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File pnmc5021 (.txt & .wp) is in directory \pub\Public_Notices\Miscellaneous. ************************************************************************* DA 96-1546 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of) ) GTE Telecom Incorporated ) ) Application for Authority Pursuant to ) Section 214 of the Communications Act of ) ITC-95-443 1934, as amended, and Section 63.01 of the ) Commission's Rules and Regulations for ) International Resale Switched Service and ) Facilities-based Service to Various ) Countries ) ORDER, AUTHORIZATION AND CERTIFICATE Adopted: September 16, 1996 Released: September 16, 1996 By the Chief, International Bureau TABLE OF CONTENTS Topic Paragraph No. I. Introduction 1 II. Background A. Application 5 B. Interexchange and In-Region Proceedings 7 III. Discussion 10 A. Regulation of GTE Telecom as Dominant or Non-Dominant under Competitive Carrier Proceeding 11 B. Foreign Carrier Affiliations 28 1. GTE's Application to Provide Facilities-Based International Private Line Services 29 2. GTE's Application to Resell International Switched Services 33 IV. Conclusion 52 V. Ordering Clauses 56 I. Introduction 1. GTE Telecom Incorporated (GTE Telecom) requests authority pursuant to Section 214 of the Communications Act, as amended (Act), to provide resold international switched voice service of unaffiliated U.S. international facilities-based carriers and facilities- based international private line services. GTE Telecom proposes to provide resold international switched service and international facilities-based private line services originating from both "out-of-region" and "in-region" points in the United States. GTE Telecom is wholly-owned by GTE Corporation (GTE), a New York corporation whose operating companies comprise the largest affiliation of independent local exchange carriers (LEC) in the United States. 2. GTE Telecom's entrance into the international services market is not prohibited by the Act, judicial decree, or the Commission's rules. We find that a partial grant of GTE Telecom's application subject to certain conditions that we impose on an interim basis will serve the public interest under Section 214 of the Act by facilitating the efficient and rapid provision of international services, while protecting ratepayers and competition in the U.S. international services market. In addition, we find that GTE Telecom's provision of the proposed international services should be subject to non-dominant carrier regulation on all routes for which we grant GTE Telecom authority to provide such services. We also find, however, that GTE Telecom's authorization should be subject to safeguards to prevent it from leveraging the market power of its LEC affiliates in the provision of local exchange and exchange access services to obtain market power in the provision of international services. In addition, we find that GTE Telecom's application to resell international switched services to two affiliated countries, the Dominican Republic and Venezuela, raises issues relating to the settlements process that we must resolve in order to determine the public interest merits of GTE Telecom's application to serve those routes. The present record does not allow us to make that determination at this time. We therefore defer a decision whether to grant GTE Telecom's application to resell international switched services to the Dominican Republic and Venezuela and whether to classify GTE Telecom as a dominant or non-dominant carrier on these routes. 3. The conditions that we apply on an interim basis to our partial grant of GTE Telecom's application are the same as the safeguards that have applied for more than ten years to affiliates of independent LECs that are regulated as non-dominant in their provision of interstate, domestic interexchange services under the rules established in the Competitive Carrier proceeding. The conditions we attach to our grant of GTE Telecom's Section 214 application will remain in place at least until the Commission has completed the Interexchange and In-Region proceedings. 4. We also conclude that GTE Telecom, in its provision of resold international switched services and facilities-based private lines services, must be treated as a nonregulated affiliate under the Commission's joint cost and affiliate transactions rules for exchange carrier accounting purposes, just as the independent LEC affiliates are now treated in their provision of interstate, domestic interexchange services. In addition, we find that the equal access and nondiscrimination requirements established in the GTE Consent Decree apply to GTE Telecom's affiliated LECs and will govern its dealings with them in its provision of international service. II. Background A. Application 5. GTE Telecom requests Section 214 authority to resell international switched voice service using the capacity of existing, unaffiliated U.S. international facilities-based carriers. GTE Telecom asserts that, as a reseller of such services, it is entitled to non- dominant carrier treatment under Section 63.10(a)(4) of the Commission's rules. GTE Telecom also seeks Section 214 authority to provide on a facilities basis international private line voice and data services between the United States and various countries through leased circuits from Intelsat. GTE Telecom states that the facilities-based services it proposes to offer "will be only to countries not served by a GTE-affiliated foreign local exchange carrier." GTE Telecom claims that, as a provider of facilities-based services to countries in which GTE Telecom is unaffiliated with the foreign carrier, it is entitled to non-dominant carrier treatment under Section 63.10(a)(1) of the rules. WorldCom, Inc. (WorldCom), Domtel Communications, Inc. (Domtel), Sprint Communications Company, L.P. (Sprint), and AT&T Corp. (AT&T) filed pleadings in response to GTE Telecom's application, to which GTE Telecom in turn responded. 6. On February 20, 1996, GTE Telecom filed an affiliation statement certifying that through its parent, GTE, it has affiliations with British Columbia Telephone Company (BC Tel) in the Province of British Columbia, Quebec Telephone in the Province of Quebec, Compania Dominicana de Telefonos, C. Por A. (Codetel) in the Dominican Republic, and Compania Anonima Nacional Telefonos de Venezuela (CANTV) in Venezuela. We address GTE Telecom's foreign carrier affiliations in Section III. B. infra. B. Interexchange and In-Region Proceedings 7. The Commission has raised issues relating to the regulatory treatment of the independent LECs in their provision of interstate, domestic interexchange services and international services in two pending proceedings. Specifically, in the Interexchange NPRM, the Commission has sought comment on whether it should modify or eliminate the separation requirements that apply as a condition of non-dominant treatment of independent LEC provision of out-of-region, domestic interstate, interexchange services. 