[Federal Register Volume 60, Number 250 (Friday, December 29, 1995)]
[Rules and Regulations]
[Pages 67332-67339]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31099]



=======================================================================
-----------------------------------------------------------------------

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 63

[IB Docket No. 95-22, FCC 95-475]


Market Entry and Regulation of Foreign-affiliated Entities

AGENCY: Federal Communications Commission.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: This Report and Order contains information collections subject 
to the Paperwork Reduction Act of 1995 (PRA). It has been submitted to 
the Office of Management and Budget (OMB) for review under section 
3507(d) of the PRA, OMB, the general public, and other Federal agencies 
are invited to comment on the information collections contained in this 
proceeding
    On November 28, 1995, the Federal Communications Commission adopted 
a Report and Order in response to a Notice of Proposed Rulemaking which 
the Commission adopted on February 7, 1995, that establishes a market 
entry standard for foreign carriers seeking to provide basic 
international telecommunications services under section 214 of the 
Communications Act of 1934, a amended (``the Act''). The Report and 
Order also establishes a standard by which the Commission will review 
whether it is in the public interest to permit foreign investment in 
licensees of common carrier radio facilities in excess of the 
benchmarks contained in section 310(b)(4) of the Act. The Report and 
Order was adopted. The Report and Order makes additional changes to the 
Commission's regulations of international common carriers.
    In reviewing applicants for international section 214 authority 
filed by a foreign carrier or its U.S. affiliate (collectively 
``foreign carrier''), the Commission will examine, as an important part 
of its public interest analysis, whether competitive opportunities 
exist for U.S. carriers in destination markets in which the foreign 
carrier has market power. The Commission will apply a similar analysis 
in reviewing indirect foreign investment in licensees of common carrier 
radio facilities under section 310(b)(4), but it will limit its review 
to the ``home market'' of the foreign investor. In addition to 
considering effective competitive opportunities, the Commission will 
examine additional public interest factors that might weigh in favor 
of, or against, approving the foreign carrier's international section 
214 application, or permitting the indirect foreign investment in a 
common carrier radio licensee to exceed the section 310(b)(4) 
benchmark.
    In taking this action, the Commission's primary goal is to advance 
the public interest by promoting effective competition in the U.S. 
telecommunications services market, particularly the market for 
international services. The action also reaffirms the Commission's 
goals to prevent anticompetitive conduct in the provisions of 
international services or facilities, and to encourage foreign 
governments to open their communications markets.

EFFECTIVE DATE: The rules adopted in this Report and Order will become 
effective January 29, 1996. However, if OMB has not approved the 
information collections contained in these rules by this date, the 
Commission will publish a document to delay the effective date of these 
rules.
    Written comments by the public on the information collections are 
due January 10, 1996.

ADDRESSES: Submit all comments concerning the Paperwork Reduction Act 
to Dorothy Conway, Federal Communications Commission, Room 234, 1919 M 
Street, NW., Washington, DC 20554, or via the Internet to dconway@fcc.
gov, and to Timothy Fain, OMB Desk Officer, 10236 NEOB, 725-17th 
Street, NW., Washington, DC 20503 or via the Internet to fain_
[email protected].

FOR FURTHER INFORMATION CONTACT: For additional information concerning 
the information collections contained in this Report and Order contact 
Dorothy Conway at 202-418-0217, or via the Internet as [email protected].
    For further information on the Report and Order contact: Susan 
O'Connell, Attorney, International Bureau, (202) 418-1484, Ken 
Schagrin, Attorney, International Bureau, (202) 418-1407, or Robert 
McDonald, Attorney, International Bureau, (202) 418-1467.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report 
and Order adopted on November 28, 1995, and released November 30, 1995 
(FCC 95-475). The full text of this Report and Order is available for 
inspection and copying during normal hours in the FCC Reference Center 
(Room 239), 1919 M St., NW., Washington, DC. The complete text also may 
be purchased from the Commission's Copy contractor, International 
Transcription Service, Inc., (202) 857-3800, 2100 M Street, NW., Suite 
140, Washington, DC 20037

Paperwork Reduction Act

    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 Report and Order. 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 collected; and (d) ways to 
minimize the burden of the collection of information on the 
respondents, including the use of automated collection techniques or 
other forms of information technology.
    This Report and Order contains information collection requirements. 
Written comments by the public on the information collections are due 
January 10, 1996. Written comments must be submitted by OMB on the 
information collections on or before January 15, 1996.
    OMB Approval Number: New Collection.
    Title: Market Entry and Regulation of Foreign-affiliated Carriers.
    Type of Review: New collection.
    Respondents: Business or other for-profit.
    Number of Respondents: 431 per year.
    Estimated Time Per Response: 9.5 hours.
    Total Annual Burden: 4127 hours.
    Needs and Uses: The collections of information for which approval 
is here sought are contained in amendments to part 63 and in the Report 
and Order adopting such amendments. These information collections are 
authorized and necessary for the Commission to carry out its statutory 
mandate, pursuant to sections 4, 214, 219, 303(r) and 403 of the 
Communications Act, 47 U.S.C. 154, 214, 219, 303(r) and 403.
    The information collections contained in amendments to Secs. 63.01 
(r) and (s) and 63.11 and 63.17(b)(4) of the Commission's rules are 
necessary to determine whether, and under what conditions, the public 
interest, convenience, and necessity will be served by authorizing 
particular foreign carriers, or their U.S. affiliates, to provide 
international common carrier services between the United States and 
countries where these foreign carriers have market power, i.e., the 
ability to 

