Federal Register / Vol. 62, No. 236 / Tuesday, December 9, 1997 / Rules and Regulations 64741

dispensing with the notice of proposed

rulemaking and public comment

procedures for this rule. Specifically,

this rulemaking comports with and is

consistent with the statutory authority

and requirements set forth in the

Electronic Freedom of Information Act

Amendments of 1996 concerning time

limits for responding to initial FOIA

requests and administrative appeals

with no issues of policy or discretion.

Accordingly, opportunity for prior

public comment is unnecessary and

contrary to the public interest, and we

are issuing this revised regulation as a

final rule.

List of Subjects in 41 CFR Part 105–60

Freedom of information.

For the reasons set out in the

preamble, 41 CFR Part 105–60 is

amended as follows:

PART 105–60—PUBLIC AVAILABILITY

OF AGENCY RECORDS AND

INFORMATIONAL MATERIALS

1. The authority citation for 41 CFR

Part 105–60 continues to read as

follows:

Authority: 5 U.S.C. 301 and 552; 40 U.S.C.

486(c).

Subpart 105–60.4—Described Records

2. Sections 105–60.402, 105–60.402–

1, and 105–60.402–2 are revised to read

as follows:

§ 105–60.402 Procedures for making

records available.

Sections 105–60.402–1 and 105–

60.402–2 set forth initial procedures for

making records available when they are

requested, including administrative

procedures to be exhausted prior to

seeking judicial review by an

appropriate United States District Court.

§ 105–60.402–1 Submission of requests.

For records located in the GSA

Central Office, the requester must

submit a request in writing to the GSA

FOIA Officer, General Services

Administration (CAI), 1800 F Street,

NW., Washington, DC 20405. Requesters

may FAX requests to (202) 501–2727, or

submit a request by e-mail to

gsa.foi@gsa.gov. For records located in

the Office of Inspector General, the

requester must submit a request to the

FOIA Officer, Office of Inspector

General, General Services

Administration, 1800 F Street NW.,

Room 5324, Washington, DC 20405. For

records located in the GSA regional

offices, the requester must submit a

request to the FOIA Officer for the

relevant region, at the address listed in

§ 105–60.303(a). Requests should

include the words ‘‘Freedom of

Information Act Request’’ prominently

marked on both the face of the request

letter and the envelope. The 20-workday

time limit for agency decisions set forth

in § 105–60.402–2 begins with receipt of

a request in the office of the official

identified in this section, unless the

provisions under §§ 105–60.305–8 and

105–60.305–12(d) apply. Failure to

include the words ‘‘Freedom of

Information Act Request’’ or to submit

a request to the official identified in this

section will result in processing delays.

A requester with questions concerning a

FOIA request should contact the GSA

FOIA Office, General Services

Administration (CAI), 1800 F Street,

NW., Washington, DC 20405, (202) 501–

2691.

§ 105–60.402–2 Response to initial

requests.

GSA will respond to an initial FOIA

request that reasonably describes

requested records, including a fee

waiver request, within 20 workdays

(that is, excluding Saturdays, Sundays,

and legal holidays) after receipt of a

request by the office of the appropriate

official specified in § 105–60.402–1.

This letter will provide the agency’s

decision with respect to disclosure or

nondisclosure of the requested records,

or, if appropriate, a decision on a

request for a fee waiver. If the records

to be disclosed are not provided with

the initial letter, the records will be sent

as soon as possible thereafter. In

unusual circumstances, as described in

§ 105–60.404, GSA will inform the

requester of the agency’s need to take an

extension of time, not to exceed an

additional 10 workdays.

Dated: November 24, 1997.

David J. Barram,

Administrator.

[FR Doc. 97–31489 Filed 12–8–97; 8:45 am]

BILLING CODE 6820–34–M

FEDERAL COMMUNICATIONS

COMMISSION

47 CFR Parts 43, 63, and 64

[IB Docket No. 97–142, FCC 97–398]

Foreign Participation in the U.S.

Telecommunications Market

AGENCY: Federal Communications

Commission.

ACTION: Final rule.

SUMMARY: On November 25, 1997, the

Federal Communications Commission

adopted a Report and Order that creates

a new regulatory framework for

international telecommunications. This

action is a result of the recent World

Trade Organization agreement on basic

telecommunications services recently

concluded wherein 69 countries,

including the United States and

virtually all of its major trading

partners, agreed to open their markets

for basic telecommunications services to

competition from foreign carriers. Due

to these changed circumstances, the

Commission initiated a proceeding to

revisit its rules governing foreign

participation in the U.S.

telecommunications market. In

addition, the Commission’s order

addresses related issues raised in

petitions for reconsideration of the

Foreign Carrier Entry Order. The new

rules will have significant benefits for

consumers. Entry by foreign suppliers of

telecommunications services will

stimulate the U.S. market for

international services, creating

incentives for carriers to offer existing

services at lower prices and adopt

innovative new services to attract

residential and small business

customers. Further opening the U.S.

market to foreign carrier entry, along

with U.S. carrier entry into foreign

markets, will allow carriers to capitalize

on newly found efficiencies by offering

one-stop shopping, which allows

customers to have a single service

provider in multiple markets, thereby

reducing administrative costs to users.

This final rule contains information

collections subject to the Paperwork

Reduction Act of 1995 (PRA), Pub. L.

No. 104–13. It will be submitted to the

Office of Management and Budget

(OMB) for review under the PRA. OMB,

the general public and other Federal

agencies are invited to comment on the

information collections contained in the

final rule.

DATES: The amendments to §§ 43.51(d)

and 64.1001(b) are effective January 8,

1998. All other regulations contain

information collection requirements and

are not effective until approved by the

Office of Management and Budget

(OMB), subject to 5 U.S.C. § 801(a)(3). A

document announcing the effective date

of these regulations will be published in

the Federal Register.

The agency reserves the right to

reconsider the effective date of this

decision if the WTO Basic Telecom

Agreement does not take effect on

January 1, 1998. If these final rules are

postponed, the agency will give timely

notice in the Federal Register.

Written comments by the public on

the information collection requirements

are due February 9, 1998.
64742 Federal Register / Vol. 62, No. 236 / Tuesday, December 9, 1997 / Rules and Regulations

ADDRESSES: A copy of any comments on

the information collections contained

herein should be submitted to Judy

Boley, Federal Communications

Commission, Room 234, 1919 M Street,

N.W., Washington, D.C. 20554, or via

the Internet to jboley@fcc.gov.

FOR FURTHER INFORMATION CONTACT:

Douglas A. Klein, Attorney-Advisor,

Policy and Facilities Branch,

Telecommunications Division,

International Bureau, (202) 418–0424;

Susan O’Connell, Attorney-Advisor,

Policy and Facilities Branch,

Telecommunications Division,

International Bureau, (202) 418–1484.

For additional information concerning

the information collections contained in

this Order contact Judy Boley at 202–

418–0214, or via the Internet at

jboley@fcc.gov.

SUPPLEMENTARY INFORMATION:

1. On June 4, 1997, the Commission

released a Notice of Proposed

Rulemaking in the Matter of Rules and

Policies on Foreign Participation in the

U.S. Telecommunications Market, IB

Docket No. 97–142 (62 FR 32966, June

17, 1997). The Notice proposed changes

to the rules and policies governing

foreign participation in the U.S. market

for basic telecommunications services

that had been previously adopted by the

Commission in the Foreign Carrier Entry

proceeding. The Commission initiated

this proceeding to consider more

appropriate rules in the liberalized

competitive environment that will exist

when the recent World Trade

Organization (WTO) agreement on basic

telecommunications services takes effect

on January 1, 1998. The WTO agreement

was concluded on February 15, 1997,

when 69 countries, including the United

States and virtually all of its major

trading partners, agreed to open their

markets for basic telecommunications

services to competition from foreign

carriers. This agreement covers 95

percent of the global market for basic

telecommunications services. Sixty-five

of these countries, including the United

States, have committed to enforce fair

rules of competition for basic

telecommunications services that are

modeled on U.S. law and regulations.

Fifty-two of these countries, which

account for approximately 90 percent of

telecommunications revenues in WTO

Member countries, have granted market

access for international services. Thus,

most of the world’s major trading

nations have made binding

commitments to transition rapidly from

monopoly provision of basic

telecommunications services to open

entry and procompetitive regulation of

these services.

2. The order removes the effective

competitive opportunities (ECO) test

and replaces it with an open entry

standard. In its Foreign Carrier Entry

Order, the Commission adopted the

ECO test as part of an overall public

interest analysis for both international

Section 214 authorizations and indirect

foreign ownership of common carrier

radio licenses under Section 310(b)(4).

(See 60 FR 67332, December 29, 1995.)

The Commission replaces the ECO test

with a rebuttable presumption that

applications for Section 214 authority

from carriers from WTO countries do

not pose concerns that would justify

denial of an application on competitive

grounds. The Commission also adopts a

rebuttable presumption that WTO

country applicants filing cable landing

license applications, as well as

applications to exceed the 25 percent

foreign ownership benchmark in a

common carrier radio licensee under

Section 310(b)(4) of the Act, similarly

do not pose such competitive concerns.

The Commission finds that adopting a

presumption in favor of entry will have

significant public interest benefits.

3. The Commission recognizes,

however, that in exceptional

circumstances, entry into the U.S.

market by an applicant affiliated with a

foreign telecommunications carrier from

a WTO country may pose competitive

risks by virtue of the applicant’s ability

to exercise market power in a relevant

foreign market. In such exceptional

circumstances, the Commission will

have the ability to attach additional

conditions to or even deny a particular

application. The Commission believes

this approach provides protection

against possible competitive harms

while favoring neither foreign nor

domestic applications.

4. The Commission also intends to

apply its new open entry policies to

cable landing license applicants. The

Commission will continue, however, to

analyze each application while seeking

the approval of the State Department as

required by Executive Order 10530. The

Commission will no longer routinely

impose a restriction on foreign

ownership of cable landing stations.

Should the Department of State,

pursuant to Executive Order 10530,

condition its approval of a particular

cable landing license on such a

restriction, the Commission will include

a condition to that effect in the

particular cable landing license. Any

such restriction would be necessary to

protect the national security of the

United States.

5. In the Foreign Carrier Entry Order,

the Commission adopted an ECO test as

part of the public interest analysis under

Section 310(b)(4) for applicants seeking

authority to acquire greater than 25

percent indirect foreign ownership in a

common carrier radio licensee. In this

Order, the Commission replaces the

current ECO test as applied to foreign

investment from WTO Member

countries in common carrier radio

licenses with its new open entry

policies. The Commission retains its

general requirement that such licensees

seek Commission approval before they

accept foreign ownership that would

put them over the 25 percent benchmark

under Section 310(b)(4). The

Commission will also continue to

require licensees who have already

received approval to exceed the 25

percent benchmark up to a certain level

of indirect foreign ownership to seek

further approval in order to increase

that level of indirect foreign ownership.

The Commission will continue to use

the ‘‘principal place of business’’ test to

determine the nationality or ‘‘home

market’’ of foreign investors, but it will

consider other means of determining an

applicant’s nationality if requested to do

so by an applicant or if so advised by

the Executive Branch.

6. The Commission will treat

aeronautical enroute and aeronautical

fixed services in the same manner as it

treats common carrier services under

Section 310(b)(4) and not apply an ECO

test to indirect foreign ownership by

entities from WTO Member countries.

The Commission declines to address the

rule limiting the number of aeronautical

enroute licenses to one per location

because the rule is beyond the scope of

this proceeding. The Commission does,

however, suggest several options for

parties seeking to provide aeronautical

services in the United States.

7. The Commission will continue to

apply the ECO and equivalency tests to

non-WTO Member countries. The

Commission believes that continuing to

apply the ECO test to non-WTO Member

countries may encourage some of those

countries to take unilateral or bilateral

steps toward opening their markets to

competition and may provide incentives

for them to join the WTO. In the case

of Section 214 applications to provide

facilities-based, resold switched, and

resold non-interconnected private line

services, the Commission will continue

to apply the ECO test as part of the

public interest inquiry when presented

with an application from a foreign

carrier or a carrier affiliated with a

foreign carrier where the foreign carrier

is from a non-WTO Member country

and has market power in the destination
Federal Register / Vol. 62, No. 236 / Tuesday, December 9, 1997 / Rules and Regulations 64743

market. The ECO test will be applied in

a similar manner as part of the

Commission’s analysis under Section 2

of the Submarine Cable Landing License

Act. The Commission will maintain the

equivalency test as part of its standard

for permitting the provision of switched

services over private lines, whether

facilities-based or through resale, for

non-WTO Member countries. The ECO

test will be applied as part of the

Commission’s general public interest

analysis under Section 310(b)(4)

regarding foreign investment by entities

from non-WTO Member countries in

common carrier radio licensees. The

Commission will retain the ECO test as

the threshold standard for permitting

accounting rate flexibility with carriers

from countries that are non-WTO

Members.

8. In the Notice, the Commission

noted that there were outstanding

petitions for reconsideration of the

Foreign Carrier Entry Order. In light of

the WTO Agreement, the Commission

requested comment on whether it

should, for purposes of countries that

are not WTO Members, apply the ECO

test to U.S. carriers that own more than

25 percent of, or control, a foreign

carrier from a non-WTO country. In the

Order, the Commission recognizes that

in the more liberalized environment that

will result from the WTO Basic Telecom

Agreement it will become increasingly

difficult to define a ‘‘U.S. carrier’’ for

the purpose of distinguishing between

U.S.-carrier and foreign-carrier

ownership of carriers. In addition, the

GATS principle of National Treatment

obligates the U.S. Government to treat

investments by carriers from WTO

Member countries no less favorably than

it treats investments by domestic

carriers. Thus, the Commission modifies

its conclusion in the Foreign Carrier

Entry Order and it will apply the ECO

test where a U.S. carrier, or a company

that owns more than 25 percent of a

U.S. carrier, owns a controlling interest

in a foreign carrier that has market

power in a non-WTO country.

9. Given the new open entry

approach, the Commission found it

necessary to revise the competitive

safeguards governing foreign-affiliated

carrier provision of basic

telecommunications services in the U.S.

market and, more broadly, U.S. carrier

dealings with foreign carriers. The

Commission establishes a regulatory

framework that modifies or eliminates

rules that could hamper competition

while balancing a need to monitor and

detect anticompetitive behavior in the

U.S. market without imposing

burdensome regulations. For the

purposes of applying the dominant

carrier safeguards and No Special

Concessions rule, the Commission

creates a rebuttable presumption that a

foreign carrier with less than 50 percent

market share in each of the relevant

markets on the foreign end of a U.S.

international route lacks sufficient

market power to affect competition

adversely in the U.S. market. The

Commission states that this

presumption is rebuttable. Carriers may

file petitions with the Commission

seeking a declaratory ruling on whether

a foreign carrier with a market share of

50 percent or more in any relevant

market should be allowed to grant a

special concession or be regulated as

non-dominant because it lacks the

ability to affect competition adversely in

the U.S. market.

