[Federal Register Volume 64, Number 124 (Tuesday, June 29, 1999)]
[Rules and Regulations]
[Pages 34734-34742]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-16032]


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

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 0, 43, 63, and 64

[IB Docket Nos. 98-148, 95-22, CC Docket No. 90-337 (Phase II), FCC 99-
73]


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

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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

SUMMARY: This document removes outdated rules that govern the manner in 
which U.S. international telecommunications carriers relate to foreign 
carriers that provide service in competitive markets. The Commission 
concludes that it should remove the existing international settlements 
policy (ISP): for settlement arrangements between U.S. carriers and 
foreign telecommunications carriers that lack market power; and for all 
settlement arrangements on routes where U.S. carriers are able to 
terminate at least 50 percent of their U.S. billed traffic in the 
foreign market at rates that are at least 25 percent below the 
applicable benchmark settlement rate.
    The Commission believes that the new rules will create greater 
incentives for U.S. carriers to adopt business strategies that will 
enable them to obtain low rates to terminate U.S. traffic in foreign 
markets.

DATES: These rules contain information collections that have not been 
approved by OMB. The Commission will publish a document in the Federal 
Register announcing the effective date of these rules. Public and 
agency comments are due on the information collections August 30, 1999.

FOR FURTHER INFORMATION CONTACT: Robert McDonald, Policy and Facilities 
Branch, Telecommunications Division, International Bureau, (202) 418-
1470.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report 
and Order, FCC 99-73, adopted on April 15, 1999, and released on May 6, 
1999. The full text of this document is available for inspection and 
copying during normal business hours in the FCC Reference Center (Room 
CY-A257) of the Federal Communications Commission, 445 12th Street, SW, 
Washington, DC 20554. The document is also available for download over 
the Internet at http://www.fcc.gov/bureaus/international/orders/1999/
fcc99073.wp. The complete text of this Order also may be purchased from 
the Commission's copy contractor, International Transcription Service, 
Inc., 1231 20th Street, N.W., Washington, D.C. 20036, (202) 857-3800.
    This document contains information collections subject to the 
Paperwork Reduction Act of 1995 (PRA). It will be submitted to the 
Office of Management and Budget (OMB) for review under the PRA. OMB, 
the general public, and other Federal agencies will be invited to 
comment on the modified information collections contained in this 
proceeding.

Summary of Report and Order

    1. In August 1998, the Commission issued a Notice of Proposed 
Rulemaking (63 FR 44224, August 18, 1998) in which it proposed 
substantial changes in the way it regulates international 
telecommunications carriers' relations with their foreign counterparts. 
The Commission initiated this proceeding pursuant to Section 11 of the 
Telecommunications Act of 1996, 47 U.S.C.161, which directs the 
Commission to undertake a review on every even-numbered year of all 
regulations that apply to operations or activities of any provider of 
telecommunications service and to repeal or modify any regulation it 
determines to be no longer necessary in the public interest. In this 
proceeding the Commission adopts most of the proposals contained in the 
Notice and implements procedures that will grant regulatory relief to 
carriers while increasing the efficiency of the Commission.
    2. The Commission finds that removing the ISP and related filing

[[Page 34735]]

