[Federal Register Volume 62, Number 236 (Tuesday, December 9, 1997)]
[Rules and Regulations]
[Pages 64741-64759]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-32013]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 43, 63, and 64

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


Foreign Participation in the U.S. Telecommunications Market

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: On November 25, 1997, the Federal Communications Commission 
adopted a Report and Order that creates a new regulatory framework for 
international telecommunications. This action is a result of the recent 
World Trade Organization agreement on basic telecommunications services 
recently concluded wherein 69 countries, including the United States 
and virtually all of its major trading partners, agreed to open their 
markets for basic telecommunications services to competition from 
foreign carriers. Due to these changed circumstances, the Commission 
initiated a proceeding to revisit its rules governing foreign 
participation in the U.S. telecommunications market. In addition, the 
Commission's order addresses related issues raised in petitions for 
reconsideration of the Foreign Carrier Entry Order. The new rules will 
have significant benefits for consumers. Entry by foreign suppliers of 
telecommunications services will stimulate the U.S. market for 
international services, creating incentives for carriers to offer 
existing services at lower prices and adopt innovative new services to 
attract residential and small business customers. Further opening the 
U.S. market to foreign carrier entry, along with U.S. carrier entry 
into foreign markets, will allow carriers to capitalize on newly found 
efficiencies by offering one-stop shopping, which allows customers to 
have a single service provider in multiple markets, thereby reducing 
administrative costs to users.
    This final rule contains information collections subject to the 
Paperwork Reduction Act of 1995 (PRA), Pub. L. No. 104-13. It will be 
submitted to the Office of Management and Budget (OMB) for review under 
the PRA. OMB, the general public and other Federal agencies are invited 
to comment on the information collections contained in the final rule.

DATES: The amendments to Secs. 43.51(d) and 64.1001(b) are effective 
January 8, 1998. All other regulations contain information collection 
requirements and are not effective until approved by the Office of 
Management and Budget (OMB), subject to 5 U.S.C. Sec. 801(a)(3). A 
document announcing the effective date of these regulations will be 
published in the Federal Register.
    The agency reserves the right to reconsider the effective date of 
this decision if the WTO Basic Telecom Agreement does not take effect 
on January 1, 1998. If these final rules are postponed, the agency will 
give timely notice in the Federal Register.
    Written comments by the public on the information collection 
requirements are due February 9, 1998.


[[Page 64742]]


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 <a href="/cdn-cgi/l/email-protection#5238303d3e372b123431317c353d24"><span class="__cf_email__" data-cfemail="442e262b28213d042227276a232b32">[email protected]</span></a>.

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 <a href="/cdn-cgi/l/email-protection#117b737e7d7468517772723f767e67"><span class="__cf_email__" data-cfemail="8ce6eee3e0e9f5cceaefefa2ebe3fa">[email protected]</span></a>.

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

[[Page 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 
foreign-derived U.S. customer proprietary network information (CPNI). 
Under Section 222(a) of the Communications Act, every 
telecommunications carrier has a duty to protect the confidentiality of 
customer information. The Commission finds that if a U.S. carrier 
desires to make use of foreign-derived CPNI pertaining to a specific 
U.S. customer, it must first obtain appropriate consent from that 
customer. In doing so, the U.S. carrier also must notify the customer 
that he or she may require the U.S. carrier to disclose the CPNI to 
unaffiliated third parties upon written request by the customer. The 
Commission finds that these procedures will balance Section 222's 
privacy and competitive issues while not burdening or preventing U.S. 
carriers from offering one-stop shopping options.
    13. The Commission declines to address issues raised by parties 
concerning the benchmark authorization conditions imposed on 
facilities-based carriers in the Benchmarks Order (62 FR 45758, August 
29, 1997). The Commission will condition a carrier's facilities-based 
authorization to serve an affiliated market on the foreign carrier 
offering U.S.-licensed international carriers a settlement rate for the 
affiliated market at or below the relevant benchmark adopted in the 
Benchmarks Order.
    14. The Commission addresses the issue of whether to apply its 
benchmark condition to authorizations to provide switched resale 
service from the United States to an affiliated market, which was not 
resolved in the Benchmarks Order. The Commission declines to apply the 
settlement rate benchmark condition to switched resale providers. The 
Commission finds that a switched reseller is less likely to attempt a 
predatory price squeeze. The Commission also finds here that it would 
be easier to detect a price squeeze in the switched resale context than 
in the facilities-based contest. The easier detection should deter 
switched resellers from attempting a price squeeze and will allow the 
Commission to take action in the event a carrier does attempt a price 
squeeze. The Commission will monitor the switched resale market 
carefully, and if it finds substantial evidence of anticompetitive 
behavior that causes harm to competition and consumers in the U.S. 
market, it may reconsider its decision not to apply the benchmark 
condition to the provision of switched resale. The Commission also 
adopts a quarterly traffic and revenue reporting requirement that 
applies to switched resellers that possess market power on the foreign 
end of the route and that have settlement rates with U.S. carriers.
    15. The Commission adopts a dominant carrier regulatory framework 
aimed at detecting and deterring anticompetitive behavior in the U.S. 
market by foreign carriers and their

[[Page 64744]]

affiliated U.S. carriers. It will retain a single-tier dominant carrier 
regulatory approach and classify any U.S.-licensed carriers as dominant 
on a particular route if it is affiliated with a foreign carrier that 
possesses market power in a relevant market on the foreign end of that 
route. The Commission did not adopt its proposal to ban exclusive 
arrangements involving joint marketing, customer steering, and the use 
of foreign market telephone customer information. The Commission adopts 
its tentative conclusion to continue its current regulatory treatment 
of co-marketing and other non-equity business arrangements between U.S. 
carriers and their foreign counterparts that affect the provision of 
U.S. international services. The Commission also found that it would be 
an unnecessary burden to apply dominant classification to all non-
equity arrangements absent a finding of substantial risk of competitive 
harm. The Commission also declined to adopt a filing requirement for 
non-equity business relationships.
    16. The Commission adopts a number of competitive safeguards as 
part of its dominant carrier regulatory framework. Dominant foreign-
affiliated carriers will be permitted to file tariffs on one day's 
notice with a presumption of lawfulness rather than the current 
fourteen-day advance notice. The Commission also eliminates its prior 
approval requirement for circuit additions and discontinuances on the 
dominant route. The Commission declines to adopt a quarterly 
notification of circuit additions or discontinuances requirement. If 
the Commission finds that an affiliated carrier is engaged in 
anticompetitive behavior, it may apply the prior approval requirement 
on that route.
    17. Although the Commission currently has in place a number of 
safeguards to prevent anticompetitive behavior, it finds that a minimal 
level of structural separation for dominant carriers is necessary. The 
Commission will require a foreign-affiliated U.S. international carrier 
regulated as dominant to provide service in the U.S. market through a 
corporation that is separate from the foreign affiliate, maintain 
separate books of account, and not jointly own switching and 
transmission facilities with its foreign carrier affiliate.
    18. The Order imposes a number of reporting requirements to assist 
the Commission in monitoring and detecting anticompetitive behavior. 
Foreign-affiliated dominant carriers will be required to file quarterly 
traffic and revenue reports for their dominant routes. The Commission 
requires that each dominant foreign-affiliated carrier file quarterly 
reports summarizing the provisioning and maintenance of all basic 
network facilities and services it procures from its foreign affiliate, 
including, but not limited to, correspondent or other basic facilities 
procured on behalf of customers of joint venture offerings. Although 
the Commission does not dictate the format for the provisioning and 
maintenance reports, the Commission describes the information that it 
requires. The Commission directs the International Bureau to adopt a 
standard reporting manual if it feels that one would be helpful, and 
permits the Bureau to modify the contents of the filing requirements as 
necessary. Carriers subject to this requirement will be able to seek a 
protective order to ensure that parties to whom confidential 
information is made available limit the persons who will have access to 
the information and the purposes for which the information will be 
used.
    19. All dominant foreign-affiliated facilities-based carriers will 
file quarterly circuit status reports. Although the Commission proposed 
quarterly notifications of circuit changes, the quarterly circuit 
status reports will provide information that can be more readily 
compared to the information provided by all U.S. international carriers 
on an annual basis under Section 43.82 of our rules. The Commission 
does not require dominant foreign-affiliated private line resale 
carriers to file quarterly circuit status reports, given that they rely 
on underlying U.S. facilities-based carriers to make arrangements with 
their affiliated carriers. The Commission directs the International 
Bureau to modify the Section 43.82 reporting manual as necessary to 
accommodate these changes. The Commission recognizes that the quarterly 
circuit status reports contain commercially sensitive information 
similar to the provisioning and maintenance reports. Thus, the 
Commission will allow dominant foreign-affiliated carriers to request 
the standard protective order for the three quarterly circuit status 
reports that dominant foreign-affiliated carriers must file.
    20. The Commission does not adopt an expedited procedure to prevent 
competitive harm in the U.S. market. Rather, the Commission will rely 
on the various remedies currently available for addressing 
anticompetitive conduct. The Commission does, however, adopt a general 
rule that would enable it to impose additional requirements on U.S. 
international carriers in circumstances where it appears that harm to 
competition is occurring on one or more U.S. international routes. The 
Commission notes that it is presently reviewing its rules to ensure 
that the Commission provides a forum for the prompt resolution of all 
formal complaints against telecommunications carriers involving claims 
of unreasonably discriminatory or otherwise unlawful conduct in 
violation of the Communications Act or its rules.
    21. In the Flexibility Order (62 FR 5535, February 6, 1997), the 
Commission developed a new approach for permitting alternative 
settlement arrangements. In this proceeding, the Commission will no 
longer apply the ECO test as a threshold standard for determining when 
to permit accounting rate flexibility. Instead, it will apply a 
rebuttable presumption that flexibility is permitted for carriers from 
WTO Member countries. In order to rebut this presumption, a party 
opposing a flexible arrangement must demonstrate that the foreign 
carrier is not subject to competition in its home market from multiple 
(more than one) facilities-based carriers that possess the ability to 
terminate international traffic and serve existing customers in the 
foreign market. The Commission also makes minor changes to conform its 
procedures for U.S. carriers to enter into an alternative payment 
arrangements, and it will apply the new policies and procedures to all 
flexibility petitions pending before the Commission in any procedural 
status at the time the new rules become effective. The Commission will 
continue to apply the safeguards developed in the Flexibility Order (62 
FR 5535, February 6, 1997). The Commission will continue to allow the 
proponent of an alternative settlement arrangement with a carrier from 
a WTO Member country to make an alternative showing where the 
presumption in favor of flexibility can be rebutted.
    22. The Order streamlines the Section 214 applications of carriers 
that demonstrate clearly and convincingly that the foreign carrier 
affiliate has less than a 50 percent market share in reach relevant 
terminating market in the destination foreign country (international, 
intercity, and local exchange access). Streamlined processing of 
Section 214 applications will be available to any applicant whose 
foreign affiliate is from a WTO Member country if the applicant 
requests authority only to serve that country solely by reselling the 
switched services of unaffiliated U.S. international carriers. 
Streamlining will be available for foreign-affiliated carriers not 
otherwise eligible for streamlined processing as long as the applicant

[[Page 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 foreign-affiliated entities. The Commission has deemed 
these changes appropriate in light of the recent World Trade 
Organization (WTO) Basic Telecommunications Services Agreement and the 
worldwide trend toward deregulation and competition in the provision of 
telecommunications services. Our objective is to increase competition 
in the U.S. telecommunications markets while minimizing the risk of 
anticompetitive harm and encouraging foreign governments to open their 
telecommunications markets. In light of the changed circumstances that 
will result from the WTO Basic Telecom Agreement and our nearly two 
years of experience with our current rules on market entry and 
regulation of foreign-affiliated entities, we find that reducing entry 
barriers for applicants affiliated with entities from WTO Member 
countries is the appropriate way to accomplish that objective. The 
Commission believes that it is no longer necessary to apply the 
``effective competitive opportunities'' (ECO) test developed in the 
1995 Foreign Carrier Entry Order to countries that are Members of the 
WTO. Instead, we will rely primarily on regulatory safeguards and 
benchmark settlement rates to reduce the potential for anticompetitive 
conduct in the U.S. market. We revise some of those safeguards in this 
Order.

