$//TRANSMITTED FOR FCC RECORD ONLY//$ $//MOO&A, TLD, Intl. Ext. of Lines, FCC 95-375//$ $/300.214 Extension of Lines/$ $/63.01 Contents of Applications/$ Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 FCC No. 95-375 In the Matter of ) TELEFONICA LARGA DISTANCIA ) File No. I-T-C-93-091 DE PUERTO RICO, INC. ) ) Application for authority ) to provide international ) private line services ) between Puerto Rico, the ) U.S. Virgin Islands, and the ) Dominican Republic ) ) Application for modification ) File No. I-S-P-93-002-ND of regulatory status from ) dominant to nondominant ) for international communications ) services for various countries; ) ) to Portugal; ) File No. I-S-P-93-003-ND ) to Romania; ) File No. I-S-P-93-004-ND ) to Venezuela. ) File No. I-S-P-93-005-ND MEMORANDUM OPINION, ORDER, AUTHORIZATION AND CERTIFICATE Adopted: August 23, 1995 Released: September 5, 1995 By the Commission: Commissioner Barrett issuing a statement. I. INTRODUCTION 1. In this order, we grant Telefonica Larga Distancia de Puerto Rico, Inc. ("TLD") authority to provide international private line service via submarine cable and microwave facilities between Puerto Rico or the U.S. Virgin Islands and the Dominican Republic. In addition, we relieve TLD of unnecessary regulatory burdens on U.S. international routes where TLD's operations present no substantial risk of anticompetitive effects in the U.S. international services market. Further, we rule that TLD may provide domestic interexchange service without limitation and without the need for specific Section 214 authority from the Commission. These actions will promote certainty for TLD and foster competition in the provision of international service by permitting TLD to use more economical facilities and to operate with fewer regulatory burdens. 2. We also remove the requirement that the full Commission review and approve all Section 214 applications for international facilities filed by foreign carriers or their affiliates. The International Bureau has sufficient policy guidance to act on such applications pursuant to its delegated authority in Section 0.261 of our rules. We will continue to act on applications that raise matters reserved for Commission review under that section. This action will eliminate unnecessary regulatory burdens on the Commission and expedite action on pending applications. II. BACKGROUND 3. On January 28, 1993, TLD filed the captioned application seeking Section 214 authority, to provide international private line services to and from Puerto Rico or the U.S. Virgin Islands and the Dominican Republic. American Telephone & Telegraph Company ("AT&T") filed a Petition to Deny. TLD opposed AT&T's petition, and AT&T filed a reply. Subsequently, AT&T withdrew its opposition. 4. TLD also filed in 1993 the captioned applications to modify its regulatory status from dominant to nondominant for the provision of international communications services on authorized U.S. international routes where TLD has no affiliation with a carrier on the foreign end, or where the service TLD seeks to provide is solely through the resale of unaffiliated U.S. facilities-based carriers' international switched services. AT&T filed a Petition to Deny but subsequently also withdrew its opposition to these applications. III. DISCUSSION Dominican Republic Application 5. TLD requests authority to use previously authorized circuits in the Transcaribbean Cable System ("TCS-1") and the international point-to-point microwave system between Monte del Estado, Puerto Rico, and Otra Banda, Dominican Republic to transmit private line traffic between those two destinations. TLD states that it will acquire the microwave capacity from Telecomunicaciones Ultramarinas de Puerto Rico ("TUPR") pursuant to TUPR's Tariff FCC No. 1. TLD proposes to use its authorized TAINO-CARIB Cable System facilities between Puerto Rico and the U.S. Virgin Islands to extend international private line service between the U.S. Virgin Islands and the Dominican Republic. TLD states it is only seeking to use its authorized facilities for an additional service that is similar in all material respects to the International Business Service ("IBS") that TLD is currently authorized to provide via satellite to the Dominican Republic. TLD contends that, given the short geographic distance between Puerto Rico and the U.S. Virgin Islands, on the one hand, and the Dominican Republic, on the other hand, it is relatively costly to provide private line services via satellite in comparison to using the requested microwave and cable facilities. The application specifies that the proposed private line services will terminate at customer premises in Puerto Rico, the U.S. Virgin Islands, and the Dominican Republic, and will not interconnect with the public switched networks in any of these jurisdictions. 