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(1) (a) (i) 1) a)dK+b70t _5xŗ+t$#$ 95 _5(_>71. a. i. (1) (a) (i) 1) a)dK+b70t _5xŗ+t/%&` ` ` 2 K96 _5(_>71. a. i. (1) (a) (i) 1) a)dK+b70t _5xŗ+t:'(` ` `  97 _5(_>71. a. i. (1) (a) (i) 1) a)dK+b70t _5xŗ+tE)*` ` `  98 _5(_>71. a. i. (1) (a) (i) 1) a)dK+b70t _5xŗ+tP+,` ` ` hhh "i~'^#)0<8HH"&H>XHH8HB8>HH^HH>"".2",2,2,"222N2222"&22H22,006"6."""""""""""2H,H,H,H,H,XAB,>,>,>,>,""""H2H2H2H2H2H2H2H2H2H2H,H2H1H2H2H282H,H,H,B,B,B6B,H?>,>,>,>,H2H2H2H6H2H6H2""2"""2F866H2>>(>">">H2;H2H2H2H2XHB"B"B"8&8&8&86>*>>.H2H2H2H2H2H2^HH6>,>,>,H2>"H28&>"H2?22!!WFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxN$<<$.2",2222`2 LL2 LL2L"",,2d"""(#L 1  XT"-II.xBackground and Pleadings`"(#R2  X=#-III.xDiscussion `(#(#X  X&$-xA.` ` CWI's Application to Provide Facilitiesbased International Services`"(#R8  X%- x` ` 1. Analysis of CWI's Market Power`"(#R9  X%-x` ` 2. Public Interest Analysis``"(#L22  X&-xB.` ` CWI's Request for Nondominant Treatment``"(#L24  X'-I V.xOrdering Clauses``"(#L30 "(0*0*0*Q'"Ԍ X-ԙ$G I. Introduction T  X-TPx1.` ` In this order, we grant Cable & Wireless, Inc. (CWI) authority pursuant to  X-Section 214 of the Communications Act of 1934V yO4-ԍx47 U.S.C.  214, as amended (Act).V to provide international facilitiesbased switched and private line services between the United States and the United Kingdom. We also find that CWI should be regulated as a nondominant carrier in the provision of international facilitiesbased and resold switched and private line services between the United States and the United Kingdom.  X1- II. Background and Pleadings TTP  X -x2.` ` CWI is a U.S. corporation organized under the laws of the District of Columbia. It is a domestic common carrier authorized to provide international switched and private line services between the United States and numerous countries, including the United Kingdom, through the resale of switched and private line services provided by other U.S. carriers. CWI also is authorized to provide international switched and private line services on  X-a facilities basis between the United States and various international points 0X {O-ԍxSee Public Notice, Report No. I8197, DA 961410 (dated Aug. 22, 1996) (granting CWI authority (effective Aug. 19, 1996) in File No. ITC96350 to provide facilitiesbased switched and private line services and resold noninterconnected private line services between the United States and various international points  {O-where CWI does not have an affiliation with a foreign carrier); see also CWI Application for Authority at 1  {O-(filed Apr. 18, 1996) (CWI Application); see also Cable & Wireless, Inc., DA 961971 (Telecom Div., released  yO-Nov. 26, 1996) (facilitiesbased service to Sweden); Cable & Wireless, Inc., 6 FCC Rcd 236 (International  yOO-Facilities Div. 1991) (facilitiesbased private line authority to Canada); Cable & Wireless, Inc., 5 FCC Rcd 7583  {O-(Com. Car. Bur. 1990) (facilitiesbased switched service authority to Canada). See also File Nos. ITC96569 (facilitiesbased service to Germany and France), ITC96568 (facilitiesbased service to Portugal and Netherlands), ITC96567 (facilitiesbased service to Spain, Belgium, Ireland, Italy and Switzerland) (granted  yOq-effective Nov. 29, 1996). 0 CWI "is ultimately 100 percent owned by Cable and Wireless plc (C&W plc), a company organized  Xb-under the laws of England and Wales."Lb  yO-ԍxCWI Application at 8.L C&W plc has an 80 percent ownership stake in Mercury Communications Ltd. (Mercury), a foreign carrier that provides domestic and  X4-international telecommunications services in the United Kingdom.&4P  {O5!-ԍxSee Cable and Wireless, Inc., Application for Authority under Section 214 of the Communications Act, as amended, to Resell Noninterconnected Private Line Services between the United States and the United  {O"-Kingdom, Order and Authorization, File No. ITC96271, DA 961620, at n.3 (Telecom. Div., released Sept. 27,  {O#-1996) (CWI Increased Private Line Resale Capacity Order).  X-x3.` ` CWI requests Section 214 authority to provide international facilitiesbased switched and private line services on a nondominant carrier basis between the United States">0*(("  X-and the United Kingdom.L yOy-ԍxCWI Application at 1 and 4.L CWI certifies that it is affiliated within the meaning of Section  X-63.01(r)(i) of the Commission's rulesFX yO-ԍx47 C.F.R.  63.01(r)(i). Since the filing of CWI's application, this section of the rules has been  {O-renumbered Section 63.18(h)(1)(i).  See Streamlining the International Section 214 Authorization Process and Tariff Requirements, 11 FCC Rcd 12884, Appendix A (1996). In general, a U.S. carrier is affiliated with a foreign carrier when a foreign carrier owns a greater than 25 percent interest in, or controls, the U.S. carrier, or when the U.S. carrier owns a greater than 25 percent interest in, or controls, a foreign carrier. Market Entry and  {O-Regulation of Foreignaffiliated Entities, 11 FCC Rcd 3873,  7377 and 24551 (1995), recon. pending  {O -(Foreign Carrier Entry Order); 47 C.F.R.  63.18(h)(1)(i); see also Foreign Carrier Entry Order at  7887 (scrutiny of foreign carrier investments of 25 percent or less; aggregation of multiple carrier interests). with Mercury.Nf  yO -ԍxCWI Application at 2 and 8. N CWI asserts that grant of its application will serve the public interest by promoting competition and stimulating more  X-efficient use of telecommunications services.F  yOb-ԍxCWI Application at 8.F BT North America Inc. (BTNA) and AT&T Corp. (AT&T) filed comments supporting and opposing, respectively, CWI's application, to  X-which CWI responded. 6   yO-ԍxComments of BT North America Inc. (filed May 28, 1996) (BTNA Comments); AT&T Comments in Opposition (filed May 28, 1996) (AT&T Opposition); CWI Reply to Comments in Opposition (filed June 10,  {OT-1996) (CWI Reply); CWI Supplemental Filing (filed Oct. 25, 1996) (CWI Supplemental Filing); see also Ex  {O-parte letter from Paul W. Kenefick, Esq., Cable & Wireless, Inc., to Joanne Wall, Federal Communications  {O-Commission (F.C.C.) (dated Nov. 19, 1996) (CWI Nov. 19, 1996 Ex Parte Letter); Ex parte letter from Paul W. Kenefick, Esq., Cable & Wireless, Inc., to William Caton, Acting Secretary, F.C.C. (dated Nov. 26, 1996) (CWI  {Oz-Nov. 26, 1996 Ex Parte Letter); Ex parte letter from Paul W. Kenefick, Esq., Cable & Wireless, Inc. to William  {OD-Caton, Acting Secretary, F.C.C., (dated Nov. 27, 1996) (CWI Nov. 27, 1996 Ex Parte Letter). AT&T filed its opposition prior to the U.K. Department of Trade and Industry's (DTI) recent announcement that it intended to lift the United Kingdom's restrictions limiting the provision of international facilitiesbased services to Mercury  {O-and BT.  