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 P6QXP%y.C8*X/C\  P6QP.&7UC2XXU4  pQX'5PC2X3f_XP*f9 xQXX(W!0(Xh0\  P6QhP)I(!X,(\  P6Q,P*{,C8*X3VC*f9 xQXl+6RC2XRXR9 xyQX.y.G8*X<G4  pQI-!&Xva,-\  P@Q,Px/d8SX|Kd{2 PQP@^*7FSS$77Sq*7*.SSSSSSSSSS77qqqSffoxffxx7Jo]oxfxfS]xff]]A.AFS7SSJSJ.SS2 X'#C\  P6Q/P#X01Í ÍX81Í Í#XP\  P6QXP# X4{  Federal Communications Commission`(#ZFCC 97195 ă   yxdddy   Њ +`Before the { Federal Communications Commission  X'+Washington, D.C. 20554 ă  X4In the Matter of hhCq)  Xv4` `  hhCq)ppIB Docket No. 97142  X_4Rules and Policies on Foreign Participation)  XH4in the U.S. Telecommunications Marketq)  X 4  ORDER AND NOTICE OF PROPOSED RULEMAKING ă   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.  XK4E Table of Contents ă  X4Topic`(#]Paragraph No.ă  X4X\I. Introduction p"(# I1׃ X\II. Background p"(#  II16 ׃  X4XX` ` A. Foreign Carrier Entry Order ` p"(#  II.A16 ׃ XX` ` B. WTO Basic Telecom Agreement ` p"(#  II.B20 ׃ X\III. Discussion p"(#  III25 ׃ XX` ` A. Entry Standard under Section 214 ` p"(#  III.A28 ׃ XX` ` X ` ` 1. WTO Member Countries p"(# III.A.129׃ XX` ` X X a. FacilitiesBased, Resold Switched and Resold NonInterconnected Private Line Services p"(# III.A.1.A29׃ XX` ` X X b. Switched Services Provided over FacilitiesBased and Resold Private Lines p"(# III.A.1.B48׃ XX` ` X ` ` 2. NonWTO Member Countries p"(# III.A.253׃ XX` ` B. Standard for Foreign Ownership under the Cable Landing License Act ` p"(#  III.B60 ׃ XX` ` X ` ` 1. WTO Member Countries p"(# III.B.162׃ XX` ` X ` ` 2. NonWTO Member Countries p"(# III.B.265׃ XX` ` C. Section 310 Standard for Foreign Ownership of Radio Licenses ` p"(#  III.C67 ׃ XX` ` X ` ` 1. WTO Member Countries p"(# III.C.172׃ XX` ` X ` ` 2. NonWTO Member Countries p"(# III.C.277׃"<&0*''ZZ\$"ԌXX` ` D. Regulatory Issues ` p"(#  III.D78 ׃ XX` ` X ` ` 1. Modification of Dominant Carrier and Other Operating Safeguards p"(# III.D.182׃ XX` ` X X a. Purpose of Dominant Carrier Regulation p"(# III.D.1.A88׃ XX` ` X X b. Basic Dominant Carrier Safeguards p"(# III.D.1.B92׃ XX` ` X XXhhCi. Tariffing Requirements hp"(# III.D.1.B.I92׃ XX` ` X XXhhCii. Addition or Discontinuation of Circuits hp"(# III.D.1.B.II95׃ XX` ` X XXhhCiii. Quarterly Traffic and Revenue Reports hp"(# III.D.1.B.III98׃ XX` ` X XXhhCiv. Provisioning and Maintenance Records hp!(# III.D.1.B.IV102׃ XX` ` X X c. Supplemental Dominant Carrier Safeguards p!(# III.D.1.C104׃ XX` ` X X d. Structural Separation p!(# III.D.1.D111׃ XX` ` X e. Other Operating Safeguards p!(# III.D.1.E114׃ XX` ` X XXhhCi. "No Special Concessions" Requirement hp!(# III.D.1.E.1114׃ XX` ` X XXhhCii. Benchmark Settlement Rates Condition hp!(# III.D.1.E.2119׃ XX` ` X XXhhCiii. Alternative Competitive Safeguards hp!(# III.D.1.E.3122׃ XX` ` X ` ` 2. Enforcement of Safeguards p!(# III.D.2124׃ XX` ` X ` ` 3. Amendments to Part 63 p!(# III.D.3128׃ XX` ` X X a. Streamlined Section 214 Procedures p!(# III.D.3.A130׃ XX` ` X X b. Other Rule Changes p!(# III.D.3.B138׃ XX` ` E. Framework for Accounting Rate Flexibility ` p!(# III.E144׃ X\IV. Procedural Issues p!(#  IV155 ׃  X4XX` ` A. Ex Parte Presentations ` p!(#  IV.A155 ׃ XX` ` B. Initial Regulatory Flexibility Analysis ` p!(#  IV.B156 ׃ XX` ` C. Initial Paperwork Reduction Act of 1995 Analysis ` p!(#  IV.C193 ׃ XX` ` D. Comment Filing Procedures ` p!(#  IV.D195 ׃ XX` ` E. Ordering Clauses ` p!(#  IV.E197 ׃ Appendix A: Rule Changes"0*%%ZZO"  X4IN I. Introduction ׃  X41.` ` IOn 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.  X 42.` ` 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  X44the Telecommunications Act of 1996.s4 yO'ԍTelecommunications Act of 1996, Pub. L. No. 104104, 110 Stat. 56.s 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.  X43.` ` Due to these changed circumstances, it is time to revisit the rules we adopted in 1995 to govern the entry of foreignaffiliated carriers into the U.S. market for basic telecommunications services. This Notice of Proposed Rulemaking (Notice) initiates a review  X4of the effective competitive opportunities (ECO) test and related rules adopted in the Foreign  X~4Carrier Entry Order.m~X {O'ԍMarket Entry and Regulation of ForeignAffiliated Entities, Report and Order, 11 FCC Rcd 3873 (1995)  {OQ'(Foreign Carrier Entry Order FCEOCITE ), recon. pending. In this Notice, we also discuss some of the issues raised in  {O'petitions for reconsideration of the Foreign Carrier Entry Order. Issues raised in these petitions for reconsideration may be rendered moot by the rules we adopt in this proceeding. We therefore hold these petitions in abeyance pending adoption of final rules in this proceeding.m We also propose conforming changes to our recently adopted framework for permitting flexible settlement arrangements between U.S. and foreign carriers.  X;44.` ` Our objective in this proceeding is to craft rules that will fairly balance a  X$4variety of public interest considerations. Our Foreign Carrier Entry Order listed a number of"$0*%%ZZ" such considerations, including competition, national security, foreign policy, law enforcement,  X4and trade policy.[ {Ob'ԍForeign Carrier Entry Order 62.[ When we adopted the ECO test, the United States had no relevant trade  X4obligations in the telecommunications services sector. We noted in the Foreign Carrier Entry  X4Order, however, that if the WTO negotiations concluded successfully, we would revisit our  X4rules as appropriate.DZ {O'ԍId.  244.D We propose now to consider all of these factors in reassessing our current rules.  Xc45.` ` 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.  X}46.` ` 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.  X 4market.x  {O'ԍSee generally Foreign Carrier Entry Order 6!18.x 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  X4power can act in an anticompetitive manner. As we said in the Foreign Carrier Entry Order,  X4we define market power as the ability to act anticompetitively against unaffiliated U.S.  X4carriers through the control of bottleneck services or facilities on the route in question.f~ {O 'ԍSee Foreign Carrier Entry Order  116.f  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"(0*%%ZZ" 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  X4required by the GATS framework.' {O4'ԍSee General Agreement on Trade in Services, April 15, 1994, Marrakesh Agreement Establishing the  {O'World Trade Organization, Annex 1B, 33 I.L.M. 1167, art. VI (1994); see also infra GATSOBLIGS22.' 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.  X_47.` ` 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  Xb4pressures in the coming years. Our Flexibility Orderb$ {O7'ԍRegulation of International Accounting Rates, CC Docket No. 90337, Phase II, Fourth Report and  {O'Order, FCC 96459 (Dec. 3, 1996) (Flexibility Order), recon. pending. will give these marketplace trends further momentum by making economically rational routing of international traffic easier to achieve.  X48.` ` 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,  X4many conduct remedies, i.e., postentry 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  Xi4telecommunications market. These tools may include our proposed benchmark safeguards i {O!'ԍSee International Settlement Rates, IB Docket No. 96261, Notice of Proposed Rulemaking, FCC 96484  {Od"'(Dec. 19, 1996) (BenchmarksBENCHNOTICE Notice). and stricter reporting requirements. We believe that our settlement rate benchmark proposals would greatly reduce the opportunity and incentive for anticompetitive conduct by"; 0*%%ZZ" 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.  X_49.` ` 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  X 4competitors..   {O7'ԍSee Telecommunications Act of 1996, Pub. L. No. 104104, secs. 101, 151,  251, 271, 272 (to be  {O'codified at 47 U.S.C. 251, 271, 272); see also Implementation of the Nonaccounting Safeguards of Sections  {O'271 and 272 of the Communications Act of 1934, as Amended, CC Docket No. 96149, First Report and Order  {O'and Further Notice of Proposed Rulemaking, FCC 96489 96-489  (Dec. 23, 1996) (Nonaccounting Safeguards Order  {O_'and FNPRM); Accounting Safeguards for Common Carriers Under the Telecommunications Act of 1996, CC  {O)'Docket No. 96150, Report and Order, 11 FCC Rcd 17,539 (1996); Regulatory Treatment of LEC Provision of Interexchange Services Originating in the LEC's Local Exchange Area and Policy and Rules Concerning the  {O'Interstate Interexchange Marketplace, CC Docket Nos. 96149 and 9661, Second Report and Order, FCC 97142  {O'(Apr. 17, 1997) (LEC Regulatory Treatment Order). Under section 271 of the Act as added by the Telecommunications Act of 1996, regional Bell Operating Companies may provide most interLATA services only after obtaining Commission approval.. At the same time, we believe that these are precisely the kinds of measures envisioned by the Reference  REFPAPR Paper on ProCompetitive 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 costoriented 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.  X4 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"e8 0*%%ZZ#" 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 facilitiesbased 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.  X 4 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 nonWTO Member countries. We specifically seek comment on the tentative legal and policy conclusions that underlie these and other rules proposed in this Notice.  X4 12.` ` We also believe it is appropriate to revisit the regulatory safeguards we should apply to foreignaffiliated 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 facilitiesbased international services. We request comment on new reporting requirements, the imposition of structural separation, and certain conduct remedies to address specific competitive concerns.  X 4 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 foreignaffiliated carriers will be able to distort competition in the U.S. market. Under these circumstances, we propose to streamline processing of applications of foreignaffiliated carriers in order to speed new entry. This policy is a logical complement to our proposal to rely on market forces and postentry safeguards to prevent anticompetitive conduct in most cases. "# 0*%%ZZ!"Ԍ X4 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.  X_415.` ` 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.  X ' 3LII. Background ׃  Xy4 A. Foreign Carrier Entry Order   XL416.` ` II II.A In November 1995, the Commission adopted rules governing entry of foreign X54affiliated carriers into the U.S. market.{ 5 {O'ԍXForeign Carrier Entry Order, supra note FCEOCITE2.(#{ These rules deal both with applications for authorizations to provide international telecommunications services pursuant to Section 214 of  X4the Communications Act of 1934D Z yO'ԍ47 U.S.C.  214.D and with applications for common carrier radio licenses  X4under Title III of the Act.M  yO'ԍ47 U.S.C. 301399B.M The Foreign Carrier Entry Order stated three goals of our  X4rules:wz {O'ԍXSee Foreign Carrier Entry Order 6, 8, 17.(#w  X4X" X` ` to promote effective competition in the U.S. telecommunications services market, particularly the market for international telecommunications services;(#`  Xh4X" X` ` to prevent anticompetitive conduct in the provision of international services or facilities; and(#`  X#4X" ` ` to encourage foreign governments to open their communications markets.(#"# 0*%%ZZ"Ԍ X4ԙ17.` ` 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 facilitiesbased, switched resale, and noninterconnected 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  Xv4foreign carrier has market power.0v yO'ԍIn general, for purposes of applying our ECO test under Section 214 of the Act, we consider an applicant to be affiliated with a foreign carrier when a foreign carrier owns a greater than 25 percent interest in,  {O 'or controls, the applicant. 47 C.F.R. 63.18(h)(1)(i); Foreign Carrier Entry Order  7377, 24551; see also  {OI 'id.  7887 (scrutiny of foreign carrier investments of 25 percent or less; aggregation of multiple carrier interests).0 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.  X 418.` ` In applying our effective competitive opportunities test, we examine first the  X 4legal, 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  X 4of entry, i.e., terms and conditions of interconnection, competitive safeguards, and the  X 4regulatory framework.e | {O'ԍForeign Carrier Entry Order 3, 42!55; see also id.  49 (we examine "whether there exist reasonable and nondiscriminatory charges, terms and conditions for interconnection to a foreign carrier's domestic facilities for termination and origination of international services . . . [and whether there are] adequate means to monitor  {O2'and enforce these conditions"); id.  51 (competitive safeguards we examine include: "(1) existence of costallocation rules to prevent crosssubsidization; (2) timely and nondiscriminatory disclosure of technical information needed to use, or interconnect with, carriers' facilities; and (3) protection of carrier and customer  {O'proprietary information"); id.  54 (in examining the regulatory framework in the destination country, our focus is on "whether there is separation between the foreign regulator and the operator of international facilitiesbased services, and whether there are fair and transparent regulatory procedures in the destination market"). e  X}419.