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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 ) ) BT North America, Inc. ) ) Application Under Section 214 of ) the Communications Act of 1934, as ) Amended, for Authority to Acquire Interests) File No. ITC-98-005 in Facilities Previously Authorized by the) Commission in Order to Provide International) Basic Switched, Private Line, Data, Television) and Business Services to Russia and for ) Authority to Resell International Basic Switched,) Private Line, Data, Television and Business) Services to Russia ) ORDER AND AUTHORIZATION Adopted: May 11, 1998 Released: May 14, 1998 By the Chief, Telecommunications Division: I. Introduction 1. In this Order, we grant BT North America, Inc. ("BTNA") authority, pursuant to Section 214 of the Communications Act of 1934, as amended, to provide facilities-based and resold international switched and private line services between the United States and Russia. We also find that BTNA qualifies for non-dominant regulatory treatment on the U.S.-Russia route. II. Background 2. BTNA is a Delaware corporation and is an indirect, wholly-owned subsidiary of British Telecommunications plc (BT), a telecommunications company organized under the laws of England and Wales. BT provides telecommunications services in the United Kingdom, including local, long distance and international telephone service. BTNA is authorized under Section 214 to provide international switched and private line services on a facilities and resale basis on various international routes. 3. On December 16, 1997, BTNA filed the above-referenced application pursuant to Section 63.18 of the Commission's rules. BTNA requests authority to provide facilities-based and resold switched and private line services between the United States and Russia. BTNA also requests that it be regulated as a non-dominant carrier for the provision of international service to Russia. BTNA's application was placed on public notice on January 9, 1998. No comments were received. III. Discussion 4. The rules and standards adopted in the Commission's recent Foreign Participation Order apply to this application. Because Russia is not a member of the World Trade Organization, we must determine whether BTNA'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 U.S. market. We also consider other public interest factors that may weigh in favor of, or against, granting the application. If we grant BTNA Section 214 authorization to serve Russia, we also must determine whether to regulate BTNA as dominant along the route due to the market power of an affiliated carrier operating in Russia. 5. BTNA certifies that it has an affiliation with a carrier in Russia within the meaning of Section 63.18(h)(1)(i)-(ii) of the rules. According to BTNA, BT owns 30 percent of St. Petersburg International Joint Stock Company (SPI), which carries international voice and data traffic via satellite. BTNA states, however, that BT appoints two of the five directors, and has no special voting rights. BTNA does not specify whether SPI is an affiliate that would trigger application of an ECO analysis. It does not appear from the record that BT has a controlling interest in SPI such that BTNA would be considered an SPI affiliate for purposes of applying an ECO analysis. We find below, however, that SPI does not in any event have sufficient market power in Russia to affect competition adversely in the U.S. market. 6. 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 three 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 the route. The relevant input markets generally include international transport facilities or services, inter-city facilities or services, and local access facilities or services at the foreign end. 7. BTNA states that SPI's market share of outgoing Russian traffic is approximately 1 percent. In addition, BTNA states that SPI has only 30 of approximately 10,000 Russian international circuits. BTNA argues that, even though competition is developing in Russia, Rostelecom still has de facto market power. 8. There is no evidence in the record that contradicts the information submitted by BTNA. We therefore find that SPI does not possess sufficient market power in Russia to affect competition adversely in the U.S. market. Thus, we find that in this instance we need not apply the ECO test. We also find no other public interest factors that would warrant denial of BTNA's application. 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 BTNA's authorization. 9. We note that in the Benchmarks Order, the Commission adopted a benchmark settlement rate condition, effective January 1, 1998, for authorizations to provide facilities-based switched or private line services to destination markets where the authorized carrier is affiliated with a foreign carrier. The 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 relevant benchmark settlement rate adopted in that order. Accordingly, BTNA is under a continuing obligation to comply with the condition adopted in the Benchmarks Order, that is, it may provide U.S. facilities- based service to or from, or through, markets in Russia that are served by an affiliated carrier that terminates U.S. international switched traffic only if the affiliated carrier has in effect a settlement rate with its U.S. international carrier correspondents that is at or below the Commission's relevant benchmark for Russia. 10. BTNA also requested that it be regulated as a non-dominant carrier on the U.S.-Russia route. Pursuant to Section 63.10(a)(3) of the Commission's 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 non-dominant 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 affect competition adversely in the U.S. market. As discussed above, BTNA's application supports its request, and we conclude that BTNA should be classified as a non-dominant carrier for service to Russia. 11. Upon review of the application, we find that a grant of this application will serve the public interest under Section 214 of the Act by providing customers with additional choices, more services and lower costs of international telecommunications. IV. Ordering Clauses 12. Upon consideration of the application, IT IS HEREBY CERTIFIED that the present and future public convenience and necessity require the grant of this application. 13. Accordingly, IT IS ORDERED that BTNA's application, File No. ITC-98-005, IS GRANTED, and BTNA is classified as a non-dominant carrier authorized to provide international services between the United States and Russia pursuant to the terms and conditions of Section 63.18(e)(1)-(2) of the Commission's rules, 47 C.F.R.  63.18(e)(1)-(2), and subject to all current and future Commission regulations, including those specifically listed below, as well as the conditions set out below. 14. IT IS FURTHER ORDERED that BTNA shall comply with the requirements specified in Sections 43.82, 63.14, 63.15(b), 63.19, and 63.21 of the Commission's rules, 47 C.F.R.  43.82, 63.14, 63.15(b), 63.19, and 63.21. 15. IT IS FURTHER ORDERED that BTNA may not -- and BTNA's tariffs must state that its customer 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 has authorized the provision of such service. See 47 C.F.R.  63.18(e)(2)(ii)(c), (e)(3)-(4); 63.21(a). 16. IT IS FURTHER ORDERED that BNTA's authorization to provide facilities-based service between the United States and Russia is subject to the conditions specified in International Settlement Rates, IB Docket No. 96-261, Report and Order, 12 FCC Rcd 19806 (1997), that is, BTNA may provide facilities-based 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 Commission's relevant benchmark for Russia. See id.  231. 17. This Order is issued under Section 0.261 of the Commission's rules and is effective upon adoption. Petitions for reconsideration under Section 1.106 or applications for review under Section 1.115 of the Commission's rules may be filed within 30 days of the date of public notice of this Order (see Section 1.4(b)(2) of the Commission's rules, 47 C.F.R.  1.4(b)(2)). FEDERAL COMMUNICATIONS COMMISSION Diane J. Cornell Chief, Telecommunications Division International Bureau