8. In the In-Region NPRM, the Commission has requested comment on whether it should "modify our existing rules that require independent LECs (exchange companies other than the BOCs) to comply with [the] . . . separation requirements [as set forth in the Competitive Carrier Fifth Report and Order] in order to qualify for non-dominant regulatory treatment in the provision of in-region, interstate, domestic, interexchange services." The Commission also is "consider[ing] whether to apply the same regulatory classification to the independent LECs' provision of in-region, international services as we adopt in this proceeding for their provision of in-region, interstate, domestic, interexchange services." 9. The In-Region proceeding does not modify the Commission's separate framework, adopted in the International Service Order and Foreign Carrier Entry Order, for regulating U.S. international carriers (including BOC affiliates or independent LECs ultimately authorized to provide in-region international services) as dominant on routes where an affiliated foreign carrier has the ability to discriminate in favor of its U.S. affiliate through control of bottleneck services or facilities in the foreign destination market. III. Discussion 10. GTE Telecom's entrance into the international services market is not prohibited by the Act, judicial decree, or the Commission's rules. We find that, with the exception of GTE Telecom's request to provide resold international switched services on the U.S.- Dominican Republic and U.S.-Venezuela routes, a grant of GTE Telecom's application subject to the conditions detailed below will serve the public interest under Section 214 of the Act by facilitating the efficient and rapid provision of international services, and by benefiting competition in the U.S. international services market and U.S consumers. In addition, we find that GTE Telecom's application to resell international switched services to the Dominican Republic and Venezuela raises issues that we must resolve to determine whether the public interest would be well-served by authorizing GTE Telecom to resell switched services on these routes. To permit the parties additional opportunity to address these outstanding issues, we defer a decision whether to grant GTE Telecom's application to resell international switched services to the Dominican Republic and Venezuela and whether to classify GTE Telecom as a non-dominant carrier on these routes. A. Regulation of GTE Telecom as Dominant or Non-Dominant under Competitive Carrier Proceeding 11. Although we find that, with the exception of the Dominican Republic and Venezuela routes, GTE Telecom's entrance into the international services market is in the public interest, we must also determine the appropriate regulatory treatment of GTE Telecom's provision of the proposed international services. Since 1980, the Commission has distinguished between carriers with market power (dominant carriers) and those without market power (non-dominant carriers) for purposes of Title II rate and entry regulation. If a common carrier is determined to be "non-dominant," Title II regulatory requirements are "streamlined." The Commission has applied standard principles of antitrust analysis to determine whether a carrier possesses market power in the provision of the relevant service in the relevant geographic market. This analysis includes a focus on: (1) market share, (2) the demand elasticity of a carrier's customers, (3) the supply elasticity of the market, and (4) a carrier's cost structure, size and resources. 12. The Commission first applied its dominant/non-dominant regulatory scheme to U.S. international carriers in 1985. The Commission held that international message telephone service (IMTS) (including international switched services) and non-IMTS (including private line services) are separate product markets. The Commission also held that, in applying the dominant/non-dominant regulatory scheme for international services, every destination country constituted a separate geographic market. The Commission did not distinguish among different regions of the continental United States in defining the relevant geographic market. 13. With the exception of the Dominican Republic, Venezuela, and Canada routes where GTE Telecom is affiliated with incumbent foreign carriers, we believe that there are no critical distinctions on the basis of GTE Telecom's market share, its size and resources, demand and supply elasticities, or conditions of entry from one destination country to another which would require a route-by-route analysis of GTE Telecom's market position for either international switched services or private line services. GTE Telecom currently has zero share in the market for international switched services. GTE Telecom is authorized to provide resold non-interconnected private line services only on the U.S.-Canada route. As a relatively new entrant, GTE Telecom's market share on that route in the provision of private line service is de minimis. We therefore conclude that GTE Telecom's market position for international switched services and private line services does not differ among routes and that we need not generally make specific route-by-route findings with the exception of the specific affiliated routes identified above. 14. In applying the Commission's standard principles of antitrust analysis to determine whether a carrier possesses market power, it is clear that, as a proposed new entrant in the provision of international switched services, GTE Telecom does not possess any share in the market for such services. Also, GTE Telecom has a de minimis share of the market for private line services. The Commission recently found that customers in the international services market are highly demand-elastic and will switch carriers in order to obtain price reductions and desired services. The Commission also found that the elasticities of supply in the international services market are high. Further, we do not envision that GTE Telecom's cost structure, size, and resources will allow it to control prices or exclude competition insofar as it is a new entrant into the international switched services market (with zero market share) and has only a de minimis share of the one private line market that it currently serves. GTE Telecom, moreover, will face a number of large, well-financed competitors, including MCI, Sprint, and AT&T in the product and geographic service markets that it proposes to serve. 15. The principal regulatory concern with GTE Telecom's application is whether it may be able to leverage the market power of its LEC affiliates in the provision of local exchange and exchange access services to gain market power in the provision of international services. Specifically, we are concerned that GTE's control of local exchange and exchange access facilities potentially gives GTE an incentive and ability to disadvantage GTE Telecom's competitors through improper allocation of costs, discrimination, or other anticompetitive conduct. 