requirements between U.S. carriers and foreign carriers that lack 
market power in foreign markets would remove unnecessary regulatory 
burdens on U.S. carriers and at the same time future competition in the 
U.S. international services market. The vast majority of commenting 
parties support this change in Commission policy.
    3. The Commission adopted the ISP and related filing requirements 
to prevent whipsawing by a foreign monopoly carrier. Where the carrier 
in the foreign market lacks market power, however, its ability to 
whipsaw U.S. carriers is substantially diminished, if not eliminated. 
Except in unusual circumstances, a U.S. carrier that is faced with an 
attempt at whipsawing by a foreign carrier that lacks market power on 
the foreign end of a particular route may respond by entering an 
agreement with a different foreign carrier on the route. The Commission 
thus concludes that the ISP is not necessary to prevent whipsawing for 
settlement arrangements with foreign carriers that lack market power.
    4. The Commission will no longer require U.S. carriers that 
conclude arrangements with foreign carriers that lack market power in 
the foreign market to comply with the terms of the ISP or its contract 
filing requirements. Instead, the Commission finds that a policy that 
promotes the conclusion of unrestricted commercial arrangements between 
U.S. carriers and foreign carriers that lack market power in the 
foreign market will best further our goal of promoting competition in 
the international services market. The Commission finds that its 47 CFR 
43.51 contract filing requirement should no longer apply to any U.S. 
carrier arrangement with a foreign carrier that lacks market power.
    5. In determining whether it should continue to apply the ISP, the 
Commission adopts a presumption that a foreign carrier lacks market 
power when it possesses less than a 50 percent market share in each of 
the relevant foreign markets.
    6. The Commission finds that it is necessary to adopt a mechanism 
to ensure that carriers enter into arrangements that deviate from the 
ISP only with carriers that lack market power in the foreign market, 
and that a relaxation of the ISP would not enable U.S. carriers to 
enter into arrangements that deviate from the ISP with foreign carriers 
that could exercise their market power to the detriment of U.S. 
consumers. The Commission will therefore make an affirmative finding to 
determine which carriers possess market power in specific foreign 
markets, and make a list of such carriers public. Carriers would thus 
be precluded from exchanging traffic outside of the ISP with carriers 
on the list unless otherwise allowed. The Commission finds that this 
approach will best advance its policy of allowing U.S. carriers to 
enter into arrangements with foreign carriers that lack market power 
with a minimum of regulatory oversight, while maintaining the ISP for 
certain arrangements with foreign carriers that possess market power in 
the foreign market. The Commission's rules include a presumption that a 
foreign carrier does not possess market power in a foreign market if it 
possesses less than 50 percent market share in each of the relevant 
foreign markets. The Commission thus issues, concurrently with the 
release of this Order, a public notice containing a list of foreign 
carriers that it believes do not qualify for this presumption, for the 
purposes of identifying arrangements that are not required to comply 
with the ISP and the Commission's No Special Concessions rule. This 
list is based on publicly available information, compiled from official 
sources, including the International Telecommunication Union (ITU). 
(Public Notice, DA 99-809, published elsehwere in this issue.) 
Interested parties may challenge the inclusion or exclusion of any 
carrier on the list by submitting a petition for declaratory ruling and 
the appropriate supporting documentation to demonstrate that a carrier 
included on the list lacks market power or that a carrier excluded from 
the list has market power. The Commission may also amend the list on 
its own motion. The list will be updated periodically and posted on the 
Commission's web page at http://www.fcc.gov/ib. Carriers are 
responsible for ensuring that arrangements they enter into outside of 
the ISP comply with the Commission's rules in the event of additions to 
the list.
    7. The Commission amends Sections 43.51 and 64.1001 to remove the 
ISP and related contract filing requirements for arrangements between 
U.S. carriers and foreign carriers that lack market power. Section 
43.51 will also specify procedures for modifying the list of foreign 
carriers that do not qualify for the presumption that they lack market 
power. The Commission also amends its No Special Concessions Rule, 
Section 63.14, to eliminate the requirement that a carrier seeking to 
enter into an exclusive arrangement with a foreign carrier that lacks 
market power submit with the Section 43.51 contract filing (which the 
Commission here eliminates) information to demonstrate that the foreign 
carrier lacks market power. This rule change will permit carriers to 
rely on the Commission's published list of foreign carriers for 
purposes of determining which foreign carriers are the subject of the 
prohibitions contained in Section 63.14.
    8. The Commission concludes that it would serve the public interest 
to remove the ISP completely on certain routes, including for 
arrangements with foreign carriers that possess market power in the 
foreign market. The Commission finds that lifting the ISP has 
significant merits where the potential harm due to a foreign carrier's 
abuse of market power is limited. The Commission declines, however, to 
adopt the standard proposed in the Notice to remove the ISP on all 
routes where it currently allows international simple resale (ISR). 
Instead, the Commission removes the ISP completely only on those routes 
where U.S. carriers have the ability to settle U.S. traffic at rates 
that are 25 percent below the benchmark, or less. The Commission 
believes this provides the proper balance between, on the one hand, its 
goal in this proceeding of eliminating regulations that impede the 
development of competition, and, on the other hand, the longstanding 
goal of the ISP of preventing anticompetitive behavior that can harm 
U.S. consumers. The Commission also finds that on those routes where 
U.S. carriers have the ability to settle U.S. traffic at rates that are 
25 percent below the benchmark, or less, the ISP is no longer 
necessary, regardless of whether the foreign country is a WTO Member or 
a non-WTO Member country. The Commission therefore repeals this rule, 
as applied in such cases, as it is no longer in the public interest.
    9. The Commission further finds that it is not necessary to require 
all traffic that is terminated in a foreign market to be settled at 25 
percent below the applicable benchmark settlement rate, or less, in 
order to lift the ISP. Rather, the Commission finds that removing the 
ISP where at least 50 percent of U.S.-billed traffic is terminated at 
such rates will ensure that the ISP is maintained only where it is 
necessary. The Commission finds that the ability of U.S. carriers to 
terminate at least 50 percent of the U.S.-billed traffic in the foreign 
market at rates that are 25 percent below the benchmark rate or less is 
convincing evidence that competitive pressures exist in the foreign 
market to constrain the market power of the foreign carrier. The 
Commission thus finds that where at least 50 percent of traffic is 
terminated at rates 25 percent lower than the

[[Page 34736]]