Summary of Significant Issues Raised by Public Comments in Response to 
the IRFA

    29. No comments were submitted specifically in response to the 
IRFA. Nevertheless, we have considered, in developing these rules and 
policies, any potential significant economic impact on small entities. 
We have attempted to minimize the burdens imposed on all entities, 
including small entities, in order to promote participation by new 
entrants in the U.S. telecommunications markets.
    30. NextWave raised comments in response to the Notice specific to 
the impact of our policy toward indirect foreign investment in C-block 
and F-block licensees. Those blocks, known as ``entrepreneur'' blocks, 
are reserved for small businesses and entrepreneurs. NextWave states 
that it and other entrepreneurial carriers are dependent on financing 
from a variety of sources, including foreign investment, and that 
access to foreign capital is vital to their financial viability. 
NextWave argues that indirect foreign investment in C-block and F-block 
licensees presents ``no conceivable risk to competition'' because those 
licenses are held by entrepreneurs who are new entrants into the 
markets. NextWave proposes that, for that reason, the Commission should 
conclude that indirect foreign investment in C-block and F-block 
personal communications systems (PCS) licensees by any entity whose 
home market is a WTO Member country serves the public interest and 
should not be subject to prior Commission approval. NextWave also urges 
the Commission, in the alternative, to establish an expedited process 
and timetable for addressing applications to exceed the 25 percent 
benchmark for indirect foreign ownership of common carrier wireless 
licensees.
    31. Telephone and Data Systems (TDS) proposed that the Commission 
permit without prior approval any amount of indirect foreign ownership 
of common carrier radio licensees held in the form of registered 
securities when

[[Page 64746]]

the foreign investor is not a carrier and comes from one of the 64 
other WTO Member countries that has committed to enforce fair rules of 
competition for basic telecommunications. Under TDS's proposal, the 
Commission would continue to require prior approval for investors from 
other WTO Member countries, for investors from non-WTO countries, and 
from all foreign carriers. TDS suggested that we scrutinize filings 
with the Securities and Exchange Commission to monitor foreign 
ownership of registered securities and that we rely on revocation, 
instead of prior approval, to protect the public interest pursuant to 
Section 310(b)(4). TDS states that adoption of its proposal would 
significantly reduce burdens on common carrier radio licensees, who 
currently must research the nationalities of their individual 
shareholders in order to remain in compliance with the restrictions on 
foreign ownership.

Description and Estimate of the Number of Small Entities to Which the 
Rules Will Apply

    32. We received no comments in response to our estimates in the 
IRFA of the number of small entities to which the proposed rules would 
apply. We conclude that the IRFA's estimates are the best available 
estimates of the number of small entities that the rules we adopt here 
will affect and that those estimates are sufficiently useful in 
enabling us to attempt to minimize the economic impact of our rules on 
small entities.
    33. The RFA generally defines small entity as having the same 
meaning as the terms small business, small organization, and small 
governmental jurisdiction and defines small business as having the same 
meaning as the term small business concern under section 3 of the Small 
Business Act unless the Commission has developed one or more 
definitions that are appropriate for its activities. The Small Business 
Act defines small business concern as one that (1) is independently 
owned and operated; (2) is not dominant in its field of operation; and 
(3) satisfies any additional criteria established by the Small Business 
Administration (SBA).
    34. The rules adopted in this Order apply only to entities 
providing international common carrier services pursuant to Section 214 
of the Communications Act; entities providing domestic or international 
wireless common carrier, aeronautical enroute, or aeronautical fixed 
services under Section 309 of the Act; and entities licensed to 
construct and operate submarine cables under the Cable Landing License 
Act.
    35. Because the small incumbent local exchange carriers (LECs) 
subject to these rules are either dominant in their fields of 
operations or are not independently owned and operated, consistent with 
our prior practice, they are excluded from the definitions of small 
entity and small business concern. Accordingly, our use of the terms 
small entities and small businesses does not encompass small incumbent 
LECs. Out of an abundance of caution, however, for the purposes of this 
FRFA, we will consider small incumbent LECs to be within this analysis, 
where a small incumbent LEC is any incumbent LEC that arguably might be 
defined by the SBA as a ``small business concern.''

Section 214  International Common Carrier Services

    36. Entities providing international common carrier service 
pursuant to Section 214 of the Act fall into the SBA's Standard 
Industrial Classification (SIC) categories for Radiotelephone 
Communications (SIC 4812) and Telephone Communications, Except 
Radiotelephone (SIC 4813). The SBA's definition of small entity for 
those categories is one with fewer than 1,500 employees. We discuss 
below the number of small entities falling within these two 
subcategories that may be affected by the rules adopted in this Order.
    37. The most reliable source of information regarding the number of 
international common carriers is the data that we collect annually in 
connection with the Telecommunications Industry Revenue: 
Telecommunications Relay Service Fund Worksheet Data (TRS Worksheet). 
In 1995, 445 toll carriers filed TRS fund worksheets. We believe that 
between 50 and 200 carriers failed to file TRS fund worksheets. We 
believe also that fewer than 10 toll carriers had 1,500 or more 
employees. Thus, at most 635 international carriers would be classified 
as small entities. Many TRS filers, however, are affiliated with other 
carriers, and therefore the number of aggregated carriers is far fewer 
than the preceding estimate. Of the 445 toll filers, 239 reported no 
carrier affiliates. Adding 50 non-filers gives a lower estimate of 289 
international carriers that would be classified as small entities. 
Thus, our best estimate of the total number of small entities is 
between 289 and 635. We are unable at this time to estimate with 
greater precision the number of international carriers that would 
qualify as small business entities under the SBA's definition. While 
not all of these entities may have provided international service in 
1995, we expect that many of these entities will seek to do so in the 
future, as will additional entrants into the market.
b. Title III  Common Carrier Services
    38. Cellular licensees. Neither the Commission nor the SBA has 
developed a definition of small entities applicable to cellular 
licensees. The closest applicable definition of small entity is the 
definition under the SBA rules applicable to radiotelephone (wireless) 
companies (SIC 4812). The most reliable source of information regarding 
the number of cellular services carriers nationwide of which we are 
aware appears to be the data that the Commission collects annually in 
connection with the TRS Worksheet. According to the most recent data, 
792 companies reported that they were engaged in the provision of 
cellular services. Although it seems certain that some of these 
carriers are not independently owned and operated, or have more than 
1,500 employees, we are unable at this time to estimate with greater 
precision the number of cellular services carriers that would qualify 
as small business concerns under the SBA's definition. Consequently, we 
estimate that there are fewer than 792 small cellular service carriers.
    39. 220 MHz Radio Services. Because the Commission has not yet 
defined a small business with respect to 220 MHz radio services, we 
will utilize the SBA's definition applicable to radiotelephone 
companies--i.e., an entity employing less than 1,500 persons. With 
respect to the 220 MHz services, the Commission has proposed a two-
tiered definition of small business for purposes of auctions: (1) For 
Economic Area (EA) licensees, a firm with average annual gross revenues 
of not more than $6 million for the preceding three years, and (2) for 
regional and nationwide licensees, a firm with average annual gross 
revenues of not more than $15 million for the preceding three years. 
Since this definition has not yet been approved by the SBA, we will 
utilize the SBA's definition applicable to radiotelephone companies. 
Given the fact that nearly all radiotelephone companies employ fewer 
than 1,000 employees, with respect to the approximately 3,800 incumbent 
licensees in this service, we will consider them to be small businesses 
under the SBA definition.
    40. Common Carrier Paging. The Commission has proposed a two-tier 
definition of small businesses in the context of auctioning licenses in 
the Common Carrier Paging services. Because the SBA has not yet 
approved this definition for paging services, we will utilize the SBA's 
definition

[[Page 64747]]

applicable to radiotelephone companies, i.e., an entity employing fewer 
than 1,500 persons. At present, there are approximately 74,000 Common 
Carrier Paging licensees. We estimate that the majority of common 
carrier paging providers would qualify as small businesses under the 
SBA definition.
    41. Mobile Service Carriers. Neither the Commission nor the SBA has 
developed a definition of small entities specifically applicable to 
mobile service carriers such as paging companies. The closest 
applicable definition under the SBA rules is for radiotelephone 
(wireless) companies. The most reliable source of information regarding 
the number of mobile service carriers nationwide of which we are aware 
appears to be the data that the Commission collects annually in 
connection with the TRS Worksheet. According to the most recent data, 
117 companies reported that they were engaged in the provision of 
mobile services. Although it seems certain that some of these carriers 
are not independently owned and operated, or have more than 1,500 
employees, we are unable at this time to estimate with greater 
precision the number of mobile service carriers that would qualify 
under the SBA's definition. Consequently, we estimate that fewer than 
117 mobile service carriers are small entities.
    42. Broadband Personal Communications Services (PCS). The broadband 
PCS spectrum is divided into six frequency blocks designated A through 
F, and the Commission has held auctions for each block. The Commission 
has defined small entity in the auctions for Blocks C and F as an 
entity that has average gross revenues of less than $40 million in the 
three previous calendar years. For Block F, an additional 
classification for ``very small business'' was added and is defined as 
an entity that, together with its affiliates, has average gross revenue 
of not more than $15 million for the preceding three calendar years. 
These regulations defining small entity in the context of broadband PCS 
auctions have been approved by the SBA. No small business within the 
SBA-approved definition bid successfully for licenses in Blocks A and 
B. There were 90 winning bidders that qualified as small entities in 
the Block C auctions. A total of 93 small and very small businesses won 
approximately 40 percent of the 1,479 licenses for Blocks D, E, and F. 
However, licenses for Blocks C through F have not been awarded fully; 
therefore, there are few, if any, small businesses currently providing 
PCS services. Based on this information, we conclude that the number of 
small broadband PCS licensees will include the 90 winning bidders and 
the 93 qualifying bidders in the D, E, and F Blocks, for a total of 183 
small PCS providers as defined by the SBA and the Commission's auction 
rules.
    43. Narrowband PCS. The Commission does not know how many 
narrowband PCS licenses will be granted or auctioned, as it has not yet 
determined the size or number of such licenses. Two auctions of 
narrowband PCS licenses have been conducted for a total of 41 licenses, 
out of which 11 were obtained by small businesses owned by members of 
minority groups and/or women. Small businesses were defined as those 
with average gross revenues for the prior three fiscal years of $40 
million or less. For purposes of this FRFA, the Commission is utilizing 
the SBA definition applicable to radiotelephone companies, i.e., an 
entity employing less than 1,500 persons. Not all of the narrowband PCS 
licenses have yet been awarded. There is therefore no basis to 
determine the number of licenses that will be awarded to small entities 
in future auctions. Given the facts that nearly all radiotelephone 
companies have fewer than 1,000 employees and that no reliable estimate 
of the number of prospective narrowband PCS licensees can be made, we 
assume, for purposes of the evaluations and conclusions in this FRFA, 
that all the remaining narrowband PCS licenses will be awarded to small 
entities.
    44. Rural Radiotelephone Service. The Commission has not adopted a 
definition of small business specific to the Rural Radiotelephone 
Service, which is defined in Section 22.99 of the Commission's Rules. A 
significant subset of the Rural Radiotelephone Service is BETRS, or 
Basic Exchange Telephone Radio Systems (the parameters of which are 
defined in Sections 22.757 and 22.759 of the Commission's Rules). 
Accordingly, we will use the SBA's definition applicable to 
radiotelephone companies, i.e., an entity employing fewer than 1,500 
persons. There are approximately 1,000 licensees in the Rural 
Radiotelephone Service, and we estimate that almost all of them have 
fewer than 1,500 employees.
    45. Air-Ground Radiotelephone. The Commission has not adopted a 
definition of small business specific to the Air-Ground Radiotelephone 
Service, which is defined in Section 22.99 of the Commission's Rules. 
Accordingly, we will use the SBA's definition applicable to 
radiotelephone companies, i.e., an entity employing fewer than 1,500 
persons. There are approximately 100 licensees in the Air-Ground 
Radiotelephone Service, and we estimate that almost all of them qualify 
as small under the SBA definition.
    46. Specialized Mobile Radio Licensees (SMR). Pursuant to Section 
90.814(b)(1) of our rules, the Commission awards bidding credits in 
auctions for geographic area 800 MHz and 900 MHz Specialized Mobile 
Radio (SMR) licenses to firms that had revenues of less than $15 
million in each of the three previous calendar years. This regulation 
defining ``small entity'' in the context of 800 MHz and 900 MHz SMR has 
been approved by the SBA. We do not know how many firms provide 800 MHz 
or 900 MHz geographic area SMR service pursuant to extended 
implementation authorizations or how many of these providers have 
annual revenues of less than $15 million. We do know that one of these 
firms has over $15 million in revenues. We assume that all of the 
remaining existing extended implementation authorizations are held by 
small entities, as that term is defined by the SBA. The Commission 
recently held auctions for geographic area licenses in the 900 MHz SMR 
band. There were 60 winning bidders who qualified as small entities in 
the 900 MHz auction. Based on this information, we conclude that the 
number of geographic area SMR licensees affected includes these 60 
small entities.
    47. Microwave Video Services. Microwave services includes common 
carrier, private operational fixed, and broadcast auxiliary radio 
services. At present, there are 22,015 common carrier licensees. 
Inasmuch as the Commission has not yet defined small business with 
respect to microwave services, we will utilize the SBA's definition 
applicable to radiotelephone companies--i.e., an entity with less than 
1,500 employees. Although some of these companies may have more than 
1,500 employees, we are unable at this time to estimate with greater 
precision the number of common carrier microwave service providers that 
would qualify under the SBA's definition. We therefore estimate that 
there are fewer than 22,015 small common carrier licensees in the 
microwave video services.
    48. Offshore Radiotelephone Service. This service operates on 
several UHF TV broadcast channels that are not used for TV broadcasting 
in the coastal area of the states bordering the Gulf of Mexico. At 
present, there are approximately 55 licensees in this service. Some of 
those licensees are common carriers. We are unable at this