16. The Commission raised a substantially similar concern in the Competitive Carrier proceeding in considering the appropriate treatment of the independent LECs' provision of interstate, interexchange services, i.e., that the independent LECs might have the potential to engage in cost-shifting and anticompetitive conduct. In the Competitive Carrier Fourth Report and Order, the Commission determined that, with a certain amount of separation, interexchange carriers affiliated with independent LECs should be regulated as non-dominant. In the Competitive Carrier Fifth Report and Order, the Commission clarified that, in order to qualify for non-dominant treatment, the affiliate of an independent LEC providing interstate, domestic, interexchange services must: (1) maintain separate books of account; (2) not jointly own transmission or switching facilities with its affiliated exchange telephone company; and (3) acquire any services from its affiliated exchange telephone company at tariffed rates, terms and conditions. The Commission observed that these separation requirements would provide some "protection against cost-shifting and anticompetitive conduct" by an independent LEC that could result from its control of local bottleneck facilities. The Commission further concluded that any interstate, interexchange services offered directly by an independent LEC (rather than through a separate affiliate) or through an affiliate that did not satisfy the specified conditions would be subject to dominant carrier regulation. Independent LEC affiliates providing interstate, domestic interexchange services are treated, for purposes of the LECs' accounting, as a nonregulated affiliate under the Commission's joint cost and affiliate transactions rules. The Commission's determination in Competitive Carrier was for "interstate, domestic, interexchange telecommunications services," and did not specifically address international services. 17. We believe that application of the separation safeguards that were adopted in the Competitive Carrier Fifth Report and Order as a condition of our granting in part the instant application will provide sufficient protection against potential abuses by GTE Telecom in its provision of out-of-region and in-region international resold switched services and facilities-based private line services pending resolution of the Interexchange and In-Region proceedings. We find no basis for distinguishing between an independent LEC's ability and incentive to improperly allocate costs, discriminate against, or otherwise disadvantage unaffiliated domestic interexchange competitors as opposed to international service competitors. Indeed, we recently found "no practical distinctions between a BOC's ability and incentive to improperly allocate costs, discriminate against, or otherwise disadvantage unaffiliated domestic interexchange as opposed to international service competitors." We therefore granted several BOC Section 214 applications to resell international switched services subject to the same conditions that the Commission adopted as a condition for non- dominant treatment of BOC provision of out-of-region, domestic interstate, interexchange services. Further, in the In-Region NPRM, the Commission tentatively concluded that it should apply the same regulatory approach that it adopts for an independent LEC's provision of interstate, domestic, interexchange services originating within its local service area to an independent LEC's provision of international services originating within its local service area. 18. The Commission recently found that the "safeguards [established in the Fifth Report and Order] have worked reasonably well and generally have been effective . . . in deterring the improper allocation of costs and unlawful discrimination [in the independent LECs' provision of interstate, domestic, interexchange services]." Although the Commission has not adopted the Fifth Report and Order separation requirements as rules applicable to the independent LECs' provision of international services, the Common Carrier Bureua used the separation requirements to classify as non-dominant an independent LEC affiliate's international service. 19. We also believe that the application of the safeguards adopted in the Fifth Report and Order will not impose an unreasonable burden on GTE Telecom in its provision of in-region and out-of-region international services pending resolution of the Interexchange and In-Region proceedings. GTE Telecom states that, in accordance with the separation requirements adopted in the Competitive Carrier proceeding, it has "separate books, do[es] not jointly own transmission or switching facilities with the [GTE telephone operating companies (GTOCs)] and acquire[s] exchange service from the GTOCs by access tariff." We therefore do not believe that applying the Fifth Report and Order safeguards on an interim basis to GTE Telecom's provision of in-region and out-of-region international services will entail extensive modifications to GTE's existing company procedures. 20. These conditional safeguards will remain in place at least until completion of the Interexchange and In-Region proceedings. We reserve the right to modify the conditions of GTE Telecom's authorization, as necessary, upon adoption of final rules for the independent LECs' provision of international and domestic interstate, interexchange services. In the meantime, it is our view that granting the instant Section 214 application, in part, subject to the safeguards as detailed below, will serve the public interest by facilitating the efficient and rapid provision of international services, while protecting ratepayers and competition in the U.S. international services market. 21. Specifically, we grant GTE Telecom's Section 214 application to resell international switched services of unaffiliated U.S. carriers on all international routes (with the exception of the U.S.-Dominican Republic and U.S.-Venezuela routes) and to provide facilities-based international private line voice and data services between the U.S. and various countries subject to the condition that GTE Telecom: (1) maintain separate books of account from its affiliated LECs; (2) not jointly own transmission or switching facilities with its affiliated LECs; and (3) take any tariffed services from its affiliated LECs pursuant to the terms and conditions of the LECs' generally applicable tariff. Although we require GTE Telecom to maintain its corporate structure as a separate legal entity from its LEC affiliates, we do not require that its separate books of account comply with our Part 32 rules. Further, except for the ban on joint ownership of transmission and switching facilities, we will permit GTE Telecom and its affiliated LECs to share personnel and other resources or assets. GTE Telecom may be staffed by its LEC affiliates' personnel, housed in existing affiliated LEC offices, and use affiliated LEC marketing or other services. 22. The Commission's existing accounting safeguards for affiliate transactions were developed in the Joint Cost Order and are codified in Parts 32 and 64 of our rules. The Part 64 cost allocation rules prescribe how carriers separate the costs of regulated activities from the costs of nonregulated activities, where the nonregulated activities are performed directly by the carrier rather than through an affiliate. The Part 32 affiliate transactions rules prescribe the way local exchange carriers record their costs, for Title II accounting purposes, when the regulated carrier does business with its nonregulated affiliates. These rules are designed to prevent local exchange carriers from imposing the costs and risks of their competitive ventures on local telephone ratepayers. These rules do not require carriers or their affiliates to charge any particular prices for assets transferred or services provided; rather, they require carriers to use certain specified valuation methods in determining the amounts to record in their Part 32 accounts, regardless of the prices charged. 