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A. 1. a. (1) (a) i) a)4 =(O4WGl *O4$ 2 1ba2OutlineE+O4*ÿUI. A. 1. a. (1) (a) i) a)4 =(O4WGl *O4/ a3OutlineE+O4*ÿUI. A. 1. a. (1) (a) i) a)4 =(O4WGl *O4: a4OutlineE+O4*ÿUI. A. 1. a. (1) (a) i) a)4 =(O4WGl *O4E a5OutlineE+O4*ÿUI. A. 1. a. (1) (a) i) a)4 =(O4WGl *O4P   2# =za6OutlineE+O4*ÿUI. A. 1. a. (1) (a) i) a)4 =(O4WGl *O4[   a7OutlineE+O4*ÿUI. A. 1. a. (1) (a) i) a)4 =(O4WGl *O4f  a8OutlineE+O4*ÿUI. A. 1. a. (1) (a) i) a)4 =(O4WGl *O4q Leventhal6@6wwLeventhal, Senter & Lerman Doc Style*O4ÿUVGl.EQ    #XN\  PXP#2U  S4" S'  Federal Communications Commission`(#kDA 98888 ă   yxdddy   dOԊ #&m PE37 &P#Before the  FEDERAL COMMUNICATIONS COMMISSION 3Washington, D.C. 20554   T`4\ In the Matter of) ) PLD TELEKOM, INC.) )  T4Applications for Authority Pursuant to)ppFile Nos. ITC98040  Tp4Section 214 of the Communications Act)pp ITC98041  TH 4of 1934, as Amended, to Acquire and Operate)pp Common Carrier and NonCommon Carrier ) Facilities For the Provision of International ) Services Between the United States and Specific )  T 4International Points, including Russia and q ) Kazakhstan, and to Provide Such) Services Via Resale) ) and ) )  T4Streamlining the International  )ppIB Docket No. 95118 Section 214 Authorization Process )  Th4and Tariff Requirements  ) Exclusion List )  S4 ORDER, AUTHORIZATION AND CERTIFICATE  Tx4Adopted: May 11, 1998 Released: May 13, 1998 By the Chief, Telecommunications Division:  S4 zRI. Introduction ă  I. A. 1. a.(1)(a) i) a) 1. a. i.(1)(a)(i) 1) a)for orderscMa1for orders  T41. In this Order, we grant PLD Telekom Inc. (PLD) authority to provide facilitiesbased and resold international telecommunications services on the U.S.Russia and U.S.Kazakhstan routes. We classify PLD as a dominant carrier in its provision of service to the Sakhalin Island region of Russia. We also grant PLD authority to provide its authorized and future services using certain nonU.S.licensed satellite facilities, provided that any satellite transmissions occur wholly outside the United States. Finally, we find that the public interest is served by amending the Commission's exclusion list to permit U.S.authorized carriers to use the following nonU.S.licensed cable facilities: U.K.German6; FLAG; all cables on the SwedenFinland route; Ulysses (UKcontinental Europe fiber project); and HERMES (continental Europe fiber optic cable).  S%4 "%0*''88$"Ԍ S4fPII. Background ă cMa1for orders  T42. PLD attests that it is a Delaware corporation primarily engaged in the provision of competitive telecommunication services in the Russian Federation (Russia) and Kazakhstan. Approximately 30 percent of PLD's stock is held directly and indirectly by Cable & Wireless plc (C&W plc), a U.K. company that has ownership interests in carriers providing telecommunications services in many countries around the world. cMa1for orders  T43. On December 29, 1997, PLD filed three separate applications seeking Section 214 authority to provide international services. The International Bureau granted one application under the Commission's streamlined processing rules, authorizing PLD to provide facilitiesbased and resold international services to the United Kingdom and international points where PLD and C&W plc have  T 4no ownership interests of 25 percent or more in foreign carriers.K  {O 'ԍXSee Public Notice, Overseas Common Carrier Section 214 Applications Actions Taken, File No. ITC98 yOR '037, DA 98315 (rel. Feb. 19, 1998). The International Bureau granted PLD authority to provide facilitiesbased and resold services, consistent with Sections 63.18(e)(1) & 63.18(e)(2) of the Commission's rules, to all international points with the exception of: Anguilla; Antigua; Ascension Island; Australia; Barbados; Bermuda; British Virgin Islands; Cayman Islands; Diego Garcia; Dominica; Falkland Islands; Fiji; Grenada; Hong Kong; Jamaica; Kazakhstan; Latvia; Macau; Maldives; Montserrat; Panama; Philippines; Russia; Seychelles; Solomon Islands; St. Helena; St. Kitts & Nevis; St. Lucia; St. Vincent; Tonga; Trinidad & Tobago; Turks & Caicos; Vanuatu; and Yemen. C&W plc's U.S.  {O'subsidiary, Cable & Wireless, Inc. (CWI), is classified as nondominant on the U.S.U.K. route. See  {O'Cable & Wireless Inc., 11 FCC Rcd 16,486 (Int'l Bur. 1996).(#K We address PLD's other two  T 4applications here.Z  f  {O'ԍXSee PLD Telekom Inc., Application for Authority Pursuant to Section 214 of the Communications Act, as Amended, to Acquire and Operate Common Carrier and NonCommon Carrier Facilities for the Provision of International Services Between the United States and the Russian Federation and Kazakhstan and to Provide Such Services Via Resale, File No. ITC-98-041 (filed December 29, 1997) (PLD application I); PLD Telekom Inc., Application for Authority Pursuant to Section 214 of the Communications Act, as Amended, to Acquire and Operate Common Carrier and NonCommon Carrier Facilities for the Provision of International Services Between the United States and Specific International Points and to Provide Such Services Via Resale, File No. ITC-98-040 (filed December 29, 1997) (PLD application II). (#Z cMa1for orders  T 44. In the first application, PLD requests authority to provide facilitiesbased and resold international services to Russia and Kazakhstan, two countries in which PLD is affiliated with foreign  TX4carriers within the meaning of the Commission's rules.fX8 {O0!'ԍXSee 47 C.F.R.  63.18(h)(1)(i)(ii).(#f PLD also requests authority to use capacity on RussiaFinland private facilities and TransRussia facilities owned by RASCOM, as well as other  T4overland cables between Russia and Finland.[ {Or$'ԍXSee PLD application I at 10.(#[ In the second application, PLD seeks authority to"\0*&&88" provide authorized and future services via nonU.S.licensed facilities that have not yet been removed from the Commission's exclusion list. The requested cable facilities include: U.K.German6, FLAG, all cables on the SwedenFinland route, Ulysses, and HERMES; the requested satellite  T4facilities include: Eutelsat, Asiasat, Turksat, and Intersputnik/Gorizont. a {O'ԍX See PLD application II at 8.