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Ext. of Lines, FCC 95-377//$ $/63.01 Contents of Applications/$ $/300.214 Extension of Lines/$ Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 FCC 95-377 ) In the Matter of ) ) Domtel Communications, Inc. ) ) Application for Authority to provide) File No. I-T-C-93-246 Direct Service between the United ) States and the Dominican Republic ) ) MEMORANDUM OPINION, ORDER, AUTHORIZATION AND CERTIFICATE Adopted: August 23, 1995 Released: September 11, 1995 By the Commission: 1. With this order we allow a new carrier facilities-based entry into the U.S. international telecommunications market. Specifically, we authorize Domtel Communications, Inc. ("Domtel") to acquire and operate U.S. international facilities to provide message telephone, data, video and private line services between the United States and various foreign countries, including the Dominican Republic. Domtel will be regulated as a nondominant carrier and will correspond in the Dominican Republic with its parent, Telepuerto San Isidro, S.A. d/b/a/ Tricom, a Dominican carrier. We believe Domtel's entry will increase competition in the U.S. and Dominican Republic markets and thus benefit U.S. consumers. Background 2. Domtel is a Delaware corporation wholly owned by Tricom. Tricom is incorporated and operating in the Dominican Republic under a license issued by the Dominican Government to provide all services, including international message telephone service, private network services, data, video, cellular and local exchange services. 3. Domtel wishes to route traffic to and from PanAmSat Corporation's ("PAS") international teleport at Homestead, Florida. Traffic will be transmitted between earth stations authorized to communicate with the PAS - 1 satellite by means of a T-1 half circuit. Tricom, Domtel's Dominican correspondent, will arrange for transmission between PAS-1 and Tricom's facilities in the Dominican Republic. Domtel requests Section 214 authority to provide service from the United States to the Dominican Republic as well as to points beyond in conjunction with its Dominican correspondent Tricom. Domtel also requests that it be regulated as a nondominant international carrier. 4. We placed Domtel's application on Public Notice on July 14, 1993. AT&T filed a petition to deny, and GTE filed opposing comments. Letters supporting the grant of this application were submitted by the Honorable Jos‚ Del Carmen Ariza, Dominican Ambassador to the United States, and the Honorable Leopoldo N£¤ez Santos, Director General of Telecommunications of the Dominican Republic. 5. Domtel amended its application on June 6, 1995, to request authority to: (1) lease an additional 1.544 Mbps circuit from PAS for service between the United States and the Dominican Republic; (2) lease from COMSAT and operate one 1.544 Mbps circuit via INTELSAT satellites for the countries listed in Appendix A to this order; and (3) to lease or acquire on an Indefeasible Right of User ("IRU") basis a one-half interest in, and operate, one 1.544 Mbps cable circuit to each of the countries listed in Appendix B via the specified common carrier cables. Discussion A. Domtel's Section 214 Application 6. AT&T asserts that the Commission should not grant Domtel's application to enter the U.S. market until the Commission determines, after conducting a factual investigation that comparable market access for all U.S. firms is available in the Dominican Republic. 7. In reply, Domtel maintains that AT&T offers no legal support for its position that a Commission finding of comparable market access in the Dominican Republic should precede a grant of its application. Domtel further asserts that Dominican law imposes no restriction on a foreign-owned carrier's ability to provide service between the Dominican Republic and the United States, as demonstrated by the fact that all carriers providing telecommunications service in the Dominican Republic are at least one-third U.S.-owned. Domtel also contends that, contrary to Section 63.52(c) of the Commission's rules, AT&T: (i) fails to provide facts demonstrating that grant of Domtel's application would be prima facie inconsistent with the public interest; and (ii) fails to state its interest in Domtel's application. 8. We deny AT&T's request that we make a finding of comparable market access before granting Domtel's application. Our action on this application is properly based on the criteria we have previously applied in ruling on applications of foreign carriers to enter the U.S. telecommunications market as facilities-based carriers. Indeed, since the filing of AT&T's petition to deny we have initiated a proceeding to examine the policies governing foreign carrier entry in the U.S. telecommunications market in which we declined to propose AT&T's "comparable market access" standard as a method of regulating entry. We tentatively concluded, however, that an important element of our public interest analysis should be effective market access for U.S. carriers in the primary international telecommunications markets served by the carrier desiring entry. This proposed standard, like our current approach, permits entry even absent effective market access for U.S. carriers where the applicant demonstrates that other public interest factors warrant its entry into the U.S. market. 