[[Page 64748]]

time to estimate the number of licensees that would qualify as small 
under the SBA's definition.
    49. Local Multipoint Distribution Service (LMDS). The Commission 
has so far licensed only one licensee in this service, and that 
licensee is not providing service as a common carrier. There will be a 
total of 986 LMDS licenses. Licensees will be permitted to decide 
whether to provide common carrier service, and we have no way of 
estimating how many will choose to do so. Because there will be no 
restrictions on the number of licenses a given entity may acquire, we 
have no way of estimating how many total licensees there will be. We 
also cannot estimate the number of common carrier licensees that will 
qualify as small entities.
    50. Space Stations (Geostationary). Very few systems are currently 
operated on a common carrier basis. Because we do not collect 
information on annual revenue or number of employees of all these 
licensees, we cannot estimate with precision the number of such 
licensees that may constitute a small business entity. It is likely 
that no more than one such entity that is currently operating as a 
common carrier would constitute a small business entity. There may be a 
small increase in the number of such entities in the future as a result 
of recent licensing action in the Ka-band.
    51. Space Stations (Non-geostationary). These systems by and large 
do not operate as common carriers. Because we do not collect 
information on annual revenue or number of employees, we cannot 
estimate with precision whether any carrier that may choose to operate 
on a common carrier basis constitutes a small business entity. The 
trend is for such systems to operate on a non-common carrier basis. 
These systems, of which there will be a limited number, by and large 
are not yet operational and are still being licensed and constructed.
    52. Earth Stations. The vast majority of earth stations licensed by 
the Commission are not operated on a common carrier basis. Earth 
stations that communicate with non-geostationary and Ka-band satellite 
systems may operate on a common carrier basis but these systems are not 
yet operational and are still being licensed and constructed. We are 
unable to estimate at this time the number of earth stations 
communicating with such systems that may operate on a common carrier 
basis and, of those, the number that will be licensed to small business 
entities.
c. Aeronautical Enroute and Aeronautical Fixed Licenses
    53. The Commission has not adopted a definition of small business 
specific to the aeronautical enroute and aeronautical fixed services. 
Accordingly, we will use the SBA's definition applicable to 
radiotelephone companies, i.e., an entity employing fewer than 1,500 
persons. There are 45 licensees providing aeronautical enroute and 
aeronautical fixed services, including Aeronautical Radio Inc. (ARINC) 
and its affiliates. All of the licensees are small businesses except 
ARINC, which has approximately 2,000 employees. We therefore conclude 
that there are 44 small businesses providing aeronautical enroute and 
aeronautical fixed services.
d. Submarine Cable Landing Licenses
    54. The new rules and policies adopted in this Order will affect 
all holders of and future applicants for cable landing licenses, 
whether or not they operate their cables as common carriers. It is 
difficult to estimate how many applications for cable landing licenses 
will be filed in coming years, but that number will likely increase if 
we adopt our proposal to lower the barriers to granting licenses for 
cables to WTO Member countries. Since 1992, there have been 
approximately 40 applications for cable landing licenses. The total 
number of licensees is difficult to determine, because many licenses 
are jointly held by several licensees. Our rules will also permit more 
current licensees to accept additional investment from entities from 
WTO Member countries.

Description of Projected Reporting, Recordkeeping, and Other Compliance 
Requirements

    55. The rules and policies adopted in this Report and Order and 
Order on Reconsideration will affect large and small entities. We will 
require that U.S. carriers whose foreign affiliates have market power 
maintain or provide certain records regarding their foreign affiliates. 
Our rules will in most cases reduce the burdens that are currently 
imposed on such carriers, and we anticipate that the remaining 
requirements will not impose a significant economic burden, 
particularly on small entities. A variety of skills may be required to 
comply with the proposed requirements, but all of the skills that may 
be required are of the type needed to conduct a carrier's normal course 
of business. No additional outside professional skills should be 
required, with the possible exception of preparing an initial Section 
214 or cable landing license application and of preparing a submission 
for our consideration under Section 310(b)(4), most of which will be 
simplified by the rules and policies we adopt here.
    56. An applicant for a Section 214 authorization or a cable landing 
license will no longer be required to show either that an affiliated 
foreign carrier lacks market power or that the destination country 
provides effective competitive opportunities (ECO) to U.S. carriers so 
long as it shows that the destination country is a Member of the World 
Trade Organization. Similarly, entities holding or seeking to hold 
common carrier wireless licenses or aeronautical enroute or 
aeronautical fixed licenses that have more than 25 percent indirect 
foreign investment will not need to demonstrate that the home markets 
of the foreign investor or investors from WTO Members offer effective 
competitive opportunities for U.S. investors in the analogous service 
sector.
    57. Authorized international common carriers will no longer be 
required to notify the Commission before accepting investments by 
foreign carriers (or their affiliates) between 10 percent and 25 
percent. We have retained a requirement that authorized carriers notify 
the Commission before accepting investment greater than 25 percent. We 
have added a requirement that authorized carriers notify the Commission 
before they (or their affiliates) acquire a direct or indirect 
controlling interest in a foreign carrier; previously, those interests 
were subject only to a post hoc notification requirement. We continue 
to require authorized carriers to notify the Commission within 30 days 
after acquiring a direct or indirect interest greater than 25 percent 
in a foreign carrier if the acquisition of that interest has not 
otherwise been reported.
    58. We have narrowed the application of our ``No Special 
Concessions'' rule, which prohibits carriers from entering into 
exclusive arrangements with foreign carriers. That rule will now apply 
only to carriers' dealings with foreign carriers that have sufficient 
market power in their home markets to adversely affect competition in 
the U.S. market. Carriers wishing to enter into alternative settlement 
arrangements with foreign carriers operating in WTO Member countries 
will presumptively be allowed to do so. That presumption may be 
overcome where an opponent demonstrates that there are not multiple 
facilities-based carriers operating in the foreign carrier's market.

[[Page 64749]]

    59. To ensure fair competition among authorized carriers and to be 
consistent with our policy governing the confidentiality of competing 
carrier information, all U.S. carriers will be prohibited from 
receiving proprietary or confidential information about competing U.S. 
carriers obtained by any foreign carrier in the course of its regular 
business dealings with the competing U.S. carrier, unless the U.S. 
carrier provides specific written permission. We will also require U.S. 
carriers desiring to make use of foreign-derived customer proprietary 
network information (CPNI) pertaining to a specific U.S. customer to 
first obtain approval from that customer and notify that customer that 
the customer may require the carrier to disclose the CPNI to 
unaffiliated third parties.
    60. An authorized carrier affiliated with a foreign carrier will be 
subject to additional requirements. Its authorization to serve the 
affiliated market will be conditioned on the foreign affiliate's 
offering to all U.S.-licensed carriers a settlement rate at or below 
the benchmark adopted for that country in the Commission's recent 
Benchmarks Order. Foreign-affiliated carriers classified as dominant 
are subject to additional reporting, recordkeeping, and compliance 
requirements. In this Order, we substantially reduce the initial 
showing that a foreign-affiliated carrier must make in order to be 
presumptively classified as non-dominant by adopting a presumption that 
a foreign carrier with less than 50 percent market share in certain 
relevant terminating markets does not have sufficient market power to 
affect competition adversely in the U.S. market. We remove existing 
dominant carrier requirements that we find to be unnecessarily 
burdensome and adopt a narrowly tailored dominant carrier framework 
designed to address specific concerns of anticompetitive behavior. We 
replace the requirement that dominant carriers file tariffs on fourteen 
days' advance notice with a one-day advance notice requirement, and we 
will accord these tariff filings a presumption of lawfulness. We will 
no longer require foreign-affiliated carriers to obtain Commission 
approval before adding or discontinuing circuits on the dominant route. 
We require dominant carriers to provide service on the affiliated route 
through a corporation that is separate from its foreign affiliate, 
maintain separate books of account, and not jointly own switching or 
transmission facilities with its foreign affiliate. Carriers regulated 
as dominant will be required to file quarterly traffic and revenue 
reports, provisioning and maintenance reports, and circuit status 
reports on the dominant affiliated route. We decline to adopt the 
proposal in the Notice to ban exclusive arrangements involving joint 
marketing, customer steering, and the use of foreign market telephone 
customer information.
    61. Finally, we impose a reporting requirement on switched 
resellers that are affiliated with a foreign carrier that has 
sufficient market power on the foreign end of a route to affect 
competition adversely in the U.S. market. We will require these 
resellers to file quarterly traffic and revenue reports for their 
switched resale traffic on the affiliated route.