6. AT&T initially opposed this application on the same grounds that it opposed TLD's earlier applications to provide direct, facilities-based service to the Bahamas and the Netherlands. AT&T argued that the authority TLD seeks exceeds limits imposed by the Commission in the TLD Order. AT&T now states, however, that the Commission has made clear it will grant all TLD facilities applications, except those involving circuits to Spain, that involve service from Puerto Rico or the U.S. Virgin Islands and do not involve expansion to the U.S. mainland. Because the Commission has acknowledged that grant of additional authority to TLD would not prejudice AT&T's petition for rulemaking on foreign market entry, AT&T states, it no longer opposes the grant of authority sought in these facilities applications. AT&T continues to believe, however, that any expansion of TLD's authority should be denied until Spain, and any other markets where Telefonica (or its affiliates) controls essential facilities, provide comparable access to U.S. carriers. 7. As we stated in the TLD Cable Order, the crucial question to be addressed in any TLD application to initiate an additional service on a U.S. international route where TLD has no affiliation with a carrier on the foreign end -- here, the Dominican Republic -- is whether the authority requested poses an additional risk of anticompetitive conduct and, if so, whether the safeguards we have in effect are sufficient to protect against that risk. TLD's application does not propose to expand the number of circuits that TLD operates to the Dominican Republic or seek authorization to utilize new or different facilities. Grant of this application, however, would be the first authorization given to TLD to provide international private line service using international cable or microwave instead of satellite facilities. TLD states in its application that it will not interconnect its private lines to the public switched network in any jurisdiction and will not use them to provide public switched service. This authorization is thus consistent with our International Resale Order. Moreover, there is no evidence of anticompetitive conduct by TLD in its provision of IBS, which is a private line offering via satellite similar to the service TLD now seeks to provide via cable and microwave facilities. Nor is there any evidence that TLD has violated the terms of its Section 214 authorizations or the Commission's rules. Finally, we note that TLD is not affiliated with any foreign carrier in the Dominican Republic. We are therefore persuaded that, properly conditioned, grant is unlikely to permit market abuse or anticompetitive conduct. 8. We find that a grant to TLD, as conditioned above, will enable it to provide international private line services to the Dominican Republic using its more efficient and economical TCS-1 Cable System and TUPR's Monte del Estado microwave facilities, instead of more costly satellite facilities. As a result, TLD will be able to offer to the public private line services at lower rates, thereby fostering competition in the Caribbean telecommunications market. We therefore grant TLD's application to provide private line service to the Dominican Republic. Applications for Nondominant Status 9. TLD has also sought modification of its regulatory status from dominant to nondominant for the provision of service to certain countries where it has no affiliation with a foreign carrier, or where the provision of service is solely through the resale of the international switched services of unaffiliated U.S. facilities-based carriers. TLD has requested a change in its regulatory status pursuant to Section 63.13 of our rules. In application File No. I-S-P-93-002-ND, TLD has certified that it has no affiliation with any foreign carrier in the countries listed in Appendix A of its application. In applications File Nos. I-S-P-93-003-ND and I-S-P-93-005-ND, TLD notes that it is affiliated with companies that have interests in carriers in Portugal and Venezuela, but it certifies that those interests are not controlling. Therefore, TLD states it is not "affiliated" with those carriers within the meaning of Section 63.01(r)(1)(i) of our rules. 10. In File No. I-S-P-93-004-ND seeking nondominant status to Romania, TLD states that it does appear to be affiliated, within the meaning of Section 63.01(r)(1)(i) of our rules, with Telefonica Romania, S.A., which provides cellular services in Romania. TLD further argues, however, that it does not believe Telefonica Romania, S.A. fits within our definition of a foreign carrier because Telefonica Romania, S.A. provides only cellular services and does not own or control intercity or local access facilities used to provide international telecommunications services to the public. Even if Telefonica Romania, S.A. meets the definition of a foreign carrier, TLD argues, it is entitled to a presumption of nondominance on the U.S.