9. We currently examine applications filed by foreign carriers or their U.S. affiliates for international Section 214 authority on a case-by-case basis. We balance our policy in favor of open entry against the potential for undue discrimination by the foreign carrier against unaffiliated U.S. carriers. The potential for such discrimination occurs when foreign carriers are permitted to offer end-to-end service in competition with U.S. carriers that must interconnect with them on the foreign end in order to complete U.S. international calls. 10. We have authorized several foreign carriers to acquire interests in U.S. international facilities subject to safeguards to protect U.S. carriers providing international service from discrimination. In these cases, we found that nondiscrimination safeguards were sufficient to protect U.S. carriers in their provision of U.S. international service from discrimination that might occur as a result of such entry. We also found that the balance of public interest considerations favored granting the applications. 11. In these recent authorizations, we found our nondiscrimination safeguards sufficient in part either because of the competition and regulation that existed in the foreign carriers' home markets, or because the authority we granted was limited in scope. These circumstances offset the fact that, in each case, the applicant's foreign carrier affiliate was the incumbent service provider in the foreign market. 12. Here, Tricom is a recent entrant in the Dominican telecommunications market and appears not to have market power in any geographic or product market. Therefore, the risk of anticompetitive effects in the U.S. telecommunications market from Domtel's entry as a facilities-based carrier on the U.S.-Dominican Republic route appears minimal. Moreover, any such risk is readily controlled by our rules and the nondiscrimination safeguards that we impose as a condition of this authorization. 13. The Dominican telecommunications market, according to Domtel, has been dominated for more than sixty years by Codetel, the principal provider of Dominican telecommunications services. Domtel proffers statistics showing a wide disparity between the number of lines, employees, and facilities operated by Tricom and those employed by Codetel. According to Domtel's opposition, at the time its application was filed, Tricom had four central offices and had less than a 3 percent market share in all the services it is authorized to provide. Tricom now estimates that it has 15 to 18 percent of the outbound minutes to the United States, while having less than 1 percent of the market for local traffic. The record also reflects that Tricom has encountered formidable obstacles in its dealings with Codetel, and has established and expanded its presence only with difficulty. For example, only upon passage of Resolution 94-003, Dominican legislation that requires Codetel to interconnect with other carriers, was Tricom finally able to reach an interconnection agreement with Codetel. Tricom's relatively small market share and evidence of its difficulties competing with Codetel persuade us that Tricom lacks market power in the Dominican Republic. 14. The Dominican Government's efforts to facilitate competitive entry bolster our conclusion that Tricom lacks market power and that Domtel's provision of end-to-end service with Tricom poses a minimal risk of anticompetitive effects in the U.S. market for international services. The record reflects that the Dominican government is taking direct action to facilitate competitive entry into the Dominican telecommunications market by reducing regulatory and other barriers to entry. According to the Director General of Telecommunications for the Dominican Republic, the Dominican government allows subsidiaries of U.S. telecommunications companies to operate in the Dominican Republic. Tricom is now one of four carriers, each partially or wholly U.S.-owned, that are licensed by the Director General of Telecommunications to provide telecommunications services in the Dominican Republic, including international facilities-based services. The Dominican Ambassador to the United States has declared that his government is committed to the principles of competition. As noted above, Resolution 94-003 should make it easier for new carriers to enter the market. Despite this progress, it still appears that competitive safeguards in the Dominican Republic are less extensive than in most other countries whose carriers we have authorized to acquire interests in U.S. international facilities. Due to Tricom's apparent lack of market power in the Dominican Republic, and the government's progress in facilitating competitive entry, we are nonetheless satisfied that, properly conditioned, grant of Domtel's application will not present a substantial risk of anticompetitive effects in the U.S. market for international services. 