(#a cMa1for orders  T845. AT&T Corp. (AT&T) filed a petition to deny PLD's application to provide service to Russia. AT&T asserts that PLD is affiliated with carriers in Russia that possess market power, but that PLD has failed to demonstrate that Russia satisfies the effective competitive opportunities (ECO) test as required by the Commission's rules governing nonWorld Trade Organization (WTO) Member  T4entry in the U.S. market.`Z {O 'ԍXSee AT&T petition to deny at 12.(#` cMa1for orders  TH 46. As noted above, C&W plc holds a 30 percent direct and indirect ownership interest in PLD. Following closure of the pleading cycle, the International Bureau adopted an order authorizing C&W plc's U.S. subsidiary, Cable & Wireless, Inc. (CWI), to provide facilitiesbased and resold  T 4international services between the United States and Russia.  {O\'ԍXSee Cable & Wireless, Inc. Application for Authority Pursuant to Section 214 of the Communications Act of 1934, as Amended, to Provide Resold and FacilitiesBased Switched and Private Line Service  {O'between the United States and Russia and to Be Held Nondominant for All Services on This Route,  {O'Order, Authorization and Certificate, File No. ITC97290, DA 98628 (rel. April 2, 1998) (CWI  {O'Order).(# Despite CWI's affiliation with a carrier that possesses market power in a discrete area of Russia, the International Bureau waived application  T 4of the ECO test, finding that its purposes would not be served in that instance.O  {O'ԍXSee id.  12.(#O CWI's authorization, however, is subject to certain conditions. First, CWI is classified as a dominant carrier in its provision of service to the Sakhalin Island region of Russia. Second, CWI is authorized to provide facilitiesbased service between the United States and the regions in Russia where it has affiliates and beyond subject to the condition that CWI's affiliates terminating international traffic in each of those regions offer to their U.S. carrier correspondents settlement rates at or below the benchmark rate  T4established for Russia in the Commission's Benchmarks Order.  TB4Q III. Discussion ă  S4 A.XApplication for Service to Russia and Kazakhstan (# cMa1for orders"6 0*&&88$"Ԍ T47. The rules and standards adopted in the Commission's recent Foreign Participation Order  T4apply to this application. ( {OB'ԍXSee Order, FCC 9810 (Jan. 29, 1998) (announcing that February 9, 1998, would be the effective date  {O 'of Rules and Policies on Foreign Participation in the U.S. Telecommunications Market and Market  {O'Entry and Regulation of ForeignAffiliated Entities, Report and Order and Order on Reconsideration, 12  {O'FCC Rcd 23,891 (1997) recon. pending (Foreign Participation Order)).(# Because Russia and Kazakhstan are not members of the WTO, we examine whether PLD's application is subject to the Commission's "effective competitive opportunities" (ECO) test. An applicant must satisfy the ECO test if it is a carrier, or controls a carrier, or is affiliated with a carrier within the meaning of Section 63.18(h)(1)(i)(B) of the Commission's rules, that possesses sufficient market power in the destination country to affect competition adversely in the  T4U.S. market. " {Oj 'ԍXSee 47 C.F.R. 63.18(h)(5) & (h)(6); see also id.  63.18(h)(1)(i)(B) (defining an affiliation to include in part "[a] greater than 25 percent ownership of capital stock, or controlling interest at any level, in the applicant by a foreign carrier, or by any entity that directly or indirectly controls or is controlled by a foreign carrier, or that is under direct or indirect common control with a foreign carrier").(# If we grant PLD's Section 214 application to provide facilitiesbased and resale services to Russia and Kazakhstan, we also must determine whether to regulate PLD as dominant along these routes due to the market power of an affiliated carrier operating in the foreign market. We address first the question whether PLD is subject to the ECO analysis.  TJ 4 1. PLD Affiliations and Market Power in Russia and Kazakhstan cMa1for orders  T 48. PLD certifies that it is affiliated with the following carriers operating in Russia:AFFILIATES Peterstar and Baltic Communications Ltd. (BCL), operating in St. Petersburg; and TeleportTP (Teleport) and MTRSviaz (MTR), operating in Moscow. PLD also has one affiliate, BECET International  T 4(BECET), operating in Kazakhstan.   yO'ԍXPLD states that it possesses ownership interests of greater than 25% in the five carriers: 60% of Peterstar; 100% of BCL; 39.46% of Teleport; 38.2% of MTR; and 50% of BECET. PLD application I  {OT'at 1015. AFFILIATESFNSee 47 C.F.R.  63.18(h)(i)(1)(A) (defining an affiliation to include "[a] greater than 25 percent ownership of capital stock, or a controlling interest at any level, by the applicant, or by any entity that directly or indirectly controls [the applicant] ... in a foreign carrier or in any entity that directly or indirectly controls a foreign carrier").(#Ơ PLD does not specify whether these carriers are affiliates that  TZ4would trigger application of an ECO analysis.g Z {O'ԍXSee 47 C.F.R. 63.18(h)(5) & (h)(6).(#g We need not reach this issue, however, because we  T24find in paragraphs 16 and 17 below that these carriers in any event do not possess sufficient market power to affect competition adversely in the U.S. market. cMa1for orders  T49. PLD states that C&W plc, which directly and indirectly owns 30 percent of PLD's common stock, has ownership interests in the following Russian carriers: Sakhalin Telekom (ST) and Sakhalin Sviaz (SS), operating exclusively in the Sakhalin Island region; and Nakhodka Telekom"j 0*&&88"  T4(NT), operating in the Nakhodka and Vladivostok region bordering on North Korea and China.  X yOh'ԍXPLD application I at 6. It is not clear from the record whether NT is affiliated with PLD for purposes of an ECO analysis. We assume, however, that PLD is affiliated with NT for purposes of this application.(#  PLD asserts, however, that because C&W plc does not possess a controlling interest in either PLD or SS, PLD is not affiliated with SS within the meaning of the Commission's rules. PLD contends that none of its affiliates has market power in Russia or Kazakhstan and that its application, therefore,  T`4does not warrant an ECO analysis.o` {O'ԍXSee PLD application I at 6; PLD opposition at 8.