23. To help ensure that the affiliated LECs properly allocate the costs of any services provided to GTE Telecom, we will require GTE Telecom to be treated as a nonregulated affiliate for purposes of its affiliated LECs' accounting under the Commission's joint cost and affiliate transactions rules, just as independent LEC affiliates are now treated in their provision of interexchange, interstate services. The fact that GTE Telecom's provision of international switched resale services and facilities-based private line services are services regulated under Title II does not per se eliminate the potential for improper allocation of costs between GTE Telecom's competitive (international) and noncompetitive (local exchange and exchange access) services. The Commission has required on an interim basis that the BOCs treat their interexchange, interstate service affiliates as nonregulated for accounting purposes "to minimize the possibility that a BOC could improperly shift the costs of its interstate, interexchange operations to its regulated local exchange and exchange access ratepayers." The Commission also noted that this requirement is consistent with the current practice of independent LECs that treat their affiliates providing interexchange services as nonregulated for exchange carrier accounting purposes. For the same reasons, we find that application of our cost allocation and affiliate transaction rules is necessary to minimize the possibility that GTE Telecom could improperly shift the costs of its international switched resale and facilities-based operations to its regulated local exchange and exchange access ratepayers. 24. The application of the interim safeguards as a condition to our grant of GTE Telecom's application to provide international services will be an effective complement to existing equal access and nondiscrimination safeguards established under the GTE Consent Decree that continue to apply to GTE Telecom's affiliated local exchange carriers. The equal access and nondiscrimination requirements established under the GTE Consent Decree remain in effect "until such restrictions or obligations are explicitly superseded by regulations prescribed by the Commission[.]" Specifically, the GTE Consent Decree prohibited GTE from discriminating against the various interexchange carriers in: (1) the establishment and dissemination of technical information and interconnection standards; (2) interconnection and use of exchange services or facilities, or the charges for each element of services; and (3) the provision of new exchange access and the planning for and implementation of the construction or modification of facilities used to provide such access. The GTE Consent Decree also required that GTE provide all interexchange carriers access that is equal in type, quality and price. 25. GTE Telecom states that the safeguards established under the GTE Consent Decree are equally relevant whether "the interexchange carrier is providing interstate or international service." GTE Telecom also observes that, "[a]lthough Section 601(a)(2) of the 1996 Act removes the restrictions and obligations imposed on GTE by its Consent Decree, the same equal access and nondiscrimination requirements the GTOCs [GTE Operating Companies] had under the GTE Consent Decree continue in force through Section 251(g) of the 1996 Act." We agree with GTE Telecom that there is no basis for distinguishing here between interexchange service and international service for purposes of GTE's equal access and nondiscrimination obligations. The equal access and nondiscrimination requirements established in the GTE Consent Decree apply to GTE Telecom's affiliated local exchange carriers and will govern its dealings with them in its provision of international service. 26. GTE Telecom also states that "[a]ll the GTOCs had customer proprietary network information (CPNI) safeguards in place before Section 702 of the 1996 Act added a new Section 222 to the Communications Act codifying confidentiality of CPNI." In addition, GTE Telecom asserts that the "GTOCs do not share CPNI with any GTE interexchange carrier or any other interexchange providers . . . . [and that t]he GTOCs will continue to comply fully with their CPNI safeguards and others required by the 1996 Act." We also note that the nondiscrimination obligations of the GTE Consent Decree apply to the GTOCs' handling of CPNI. GTE's exchange carrier affiliates must therefore continue to observe all CPNI safeguards mandated by the GTE Consent Decree and prior Commission proceedings until the Commission rules otherwise. We note that Section 702 of the 1996 Act added a new Section 222 to the Communications Act of 1934, codifying the confidentiality of CPNI. The Commission has already commenced a rulemaking to clarify the CPNI requirements imposed on all telecommunications carriers by the 1996 Act. The Commission's rulemakings on the 1996 Act may impose additional requirements on international operations of independent LECs, or may reduce them, but until that time, GTE Telecom's affiliated LECs must continue to adhere to the equal access and nondiscrimination requirements established in the GTE Consent Decree. To the extent that the 1996 Act requires more of GTE, or imposes greater restrictions on GTE's use of CPNI, the statute, of course, governs. 27. In summary, we grant in part GTE Telecom's Section 214 application to resell international switched services and to provide facilities-based international private line services subject to the condition that GTE Telecom complies with the Fifth Report and Order separation requirements. We also require that GTE Telecom, in its provision of resold international switched services and facilities-based private lines services, be treated as a nonregulated affiliate under the Commission's joint cost and affiliate transactions rules for exchange carrier accounting purposes, just as the independent LEC affiliates are now treated in their provision of interstate, domestic interexchange services. The conditions we attach to our grant of GTE Telecom's Section 214 application will remain in place at least until the Commission has completed the Interexchange and In-Region proceedings. We reserve the right to modify the conditions of the authorization granted in this order, as necessary, upon the Commission's adoption of final rules for independent LECs' provision of international and domestic interstate, interexchange services. B. Foreign Carrier Affiliations 28. In 1992, the Commission modified its 1985 policy that treated U.S. foreign- owned common carriers as dominant in their provision of all international services to all foreign markets. Specifically, the Commission adopted a framework for regulating U.S. international carriers as dominant on routes where an affiliated foreign carrier has the ability to discriminate in favor of its U.S. affiliate through control of bottleneck services or facilities in the destination market. Under this framework, a U.S. international carrier having no affiliation with, and that itself is not, a foreign carrier in the destination market is presumptively non-dominant for that route. In addition, a U.S. international carrier that serves a destination market solely through the resale of the switched services of a U.S. facilities-based carrier with which the reseller is not affiliated is presumptively non-dominant for that route -- "regardless of any foreign affiliations." 