[[Page 67333]]
discriminate against unaffiliated U.S. carriers through control of 
``bottleneck services or facilities'' on the foreign end of a U.S. 
international route. ``Bottleneck services or facilities'' are those 
that are necessary to terminate U.S. international traffic.
    Second, 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.
    Third, the information collections contained in amendments to 
Sec. 63.01(k) of the Commission's rules are necessary to protect the 
U.S. public interest in cost-based international telecommunications 
services.
    Fourth, the information collections under section 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 radio licensee would be inconsistent with the public interest.
    The Order adopts a requirement that section 214 applicants amend 
their pending applications to the extent they are inconsistent with the 
new rules. Applications pending as of the effective date of the new 
rules must be amended within thirty days of the effective date of the 
new rules. This information will be used to process pending 
applications under the Commission's public interest standard enunciated 
in the Order.
    The information will be used by the Commission staff in carrying 
out its duties under the Communications Act. Common carrier applicants 
providing or seeking to provide international service under part 63 of 
the Commission's rules must comply with our rules.

Summary of Report and Order

    In response to the Notice of Proposed Rulemaking (60 FR 11644 
(March 2, 1995)), the Commission adopted a decision to further the goal 
of promoting effective competition in the U.S. telecommunications 
market, particularly the market for international services. In order to 
promote effective competition in this market, the Commission's new 
rules are designed to prevent anticompetitive conduct in the provision 
of international services or facilities, and to encourage foreign 
governments to open their communications markets.
    With this Report and Order, the Commission adopts standards for 
regulating the entry of foreign carriers into the United States market 
for international telecommunications services. This Report and Order 
explicitly sets forth the entry criteria necessary to promote effective 
competition in the U.S. market for these services, including global, 
seamless network services. As an important part of the Commission's 
overall public interest analysis under Section 214 of the 
Communications Act, it will examine whether effective competitive 
opportunities exist for U.S. carriers in the destination markets of 
foreign carriers seeking to enter the U.S. international services 
market either directly or through an affiliation with a new or existing 
U.S. carrier.
    Similarly, in deciding whether it is in the public interest to 
permit indirect foreign investment in licensees of common carrier 
wireless facilities in excess of the benchmarks contained in section 
310(b)(4) of the Act, the Commission will examine whether foreign 
markets offer effective competitive opportunities to U.S. entities. 
This approach is fully consistent not only with the Commission's 
existing jurisdiction under section 310, but also with 
telecommunications bills currently pending in Congress which would 
specifically incorporate an effective competitive opportunities 
analysis as part of a section 310(b)(4) determination.

The New Entry Standard

    The Commission's effective competitive opportunities analysis under 
section 214 of the Act will focus first on whether U.S. carriers have 
the legal right to provide international basic services in the 
destination markets where the foreign applicant has market power. If 
there are no legal barriers to entry, the Commission also will consider 
the practical ability for U.S. carriers to compete in those markets. 
The Commission considers several factors essential to viable 
competition. These factors include: First, whether there are reasonable 
and nondiscriminatory terms and conditions for interconnection to a 
foreign carrier's facilities; second, whether there are competitive 
safeguards to protect against anticompetitive conduct; and third, 
whether there is an effective regulatory framework to implement and 
enforce these conditions and safeguards. The Commission will apply the 
effective competitive opportunities analysis to foreign carriers 
seeking to provide facilities-based or resale service in the United 
States. The public interest analysis under section 214 also will 
continue to consider additional public interest factors, including the 
general significance of the proposed entry to the promotion of 
competition in the U.S. communications services market, the presence of 
cost-based accounting rates, as well as national security, law 
enforcement issues, foreign policy, or trade concerns raised by the 
Executive Branch.
    The analysis under section 310 is similar to that under section 
214, but with some important distinctions. Most notably, the 
Commission's determination will focus on the foreign investor's ``home 
market'', and will be applied to the specific service in which the 
foreign entity seeks to invest in the United States, e.g., cellular 
service. If the services in the U.S. and home markets are not precisely 
matched, the Commission will use the most closely substitutable 
wireless service in the home market, as determined from the consumer's 
perspective. The Commission also will examine additional public 
interest factors that might weigh in favor of, or against, allowing a 
foreign investor to exceed the 25 percent benchmark contained in 
section 310(b)(4). In determining a foreign investor's ``home market'', 
the Commission will identify (1) the country of its incorporation, 
organization, or charter; (2) the nationality of all investment 
principals, officers, and directors; (3) the country in which its world 
headquarters is located; (4) the country in which the majority of its 
tangible property, including production, transmission, billing, 
information, and control facilities, is located; and (5) the country 
from which it derives the greatest sales and revenues from its 
operations. If all five of these factors indicate that the same country 
should be considered to be the entity's home market, it will be 
presumed to be so, subject only to rebuttal based on clear and 
convincing evidence to the contrary. If these five factors yield 
inconsistent results, however, the Commission will balance them, as 
well as any other information that is particularly relevant to the 
case, to determine the appropriate home market under the totality of 
the circumstances.