(#o AT&T objects to this claim, arguing that PLD has failed to make a showing that it is not affiliated with SS and ST under the Commission's rules. AT&T warns that these affiliates may use their "control of bottleneck facilities . . . to discriminate against other  T4U.S. carriers."Sz yO 'ԍXAT&T petition at 3. (#S cMa1for orders  T4 10. As an initial matter, we examine the disputed issue whether PLD is affiliated with the Sakhalin Island carriers for purposes of applying an ECO analysis. Our rules would classify SS as an affiliate of PLD for purposes of an ECO analysis if PLD has a controlling interest in SS, or if C&W  T 4plc owns more than 25 percent of PLD and has a controlling interest in SS.Z  {O'ԍXSee supra  7 & note 10.(#Z PLD states for the record that C&W plc holds a lessthancontrolling 37 percent ownership interest in SS and does not  T 4exercise control over SS under Russian law.  {O 'ԍXPLD opposition at 8. See also CWI Order  9 n.10 (finding that SS is controlled by the Svyazinvest, the governmentcontrolled holding company for telecommunications assets).(# PLD also states for the record that it does not control  T 4SS.W  {O>'ԍXSee PLD opposition at 8.(#W Accordingly, we find that no affiliation arises between PLD and SS for purposes of applying an ECO analysis. PLD nonetheless readily acknowledges that C&W plc does possess a controlling  TX4interest in ST.FX  {O'ԍXSee id.(#F Because C&W plc also has a 30 percent ownership interest in PLD, PLD is affiliated with ST for purposes of an ECO analysis. cMa1for orders  T4 11. We next determine whether any of PLD's affiliates has market power in Russia or Kazakhstan. The Commission defines market power as a carrier's ability to raise price by restricting the output of its services. In the international context, our regulatory approach addresses the ability of a carrier operating in a foreign market to discriminate against unaffiliated carriers through the"h0*&&88 "  T4control of an input that is necessary for the provision of international services.\ {Oh' " ЍXSee Foreign Participation Order  14445. The Commission noted that for purposes of an ECO analysis,  " market power is defined in "the same way that we define it in the context of our regulations [governing]  {O'foreign carriers with market power." Id.  128.(#ƌ The relevant foreign input markets generally include international transport facilities or services, intercity facilities or services, and local access facilities or services at the foreign end. The Commission recognized in the  T4Foreign Participation Order that the examination of a discrete geographic region may be appropriate,  Tb4in some instances, for the purpose of identifying relevant input markets on the foreign end.\b {O'ԍXSee id.  145.(#\ cMa1for orders  T4 12. In the Foreign Participation Order, the Commission concluded that it is appropriate to presume, subject to rebuttal, that a foreign carrier with less than 50 percent market share in each of the relevant input markets on the foreign end of a U.S. international route lacks sufficient market power to affect competition adversely in the U.S. market. In the absence of such a demonstration, however, the affiliate would presumptively be treated as having market power on the foreign end of  TL 4the route.PL ~ {Oj'ԍXSee id.  161.(#P cMa1for orders  T 4 13. The International Bureau recently reviewed the Russian market in its order granting CWI  T 4authority to provide service to Russia.  Consistent with the Commission's finding that a review of discrete geographic markets may be appropriate, the Bureau concluded that the "competitive characteristics in the Sakhalin Island region are sufficiently distinct from the Russian national market to warrant treating the region as a distinct geographic market for purposes of our market power  T44analysis."P4 {O'ԍXCWI Order  8.(#P The Bureau based its conclusion, in part, on CWI's affiliation with both ST and SS, finding that "ST and SS may have sufficient market power in [the Sakhalin Island] region to affect  T4competition adversely in the U.S. market."H {O&'ԍXId.(#H While PLD, unlike CWI, is not affiliated with SS, we conclude nonetheless that is appropriate to treat the Sakhalin Island region as a discrete geographic market for purposes of our market power analysis. cMa1for orders  TD4 14. The Sakhalin Island region is a discrete area that covers 700,000 potential customers out of a population of 150 million. ST has approximately 50 percent of the market share of international switched traffic originating and terminating in that region. ST terminates U.S. international service in Sakhalin, and its current settlement rate " which it negotiates with U.S. carriers specifically for U.S. traffic that terminates in Sakhalin " is $1.00. This rate has not changed since service to Sakhalin was initiated in 1992. We also find it relevant that ST shares common ownership with SS, which controls the local public switched telephone network (PSTN). While U.S. carriers may route traffic to Sakhalin via Rostelecom (whose settlement rate is $1.06) or Kriljon, both carriers must terminate",4 0*&&88q"  T4their traffic via SS.$ {Oh'ԍXSee CWI Order  9. SS has approximately 20 percent of the market share of the international traffic that originates and terminates on Sakhalin. By law, SS must send its international traffic through Rostelecom, the governmentcontrolled longdistance and international operator that has direct  {O'connectivity to the United States. See id.(#Ư We are concerned that, in these circumstances, ST may have sufficient market power in the Sakhalin Island region to affect competition adversely in the U.S. market. We therefore find that it is appropriate to examine the Sakhalin Island region as a discrete geographic area for purposes of our market power analysis. cMa1for orders  T8415.  PLD argues that despite its affiliation with ST, an ECO analysis is not warranted. PLD claims that an ECO analysis should not apply because its affiliate ST does not control "bottleneck  T4facilities."S yO< 'ԍXPLD opposition at 8.(#S We note, however, that the facilities and services relevant to our market power analysis are not limited to local exchange and exchange access facilities and services but include international transport and intercity facilities and services that are necessary for the provision of U.S. international  Tp4services.hpD {OT'ԍXSee Foreign Participation Order  145.