See DTI Press Notice, "UK to Open up International Telecommunications Services: BTMercury  {Oh-Duopoly Ended," P/96/416 (dated June 6, 1996) (DTI June 6, 1996 Press Notice). CWI filed its responsive pleadings subsequent to that decision.  X_- x 4.` ` CWI contends that Mercury does not possess bottleneck control in the United Kingdom's domestic market and that British Telecom (BT) is "widely recognized" as the  X1-dominant provider in that market. 1 {Of!-ԍxCWI Application at 5; accord BTNA Comments at 4; CWI Application at 5 (noting that, "among the  yO0"-myriad of telecommunications operators in the U.K., only BT is subject to price regulation"). CWI avers that "[t]here are currently 22 regional and national facilitiesbased license holders and 125 cable operators licensed to provide service  X -within defined citites and towns." \X  {O%-ԍxCWI Nov. 27, 1996 Ex Parte Letter at 2; see also CWI Application at 1415; CWI Supplemental Filing  {O\&-at 2; accord BTNA Comments at 6 ("alternative national networks in addition to Mercury's are . . . well"$' 0*((s&" established; for example, as of November 1995, Energis had already built 4,100 km of its national trunk network"). CWI asserts that, according to the United Kingdom's"  0*((A " Office of Telecommunications (Oftel), Mercury generates "approximately 0.549 percent of the residential [market] revenues and 7.216 percent of the business market revenues in the U.K.  X-local market."  {Ok-ԍxCWI Nov. 27, 1996 Ex Parte Letter at 3 and  Attachment 2, "Oftel Market Information Update: Containing Data for the Period to Q4 1995/96" (Oct. 1996)). CWI claims that, in the national market, Mercury generates approximately 5.86 percent of the residential market revenues and 20.5 percent of the business market  X-revenues.U \B {O -ԍxCWI Nov. 27, 1996 Ex Parte Letter at 3 and Attachment 2, "Oftel Market Information Update:  {Oa -Containing Data for the Period to Q4 1995/96" (Oct. 1996); id. at 3 (explaining that the "national market . . . equates roughly to the U.S. 'toll market'"). U CWI also maintains that approximately 60,000 people a month switch from BT to  X-local cable companies for their telephone service.f  {O-ԍxCWI Supplemental Filing at 4 (citing "Why Talk is Getting Cheaper," Daily Express, at 60 (Oct. 16,  {On-1996)); accord BTNA Comments at 56. CWI also asserts that it does not have the size and resources to discriminate against unaffiliated U.S. carriers in the U.K. domestic  X_-market because it controls only 13 percent of the domestic digital infrastructure.N_  yO-ԍxCWI Supplemental Filing at 4.N  XH-  X1-x 5.` ` With respect to the market for international services, CWI asserts that Mercury's share of the U.K. international market is as modest as its share of the U.K. domestic market. CWI contends that, "in 1995, Mercury held only 24.6 percent of the IMTS  X -[i.e., international message telephone service] and ISR market based on revenue, and only a  X -modest 36 percent of the IPL [i.e., international private line] market."- R  {O-ԍxCWI Application at 15; CWI Nov. 27, 1996 Ex Parte Letter at 2ĩ3 and Attachment One, "Oftel: The  {O-U.K. Telecommunications Industry: Market Information 1992/93 to 1994/95, Tables 1.4 and 5.2; see also id. at 3  {On-and Attachment 2, "Oftel Market Information Update: Containing Data for the Period to Q4 1995/96," (Oct. 1996) ("in the international market, [Mercury] . . . generates 10.326 percent of the residential market revenues  {O-and 25.263 percent of the business market revenues"); see ACC Global Corporation, Alanna Inc., Applications for Authority pursuant to Section 214 of the Communications Act of 1934, as amended, to Operate as  {O-International Private Line Carriers, 9 FCC Rcd 6240, at  14 (1994) (ACC/Alanna) ("ISR is the United Kingdom's term for the resale of international private lines interconnected to the public switched network at both ends, as opposed to one end only").- CWI maintains that there is sufficient supply elasticity in the facilitiesbased switched and private line markets in  X -the United Kingdom and that it will increase in the future.N , yO$-ԍxCWI Supplemental Filing at 3.N In this regard, CWI claims that  X-there are 25 licensed ISR providers operating in the United Kingdom,N yO'-ԍxCWI Supplemental Filing at 3.N as well as a multitude"L0*(("  X-of other carriers reselling IMTS and IPL services.G yOy-ԍxCWI Application at 15.G In addition, CWI states that DTI has "proposed ending the present duopoly on international facilities to the U.S.," that over 40 companies have applied for international facilitiesbased licenses which DTI expects to grant by the end of 1996, and that the new applicants will not be subject to foreign ownership  X-restrictions.NX yO-ԍxCWI Supplemental Filing at 3.N CWI also states that the Commission has determined that the United Kingdom  X-is an "equivalent country" for ISR purposes.GZ {O& -ԍxCWI Supplemental Filing at 3; see ACC/Alanna at  1 (1994) (finding "that equivalent international private line resale opportunities exist in the United Kingdom for U.S.based carriers seeking to provide service between the United States and the United Kingdom").G CWI also suggests that international service customers in the United Kingdom benefit from strong price competition as evidenced by the facts that "the average BT phone bill has fallen by over 25 percent in real terms since 1990, AT&T claims it undercuts BT's basic rates by up to 40 percent on some calls, and Mercury  X1-can offer international calls at 20 percent less than BT."1  {O-ԍxCWI Supplemental Filing at 4 (citing "Why Talk is Getting Cheaper," Daily Express, at 60 (Oct. 16, 1996)). CWI asserts that it does not possess the size and resources to discriminate against unaffiliated U.S. carriers because it controls 42 percent of the digital IPLs and 17.6 percent of the international digital  X -infrastructure.N d  yO-ԍxCWI Supplemental Filing at 4.N For these reasons, CWI claims that Mercury lacks sufficient market power to control bottleneck services or facilities in the United Kingdom and, therefore, has no ability to  X -discriminate in favor of CWI in that country.e  yOc-ԍxCWI Application at 15; CWI Supplemental Filing at 2.e  X-x6.