1. GTE's Application to Provide Facilities-based International Private Line Services 29. Under the framework adopted in International Services and Section 63.10(a)(1) of the rules, we find that GTE Telecom qualifies as a non-dominant provider of facilities-based international private line services to the various countries not served by a GTE-affiliated foreign carrier as listed in GTE Telecom's Section 214 application. 30. Domtel asserts that any grant of GTE Telecom's application to provide facilities-based international private line services on a non-dominant basis should be conditioned on "GTE Telecom's continuing not to have any affiliation with a carrier in any country to which it has been granted such authority." Domtel also recommends that "any grant of the authority requested for facilities-based service should be conditioned upon GTE Telecom's not routing traffic through third countries to or from countries for which it does not have 214 authority, such as the Dominican Republic, Venezuela and Canada." 31. In response, GTE Telecom asserts that Domtel's request that the authorization be conditioned upon GTE Telecom's continuing not to have any affiliation with a carrier in any country to which it has been granted such authority is unnecessary. GTE Telecom asserts that Section 63.11 requires a carrier who later becomes affiliated with a foreign carrier to notify the Commission and file certain information so that the Commission can determine whether dominant regulation should then be applied. 32. Under Section 63.11 of the rules, a carrier authorized to provide international communications is required to notify the Commission when it becomes affiliated with a foreign carrier and to file (and maintain the accuracy of) certain certified information related to the foreign carrier affiliation. The Commission may use this information "to determine whether a change in [the carrier's] regulatory status may be warranted." In the event that GTE Telecom becomes affiliated with a foreign carrier on a route for which it receives authority to provide international private line services, the Commission will have the opportunity to determine whether GTE Telecom continues to qualify for non-dominant carrier treatment on that route under the framework adopted in International Services and Section 63.10 of the Commission's rules. To the extent that Domtel suggests that we should review de novo the public interest merits of GTE Telecom's provision of international private line service on the routes where it may acquire an affiliation with a foreign carrier, we note that the Commission in the Foreign Carrier Entry Order specifically declined to adopt any prohibition against U.S. carrier investments in foreign carriers. We therefore deny Domtel's request that we condition GTE Telecom's authorization to provide on a non-dominant basis international private line services to countries not served by a GTE-affiliated foreign LEC on its continuing not to have any affiliation with a carrier in any country to which it has been granted such authority. We will impose the same conditions on our grant of this application as we impose on any other application to provide facilities-based private line services. These conditions should address Domtel's concerns regarding GTE Telecom's routing of traffic through third countries to or from countries for which it does not have Section 214 authority. 2. GTE's Application to Resell International Switched Services 33. Under the framework adopted in International Services and Section 63.10(a)(4) of the rules, we find that GTE Telecom qualifies as a non-dominant reseller of international switched services on all routes for which we grant GTE Telecom Section 214 authorization, including the U.S.-Canada route where GTE Telecom is affiliated with BC Tel and Quebec Telephone. With regard to GTE Telecom's resale of switched services to countries other than the Dominican Republic and Venezuela, no party filed an opposition or requests that GTE Telecom be classified as dominant. We find that GTE Telecom qualifies as a non-dominant reseller of international switched services on all routes for which we grant GTE Telecom Section 214 authorization, including the U.S.-Canada route where GTE Telecom is affiliated with BC Tel and Quebec Telephone. 34. By contrast, we find that GTE Telecom's application to resell international switched services to the Dominican Republic and Venezuela raises issues relating to the settlements process that we must resolve in order to determine the public interest merits of its application to serve these destination countries. The present record does not allow us to make that determination at this time. We therefore defer a decision whether to grant GTE Telecom's request to resell international switched services to the Dominican Republic and Venezuela and whether to classify GTE Telecom as a non-dominant carrier on these routes. 35. With regard to GTE Telecom's request to resell international switched services on a non-dominant carrier basis to the Dominican Republic and Venezuela, Domtel and AT&T filed oppositions. Domtel asserts that GTE Telecom is not entitled to a presumption of non-dominance on these routes under Section 63.10(a)(4) of the rules because: (1) GTE, through its ownership of Codetel and CANTV in the Dominican Republic and Venezuela, respectively, has a history of discriminating against unaffiliated carriers; (2) Codetel and CANTV are dominant carriers in their respective markets; and (3) two of the U.S. carriers whose services GTE Telecom proposes to resell "together dominate (80 percent) U.S. traffic to the foreign destination[.]" Under these circumstances, argues Domtel, GTE Telecom "has the ability to interfere with the underlying operating arrangements of the resold U.S. carrier and [GTE Telecom's] . . . foreign affiliate[.]" 36. As evidence of GTE's anticompetitive behavior, Domtel asserts that Codetel: (1) has entered into exclusive correspondent agreements with MCI, Sprint and Telefonica Larga Distancia de Puerto Rico; (2) agreed to interconnect Dominican carriers only if they would agree to relinquish any right to provide local exchange service, and only if they would agree to a price fixing arrangement which establishes U.S. accounting rates satisfactory to GTE; (3) attempted to block the assignment of central office codes to Tricom, its Dominican competitor and Domtel's parent; and (4) established growth-based accounting rate mechanisms with AT&T and MCI, but refused to do so with smaller U.S. carriers. Domtel claims that Codetel controls bottleneck facilities and 90 percent of the local exchange market in the Dominican Republic, as well as 80 percent of its international market. Domtel claims that CANTV, GTE Telecom's foreign affiliate in Venezuela, has a legal monopoly over basic services through the year 2000. 