NOTICE ********************************************************* NOTICE ********************************************************* This document was originally prepared in Word Perfect. If the original document contained-- * Footnotes * Boldface & Italics --this information is missing in this version The document format (spacing, margins, tabs, etc.) is changed too. If you need the complete document, download the Word Perfect version. For information about downloading documents (FTP) see file how2ftp. File how2ftp (.txt & .wp) is in directory /pub/Bureaus/Miscellaneous/Public_Notices/ ***************************************************************** ******** Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 DA 96-621 In the Matter of) ) ACC Global Corporation) ) Applications for authority pursuant ) to Section 214 of the Communications ) File Nos. I-T-C-95-056 Act of 1934, as amended, to resell ) I-T-C-95-059 private lines for the provision of ) switched services between the ) United States and Germany ) and the United States and France ) MEMORANDUM OPINION AND ORDER Adopted: April 23, 1996 Released: April 23, 1996 By the Chief, International Bureau: Introduction 1. ACC Global Corporation (ACC) seeks authorization under Section 214 of the Communications Act to resell international private lines for the provision of switched services between the United States and Germany, and the United States and France. The Commission requires applicants seeking to resell international private lines for the provision of switched services to demonstrate that equivalent resale opportunities exist for U.S.-based carriers in the country at the other end of the private line. ACC asks us to find that Germany and France offer such equivalent opportunities. 2. ACC is a Delaware corporation that resells private line and switched services. ACC is a wholly-owned subsidiary of ACC Corp., a publicly-traded U.S. corporation, with foreign reseller affiliates in Canada and the United Kingdom. ACC proposes to lease, from authorized U.S. carriers, international private lines interconnected to the public switched network at both ends, and to use them for the provision of switched services between the United States and Germany and the United States and France. 3. We placed ACC's applications on public notice on November 29, 1994. AT&T Corp. (AT&T) filed petitions to deny each application. ACC filed an opposition to each AT&T petition, to which AT&T replied. 4. We find that equivalent opportunities do not now exist in either Germany or France for U.S.-based carriers seeking to engage in international private line resale between the United States and either Germany or France. Accordingly, we deny ACC's applications. ACC may, of course, file anew when it can demonstrate that equivalent opportunities exist in those markets. While we see much to be encouraged about as the German and French Governments move towards liberalization, we do not yet see real movement on resale opportunities. To the contrary, Deutsche Telekom and France Telecom appear to be resisting such competition, and the respective governments do not seem inclined to press the issue. Nonetheless, we hope that regulatory conditions in those countries ultimately will permit us to find that equivalent opportunities exist. Background 5. In the International Resale Order, the Commission found that encouraging the resale of international telecommunications services would further the dual public interest in cost-based prices for international telecommunications services and more efficient use of international facilities. Specifically, the Commission concluded that promoting the resale of international private lines to provide switched services would foster new entry into the international telecommunications market and exert downward pressure on above-cost international accounting rates and foreign collection rates through the diversion of switched traffic to resold private lines. 6. The Commission further concluded, however, that permitting "one-way" resale, i.e., resale only from the overseas point inbound to the United States, would have the undesirable effect of undermining the goals and benefits that international private line resale is intended to achieve. Such "one-way" resale could enable foreign carriers unilaterally to divert to private lines U.S. inbound switched traffic, for which U.S. carriers normally receive settlements payments under our International Settlements Policy, thereby evading the settlements process for that traffic. 7. Permitting the unilateral evasion of the settlements process would not only exacerbate the U.S. net settlements deficit, it would also fail to exert downward pressure on international accounting rates and foreign collection rates, thereby frustrating the Commission's international private line resale policy goals. Accordingly, the Commission concluded that it would authorize the resale of international private lines interconnected to the public switched network only to countries that allow such resale to occur in both directions. The Commission also required each applicant seeking to resell international private lines in the United States to demonstrate that the destination foreign country affords resale opportunities equivalent to those available under U.S. law. 8. In the Foreign Carrier Entry Order, the Commission amended its rules in Section 63.01 to restate its equivalency criteria in the same manner as its effective competitive opportunities criteria, which govern entry by foreign carriers that control foreign bottleneck facilities. The Commission's rules thus require that applicants seeking to provide switched service over resold private lines demonstrate that the foreign country at the other end of the private line provides U.S. carriers with: (1) the legal right to resell international private lines, interconnected at both ends, for the provision of switched services; (2) nondiscriminatory charges, terms and conditions for interconnection of foreign domestic carrier facilities for termination and origination of international services, with adequate means of enforcement; (3) competitive safeguards to protect against anticompetitive and discriminatory practices affecting private line resale; and (4) fair and transparent regulatory procedures, including separation between the regulator and the operator of international facilities-based services. 9. The Commission also noted that while the effective competitive opportunities test requires that these four principles be satisfied in the near future, its equivalency standard requires that the four principles be satisfied at the time an equivalency determination is made. This distinction was retained to serve the underlying purpose of the equivalency requirement: to prevent undue increase in the U.S. settlements deficit. ACC's Applications A. U.S.-Germany Private Line Resale Application 10. ACC's applications require that we determine whether there are equivalent private line resale opportunities for U.S.-based carriers in Germany and France. ACC does not contend that Germany currently meets the Commission's equivalency requirement. Rather, ACC claims that there are positive signs that Germany may offer such opportunities in the future based on ACC's belief that the German Federal Ministry of Posts and Telecommunications is "intrigued" by the concept of domestic and international resale. ACC believes that this application facilitates its domestic and international resale applications currently pending in Germany by presenting a complete proposal for end-to-end service. ACC asserts that Germany has taken significant steps in recent years, including permitting the use of private lines to resell data and value-added services, to open its telecommunications market. According to ACC, the application before us will help encourage further German liberalization. 