benchmark, or less, a foreign carrier is unlikely to have the ability 
to exercise market power to harm U.S. consumers and that the ISP is 
thus unnecessary.
    10. The Commission will amend its rules establishing procedures for 
carriers seeking to enter into an arrangement that does not comply with 
the ISP with a foreign carrier that possesses market power on a route 
for which the ISP has not previously been lifted. Such carriers must 
file a petition for declaratory ruling that at least 50 percent of 
U.S.-billed traffic on the route is terminated in the foreign market at 
rates that are 25 percent below the benchmark settlement rate, or less. 
For upper income routes, 25 percent below the benchmark rate is 11.25 
cents; for upper middle income routes, 25 percent below the benchmark 
rate is 14.25 cents; and for lower income routes, 25 percent below the 
benchmark rate is 17.25 cents. Carriers filing such petitions should 
include the appropriate supporting documentation demonstrating that the 
route qualifies for exemption from the ISP. Such documentation may 
include settlement rate or other data published by the Commission. The 
Commission will issue a public notice upon the filing of such a 
petition and may, in each case, determine an appropriate deadline for 
filing comments. Unopposed requests may be granted by public notice. 
The Commission will publish and periodically update a list of 
international routes exempt from the ISP on the Commission's web page 
at http://www.fcc.gov/ib.
    11. The Commission also concludes here that it should amend its 
filing requirements to allow that settlement rate information and 
copies of contracts required to be filed under Section 43.51 be filed 
confidentially for arrangements with foreign carriers that possess 
market power on routes where it removes the ISP. The Commission finds 
that requiring carriers to file copies of arrangements entered into 
with foreign carriers that possess market power in the relevant foreign 
telecommunications markets provides a valuable tool to ensure that U.S. 
carriers do not enter into arrangements that would allow the foreign 
carrier to exercise its market power to the detriment of U.S. 
consumers. The Commission will therefore amend Sections 43.51 and 
64.1001 of the Commission's rules to require carriers that exchange 
traffic with foreign carriers that possess market power on routes where 
it has lifted the ISP to file information on rates paid for the 
origination and/or termination of international traffic and copies of 
their contracts with these foreign carriers with the Commission. Such 
information may be filed with the Commission under confidential seal. 
This filing requirement covers all arrangements between U.S. and 
foreign carriers that possess market power, including arrangements 
currently classified as ISR arrangements and alternative settlement 
arrangements. The Commission finds that a confidential filing 
requirement will adequately deter the kind of anticompetitive conduct 
in which affiliated carriers or joint venture partners could engage.
    12. Removing the ISP could exacerbate the concern about 
anticompetitive behavior by allowing a foreign carrier to adopt a 
strategy that would raise the costs of its U.S. affiliate's rivals and 
thus improve the position of the joint enterprise. The Commission finds 
that on routes where it removes the ISP, the danger of harm from such 
action, generally, is significantly reduced. Due to heightened concern 
about anticompetitive arrangements between U.S. carriers and their 
affiliates and joint venture partners, however, the Commission finds it 
necessary to adopt an additional safeguard to deter such arrangements. 
The Commission adopts a safeguard that prohibits U.S. carriers that are 
affiliated or non-equity joint venture partners with foreign carriers 
that possess market power in the foreign market from entering into 
arrangements that may present a significant adverse impact on 
competition on the international route. If the Commission finds that 
carriers have entered into such arrangements, the Commission reserves 
the right to take appropriate action to remedy the situation, including 
reimposing the ISP on the route.
    13. In 1996, the Commission adopted the Flexibility Order (62 FR 
5535, February 6, 1997), which established a framework for permitting 
flexibility in its accounting rate policies where appropriate market 
and regulatory conditions exist. Under the flexibility policy, the 
Commission maintains a presumption in favor of allowing flexible 
settlement arrangements with carriers in WTO Member markets that can be 
rebutted only by a showing that the foreign carrier that is a party to 
the flexible settlement arrangement does not face competition from 
multiple facilities-based carriers. The Commission finds here, that the 
changes it makes in this Order to exempt from the ISP arrangements 
between U.S. and foreign carriers that lack market power, and between 
U.S. and all foreign carriers on routes that allow U.S. carriers to 
terminate at least 50 percent of their traffic at rates that are at 
least 25 percent below the applicable benchmark settlement rate largely 
supersede the policies adopted in the Flexibility Order. The Commission 
therefore finds that maintaining the flexibility policies and 
procedures would needlessly complicate its accounting rate policies. 
The Commission eliminates the flexibility policy and therefore removes 
Section 64.1002 of its rules.
    14. The Commission finds, however, that there may be unforeseen 
circumstances in which it may be in the public interest to allow an 
arrangement with a foreign carrier with market power to deviate from 
the ISP, even though the standard for removing the ISP has not been 
met. The Commission will therefore entertain waivers of the ISP for 
individual settlement arrangements. Among the factors the Commission 
will consider are whether granting such a waiver would promote the 
public interest in achieving cost-based rates for terminating 
international traffic, while precluding the abuse of foreign market 
power.
    15. The Commission finds that there is no valid reason to apply the 
No Special Concessions rule to the terms and conditions under which 
traffic is settled, including the allocation of return traffic, on a 
route where the Commission removes the ISP. It makes no sense for the 
No Special Concessions rule to impose a nondiscrimination requirement 
for settlement arrangements on routes where it removes the ISP. The 
point of removing the ISP is to allow market forces to determine the 
types of arrangements into which carriers enter. The Commission 
therefore will amend Section 63.14 of the Commission's rules to clarify 
that the No Special Concessions rule does not apply to the terms and 
conditions under which traffic is settled, including the allocation of 
return traffic, on routes where the Commission removes the ISP. The 
Commission also finds that the No Special Concessions rule should apply 
to interconnection of international facilities, private line 
provisioning and maintenance, and quality of service on routes where 
the Commission removes the ISP. The Commission finds that there is 
still a risk of anticompetitive conduct for arrangements with foreign 
carriers that possess market power, even on routes where the Commission 
removes the ISP. The Commission therefore will maintain the No Special 
Concessions rule, as modified above, on all routes, regardless of 
whether the ISP applies.
    16. In the Notice, the Commission sought comment on whether 
removing the ISP and related filing requirements may allow carriers to 
enter into

[[Page 34737]]