37. Domtel maintains that two U.S. facilities-based carriers together account for 80 percent of the U.S. traffic to the Dominican Republic. Domtel recommends that, if the Commission grants GTE Telecom's application to resell either of these two U.S. facilities- based carriers to the Dominican Republic, then the Commission should classify GTE Telecom as a dominant carrier on this route. Domtel also requests that GTE Telecom be allowed to resell the services of these two U.S. carriers only when "the U.S. carrier makes the same volume and terms and conditions of resale available to all other resellers." In addition, Domtel requests that "GTE Telecom's resale be required to adhere in all respects to proportionate return . . . . [i.e., that GTE Telecom] accept only . . . [its] proportionate share of return traffic]." 38. AT&T asserts that GTE Telecom's application should be denied with respect to its request for authority to resell switched services on the U.S.-Dominican Republic and the U.S.-Venezuela routes. AT&T contends that GTE Telecom's control of Codetel and CANTV (which AT&T characterizes as the de facto and de jure monopoly carriers in the Dominican Republic and Venezuela, respectively) permits GTE Telecom to maintain above-cost accounting rates between these foreign countries and the United States to the detriment of the U.S. public interest. AT&T claims that granting GTE Telecom resale authority to the Dominican Republic and Venezuela would remove any incentive GTE Telecom's foreign affiliates may have to reduce their above-cost accounting rates. As a result, AT&T claims, U.S. consumers would continue to bear the burden of settlements subsidies to Codetel and CANTV caused by these carriers' above-cost rates. AT&T contends that granting GTE Telecom resale authority to the Dominican Republic and Venezuela would provide it with the incentive and the ability to price resold services to these countries "at or below its costs in order to generate significant profits through its affiliates' above-cost accounting rates with U.S. carriers." 39. AT&T states that its current accounting rate with Codetel during the peak period is $1.10 per minute. AT&T asserts that, because of competition in the United States for international traffic and because U.S. carriers price their services on a two-way basis taking into account the settlements credit they receive for return traffic, U.S. resale customers can readily obtain prices for switched services to the Dominican Republic that are well below the per minute settlement rate. AT&T avers that "the combination of intense competition on the U.S. side and Codetel's de facto monopoly in the Dominican Republic means that GTE [Telecom] could make substantial profits as a reseller even if it prices its U.S.-based offering at its cost or lower and makes its profit solely from the settlements payments paid by the underlying facilities-based carrier." AT&T bases its argument on the proposition that GTE Telecom "could price its U.S.-outbound switched resale service [to the Dominican Republic] to make no money and earn $0.45 per minute [profit] based on the settlements payments paid by the underlying U.S. facilities-based carrier." AT&T estimates that Codetel can terminate traffic at less than $0.10 per minute, thereby affording a profit of at least $0.45 ($0.55 settlement fee minus $0.10 termination cost) per minute of inbound traffic from the United States. 40. In response, GTE Telecom contends that Domtel's "unsupported generalized claim of the potential to discriminate is not enough to overcome the presumption" of non- dominance for carriers seeking to provide resale through the facilities of an unaffiliated U.S. carrier under Section 63.10(a)(4) of the rules. GTE Telecom also generally denies Domtel's allegations of anticompetitive activities by Codetel in the Dominican Republic. GTE Telecom claims that AT&T has presented no evidence to rebut the presumption of non-dominance for international resale under Section 63.10(b)(4) of the rules. GTE Telecom "vehemently denies" AT&T's allegation that its foreign carrier affiliates in the Dominican Republic and Venezuela have extorted monopoly rents through above-cost accounting rates. GTE Telecom asserts that the U.S./Dominican Republic accounting rates have declined significantly in the last five years and that "the current average settlement rate for the Dominican Republic is within the benchmarks established by the Commission[.]" GTE Telecom avers that the accounting rate to Venezuela also has declined in the last five years because of volume and off-peak discounts. GTE Telecom further contends that "the level of accounting rates has . . . nothing to do with the foreign affiliate's ability to discriminate against AT&T or any other U.S. carrier in favor of GTE Telecom." 41. GTE Telecom maintains that AT&T's suggestion that GTE Telecom could benefit from purported "above-cost" accounting rates is unfounded. GTE Telecom states that, according to the IMTS Accounting Rate Report, three carriers have established accounting rates for the Dominican Republic. GTE Telecom asserts that the underlying U.S. facilities carrier (and not GTE Telecom as a reseller) would negotiate with one of these three Dominican carriers for delivery of traffic in the Dominican Republic and that GTE Telecom, as a reseller, "has no role in choosing or dealing with the carrier in the Dominican Republic." GTE Telecom states that its resold traffic to the Dominican Republic "could well be handled by one of the two unaffiliated [Dominican] carriers[.]" 42. AT&T asserts that, contrary to GTE Telecom's suggestion, U.S. carriers cannot readily avoid Codetel's above-cost accounting rates by terminating their traffic to the Dominican Republic with Dominican international carriers that are not affiliated with GTE. AT&T asserts that Codetel's control of "the overwhelming majority of the local access lines in the Dominican Republic . . . . enables it to control international traffic to and from the Dominican Republic and thus prevents [the two unaffiliated Dominican carriers,] AAC&R and Tricom[,] from providing a viable alternative traffic bound for the Dominican Republic." Consequently, AT&T claims, "Codetel possesses the ability to dictate the average settlement rate between the U.S. and the Dominican Republic." AT&T asserts that "granting GTE [Telecom] the authority it seeks would provide Codetel the means -- through GTE [Telecom] -- to distort traffic flows between the U.S. and the Dominican Republic in order to increase the amount of settlement subsidies paid to it by U.S. carriers, and ultimately by U.S. consumers." AT&T recommends that the Commission either deny GTE Telecom's request for resale authority to the Dominican Republic and to Venezuela or, alternatively, grant such authority upon "GTE [Telecom's] establishment of cost-based accounting rates in the Dominican Republic and Venezuela." AT&T also contends that U.S. carriers cannot avoid the above-cost accounting rates of GTE Telecom's foreign affiliate in Venezuela because "CANTV has a monopoly through the year 2000." 43. We defer a decision with respect to GTE Telecom's request to resell international switched services to the Dominican Republic and Venezuela. The record indicates that GTE controls both Codetel and CANTV. We are concerned that GTE Telecom, as a reseller of international switched services to the Dominican Republic and Venezuela, may be able to use the market power of its foreign carrier affiliates in those countries in ways that directly undermine the public interest in an effectively competitive U.S. international services market. 