Affiliation

    For purposes of implementing this entry standard, the Commission 
adopts a new definition of ``affiliation''. It now defines affiliation 
as an ownership interest of greater than 25 percent, or a controlling 
interest at any level, in a U.S. carrier by a foreign carrier. The 
Commission also will apply its effective competitive opportunities 
analysis to foreign carrier investments of 25 percent or less if the 
investment presents a significant potential impact on competition in 
the U.S. market for 

[[Page 67334]]
international telecommunications services. In addition, the Commission 
will aggregate investments of two or more foreign carriers where they 
are likely to act in concert and the combined interests either exceed 
25 percent or constitute a controlling interest.
    This definition of affiliation will apply both for purposes of 
determining when to apply the effective competitive opportunities 
analysis and of determining the regulatory status of all affiliated 
carriers, including U.S.-based carriers that have a greater than 25 
percent investment, or a controlling interest, in a foreign carrier. 
The Commission also is adopting a prior notification and approval 
requirement to determine whether a particular investment in a U.S. 
carrier by a foreign carrier constitutes an affiliation with that 
foreign carrier, and to determine whether the investment serves the 
public interest, convenience and necessity. A U.S. international 
carrier is required to notify the Commission 60 days prior to 
acquisition by a foreign carrier of a 10 percent or greater interest in 
that U.S. carrier.

Amendment of Pending Applications

    The Report and Order adopts a requirement that section 214 
applicants amend their pending applications to the extent they are 
inconsistent with the new rules. The Report and Order requires that 
applications pending as of the effective date of the new rules be 
amended within thirty days of the effective date of the new rules.

Dominant Carrier and Other Operating Safeguards

    This Report and Order also modifies the safeguards that apply to 
foreign-affiliated carriers regulated as dominant under Sec. 63.10 of 
the Commission's rules, 47 CFR 63.10, as amended in the Report and 
Order. The modified dominant carrier safeguards also will apply to U.S. 
carriers on particular routes where they are engaged in a co-marketing 
or other arrangement with a dominant foreign carrier, and such 
arrangement presents a substantial risk of anticompetitive effects in 
the U.S. market for international telecommunications services.
    The Commission has modified these safeguards to reduce regulatory 
burdens while maintaining effective oversight over foreign-affiliated 
or allied carriers. It allows dominant, foreign-affiliated or allied 
carriers to file tariffs on 14 days notice instead of the previous 45 
days and relieves those carriers of the burden of filing cost support 
information. It also requires that a dominant, foreign-affiliated or 
allied carrier maintain complete records of the provisioning and 
maintenance of service and facilities it procures from its foreign 
carrier affiliate or ally. The Order maintains the existing requirement 
that a dominant foreign-affiliated carrier (and, under the new rules, a 
dominant, allied carrier) receive specific section 214 authorization 
before adding or removing circuits on routes where it is regulated as 
dominant, and file quarterly traffic and revenue reports.
    The Order also conforms the Commission's ``no special concessions'' 
prohibition and ``no exclusive arrangements'' condition that have 
regularly been placed in section 214 authorizations and applies a ``no 
special concessions'' prohibition to all U.S. international carriers. 
This means that no U.S. carrier is allowed to accept a special 
concession directly or indirectly from any foreign carrier with respect 
to traffic or revenue flows between the United States and any foreign 
country for which the U.S. carrier is authorized to provide service.

Additional Matters

    The Order additionally adopts new rules relating to the provision 
of international switched basic service via facilities-based and resold 
private lines. These rules apply to all U.S. carriers, both those that 
are affiliated and unaffiliated with a foreign carrier. And, it adopts 
a modified definition of a U.S. international facilities-based carrier.