` ` The Foreign Carrier Entry Order also delineated additional public interest factors that we consider in determining whether to grant a foreignaffiliated carrier's application. These include the general significance of the proposed entry on competition in the U.S. communications services market, the presence of costbased accounting rates (under Section 214), as well as national security, law enforcement issues, foreign policy and trade  X 4concerns brought to our attention by the Executive Branch.p R  {O#'ԍXForeign Carrier Entry Order 3, 61!72.(#p We stated in the Foreign  X4Carrier Entry Order that we would accord deference to the views of the Executive Branch on" 0*%%ZZ)"  X4issues uniquely within its competence.d {Oy'ԍXForeign Carrier Entry Order 219.(#d 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  X4exchange for still greater liberalization in the U.S. basic telecommunications market.\Z {O'ԍForeign Carrier Entry Order 240.\  X' B. WTO Basic Telecom Agreement   Xv420.` `  II.B The WTO Basic Telecom Agreement was concluded under the framework  X_4established by the General Agreement on Trade in Services (GATS)._ yO 'ԍGeneral Agreement on Trade in Services, April 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 1B, 33 I.L.M. 1167 (1994) [hereinafter 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.  X 421.` ` 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, sectorspecific 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.  X422.` ` 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  X~4Members "Most Favored Nation" (MFN) treatment.?\~D {Os!'ԍSee GATS art. II. The MFN obligation, like other provisions of the GATS, applies to "measures" that  {O="'affect trade in services. "Measures" are essentially actions taken by a national or subnational government. See GATS art. I para. 3(a).? 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"P h 0*%%ZZN"  X4not made specific market access commitments.X yOy'ԍIn other words, even if a country has not specifically agreed to allow U.S. carriers to enter its market, it must treat U.S. carriers no less favorably than any other foreign carrier if it does allow foreign entry into its market. A related GATS obligation is National Treatment, which is a nondiscrimination rule that requires a WTO Member to treat companies  X4from other WTO Members as it treats its own companies." {Ok'ԍSee GATS art. XVII. An important distinction between MFN and National Treatment is that a WTO Member may expressly limit National Treatment by stating in its schedule of commitments the ways in which it intends to treat nonnational companies differently from national companies. MFN treatment, in contrast, cannot be limited in this way, although a Member may take exemptions from the GATS MFN requirement. In addition, a Member is obligated to grant other Members' companies access to its market on the terms that it specifies  X4in its schedule of commitments.I {O' 'ԍSee GATS art. XVI.I Like National Treatment, Market Access may be limited, but only in ways specifically enumerated in the GATS. GATSOBLIGS Finally, the GATS  GATSFAIR requires measures  Xv4related to domestic regulation to be reasonable, objective, impartial, and transparent.Nvd  {O'ԍSee GATS arts. III, VI.N  XH423.` ` 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  X 4(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.  X424.` ` Similarly, if a foreign government fails to comply with the regulatory principles  X4to which it has committed itself, the U.S. Government may enforce that commitment.  {O"'ԍThese regulatory principles are embodied in the Reference Paper discussed in para. REFPAPR9, supra, which was multilaterally negotiated during the WTO negotiations on basic telecommunications. These principles are essentially the same as the requirements of the Communications Act and the" P 0*%%ZZ" Telecommunications Act of 1996 that this Commission has implemented over the past 16 months. Sixtyfive governments have undertaken enforceable obligations to ensure that dominant carriers provide nondiscriminatory and timely interconnection to their competitors at costoriented 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 crosssubsidizing competitive services with monopoly services, the U.S. Government could take a dispute against that government.  X 4YM III. Discussion ׃  X 425.` ` IIIIn 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  X4access to reasonable rates and high quality services.kZ {Oh'ԍForeign Carrier Entry Order  89, 17; see also id. 10 ("Effective competition directly advances the public interest and the Commission's paramount goal of making available a rapid, efficient, worldwide wire and radio communication service with adequate facilities at reasonable charges.").k  X426.` ` Our second goal is to prevent anticompetitive conduct in the provision of  X4international 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  X"4the detriment of U.S. consumers.&Z" {O"'ԍForeign Carrier Entry Order  13; see also id. ("Our regulation of discriminatory and exclusionary behavior . . . has sought to control the potential misuse of monopoly power while maintaining the benefits of competitive entry.").& "" 0*%%ZZ"Ԍ X4ԙ27.` ` 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 endtoend 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,  X_4increased quality, and innovation.b_ {O'ԍForeign Carrier Entry Order  1415, 17; see also id.  16 ("Only with effective opportunities to compete on the foreign end can both the benefits of foreign carrier affiliation and the prevention of  {Oj 'anticompetitive conduct actually be achieved."); id.  29 ("Safeguards by themselves are not as effective in achieving meaningful competition in the provision of U.S. international services as a market structure supported by competitive entry and safeguards on both ends of a particular international route.").b  X1' A. Entry Standard under Section 214   X 428.` `  III.A In November 1995, when the Commission adopted the Foreign Carrier Entry  X 4Order, more than 95 percent of the world's telecommunications revenues (excluding U.S.  X 4telecommunications revenues) went to monopoly or dominant carriers.a | {O'ԍGregory C. Staple ed., Telegeography 1995.a 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. Fiftytwo 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.  X' 1. WTO Member Countries  XR' ` ` a. FacilitiesBased, Resold Switched and Resold NonInterconnected  X;'Private Line Services (#` "$ 0*%%ZZ"Ԍ X429.` `  III.A.1 III.A.1.AWe tentatively conclude that the WTO commitments made by 68 other  X4governments will, when fulfilled, substantially achieve the paramount goal of our Foreign  X4Carrier 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.  Xc430.` ` 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 endtoend 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  X 4acumen, responsiveness to customers, [and] . . . technological innovation."[  {OR'ԍForeign Carrier Entry Order  15.[ As a result, U.S. consumers of international services will receive the maximum benefits of reduced rates and  X 4increased quality, choice, and innovation.[ Z {O'ԍForeign Carrier Entry Order  14.[ 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.  XO431.` ` 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 facilitiesbased and resold non X;4interconnected private line services.!"; yO!'ԍWhen a U.S. carrier provides these services in correspondence with an affiliated foreign carrier that has market power in the destination market, discriminatory conduct can occur in the routing and settlement of traffic (for facilitiesbased switched services); pricing, provisioning and maintenance of essential facilities; and use of  {O0$'information (e.g., technical information; carrier and customer proprietary information). See infra  RISKS90 . The market access and regulatory commitments that";!0*%%ZZ" their governments have made should provide a meaningful check on their exercise of market power. As discussed below, however, where international facilitiesbased competition does not exist in the destination market of a foreignaffiliated U.S. carrier, we propose to impose specific safeguards to ensure that a foreignaffiliated carrier is unable to leverage its foreign  X4market power into the U.S. market.Y" {O'ԍSee infra Section III.D.1.c.Y 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  X_4the U.S. international services market.`#_Z {Oj 'ԍSee Foreign Carrier Entry Order  143.`  X1432.` ` 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 facilitiesbased, resold switched, and resold noninterconnected 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 facilitiesbased, resold switched, or resold noninterconnected private line services. In order to rebut 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.  X4 33.` ` Several factors weigh in favor of our eliminating the ECO test for facilitiesbased, resold switched, and resold noninterconnected 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  XN4proposals 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.  X4!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. " #0*%%ZZH" 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  X4power and ECO analyses that this Commission has undertaken since the Foreign Carrier  X4Entry Order have been factspecific, detailed reviews of competitive conditions FSDRCC  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.  X54"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.  Xf4#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 facilitiesbased, resold switched, or resold noninterconnected 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 nonWTO 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  XR4treatment and that their domestic regulations be reasonable, objective, and impartial.I$R {O'ԍSee GATS art. VI. I 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. " Z$0*%%ZZ."Ԍ X4$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.  X 4%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  Xy4revised dominant carrier safeguards described below.O%y {O'ԍSee infra Section III.D.O 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  X44with our rules and policies.\&4Z {O?'ԍSee 47 U.S.C.  214, 502, 503.\ In extreme cases, we have authority to revoke authorizations. Enforcement of the antitrust laws is also available to remedy anticompetitive conduct or  X4effects. 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  X4anticompetitive conduct.'\ {Ow'ԍSee Benchmarks Notice  75 ("[I]f a foreign carrier is collecting costbased settlement rates, or if its ability to collect abovecost settlement rates is constrained by the existence of effective competition in its home  {O 'market, concerns about anticompetitive behavior will be significantly diminished."); id. 83. For example, we have proposed to condition the facilitiesbased 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  X4is within the benchmark range proposed in that proceeding.w( yOV!'ԍWe discuss the proposed safeguard below in Section III.D.1.e.ii.w  Xg4&39.` ` In general, we believe that the WTO Basic Telecom Agreement sufficiently  XP4reduces the risk of anticompetitive effects, including anticompetitive conduct, that these postentry safeguards will be adequate to protect competition in the U.S. telecommunications"9(0*%%ZZ+" 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.  Xv4'40.` ` 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 outputRP. 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.  Xy4(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  X4misconduct involving false statements or dishonesty.)& {Oh'ԍSee Policy Regarding Character Qualifications in Broadcast Licensing, 102 FCC 2d 1179, 119597,  {O2'120003 (1986) (Character Qualifications), modified, 5 FCC Rcd 3252, 3252 (1990) (Character Qualifications  {O'Modification); MCI Telecommunications Corp., 3 FCC Rcd 509, 515 n.14 (1988) (stating that character qualifications standards adopted in the broadcast context can provide guidance in the common carrier context).  X4)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  X4radio transmission of energy."*  yO'ԍClayton Act  11, 15 U.S.C.  21(a). Section 7 of the Clayton Act proscribes the acquisition of stock or assets of a company by another company "where in any line of commerce or in any activity affecting commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly." 15 U.S.C.  18. The courts have construed these statutory authorizations to mean that the Commission has discharged its statutory responsibilities "when the Commission"|*0*%%ZZ`" seriously considers the antitrust consequences of a proposal and weighs those consequences  X4with other public interest factors."