-Romania route because it provides service on this route solely through the resale of the international switched services of other U.S. facilities- based carriers with which TLD is not affiliated. Thus, according to TLD, it should be classified as a nondominant carrier for the provision of service to Romania under Section 63.10(a)(4) of our rules. 11. AT&T originally objected to TLD's applications for nondominant status. It argued that our International Services decision considered streamlined treatment of nondominant carriers without addressing the broader question of entry standards for foreign carriers seeking to enter the U.S. telecommunications market. However, AT&T no longer objects to the grant of the captioned applications given the Commission's decision to address market entry by foreign carriers in a separate rulemaking proceeding. 12. We stated in the TLD Order that TLD would be regulated as dominant to all foreign points unless and until it could demonstrate, pursuant to International Services, that it qualifies for nondominant regulation on particular routes where it lacks affiliation with a foreign carrier that has the ability and incentive to discriminate in its favor. In International Services, we concluded that a U.S. carrier that has no affiliation with a foreign carrier in a particular country to which it provides service should be considered presumptively nondominant for the provision of international service on that route. We also concluded that a U.S. carrier that provides service to a particular country solely through the resale of an unaffiliated U.S. facilities-based carrier's international switched services shall presumptively be classified as nondominant for the provision of the authorized service. 13. Pursuant to our decision in International Services, we find no reason to continue to regulate TLD as dominant on those U.S. international routes for which it has no affiliation with a carrier on the foreign end and for which it has requested nondominant status, including the U.S- Portugal and U.S.-Venezuela routes. We find, based on the information in the record, that TLD's parent corporation does not have a controlling interest in carriers in either Portugal or Venezuela. Thus, TLD is not affiliated with a foreign carrier, within the meaning our rules, in either market. We see no evidence from TLD's current international operations that suggests the presumption in Section 63.10(a)(1) of our rules should not apply to TLD for services to the countries listed in application File Nos. I-S-P-93-002-ND, I-S-P-93-003-ND, and I-S-P-93-005-ND. Nor in our recent rulemaking on foreign carrier entry have we proposed to change our basic framework for determining the regulatory status of U.S. carriers that are affiliated with foreign carriers, though we have allowed parties the opportunity to comment on our current definition of affiliation. As noted by AT&T, concerns related to the broader question of entry standards for foreign carriers or their affiliates will be addressed in our rulemaking on that subject. We therefore grant TLD's request for nondominant status in File Nos. I-S-P-93-002-ND, I-S-P-93-003-ND and I-S-P-93-005-ND. 14. We also grant TLD's request for nondominant status to Romania (File No. I-S-P-93- 004-ND) despite TLD's affiliation with Telefonica Romania, S.A. Because TLD provides service on the U.S.-Romania route solely through the resale of international switched services of other U.S. facilities-based carriers with which TLD is not affiliated, it is presumptively nondominant under Section 63.10(a)(4) of our Rules. No party has offered any evidence to defeat this presumption, and we find no basis in the record to continue regulating TLD as dominant to Romania. 15. TLD's change in regulatory status permits it, among other things, to add circuits on routes for which it is regulated as nondominant without obtaining prior Commission approval. We will, however, continue to require that TLD obtain our prior approval to acquire additional capacity in the TCS-1 and TAINO-CARIB cables. We imposed this requirement in the TLD Order at the request of the State Department. We will consider modifying or eliminating this requirement should TLD and the State Department request such action. TLD's Provision of Domestic Interexchange Service 16. On March 9, 1995, TLD met with Commission staff regarding TLD's ability to provide domestic interexchange service. TLD was concerned that the language in previous Commission orders affecting TLD was ambiguous as to the type of service it could provide within the United States. In particular, the TLD Cable Order stated in a footnote that TLD's entry into the U.S. mainland market to compete for U.S. international and domestic traffic would require a major expansion of its existing authority. 