Final Regulatory Flexibility Act Analysis

    Pursuant to section 603 of Title 5, United States Code, 5 U.S.C. 
603, an initial Regulatory Flexibility Analysis was incorporated in the 
Notice of Proposed Rulemaking in CC Docket No. 95-22. Written comments 
on the proposals in the Notice, including the Regulatory Flexibility 
Analysis, were requested.
A. Need and Purpose of this Action
    This rulemaking proceeding establishes an effective competitive 
opportunities analysis as an important public interest factor in the 
Commission's overall public interest analysis of applications filed by 
foreign carriers to enter the U.S. international telecommunications 
market pursuant to section 214 of the Communications Act. It also 
adopts a similar analysis for determining whether the public interest 
would be disserved by permitting indirect foreign investment in common 
carrier licensees in excess of the benchmarks contained in section 
310(b)(4) of the Act. In addition, this proceeding modifies existing 
rules and policies relating to the definition of a U.S. international 
facilities-based carrier, the regulation of certain dominant carriers 
in the provision of international service, and other rules governing 
the provision of switched services over international private lines.
B. Issues Raised by the Public Comments in Response to the Regulatory 
Flexibility Analysis
    There were no comments submitted in response to the Regulatory 
Flexibility Analysis. The Notice of Proposed Rulemaking offered a 
number of alternatives for each issue raised. The Commission responded 
to commenters' concerns and significantly altered the proposed market 
entry standard. The new approach under section 214 is designed to focus 
on foreign carrier entry that poses a substantial risk of 
anticompetitive effects in the provision of international services. In 
addition, the Commission is adopting a standard that is clear and 
administratively feasible.
C. Significant Alternatives Considered
    The Commission has attempted to balance all the commenters' 
concerns with our public interest mandate under the Act in order to 
adopt a clear and administratively feasible approach to market entry by 
foreign carriers. Instead of examining whether effective competitive 
opportunities exist for U.S. carriers in every primary market where a 
foreign carrier operates, regardless of whether the foreign carrier 
seeks to serve such market, the Commission will focus its analysis 
under section 214 only on destination countries where the foreign 
carrier holds market power. Our route-by-route approach reduces the 
regulatory burden on all U.S. carriers seeking an affiliation with a 
foreign carrier. The Commission has not adopted the suggestion of some 
parties to exempt small U.S. carriers from the market entry rules. 
Whether a dominant foreign carrier makes a significant investment in a 
small U.S. carrier or a large one, there is a substantial risk of 
anticompetitive effects. Therefore, the Commission declines to exempt 
small U.S. carriers from these rules.
    The Commission proposed to modify its standard for determining when 
a U.S. carrier is affiliated with a foreign carrier for purposes of 
both the market entry analysis and post-entry regulation. The 
Commission considered investment levels ranging from greater than ten 
percent to controlling interests at any level. It also considered 
adopting an affiliation standard based on: The dollar amount of the 
investment; the percentage of the investment; or the 

[[Page 67335]]
amount of traffic carried by the U.S. carrier in correspondence with 
the foreign carrier. The Commission additionally considered adopting a 
reciprocal affiliation standard. Based on the record, the Commission 
has modified its definition of affiliation and will now consider 
affiliated any U.S. carrier with either: (1) A greater than 25 percent 
interest (or a controlling interest at any level) held by a foreign 
carrier; or (2) a greater than 25 percent interest in, or control of, a 
foreign carrier.
    The Commission will apply its effective competitive opportunities 
analysis to the first category of affiliated U.S. carriers on routes 
where the affiliated foreign carrier has market powers in the 
destination country. It will apply its dominant carrier safeguards to 
all affiliated U.S. carriers on routes where the affiliated foreign 
carrier has market power. These safeguards will also now apply to U.S. 
carriers on routes for which they have formed a non-exclusive co-
marketing arrangement or other joint venture with a dominant foreign 
carrier, where such arrangements present a substantial risk of 
anticompetitive effects.
    The Commission has eliminated the requirement that dominant, 
foreign-affiliated carriers file cost support with their tariffs. This 
will reduce burdensome filing requirements. The Commission also adopts 
its proposed 14-day notice period (currently 45 days) for the filing of 
international service tariffs by dominant, foreign-affiliated carriers. 
The Commission adopts a new recordkeeping requirement that a dominant, 
foreign-affiliated carrier maintain complete records of the 
provisioning and maintenance of network facilities and services it 
procures from its foreign affiliate or ally. The Commission found that 
although this requirement is a minor burden, its benefit in preventing 
anticompetitive conduct outweighs such a burden. The Commission adopts 
new rules related to the provision of switched services using 
international private lines. These rules will enhance opportunities for 
U.S. carriers to serve U.S. consumers more efficiently. The Commission 
also adopts a definition of ``U.S. international facilities-based 
carrier'' that may facilitate the ability of smaller U.S. carriers to 
obtain operating agreements.

Ordering clauses

    Accordingly, it is ordered that the policies, rules, and 
requirements adopted herein, except those needing OMB approval, will 
become effective January 29, 1996.
    Matters subject to OMB approval, pursuant to the Paperwork 
Reduction Act of 1995, Public Law 104-13, will become effective upon 
such approval.
    This action is taken pursuant to sections 4, 214, 219, 303(r) and 
403 of the Communications Act of 1934, as amended, 47 U.S.C. 154, 214, 
219, 303(r) and 403.
    It is further ordered That this proceeding is hereby terminated.