~+ {Ob'ԍUnited States v. FCC, 652 F.2d 72, 88 (D.C. Cir. 1980) (en banc).~  X4*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  X4observed 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  Xa4that we deny a particular application.g,aZ {Ol 'ԍForeign Carrier Entry Order  3, 6172.g  X34+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 facilitiesbased, resold switched, and resold noninterconnected 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.  Xd4,45.` ` 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 facilitiesbased, resold switched, or resold noninterconnected 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.  X~4-46.` ` 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 endtoend operations might flow solely to a particular U.S. carrier and its foreign affiliate.  X4.47.` ` We also request comment on whether the procompetitive benefits of eliminating the effective competitive opportunities test for WTO Member countries (including" ,0*%%ZZH" WTO Member countries that have made no, poor, or unfulfilled commitments towards opening their markets to effective competition) outweigh the procompetitive 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.  X_'` ` b. Switched Services Provided over FacilitiesBased and Resold Private  XH'Lines (#`  X 4/48.` ` III.A.1.BWe have applied an "equivalency" test EQUIV1  since 1992 to applications from all carriers that seek to provide switched, basic telecommunications services using resold  X 4international private lines.-(  {Oe 'ԍSee Regulation of International Accounting Rates, Phase II, CC Docket No. 90337, First Report and  {O/'Order, 7 FCC Rcd 559, 561 (1991) (International Resale Order); Order on Reconsideration and Third Further  {O'Notice of Proposed Rulemaking, 7 FCC Rcd 7927 (1992); Third Report and Order and Order on  {O'Reconsideration, 11 FCC Rcd 12,498 (1996). 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.  X 4carriers resale opportunities equivalent to those available under U.S. law. The Foreign  X4Carrier Entry Order extended this test, with limited exception, to carriers using their  X}4authorized facilitiesbased private lines. .. } yO'ԍAuthorized U.S. carriers may use their facilitiesbased private lines to carry switched traffic without demonstrating equivalency for the country at the foreign end of the private line provided: (1) the carrier's private line is interconnected to the public switched network only on one end " either the U.S. end or the foreign end; and (2) the carrier is not operating the facility in correspondence with a carrier that directly or indirectly owns  {O'the private line facility in the foreign country at the other end of the private line. See 47 C.F.R. 63.18(e)(4)(ii);  {O'Foreign Carrier Entry Order  157161. We have received two petitions for reconsideration of this rule. WorldCom requests that we extend the rule to permit a U.S. facilitiesbased private line carrier to correspond with a nondominant, U.S.affiliated carrier that owns a foreign halfcircuit. BT North America, Inc. (BTNA) requests that we permit U.S. private line resellers to engage in oneended interconnection on the same basis allowed facilitiesbased private line carriers. These requests for reconsideration may become moot with respect to the provision of switched, basic services over private lines between the United States and WTO Member countries in the event we adopt our proposal to eliminate the equivalency test as the standard for authorizing  {OJ'such services.  See infra  EQ150 ! EQ252 .  The Foreign Carrier Entry Order also restated the  Xh4equivalency test in the same manner as the ECO test./h {O!'ԍForeign Carrier Entry Order  136138. We noted, however, two practical distinctions between the  {O"'equivalency and ECO tests. First, the equivalency test applies to applications from any entity seeking to provide switched services via international private lines " regardless of any foreign carrier affiliation in the destination  {O#$'market. Second, the equivalency test requires that the de jure and de facto criteria be met at the time we make  {O$'an equivalency finding, while the ECO test requires that these criteria be satisfied in the near future. Id. 138. "hf/0*%%ZZ"Ԍ X4ԙ049.` ` We adopted the equivalency test EQUIV2  to prevent "oneway 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  X4accounting rate system. In the International Resale Order, we stated that such oneway 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 abovecost 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  X 4in the reverse direction, and must continue to pay a relatively high settlement rate.0\  {O 'ԍWe noted in the Benchmarks Notice that the average foreign settlement rate for U.S. traffic (weighted by minutes of U.S. outgoing traffic) is approximately $0.36 per minute. This is potentially as much as four to six  {O' 'times our estimate of the incremental cost of terminating international traffic. Benchmarks Notice  34. This type of distortion could impede our goal of creating greater competition in the U.S. IMTS market.  X 4150.` ` We believe that, for purposes of WTO Member countries, the WTO agreement substantially reduces the threat of oneway 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  X4private lines for the provision of switched, basic services in the Benchmarks proceeding. As  X4discussed infra in Section III.D, we propose to modify that condition to cover U.S. facilitiesbased carriers' use of their authorized private lines for the provision of switched, basic  X4services.1 yOM'ԍWe review the proposed benchmark settlement rate condition for facilitiesbased carriers' use of their  {O'authorized private lines for the provision of switched, basic services infra in Section III.D.1.e.ii. EQ1We 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.  X&4251.` ` We nonetheless remain concerned about the potential for oneway bypass in the U.S. IMTS market for those WTO countries that have made no or poor quality commitments"F10*%%ZZ" 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.  X4These mechanisms would consist of the postentry safeguards discussed in Section III.D infra, including, in particular, the proposed benchmark settlement rate conditions.  Xx4352.` ` We request comment on our tentative conclusion that, with the WTO Basic Telecom Agreement and our proposed benchmark settlement rate conditions, EQ2it 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 oneway 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.  XM'X 2. NonWTO Member Countries (#  X4453.` `  III.A.2 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 facilitiesbased, resold switched, and resold noninterconnected private line services filed by carriers from countries  X4that 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.  X;4554.` ` We therefore conclude that we have not fully achieved the goals of the Foreign  X&4Carrier Entry Order because, as far as nonWTO 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 facilitiesbased, resold switched, and resold noninterconnected private line services between the United States and nonWTO 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, nonWTO Member countries are not subject to the general obligations of the GATS. Therefore, to the extent the nonWTO Member countries liberalize"p$10*%%ZZ"" 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 nonWTO countries engage in discriminatory conduct.  X4655.` ` We tentatively conclude that, for purposes of Section 214 applications to provide facilitiesbased, resold switched, and resold noninterconnected 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.  X 4756.` ` Commenters on this issue should discuss whether we should modify our ECO  X 4test for nonWTO countries. We note that a petition for reconsideration of the Foreign  X 4Carrier Entry Order requests that the Commission modify application of the ECO analysis.F2\  {OP'ԍSee Telefonica Larga Distancia de Puerto Rico Petition for Reconsideration of the Foreign Carrier Entry  {O'Order (filed Jan. 29, 1996) (TLD Petition); TLD Reply to Oppositions to Petition for Reconsideration (filed Mar. 11, 1996) (TLD Reply).F  X 4857.` ` 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 Xf4WTO country.w3Zf {O'ԍ  Commenters who advocate retaining the ECO analysis for purposes of countries that are WTO Members may also discuss whether 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 WTO country. w We note that, in a petition for reconsideration of the Foreign Carrier Entry  XQ4Order, 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  X4not support its discriminatory application of the ECO test.t4F {O'ԍSee TLD Petition at 1318; see also id. at 1112 (the Commission should "apply the ECO analysis to  {OR 'controlling investments held by U.S. carriers [in foreign carriers that own bottleneck facilities]"); id. at 3 (in the alternative, noting that the ECO analysis applies not only to "destination markets where a foreign carrier has a 25 percent or more investment in the U.S. carrier. . . but also to routes to third countries . . . where there is a carrier under the common control of the investing carrier[,]" and requesting that the Commission should "reconsider its decision to apply the ECO analysis to [such] third country routes . . . where the foreign carrier in those third  {O<$'countries does not have an investment of at least 25 percent in the U.S. carrier applicant"); see also TLD Reply"%30*%%4$"  {OX'at 24 and 89; see also BT North America Petition for Reconsideration (filed Jan. 29, 1997) (BTNA Petition) at 35 (potential for anticompetitive conduct exists when a U.S.based carrier has an ownership interest in foreign carriers having market power in the destination market); AT&T Opposition to Petitions for Reconsideration (filed Feb. 29, 1996) (AT&T Opposition) at 2, 1011 (supporting Commission's decision).t "z40*%%ZZ"Ԍ X4ԙ958.` ` 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  X4that 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 oneway 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 nonWTO 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 nonWTO countries engage in discriminatory conduct.  X 4:59.` ` Liberalization of the international services markets of WTO Member countries may increase pressure on nonWTO 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 oneway bypass of the settlements process by carriers from nonWTO Member countries. We seek comment on this tentative conclusion.     X' B. Standard for Foreign Ownership under the Cable Landing License Act   X4;60.` `  III.B The Cable Landing License ActT5z yO'ԍ47 U.S.C. 35!39 (1994).T 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  Xe4its citizens in foreign countries, or will promote the security of the United States."$6Ze  yO #'ԍ47 U.S.C. 35. The powers granted to the President by the Cable Landing License Act have been  {O#'delegated to the Commission by Executive Order No. 10,530, reprinted as amended in 3 U.S.C.A. 301 at 1052 (1985).$ We may"e, 60*%%ZZ#" also impose such terms on a license "as shall be necessary to assure just and reasonable rates  X4and service in the operation and use of cables so licensed."C7 yOb'ԍ47 U.S.C. 35.C We did not address the exercise  X4of this jurisdiction in the Foreign Carrier Entry Order.  X4<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  Xz4given to us under the Cable Landing License Act.8zX {O 'ԍTelefonica Larga Distancia de Puerto Rico, Inc., File Nos. ITC92116AL, SCL93001, ITC93029 (May2, 1997). 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 ECOtype analysis to applications for cable landing licenses historically on a casebycase basis.   X ' 1. WTO Member Countries   X 4=62.` `  III.B.1 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.  X4>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"80*%%ZZk" 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.  X_4?64.` ` As required by Executive Order 10530,9_ {O'ԍExec. Order No. 10,530, 5(a), reprinted as amended in 3 U.S.C.A. 301 at 1052 (1985). 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  X 4ownership restrictions be imposed on the U.S. cable landing station?8: Z {O'ԍSee, e.g., Letter from Michael T.N. Fitch, Acting United States Coordinator and Director, Bureau of International Communications and Information Policy, U.S. Department of State, to George S. Li, Chief, International Facilities Division, Federal Communications Commission (Oct. 6, 1992) (approving the transfer of cable landing licenses to LD Acquisition Corporation, a wholly owned subsidiary of Telefonica de Espana, subject to a list of conditions) (available in the FCC International Bureau Reference Center).8 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.  X' 2. NonWTO Member Countries   Xb4@65.