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Federal Communications Commission
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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).

Report No. IN 97-25 INTERNATIONAL ACTION August 21, 1997


The Federal Communications Commission has approved the merger of MCI Communications Corporation (MCI) and British Telecommunications plc (BT) subject to conditions and safeguards that ensure the merger will enhance competition in the United States. In approving the merger, the Commission relied upon the fact that the U.S.-U.K. route is one of the most competitive in the world because of substantial liberalization and deregulation of the U.S. and U.K. telecommunications markets. The Commission found that the transfer of control of MCI's licenses and authorizations to BT is in the public interest given commitments made and actions taken by MCI and BT.

The Commission concluded that the following commitments and developments ensure that the merger will have procompetitive effects and that competition on the U.S.-U.K. route will set a standard for the world:

First, BT recently agreed to accept a settlement rate of 7 cents per minute, one of the lowest in the world, to terminate U.S.-outbound calls in the United Kingdom.

Second, MCI has committed to support the equal access initiatives of the European Union. Under equal access, customers would have the option of pre-subscribing to carriers other than BT for U.K.-outbound long distance and international calls. Currently, such customers must dial special access codes on a call-by-call basis to use BT's competitors. MCI also acknowledged that the FCC could take enforcement action against MCI if BT fails to comply with European Union equal access requirements as implemented by the United Kingdom. Accordingly, the Commission conditioned its grant of the license transfer upon MCI's non-acceptance of BT traffic originated in the United Kingdom to the extent BT is found to be in non-compliance with U.K. regulations implementing any European Union equal access requirements.

Third, BT and MCI have committed to the European Commission to make substantial capacity on the TAT-12/13 transatlantic submarine cable available to newly licensed competitors. In addition, MCI has agreed to provide these new competitors with adequate matching backhaul capacity in the United States.

Fourth, BT and the U.K. Government recently announced that the U.K. Government will redeem its "special share" in BT. The U.K. Government's decision to sever all ownership ties with BT provides additional assurance that BT will not enjoy any special advantage over other carriers.

The Commission also found that, given BT's market power in the United Kingdom, MCI should be regulated as a dominant carrier on the U.S.-U.K. route. The Commission waived the application of the dominant carrier requirements, however, until new rules are adopted and made effective in the Foreign Participation proceeding implementing the Basic Telecommunications Agreement concluded in the World Trade Organization on February 15, 1997. The Commission required MCI in the interim to continue to comply with the safeguards imposed by the Commission in its July 1994 decision approving BT's 20 percent investment in MCI.

In its action today, the Commission also agreed to transfer control of MCI's Direct Broadcast Satellite (DBS) license to BT, subject to any final rules adopted in proceedings relating to DBS licenses and the outcome of pending applications for review of the order granting MCI's DBS license.

Finally, the Commission conditioned its approval upon compliance with the provisions of the agreement of May 22, 1997, among BT, MCI, the U.S. Department of Defense, and the Federal Bureau of Investigation. The agreement addresses the national security and law enforcement concerns of the Executive Branch.

Action by the Commission August 21, 1997, by Memorandum Opinion and Order (FCC 97-302).

- FCC -

News media contact: Meribeth McCarrick at (202) 418-0256.
International Bureau contacts: Joanna Lowry at (202) 418-1465
Jamie Hedlund at (202) 418-1399