(#h PLD states that ST has "approximately 50 percent of the market for international switched  TH 4traffic originating and terminating in the Sakhalin Island region."MH  yO'ԍXPLD opposition at 9.(#M PLD does not make a showing that ST has a market share less than 50 percent. PLD states only that there are two other carriers engaged in international switched traffic originating and terminating in the Sakhalin Island region. We conclude here that PLD has not shown that ST lacks sufficient market power to affect competition adversely in the U.S. market. Accordingly, PLD's application for service to Russia is subject to an  T 4ECO analysis under Section 63.18(h)(5) & (h)(6) of the rules. f  yO'ԍXPLD also argues that an ECO analysis should not apply to its application because the licensed operating  {ON'area of ST cover no more than 700,000 potential customers out of a population of 150 million. See PLD opposition at 6. As a result, PLD claims, ST lacks market power in Russia. As we concluded above in paragraphs 13 and 14, however, the competitive characteristics of the Sakhalin Island region dictate that our market power analysis should address the Sakhalin Island region as a discrete geographic market, rather than examining the Russian market in its entirety. (#ƒ cMa1for orders  T0416. By contrast, we find that PLD's other Russian affiliates, Peterstar, BCL, Teleport, MTR, and NT, do not possess sufficient market power in any relevant input market in their areas of operation to affect competition adversely in the U.S. market. Indeed, AT&T does not assert that any of these five Russian carriers possesses market power in a relevant market. As we concluded in the  T4CWI Order, the St. Petersburg market is highly competitive. Peterstar is one of approximately one  Tj4dozen local overlays, i.e., competitive local exchange carriers, in that city. Peterstar PBCLNT  does not operate the local PSTN but has interconnection agreements in order to provide local and longdistance service. BCL is a dedicated international operator that does not connect to the local PSTN but handles local traffic between subscribers on its limited network in St. Petersburg. It is one of five"0*&&88a" similar carriers operating in St. Petersburg. NT does not control the PSTN and is one of many  T4carriers offering competitive local and international service in the Nakhodka and Vladivostok region.[ {O@'ԍXSee CWI Order  10.(#[ In addition, PLD states that Teleport's provision of international services in Moscow faces competition from a number of operators, including Comstar, Combellga, Telmos and Sovintel. Teleport has several regional and national competitors including Sprint/GlobalOne and Rostelecom. MTR provides local, national and international telecommunications services to less than 1,000 customers in Moscow using circuits leased from a number of providers and a leased switch. MTR  T4serves a tiny fraction of a market dominated by Moscow's incumbent local provider, MGTS.^Z {O 'ԍXSee PLD application I at 1315.(#^ cMa1for orders  T417. With regard to PLD's request to provide service to Kazakhstan, PLD states that it possesses an indirect ownership interest of 50 percent in BECET, the only cellular network operator  TH 4in Kazakhstan.M H  {O'ԍXSee id. at 15.(#M PLD states that BECET began offering service in 1994 and, as of June 30, 1997, had approximately 9,000 subscribers out of 4.2 million people in the region covered by its network. PLD asserts, moreover, that BECET's network has a maximum capacity of 50,000 subscribers. PLD also asserts that BECET does not possess the ability to discriminate against unaffiliated U.S. carriers.  T 4AT&T does not oppose PLD's request to serve Kazakhstan.V! ~ {O'ԍXSee AT&T reply at 1 n.1(#V Nothing in the record leads us to find that BECET has sufficient market power in a relevant input market in Kazakhstan to affect competition adversely in the U.S. market.  T4 2. Section 214 Authorization cMa1for orders  T418. Because PLD is affiliated with ST, a carrier that we find to have market power in a relevant input market in a discrete geographic market in Russia, we consider whether to apply the ECO test to PLD's application. AT&T asserts that PLD's application for service to Russia should be denied. AT&T argues that PLD's affiliate ST has market power in the Sakhalin Island region, that  T4the region is growing rapidly, and that there is no de minimis exception to application of the ECO test. Because PLD has failed to demonstrate that its affiliate ST lacks market power and has failed to  T4make the required ECO showing, AT&T claims, its application should be denied.X" {Oz'ԍXSee AT&T petition at 13.(#X AT&T also claims that no restrictions on service to the Sakhalin Island region can protect the public interest against anticompetitive behavior because PLD can route Sakhalin Island traffic through its other Russian affiliates and, if granted, by way of TransRussia facilities. AT&T asserts that the Commission's regulatory safeguards are inadequate and that the ECO test is intended to protect the"*"0*&&88q"  T4public interest in such instances.i# {Oh'ԍXSee AT&T petition at 4; AT&T reply at 46.(#i PLD, while maintaining that its affiliation should have no impact on its application to serve other areas in Russia, offers to forego service to the Sakhalin Island region until either the Commission resolves the region's status through the CWI Section 214 application or  T4C&W plc disposes of its interest in PLD.b$Z {O'ԍXSee PLD opposition at 2 (referring to the CWI application for service to Russia, File No. ITC97290,  {OL'that the International Bureau granted after the pleading cycle closed in this proceeding. See supra  6). We note that press reports indicate that C&W plc has reached agreement with News Corp.'s subsidiary,  {O'News America, to sell its ownership interest in PLD. See, e.g., News Corp Buys Into Russian Carrier  {O 'PLD, Telecommunications Reports at 27 (Apr. 27, 1998).(#b AT&T replies that the Foreign Participation Order does  Tb4not suggest that ECO may be applied on a regional basis within a single country.S%b {O 'ԍXSee AT&T reply at 6.(#S Any deviation from the Commission's standard ECO requirements, AT&T claims, "would reduce the incentives  T4created by the ECO test to open markets in nonWTO Member countries."B& {OV'ԍXId.