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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 ) ) IB Docket No. 97-142 Rules and Policies on Foreign Participation ) in the U.S. Telecommunications Market ) ORDER AND NOTICE OF PROPOSED RULEMAKING Adopted: June 4, 1997 Released: June 4, 1997 Comment Date: July 9, 1997 Reply Comment Date: August 12, 1997 By the Commission: Chairman Hundt issuing a separate statement. Table of Contents Topic Paragraph No. I. Introduction . . . . . . . . . . . . . . . . . . . . . . . 1 II. Background. . . . . . . . . . . . . . . . . . . . . . . . 16 A. Foreign Carrier Entry Order . . . . . . . . . . . . . 16 B. WTO Basic Telecom Agreement . . . . . . . . . . . . . 20 III. Discussion . . . . . . . . . . . . . . . . . . . . . . . 25 A. Entry Standard under Section 214. . . . . . . . . . . 28 1. WTO Member Countries . . . . . . . . . . . . . . 29 a. Facilities-Based, Resold Switched and Resold Non- Interconnected Private Line Services . . . 29 b. Switched Services Provided over Facilities-Based and Resold Private Lines. . . . . . . . . . . . . . . 48 2. Non-WTO Member Countries . . . . . . . . . . . . 53 B. Standard for Foreign Ownership under the Cable Landing License Act 60 1. WTO Member Countries . . . . . . . . . . . . . . 62 2. Non-WTO Member Countries . . . . . . . . . . . . 65 C. Section 310 Standard for Foreign Ownership of Radio Licenses 67 1. WTO Member Countries . . . . . . . . . . . . . . 72 2. Non-WTO Member Countries . . . . . . . . . . . . 77 D. Regulatory Issues . . . . . . . . . . . . . . . . . . 78 1. Modification of Dominant Carrier and Other Operating Safeguards 82 a. Purpose of Dominant Carrier Regulation. . . 88 b. Basic Dominant Carrier Safeguards . . . . . 92 i. Tariffing Requirements . . . . . . . . 92 ii. Addition or Discontinuation of Circuits 95 iii. Quarterly Traffic and Revenue Reports 98 iv. Provisioning and Maintenance Records 102 c. Supplemental Dominant Carrier Safeguards. 104 d. Structural Separation . . . . . . . . . . 111 e. Other Operating Safeguards. . . . . . . . 114 i. "No Special Concessions" Requirement 114 ii. Benchmark Settlement Rates Condition 119 iii. Alternative Competitive Safeguards 122 2. Enforcement of Safeguards. . . . . . . . . . . 124 3. Amendments to Part 63. . . . . . . . . . . . . 128 a. Streamlined Section 214 Procedures. . . . 130 b. Other Rule Changes. . . . . . . . . . . . 138 E. Framework for Accounting Rate Flexibility . . . . . 144 IV. Procedural Issues . . . . . . . . . . . . . . . . . . . 155 A. Ex Parte Presentations. . . . . . . . . . . . . . . 155 B. Initial Regulatory Flexibility Analysis . . . . . . 156 C. Initial Paperwork Reduction Act of 1995 Analysis. . 193 D. Comment Filing Procedures . . . . . . . . . . . . . 195 E. Ordering Clauses. . . . . . . . . . . . . . . . . . 197 Appendix A: Rule Changes I. Introduction 1. On February 15, 1997, the United States and 68 other countries concluded a historic agreement to open markets for basic telecommunications services. This agreement, negotiated under the auspices of the World Trade Organization (WTO), covers 95 percent of the global market for basic telecommunications services. Under the terms of the agreement, the President of the United States has agreed to allow foreign suppliers to provide a broad range of basic telecommunications services in the United States. The U.S. commitment covers local, long distance, and international telecommunications services, provided by wire or radio, on a facilities basis or through resale. In return, U.S. companies will be able to provide basic telecommunications services in 68 other countries, including virtually all major U.S. international trading partners. 2. The WTO Basic Telecom Agreement promises to alter fundamentally the competitive landscape for telecommunications services. Not only have 69 countries agreed to permit competition from foreign suppliers of basic telecommunications services, but 65 of these countries have committed to enforce fair rules of competition for basic telecommunications services. These rules, which cover interconnection of competing telecommunications service suppliers, competition safeguards, and transparent and independent regulation of telecommunications services, incorporate the principles that are at the heart of the Telecommunications Act of 1996. As a result, most of the world's major trading nations have made binding commitments to transition rapidly from monopoly provision of basic telecommunications services to open entry and procompetitive regulation of these services. 3. Due to these changed circumstances, it is time to revisit the rules we adopted in 1995 to govern the entry of foreign-affiliated carriers into the U.S. market for basic telecommunications services. This Notice of Proposed Rulemaking (Notice) initiates a review of the effective competitive opportunities (ECO) test and related rules adopted in the Foreign Carrier Entry Order. We also propose conforming changes to our recently adopted framework for permitting flexible settlement arrangements between U.S. and foreign carriers. 4. Our objective in this proceeding is to craft rules that will fairly balance a variety of public interest considerations. Our Foreign Carrier Entry Order listed a number of such considerations, including competition, national security, foreign policy, law enforcement, and trade policy. When we adopted the ECO test, the United States had no relevant trade obligations in the telecommunications services sector. We noted in the Foreign Carrier Entry Order, however, that if the WTO negotiations concluded successfully, we would revisit our rules as appropriate. We propose now to consider all of these factors in reassessing our current rules. 5. In general, we believe that the benefits of the WTO Basic Telecom Agreement allow us to adopt an open entry policy for foreign-affiliated carriers. Open entry introduces new sources of competition, which will produce lower prices and greater service choice and innovation for American consumers. While we tentatively conclude that the public interest will be served by dispensing with detailed review of competitive conditions in foreign markets prior to foreign carrier entry into the U.S. market, we nevertheless will continue to exercise our authority to promote important public interest objectives. Among the most important of these is the commitment of the Telecommunications Act of 1996 to ensure open and fair competition in the U.S. telecommunications market. 6. Our new open entry policy as detailed below represents a major shift in our philosophy for regulation of the international telecommunications market. Prior to the conclusion of the WTO Basic Telecom Agreement, the overall lack of competition in the global telecommunications market convinced us that it was necessary to scrutinize and control entry into this market through our ECO test to promote and protect competition in the U.S. market. The fundamental marketplace changes that this Agreement will bring about allow us to lower this entry barrier while still promoting vital public interest objectives. We therefore will allow entry into the U.S. international services market, as we do in the domestic interexchange market, subject to safeguards designed to ensure that no competitor with market power can act in an anticompetitive manner. As we said in the Foreign Carrier Entry Order, we define market power as the ability to act anticompetitively against unaffiliated U.S. carriers through the control of bottleneck services or facilities on the route in question. To protect competition, we propose to continue to monitor behavior in the market and to take swift action to ensure that no carrier abuses its market power so as to distort competition in the U.S. telecommunications market. In some cases, we will impose conditions on authorizations or impose conduct safeguards to prevent a carrier from abusing its market power. This approach also fulfills U.S. obligations, negotiated as part of the WTO Basic Telecom Agreement, to maintain measures to prevent anticompetitive conduct. Further, these rules are a "reasonable, objective and impartial" means of promoting public interest goals, as required by the GATS framework. We emphasize that the characteristics that can be expected to raise concerns of anticompetitive conduct will be not the carrier's foreign affiliation but factors that could result in competitive distortions. 7. This regulatory philosophy will take advantage of market forces, which are more effective at deterring anticompetitive conduct than our rules would be. First, the creation of a competitive market in many countries means that U.S.-licensed carriers have more options for innovative responses to anticompetitive initiatives. Thus, marketplace forces will function to prevent competitive distortions. In addition, by making foreign carrier entry into the U.S. market easier, we will also make it easier for both U.S. and foreign carriers to achieve global strategies that involve efficient and flexible routing of international traffic. Because the United States is the largest hub for international traffic, these strategies will not only benefit U.S. consumers, but will shape the dynamics of the global telecommunications market. In contrast, carriers that continue to rely on traditional strategies based on bilateral traffic routing and extremely high margins on international traffic will face severe competitive pressures in the coming years. Our Flexibility Order will give these marketplace trends further momentum by making economically rational routing of international traffic easier to achieve. 8. At the same time, the emergence of a more dynamic market requires new regulatory tools to address the remaining potential for anticompetitive behavior. In a primarily bilateral market with very limited competition and extraordinarily large margins, many conduct remedies, i.e., post-entry safeguards, had little impact compared to the potential rewards of anticompetitive behavior. In the emerging market for international services, we believe that a flexible set of tools that generally will apply after an authorization has been granted will best serve to promote free and fair competition in the U.S. international telecommunications market. These tools may include our proposed benchmark safeguards and stricter reporting requirements. We believe that our settlement rate benchmark proposals would greatly reduce the opportunity and incentive for anticompetitive conduct by significantly reducing the extent to which settlement payments U.S. carriers pay their foreign correspondents exceed the cost the foreign carriers incur to terminate calls. In addition, in cases in which a carrier's control of bottleneck facilities presents more serious competitive risks, we propose to employ a new set of dominant carrier safeguards. Finally, when we find actual misconduct in the market, we propose to impose financial sanctions and various conduct remedies, including potentially the imposition of stricter structural remedies. 9. We accordingly propose a number of measures for detecting and deterring anticompetitive behavior that we believe reflect emerging market realities. This regulatory approach is consistent with the approach taken in the domestic context pursuant to the Telecommunications Act of 1996, under which Bell Operating Companies (BOCs) and other local exchange carriers are permitted to enter the long distance market if they satisfy detailed statutory and regulatory safeguards designed to ensure that incumbent local exchange carriers are unable to leverage their power in the local market to the detriment of their interexchange competitors. At the same time, we believe that these are precisely the kinds of measures envisioned by the Reference Paper on Pro-Competitive Regulatory Principles negotiated as part of the WTO Basic Telecom Agreement. The Reference Paper obligates the governments that have adopted it as part of their schedules of commitments to maintain measures to prevent anticompetitive conduct, to ensure fair, nondiscriminatory and cost-oriented interconnection, and to administer universal service obligations in a competitively neutral manner, among other things. The rules that we have adopted to implement the Telecommunications Act meet these requirements. 10. Consistent with this new regulatory philosophy, we tentatively conclude that, for Section 214 applications to enter the U.S. international market of carriers from WTO Member countries, it no longer will be necessary to undertake an effective competitive opportunities analysis to achieve the public interest objectives that our current rules were intended to serve. Instead, we tentatively conclude that the public interest will be best served by granting streamlined processing of applications for international Section 214 authorization by these carriers except in those circumstances where foreign carrier entry would pose a very high risk to competition. Similarly, we conclude that it is no longer necessary to apply an equivalency analysis as the basis for authorizing all U.S. carriers to provide switched, basic services over facilities-based or resold private lines between the United States and WTO Member countries. In order to ensure that these revised rules will serve the public interest, we propose a number of measures that will safeguard competition and other vital public interest objectives. Likewise, we tentatively conclude that it is not necessary to apply an ECO test for cable landing licenses for cables between the United States and other WTO Member countries. Finally, we tentatively conclude that, pursuant to our discretion under Section 310(b)(4) of the Communications Act, 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, absent compelling evidence to the contrary. 11. We seek comment on our tentative conclusions that the public interest will be served by revising our rules governing international Section 214, Title III common carrier, and cable landing license applications in this manner. We also seek comment on our tentative conclusion that the public interest will be best served by retaining the existing ECO test for Section 214, Title III common carrier, and cable landing license applications from entities from non-WTO Member countries. We specifically seek comment on the tentative legal and policy conclusions that underlie these and other rules proposed in this Notice. 12. We also believe it is appropriate to revisit the regulatory safeguards we should apply to foreign-affiliated carriers in the context of the new competitive environment that will prevail in the future. We tentatively conclude that we should modify our dominant carrier safeguards to lessen unnecessary regulatory burdens while at the same time improving our ability to detect, deter and remedy anticompetitive conduct. We also propose to adopt supplemental dominant carrier safeguards that would apply to U.S. carriers that are affiliated with foreign carriers that have market power in destination countries that have not issued licenses for the competitive provisioning of facilities-based international services. We request comment on new reporting requirements, the imposition of structural separation, and certain conduct remedies to address specific competitive concerns. 13. Our proposed regulatory framework also includes a commitment to expediting licensing of new entrants. As we have noted, the WTO Basic Telecom Agreement significantly lessens our concerns that foreign-affiliated carriers will be able to distort competition in the U.S. market. Under these circumstances, we propose to streamline processing of applications of foreign-affiliated carriers in order to speed new entry. This policy is a logical complement to our proposal to rely on market forces and post-entry safeguards to prevent anticompetitive conduct in most cases. 14. We recognize that some WTO Member countries have made no commitments, have committed to less than full market access, have not committed to enforcing fair rules of competition, or might not implement their commitments fully. Although these countries collectively represent a relatively small portion of the world telecommunications market, their carriers' participation in the U.S. market could result in competition problems. We seek comment on the appropriate regulatory responses to those potential problems. 15. Finally, we seek comment on our tentative conclusion that we should not conduct an ECO analysis for purposes of determining whether to permit a U.S. carrier to enter into an alternative settlement arrangement with carriers from WTO Member countries. We propose instead to adopt a rebuttable presumption in favor of permitting U.S. carriers to negotiate such arrangements with carriers from WTO Member countries. We again note the special issues posed by WTO Members who have made no or limited market access commitments. II. Background A. Foreign Carrier Entry Order 16. In November 1995, the Commission adopted rules governing entry of foreign- affiliated carriers into the U.S. market. These rules deal both with applications for authorizations to provide international telecommunications services pursuant to Section 214 of the Communications Act of 1934 and with applications for common carrier radio licenses under Title III of the Act. The Foreign Carrier Entry Order stated three goals of our rules: to promote effective competition in the U.S. telecommunications services market, particularly the market for international telecommunications services; to prevent anticompetitive conduct in the provision of international services or facilities; and to encourage foreign governments to open their communications markets. 17. To achieve these goals, we adopted an effective competitive opportunities test as part of our overall public interest analysis for both categories of authorizations international Section 214 authorizations and Title III licenses. We apply the ECO test to applications for international facilities-based, switched resale, and non-interconnected private line resale under Section 214 only in circumstances where an applicant seeks authority to provide the service between the United States and a destination market in which an affiliated foreign carrier has market power. In the Title III context, we apply the ECO test to common carrier radio applicants or licensees that seek to exceed the 25 percent indirect foreign ownership benchmark contained in Section 310(b)(4) of the Act. 18. In applying our effective competitive opportunities test, we examine first the legal, or de jure, ability of U.S. carriers to enter the foreign destination market and provide the relevant service. If there are no legal barriers to entry, we consider the practical ability for U.S. carriers to compete in those markets. This analysis focuses on the actual conditions of entry, i.e., terms and conditions of interconnection, competitive safeguards, and the regulatory framework. 19. The Foreign Carrier Entry Order also delineated additional public interest factors that we consider in determining whether to grant a foreign-affiliated carrier's application. These include the general significance of the proposed entry on competition in the U.S. communications services market, the presence of cost-based accounting rates (under Section 214), as well as national security, law enforcement issues, foreign policy and trade concerns brought to our attention by the Executive Branch. We stated in the Foreign Carrier Entry Order that we would accord deference to the views of the Executive Branch on issues uniquely within its competence. Finally, we said that we would amend our rules if the Executive Branch were to succeed in negotiating greater market access for U.S. carriers in exchange for still greater liberalization in the U.S. basic telecommunications market. B. WTO Basic Telecom Agreement 20. The WTO Basic Telecom Agreement was concluded under the framework established by the General Agreement on Trade in Services (GATS). The GATS was concluded as part of the Uruguay Round of multilateral trade negotiations in December 1993. For the first time, the GATS brought trade in services within the international trading regime established for trade in goods by the General Agreement on Tariffs and Trade after the Second World War. 21. The GATS applies to all service sectors. At the conclusion of the Uruguay Round, the United States and other WTO Members made commitments to allow market access for a broad range of services including such diverse industries as construction services, professional services (such as legal and medical services), distribution services, and value added (or enhanced) telecommunications services. Basic telecommunications, however, was one of a limited number of service sectors in which no Member was willing to make binding trade commitments. Nevertheless, because WTO Members recognized the economic importance of basic telecommunications services, the WTO established a separate, sector-specific negotiation for basic telecommunications services. These negotiations were scheduled to conclude by April 30, 1996. Because the negotiation had made insufficient progress by that date, the WTO agreed to extend the deadline for concluding the negotiations to February 15, 1997. 22. The GATS imposes a number of obligations on WTO Members. First, all WTO Members are required to accord to services and service suppliers of all other WTO Members "Most Favored Nation" (MFN) treatment. Essentially, MFN is a nondiscrimination rule that requires each WTO Member to treat all other WTO Members similarly. All WTO Members are required to extend MFN treatment to all other WTO Members, even if they have not made specific market access commitments. A related GATS obligation is National Treatment, which is a nondiscrimination rule that requires a WTO Member to treat companies from other WTO Members as it treats its own companies. In addition, a Member is obligated to grant other Members' companies access to its market on the terms that it specifies in its schedule of commitments. Like National Treatment, Market Access may be limited, but only in ways specifically enumerated in the GATS. Finally, the GATS requires measures related to domestic regulation to be reasonable, objective, impartial, and transparent. 