` ` CWI also claims that its application passes the effective competitive  Xy-opportunities (ECO) test established in the Foreign Carrier Entry Order.gy  {O-ԍxCWI Application at 3; accord BTNA Comments at 2.g In support, CWI  Xd-cites DTI's decision to "eliminate[] the U.K. duopoly on international facilities"nd {O+ -ԍxCWI Reply at 2 (citing DTI June 6, 1996 Press Notice). n and the Commission's designation of the United Kingdom "as an 'equivalent' country for . . . [ISR]  X6-purposes[.]"}\6 {O#-ԍxCWI Application at 4 and 12 (citing ACC/Alanna and claiming that designating the United Kingdom as an "equivalent" country for ISR "purposes clearly indicates that the FCC has confidence in the fair and non {O!%-discriminatory nature of the U.K. interconnect regime"); see also BTNA Comments at 23.} In addition, CWI avers that the licenses of incumbent facilitiesbased carriers contain conditions ensuring nondiscriminatory interconnection and imposing competitive safeguards. Further, CWI maintains that the fact that there are more than 150 facilitiesbased"0*((d" carriers attests to the efficacy of these competitive safeguards and Oftel's regulatory  X-oversight.F yOb-ԍxCWI Application at 4.F  X- x 7.` ` AT&T asserts that Mercury possesses market power and that the United Kingdom fails the effective competitive opportunities test because the United Kingdom "legally prohibits facilitiesbased international competition . . . and allows only . . . Mercury  Xv-and BT to provide facilitiesbased international services."W\vX {O -ԍxAT&T Opposition at 23; id. at 45. As noted above, AT&T filed its opposition prior to DTI's announcement that it intended to lift the United Kingdom's restrictions on the provision of international  {O -facilitiesbased services. See DTI June 6, 1996 Press Notice.W AT&T claims that CWI has made  X_-no showing of any public interest factors that would warrant approval of its application.G_| yO -ԍxAT&T Opposition at 5. G AT&T therefore recommends that the Commission defer reaching a decision on CWI's  X1-application until the "U.K. takes more definitive action toward removing the current de jure  X -international facilitiesbased prohibition."F  yO-ԍxAT&T Opposition at 5.F AT&T also suggests that, as a part of "its overall public interest analysis[,]" the Commission should examine "whether new entrants have the practical ability to obtain international facilities and the means to access that capacity in the  X -U.K."K  yO$-ԍxAT&T Opposition at 5, n.8.K In particular, AT&T recommends that "the role Mercury will play in making access  X -available to new entrants should be evaluated herein."J! ,  yO-ԍxAT&T Opposition at 5 n.8.J  X -  X- #]   III. Discussion TP  Xd-xA. CWI's Application to Provide Facilitiesbased International Services  X6-x8.` ` Because CWI and its foreign carrier affiliate Mercury are under the common control of C&W plc, we must review CWI's application to provide international services to  X-the United Kingdom under the framework established in the Commission's Foreign Carrier  X-Entry Order."  {O`"-ԍxForeign Carrier Entry Order at  102; 47 C.F.R.  63.18(h)(6).   In that order, the Commission determined that foreign carriers seeking to provide U.S. international services to countries in which they have market power must demonstrate that the affiliated country offers "effective competitive opportunities" (ECO) for"N "0*(("  X-U.S. carriers to offer like services.a# {Oy-ԍxForeign Carrier Entry Order at  139148; see also id. at  16 ("[o]ur goal of promoting effective competition in the context of foreign carrier entry into the U.S. international market is . . . best served by  {O -considering the extent to which foreign countries have opened their markets to U.S. carriers"); see also id. at  4072 (discussing the factors that comprise the effective competitive opportunities analysis) and  99109 (discussing those affiliated carriers subject to the ECO analysis).a The Commission stated that it would apply the ECO analysis only to Section 214 applications filed by foreign carriers or certain affiliates of such carriers that seek to provide U.S. international services on routes where the foreign carriers have market power on the foreign end. The Commission determined that it is unnecessary to apply the ECO analysis where an applicant's foreign affiliate does not have market power on  X-the foreign end of the route. $| {O -ԍxForeign Carrier Entry Order at  2, 19 and 102; see also id. at  102 ("[f]oreign carriers that do not have market power . . . lack the ability to discriminate against unaffiliated U.S. carriers").  The Commission also determined that it would continue to consider other public interest factors that may weigh in favor of, or against, granting the application. Such public interest factors include the general significance of the proposed entry to the promotion of competition in the U.S. telecommunications market, any national security, law enforcement, foreign policy, or trade concerns raised by the Executive Branch, and the  X -presence of costbased accounting rates.n%  {O-ԍxForeign Carrier Entry Order at  3 and 62 .n  X -x` ` 1. Analysis of CWI's Market Power  X -x9.` ` The Foreign Carrier Entry Order defines market power as "the ability of the carrier to act anticompetitively against unaffiliated U.S. carriers through the control of  X-bottleneck services or facilities on the foreign end."_&h  {O-ԍxForeign Carrier Entry Order at  116._ "Bottleneck services or facilities" are "those that are necessary for the provision of international services, including intercity or  Xd-local access facilities on the foreign end."`'d  {O-ԍxForeign Carrier Entry Order at  116. ` To assess Mercury's market power, we apply traditional antitrust principles to examine: (1) Mercury's market share; (2) the supply elasticity  X6-of the market;5(~6  yOs -ԍxThere are two factors that determine supply elasticities in the market. The first is the supply of capacity of existing competitors: supply elasticities tend to be high if existing competitors have or can easily acquire significant additional capacity in a relatively short time period. The second factor is low entry barriers: supply elasticities tend to be high even if existing suppliers lack excess capacity if new suppliers can enter the market  {O#-relatively easily and add to existing capacity. See Motion of AT&T Corp. to be Declared NonDominant for  {O]$-International Service, Order, FCC 96209 at  48 (released May 14, 1996) (AT&T International Nondominance  {O'%-Order). 5 (3) the demand elasticity for Mercury's services;e)6 yO-ԍxDemand elasticity or responsiveness for Mercury's services is the propensity of customers to switch carriers or otherwise change the amount of services they purchase from the carrier in response to relative changes  {O -in price and quality.  