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

    62. None.

Steps Taken To Minimize Significant Economic Impact on Small Entities, 
and Significant Alternatives Considered

    63. We have taken significant steps to minimize the procedural 
burdens imposed on all affected entities. The application of the rules 
we adopt in this Order does not vary depending on the size of the 
entities involved. Some regulations may be more burdensome on large 
carriers than on small carriers because large carriers may be more 
likely to be dominant or to operate on a facilities basis than are 
small carriers. That is, small carriers may be more likely to operate 
as resellers of switched international services, which are less likely 
to be subject to our most stringent regulation.
    64. The revisions to our policies toward evaluating Section 214 and 
cable landing license applications will significantly reduce burdens on 
many current and potential international common carriers. A foreign-
affiliated carrier seeking to serve an affiliated route will no longer 
be required to show either that its affiliate lacks market power or 
that the destination country provides effective competitive 
opportunities (ECO) to U.S. carriers so long as it shows that the 
destination country is a Member of the World Trade Organization. We 
believe this to be a minimal burden for most small entities and a 
significantly lesser burden than the detailed showings required to 
demonstrate either that the affiliate lacks market power or that the 
destination country provides ECO. The ECO test, in particular, has 
proven to be unusually burdensome both on applicants and on the 
Commission.
    65. Similarly, the revisions to our policy toward evaluating 
Section 310(b)(4) requests by common carrier radio licensees and 
aeronautical licensees to accept indirect foreign investment greater 
than 25 percent will significantly reduce the burdens on licensees (and 
prospective licensees) seeking to accept investment from entities in 
WTO Member countries. Those applicants will no longer be required to 
show that the home market of the investor offers effective competitive 
opportunities for U.S. investors in the analogous service sector. This 
will make those applications much simpler and less time-consuming and, 
more importantly, will make it much easier for licensees to accept 
foreign investment and for prospective licensees to plan their business 
affairs. Common carrier radio licensees will continue to be required to 
seek Commission approval before accepting indirect foreign investment 
above a level for which they have previously received Commission 
approval.
    66. We have taken steps to facilitate entry into the U.S. market 
for international telecommunications services by small carriers. Small 
carriers often enter the market, at least initially, by reselling the 
switched services of other authorized international carriers. In this 
Order, we change our procedural rules to afford streamlined processing 
to any applicant whose foreign affiliate is from a WTO Member country 
if the applicant requests authority to serve that country solely by 
reselling the switched services of unaffiliated U.S. international 
carriers. We also will streamline process the Section 214 application 
of any foreign-affiliated applicant whose affiliate is from a WTO 
Member and that demonstrates clearly and convincingly that the foreign 
affiliate has less than a 50 percent market share in certain relevant 
terminating markets in the destination foreign country. In addition, we 
will streamline process the Section 214 application of any applicant 
whose affiliate is from a WTO Member and is not otherwise eligible for 
streamlined processing if the applicant certifies that it will comply 
with our dominant carrier regulations. Streamlined applications, unless 
they are removed from the streamlined process, are granted 35 days from 
the date they are placed on public notice.
    67. In revising our regulations that apply to authorized 
international common carriers, we have developed a targeted approach 
designed to monitor and detect anticompetitive behavior in the U.S. 
market without imposing regulations that are more burdensome than 
necessary. In doing so, we have

[[Page 64750]]

attempted to minimize burdens on entities that are unlikely to pose a 
threat to competition. We also have removed restrictions on whole 
categories of activities that we have concluded do not pose a threat to 
competition in the developing competitive marketplace. Our approach 
relies in large part on reporting requirements, rather than 
restrictions on capacity changes or service options, to prevent 
affiliated carriers from causing competitive harms in the U.S. 
international services market.
    68. We have significantly reduced the scope of our rule that 
prohibits carriers from entering into certain exclusive arrangements 
with foreign carriers. Our ``No Special Concessions'' rule will now 
prohibit accepting certain specified arrangements only from foreign 
carriers that have sufficient market power in their home markets to 
adversely affect competition in the U.S. market. We adopt a presumption 
that foreign carriers with less than 50 percent market share in the 
relevant terminating markets do not have such sufficient market power. 
We anticipate that delineating those arrangements that are subject to 
the prohibition and adopting this presumption will significantly 
clarify the circumstances in which authorized carriers will be 
permitted to accept special concessions from foreign carriers. This 
more targeted rule also will allow authorized carriers substantially 
more flexibility in arranging their business affairs.
    69. Carriers wishing to enter into alternative settlement 
arrangements with foreign carriers operating in WTO Member countries 
will presumptively be allowed to do so. This presumption may be 
overcome by a demonstration that there are not multiple facilities-
based carriers operating in the foreign carrier's market. We expect to 
allow alternative settlements more as a rule than as an exception, and 
the issue of whether there are multiple facilities-based carriers 
operating in the foreign market will be less burdensome than the issue 
of whether the foreign market offers effective competitive 
opportunities, which is the standard being replaced.
    70. We have declined, in this Order, to adopt certain proposals in 
the Notice that would have restricted the business strategies of 
carriers classified as dominant. Instead, we will impose reporting 
requirements that will enable us to detect and deter anticompetitive 
behavior. We have declined to adopt proposals in the Notice to ban 
exclusive arrangements involving joint marketing, customer steering, 
and the use of foreign market telephone customer information. We have 
found that such proscriptive safeguards would be unduly burdensome and 
could unnecessarily impede business activities. We choose to rely 
instead on the general prohibition on accepting special concessions 
combined with additional reporting and disclosure requirements, instead 
of proscriptive safeguards, for carriers with foreign affiliations. We 
have also relieved carriers of the requirement to notify the Commission 
of investments by foreign carriers of 10 percent or more; they now must 
report an investment by a foreign carrier only when that investment 
exceeds 25 percent. We conclude that none of the safeguards we impose 
specifically on carriers classified as dominant will impose significant 
economic burdens.
    71. We have also declined to impose on switched resellers a 
condition that their foreign affiliates maintain settlement rates at or 
below the benchmark settlement rates we adopted in the Benchmarks 
Order. We find that such a condition would be unnecessarily burdensome 
inasmuch as resellers have less ability to engage in anticompetitive 
conduct than facilities-based carriers and we have a greater ability to 
detect anticompetitive conduct by switched resellers. Imposing a 
benchmark condition on switched resellers would impose significant 
economic impact on resellers, many of whom are small entities, that 
could prevent some new entrants from entering the U.S. market and 
affect the ability of existing carriers to provide service. To address 
concerns about traffic distortions related to resale, however, we have 
decided to impose a requirement on switched resellers that are 
affiliated with a carrier that has sufficient market power to affect 
competition adversely in the U.S. market. We will require those 
resellers to file quarterly traffic and revenue reports for their 
traffic on the affiliated route in order to enable the Commission to 
determine whether switched resellers are engaging in anticompetitive 
conduct.
    72. In the Notice, we sought comment on whether to adopt, as an 
additional dominant carrier safeguard, some level of structural 
separation between a U.S. carrier and its affiliated foreign carrier. 
We adopt here a requirement that a foreign-affiliated U.S. 
international carrier regulated as dominant provide service in the U.S. 
market through a corporation that is separate from the foreign 
affiliate, maintain separate books of account, and not jointly own 
switching and transmission facilities with its foreign carrier 
affiliate. We find that, without such separation, discrimination, cost-
misallocation, and the possibility of a predatory price squeeze by such 
a foreign-affiliated carrier would have the potential to cause 
substantial harm to consumers, competition, and production efficiency 
in the U.S. international services market. These requirements will not 
impose a significant burden on such carriers because most foreign-
affiliated carriers operating in the United States do so in a manner 
that is consistent with the requirements we adopt here. We have 
considered imposing more stringent structural separation requirements 
but have found them to be unnecessary and to potentially impose a 
significant burden on foreign-affiliated carriers that operate in the 
U.S. market.
    73. We are unable to adopt NextWave's proposal to state that 
indirect foreign investment in C-block and F-block PCS licensees by any 
entity whose home market is a WTO Member country serves the public 
interest and will not be subject to prior Commission approval. We have 
found that prior approval is necessary in all instances of indirect 
foreign investment in excess of 25 percent because of the need to 
review such investments for national security, law enforcement, foreign 
policy, and trade concerns as well as for the exceptional case that 
poses a very high risk to competition. We do, however, adopt NextWave's 
alternative proposal to establish an expedited process and timetable 
for addressing those applications: These applications will generally be 
added to the International Bureau's streamlined process and usually 
granted within 35 days from the date the International Bureau places 
the application on public notice. We expect that application of our 
open entry standard and streamlined process will both minimize 
procedural burdens on small entities and present substantial new 
opportunities for obtaining foreign capital.
    74. We are unable to adopt TDS's proposal to disregard investments 
in common carrier radio licensees by non-carriers held as publicly 
traded securities. We accept the concerns of Executive Branch agencies 
that a prior approval process is necessary for all investments and that 
even small investments in publicly traded securities could, if 
aggregated, nevertheless create a degree of control or influence over a 
licensee that would be contrary to U.S. national security or law 
enforcement issues.
    75. We have also decided not to adopt a policy that a common 
carrier radio licensee need not seek Commission approval before 
accepting increases in indirect foreign ownership once they

[[Page 64751]]

have obtained Commission authority to exceed 25 percent indirect 
foreign ownership. We have determined that every such increase requires 
Commission review in order to consider the effect of the ownership on 
national security and law enforcement interests.
    76. We conclude that these steps we have taken to minimize 
significant economic impact on small entities will advance the small 
business goals of Section 257 of the Act, as added by the 
Telecommunications Act of 1996.

Report to Congress

    77. The Commission will send a copy of this Report and Order and 
Order on Reconsideration, including this FRFA, in a report to be sent 
to Congress pursuant to the Small Business Regulatory Enforcement 
Fairness Act of 1996, see 5 U.S.C. Sec. 801(a)(1)(A). A summary of this 
Report and Order and Order on Reconsideration, and a copy of this FRFA, 
will also be published in the Federal Register, see 5 U.S.C. 
Sec. 604(b), and will be sent to the Chief Counsel for Advocacy of the 
Small Business Administration.

Paperwork Reduction Act of 1995 Analysis

    78. This Report and Order contains a modified information 
collection. The Commission, as part of its continuing effort to reduce 
paperwork burdens, invites the general public and the Office of 
Management and Budget (OMB) to comment on the information collections 
contained in this order, as required by the Paperwork Reduction Act of 
1995, Pub. L. No. 104-13. Public and agency comments are due February 
9, 1998. Comments should address: (a) Whether the collection of 
information is necessary for the proper performance of the functions of 
the Commission, including whether the information shall have practical 
utility; (b) the accuracy of the Commission's burden estimates; (c) 
ways to enhance the quality, utility, and clarity of the information.
    79. Public reporting burden for the collections of information is 
estimated as follows:
    OMB Control Number: 3060-0686.
    Title: Streamlining the International Section 214 Authorization 
Process and Tariff Requirements.
    Type of Review: Revision of existing collection.
    Respondents: Business or other For-Profit.
    Number of Respondents: 3,251.
    Estimated Time Per Response: 2 hours.
    Total Annual Burden: 145,895 hours.
    Estimated costs per respondent: $3,192.
    Needs and Uses: The information collections pertaining to Parts 1 
and 63 are necessary largely to determine the qualifications of 
applicants to provide common carrier international telecommunications 
services, or to construct and operate submarine cables, including 
applicants that are affiliated with foreign carriers, and to determine 
whether and under what conditions the authorizations are in the public 
interest, convenience, and necessity. The information collections 
contained in amendments to Sec. 63.10 of the Commission's rules are 
necessary for the Commission to maintain effective oversight of U.S. 
carriers that are affiliated with, or involved in certain co-marketing 
or similar arrangements with, foreign carriers that have market power. 
The information collected pursuant to part 61 of the rules is necessary 
for the Commission to ensure that rates, terms and conditions for 
international service are just and reasonable, as required by the 
Communications Act of 1934.
    80. The information collections under Sec. 310(b)(4) of the Act are 
necessary to determine, under that section, whether a greater than 25 
percent indirect foreign ownership interest in a U.S. common carrier 
ratio licensee would be inconsistent with the public interest.
    81. We do not anticipate that the rules will have any impact on the 
paperwork burden imposed under the Commission's Flexibility Policy 
established in the Fourth Report and Order, CC Docket No. 90-337, Phase 
I (62 FR 5535, February 6, 1997), OMB Control Nos. 3060-0160 and 3060-
0764.

