larger business market
    customers. *See MCI/WorldCom Order*, 13 FCC Rcd at 18095, para. 122.
    Because XO provides services to both "small" and "medium"-sized
    businesses, we conclude that it provides service to both types of
    customers that are relevant for the Commission's analysis. *See May
    9 Letter* at 3.

[^85]: XO is a full service provider of communication and information
    services to business customers throughout the United States.
    *Domestic 214 Application* at 3. XO delivers these services over its
    own network of metropolitan fiber rings and long haul fiber optic
    facilities, and through the use of facilities and services leased or
    purchased from incumbent local exchange carriers.

[^86]: *May 9 Letter* at 6.

[^87]: Based on total toll service revenues, AT&T, WorldCom and Sprint
    held a combined market share of approximately 64 percent for the
    year 2000. *See May 9 Letter* at 6 (citing Trends in Telephone
    Service, Industry Analysis Division, Com. Car. Bur., August 2001, at
    Table 10.9). *See also* Statistics of Communications Common
    Carriers, Industry Analysis Division, Wireline Competition Bur.,
    September 2002, at Table 1.6 (indicating that based on total toll
    service revenues for long distance carriers for the year 2001, AT&T,
    WorldCom and Sprint also held a combined market share of
    approximately 64 percent).

[^88]: Telmex also is affiliated with entities that provide or are
    authorized to provide U.S. domestic and international services in
    some or all of the same geographic markets as XO. *See* *supra*
    para. 6. *See also* *May 9 Letter* at 2. None of these entities,
    however, are significant participants in the U.S. domestic or
    international services market. *See* *May 9 Letter* at 3-4 (stating
    that Telmex USA currently does not provide telecommunications
    services in the United States; and calculating for XO and McLeod a
    0.04 percent share and a 0.43 percent share, respectively, of total
    U.S.-billed international service revenues for the year 2000, both
    reporting on a switched resale basis only). We note that, even if we
    calculate XO's and McLeod's respective market shares as a percentage
    of switched resale revenues only, their shares are 0.08 and 0.87
    percent, respectively. Thus, even assuming a combination of XO,
    McLeod and Telmex, it is highly unlikely that such a combination
    would result in a significant loss of competition in the markets in
    which they operate.

[^89]: *Foreign Participation Order* 12 FCC Rcd at 23913, para. 50.

[^90]: *Id*. at para. 51.

[^91]: *See Foreign Participation Order,* 12 FCC Rcd at 23987, 23991-99,
    paras. 215, 221-39.

[^92]: XO certifies that it will be affiliated within the meaning of 47
    C.F.R. 63.09(e) with America Movil and Techtel. *International 214
    Application* at 6.

[^93]: Telmex's affiliate in Argentina, Techtel, is a new competitor in
    that market and is therefore not considered to possess market power
    in Argentina. The Commission has not imposed dominant carrier
    treatment on Telmex USA on the U.S.-Argentina route. *See* File No.
    FCN-NEW-20000908-00051.

[^94]: 47 C.F.R. § 63.10 (c) and (e).

[^95]: In the *Foreign Participation Order*, the Commission concluded
    that these safeguards, in conjunction with generally applicable
    international safeguards, are sufficient to protect against vertical
    harms by carriers from WTO countries in virtually all circumstances.
    In the exceptional case where an application poses a very high risk
    to competition in the U.S. market, and where the standard safeguards
    and additional conditions would be ineffective, the Commission
    reserves the right to deny the application. *Foreign Participation
    Order*, 12 FCC Rcd at 23913-14, para. 51. In circumstances where an
    affiliated foreign carrier possesses market power in a non-WTO
    Member country, the Commission applies the ECO test as part of its
    public interest inquiry under section 214(a). *Id.* at 23944, para.
    124.

[^96]: RCN alleges that Telmex provides poor service quality, does not
    provide MCM Telecom with same level of service quality that it
    provides to itself and its affiliates, owes MCM several million
    dollars for undisputed interconnection compensation and that Mexican
    regulators (SCT & COFETEL) fail to adequately regulate Telmex.
    Petition at 3-5.

[^97]: *See* *Foreign Participation Order,* 12 FCC Rcd at 23913-14,
    para. 51. Specifically, the Commission found that its regulatory
    safeguards and enforcement authority would be sufficient to detect
    and deter anticompetitive conduct by U.S.-authorized carriers and
    their foreign affiliates in WTO Member countries, regardless of the
    quality of their market opening commitments in the WTO or the extent
    of implementation of their commitments. *Id*. at 23907-10, paras.
    37-42.