15. Balanced against this minimal risk of competitive harm are a number of public interest benefits that support grant of Domtel's application. We anticipate that this action will create procompetitive benefits in the U.S. international telecommunications market. The addition of another facilities-based carrier originating or terminating U.S. international voice, data and video services on the U.S.-Dominican Republic route should foster lower prices and increased service choices for U.S. consumers. By the same token, permitting Tricom and Domtel to operate end-to-end between the United States and the Dominican Republic may have a beneficial impact on competition in the Dominican Republic. Domtel may be willing to provide service in correspondence with Tricom on terms that Tricom could not otherwise obtain from unaffiliated U.S. carriers, which may lack the incentive to correspond with a new entrant such as Tricom. The U.S. settlement payments deficit with the Dominican Republic also may improve to the extent Tricom can operate more efficiently, reduce its calling prices to Dominican customers, and stimulate outbound traffic to the United States. Grant of Tricom's application also may encourage other foreign countries to open their telecommunication markets to competition. Requirement of Cost-based Accounting Rates 16. AT&T requests that we condition any grant of authority to Domtel on Tricom's agreement to establish nondiscriminatory, cost-based accounting rates. Domtel states that the Commission has previously refused to impose such a condition. Domtel also contends that, because Tricom is not dominant in the Dominican Republic, or in any other market, there is no danger of discriminatory accounting rate practices. GTE likewise opposes the imposition of any such condition, asserting that accounting rates should be established through voluntary negotiation by the carriers. 17. We have in all prior cases denied AT&T's request that we require cost-based accounting rates as a condition of foreign carrier entry. In these orders, we stated that we would rely on mechanisms other than conditioning Section 214 authorizations to encourage foreign correspondents to lower their accounting rates with U.S. carriers. We also observed in AmericaTel and in the Foreign Carrier Entry NPRM that accounting rates should drop as a natural consequence of foreign market competition. For this reason, we did not propose in that rulemaking to adopt AT&T's suggestion that we condition foreign carrier entry on cost-based accounting rates. The market liberalization underway in the Dominican Republic, and Tricom's apparent lack of market power, further bolster our conclusion that, in this case, we should rely on other mechanisms to achieve our goal of nondiscriminatory, cost-based accounting rates. Domtel's authorization, however, is of course subject to any regulatory requirements that we may adopt in any relevant proceeding of general applicability. Other Alleged Defects in Domtel's Application 18. Finally, GTE asserts that Domtel has either omitted or insufficiently addressed certain information required by Section 63.01 of the Commission's regulations. According to GTE, Domtel has not described how it proposes to route traffic to and from the PAS earth station it will use at Homestead, Florida, or how Tricom will connect to satellite facilities in the Dominican Republic. GTE also contends that the application lacks the required estimates of revenues and costs called for by Section 63.01(m). GTE concludes that the Commission should decline to grant Domtel's application until it complies with the rules. 19. In reply, Domtel states that its application contains not only the information specified by Section 63.01 and all of its subsections, but considerably more information than is contained in most applications granted by the Commission. Upon examining Domtel's application, we do not find the application to be deficient. There is sufficient information upon which to base a grant. B. Regulatory Status of Domtel 20. Both AT&T and GTE contend that Domtel failed to support its request to be regulated as a nondominant carrier because Domtel failed to demonstrate that Tricom lacks the ability to discriminate against unaffiliated U.S. carriers. AT&T asserts that Tricom provides private line and switched services throughout the Dominican Republic and with foreign correspondents via local exchange facilities it owns in the Dominican Republic. According to GTE, this network is composed of cellular telephone units and wire, and a teleport completely independent of the Codetel network. Furthermore, GTE alleges, Tricom operates 24 calling centers and 6 "agencies" -- facilities resembling calling centers but located in commercial establishments. GTE contends that Tricom can use these facilities to segregate its traffic in favor of Domtel. AT&T and GTE conclude that Domtel must demonstrate that Tricom's facilities serving these commercial segments, particularly those being used for private line services, are not potential bottlenecks which could be used to discriminate against other U.S. international carriers serving the Dominican Republic. 