10. The Commission narrows its No

Special Concessions rule to allow U.S.

carriers to accept special concessions

granted by foreign carriers that do not

possess market power in a relevant

foreign market without first obtaining

specific approval from the Commission.

The Commission concludes that its No

Special Concessions rule should be

limited to exclusive dealings involving

services, facilities, or functions on the

foreign end of a U.S. international route

that are necessary for the provision of

U.S. basic international service. The

Commission did not adopt its proposal

to specify a prohibition on special

concessions involving the joint handling

of basic U.S. traffic originating or

terminating in third countries.

11. The Commission prohibits U.S.

carriers from receiving proprietary or

confidential information obtained by

any foreign carrier in the course of its

regular business dealings with a

competing U.S. carrier, unless the

competing U.S. carrier provides its

specific permission in writing. Where a

U.S. carrier is affiliated with a foreign

carrier, the proprietary or confidential

information of other U.S. carriers

obtained by that foreign affiliate may

not be used for any purpose other than

for conducting the correspondent

relationships with the carriers from

whom the information was obtained.

This rule will serve as a general

requirement on all existing, pending,

and future authorizations to provide

U.S. international services.

12. The Commission concludes that

safeguards are necessary given the

privacy and anticompetitive effects that

may result from the use of foreignderived U.S. customer proprietary

network information (CPNI). Under

Section 222(a) of the Communications

Act, every telecommunications carrier

has a duty to protect the confidentiality

of customer information. The

Commission finds that if a U.S. carrier

desires to make use of foreign-derived

CPNI pertaining to a specific U.S.

customer, it must first obtain

appropriate consent from that customer.

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

notify the customer that he or she may

require the U.S. carrier to disclose the

CPNI to unaffiliated third parties upon

written request by the customer. The

Commission finds that these procedures

will balance Section 222’s privacy and

competitive issues while not burdening

or preventing U.S. carriers from offering

one-stop shopping options.

13. The Commission declines to

address issues raised by parties

concerning the benchmark authorization

conditions imposed on facilities-based

carriers in the Benchmarks Order (62 FR

45758, August 29, 1997). The

Commission will condition a carrier’s

facilities-based authorization to serve an

affiliated market on the foreign carrier

offering U.S.-licensed international

carriers a settlement rate for the

affiliated market at or below the relevant

benchmark adopted in the Benchmarks

Order.

14. The Commission addresses the

issue of whether to apply its benchmark

condition to authorizations to provide

switched resale service from the United

States to an affiliated market, which was

not resolved in the Benchmarks Order.

The Commission declines to apply the

settlement rate benchmark condition to

switched resale providers. The

Commission finds that a switched

reseller is less likely to attempt a

predatory price squeeze. The

Commission also finds here that it

would be easier to detect a price

squeeze in the switched resale context

than in the facilities-based contest. The

easier detection should deter switched

resellers from attempting a price

squeeze and will allow the Commission

to take action in the event a carrier does

attempt a price squeeze. The

Commission will monitor the switched

resale market carefully, and if it finds

substantial evidence of anticompetitive

behavior that causes harm to

competition and consumers in the U.S.

market, it may reconsider its decision

not to apply the benchmark condition to

the provision of switched resale. The

Commission also adopts a quarterly

traffic and revenue reporting

requirement that applies to switched

resellers that possess market power on

the foreign end of the route and that

have settlement rates with U.S. carriers.

15. The Commission adopts a

dominant carrier regulatory framework

aimed at detecting and deterring

anticompetitive behavior in the U.S.

market by foreign carriers and their
64744 Federal Register / Vol. 62, No. 236 / Tuesday, December 9, 1997 / Rules and Regulations

affiliated U.S. carriers. It will retain a

single-tier dominant carrier regulatory

approach and classify any U.S.-licensed

carriers as dominant on a particular

route if it is affiliated with a foreign

carrier that possesses market power in a

relevant market on the foreign end of

that route. The Commission did not

adopt its proposal to ban exclusive

arrangements involving joint marketing,

customer steering, and the use of foreign

market telephone customer information.

The Commission adopts its tentative

conclusion to continue its current

regulatory treatment of co-marketing

and other non-equity business

arrangements between U.S. carriers and

their foreign counterparts that affect the

provision of U.S. international services.

The Commission also found that it

would be an unnecessary burden to

apply dominant classification to all nonequity arrangements absent a finding of

substantial risk of competitive harm.

The Commission also declined to adopt

a filing requirement for non-equity

business relationships.

16. The Commission adopts a number

of competitive safeguards as part of its

dominant carrier regulatory framework.

Dominant foreign-affiliated carriers will

be permitted to file tariffs on one day’s

notice with a presumption of lawfulness

rather than the current fourteen-day

advance notice. The Commission also

eliminates its prior approval

requirement for circuit additions and

discontinuances on the dominant route.

The Commission declines to adopt a

quarterly notification of circuit

additions or discontinuances

requirement. If the Commission finds

that an affiliated carrier is engaged in

anticompetitive behavior, it may apply

the prior approval requirement on that

route.

17. Although the Commission

currently has in place a number of

safeguards to prevent anticompetitive

behavior, it finds that a minimal level of

structural separation for dominant

carriers is necessary. The Commission

will require a foreign-affiliated U.S.

international carrier regulated as

dominant to provide service in the U.S.

market through a corporation that is

separate from the foreign affiliate,

maintain separate books of account, and

not jointly own switching and

transmission facilities with its foreign

carrier affiliate.

18. The Order imposes a number of

reporting requirements to assist the

Commission in monitoring and

detecting anticompetitive behavior.

Foreign-affiliated dominant carriers will

be required to file quarterly traffic and

revenue reports for their dominant

routes. The Commission requires that

each dominant foreign-affiliated carrier

file quarterly reports summarizing the

provisioning and maintenance of all

basic network facilities and services it

procures from its foreign affiliate,

including, but not limited to,

correspondent or other basic facilities

procured on behalf of customers of joint

venture offerings. Although the

Commission does not dictate the format

for the provisioning and maintenance

reports, the Commission describes the

information that it requires. The

Commission directs the International

Bureau to adopt a standard reporting

manual if it feels that one would be

helpful, and permits the Bureau to

modify the contents of the filing

requirements as necessary. Carriers

subject to this requirement will be able

to seek a protective order to ensure that

parties to whom confidential

information is made available limit the

persons who will have access to the

information and the purposes for which

the information will be used.

19. All dominant foreign-affiliated

facilities-based carriers will file

quarterly circuit status reports.

Although the Commission proposed

quarterly notifications of circuit

changes, the quarterly circuit status

reports will provide information that

can be more readily compared to the

information provided by all U.S.

international carriers on an annual basis

under Section 43.82 of our rules. The

Commission does not require dominant

foreign-affiliated private line resale

carriers to file quarterly circuit status

reports, given that they rely on

underlying U.S. facilities-based carriers

to make arrangements with their

affiliated carriers. The Commission

directs the International Bureau to

modify the Section 43.82 reporting

manual as necessary to accommodate

these changes. The Commission

recognizes that the quarterly circuit

status reports contain commercially

sensitive information similar to the

provisioning and maintenance reports.

Thus, the Commission will allow

dominant foreign-affiliated carriers to

request the standard protective order for

the three quarterly circuit status reports

that dominant foreign-affiliated carriers

must file.

20. The Commission does not adopt

an expedited procedure to prevent

competitive harm in the U.S. market.

Rather, the Commission will rely on the

various remedies currently available for

addressing anticompetitive conduct.

The Commission does, however, adopt

a general rule that would enable it to

impose additional requirements on U.S.

international carriers in circumstances

where it appears that harm to

competition is occurring on one or more

U.S. international routes. The

Commission notes that it is presently

reviewing its rules to ensure that the

Commission provides a forum for the

prompt resolution of all formal

complaints against telecommunications

carriers involving claims of

unreasonably discriminatory or

otherwise unlawful conduct in violation

of the Communications Act or its rules.

21. In the Flexibility Order (62 FR

5535, February 6, 1997), the

Commission developed a new approach

for permitting alternative settlement

arrangements. In this proceeding, the

Commission will no longer apply the

ECO test as a threshold standard for

determining when to permit accounting

rate flexibility. Instead, it will apply a

rebuttable presumption that flexibility is

permitted for carriers from WTO

Member countries. In order to rebut this

presumption, a party opposing a flexible

arrangement must demonstrate that the

foreign carrier is not subject to

competition in its home market from

multiple (more than one) facilities-based

carriers that possess the ability to

terminate international traffic and serve

existing customers in the foreign

market. The Commission also makes

minor changes to conform its

procedures for U.S. carriers to enter into

an alternative payment arrangements,

and it will apply the new policies and

procedures to all flexibility petitions

pending before the Commission in any

procedural status at the time the new

rules become effective. The Commission

will continue to apply the safeguards

developed in the Flexibility Order (62

FR 5535, February 6, 1997). The

Commission will continue to allow the

proponent of an alternative settlement

arrangement with a carrier from a WTO

Member country to make an alternative

showing where the presumption in

favor of flexibility can be rebutted.

22. The Order streamlines the Section

214 applications of carriers that

demonstrate clearly and convincingly

that the foreign carrier affiliate has less

than a 50 percent market share in reach

relevant terminating market in the

destination foreign country

(international, intercity, and local

exchange access). Streamlined

processing of Section 214 applications

will be available to any applicant whose

foreign affiliate is from a WTO Member

country if the applicant requests

authority only to serve that country

solely by reselling the switched services

of unaffiliated U.S. international

carriers. Streamlining will be available

for foreign-affiliated carriers not

otherwise eligible for streamlined

processing as long as the applicant
Federal Register / Vol. 62, No. 236 / Tuesday, December 9, 1997 / Rules and Regulations 64745

certifies that it will comply with the

dominant carrier regulations of the

Order. In addition, the Commission will

streamline applications for assignments

and transfers of control of Section 214

authorizations in circumstances where

an initial Section 214 application filed

by the assignee or transferee would be

eligible for streamlined processing. The

Commission will streamline Section

310(b)(4) requests when they meet the

criteria described in the Order. In all

circumstances, Commission staff will

have discretion to deem an application

ineligible for streamlined processing

either because it raises market power

concerns or because an Executive

Branch agency raises concerns with

respect to issues within its expertise. In

such cases the Commission will issue a

public notice that the application has

been removed from the streamlined

process, and within ninety days of the

public notice it will either issue an

order acting upon the application or

provide public notice that, because the

application raises issues of

extraordinary complexity, an additional

90-day period for review is needed.

Each successive 90-day period may be

so extended.

23. The Commission amends its rules

to raise the level of foreign ownership

that requires prior notification from 10

percent to greater than 25 percent. This

change will eliminate the requirement

that authorized carriers notify the

Commission before accepting foreign

carrier investments of 25 percent or less.

An authorized carrier will, however, be

required to notify the Commission sixty

days before it, or a company that owns

more than 25 percent of it, acquires a

direct or indirect controlling interest in

a foreign carrier.

24. The Commission dismisses

arguments that the Commission’s public

interest analysis is invalid under the

General Agreement on Trade in Services

(GATS). The Commission states that the

Order establishes the parameters for

reviewing applications to provide

international services. The Commission

also found that its safeguards are

consistent with the GATS.

25. Finally, the Commission disposes

of the pending petitions for

reconsideration of the Foreign Carrier

Entry Order because of their close

relationship with the substance of this

proceeding.

26. The Commission states that it will

largely rely on reporting requirements,

rather than restrictions on capacity

changes or service options, to prevent

carriers from causing competitive harm

in the U.S. market. The Commission

declines to adopt its proposal for a

supplemental tier of dominant carrier

safeguards for U.S. carriers affiliated

with foreign carriers that do not face

facilities-based competition on the

foreign end of a particular route. The

Commission retains authority to impose

sanctions, in the event it finds evidence

of anticompetitive conduct.

Final Regulatory Flexibility Analysis

27. As required by the Regulatory

Flexibility Act (RFA), an Initial

Regulatory Flexibility Analysis (IRFA)

was included in the Notice of Proposed

Rulemaking in this proceeding. The

Commission sought written public

comment on the proposals in the Notice,

including comment on the IRFA. This

Final Regulatory Flexibility Analysis

(FRFA) conforms to the RFA. This

analysis also serves as the FRFA for the

issues disposed of here on

reconsideration of the Foreign Carrier

Entry Order.

Need for, and Objectives of, the Rules

and Policies Adopted Here

28. This Report and Order and Order

on Reconsideration adopts a liberalized

standard for participation by foreign and

foreign-affiliated entities in the U.S.

telecommunications markets. This open

entry standard will apply to the

provision of international

telecommunications services under

Section 214 of the Communications Act,

indirect foreign ownership of common

carrier radio licensees under Section

310(b)(4), and cable landing licenses

under the Submarine Cable Landing

License Act. It also revises the

Commission’s regulatory safeguards

governing the provision of international

telecommunications services in light of

recent changes in the world’s

telecommunications market and the

Commission’s liberalized standard for

participation by foreign and foreignaffiliated entities. The Commission has

deemed these changes appropriate in

light of the recent World Trade

Organization (WTO) Basic

Telecommunications Services

Agreement and the worldwide trend

toward deregulation and competition in

the provision of telecommunications

services. Our objective is to increase

competition in the U.S.

telecommunications markets while

minimizing the risk of anticompetitive

harm and encouraging foreign

governments to open their

telecommunications markets. In light of

the changed circumstances that will

result from the WTO Basic Telecom

Agreement and our nearly two years of

experience with our current rules on

market entry and regulation of foreignaffiliated entities, we find that reducing

entry barriers for applicants affiliated

with entities from WTO Member

countries is the appropriate way to

accomplish that objective. The

Commission believes that it is no longer

necessary to apply the ‘‘effective

competitive opportunities’’ (ECO) test

developed in the 1995 Foreign Carrier

Entry Order to countries that are

Members of the WTO. Instead, we will

rely primarily on regulatory safeguards

and benchmark settlement rates to

reduce the potential for anticompetitive

conduct in the U.S. market. We revise

some of those safeguards in this Order.