11. AT&T urges us to deny ACC's application. It asserts that Germany fails to meet the Commission's minimum requirement under Section 63.01(k)(5) of our rules for existing, not potential, equivalency. AT&T states that Germany prohibits essential conditions necessary for such a finding of equivalency: the resale of public switched voice services and the ability to interconnect private lines to the public switched network at both ends for the provision of public switched voice services. AT&T also asserts that the German market lacks the protections -- including tariffed or standard, nondiscriminatory carrier interconnect arrangements at standard prices -- necessary to ensure the existence of a viable international resale market in a country that is dominated by Deutsche Telekom, the monopoly provider of public switched voice telephony services and facilities. Moreover, AT&T disagrees with ACC that the application promotes German private line resale liberalization. Specifically, AT&T states that continued consideration of the application would be counter-productive by suggesting that something less than true equivalency would be sufficient. B. U.S.-France Private Line Resale Application 12. ACC also does not contend that there are equivalent resale opportunities in France. ACC recognizes that France does not permit the resale of public switched voice services or the interconnection of private lines to the public switched network at both ends, the minimum criteria for an equivalency finding. France Telecom is the monopoly provider of public switched voice telephony services and facilities, ACC concedes. Instead, ACC submits that the French regulatory environment is becoming favorably disposed towards competition. ACC states that, based on its contacts with French regulators, it believes that the French Government is interested in the concept of international private line resale. ACC further believes that the pendency of its application before us will serve to accelerate the process of securing authority to provide private line resale in France. 13. AT&T urges us to deny ACC's application. AT&T states that ACC makes no claim that equivalent resale opportunities currently exist in France, and only asserts that, at most, these opportunities might exist in the future. AT&T states that France does not meet the Commission's minimum requirements for equivalency. AT&T also contends that France lacks essential protections for resellers, including a tariffed or standard, nondiscriminatory carrier interconnect arrangement at standard prices. AT&T concludes that the application is facially deficient and should be summarily dismissed. Discussion 14. ACC and AT&T do not disagree about the key factual issues in this proceeding: German and French private line resale policies. AT&T emphasizes, and ACC concedes, that Germany and France do not meet the minimum criteria outlined in our Foreign Carrier Entry Order because they currently prohibit the resale of private lines for the provision of public switched services and the interconnection of private lines to the public switched network at both ends for the provision of public switched services. The only issue in dispute is whether the pendency of ACC's applications would serve some other public interest purpose, such as encouraging liberalization in Germany or France. 15. There is no question that the current German and French regulatory regimes do not meet the minimum criteria of the Foreign Carrier Entry Order. France and Germany currently allow only resale for the provision of one-end interconnected private line services. The provision of international resale of private line services interconnected at both ends to the public switched network is only permitted to "closed user groups" in both Germany and France. In sum, there is no evidence of existing private line resale opportunities equivalent to those afforded in the United States, as the Commission required in its equivalency proceedings regarding Canada, Sweden and the United Kingdom. We disagree with ACC that the indefinite pendency of the applications, until further private line resale liberalization in Germany and France occurs, would serve any useful purpose. 16. We recognize that both Germany and France appear to be making progress in developing a new regulatory structure to implement competition for the provision of public switched voice services and facilities by January 1, 1998, as mandated by the E.U. Council of Ministers and directed by the European Commission. For example, the Federal Ministry of Posts and Telecommunications has issued a draft Telecommunications Act, which proposes wide-ranging liberalization of the German telecommunications regulatory regime. In allowing competitive provision of telecommunications facilities and public switched services, such liberalization presumably would include the resale of international private lines for the provision of switched services covered by this application. Until such competition emerges, however, DT still is operating as a classic monopolist, controlling access to the German public switched network, and refusing to permit its network to be used to provide international resale of private line services interconnected at both ends. 17. Similarly, the French Government has issued a "public consultation document" entitled "New Ground Rules for Telecommunications in France," which outlines key features of the French Government's planned liberalization of its telecommunications regulatory regime. This document expresses the French Government's commitment to the implementation of full competition for public switched voice telephony services and facilities by January 1, 1998. However, France Telecom now does not allow its network to be used to provide international resale of private line services interconnected at both ends to the public switched network. 18. Although there is no indication that German and French regulatory policies on private line resale will change in the near term, we look forward to the implementation of liberalization measures in Germany and France. We ask ACC to keep us apprised of the status of its discussions with German and French officials regarding ACC's international private line resale applications pending in those countries. In the event that private line resale liberalization is forthcoming sooner than the 1998 deadline in either or both countries, we would welcome further applications for equivalency findings for these countries. In the interim, we agree with AT&T that ACC's applications must be denied. We therefore deny ACC's applications without prejudice to refiling at a later date. Ordering Clauses 19. Accordingly, IT IS HEREBY ORDERED that the applications File Nos. I-T-C- 95-056 and -059 of ACC Global Corporation for authorization to resell international private lines for the provision of switched services between the United States and Germany and the United States and France ARE DENIED WITHOUT PREJUDICE. 20. This Order is issued under Section 0.261 of the Commission's Rules. Petitions for reconsideration under Section 1.106 or applications for review under Section 1.115 of the Commission's Rules may be filed within 30 days of the date of public notice of this Order (see Section 1.4(b)(2)). FEDERAL COMMUNICATIONS COMMISSION Scott Blake Harris Chief, International Bureau