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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of Telecom New Zealand Limited ) ) File No. I-T-C-97-049 Application for Authority pursuant to ) Section 214 of the Communications Act ) of 1934, as amended, to Resell International ) Private Lines Interconnected to the Public ) Switched Network for the Provision of ) Switched Service Between the United ) States and New Zealand ) ORDER, AUTHORIZATION AND CERTIFICATE Adopted: September 30, 1997 Released: October 6, 1997 By the Chief, Telecommunications Division I. INTRODUCTION 1. In this decision, we grant the request of Telecom New Zealand Limited ("TNZL") for authority pursuant to Section 214 of the Communications Act, as amended, and Section 63.18(e) of the Commission's rules, to resell international private lines interconnected to the public switched network for the provision of telecommunications services between the United States and New Zealand. II. BACKGROUND 2. TNZL is a wholly-owned subsidiary of Telecom Corporation of New Zealand Limited ("TCNZ"), also a New Zealand corporation. TNZL is the wireline operating subsidiary for TCNZ. Among other things, TNZL operates the New Zealand "half" of facilities on international routes, including the U.S.- New Zealand route. TCNZ negotiates interconnection arrangements with competing carriers for local and "inter-city" (also referred to as "toll") services in New Zealand. 3. Bell Atlantic Corporation and Ameritech Corporation each holds indirect minority ownership interests in TNZL. TNZL is an affiliate of both Bell Atlantic and Ameritech, for purposes of Section 271(b)(1) of the Communications Act of 1934, as amended ("the Act"), and is at this time prohibited from originating interLATA services, including international services, in any of Bell Atlantic's or Ameritech's "in-region" states (as defined in Section 271(i) of the Act). Since NYNEX Corporation is now a wholly-owned subsidiary of Bell Atlantic, TNZL is also at this time prohibited from originating interLATA services, including international services, in any of NYNEX's in-region states. 4. On January 28, 1997, TNZL filed an application to resell international private lines between the United States and New Zealand, interconnected to the public switched network at one or both ends, for the provision of switched service. TNZL also states that it "will not carry over international private lines any switched traffic originating in any state served by a Bell Atlantic or Ameritech operating company until [the Section 271] restriction is lifted in that state." We placed TNZL's application on public notice on January 31, 1997; no comments were received. III. DISCUSSION A. Equivalency Analysis 5. The Commission's rules require that applicants seeking to provide switched service over resold private lines demonstrate that the foreign country at the other end of the private line provides U.S. carriers with: (1) the legal right to resell international private lines (IPLs), interconnected at both ends, for the provision of switched services; (2) reasonable and nondiscriminatory charges, terms and conditions for interconnection to foreign carrier domestic facilities for termination and origination of international services, with adequate means of enforcement; (3) competitive safeguards to protect against anticompetitive and discriminatory practices affecting private line resale; and (4) fair and transparent regulatory procedures, including separation between the regulator and the operator of international facilities-based services. These four principles must be satisfied at the time we make an equivalency determination. Additionally, we examine other public interest factors that may warrant grant or denial of the application. 6. On December 31, 1996, the International Bureau released an order granting Communications TeleSystems International authority to resell private lines between the United States and New Zealand for the provision of switched services. In that Order the Bureau found that New Zealand affords U.S. carriers opportunities to resell international private lines to provide switched services which are equivalent to those offered in the United States. Specifically, the Bureau concluded that New Zealand affords U.S. carriers the legal right to provide switched services over resold private lines interconnected to the public switched network at both ends; U.S. carriers are able to obtain reasonable and nondiscriminatory interconnection charges, terms and conditions; New Zealand's laws provide sufficient protection against anticompetitive practices; and there is sufficient regulatory oversight to protect and promote competition. 7. There is no evidence in the record that contradicts the Bureau's equivalency determination in the New Zealand Equivalency Order, and we find no reason to revisit that decision in this proceeding. We also find no countervailing public interest reasons to deny TNZL's application. Indeed, we anticipate that grant of resale authorization will promote competition in the U.S. international services market. 8. We note that, in the recent Benchmarks Order, the Commission amended its rules, effective January 1, 1998, to require that applications for authority to provide switched services over resold IPLs between the United States and a particular country demonstrate, in addition to the required equivalency showing, that settlement rates for at least 50 percent of the settled U.S. traffic on the route in question is at or below the appropriate settlement benchmark rate. The Commission noted that settlement rates on routes for which we have already found equivalent resale opportunities, including New Zealand, are, or will be, within the benchmark rates and stated that it would not require any future showings from carriers on routes for which it has already made an equivalency determination. Current settlement rates for New Zealand are in fact below the benchmark rate of $.15 for high income countries. B. Regulatory Treatment 9. Dominant status. We will regulate TNZL as dominant in its provision of switched services via resold international private lines on the U.S.-New Zealand route under Section 63.10 of the rules. TNZL has not sought non-dominant status, nor has it provided evidence to support a finding of non-dominance. 