Summary of Significant Issues Raised by

Public Comments in Response to the

IRFA

29. No comments were submitted

specifically in response to the IRFA.

Nevertheless, we have considered, in

developing these rules and policies, any

potential significant economic impact

on small entities. We have attempted to

minimize the burdens imposed on all

entities, including small entities, in

order to promote participation by new

entrants in the U.S. telecommunications

markets.

30. NextWave raised comments in

response to the Notice specific to the

impact of our policy toward indirect

foreign investment in C-block and Fblock licensees. Those blocks, known as

‘‘entrepreneur’’ blocks, are reserved for

small businesses and entrepreneurs.

NextWave states that it and other

entrepreneurial carriers are dependent

on financing from a variety of sources,

including foreign investment, and that

access to foreign capital is vital to their

financial viability. NextWave argues

that indirect foreign investment in Cblock and F-block licensees presents

‘‘no conceivable risk to competition’’

because those licenses are held by

entrepreneurs who are new entrants into

the markets. NextWave proposes that,

for that reason, the Commission should

conclude that indirect foreign

investment in C-block and F-block

personal communications systems (PCS)

licensees by any entity whose home

market is a WTO Member country

serves the public interest and should

not be subject to prior Commission

approval. NextWave also urges the

Commission, in the alternative, to

establish an expedited process and

timetable for addressing applications to

exceed the 25 percent benchmark for

indirect foreign ownership of common

carrier wireless licensees.

31. Telephone and Data Systems

(TDS) proposed that the Commission

permit without prior approval any

amount of indirect foreign ownership of

common carrier radio licensees held in

the form of registered securities when
64746 Federal Register / Vol. 62, No. 236 / Tuesday, December 9, 1997 / Rules and Regulations

the foreign investor is not a carrier and

comes from one of the 64 other WTO

Member countries that has committed to

enforce fair rules of competition for

basic telecommunications. Under TDS’s

proposal, the Commission would

continue to require prior approval for

investors from other WTO Member

countries, for investors from non-WTO

countries, and from all foreign carriers.

TDS suggested that we scrutinize filings

with the Securities and Exchange

Commission to monitor foreign

ownership of registered securities and

that we rely on revocation, instead of

prior approval, to protect the public

interest pursuant to Section 310(b)(4).

TDS states that adoption of its proposal

would significantly reduce burdens on

common carrier radio licensees, who

currently must research the nationalities

of their individual shareholders in order

to remain in compliance with the

restrictions on foreign ownership.

Description and Estimate of the Number

of Small Entities to Which the Rules

Will Apply

32. We received no comments in

response to our estimates in the IRFA of

the number of small entities to which

the proposed rules would apply. We

conclude that the IRFA’s estimates are

the best available estimates of the

number of small entities that the rules

we adopt here will affect and that those

estimates are sufficiently useful in

enabling us to attempt to minimize the

economic impact of our rules on small

entities.

33. The RFA generally defines small

entity as having the same meaning as

the terms small business, small

organization, and small governmental

jurisdiction and defines small business

as having the same meaning as the term

small business concern under section 3

of the Small Business Act unless the

Commission has developed one or more

definitions that are appropriate for its

activities. The Small Business Act

defines small business concern as one

that (1) is independently owned and

operated; (2) is not dominant in its field

of operation; and (3) satisfies any

additional criteria established by the

Small Business Administration (SBA).

34. The rules adopted in this Order

apply only to entities providing

international common carrier services

pursuant to Section 214 of the

Communications Act; entities providing

domestic or international wireless

common carrier, aeronautical enroute,

or aeronautical fixed services under

Section 309 of the Act; and entities

licensed to construct and operate

submarine cables under the Cable

Landing License Act.

35. Because the small incumbent local

exchange carriers (LECs) subject to these

rules are either dominant in their fields

of operations or are not independently

owned and operated, consistent with

our prior practice, they are excluded

from the definitions of small entity and

small business concern. Accordingly,

our use of the terms small entities and

small businesses does not encompass

small incumbent LECs. Out of an

abundance of caution, however, for the

purposes of this FRFA, we will consider

small incumbent LECs to be within this

analysis, where a small incumbent LEC

is any incumbent LEC that arguably

might be defined by the SBA as a ‘‘small

business concern.’’

Section 214 International Common

Carrier Services

36. Entities providing international

common carrier service pursuant to

Section 214 of the Act fall into the

SBA’s Standard Industrial Classification

(SIC) categories for Radiotelephone

Communications (SIC 4812) and

Telephone Communications, Except

Radiotelephone (SIC 4813). The SBA’s

definition of small entity for those

categories is one with fewer than 1,500

employees. We discuss below the

number of small entities falling within

these two subcategories that may be

affected by the rules adopted in this

Order.

37. The most reliable source of

information regarding the number of

international common carriers is the

data that we collect annually in

connection with the

Telecommunications Industry Revenue:

Telecommunications Relay Service

Fund Worksheet Data (TRS Worksheet).

In 1995, 445 toll carriers filed TRS fund

worksheets. We believe that between 50

and 200 carriers failed to file TRS fund

worksheets. We believe also that fewer

than 10 toll carriers had 1,500 or more

employees. Thus, at most 635

international carriers would be

classified as small entities. Many TRS

filers, however, are affiliated with other

carriers, and therefore the number of

aggregated carriers is far fewer than the

preceding estimate. Of the 445 toll

filers, 239 reported no carrier affiliates.

Adding 50 non-filers gives a lower

estimate of 289 international carriers

that would be classified as small

entities. Thus, our best estimate of the

total number of small entities is between

289 and 635. We are unable at this time

to estimate with greater precision the

number of international carriers that

would qualify as small business entities

under the SBA’s definition. While not

all of these entities may have provided

international service in 1995, we expect

that many of these entities will seek to

do so in the future, as will additional

entrants into the market.

b. Title III Common Carrier Services

38. Cellular licensees. Neither the

Commission nor the SBA has developed

a definition of small entities applicable

to cellular licensees. The closest

applicable definition of small entity is

the definition under the SBA rules

applicable to radiotelephone (wireless)

companies (SIC 4812). The most reliable

source of information regarding the

number of cellular services carriers

nationwide of which we are aware

appears to be the data that the

Commission collects annually in

connection with the TRS Worksheet.

According to the most recent data, 792

companies reported that they were

engaged in the provision of cellular

services. Although it seems certain that

some of these carriers are not

independently owned and operated, or

have more than 1,500 employees, we are

unable at this time to estimate with

greater precision the number of cellular

services carriers that would qualify as

small business concerns under the

SBA’s definition. Consequently, we

estimate that there are fewer than 792

small cellular service carriers.

39. 220 MHz Radio Services. Because

the Commission has not yet defined a

small business with respect to 220 MHz

radio services, we will utilize the SBA’s

definition applicable to radiotelephone

companies—i.e., an entity employing

less than 1,500 persons. With respect to

the 220 MHz services, the Commission

has proposed a two-tiered definition of

small business for purposes of auctions:

(1) For Economic Area (EA) licensees, a

firm with average annual gross revenues

of not more than $6 million for the

preceding three years, and (2) for

regional and nationwide licensees, a

firm with average annual gross revenues

of not more than $15 million for the

preceding three years. Since this

definition has not yet been approved by

the SBA, we will utilize the SBA’s

definition applicable to radiotelephone

companies. Given the fact that nearly all

radiotelephone companies employ

fewer than 1,000 employees, with

respect to the approximately 3,800

incumbent licensees in this service, we

will consider them to be small

businesses under the SBA definition.

40. Common Carrier Paging. The

Commission has proposed a two-tier

definition of small businesses in the

context of auctioning licenses in the

Common Carrier Paging services.

Because the SBA has not yet approved

this definition for paging services, we

will utilize the SBA’s definition
Federal Register / Vol. 62, No. 236 / Tuesday, December 9, 1997 / Rules and Regulations 64747

applicable to radiotelephone companies,

i.e., an entity employing fewer than

1,500 persons. At present, there are

approximately 74,000 Common Carrier

Paging licensees. We estimate that the

majority of common carrier paging

providers would qualify as small

businesses under the SBA definition.

41. Mobile Service Carriers. Neither

the Commission nor the SBA has

developed a definition of small entities

specifically applicable to mobile service

carriers such as paging companies. The

closest applicable definition under the

SBA rules is for radiotelephone

(wireless) companies. The most reliable

source of information regarding the

number of mobile service carriers

nationwide of which we are aware

appears to be the data that the

Commission collects annually in

connection with the TRS Worksheet.

According to the most recent data, 117

companies reported that they were

engaged in the provision of mobile

services. Although it seems certain that

some of these carriers are not

independently owned and operated, or

have more than 1,500 employees, we are

unable at this time to estimate with

greater precision the number of mobile

service carriers that would qualify

under the SBA’s definition.

Consequently, we estimate that fewer

than 117 mobile service carriers are

small entities.

42. Broadband Personal

Communications Services (PCS). The

broadband PCS spectrum is divided into

six frequency blocks designated A

through F, and the Commission has held

auctions for each block. The

Commission has defined small entity in

the auctions for Blocks C and F as an

entity that has average gross revenues of

less than $40 million in the three

previous calendar years. For Block F, an

additional classification for ‘‘very small

business’’ was added and is defined as

an entity that, together with its affiliates,

has average gross revenue of not more

than $15 million for the preceding three

calendar years. These regulations

defining small entity in the context of

broadband PCS auctions have been

approved by the SBA. No small business

within the SBA-approved definition bid

successfully for licenses in Blocks A

and B. There were 90 winning bidders

that qualified as small entities in the

Block C auctions. A total of 93 small

and very small businesses won

approximately 40 percent of the 1,479

licenses for Blocks D, E, and F.

However, licenses for Blocks C through

F have not been awarded fully;

therefore, there are few, if any, small

businesses currently providing PCS

services. Based on this information, we

conclude that the number of small

broadband PCS licensees will include

the 90 winning bidders and the 93

qualifying bidders in the D, E, and F

Blocks, for a total of 183 small PCS

providers as defined by the SBA and the

Commission’s auction rules.

43. Narrowband PCS. The

Commission does not know how many

narrowband PCS licenses will be

granted or auctioned, as it has not yet

determined the size or number of such

licenses. Two auctions of narrowband

PCS licenses have been conducted for a

total of 41 licenses, out of which 11

were obtained by small businesses

owned by members of minority groups

and/or women. Small businesses were

defined as those with average gross

revenues for the prior three fiscal years

of $40 million or less. For purposes of

this FRFA, the Commission is utilizing

the SBA definition applicable to

radiotelephone companies, i.e., an

entity employing less than 1,500

persons. Not all of the narrowband PCS

licenses have yet been awarded. There

is therefore no basis to determine the

number of licenses that will be awarded

to small entities in future auctions.

Given the facts that nearly all

radiotelephone companies have fewer

than 1,000 employees and that no

reliable estimate of the number of

prospective narrowband PCS licensees

can be made, we assume, for purposes

of the evaluations and conclusions in

this FRFA, that all the remaining

narrowband PCS licenses will be

awarded to small entities.

44. Rural Radiotelephone Service. The

Commission has not adopted a

definition of small business specific to

the Rural Radiotelephone Service,

which is defined in Section 22.99 of the

Commission’s Rules. A significant

subset of the Rural Radiotelephone

Service is BETRS, or Basic Exchange

Telephone Radio Systems (the

parameters of which are defined in

Sections 22.757 and 22.759 of the

Commission’s Rules). Accordingly, we

will use the SBA’s definition applicable

to radiotelephone companies, i.e., an

entity employing fewer than 1,500

persons. There are approximately 1,000

licensees in the Rural Radiotelephone

Service, and we estimate that almost all

of them have fewer than 1,500

employees.

45. Air-Ground Radiotelephone. The

Commission has not adopted a

definition of small business specific to

the Air-Ground Radiotelephone Service,

which is defined in Section 22.99 of the

Commission’s Rules. Accordingly, we

will use the SBA’s definition applicable

to radiotelephone companies, i.e., an

entity employing fewer than 1,500

persons. There are approximately 100

licensees in the Air-Ground

Radiotelephone Service, and we

estimate that almost all of them qualify

as small under the SBA definition.

46. Specialized Mobile Radio

Licensees (SMR). Pursuant to Section

90.814(b)(1) of our rules, the

Commission awards bidding credits in

auctions for geographic area 800 MHz

and 900 MHz Specialized Mobile Radio

(SMR) licenses to firms that had

revenues of less than $15 million in

each of the three previous calendar

years. This regulation defining ‘‘small

entity’’ in the context of 800 MHz and

900 MHz SMR has been approved by the

SBA. We do not know how many firms

provide 800 MHz or 900 MHz

geographic area SMR service pursuant

to extended implementation

authorizations or how many of these

providers have annual revenues of less

than $15 million. We do know that one

of these firms has over $15 million in

revenues. We assume that all of the

remaining existing extended

implementation authorizations are held

by small entities, as that term is defined

by the SBA. The Commission recently

held auctions for geographic area

licenses in the 900 MHz SMR band.

There were 60 winning bidders who

qualified as small entities in the 900

MHz auction. Based on this information,

we conclude that the number of

geographic area SMR licensees affected

includes these 60 small entities.

47. Microwave Video Services.

Microwave services includes common

carrier, private operational fixed, and

broadcast auxiliary radio services. At

present, there are 22,015 common

carrier licensees. Inasmuch as the

Commission has not yet defined small

business with respect to microwave

services, we will utilize the SBA’s

definition applicable to radiotelephone

companies—i.e., an entity with less than

1,500 employees. Although some of

these companies may have more than

1,500 employees, we are unable at this

time to estimate with greater precision

the number of common carrier

microwave service providers that would

qualify under the SBA’s definition. We

therefore estimate that there are fewer

than 22,015 small common carrier

licensees in the microwave video

services.

48. Offshore Radiotelephone Service.

This service operates on several UHF

TV broadcast channels that are not used

for TV broadcasting in the coastal area

of the states bordering the Gulf of

Mexico. At present, there are

approximately 55 licensees in this

service. Some of those licensees are

common carriers. We are unable at this
64748 Federal Register / Vol. 62, No. 236 / Tuesday, December 9, 1997 / Rules and Regulations

time to estimate the number of licensees

that would qualify as small under the

SBA’s definition.

49. Local Multipoint Distribution

Service (LMDS). The Commission has so

far licensed only one licensee in this

service, and that licensee is not

providing service as a common carrier.