arrangements that may have anticompetitive effects. In particular, the 
Commission noted that U.S. carriers have, in the past, expressed 
concern regarding whether their competitors may negotiate arrangements 
to accept ``groomed'' traffic, i.e. traffic that terminates in 
particular geographic regions. The Commission finds that the danger of 
anticompetitive effects of grooming arrangements are unlikely. The 
Commission therefore finds that a prohibition against incumbent local 
exchange carriers accepting ``groomed'' international traffic is 
unnecessary.
    17. Given its conclusion that grooming arrangements are not a cause 
for concern on routes where it has removed the ISP, the Commission 
hereby removes the condition imposed on Bell Operating Company 
international Section 214 certificates, which required these carriers 
to obtain prior Commission approval of grooming arrangements.
    18. The Commission sought comment in the Notice on whether it 
should continue to afford carriers the option of filing either a 
notification or a modification notice for simple changes in accounting 
rates negotiated with foreign carriers. The Commission finds that 
adopting a single procedure for accounting rate changes will simplify 
its regulatory structure and avoid confusion for parties seeking to 
make the required filings with the Commission. The Commission therefore 
adopts its proposal to remove the option of filing a notification and 
require that all accounting rate filings be governed under the existing 
procedures for accounting rate modifications.
    19. The Commission also sought comment on the extent to which it 
should continue to require that carriers making accounting rate filings 
serve every carrier that provides service on the international route 
with a copy of the filing. The Commission noted that the number of 
international carriers is growing on many routes and sought comment on 
whether another approach is warranted. The Commission also noted that 
it had been urged to require that accounting rate filings be placed on 
public notice, as is required for petitions seeking approval of 
flexible settlement arrangements. Further, the Commission noted that it 
has introduced an electronic filing mechanism for accounting rate 
filings, and that information contained in such filings would be 
available on the Commission's web site at http://www.fcc.gov/ib. The 
Commission's electronic filing system for accounting rate filings was 
introduced very recently, however, and the Commission has not had 
sufficient experience with the system to determine whether the 
information available on the Commission's web site will be an adequate 
substitute for the existing service requirement. The Commission 
therefore declines to remove the existing service requirement at this 
time. The Commission anticipates, however, that it may remove the 
service requirement in the near future, as it continues to implement 
the new electronic filing system. The Commission will therefore 
eliminate the existing service requirement within 3 months of the 
release of this Order. The Commission delegates to the Chief, 
International Bureau the authority to implement this change and direct 
the International Bureau to issue a Public Notice at that time to make 
this change in the Commission's rules.
    20. The Commission also has pending two remaining issues on 
reconsideration of the Foreign Carrier Entry Order (60 FR 6732, 
December 29, 1995; 61 FR 4937, February 9, 1996). In that order, the 
Commission adopted the requirement that U.S. facilities-based carriers 
obtain separate Section 214 authority and demonstrate that equivalency 
exists when such carriers seek to provide ISR over their facilities-
based U.S. international private lines. The Commission adopted an 
exception to this general rule, however, to permit a carrier to use its 
U.S. facilities-based private lines to carry switched traffic without 
demonstrating equivalency where two conditions are met: (1) the private 
line is interconnected to the public switched network on one end only--
either the U.S. end or the foreign end; and (2) the foreign 
correspondent with which the U.S. facilities-based carrier is 
interchanging switched traffic is not the owner of the underlying 
foreign private line half-circuit. The Commission finds above that 
there are significant public interest benefits to permitting U.S. 
facilities-based carriers to provide switched services, without 
limitation, outside the ISP in correspondence with foreign carriers 
that lack market power. In light of this conclusion, the provision the 
Commission adopted in the Foreign Carrier Entry Order permitting one-
end interconnection by U.S. facilities-based carriers is superfluous. 
The Commission's decision to lift the ISP for all U.S. carrier 
arrangements with foreign carriers that lack market power thus 
effectively subsumes the rule that permits one-end interconnection by 
U.S. facilities-based carriers. The Commission therefore eliminates 
that rule.
    21. British Telecommunications North America (BTNA) seeks 
reconsideration of the Commission's decision not to allow resellers on 
the U.S. end to offer one-end interconnection services. The Commission 
finds merit to BTNA's argument that U.S. private line resellers should 
be accorded the same regulatory freedom as U.S. facilities-based 
carriers to exchange switched traffic in correspondence with foreign 
carriers that lack market power. The Commission therefore modifies its 
rules to permit U.S.-authorized private line resellers to interconnect 
their private lines to the public switched network, at one or both 
ends, for the provision of switched basic services, and thus, to engage 
in ISR in either of the following circumstances: (1) on any route where 
the resale carrier exchanges switched traffic with a foreign carrier 
that lacks market power; or (2) on any route for which the Commission 
has authorized the provision of ISR. This rule supersedes the condition 
that appears in the Section 214 authorizations of private line 
resellers that limits their ability to resell interconnected private 
lines to routes for which the Commission have authorized ISR.
    22. The Commission also directs all U.S. private line carriers to 
amend their international private line tariffs to track the policy and 
rules the Commission adopts in this Order. In particular, the 
Commission shall require that a carrier's tariff explicitly state the 
Commission's policy that the private line user may engage in resale of 
the international private line for the provision of a switched, basic 
telecommunications service upon authorization from the Commission under 
Section 214 of the Communications Act of 1934, as amended, and provided 
that the private line is used only on a route where the resale carrier 
exchanges switched traffic with a foreign carrier that the Commission 
has determined lacks market power; or on any route for which the 
Commission has authorized the provision of switched services over 
private lines. Carriers will be required to amend their international 
private line tariffs within ten days after the effective date of the 
rules adopted in this order.

Final Regulatory Flexibility Certification

    23. The Regulatory Flexibility Act (RFA), 5 U.S.C. 601 et seq., 
requires that a regulatory flexibility analysis be prepared for notice-
and-comment rulemaking proceedings, unless the agency certifies that 
``the rule will not, if promulgated, have a significant economic impact 
on a substantial number of small entities.'' The RFA generally defines 
``small entity'' as having the same meaning as the terms

[[Page 34738]]

``small business,'' ``small organization,'' and ``small governmental 
jurisdiction.'' In addition, the term ``small business'' has the same 
meaning as the term ``small business concern'' under the Small Business 
Act. A small business concern is one which: (1) is independently owned 
and operated; (2) is not dominant in its field of operation; and (3) 
satisfies any additional criteria established by the Small Business 
Administration (SBA).
    24. In the Notice in this proceeding, the Commission certified that 
the proposed rules ``[would] not, if promulgated, have a significant 
economic impact on a substantial number of small entities.'' No 
comments were received concerning this certification. The purposes of 
this proceeding are to eliminate some regulatory requirements and to 
simplify and clarify other existing rules. These rule changes will 
affect facilities-based international telecommunications carriers 
exclusively--in particular, approximately 10 facilities-based 
international telecommunications carriers. Neither the Commission nor 
SBA has developed a small business definition specifically applicable 
to such international carriers; therefore, the Commission will utilize 
the definition under the SBA rules for Communications Services, Not 
Elsewhere Classified (NEC). Under this definition, a small business is 
one with $11.0 million or less in annual receipts. Based on information 
filed with the Commission, the subject facilities-based international 
telecommunications carriers do not fall within the above definition of 
``small business'' because they each have more than $11.0 million in 
annual receipts. The rule modifications at issue do not impose any 
additional compliance burden on persons dealing with the Commission, 
including small entities. Rather, this action removes filing 
requirements in scaling back application of the Commission's 
International Settlements policy. Accordingly, the Commission 
certifies, pursuant to the RFA, that the rules adopted herein will not 
have a significant economic impact on a substantial number of small 
entities. The Commission will send a copy of the Report and Order and 
Order on Reconsideration, including a copy of this final certification, 
in a report to Congress pursuant to the Small Business Regulatory 
Enforcement Fairness Act of 1996, see 5 U.S.C. 801(a)(1)(A). In 
addition, the Report and Order and Order on Reconsideration and this 
certification will be sent to the Chief Counsel for Advocacy of the 
Small Business Administration, and will be published in the Federal 
Register. See 5 U.S.C. 605(b).