Ordering Clauses

    82. Accordingly, it is ordered that, pursuant to Sections 1, 2, 
4(i), 201, 203, 205, 214, 303(r), and 310 of the Communications Act of 
1934, as amended, 47 U.S.C. Sections 151, 152, 154(i), 201, 205, 214, 
303(r), 310, the policies, rules, and requirements discussed herein are 
adopted and parts 43, 63, and 64, 47 CFR parts 43, 63, and 64 are 
revised.
    83. It is further ordered that authority is delegated to the Chief, 
International Bureau as discussed in this Order.
    84. It is further ordered that the petitions for reconsideration in 
IB Docket No. 95-22 are granted in part, denied in part, and deferred 
as discussed in this Order.
    85. It is further ordered that the Commission's Office of Managing 
Director shall send a copy of this Report and Order and Order on 
Reconsideration, including the Final Regulatory Flexibility Analysis, 
to the Chief Counsel for Advocacy of the Small Business Administration.
    86. It is further ordered that the policies, rules, and 
requirements established in this decision shall take effect January 8, 
1998 or in accordance with the requirements of 5 U.S.C. 801(a)(3) and 
44 U.S.C. 3507. The Commission will publish a document at a later date 
announcing the effective date. The Commission reserves the right to 
reconsider the effective date of this decision if the WTO Basic Telecom 
Agreement does not take effect on January 1, 1998.

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

    Communications common carriers, Reporting and recordkeeping 
requirements.

Federal Communications Commission.

Magalie Roman Salas,
Secretary.

Final Rules

    Parts 43, 63, and 64 of Title 47 of the Code of Federal Regulations 
are amended as follows:

PART 43--REPORTS OF COMMUNICATION COMMON CARRIERS AND CERTAIN 
AFFILIATES

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

    Authority: 47 U.S.C. 154.

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


Sec. 43.51  Contracts and concessions.

* * * * *
    (d) Any U.S. carrier that interconnects an international private 
line to the U.S. public switched network, at its switch, including any 
switch in which the carrier obtains capacity either through lease or 
otherwise, shall file annually with the Chief of the International 
Bureau a certified statement containing the number and type (e.g., a 
64-kbps circuit) of private lines interconnected in such a manner. The 
certified statement shall specify the number and type of interconnected 
private lines on a country specific basis. The identity of the customer 
need not be reported, and the Commission will treat the country of 
origin information as confidential. Carriers need not file their 
contracts for such interconnections, unless they are specifically 
requested to do so. These reports shall be filed on a consolidated 
basis on February 1 (covering international private lines 
interconnected during the preceding January 1 to December 31 period) of 
each year. International private lines to countries for which the 
Commission has authorized the provision of switched

[[Page 64752]]

basic services over private lines at any time during a particular 
reporting period are exempt from this requirement.
    3. Sec. 43.61 is amended by revising paragraph (c) to read as 
follows:


Sec. 43.61  Reports of international telecommunications traffic.

* * * * *
    (c) Each common carrier engaged in the resale of international 
switched services that has an affiliation with a foreign carrier that 
has sufficient market power on the foreign end of an international 
route to affect competition adversely in the U.S. market and that 
collects settlement payments from U.S. carriers shall file a quarterly 
version of the report required in paragraph (a) of this section for its 
switched resale services on the dominant route within 90 days from the 
end of each calendar quarter. For purposes of this paragraph, 
``affiliation'' is defined in Sec. 63.18(h)(1)(i) of this chapter and 
``foreign carrier'' is defined in Sec. 63.18(h)(1)(ii) of this chapter.
* * * * *

PART 63--EXTENSION OF LINES AND DISCONTINUANCE, REDUCTION, OUTAGE 
AND IMPAIRMENT OF SERVICE BY COMMON CARRIERS; AND GRANTS OF 
RECOGNIZED PRIVATE OPERATING AGENCY STATUS

    1. The authority citation for Part 63 continues to read as follows:

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

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


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

    (a) Unless otherwise determined by the Commission, any party 
authorized to provide an international communications service under 
this part shall be classified as either dominant or non-dominant for 
the provision of particular international communications services on 
particular routes as set forth in this section. The rules set forth in 
this section shall also apply to determinations of regulatory status 
pursuant to Secs. 63.11 and 63.13. For purposes of paragraphs (a)(1) 
through (a)(3) of this section, ``affiliation'' and ``foreign carrier'' 
are defined as set forth in Sec. 63.18(h)(1)(i) and (ii), respectively. 
For purposes of paragraphs (a)(2) and (a)(3) of this section, the 
relevant markets on the foreign end of a U.S. international route 
include: international transport facilities or services, including 
cable landing station access and backhaul facilities; inter-city 
facilities or services; and local access facilities or services on the 
foreign end of a particular route.
    (1) A U.S. carrier that has no affiliation with, and that itself is 
not, a foreign carrier in a particular country to which it provides 
service (i.e., a destination country) shall presumptively be considered 
non-dominant for the provision of international communications services 
on that route;
    (2) Except as provided in paragraph (a)(4) of this section, a U.S. 
carrier that is, or that has or acquires an affiliation with a foreign 
carrier that is a monopoly provider of communications services in a 
relevant market in a destination country shall presumptively be 
classified as dominant for the provision of international 
communications services on that route; and
    (3) A U.S. carrier that is, or that has or acquires an affiliation 
with a foreign carrier that is not a monopoly provider of 
communications services in a relevant market in a destination country 
and that seeks to be regulated as non-dominant on that route bears the 
burden of submitting information to the Commission sufficient to 
demonstrate that its foreign affiliate lacks sufficient market power on 
the foreign end of the route to affect competition adversely in the 
U.S. market. If the U.S. carrier demonstrates that the foreign 
affiliate lacks 50 percent market share in the international transport 
and the local access markets on the foreign end of the route, the U.S. 
carrier shall presumptively be classified as non-dominant.
    (4) A carrier that is authorized under this part to provide to a 
particular destination country a particular international 
communications service, and that provides such service solely through 
the resale of an unaffiliated U.S. facilities-based carrier's 
international switched services (either directly or indirectly through 
the resale of another U.S. resale carrier's international switched 
services), shall presumptively be classified as non-dominant for the 
provision of the authorized service. The existence of an affiliation 
with a U.S. facilities-based international carrier shall be assessed in 
accordance with the definition of affiliation contained in 
Sec. 63.18(h)(1)(i) of this chapter, except that the phrase ``U.S. 
facilities-based international carrier'' shall be substituted for the 
phrase ``foreign carrier.''
    (b) Any party that seeks to defeat the presumptions in paragraph 
(a) of this section shall bear the burden of proof upon any issue it 
raises as to the proper classification of the U.S. carrier.
    (c) Any carrier classified as dominant for the provision of 
particular services on particular routes under this section shall 
comply with the following requirements in its provision of such 
services on each such route:
    (1) File international service tariffs on one day's notice without 
cost support;
    (2) Provide services as an entity that is separate from its foreign 
carrier affiliate, in compliance with the following requirements:
    (i) The authorized carrier shall maintain separate books of account 
from its affiliated foreign carrier. These separate books of account do 
not need to comply with Part 32 of this chapter; and
    (ii) The authorized carrier shall not jointly own transmission or 
switching facilities with its affiliated foreign carrier. Nothing in 
this section prohibits the U.S. carrier from sharing personnel or other 
resources or assets with its foreign affiliate;
    (3) File quarterly reports on traffic and revenue, consistent with 
the reporting requirements authorized pursuant to Sec. 43.61, within 90 
days from the end of each calendar quarter;
    (4) File quarterly reports summarizing the provisioning and 
maintenance of all basic network facilities and services procured from 
its foreign carrier affiliate or from an allied foreign carrier, 
including, but not limited to, those it procures on behalf of customers 
of any joint venture for the provision of U.S. basic or enhanced 
services in which the authorized carrier and the foreign carrier 
participate, within 90 days from the end of each calendar quarter. 
These reports should contain the following: the types of circuits and 
services provided; the average time intervals between order and 
delivery; the number of outages and intervals between fault report and 
service restoration; and for circuits used to provide international 
switched service, the percentage of ``peak hour'' calls that failed to 
complete;
    (5) In the case of an authorized facilities-based carrier, file 
quarterly circuit status reports within 90 days from the end of each 
calendar quarter in the format set out by the Sec. 43.82 annual circuit 
status manual, with two exceptions: activated or idle circuits must be 
reported on a facility-by-facility basis; and the derived circuits need 
not be specified in the three quarterly reports due on June 30, 
September 30, and December 31. For purposes of this paragraph, 
``facilities-based carrier'' is defined in Sec. 63.18 note 2 to 
paragraph (h).

[[Page 64753]]

    (d) A carrier classified as dominant under this section shall file 
an original and two copies of each report required by paragraphs 
(c)(3), (c)(4), and (c)(5) of this section with the Chief, 
International Bureau. The carrier shall include with its filings 
separate computer diskettes for the reports required by paragraphs 
(c)(3) and (c)(5), in the format specified by the Sec. 43.61 and 
Sec. 43.82 filing manuals, respectively. The carrier shall also file 
one paper copy of these reports, accompanied by the appropriate 
computer diskettes, with the Commission's copy contractor. The 
transmittal letter accompanying each report shall clearly identify the 
report as responsive to the appropriate paragraph of Sec. 63.10(c).
    3. Sec. 63.11 is revised to read as follows:


Sec. 63.11  Notification by and prior approval for U.S. international 
carriers that have or propose to acquire an affiliation with a foreign 
carrier.