There will be a total of 986 LMDS

licenses. Licensees will be permitted to

decide whether to provide common

carrier service, and we have no way of

estimating how many will choose to do

so. Because there will be no restrictions

on the number of licenses a given entity

may acquire, we have no way of

estimating how many total licensees

there will be. We also cannot estimate

the number of common carrier licensees

that will qualify as small entities.

50. Space Stations (Geostationary).

Very few systems are currently operated

on a common carrier basis. Because we

do not collect information on annual

revenue or number of employees of all

these licensees, we cannot estimate with

precision the number of such licensees

that may constitute a small business

entity. It is likely that no more than one

such entity that is currently operating as

a common carrier would constitute a

small business entity. There may be a

small increase in the number of such

entities in the future as a result of recent

licensing action in the Ka-band.

51. Space Stations (Nongeostationary). These systems by and

large do not operate as common carriers.

Because we do not collect information

on annual revenue or number of

employees, we cannot estimate with

precision whether any carrier that may

choose to operate on a common carrier

basis constitutes a small business entity.

The trend is for such systems to operate

on a non-common carrier basis. These

systems, of which there will be a limited

number, by and large are not yet

operational and are still being licensed

and constructed.

52. Earth Stations. The vast majority

of earth stations licensed by the

Commission are not operated on a

common carrier basis. Earth stations

that communicate with nongeostationary and Ka-band satellite

systems may operate on a common

carrier basis but these systems are not

yet operational and are still being

licensed and constructed. We are unable

to estimate at this time the number of

earth stations communicating with such

systems that may operate on a common

carrier basis and, of those, the number

that will be licensed to small business

entities.

c. Aeronautical Enroute and

Aeronautical Fixed Licenses

53. The Commission has not adopted

a definition of small business specific to

the aeronautical enroute and

aeronautical fixed services.

Accordingly, we will use the SBA’s

definition applicable to radiotelephone

companies, i.e., an entity employing

fewer than 1,500 persons. There are 45

licensees providing aeronautical enroute

and aeronautical fixed services,

including Aeronautical Radio Inc.

(ARINC) and its affiliates. All of the

licensees are small businesses except

ARINC, which has approximately 2,000

employees. We therefore conclude that

there are 44 small businesses providing

aeronautical enroute and aeronautical

fixed services.

d. Submarine Cable Landing Licenses

54. The new rules and policies

adopted in this Order will affect all

holders of and future applicants for

cable landing licenses, whether or not

they operate their cables as common

carriers. It is difficult to estimate how

many applications for cable landing

licenses will be filed in coming years,

but that number will likely increase if

we adopt our proposal to lower the

barriers to granting licenses for cables to

WTO Member countries. Since 1992,

there have been approximately 40

applications for cable landing licenses.

The total number of licensees is difficult

to determine, because many licenses are

jointly held by several licensees. Our

rules will also permit more current

licensees to accept additional

investment from entities from WTO

Member countries.

Description of Projected Reporting,

Recordkeeping, and Other Compliance

Requirements

55. The rules and policies adopted in

this Report and Order and Order on

Reconsideration will affect large and

small entities. We will require that U.S.

carriers whose foreign affiliates have

market power maintain or provide

certain records regarding their foreign

affiliates. Our rules will in most cases

reduce the burdens that are currently

imposed on such carriers, and we

anticipate that the remaining

requirements will not impose a

significant economic burden,

particularly on small entities. A variety

of skills may be required to comply with

the proposed requirements, but all of

the skills that may be required are of the

type needed to conduct a carrier’s

normal course of business. No

additional outside professional skills

should be required, with the possible

exception of preparing an initial Section

214 or cable landing license application

and of preparing a submission for our

consideration under Section 310(b)(4),

most of which will be simplified by the

rules and policies we adopt here.

56. An applicant for a Section 214

authorization or a cable landing license

will no longer be required to show

either that an affiliated foreign carrier

lacks market power or that the

destination country provides effective

competitive opportunities (ECO) to U.S.

carriers so long as it shows that the

destination country is a Member of the

World Trade Organization. Similarly,

entities holding or seeking to hold

common carrier wireless licenses or

aeronautical enroute or aeronautical

fixed licenses that have more than 25

percent indirect foreign investment will

not need to demonstrate that the home

markets of the foreign investor or

investors from WTO Members offer

effective competitive opportunities for

U.S. investors in the analogous service

sector.

57. Authorized international common

carriers will no longer be required to

notify the Commission before accepting

investments by foreign carriers (or their

affiliates) between 10 percent and 25

percent. We have retained a requirement

that authorized carriers notify the

Commission before accepting

investment greater than 25 percent. We

have added a requirement that

authorized carriers notify the

Commission before they (or their

affiliates) acquire a direct or indirect

controlling interest in a foreign carrier;

previously, those interests were subject

only to a post hoc notification

requirement. We continue to require

authorized carriers to notify the

Commission within 30 days after

acquiring a direct or indirect interest

greater than 25 percent in a foreign

carrier if the acquisition of that interest

has not otherwise been reported.

58. We have narrowed the application

of our ‘‘No Special Concessions’’ rule,

which prohibits carriers from entering

into exclusive arrangements with

foreign carriers. That rule will now

apply only to carriers’ dealings with

foreign carriers that have sufficient

market power in their home markets to

adversely affect competition in the U.S.

market. Carriers wishing to enter into

alternative settlement arrangements

with foreign carriers operating in WTO

Member countries will presumptively

be allowed to do so. That presumption

may be overcome where an opponent

demonstrates that there are not multiple

facilities-based carriers operating in the

foreign carrier’s market.
Federal Register / Vol. 62, No. 236 / Tuesday, December 9, 1997 / Rules and Regulations 64749

59. To ensure fair competition among

authorized carriers and to be consistent

with our policy governing the

confidentiality of competing carrier

information, all U.S. carriers will be

prohibited from receiving proprietary or

confidential information about

competing U.S. carriers obtained by any

foreign carrier in the course of its

regular business dealings with the

competing U.S. carrier, unless the U.S.

carrier provides specific written

permission. We will also require U.S.

carriers desiring to make use of foreignderived customer proprietary network

information (CPNI) pertaining to a

specific U.S. customer to first obtain

approval from that customer and notify

that customer that the customer may

require the carrier to disclose the CPNI

to unaffiliated third parties.

60. An authorized carrier affiliated

with a foreign carrier will be subject to

additional requirements. Its

authorization to serve the affiliated

market will be conditioned on the

foreign affiliate’s offering to all U.S.-

licensed carriers a settlement rate at or

below the benchmark adopted for that

country in the Commission’s recent

Benchmarks Order. Foreign-affiliated

carriers classified as dominant are

subject to additional reporting,

recordkeeping, and compliance

requirements. In this Order, we

substantially reduce the initial showing

that a foreign-affiliated carrier must

make in order to be presumptively

classified as non-dominant by adopting

a presumption that a foreign carrier with

less than 50 percent market share in

certain relevant terminating markets

does not have sufficient market power

to affect competition adversely in the

U.S. market. We remove existing

dominant carrier requirements that we

find to be unnecessarily burdensome

and adopt a narrowly tailored dominant

carrier framework designed to address

specific concerns of anticompetitive

behavior. We replace the requirement

that dominant carriers file tariffs on

fourteen days’ advance notice with a

one-day advance notice requirement,

and we will accord these tariff filings a

presumption of lawfulness. We will no

longer require foreign-affiliated carriers

to obtain Commission approval before

adding or discontinuing circuits on the

dominant route. We require dominant

carriers to provide service on the

affiliated route through a corporation

that is separate from its foreign affiliate,

maintain separate books of account, and

not jointly own switching or

transmission facilities with its foreign

affiliate. Carriers regulated as dominant

will be required to file quarterly traffic

and revenue reports, provisioning and

maintenance reports, and circuit status

reports on the dominant affiliated route.

We decline to adopt the proposal in the

Notice to ban exclusive arrangements

involving joint marketing, customer

steering, and the use of foreign market

telephone customer information.

61. Finally, we impose a reporting

requirement on switched resellers that

are affiliated with a foreign carrier that

has sufficient market power on the

foreign end of a route to affect

competition adversely in the U.S.

market. We will require these resellers

to file quarterly traffic and revenue

reports for their switched resale traffic

on the affiliated route.

Federal Rules That May Duplicate,

Overlap, or Conflict With the Rules

Adopted Here

62. None.

Steps Taken To Minimize Significant

Economic Impact on Small Entities, and

Significant Alternatives Considered

63. We have taken significant steps to

minimize the procedural burdens

imposed on all affected entities. The

application of the rules we adopt in this

Order does not vary depending on the

size of the entities involved. Some

regulations may be more burdensome on

large carriers than on small carriers

because large carriers may be more

likely to be dominant or to operate on

a facilities basis than are small carriers.

That is, small carriers may be more

likely to operate as resellers of switched

international services, which are less

likely to be subject to our most stringent

regulation.

64. The revisions to our policies

toward evaluating Section 214 and cable

landing license applications will

significantly reduce burdens on many

current and potential international

common carriers. A foreign-affiliated

carrier seeking to serve an affiliated

route will no longer be required to show

either that its affiliate lacks market

power or that the destination country

provides effective competitive

opportunities (ECO) to U.S. carriers so

long as it shows that the destination

country is a Member of the World Trade

Organization. We believe this to be a

minimal burden for most small entities

and a significantly lesser burden than

the detailed showings required to

demonstrate either that the affiliate

lacks market power or that the

destination country provides ECO. The

ECO test, in particular, has proven to be

unusually burdensome both on

applicants and on the Commission.

65. Similarly, the revisions to our

policy toward evaluating Section

310(b)(4) requests by common carrier

radio licensees and aeronautical

licensees to accept indirect foreign

investment greater than 25 percent will

significantly reduce the burdens on

licensees (and prospective licensees)

seeking to accept investment from

entities in WTO Member countries.

Those applicants will no longer be

required to show that the home market

of the investor offers effective

competitive opportunities for U.S.

investors in the analogous service

sector. This will make those

applications much simpler and less

time-consuming and, more importantly,

will make it much easier for licensees to

accept foreign investment and for

prospective licensees to plan their

business affairs. Common carrier radio

licensees will continue to be required to

seek Commission approval before

accepting indirect foreign investment

above a level for which they have

previously received Commission

approval.

66. We have taken steps to facilitate

entry into the U.S. market for

international telecommunications

services by small carriers. Small carriers

often enter the market, at least initially,

by reselling the switched services of

other authorized international carriers.

In this Order, we change our procedural

rules to afford streamlined processing to

any applicant whose foreign affiliate is

from a WTO Member country if the

applicant requests authority to serve

that country solely by reselling the

switched services of unaffiliated U.S.

international carriers. We also will

streamline process the Section 214

application of any foreign-affiliated

applicant whose affiliate is from a WTO

Member and that demonstrates clearly

and convincingly that the foreign

affiliate has less than a 50 percent

market share in certain relevant

terminating markets in the destination

foreign country. In addition, we will

streamline process the Section 214

application of any applicant whose

affiliate is from a WTO Member and is

not otherwise eligible for streamlined

processing if the applicant certifies that

it will comply with our dominant

carrier regulations. Streamlined

applications, unless they are removed

from the streamlined process, are

granted 35 days from the date they are

placed on public notice.

67. In revising our regulations that

apply to authorized international

common carriers, we have developed a

targeted approach designed to monitor

and detect anticompetitive behavior in

the U.S. market without imposing

regulations that are more burdensome

than necessary. In doing so, we have
64750 Federal Register / Vol. 62, No. 236 / Tuesday, December 9, 1997 / Rules and Regulations

attempted to minimize burdens on

entities that are unlikely to pose a threat

to competition. We also have removed

restrictions on whole categories of

activities that we have concluded do not

pose a threat to competition in the

developing competitive marketplace.

Our approach relies in large part on

reporting requirements, rather than

restrictions on capacity changes or

service options, to prevent affiliated

carriers from causing competitive harms

in the U.S. international services

market.

68. We have significantly reduced the

scope of our rule that prohibits carriers

from entering into certain exclusive

arrangements with foreign carriers. Our

‘‘No Special Concessions’’ rule will now

prohibit accepting certain specified

arrangements only from foreign carriers

that have sufficient market power in

their home markets to adversely affect

competition in the U.S. market. We

adopt a presumption that foreign

carriers with less than 50 percent

market share in the relevant terminating

markets do not have such sufficient

market power. We anticipate that

delineating those arrangements that are

subject to the prohibition and adopting

this presumption will significantly

clarify the circumstances in which

authorized carriers will be permitted to

accept special concessions from foreign

carriers. This more targeted rule also

will allow authorized carriers

substantially more flexibility in

arranging their business affairs.

69. Carriers wishing to enter into

alternative settlement arrangements

with foreign carriers operating in WTO

Member countries will presumptively

be allowed to do so. This presumption

may be overcome by a demonstration

that there are not multiple facilitiesbased carriers operating in the foreign

carrier’s market. We expect to allow

alternative settlements more as a rule

than as an exception, and the issue of

whether there are multiple facilitiesbased carriers operating in the foreign

market will be less burdensome than the

issue of whether the foreign market

offers effective competitive

opportunities, which is the standard

being replaced.

70. We have declined, in this Order,

to adopt certain proposals in the Notice

that would have restricted the business

strategies of carriers classified as

dominant. Instead, we will impose

reporting requirements that will enable

us to detect and deter anticompetitive

behavior. We have declined to adopt

proposals in the Notice to ban exclusive

arrangements involving joint marketing,

customer steering, and the use of foreign

market telephone customer information.

We have found that such proscriptive

safeguards would be unduly

burdensome and could unnecessarily

impede business activities. We choose

to rely instead on the general

prohibition on accepting special

concessions combined with additional

reporting and disclosure requirements,

instead of proscriptive safeguards, for

carriers with foreign affiliations. We

have also relieved carriers of the

requirement to notify the Commission of

investments by foreign carriers of 10

percent or more; they now must report

an investment by a foreign carrier only

when that investment exceeds 25

percent. We conclude that none of the

safeguards we impose specifically on

carriers classified as dominant will

impose significant economic burdens.