` `  III.B.2 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 nonWTO Member country seeks to land and operate a cable between that country and the  X4United States. As noted in Section III.A.2, supra, there are no changed circumstances with respect to nonWTO 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 nonWTO Member countries may raise a risk of  X~4anticompetitive conduct similar to the harms we addressed in the Foreign Carrier Entry  Xi4Order with respect to Section 214 authorizations.  X=4A66.` ` We also find that use of our discretion to deny a license for a cable between the United States and a nonWTO Member country where a dominant foreign carrier seeks to"& :0*%%ZZ" 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 nonWTO 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  X4cable on its shores. We would also continue to consider, in addition to the de jure and de  Xx4facto 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.  X5' C. Section 310 Standard for Foreign Ownership of Radio Licenses   X 4B67.` `  III.C 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  X4and including 100 percent.! ;( {O 'ԍSee, e.g., Sprint Corp., Declaratory Ruling and Order, 11 FCC Rcd 1850 (1996) (approving 28 percent  {O'foreign ownership of Sprint); Cable & Wireless, Inc., 10 FCC Rcd 13,177 (1995) (approving controlling interest  {O'by aliens of parent corporation that controlled corporation applying for common carrier satellite licenses); MCI  {Ok'Communications Corp. and British Telecommunications plc, Declaratory Ruling and Order, 9 FCC Rcd 3960  {O5'(1994) (approving transaction that would result in a potential 28 percent foreign ownership of MCI); GRC  {O'Cablevision, Inc., 47 FCC 2d 467 (1974) (approving controlling interest by aliens of parent corporation that controlled corporation applying for cable antenna radio service licenses when such licenses were covered by  {O'Section 310(b)); Melbourne Int'l Communications, Ltd., DA 97115, File Nos. 1940DSETC96(2), ITC96492(TC) (Int'l Bur. Jan. 21, 1997) (approving controlling interest by aliens of parent corporation that controlled  {O#'corporation holding two common carrier satellite earth stations); AmericaSky Corp., DA 962034, File No. 1821DSETC96(3) (Int'l Bur. Dec. 6, 1996) (approving controlling interest by aliens of parent corporation that  {O'controlled corporation holding three earth station facilities); Shell Offshore Servs. Co., 11 FCC Rcd 10,119 (Int'l Bur. & Wireless Bur. 1996) (approving controlling interest by aliens of parent corporation that controlled corporation applying for authority to operate a digital pointtopoint microwave network on a common carrier  {O'basis); MCI Communications Corp., Declaratory Ruling, 10 FCC Rcd 8697 (Int'l Bur. 1995) (granting MCI's  {O'petition for an increase in its foreign ownership from 28 percent to 35 percent); Teleport Transmission Holdings,  {O'Inc., 9 FCC Rcd 6430 (Int'l Bur., Telecom. Div., 1994) (approving acquisition of controlling interest by aliens of parent corporation that controlled corporate common carrier satellite earth station licensee).! 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  X:4anticompetitive conduct, and opening foreign markets.f<: {O#'ԍSee Foreign Carrier Entry Order 186.f "#J<0*%%ZZU"Ԍ X4C68.` ` 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  X4investment from WTO Member countries.= yOK'ԍWe do not address in this proceeding applications by users in the United States for Title III licenses to access nonU.S. satellites. Those are being addressed in the matter of Amendment of the Commission's Regulatory Policies to Allow NonU.S.Licensed Space Stations to Provide Domestic and International Satellite  {O'Service in the United States, IB Docket No. 96111, Notice of Proposed Rulemaking, FCC 96210 (May 14,  {Om'1996) (DISCO II). 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  X14the license to address specific concerns.]>1| {O^'ԍSee 47 U.S.C. 307(a), 309(a).]  X 4D69.` ` We propose not to change our approach to Section 310(b)(4) common carrier applications with respect to applicants with investors from nonWTO 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,  X 4supra, these goals have not yet been achieved with respect to nonWTO Member countries.  X{4E70.` ` We also propose not to change the ad hoc approach that we reaffirmed in the  Xf4Foreign 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  X#4sufficient historical guidance in this context to establish a general rule.f?# {O'ԍSee Foreign Carrier Entry Order 196.f We tentatively  X 4conclude that experience has shown that an ad hoc approach is appropriate for these licenses, and we see no reason to change our casebycase approach now. We seek comment on this tentative conclusion.  X4F71.` ` Finally, we do not propose to amend our rules for broadcast licenses, which are  X4not 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"?0*%%ZZz"  X4different issues than common carrier licenses.s@ {Oy'ԍSee Foreign Carrier Entry Order 190!194. s We do not propose to disturb that finding here.  X' 1. WTO Member Countries   X4G72.` `  III.C.1 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  X 4opportunities focuses first on the de jure restrictions imposed by the foreign government and  X 4also 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 lessthancontrolling 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  X4permitted to U.S. investors.qAZ {O'ԍSee Foreign Carrier Entry Order 199!214.q  XQ4H73.` ` 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. Twentyseven 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  X&4anticompetitive dangers as in the international Section 214 context.]B& {O"'ԍSee infra   ACDS90 .] 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."~B0*%%ZZ"Ԍ X4ԙI74.` ` 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  XH4Executive Branch.YCH {O 'ԍSee supra Section III.A.1.a.Y 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.  X 4J75.` ` 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.  X|4K76.` ` We tentatively conclude that we will continue to determine a foreign investor's  Xe4home market by applying the "principal place of business" test that we set out in the Foreign  XP4Carrier Entry Order.fDPZ {O['ԍSee Foreign Carrier Entry Order 207.f 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  X$4"service supplier" of a WTO Member.LE$ {O"'ԍSee GATS art. XXVIII.L 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"~E0*%%ZZ" 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.  X' 2. NonWTO Member Countries   X_4L77.` `  III.C.2 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  X4the governments of nonWTO Member countries to lift de jure and de facto barriers to U.S.  X{4investment.fF{ {O'ԍSee Foreign Carrier Entry Order  186.f We seek comment on these tentative conclusions and on ways that the existing ECO test might be revised to be less administratively burdensome.  X6' D. Regulatory Issues   X4M78.` `  III.D 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  X4carrier services. We have attempted in recent proceedingsGZ {O'ԍSee, e.g., Foreign Carrier Entry Order  256!271 (modifying dominant carrier and other operating  {O'safeguards); Regulation of International Accounting Rates, CC Docket No. 90337, Phase II, Fourth Report and  {Oy'Order, FCC 96459 (Dec. 3, 1996) (Flexibility Order), recon. pending (adopting rules permitting flexible  {OC'settlement arrangements); Rules for Filing of International Circuit Status Reports, CC Docket No. 93157, Report  {O 'and Order, 10 FCC Rcd 8605 (1995); Benchmarks Notice, supra note BENCHNOTICE9; infra BSRC1119!BSRC2121. 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. "9G0*%%ZZ"Ԍ X4N79.` ` 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 ProCompetitive 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  X 4impartial means of attaining legitimate public interest goals.HH  {ON'ԍSee GATS art. VI.H  X 4O80.` ` 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 foreignaffiliated 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  X44and 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 halfcircuits, cable headends, and digital access crossconnection 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.  X 4P81.` ` 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 facilitiesbased 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 foreignaffiliated carriers. Finally,"! ZH0*%%ZZ " in order to deter anticompetitive conduct further, we make clear here our intention to impose specific and significant sanctions on foreignaffiliated carriers that engage in anticompetitive  X4conduct in the U.S. market.I yOK'ԍSuch sanctions would apply equally to all U.S. carriers with foreign affiliates that have market power in the foreign market, regardless of whether the carriers' primary ownership is U.S. or foreign. 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  X4safeguards on such entry.8J  {O^ 'ԍSee 47 U.S.C.  272 (b)(e); see also Implementation of the Nonaccounting Safeguards of Sections 271  {O( 'and 272 of the Communications Act of 1934, as Amended, CC Docket No. 96149, First Report and Order and  {O 'Further Notice of Proposed Rulemaking, FCC 96489 (Dec. 23, 1996) (Nonaccounting Safeguards Order and  {O 'FNPRM). In both the domestic and international services contexts, we believe that competition does not remove the need for regulatory constraints on carriers that have the ability to leverage their existing market power into  {ON 'new markets. See also Regulatory Treatment of LEC Provision of Interexchange Services Originating in the LEC's Local Exchange Area and Policy and Rules Concerning the Interstate Interexchange Marketplace, CC  {O'Docket Nos. 96149 and 9661, Second Report and Order, FCC 97142 (April 17, 1997) (LEC Regulatory  {O'Treatment Order).8  X_' 1. Modification of Dominant Carrier and Other Operating Safeguards    X14Q82.` `  III.D.1 Our international regulations traditionally have distinguished between "dominant" and "nondominant" carriers. We have classified carriers operating in the U.S. market, whether U.S. or foreignowned, 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.  X 4carrier can exercise market power on the U.S. end of a particular routeK  {O'ԍSee generally International Competitive Carrier Policies, Report and Order, 102 FCC 2d 812 (1985),  {ON'recon. denied, 60 RR 2d 1435 (1986). 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  X4services 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  Xd4terminate U.S. international traffic).LFdZ  {Oo'ԍSee Regulation of International Common Carrier Services, Report and Order, 7 FCC Rcd 7331, 7334  {O9 '19 (1992) (International Services); see also Foreign Carrier Entry Order 116. In general, for purposes of determining a U.S. international carrier's regulatory status, we consider the U.S. carrier to be affiliated with a foreign carrier when the foreign carrier owns a greater than 25 percent interest in, or controls, the U.S. carrier or  {O"'when the U.S. carrier owns a greater than 25 percent interest in, or controls, the foreign carrier. See 47 C.F.R. 63.18(h)(1)(i)(A)!(B). We then apply the following presumptions: (1) carriers without a foreign affiliation on the route at issue are presumed nondominant; (2) carriers affiliated with a carrier that is a monopoly in the"$K0*%%$" destination market are presumptively classified as dominant for that route; and (3) carriers affiliated with a foreign carrier that is not a monopoly on that route receive closer scrutiny by the Commission. Carriers that provide service on a route solely through the resale of an unaffiliated U.S. facilitiesbased carrier's international  {O'switched services are presumed nondominant regardless of any foreign carrier affiliation on the route. See  {Oz'International Services  19, 31; see also 47 C.F.R. 63.10(a). Carriers regulated as dominant on a particular route due"d!DL0*%%ZZ" to an affiliation with a carrier on the foreign end of the route are subject to specific  X4safeguards set forth in our rules.MD yO'ԍA foreignaffiliated carrier regulated as dominant on a particular route is requiredLSTGENREQ to: "(1) file international service tariffs on 14days notice without cost support; (2) maintain complete records of the provisioning and maintenance of basic network facilities and services procured from its foreign carrier affiliate . . . ; (3) obtain Commission approval pursuant to 63.18 before adding or discontinuing circuits; and (4) file quarterly reports of revenue, number of messages, and number of minutes of both originating and terminating traffic . . . ." 