List of Subjects in 47 CFR Part 63

    Communications common carriers, Reporting and recordkeeping 
requirements, Telegraph, Telephone.

Federal Communications Commission,
LaVera Marshall,
Acting Secretary.

Final Rules

    Part 63 of Title 47 of the Code of Federal Regulations is amended 
as follows:

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: Secs. 1, 4(i), 4(j), 201-205, 218, and 403 of the 
Communications Act of 1934, as amended, and sec. 613 of the Cable 
Communications Policy Act of 1984, 47 U.S.C. secs. 151, 154(i), 
15(j), 201-205, 218, 403, and 533 unless otherwise noted.

    2. Section 63.01 is amended by revising paragraphs (k)(5) and (r), 
redesignating paragraph (k)(6) as paragraph (k)(7), and adding new 
paragraphs (k)(6), (s) and Notes 1 through 4 to paragraph (r) to read 
as follows:


Sec. 63.01  Contents of applications.

* * * * *
    (k) * * *
    (5) The procedures set forth in this section are subject to 
Commission policies on resale of international private lines in CC 
Docket No. 90-337 as amended in IB Docket No. 95-22. If proposed 
facilities are to be acquired through the resale of private lines for 
the purpose of providing international switched basic services, 
applicant shall demonstrate for each country to which it seeks to 
provide such services that the country affords resale opportunities 
equivalent to those available under U.S. law. In this regard, applicant 
shall:
    (i) State whether the Commission has previously determined that 
equivalent resale opportunities exist between the United States and the 
subject country; or
    (ii) Include other evidence demonstrating that equivalent resale 
opportunities exist between the United States and the subject country, 
including any relevant bilateral agreements between the administrations 
involved. Parties must demonstrate that the foreign country at the 
other end of the private line provides U.S. carriers with:
    (A) The legal right to resell international private lines, 
interconnected at both ends, for the provision of switched services;
    (B) Nondiscriminatory charges, terms and conditions for 
interconnection to foreign domestic carrier facilities for termination 
and origination of international services, with adequate means of 
enforcement;
    (C) Competitive safeguards to protect against anticompetitive and 
discriminatory practices affecting private line resale; and
    (D) Fair and transparent regulatory procedures, including 
separation between the regulator and operator of international 
facilities-based services.
    (6) Except as otherwise provided in this paragraph, any carrier 
authorized under this part to acquire and operate international private 
line facilities other than through resale shall, for each country for 
which it seeks to provide switched basic service over its authorized 
private lines facilities, request such authority by formal application. 
Such application shall be accompanied by a demonstration that that 
country affords resale opportunities equivalent to those available 
under U.S. law. In this regard, applicant shall include the information 
required by paragraph (k)(5) of this section.
    (i) No formal application is required under this paragraph 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.
* * * * *
    (r) 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% ownership of capital stock, or controlling 
interest at 

[[Page 67336]]
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% 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.
    (2) In support of the required certification, each applicant shall 
also provide the name, address, citizenship and principal businesses of 
its 10 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 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 (r)(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 that certifies under this section that it has an 
affiliation with a foreign carrier and that proposes to acquire 
facilities through the resale of the international private line 
services of another U.S. carrier shall additionally certify as to 
whether or not the affiliated foreign carrier owns or controls 
telecommunications facilities in the particular country(ies) to which 
the applicant proposes to provide service (i.e., the destination 
country(ies)). For purposes of this paragraph, telecommunication 
facilities are defined as the underlying telecommunications transport 
means, including intercity and local access facilities, used by a 
foreign carrier to provide international telecommunications services 
offered to the public.
    (5) 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 (r)(3) 
and (4) 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 30 days file with the 
Secretary in duplicate a corrected certification referencing the FCC 
File No. under which the original certification was provided. This 
information may be used by the Commission to determine whether a change 
in regulatory status may be warranted under Sec. 63.10.
    (6) Each applicant that certifies that it is, or that it has an 
affiliation, a foreign carrier, as defined in paragraphs (r)(1)(i)(B) 
and (r)(1)(ii) of this section, in a named foreign country and that 
desires to operate as a U.S. facilities-based international carrier to 
that country from the United States shall provide information in its 
application filed under this part to demonstrate that either:
    (i) The named foreign country (i.e., the destination foreign 
country) provides effective competitive opportunities to U.S. carriers 
to compete in that country's international facilities-based market; or
    (ii) Its affiliated foreign carrier does not have the ability to 
discriminate against unaffiliated U.S. international carriers through 
control of bottleneck services or facilities in the destination 
country.
    (A) The demonstration specified by paragraph (r)(6)(i) of this 
section should address the following factors:
    (1) The legal, or de jure, ability of U.S. carriers to enter the 
foreign market and provide facilities-based international services, in 
particular, international message telephone service (IMTS);
    (2) 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;
    (3) Whether competitive safeguards exist in the foreign country to 
protect against anticompetitive practices, including safeguards such 
as:
    (i) Existence of cost-allocation rules in the foreign country to 
prevent cross-subsidization;
    (ii) Timely and nondiscriminatory disclosure of technical 
information needed to use, or interconnect with, carriers' facilities;
    (iii) Protection of carrier and customer proprietary information; 
and
    (4) Whether there is an effective regulatory framework in the 
foreign country to develop, implement and enforce legal requirements, 
interconnection arrangements and other safeguards; and
    (5) Any other factors the applicant deems relevant to its 
demonstration.
    (B) The demonstration specified in paragraph (r)(6)(ii) of this 
section should include the same information requested by paragraph 
(r)(8) of this section.
    (7) Each applicant that certifies that it is, or that it has an 
affiliation with, a foreign carrier, as defined in paragraphs 
(r)(1)(i)(B) and (r)(1)(ii) of this section, in a named foreign country 
and that desires to resell the international switched or non-
interconnected private line services, respectively, of another U.S. 
carrier for the purpose of providing international communications 
services to the name foreign country from the United States shall 
provide information in its application filed under this part to 
demonstrate that either.
    (i) The named foreign country (i.e., the destination foreign 
country) provides effective competitive opportunities to U.S. carriers 
to resell international switched or noninterconnect private line 
services, respectively; or
    (ii) Its affiliated foreign carrier does not have the ability to 
discriminate against unaffiliated U.S. international carriers through 
control of bottleneck services or facilities in the destination 
country.
    (A) The demonstration specified by paragraph (r)(7)(i) of this 
section should address the following factors:
    (1) The legal, or de jure, 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;
    (2) Whether there exist reasonable and nondiscriminatory charges, 
terms and conditions for the provision of the relevant resale service;