17. The Commission historically has not imposed foreign ownership restrictions on domestic interexchange services, other than the statutory requirements of Section 310 of the Communications Act. Nor have we proposed to change our policy in our Foreign Carrier NPRM, although we have allowed parties the opportunity to comment in that proceeding on our current policy. To the extent the Commission's footnote in the TLD Cable Order suggests that TLD should not be permitted to provide U.S. domestic interexchange service on or from the U.S. mainland, we do not believe such a restriction is consistent with our general regulatory scheme for the provision of U.S. domestic interexchange service. Accordingly, we rule that TLD may provide U.S. domestic interexchange service without limitation. It also may do so without specific Section 214 authority from the Commission. TLD is regulated as a nondominant carrier in its provision of domestic off-island interexchange services (e.g., from Puerto Rico to the U.S. mainland). So long as TLD conforms with the guidelines specified in the Fifth Report and Order governing interexchange services provided by local exchange carrier affiliates, TLD need not seek specific Section 214 authority to compete in the U.S. mainland market for domestic interexchange service. 18. We have already imposed nondiscrimination safeguards on the participation of PRTC and TLD in the provision of off-island services. These conditions, by their terms, shall also govern PRTC and TLD in their provision of service from the U.S. mainland to Puerto Rico. As we concluded in the TLD Order, applying these safeguards to PRTC to govern its relationship with TLD provides protection against anticompetitive and discriminatory behavior by PRTC against other U.S. interexchange carriers. We emphasize, however, that TLD's authorizations do not include the authority to offer U.S. international service to or from the U.S. mainland. Delegation of Authority 19. In our TLD Order, we stated that international facilities applications from entities affiliated with foreign carriers would require full Commission review and approval. Since that order, the Commission has granted on a case-by-case basis several Section 214 applications by foreign carriers to provide international facilities-based service. Where warranted, we have imposed safeguards and conditions on the applicants to prevent anticompetitive conduct. We have specific guidelines for determining the dominant or nondominant regulatory status for U.S. international carriers that are affiliated with foreign carriers. 20. Given our previous decisions, the International Bureau has sufficient policy guidance to act on Section 214 applications from foreign carriers or their affiliates and to determine their regulatory status. We therefore remove the requirement that the full Commission review such carriers' Section 214 applications for international facilities, except to the extent particular applications raise matters reserved for Commission review under our general delegation of authority to the International Bureau. The Bureau has full authority to act on Section 214 applications filed by foreign carriers or their affiliates under its delegated authority in Section 0.261 of the rules. The Bureau shall also determine the regulatory status of such carriers on particular routes for specific international services. IV. ORDERING CLAUSES 21. Upon consideration of the subject application, File No. I-T-C-93-091, IT IS HEREBY CERTIFIED that the present and future public convenience and necessity require the authorization of TLD to provide private line services between Puerto Rico or the U.S. Virgin Islands and the Dominican Republic. 22. Accordingly, IT IS ORDERED that application File No. I-T-C-93-091 IS GRANTED, and TLD is authorized to: a. use its 30 authorized circuits in Segment G of TCS-1 to provide its authorized international services, including private line services, between Puerto Rico or the U.S. Virgin Islands and the Dominican Republic; b. use its 120 authorized circuits in TUPR's Monte del Estado microwave system to provide its authorized international services, including private line services, between Puerto Rico or the U.S. Virgin Islands and the Dominican Republic; and c. use its authorized TAINO-CARIB Cable System facilities between Puerto Rico and the U.S. Virgin Islands to transmit private line traffic to and from the U.S. Virgin Islands that originates or terminates in the Dominican Republic. 23. IT IS FURTHER ORDERED that our authorization of TLD to provide private lines is limited to the provision of Puerto Rico/U.S. Virgin Islands-Dominican Republic private line service only -- that is, private lines which originate in Puerto Rico or the U.S. Virgin Islands and terminate in the Dominican Republic or which originate in the Dominican Republic and terminate in Puerto Rico or the U.S. Virgin Islands. In addition, TLD may not -- and TLD's tariff must state that TLD's customers may not -- connect its private lines provided over these facilities to the public switched network at either the Puerto Rico/U.S. Virgin Islands or the Dominican Republic end, for the provision of international switched basic services, unless authorized to do so by the Commission after a finding by the Commission that the Dominican Republic affords resale opportunities equivalent to those available under U.S. law, in accordance with Regulation of International Accounting Rates, Phase II, First Report and Order, 7 FCC Rcd 559 (1991), Order on Reconsideration and Third Further Notice of Proposed Rulemaking, 7 FCC Rcd 7927 (1992), petition for reconsideration pending. 