23. The commitments of the 69 countries that participated in the WTO Basic Telecom Agreement, including the United States, are binding in that they can be enforced through WTO dispute settlement. If a foreign government fails to grant market access to a U.S. carrier, the U.S. Government may take a trade dispute against the foreign government to the WTO. The remedies available if the plaintiff prevails do not include specific performance (i.e., a requirement that the defendant fulfill its trade commitment). Rather, the plaintiff may take trade retaliation against the defendant in any goods or services sector. Thus, if a country that has committed to allow market access to provide international service granted a license to a French company but denied a license to a similarly situated U.S. company, the U.S. Government would have the right to take a dispute against that government in the WTO. While companies from the defendant country might not be interested in entering the U.S. telecommunications market, its industry would likely have substantial volumes of trade with the United States in a variety of other goods and services sectors. If the U.S. Government prevailed in a dispute, it could choose to retaliate against the defendant in appropriate sectors. 24. Similarly, if a foreign government fails to comply with the regulatory principles to which it has committed itself, the U.S. Government may enforce that commitment. These principles are essentially the same as the requirements of the Communications Act and the Telecommunications Act of 1996 that this Commission has implemented over the past 16 months. Sixty-five governments have undertaken enforceable obligations to ensure that dominant carriers provide nondiscriminatory and timely interconnection to their competitors at cost-oriented rates. If a dominant carrier provided interconnection to U.S. carriers on less favorable terms than it provides to its own nationals or to carriers from a third country, the U.S. Government could take a dispute against the dominant carrier's government for failing to maintain measures to ensure nondiscriminatory interconnection. These governments have also bound themselves to take measures to prevent other forms of anticompetitive conduct, and to regulate the telecommunications industry in a transparent manner. As a result, if a government that committed to prevent anticompetitive conduct failed to adopt measures to prevent its dominant carrier from cross-subsidizing competitive services with monopoly services, the U.S. Government could take a dispute against that government. III. Discussion 25. In this Notice, we reaffirm the three goals of our regulation of the U.S. international telecommunications market. Our primary goal is to advance the public interest by promoting effective competition in the U.S. telecommunications services market, particularly the market for international services. Effective competition in the U.S. international services market promotes opportunities for U.S. consumers to choose among multiple suppliers based on innovative offerings, service quality and efficiencies, and price competitiveness. In a competitive environment, market forces can replace burdensome regulation and more effectively achieve our public interest objectives of ensuring consumers access to reasonable rates and high quality services. 26. Our second goal is to prevent anticompetitive conduct in the provision of international services or facilities. As we found in the Foreign Carrier Entry Order, regulation that precludes discriminatory and exclusionary behavior is a necessary precondition to effective competition. Such anticompetitive conduct can deny consumers the benefits of greater innovation and lower prices that competition would normally produce. Our regulatory policies have long addressed the ability of carriers to abuse their market power on the foreign end of U.S. international routes by engaging in discriminatory and exclusionary behavior to the detriment of U.S. consumers. 27. Our third goal is to encourage foreign governments to open their communications markets. Effective competition requires that carriers have the ability to compete through forming new organizations and new means of providing service. If there is no opportunity for U.S. participation in competitive markets abroad, the benefits of providing international service on an end-to-end basis will flow solely to a dominant foreign carrier and its U.S. affiliate rather than to all competitors on this route. In such circumstances, U.S. consumers of international services are denied the maximum benefits of reduced rates, increased quality, and innovation. A. Entry Standard under Section 214 28. In November 1995, when the Commission adopted the Foreign Carrier Entry Order, more than 95 percent of the world's telecommunications revenues (excluding U.S. telecommunications revenues) went to monopoly or dominant carriers. Almost all major telecommunications markets were closed to competition. Now, the WTO commitments of 69 nations, including virtually all of the largest U.S. international trading partners, dramatically change the competitive environment in the global telecommunications market. These 69 countries (including the United States), representing 95 percent of global telecom revenues, have agreed to permit competition from foreign suppliers of basic telecommunications services. Further, 65 of these countries have committed to enforce fair rules of competition for basic telecommunications services that are embodied both in the Reference Paper on Procompetitive Regulatory Principles and in U.S. law and regulations. Fifty-two of these countries, which account for approximately 90 percent of telecommunications revenues in WTO Member countries, have granted market access for international services. Thus, most of the world's major trading nations have made binding commitments to transition rapidly from monopoly provision of basic telecommunications services to open entry and procompetitive regulation of these services. The WTO commitments enter into force on January 1, 1998. 1. WTO Member Countries a. Facilities-Based, Resold Switched and Resold Non-Interconnected Private Line Services 29. We tentatively conclude that the WTO commitments made by 68 other governments will, when fulfilled, substantially achieve the paramount goal of our Foreign Carrier Entry Order, promoting effective competition in the U.S. international services market. We base this tentative conclusion in part on our findings that the Agreement will substantially open foreign markets and will greatly reduce foreign carriers' ability to engage in anticompetitive conduct in the provision of U.S. international services and facilities. 30. These market access commitments and regulatory commitments greatly advance our goal of opening foreign communications markets. U.S. carriers now will be able to provide international service on an end-to-end basis to and from the United States and among foreign countries. U.S. carriers will also be able to make important strategic investments in critical foreign telecommunications markets. These opportunities will help ensure that international carriers serving the United States compete on the basis of "superior business acumen, responsiveness to customers, [and] . . . technological innovation." As a result, U.S. consumers of international services will receive the maximum benefits of reduced rates and increased quality, choice, and innovation. Moreover, the increased competitive opportunities for U.S. carriers should directly promote effective competition in the U.S. international services market by lowering the costs of U.S. carriers. 31. The commitments also represent significant progress towards achieving our goal of preventing anticompetitive conduct. Prior to this Agreement, only four percent of the international telecommunications markets in the world, outside of the United States, were subject to competition. After this Agreement, countries representing over 95 percent of the world's telecommunications revenues will be open to competition by U.S. carriers. As a result, most foreign carriers with monopoly positions today should have far less market power as a result of the WTO commitments, not only because they would be newly subject to competition but because they would be subject to meaningful disciplines to prevent abuse of market power in the form of interconnection obligations and other competitive safeguards to which their governments have committed. In particular, we are considerably less concerned that incumbent foreign carriers will be able to abuse the market power they enjoy in their home markets when they provide U.S. international facilities-based and resold non-interconnected private line services. The market access and regulatory commitments that their governments have made should provide a meaningful check on their exercise of market power. As discussed below, however, where international facilities-based competition does not exist in the destination market of a foreign-affiliated U.S. carrier, we propose to impose specific safeguards to ensure that a foreign- affiliated carrier is unable to leverage its foreign market power into the U.S. market. Finally, we also continue to believe that the resale of international switched services by a U.S. carrier whose foreign affiliate has market power in the destination country does not present a substantial possibility of anticompetitive conduct in the U.S. international services market. 32. In light of the new competitive environment created by the WTO Basic Telecom Agreement, we tentatively conclude that we should eliminate the ECO test as part of our public interest analysis of pending and future Section 214 applications filed by foreign carriers from WTO Member countries that seek to provide facilities-based, resold switched, and resold non- interconnected private line services. We tentatively conclude that we should instead establish a rebuttable presumption in favor of granting a Section 214 application filed by a carrier from a WTO Member country to provide international facilities-based, resold switched, or resold non- interconnected private line services. In order to rebut the presumption in favor of granting such a Section 214 application, a petitioner would be required to show that grant of the application would pose a very high risk to competition in the U.S. telecommunications market that could not be addressed by conditions that we could impose on the authorization. 33. Several factors weigh in favor of our eliminating the ECO test for facilities-based, resold switched, and resold non-interconnected private line services and establishing a rebuttable presumption in favor of granting Section 214 applications to provide such services. We believe that the WTO commitments will soon result in a dramatically changed global competitive environment in which almost all of the major traffic routes will be open to competition. Further, for the first time our major trading partners have committed to regulatory principles and a dispute resolution process which assure their markets will be open in fact, not just in theory. We also believe that adoption of our settlement rate benchmarks proposals would provide an effective regulatory tool in preventing anticompetitive behavior in the U.S. international services market. In these circumstances, we believe we can and should rely on competitive market forces rather than our ECO test as a means of achieving the maximum benefits for U.S. consumers. 34. Eliminating the ECO test will ensure that foreign carriers will more easily be able to enter our market, providing price and service quality competition to U.S. carriers. Eliminating the ECO test will also significantly reduce the time and regulatory burden associated with foreign carrier entry into the U.S. market in today's regime. The market power and ECO analyses that this Commission has undertaken since the Foreign Carrier Entry Order have been fact-specific, detailed reviews of competitive conditions on particular bilateral international telecommunications routes. They require substantial commitments of time and resources by both private parties and the Commission that may no longer be necessary in the competitive environment that will exist once the WTO commitments take effect. 35. Although 69 WTO Member countries have made commitments to open their basic telecommunications markets, approximately 60 other WTO Members representing 3 percent of the total basic telecom services revenues for WTO Member countries have made no such commitments. Moreover, of the 69 countries that have made binding commitments, 17 have not committed to open their international services markets. For carriers from these countries, the WTO Basic Telecom Agreement will be less effective in preventing anticompetitive conduct. Nevertheless, a number of reasons justify eliminating the ECO test as applied to carriers from these countries as well. 36. First, petitioners will have the opportunity to rebut the presumption in favor of granting a Section 214 application filed by carrier from a WTO Member country to provide international facilities-based, resold switched, or resold non-interconnected private line services. Moreover, although some WTO countries have not, to date, made commitments to open their markets to competition from U.S. and other foreign carriers, two facts lead us to believe that the likelihood of liberalization is higher in these markets than in non-WTO countries. The GATS is part of the multilateral framework of rules for the progressive liberalization of trade. Therefore, it is reasonable to expect that WTO Members will make market access commitments for basic telecommunications services either on their own motion or as part of a subsequent trade negotiation. Further, even WTO countries that have not made specific commitments of market access for basic telecommunications services are subject to the general obligations of the GATS for example, that they grant Most Favored Nation treatment and that their domestic regulations be reasonable, objective, and impartial. As a consequence, when these WTO countries begin to liberalize their markets, they will be obliged to treat U.S. carriers no differently than they treat other foreign carriers. Although this is not a guarantee that U.S. carriers will be allowed to provide service in these countries, it does create enforceable rights when a foreign government takes actions that affect the rights of U.S. carriers. 37. The WTO dispute resolution procedure will also allow the U.S. Government to enforce these obligations as well as specific commitments made by the WTO Members. Thus, for example, if a WTO Member that has made no market access commitments unilaterally decides to liberalize its market, the GATS protects U.S. carriers from discriminatory treatment. Finally, we tentatively conclude that applying the same rules to all WTO Members would be most consistent with U.S. international trade obligations under the GATS. We believe that honoring the U.S. Government's international obligations will serve the public interest and the U.S. national interest. In addition, given that countries that account for the vast majority of international telecommunications services revenues have made good market access and regulatory commitments, the burden of continuing to apply the ECO test to dominant carriers from other WTO countries is not justified by the limited possibility that this will prevent significant anticompetitive conduct. 38. For these reasons, we tentatively conclude that we can and should rely on regulatory mechanisms instead of our existing ECO framework to address our remaining concerns regarding possible anticompetitive behavior. These mechanisms include the general requirements imposed on all U.S. international carriers pursuant to our existing rules and the revised dominant carrier safeguards described below. In addition, we have the ability to impose fines and forfeitures for violations of our rules and to impose additional conditions on the Section 214 authorizations of particular carriers where necessary to ensure compliance with our rules and policies. In extreme cases, we have authority to revoke authorizations. Enforcement of the antitrust laws is also available to remedy anticompetitive conduct or effects. Finally, we believe that the rules we have proposed in the Benchmarks proceeding would largely eliminate the ability and incentive of foreign carriers to engage in anticompetitive conduct. For example, we have proposed to condition the facilities-based switched and private line authorizations of U.S. carriers to serve affiliated markets on the affiliated foreign carrier's offering authorized U.S. international carriers a settlement rate that is within the benchmark range proposed in that proceeding. 39. In general, we believe that the WTO Basic Telecom Agreement sufficiently reduces the risk of anticompetitive effects, including anticompetitive conduct, that these post- entry safeguards will be adequate to protect competition in the U.S. telecommunications market. Nevertheless, some applications may pose a very high risk to competition. In these circumstances, we would deny an application for a Section 214 authorization even if the applicant is from a WTO Member country. We believe that foreign carrier entry that is likely to harm U.S. consumers in a substantial way, such as through increased rates or decreased service options, would justify denial of an authorization. 40. For example, it is unlikely that we would find it in the public interest to grant the Section 214 application of a foreign carrier in circumstances where the carrier would have the ability, upon entry or shortly thereafter, to raise the price of U.S. international service by restricting its output. In particular, a Section 214 applicant that is affiliated with multiple foreign carriers that control bottleneck facilities on the foreign end of major international traffic routes may be uniquely positioned to exclude competition in particular geographic and product markets. Such an entity may, by virtue of its affiliations, possess unique combined resources. These resources could consist of extensive facilities, including scarce orbital locations and spectrum, a large foreign customer base, extensive proprietary network information, and insufficient separation from, or close ties to, foreign government entities. 41. We believe that conduct warranting denial of an authorization may include adjudicated violations of U.S. antitrust law or other laws protecting competition. Similarly, a demonstration that a foreign carrier has engaged in a pattern of anticompetitive or fraudulent conduct in a foreign market may also constitute grounds for denying an application. Additional circumstances that may justify denying Section 214 (or Title III) applications include adjudicated (a) fraudulent representations to U.S. governmental units and (b) criminal misconduct involving false statements or dishonesty. 42. We also observe that the Clayton Act empowers the Commission to disapprove anticompetitive acquisitions of "common carriers engaged in wire or radio communication or radio transmission of energy." The courts have construed these statutory authorizations to mean that the Commission has discharged its statutory responsibilities "when the Commission seriously considers the antitrust consequences of a proposal and weighs those consequences with other public interest factors." 43. Other public interest factors may also justify denying an application for authorization under Section 214 or Title III of the Communications Act. In particular, as we observed in the Foreign Carrier Entry Order, national security, law enforcement, foreign policy, or trade concerns brought to our attention by the Executive branch may also require that we deny a particular application. 44. We request comment on our tentative conclusion that, when presented with international Section 214 applications of carriers from countries that are Members of the WTO to provide international facilities-based, resold switched, and resold non-interconnected private line services, it is no longer necessary to undertake an ECO analysis to achieve the public interest objectives that our current rules were intended to serve. We propose to apply this new policy to all proceedings pending before the Commission in any procedural status at the time our new rules become effective. We seek comment on the legal and policy considerations that underlie this tentative conclusion. 45. We also request comment on our tentative conclusion that we should establish a rebuttable presumption in favor of granting a Section 214 application filed by carrier from a WTO Member country to provide international facilities-based, resold switched, or resold non- interconnected private line services. We specifically request comment on our tentative conclusion that, in order to rebut the presumption in favor of granting such a Section 214 application, a petitioner would be required to show that grant of the application would pose a very high risk to competition in the U.S. telecommunications market that could not be addressed by conditions that we could impose on the authorization. We seek comment on the legal and policy considerations that underlie these tentative conclusions. 