See Revisions to Price Cap Rules for AT&T Corp., 10 FCC Rcd 3009, 3016 (1995)  {O-(Commercial Services Order). High demand elasticities indicate customers' willingness and ability to switch to or from the carrier in order to obtain price reductions and desired features.e and (4) Mercury's cost"6|)0*((*"  X-structure, size and resources.*| {O--ԍxAT&T International Nondominance Order at  6679; Motion of AT&T Corp. to be Reclassified as a  {O-NonDominant Carrier, 11 FCC Rcd 3271, 329394 (1995) (AT&T Domestic Nondominance Order); see also KDD America, Inc., Application for Authority under Section 214 of the Communications Act of 1934, as amended, to Resell Noninterconnected Private Line Services between the United States and Various International  {OQ -Points, Order, Authorization and Certificate, File No. ITC95481, DA 961559,  10. (International Bur.,  {O -released Sept. 17, 1996) (KDD America). We analyze Mercury's market power in the provision of international switched services and private line services separately because the two services  X-constitute separate product markets.+\  {O-ԍxSee International Competitive Carrier Policies, 102 F.C.C. 2d 812, at  37 (1985) (finding that IMTS (including international switched services) and nonIMTS (including private line services) are separate product  {O-markets) (International Competitive Carrier), recon. denied, 60 RR 2d 1435 (1986).  X-  X-x 10.` ` We examine first the local and national (domestic long distance) markets for  X-terminating international private line and switched services at their U.K. destination. A carrier controlling bottleneck facilities and services in the domestic local or long distance markets could discriminate in favor of an affiliate competing in the private line or switched services markets by offering its affiliate superior technical quality, faster provisioning or preferential rates.  X -x 11.` ` We find that Mercury's shares of the U.K. domestic market for local services are low: 0.55 percent and 7.21 percent of the residential and business markets, respectively, based on revenues, and 5.86 percent and 20.5 percent of the national (long distance)  X -residential and business markets, respectively, based on revenues.,\  {O-ԍxSee CWI Nov. 27, 1996 Ex Parte Letter at 3 (citing Oftel's "Market Information Update" (Oct. 1996));  {OY-cf. AT&T Domestic Nondominance Order at  72 (finding that the decline in AT&T's overall share in the long distance market to 60 percent "suggests that AT&T no longer possesses market power"). We also note that, according to CWI, "Mercury is not the sole provider of telecommunications services in any  X-part of the United Kingdom."^-D {O!-ԍxCWI Nov. 26, 1996 Ex Parte Letter at 2.^ We also find that there is sufficient supply elasticity in the U.K. domestic market to support a finding that Mercury does not control bottleneck facilities and services in that market. Mercury provides facilitiesbased local and long distance service in the United Kingdom in direct competition with BT (the largest provider of domestic telecommunications services in the United Kingdom) and 22 regional and national facilitiesbased licensed holders. In addition, there are 125 cable operators licensed to provide local  X-telecommunications services. Further, the United Kingdom has opened its markets for the"-0*(("  X-provision of domestic local and long distance services.:.Z {Oy-ԍxSee ACC/Alanna at  11 (finding that the United Kingdom "has opened virtually all sectors of its telecommunications market to competition, with the notable exception of international facilitiesbased competition, which is limited to BT and Mercury Ltd."). : Also, the fact that 60,000 customers a month switch from BT to local cable companies for their telephone service supports a finding that U.K. customers consider the local services provided by U.K. competitors generally to be close substitutes and that they are willing to switch local carriers to obtain  X-price reductions and desired services.t/ {O? -ԍxSee CWI Supplemental Filing at 4; BTNA Comments at 56.t  Xv-x 12.` ` We also find that Mercury's size and resources do not provide persuasive evidence that Mercury holds market power in the United Kingdom's domestic telecommunications market. Mercury's parent, C&W plc, is a large, wellfinanced corporation with interests in more than forty carriers worldwide. It is not surprising that Mercury might enjoy some advantages, including resource advantages, scale economies, and ready access to capital, as a result of its relationship with C&W plc. Such advantages do not,  X -however, necessarily indicate that Mercury has the ability to control price. 0j | {O-ԍxSee AT&T International Nondominance at  6669 (in light of the fact that AT&T faces large, wellfinanced competitors, including MCI and Sprint, the Commission holds that AT&T's cost structure, size and  {O-superior resources are not alone persuasive evidence of market power); see also AT&T Domestic Nondominance  {Ou-at  73 (for purposes of domestic, interstate, interexchange services, AT&T's size and resources do not alone  yO?-constitute persuasive evidence of market power); NYNEX Long Distance Co., Ameritech Communications, Inc., and Bell Atlantic Communications, Inc., Applications for Authority Pursuant to Section 214 of the  {O-Communications Act of 1934, as amended, to Resell International Switched Services, Order, Authorization, and  {O-Certificate, DA 961169,  11 (International Bur., released July 24, 1996) (NYNEX LD et al. Order) ("we do not envision that . . . [the] cost structure, size, and resources [of NYNEX Corp.'s., Bell Atlantic Corporation's, Ameritech Corporation's international affiliates] will allow them to control prices or exclude competition insofar as they are new entrants into the international services market and will face a number of large, wellfinanced competitors, including MCI, Sprint, and AT&T"). As the  X -Commission observed in the First Interexchange Competition Order, the issue is not whether Mercury has advantages, but "whether such advantages are so great to preclude the effective  X -functioning of a competitive market." 1&  {O -ԍ xCompetition in the Interstate Interexchange Marketplace, CC Docket No. 90132, Report and Order, 6  {O-FCC Rcd 5880, 589192 (1991) (First Interexchange Competition Order); see also id. at 5892 (the "competitive process itself is largely about trying to develop one's own advantages, and all firms need not be equal in all  {Of!