(#B cMa1for orders  T419. We conclude that it would not serve the purposes of the ECO test to apply it in the circumstances presented in the instant application and that waiving the ECO requirement will best  Tr4serve the public interest.'r6  {OH'ԍXSee 47 C.F.R. 1.3 (allowing the Commission to waive any provision of the rules for good cause).(#ƣ ST's market power is confined to a small, albeit developing, area of a very large country: the licensed operating area of ST includes no more than 700,000 potential  T" 4customers, whereas Russia has approximately 150 million potential customers.k(\"  {O'ԍXSee PLD application I at 17. KRILJON  U.S. carriers reported 130,931,538 minutes of traffic between the United States and Russia in 1996. According to CWI, no more than 720,000 minutes, 0.5 percent, were to or  {O'from Sakhalin. See CWI Order  12 n.17.(#k Furthermore, Rostelecom, the governmentcontrolled carrier that operates the longdistance and international backbone, controls over 75 percent of Russia's international traffic. If we were to deny PLD's authorization to provide service to Russia because of its affiliate ST's market power in such a small region, we would deny U.S. consumers the benefits of an additional carrier serving the large Russian market. We also do not find it necessary or desirable to apply an ECO analysis to Sakhalin on a "regional basis." If we were to limit our application of the ECO test to the Sakhalin Island region and deny the authorization on that ground, that denial would impose an unnecessary burden on PLD  T4by increasing its costs to hand off traffic bound for Sakhalin to another carrier.) {On!'ԍXSee Telstra, Inc., 11 FCC Rcd 20,428  13 (1996) (waiving application of the ECO test to Kiribati).(#ƫ We see no evidence that either the traffic volumes to Sakhalin or the community of interest in the United States for calls to Sakhalin is great enough to warrant application of the ECO test to Sakhalin. Also, in these circumstances, application of the ECO test would not advance the Commission's goal of promoting"j ~)0*&&88 " the opening of foreign markets because denying PLD's application to serve Sakhalin would be  T4unlikely to encourage the Russian government to change any relevant market entry policies.[* {O@'ԍXSee CWI Order  12.(#[ cMa1for orders  T420. Finally, we consider other public interest factors that may weigh in favor of, or against, granting the application. These 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 presence of costbased accounting rates. The Executive Branch has not raised any national security, law enforcement, foreign policy, or trade concerns with this application, and we know of no other countervailing public interest considerations. We remain concerned by the high accounting rates of carriers that terminate international traffic in Russia, but we do not believe that concern warrants denying PLD's authorization. The Commission's benchmark settlement rate condition, together with the Commission's other competitive safeguards, sufficiently address our concern with the high accounting rates on the U.S.!Russia route. Despite AT&T claims regarding the effectiveness of our regulatory safeguards, we are confident that, in these circumstances, the safeguards described below will be sufficient to prevent any anticompetitive effects that might otherwise result. We believe, moreover, that PLDs entry will increase competition in the United States and Russian markets and thus benefit U.S. consumers. Consequently, we find that the public interest would be served by granting PLD Section 214 authority to provide facilitiesbased and resold services between the United States and Russia. In addition, we grant PLD's request to use capacity on RussiaFinland private facilities and TransRussia facilities, as well as other overland cables between Russia and Finland. cMa1for orders  T421. With regard to PLD's application to serve Kazakhstan, we conclude that because its affiliate BECET lacks market power in a relevant input market, no ECO finding is required. In addition, the Executive Branch has not raised any national security, law enforcement, foreign policy, or trade concerns with this application, and we know of no other countervailing public interest considerations. The level of settlement rates paid by U.S. carriers to terminate traffic in Kazakhstan is not relevant to PLD's application because BECET does not settle U.S. international traffic. We therefore grant PLD's application to provide facilitiesbased and resold services to Kazakhstan.  TP4 3. Regulatory Classification cMa1for orders  T422. Pursuant to Section 63.10(a)(3) of the Commissions rules, an authorized carrier that is affiliated with a foreign carrier that is not a monopoly in a destination country and that seeks to be regulated as nondominant on that route bears the burden of submitting information sufficient to demonstrate that its foreign affiliate lacks sufficient market power on the foreign end of the route to  T`4affect competition adversely in the U.S. market.+`Z {OZ"'ԍX47 C.F.R.  63.10(a)(3); see also Foreign Participation Order  232.(#Ə cMa1for orders  T 423. As discussed above, PLD has not shown that ST lacks sufficient market power in the Sakhalin Island region to affect competition adversely in the U.S. market. We therefore find, on the" +0*&&88" record before us, sufficient basis to warrant regulating PLD as dominant in its provision of switched  T4and private line services between the United States and the Sakhalin Island region of Russia.," yO@'ԍXWe note here that certain affiliations within the meaning of Section 63.18(h)(1)(i)(A) are relevant for determining a carrier's appropriate regulatory treatment but are not relevant for purposes of applying an  {O'ECO analysis. Compare 47 C.F.R.  63.18(h)(1)(i)(A) with id.  63.18(h)(5) & (h)(6). We find that PLD is not affiliated with SS under the Commission's rules for any purpose.(# As we concluded above, none of PLD's other affiliates in Russia or its affiliate in Kazakhstan have market power. We therefore classify PLD as nondominant in its provision of service to all other regions of Russia and to Kazakhstan. This dominance classification requires only that PLD be structurally separate from ST and that it file certain reports on a quarterly basis regarding its provision of service  T4along the U.S.!Sakhalin route.