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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of ) ) IDC America, Inc. ) ) Application Under Section 214 of the ) File No. ITC-97-663 Communications Act of 1934, as Amended,) for Authority to Provide International ) Facilities-Based and Resale Services to Japan ) ORDER, AUTHORIZATION AND CERTIFICATE Adopted: February 3, 1998 Released: February 3, 1998 By the Chief, Telecommunications Division: I. INTRODUCTION 1. In this Order we grant IDC America, Inc. ("IDC America") authority, pursuant to Section 214 of the Communications Act of 1934, as amended, to acquire and operate facilities and resell the international services of authorized U.S. carriers for the provision of international basic switched, private line, data, video and business services between the United States and Japan. II. BACKGROUND 2. IDC America is a Delaware corporation, wholly-owned by International Digital Communications, Inc. ("IDC"), a corporation which provides international and domestic long distance telecommunications services in Japan. We placed the application on public notice but no comments were received. IDC America currently is authorized to: 1) resell non-interconnected private lines between the United States and Japan, and 2) operate as a facilities-based and resale carrier for the provision of international services between the United States and various points, except Japan. III. DISCUSSION 3. Because a foreign carrier owns greater than 25 percent of the capital stock of IDC America, the Commission's Foreign Carrier Entry Order requires us to review its application for service to Japan under the framework established in that order. The Commission in the Foreign Carrier Entry Order stated that carriers seeking to provide international services to countries in which they have an affiliate with market power must demonstrate that the affiliated market offers "effective competitive opportunities" ("ECO") for U.S. carriers to offer like services. The Commission stated that it would apply the ECO analysis only to Section 214 applications from foreign carriers, or certain affiliates of foreign carriers, with market power in destination countries that potentially can be leveraged to the detriment of unaffiliated U.S. carriers providing service to those countries. The Commission also determined that it would continue to consider other public interest factors that may weigh in favor of, or against, granting the application. 4. In order to determine whether an ECO analysis is necessary we must determine whether IDC America's parent, IDC, has market power. The Foreign Carrier Entry Order defines "market power" as the "ability of the carrier to act anticompetitively against unaffiliated U.S. carriers through control of bottleneck facilities on the foreign end." Bottleneck services or facilities are "those that are necessary for the provision of international services, including inter-city or local access facilities on the foreign end." 5. IDC America contends that IDC does not have market power in any segment of Japan's international telecommunications market. In the IDC Resale Authorization, we concluded that IDC did not have market power in the international facilities-based private line market. We based our conclusion on IDC's 16.6 percent share of the international facilities-based private line market in Japan (as measured by the number of international private lines) and its 18.7 percent share of revenues for that service. In its application, IDC America states that IDC's market share increased slightly to 19.8 percent of the number of private-line circuits; its share of revenue decreased slightly to 16.4 percent. IDC had 20.5 percent market share for all long distance telecommunications services (as measured by number of circuits) and 16.5 percent of revenue for those services. IDC does not own any local exchange access facilities. We also note that Japan has recently opened the facilities-based international services market to additional competition. We recently concluded that one of IDC's competitors in Japan, Japan Telecom, did not have market power. IDC's market share is only a few percentage points higher than Japan Telecom's. We conclude, based on IDC's market share, that IDC does not have market power in any relevant market in Japan. We therefore do not apply the ECO test to IDC America 's application. 6. We find that there are no other countervailing public interest reasons to deny grant of IDC America 's application. The Executive Branch has not raised any national security, law enforcement, foreign policy or trade concerns with this application. We remain concerned about Japan's high accounting rates and would like to see them decrease. But we do not find that a reason to deny IDC America's application. We believe that increased competition will help put pressure on above-cost accounting rates. In addition, as noted below, provision of facilities-based service is conditioned on a reduction in IDC's accounting rate with U.S. carriers. Accordingly, we find it in the public interest to authorize IDC America to provide facilities-based and resale services between the United States and Japan. Given our finding that IDC does not have market power in any relevant market, we find that IDC America should be regulated as non-dominant on the U.S.-Japan route. 7. In the Benchmarks Order, the Commission adopted a benchmark settlement rate condition, effective January 1, 1998, for authorizations to provide facilities-based switched or private line services to destination markets where the authorized carrier is affiliated with a foreign carrier. Pursuant to the Benchmarks Order, we condition any authorization to provide facilities-based switched or private line service to an affiliated market on the affiliated foreign carrier having in effect a settlement rate with U.S. international carriers on the U.S.-affiliated market route that is at or below the relevant benchmark settlement rate. The Benchmarks Order requires U.S. carriers to negotiate a settlement rate of U.S. $0.15 per minute with carriers in Japan. Thus, we authorize IDC America to begin facilities-based service only when IDC 's settlement rate is at or below $0.15. IV. CONCLUSION 8. We find that grant of authorization to IDC America to provide facilities-based and resale services between the United States and Japan is in the public interest and consistent with Section 214 of the Communications Act. IDC America already has authority to resell non- interconnected private lines between the United States and Japan. This authorization gives IDC America the ability to immediately resell switched services of authorized U.S. carriers to Japan. IDC America may commence facilities-based service when IDC's settlement rate with its U.S. carrier correspondents is at or below $0.15. We classify IDC America as non-dominant on the U.S.-Japan route for the provision of facilities-based and resale services. V. ORDERING CLAUSES 9. Accordingly, IT IS ORDERED that File No. ITC 97-449 IS GRANTED and IDC America, Inc. is authorized to provide: i) facilities-based service between the United States and Japan at such time as IDC's settlement rate with its U.S. carrier correspondents is at or below $0.15 and ii) resold switched services immediately. 10. IT IS FURTHER ORDERED that IDC America, Inc. shall be regulated as a non- dominant carrier for the provision of its authorized facilities-based and resold services between the United States and Japan. 11. IT IS FURTHER ORDERED that, as a non-dominant carrier on the U.S.-Japan route, IDC America, Inc. shall comply with Sections 43.82, 63.19, 63.21 and 63.15(b) of the Commission's rules, 47 C.F.R.  43.82, 63.19, 63.21 and 63.15(b). 12. This Order is issued under Section 0.261 of the Commission's rules, 47 C.F.R.  0.261 (1996), and is effective upon adoption. Petitions for reconsideration under Section 1.106 of the Commission's rules, 47 C.F.R.  1.106 (1996), or applications for review under Section 1.115 of the Commission's rules, 47 C.F.R.  1.115 (1996), may be filed within 30 days of the date of public notice of this Order and Authorization (see 47 C.F.R.  1.4(b)(2)). FEDERAL COMMUNICATIONS COMMISSION Diane Cornell Chief, Telecommunications Division