46. We also request comment on our tentative conclusion that regulatory safeguards can effectively guard against and redress the possibility of anticompetitive behavior, instead of our existing ECO analysis. Commenters should also address whether, in light of the WTO Basic Telecom Agreement, we should be concerned that the efficiencies and potential innovations generated by end-to-end operations might flow solely to a particular U.S. carrier and its foreign affiliate. 47. We also request comment on whether the pro-competitive benefits of eliminating the effective competitive opportunities test for WTO Member countries (including WTO Member countries that have made no, poor, or unfulfilled commitments towards opening their markets to effective competition) outweigh the pro-competitive benefits of retaining the test for these countries. Commenters should address whether we should examine the extent of a WTO Member's commitment or its implementation of its commitment in determining whether a particular application presents competition problems that must be addressed. b. Switched Services Provided over Facilities-Based and Resold Private Lines 48. We have applied an "equivalency" test since 1992 to applications from all carriers that seek to provide switched, basic telecommunications services using resold international private lines. The equivalency test requires that, before any U.S. carrier provides switched, basic services over resold, U.S. international private lines, the Commission must make a finding that the country at the foreign end of the private line affords U.S. carriers resale opportunities equivalent to those available under U.S. law. The Foreign Carrier Entry Order extended this test, with limited exception, to carriers using their authorized facilities-based private lines. The Foreign Carrier Entry Order also restated the equivalency test in the same manner as the ECO test. 49. We adopted the equivalency test to prevent "one-way bypass" of the accounting rate system, where private lines are used only for inbound switched traffic into the United States while outbound switched traffic from the United States remains subject to the accounting rate system. In the International Resale Order, we stated that such one-way bypass was not in the public interest because it would exacerbate the U.S. net settlements deficit and ultimately increase the burden on U.S. ratepayers through, for example, higher rates for international message telephone service (IMTS). We have also noted that there is a great potential for distortion of competition in the U.S. IMTS market when a foreign carrier collecting above-cost settlement rates is able to send its switched traffic over resold private lines into the United States, but U.S. carriers are unable to send their traffic over private lines in the reverse direction, and must continue to pay a relatively high settlement rate. This type of distortion could impede our goal of creating greater competition in the U.S. IMTS market. 50. We believe that, for purposes of WTO Member countries, the WTO agreement substantially reduces the threat of one-way bypass. U.S. carriers will have the opportunity to send U.S. outbound switched traffic over private lines to 52 countries, which represent approximately 90 percent of total telecommunications revenues of WTO Member countries. Moreover, by opening these foreign markets to competition in international services, the WTO Basic Telecom Agreement will exert considerable pressure for reform of the international accounting rate system. These competitive pressures should also lead to lower prices and greater alternatives for terminating U.S. international traffic. We have also proposed to adopt a benchmark settlement rate condition as a condition for authorizing U.S. carriers to resell private lines for the provision of switched, basic services in the Benchmarks proceeding. As discussed infra in Section III.D, we propose to modify that condition to cover U.S. facilities-based carriers' use of their authorized private lines for the provision of switched, basic services. We therefore tentatively conclude that, for the same reasons articulated above for other international services, it is no longer necessary, or desirable from an administrative standpoint, to continue to apply the equivalency test to pending or future Section 214 applications to provide switched, basic services over private lines between the United States and WTO Member countries. 51. We nonetheless remain concerned about the potential for one-way bypass in the U.S. IMTS market for those WTO countries that have made no or poor quality commitments to open their markets to international services competition and for those WTO countries that do not implement their commitments in a timely manner. We believe, however, that this concern can be addressed by less burdensome regulatory mechanisms than our ECO test. These mechanisms would consist of the post-entry safeguards discussed in Section III.D infra, including, in particular, the proposed benchmark settlement rate conditions. 52. We request comment on our tentative conclusion that, with the WTO Basic Telecom Agreement and our proposed benchmark settlement rate conditions, it is no longer necessary or desirable to use the equivalency test as the standard for permitting the use of private lines between the United States and WTO Member countries for the provision of switched services. Commenters should address specifically whether the proposed benchmark settlement rate conditions are sufficient to address our concerns that one-way bypass of the accounting rate system could create market distortions in the U.S. IMTS market and inflate the U.S. net settlements deficit. Commenters that believe these proposed conditions are not sufficient should address whether other measures can be implemented to eliminate these concerns. Commenters should also address whether we should examine the extent of a WTO Member's commitment or its implementation of its commitment in determining whether a particular application presents competition problems that must be addressed. 2. Non-WTO Member Countries 53. We next consider whether it remains necessary to conduct an effective competitive opportunities analysis to achieve the public interest goals that our rules were intended to achieve for purposes of Section 214 applications to provide facilities-based, resold switched, and resold non-interconnected private line services filed by carriers from countries that are not WTO Members. None of these countries has made commitments under the GATS to open its international services market to effective competition or to enforce rules of fair competition for telecommunications services. We have no evidence before us that would suggest that these countries have taken any significant steps to open their international services markets to effective competition. 54. We therefore conclude that we have not fully achieved the goals of the Foreign Carrier Entry Order because, as far as non-WTO countries are concerned, we have made little if any progress toward promoting competition on bilateral routes nor have we succeeded in encouraging the opening of these markets. Moreover, the same potential for anticompetitive conduct continues to exist in the provision of international facilities-based, resold switched, and resold non-interconnected private line services between the United States and non-WTO countries after the WTO Basic Telecom Agreement as before. Further, unlike the WTO Member countries that have not made specific commitments of market access for basic telecommunications services, non-WTO Member countries are not subject to the general obligations of the GATS. Therefore, to the extent the non-WTO Member countries liberalize their markets, they are not obliged under the GATS to refrain from discriminating against U.S. carriers. Also, U.S. carriers have no enforceable rights under the GATS and the U.S. government has no resort to the WTO resolution procedure in the event non-WTO countries engage in discriminatory conduct. 55. We tentatively conclude that, for purposes of Section 214 applications to provide facilities-based, resold switched, and resold non-interconnected private line services filed by carriers that are not from WTO Member countries, it remains necessary to conduct an effective competitive opportunities analysis to achieve the public interest goals that our rules were intended to achieve. We seek comment on this tentative conclusion. 56. Commenters on this issue should discuss whether we should modify our ECO test for non-WTO countries. We note that a petition for reconsideration of the Foreign Carrier Entry Order requests that the Commission modify application of the ECO analysis. 57. We also request comment on whether, for purposes of countries that are not WTO Members, we should modify our effective competitive opportunities test to include U.S. carriers that own a greater than 25 percent interest in, or control, a foreign carrier from a non-WTO country. We note that, in a petition for reconsideration of the Foreign Carrier Entry Order, Telefonica Larga Distancia de Puerto Rico (TLD) asserts that the Commission's decision not to apply the effective competitive opportunities test to U.S. carriers that own a greater than 25 percent interest in, or control, a foreign carrier violates the Due Process and Equal Protection Clauses of the Constitution. TLD also argues that the Commission's assertion that it lacks similar jurisdiction over foreign carriers that own or control U.S. carriers as compared to U.S. carriers that own or control foreign carriers is incorrect and does not support its discriminatory application of the ECO test. 58. We must also consider whether, for purposes of Section 214 applications to provide switched, basic services over private lines between the United States and countries that are not WTO Members, the equivalency test continues to serve a necessary role in achieving our public interest goals. For these countries, we continue to have the same concerns regarding one- way bypass of the accounting rate system that prompted adoption of the equivalency test. There is no evidence before us that would suggest that these countries allow or have made commitments to allow U.S. carriers opportunities to provide international switched, basic services over private lines equivalent to those available under U.S. law. Further, to the extent the non-WTO Member countries liberalize their markets to allow equivalent opportunities to provide switched services over private lines, they are not obliged under the GATS to refrain from discriminating against U.S. carriers. U.S. carriers have no enforceable rights under the GATS and the U.S. government has no recourse to the WTO resolution process in the event non-WTO countries engage in discriminatory conduct. 59. Liberalization of the international services markets of WTO Member countries may increase pressure on non-WTO Member countries to reform their basic telecom markets and their accounting rates. We are not confident, however, that reform will come quickly or broadly enough to outweigh the need at this time to maintain our equivalency standard. We therefore tentatively conclude that this standard continues to be necessary to protect U.S. consumers against increases in net settlement payments by U.S. carriers and to prevent anticompetitive distortions in the IMTS market created by one-way bypass of the settlements process by carriers from non-WTO Member countries. We seek comment on this tentative conclusion. B. Standard for Foreign Ownership under the Cable Landing License Act 60. The Cable Landing License Act allows us to deny an application for a cable landing license if to do so would "assist in securing rights for the landing or operation of cables in foreign countries, or in maintaining the rights or interests of the United States or of its citizens in foreign countries, or will promote the security of the United States." We may also impose such terms on a license "as shall be necessary to assure just and reasonable rates and service in the operation and use of cables so licensed." We did not address the exercise of this jurisdiction in the Foreign Carrier Entry Order. 61. In Telefonica Larga Distancia de Puerto Rico, Inc. (TLD), we for the first time denied a cable landing license by explicitly applying an ECO analysis as part of the discretion given to us under the Cable Landing License Act. As we stated in that order, similar to Section 214 applications, one of the purposes of the Cable Landing License Act is to encourage foreign governments to allow U.S. companies to have ownership and operation rights in cables landing on their shores. Thus, we said, we have in essence applied an ECO-type analysis to applications for cable landing licenses historically on a case-by-case basis. 1. WTO Member Countries 62. We now tentatively conclude that, in light of the WTO Basic Telecom Agreement, we need not apply an ECO test or any reciprocity criteria as part of our inquiry under Section 2 of the Cable Landing License Act for pending or future applications for cables between the United States and WTO Member countries. As in the context of Section 214 applications, we find that our concerns with respect to opening foreign markets and eliminating the opportunity for anticompetitive conduct have largely been satisfied. None of the 68 other countries that made commitments has reserved the right to deny cable landing licenses on the basis of reciprocity. We therefore anticipate that those countries will allow U.S. companies to land cables in their countries, greatly reducing our need to exercise our authority to deny an application on the grounds that denial would "assist in securing rights for the landing or operation of cables in foreign countries." Because 52 countries have committed to granting market access for international services, we tentatively conclude that, as in the Section 214 context, we do not have the same anticompetitive concerns that caused us to examine ECO criteria. In this new competitive environment, we believe the benefits of applying an ECO test are outweighed by the administrative burden on the Commission and by the burden on potential applicants. Instead, we expect to grant most applications for cable landing licenses unless the State Department disapproves or there is some other compelling public interest reason, consistent with our discretion under the Cable Landing License Act, for doing so. 63. Although we expect that cable landing licenses will routinely be granted for submarine cables between the United States and other WTO Member countries, we seek comment on whether there might be some circumstances in which grant of a cable landing license would pose such a high risk to competition that we should exercise our discretion to deny an application for a cable landing license. Commenters should also address whether we should examine the extent of a WTO Member's commitment or its implementation of its commitment in determining whether a particular application presents competition problems that must be addressed. 64. As required by Executive Order 10530, we will continue to seek advice from the Executive Branch and, in particular, the approval of the State Department for every application for a cable landing license. We seek comment from the Executive Branch and other interested parties regarding what conditions should be placed on cable landing licenses subsequent to the effective date of the WTO Basic Telecom Agreement. For example, should ownership restrictions be imposed on the U.S. cable landing station? We will defer to the State Department's authority if it advises us that it will condition its approval of cable landing licenses on the imposition of certain conditions. 2. Non-WTO Member Countries 65. For countries that are not Members of the WTO, we tentatively conclude that we should continue our policy of applying an ECO test as part of our inquiry under Section 2 of the Cable Landing License Act. That provision gives us discretion to deny any application if to do so would assist in securing rights to land cables in other countries; we believe we should exercise that discretion in circumstances where a carrier that has market power in a non-WTO Member country seeks to land and operate a cable between that country and the United States. As noted in Section III.A.2, supra, there are no changed circumstances with respect to non-WTO Member countries that would justify not imposing an ECO analysis under the reciprocity provision of the Cable Landing License Act. We find that granting a cable landing license to applicants from non-WTO Member countries may raise a risk of anticompetitive conduct similar to the harms we addressed in the Foreign Carrier Entry Order with respect to Section 214 authorizations. 66. We also find that use of our discretion to deny a license for a cable between the United States and a non-WTO Member country where a dominant foreign carrier seeks to operate both ends of the cable can further our statutory objective to secure landing rights for U.S. companies. Thus, when considering an application to land a cable that will connect to a non- WTO Member country, we would consider whether the applicant is affiliated with a carrier that is dominant in the destination market of the cable, and if so, we would consider whether that destination market offers effective opportunities for U.S. companies to land a cable on its shores. We would also continue to consider, in addition to the de jure and de facto ECO criteria, other factors consistent with our discretion under the Cable Landing License Act that may weigh in favor of or against grant of a license. C. Section 310 Standard for Foreign Ownership of Radio Licenses 67. Section 310(b)(4) of the Communications Act allows the Commission to deny or revoke a common carrier, broadcast, or aeronautical radio license if more than 25 percent of the applicant or licensee is indirectly foreign owned and we find that denial or revocation would serve the public interest. Under the plain language of Section 310(b)(4), the Commission has the authority to allow indirect foreign ownership to exceed 25 percent, up to and including 100 percent. In the Foreign Carrier Entry Order, we adopted an ECO test as part of our public interest analysis under Section 310(b)(4) for common carrier licenses. We found that opening the U.S. market to foreign investment to the extent foreign countries do so in their markets would best serve our goals of promoting competition, preventing anticompetitive conduct, and opening foreign markets. 68. We now propose to eliminate the ECO test as part of our Section 310(b)(4) public interest analysis for common carrier radio licensees or applicants with foreign investment from WTO Member countries. We tentatively conclude that the ECO test is no longer a necessary or desirable means of achieving our goals for the U.S. telecommunications market in light of the new global competitive conditions created by the WTO Basic Telecom Agreement. We stress that, as with all licensing decisions, our decision whether to grant a license to a carrier with foreign investment must continue to be based on a finding that grant of the license would serve the public interest. We thus retain the authority to deny an application based on a finding that a grant would not serve the public interest or to condition the license to address specific concerns. 69. We propose not to change our approach to Section 310(b)(4) common carrier applications with respect to applicants with investors from non-WTO Member countries. We tentatively conclude that our goals will continue to be served by application of the ECO test as part of our public interest analysis for those markets. As we noted in Section III.A.2, supra, these goals have not yet been achieved with respect to non-WTO Member countries. 70. We also propose not to change the ad hoc approach that we reaffirmed in the Foreign Carrier Entry Order for aeronautical licenses. There, we concluded that we would not apply the ECO test to applications for aeronautical licenses. We stated that aeronautical services play a key role in aviation safety and national security and that we had not had sufficient historical guidance in this context to establish a general rule. We tentatively conclude that experience has shown that an ad hoc approach is appropriate for these licenses, and we see no reason to change our case-by-case approach now. We seek comment on this tentative conclusion. 71. Finally, we do not propose to amend our rules for broadcast licenses, which are not covered by the WTO Basic Telecom Agreement. In the Foreign Carrier Entry Order, we did not adopt an ECO analysis for broadcast licenses because we found that they present different issues than common carrier licenses. We do not propose to disturb that finding here. 1. WTO Member Countries 72. In the Foreign Carrier Entry Order, we adopted a separate ECO test as part of our public interest analysis of applications under Section 310(b)(4) for common carrier licenses. Under this test, we first determine the applicant's "home market(s)" by using a "principal place of business" approach. Next, we look at the particular wireless service in which the foreign investor seeks to participate in the U.S. market and determine whether the applicant's home market (or markets) offers effective competitive opportunities for U.S. investors in that service. Our analysis of the home market's effective competitive opportunities focuses first on the de jurerestrictions imposed by the foreign government and also considers de facto limitations on U.S. participation in the foreign market. We also decided that, if a foreign market allowed U.S. investors to hold only a less-than-controlling interest in providers of the relevant service, then we would allow an applicant with investment from that country to exceed the 25 percent benchmark only up to the level of ownership permitted to U.S. investors. 