21. Domtel states that it meets the requirements for a finding of nondominance under Regulation of International Common Carrier Services because Tricom does not control any bottleneck services or facilities in the Dominican Republic and therefore lacks any ability to discriminate against unaffiliated U.S. international carriers through control of such facilities. Moreover, Domtel states, Tricom is patently unable and unwilling to discriminate against unaffiliated U.S. international carriers through such means as preferential operating agreements, preferential routing of traffic, exclusive or more favorable transiting agreements, or preferential domestic access and interconnection arrangements. Domtel also maintains that Tricom is open to negotiating an operating agreement with any U.S. carrier, has no history of discrimination, and has no incentive to direct all of its traffic to Domtel since Domtel does not have the significant market share that other U.S. carriers possess. 22. Pursuant to Section 63.10(a)(3) of the Commission's rules, Domtel bears the burden of submitting information sufficient to demonstrate that Tricom lacks the ability to discriminate against unaffiliated U.S. carriers through control of bottleneck services or facilities in the Dominican Republic. Domtel's discussion of Tricom's market share and our findings in Section A on this issue are directly relevant to this showing. Tricom provides local exchange, long distance, IMTS, private network, data, video and cellular services and targets the major commercial areas in Santo Domingo. It does not appear from the record, however, that Tricom is the sole provider of telecommunications service in any area of geographic significance in the Dominican Republic. Moreover, the government does not grant exclusive franchises for any telecommunications service. While Tricom has made progress in gaining market share of international long distance revenues, its share of the market is still small relative to Codetel's. These facts, coupled with the Dominican government's efforts to reduce regulatory and other barriers to entry, makes it unlikely that Tricom has the ability to engage in discrimination or successfully sustain any facility as a bottleneck. Further, as a new entrant in need of increased traffic, Tricom has strong incentives to avoid discrimination and correspond with other U.S. carriers. Consequently, we will not regulate Domtel as a dominant carrier. Ordering Clauses 23. Accordingly, IT IS ORDERED, that application File No. I-T-C-93-246 IS GRANTED, and Domtel Communications, Inc. ("Domtel") is authorized to: a. lease from Comsat and operate one 1.544 Mbps circuit between appropriately licensed U.S. earth stations and INTELSAT satellites, connecting with similar facilities between the satellites and the points listed in Appendix A, furnished by its correspondents; b. lease or acquire on an Indefeasible Right of User ("IRU") basis a one-half interest in, and operate, one 1.544 Mbps cable circuit to each of the countries listed in Appendix B via the specified common carrier cables; c. lease capacity in U.S. earth stations authorized to communicate with INTELSAT satellites; d. lease necessary domestic connecting facilities; and e. use the facilities set forth in the foregoing subparagraphs to provide international message telephone, data, video and private line services between the United States and the points specified in Appendices A and B; and f. lease and operate two 1.544 Mbps circuits between appropriately licensed U.S. earth stations and the PAS-1 satellite, connecting with similar circuits between the satellite and the Dominican Republic, furnished by its correspondent; g. lease capacity in U.S. earth stations authorized to communicate with the PAS-1 satellite; and h. use the facilities set forth in subparagraphs d., f., and g. to provide international message telephone, data, video and private line services between the United States and the Dominican Republic and beyond to the points listed in Appendices A and B. 24. IT IS FURTHER ORDERED that neither Domtel nor any persons or companies directly or indirectly controlling or controlled by Domtel, or under direct or indirect common control with it, shall acquire or enjoy any right, for the purposes of handling or interchanging traffic to or from the United States, its territories or possessions, which is denied to any other United States carrier by reason of any concession, contract, understanding, or working arrangement to which Domtel or any persons or companies controlling or controlled by Domtel are parties. See also 47 C.F.R.  63.14. 