10. Foreign Affiliations. Our grant of private line authority to TNZL also permits it to hub through New Zealand U.S. inbound or outbound traffic from or to third countries in accordance with the provisions of Section 63.17 of the rules. This rule provides, inter alia, that a U.S. carrier may not engage in switched hubbing to a country where it has an affiliation with a foreign carrier unless specifically authorized to do so. TNZL states that it has affiliates in one foreign country, Australia, but none of these affiliates owns any facilities. Thus, TNZL asserts that its affiliates do not have the ability to exercise any control over bottleneck services or facilities in Australia. We agree, and find that the public interest will be served by granting TNZL authority to engage in switched hubbing to Australia. The Commission has recognized that participation in the U.S. market by foreign carriers that do not own or control telecommunications facilities in a foreign destination market is unlikely to raise market power concerns. 11. TNZL also asserts that one of its affiliates, Telecom Cook Islands, Limited, provides facilities-based telecommunications services in the Cook Islands (population 20,000). TNZL states that Cook Islanders are New Zealand citizens and that the Cook Islands do not constitute a separate country. TNZL, therefore, requests that its application for authority to provide switched service over resold international private lines between the United States and New Zealand also include the provision of similar service between the United States and the Cook Islands. Because the U.S.-Cook Islands accounting rate is $2.00, in contrast to the separate U.S.-New Zealand accounting rate of $.27, we find on this record that there is the potential for "one-way bypass" of the settlements process for U.S.-inbound traffic from the Cook Islands. Since TNZL has not demonstrated at this time that the Cook Islands satisfies the equivalency standard, we deny without prejudice TNZL's requested authorization to provide switched services over resold private lines between the United States and the Cook Islands. 12. BOC "In-region". As discussed, supra paragraph 3, TNZL is an affiliate of the Bell Atlantic, NYNEX and Ameritech operating companies for purposes of the Section 271 limitation on Bell operating company ("BOC") provision of in-region interLATA services. We therefore prohibit TNZL from carrying over its authorized resold international private lines any switched traffic originating in any of the "in-region" states of its affiliated BOCs until and only to the extent the Commission grants each of their respective operating companies' applications to provide in-region interLATA service pursuant to Section 271 of the Act. Additionally, to the extent the Act permits TNZL to terminate in-region switched traffic that is routed over their resold international private lines, we specifically impose our Section 43.51(e) filing requirements on any agreements negotiated by TNZL with foreign carriers to route such traffic to the in-region states of any of its affiliates via its authorized resold international private lines. IV. CONCLUSION 13. We grant TNZL's application because we find that New Zealand offers equivalent private line resale opportunities to U.S.-based carriers for the provision of switched services. We believe that TNZL's provision of switched service via resold international private lines between the United States and New Zealand will promote the introduction of new international telecommunications services at lower prices, including more cost-based accounting rates. It also will promote new entry into the international telecommunications market and advance the goal of achieving a competitive global information infrastructure. V. ORDERING CLAUSES 14. Accordingly, IT IS HEREBY ORDERED that application File No. I-T-C-97- 049 IS GRANTED, and applicant is authorized to resell international private lines between the United States and New Zealand for the provision of switched services including voice, data, and facsimile. 15. IT IS FURTHER ORDERED that the authority granted herein to resell international private lines between the United States and New Zealand for the provision of switched services is limited to the provision of such services between the United States and New Zealand only, except that applicant may engage in "switched hubbing" through New Zealand consistent with Section 63.17 of the rules, and specifically, to Australia. 16. IT IS FURTHER ORDERED that TNZL's request that its application for authority to provide switched service over resold international private lines between the United States and New Zealand also include the provision of similar service between the United States and the Cook Islands is DENIED without prejudice. 17. IT IS FURTHER ORDERED that TNZL is prohibited from providing any international services originating in Bell Atlantic Corporation's or NYNEX Corporation's or Ameritech Corporation's in-region territories until and only to the extent the Commission grants each of their respective operating companies' applications to provide in-region inter-LATA service pursuant to Section 271 of the Act. 18. IT IS FURTHER ORDERED that any agreements TNZL negotiates with foreign carriers to route U.S. in-bound switched traffic to the in-region states of its affiliates via its authorized resold international private lines are subject to our Section 43.51(e) requirements. See 47 C.F.R.  43.51(e). 19. IT IS FURTHER ORDERED that TNZL shall be regulated as a dominant carrier on the U.S.-New Zealand route under Section 63.10 of the rules, and shall comply with the requirements of paragraph (c) of that section. The quarterly traffic reports filed pursuant to Section 63.10(c) must specify the information required by Section 43.61 for "facilities resale" on the U.S.-New Zealand route. 20. IT IS FURTHER ORDERED that TNZL shall comply with Sections 63.15 (b) and 63.21 of the Commission's rules, 47 C.F.R.  63.15 (b) and 63.21. 21. IT IS FURTHER ORDERED that grant of this authorization is conditioned upon New Zealand's continuing to afford resale opportunities to U.S.-based carriers equivalent to those afforded under U.S. law. 22. This Order is issued under Section 0.261 of the Commission's Rules, 47 C.F.R. 0.261 (1994), and is effective upon adoption. Petitions for reconsideration under Section 1.106, 47 C.F.R.  1.106 (1994), or applications for review under Section 1.115 of the Commission's Rules, 47 C.F.R.  1.115 (1994), may be filed within thirty days of the Public Notice of this Memorandum Opinion, Order and Certificate (see 47 C.F.R.  1.4(b)(2)). FEDERAL COMMUNICATIONS COMMISSION Diane J. Cornell Chief, Telecommunications Division