44. We acknowledge that the Commission has determined that a U.S. international carrier that serves a destination market solely through the resale of the switched services of a U.S. facilities-based carrier with which the reseller is not affiliated is presumptively non- dominant for that route -- regardless of any foreign affiliations. In the Foreign Carrier Entry Order, the Commission noted that it was unlikely that a foreign carrier reseller would engage in discriminatory conduct because, in order to favor its U.S. resale affiliate, the foreign carrier affiliate would necessarily have to favor the underlying carrier as well. In the case of the Dominican Republic and Venezuela, however, sufficient questions regarding GTE Telecom's affiliates' ability to harm competition in these markets have been raised that require further analysis. 45. GTE Telecom's application to resell international switched services to the Dominican Republic and Venezuela raises the question whether GTE Telecom has the ability and the incentive to manipulate the settlements process and its prices to U.S. consumers on these affiliated routes in a manner that increases U.S. carrier outpayments to Codetel and CANTV. AT&T has raised a plausible scenario under which GTE could maximize its overall profits by pricing GTE Telecom's U.S. resold switched services at or even below cost in order to generate significant settlement payments to its foreign carrier affiliates. While such pricing behavior might benefit U.S. consumers in the short-run by reducing international switched service rates to the Dominican Republic and Venezuela, we are concerned about the long-term effects of such pricing behavior. U.S facilities-based carrier costs may increase as a result of an increase in their outpayments to Codetel and CANTV, which could negatively impact rates paid by U.S. consumers. And the profitability of such a scheme for GTE may decrease that carrier's incentive to encourage its affiliates to negotiate lower, cost-oriented accounting rates with U.S. carriers. 46. AT&T's alleged pricing scheme would not be of concern if we were confident that accounting rates for the Dominican Republic and Venezuela were set at nondiscriminatory, cost-oriented levels. It also would not be of concern if these markets were effectively competitive and market forces determined the charges for terminating U.S. international traffic. The record, however, does not support the conclusion that charges for terminating U.S. traffic to the Dominican Republic or Venezuela are the product of effectively competitive markets or otherwise established at nondiscriminatory, cost-oriented levels. 47. The problem raised by AT&T is not an issue of discrimination. It is a question of whether allowing GTE Telecom to resell switched services could exacerbate the settlement outpayments by U.S. carriers to the Dominican Republic and Venezuela. In 1994, for example, U.S. carriers had a net outpayment of $129,000,000 to the Dominican Republic. A portion of this outpayment represents Dominican carriers' cost of terminating traffic, but the great majority of it apparently represents a subsidy from U.S. consumers to the Dominican carriers, of which Codetel is by far the largest. 48. We also note that in Venezuela, CANTV has engaged in discriminatory treatment of U.S. carriers in its accounting rate negotiations by refusing to offer the same terms and conditions to all U.S. carriers in violation of our International Settlements Policy (" ISP"). This behavior involves both the accounting rates and their effective dates. CANTV's current accounting rate with WorldCom is $1.30 per minute and the rate with AT&T and MCI is $1.30 during the peak period and $1.00 during the off-peak period. Recently, AT&T and MCI filed waivers of the Commission's ISP to implement a reduction of their peak period accounting rates with CANTV to $1.25 on May 1, 1995, then to $1.20 on July 1, 1995, and finally to $1.15 on October 1, 1995. WorldCom filed a waiver of the Commission's ISP to reduce its accounting rate with CANTV to $1.15 during the peak period and to introduce a $1.00 rate during the off-peak period, effective January 1, 1996. Its peak period rate would fall to $1.10 on January 1, 1997. Thus, WorldCom would not receive the benefits of the two interim reductions offered by CANTV to AT&T and MCI, and the off- peak rate, which is part of AT&T and MCI's current arrangement, would not become effective until January 1, 1996. Moreover, the rate of $1.15 per minute would not be available to WorldCom until three months after AT&T and MCI would receive it. Finally, WorldCom's agreement with CANTV includes a reduction scheduled for January 1, 1997, that is not part of the AT&T or MCI waivers. If approved, the result would be different accounting rate arrangements with different U.S. carriers. 49. The purpose of the ISP is to prevent monopoly carriers such as CANTV from exercising their market power against U.S. carriers in accounting rate negotiations by engaging in discriminatory conduct. This kind of discriminatory conduct by CANTV would result in different accounting rates among U.S. carriers that are unrelated to costs and raise the costs of some U.S. carriers above the costs of others. These differences would impair the ability of those carriers that are the target of discrimination to compete in the U.S. international services market to the detriment of U.S. consumers. To prevent such abusive behavior, the Commission has stated that, as part of the ISP, it expects accounting rate revisions to be made available to all U.S. carriers. This includes both the accounting rate and the effective date of the rate. 50. In addition, the record in Domtel Communications, Inc. contains credible evidence that Tricom, Domtel's parent and a Dominican carrier, "encountered formidable obstacles in its dealings with Codetel, and has established and expanded its presence [in the Dominican Republic] only with difficulty." Codetel also appears to have used its accounting rate negotiations with U.S. carriers as a vehicle to thwart competition in the Dominican Republic, albeit in a manner that ultimately reduced U.S. carrier settlement costs. Such moves to frustrate competition in the Dominican telecommunications market undermine the Commission's efforts to encourage competition in foreign markets as a vehicle to drive accounting rates toward cost. 51. The present record does not allow us to determine at this time the degree to which GTE Telecom has the ability and incentive to exacerbate the already serious settlements imbalance on the U.S-Dominican Republic and U.S.