Supplemental Final Regulatory Flexibility Analysis

    25. As required by the Regulatory Flexibility Act (RFA), an Initial 
Regulatory Flexibility Analysis (IRFA) was incorporated in the Notice 
in IB Docket No. 95-22, and a Final Regulatory Flexibility Analysis 
(FRFA) was incorporated into the Report and Order in that docket. The 
Order contains a Supplemental Final Regulatory Flexibility Analysis 
(Supplemental FRFA) which conforms to the RFA.
    26. Need for, and Objectives of, the Present Action. This action 
creates greater opportunities for U.S. international private line 
resellers to carry U.S. international traffic outside of the 
settlements process. It also harmonizes the treatment of private line 
resellers with that of facilities-based carriers.
    27. Summary of Significant Issues Raised by Reconsideration 
Petitions. No petitions were received in direct response to the FRFA in 
the Report and Order, nor were small business issues raised.
    28. Description and Estimate of the Number of Small Entities to 
which the Rules Will Apply. As noted in the associated Final Regulatory 
Flexibility Certification in IB Docket No. 98-148, supra, the RFA 
directs agencies to provide a Regulatory Flexibility Analysis in 
notice-and-comment rulemaking proceedings, unless the agency certifies 
that ``the rule will not, if promulgated, have a significant economic 
impact on a substantial number of small entities.'' The Commission's 
action on reconsideration in IB Docket No. 95-22 will affect 
telecommunications resellers, including resellers that are small 
businesses; therefore, the Commission incorporates this present 
Supplemental FRFA into its Report and Order and Order on 
Reconsideration.
    29. In light of the petitions for reconsideration in IB Docket No. 
95-22, the Commission modifies its rules to allow U.S. international 
private line resellers to carry switched traffic over international 
private line circuits in correspondence with foreign carriers that lack 
market power. The Commission expects that these changes will allow U.S. 
private line resellers, including small entities, to take advantage of 
new opportunities in the international telecommunications marketplace. 
As noted in the associated certification, supra, in instances where 
neither the Commission nor the SBA has developed a small business 
definition specifically applicable to the entities potentially affected 
by its action, the Commission utilizes the pertinent definition under 
the SBA rules. Here, neither the Commission nor the SBA has developed a 
definition of small entities specifically applicable to resellers. The 
closest applicable SBA definition for a reseller is a telephone 
communications company other than a radiotelephone (wireless) company. 
The Commission describes available statistics for telecommunications 
entities generally, including resellers, then give more particular 
information on resellers.
    30. The SBA has developed a small business definition for 
establishments engaged in providing ``Telephone Communications, Except 
Radiotelephone'' (wireless) to be such businesses having no more than 
1,500 employees. The U.S. Bureau of the Census reports that there were 
2,321 such telephone companies in operation for at least one year at 
the end of 1992. All but 26 of the 2,321 non-radiotelephone companies 
listed by the Census Bureau were reported to have fewer than 1,000 
employees. Thus, even if all 26 of those companies had more than 1,500 
employees, there would still be 2,295 non-radiotelephone companies that 
might qualify as small entities. The Commission does not have data 
specifying the number of these carriers that are not independently 
owned and operated, and thus are unable at this time to estimate with 
greater precision the number of wireline carriers and service providers 
that would qualify as small business concerns under the SBA's 
definition. Consequently, the Commission estimates that fewer than 
2,295 small telephone communications companies other than 
radiotelephone companies are small entities that may be affected by 
present action.
    31. The most reliable source of information regarding the total 
numbers of certain common carrier and related providers nationwide, as 
well as the numbers of commercial wireless entities, appears to be data 
the Commission publishes annually in its Telecommunications Industry 
Revenue report, regarding the Telecommunications Relay Service (TRS). 
According to TRS data, 339 reported that they were engaged in the 
resale of telephone service (including debit card providers). The 
Commission does not have data specifying the number of these carriers 
that are not independently owned and operated or have more than 1,500 
employees, and thus are unable at this time to estimate

[[Page 34739]]

with greater precision the number of resellers that would qualify as 
small business concerns under the SBA's definition. Consequently, the 
Commission estimates that there are fewer than 339 small entity 
resellers that may be affected by the rules.
    32. Steps Taken to Minimize Significant Economic Impact on Small 
Entities, and Significant Alternatives Considered. In its 
reconsideration of IB Docket No. 95-22, the Commission modifies its 
rules to allow U.S. private line resellers to carry switched traffic 
over international private line circuits in correspondence with foreign 
carriers that lack market power. The Commission expects that these 
changes will expand the ability of U.S. private line resellers, 
including small entities, to reap economic benefits by taking advantage 
of new opportunities in the international telecommunications 
marketplace.
    33. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements. As discussed, in reconsideration of the 
petitions in IB Docket No. 95-22, the Commission modifies its rules to 
allow U.S. private line resellers to carry switched traffic over 
international private line circuits in correspondence with foreign 
carriers that lack market power. Authorized private line resellers will 
be subject to no reporting, recordkeeping, or compliance requirements 
in order to carry switched traffic over international private line 
circuits in correspondence with foreign carriers that lack market 
power.
    34. Report to Congress. The Commission will send a copy of the 
Report and Order and Order on Reconsideration, including this 
Supplemental FRFA, in a report to be sent to Congress pursuant to the 
Small Business Regulatory Enforcement Fairness Act of 1996, see 5 
U.S.C. 801(a)(1)(A). In addition, the Commission will send a copy of 
the Report and Order and Order on Reconsideration, including this 
Supplemental FRFA, to the Chief Counsel for Advocacy of the Small 
Business Administration. A copy of the Report and Order and Order on 
Reconsideration and Supplemental FRFA (or summaries thereof) will also 
be published in the Federal Register. See 5 U.S.C. 604(b).

Paperwork Reduction Act of 1995 Analysis

    35. This Order contains information collections which will be 
submitted to the Office of. As part of our continuing effort to reduce 
paperwork burdens, the Commission invites the general public and other 
Federal agencies to take this opportunity to comment on the following 
information collection, as required by the Paperwork Reduction Act of 
1995, Public Law 104-13. Public and agency comments are due August 30, 
1999. Comments should address the following: (a) whether the proposed 
collection of information is necessary for the proper performance of 
the functions of the Commission, including whether the information 
shall have practical utility; (b) the accuracy of the Commission's 
burden estimate; (c) ways to enhance the quality, utility, and clarity 
of the information collected; and (d) ways to minimize the burden of 
the collection of information on the respondents, including the use of 
automated collection techniques or other forms of information 
technology.
    OMB Control Number: 3060-XXXX.
    Title: Operating Agreements of Common Carriers & Affiliates.
    Form Number: N/A.
    Type of Review: New collection.
    Respondents: Business and other for-profit entities.
    Number of Respondents: 20.
    Number of Responses: 1180.
    Estimated Time Per Response: 5 hours.
    Frequency of Response: On Occasion.
    Total Annual Burden: 5900.
    Total Annual Costs: None.
    Needs and Uses: The information contained in these reports will be 
used by the Commission to determine whether the activities reported 
have affected or are likely to affect adversely the carrier's service 
to the public or whether these activities result in undue or 
unreasonable increases in charges. If this information was not 
reported, the Commission would not be able to ascertain the impact of 
these activities on the just and reasonable rates as required by the 
Act.