47 C.F.R. 63.10(c). These safeguards are to a great extent different from the safeguards the Commission traditionally has imposed on U.S. carriers regulated as dominant  X4due to market power of the U.S. carrier on the U.S. end of a route.N  yO('ԍRegulations associated with dominant carrier classification due to market power of the U.S. carrier on  {O'the U.S. end of a route include rate of return or price cap regulation to ensure that rates are reasonable, see 47 C.F.R. 61.41(a)(1), and more stringent section 214 requirements to prevent investment in unnecessary new  {O'plant and to bar service discontinuances in areas served by a single carrier. See generally LEC Regulatory  {OL'Treatment Order  8586; Motion of AT&T Corp. to Be Declared NonDominant for International Services,  {O'Order, FCC 96209 (May 14, 1996)  2628; Petition of GTE Hawaiian Telephone Co., Inc. for Reclassification  {O'as a NonDominant IMTS Carrier, DA 961748,  8 (Int'l Bur. Oct. 22, 1996). In the LEC Regulatory Treatment  {O'Order, we recently concluded that the Bell Operating Companies' (BOCs) and independent local exchange carriers' (ILECs) market power in the provision of local exchange and exchange access service did not warrant imposing these traditional dominant carrier safeguards on the BOCs' and ILECs' provision of inregion and outofregion domestic and international long distance services. We concluded that these safeguards generally were designed to prevent a carrier from raising prices by restricting its own output and that the BOCs and ILECs could not leverage their local bottlenecks to this extent in the long distance marketplace. We also concluded that the benefits of these safeguards would be outweighed by the burdens that would be imposed on competition and that other statutory safeguards and regulations applicable to these carriers would address such concerns in a less  {O'burdensome and more effective manner. We noted in the LEC Regulatory Treatment Order the separate issue of whether a BOC, or ILEC, or any other U.S. carrier should be regulated as dominant in the provision of international service because of the market power of an affiliated foreign carrier in a foreign destination market.  {OF'Id.  8 n.22. 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. "v"lN0*%%ZZb"Ԍ X4R83.` ` We tentatively conclude that the general requirements imposed on all U.S.  X4international carriers by our rulesO {Ob'ԍ See 47 U.S.C.  201!203; 47 C.F.R.  43.51(a)!(d) (requiring common carriers engaged in foreign communications to file with the Commission certain contracts, agreements, and other arrangements); 47 C.F.R. 43.51(e) (International Settlements Policy); 47 C.F.R.  43.61 (requiring common carriers engaged in the provision of international telecommunications service between the United States and foreign destinations to file reports containing annual traffic and revenue data); 47 C.F.R.  43.82 (requiring facilitiesbased carriers engaged in the provision of international service to file annual international circuit status reports); 47 C.F.R.  63.14 (prohibiting U.S carriers authorized to provide international communications service from agreeing to accept special concessions directly or indirectly from any foreign carrier or administration with respect to traffic or revenue flows between the United States and any foreign country for which the U.S. carrier is authorized to provide service); 47 C.F.R.  63.15 (requiring private line resellers to file annual circuit addition reports). 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.  X 4S84.ؚ` ` 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 foreignaffiliated 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 facilitiesbased 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 facilitiesbased 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 X4affiliated carriers.  X4T85.` ` We believe that this approach is a significant advance from the regime imposed  X|4by 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"g#b O0*%%ZZ#" foreign carriers with market power from leveraging that market power into the U.S. market. We seek comment on this tentative conclusion.  X4U86.` ` We also tentatively conclude that we should continue our current regulatory treatment of nonequity business arrangements between U.S. and foreign carriers. We stated  X4in 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 comarketing or other arrangement with a foreign carrier that has market power presents a  XJ4substantial risk of anticompetitive effects in the U.S. international services market.\PJ {O 'ԍForeign Carrier Entry Order 253.\ We continue to believe that circumstances may arise where a nonequity 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 comarketing or other nonequity 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  X4joint venture arrangements.aQZ {O'ԍSee MCI Petition for Reconsideration of the Foreign Carrier Entry Order at 6 (arguing that, in order to determine whether to impose dominant carrier regulation, we should require all U.S. carriers that have entered into a nonequity business agreement to file copies of that agreement within 30 days of execution and to file all agreements related to routing of traffic and settlement of accounts on the affected route to the extent not already required under Section 43.51 of the rules; file semiannual circuit status reports; maintain records on provisioning and maintenance of network facilities and services procured from a foreign partner; and file quarterly traffic and  {OO'revenue reports); see also BTNA Petition for Reconsideration at 7 (arguing that we should require U.S. carriers to notify the Commission within 30 days of the formation of a comarketing or other nonequity business agreement and clarify that we will impose competitive safeguards in addition to dominant carrier regulation where necessary and appropriate).a  Xd4V87.` ` Finally, we propose that, in determining whether to classify a foreignaffiliated 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  X4market weighs in favor of nondominant treatment.R  {O 'ԍSee 47 C.F.R.  63.18(h)(8)(ii); see also 47 C.F.R.  63.10(a) 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 foreignaffiliated carriers on routes where their affiliates have market power, regardless of the foreign country's regulatory"$ R0*%%ZZ" 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.  X'` ` a. Purpose of Dominant Carrier Regulation   Xv4W88.` ` III.D.1.AAs 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  XH4levels.hSH {O 'ԍSee LEC Regulatory Treatment Order 83.h 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  X 4input, such as access to bottleneck facilities, that its rivals need to offer their services.T Z yO'ԍEconomists have recognized these different ways to exercise market power by distinguishing between "Stiglerian" market power, which is the ability of a firm profitably to raise and sustain its price significantly above the competitive level by restricting its own output, and "Bainian" market power, which is the ability of a firm profitably to raise and sustain its price significantly above the competitive level by raising its rivals' costs, thereby causing the rivals to restrain their output. Thomas G. Krattenmaker, Robert H. Lande, & Steven C.  {O'Salop, Monopoly Power and Market Power in Antitrust Law, 76 Geo. L.J. 241, 24953 (1987). We believe that foreign affiliations primarily present concerns falling into this second category.  X 4X89.` ` 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  X|4raise the price of U.S. international service by restricting its output.[U| {O#'ԍSee supra  RP40 .[ Thus, our analysis below focuses on retaining or modifying our safeguards only to the extent necessary to"e%f U0*%%ZZW" prevent a carrier from exercising its foreign market power by raising the costs of unaffiliated U.S. international carriers through control of bottleneck facilities.  X4Y90.` ` Our primary concerns with anticompetitive conduct ACDS  by a foreign carrier that has market power include: ( RISKS 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 lowcost 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  Xb4that use the foreign carrier's home market power.Vb {O'ԍSee Sprint Corp., Declaratory Ruling and Order, 11 FCC Rcd 1850, 56!57 (1996) (Sprint/DT/FT).  X44Z91.` ` We discuss below proposed modifications to our dominant carrier safeguards to  X4strengthen our ability to detect and deter these forms of anticompetitive conduct.WZ {O('ԍSee supra note LSTGENREQ77 (listing our current dominant carrier requirements). 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  X4the Benchmarks Notice and discuss possible remedies where anticompetitive conduct has occurred.  X~'` ` b. Basic Dominant Carrier Safeguards   XP'` `  i. Tariffing Requirements  "9&W0*%%ZZ"Ԍ X4[92.` ` III.D.1.BIII.D.1.B.ICurrently, we require carriers regulated as dominant due to a foreign carrier  X4affiliation to file their international service tariffs on no less than 14 days' notice.QX {Ob'ԍWe adopted this notice period in the Foreign Carrier Entry Order, reducing it from the previous requirement of 45 days' notice. We also eliminated in that proceeding the requirement that these dominant carriers file cost support. We based our new tariffing requirements on our belief that competition in the U.S. international services market is a better constraint on unreasonable prices than Commission review of a foreign carrier's cost showing, and that a shortened notice period provides carriers with additional flexibility to respond  {OL'to customer demand. See also Foreign Carrier Entry Order 261 ("We have due authority to request . . . [cost support] information under the Act, and we will do so when necessary to review the lawfulness of particular tariff filings."). We also found a 14day notice period sufficient to permit interested parties and the Commission  {O 'an opportunity to assess the lawfulness of these tariffs. See also Foreign Carrier Entry Order 262.Q 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  X4raising prices by raising its rivals' costs.bY {O'ԍSee LEC Regulatory Treatment Order  85.b These tariffing safeguards are not wellsuited 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  XH4country.nZH0  {O)'ԍThese risks are explained supra   RISKS90 .n  X 4\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  X44demand.[4  {O'ԍBut see Sprint/DT/FT  107 (finding that the 14day notice period " rather than a oneday notice period " provided a better opportunity to detect potential predatory pricing before it occurs).  X4 ]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 foreignaffiliated carriers (the 14day advance notice period and the no presumption of lawfulness) outweigh any benefits of such regulation. We thus tentatively conclude that we should allow dominant, foreignaffiliated U.S. carriers to file their international service tariffs"'3 [0*%%ZZ" 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  X4we should maintain the longer notice period as a tool to detect predatory price squeezes.  X' ` `  ii. Addition or Discontinuation of Circuits   Xv4^95.` ` III.D.1.B.IIIn 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  X 4services.\$  {OP'ԍForeign Carrier Entry Order  26365; see also id.  264 ("To the extent a U.S. carrier is engaged in collusive behavior with a foreign carrier, the prior authorization process allows the Commission to condition the grant of additional circuits or otherwise deny them, rather than to engage in what could be a lengthy revocation  {O'process."); accord Sprint/FT/DT 107.  X 4 _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 facilitiesbased competition and licensed multiple international facilitiesbased 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  X4circuit status and addition reports.T] yO?'ԍ47 C.F.R.  43.82, 63.15(b).T 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  X~4to instead require quarterly notification of circuit additions.K^~D yOs!'ԍWhen the Commission approved British Telecom's 20 percent investment in MCI, it did not impose dominant carrier regulation, and therefore a prior certification requirement, on MCI. It imposed other safeguards, however, including the requirement that MCI notify the Commission of each addition of circuits on the U.S. {O#'U.K. route. See MCI Communications Corporation/British Telecommunications plc, Declaratory Ruling and  {O$'Order, 9 FCC Rcd 3960,  37, 39, 46 (1994) (BT/MCI).K We also request comment"~( ^0*%%ZZm" whether we should require that the quarterly notification of circuit additions specify the particular facilities on which each circuit is added.  X4`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  X4the 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 nonWTO Member country prior to adoption of the ECO test would be permitted to add circuits to nonWTO Member countries that have eliminated legal barriers to entry and licensed multiple new international facilitiesbased 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.  X ' ` `  iii. Quarterly Traffic and Revenue Reports    X{4a98.` ` III.D.1.B.IIIIn 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  X84requirement was "necessary to limit the potential for anticompetitive conduct."8_8 {O'ԍForeign Carrier Entry Order  265; see also Sprint/FT/DT 107 ("[T]he requirement that Sprint file quarterly traffic reports and seek prior approval for circuit additions or changes on the France and Germany routes will better enable us to monitor traffic flows between Sprint and FT in France and DT in Germany and to remedy promptly any abuses of foreign market power. . . . [This requirement] is necessary to aid detection of,  yO'and help deter, anticompetitive conduct.").8 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.  