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Federal Communications Commission
1919 - M Street, N.W.
Washington, D.C. 20554
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Internet: http://www.fcc.gov

This is an unofficial announcement of Commission action. Release of the full text of a Commission order constitutes official action. See MCI v. FCC. 515 F 2d 385 (D.C. Circ 1974).

IN 97-15 COMMISSION ACTION June 4 1997, 1997

(IB Docket No. 97-142)

The Commission today released a Notice of Proposed Rulemaking (Notice) that proposes a policy that would liberalize entry into the U.S. telecommunications market for most foreign-affiliated carriers. The Notice proposes rules that the Commission believes would be more appropriate in the liberalized competitive environment that will exist when the recent World Trade Organization (WTO) agreement on basic telecommunications services takes effect on January 1, 1998. The WTO agreement promises to open 95 percent of the global telecommunications market to U.S. companies. The Commission proposes to change its current rules that apply the "effective competitive opportunities" (ECO) test for companies from WTO countries. The Notice also proposes, however, to retain safeguards to prevent foreign carriers with market power from distorting competition in the U.S. market. In addition, the Commission retains the authority to deny or condition such foreign carrier entry if required by the public interest.

The WTO agreement was concluded on February 15, 1997 when 69 countries including the United States and virtually all of its major trading partners committed to open their markets to competition from foreign carriers. In addition, 65 of these countries, including the United States, agreed to a far reaching document known as the Reference Paper on Pro-Competitive Regulatory Principles, which contains a binding, enforceable set of competition rules. These rules include guarantees of fair and economical interconnection between competing carriers; prohibitions on anticompetititve conduct; and independent regulation of the telecommunications industry. These pro-competitive rules incorporate principles that are at the heart of the Telecommunications Act, and contain an effective dispute resolution mechanism to allow full enforcement by WTO members.

Implementation of the WTO basic telecommunications agreement will fundamentally alter the competitive landscape of the telecommunications industry. In 1995, when virtually all major telecommunications markets outside the United States were closed, the FCC adopted the ECO test, and related rules, to evaluate applications from foreign-affiliated carriers. In adopting the ECO test, the Commission stated that its goals were to promote competition in the U.S. market; to prevent anticompetitive conduct; and to encourage foreign governments to open their markets. The Commission also stated that it would revisit those rules if a WTO agreement were reached. The Commission now proposes to amend its rules because the commitments made by the countries party to the WTO basic telecommunications agreement substantially achieve the goals of the ECO test.

The Commission seeks comment on the following tentative conclusions in the Notice:

It is no longer necessary for the Commission to undertake the detailed ECO analysis considering whether there exist legal and practical barriers to entry in the foreign market in determining whether to grant international Section 214 applications filed by carriers from WTO member countries. The Commission tentatively concludes that competition in the U.S. market will be best served by eliminating the burdensome ECO analysis and instead granting those applications on a streamlined basis.

Indirect foreign ownership of common carrier radio licensees up to 100 percent should be presumed to be consistent with the public interest when the foreign investor is from a WTO member country, and an ECO test is not necessary.

The Commission tentatively concludes that it is no longer necessary to apply an equivalency analysis as the basis for authorizing carriers to provide switched services over resold or facilities-based private lines between the United States and WTO member countries.

The Commission proposes not to apply an ECO test for cable landing licenses for submarine cables between the United States and other WTO member countries.

In addition, although the Commission assumes that applications from carriers from WTO member countries will serve the public interest, it retains the authority to deny or condition such entry if this is required by the public interest.

In contrast, the Commission proposes to retain the existing ECO test for Section 214, Title III, and cable landing license applications from entities from countries that are not members of the WTO. The Commission does not believe that its public interest objectives would be achieved by eliminating ECO for carriers from these countries at this time.

The Commission also proposes not use to an ECO test for purposes of determining whether to permit U.S. carriers to enter into alternative settlement arrangements with carriers from WTO member countries under its Flexibility Order. Instead, the Commission would permit most such arrangements absent a showing that market conditions in the country in question are not sufficiently competitive to prevent a carrier with market power in that country from discriminating against U.S. carriers.

The Commission proposes several modifications to its safeguards that apply to foreign-affiliated carriers regulated as dominant on the affiliated route. The proposed revisions are designed to prevent anticompetitive conduct while being no more burdensome than necessary. The Commission proposes the following changes to its regulation of these foreign-affiliated carriers:

Modification of the current dominant carrier safeguards, which would apply to all carriers regulated as dominant due to an affiliation with a foreign carrier that has market power, to better tailor them to address competitive concerns, including reduced tariff notification and prior authorization requirements.

Adoption of supplemental safeguards that would apply where the dominant U.S. carrier's foreign affiliate is not subject to competition from multiple international facilities-based competitors. The proposals include prohibiting exclusive arrangements with the affiliated foreign carrier for the joint marketing of basic telecommunications services, the steering of customers by the foreign carrier to the U.S. carrier, or the use of foreign market telephone customer information. The Commission also proposes to require prior approval to add circuits on an affiliated route and to require carriers to file quarterly circuit status reports.

The Notice asks for comment on whether the Commission should require some level of structural separation between a U.S. carrier and a dominant foreign affiliate, and asks for comment on what that level of separation should be.

The Notice references the competitive safeguards proposed in the Commission's December 1996 Benchmarks Notice, and does not suggest any modifications to the proposed benchmark settlement rates.

Action by the Commission June 4, 1997, by Notice of Proposed Rulemaking (FCC 97- 195). Commissioners.

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News Media contacts: Meribeth McCarrick at (202) 418-0256 and David Fiske at (202) 418-0513.

International Bureau contacts: Doug Klein at (202) 418-0424, Susan O'Connell at (202) 418-1484, or Kelly Cameron at (202) 418-1473.