[[Page 67337]]

    (3) Whether competitive safeguards exist in the foreign country to 
protect against anticompetitive practices, including safeguards such 
as:
    (i) Existence of cost-allocation rules in the foreign country to 
prevent cross-subsidization;
    (ii) Timely and nondiscriminatory disclosure of technical 
information needed to use, or interconnect with, carriers' facilities;
    (iii) Protection of carrier and customer proprietary information; 
and
    (4) Whether there is an effective regulatory framework in the 
foreign country to develop, implement and enforce legal requirements, 
interconnection arrangements and other safeguards; and
    (5) Any other factors the applicant deems relevant to its 
demonstration.
    (B) The demonstration specified in paragraph (r)(7)(ii) of this 
section should include the same information requested by paragraph 
(r)(8) of this section.
    (8) 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 international 
communications service to that country may provide information in its 
application filed under this part to demonstrate that its affiliated 
foreign carrier does not have the ability to discriminate against 
unaffiliated U.S. international carriers through control of bottleneck 
services or facilities in the named foreign country. See Sec. 63.10, 
Regulatory Classification of U.S. International Carriers.
    (i) Such a demonstration should address the factors that relate to 
the scope or degree of the foreign affiliate's bottleneck control, such 
as:
    (A) The monopoly, oligopoly or duopoly status of the destination 
country; and
    (B) Whether the foreign affiliate has the potential to discriminate 
against unaffiliated U.S. international carriers through such means as 
preferential operating agreements, preferential routing of traffic, 
exclusive or more favorable transiting agreements, or preferential 
domestic access and interconnection arrangements.
    (ii) Such a demonstration may also address other factors the 
applicant deems relevant to its demonstration, such as the 
effectiveness of public regulation in the destination country.
    (s) Each applicant shall certify that the applicant has not agreed 
to accept special concessions directly or indirectly from any foreign 
carrier or administration with respect to traffic or revenue flows 
between the U.S. and any foreign country which the applicant may serve 
under the authority granted under this part and will not enter into 
such agreements in the future.
    (1) For purposes of this paragraph, and of Secs. 63.11(c)(2)(iii), 
63.13(a)(4), and 63.14, special concession is defined as any 
arrangement that affects traffic or revenue flows to or from the U.S. 
that is offered exclusively by a foreign carrier or administration to a 
particular U.S. international carrier and not also to similarly 
situated U.S. international carriers authorized to serve a particular 
route.
    (2) The special concessions certification required by this 
paragraph and by Secs. 63.11(c)(2)(iii) and 63.13(a)(4) 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.