X4 b99.` ` 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.  XR4 c100.` ` 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 foreignaffiliated carriers. ")z_0*%%ZZt" 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  X4our recent Flexibility Order*`L {OK'ԍRegulation of International Accounting Rates, CC Docket No. 90337, Phase II, Fourth Report and  {O'Order, FCC 96459 (Dec. 3, 1996) (Flexibility Order) FLEXCITE , recon. pending. To facilitate our review of alternative  {O'settlements, we required in the Flexibility Order that U.S. carriers include in their annual report of international telecommunications traffic filed pursuant to Section 43.61 of our rules the number of minutes of outbound and  {Oq'inbound traffic settled pursuant to each alternative arrangement. See id. 61. We also require that carriers routing switched traffic over private lines to countries deemed to offer equivalent resale opportunities file semi {O 'annual traffic reports for such traffic for the first three years following an equivalency determination. See, e.g.,  {O 'fONOROLA/EMI, 7 FCC Rcd 7312 (1992), on recon., 9 FCC Rcd 4066 (1994).* 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.  Xx4d101.` ` 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.  X '` `  iv. Provisioning and Maintenance Records   X 4 e102. ` ` III.D.1.B.IVIn the Foreign Carrier Entry Order, we required that a dominant, foreignaffiliated 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  Xf4be useful in guarding against improper discrimination.\af {O'ԍForeign Carrier Entry Order  266.\  X84 f103. ` ` We propose to retain the requirement that foreignaffiliated 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"R*n a0*%%ZZ" 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  X4specify a particular form and content for provisioning and maintenance records.b {OK'ԍSee also Sprint/FT/DT  119 (requiring Sprint to file with the Commission quarterly reports summarizing its records on the provisioning and maintenance of facilities and services by FT and DT including, but not limited to, correspondent or other basic services or facilities procured on behalf of customers of their  {O'joint venture offerings, in France and Germany); Nonaccounting Safeguards Order and FNPRM, supra note 96-48910 (requesting comment on procedures for implementing the service interval disclosure requirements of section 272(e)(1) of the Telecommunications Act).   X'` ` c. Supplemental Dominant Carrier Safeguards   Xv4g104.` ` III.D.1.C 2ND TIER Although we propose above to remove portions of our existing dominant carrier regulation, we believe that significant concerns continue to exist  CONCERNS for carriers affiliated with foreign carriers that do not face international facilitiesbased 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 facilitiesbased competition for international services in these destination countries. These safeguards would generally apply in addition to our proposed basic dominant carrier  X 4safeguards.=c D yO'ԍTo the extent any supplemental safeguard we adopt is duplicative of, or inconsistent with, a basic safeguard, we would require a carrier subject to the supplemental safeguards to comply with the supplemental safeguard only. For example, if we require dominant carriers subject to supplemental safeguards to obtain prior approval before adding circuits and to file quarterly circuit status reports on the dominant route, it would appear unnecessary to require that they also notify us quarterly of their circuit additions. = Where a foreign carrier with market power in a destination country can demonstrate that the country has eliminated legal barriers to international facilitiesbased competition and has authorized multiple international facilitiesbased 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 facilitiesbased competitors is an appropriate measure of competition in the foreign market.  X4h105.` ` 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."|+ c0*%%ZZ`" 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  X4instead be treated as special concessions under Section 63.14 of the rules.~d {O'ԍSee infra  N.S.C.114!N.S.C.END118.~ Our concern with adopting a blanket prohibition of these arrangements is that it may unnecessarily limit potential U.S. consumer benefits, such as onestop shopping.  X14i106.` ` 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  X 4the Act.\e\ Z {O'ԍ 47 U.S.C. 222; see Implementation of the Telecommunications Act of 1996: Telecommunications Carriers' Use of Customer Proprietary Network Information and Other Customer Information, CC Docket No. 96 {O'115, Notice of Proposed Rulemaking, 11 FCC Rcd 12,513 (1996).\ We note that Section 222 of the Act applies to all carriers, not just carriers that would be subject to the supplemental safeguards.  X 4j107.` ` We further believe that, where a foreign carrier with market power does not face international facilitiesbased 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 facilitiesbased 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  Xe4of their circuits on the dominant route is either active or idle.f"e~ yO!'ԍThe annual circuit status and addition reports filed by all U.S. international carriers under Sections 43.82  {O\"'and 63.15 of the rules are not facilityspecific. See Rules for the Filing of International Circuit Status Reports, CC Docket No. 93157, 10 FCC Rcd 8605, 8606  9 (1995); Public Notice, Annual Circuit Status Reports Due on March 31, DA 97577, released March 18, 1997. "N,h f0*%%ZZ4"Ԍ X4k108.` ` 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  X4agreement supersedes.Fg yO4'ԍ47 C.F.R.  43.51.F 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 3inch diskette, formatted in IBMcompatible form, using WordPerfect 5.1 software) of contracts that would be made publicly available. We also propose that foreignaffiliated 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  X 4foreign carriers.h X {O 'ԍSee also Sprint/FT/DT  119 (requiring Sprint to file with the Commission quarterly reports summarizing its records on the provisioning and maintenance of facilities and services by FT and DT including, but not limited to, correspondent or other basic services or facilities procured on behalf of customers of their  {Of'joint venture offerings, in France and Germany); Nonaccounting Safeguards Order and FNPRM, supra note 96-48910 (requesting comment on procedures for implementing the service interval disclosure requirements of section 272(e)(1) of the Telecommunications Act). We seek comment on these tentative conclusions.  X 4l109.` ` 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  Xb4rates 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  X64this route would be significantly reduced if the settlement rate were at this low level.vi\6 {O'ԍIn the Benchmarks Notice, we proposed to condition Section 214 authorizations to serve foreignaffiliated markets on the foreign affiliate's offering U.S. carriers a settlement rate within the relevant benchmark  {OM'range for traffic on the route in question. See Benchmarks Notice 76.v  X4m110.` ` We propose to streamline all applications from carriers that are willing to  X4accept such heightened regulation.yj  {O!'ԍSee infra PARA 118131!PARA 126137.y We seek comment on this tentative conclusion.  X4` ` d. Structural Separation "- j0*%%ZZ"Ԍ X4n111.` ` III.D.1.DWe 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 inregion basis. NonBOC LECs currently are authorized to enter the inregion longdistance market and are also subject to separation requirements. These requirements, however, are not as stringent as those that apply to BOC  X 4provision of inregion service. k  {O 'ԍSee 47 U.S.C.  272 (requiring that a BOC provide inregion, interLATA service (i.e., service between local access and transport areas) through a separate affiliate that meets the structural and transactional  {O% 'requirements of Section 272); id.  272(b) (the Section 272 separate affiliate: (1) is required to "operate independently" from the BOC; (2) is required to maintain separate books, records, and accounts from the BOC; (3) is required to have "separate officers, directors, and employees" from the BOC; (4) "may not obtain credit under any arrangement that would permit a creditor, upon default, to have recourse to the assets of the [BOC]"; and (5) is required to "conduct all transactions with the [BOC] . . . on an arm's length basis with any such  {O'transactions reduced to writing and available for public inspection"); see also Nonaccounting Safeguards Order  {O'and FNPRM  15, 146191 (in implementing the structural separation requirements mandated by Section 272,  {O'the Commission determined, inter alia, that (1) a BOC and its Section 272 affiliate are prohibited from jointly owning transmission and switching facilities or the land and buildings on which such facilities are located and (2) a BOC and its affiliates, other than the Section 272 affiliate itself, is prohibited from providing operating, installation, and maintenance services associated with the facilities owned by the Section 272 affiliate (and, similarly, that a Section 272 affiliate is prohibited from providing such services associated with the BOC's  {O'facilities)); LEC Regulatory Treatment Order  2, 7, 179 (requiring incumbent independent LECs (i.e., exchange telephone companies other than the BOCs) that control local exchange and exchange access facilities to provide their inregion, interstate, domestic, interexchange services through a separate affiliate that (1) maintains separate books of account; (2) does not jointly own transmission or switching facilities with its affiliated exchange telephone company; and (3) acquires that exchange telephone company's services at tariffed rates and conditions);  {Ow'id. 164 ("In addition to taking exchange services by tariff, the LEC may alternatively take unbundled network elements or exchange services for the provision of a telecommunications service subject to the same terms and conditions as provided in an agreement approved under section 252 to which the independent LEC is a party.");  {O'id.  8 (requiring the independent LECs to provide inregion, international services through a separate affiliate that satisfies the same separation requirements that apply to their provision of inregion, interstate, domestic, interexchange services).  X 4o112.` ` 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."y.(k0*%%ZZ" 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.  X4p113.` ` 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 facilitiesbased carriers. As discussed above, we  XH4believe such carriers have greater ability to discriminate in favor of affiliated carriers,blH {O 'ԍSee supra  CONCERNS104.b and it may thus be appropriate to apply stricter separation requirements than we apply to carriers that face competition in their markets.  X '` ` e. Other Operating Safeguards  X '` `  i. "No Special Concessions" Requirement   X4q114.` ` III.D.1.EIII.D.1.E.1 N.S.C. 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  Xb4foreign carrier or administration.PmbZ {Om'ԍSee 47 C.F.R.  63.14.P Although this provision, on its face, applies to any  XK4foreign carrier or administration, regardless of its market power, we stated in the Foreign  X64Carrier 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  X4and adopt competitive safeguards.\n {Ob'ԍForeign Carrier Entry Order 257.\  X4r115.` ` 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 intercity or local access facilities on the  X$4foreign end.~o$~ {OS$'ԍSee Foreign Carrier Entry Order 116 (defining market power).~ "$/o0*%%ZZ"Ԍ X4ԙs116.` ` 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  X4foreign carrier."pX yOK'ԍWe may make market power determinations, for example, in circumstances where a foreign carrier has itself filed an international Section 214 application and requested classification as a nondominant carrier under Section 63.10 of the rules." For example, is there a "brightline" test that we can use to identify a class  X4of foreign carriers that do not raise market power concerns?&q yOT'ԍOur processing rules for "streamlining" Section 214 applications contain a brightline test to identify those facilities applications filed by foreignaffiliated carriers that do not appear likely to raise market power concerns and that, as a result, can be granted without conducting an ECO analysis or imposing dominant carrier  {O 'safeguards. See 47 C.F.R. 63.12(c)(1). We request comment infra, in paragraphs EXPAND1133!EXPAND2137, on whether we can modify the brightline test used for processing Section 214 applications to expand the class of carriers that appear  yO> 'unlikely to raise market power concerns and that therefore can be authorized on a streamlined basis. & Formulating such a brightline 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.  