    (a) Any carrier authorized to provide international communications 
service under this part shall notify the Commission sixty days prior to 
the consummation of either of the following acquisitions of direct or 
indirect controlling interests in or by foreign carriers:
    (1) acquisition of a direct or indirect controlling interest in a 
foreign carrier (as defined in Sec. 63.18(h)(1)(ii)) by the authorized 
carrier, or by any entity that directly or indirectly controls the 
authorized carrier, or that directly or indirectly owns more than 25 
percent of the capital stock of the authorized carrier; or
    (2) acquisition of a direct or indirect interest in the capital 
stock of the authorized carrier by a foreign carrier or by an entity 
that directly or indirectly controls a foreign carrier where the 
interest would create an affiliation within the meaning of 
Sec. 63.18(h)(1)(i)(B).
    (b) Any carrier authorized to provide international communications 
service under this part that becomes affiliated with a foreign carrier 
within the meaning of Sec. 63.18(h)(1) that has not previously notified 
the Commission pursuant to this section or Sec. 63.18 shall notify the 
Commission within thirty days after acquiring the affiliation. In 
particular, acquisition by an authorized carrier (or by any entity that 
directly or indirectly controls, is controlled by, or is under direct 
or indirect common control with the authorized carrier) of a direct or 
indirect interest in a foreign carrier that is greater than 25 percent 
but not controlling is subject to this paragraph but not to paragraph 
(a).
    (c) The notification required under paragraphs (a) and (b) of this 
section shall contain a list of the affiliated foreign carriers named 
in paragraphs (a) and (b) of this section and shall state individually 
the country or countries in which the foreign carriers are authorized 
to provide telecommunications services to the public. It shall 
additionally specify which, if any, of these countries is a Member of 
the World Trade Organization; which, if any, of these countries the 
U.S. carrier is authorized to serve under this part; what services it 
is authorized to provide to each such country; and the FCC File No. 
under which each such authorization was granted. The notification shall 
certify to the information specified in this paragraph.
    (1) The carrier also should specify, where applicable, those 
countries named in paragraph (c) of this section for which it provides 
a specified international communications service solely through the 
resale of the international switched services of U.S. facilities-based 
carriers with which the resale carrier does not have an affiliation. 
Such an affiliation is defined in Sec. 63.18(h)(1)(i), except that the 
phrase ``U.S. facilities-based international carrier'' shall be 
substituted for the phrase ``foreign carrier.''
    (2) The carrier shall also submit with its notification:
    (i) The ownership information as required to be submitted pursuant 
to Sec. 63.18(h)(2); and
    (ii) A ``special concessions'' certification as required to be 
submitted pursuant to Sec. 63.18(i).
    (d) In order to retain non-dominant status on the affiliated route, 
the carrier notifying the Commission of a foreign carrier affiliation 
under paragraph (a) or (b) of this section should provide information 
to demonstrate that it qualifies for non-dominant classification 
pursuant to Sec. 63.10.
    (e) After the Commission issues a public notice of the submissions 
made under this section, interested parties may file comments within 14 
days of the public notice.
    (1) In the case of a notification filed under paragraph (a) of this 
section, the Commission, if it deems it necessary, will by written 
order at any time before or after the submission of public comments 
impose dominant carrier regulation on the carrier for the affiliated 
routes based on the provisions of Sec. 63.10.
    (2) The Commission will, unless it notifies the carrier in writing 
within 30 days of issuance of the public notice that the investment 
raises a substantial and material question of fact as to whether the 
investment serves the public interest, convenience and necessity, 
presume the investment to be in the public interest. If notified that 
the investment raises a substantial and material question, then the 
carrier shall not consummate the planned investment until it has filed 
an application under Sec. 63.18 and submitted the information specified 
under Sec. 63.18(h)(5) or (6) as applicable, and Sec. 63.18(h)(7) and 
(8), as applicable, and the Commission has approved the application by 
formal written order.
    (f) All authorized carriers are responsible for the continuing 
accuracy of certifications with regard to affiliations with foreign 
carriers made under this section and under Sec. 63.18. Whenever the 
substance of any such certification is no longer accurate, the carrier 
shall as promptly as possible, and in any event within thirty days, 
file with the Secretary in duplicate a corrected certification 
referencing the FCC File No. under which the original certification was 
provided, except that the carrier shall immediately inform the 
Commission if at any time the representations in the ``special 
concessions'' certification provided under paragraph (c)(2)(ii) of this 
section or Sec. 63.18(i) are no longer true. See Sec. 63.18(i). This 
information may be used by the Commission to determine whether a change 
in regulatory status may be warranted under Sec. 63.10.
    Note to Sec. 63.11: ``Control'' as used in this section includes 
actual working control in whatever manner exercised and is not limited 
to majority stock ownership.
    4. Sec. 63.12 is revised to read as follows:


Sec. 63.12  Processing of international Section 214 applications.

    (a) Except as provided by paragraph (c) of this section, a complete 
application seeking authorization under Sec. 63.18 shall be granted by 
the Commission 35 days after the date of public notice listing the 
application as accepted for filing.
    (b) Issuance of public notice of the grant shall be deemed the 
issuance of Section 214 certification to the applicant, which may 
commence operation on the 36th day after the date of public notice 
listing the application as accepted for filing, but only in accordance 
with the operations proposed in its application and the rules, 
regulations, and policies of the Commission.
    (c) The streamlined processing procedures provided by paragraphs 
(a) and (b) of this section shall not apply where:

[[Page 64754]]

    (1) The applicant has an affiliation within the meaning of 
Sec. 63.18(h)(1)(i) with a foreign carrier in a destination market, and 
the Commission has not yet made a determination as to whether that 
foreign carrier lacks sufficient market power in that destination 
market to affect competition adversely in the U.S. market, unless the 
applicant clearly demonstrates in its application at least one of the 
following:
    (i) The applicant qualifies for a presumption of non-dominance 
under Sec. 63.10(a)(3);
    (ii) The affiliated destination market is a WTO Member country and 
the applicant qualifies for a presumption of non-dominance under 
Sec. 63.10(a)(4); or
    (iii) The affiliated destination market is a WTO Member country and 
the applicant agrees to be classified as a dominant carrier to the 
affiliated destination country under Sec. 63.10, without prejudice to 
its right to petition for reclassification at a later date; or
    (2) The applicant has an affiliation within the meaning of 
Sec. 63.18(h)(1)(i) with a dominant U.S. carrier whose international 
switched or private line services the applicant seeks authority to 
resell (either directly or indirectly through the resale of another 
reseller's services), unless the applicant agrees to be classified as a 
dominant carrier to the affiliated destination country under Sec. 63.10 
(without prejudice to its right to petition for reclassification at a 
later date); or
    (3) The applicant seeks authority to provide switched basic 
services over private lines to a country for which the Commission has 
not previously authorized the provision of switched services over 
private lines; or
    (4) The application is formally opposed by a pleading meeting the 
following criteria:
    (i) The caption and text of the pleading make it unmistakably clear 
that the pleading is intended to be a formal opposition;
    (ii) The pleading is served upon the other parties to the 
proceeding; and
    (iii) The pleading is filed within the time period prescribed for 
the filing of objections or comments; or
    (5) The Commission has informed the applicant in writing, within 28 
days after the date of public notice accepting the application for 
filing, that the application is not eligible for streamlined processing 
under this section.
    (d) Any complete application that is subject to paragraph (c) of 
this section will be acted upon only by formal written order, and 
operation for which such authorization is sought may not commence 
except in accordance with such order. The Commission will issue public 
notice that the application is ineligible for streamlined processing. 
Within 90 days of the public notice, the Commission will issue an order 
acting upon the application or provide public notice that, because the 
application raises questions of extraordinary complexity, an additional 
90-day period for review is needed. Each successive 90-day period may 
be so extended.
    5. Sec. 63.13 is revised to read as follows:


Sec. 63.13  Procedures for modifying regulatory classification of U.S. 
international carriers from dominant to non-dominant.

    Any party that desires to modify its regulatory status from 
dominant to non-dominant for the provision of particular international 
communications services on a particular route should provide 
information in its application to demonstrate that it qualifies for 
non-dominant classification pursuant to Sec. 63.10.
    6. Sec. 63.14 is revised to read as follows:


Sec. 63.14  Prohibition on agreeing to accept special concessions.

    (a) Any carrier authorized to provide international communications 
service under this part shall be prohibited from agreeing to accept 
special concessions directly or indirectly from any foreign carrier 
with respect to any U.S. international route where the foreign carrier 
possesses sufficient market power on the foreign end of the route to 
affect competition adversely in the U.S. market, as described in 
paragraph (c) of this section, and from agreeing to accept special 
concessions in the future. For purposes of this section, ``foreign 
carrier'' is defined in Sec. 63.18(h)(1)(ii).
    (b) For purposes of this section and Secs. 63.11(c)(2)(ii) and 
63.18(i), a special concession is defined as an exclusive arrangement 
involving services, facilities, or functions on the foreign end of a 
U.S. international route that are necessary for the provision of basic 
telecommunications services where the arrangement is not offered to 
similarly situated U.S.-licensed carriers and involves:
    (1) Operating agreements for the provision of basic services;
    (2) Distribution arrangements or interconnection arrangements, 
including pricing, technical specifications, functional capabilities, 
or other quality and operational characteristics, such as provisioning 
and maintenance times; or
    (3) Any information, prior to public disclosure, about a foreign 
carrier's basic network services that affects either the provision of 
basic or enhanced services or interconnection to the foreign country's 
domestic network by U.S. carriers or their U.S. customers.
    (c) A U.S. carrier that seeks to enter a special concession with a 
foreign carrier bears the burden of submitting information, as part of 
the requirement to file the agreement with the Commission pursuant to 
Sec. 43.51, sufficient to demonstrate that the foreign carrier lacks 
sufficient market power on the foreign end of the route to affect 
competition adversely in the U.S. market. If the U.S. carrier makes a 
showing that the foreign carrier lacks 50 percent market share in the 
international transport and the local access markets on the foreign end 
of the route, the U.S. carrier will presumptively be allowed to agree 
to accept the special concession.
    (d) Any party that seeks to defeat the presumption in paragraph (c) 
of this section shall bear the burden of proof upon any issue it raises 
as to the ability of the foreign carrier to affect competition 
adversely in the U.S. market.
    7. Sec. 63.17 is amended by revising paragraph (b) to read as 
follows:


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

* * * * *
    (b) Except as provided in paragraph (b)(4) of this section, a U.S. 
common carrier, whether a reseller or facilities-based carrier, may 
engage in ``switched hubbing'' to countries for which the Commission 
has not authorized the provision of switched basic services over 
private lines provided the carrier complies with the following 
conditions:
    (1) U.S.-outbound switched traffic shall be routed over the 
carrier's authorized U.S. international private lines to a country for 
which the Commission has authorized the provision of switched services 
over private lines (i.e., the ``hub'' country), and then forwarded to 
the third country only by taking at published rates and reselling the 
international message telephone service (IMTS) of a carrier in the hub 
country;
    (2) U.S.-inbound switched traffic shall be carried to a country for 
which the Commission has authorized the provision of switched services 
over private lines (i.e., the ``hub'' country) as part of the IMTS 
traffic flow from a third country and then terminated in the United 
States over U.S. international private lines from the hub country;
    (3) U.S. common carriers that route U.S.-billed traffic via 
switched hubbing shall tariff their service on a ``through'' basis 
between the United States and the

[[Page 64755]]

ultimate point of origination or termination;
    (4) No U.S. common carrier may engage in switched hubbing to or 
from a third country where it has an affiliation with a foreign carrier 
unless and until it has received authority to serve that country under 
Sec. 63.18(e)(1), (e)(2), or (e)(6).
    8. Sec. 63.18 is amended to revise paragraphs (e), (h) and (i) and 
to add new paragraph (k) to read as follows:


Sec. 63.18  Contents of applications for international common carriers.