    OMB Control Number: 3060-0454.
    Title: Regulation of International Accounting Rates.
    Form Number: N/A.
    Type of Review: Revision of a currently approved collection.
    Respondents: Business and other for-profit entities.
    Number of Respondents: 20.
    Estimated Time Per Response: l hour.
    Frequency of Response: On occasion. We estimate that more carriers 
will file for fewer markets (about 38). Third party disclosure.
    Total Annual Burden: 760.
    Total Annual Costs: $25,270.
    Needs and Uses: The information is a method for the Commission to 
monitor the international accounting rates to ensure that the public 
interest is being served and also to enforce Commission policies.

    OMB Control Number: 3060-0764.
    Title: Regulation of International Accounting Rates.
    Form Number: N/A.
    Type of Review: Elimination of a currently approved collection.
    Respondents: Business and other for-profit entities.
    Number of Respondents: -30.
    Estimated Time Per Response: 16 hours.
    Total Annual Burden: -80 hours.
    Total Annual Costs: -$180.000.
    Needs and Uses: This Order removes Section 64.1002, and thus this 
collection of information is no longer necessary.
    Written comments by the public on the proposed information 
collections are due on or before August 30, 1999. Direct all comments 
to Les Smith, Federal Communications Commission, 445 12th Street, S.W., 
Washington, DC 20554 or via the Internet to [email protected]. For 
additional information or copies of the information collections contact 
Les Smith at (202) 418-0217 or via the Internet at [email protected].

Ordering Clauses

    36. Accordingly, it is ordered that, pursuant to Sections 1, 2, 
4(i), 201, 203, 205, 214, 303(r), and 309 of the Communications Act of 
1934, as amended, 47 U.S.C. Sections 151, 152, 154(i), 201, 205, 214, 
303(r), 309, the policies, rules, and requirements discussed herein are 
adopted and Parts 43 and 63 of the Commission's rules, 47 CFR Parts 43 
and 63, are amended as set forth in the rule changes.
    37. It is further ordered that the petitions for reconsideration in 
CC Docket No. 90-337 are denied.
    38. It is further ordered that the petitions for reconsideration in 
IB Docket No. 95-22 are granted in part and denied in part, as 
discussed herein.
    39. It is further ordered that the Commission's Office of Public 
Affairs, Reference Operations Division, shall send a copy of this 
Report and Order and Order on Reconsideration, including the Final 
Regulatory Flexibility Certification and the Supplemental Final 
Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of 
the Small Business Administration.
    40. It is further ordered that the policies, rules, and 
requirements established in this decision shall take effect after the 
Commission publishes a document in the Federal Register announcing the 
effective date of these rules or in accordance with the

[[Page 34740]]

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

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

    Communications common carriers, Reporting and recordkeeping 
requirements.

Federal Communications Commission.
Magalie Roman Salas,
Secretary.

Rule Changes

    For the reasons discussed in the preamble, the Federal 
Communications Commission amends 47 CFR parts 0, 43, 63, and 64 as 
follows:

PART 0--COMMISSION ORGANIZATION

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

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

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


Sec. 0.457  Records not routinely available for public inspection.

* * * * *
    (d) * * *
    (1) * * *
    (vi) The rates, terms and conditions in any agreement between a 
U.S. carrier and a foreign carrier that govern the settlement of U.S. 
international traffic, including the method for allocating return 
traffic, if the U.S. international route is exempt from the 
international settlements policy under Sec. 43.51(g) of this chapter.
* * * * *

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

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

    Authority: 47 U.S.C. 154; Telecommunications Act of 1996, Pub. 
L. 104-104, secs. 402(b)(2)(B), (c), 110 Stat. 56 (1996) as amended 
unless otherwise noted. 47 U.S.C. 211, 219, 220 as amended.

    4. Section 43.51 is amended by revising paragraphs (a), (b) and 
(e), and by adding paragraphs (f) and (g) to read as follows:


Sec. 43.51  Contracts and concessions.