-respects for this process to work"); see also AT&T Domestic Nondominance at  73.  There is nothing in the record to indicate that the advantages that Mercury may derive as a result of its ownership by C&W plc confer market power on Mercury. Indeed, Mercury faces competition in the domestic local and long distance markets from numerous carriers, including such large, wellfinanced, and wellestablished carriers as BT. We note that Mercury's shares of local and national calls based on revenues between April 1992 and March 1995 have remained very low relative to those of"8 10*(( "  X-BT.2 {Oy-ԍxCWI Nov. 26, 1996 Ex Parte Letter, Attachment, Table 1.1(a); see also ex parte letter from Jeanne M. Schaaf, BT North America Inc., to William F. Caton, Acting Secretary, F.C.C., at (unnumbered) 4, 10, 14 and  {O -21 (dated Oct. 31, 1996; filed in ITC96439 and ISP96007ND) (BT Oct. 31, 1996 Ex parte Letter) (based on  yO-Oftel Market Information, November 1995, and updates through August 1996, BT's share of "national call revenues was 80.8 percent as of [the fourth quarter of 1995;]" its "share of local call revenues was 91.7 percent as of [the fourth quarter of 1995;]" its "exchange line revenues represent a 94 percent market share"). Further, the number of exchange lines that Mercury owns in the United Kingdom in comparison to those owned by BT remains low, a trend which suggests that Mercury does not  X-have the ability to exclude competition in this market.3"D {O -ԍxSee BT Oct. 31, 1991 Ex Parte Letter at unnumbered 23 (based on Oftel Market Information, November 1995, and updates through August 1996, Mercury owned 130,000 exchange lines in 1991/92 and 290,000 exchange lines as of the fourth quarter of 1995; in comparison, BT owned 25,590,000 exchange lines in 1991/92 and 27,190,000 exchange lines as of the fourth quarter of 1995).  Based on these facts and findings, we conclude that Mercury lacks market power and does not control bottleneck services and facilities in the United Kingdom's domestic market for terminating international switched and private line services.  X_-x 13.` ` We next examine the facilitiesbased markets for international switched and private line services. We analyze the facilitiesbased markets for these services because U.S. carriers, whether operating on a facilities or resale basis, ultimately depend upon the underlying international facilitiesbased carrier(s) to provide international service to the United Kingdom. If a carrier were to exercise market power in facilitiesbased international services markets, it could discriminate in favor of an affiliated U.S. service provider by offering the affiliate preferential rates or conditions of service.  X -x 14.` ` With the issuance of new facilitiesbased international licenses by DTI,X4 .  {O-ԍXxSee infra  1617.(#X we do  X-not find that Mercury's current market shares of 24.6 percent and 36 percent for international  Xy-switched and private line services confer market power in either product market.5y  {O-ԍxSee AT&T International Nondominance Order at  5, 3740 (finding that AT&T's overall share of the IMTS market of 59 percent does not support a finding that AT&T can unilaterally exercise market power or dominate the market). We note that our analysis assumes that Mercury's market share will remain constant with the increased number of facilitiesbased competitors. Normally, we would expect that, with increased competition, Mercury's market share would fall. The market data available to us for the United Kingdom does not focus solely on the share of the two licensed international facilitiesbased carriers, but compares Mercury's shares to the shares of all other U.K. international carriers, including BT and resale carriers. Statistics for the first three months of 1996 reveal that BT has a market share of 68.05 percent based on  X-minutes as compared to Mercury's market share of 19.41 percent.6r {O)&-ԍxSee CWI Nov. 19, 1996 Ex Parte Letter at 2 (citing Oftel August 1996 Market Information Update and asserting that Mercury's "market share of international switched minutes is significantly less than BT's share"). The data suggests that," 60*((" with the issuance of new facilitiesbased licenses, Mercury will lack the ability to raise and sustain prices above a competitive level for the provision of international switched and private line services.  X-  X-x15.` ` With respect to supply capacity in the facilitiesbased international services market, we find that there is significant capacity on existing and future cables and satellite  Xv-circuits between the United States and the United Kingdom.v7v {O-ԍxSee, e.g., MFS Globenet, Inc., Application for a license to land and operate in the United States a private submarine fiber optic cable extending between the United States and the United Kingdom, Cable Landing  {O -License, DA 961649 (Telecom. Div., released Oct. 3, 1996) (MFS Globenet) (finding no public interest reason to require the applicant's proposed cable facilities be provided on a common carrier basis in light of the wide availability of common carrier circuits on existing and future cables and satellite circuits on the U.S.U.K. route). v The continental United States and the United Kingdom are served or will soon be served by a number of submarine cables,  XH-including the TAT12/TAT13 cable network, the PTAT system, the Atlantic Express I and II  X3-cables, as well as by Intelsat, PanAmSat, Orion, and Columbia/TDRS satellite systems.8&3| {O`-ԍxSee TAT12/TAT13 Cable Landing License, 8 FCC Rcd 4808 (1993); Atlantic Express Cable Landing  {O*-Licenses, Cable Landing Licenses, 11 FCC Rcd 7033 (Telecom. Div., 1996); MFS Globenet; see also Cable & Wireless, plc, Application for License to Land and Operate a Submarine Fiber Optic Cable between the United  {O-States and the United Kingdom, File No. SCL96005 (filed June 26, 1996) (pending). There is no evidence in the record to suggest that new competitive carriers will not be able to  X -obtain access to existing and planned supply capacity.9 j  {O -ԍxSee generally AT&T International Nondominance Order at  5265; see also infra Section III. A. 2  X -x16.