73. We tentatively conclude that we can now further open the U.S. market to competition by eliminating this ECO test for pending as well as future applications as part of our public interest analysis under Section 310(b)(4). We believe that the WTO Basic Telecom Agreement substantially achieves our goal of opening foreign markets, particularly for common carrier wireless services. Twenty-seven other countries, including virtually all of the world's major markets, have agreed to open their markets to 100 percent foreign investment in wireless services as of January 1, 1998, and 17 others will phase in full openness beginning in 1999. Others will permit lesser degrees of foreign ownership. We also note that 65 of these countries have committed to enforce fair rules of competition. In this new environment, we believe that facilitating foreign investment in U.S. wireless markets will significantly enhance competition in these markets. Moreover, we see little concern with anticompetitive conduct as a result of foreign investment in these markets, which, for the most part, consist of wholly domestic services. They therefore do not implicate the same kinds of anticompetitive dangers as in the international Section 214 context. Finally, we believe that eliminating the ECO test will speed foreign investment into U.S. wireless markets and relieve applicants and this Commission of unnecessary regulatory burdens. 74. We therefore propose to eliminate the ECO test as a component of the Section 310(b)(4) public interest analysis for common carrier applicants with investment by entities from WTO countries. Instead, we propose to simplify our review of such foreign investment. If an applicant's foreign investor has its home market in a WTO Member country, there would be a strong presumption that denial of the application would not serve the public interest. We would, of course, continue to consider public interest factors in determining whether to grant or deny a common carrier application under Section 310(b)(4), including any national security, law enforcement, foreign policy, or trade concerns brought to our attention by the Executive Branch. We propose to apply this new policy to all proceedings pending before the Commission in any procedural status at the time our new rules become effective. 75. We do not anticipate that we would easily be persuaded that the public interest would be served by denying a license based on Section 310(b)(4) concerns, absent serious concerns raised by the Executive Branch. Nevertheless, some applications may pose a very high risk to competition. In these circumstances, we would deny an application even if the applicant's foreign investment is from a WTO Member country. A party petitioning to deny an application would have to show that grant of the application would pose a very high risk to competition in the U.S. telecommunications market that could not be addressed by conditions that we could impose on the license. We request comment on this tentative conclusion and ask whether other specific criteria may be relevant under Section 310(b)(4). In particular, we ask whether we need to review an increase in foreign ownership by a licensee that already has more than 25 percent foreign ownership. It is clear that we will need to review applications that involve a transfer of control of a licensee, but we solicit comment here on whether we need to review additional investments that do not effect a transfer of control. Commenters should also address whether we should examine the extent of a WTO Member's commitment or its implementation of its commitment in determining whether a particular application presents competition problems that must be addressed. 76. We tentatively conclude that we will continue to determine a foreign investor's home market by applying the "principal place of business" test that we set out in the Foreign Carrier Entry Order. We note that under the GATS, a corporation formed under the laws of a Member and doing substantive business in the territory of that or another Member is a "service supplier" of a WTO Member. Thus, a "service supplier" of one country could, in some instances, have its "principal place of business" in another country. It has been our experience that equating a foreign entity's home market to its principal place of business has been a workable definition that has reliably determined the market with which it is fairest to associate the foreign entity. We accordingly tentatively conclude that we should retain this approach. We nevertheless request comment on whether this GATS concept should affect our analysis of a foreign investor's home market. 2. Non-WTO Member Countries 77. If a common carrier applicant is unable to show that its foreign investor is from a WTO Member country, we propose to retain the existing ECO test as a component of our public interest analysis under Section 310(b)(4). We would continue to examine whether the foreign investor's principal place of business offers effective competitive opportunities to U.S. investors in the particular service sector in which the applicant seeks to compete in the U.S. market. We tentatively find that our goals of increasing competition and opening foreign markets would continue to be served by opening the U.S. market to foreign investors only to the extent that the foreign investors' home markets are open to U.S. investors. We continue to believe that the incentive of being allowed to participate in the U.S. market will encourage the governments of non-WTO Member countries to lift de jure and de facto barriers to U.S. investment. We seek comment on these tentative conclusions and on ways that the existing ECO test might be revised to be less administratively burdensome. D. Regulatory Issues 78. We believe it is appropriate to revisit in this proceeding the regulatory safeguards that we apply to U.S. carriers in their provision of U.S. international common carrier services. We have attempted in recent proceedings to focus our regulatory safeguards on our primary goal of promoting effective competition and on the necessary corollary of preventing anticompetitive conduct in the provision of U.S. international services and facilities. We are particularly concerned that our regulations be effective but no more burdensome than necessary to prevent such conduct. Our intention in this proceeding is to ensure that each of the regulations we impose on U.S. international carriers serves a necessary function that is not duplicated by some other regulation or statute. 79. Our review of our regulatory safeguards is also prompted by the GATS obligation, under Article VI, that Member countries' domestic regulation be administered in a reasonable, objective and impartial manner. The GATS also requires that any regulatory safeguards that we impose on carriers from WTO Member countries are consistent with our commitments under the WTO Basic Telecom Agreement, including our MFN and National Treatment obligations. Moreover, the safeguards that we propose in this Notice serve to fulfill the U.S. obligations, negotiated as part of the WTO Basic Telecom Agreement, to maintain measures to prevent anticompetitive conduct. The Reference Paper on Pro-Competitive Regulatory Principles not only allows, but requires, countries to maintain appropriate measures to prevent anticompetitive practices in the basic telecommunications market. We believe that the rules that we propose in this section not only will be effective in fulfilling these regulatory commitments made by the U.S. Government but will be consistent with other relevant provisions of the GATS in that they are a reasonable, objective, and impartial means of attaining legitimate public interest goals. 80. We conclude above that opening our markets to carriers from WTO countries is in the public interest. We believe, however, that even in this new competitive environment, we must maintain safeguards against the potential for a foreign-affiliated U.S. carrier to leverage the market power of its foreign carrier affiliate to the detriment of unaffiliated U.S. carriers. We also believe that foreign carriers that have market power in a destination country and that are not subject to competition in that country have a heightened ability to discriminate in favor of their U.S. affiliate. Lacking competitive choices, unaffiliated carriers would be forced to use termination facilities provided by the foreign incumbent, who could use such monopoly control to discriminate in favor of its affiliate. Monopoly control could extend over a variety of network elements essential to the termination of international service, such as international half-circuits, cable head-ends, and digital access cross-connection switches. Foreign monopolists would also have an unfair advantage in providing service to customers who have a presence in both the U.S. and foreign markets and who wish to be served by the same international carrier on both ends. Such customers would have no option but to rely on the foreign monopolist for service. Our concern extends beyond the potential for harm caused to unaffiliated carriers. Premiums extracted through monopoly control could ultimately result in higher rates to U.S. consumers. 81. We therefore tentatively conclude that we should strengthen our rules aimed at detecting and deterring anticompetitive conduct by foreign carriers with market power, particularly carriers that do not face international facilities-based competition on the foreign end of a U.S. international route. This approach allows the Commission to maintain oversight while limiting the regulatory burden imposed generally on foreign-affiliated carriers. Finally, in order to deter anticompetitive conduct further, we make clear here our intention to impose specific and significant sanctions on foreign-affiliated carriers that engage in anticompetitive conduct in the U.S. market. This approach is consistent with the approach taken under the Telecommunications Act of 1996, which allows Bell Operating Companies to enter the domestic and international long distance marketplace, but places significant competitive safeguards on such entry. 1. Modification of Dominant Carrier and Other Operating Safeguards 82. Our international regulations traditionally have distinguished between "dominant" and "non-dominant" carriers. We have classified carriers operating in the U.S. market, whether U.S.- or foreign-owned, as dominant in their provision of U.S. international services on particular routes in two circumstances: (1) where we have determined that a U.S. carrier can exercise market power on the U.S. end of a particular route and (2) where we have determined that a foreign carrier affiliate of the U.S. carrier has market power on the foreign end of a particular route that can adversely affect competition in the U.S. international services market (e.g., a carrier has the ability to act anticompetitively against unaffiliated U.S. carriers through the control of services or facilities on the foreign end that are essential to terminate U.S. international traffic). Carriers regulated as dominant on a particular route due to an affiliation with a carrier on the foreign end of the route are subject to specific safeguards set forth in our rules. These safeguards are to a great extent different from the safeguards the Commission traditionally has imposed on U.S. carriers regulated as dominant due to market power of the U.S. carrier on the U.S. end of a route. Our focus in this proceeding is the safeguards that we impose due to a U.S. carrier's affiliation with a carrier that has market power on the foreign end of a U.S. international route. 83. We tentatively conclude that the general requirements imposed on all U.S. international carriers by our rules should permit us to scale back some of our current basic dominant carrier safeguards without compromising in any meaningful way our ability to monitor and prevent anticompetitive conduct. Reducing these unnecessary regulations will have the beneficial effect of lowering carrier costs. They will also help minimize tacit coordination of prices and facilitate carriers' ability to make rapid, efficient responses to changes in demand and cost. We also anticipate that reduced regulatory burdens will have a beneficial impact on consumers by allowing carriers to respond more rapidly to competitive pressures to lower prices and improve the quality of service. 84. We also recognize, however, that foreign carriers with market power that are not subject to competition in their markets have the incentive and a heightened ability to discriminate in favor of a U.S. affiliate, a practice that could result in higher rates and less innovative, lower quality service than is available under competitive conditions. We therefore propose to adopt dominant carrier safeguards that would apply to foreign-affiliated carriers depending on the risk of competitive harm the carrier poses. The basic safeguards would apply to all U.S. carriers that are regulated as dominant on a particular route due to an affiliation with a carrier with market power in the destination country. A carrier that is affiliated with a foreign carrier that has market power but that faces competition from multiple international facilities-based carriers in the foreign destination country would be subject to these basic safeguards only. A carrier that is affiliated with a foreign carrier that has market power and does not face competition from multiple international facilities-based carriers in the foreign destination country would also be subject to supplemental safeguards. This approach allows the Commission to maintain maximum oversight where competitive risks are substantial while limiting the regulatory burden imposed generally on foreign-affiliated carriers. 85. We believe that this approach is a significant advance from the regime imposed by the Foreign Carrier Entry Order. This approach, together with the other safeguards discussed below, would allow entry by all carriers from WTO countries, but would prevent foreign carriers with market power from leveraging that market power into the U.S. market. We seek comment on this tentative conclusion. 86. We also tentatively conclude that we should continue our current regulatory treatment of non-equity business arrangements between U.S. and foreign carriers. We stated in the Foreign Carrier Entry Order that we would impose dominant carrier regulation on a U.S. carrier for its provision of international basic service on particular routes where a co-marketing or other arrangement with a foreign carrier that has market power presents a substantial risk of anticompetitive effects in the U.S. international services market. We continue to believe that circumstances may arise where a non-equity business relationship between a U.S. carrier and a foreign carrier with market power creates a risk of anticompetitive conduct that warrants increased Commission oversight. We therefore propose that, where we do find a substantial risk of anticompetitive effects from a particular co-marketing or other non-equity arrangement, we will impose the basic and, where applicable, the supplemental dominant carrier safeguards on the participating U.S. carrier. We request comment on this proposal, including whether additional safeguards are necessary for these joint venture arrangements. 87. Finally, we propose that, in determining whether to classify a foreign-affiliated U.S. carrier as dominant with respect to an affiliated destination market, we should generally not consider the effectiveness of foreign regulation in the destination market as a relevant factor. Currently, our rules permit carriers to argue that effective regulation in the foreign market weighs in favor of non-dominant treatment. Our experience has been that analyzing the effectiveness of regulation in a foreign market imposes significant burdens on the Commission and on applicants and delays foreign carrier entry. Rather, we believe it would be faster and fairer to apply dominant carrier regulation to all foreign-affiliated carriers on routes where their affiliates have market power, regardless of the foreign country's regulatory regime. We believe that improved safeguards should cause no additional undue burdens on the affiliated U.S. carrier where a foreign country has adopted effective competition safeguards. We seek comment on this proposal. a. Purpose of Dominant Carrier Regulation 88. As the Commission has previously observed, there are two ways in which a carrier can exercise its market power to profitably raise and sustain prices above competitive levels. First, a carrier may be able to raise prices by restricting its own output (which usually requires a large market share); second, a carrier may be able to raise prices (or prevent prices from falling to a lower competitive level) by increasing its rivals' costs and thereby causing its rivals to restrict their output through the carrier's control of an essential input, such as access to bottleneck facilities, that its rivals need to offer their services. We believe that foreign affiliations primarily present concerns falling into this second category. 89. We tentatively conclude that we should target our dominant carrier safeguards at issue in this proceeding to address the ability of a carrier that has market power on the foreign end of a U.S. international route to increase the costs of unaffiliated U.S. carriers through its control of services or facilities used to terminate U.S. international traffic. A foreign carrier with bottleneck control over essential foreign facilities has the incentive and ability to restrict the supply of facilities and services needed to terminate U.S. traffic and to discriminate in favor of its U.S. affiliate in providing such facilities and services. As a new entrant in competition with incumbent U.S. international carriers, it is less likely, however, that a foreign carrier will possess sufficient market share needed to raise its U.S. international service prices by restricting output. Further, given the framework we propose to adopt in this proceeding to govern entry by foreign carriers with market power, it is unlikely that we would find it in the public interest to grant the Section 214 application of a foreign carrier in circumstances where such a carrier would have the ability, upon entry or shortly thereafter, to raise the price of U.S. international service by restricting its output. Thus, our analysis below focuses on retaining or modifying our safeguards only to the extent necessary to prevent a carrier from exercising its foreign market power by raising the costs of unaffiliated U.S. international carriers through control of bottleneck facilities. 90. Our primary concerns with anticompetitive conduct by a foreign carrier that has market power include: (1) routing calls to the U.S. affiliate in proportions greater than those justified under our proportionate return policy; (2) otherwise inappropriately manipulating the calculations and settlements payments to favor the U.S. affiliate wrongfully; (3) routing low-cost proportionate return traffic to the U.S. affiliate, and leaving the rest to its competitor; (4) providing the U.S. affiliate better provisioning and maintenance intervals and better quality of service for essential facilities in the destination country, including the foreign circuit and termination facilities for private network services; (5) undercharging the U.S. affiliate and/or overcharging its competitors for use of the same essential facilities in the destination country; (6) revealing to the U.S. affiliate the confidential information that the foreign carrier receives from the U.S. affiliate's competitors; (7) giving the U.S. affiliate advance notice of network changes and other information that the U.S. affiliate and its competitors will need to know; (8) refusing to implement a new service or capability in correspondence with an unaffiliated U.S. carrier until the U.S. affiliate is able to provide the service or capability; or (9) either as an agent or through an affiliated third party, selling the services of the U.S. affiliate in ways that use the foreign carrier's home market power. 91. We discuss below proposed modifications to our dominant carrier safeguards to strengthen our ability to detect and deter these forms of anticompetitive conduct. We also discuss below proposed revisions to our no special concessions prohibition, which currently prohibits all U.S. carriers from agreeing to accept special concessions from any foreign carrier or administration. Finally, we also reiterate the benchmark settlement rate proposals raised in the Benchmarks Notice and discuss possible remedies where anticompetitive conduct has occurred. b. Basic Dominant Carrier Safeguards i. Tariffing Requirements 92. Currently, we require carriers regulated as dominant due to a foreign carrier affiliation to file their international service tariffs on no less than 14 days' notice. The international service tariffs filed by these dominant carriers are not presumed lawful. We believe that these dominant carrier tariffing safeguards are generally designed to prevent a carrier from raising prices by restricting its own output rather than to prevent a carrier from raising prices by raising its rivals' costs. These tariffing safeguards are not well-suited to prevent the competitive risks generally associated with a U.S. carrier operating in correspondence with an affiliated foreign carrier that has market power in a destination country. 