-Venezuela routes and the implications of such distortions for U.S. consumers. We must resolve these issues in order to determine whether the public interest would be served by authorizing GTE Telecom to resell switched service on these routes. We therefore defer a decision with respect to GTE Telecom's request for authorization on the Dominican Republic and Venezuela routes to permit the parties an additional opportunity to address these outstanding issues. IV. Conclusion 52. We find that a partial grant of GTE Telecom's application, subject to the conditions that we impose on an interim basis as set forth above, will serve the public interest under Section 214 of the Act by increasing competition in international services, expanding the range of new and innovative services, and allowing for the more efficient use of existing international telecommunications facilities. In addition, we find that GTE Telecom's application to resell international switched services to two affiliated countries, the Dominican Republic and Venezuela, raises issues relating to the settlements process that cannot be resolved on the present record at this time. We therefore defer a decision with respect to GTE Telecom's application to resell international switched services to those two destinations to give the parties an additional opportunity to address these issues. We also find that GTE Telecom qualifies for non-dominant carrier regulation on the routes for which we authorize it to provide international service. We therefore grant in part GTE Telecom's application for authority (1) to resell the switched services of other common carriers to provide international switched telecommunications services between the United States and all international points (with the exception of the Dominican Republic and Venezuela) and (2) to provide on a facilities basis international private line voice and data services between the United States and the various countries identified in paragraph 58 by leasing circuits from Intelsat. The conditions we attach to our partial grant of the instant Section 214 application will remain in place at least until the Commission completes the Interexchange and In-Region proceedings. Specifically, we reserve the right to modify the conditions of the authorization granted in this order, as necessary, upon the Commission's adoption of final rules for independent LECs' provision of international and domestic interstate, interexchange services. 53. As a non-dominant provider of international resold switched services and facilities-based private line services, GTE Telecom will be allowed to file tariffs on no less than one days' notice, without economic or cost support, and the tariffs will be presumed lawful. GTE Telecom also will be subject to the Section 214 requirements of non-dominant U.S. international carriers. 54. As a non-dominant carrier, GTE Telecom will be subject to regulation under Title II of the Act. Specifically, Title II requires carriers to offer international services under rates, terms and conditions that are just, reasonable and not unduly discriminatory (Sections 201 and 202), and Title II carriers are subject to the Commission's complaint process (Sections 206-209). Title II carriers also are required to file tariffs pursuant to our streamlined tariffing procedures (Sections 203 and 205). Non-dominant U.S. international carriers, such as GTE Telecom, also are subject to the requirements of Sections 43.51, 43.61, 43.82, 63.14 and 63.19 of the Commission's rules. 55. This order will be effective upon its adoption. V. Ordering Clauses 56. Upon consideration of the application and in view of the foregoing, IT IS HEREBY CERTIFIED that the present and future public convenience and necessity require the provision of resold international switched services between the United States and all international points (with the exception of the Dominican Republic and Venezuela) and the provision of facilities-based international private line services by GTE Telecom Incorporated (GTE Telecom) subject to the conditions set forth below. 57. Accordingly, IT IS HEREBY ORDERED that application File No. ITC-95-443 filed by GTE Telecom IS GRANTED IN PART and GTE Telecom is authorized to resell on a non-dominant carrier basis international switched services of unaffiliated U.S. international carriers for the provision of international switched services originating from U.S. points and terminating at all international points, with the exception of the Dominican Republic and Venezuela. 58. IT IS FURTHER ORDERED that GTE Telecom is authorized to provide on a non-dominant carrier basis facilities-based international private line voice and data services between the U.S. and the following locations only: Argentina, Australia, Belize, Bolivia, Brazil, Cayman Island, Chile, China, Colombia, Costa Rica, Ecuador, French Guyana, Guatemala, Guyana, Haiti, Honduras, Hong Kong, Jamaica, Japan, Malaysia, Mexico, New Zealand, Nicaragua, Panama, Paraguay, Peru, Philippines, San Salvador, Surinam, Taiwan, United Kingdom, Uruguay, and Guantanamo Bay Naval Base. In addition, GTE Telecom may not -- and its tariffs must state that its customers may not -- connect private lines provided over these facilities to the public switched network at either the U.S. or foreign end or both (except in the case of the United Kingdom), for the provision of international switched basic services, unless authorized to do so by the Commission upon a finding that the foreign administration affords resale opportunities equivalent to those available under U.S. law, in accordance with Market Entry and Regulation of Foreign-affiliated Entities, 11 FCC Rcd 3873 (1995). The limitations in this paragraph are subject to the exceptions contained in Sections 63.17 and 63.18(e)(4) of the Commission's rules, 47 C.F.R.  63.17 (in the case of the United Kingdom) and 63.18(e)(4). 59. IT IS FURTHER ORDERED that GTE Telecom shall: (1) maintain separate books of account from any affiliated local exchange carrier (LEC); (2) not jointly own transmission or switching facilities with any affiliated LEC; and (3) take any tariffed services from the affiliated LEC pursuant to the terms and conditions of the LEC's generally applicable tariff. 60. IT IS FURTHER ORDERED that this authorization is subject to the condition that GTE Telecom be treated as a nonregulated affiliate for purposes of local exchange carrier accounting under the Commission's joint cost and affiliate transactions rules as set forth in Parts 32 and 64 of the Commission's rules. 61. IT IS FURTHER ORDERED that the conditions that attach to the grant of GTE Telecom's application as set forth in Section III. A. of this order will remain in place at least until the Commission has completed Policy and Rules Concerning the Interstate, Interexchange Marketplace and Implementation of Section 254(g) of the Communications Act of 1934, Notice of Proposed Rulemaking, CC Docket No. 96-61, FCC 96-123 (released Mar. 25, 1996) and Implementation of the Non-Accounting Safeguards of Sections 271 and 272 of the Communications Act of 1934, as amended, and Regulatory Treatment of LEC Provision of Interexchange Services Originating in the LEC's Local Exchange Area, Notice of Proposed Rulemaking, CC Docket No. 96-149, FCC 96-308 (released July 18, 1996). The International Bureau reserves the right to modify the conditions of the authorization granted in this order, as necessary, upon the Commission's adoption of final rules for the independent LECs' provision of out-of-region and in-region international and domestic interstate, interexchange services. 62. IT IS FURTHER ORDERED that GTE Telecom shall comply with the requirements specified in Sections 43.82 and 63.21 of the Commission's rules, 47 C.F.R.  43.82 and 63.21. 63. This order is issued under Section 0.261 of the Commission's rules and is effective upon adoption. 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 the public notice of this order (see Section 1.4(b)(2)). FEDERAL COMMUNICATIONS COMMISSION Donald H. Gips Chief, International Bureau