` ` With respect to barriers to entry into these product markets, the second factor in our analysis of supply elasticities, we note that DTI has announced it will eliminate the restrictions limiting the provision of international facilitiesbased services to BT and Mercury and has invited companies to apply for licenses to provide international facilitiesbased telecommunications services on all routes from the United Kingdom "on the same terms  Xd-enjoyed by BT and Mercury.":$d  {O-ԍxDTI June 6, 1996 Press Notice at 1 and Attachment, "Licenses to Provide International  {O-Telecommunications Services: Notes for Applicants," at 1; id. (expressing its "hope by July [1996] to produce, on the basis of such applications, a draft standard license for comment by applicants, and would seek to issue  yOm-licenses as quickly as possible thereafter"). DTI, however, has not yet authorized any carrier other than Mercury or BT to provide international facilitiesbased services. It is therefore not clear whether the ability to obtain an authorization to provide such services will prove to be a barrier to entry into the international facilitiesbased switched and private line services markets. Until DTI issues additional licenses, Mercury's and BT's competitors must acquire the underlying services to provide international switched and private line services on a resale basis from Mercury or BT.  X- x17.` ` Nevertheless, we are encouraged by the United Kingdom's decision to accept applications for international facilitiesbased licenses and its announced intention to "quickly"" :0*((3" issue additional licenses for such services "on the same terms as those enjoyed by BT and  X-Mercury."o; {Ob-ԍxDTI June 6, 1996 Public Notice at 1 and Attachment at 1.o We believe that DTI's execution of this intention by issuing additional licenses for international facilitiesbased services will introduce a new wave of competitors in the provision of international facilitiesbased and resold services from the United Kingdom. Further, there is nothing in the record before us to suggest that the United Kingdom will impose restrictions on foreign ownership or participation in the provision of international facilitiesbased switched and private line services. Indeed, the United Kingdom currently "imposes no restrictions on either foreign ownership of telecommunications service providers  XH-or foreign participation in . . . any . . . sector of the U.K. telecommunications market."Q<HZ {OS -ԍxSee ACC/Alanna at  11.Q In addition, we have no reason to believe that DTI would impose restrictions on entrance into  X -the international facilitiesbased switches services market based on demand.U=\  {O-ԍxCf. KDD America at  19 (concluding "that KDDJapan has significant market power in the facilities {O-based IPL market" because, inter alia, the regulatory authority imposes restrictions on entrance into the IPL facilitiesbased market based on demand). U We therefore anticipate that the implementation of the United Kingdom's new regulatory policies will promote competitive entry into the international facilitiesbased switched and private line services markets.  X - x18.` ` We further find that the current number of international service competitors is evidence of an elastic demand for Mercury's services. According to CWI's undisputed claim, a "multitude" of carriers resell international private line services and IMTS, and 25 operators  Xb-provide ISR services.o>b {O#-ԍxSee CWI Supplemental Filing at 3; CWI Application at 15.o We also find that the likely increase in the number of facilitiesbased competitors resulting from the issuance of new licenses by DTI will add to the level of competition by vendors for customers.  X-x19.` ` We also find, for the same reasons stated in paragraph 12, that Mercury's size and resources do not provide persuasive evidence that Mercury holds market power in the provision of international facilitiesbased switched and private line services. Mercury today faces competition in the provision of international facilitiesbased services from BT, and we expect additional wellfinanced competitors to enter the facilitiesbased market soon. Further, Mercury's shares of the international switched and private line services markets have remained  X|-low relative to BT's shares.?$| {O#-ԍxSee CWI Nov. 26, 1996 Ex Parte Letter, Attachment, Tables 1.1(a), 1.4, and 5.2; see also BT Oct. 31,  {O$-1996 Ex Parte Letter at (unnumbered) 4 and 6 (based on Oftel Market Information, November 1995, and updates through August 1996, BT's share of "international call revenues was 70 percent as of [the fourth quarter of 1995]"). "e ?0*(("Ԍ X- x20.` ` Based on the record in this proceeding, we find that, once DTI issues additional facilitiesbased licenses for international switched and private line services, Mercury will lack market power in the United Kingdom in the provision of these services. Because Mercury will lack such power and, therefore, the ability to discriminate among U.S. carriers in the provision of international switched and private line services, we do not apply the effective  X-competitive opportunities test as part of our review of CWI's application. As discussed infra, our grant of the instant application will become effective after DTI issues additional international facilitiesbased licenses.  X3-x21.` ` On October 22, 1996, C&W announced that Mercury Communications, Inc., NYNEX CableComms Group, Bell Cablemedia plc and Videotron Holdings plc proposed to merge their operations to create Cable & Wireless Communications (CWC), a  X -telecommunications company offering cable and telephony services in the United Kingdom.@$  {Og -ԍxCWI Supplemental Filing at 5; see also BT Oct. 31, 1996 Ex Parte Letter, Attachment at unnumbered  {O1-24 (Cable & Wireless Press Info, "U.S. Press Release for Immediate Release October 1996" (stating that, "[o]n completion of the transaction, the new company will offer direct communications services to businesses throughout the U.K. and to approximately six million franchised homes")). C&W plc, NYNEX, and Bell Canada will own 52.6 percent, 18.5 percent, and 14.2 percent, respectively, of CWC, with the remainder "to be sold to the public in an initial offering in  X -1997."NA  yO-ԍxCWI Supplemental Filing at 5.N CWI states that, "[n]either Mercury nor any of the cable companies with which  X-Mercury is merging are the sole telecommunications providers in any part of the U.K."^BD {O-ԍxCWI Nov. 27, 1996 Ex Parte Letter at 2.^ CWI also states that, if the proposed merger is consummated, then CWC "will control over 566,000 residential lines representing approximately 2.5 percent of the U.K. residential market  XM-. . . . [, and] 337,000 business lines representing 5 percent of the U.K. business market[.]"^CM {O-ԍxCWI Nov. 19, 1996 Ex Parte Letter at 2.