X_4 t117.` ` 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.  X4u118.` ` 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 facilitiesbased entry and licensed multiple international facilitiesbased competitors. Finally, N.S.C.ENDwe propose to revise"N0b q0*%%ZZ" 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.   X'` `  ii. Benchmark Settlement Rates Condition  Xv4 v119.` ` III.D.1.E.2 BSRC1  BSRC1 We proposed in the Benchmarks proceeding to condition the facilitiesbased 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  X34within the benchmark range proposed in that proceeding.7r~3 {O 'ԍBenchmarks Notice  76. We proposed in the Benchmarks Notice to revise our settlement rate benchmarks adopted in 1992. We proposed three benchmarks ranges, based on countries' level of economic development " upper income, middle income, and low income. We proposed to calculate the upper end of each range using foreign carriers' tariffed rates for the three network elements used to provide international termination  {O 'services (i.e., international transmission facilities, international switching facilities, and domestic transport and termination) and the lower end of each range using an estimate of the long run incremental cost of providing  {O`'international termination services. Id.  4352.7 Consistent with our existing International Settlements Policy (ISP), all U.S. carriers would receive the same settlement rate  X 4for traffic on that route.}s  {O'ԍXSee infra note  ISP138  for an explanation of the ISP.(#} 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  X 4in 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 costbased  X 4termination) or to revoke the authorization of the carrier to serve the affiliated market.t  {O'ԍBenchmarks Notice  76. An authorization granted to a facilitiesbased carrier would thus be granted  {O'subject to a condition to this effect. Id. n.76. We  X4emphasized 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  Xh4settlement rates.Yuh  {O'ԍXBenchmarks Notice  77.(#Y We will decide whether to adopt this proposed condition in the  XQ4Benchmarks proceeding.  X%4 w120.` ` We also proposed in the Benchmarks Notice a competitive safeguard to address the potential market distortions resulting from oneway bypass of the accounting rate  X4system.{vX"  yO8#'ԍOneway bypass exacerbates the net settlements deficit by allowing a foreign carrier to route U.S. bound traffic over private lines, where traffic is not subject to settlements payments, while the U.S. carrier is prohibited"$u0*%%$" from routing its foreignbound traffic over private lines and must therefore make settlement payments for the foreignbound traffic. The prevention of such oneway bypass is the basis for the Commission's equivalency  {O'policy. See supra  EQUIV148שEQUIV249.{ Specifically, we proposed to grant carriers' applications for authority to resell"1v0*%%ZZC" 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  X4such time as all settlement rates on the route are brought within the benchmark range./w yO 'ԍWe noted that this condition would apply to any U.S. carrier seeking to provide switched, basic services via resold private lines regardless of whether the carrier is operating on a particular route in correspondence with an affiliated foreign carrier. We reasoned that even an unaffiliated U.S. carrier would have the ability to distort  {OH 'competition on the route to the extent it accepted oneway bypass traffic from a foreign carrier. Benchmarks  {O'Notice  82./ We  Xv4also proposed to order all U.S. international carriers to pay a costbased settlement rateix\vf  {O'ԍThe Benchmarks NPRM proposes that carriers be required to pay at the proposed low end of the appropriate benchmark range, which for all three ranges is based on an estimate of the long run incremental cost  {O'of providing international termination services. Benchmarks NPRM  83.i if, after a carrier has commenced switched service via a resold private line, we learn that  XH4competition on the route has been distorted " i.e., that oneway bypass is occurring.yH  yO'ԍWe asked for comment on what mechanism or approach we should use to determine when competition  {OK'has been distorted and the lower settlement rate should be applied. Benchmarks NPRM  83. We believe our concern about the potential for distortions in the U.S. IMTS market from oneway bypass can be effectively addressed through these settlement rate conditions.  X 4x121.` ` In light of our proposal in Section III.A.1.b above to eliminate the equivalency  X 4test as the standard for authorizing the provision of switched service over resold or facilities X 4based private lines between the United States and WTO Member countries, we believe it may be necessary to apply to U.S. facilitiesbased private line carriers the benchmark settlement  X4rate conditions that we have proposed to apply to U.S. private line resellers.tz yO+'ԍOur current rules generally prohibit U.S. facilitiesbased carriers from diverting U.S. switched traffic to their private lines unless the Commission has made an equivalency finding for the country at the foreign end of the private line. The only exception to this rule is where the U.S. facilitiesbased carrier's private line is interconnected to the public switched network on one end only and the U.S. carrier's foreign correspondent does  {OK"'not own the underlying foreign halfcircuit. See supra  EQUIV148שEQUIV249.t Facilitiesbased private line carriers also have the ability to distort competition on a particular route to the extent they terminate oneway 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."Q2z0*%%ZZ" IMTS market from oneway bypass of the settlements process. Thus, we propose generally to prohibit a U.S. facilitiesbased private line carrier from originating or terminating U.S. switched traffic over its facilitiesbased 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  X4settlement 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  Xx4supplemental comments on this proposal in the Benchmarks proceeding. We will decide whether to adopt rules to implement these proposed benchmark settlement rate conditions in  XL4the Benchmarks proceeding. BSRC2   X '` `  iii. Alternative Competitive Safeguards  X 4y122.` ` III.D.1.E.3We 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?  XQ4z123.` ` 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 facilitiesbased 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.  X' 2. Enforcement of Safeguards  X4  Xk4{124.` `  III.D.2 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  X4carrier's willful or repeated violation of the conditions.R{ yO 'ԍX47 U.S.C.  503(b)(1).(#R 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"3X{0*%%ZZQ"  X4any single act or failure to act.y| {Oy'ԍXId.  503(b)(2)(B); see also 47 C.F.R.  1.80.(#y In addition or in the alternative, we also retain the power to revoke a Section 214 certificate.  X4|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.  X 4}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.  X4~127.` ` 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.  X' 3. Amendments to Part 63  X 4128.` `  III.D.3 We propose below rule changes to afford streamlined processing to the international Section 214 applications filed by foreign carriers from WTO Member countries"!4Z|0*%%ZZ " consistent with our proposals above. We also make technical corrections to, and propose to  X4amend, certain other rules adopted in the Foreign Carrier Entry Order and our Streamlining  X4Order.} {OM'ԍStreamlining the International Section 214 Authorization Process and Tariff Requirements, Report and  {O'Order, 11 FCC Rcd 12,884 (1996).  X4129.` ` 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.  X '` ` a. Streamlined Section 214 Procedures   X 4130.` ` III.D.3.AWe 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.  X4131.` `  PARA 118 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  X4foreign carriers or their U.S. affiliates in circumstances where the foreign carrier is not a  Xk4"facilitiesbased" carrier in the destination market.~ k$ yO@'ԍOur rules define a "facilitiesbased carrier" as "one that holds an ownership, indefeasiblerightofuser, or leasehold interest in bare capacity in an international facility, regardless of whether the underlying facility is a common or noncommon carrier submarine cable, or an INTELSAT or separate satellite system." 47 C.F.R. 63.18(h) n.2. Our decision to streamline process applications from carriers whose foreign affiliates are not "facilitiesbased" in the destination market reflects our view that participation in the U.S. market by foreign carriers that do not"=5 ~0*%%ZZ" own or control telecommunications facilities in a foreign market is unlikely to raise market  X4power concerns.x yOb'ԍBecause our definition of a facilitiesbased carrier does not by its terms include carriers with interests in foreign domestic facilities, we have streamlined the processing of many applications from carriers whose affiliates hold interests only in foreign domestic facilities. These applications generally have involved affiliated foreign carriers that own foreign domestic mobile radio facilities. We have relied upon initial staff review of the application, and information provided by the applicant, to determine whether the affiliated foreign carrier's domestic facilities raised market power concerns. In such a case, Commission staff has the discretion to place the application on Public Notice as not eligible for streamlined processing.  X4 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 nonWTO 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.  X 4 133.` ` We therefore request comment whether we can expand EXPAND1  the class of affiliated applicants eligible for streamlined processing to include some applicants whose affiliated foreign carriers may fall within the definition of a "facilitiesbased" 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.  X4 134.` ` We request commenters to submit specific proposals to expand the class of affiliated carriers eligible for streamlined processing. X` hp x (#%'0*,.8135@8:0*%%ZZ"" 3 of the Small Business Act unless the Commission has developed one or more definitions  X4that are appropriate for its activities./:z yOb'ԍ5 U.S.C.  601(3) (incorporating by reference the definition of "small business concern" in 15 U.S.C.  632). Pursuant to 5 U.S.C.  601(3), the statutory definition of a small business applies "unless an agency, after consultation with the Office of Advocacy of the Small Business Administration and after opportunity for public comment, establishes one or more definitions of such term which are appropriate to the activities of the agency and publishes such definition(s) in the Federal Register."/ The Small Business Act defines small business  X4concern 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  X4Administration (SBA).Xx:z yO 'ԍSmall Business Act, 15 U.S.C.  632.X  Xz4161.` ` 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.  X 4162.` ` 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  X 4operated, consistent with our prior practice, they are excluded from the definitions of small  X 4entity and small business concern.i^ :z {Of'ԍSee Implementation of the Local Competition Provisions in the Telecommunications Act of 1996, First  {O0'Report and Order, 11 FCC Rcd 15,499, 1328!1330, 1342 (1996), partial stay granted, Iowa Utils. Bd. v.  {O'FCC, 109 F.3d 418 (8th Cir. 1996).i Accordingly, our use of the terms small entities and  X4small 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  X>4concern."D>. :z {O4'ԍSee id.D  X' ` ` a. Section 214 International Common Carrier Services  X4163.` ` 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  X4Radiotelephone (SIC 4813). The SBA's definition of small entity for those categories is one"? 0*%%ZZ"  X4with fewer than 1,500 employees.H:z yOy'ԍ13 C.F.R. 121.201.H We discuss below the number of small entities falling within these two subcategories that may be affected by the rules proposed in this Notice.  X4164.` ` The most reliable source of information regarding the number of international common carriers is the data that we collect annually in connection with the  V4Telecommunications Industry Revenue: Telecommunications Relay Service Fund Worksheet  Xv4Data (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.  XM'` ` b. Title III Common Carrier Services  X4165.` ` 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  X4Commission collects annually in connection with the TRS Worksheet.O^X:z {O'ԍFederal Communications Commission, CCB Industry Analysis Division, Telecommunication Industry  {O'Revenue: TRS Worksheet Data, Tbl. 1 (Average Total Telecommunication Revenue Reported by Class of  {OK'Carrier) (December 1996) (TRS Worksheet).O According to the most recent data, 792 companies reported that they were engaged in the provision of cellular  X4services.:~:z {O 'ԍId.: 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."