24. IT IS FURTHER ORDERED that neither TLD nor any persons or companies directly or indirectly controlling it or controlled by it, or under direct or indirect common control with it, shall acquire or enjoy any right, for the purposes of handling or interchanging traffic to or from the United States, its territories or possessions, which is denied to any other United States carrier by reason of any concession, contract, understanding, or working arrangement to which TLD or any persons or companies controlling or controlled by TLD are parties. See also 47 C.F.R.  63.14. 25. IT IS FURTHER ORDERED that TLD shall file with the Commission copies of any operating agreement it enters into with TLD's foreign correspondent in the Dominican Republic within 30 days of the execution of such agreement, and shall otherwise comply with the filing requirements contained in Section 43.51 of the Commission's Rules, 47 C.F.R.  43.51. 26. IT IS FURTHER ORDERED that TLD shall file tariff provisions pursuant to Section 203 of the Act, 47 U.S.C. 203, and Part 61 of the Commission's Rules, 47 C.F.R. Part 61, for the service authorized in this Order. 27. IT IS FURTHER ORDERED that TLD shall file the annual reports of overseas telecommunications traffic required by Section 43.61 of the Commission's Rules, 47 C.F.R. 43.61. 28. IT IS FURTHER ORDERED, pursuant to Section 63.10(a)(1) and (4) of the Commission's Rules, that Applications File Nos. I-S-P-93-002-ND, I-S-P-93-003-ND, I-S-P-93-004- ND, and I-S-P-93-005-ND ARE GRANTED, and TLD shall be regulated as nondominant for the countries listed in the Appendix to this order. 29. This order is effective upon adoption. Petitions for reconsideration under Section 1.106, 47 C.F.R.  1.106, may be filed within 30 days of public notice of this order (see Section 1.4(b)(2), 47 C.F.R.  1.4(b)(2)). FEDERAL COMMUNICATIONS COMMISSION William F. Caton Acting Secretary APPENDIX COUNTRIES FOR WHICH TELEFONICA LARGA DISTANCIA DE PUERTO RICO, INC. IS GRANTED NONDOMINANT STATUS Afghanistan Algeria American Samoa Andorra Angola Anguilla Antarctica Antigua ( including Barbuda) Armenia Aruba Ascension Island Australia (inclu- ding Tasmania) Austria Bahamas Bahrain Bangladesh Barbados Belarus Belgium Belize Benin Bermuda Bhutan Bolivia Botswana Brazil British Virgin Islands Brunei Bulgaria Burkina Faso Burma Burundi Cameroon Canada Cape Verde Islands Cayman Island Central African Republic Chad Republic China Christmas & Cocos Islands Comoros, Federal and Islamic Republic of Congo Republic Cook Island Costa Rica Croatia Curacao Cyprus Czech Denmark Dominica Dominican Republic Djibouti, Republic of Easter Island Ecuador Egypt El Salvador Equatorial Guinea, Republic of Estonia Ethiopia Falkland Islands Faroe Islands Fiji Islands Finland France French Antilles: (St. Marteen, Guadalupe, St. Bartholomy, Martinique) French Guiana French Polynesia (Moorea & Tahiti) Gabon Republic Gambia Germany Ghana Gibraltar Georgia Greece Greenland Grenada Guam Guantanamo Bay Guatemala Guinea-Bissau Guinea, People's Revolutionary Republic Guyana Haiti Honduras Hong Kong Hungary Iceland India Indonesia Iran Iraq Ireland Israel Italy Ivory Coast Jamaica Japan Jordan Kazakahstan Kenya Kiribati Korea Kuwait Kyrgyzstan Laos Latvia Lebanon Lesotho Liberia Libya Liechtenstein Lithuania Luxembourg Macao Macedonia, Former Rep. of Yugoslavia Madagascar, Dem. Republic of Malawi Malaysia Maldives, Rep of Mali Republic Malta Marshall Islands Mauritania, Islamic Rep. of Mauritius Mexico Micronesia Midway Moldova Monaco Mongolia, Peoples Rep. of Morocco Mozambique Namibia Nauru Nepal Netherlands Netherlands Antilles (Bonaire, Saba, St. Eustatius, St. Maarten) Nevis New Calendonia New Zealand Nicaragua Niger Republic Nigeria Niue Norfolk Islands Norway Oman Pakistan Palau, Rep. of Panama Papua New Guinea Paraguay Philippines Portugal Qatar Reunion Island Romania Russia Rwanda Saipan San Marino Sao Tome Saudi Arabia Senegal Serbia and Herzegovenia Seychelles Sierra Leone Singapore Slovakia Solomon Islands Somali Republic South Africa Spanish Sahara Sri Lanka St. Helena St. Kitts St. Lucia St. Pierre/ Miquelon St. Vincent/ Grenadines Sudan Suriname Swaziland Sweden Switzerland Syrian Arab Republic Taiwan Tajikistan Tanzania Thailand Togo Tonga Islands Trinidad & Tobago Tunisia Turkey Turkmenistan Turks & Caicos Islands Tuvalu Uganda Ukraine United Arab Emirates United Kingdom (including Northern Ireland) Uruguay Uzbekistan Vanuata, Republic of Vatican City Venezuela Wake Island Western Samoa Yemen Arab Republic Yemen, People's Democratic Public Zaire Zambia Zimbabwe