NEWS FEDERAL COMMUNICATIONS COMMISSION 445 12th STREET, S.W. WASHINGTON, D.C. 20554 This is an unofficial announcement of Commission action.News media information 202/418-0500 Release of the full text of a Commission order constitutes official action.Fax-On-Demand 202/418-2830 See MCI v. FCC, 515 F.2d 385 (D.C. Cir. 1974).Internet: http://www..fcc.gov ftp.fcc.gov FOR IMMEDIATE RELEASE: News Media contact: October 22, 1999 Rosemary Kimball at (202) 418-0500 COMMISSION APPROVES AT&T/BT REQUEST TO OBTAIN OR TRANSFER LICENSES TO JOINT VENTURE TO PROVIDE INTERNATIONAL SERVICES The Commission voted today to approve the application of AT&T Corp., (AT&T) and British Telecommunications, plc, (BT) to obtain or transfer licenses and authorizations in connection with a proposed joint venture (JV) to provide international telecommunications services. The Commission's action grants the JV Section 214 authorizations to provide international telecommunications services, and authorizes AT&T to transfer to the JV AT&T's existing ownership interests in submarine cable stations and facilities and certain earth station licenses. While finding the JV application to be in the public interest, the Commission imposed limited conditions on the JV. First, the Commission decided that the JV should be regulated as dominant on the U.S.- U.K. route because of its affiliation with BT, a foreign carrier with market power. The Commission did not conclude, however, that AT&T should be regulated as dominant on the U.S.- U.K. route because it is not "affiliated" with BT. Second, the Commission concluded that neither AT&T nor the JV will be permitted to accept any special concessions either directly from BT or through the JV's subsidiary in the U.K.. This no "special concessions rule" will prevent the foreign carriers from leveraging their foreign market power into the U.S. international services market. Third, the JV cannot accept traffic from BT to the extent BT does not comply with the U.K. regulations implementing the EC's equal access requirement. The "equal access" requirement requires an exchange carrier (such as BT) to offer its competitors access to its local exchange customers to provide interexchange and international calls on the same basis as the exchange carrier affords to itself. Fourth, the Commission conditioned its grant of the application on compliance with an agreement regarding law enforcement, national security and public safety issues reached between the parties and the Department of Defense, the Department of Justice and the Federal Bureau of Investigation. We also note that, although the Commission concluded that unbundling the local loop in the U.K. is necessary to permit U.S. carriers to provide end-to-end broadband services between the U.S. and the U.K., the Commission noted that the U.K. regulator, Oftel, adopted a proposal in July 1999 to require BT to begin technical trials that would lead to unbundling by July 2001. Thus, the Commission declined to impose any unbundling requirement on BT in this proceeding. In addition, the JV is authorized to self-correspond on the U.S.- U.K. route; that is, the JV may use its own facilities, rather than the facilities of a correspondent foreign carrier to terminate traffic at the foreign end of a call. Although today's approval involves a joint venture and not a merger, the Commission followed the same analytical framework that it applies to mergers in conducting the public interest analysis of the competitive effects of the JV. The Commission concluded that the focus of a merger analysis and a joint venture analysis is the same: whether the transaction is pro- competitive and benefits consumers. The Commission concluded that the proposed JV is likely to have several pro-competitive effects in the market for global seamless services. First, Commission found that the global seamless services market has several significant participants, and that there are no barriers to entry. Second, the Commission found that the proposed JV will not eliminate a significant competitor. By teaming with AT&T, BT is simply replacing the partner it lost when the proposed BT/MCI merger failed because of the acquisition of MCI by WorldCom. Third, by building an IP-based global network that will offer high-speed transport capacity to the world's largest cities, the JV will further the development of packet-switched international networks and facilitate the migration from the circuit switched network. The result will be to benefit users of voice, data, and video services who demand increased bandwidth. Finally, the joint venture is likely to benefit consumers by encouraging the movement away from the traditional accounting rate regime and toward competitive alternatives, including end-to-end provisioning, for the termination of international traffic. Under the proposed joint venture, AT&T will transfer all of its international facilities to joint venture (JV) entities. AT&T will continue to offer international services to its residential and business customers on a common carrier basis pursuant to its Section 214 authorization. The joint venture (JV) will provision to AT&T the underlying international services components, excluding backhaul facilities and domestic switching services. The JV will develop and offer new services to meet the telecommunications needs of multinational corporations (MNCs). The JV will also provide wholesale, or carriers' carrier, services to international service providers on a common carrier basis. Moreover, AT&T and BT propose to make substantial capital investments to enable the JV to replace AT&T's and BT's existing circuit-switched international facilities with a state-of-the-art Internet Protocol-based (IP) global network. AT&T and BT state that the proposed IP network will have a global architecture based on open standards, to ensure that it is fully compatible with the networks of AT&T, BT, and foreign carriers that will operate in conjunction with the JV outside the United States and United Kingdom. The Commission did not agree with the claims of Cable & Wireless and GTE that the proposed joint venture will have an anticompetitive effect in the market for global seamless services. The Commission found that the global seamless services market has a number of significant participants, including large global providers like MCI/WorldCom, Global One, Cable & Wireless, and Equant. In addition, there are numerous smaller carriers with a global or regional presence that have emerged as potentially significant rivals, including Teleglobe, Level 3, Qwest, GTS, Viatel, and Global Crossing. Finally, AT&T/BT, the Department of Defense, the Department of Justice and the Federal Bureau of Investigation have executed an agreement that resolves many potential national security, law enforcement, and public safety issues. The executed agreement conditions the grant of AT&T/BT's application to obtain or transfer licenses and authorizations on compliance with the agreement. In brief, the agreement provides that all domestic telecommunications infrastructure owned by AT&T/BT will be controlled by AT&T/BT's subsidiaries and will at all times be located in the United States. This will provide law enforcement with the technical and jurisdictional ability to comply with lawful electronic surveillance. The agreement also provides that AT&T/BT will take reasonable and appropriate measures to prevent improper use of facilities used in the domestic telecommunications infrastructure, specifically with respect to personnel holding sensitive positions, information storage and access, and disclosure to foreign entities. The parties have also agreed to adopt and maintain certain policies with regard to confidentiality and security of electronic surveillance orders and authorizations, orders, legal process, and statutory authorizations and certifications related to subscriber records and information. Finally, the parties have agreed to implement certain measures requiring personnel security clearances, secure storage facilities, and the prevention of access by unauthorized personnel to secure or sensitive network facilities and offices. Action by the Commission, October 22, 1999, by Memorandum Opinion and Order (FCC 99-313). Chairman Kennard, Commissioners Ness, Furchtgott-Roth, Powell and Tristani with Commissioner Furchtgott-Roth issuing a separate statement. - FCC - International Bureau Contact: Matthew Vitale at (202) 418-1460. IB Docket No. 98-212 Report No. IN 99-33 -FCC-