- {Ob 'ԍXSee 47 C.F.R. 63.10(c); Foreign Participation Order  215!292. (#Ɣ cMa1for orders  T424. Until PLD initiates switched service to Sakhalin as a facilitiesbased carrier, it is entitled to a presumption of nondominance for its provision of switched services along that route so long as it provides switched services to Sakhalin only through the resale of unaffiliated U.S. carriers'  TH 4international switched services.^.H D {O,'ԍXSee 47 C.F.R. 63.10(a)(4).(#^ Therefore, our classification of PLD as dominant for its provision of switched services along the route will not take effect until PLD actually initiates facilitiesbased switched service on the route. However, because PLD is affiliated with a carrier that we find may have sufficient market power to affect competition adversely in the U.S. market and that collects settlement payments from U.S. carriers, it is required to file quarterly traffic reports for its switched  T 4resale service to Sakhalin pursuant to Section 43.61(c).U/  {O'ԍXSee id. 43.61(c).(#U  T04  X4. Benchmark Settlement Rate Condition(# cMa1for orders  T425. In the Benchmarks Order, the Commission adopted a benchmark settlement rate condition, effective January 1, 1998, for authorizations to provide facilitiesbased switched or private  T4line services to destination markets where the authorized carrier is affiliated with a foreign carrier.0&h  {O'ԍXSee International Settlement Rates, Report and Order, 12 FCC Rcd 19,806 (1997), recon. pending,  {Od'appeal filed, Cable & Wireless v. FCC, No. 97-1612 (D.C. Cir. filed Sept. 25, 1997) (Benchmarks  {O.'Order). The settlement rate refers to each carrier's portion of the accounting rate, which is normally half of the accounting rate.(#ƾ  Tj4The Benchmarks Order requires that we condition these authorizations on the affiliated foreign carrier offering U.S. international carriers a settlement rate for the affiliated market that is at or below the  T4relevant benchmark settlement rate adopted in that order.1V  {O$'ԍXId.  231. The Commission reaffirmed this condition in the Foreign Participation Order. See Foreign  {O$'Participation Order  191.(#" 10*&&88"Ԍ T4cMa1for ordersۙ26. The competitive harm that this condition addresses is the ability of a foreignaffiliated carrier to engage in predatory price squeeze behavior on the affiliated route when it provides facilitiesbased service to a market in which its affiliated foreign carrier provides the terminating  T4service and collects abovecost settlement rates. As the Commission explained in the Benchmarks  Tb4Order, a price squeeze refers to a particular, welldefined strategy of predation that would involve the foreign carrier setting "high" (abovecost) international settlement rates while its U.S. affiliate offers "low" prices for domestic international message telephone service (IMTS) in competition with other carriers. Because the foreign carrier's international termination services are a necessary input for providing IMTS, the foreign carrier can create a situation where the relationship between its "high" international settlement rates and its affiliate's "low" prices for IMTS forces competing carriers either  Tt4to lose money or to lose customers even if they are more efficient than the affiliate.c2t {O 'ԍXSee Benchmarks Order  208.(#c cMa1for orders  T$ 427. In the Benchmarks Order, the Commission used the term "affiliated market" to refer to a  T 4market in which an affiliated carrier provides terminating service and collects settlement rates.L3 Z {O'ԍXSee id.(#L The  T 4International Bureau found in the CWI Order that, for this purpose, a "market" is not necessarily an entire country but may be the geographic region served by a particular carrier or group of carriers, particularly where that region maintains a distinct accounting rate with U.S. carriers. Otherwise, the benchmarks condition would preclude CWI from providing facilitiesbased service to all of Russia merely because it has affiliations with carriers that terminate international traffic only in small parts of  T4Russia and have settlement rates above the Commission's benchmark.U4 {O'ԍXSee CWI Order  20.(#U cMa1for orders  T428. Consistent with the Bureau's reasoning in the CWI Order, we find a risk of predatory price squeeze behavior only to the extent PLD terminates U.S. international traffic in regions served by affiliates that terminate U.S. international traffic and collect abovecost settlement rates from unaffiliated U.S. rivals. We also find a risk of predatory price squeeze behavior to the extent PLD routes U.S. international traffic through those affiliated markets to other regions of Russia. There is no risk of price squeeze behavior, however, where PLD otherwise routes U.S. international traffic to unaffiliated regions of Russia, because in its provision of facilitiesbased service to those regions, its settlement payments are made to unaffiliated carriers. Thus, we authorize PLD to provide facilitiesbased service between the United States and markets in Russia that are served by an affiliated foreign carrier, and to route facilitiesbased traffic beyond such markets, subject to the condition that PLD's affiliates terminating international traffic in each of those markets offer to their U.S. carrier correspondents settlement rates at or below $0.19, the benchmark settlement rate established for  T4Russia in the Benchmarks Order. PLD's provision of facilitiesbased service to unaffiliated markets in Russia will not be subject to such a condition. cMa1for orders  Tl429. We recognize that this approach will result in PLD not being able to serve some parts of Russia using its own facilities, but we believe it is necessary to prevent anticompetitive conduct. We"D ~40*&&887" also believe this narrowly tailored approach is a sounder policy than treating all of Russia as a single market for purposes of applying the benchmarks condition, which would require that PLD not serve any part of Russia on a facilities basis until its affiliates' settlement rates are at or below the benchmark. Because of PLD's small presence in Russia, the potential that it could abuse its position and defeat the purpose of the benchmarks condition is remote. cMa1for orders  T430. Because BECET, PLD's Kazakhstan affiliate, does not settle U.S. international traffic, the benchmark condition is not applicable, and PLD may provide facilitiesbased services to  T4Kazakhstan upon the effective date of this order.K5 {O( 'ԍXPLD, however, is under a continuing obligation to comply with the condition in the Benchmarks Order that it may provide facilitiesbased service between the United States and Kazakhstan subject to the condition that any affiliated carrier that terminates U.S. international switched traffic must have in effect a settlement rate with its U.S. international carrier correspondents that is at or below the Commission's  {OJ 'relevant benchmark for Kazakhstan. See Benchmarks Order  228, 231.