* * * * *
    (e) One or more of the following statements, as pertinent:
    (1) If applying for authority to acquire interests in facilities 
previously authorized by the Commission in order to provide 
international basic switched, private line, data, television and 
business services to all international points, the applicant shall:
    (i) State that it is requesting Section 214 authority to operate as 
a facilities-based carrier pursuant to the terms and conditions of 
paragraph (e)(1) of this section.
    (ii) Comply with the following terms and conditions:
    (A) Authority to provide services to all international points under 
this part extends to those countries for which the applicant qualifies 
for non-dominant regulation as set forth in Sec. 63.10, except in the 
following circumstance: If an applicant is affiliated with a foreign 
carrier in a destination market and the Commission has not determined 
that the foreign carrier lacks sufficient market power in the 
destination market to affect competition adversely in the U.S. market 
(see Sec. 63.10(a)), the applicant shall not commence service on any 
such route until it receives specific authority to do so under 
paragraph (e)(6) of this section.
    (B) The applicant may only provide service using half-circuits on 
appropriately licensed U.S. common and non-common carrier facilities 
(under either Title III of the Communications Act of 1934, as amended, 
or the Submarine Cable Landing License Act, 47 U.S.C. 34 et al.) 
provided that these facilities do not appear on an exclusion list 
published by the Commission and any necessary overseas connecting 
facilities. Applicants may not use non-U.S. licensed facilities unless 
and until the Commission specifically approves their use and so 
indicates on the exclusion list, and only then for service to the 
countries indicated thereon.
    (C) The applicant may provide service to any country not included 
on an exclusion list published by the Commission.
    (D) The applicant may provide international basic switched, private 
line, data, television and business services.
    (E) The authority granted under this paragraph shall be subject to 
all Commission rules and regulations and any conditions stated in the 
Commission's public notice or order that serves as the applicant's 
Section 214 certificate. See Sec. 63.12.
    (2) If applying for authority to resell the international services 
of authorized U.S. common carriers for the provision of international 
basic switched, private line, data, television and business services to 
all international points, the applicant shall:
    (i) State that it is requesting Section 214 authority to operate as 
a resale carrier pursuant to the terms and conditions of 
Sec. 63.18(e)(2).
    (ii) Comply with the following terms and conditions:
    (A) Authority to provide resold services to all international 
points under this part extends to those countries and services for 
which the applicant qualifies for non-dominant regulation as set forth 
in Sec. 63.10, except in the following circumstances, in which case an 
applicant shall not commence service until it receives specific 
authority to do so under paragraph (e)(6) of this section:
    (1) An application to provide switched resold services to a non-WTO 
Member country where the applicant is affiliated with a foreign 
carrier; and
    (2) An application to resell private line services to a destination 
market where the applicant is affiliated with a foreign carrier and the 
Commission has not determined that the foreign carrier lacks sufficient 
market power in the destination market to affect competition adversely 
in the U.S. market (see Sec. 63.10(a)).
    (B) The applicant may resell the international services of any 
authorized common carrier, except affiliated carriers regulated as 
dominant on the route to be served, pursuant to that carrier's tariff 
or contract duly filed with the Commission, for the provision of 
international basic switched, private line, data, television and 
business services to all international points;
    (C) The applicant may resell private line services for the 
provision of international switched basic services only in 
circumstances where the Commission has specifically authorized the 
provision of switched basic services over private lines to the 
particular country at the foreign end of the private line. In making 
determinations about particular destination countries, the Commission 
will follow the policies adopted in IB Docket Nos. 96-261 and 97-142 
(these documents are available at the FCC's Reference Operations 
Division, Washington, D.C. 20554, and on the FCC's World Wide Web Site 
at http://www.fcc.gov). The Commission will provide public notice of 
its decisions to authorize the provision of switched basic services 
over private lines to particular countries.
    (D) The authority granted under this paragraph shall be subject to 
all Commission rules and regulations, including the limitation in 
Sec. 63.21 on the use of private lines for the provision of switched 
services, and any conditions stated in the Commission's public notice 
or order that serves as the applicant's Section 214 certificate. See 
Secs. 63.12, 63.21.
    (3) If applying for authority to provide international switched 
basic services over resold private lines between the United States and 
a WTO Member country for which the Commission has not previously 
authorized the provision of switched services over private lines, the 
applicant shall demonstrate either that settlement rates for at least 
50 percent of the settled U.S.-billed traffic between the United States 
and the country at the foreign end of the private line are at or below 
the benchmark settlement rate adopted for that country in IB Docket No. 
96-261 or that the country affords resale opportunities equivalent to 
those available under U.S. law. If applying for authority to provide 
international switched basic services over resold private lines between 
the United States and a non-WTO Member country for which the Commission 
has not previously authorized the provision of switched services over 
private lines, the applicant shall demonstrate that settlement rates 
for at least 50 percent of the settled U.S.-billed traffic between the 
United States and the country at the foreign end of the private line 
are at or below the benchmark settlement rate adopted for that country 
in IB Docket No. 96-261 and that the country affords resale 
opportunities equivalent to those available under U.S. law. With regard 
to showing that a destination country affords resale opportunities 
equivalent to those available under U.S. law, an applicant shall 
include evidence demonstrating that equivalent resale opportunities 
exist between the United States and the subject country, including any 
relevant bilateral or multilateral agreements between the 
administrations involved. Parties must demonstrate that the foreign 
country at the other end of the private line provides U.S.-based 
carriers with:

[[Page 64756]]

    (i) The legal right to resell international private lines, 
interconnected at both ends, for the provision of switched services;
    (ii) Reasonable and nondiscriminatory charges, terms and conditions 
for interconnection to foreign domestic carrier facilities for 
termination and origination of international services, with adequate 
means of enforcement;
    (iii) Competitive safeguards to protect against anticompetitive and 
discriminatory practices affecting private line resale; and
    (iv) Fair and transparent regulatory procedures, including 
separation between the regulator and operator of international 
facilities-based services.
    (4) Any carrier authorized under this section to acquire and 
operate international private line facilities other than through resale 
may use those private lines to provide switched basic services only in 
circumstances where the Commission has previously authorized the 
provision of switched services over private lines to the particular 
country at the foreign end of the private line. The Commission will 
provide public notice of its decisions to authorize the provision of 
switched services over private lines to particular countries pursuant 
to its policies adopted in IB Docket Nos. 96-261 and 97-142. This 
provision is subject to the following exceptions and conditions:
    (i) The applicant shall not initiate such service on a particular 
route absent a grant of specific authority under paragraph (e)(6) of 
this section in circumstances where the applicant is affiliated with a 
carrier in the country at the foreign end of the private line and the 
Commission has not determined that the foreign carrier lacks sufficient 
market power in the country at the foreign end of the private line to 
affect competition adversely in the U.S. market. See Sec. 63.10(a).
    (ii) The applicant is subject to all applicable Commission rules 
and regulations, including the limitation Sec. 63.21 on the use of 
private lines for the provision of switched services, and any 
conditions stated in the Commission's public notice or order that 
serves as the applicant's Section 214 certificate. See Secs. 63.12, 
63.21.
    (A) Except as provided in paragraph (e)(4)(ii)(B) of this section, 
any carrier that seeks to provide international switched basic services 
over its authorized private line facilities between the United States 
and a WTO Member country for which the Commission has not previously 
authorized the provision of switched services over private lines shall 
demonstrate that settlement rates for at least 50 percent of the 
settled U.S.-billed traffic between the United States and the country 
at the foreign end of the private line are at or below the benchmark 
settlement rate adopted for that country in IB Docket No. 96-261 or 
that the country affords resale opportunities equivalent to those 
available under U.S. law. With regard to showing that a destination 
country affords resale opportunities equivalent to those available 
under U.S. law, an applicant shall include the information required by 
paragraph (e)(3) of this section.
    (B) No formal application is required under paragraph (e)(4) of 
this section in circumstances where the carrier's previously authorized 
private line facility is interconnected to the public switched network 
only on one end--either the U.S. or the foreign end--and where the 
carrier is not operating the facility in correspondence with a carrier 
that directly or indirectly owns the private line facility in the 
foreign country at the other end of the private line.
    (5) If applying for authority to acquire facilities through the 
transfer of control of a common carrier holding international Section 
214 authorization, or through the assignment of another carrier's 
existing authorization, the applicant shall complete paragraphs (a) 
through (d) of this section for both the transferor/assignor and the 
transferee/assignee. Paragraph (g) of this section is not applicable, 
and only the transferee/assignee needs to complete paragraphs (h) 
through (k) of this section. At the beginning of the application, the 
applicant should also include a narrative of the means by which the 
transfer or assignment will take place. The Commission reserves the 
right to request additional information as to the particulars of the 
transaction to aid it in making its public interest determination.
    (6) If applying for authority to acquire facilities or to provide 
services not covered by Sec. 63.18(e) (1) through (5), the applicant 
shall provide a description of the facilities and services for which it 
seeks authorization. Such description also shall include any additional 
information the Commission shall have specified previously in an order, 
public notice or other official action as necessary for authorization. 
Applicants for new submarine cable facilities also shall include a list 
of the proposed owners of the cable, their voting interests and 
ownership interests by segment in the cable.
* * * * *
    (h) A certification as to whether or not the applicant is, or has 
an affiliation with, a foreign carrier.
    (1) The certification shall state with specificity each foreign 
country in which the applicant is, or has an affiliation with, a 
foreign carrier. For purposes of this certification:
    (i) Affiliation is defined to include:
    (A) A greater than 25 percent ownership of capital stock, or 
controlling interest at any level, by the applicant, or by any entity 
that directly or indirectly controls or is controlled by it, or that is 
under direct or indirect common control with it, in a foreign carrier 
or in any entity that directly or indirectly controls a foreign 
carrier; or
    (B) A greater than 25 percent ownership of capital stock, or 
controlling interest at any level, in the applicant by a foreign 
carrier, or by any entity that directly or indirectly controls or is 
controlled by a foreign carrier, or that is under direct or indirect 
common control with a foreign carrier; or by two or more foreign 
carriers investing in the applicant in the same manner in circumstances 
where the foreign carriers are parties to, or the beneficiaries of, a 
contractual relation (e.g., a joint venture or market alliance) 
affecting the provision or marketing of basic international 
telecommunications services in the United States. A U.S. carrier also 
will be considered to be affiliated with a foreign carrier where the 
foreign carrier controls, is controlled by, or is under common control 
with a second foreign carrier already found to be affiliated with that 
U.S. carrier under this section.
    (ii) Foreign carrier is defined as any entity that is authorized 
within a foreign country to engage in the provision of international 
telecommunications services offered to the public in that country 
within the meaning of the International Telecommunication Regulations, 
see Final Acts of the World Administrative Telegraph and Telephone 
Conference, Melbourne, 1988 (WATTC-88), Art. 1, which includes entities 
authorized to engage in the provision of domestic telecommunications 
services if such carriers have the ability to originate or terminate 
telecommunications services to or from points outside their country.
    (2) In support of the required certification, each applicant shall 
also provide the name, address, citizenship and principal businesses of 
its ten percent or greater direct and indirect shareholders or other 
equity holders and identify any interlocking directorates.
    (3) Each applicant that proposes to acquire facilities through the 
resale of the international switched or private

[[Page 64757]]