&@0*%%ZZ"Ԍ X4ԙ166.` ` 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  X4applicable to radiotelephone companies " i.e., an entity employing less than 1,500 persons.R:z yOM'ԍ13 C.F.R.  121.201, SIC 4812.R With respect to the 220 MHz services, the Commission has proposed a twotiered definition  X4of small business for purposes of auctions: (1) for Economic Area (EA) licensees,X:z yO'ԍEconomic Area (EA) licenses refer to the 60 channels in the 172 geographic areas as defined by the  {Ow'Bureau of Economic Analysis, Department of Commerce. See Amendment of Part 90 of the Commission's Rules to Provide for the Use of the 220222 MHz Band by the Private Land Mobile Radio Service, GN Docket 93252,  {O 'Second Memorandum Opinion and Order and Third Notice of Proposed Rule Making, 10 FCC Rcd 6880 (1995), 60 FR 26861 (May 19, 1995). 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  Xa4not more than $15 million for the preceding three years.:a :z {O'ԍId.: 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  X 4employees,E\ :z {Ok'ԍSee U.S. Bureau of the Census, U.S. Department of Commerce, 1992 Census of Transportation,  {O5'Communications, and Utilities, UC92S1, Subject Series, Establishment and Firm Size, Tbl. 5, Employment Size of Firms; 1992, SIC 4812 (issued May 1995).E with respect to the approximately 3,800 incumbent licensees in this service, we will consider them to be small businesses under the SBA definition.  X 4167.` ` Common Carrier Paging. The Commission has proposed a twotier 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  X!4entity employing fewer than 1,500 persons.R! :z yO 'ԍ13 C.F.R.  121.201, SIC 4812.R 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. "AR 0*%%ZZ:"Ԍ X4168.` ` 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  X4collects annually in connection with the TRS Worksheet. According to the most recent data,  Xz4117 companies reported that they were engaged in the provision of mobile services.:z:z {O'ԍId.: 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.  X 4169.` ` Broadband Personal Communications Services (PCS). The broadband PCS spectrum is divided into six frequency blocks designated A through F, and the Commission  X 4has 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  X4the three previous calendar years.Z:z {O'ԍSee Amendment of Parts 20 and 24 of the Commission's Rules Broadband PCS Competitive Bidding  {OV'and the Commercial Mobile Radio Service Spectrum Cap, Report and Order, 11 FCC Rcd 7824 (1996). 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  XS4gross revenue of not more than $15 million for the preceding three calendar years.DS:z {O'ԍSee id.D These  X<4regulations defining small entity in the context of broadband PCS auctions have been approved by the SBA. No small business within the SBAapproved 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.  XA4170.` ` 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"BH0*%%ZZ" 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  X4revenues for the prior three fiscal years of $40 million or less.$:z {OK'ԍSee Implementation of Section 309(j) of the Communications Act Competitive Bidding, PP Docket No. 93253, and Amendment of the Commission's Rules to Establish New Narrowband PCS, GEN Docket No. 90 {O'314, Competitive Bidding Third Memorandum Opinion and Order and Further Notice, 10 FCC Rcd 175, 208 (1994). For purposes of this initial regulatory flexibility analysis, the Commission is utilizing the SBA definition applicable to  X4radiotelephone companies, i.e., an entity employing less than 1,500 persons.v:z yO 'ԍ13 C.F.R.  121.201, Standard Industrial Classification Code 4812.v 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  X_4that nearly all radiotelephone companies have fewer than 1,000 employees_D:z yOT'ԍThe 1992 Census of Transportation, Communications, and Utilities, conducted by the Bureau of the Census, shows that only 12 radiotelephone firms out of a total of 1,178 such firms which operated during 1992 had 1,000 or more employees. U.S. Bureau of the Census, U.S. Department of Commerce, 1992 Census of Transportation, Communications, and Utilities, UC92S1, Subject Series, Establishment and Firm Size, Table 5, Employment Size of Firms: 1992, SIC Code 4812 (issued May 1995). 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.  X 4171.` ` Rural Radiotelephone Service. The Commission has not adopted a definition of small business specific to the Rural Radiotelephone Service, which is defined in Section  X 422.99 of the Commission's Rules.E :z yOe'ԍ47 C.F.R.  22.9.E 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,  XM4and we estimate that almost all of them have fewer than 1,500 employees.TM :z yO'ԍ13 C.F.R.  121.201, SIC 4812. T  X4172.` ` AirGround Radiotelephone. The Commission has not adopted a definition of small business specific to the AirGround Radiotelephone Service, which is defined in Section  X422.99 of the Commission's Rules.::z {O$'ԍId.: Accordingly, we will use the SBA's definition applicable"C0*%%ZZ]"  X4to radiotelephone companies, i.e., an entity employing fewer than 1,500 persons.=:z {Oy'ԍId. = There are approximately 100 licensees in the AirGround Radiotelephone Service, and we estimate that almost all of them qualify as small under the SBA definition.  X4173.` ` 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  XJ4entity" in the context of 800 MHz and 900 MHz SMR has been approved by the SBA.;JZ:z {OU 'ԍSee Amendment of Parts 2 and 90 of the Commission's Rules to Provide for the Use of 200 Channels Outside the Designated Filing Areas in the 896901 MHz and the 935940 MHz Bands Allotted to the  {O 'Specialized Mobile Radio Pool, PR Docket No. 89583, Second Order on Reconsideration and Seventh Report  {O 'and Order, 11 FCC Rcd 2639, 2693702 (1995), 60 FR 48913 (September 21, 1995); Amendment of Part 90 of the Commission's Rules to Facilitate Future Development of SMR Systems in the 800 MHz Frequency Band, PR  {OC'Docket No. 93144, First Report and Order, Eighth Report and Order, and Second Further Notice of Proposed  {O 'Rule Making, 11 FCC Rcd 1463 (1995), 61 FR 6212 (February 16, 1996).; 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.  XM4174.` ` Microwave Video Services. Microwave services includes common carrier,M:z {O'ԍ47 C.F.R.  101 et seq. (formerly part 21 of the Commission's rules). private operational fixed, and broadcast auxiliary radio services. At present, there are 22,015  X!4common 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  X4radiotelephone companies " i.e., an entity with less than 1,500 employees.R6 :z yO 'ԍ13 C.F.R.  121.201, SIC 4812.R 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."D 0*%%ZZ"Ԍ X4ԙ175.` ` 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  X4bordering the Gulf of Mexico.:z yOM'ԍThese licensees are governed by subpart I of part 22 of the Commission's rules, 47 C.F.R.  22.1001!.1037. 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.  Xx4176.` ` 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  XL4common carrier. There will be a total of 986 LMDS licenses.)L :z {O 'ԍSee Rulemaking to Amend Parts 1, 2, 21, and 25 of the Commission's Rules to Redesignate the 25.5!29.5 GHz Frequency Band, to Reallocate the 29.5!30.0 GHz Frequency Band, to Establish Rules and Policies for Local Multipoint Distribution Service and for Fixed Satellite Services, CC Docket No. 92297,  {Ow'Second Report and Order, Order on Reconsideration, and Fifth Notice of Proposed Rulemaking, FCC 9782  {OA'(Mar. 13, 1997), 13 (LMDS Order).) 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.  X 4177.` ` 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 Kaband.  X4178.` ` Space Stations (Nongeostationary). 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.  XV4179.` ` 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"AE0*%%ZZ"ԫgeostationary and Kaband 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.  Xv'` `  c. Submarine Cable Landing Licenses (#  XH4180.` ` 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.  Xb4181.` ` 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.  X74182.` ` Section 214 and the Cable Landing License Act. The proposed revisions to our  X"4rules and policies pursuant to Section 214D":z yO'ԍ47 U.S.C. 214.D and the Cable Landing License ActM"X:z yO+!'ԍ47 U.S.C. 34!39.M would significantly reduce the burdens on international common carriers. Our proposal would reduce the burden on foreignaffiliated 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"F0*%%ZZ^" 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.  X4183.` ` The proposed "basic dominant carrier safeguards"Y:z {O4'ԍSee supra Section III.D.1.b.Y 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.  Xy4184.` ` This Notice proposes to impose supplemental dominant carrier regulation on U.S. carriers whose foreign affiliates do not face facilitiesbased competition for international  XK4services in the destination countries in which they have market power._KZ:z {OV'ԍSee supra Section III.D.1.c. _ 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.  Xe4185.` ` 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.  X 4186.` ` 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" G0*%%ZZH" 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.  X4187.` ` 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  Xx4Communications ActJx:z yO'ԍ47 U.S.C. 310(b)(4).J 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.  X 4188.` ` 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.  X4189.` ` 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  X4adopted in our Flexibility Order.X:z {O'ԍRegulation of International Accounting Rates, Docket No. CC 90337, Phase II, Fourth Report and  {OS'Order, FCC 96459 (Dec. 3, 1996) (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.  X4190.` ` Federal rules that overlap, duplicate, or conflict with the Commission's  X4proposal: None. "H0*%%ZZ"Ԍ X4191.` ` Any significant alternatives minimizing impact on small entities and  X4consistent 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.  X 4192.` ` 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.   Xb' C. Initial Paperwork Reduction Act of 1995 Analysis   X44193.` `  IV.C 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. 10413. 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.  X 4194.` ` 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.  X"' D. Comment Filing Procedures  "#I0*%%ZZ!"Ԍ X4195.` `  IV.D Comments and reply comments should be captioned in IB Docket No. 97142 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 3.5inch diskette in WordPerfect 5.1 format.  Xy4196.` ` 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.  X4  X' E. Ordering Clauses  X4197.` `  IV.E 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.  X74198.` ` 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. "J0*%%ZZZ"Ԍ X4 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  X4paragraph 603(a) of the Regulatory Flexibility Act, 5 U.S.C. 601 et seq. ` `  hhCqFEDERAL COMMUNICATIONS COMMISSION ` `  hhCqWilliam F. Caton ` `  hhCqActing Secretary " K0*%%ZZ"  X'  \ Appendix A #C\  P6Q/P#  ZnRULE CHANGES\ Part 63 of Title 47 of the Code of Federal Regulations is amended as follows:  yO' PART 63--EXTENSION OF LINES AND DISCONTINUANCE, REDUCTION, OUTAGE AND IMPAIRMENT OF SERVICE BY COMMON CARRIERS AND GRANTS OF RECOGNIZED PRIVATE OPERATING AGENCY STATUS  yO)'  yO'1.` ` The authority citation for Part 63 continues to read as follows:  yO ' Authority : 47 U.S.C. 151, 154(i), 154(j), 201-205, 218, 403 and 533, unless otherwise noted.  yO '2.` ` Section 63.11 is amended by revising paragraph (b) to read as follows:  yO '  63.11 Notification by and prior approval for U.S. international carriers that have or propose to acquire  yOi 'ten percent investments by, and/or an affiliation with, a foreign carrier. * * * * *  yO'(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.  yO'* * * * *` `  yO!'3.` ` Section 63.18 is amended by revising paragraph (e)(3)(i)(B) to read as follows:  yO'  63.18 Contents of applications for international common carriers.  yOA'* * * * * ` `  yO'(e)` ` * * *  yOa'(3)` ` * * *  yO '(i)` ` * * *  yO"'(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; * * * * *"%L-q)q)ZZ$"  X'  =#XP\  P6QXP#  X'\ STATEMENT OF FCC CHAIRMAN REED HUNDT ă  X4X June 4, 1997 ă  X4Re: Rules and Policies on Foreign Participation in the U.S. Telecommunications Market, IB Docket No. 97142 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 ProCompetitive Regulatory Principles. The Reference Paper is a binding, enforceable set of procompetitive 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 procompetitive 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  X 4greater 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.