    (a) Any communications common carrier that: is engaged in domestic 
communications and has not been classified as nondominant pursuant to 
Sec. 61.3 of this chapter or, except as provided in paragraphs (f) and 
(g) of this section, is engaged in foreign communications, and enters 
into a contract with another carrier, including an operating agreement 
with a communications entity in a foreign point for the provision of a 
common carrier service between the United States and that point; must 
file with the Commission, within thirty (30) days of execution, a copy 
of each contract, agreement, concession, license, authorization, 
operating agreement or other arrangement to which it is a party and 
amendments thereto with respect to the following:
    (1) The exchange of services;
    (2) Except as provided in paragraph (c) of this section, the 
interchange or routing of traffic and matters concerning rates, 
accounting rates, division of tolls, or the basis of settlement of 
traffic balances; and
    (3) The rights granted to the carrier by any foreign government for 
the landing, connection, installation, or operation of cables, land 
lines, radio stations, offices, or for otherwise engaging in 
communication operations.
    (b) If the agreement referred to in this section is made other than 
in writing, a certified statement covering all details thereof must be 
filed by at least one of the parties to the agreement. Each other party 
to the agreement which is also subject to these provisions may, in lieu 
of also filing a copy of the agreement, file a certified statement 
referencing the filed document. The Commission may, at any time and 
upon reasonable request, require any communication common carrier not 
subject to the provisions of this section to submit the documents 
referenced in this section.
* * * * *
    (e) International settlements policy. (1) Except as provided in 
paragraph (g) of this section, if a carrier files an operating 
agreement (whether in the form of a contract, concession, license, 
etc.) referred to in paragraph (a) of this section to begin providing 
switched voice, telex, telegraph, or packet-switched service between 
the United States and a foreign point and the terms and conditions of 
such agreement relating to the exchange of services, interchange or 
routing of traffic and matters concerning rates, accounting rates, 
division of tolls, the allocation of return traffic, or the basis of 
settlement of traffic balances, are not identical to the equivalent 
terms and conditions in the operating agreement of another carrier 
providing the same or similar service between the United States and the 
same foreign point, the carrier must also file with the International 
Bureau a modification request under Sec. 64.1001 of this chapter. 
Unless a carrier is providing switched voice, telex, telegraph, or 
packet-switched service between the United States and a foreign point 
pursuant to an operating agreement that is exempt from the 
international settlements policy under paragraph (g) of this section, 
the carrier shall not bargain for or agree to accept more than its 
proportionate share of return traffic.
    (2) Except as provided in paragraph (g) of this section, if a 
carrier files an amendment to the operating agreement referred to in 
paragraph (a) of this section under which it already provides switched 
voice, telex, telegraph, or packet-switched service between the United 
States and a foreign point, and other carriers provide the same or 
similar service to the same foreign point, and the amendment relates to 
the exchange of services, interchange or routing of traffic and matters 
concerning rates, accounting rates, division of tolls, the allocation 
of return traffic, or the basis of settlement of traffic balances, the 
carrier must also file with the International Bureau a modification 
request under Sec. 64.1001 of this chapter.
    (f) Confidential treatment. (1) A carrier providing service on an 
international route that is exempt from the international settlements 
policy under paragraph (g)(2) of this section, but that is required by 
paragraph (a) or (b) of this section to file a contract covering that 
route with the Commission, may request confidential treatment under 
Sec. 0.457 of this chapter for the rates, terms and conditions that 
govern the settlement of U.S. international traffic.
    (2) Carriers requesting confidential treatment under this paragraph 
must include the information specified in Sec. 64.1001(c) of this 
chapter. Such filings shall be made with the Commission, with a copy to 
the Chief, International Bureau. The transmittal letter accompanying 
the confidential filing shall clearly identify the filing as responsive 
to Sec. 43.51(f).
    (g) Exemption from the international settlements policy and 
contract filing requirements.
    (1) A carrier that enters into a contract, including an operating 
agreement, for the provision of a common carrier service between the 
United States and a foreign point with a carrier that lacks market 
power in that foreign market is not subject to the requirements of 
paragraphs (a), (b) or (e) of this section.
    (i) A foreign carrier lacks market power for purposes of paragraph 
(g)(1) of this section if it does not appear on the Commission's list 
of foreign carriers that do not qualify for the presumption

[[Page 34741]]

that they lack market power in particular foreign points. The list of 
foreign carriers that do not qualify for the presumption that they lack 
market power in particular foreign points is available from the 
International Bureau's World Wide Web site at http://www.fcc.gov/ib.
    (ii) The Commission will include on the list of foreign carriers 
that do not qualify for the presumption that they lack market power in 
particular foreign points any foreign carrier that has 50 percent or 
more market share in the international transport or local access 
markets of a foreign point. A party that seeks to remove such a carrier 
from the Commission's list bears the burden of submitting information 
to the Commission sufficient to demonstrate that the foreign carrier 
lacks 50 percent market share in the international transport and local 
access markets on the foreign end of the route or that it nevertheless 
lacks sufficient market power on the foreign end of the route to affect 
competition adversely in the U.S. market. A party that seeks to add a 
carrier to the Commission's list bears the burden of submitting 
information to the Commission sufficient to demonstrate that the 
foreign carrier has 50 percent or more market share in the 
international transport or local access markets on the foreign end of 
the route or that it nevertheless has sufficient market power to affect 
competition adversely in the U.S. market.
    (2) A carrier that enters into a contract, including an operating 
agreement, with a carrier in a foreign point for the provision of a 
common carrier service between the United States and that point is not 
subject to the international settlements policy in paragraph (e) of 
this section if the foreign point appears on the Commission's list of 
international routes that the Commission has exempted from the 
international settlements policy. The list of exempt routes is 
available from the International Bureau's World Wide Web site at http:/
/www.fcc.gov/ib.
    (i) A party that seeks to add a foreign market to the list of 
markets that are exempt from the international settlements policy must 
show that U.S. carriers are able to terminate at least 50 percent of 
U.S.-billed traffic in the foreign market at rates that are at least 25 
percent below the benchmark settlement rate adopted for that country in 
IB Docket No. 96-261.
    (ii) A party that seeks to remove a foreign market from the list of 
markets that are exempt from the international settlements policy must 
show that U.S. carriers are unable to terminate at least 50 percent of 
U.S.-billed traffic in the foreign market at rates that are at least 25 
percent below the benchmark settlement rate adopted for that country in 
IB Docket No. 96-261.

    Note to paragraph (g): The Commission's benchmark settlement 
rates are available in International Settlement Rates, IB Docket No. 
96-261, Report and Order, 12 FCC Rcd 19,806, 62 FR 45758 (August 29, 
1997).

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

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

    Authority: 47 U.S.C. 151, 154(i), 154(j), 160, 161, 201-205, 
218, 403, 533 unless otherwise noted.

    6. Section 63.14 is amended by revising paragraphs (a) and (c), and 
by removing paragraph (d), to read as follows:


Sec. 63.14  Prohibition on agreeing to accept special concessions.

    (a) Any carrier authorized to provide international communications 
service under this part shall be prohibited, except as provided in 
paragraph (c) of this section, from agreeing to accept special 
concessions directly or indirectly from any foreign carrier with 
respect to any U.S. international route where the foreign carrier 
possesses sufficient market power on the foreign end of the route to 
affect competition adversely in the U.S. market and from agreeing to 
accept special concessions in the future.