^  X6- Although the proposed merger has not been consummated, it does appear that CWI is correct in its assertion that, even after the proposed merger is consummated, Mercury will not have  X-"bottleneck control in local or long distance telecommunications services."NDh  yO!-ԍxCWI Supplemental Filing at 5.N  X-x` ` 2. Public Interest Analysis  X-x22.` ` We next examine whether there are any countervailing public interest reasons to deny CWI's application. The Executive Branch has not raised any national security, law enforcement, foreign policy or trade concerns with this application. AT&T suggests that our public interest analysis should include an examination as to whether new entrants into the  XP-U.K. international services market "have the practical ability to obtain international facilities and the means to access that capacity in the U.K." and what "role Mercury will play in"9 D0*(("  X-making access available to new entrants."JE yOy-ԍxAT&T Opposition at 5 n.8.J The Commission has, however, determined that it should only apply its ECO analysis which includes an analysis of practical barriers to entry  X-into the relevant markethFX {O-ԍxSee Foreign Carrier Market Entry Order at  3.h to applications from foreign carriers that have market power, or  X-are affiliated with such carriers, in the destination market they seek to serve._G {OV-ԍxForeign Carrier Entry Order at  102._ In this order, we find that Mercury lacks market power in the local and national markets and that it will lack market power in the international switched and private line markets at the time the instant facilitiesbased authorization is effective. The application, therefore, is not subject to our ECO analysis. We therefore need not examine whether there are practical barriers to  XH-entry into these markets as part of our public interest analysis under the Foreign Carrier  X3-Entry Order.H3| {O`-ԍxSee Foreign Carrier Entry Order at  2 (the ECO analysis is part of our overall public interest analysis under Section 214 of the Act). Our finding is based in part on the lack of any specific evidence in the record  X -to indicate that new competitors will not be able to access international capacity.SI  {O-ԍxSee supra Section III. A. 1.S  X -x23.` ` We thus find that no countervailing public interest factors have been raised by  X -any party in this proceeding that would warrant denying CWI's application. Accordingly, we find that the public interest would be served by granting CWI's application to provide facilitiesbased international switched and private line services.  X}-xB. CWI's Request for Nondominant Treatment  XO- x 24.` ` Under the Commission's rules, a U.S. carrier that is affiliated with a foreign carrier that is not a monopoly in a destination country and that seeks to be regulated as a nondominant carrier for the provision of facilitiesbased switched or private line services, or for the resale of private line services, bears the burden of submitting information sufficient to demonstrate that its foreign affiliate lacks the ability to discriminate against unaffiliated U.S. international carriers through control of bottleneck services or facilities in the destination  X-country.J&h  {O!-ԍxSee Regulation of International Common Carrier Services, 7 FCC Rcd 7331, 7334 (1992) (International  {O"-Services); see also Foreign Carrier Entry Order at 396677 (maintaining the basic regulatory framework adopted  {Or#-in International Services for determining the regulatory status of U.S. international carriers that are affiliated with foreign carriers); Section 63.10(a)(3) of the rules, 47 C.F.R.  63.10 (a)(3).  X- x 25.` ` In a 1994 decision authorizing CWI to resell interconnected international private lines for the provision of switched service between the United States and the United"V J0*((P"  X-Kingdom, we classified CWI as a dominant carrier for the provision of such service.mK yOy-ԍxCable & Wireless, Inc., 9 FCC Rcd 7283 (Telecom. Div. 1994).m In 1993, the Commission classified CWI as dominant in its provision of resold non X-interconnected private lines to the United Kingdom.}LX yO-ԍxCable & Wireless Communications, Inc., 8 FCC Rcd 1664 (Com. Car. Bur. 1993).} In a 1994 order, we deferred a decision regarding a pending CWI petition for reclassification as a nondominant carrier for the  X-provision of resold, noninterconnected IPL service on the U.S.U.K. route.M yO= -ԍxPetition of Cable & Wireless, Inc. for Non-dominant Status on International Private Line Routes, 9 FCC Rcd 6096, 6097 (1994). AT&T opposed  X-CWI's petition for reclassification in that proceeding.N@ yO~ -ԍxAT&T Opposition in File No. ISP93007ND (filed May 21, 1993) (AT&T Opposition to CWI Reclassification Petition); AT&T Reply (filed June 15, 1993). In CWI Increased Private Line Resale  Xx-Capacity Order, we deferred to the instant proceeding a decision on whether CWI should be reclassified as a nondominant carrier in its provision of resold noninterconnected IPL  XL-services between the United States and the United Kingdom.OL {O-ԍxCWI Increased Private Line Resale Capacity Order at  1 and 6.  X - x 26.` ` As discussed above, we find that CWI's foreign affiliate Mercury will not control bottleneck services or facilities in the United Kingdom once DTI issues additional international facilitiesbased licenses. CWI's foreign affiliate would then lack the ability to discriminate against unaffiliated U.S. international carriers terminating switched and private line traffic in the United Kingdom. Consequently, we find that CWI should be regulated as a nondominant carrier for the provision of the international facilitiesbased switched and private line services between the United States and the United Kingdom after DTI issues additional international facilitiesbased licenses. For the same reason, we also find that CWI should then be regulated as a nondominant carrier for the provision of resold interconnected and noninterconnected private line services for which CWI previously obtained Section 214 authority on a dominant carrier basis on the U.S.U.K. route.  X - x 27.` ` We disagree with AT&T's allegation that Mercury has the ability to discriminate against unaffiliated U.S. carriers because it is allowed "to set its rates for private  X-line halfcircuits without regulatory review[.]"lP*  yO!