71. We have also declined to impose

on switched resellers a condition that

their foreign affiliates maintain

settlement rates at or below the

benchmark settlement rates we adopted

in the Benchmarks Order. We find that

such a condition would be

unnecessarily burdensome inasmuch as

resellers have less ability to engage in

anticompetitive conduct than facilitiesbased carriers and we have a greater

ability to detect anticompetitive conduct

by switched resellers. Imposing a

benchmark condition on switched

resellers would impose significant

economic impact on resellers, many of

whom are small entities, that could

prevent some new entrants from

entering the U.S. market and affect the

ability of existing carriers to provide

service. To address concerns about

traffic distortions related to resale,

however, we have decided to impose a

requirement on switched resellers that

are affiliated with a carrier that has

sufficient market power to affect

competition adversely in the U.S.

market. We will require those resellers

to file quarterly traffic and revenue

reports for their traffic on the affiliated

route in order to enable the Commission

to determine whether switched resellers

are engaging in anticompetitive

conduct.

72. In the Notice, we sought comment

on whether to adopt, as an additional

dominant carrier safeguard, some level

of structural separation between a U.S.

carrier and its affiliated foreign carrier.

We adopt here a requirement that a

foreign-affiliated U.S. international

carrier regulated as dominant provide

service in the U.S. market through a

corporation that is separate from the

foreign affiliate, maintain separate books

of account, and not jointly own

switching and transmission facilities

with its foreign carrier affiliate. We find

that, without such separation,

discrimination, cost-misallocation, and

the possibility of a predatory price

squeeze by such a foreign-affiliated

carrier would have the potential to

cause substantial harm to consumers,

competition, and production efficiency

in the U.S. international services

market. These requirements will not

impose a significant burden on such

carriers because most foreign-affiliated

carriers operating in the United States

do so in a manner that is consistent with

the requirements we adopt here. We

have considered imposing more

stringent structural separation

requirements but have found them to be

unnecessary and to potentially impose a

significant burden on foreign-affiliated

carriers that operate in the U.S. market.

73. We are unable to adopt

NextWave’s proposal to state that

indirect foreign investment in C-block

and F-block PCS licensees by any entity

whose home market is a WTO Member

country serves the public interest and

will not be subject to prior Commission

approval. We have found that prior

approval is necessary in all instances of

indirect foreign investment in excess of

25 percent because of the need to review

such investments for national security,

law enforcement, foreign policy, and

trade concerns as well as for the

exceptional case that poses a very high

risk to competition. We do, however,

adopt NextWave’s alternative proposal

to establish an expedited process and

timetable for addressing those

applications: These applications will

generally be added to the International

Bureau’s streamlined process and

usually granted within 35 days from the

date the International Bureau places the

application on public notice. We expect

that application of our open entry

standard and streamlined process will

both minimize procedural burdens on

small entities and present substantial

new opportunities for obtaining foreign

capital.

74. We are unable to adopt TDS’s

proposal to disregard investments in

common carrier radio licensees by noncarriers held as publicly traded

securities. We accept the concerns of

Executive Branch agencies that a prior

approval process is necessary for all

investments and that even small

investments in publicly traded

securities could, if aggregated,

nevertheless create a degree of control

or influence over a licensee that would

be contrary to U.S. national security or

law enforcement issues.

75. We have also decided not to adopt

a policy that a common carrier radio

licensee need not seek Commission

approval before accepting increases in

indirect foreign ownership once they
Federal Register / Vol. 62, No. 236 / Tuesday, December 9, 1997 / Rules and Regulations 64751

have obtained Commission authority to

exceed 25 percent indirect foreign

ownership. We have determined that

every such increase requires

Commission review in order to consider

the effect of the ownership on national

security and law enforcement interests.

76. We conclude that these steps we

have taken to minimize significant

economic impact on small entities will

advance the small business goals of

Section 257 of the Act, as added by the

Telecommunications Act of 1996.

Report to Congress

77. The Commission will send a copy

of this Report and Order and Order on

Reconsideration, including this FRFA,

in a report to be sent to Congress

pursuant to the Small Business

Regulatory Enforcement Fairness Act of

1996, see 5 U.S.C. § 801(a)(1)(A). A

summary of this Report and Order and

Order on Reconsideration, and a copy of

this FRFA, will also be published in the

Federal Register, see 5 U.S.C. § 604(b),

and will be sent to the Chief Counsel for

Advocacy of the Small Business

Administration.

Paperwork Reduction Act of 1995

Analysis

78. This Report and Order contains a

modified information collection. The

Commission, as part of its continuing

effort to reduce paperwork burdens,

invites the general public and the Office

of Management and Budget (OMB) to

comment on the information collections

contained in this order, as required by

the Paperwork Reduction Act of 1995,

Pub. L. No. 104–13. Public and agency

comments are due February 9, 1998.

Comments should address: (a) Whether

the collection of information is

necessary for the proper performance of

the functions of the Commission,

including whether the information shall

have practical utility; (b) the accuracy of

the Commission’s burden estimates; (c)

ways to enhance the quality, utility, and

clarity of the information.

79. Public reporting burden for the

collections of information is estimated

as follows:

OMB Control Number: 3060–0686.

Title: Streamlining the International

Section 214 Authorization Process and

Tariff Requirements.

Type of Review: Revision of existing

collection.

Respondents: Business or other ForProfit.

Number of Respondents: 3,251.

Estimated Time Per Response: 2

hours.

Total Annual Burden: 145,895 hours.

Estimated costs per respondent:

$3,192.

Needs and Uses: The information

collections pertaining to Parts 1 and 63

are necessary largely to determine the

qualifications of applicants to provide

common carrier international

telecommunications services, or to

construct and operate submarine cables,

including applicants that are affiliated

with foreign carriers, and to determine

whether and under what conditions the

authorizations are in the public interest,

convenience, and necessity. The

information collections contained in

amendments to § 63.10 of the

Commission’s rules are necessary for the

Commission to maintain effective

oversight of U.S. carriers that are

affiliated with, or involved in certain comarketing or similar arrangements with,

foreign carriers that have market power.

The information collected pursuant to

part 61 of the rules is necessary for the

Commission to ensure that rates, terms

and conditions for international service

are just and reasonable, as required by

the Communications Act of 1934.

80. The information collections under

§ 310(b)(4) of the Act are necessary to

determine, under that section, whether

a greater than 25 percent indirect

foreign ownership interest in a U.S.

common carrier ratio licensee would be

inconsistent with the public interest.

81. We do not anticipate that the rules

will have any impact on the paperwork

burden imposed under the

Commission’s Flexibility Policy

established in the Fourth Report and

Order, CC Docket No. 90–337, Phase I

(62 FR 5535, February 6, 1997), OMB

Control Nos. 3060–0160 and 3060–0764.

Ordering Clauses

82. Accordingly, it is ordered that,

pursuant to Sections 1, 2, 4(i), 201, 203,

205, 214, 303(r), and 310 of the

Communications Act of 1934, as

amended, 47 U.S.C. Sections 151, 152,

154(i), 201, 205, 214, 303(r), 310, the

policies, rules, and requirements

discussed herein are adopted and parts

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

64 are revised.

83. It is further ordered that authority

is delegated to the Chief, International

Bureau as discussed in this Order.

84. It is further ordered that the

petitions for reconsideration in IB

Docket No. 95–22 are granted in part,

denied in part, and deferred as

discussed in this Order.

85. It is further ordered that the

Commission’s Office of Managing

Director shall send a copy of this Report

and Order and Order on

Reconsideration, including the Final

Regulatory Flexibility Analysis, to the

Chief Counsel for Advocacy of the Small

Business Administration.

86. It is further ordered that the

policies, rules, and requirements

established in this decision shall take

effect January 8, 1998 or in accordance

with the requirements of 5 U.S.C.

801(a)(3) and 44 U.S.C. 3507. The

Commission will publish a document at

a later date announcing the effective

date. The Commission reserves the right

to reconsider the effective date of this

decision if the WTO Basic Telecom

Agreement does not take effect on

January 1, 1998.

List of Subjects in 47 CFR Parts 43, 63,

and 64

Communications common carriers,

Reporting and recordkeeping

requirements.

Federal Communications Commission.

Magalie Roman Salas,

Secretary.

Final Rules

Parts 43, 63, and 64 of Title 47 of the

Code of Federal Regulations are

amended as follows:

PART 43—REPORTS OF

COMMUNICATION COMMON

CARRIERS AND CERTAIN AFFILIATES

1. The authority citation for Part 43

continues to read as follows:

Authority: 47 U.S.C. 154.

2. § 43.51 is amended by revising

paragraph (d) to read as follows:

§ 43.51 Contracts and concessions.

* * * * *

(d) Any U.S. carrier that interconnects

an international private line to the U.S.

public switched network, at its switch,

including any switch in which the

carrier obtains capacity either through

lease or otherwise, shall file annually

with the Chief of the International

Bureau a certified statement containing

the number and type (e.g., a 64-kbps

circuit) of private lines interconnected

in such a manner. The certified

statement shall specify the number and

type of interconnected private lines on

a country specific basis. The identity of

the customer need not be reported, and

the Commission will treat the country of

origin information as confidential.

Carriers need not file their contracts for

such interconnections, unless they are

specifically requested to do so. These

reports shall be filed on a consolidated

basis on February 1 (covering

international private lines

interconnected during the preceding

January 1 to December 31 period) of

each year. International private lines to

countries for which the Commission has

authorized the provision of switched
64752 Federal Register / Vol. 62, No. 236 / Tuesday, December 9, 1997 / Rules and Regulations

basic services over private lines at any

time during a particular reporting

period are exempt from this

requirement.

3. § 43.61 is amended by revising

paragraph (c) to read as follows:

§ 43.61 Reports of international

telecommunications traffic.

* * * * *

(c) Each common carrier engaged in

the resale of international switched

services that has an affiliation with a

foreign carrier that has sufficient market

power on the foreign end of an

international route to affect competition

adversely in the U.S. market and that

collects settlement payments from U.S.

carriers shall file a quarterly version of

the report required in paragraph (a) of

this section for its switched resale

services on the dominant route within

90 days from the end of each calendar

quarter. For purposes of this paragraph,

‘‘affiliation’’ is defined in § 63.18(h)(1)(i)

of this chapter and ‘‘foreign carrier’’ is

defined in § 63.18(h)(1)(ii) of this

chapter.

* * * * *

PART 63—EXTENSION OF LINES AND

DISCONTINUANCE, REDUCTION,

OUTAGE AND IMPAIRMENT OF

SERVICE BY COMMON CARRIERS;

AND GRANTS OF RECOGNIZED

PRIVATE OPERATING AGENCY

STATUS

1. The authority citation for Part 63

continues to read as follows:

Authority: 47 U.S.C. 151, 154(i), 154(j),

201–205, 218, 403, 533 unless otherwise

noted.

2. § 63.10 is revised to read as follows:

§ 63.10 Regulatory classification of U.S.

international carriers.

(a) Unless otherwise determined by

the Commission, any party authorized

to provide an international

communications service under this part

shall be classified as either dominant or

non-dominant for the provision of

particular international communications

services on particular routes as set forth

in this section. The rules set forth in this

section shall also apply to

determinations of regulatory status

pursuant to §§ 63.11 and 63.13. For

purposes of paragraphs (a)(1) through

(a)(3) of this section, ‘‘affiliation’’ and

‘‘foreign carrier’’ are defined as set forth

in § 63.18(h)(1)(i) and (ii), respectively.

For purposes of paragraphs (a)(2) and

(a)(3) of this section, the relevant

markets on the foreign end of a U.S.

international route include:

international transport facilities or

services, including cable landing station

access and backhaul facilities; inter-city

facilities or services; and local access

facilities or services on the foreign end

of a particular route.

(1) A U.S. carrier that has no

affiliation with, and that itself is not, a

foreign carrier in a particular country to

which it provides service (i.e., a

destination country) shall

presumptively be considered nondominant for the provision of

international communications services

on that route;

(2) Except as provided in paragraph

(a)(4) of this section, a U.S. carrier that

is, or that has or acquires an affiliation

with a foreign carrier that is a monopoly

provider of communications services in

a relevant market in a destination

country shall presumptively be

classified as dominant for the provision

of international communications

services on that route; and

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

or acquires an affiliation with a foreign

carrier that is not a monopoly provider

of communications services in a

relevant market in a destination country

and that seeks to be regulated as nondominant on that route bears the burden

of submitting information to the

Commission sufficient to demonstrate

that its foreign affiliate lacks sufficient

market power on the foreign end of the

route to affect competition adversely in

the U.S. market. If the U.S. carrier

demonstrates that the foreign affiliate

lacks 50 percent market share in the

international transport and the local

access markets on the foreign end of the

route, the U.S. carrier shall

presumptively be classified as nondominant.

(4) A carrier that is authorized under

this part to provide to a particular

destination country a particular

international communications service,

and that provides such service solely

through the resale of an unaffiliated U.S.

facilities-based carrier’s international

switched services (either directly or

indirectly through the resale of another

U.S. resale carrier’s international

switched services), shall presumptively

be classified as non-dominant for the

provision of the authorized service. The

existence of an affiliation with a U.S.

facilities-based international carrier

shall be assessed in accordance with the

definition of affiliation contained in

§ 63.18(h)(1)(i) of this chapter, except

that the phrase ‘‘U.S. facilities-based

international carrier’’ shall be

substituted for the phrase ‘‘foreign

carrier.’’

(b) Any party that seeks to defeat the

presumptions in paragraph (a) of this

section shall bear the burden of proof

upon any issue it raises as to the proper

classification of the U.S. carrier.

(c) Any carrier classified as dominant

for the provision of particular services

on particular routes under this section

shall comply with the following

requirements in its provision of such

services on each such route:

(1) File international service tariffs on

one day’s notice without cost support;

(2) Provide services as an entity that

is separate from its foreign carrier

affiliate, in compliance with the

following requirements:

(i) The authorized carrier shall

maintain separate books of account from

its affiliated foreign carrier. These

separate books of account do not need

to comply with Part 32 of this chapter;

and

(ii) The authorized carrier shall not

jointly own transmission or switching

facilities with its affiliated foreign

carrier. Nothing in this section prohibits

the U.S. carrier from sharing personnel

or other resources or assets with its

foreign affiliate;

(3) File quarterly reports on traffic and

revenue, consistent with the reporting

requirements authorized pursuant to

§ 43.61, within 90 days from the end of

each calendar quarter;

(4) File quarterly reports summarizing

the provisioning and maintenance of all

basic network facilities and services

procured from its foreign carrier affiliate

or from an allied foreign carrier,

including, but not limited to, those it

procures on behalf of customers of any

joint venture for the provision of U.S.

basic or enhanced services in which the

authorized carrier and the foreign

carrier participate, within 90 days from

the end of each calendar quarter. These

reports should contain the following:

the types of circuits and services

provided; the average time intervals

between order and delivery; the number

of outages and intervals between fault

report and service restoration; and for

circuits used to provide international

switched service, the percentage of

‘‘peak hour’’ calls that failed to

complete;

(5) In the case of an authorized

facilities-based carrier, file quarterly

circuit status reports within 90 days

from the end of each calendar quarter in

the format set out by the § 43.82 annual

circuit status manual, with two

exceptions: activated or idle circuits

must be reported on a facility-by-facility

basis; and the derived circuits need not

be specified in the three quarterly

reports due on June 30, September 30,

and December 31. For purposes of this

paragraph, ‘‘facilities-based carrier’’ is

defined in § 63.18 note 2 to paragraph

(h).
Federal Register / Vol. 62, No. 236 / Tuesday, December 9, 1997 / Rules and Regulations 64753

(d) A carrier classified as dominant

under this section shall file an original

and two copies of each report required

by paragraphs (c)(3), (c)(4), and (c)(5) of

this section with the Chief, International

Bureau. The carrier shall include with

its filings separate computer diskettes

for the reports required by paragraphs

(c)(3) and (c)(5), in the format specified

by the § 43.61 and § 43.82 filing

manuals, respectively. The carrier shall

also file one paper copy of these reports,

accompanied by the appropriate

computer diskettes, with the

Commission’s copy contractor. The

transmittal letter accompanying each

report shall clearly identify the report as

responsive to the appropriate paragraph

of § 63.10(c).