[^98]: The Commission stated in the *Foreign Participation Order* that
    it would find denial warranted in circumstances where a carrier has
    the ability upon entry, or shortly thereafter, to raise prices by
    restricting output. The Commission also stated that it would
    consider an applicant's past behavior as an indication whether it
    would fail to comply with regulatory safeguards and whose behavior,
    as a result, could damage competition and otherwise negatively
    impact the public interest. In particular, the Commission stated it
    would consider whether a carrier has engaged in adjudicated
    violations of Commission rules, U.S. antitrust or other competition
    laws, or in demonstrated fraudulent or other criminal behavior.
    *Foreign Participation Order*, 12 FCC Rcd at 23915, para. 53.

[^99]: *See Telmex International Ventures USA, Inc, Apparent Liability
    for Forfeiture*, Notice of Apparent Liability for Forfeiture, 15 FCC
    Rcd 714 (Enforcement Bureau 2000), cancelled in Memorandum Opinion
    and Order, 16 FCC Rcd 14446 (Enforcement Bureau 2001).

[^100]: Telmex USA, L.L.C. ("Telmex USA") is an indirect, wholly owned
    subsidiary of Telmex which holds an international section 214
    authorization to provide international switched resale services in
    the United States. *See* n.15 *supra.*

[^101]: *Id*.

[^102]: *Foreign Participation Order* at 12 FCC Rcd at 23914-15, paras.
    52-53. *See also supra* n.98.

[^103]: 47 C.F.R. § 63.21(g).

[^104]: *Petition* at 8-10.

[^105]: See *Foreign Participation Order* para. 39.

[^106]: *Id.* at paras. 39-41. For several years, the United States
    Trade Representative has had concerns with barriers to competition
    in Mexico\'s telecommunications market. On August 17, 2000, the
    United States requested consultations with Mexico regarding its
    commitments and obligations under the General Agreement on Trade in
    Services ("GATS") with respect to telecommunications services.
    According to the U.S. consultation request, the Government of Mexico
    has failed to (1) maintain effective discipline over dominant
    carrier, Telmex; (2) ensure timely, cost-oriented interconnection;
    and (3) permit alternatives to a system of charging U.S. carriers
    above-cost rates for completing international calls into Mexico.
    These consultations, which were held on October 10, 2000, did not
    resolve the dispute. Therefore, on November 10, 2000, USTR filed a
    request for the establishment of a dispute resolution panel as well
    as an additional request for consultations. Those consultations were
    held on January 16, 2001. At that time, the United States decided
    not to pursue its panel request further given progress achieved in
    Mexico\'s domestic telecommunications market. For instance, Mexico
    reduced domestic interconnection rates and introduced measures to
    regulate Telmex as a dominant carrier. However, based on the view
    that, Mexico has not addressed U.S. concerns regarding its
    international telecommunications regime, including rates that Telmex
    charges U.S. operators to complete calls into Mexico, on February
    13, 2002, the United States filed a new request for a panel to
    examine these unresolved issues. The panel was established on April
    17, 2002. *See* Office of United States Trade Representative, *WTO
    Dispute Settlement Regarding Telecommunications Trade Barriers in
    Mexico*, Docket No. WTO/DS-204, Notice and Request for Comments, 67
    Fed. Reg. 20195 (2002).

[^107]: *See* Petition at 4, Exhibit 1(*citing* Comments of MCM Telecom
    to the Office of the United States Trade Representative, dated
    December 13, 2000).

[^108]: *See* Office of United States Trade Representative, *WTO Dispute
    Settlement Regarding Telecommunications Trade Barriers in Mexico*,
    Docket No. WTO/DS-204, *Notice and Request for Comments*, 67 Fed.
    Reg. 20195 (2002).

[^109]: *Foreign Participation Order*, 12 FCC Rcd at 23918, para. 59.

[^110]: Department of Justice and Federal Bureau of Investigation,
    Petition to Adopt Conditions to Authorizations and Licenses in the
    Matter of XO COMMUNICATIONS, INC; Applications for Consent to
    Transfer Control of a Company Holding Licenses and Authorizations
    Pursuant to Section 214 and 310(d) of the Communications Act and for
    Declaratory Ruling Pursuant to Section 310(b)(4) of the
    Communications Act (File Nos. ITC-T/C-20020221-00095;
    ITC-T/C-20020221-00096, FCC File No 0000753828, FCC File No.
    0000772528, and FCC File No. 0000774240) (filed February 21, 2002)
    ("*Petition to Adopt Conditions*") (attaching the XO/DOJ/FBI
    Agreement).

[^111]: *Petition to Adopt Conditions* at 4.

[^112]: *XO/DOJ/FBI Agreement* at Article 2.3.

[^113]: *Id.* at Art. 2.3.

[^114]: *Id.* at Art. 2.6-3.12.

[^115]: *Id.* at Art. 3.3-3.5.

[^116]: *Foreign Participation Order*, 12 FCC Rcd at 23919-21, paras.
    61-66.

[^117]: XO/DOJ/FBI Agreement at 20, Article 7.1.