93. We also believe that applying the current dominant carrier tariffing safeguards to a U.S. carrier that does not have the ability to raise prices for international services by restricting its own output can dampen competition. The advance notice period and "no presumption of lawfulness" can facilitate the tacit coordination of prices and impede a carrier's ability to innovate and efficiently respond to changes in demand and cost. Moreover, we believe that our dominant carrier tariffing requirements can impose significant administrative burdens on the Commission and carriers, particularly to the extent they encourage competitors to challenge a carrier's rates in order to impede the carrier's ability to compete. We also believe that a shortened notice period, when coupled with a presumption of lawfulness, will provide carriers with additional flexibility to respond to customer demand. 94. We tentatively conclude that the burdens imposed on competition, the regulated firms, and the Commission by the current tariffing requirements we apply to dominant foreign- affiliated carriers (the 14-day advance notice period and the no presumption of lawfulness) outweigh any benefits of such regulation. We thus tentatively conclude that we should allow dominant, foreign-affiliated U.S. carriers to file their international service tariffs on one day's notice and that we should accord such tariff filings a presumption of lawfulness. We request comment on these tentative conclusions. We also request comment on whether we should maintain the longer notice period as a tool to detect predatory price squeezes. ii. Addition or Discontinuation of Circuits 95. In the Foreign Carrier Entry Order, we retained our requirement that carriers regulated as dominant because of a relationship with a foreign carrier obtain Section 214 approval before adding or discontinuing circuits on those routes for which the carrier is regulated as dominant. We explained that prior authorization enables us to monitor the addition of circuits on affiliated routes and detect deviations from expected traffic flows, including the flow of return traffic. We found that it was necessary to retain the requirement to remedy promptly any abuses of foreign market power in the provision of U.S. international services. 96. We do not believe that the value of prior approval as a tool to detect and remedy potential anticompetitive conduct justifies the burden it imposes on carriers regulated as dominant in their provision of service to countries that have eliminated legal barriers to international facilities-based competition and licensed multiple international facilities-based competitors to compete with the incumbent carrier. Foreign market conditions in these circumstances will provide some protection against discrimination by the foreign carrier against unaffiliated U.S. carriers. We believe that we can rely on other less burdensome mechanisms to monitor an affiliated carrier's circuit growth on the affiliated route. These mechanisms include quarterly traffic and revenue reports, discussed below, and our annual circuit status and addition reports. We also propose to require as a basic dominant carrier safeguard that the carrier notify the Commission of the addition of circuits on the dominant route, specifying the joint owner of the circuit. We request comment on our proposal not to include as a basic dominant carrier safeguard prior approval to add or discontinue circuits but to instead require quarterly notification of circuit additions. We also request comment whether we should require that the quarterly notification of circuit additions specify the particular facilities on which each circuit is added. 97. Finally, we note that certain carriers regulated as dominant on particular routes due to a foreign carrier affiliation obtained their Section 214 authorization prior to adoption of the ECO test in the Foreign Carrier Entry Order. As Cable & Wireless, Inc., has noted in its petition for reconsideration of that order, the ECO test applies to applications from these dominant carriers when they seek to add circuits on their authorized dominant routes. By eliminating the prior certification requirement as a basic dominant carrier safeguard, a foreign carrier that obtained authority to serve a non-WTO Member country prior to adoption of the ECO test would be permitted to add circuits to non-WTO Member countries that have eliminated legal barriers to entry and licensed multiple new international facilities-based competitors, unless we otherwise prohibited these circuit additions by rule. We request comment on whether such a rule is necessary to achieve the goals in this proceeding. iii. Quarterly Traffic and Revenue Reports 98. In the Foreign Carrier Entry Order, we decided to retain our requirement that carriers regulated as dominant because of a relationship with a foreign carrier file quarterly traffic and revenue reports. We held that maintaining the quarterly traffic and revenue report requirement was "necessary to limit the potential for anticompetitive conduct." We continue to believe that quarterly traffic and revenue reports help enable us to detect and deter anticompetitive conduct. In particular, they assist us in detecting deviations from expected traffic flows for example, in the flow of return traffic from an affiliated country. 99. Commenters addressing our tentative conclusion to maintain our quarterly traffic and revenue reports should address whether, if we retain these reports, we should change them to make them more effective in identifying anticompetitive conduct by providing greater specificity regarding the type of information to be reported. 100. We believe that, if we revise our approach to authorizing foreign carriers with market power to participate in the U.S. international services market as proposed in this Notice, we must strengthen our ability to detect and deter anticompetitive conduct. We therefore request comment on whether other measures would be useful to strengthen the reporting requirements proposed as basic safeguards for dominant foreign-affiliated carriers. Alternatively, we request comment whether our annual filing requirements under Section 43.61 of the rules and the reporting requirements established in our equivalency decisions and our recent Flexibility Order provide sufficient information to identify anticompetitive conduct. We also request carriers to address whether they have their own internally compiled information that better aides them in detecting anticompetitive conduct by their competitors. 101. We further request comment on whether there should be presumptions about what constitutes evidence of distortions in competition based on traffic flow. Commenters should address whether there are thresholds that would allow for a normal variation in traffic but that would in themselves be a basis for invoking additional safeguards. iv. Provisioning and Maintenance Records 102. In the Foreign Carrier Entry Order, we required that a dominant, foreign- affiliated carrier maintain complete records of the provisioning and maintenance of basic network facilities and services it procures from its foreign carrier affiliate. We required that this information be available to the Commission upon request. We found that this recordkeeping requirement would constitute a minor burden and that such information would be useful in guarding against improper discrimination. 103. We propose to retain the requirement that foreign-affiliated dominant carriers maintain records on the provisioning and maintenance of basic network facilities and services procured from the foreign carrier affiliate. We tentatively conclude that the potential for undue discrimination in the provisioning and maintenance of foreign facilities and services by a foreign carrier with market power in favor of an affiliated U.S. carrier presents a substantial risk to competition in the U.S. international services market and that this risk justifies maintaining this recordkeeping requirement. We believe this requirement serves as a valuable deterrent to discriminatory behavior and can serve as evidence of such behavior in the event we find it necessary to undertake an investigation and possible enforcement action. We request comment on this tentative conclusion. Commenters on this issue should discuss whether the provisioning and maintenance recordkeeping requirement is sufficient and necessary to prevent discrimination in favor of an affiliated U.S. carrier by a foreign carrier with market power. We also request commenters on this issue to address whether we should specify a particular form and content for provisioning and maintenance records. c. Supplemental Dominant Carrier Safeguards 104. Although we propose above to remove portions of our existing dominant carrier regulation, we believe that significant concerns continue to exist for carriers affiliated with foreign carriers that do not face international facilities-based competition in the destination market. We therefore propose to impose supplemental dominant carrier regulation on U.S. carriers whose foreign affiliates have market power in destination countries and do not face facilities-based competition for international services in these destination countries. These safeguards would generally apply in addition to our proposed basic dominant carrier safeguards. Where a foreign carrier with market power in a destination country can demonstrate that the country has eliminated legal barriers to international facilities-based competition and has authorized multiple international facilities-based competitors to compete with the incumbent carrier, we would presume that supplemental dominant carrier regulation is not necessary. Where a foreign carrier cannot make this showing, we would presume that sufficient competition does not exist to help protect against discrimination in favor of the foreign carrier's U.S. affiliate and would impose supplemental dominant carrier regulation as discussed below. We seek comment on these tentative conclusions. We also seek comment on whether a different standard than the presence of multiple international facilities-based competitors is an appropriate measure of competition in the foreign market. 105. We propose to prohibit a U.S. carrier that is subject to supplemental dominant carrier regulation from entering into an exclusive arrangement 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 (including names and addresses). Where the carrier authorized to enter the U.S. market is itself a foreign carrier with market power, we would similarly prohibit that carrier from marketing U.S. and foreign services jointly, steering foreign market customers to its U.S. operations, and using foreign market telephone customer information unless these arrangements were made available on a nondiscriminatory basis to other U.S. carriers. We request comment on this approach, including whether these exclusive arrangements should instead be treated as special concessions under Section 63.14 of the rules. Our concern with adopting a blanket prohibition of these arrangements is that it may unnecessarily limit potential U.S. consumer benefits, such as one- stop shopping. 106. We also specifically request comment whether a U.S. carrier's use of foreign market telephone customer information is subject to the provisions of Section 222 of the Act and should be subject to any rules the Commission may adopt to implement this provision of the Act. We note that Section 222 of the Act applies to all carriers, not just carriers that would be subject to the supplemental safeguards. 107. We further believe that, where a foreign carrier with market power does not face international facilities-based competition in the destination country, it is critical that we enhance our monitoring of the carrier's traffic and circuit growth for that country and have the ability to remedy promptly any anticompetitive conduct. We therefore propose that foreign carriers subject to supplemental dominant carrier regulation on an affiliated route be required to obtain prior approval to add circuits on that route. We also propose to require these carriers to file quarterly circuit status reports for their facilities-based circuits and resold private line circuits and to make these reports publicly available in order to facilitate detection of improper routing of traffic. We believe that both of these requirements would allow for more timely oversight of the level of traffic carried by the foreign carrier on the affiliated route and would enhance our ability to remedy more promptly any anticompetitive conduct in the routing of U.S. international traffic. We seek comment on these tentative conclusions. We also request comment whether, if we adopt a quarterly circuit status reporting requirement, it is necessary to require carriers to specify the particular facility on which each of their circuits on the dominant route is either active or idle. 108. We also propose to require that carriers subject to supplemental dominant carrier regulation make available an electronic summary of contracts filed under Section 43.51 and to identify in the summary particular provisions in other agreements that the new agreement supersedes. We believe that this requirement would facilitate the ability of the Commission and other carriers to more easily become aware of the subject matter of a given contract and the extent to which a newly concluded agreement supersedes existing agreements. We tentatively conclude that such carriers should file an electronic summary (on a 3«-inch diskette, formatted in IBM-compatible form, using WordPerfect 5.1 software) of contracts that would be made publicly available. We also propose that foreign-affiliated carriers subject to supplemental dominant carrier regulation file quarterly reports summarizing their records on the provisioning and maintenance of facilities and services by their affiliated foreign carriers. We seek comment on these tentative conclusions. 109. Our goal in proposing these heightened safeguards is not to impose burdensome regulations that might deter foreign carrier entry. On the contrary, we have attempted to craft safeguards that are no more burdensome than necessary to address our competitive concerns. With this goal in mind, we ask for comment on whether we should lift these supplemental safeguards for any dominant foreign-affiliated carrier whose foreign affiliate offers settlement rates at or below the low end of the benchmark range proposed in our Benchmarks Notice on the affiliated route. We believe that the ability of any such carrier to distort competition on this route would be significantly reduced if the settlement rate were at this low level. 110. We propose to streamline all applications from carriers that are willing to accept such heightened regulation. We seek comment on this tentative conclusion. d. Structural Separation 111. We seek comment on whether we should adopt an additional safeguard that would apply to carriers regulated as dominant on a particular route or routes due to a foreign carrier affiliation. Specifically, we seek comment on whether we should require some level of structural separation between the U.S. carrier and its affiliated foreign carrier. We seek comment on the level of separation that should be imposed and on whether the U.S. interexchange marketplace is an appropriate model. We note that Bell Operating Companies (BOCs) will be subject to strict structural separation requirements when they are authorized to enter into the long distance market on an in-region basis. Non-BOC LECs currently are authorized to enter the in-region long- distance market and are also subject to separation requirements. These requirements, however, are not as stringent as those that apply to BOC provision of in-region service. 112. We seek comment on whether either of these approaches is an appropriate model to apply as a basic safeguard for U.S. carriers regulated as dominant on particular routes. Alternatively, should we instead only require such carriers to maintain separate accounts, in particular, for facilities and services acquired from its foreign carrier affiliate? Or, should we require that, to the extent a U.S. carrier regulated as dominant uses any of its or any affiliate's foreign market facilities or services on the dominant route to carry U.S. outbound or inbound traffic to or from third countries, it must do so only pursuant to rates that are published in the foreign country or publicly filed with the Commission? This requirement may be necessary in the prevention and detection of anticompetitive conduct. 113. We also seek comment on what level of separation is warranted as a supplemental dominant carrier safeguard for foreign carriers seeking entry into the U.S. market where such carriers have market power in the destination country and do not face competition from multiple international facilities-based carriers. As discussed above, we believe such carriers have greater ability to discriminate in favor of affiliated carriers, and it may thus be appropriate to apply stricter separation requirements than we apply to carriers that face competition in their markets. e. Other Operating Safeguards i. "No Special Concessions" Requirement 114. We currently prohibit all U.S. carriers, regardless of their regulatory status or whether they have a foreign affiliate, from agreeing to accept special concessions from any foreign carrier or administration. Although this provision, on its face, applies to any foreign carrier or administration, regardless of its market power, we stated in the Foreign Carrier Entry Order that we would look favorably upon requests to waive the special concessions prohibition in circumstances where a U.S. carrier could demonstrate that the foreign carrier granting the concession lacks market power. We found that a waiver process is necessary in order to assess the market power of the foreign carrier granting the concession but stated that we would revisit our approach as foreign markets eliminate restrictions to entry and adopt competitive safeguards. 115. With the WTO Basic Telecom Agreement, competition will become more the rule than the exception on the foreign end of major U.S. international routes. We therefore propose to modify our no special concessions prohibition to apply only to concessions granted by foreign carriers with market power in the provision of services or facilities necessary for the provision of international services, including inter-city or local access facilities on the foreign end. 116. We request comment on how best to implement this proposal in circumstances where the Commission has not made a specific market power determination for a particular foreign carrier. For example, is there a "bright-line" test that we can use to identify a class of foreign carriers that do not raise market power concerns? Formulating such a bright-line test could reduce the need for U.S. carriers to file petitions for declaratory ruling to determine whether it is permissible to enter into exclusive arrangements with such carriers. 117. We also propose to give greater specificity to our "no special concessions" requirement by delineating in this proceeding the types of conduct that we consider to be prohibited by that requirement. We propose to interpret the no special concessions prohibition of Section 63.14 of our rules to prohibit any U.S. carrier from agreeing to accept from a foreign carrier with market power in the destination country an exclusive arrangement that affects traffic or revenue flows to or from the United States not offered to similarly situated U.S. carriers involving (1) operating agreements for the provision of basic services; (2) distribution or interconnection arrangements, including pricing, technical specifications, functional capabilities, or other quality and operational characteristics, such as provisioning and maintenance times; (3) any information, prior to public disclosure, about a foreign carrier's basic network services that affects either the provision of basic or enhanced services or interconnection to the foreign country's domestic network by U.S. carriers or their U.S. customers; (4) any proprietary or confidential information obtained by the foreign carrier from competing U.S. carriers in the course of regular business activities with such U.S. carriers, unless specific permission has been obtained in writing from the U.S. carrier involved; and (5) arrangements for the joint handling of basic U.S. traffic originating or terminating in third countries. 118. We request comment on our tentative conclusion that we should interpret Section 63.14 to prohibit these special concessions between a U.S. carrier and a foreign carrier that has market power in the destination country. In particular, we seek comment on whether we should permit any of these exclusive arrangements where the foreign carrier has market power in a country that has eliminated barriers to international facilities-based entry and licensed multiple international facilities-based competitors. Finally, we propose to revise the text of Section 63.14 specifically to cover circumstances where a foreign carrier has entered the U.S. market directly and without creating a separate legal entity to operate on the U.S. end. ii. Benchmark Settlement Rates Condition 119. We proposed in the Benchmarks proceeding to condition the facilities-based switched and private line authorizations of U.S. carriers to serve affiliated markets on the affiliated foreign carrier offering authorized U.S. international carriers a settlement rate that is within the benchmark range proposed in that proceeding. Consistent with our existing International Settlements Policy (ISP), all U.S. carriers would receive the same settlement rate for traffic on that route. If, after the carrier has commenced service to the affiliated market, we learn that the carrier's service offering has caused a distortion of competition on the route in question, we proposed in the Benchmarks proceeding to order that settlement rates to that country be reduced to the bottom of the range (which in our view approaches cost-based termination) or to revoke the authorization of the carrier to serve the affiliated market. We emphasized in the Benchmarks Notice that the purpose of this proposal is to prevent carriers from distorting the IMTS market through service to affiliated markets with excessive settlement rates. We will decide whether to adopt this proposed condition in the Benchmarks proceeding. 