(#K  Sp4 B.Use of Certain NonU.S.licensed Facilities cMa1for orders  T 431. We now turn to the second application that is before us in this proceeding. PLD requests authority to provide authorized and future services using nonU.S.licensed facilities not yet identified as exceptions to the Commission's exclusion list, which prohibits use of nonU.S.licensed facilities  T 4unless the Commission has so authorized.6 | yO'ԍXAs noted above, PLD is already authorized to provide facilitiesbased and resale international services to  {O'numerous international points. See supra  3 n.1.(# Specifically, PLD seeks permission to use the following nonU.S.licensed facilities: U.K.German6; FLAG; Eutelsat; Asiasat; Turksat; Intersputnik/Gorizont; all cables on the SwedenFinland route; Ulysses (UKcontinental Europe fiber  T04project); and HERMES (continental Europe fiber optic cable). a70 {O'ԍX See PLD application II at 3.(#a No party filed comments with regard to PLD's request. cMa1for orders  T432. In the International Section 214 Streamlining Order, the Commission directed the International Bureau to develop an exclusion list that identifies restrictions on providing service using  Tj4particular facilities or to particular countries.8jh  {Or'ԍXSee Streamlining the International Section 214 Authorization Process and Tariff Requirements, Report  {O<'and Order, 11 FCC Rcd 12,884 (1996) (Streamlining Order). (# The Commission's rules provide that carriers that have obtained a global Section 214 authorization may not use nonU.S.licensed facilities unless and until the Commission specifically approves their use and indicates that the facilities are an exception  T4to the exclusion list.e9  {OV#'ԍXSee 47 C.F.R.  63.18(e)(1)(ii)(B).(#e The list currently excludes all nonU.S.licensed cable and satellite systems" V 90*&&88T"  T4with the exception of 48 specified foreign cable systems.s:X yOh'ԍXThe exclusion list is included as a part of each public notice that lists granted streamlined Section 214 applications and is available in the International Bureau's Reference Center. A current version is also maintained on the Commission's World Wide Web site at http://www.fcc.gov/ib/td/pf/exclusionlist.html. (#s The Commission will amend the exclusion list where the public interest requires; in fact, the Commission has stated that exclusions are  T4appropriate "only in the most imperative of circumstances"; {O8'ԍXSee Streamlining Order  18 (stating that "we envision . . . exclusions only taking place in the most imperative of circumstances"). The list was last modified on October 22, 1996, when CANUS1, a  {O'submarine cable, was removed. See Streamlining the International Section 214 Authorization Process  {O 'and Tariff Requirements Exclusion List, Order on Reconsideration, 11 FCC Rcd 14,372 (1996)  {O^ '(Exclusion List Reconsideration Order). In that order, the Commission found that there were no  {O( '"imperative circumstances" warranting the placement of the facility on the exclusion list. Id.  7. CANUS1 was therefore removed.(# cMa1for orders  T`4 33. With regard to the cable facilities identified by PLD, we do not find any imperative circumstances that warrant their continued exclusion. Removal of these cable systems from the exclusion list will reduce the regulatory burden on U.S. carriers wishing to obtain capacity on these facilities and should make the market for cable access more competitive, leading to lower prices for  T4U.S. carriers' end users.<2  {O'ԍXSee, e.g., Exclusion List Reconsideration Order  7 (finding same benefits resulting from removal of CANUS1 from exclusion list).(# We therefore find that the public interest will be served by removing the requested facilities from the exclusion list. The U.K.German6, FLAG, all cables on the SwedenFinland route, Ulysses, and Hermes will therefore be added to the facilities specified as excepted from the exclusion list. This modification of the exclusion list allows PLD and any other U.S. facilitiesbased carrier with global section 214 authorization to use these cable systems. A revised version of the Exclusion List is attached to this order as Appendix A.  T 4 cMa1for orders  T 4!34. PLD also requested authority to provide service using the following nonU.S.licensed satellite facilities: Asiasat, Eutelsat, Intersputnik/Gorizont, and Turksat. We grant PLD authority to provide authorized services in part through the use of these facilities, provided that any satellite transmissions involving these facilities occur wholly outside the United States. This grant, therefore, does not authorize PLD to make use of these satellite facilities in conjunction with an earth station located in the United States. Direct access to the United States via nonU.S.licensed satellites is  T4subject to the rules and policies established in DISCO II. =  {O'ԍXSee Amendment of the Commission's Regulatory Policies to Allow NonU.S.licensed Space Stations to Provide Domestic and International Satellite Service in the United States, Amendment of Section 25.131 of the Commission's Rules and Regulations to Eliminate the Licensing Requirement for Certain  {O>"'International ReceiveOnly Earth Stations, Report and Order, 12 FCC Rcd 14,220  183192 (1997)  {O#'(DISCO II).