3. § 63.11 is revised to read as follows:

§ 63.11 Notification by and prior approval

for U.S. international carriers that have or

propose to acquire an affiliation with a

foreign carrier.

(a) Any carrier authorized to provide

international communications service

under this part shall notify the

Commission sixty days prior to the

consummation of either of the following

acquisitions of direct or indirect

controlling interests in or by foreign

carriers:

(1) acquisition of a direct or indirect

controlling interest in a foreign carrier

(as defined in § 63.18(h)(1)(ii)) by the

authorized carrier, or by any entity that

directly or indirectly controls the

authorized carrier, or that directly or

indirectly owns more than 25 percent of

the capital stock of the authorized

carrier; or

(2) acquisition of a direct or indirect

interest in the capital stock of the

authorized carrier by a foreign carrier or

by an entity that directly or indirectly

controls a foreign carrier where the

interest would create an affiliation

within the meaning of

§ 63.18(h)(1)(i)(B).

(b) Any carrier authorized to provide

international communications service

under this part that becomes affiliated

with a foreign carrier within the

meaning of § 63.18(h)(1) that has not

previously notified the Commission

pursuant to this section or § 63.18 shall

notify the Commission within thirty

days after acquiring the affiliation. In

particular, acquisition by an authorized

carrier (or by any entity that directly or

indirectly controls, is controlled by, or

is under direct or indirect common

control with the authorized carrier) of a

direct or indirect interest in a foreign

carrier that is greater than 25 percent

but not controlling is subject to this

paragraph but not to paragraph (a).

(c) The notification required under

paragraphs (a) and (b) of this section

shall contain a list of the affiliated

foreign carriers named in paragraphs (a)

and (b) of this section and shall state

individually the country or countries in

which the foreign carriers are

authorized to provide

telecommunications services to the

public. It shall additionally specify

which, if any, of these countries is a

Member of the World Trade

Organization; which, if any, of these

countries the U.S. carrier is authorized

to serve under this part; what services

it is authorized to provide to each such

country; and the FCC File No. under

which each such authorization was

granted. The notification shall certify to

the information specified in this

paragraph.

(1) The carrier also should specify,

where applicable, those countries

named in paragraph (c) of this section

for which it provides a specified

international communications service

solely through the resale of the

international switched services of U.S.

facilities-based carriers with which the

resale carrier does not have an

affiliation. Such an affiliation is defined

in § 63.18(h)(1)(i), except that the phrase

‘‘U.S. facilities-based international

carrier’’ shall be substituted for the

phrase ‘‘foreign carrier.’’

(2) The carrier shall also submit with

its notification:

(i) The ownership information as

required to be submitted pursuant to

§ 63.18(h)(2); and

(ii) A ‘‘special concessions’’

certification as required to be submitted

pursuant to § 63.18(i).

(d) In order to retain non-dominant

status on the affiliated route, the carrier

notifying the Commission of a foreign

carrier affiliation under paragraph (a) or

(b) of this section should provide

information to demonstrate that it

qualifies for non-dominant classification

pursuant to § 63.10.

(e) After the Commission issues a

public notice of the submissions made

under this section, interested parties

may file comments within 14 days of

the public notice.

(1) In the case of a notification filed

under paragraph (a) of this section, the

Commission, if it deems it necessary,

will by written order at any time before

or after the submission of public

comments impose dominant carrier

regulation on the carrier for the

affiliated routes based on the provisions

of § 63.10.

(2) The Commission will, unless it

notifies the carrier in writing within 30

days of issuance of the public notice

that the investment raises a substantial

and material question of fact as to

whether the investment serves the

public interest, convenience and

necessity, presume the investment to be

in the public interest. If notified that the

investment raises a substantial and

material question, then the carrier shall

not consummate the planned

investment until it has filed an

application under § 63.18 and submitted

the information specified under

§ 63.18(h)(5) or (6) as applicable, and

§ 63.18(h)(7) and (8), as applicable, and

the Commission has approved the

application by formal written order.

(f) All authorized carriers are

responsible for the continuing accuracy

of certifications with regard to

affiliations with foreign carriers made

under this section and under § 63.18.

Whenever the substance of any such

certification is no longer accurate, the

carrier shall as promptly as possible,

and in any event within thirty days, file

with the Secretary in duplicate a

corrected certification referencing the

FCC File No. under which the original

certification was provided, except that

the carrier shall immediately inform the

Commission if at any time the

representations in the ‘‘special

concessions’’ certification provided

under paragraph (c)(2)(ii) of this section

or § 63.18(i) are no longer true. See

§ 63.18(i). This information may be used

by the Commission to determine

whether a change in regulatory status

may be warranted under § 63.10.

Note to § 63.11: ‘‘Control’’ as used in

this section includes actual working

control in whatever manner exercised

and is not limited to majority stock

ownership.

4. § 63.12 is revised to read as follows:

§ 63.12 Processing of international Section

214 applications.

(a) Except as provided by paragraph

(c) of this section, a complete

application seeking authorization under

§ 63.18 shall be granted by the

Commission 35 days after the date of

public notice listing the application as

accepted for filing.

(b) Issuance of public notice of the

grant shall be deemed the issuance of

Section 214 certification to the

applicant, which may commence

operation on the 36th day after the date

of public notice listing the application

as accepted for filing, but only in

accordance with the operations

proposed in its application and the

rules, regulations, and policies of the

Commission.

(c) The streamlined processing

procedures provided by paragraphs (a)

and (b) of this section shall not apply

where:
64754 Federal Register / Vol. 62, No. 236 / Tuesday, December 9, 1997 / Rules and Regulations

(1) The applicant has an affiliation

within the meaning of § 63.18(h)(1)(i)

with a foreign carrier in a destination

market, and the Commission has not yet

made a determination as to whether that

foreign carrier lacks sufficient market

power in that destination market to

affect competition adversely in the U.S.

market, unless the applicant clearly

demonstrates in its application at least

one of the following:

(i) The applicant qualifies for a

presumption of non-dominance under

§ 63.10(a)(3);

(ii) The affiliated destination market

is a WTO Member country and the

applicant qualifies for a presumption of

non-dominance under § 63.10(a)(4); or

(iii) The affiliated destination market

is a WTO Member country and the

applicant agrees to be classified as a

dominant carrier to the affiliated

destination country under § 63.10,

without prejudice to its right to petition

for reclassification at a later date; or

(2) The applicant has an affiliation

within the meaning of § 63.18(h)(1)(i)

with a dominant U.S. carrier whose

international switched or private line

services the applicant seeks authority to

resell (either directly or indirectly

through the resale of another reseller’s

services), unless the applicant agrees to

be classified as a dominant carrier to the

affiliated destination country under

§ 63.10 (without prejudice to its right to

petition for reclassification at a later

date); or

(3) The applicant seeks authority to

provide switched basic services over

private lines to a country for which the

Commission has not previously

authorized the provision of switched

services over private lines; or

(4) The application is formally

opposed by a pleading meeting the

following criteria:

(i) The caption and text of the

pleading make it unmistakably clear

that the pleading is intended to be a

formal opposition;

(ii) The pleading is served upon the

other parties to the proceeding; and

(iii) The pleading is filed within the

time period prescribed for the filing of

objections or comments; or

(5) The Commission has informed the

applicant in writing, within 28 days

after the date of public notice accepting

the application for filing, that the

application is not eligible for

streamlined processing under this

section.

(d) Any complete application that is

subject to paragraph (c) of this section

will be acted upon only by formal

written order, and operation for which

such authorization is sought may not

commence except in accordance with

such order. The Commission will issue

public notice that the application is

ineligible for streamlined processing.

Within 90 days of the public notice, the

Commission will issue an order acting

upon the application or provide public

notice that, because the application

raises questions of extraordinary

complexity, an additional 90-day period

for review is needed. Each successive

90-day period may be so extended.

5. § 63.13 is revised to read as follows:

§ 63.13 Procedures for modifying

regulatory classification of U.S.

international carriers from dominant to nondominant.

Any party that desires to modify its

regulatory status from dominant to nondominant for the provision of particular

international communications services

on a particular route should provide

information in its application to

demonstrate that it qualifies for nondominant classification pursuant to

§ 63.10.

6. § 63.14 is revised to read as follows:

§ 63.14 Prohibition on agreeing to accept

special concessions.

(a) Any carrier authorized to provide

international communications service

under this part shall be prohibited from

agreeing to accept special concessions

directly or indirectly from any foreign

carrier with respect to any U.S.

international route where the foreign

carrier possesses sufficient market

power on the foreign end of the route to

affect competition adversely in the U.S.

market, as described in paragraph (c) of

this section, and from agreeing to accept

special concessions in the future. For

purposes of this section, ‘‘foreign

carrier’’ is defined in § 63.18(h)(1)(ii).

(b) For purposes of this section and

§§ 63.11(c)(2)(ii) and 63.18(i), a special

concession is defined as an exclusive

arrangement involving services,

facilities, or functions on the foreign

end of a U.S. international route that are

necessary for the provision of basic

telecommunications services where the

arrangement is not offered to similarly

situated U.S.-licensed carriers and

involves:

(1) Operating agreements for the

provision of basic services;

(2) Distribution arrangements or

interconnection arrangements,

including pricing, technical

specifications, functional capabilities, or

other quality and operational

characteristics, such as provisioning and

maintenance times; or

(3) Any information, prior to public

disclosure, about a foreign carrier’s

basic network services that affects either

the provision of basic or enhanced

services or interconnection to the

foreign country’s domestic network by

U.S. carriers or their U.S. customers.

(c) A U.S. carrier that seeks to enter

a special concession with a foreign

carrier bears the burden of submitting

information, as part of the requirement

to file the agreement with the

Commission pursuant to § 43.51,

sufficient to demonstrate that the

foreign carrier lacks sufficient market

power on the foreign end of the route to

affect competition adversely in the U.S.

market. If the U.S. carrier makes a

showing that the foreign carrier lacks 50

percent market share in the

international transport and the local

access markets on the foreign end of the

route, the U.S. carrier will

presumptively be allowed to agree to

accept the special concession.

(d) Any party that seeks to defeat the

presumption in paragraph (c) of this

section shall bear the burden of proof

upon any issue it raises as to the ability

of the foreign carrier to affect

competition adversely in the U.S.

market.

7. § 63.17 is amended by revising

paragraph (b) to read as follows:

§ 63.17 Special provisions for U.S.

international common carriers.

* * * * *

(b) Except as provided in paragraph

(b)(4) of this section, a U.S. common

carrier, whether a reseller or facilitiesbased carrier, may engage in ‘‘switched

hubbing’’ to countries for which the

Commission has not authorized the

provision of switched basic services

over private lines provided the carrier

complies with the following conditions:

(1) U.S.-outbound switched traffic

shall be routed over the carrier’s

authorized U.S. international private

lines to a country for which the

Commission has authorized the

provision of switched services over

private lines (i.e., the ‘‘hub’’ country),

and then forwarded to the third country

only by taking at published rates and

reselling the international message

telephone service (IMTS) of a carrier in

the hub country;

(2) U.S.-inbound switched traffic shall

be carried to a country for which the

Commission has authorized the

provision of switched services over

private lines (i.e., the ‘‘hub’’ country) as

part of the IMTS traffic flow from a third

country and then terminated in the

United States over U.S. international

private lines from the hub country;

(3) U.S. common carriers that route

U.S.-billed traffic via switched hubbing

shall tariff their service on a ‘‘through’’

basis between the United States and the
Federal Register / Vol. 62, No. 236 / Tuesday, December 9, 1997 / Rules and Regulations 64755

ultimate point of origination or

termination;

(4) No U.S. common carrier may

engage in switched hubbing to or from

a third country where it has an

affiliation with a foreign carrier unless

and until it has received authority to

serve that country under § 63.18(e)(1),

(e)(2), or (e)(6).

8. § 63.18 is amended to revise

paragraphs (e), (h) and (i) and to add

new paragraph (k) to read as follows:

§ 63.18 Contents of applications for

international common carriers.

* * * * *

(e) One or more of the following

statements, as pertinent:

(1) If applying for authority to acquire

interests in facilities previously

authorized by the Commission in order

to provide international basic switched,

private line, data, television and

business services to all international

points, the applicant shall:

(i) State that it is requesting Section

214 authority to operate as a facilitiesbased carrier pursuant to the terms and

conditions of paragraph (e)(1) of this

section.

(ii) Comply with the following terms

and conditions:

(A) Authority to provide services to

all international points under this part

extends to those countries for which the

applicant qualifies for non-dominant

regulation as set forth in § 63.10, except

in the following circumstance: If an

applicant is affiliated with a foreign

carrier in a destination market and the

Commission has not determined that the

foreign carrier lacks sufficient market

power in the destination market to affect

competition adversely in the U.S.

market (see § 63.10(a)), the applicant

shall not commence service on any such

route until it receives specific authority

to do so under paragraph (e)(6) of this

section.

(B) The applicant may only provide

service using half-circuits on

appropriately licensed U.S. common

and non-common carrier facilities

(under either Title III of the

Communications Act of 1934, as

amended, or the Submarine Cable

Landing License Act, 47 U.S.C. 34 et al.)

provided that these facilities do not

appear on an exclusion list published by

the Commission and any necessary

overseas connecting facilities.