-ԍxAT&T Opposition to CWI Petition for Reclassification at 14.l We believe that Mercury's low market share relative to BT, the high supply and demand elasticities of the market, and the number, size and financial strength of Mercury's current and future competitors (including BT) in the provision of international private line services, will prevent Mercury from engaging in discriminatory pricing behavior. We also believe that the fact that Mercury is not subject to rate regulation suggests Oftel's confidence that competition will restrain Mercury from engaging in discriminatory or other anticompetitive pricing activities. We also disagree with"R P0*((" AT&T's contention that Mercury has the ability to discriminate against unaffiliated U.S. carriers because it has all the necessary authorizations to compete, continues to benefit from regulatory policies intended to foster the development of 'managed competition,' has secured and implemented interconnection arrangements with the BT, and "enjoys access to the  X-customer base in the U.K. not available to U.S. carriers generally."kQ yO-ԍxAT&T Opposition to CWI Petition for Reclassification at 1.k As indicated supra, it is to be expected that Mercury, as an incumbent in the international facilitiesbased private line market, would enjoy certain advantages over new entrants into the market. We do not believe that the benefits identified by AT&T give CWI an unfair advantage over competitors, nor do we believe these advantages are so great as to preclude the effective functioning of a  X3-competitive market.uR3X {O< -ԍxSee First Interexchange Competition Order at  589192.u  X - x 28.` ` Accordingly, we find that CWI should be regulated as a nondominant carrier for the provision of all international switched and private line services between the United  X -States and the United Kingdom after DTI has issued additional facilitiesbased licenses. We reserve the right to revisit CWI's status on the U.S.U.K. route at a later date in the event CWI in the future obtains market power which could enable it to discriminate against unaffiliated U.S. carriers.  Xd- x 29.` ` Our grant of CWI's application to provide international facilitiesbased switched services and our reclassification of CWI as a nondominant carrier in its provision of facilitiesbased switched service on the U.S.U.K. route will become effective after DTI issues additional international facilitiesbased switched services licenses, CWI informs the Commission in writing that DTI has done so, and the Chief, International Bureau, informs CWI that the Bureau has received its notification and its authorization is effective. Similarly, our grant of CWI's application to provide international facilitiesbased private line services and our reclassification of CWI as a nondominant carrier in its provision of facilitiesbased and resold private line service (both interconnected and noninterconnected) on the U.S.U.K. route will become effective after DTI issues additional international facilitiesbased private line services licenses, CWI informs the Commission in writing that DTI has done so, and the Chief, International Bureau, informs CWI that the Bureau has received its notification and its authorization is effective. Should either group of licenses be limited in number or contain conditions that limit the ability of licensees to compete effectively in the relevant market(s), we reserve the right to reconsider the instant grant.  X- IV. Ordering Clauses  X-TP  X -x 30.` ` Accordingly, IT IS HEREBY CERTIFIED that the present and future public interest, convenience, and necessity require a grant of the present application and IT IS ORDERED that application File No. ITC96239 IS GRANTED, and Cable &Wireless Inc.""R0*((!" (CWI) is authorized to provide international facilitiesbased switched and private line services between the United States and the United Kingdom.  X-x31.` ` IT IS FURTHER ORDERED that the facilities for which authority is granted in this order shall be used to provide service between the United States and the United Kingdom only, except that: (1) CWI may use the facilities in conjunction with previously authorized facilities or services to route through the United States traffic that originates and terminates in third countries; (2) CWI may use the facilities to route U.S. traffic on an indirect, switched transit or switched hubbing basis to countries where CWI does not have an affiliation with a foreign carrier, and to countries where it does have an affiliation with a foreign carrier provided it has received a grant of specific authorization under the Communications Act of 1934, as amended, 47 U.S.C.  214.  X - x 32.` ` IT IS FURTHER ORDERED that CWI shall be regulated as a nondominant carrier for the provision of all its authorized international switched and private line services between the United States and the United Kingdom in accordance with the requirements of  X-paragraph 35 infra.  Xd- x  33.` ` IT IS FURTHER ORDERED that the petition filed by CWI in File No. ISP93007ND is GRANTED and CWI is authorized to provide non-interconnected, resold international private line service between the United States and the United Kingdom on a non X-dominant carrier basis in accordance with the requirements of paragraph 35 infra.  0  X - x  X- x !34.` ` IT IS FURTHER ORDERED that, as a nondominant carrier on the U.S.U.K. route, CWI shall comply with Sections 43.82, 63.21 and 63.15(b) of the Commission's rules.  X- x "35.` ` IT IS FURTHER ORDERED that this the grant of CWI's application to provide international facilitiesbased switched services and our reclassification of CWI as a nondominant carrier in its provision of facilitiesbased switched service on the U.S.U.K. route WILL BE EFFECTIVE after DTI issues additional international facilitiesbased switched services licenses, CWI informs the Commission in writing that DTI has done so, and the Chief, International Bureau, informs CWI that the Bureau has received its notification and its authorization is effective. IT IS FURTHER ORDERED that the grant of CWI's application to provide international facilitiesbased private line services and our reclassification of CWI as a nondominant carrier in its provision of facilitiesbased and resold private line service (both interconnected and noninterconnected) on the U.S.U.K. route WILL BE EFFECTIVE after DTI issues additional international facilitiesbased private line services licenses, CWI informs the Commission in writing that DTI has done so, and the "!R0*(( " Chief, International Bureau, informs CWI that the Bureau has received its notification and its  X-authorization is effective. 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  X-of public notice of this order. See Section 1.4(b)(2) of the Commission's rules, 47 C.F.R.  1.4(b)(2). x` `  hh@FEDERAL COMMUNICATIONS COMMISSION x` `  hh@Donald H. Gips x` `  hh@Chief, International Bureau