120. We also proposed in the Benchmarks Notice a competitive safeguard to address the potential market distortions resulting from one-way bypass of the accounting rate system. Specifically, we proposed to grant carriers' applications for authority to resell international private lines to provide switched services on the condition that accounting rates on the route or routes in question are within the settlement rate benchmark ranges to be adopted by the Commission. Under the proposed condition, if any carrier's settlement rate on the route in question is outside the appropriate benchmark range, a carrier would not be permitted to use its private line resale authorization to provide switched, basic services until such time as all settlement rates on the route are brought within the benchmark range. We also proposed to order all U.S. international carriers to pay a cost-based settlement rate if, after a carrier has commenced switched service via a resold private line, we learn that competition on the route has been distorted i.e., that one-way bypass is occurring. We believe our concern about the potential for distortions in the U.S. IMTS market from one-way bypass can be effectively addressed through these settlement rate conditions. 121. In light of our proposal in Section III.A.1.b above to eliminate the equivalency test as the standard for authorizing the provision of switched service over resold or facilities- based private lines between the United States and WTO Member countries, we believe it may be necessary to apply to U.S. facilities-based private line carriers the benchmark settlement rate conditions that we have proposed to apply to U.S. private line resellers. Facilities-based private line carriers also have the ability to distort competition on a particular route to the extent they terminate one-way bypass traffic from a foreign carrier. We believe this condition may be necessary in order to limit effectively the potential for distortion in the U.S. IMTS market from one-way bypass of the settlements process. Thus, we propose generally to prohibit a U.S. facilities-based private line carrier from originating or terminating U.S. switched traffic over its facilities-based private lines until all U.S. carriers' settlement rates for the country or location at the foreign end of the private line are within the benchmark settlement range to be established in the Benchmarks proceeding. In a Public Notice issued simultaneously with this Notice, the International Bureau invites interested parties to file supplemental comments on this proposal in the Benchmarks proceeding. We will decide whether to adopt rules to implement these proposed benchmark settlement rate conditions in the Benchmarks proceeding. iii. Alternative Competitive Safeguards 122. We also request comment on what measures we should take in the event we decline, or are unable, to implement any of the safeguards we have proposed in this section of the Notice. Under these circumstances, what additional safeguards should the Commission adopt to promote effective competition and prevent anticompetitive conduct in the provision of U.S. international services and facilities? For example, should we reinstate the ECO and equivalency tests for WTO Member countries? 123. Alternatively, in these circumstances should we condition the Section 214 authorizations granted to foreign carriers or their U.S. affiliates to prohibit or limit service to a country where the foreign carrier has market power if that country retains prohibitions on international service competition and has failed to authorize new facilities-based entrants within one year of the date the foreign carrier initiated service in the United States? We seek comment on this option and any other safeguards or measures that may be necessary if the Commission declines, or is unable, to implement any of the safeguards proposed here. 2. Enforcement of Safeguards 124. Once we issue a Section 214 authorization to a foreign carrier, we intend to enforce vigorously the dominant carrier and other operating safeguards that we adopt in this proceeding. We have many remedies that we may pursue against a carrier that fails to comply with these conditions. These remedies include imposing a monetary forfeiture for a carrier's willful or repeated violation of the conditions. Section 503 of the Act allows us to impose a forfeiture of up to $100,000 for each violation or each day of a continuing violation by a carrier. The amount assessed for a continuing violation may go up to $1,000,000 for any single act or failure to act. In addition or in the alternative, we also retain the power to revoke a Section 214 certificate. 125. We also have ample authority to investigate allegations that a carrier has violated our rules, and we will not hesitate to do so when presented with credible evidence of such a violation. Section 218 of the Act authorizes the Commission to inquire into the management of the business of all carriers subject to the Act and to "obtain from such carriers and from persons directly or indirectly controlling or controlled by, or under direct or indirect common control with, such carriers full and complete information necessary to enable the Commission to perform the duties and carry out the objects for which it was created." Thus, for example, where a carrier's quarterly traffic report or other information submitted to the Commission suggests that a U.S. carrier and its affiliated foreign carrier may have manipulated the settlements process on a particular route, we may find it necessary to audit the revenue and traffic records of the U.S. carrier, or foreign carrier, or both. 126. Where we have actually adjudicated a violation of our rules, we also have ample authority to impose additional conditions on a carrier's Section 214 authorization. For example, where we find that a carrier has knowingly received technical network information regarding foreign bottleneck facilities in advance of unaffiliated U.S. carriers, it may be necessary to impose strict structural separation on the U.S. and foreign carrier. Such a condition may also be warranted where we find that a carrier has knowingly received preferential provisioning and maintenance of foreign bottleneck facilities and services from its affiliated foreign carrier. 127. We request comment on additional remedies that we may use to redress rule violations and the circumstances in which such remedies would be appropriate. We have several additional remedies available to us, including the revocation of a carrier's license, fines, an audit, imposing strict structural separation, freezing circuits, prohibiting the use of foreign market telephone customer information and the joint marketing of basic services by a U.S. carrier and its foreign affiliate, and imposing mandated accounting rates at the low end of our benchmarks, if our proposed approach is adopted. We make clear here that any carrier, regardless of any foreign affiliation, would be subject to significant sanctions for violation of the Commission's rules. 3. Amendments to Part 63 128. We propose below rule changes to afford streamlined processing to the international Section 214 applications filed by foreign carriers from WTO Member countries consistent with our proposals above. We also make technical corrections to, and propose to amend, certain other rules adopted in the Foreign Carrier Entry Order and our Streamlining Order. 129. We emphasize that a decision in this proceeding to eliminate or revise the ECO test as it applies to certain applications may require that we amend the Section 214 application content and related rules contained in Sections 63.18, 63.11, and 63.12. We invite parties to submit specific proposed changes to these rules to implement their substantive recommendations. a. Streamlined Section 214 Procedures 130. We have significantly reduced the time required to process international Section 214 applications in recent years by streamlining our processing of these applications. We were not, however, able to apply these streamlined procedures to applications that raised competitive concerns, including, in particular, applications filed by dominant foreign-affiliated carriers. These carriers have expressed concern that they were not able to take advantage of our streamlined process, which generally ensured action in a very short time frame. Our policy has always been to make streamlined procedures available to the maximum number of applicants possible, consistent with ensuring that our competitive concerns are addressed. As we have noted, the WTO Basic Telecom Agreement significantly lessens our concerns that foreign-affiliated carriers will be able to distort competition in the U.S. market. Therefore, we believe that expanding the scope of streamlined processing will benefit U.S. consumers by speeding procompetitive new entry into our market. 131. We propose to streamline the international Section 214 applications filed by foreign carriers, or their U.S. affiliates, from WTO Member countries as much as possible. Our current rules generally permit streamlined processing of Section 214 applications filed by foreign carriers or their U.S. affiliates in circumstances where the foreign carrier is not a "facilities- based" carrier in the destination market. Our decision to streamline process applications from carriers whose foreign affiliates are not "facilities-based" in the destination market reflects our view that participation in the U.S. market by foreign carriers that do not own or control telecommunications facilities in a foreign market is unlikely to raise market power concerns. 132. We believe it likely will continue to be necessary, however, for Commission staff to identify particular applications that raise market power concerns, even if we adopt several of the changes we have proposed to make to our framework for foreign carrier entry and regulation. This would be the case where we may have to determine whether to regulate a U.S. carrier as dominant on a particular route because of an affiliated foreign carrier's market power in the destination country. This would also be the case if we continue to apply the ECO test to applicants that are affiliated with foreign carriers from non-WTO countries. We would like to reexamine our streamlining rules, however, to assess whether we can expand the class of carriers that, as a general rule, would appear unlikely to raise market power concerns. This would permit us to afford streamlined processing to all but a limited number of affiliated U.S. carriers. 133. We therefore request comment whether we can expand the class of affiliated applicants eligible for streamlined processing to include some applicants whose affiliated foreign carriers may fall within the definition of a "facilities-based" carrier. For example, there is a growing number of "new entrants" in liberalized foreign markets. We expect that this will increasingly be the case with the WTO Basic Telecom Agreement. Many of these carriers do not provide public switched voice service. 134. We request commenters to submit specific proposals to expand the class of affiliated carriers eligible for streamlined processing. We specifically propose to afford streamlined processing to the Section 214 application of any applicant that is affiliated with a carrier from a WTO Member country where the applicant requests authority to serve that country solely by reselling the switched services of unaffiliated U.S. international carriers. Streamlined processing is warranted in such a case because, as we have previously found, pure switched resale presents no substantial risk of a foreign carrier leveraging its market power into the U.S. international services market. 135. We also propose to afford streamlined processing to the Section 214 applications of applicants affiliated with carriers from WTO Member countries that seek to serve those countries other than through pure switched resale. In circumstances where the applicant does not otherwise qualify for streamlined processing (for example, where the affiliated foreign carrier is "facilities-based" in the WTO Member country), we propose to streamline process the application so long as the applicant certifies it will comply with basic and supplemental dominant carrier regulations described in Section III.D.1.b-c, supra. 136. We also propose that Commission staff exercise its discretion to afford streamlined processing in circumstances where the applicant certifies it will comply with our basic dominant carrier safeguards and demonstrates clearly and convincingly in its Section 214 application that the WTO Member country has eliminated legal barriers to international facilities- based entry and licensed multiple additional international facilities-based carriers to compete with the incumbent carrier. We request comment on these proposals. 137. We also propose to amend our rules to extend streamlined processing to applications for assignments and transfers of control of Section 214 authorizations. We propose to define the class of carriers eligible for streamlined processing of assignments and transfers in the same manner as we adopt for the grant of an initial Section 214 authorization. Thus, we intend to exclude only those proposed assignments and transfers that raise market power concerns. We invite comment on this proposal and specific suggestions for rule changes. b. Other Rule Changes 138. We here make several technical corrections to part 63 of our rules. Because these rule changes are minor corrections that simply conform our rules to our intent and to current practice and were justified in an earlier rulemaking proceeding, we find good cause to conclude that notice and comment procedures are unnecessary. First, we correct Section 63.18(e)(3) of the rules, which sets forth the equivalency test we currently apply in authorizing the use of private lines between the United States and all countries for the provision of switched services. In drafting this rule, we inadvertently omitted the word "reasonable" from paragraph (e)(3)(i)(B). As corrected, this paragraph will provide in relevant part that the "charges, terms and conditions for interconnection to foreign domestic carrier facilities" be both "reasonable and nondiscriminatory." 139. Second, Section 63.11(b) requires that any U.S. international carrier that knows of a planned investment by a foreign carrier of a ten percent or greater interest, whether direct or indirect, in the capital stock of the authorized carrier shall notify the Commission within 60 days prior to the acquisition of such interest. Paragraph (e) of Section 63.11 provides that, where the Commission finds that the planned investment by the foreign carrier raises a substantial and material question of fact as to whether the investment serves the public interest, convenience and necessity, the U.S. carrier shall not consummate the investment until it has submitted an application under Section 63.18 of the rules. 140. Carriers have argued that this rule can be read to include only investments by foreign carriers, and not investments by their parent holding companies. Such an interpretation is not in accord with our intent in adopting this prior notification requirement. The prior notification requirement is intended to provide the Commission the opportunity to determine whether a particular planned investment in a U.S. carrier raises concerns that a foreign carrier with market power may, as a result of the investment, obtain a financial incentive to discriminate in favor of the U.S. carrier. Such an incentive can exist whether the foreign carrier itself makes the investment in the U.S. carrier or whether the investment is made by an entity that directly or indirectly controls the foreign carrier, is controlled by the foreign carrier, or is under direct or indirect common control with the foreign carrier. Our definition of affiliation in Section 63.18(h)(1)(i)(B) of the rules is written to cover all such ownership interests. We intended that the reference in Section 63.11(b) to investments by a foreign carrier, "whether direct or indirect," also cover such interests. 141. Commission staff has issued a Public Notice that advises carriers to calculate the 10 percent ownership interests under Section 63.11(b) in the same manner as affiliations are calculated under the first clause of Section 63.18(h)(1)(i)(B). We here correct Section 63.11(b) to state that carriers shall report the planned acquisition of "a ten percent or greater planned investment in the capital stock of the carrier by a foreign carrier, or by any entity that directly or indirectly controls or is controlled by a foreign carrier, or that is under direct or indirect common control with a foreign carrier." 142. We also correct Section 63.11(b) to make clear the current obligation of U.S. carriers that have notified us of a 10 percent or greater planned investment by a foreign carrier (or affiliated company) to maintain the accuracy of the initial report by notifying us of additional investment interests by the foreign carrier or an affiliated company. Finally, we delete the word within in the first sentence of Section 63.11(b) to make clear that the initial notification must be filed at least 60 days before the acquisition of the interest. 143. We propose to maintain the Section 63.11(b) prior notification requirement for U.S. carriers with planned investments by foreign carriers (and their affiliated companies) regardless of whether or not the foreign carrier is from a WTO Member country. Although we believe that only exceptional circumstances would justify denying approval of an investment by a foreign carrier (or an affiliated company) where the foreign carrier is from a WTO Member country, we cannot rule out the possibility that a particular investment might present a very high threat of anticompetitive harm. We therefore propose that, if we inform a U.S. carrier under Section 63.11 that it must seek formal approval of a planned investment by a foreign carrier (or an affiliated company) that is from a WTO Member country, we will apply to the U.S. carrier's application the same standard that we have proposed in Section III.A.1.a of this Notice for considering the Section 214 applications filed by carriers from WTO Member countries. We will not apply an ECO analysis to these applications. We will continue to apply an ECO analysis, however, to applications in which a U.S. carrier seeks approval for a planned investment by a foreign carrier (or an affiliated company) from a non-WTO country. We request comment on this proposal. E. Framework for Accounting Rate Flexibility 144. We also seek comment on whether we should modify the framework adopted in our Flexibility Order for approving alternative settlement arrangements. In the Flexibility Order, we authorized U.S. carriers to negotiate alternative settlement arrangements that deviate from the requirements of our International Settlements Policy (ISP) with any foreign correspondent in a country that satisfies the ECO test. We also stated that we would consider such alternative settlement arrangements between a U.S. carrier and a foreign correspondent in a country that does not satisfy the ECO test, where the U.S. carrier can demonstrate that deviation from the ISP will promote market-oriented pricing and competition, while precluding the abuse of market power by the foreign correspondent. 145. We adopted the ECO test as the standard for permitting flexibility because we believe it is a good indicator of whether the legal, regulatory and economic conditions in a foreign market support competition such that the ISP is no longer necessary to protect against abuse of market power by foreign carriers. In particular, we noted that, where the ECO test has been satisfied, the ability of foreign carriers to exercise market power is constrained by the existence of, or potential for, competitive entry. We also noted that the ECO test seeks to ensure that a foreign country has implemented competitive safeguards to protect against the exercise of market power by a dominant carrier. 146. We anticipated that, in many instances, a U.S. carrier will seek approval to enter an alternative arrangement with a foreign carrier in a country that has already been found to satisfy the ECO test in the context of a prior Section 214 facilities application to serve that country. However, we noted that a U.S. carrier could also seek approval to enter an alternative payment arrangement with a carrier in a foreign country where we have not yet made an ECO determination, and in that case, a petitioning carrier would be required to submit sufficient evidence to support a finding that the ECO test has been satisfied. Thus, we considered that use of the already established ECO test as the threshold standard for permitting flexibility would be administratively efficient and would provide consistent results and business certainty for U.S. carriers. 