    Note to paragraph (a): Carriers may rely on the Commission's 
list of foreign carriers that do not qualify for the presumption 
that they lack market power in particular foreign points for 
purposes of determining which foreign carriers are the subject of 
the prohibitions contained in this section. The Commission's list of 
foreign carriers that do not qualify for the presumption that they 
lack market power is available from the International Bureau's World 
Wide Web site at http://www.fcc.gov/ib.
* * * * *
    (c) This section shall not apply to the rates, terms and conditions 
in an agreement between a U.S. carrier and a foreign carrier that 
govern the settlement of international traffic, including the method 
for allocating return traffic, if the international route is exempt 
from the international settlements policy under Sec. 43.51(g)(2) of 
this chapter.
    7. Section 63.16 is amended by revising paragraph (a) to read as 
follows:


Sec. 63.16  Switched services over private lines.

    (a) Except as provided in Secs. 63.22 (e)(2) and 63.23(d)(2), a 
carrier may provide switched basic services over its authorized private 
lines if and only if the country at the foreign end of the private line 
appears on a Commission list of destinations to which the Commission 
has authorized the provision of switched services over private lines. 
The list of authorized destinations is available from the International 
Bureau's World Wide Web site at http://www.fcc.gov/ib.
* * * * *
    8. Section 63.22 is amended by revising paragraph (e) to read as 
follows:


Sec. 63.22  Facilities-based international common carriers.

* * * * *
    (e)(1) Except as provided in paragraph (e)(2) of this section, the 
carrier may provide switched basic services over its authorized 
facilities-based private lines if and only if the country at the 
foreign end of the private line appears on a Commission list of 
countries to which the Commission has authorized the provision of 
switched services over private lines. See Sec. 63.16. If at any time 
the Commission removes the country from that list or finds that market 
distortion has occurred in the routing of traffic between the United 
States and that country, the carrier shall comply with enforcement 
actions taken by the Commission.
    (2) The carrier may use its authorized facilities-based private 
lines to provide switched basic services in circumstances where the 
carrier is exchanging switched traffic with a foreign carrier that 
lacks market power in the country at the foreign end of the private 
line.
    (3) A foreign carrier lacks market power for purposes of paragraph 
(e)(2) of this section if it does not appear on the Commission's list 
of foreign carriers that do not qualify for the presumption that they 
lack market power in particular foreign points. This list is available 
from the International Bureau's World Wide Web site at 
http://www.fcc.gov/ib.
* * * * *
    9. Section 63.23 is amended by revising paragraph (d) to read as 
follows:


Sec. 63.23  Resale-based international common carriers.

* * * * *
    (d)(1) Except as provided in paragraph (d)(2) of this section, the 
carrier may provide switched basic services over its authorized resold 
private lines if and

[[Page 34742]]

only if the country at the foreign end of the private line appears on a 
Commission list of countries to which the Commission has authorized the 
provision of switched services over private lines. See Sec. 63.16. If 
at any time the Commission removes the country from that list or finds 
that market distortion has occurred in the routing of traffic between 
the United States and that country, the carrier shall comply with 
enforcement actions taken by the Commission.
    (2) The carrier may use its authorized resold private lines to 
provide switched basic services in circumstances where the carrier is 
exchanging switched traffic with a foreign carrier that lacks market 
power in the country at the foreign end of the private line.
    (3) A foreign carrier lacks market power for purposes of paragraph 
(d)(2) of this section if it does not appear on the Commission's list 
of foreign carriers that do not qualify for the presumption that they 
lack market power in particular foreign points. This list is available 
from the International Bureau's World Wide Web site at 
http://www.fcc.gov/ib.
* * * * *

PART 64 --MISCELLANEOUS RULES RELATING TO COMMON CARRIERS

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

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

    11. Section 64.1001 is amended by revising paragraphs (b) through 
(g) and by removing paragraphs (h) through (l) to read as follows:


Sec. 64.1001  International settlements policy and modification 
requests.

* * * * *
    (b) If the international settlement arrangement in the operating 
agreement or amendment referred to in Sec. 43.51(e)(1) or (e)(2) of 
this chapter differs from the arrangement in effect in the operating 
agreement of another carrier providing service to or from the same 
foreign point, the carrier must file a modification request under this 
section unless the international route is exempt from the international 
settlements policy under Sec. 43.51(g) of this chapter.
    (c) A modification request must contain the following information:
    (1) The applicable international service;
    (2) The name of the foreign telecommunications administration;
    (3) The present accounting rate (including any surcharges);
    (4) The new accounting rate (including any surcharges);
    (5) The effective date;
    (6) The division of the accounting rate; and
    (7) An explanation of the proposed modification(s) in the operating 
agreement with the foreign correspondent.
    (d) A modification request must contain a notarized statement that 
the filing carrier:
    (1) Has not bargained for, nor has knowledge of, exclusive 
availability of the new accounting rate;
    (2) Has not bargained for, nor has any indication that it will 
receive, more than its proportionate share of return traffic; and
    (3) Has informed the foreign administration that U.S. policy 
requires that competing U.S. carriers have access to accounting rates 
negotiated by the filing carrier with the foreign administration on a 
nondiscriminatory basis.
    (e) An operating agreement or amendment filed under a modification 
request cannot become effective until the modification request has been 
granted under paragraph (g) of this section.
    (f) Carriers must serve a copy of the modification request on all 
carriers providing the same or similar service to the foreign 
administration identified in the filing on the same day a modification 
request is filed.
    (g) All modification requests will be subject to a twenty-one (21) 
day pleading period for objections or comments, commencing the date 
after the request is filed. If the modification request is not complete 
when filed, the carrier will be notified that additional information is 
to be submitted, and a new 21 day pleading period will begin when the 
additional information is filed. The modification request will be 
deemed granted as of the twenty-second (22nd) day without any formal 
staff action being taken: provided
    (1) No objections have been filed, and
    (2) The International Bureau has not notified the carrier that 
grant of the modification request may not serve the public interest and 
that implementation of the proposed modification must await formal 
staff action on the modification request. If objections or comments are 
filed, the carrier requesting the modification request may file a 
response pursuant to Sec. 1.45 of this chapter. Modification requests 
that are formally opposed must await formal action by the International 
Bureau before the proposed modification can be implemented.


Sec. 64.1002  [Removed]

    12. Section 64.1002 is removed.
[FR Doc. 99-16032 Filed 6-28-99; 8:45 am]
BILLING CODE 6712-10-P