line services of another U.S. carrier shall additionally certify as to 
whether or not the applicant has an affiliation with the U.S. 
carrier(s) whose facilities-based service(s) the applicant proposes to 
resell (either directly or indirectly through the resale of another 
reseller's service). For purposes of this paragraph, affiliation is 
defined as in paragraph (h)(1)(i) of this section, except that the 
phrase ``U.S. facilities-based international carrier'' shall be 
substituted for the phrase ``foreign carrier.''
    (4) Each applicant and carrier authorized to provide international 
communications service under this part is responsible for the 
continuing accuracy of the certifications required by paragraphs (h)(1) 
through (3) of this section. Whenever the substance of any such 
certification is no longer accurate, the applicant/carrier shall as 
promptly as possible and in any event within thirty days file with the 
Secretary in duplicate a corrected certification referencing the FCC 
File No. under which the original certification was provided. The 
information may be used by the Commission to determine whether a change 
in regulatory status may be warranted under Sec. 63.10.
    (5) Any applicant that seeks to operate as a U.S. facilities-based 
international carrier to a particular country and that is a foreign 
carrier in that country, or directly or indirectly controls a foreign 
carrier in that country, or has an affiliation within the meaning of 
paragraph (h)(1)(i)(B) of this section with a foreign carrier in that 
country shall provide the following information:
    (i) The named foreign country (i.e., the destination foreign 
country) is a Member of the World Trade Organization; or
    (ii) The applicant's affiliated foreign carrier lacks sufficient 
market power in the named foreign country to affect competition 
adversely in the U.S. market; or
    (iii) The named foreign country provides effective competitive 
opportunities to U.S. carriers to compete in that country's 
international facilities-based market. An effective competitive 
opportunities demonstration should address the following factors:
    (A) The legal ability of U.S. carriers to enter the foreign market 
and provide facilities-based international services, in particular 
international message telephone service (IMTS);
    (B) Whether there exist reasonable and nondiscriminatory charges, 
terms and conditions for interconnection to a foreign carrier's 
domestic facilities for termination and origination of international 
services;
    (C) Whether competitive safeguards exist in the foreign country to 
protect against anticompetitive practices, including safeguards such 
as:
    (1) Existence of cost-allocation rules in the foreign country to 
prevent cross-subsidization;
    (2) Timely and nondiscriminatory disclosure of technical 
information needed to use, or interconnect with, carriers' facilities; 
and
    (3) Protection of carrier and customer proprietary information;
    (D) Whether there is an effective regulatory framework in the 
foreign country to develop, implement and enforce legal requirements, 
interconnection arrangements and other safeguards; and
    (E) Any other factors the applicant deems relevant to its 
demonstration.
    (6) Any applicant that proposes to resell the international 
switched or non-interconnected private line services of another U.S. 
carrier for the purpose of providing international communications 
services to the named foreign country and that is a foreign carrier in 
that country, or directly or indirectly controls a foreign carrier in 
that country, or has an affiliation within the meaning of paragraph 
(h)(1)(i)(B) of this section with a foreign carrier in the destination 
country shall provide the following information (see also paragraph 
(h)(7) of this section):
    (i) The named foreign country (i.e., the destination foreign 
country) is a Member of the World Trade Organization; or
    (ii) The applicant's affiliated foreign carrier lacks sufficient 
market power in the named foreign country to affect competition 
adversely in the U.S. market; or
    (iii) The named foreign country provides effective competitive 
opportunities to U.S. carriers to resell international switched or non-
interconnected private line services, respectively. An effective 
competitive opportunities demonstration should address the following 
factors:
    (A) The legal ability of U.S. carriers to enter the foreign market 
and provide resold international switched services (for switched resale 
applications) or non-interconnected private line services (for non-
interconnected private line resale applications);
    (B) Whether there exist reasonable and nondiscriminatory charges, 
terms and conditions for the provision of the relevant resale service;
    (C) Whether competitive safeguards exist in the foreign country to 
protect against anticompetitive practices, including safeguards such 
as:
    (1) Existence of cost-allocation rules in the foreign country to 
prevent cross-subsidization;
    (2) Timely and nondiscriminatory disclosure of technical 
information needed to use, or interconnect with, carriers' facilities; 
and
    (3) Protection of carrier and customer proprietary information;
    (D) Whether there is an effective regulatory framework in the 
foreign country to develop, implement and enforce legal requirements, 
interconnection arrangements and other safeguards; and
    (E) Any other factors the applicant deems relevant to its 
demonstration.
    (7) Any applicant that proposes to resell the international 
switched services of an unaffiliated U.S. carrier for the purpose of 
providing international communications services to the named foreign 
country and that is a foreign carrier in that country or has an 
affiliation with a foreign carrier in that country shall either provide 
in its application a showing that would satisfy Sec. 63.10(a)(3) or 
state that it will file the quarterly traffic reports required by 
Sec. 43.61(c) of this chapter.
    (8) With respect to regulatory classification under Sec. 63.10, 
each applicant that certifies that it has an affiliation with a foreign 
carrier in a named foreign country and that desires to be regulated as 
non-dominant for the provision of particular international 
communications services to that country should provide information in 
its application to demonstrate that it qualifies for non-dominant 
classification pursuant to Sec. 63.10.
    (i) Each applicant shall certify that the applicant has not agreed 
to accept special concessions directly or indirectly from any foreign 
carrier with respect to any U.S. international route where the foreign 
carrier possesses sufficient market power on the foreign end of the 
route to affect competition adversely in the U.S. market and will not 
enter into such agreements in the future. This certification shall be 
viewed as an ongoing representation to the Commission, and applicants/
carriers shall immediately inform the Commission if at any time the 
representations in their certifications are no longer true. Failure to 
so inform the Commission will be deemed a material misrepresentation to 
the Commission. For purposes of this section, ``special concession'' is 
defined in Sec. 63.14(b) and ``foreign carrier'' is defined in 
paragraph (h)(1)(ii) of this section.
* * * * *
    (k) If the applicant desires streamlined processing pursuant to

[[Page 64758]]

Sec. 63.12, a statement of how the application qualifies for 
streamlined processing.
    9. Sec. 63.21 is amended to revise paragraph (a); to redesignate 
paragraph (e) as paragraph (h); and to add paragraphs (e), (f), and (g) 
to read as follows:


Sec. 63.21  Conditions applicable to international Section 214 
authorizations.

* * * * *
    (a) Carriers may not use their authorized facilities-based or 
resold international private lines for the provision of switched basic 
services between the United States and a WTO Member country unless and 
until the Commission has determined that the country at the foreign end 
of the private line provides equivalent resale opportunities or that 
settlement rates for at least 50 percent of the settled U.S.-billed 
traffic between the United States and that country are at or below the 
benchmark settlement rate adopted for that country in IB Docket No. 96-
261 (this document is available at the FCC's Reference Operations 
Division, Washington, D.C. 20554, and on the FCC's World Wide Web Site 
at http://www.fcc.gov). Carriers may not use their authorized 
facilities-based or resold international private lines for the 
provision of switched basic services between the United States and a 
non-WTO Member country unless and until the Commission has determined 
that the country at the foreign end of the private line provides 
equivalent resale opportunities and that settlement rates for at least 
50 percent of the settled U.S.-billed traffic between the United States 
and that country are at or below the benchmark settlement rate adopted 
for that country in IB Docket No. 96-261. (See Sec. 63.18(e)(3)-(4).) 
If at any time the Commission finds, after an initial determination of 
compliance for a particular country, that the country no longer 
provides equivalent resale opportunities or that market distortion has 
occurred in the routing of traffic between the United States and that 
country, carriers shall comply with enforcement actions taken by the 
Commission. This condition shall not apply to a carrier's use of its 
authorized facilities-based private lines to provide service as 
described in Sec. 63.18(e)(4)(ii)(B).
* * * * *
    (e) Authorized carriers may not access or make use of specific U.S. 
customer proprietary network information that is derived from a foreign 
network unless the carrier obtains approval from that U.S. customer. In 
seeking to obtain approval, the carrier must notify the U.S. customer 
that the customer may require the carrier to disclose the information 
to unaffiliated third parties upon written request by the customer.
    (f) Authorized carriers may not receive from a foreign carrier any 
proprietary or confidential information pertaining to a competing U.S. 
carrier, obtained by the foreign carrier in the course of its normal 
business dealings, unless the competing U.S. carrier provides its 
permission in writing.
    (g) The Commission reserves the right to review a carrier's 
authorization, and, if warranted, impose additional requirements on 
U.S. international carriers in circumstances where it appears that harm 
to competition is occurring on one or more U.S. international routes.
* * * * *

PART 64--MISCELLANEOUS RULES RELATING TO COMMON CARRIERS

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

    Authority: 47 U.S.C. 154, 254(k). Interpret or apply 47 U.S.C. 
201, 218, 226, 228, 254(k), 276 unless otherwise noted.

    2. Sec. 64.1001 is amended by revising paragraphs (b), (c), and (d) 
to read as follows:


Sec. 64.1001  International settlements policy and modification 
requests.

* * * * *
    (b) If the accounting rate referred to in Sec. 43.51(e)(1) of this 
chapter is lower than the accounting rate in effect in the operating 
agreement of another carrier providing service to or from the same 
foreign point, and there is no modification in the other terms and 
conditions referred to in Sec. 43.51(e)(1) of this chapter, the carrier 
must file a notification letter under paragraph (e) of this section.
    (c) If the amendment referred to in Sec. 43.51(e)(2) of this 
chapter is a simple reduction in the accounting rate, and there is no 
modification in the other terms and conditions referred to in 
Sec. 43.51(e)(2) of this chapter, the carrier must file a notification 
letter under paragraph (e) of this section.
    (d) If the operating agreement or amendment referred to in 
Secs. 43.51(e)(1) and (e)(2) of this chapter is not subject to 
notification under paragraphs (b) and (c) of this section, the carrier 
must file a modification request under paragraph (f) of this section.
* * * * *
    3. Sec. 64.1002 is revised to read as follows:


Sec. 64.1002  Alternative settlement arrangements.

    (a) A communications common carrier engaged in providing switched 
voice, telex, telegraph, or packet switched service between the United 
States and a foreign point may seek approval to enter into an operating 
agreement with a foreign telecommunications administration containing 
an alternative settlement arrangement that does not comply with the 
requirements of Sec. 43.51(e)(1) and Sec. 63.14 of this chapter and 
Sec. 64.1001 by filing a petition for declaratory ruling in compliance 
with the requirements of this section.
    (b) A petition for declaratory ruling must contain the following:
    (1) Information to demonstrate that:
    (i) The alternative settlement arrangement is on a route between 
the United States and a World Trade Organization Member; or
    (ii) For an alternative settlement arrangement on a route between 
the United States and a non-World Trade Organization Member:
    (A) The Commission has made a previous determination that the 
effective competitive opportunities test in Sec. 63.18(h)(5)(iii) of 
this chapter has been satisfied on the route covered by the alternative 
settlement arrangement; or
    (B) The effective competitive opportunities test in 
Sec. 63.18(h)(5)(iii) of this chapter is satisfied on the route covered 
by the alternative settlement arrangement; or
    (iii) The alternative settlement arrangement is otherwise in the 
public interest.
    (2) A certification as to whether the alternative settlement 
arrangement affects more than 25 percent of the outbound traffic or 25 
percent of the inbound traffic on the route to which the alternative 
settlement arrangement applies.
    (3) A certification as to whether the parties to the alternative 
settlement arrangement are affiliated, as defined in 
Sec. 63.18(h)(1)(i) of this chapter, or involved in a non-equity joint 
venture affecting the provision of basic services on the route to which 
the alternative settlement arrangement applies.
    (4) A copy of the alternative settlement arrangement if it affects 
more than 25 percent of the outbound traffic or 25 percent of the 
inbound traffic on the route to which the alternative settlement 
arrangement applies, or if it is between parties that are affiliated, 
as defined in Sec. 63.18(h)(1)(i) of this chapter, or that are involved 
in a non-equity joint venture affecting the provision of basic services 
on the route

[[Page 64759]]

to which the alternative settlement arrangement applies.
    (5) A summary of the terms and conditions of the alternative 
settlement arrangement if it does not come within the scope of 
paragraph (b)(4) of this section. However, upon request by the 
International Bureau, a full copy of such alternative settlement 
arrangement must be forwarded promptly to the International Bureau.
    (c) If the petition for declaratory ruling contains a certification 
under paragraph (b)(1)(i) of this section that the proposed alternative 
settlement arrangement is for service on a route between the United 
States and a World Trade Organization Member, a party may oppose the 
petition under paragraph (f) of this section with a showing that the 
participating carrier on the foreign end of the route does not have 
multiple (more than one) international facilities-based competitors. In 
such a case, the petitioning party may make a showing under paragraph 
(b)(1)(iii) of this section, pursuant to paragraph (g) of this section.
    (d) An alternative settlement arrangement filed for approval under 
this section cannot become effective until the petition for declaratory 
ruling required by paragraph (a) of this section has been granted under 
paragraph (f) of this section.
    (e) On the same day the petition for declaratory ruling has been 
filed, the filing carrier must serve a copy of the petition on all 
carriers providing the same or similar service with the foreign carrier 
identified in the petition.
    (f) All petitions for declaratory ruling shall be subject to a 21-
day pleading period for objections or comments, commencing the day 
after the date of public notice listing the petition as accepted for 
filing. A petition for declaratory ruling shall be deemed granted as of 
the 28th day without any formal staff action provided that:
    (1) The petition is not formally opposed by a pleading meeting the 
following criteria:
    (i) The caption and text of the pleading make it unmistakably clear 
that the pleading is intended to be a formal opposition;
    (ii) The pleading is served upon the other parties to the 
proceeding; and
    (iii) the pleading is filed within the time period prescribed; or
    (2) The International Bureau has not notified the filing carrier 
that grant of the petition may not serve the public interest and that 
implementation of the proposed alternative settlement arrangement must 
await formal staff action on the petition.
    (g) If objections or comments are filed, the petitioning carrier 
may file a response pursuant to Sec. 1.45 of this chapter. Petitions 
that are formally opposed must await formal action by the International 
Bureau before the proposed alternative settlement arrangement may be 
implemented.

[FR Doc. 97-32013 Filed 12-5-97; 10:03 am]
BILLING CODE 6712-01-P


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