147. We believe, however, that it would be administratively inefficient for the Commission and burdensome to carriers to continue to conduct an ECO analysis for purposes of determining whether to permit flexibility if, as a result of our review of the ECO test in this proceeding, we conclude that it is no longer necessary to apply the test to applications for international Section 214 authorization from carriers in WTO Member countries. As noted above in paragraph 34, the ECO test requires a fact-specific, detailed review of competitive conditions on a given route. If it has no application in another regulatory context, we believe such a thorough review may not be appropriate or necessary solely for purposes of determining whether to permit flexibility. 148. We further believe that the WTO agreement makes application of the ECO test as the threshold for permitting flexibility unnecessary. As we explained above in Section III.A.1, we believe that the commitments to competition and fair regulatory principles in the WTO Basic Telecom Agreement will substantially lessen the ability of foreign carriers with market power to discriminate among U.S. carriers. 149. In light of the changes in the global telecommunications market due to the WTO Basic Telecom Agreement, we believe flexibility can be more the rule than the exception. As we stated in the Flexibility Order, our ISP was designed for a global telecommunications market dominated by monopoly providers. In adopting our flexibility policy, we recognized that the global market is changing, and that without updating, our settlement policies could impede competitive behavior and the development of effectively competitive markets. The WTO Basic Telecom Agreement hastens the changes in the global telecommunications market that prompted our flexibility policy and makes the need for updating our settlement policy even more urgent. 150. We therefore tentatively conclude that, if we no longer apply the ECO test to international Section 214 applications filed by carriers from WTO Member countries, we should not conduct an ECO analysis for purposes of determining whether to permit a U.S. carrier to enter an alternative settlement arrangement with carriers from WTO Member countries. Instead, we tentatively conclude that we should adopt a rebuttable presumption that flexibility is permitted for carriers from WTO Member countries. We believe that such a presumption would be appropriate because, as stated above, our concern about discriminatory treatment of U.S. carriers by foreign carriers with market power is significantly diminished by the commitments to competition and fair regulatory treatment made by WTO Member countries. A presumption in favor of flexibility for WTO Member countries would also bring our settlements policy in line with the reality of a global market where most of the world's major trading partners have committed to open entry and procompetitive regulation of basic telecommunications services. 151. We recognize, however, that WTO membership alone will not guarantee conditions in a foreign market are sufficiently competitive to prevent foreign carriers with market power from discriminating among U.S. carriers in settlement rate negotiations. In particular, market conditions in WTO Member countries that have made weak or no market access commitments are unlikely to be sufficiently competitive to warrant deviation from the requirements of the ISP. Therefore, we further tentatively conclude that the presumption in favor of flexibility may be rebutted by 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. Specifically, we propose that the presumption could be rebutted by a showing that the country has not opened its market to competition, either because the country has not complied with its market access commitment, its commitment has not taken effect, or it made no commitment. The presumption could also be rebutted by a showing that the country does not, or will not in the near future, have in place fair rules of competition, such as those contained in the Reference Paper, to ensure viable opportunities for actual entry. 152. Under the procedures adopted in our Flexibility Order, U.S. carriers may obtain approval to enter an alternative payment arrangement by filing a detailed petition for declaratory ruling that the alternative payment arrangement is permitted under the criteria for deviating from the ISP adopted in that proceeding. The petition for declaratory ruling is put on public notice and interested parties are given an opportunity to file a formal opposition within twenty days. We propose minor changes to these procedures to conform to the proposals made here. Specifically, we propose that where a U.S. carrier seeks approval to enter an alternative arrangement with a carrier in a WTO Member country, the requesting carrier be required to show only that the carrier is operating in a WTO Member country. The burden would be on opposing parties to show that market conditions in the country in question are not sufficient to prevent a carrier with market power from discriminating against U.S. carriers. This showing could be made by presenting evidence that the country has not opened its market to competition or that it does not, or will not in the near future, have in place fair rules of competition. We thus expect that for WTO Member countries that have made weak or no market access commitments, the presumption in favor of flexibility we propose here can be easily rebutted. We propose to apply this new policy to all flexibility petitions pending before the Commission in any procedural status at the time our new rules become effective. 153. We seek comment on these tentative conclusions and proposals. In particular, we seek comment on whether we should continue to conduct an ECO analysis for purposes of determining whether to permit flexibility with a carrier from a WTO Member country. We further seek comment on whether our proposal to adopt a rebuttable presumption that flexibility is permitted with such countries would further the policy stated in the Flexibility Order of allowing flexibility where competitive market conditions exist in a foreign market. We also seek comment on what showing should be required to rebut the presumption that flexibility is permitted for WTO Member countries. 154. We further tentatively conclude that we should continue to apply the ECO test as the threshold standard for permitting flexibility with carriers that are from countries that are not WTO Members. For countries that are not WTO Members, we have no basis to presume that conditions in the foreign market are sufficiently competitive to warrant deviation from our ISP. We continue, therefore, to believe that the ECO test provides the best indicator of whether the legal, regulatory and economic conditions in a foreign market support competition such that the ISP is no longer necessary to protect against abuse of market power by foreign carriers. We seek comment on this tentative conclusion. IV. Procedural Issues A. Ex Parte Presentations 155. This is a non-restricted (i.e., permit-but-disclose) notice-and-comment rulemaking proceeding. Ex parte presentations are permitted, except during the Sunshine Agenda period, provided that they are disclosed as provided in the Commission's rules. See generally 47 C.F.R.  1.1202, 1.1203, 1.1206. B. Initial Regulatory Flexibility Analysis 156. Pursuant to the Regulatory Flexibility Act of 1990, 5 U.S.C.  601 612, ("RFA") as amended by the Contract with America Advancement Act of 1996, Pub. L. No. 104- 121, 110 Stat. 847, the Commission's Initial Regulatory Flexibility Analysis with respect to this Notice of Proposed Rulemaking is as follows: 157. Reason for Action: The Commission is issuing this Notice of Proposed Rulemaking to seek comment on possible changes to our rules and policies for allowing foreign- affiliated entities to participate in the U.S. telecommunications market. In light of the recent agreement reached by Members of the World Trade Organization to liberalize the provision of basic telecommunications services, we believe it is appropriate to relax our scrutiny of applications filed by affiliates of entities from WTO Member countries for authority pursuant to Section 214 of the Communications Act, 47 U.S.C.  214, and the Cable Landing License Act, 47 U.S.C.  34 39; and to relax our scrutiny of indirect foreign investment in holders of common carrier radio licenses under Section 310(b)(4) of the Communications Act, 47 U.S.C.  310(b)(4). We also believe that other changes to our regulation of foreign-affiliated entities are appropriate in light of the WTO agreement and our experience applying our current rules. 158. Objectives: The objective of this proceeding is to increase competition in the U.S. market for basic telecommunications services while minimizing the risk of anticompetitive harm. In light of the changed circumstances that will result from the WTO agreement on basic telecommunications and our nearly two years of experience with our current rules on market entry, we believe that reducing entry barriers for applicants affiliated with entities from WTO Member countries is the appropriate way to accomplish that objective. The Commission believes that the "effective competitive opportunities" test developed in its Foreign Carrier Entry Order is no longer necessary as applied to countries that are members of the WTO. Instead, we propose to rely primarily on regulatory safeguards and settlement-rate benchmarks to prevent anticompetitive conduct in the U.S. telecommunications marketplace. We propose some revisions to those regulatory safeguards in this Notice. 159. Legal basis: This Notice of Proposed Rulemaking is adopted pursuant to Sections 1, 4(i), 201(b), 214, 303(r), 307, 309(a), 310 of the Communications Act of 1934, as amended, 47 U.S.C.  151, 154(i), 214, 303(r), 307, 309(a), 310. Description and Estimate of the Number of Small Entities to Which the Proposed Rules Will Apply: 160. The RFA generally defines small entity as having the same meaning as the terms small business, small organization, and small governmental jurisdiction and defines small business as having the same meaning as the term small business concern under section 3 of the Small Business Act unless the Commission has developed one or more definitions that are appropriate for its activities. The Small Business Act defines small business concern as one that (1) is independently owned and operated; (2) is not dominant in its field of operation; and (3) satisfies any additional criteria established by the Small Business Administration (SBA). 161. The rules proposed in this Notice apply only to entities providing international common carrier services pursuant to Section 214 of the Communications Act; entities providing domestic or international wireless common carrier services under Section 309 of the Act; and entities licensed to construct and operate submarine cables under the Cable Landing License Act. 162. Because the small incumbent local exchange carriers (LECs) subject to these rules are either dominant in their fields of operations or are not independently owned and operated, consistent with our prior practice, they are excluded from the definitions of small entity and small business concern. Accordingly, our use of the terms small entities and small businesses does not encompass small incumbent LECs. Out of an abundance of caution, however, for the purposes of this initial regulatory flexibility analysis, we will consider small incumbent LECs to be within this analysis, where a small incumbent LEC is any incumbent LEC that arguably might be defined by the SBA as a "small business concern." a. Section 214 International Common Carrier Services 163. Entities providing international common carrier service pursuant to Section 214 of the Act fall into the SBA's Standard Industrial Classification (SIC) categories for Radiotelephone Communications (SIC 4812) and Telephone Communications, Except Radiotelephone (SIC 4813). The SBA's definition of small entity for those categories is one with fewer than 1,500 employees. We discuss below the number of small entities falling within these two subcategories that may be affected by the rules proposed in this Notice. 164. The most reliable source of information regarding the number of international common carriers is the data that we collect annually in connection with the Telecommunications Industry Revenue: Telecommunications Relay Service Fund Worksheet Data (TRS Worksheet). In 1995, 445 toll carriers filed TRS fund worksheets. We believe that between 50 and 200 carriers failed to file TRS fund worksheets. We believe also that fewer than 10 toll carriers had 1,500 or more employees. Thus, at most 635 international carriers would be classified as small entities. Many TRS filers, however, are affiliated with other carriers, and therefore the number of aggregated carriers is far fewer than the preceding estimate. Of the 445 toll filers, 239 reported no carrier affiliates. Adding 50 non-filers gives a lower estimate of 289 international carriers that would be classified as small entities. Thus, our best estimate of the total number of small entities is between 289 and 635. We are unable at this time to estimate with greater precision the number of international carriers that would qualify as small business entities under the SBA's definition. While not all of these entities may have provided international service in 1995, we expect that many of these entities will seek to do so in the future, as will additional entrants into the market. b. Title III Common Carrier Services 165. Cellular licensees. Neither the Commission nor the SBA has developed a definition of small entities applicable to cellular licensees. The closest applicable definition of small entity is the definition under the SBA rules applicable to radiotelephone (wireless) companies (SIC 4812). The most reliable source of information regarding the number of cellular services carriers nationwide of which we are aware appears to be the data that the Commission collects annually in connection with the TRS Worksheet. According to the most recent data, 792 companies reported that they were engaged in the provision of cellular services. Although it seems certain that some of these carriers are not independently owned and operated, or have more than 1,500 employees, we are unable at this time to estimate with greater precision the number of cellular services carriers that would qualify as small business concerns under the SBA's definition. Consequently, we estimate that there are fewer than 792 small cellular service carriers. 166. 220 MHz Radio Services. Because the Commission has not yet defined a small business with respect to 220 MHz radio services, we will utilize the SBA's definition applicable to radiotelephone companies i.e., an entity employing less than 1,500 persons. With respect to the 220 MHz services, the Commission has proposed a two-tiered definition of small business for purposes of auctions: (1) for Economic Area (EA) licensees, a firm with average annual gross revenues of not more than $6 million for the preceding three years, and (2) for regional and nationwide licensees, a firm with average annual gross revenues of not more than $15 million for the preceding three years. Since this definition has not yet been approved by the SBA, we will utilize the SBA's definition applicable to radiotelephone companies. Given the fact that nearly all radiotelephone companies employ fewer than 1,500 employees, with respect to the approximately 3,800 incumbent licensees in this service, we will consider them to be small businesses under the SBA definition. 167. Common Carrier Paging. The Commission has proposed a two-tier definition of small businesses in the context of auctioning licenses in the Common Carrier Paging services. Under that proposal, a small business would be either (1) an entity that, together with its affiliates and controlling principals, has average gross revenues for the three preceding years of not more than $3 million, or (2) an entity that, together with affiliates and controlling principals, has average gross revenues for the three preceding calendar years of not more than $15 million. Since the SBA has not yet approved this definition for paging services, we will utilize the SBA's definition applicable to radiotelephone companies, i.e., an entity employing fewer than 1,500 persons. At present, there are approximately 74,000 Common Carrier Paging licensees. We estimate that the majority of common carrier paging providers would qualify as small businesses under the SBA definition. 168. Mobile Service Carriers. Neither the Commission nor the SBA has developed a definition of small entities specifically applicable to mobile service carriers such as paging companies. The closest applicable definition under the SBA rules is for radiotelephone (wireless) companies. The most reliable source of information regarding the number of mobile service carriers nationwide of which we are aware appears to be the data that the Commission collects annually in connection with the TRS Worksheet. According to the most recent data, 117 companies reported that they were engaged in the provision of mobile services. Although it seems certain that some of these carriers are not independently owned and operated, or have more than 1,500 employees, we are unable at this time to estimate with greater precision the number of mobile service carriers that would qualify under the SBA's definition. Consequently, we estimate that fewer than 117 mobile service carriers are small entities. 169. Broadband Personal Communications Services (PCS). The broadband PCS spectrum is divided into six frequency blocks designated A through F, and the Commission has held auctions for each block. The Commission has defined small entity in the auctions for Blocks C and F as an entity that has average gross revenues of less than $40 million in the three previous calendar years. For Block F, an additional classification for "very small business" was added and is defined as an entity that, together with its affiliates, has average gross revenue of not more than $15 million for the preceding three calendar years. These regulations defining small entity in the context of broadband PCS auctions have been approved by the SBA. No small business within the SBA-approved definition bid successfully for licenses in Blocks A and B. There were 90 winning bidders that qualified as small entities in the Block C auctions. A total of 93 small and very small businesses won approximately 40 percent of the 1,479 licenses for Blocks D, E, and F. However, licenses for Blocks C through F have not been awarded fully; therefore, there are few, if any, small businesses currently providing PCS services. Based on this information, we conclude that the number of small broadband PCS licensees will include the 90 winning bidders and the 93 qualifying bidders in the D, E, and F Blocks, for a total of 183 small PCS providers as defined by the SBA and the Commission's auction rules. 170. Narrowband PCS. The Commission does not know how many narrowband PCS licenses will be granted or auctioned, as it has not yet determined the size or number of such licenses. Two auctions of narrowband PCS licenses have been conducted for a total of 41 licenses, out of which 11 were obtained by small businesses owned by members of minority groups and/or women. Small businesses were defined as those with average gross revenues for the prior three fiscal years of $40 million or less. For purposes of this initial regulatory flexibility analysis, the Commission is utilizing the SBA definition applicable to radiotelephone companies, i.e., an entity employing less than 1,500 persons. Not all of the narrowband PCS licenses have yet been awarded. There is therefore no basis to determine the number of licenses that will be awarded to small entities in future auctions. Given the facts that nearly all radiotelephone companies have fewer than 1,000 employees and that no reliable estimate of the number of prospective narrowband PCS licensees can be made, we assume, for purposes of the evaluations and conclusions in this Initial Regulatory Flexibility Analysis, that all the remaining narrowband PCS licenses will be awarded to small entities. 171. Rural Radiotelephone Service. The Commission has not adopted a definition of small business specific to the Rural Radiotelephone Service, which is defined in Section 22.99 of the Commission's Rules. A significant subset of the Rural Radiotelephone Service is BETRS, or Basic Exchange Telephone Radio Systems (the parameters of which are defined in Sections 22.757 and 22.759 of the Commission's Rules). Accordingly, we will use the SBA's definition applicable to radiotelephone companies, i.e., an entity employing fewer than 1,500 persons. There are approximately 1,000 licensees in the Rural Radiotelephone Service, and we estimate that almost all of them have fewer than 1,500 employees. 172. Air-Ground Radiotelephone. The Commission has not adopted a definition of small business specific to the Air-Ground Radiotelephone Service, which is defined in Section 22.99 of the Commission's Rules. Accordingly, we will use the SBA's definition applicable to radiotelephone companies, i.e., an entity employing fewer than 1,500 persons. There are approximately 100 licensees in the Air-Ground Radiotelephone Service, and we estimate that almost all of them qualify as small under the SBA definition. 