    Note 1 to paragraph (r): The word ``control'' as used herein is 
not limited to majority stock ownership, but includes actual working 
control in whatever manner exercised.
    Note 2 to paragraph (r): The term ``U.S. facilities-based 
international carrier'' means one that holds an ownership, 
indefeasible-right-of-user, or leasehold interest in bare capacity 
in an international facility, regardless of whether the underlying 
facility is a common or noncommon carrier submarine cable, or an 
INTELSAT or separate satellite system.
    Note 3 to paragraph (r): The assessment of ``capital stock'' 
ownership will be made under the standards developed in Commission 
case law for determining such ownership. See, e.g., Fox Television 
Stations, Inc., 10 FCC Rcd 8452 (1995). ``Capital stock'' includes 
all forms of equity ownership, including partnership interests.
    Note 4 to paragraph (r): In applying the provisions of this 
section, ownership and other interests in U.S. and foreign carriers 
will be attributed to their holders and deemed cognizable pursuant 
to the following criteria: Attribution of ownership interests in a 
carrier that are held indirectly by any party through one or more 
intervening corporations will be determined by successive 
multiplication of the ownership percentages for each link in the 
vertical ownership chain and application of the relevant attribution 
benchmark to the resulting product, except that wherever the 
ownership percentage for any link in the chain exceeds 50%, it shall 
not be included for purposes of this multiplication. (For example, 
if A owns 30% of company X, which owns 60% of company Y, which owns 
26% of ``carrier,'' then X's interest in ``carrier'' would be 26% 
(the same as Y's interest because X's interest in Y exceeds 50%), 
and A's interest in ``carrier'' would be 7.8% (0.30 x 0.26). Under 
the 25% attribution benchmark, X's interest in ``carrier'' would be 
cognizable, while A's interest would not be cognizable.)

    3. Section 63.10 is amended by revising paragraphs (a)(1) through 
(a)(3), and adding paragraph (c) to read as follows:


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

    (a) * * *
    (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) will presumptively be considered 
non-dominant for the provision of international communications services 
on that route;
    (2) A U.S. carrier that is, or that has or acquires an affiliation 
with a foreign carrier that is a monopoly in a destination country will 
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 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 the ability to 
discriminate against unaffiliated U.S. carriers through control of 
bottleneck services or facilities in the destination country. Such a 
demonstration should address the factors that relate to the scope or 
degree of the foreign affiliate's bottleneck control, including those 
listed in Sec. 63.01(r)(8).
* * * * *
    (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 14-days notice without 
cost support;
    (2) Maintain complete records of the provisioning and maintenance 
of 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 U.S. and foreign carrier participate, which information shall be 
made available to the Commission upon request;
    (3) Obtain Commission approval pursuant to Sec. 63.01 before adding 
or discontinuing circuits; and
    (4) File quarterly reports of revenue, number of messages, and 
number of 

[[Page 67338]]
minutes of both originating and terminating traffic within 90 days from 
the end of each calendar quarter.
    4. Section 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 ten percent investments by, 
and/or an affiliation with, a foreign carrier.

    (a) Any carrier authorized to provide international communications 
service under this part that, as of the effective date of this rule as 
amended in IB Docket No. 95-22, is, or has an affiliation with, a 
foreign carrier within the meaning of Sec. 63.01(r)(1)(i)(A) or 
(r)(1)(i)(B), or that as of such date knows of an existing ten percent 
or greater interest, whether direct or indirect, in the capital stock 
of the authorized carrier by a foreign carrier, or that after the 
effective date of this rule becomes affiliated with a foreign carrier 
within the meaning of Sec. 63.01(r)(1)(i)(A), shall notify the 
Commission within thirty days of the effective date of this rule or 
within thirty days of the acquisition of the affiliation, whichever 
occurs later. For purposes of this section, ``foreign carrier'' is 
defined as set forth in Sec. 63.01(r)(1)(ii).
    (1) The notification shall certify to the information specified in 
paragraph (c) of this section.
    (2) Any carrier that has previously notified the Commission of an 
affiliation with a foreign carrier, as defined by Sec. 63.01(r)(1) 
immediately prior to the rule's amendment in IB Docket No. 95-22, need 
not notify the Commission again of the same affiliation.
    (b) Any carrier authorized to provide international communications 
service under this part that knows of a planned investment by a foreign 
carrier of a ten percent or greater interest, whether direct or 
indirect, in the capital stock of the authorized carrier shall notify 
the Commission within sixty days prior to the acquisition of such 
interest. The notification shall certify to the information specified 
in paragraph (c) of this section.
    (c) The notification required under paragraphs (a) and (b) of this 
section shall contain a list of all affiliated foreign carriers and 
shall state individually the country or countries in which the foreign 
carriers named in paragraphs (a) and (b) of this section are authorized 
to provide telecommunications services offered to the public. It shall 
additionally specify 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.
    (1) The carrier should also specify, where applicable, those 
countries named in paragraph (c) for which it provides a specified 
international communications service solely through the resale of the 
international switched or private line services of U.S. facilities-
based carriers with which the resale carrier does not have an 
affiliation. Such an affiliation is defined as in Sec. 63.01(r)(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. 63.01(r)(2);
    (ii) Where the carrier is authorized as a private line reseller on 
a particular route for which it has an affiliation with a foreign 
carrier, as defined in Sec. 63.01(r)(1)(i), a certification as required 
to be submitted pursuant to Sec. 63.01(r)(4); and
    (iii) A ``special concessions'' certification as required to be 
submitted pursuant to Sec. 63.01(s).
    (3) The carrier is responsible for the continuing accuracy of the 
certifications provided under this section. Whenever the substance of 
any certification provided under this section is no longer accurate, 
the carrier shall as promptly as possible, and in any event within 30 
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)(iii) of 
this section are no longer true. See Sec. 63.01(s)(2). This information 
may be used by the Commission to determine whether a change in 
regulatory status may be warranted under Sec. 63.10.
    (d) Unless the carrier notifying the Commission of a foreign 
carrier affiliation under paragraph (a) of this section qualifies for 
the presumption of non-dominant regulation pursuant to 
Sec. 63.10(a)(4), it should submit the information specified in 
Sec. 63.01(r)(8) to retain its non-dominant status on any affiliated 
route.
    (e) The Commission will issue public notice of the submissions made 
under this section for 14 days.
    (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) In the case of a planned investment by a foreign carrier of a 
ten percent or greater interest, whether direct or indirect, in the 
capital stock of the authorized carrier, 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 acquisition raises a 
substantial and material question, then the carrier shall not 
consummate the planned investment until it has filed an application 
under Sec. 63.01 and submitted the information specified under 
paragraphs (r) (6) or (7), as applicable, and (8) of that section, and 
the Commission has approved the application by formal written order.
    5. Section 63.12 is amended by revising paragraph (c)(1) to read as 
follows:


Sec. 63.12  Streamlined processing of certain international resale 
applications.

* * * * *
    (c) * * *
    (1) The applicant has an affiliation within the meaning of 
Sec. 63.01(r)(3), with the U.S. facilities-based 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); or
* * * * *
    6. Section 63.13 is amended by revising the last sentences of 
paragraphs (a)(3) and (a)(5), and by revising paragraph (a)(4) to read 
as follows:


Sec. 63.13  Streamlined procedures for modifying regulatory 
classification of U.S. international carriers from dominant to 
nondominant.

    (a) * * *
    (3) * * * For purposes of paragraph (a)(3), ``telecommunications 
facilities'' are defined as in Sec. 63.01(r)(4).
    (4) Any carrier filing a certified list pursuant to paragraph 
(a)(2) of this section must also provide the ``special concessions'' 
certification as required to be submitted pursuant to Sec. 63.01(r)(3).
    (5) * * * See Sec. 63.01(s)(2).
    7. Section 63.14 is revised to read as follows:


Sec. 63.14  Prohibition on agreeing to accept special concessions.

    Any carrier authorized to provide international communications 
service 

[[Page 67339]]
under this part shall be prohibited from agreeing to accept special 
concessions directly or indirectly from any foreign carrier or 
administration with respect to traffic or revenue flows between the 
United States and any foreign country served under the authority of 
this part and from agreeing to enter into such agreements in the 
future. For purpose of this section, foreign carrier is defined as in 
Sec. 63.01(r)(1)(ii); and special concession is defined as in 
Sec. 63.01(s).
    8. A new Sec. 63.17 is added to read as follows:


Sec. 63.17  Special Provisions For U.S. International Common Carriers.

    (a) Unless otherwise prohibited by the terms of its Section 214 
certificate, a U.S. common carrier authorized under this part to 
provide international private line service, whether as a reseller or 
facilities-based carrier, may interconnect its authorized private lines 
to the public switched network on behalf of an end user customer for 
the end user customer's own use.
    (b) Except as provided in paragraph (b)(5) of this section, a U.S. 
common carrier, whether a reseller or facilities-based, may engage in 
``switched hubbing'' to countries not found to offer equivalent resale 
opportunities under Sec. 63.01(k) (5) and (6) under the following 
conditions:
    (1) U.S.-outbound switched traffic shall be routed over the 
carrier's authorized U.S. international private lines to an equivalent 
country, and then forwarded to a third, nonequivalent country only by 
taking at published rates and reselling the International Message 
Telephone Service (IMTS) of a carrier in the equivalent country;
    (2) U.S.-inbound switched traffic shall be carried to an equivalent 
country as part of the IMTS traffic flow from a non-equivalent third 
country and then terminated in the United States over U.S. 
international private lines from the equivalent hub country;
    (3) U.S. common carriers that route U.S.-outbound traffic via 
switched hubbing through an equivalent country shall tariff their 
service on a ``through'' basis from the United States to the ultimate 
foreign destination.
    (4) No U.S. common carrier may engage in switched hubbing under 
this section to a country for which it has an affiliation with a 
foreign carrier unless and until it receives specific authority to do 
so under Sec. 63.01. For purposes of this paragraph, ``affiliation'' 
and ``foreign carrier'' are defined as set forth in Sec. 63.01(r)(1) 
(i)(B) and (ii), respectively.

[FR Doc. 95-31099 Filed 12-28-95; 8:45 am]
BILLING CODE 6712-01-M