Applicants may not use non-U.S.

licensed facilities unless and until the

Commission specifically approves their

use and so indicates on the exclusion

list, and only then for service to the

countries indicated thereon.

(C) The applicant may provide service

to any country not included on an

exclusion list published by the

Commission.

(D) The applicant may provide

international basic switched, private

line, data, television and business

services.

(E) The authority granted under this

paragraph shall be subject to all

Commission rules and regulations and

any conditions stated in the

Commission’s public notice or order

that serves as the applicant’s Section

214 certificate. See § 63.12.

(2) If applying for authority to resell

the international services of authorized

U.S. common carriers for the provision

of international basic switched, private

line, data, television and business

services to all international points, the

applicant shall:

(i) State that it is requesting Section

214 authority to operate as a resale

carrier pursuant to the terms and

conditions of § 63.18(e)(2).

(ii) Comply with the following terms

and conditions:

(A) Authority to provide resold

services to all international points under

this part extends to those countries and

services for which the applicant

qualifies for non-dominant regulation as

set forth in § 63.10, except in the

following circumstances, in which case

an applicant shall not commence

service until it receives specific

authority to do so under paragraph (e)(6)

of this section:

(1) An application to provide

switched resold services to a non-WTO

Member country where the applicant is

affiliated with a foreign carrier; and

(2) An application to resell private

line services to a destination market

where the applicant is affiliated with a

foreign carrier and the Commission has

not determined that the foreign carrier

lacks sufficient market power in the

destination market to affect competition

adversely in the U.S. market (see

§ 63.10(a)).

(B) The applicant may resell the

international services of any authorized

common carrier, except affiliated

carriers regulated as dominant on the

route to be served, pursuant to that

carrier’s tariff or contract duly filed with

the Commission, for the provision of

international basic switched, private

line, data, television and business

services to all international points;

(C) The applicant may resell private

line services for the provision of

international switched basic services

only in circumstances where the

Commission has specifically authorized

the provision of switched basic services

over private lines to the particular

country at the foreign end of the private

line. In making determinations about

particular destination countries, the

Commission will follow the policies

adopted in IB Docket Nos. 96–261 and

97–142 (these documents are available

at the FCC’s Reference Operations

Division, Washington, D.C. 20554, and

on the FCC’s World Wide Web Site at

http://www.fcc.gov). The Commission

will provide public notice of its

decisions to authorize the provision of

switched basic services over private

lines to particular countries.

(D) The authority granted under this

paragraph shall be subject to all

Commission rules and regulations,

including the limitation in § 63.21 on

the use of private lines for the provision

of switched services, and any conditions

stated in the Commission’s public

notice or order that serves as the

applicant’s Section 214 certificate. See

§§ 63.12, 63.21.

(3) If applying for authority to provide

international switched basic services

over resold private lines between the

United States and a WTO Member

country for which the Commission has

not previously authorized the provision

of switched services over private lines,

the applicant shall demonstrate either

that settlement rates for at least 50

percent of the settled U.S.-billed traffic

between the United States and the

country at the foreign end of the private

line are at or below the benchmark

settlement rate adopted for that country

in IB Docket No. 96–261 or that the

country affords resale opportunities

equivalent to those available under U.S.

law. If applying for authority to provide

international switched basic services

over resold private lines between the

United States and a non-WTO Member

country for which the Commission has

not previously authorized the provision

of switched services over private lines,

the applicant shall demonstrate that

settlement rates for at least 50 percent

of the settled U.S.-billed traffic between

the United States and the country at the

foreign end of the private line are at or

below the benchmark settlement rate

adopted for that country in IB Docket

No. 96–261 and that the country affords

resale opportunities equivalent to those

available under U.S. law. With regard to

showing that a destination country

affords resale opportunities equivalent

to those available under U.S. law, an

applicant shall include evidence

demonstrating that equivalent resale

opportunities exist between the United

States and the subject country,

including any relevant bilateral or

multilateral agreements between the

administrations involved. Parties must

demonstrate that the foreign country at

the other end of the private line

provides U.S.-based carriers with:
64756 Federal Register / Vol. 62, No. 236 / Tuesday, December 9, 1997 / Rules and Regulations

(i) The legal right to resell

international private lines,

interconnected at both ends, for the

provision of switched services;

(ii) Reasonable and nondiscriminatory

charges, terms and conditions for

interconnection to foreign domestic

carrier facilities for termination and

origination of international services,

with adequate means of enforcement;

(iii) Competitive safeguards to protect

against anticompetitive and

discriminatory practices affecting

private line resale; and

(iv) Fair and transparent regulatory

procedures, including separation

between the regulator and operator of

international facilities-based services.

(4) Any carrier authorized under this

section to acquire and operate

international private line facilities other

than through resale may use those

private lines to provide switched basic

services only in circumstances where

the Commission has previously

authorized the provision of switched

services over private lines to the

particular country at the foreign end of

the private line. The Commission will

provide public notice of its decisions to

authorize the provision of switched

services over private lines to particular

countries pursuant to its policies

adopted in IB Docket Nos. 96–261 and

97–142. This provision is subject to the

following exceptions and conditions:

(i) The applicant shall not initiate

such service on a particular route absent

a grant of specific authority under

paragraph (e)(6) of this section in

circumstances where the applicant is

affiliated with a carrier in the country at

the foreign end of the private line and

the Commission has not determined that

the foreign carrier lacks sufficient

market power in the country at the

foreign end of the private line to affect

competition adversely in the U.S.

market. See § 63.10(a).

(ii) The applicant is subject to all

applicable Commission rules and

regulations, including the limitation

§ 63.21 on the use of private lines for the

provision of switched services, and any

conditions stated in the Commission’s

public notice or order that serves as the

applicant’s Section 214 certificate. See

§§ 63.12, 63.21.

(A) Except as provided in paragraph

(e)(4)(ii)(B) of this section, any carrier

that seeks to provide international

switched basic services over its

authorized private line facilities

between the United States and a WTO

Member country for which the

Commission has not previously

authorized the provision of switched

services over private lines shall

demonstrate that settlement rates for at

least 50 percent of the settled U.S.-billed

traffic between the United States and

the country at the foreign end of the

private line are at or below the

benchmark settlement rate adopted for

that country in IB Docket No. 96–261 or

that the country affords resale

opportunities equivalent to those

available under U.S. law. With regard to

showing that a destination country

affords resale opportunities equivalent

to those available under U.S. law, an

applicant shall include the information

required by paragraph (e)(3) of this

section.

(B) No formal application is required

under paragraph (e)(4) of this section in

circumstances where the carrier’s

previously authorized private line

facility is interconnected to the public

switched network only on one end—

either the U.S. or the foreign end—and

where the carrier is not operating the

facility in correspondence with a carrier

that directly or indirectly owns the

private line facility in the foreign

country at the other end of the private

line.

(5) If applying for authority to acquire

facilities through the transfer of control

of a common carrier holding

international Section 214 authorization,

or through the assignment of another

carrier’s existing authorization, the

applicant shall complete paragraphs (a)

through (d) of this section for both the

transferor/assignor and the transferee/

assignee. Paragraph (g) of this section is

not applicable, and only the transferee/

assignee needs to complete paragraphs

(h) through (k) of this section. At the

beginning of the application, the

applicant should also include a

narrative of the means by which the

transfer or assignment will take place.

The Commission reserves the right to

request additional information as to the

particulars of the transaction to aid it in

making its public interest

determination.

(6) If applying for authority to acquire

facilities or to provide services not

covered by § 63.18(e) (1) through (5), the

applicant shall provide a description of

the facilities and services for which it

seeks authorization. Such description

also shall include any additional

information the Commission shall have

specified previously in an order, public

notice or other official action as

necessary for authorization. Applicants

for new submarine cable facilities also

shall include a list of the proposed

owners of the cable, their voting

interests and ownership interests by

segment in the cable.

* * * * *

(h) A certification as to whether or not

the applicant is, or has an affiliation

with, a foreign carrier.

(1) The certification shall state with

specificity each foreign country in

which the applicant is, or has an

affiliation with, a foreign carrier. For

purposes of this certification:

(i) Affiliation is defined to include:

(A) A greater than 25 percent

ownership of capital stock, or

controlling interest at any level, by the

applicant, or by any entity that directly

or indirectly controls or is controlled by

it, or that is under direct or indirect

common control with it, in a foreign

carrier or in any entity that directly or

indirectly controls a foreign carrier; or

(B) A greater than 25 percent

ownership of capital stock, or

controlling interest at any level, in the

applicant by a foreign carrier, or by any

entity that directly or indirectly controls

or is controlled by a foreign carrier, or

that is under direct or indirect common

control with a foreign carrier; or by two

or more foreign carriers investing in the

applicant in the same manner in

circumstances where the foreign carriers

are parties to, or the beneficiaries of, a

contractual relation (e.g., a joint venture

or market alliance) affecting the

provision or marketing of basic

international telecommunications

services in the United States. A U.S.

carrier also will be considered to be

affiliated with a foreign carrier where

the foreign carrier controls, is controlled

by, or is under common control with a

second foreign carrier already found to

be affiliated with that U.S. carrier under

this section.

(ii) Foreign carrier is defined as any

entity that is authorized within a foreign

country to engage in the provision of

international telecommunications

services offered to the public in that

country within the meaning of the

International Telecommunication

Regulations, see Final Acts of the World

Administrative Telegraph and

Telephone Conference, Melbourne, 1988

(WATTC–88), Art. 1, which includes

entities authorized to engage in the

provision of domestic

telecommunications services if such

carriers have the ability to originate or

terminate telecommunications services

to or from points outside their country.

(2) In support of the required

certification, each applicant shall also

provide the name, address, citizenship

and principal businesses of its ten

percent or greater direct and indirect

shareholders or other equity holders and

identify any interlocking directorates.

(3) Each applicant that proposes to

acquire facilities through the resale of

the international switched or private
Federal Register / Vol. 62, No. 236 / Tuesday, December 9, 1997 / Rules and Regulations 64757

line services of another U.S. carrier shall

additionally certify as to whether or not

the applicant has an affiliation with the

U.S. carrier(s) whose facilities-based

service(s) the applicant proposes to

resell (either directly or indirectly

through the resale of another reseller’s

service). For purposes of this paragraph,

affiliation is defined as in paragraph

(h)(1)(i) of this section, except that the

phrase ‘‘U.S. facilities-based

international carrier’’ shall be

substituted for the phrase ‘‘foreign

carrier.’’

(4) Each applicant and carrier

authorized to provide international

communications service under this part

is responsible for the continuing

accuracy of the certifications required

by paragraphs (h)(1) through (3) of this

section. Whenever the substance of any

such certification is no longer accurate,

the applicant/carrier shall as promptly

as possible and in any event within

thirty days file with the Secretary in

duplicate a corrected certification

referencing the FCC File No. under

which the original certification was

provided. The information may be used

by the Commission to determine

whether a change in regulatory status

may be warranted under § 63.10.

(5) Any applicant that seeks to operate

as a U.S. facilities-based international

carrier to a particular country and that

is a foreign carrier in that country, or

directly or indirectly controls a foreign

carrier in that country, or has an

affiliation within the meaning of

paragraph (h)(1)(i)(B) of this section

with a foreign carrier in that country

shall provide the following information:

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

the destination foreign country) is a

Member of the World Trade

Organization; or

(ii) The applicant’s affiliated foreign

carrier lacks sufficient market power in

the named foreign country to affect

competition adversely in the U.S.

market; or

(iii) The named foreign country

provides effective competitive

opportunities to U.S. carriers to compete

in that country’s international facilitiesbased market. An effective competitive

opportunities demonstration should

address the following factors:

(A) The legal ability of U.S. carriers to

enter the foreign market and provide

facilities-based international services, in

particular international message

telephone service (IMTS);

(B) Whether there exist reasonable

and nondiscriminatory charges, terms

and conditions for interconnection to a

foreign carrier’s domestic facilities for

termination and origination of

international services;

(C) Whether competitive safeguards

exist in the foreign country to protect

against anticompetitive practices,

including safeguards such as:

(1) Existence of cost-allocation rules

in the foreign country to prevent crosssubsidization;

(2) Timely and nondiscriminatory

disclosure of technical information

needed to use, or interconnect with,

carriers’ facilities; and

(3) Protection of carrier and customer

proprietary information;

(D) Whether there is an effective

regulatory framework in the foreign

country to develop, implement and

enforce legal requirements,

interconnection arrangements and other

safeguards; and

(E) Any other factors the applicant

deems relevant to its demonstration.

(6) Any applicant that proposes to

resell the international switched or noninterconnected private line services of

another U.S. carrier for the purpose of

providing international communications

services to the named foreign country

and that is a foreign carrier in that

country, or directly or indirectly

controls a foreign carrier in that country,

or has an affiliation within the meaning

of paragraph (h)(1)(i)(B) of this section

with a foreign carrier in the destination

country shall provide the following

information (see also paragraph (h)(7) of

this section):

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

the destination foreign country) is a

Member of the World Trade

Organization; or

(ii) The applicant’s affiliated foreign

carrier lacks sufficient market power in

the named foreign country to affect

competition adversely in the U.S.

market; or

(iii) The named foreign country

provides effective competitive

opportunities to U.S. carriers to resell

international switched or noninterconnected private line services,

respectively. An effective competitive

opportunities demonstration should

address the following factors:

(A) The legal ability of U.S. carriers to

enter the foreign market and provide

resold international switched services

(for switched resale applications) or

non-interconnected private line services

(for non-interconnected private line

resale applications);

(B) Whether there exist reasonable

and nondiscriminatory charges, terms

and conditions for the provision of the

relevant resale service;

(C) Whether competitive safeguards

exist in the foreign country to protect

against anticompetitive practices,

including safeguards such as:

(1) Existence of cost-allocation rules

in the foreign country to prevent crosssubsidization;

(2) Timely and nondiscriminatory

disclosure of technical information

needed to use, or interconnect with,

carriers’ facilities; and

(3) Protection of carrier and customer

proprietary information;

(D) Whether there is an effective

regulatory framework in the foreign

country to develop, implement and

enforce legal requirements,

interconnection arrangements and other

safeguards; and

(E) Any other factors the applicant

deems relevant to its demonstration.

(7) Any applicant that proposes to

resell the international switched

services of an unaffiliated U.S. carrier

for the purpose of providing

international communications services

to the named foreign country and that

is a foreign carrier in that country or has

an affiliation with a foreign carrier in

that country shall either provide in its

application a showing that would satisfy

§ 63.10(a)(3) or state that it will file the

quarterly traffic reports required by

§ 43.61(c) of this chapter.