173. Specialized Mobile Radio Licensees (SMR). Pursuant to Section 90.814(b)(1) of our rules, the Commission awards bidding credits in auctions for geographic area 800 MHz and 900 MHz Specialized Mobile Radio (SMR) licenses to firms that had revenues of less than $15 million in each of the three previous calendar years. This regulation defining "small entity" in the context of 800 MHz and 900 MHz SMR has been approved by the SBA. We do not know how many firms provide 800 MHz or 900 MHz geographic area SMR service pursuant to extended implementation authorizations or how many of these providers have annual revenues of less than $15 million. We do know that one of these firms has over $15 million in revenues. We assume that all of the remaining existing extended implementation authorizations are held by small entities, as that term is defined by the SBA. The Commission recently held auctions for geographic area licenses in the 900 MHz SMR band. There were 60 winning bidders who qualified as small entities in the 900 MHz auction. Based on this information, we conclude that the number of geographic area SMR licensees affected includes these 60 small entities. 174. Microwave Video Services. Microwave services includes common carrier, private operational fixed, and broadcast auxiliary radio services. At present, there are 22,015 common carrier licensees. Inasmuch as the Commission has not yet defined small business with respect to microwave services, we will utilize the SBA's definition applicable to radiotelephone companies i.e., an entity with less than 1,500 employees. Although some of these companies may have more than 1,500 employees, we are unable at this time to estimate with greater precision the number of common carrier microwave service providers that would qualify under the SBA's definition. We therefore estimate that there are fewer than 22,015 small common carrier licensees in the microwave video services. 175. Offshore Radiotelephone Service. This service operates on several UHF TV broadcast channels that are not used for TV broadcasting in the coastal area of the states bordering the Gulf of Mexico. At present, there are approximately 55 licensees in this service. Some of those licensees are common carriers. We are unable at this time to estimate the number of licensees that would qualify as small under the SBA's definition. 176. Local Multipoint Distribution Service (LMDS). The Commission has so far licensed only one licensee in this service, and that licensee is not providing service as a common carrier. There will be a total of 986 LMDS licenses. Licensees will be permitted to decide whether to provide common carrier service, and we have no way of estimating how many will choose to do so. Because there will be no restrictions on the number of licenses a given entity may acquire, we have no way of estimating how many total licensees there will be. We also cannot estimate the number of common carrier licensees that will qualify as small entities. 177. Space Stations (Geostationary). Very few systems are currently operated on a common carrier basis. Because we do not collect information on annual revenue or number of employees of all these licensees, we cannot estimate with precision the number of such licensees that may constitute a small business entity. It is likely that no more than one such entity that is currently operating as a common carrier would constitute a small business entity. There may be a small increase in the number of such entities in the future as a result of recent licensing action in the Ka-band. 178. Space Stations (Non-geostationary). These systems by and large do not operate as common carriers. Because we do not collect information on annual revenue or number of employees, we cannot estimate with precision whether any carrier that may choose to operate on a common carrier basis constitutes a small business entity. The trend is for such systems to operate on a non common carrier basis. These systems, of which there will be a limited number, by and large are not yet operational and are still being licensed and constructed. 179. Earth Stations. The vast majority of earth stations licensed by the Commission are not operated on a common carrier basis. Earth stations that communicate with non- geostationary and Ka-band satellite systems may operate on a common carrier basis but these systems are not yet operational and are still being licensed and constructed. We are unable to estimate at this time the number of earth stations communicating with such systems that may operate on a common carrier basis and, of those, the number that will be licensed to small business entities. c. Submarine Cable Landing Licenses 180. Our proposals would affect all holders of and future applicants for cable landing licenses, whether or not they operate their cables as common carriers. We have no way of knowing how many applications for cable landing licenses will be filed in coming years, but that number will likely increase if we adopt our proposal to lower the barriers to granting licenses for cables to WTO Member countries. Since 1992, there have been approximately 35 applications for cable landing licenses. The total number of licensees is difficult to determine, because many licenses are jointly held by several licensees. Our rules will also permit more current licensees to accept additional investment from entities from WTO Member countries. 181. Reporting, recordkeeping, and other compliance requirements: The actions contained in this Notice of Proposed Rulemaking may affect large and small carriers. We propose to require that U.S. carriers whose foreign affiliates have market power maintain or provide certain records regarding their foreign affiliates. Our proposals would in most cases reduce the burdens that are currently imposed on such carriers, and we anticipate that the remaining requirements would not impose a significant economic burden on small entities. A variety of skills may be required to comply with the proposed requirements, but all of the skills that may be required are of the type needed to conduct a carrier's normal course of business. No additional outside professional skills should be required, with the possible exception of preparing an initial Section 214 or cable landing license application and of preparing a submission for our consideration under Section 310(b)(4), all of which would be simplified by our proposals. 182. Section 214 and the Cable Landing License Act. The proposed revisions to our rules and policies pursuant to Section 214 and the Cable Landing License Act would significantly reduce the burdens on international common carriers. Our proposal would reduce the burden on foreign-affiliated carriers seeking to enter the market by requiring only that they show that their foreign affiliate is from a country that is a Member of the World Trade Organization. We believe this to be a minimal burden for most small entities and a significant reduction of burdens relative to our current application requirements. 183. The proposed "basic dominant carrier safeguards" would be less burdensome to most international common carriers than our current regulations. Carriers would no longer be required to obtain approval before adding or discontinuing circuits. Instead, they would be required only to file quarterly notification of additions of circuits. We propose to eliminate the requirement that dominant carriers file their international service tariffs on no less than 14 days' notice. Instead, we would allow those carriers to file their international service tariffs on one day's notice and accord them a presumption of lawfulness. This change would reduce regulatory burdens and increase the ability of carriers to innovate and efficiently respond to changes in demand and cost. We propose to retain the requirements that carriers file quarterly traffic and revenue reports and keep records of provisioning and maintenance of basic network facilities and services procured from the foreign affiliate. We anticipate that most of the entities subject to dominant carrier regulation would not be small entities, but we seek comment on that tentative conclusion. 184. This Notice proposes to impose supplemental dominant carrier regulation on U.S. carriers whose foreign affiliates do not face facilities-based competition for international services in the destination countries in which they have market power. We believe that additional regulation of those carriers is necessary to ensure that the foreign carrier does not discriminate in favor of its U.S. affiliate. These additional requirements may include stricter structural separation between the U.S. carrier and its foreign affiliate; stricter limits on certain arrangements for the sharing of information, customers, and joint marketing; prior approval for addition of circuits; quarterly circuit status reports; filing an electronic summary of Section 43.51 contracts; and quarterly provisioning and maintenance reports. We anticipate that few if any small entities would be subject to supplemental regulation, but we seek comment on that tentative conclusion. 185. The Notice also seeks comment on whether, in light of our proposal to liberalize our rules on market entry, we need to impose as a dominant carrier safeguard some level of structural separation between the U.S. carrier and its foreign affiliate. 186. We have considered the impact on small and large entities in developing these proposals, and we view these proposed regulations as critical to preventing anticompetitive conduct. We also believe that these safeguards would protect small entities from entities that are affiliated with large foreign carriers by preventing foreign affiliates from leveraging their market power to the disadvantage of small, independent entities. We seek comment on whether we can further reduce the burdens on small entities and still achieve our goal of preventing anticompetitive behavior in the U.S. market. 187. Section 310(b)(4). We also propose to reduce the burdens on common carrier licensees with foreign investment from WTO Member countries. Section 310(b)(4) of the Communications Act has always required that we make a finding about whether indirect foreign investment in excess of 25 percent would serve the public interest. Our proposal here would, in many cases, greatly simplify the required showing by licensees or potential licensees. An applicant that could show that its foreign investor's principal place of business is in a country that is a Member of the WTO would in most cases have to make no further showing. An applicant whose foreign investment comes from a country that is not a WTO Member would still have to show that it satisfies the effective competitive opportunities test, but that burden would not be greater than that imposed by our current requirements. 188. This Notice asks for comment on whether we should adopt specific criteria for denial of Title III common carrier (and Section 214) applications that present such an unusual danger of anticompetitive effects that they should be denied even though the foreign investment is from WTO Member countries. We also ask whether we can further reduce regulatory burdens by eliminating our review of increases in foreign ownership by licensees that already have more than 25 percent foreign ownership. We also seek comment on other ways in which the consideration of foreign investment under Section 310(b)(4) could be made less burdensome for small entities. 189. Accounting Rate Flexibility. We propose to reduce the burden on U.S. carriers that seek approval of alternative settlement rate arrangements with foreign carriers from WTO Member countries. Currently, a carrier seeking such approval must file a detailed petition for declaratory ruling showing that the alternative arrangement is permitted under the criteria adopted in our Flexibility Order. We propose here to require only that an applicant show that the foreign carrier is operating in a country that is a Member of the WTO. An opposing party would have the burden of showing that market conditions in the country in question are not sufficient to prevent a carrier with market power from discriminating against U.S. carriers. 190. Federal rules that overlap, duplicate, or conflict with the Commission's proposal: None. 191. Any significant alternatives minimizing impact on small entities and consistent with stated objectives: In developing the proposals contained in this Notice, we have attempted to minimize the burdens on all entities in order to allow maximum participation in the U.S. telecommunications markets while achieving our other objectives. We seek comment on the impact of our proposals on small entities and on any possible alternatives that could minimize the impact of our rules on small entities. In particular, we seek comment on alternatives to the reporting, recordkeeping, and other compliance requirements discussed above. We also seek specific comment on the impact on small entities of our proposals to modify our dominant carrier safeguards. 192. Comments are solicited: Written comments are requested on this Initial Regulatory Flexibility Analysis. These comments must be filed in accordance with the same filing deadlines set for comments on the other issues in this Notice of Proposed Rulemaking, but they must have a separate and distinct heading designating them as responses to the Regulatory Flexibility Analysis. The Secretary shall send a copy of this Notice to the Chief Counsel for Advocacy of the Small Business Administration in accordance with Section 603(a) of the Regulatory Flexibility Act. C. Initial Paperwork Reduction Act of 1995 Analysis 193. This Notice of Proposed Rulemaking contains either a proposed or a modified information collection. As part of our continuing effort to reduce paperwork burdens, we invite the general public and the Office of Management and Budget (OMB) to comment on the information collections contained in this NPRM, as required by the Paperwork Reduction Act of 1995, Pub. L. No. 104-13. Public and agency comments are due 60 days from the date of publication of this NPRM in the Federal Register. Comments should address: (a) whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information shall have practical utility; (b) the accuracy of the Commission's burden estimates; (c) ways to enhance the quality, utility, and clarity of the information collected; and (d) ways to minimize the burden of the collection of information on the respondents, including the use of automated collection techniques or other forms of information technology. 194. The rule changes adopted here, as set forth in Appendix A, have been analyzed with respect to the Paperwork Reduction Act of 1980 and found to impose no new or modified requirements or burdens on the public. Accordingly, their implementation is not subject to approval by the Office of Management and Budget under that Act. D. Comment Filing Procedures 195. Comments and reply comments should be captioned in IB Docket No. 97-142 only. Pursuant to applicable procedures in Sections 1.415 and 1.419 of the Commission's rules, 47 C.F.R.  1.415, 1.419, interested parties may file initial comments on or before July 9, 1997, and reply comments on or before August 12, 1997. To file formally in this proceeding, you must file an original and four copies of all comments, reply comments, and supporting comments. If you want each Commissioner to receive a personal copy of your comments, you must file an original and nine copies. Comments and reply comments should be sent to Office of the Secretary, Federal Communications Commission, 1919 M Street, N.W., Room 222, Washington, D.C. 20554, with a copy to Douglas A. Klein of the International Bureau, 2000 M Street, N.W., Suite 800, Washington, D.C. 20554. Parties should also file one copy of any documents filed in this docket with the Commission's copy contractor, International Transcription Services, Inc., 2100 M Street, N.W., Suite 140, Washington, D.C. 20037. Comments and reply comments will be available for public inspection during regular business hours in the FCC Reference Center, 1919 M Street, N.W., Room 239, Washington, D.C. Parties are also encouraged to file a copy of all pleadings on a 3.5-inch diskette in WordPerfect 5.1 format. 196. Written comments by the public on the proposed and/or modified information collections are due on or before 60 days after the date of publication in the Federal Register. In addition to filing comments with the Secretary, a copy of any comments on the information collections contained herein should be submitted to Judy Boley, Federal Communications Commission, Room 234, 1919 M Street, N.W., Washington, DC 20554, or via the Internet to jboley@fcc.gov. E. Ordering Clauses 197. Accordingly, IT IS ORDERED that, pursuant to Sections 1, 4(i), 201(b), 214, 303(r), 307, 309(a), and 310 of the Communications Act of 1934, as amended, 47 U.S.C.  151, 154(i), 214, 303(r), 307, 309(a), 310, this NOTICE OF PROPOSED RULEMAKING is hereby ADOPTED. 198. IT IS FURTHER ORDERED that the minor changes to part 63 of the Commission's rules, as set forth in Appendix A, are hereby adopted effective 30 days after publication in the Federal Register. 199. IT IS FURTHER ORDERED that the Secretary shall send a copy of this NOTICE OF PROPOSED RULEMAKING, including the regulatory flexibility certification, to the Chief Counsel for Advocacy of the Small Business Administration, in accordance with paragraph 603(a) of the Regulatory Flexibility Act, 5 U.S.C.  601 et seq. FEDERAL COMMUNICATIONS COMMISSION William F. Caton Acting Secretary Appendix A RULE CHANGES Part 63 of Title 47 of the Code of Federal Regulations is amended as follows: PART 63--EXTENSION OF LINES AND DISCONTINUANCE, REDUCTION, OUTAGE AND IMPAIRMENT OF SERVICE BY COMMON CARRIERS AND GRANTS OF RECOGNIZED PRIVATE OPERATING AGENCY STATUS 1. The authority citation for Part 63 continues to read as follows: Authority: 47 U.S.C. 151, 154(i), 154(j), 201-205, 218, 403 and 533, unless otherwise noted. 2. Section 63.11 is amended by revising paragraph (b) to read as follows:  63.11 Notification by and prior approval for U.S. international carriers that have or propose to acquire ten percent investments by, and/or an affiliation with, a foreign carrier. * * * * * (b) Any carrier authorized to provide international communications service under this part that knows of a planned investment by a foreign carrier of a ten percent or greater interest, whether direct or indirect, in the capital stock of the authorized carrier shall notify the Commission sixty days prior to the acquisition of such interest. Any such authorized carrier shall report a ten percent or greater planned investment in the capital stock of the carrier by a foreign carrier, or by any entity that directly or indirectly controls or is controlled by a foreign carrier, or that is under direct or indirect common control with a foreign carrier. The notification shall certify to the information specified in paragraph (c) of this section. Carriers that have filed a notification pursuant to this paragraph are required to maintain the accuracy of the initial filing by notifying the Commission of additional investment interests by the foreign carrier or an affiliated company. * * * * * 3. Section 63.18 is amended by revising paragraph (e)(3)(i)(B) to read as follows:  63.18 Contents of applications for international common carriers. * * * * * (e) * * * (3) * * * (i) * * * (B) Reasonable and nondiscriminatory charges, terms and conditions for interconnection to foreign domestic carrier facilities for termination and origination of international services, with adequate means of enforcement; * * * * * STATEMENT OF FCC CHAIRMAN REED HUNDT June 4, 1997 Re: Rules and Policies on Foreign Participation in the U.S. Telecommunications Market, IB Docket No. 97-142 In Buenos Aires three years ago, at the first International Telecommunications Union development conference, Vice President Gore challenged the nations of the world to build a network around the globe linking all human knowledge and creating global opportunities. One year ago, Congress delivered a clear and compelling blueprint for competition that will build this network in the United States. And in February of this year, the United States, under the leadership of United States Trade Representative Ambassador Charlene Barshefsky, reached a historic agreement with 68 other countries to open markets for basic telecommunications services around the world. Today, the Commission begins action to amend its rules in response to the landmark agreement on telecommunications negotiated under the auspices of the World Trade Organization (WTO). In the agreement, countries representing 95 percent of the global market for basic telecommunications services have pledged to open their markets to international competition. By this agreement, the Telecommunications Act enacted a year ago by Congress has become the world's gold standard for pro-competitive deregulation, for sixty-five countries have bound themselves to the Reference Paper on Pro-Competitive Regulatory Principles. The Reference Paper is a binding, enforceable set of pro-competitive rules that closely follows the Congressional vision of free competition, fair rules, and effective enforcement enacted in the Telecommunications Act. In light of the historic move by countries representing the overwhelming majority of the world telecommunications market to open their markets to foreign entry and investment and to bind themselves to the pro-competitive rules enshrined in the Reference Paper, we believe that we should similarly open our market to foreign investment and entry by foreign carriers. Such entry will attract increased investment capital and will introduce new sources of competition in the telecom market in the United States, which will produce lower prices and greater service choice and innovation for American consumers. The Notice also proposes to implement safeguards to prevent foreign carriers with market power from distorting competition in the U.S. market. And, we will retain our undiluted authority to deny or condition such foreign carrier entry if the public interest so requires.