25. IT IS FURTHER ORDERED that our authorization of Domtel to provide private lines as part of its authorized services is limited to the provision of such private lines only between the United States and the countries listed in the Appendices -- that is, private lines which originate in the United States and terminate in one of the countries listed in the Appendices, or which originate in one of the countries listed in the Appendices and terminate in the United States. In addition, Domtel may not -- and Domtel's tariff must state that its customers may not -- connect private lines provided over these facilities to the public switched network at either the U.S. or foreign end, or both for the provision of international switched basic services, unless authorized to do so by the Commission upon a finding that the destination country affords resale opportunities equivalent to those available under U.S. law in accordance with Regulation of International Accounting Rates, Phase II, First Report and Order, 7 FCC Rcd 559 (1991), Order on Reconsideration and Third Further Notice of Proposed Rulemaking, 7 FCC Rcd 7927 (1992), petition for rulemaking pending. 26. IT IS FURTHER ORDERED that Domtel shall file copies of any operating agreements entered into with its foreign correspondents with the Commission within 30 days of their execution and shall otherwise comply with the filing requirements set forth in Section 43.51 of the Commission's Rules, 47 C.F.R.  43.51. 27. IT IS FURTHER ORDERED that Domtel shall file a tariff pursuant to Section 203 of the Communications Act, 47 U.S.C.  203, and Part 61 of the Commission's rules, 47 C.F.R. Part 61, for the services authorized in this Order. 28. IT IS FURTHER ORDERED, that Domtel shall file the annual reports of overseas telecommunications traffic required by Section 43.61 of the Commission's rules, 47 C.F.R.  43.61. 29. IT IS FURTHER ORDERED, that Domtel shall file annual circuit status reports in accordance with the requirements set forth in Rules for Filing of International Circuit Status Reports, CC Docket No. 93-157, Report and Order, FCC 95-280, adopted July 12, 1995. 30. This Order is effective upon release. Petitions for reconsideration under Section 1.106 of the Commission's rules, 47 C.F.R.  1.106, may be filed within 30 days of public notice of this Order. (See Commission rule 1.4(b)(2), 47 C.F.R 1.4 (b)(2)). FEDERAL COMMUNICATIONS COMMISSION William F. Caton Acting Secretary APPENDIX A COUNTRIES TO BE SERVED VIA SATELLITE Atlantic Ocean Area Regions Latin America Antigua CuracaoNetherlands Antilles Argentina Dominican Republic Nicaragua Aruba EcuadorPanama Bahamas El Salvador Paraguay Barbados French Guiana Peru Belize GrenadaSt. Lucia Bermuda Guantanamo Bay St. Vincent Bolivia Guatemala Surinam Brazil Guyana Trinidad & Tobago Cayman IslandsHaiti Turks & Caicos Isles Chile Honduras Uruguay Colombia JamaicaVenezuela Costa Rica Martinique Europe Austria IrelandSlovenia Belgium Italy Spain Croatia Liechtenstein Sweden Cyprus Luxembourg Switzerland Denmark Malta Turkey Finland Monaco United Kingdom France Netherlands Vatican Germany Norway Yugoslavia Greece Portugal Iceland San Marino A - 2 Middle/Near East and Africa and Other Europe Algeria HungaryQatar Angola Iran Romania Armenia Iraq Russian Federation Ascension Island Israel Saudi Arabia Azerbiajan Ivory Coast Senegal Azores Jordan Sierra Leone Bahrain Kazakhstan South Africa Belarus Kenya Sri Lanka Benin Kuwait Sudan Botswana Kyrgyzstan Swaziland Bulgaria Latvia Syria Burkina Faso LebanonTajikistan Burma LesothoTanzania Cameroon LiberiaTogo Canary IslandsLibya Tunisia Cape Verde Lithuania Turkmenistan Central African Republic Madagascar United Arab Emirates Chad Malagasy Republic Yemen Congo Malawi Zaire CzechoslovakiaMali Zambia Diego Garcia Mauritania Zimbabwe Egypt MoldovaUganda Estonia MoroccoUkraine Ethiopia Mozambique Uzbekistan Gabon Niger Gambia Nigeria Georgia Oman Ghana Pakistan Gibralter Poland Guinea A - 3 Pacific Ocean Area Region American SamoaJapan Philippines Australia Kiribati Ponape Brunei Korea Saipan China (Peoples Republic of) Kosrae Singapore Christmas Island Malaysia Sri Lanka Cook Island Mariana Island Taiwan Ebeye Nauru Thailand Fiji Islands New Caledonia Tonga French Polynesia New Guinea Truk Guam New Zealand Vanuatu Hong Kong Palau Western Somoa India Papua New Guinea Yap Indonesia APPENDIX B COUNTRIES TO BE SERVED VIA CABLE Country No. of 1.554 Circuits Facility Argentina 1 AMERICAS-1, UNISOR Chile 1 AMERICAS-1, UNISOR Costa Rica 1 COLUMBUS-2 Ecuador 1 TCS-1, COLUMBIA El Salvador 1 COLUMBUS-2 French Guiana 1 TAINO-CARIB, DECMS Guatemala 1 COLUMBUS-2 Honduras 1 COLUMBUS-2 St. Kitts & Nevis 1 TAINO-CARIB, DECMS Nicaragua 1 COLUMBUS-2 Paraguay 1 AMERICAS-1 Peru 1 TCS-1, ASETA Uruguay 1 AMERICAS-1, UNISOR Mexico 1 COLUMBUS-2 St. Thomas 1 COLUMBUS-2, TAINO-CARIB Portugal 1 COLUMBUS-2 Italy 1 COLUMBUS-2 Canary Islands1 COLUMBUS-2 Brazil 1 AMERICAS-1 Trinidad 1 AMERICAS-1 Venezuela 1 AMERICAS-1 Canada 1 TAT-9 United Kingdom1 TAT-9 France 1 TAT-9 Spain 1 TAT-9 Jamaica 1 TCS-1 Dominican Republic 1 TCS-1 Tortola 1 TAINO-CARIB