(8) With respect to regulatory

classification under § 63.10, each

applicant that certifies that it has an

affiliation with a foreign carrier in a

named foreign country and that desires

to be regulated as non-dominant for the

provision of particular international

communications services to that country

should provide information in its

application to demonstrate that it

qualifies for non-dominant classification

pursuant to § 63.10.

(i) Each applicant shall certify that the

applicant has not agreed to accept

special concessions directly or

indirectly from any foreign carrier with

respect to any U.S. international route

where the foreign carrier possesses

sufficient market power on the foreign

end of the route to affect competition

adversely in the U.S. market and will

not enter into such agreements in the

future. This certification shall be viewed

as an ongoing representation to the

Commission, and applicants/carriers

shall immediately inform the

Commission if at any time the

representations in their certifications are

no longer true. Failure to so inform the

Commission will be deemed a material

misrepresentation to the Commission.

For purposes of this section, ‘‘special

concession’’ is defined in § 63.14(b) and

‘‘foreign carrier’’ is defined in paragraph

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

* * * * *

(k) If the applicant desires

streamlined processing pursuant to
64758 Federal Register / Vol. 62, No. 236 / Tuesday, December 9, 1997 / Rules and Regulations

§ 63.12, a statement of how the

application qualifies for streamlined

processing.

9. § 63.21 is amended to revise

paragraph (a); to redesignate paragraph

(e) as paragraph (h); and to add

paragraphs (e), (f), and (g) to read as

follows:

§ 63.21 Conditions applicable to

international Section 214 authorizations.

* * * * *

(a) Carriers may not use their

authorized facilities-based or resold

international private lines for the

provision of switched basic services

between the United States and a WTO

Member country unless and until the

Commission has determined that the

country at the foreign end of the private

line provides equivalent resale

opportunities or that settlement rates for

at least 50 percent of the settled U.S.-

billed traffic between the United States

and that country are at or below the

benchmark settlement rate adopted for

that country in IB Docket No. 96–261

(this document is available at the FCC’s

Reference Operations Division,

Washington, D.C. 20554, and on the

FCC’s World Wide Web Site at http://

www.fcc.gov). Carriers may not use

their authorized facilities-based or

resold international private lines for the

provision of switched basic services

between the United States and a nonWTO Member country unless and until

the Commission has determined that the

country at the foreign end of the private

line provides equivalent resale

opportunities and that settlement rates

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

billed traffic between the United States

and that country are at or below the

benchmark settlement rate adopted for

that country in IB Docket No. 96–261.

(See § 63.18(e)(3)–(4).) If at any time the

Commission finds, after an initial

determination of compliance for a

particular country, that the country no

longer provides equivalent resale

opportunities or that market distortion

has occurred in the routing of traffic

between the United States and that

country, carriers shall comply with

enforcement actions taken by the

Commission. This condition shall not

apply to a carrier’s use of its authorized

facilities-based private lines to provide

service as described in

§ 63.18(e)(4)(ii)(B).

* * * * *

(e) Authorized carriers may not access

or make use of specific U.S. customer

proprietary network information that is

derived from a foreign network unless

the carrier obtains approval from that

U.S. customer. In seeking to obtain

approval, the carrier must notify the

U.S. customer that the customer may

require the carrier to disclose the

information to unaffiliated third parties

upon written request by the customer.

(f) Authorized carriers may not

receive from a foreign carrier any

proprietary or confidential information

pertaining to a competing U.S. carrier,

obtained by the foreign carrier in the

course of its normal business dealings,

unless the competing U.S. carrier

provides its permission in writing.

(g) The Commission reserves the right

to review a carrier’s authorization, and,

if warranted, impose additional

requirements on U.S. international

carriers in circumstances where it

appears that harm to competition is

occurring on one or more U.S.

international routes.

* * * * *

PART 64—MISCELLANEOUS RULES

RELATING TO COMMON CARRIERS

1. The authority citation of Part 64 is

revised to read as follows:

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

or apply 47 U.S.C. 201, 218, 226, 228, 254(k),

276 unless otherwise noted.

2. § 64.1001 is amended by revising

paragraphs (b), (c), and (d) to read as

follows:

§ 64.1001 International settlements policy

and modification requests.

* * * * *

(b) If the accounting rate referred to in

§ 43.51(e)(1) of this chapter is lower

than the accounting rate in effect in the

operating agreement of another carrier

providing service to or from the same

foreign point, and there is no

modification in the other terms and

conditions referred to in § 43.51(e)(1) of

this chapter, the carrier must file a

notification letter under paragraph (e) of

this section.

(c) If the amendment referred to in

§ 43.51(e)(2) of this chapter is a simple

reduction in the accounting rate, and

there is no modification in the other

terms and conditions referred to in

§ 43.51(e)(2) of this chapter, the carrier

must file a notification letter under

paragraph (e) of this section.

(d) If the operating agreement or

amendment referred to in §§ 43.51(e)(1)

and (e)(2) of this chapter is not subject

to notification under paragraphs (b) and

(c) of this section, the carrier must file

a modification request under paragraph

(f) of this section.

* * * * *

3. § 64.1002 is revised to read as

follows:

§ 64.1002 Alternative settlement

arrangements.

(a) A communications common

carrier engaged in providing switched

voice, telex, telegraph, or packet

switched service between the United

States and a foreign point may seek

approval to enter into an operating

agreement with a foreign

telecommunications administration

containing an alternative settlement

arrangement that does not comply with

the requirements of § 43.51(e)(1) and

§ 63.14 of this chapter and § 64.1001 by

filing a petition for declaratory ruling in

compliance with the requirements of

this section.

(b) A petition for declaratory ruling

must contain the following:

(1) Information to demonstrate that:

(i) The alternative settlement

arrangement is on a route between the

United States and a World Trade

Organization Member; or

(ii) For an alternative settlement

arrangement on a route between the

United States and a non-World Trade

Organization Member:

(A) The Commission has made a

previous determination that the

effective competitive opportunities test

in § 63.18(h)(5)(iii) of this chapter has

been satisfied on the route covered by

the alternative settlement arrangement;

or

(B) The effective competitive

opportunities test in § 63.18(h)(5)(iii) of

this chapter is satisfied on the route

covered by the alternative settlement

arrangement; or

(iii) The alternative settlement

arrangement is otherwise in the public

interest.

(2) A certification as to whether the

alternative settlement arrangement

affects more than 25 percent of the

outbound traffic or 25 percent of the

inbound traffic on the route to which

the alternative settlement arrangement

applies.

(3) A certification as to whether the

parties to the alternative settlement

arrangement are affiliated, as defined in

§ 63.18(h)(1)(i) of this chapter, or

involved in a non-equity joint venture

affecting the provision of basic services

on the route to which the alternative

settlement arrangement applies.

(4) A copy of the alternative

settlement arrangement if it affects more

than 25 percent of the outbound traffic

or 25 percent of the inbound traffic on

the route to which the alternative

settlement arrangement applies, or if it

is between parties that are affiliated, as

defined in § 63.18(h)(1)(i) of this

chapter, or that are involved in a nonequity joint venture affecting the

provision of basic services on the route
Federal Register / Vol. 62, No. 236 / Tuesday, December 9, 1997 / Rules and Regulations 64759

1Most access providers are incumbent local

exchange carriers (incumbent LECs) that provide

access customers with circuits that interconnect to

the local carrier’s public switched telephone

network. Commission rules require that ‘‘interstate

access services should be made available on a nondiscriminatory basis and, as far as possible, without

distinction between end user and IC [interexchange

carrier] customers.’’ Petition of First Data

Resources, Inc., Regarding the Availability of

Feature Group B Access Service to End Users,

Memorandum Opinion and Order, 1986 WL 291786

(rel. May 28, 1986) at para. 13. Typical access

customers include interexchange carriers, wireless

carriers, competitive access providers, and large

corporate users.

2Feature Group D access, or ‘‘equal access,’’ is

known in the industry as ‘‘One-plus’’ (‘‘1+’’)

dialing. This type of access allows calls to be routed

directly to the caller’s carrier of choice. Feature

Group D/equal access offers features, including

presubscription, not generally available through

other forms of access. In 1988, the Industry Carriers

Compatibility Forum (ICCF), operating under the

Alliance for Telecommunications Industry

Solutions (ATIS), Carrier Liaison Committee (CLC),

began to develop a two-part plan to convert and

expand three-digit Feature Group D CICs to four

digits. The second part of the plan, originally

scheduled to occur in the third quarter of 1993,

contemplated expansion of three-digit Feature

Group D CICs to four digits and eventual

elimination of the 10XXX CAC format. See Letter

of October 13, 1989, from G.J. Handler, Vice

President, Network Planning, Bell Communications

Research (Bellcore), to Richard M. Firestone, Chief,

Common Carrier Bureau, Federal Communications

Commission at 2 (Handler Letter). The ICCF’s plan

was published in 1991. See Expansion of Carrier

Identification Code Capacity for Feature Group D

(FGD), Bellcore Technical Reference TR–NWT–

001050, Issue 1 (April 1991) (ICCF Expansion Plan,

April 1991). In 1994, the expansion of Feature

Group D CICs was scheduled for the first quarter of

1995. See Administration of the North American

Numbering Plan, Notice of Proposed Rulemaking,

CC Docket No. 92–237, 9 FCC Rcd 2068, 2076

(1994) (59 FR 24103 (5/10/94) (CICs NPRM). In

January 1997, the ICCF became part of the Network

Interconnection Interoperability Forum (NIIF),

which also operates under the auspices of the CLC.

3Administration of the North American

Numbering Plan, Carrier Identification Codes

(CICs), Second Report and Order, CC Docket No.

92–237, FCC 97–125 (released April 11, 1997) (62

FR 19056 (April 18, 1997)) (CICs Second Report and

Order).

4See CICs Second Report and Order at para. 28.

5See Handler Letter at 2.

6See CICs NPRM, 9 FCC Rcd at 2076–77.

to which the alternative settlement

arrangement applies.

(5) A summary of the terms and

conditions of the alternative settlement

arrangement if it does not come within

the scope of paragraph (b)(4) of this

section. However, upon request by the

International Bureau, a full copy of such

alternative settlement arrangement must

be forwarded promptly to the

International Bureau.

(c) If the petition for declaratory

ruling contains a certification under

paragraph (b)(1)(i) of this section that

the proposed alternative settlement

arrangement is for service on a route

between the United States and a World

Trade Organization Member, a party

may oppose the petition under

paragraph (f) of this section with a

showing that the participating carrier on

the foreign end of the route does not

have multiple (more than one)

international facilities-based

competitors. In such a case, the

petitioning party may make a showing

under paragraph (b)(1)(iii) of this

section, pursuant to paragraph (g) of this

section.

(d) An alternative settlement

arrangement filed for approval under

this section cannot become effective

until the petition for declaratory ruling

required by paragraph (a) of this section

has been granted under paragraph (f) of

this section.

(e) On the same day the petition for

declaratory ruling has been filed, the

filing carrier must serve a copy of the

petition on all carriers providing the

same or similar service with the foreign

carrier identified in the petition.

(f) All petitions for declaratory ruling

shall be subject to a 21-day pleading

period for objections or comments,

commencing the day after the date of

public notice listing the petition as

accepted for filing. A petition for

declaratory ruling shall be deemed

granted as of the 28th day without any

formal staff action provided that:

(1) The petition is not formally

opposed by a pleading meeting the

following criteria:

(i) The caption and text of the

pleading make it unmistakably clear

that the pleading is intended to be a

formal opposition;

(ii) The pleading is served upon the

other parties to the proceeding; and

(iii) the pleading is filed within the

time period prescribed; or

(2) The International Bureau has not

notified the filing carrier that grant of

the petition may not serve the public

interest and that implementation of the

proposed alternative settlement

arrangement must await formal staff

action on the petition.

(g) If objections or comments are filed,

the petitioning carrier may file a

response pursuant to § 1.45 of this

chapter. Petitions that are formally

opposed must await formal action by

the International Bureau before the

proposed alternative settlement

arrangement may be implemented.

[FR Doc. 97–32013 Filed 12–5–97; 10:03 am]

BILLING CODE 6712–01–P

FEDERAL COMMUNICATIONS

COMMISSION

47 CFR Parts 52 and 64

[DA 97–2528]

Petitions for Waiver of the Four-Digit

Carrier Identification Code (CIC)

Implementation Schedule

AGENCY: Federal Communications

Commission.

ACTION: Final rule.

SUMMARY: On December 3, 1997, the

Network Services Division of the

Commission’s Common Carrier Bureau,

released an Order granting extensions to

certain local exchange carriers (LECs) of

the January 1, 1998 deadline for

implementing four-digit carrier code

identification codes (CIC). The Order is

intended to respond to waiver requests

received from certain LECs.

EFFECTIVE DATE: December 3, 1997.

FOR FURTHER INFORMATION CONTACT:

Elizabeth Nightingale, Attorney,

Network Services Division, Common

Carrier Bureau, (202) 418–2352.

SUPPLEMENTARY INFORMATION:

Adopted: December 2, 1997

Released: December 3, 1997

I. Introduction

Carrier identification codes (CICs) are

numeric codes that enable local

exchange carriers (LECs) providing

interstate interexchange access services

to identify the interstate interexchange

carrier (IXC) that the originating caller

wishes to use to transmit its interstate

call.1 LECs use the CICs to route traffic

to the proper IXC and to bill for the

interstate access service provided. CICs

facilitate competition by enabling

callers to use the services of

telecommunications service providers

either by presubscription or by dialing

a carrier access code, or CAC, which

incorporates that carrier’s unique

Feature Group D CIC.2 Originally, CICs

were unique three-digit codes (XXX)

and CACs were five-digit codes

incorporating the CIC (10XXX).

2. On April 11, 1997, in the CICs

Second Report and Order,3 the

Commission approved an industry plan

to expand Feature Group D CICs from

three to four digits on the ground that

it was a reasonable method of meeting

future demand for CICs as the supply of

three-digit codes was exhausted.4 The

industry agreed that as the expansion

from three to four-digit CICs occurred,

and as carriers replaced their five-digit

CACs with seven-digit CACs, a

transition, or permissive dialing period,

was needed. The industry, however,

was unable to agree on the length of the

transition.5 In its 1994 CICs NPRM, the

Commission proposed a six-year

period.6 In the CICs Second Report and

Order, however, because of the rapidly

depleting pool of available three-digit