(#  PLD's application does not provide the information necessary for us to determine whether direct access would be consistent with these policies. "jB=0*&&88"Ԍ S4ԙ r;IV. Ordering Clauses ă cMa1for orders "35. Accordingly, IT IS HEREBY CERTIFIED that the present and future public interest, convenience, and necessity require a grant of the referenced applications. Therefore, IT IS ORDERED that application File No. ITC-98-041 IS GRANTED, and PLD is authorized, pursuant to Section 63.18(e)(6) of the Commission's rules, 47 C.F.R.  63.18(e)(6), to provide international basic switched, private line, data, television, and business services between the United States and Russia and Kazakhstan on a facilities and resale basis, including use of capacity on RussiaFinland private facilities, TransRussia facilities, and other overland cables between Russia and Finland, subject to the terms and conditions of Section 63.16(e)(1)(2) of the rules, 47 C.F.R.  63.18(e)(1)(2), and all current and future Commission regulations, including those specifically listed below, as well as the conditions set out below. IT IS FURTHER ORDERED that AT&T's petition to deny IS DENIED. cMa1for orders #36. IT IS FURTHER ORDERED that application File No. ITC98040 IS GRANTED and PLD is authorized to use the following nonU.S.licensed cable facilities in its provision of all authorized and future services: U.K.German6, FLAG, all cables on the SwedenFinland route, Ulysses, and Hermes; PLD is also authorized to use the following nonU.S.licensed satellite facilities in its provision of all authorized and future services, provided that any satellite transmissions involving these facilities occur wholly outside the United States: Asiasat, Eutelsat, Intersputnik/Gorizont, and Turksat. cMa1for orders $37. IT IS FURTHER ORDERED that PLD shall comply with the requirements specified in Sections 43.82, 63.14, 63.15(b), 63.19, and 63.21 of the Commissions Rules, 47 C.F.R.  43.82, 63.14, 63.15(b), 63.19, 63.21. cMa1for orders %38. IT IS FURTHER ORDERED that PLD may not " and PLD's tariffs must state that its customers may not " connect their private lines to the public switched network at either the U.S. or foreign end, or both, for the provision of international switched basic services unless the Commission  T4has authorized the provision of such service. See 47 C.F.R. 63.18(e)(2)(ii)(c), (e)(3)!(4); 63.21(a). cMa1for orders &39. IT IS FURTHER ORDERED that PLD's authorization to provide facilities-based service to Russia is subject to the conditions specified in International Settlement Rates, IB Docket No. 96 T4261, Report and Order, FCC 97280 (rel. Aug. 18, 1997), that is, PLD may provide facilitiesbased service to a region served by an affiliate that terminates U.S. international switched traffic only if that affiliate has in effect a settlement rate with U.S. international carriers that is at or below the  Td4Commission's relevant benchmark for Russia. See id. 231. cMa1for orders '40. IT IS FURTHER ORDERED that PLD shall be regulated as a dominant carrier under Section 63.10 of the rules and shall comply with the requirements of paragraph (c) of that section for services between the United States and the Sakhalin Island region of Russia, and PLD shall be regulated as a nondominant carrier for services between the United States and other regions of Russia. cMa1for orders"N$=0*&&88""Ԍ(41. IT IS FURTHER ORDERED that PLD shall comply with the requirements of Section 43.61(c) of the rules with respect to its provision of resold switched services to the Sakhalin Island region and that it shall not agree to accept special concessions from ST for the provision of service between the United States and the Sakhalin Island region. "Special concessions" is defined in Section  T`463.14(b) of the Commission's rules as amended by the Commission's Foreign Participation Order, FCC 97398. cMa1for orders  T4)42.  9. IT IS FURTHER ORDERED that the Exclusion List attached as Appendix A to this order, which identifies restrictions on providing service using particular facilities or to particular countries for those carriers receiving a global Section 214 authorization, is hereby adopted. cMa1for orders  TJ 4*43.  This Order is issued under Section 0.261 of the Commissions Rules and is effective upon adoption. Petitions for reconsideration under Section 1.106 or applications for review under Section 1.115 of the Commissions Rules may be filed within 30 days of the date of public notice of this Order (see Section 1.4(b)(2)). ` `  hhCFEDERAL COMMUNICATIONS COMMISSION ` `  hhCDiane J. Cornell ` `  hhCChief, Telecommunications Division ` `  hhCInternational Bureau "B=0*&&88"  S4  @A-@ _Appendix A ă -- Last Amended May 11, 1998 -- The following is a list of countries and facilities not covered by grant of global Section 214 authority under Section 63.18(e)(1) of the Commission's Rules, 47 C.F.R.  63.18(e)(1). In addition, the facilities listed shall not be used by U.S. carriers authorized under Section 63.01 of the Commission's Rules unless the carrier's Section 214 authorization specifically lists the facility. Carriers desiring to serve countries or use facilities listed as excluded hereon shall file a separate Section 214 application pursuant to Section 63.18(e)(6) of the Commission's Rules. Countries Cuba (applications for service to this country shall comply with the separate filing requirements of the Commission's Public Notice Report No. I-6831, dated July 27, 1993, "FCC to Accept Applications for Service to Cuba.") Facilities All non-U.S.licensed cable and satellite systems except the following cable systems: Aden-Djibouti APC APCN APHRODITE 2 ARIANNE 2 ASEAN B-M-P Brunei-Singapore CADMOS CANTAT-3 CARAC CELTIC China-Japan CIOS Denmark-Russia 1 ECFS EMOS-1 EURAFRICA FLAG Germany-Denmark 1 Germany-Sweden No. 4 Germany-Sweden No. 5 H-J-K" %=0*&&88#"ԌHERMES HONTAI-2 ITUR KATTEGAT-1 Kuantan-Kota Kinabalu LATVIA-SWEDEN Malaysia-Thailand Marseille/Palermo Link MAT-2 ODIN PENCAN-5 R-J-K RIOJA SAT-2 SEA-ME-WE 2 SEA-ME-WE 3 SwedenFinland T-V-H TAGIDE 2 TASMAN 2 UGARIT UK-BEL 6 UK-Denmark 4 UK-Germany 5 UKGermany 6 UK-Netherlands 12 UK-Netherlands 14 UK-Spain 4 Ulysses UNISUR This list is subject to change by the Commission when the public interest requires. Before amending the list, the Commission will first issue a public notice giving affected parties the opportunity for comment and hearing on the proposed changes. The Commission will then release an order amending the exclusion list. This list also is subject to change upon issuance of an Executive Order. See Streamlining the Section 214 Authorization Process and Tariff Requirements, IB Docket No. 95-118, FCC 96-79, released March 13, 1996. For additional information, contact the International Bureau's Telecommunications Division, Policy & Facilities Branch, (202) 418-1460.