******************************************************** NOTICE ******************************************************** This document was converted from WordPerfect to ASCII Text format. Content from the original version of the document such as headers, footers, footnotes, endnotes, graphics, and page numbers will not show up in this text version. All text attributes such as bold, italic, underlining, etc. from the original document will not show up in this text version. Features of the original document layout such as columns, tables, line and letter spacing, pagination, and margins will not be preserved in the text version. 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 ) AT&T CORP. ) AT&T ALASCOM ) AT&T PUERTO RICO ) AT&T VIRGIN ISLANDS ) File No. ITC-214-19981118-00820 ) Hong Kong Telecommunications (Pacific) Ltd. ) File No. ITC-214-19980930-00689 ) Applications for authority, pursuant to Section 214 of ) the Communications Act of 1934, as amended, to ) provide switched services using international private ) lines interconnected with the public switched network ) at one or both ends between the United States ) and Hong Kong ) ORDER, AUTHORIZATION AND CERTIFICATE Adopted: December 31, 1998 Released: January 4, 1999 By the Chief, Telecommunications Division: I. INTRODUCTION 1. With this order, we add Hong Kong to the list of countries for which U.S. carriers may provide switched, basic telecommunications services over international private lines (also known as international simple resale or "ISR"). We find that two major U.S. carriers' settlement rates for Hong Kong are below the Commission's benchmark settlement rate and have good reason to believe that other U.S. carriers will soon negotiate the same rate. We therefore conclude that the public interest in cost-based telecommunications services would be served by permitting the above-referenced applicants, and other authorized private line carriers, to interconnect their private lines between the United States and Hong Kong for the provision of switched, basic services, at such time as U.S. carriers that handle 50 percent of the U.S.-Hong Kong traffic are able to exchange traffic at rates at or below the applicable benchmark settlement rate. Our action today will permit U.S. carriers to route traffic between the United States and Hong Kong outside the traditional settlements system, enabling them to offer U.S. international service at reduced rates. We expect that such activity will, in turn, exert increased pressure to lower settlement rates further and reduce consumer prices. II. BACKGROUND 2. Hong Kong Telecommunications (Pacific) Ltd. (HKTP) filed an application seeking to provide switched basic service over private lines between the United States and Hong Kong. AT&T Corp., AT&T Alascom, AT&T Puerto Rico, and AT&T Virgin Islands (collectively, AT&T) filed a joint application requesting Section 214 authority to provide switched, basic telecommunications services using their authorized international facilities-based private lines between the United States and Hong Kong. We placed both applications on public notice. AT&T and MCI WorldCom filed comments on HKTP's application, and no party opposed AT&T's application or submitted comments. III. DISCUSSION 3. HKTP is a corporation organized and existing under the laws of Hong Kong. Cable & Wireless, plc holds approximately 54 percent of HKTP's parent, Hong Kong Telecom. HKTP is affiliated, through Cable and Wireless, plc, with carriers in 39 countries, including the international carrier in Hong Kong, Hong Kong Telecommunications International (HKTI). HKTP has agreed to be subject to dominant carrier regulation on the U.S.-Hong Kong route. AT&T is an authorized facilities-based private line carrier on the United States-Hong Kong route. AT&T certifies that it is not affiliated with any foreign carrier in Hong Kong. 4. HKTP seeks conditional authorization to provide switched, basic service over resold private lines effective on the date on which the Hong Kong regulator, OFTA, commences granting applications for licenses to provide international telecommunications service that will allow licensees to engage in voice ISR on the U.S.-Hong Kong route, or upon the date on which the settlement rate on the route drops to the applicable benchmark rate, whichever comes first. AT&T seeks authority to use its authorized facilities-based private lines for the provision of switched services between the United States and Hong Kong, as of January 1, 1999. 5. Under the Commission's rules, the provision of service via ISR to Hong Kong is subject to the condition that the settlement rate for at least 50 percent of the settled U.S.-billed traffic between the United States and Hong Kong is at or below the benchmark settlement rate adopted in the Benchmarks Order or that Hong Kong afford U.S. carriers equivalent opportunities to provide ISR. The Commission's benchmark settlement rate for Hong Kong is 15 cents. 6. AT&T filed an International Settlements Policy Notification of a change in the accounting rate for International Message Telephone Service (IMTS) with Hong Kong on November 13, 1998. AT&T notified the Commission that the accounting rate for IMTS service between AT&T and HKTI would decrease from .52 SDR to .10 SDR, effective January 1, 1999. Employing the exchange rate on November 11, 1998, AT&T states that an accounting rate of .10 SDR equates to an accounting rate of 13.8 cents and a settlement rate of 6.9 cents. MCI WorldCom also filed an International Settlements Policy Notification of a change in the accounting rate for IMTS with Hong Kong for the same rate negotiated by AT&T on December 31, 1998. We note that, according to the Commission's Section 43.61 traffic data, AT&T and MCI WorldCom collectively handle more than 50 percent of U.S. billed traffic on the U.S.-Hong Kong route. 7. Because AT&T and MCI WorldCom collectively handle more than 50 percent of U.S. billed traffic on the U.S.-Hong Kong route, we find that Hong Kong will satisfy the benchmark condition for ISR as of the effective date of those agreements, January 1, 1999. Accordingly, we grant the applications of AT&T and HKTP to provide switched services using international private lines between the United States and Hong Kong, effective on January 1, 1999. At that time, we will also add Hong Kong to the list of destinations for which U.S. carriers may provide switched services over their authorized facilities-based or resold private lines on that date. 8. AT&T and MCI filed comments in response to HKTP's application. AT&T argues that HKTP has not satisfied the equivalency test, but states that it supports the authorization of ISR for service to Hong Kong as of January 1, 1999. MCI also states that Hong Kong does not, at the time of its comments, satisfy the Commission's conditions to provide ISR. Because we find that Hong Kong will meet the Commssion's Benchmarks condition on the effective date of this Order, we do not reach the issue of whether Hong Kong satisfies the equivalency test and therefore find that neither AT&T nor MCI WorldCom raises issues that would bar granting HKTP's authorization. IV. ORDERING CLAUSES 9. Accordingly, IT IS ORDERED that the applications of AT&T Corp., AT&T Alascom, AT&T Puerto Rico, and AT&T Virgin Islands, File No. ITC-214-19981118-00820 and Hong Kong Telecommunications (Pacific) Ltd., File No. ITC-214-19980930-00689 ARE GRANTED, and AT&T Corp., AT&T Alascom, AT&T Puerto Rico, and AT&T Virgin Islands are authorized, pursuant to Section 63.18(e)(4) of the Commission's Rules, 47 C.F.R.  63.18(e)(4), to provide switched, basic telecommunications services using their authorized international facilities-based private lines interconnected to the public switched network at one or both ends between the United States and Hong Kong; Hong Kong Telecommunications (Pacific) Ltd. is authorized, pursuant to Section 63.18(e)(3) of the Commission's rules, 47 C.F.R.  63.18(e)(3), to provide switched, basic telecommunications service using resold international private lines interconnected to the public switched network at one or both ends between the United States and Hong Kong; 10. IT IS FURTHER ORDERED that the authority granted herein to provide switched, basic telecommunications services using international private lines between the United States and Hong Kong for the provision of switched services is limited to the provision of such services between the United States and Hong Kong. This restriction is subject to the following exceptions: (a) the applicants may engage in "switched hubbing" through Hong Kong consistent with Section 63.17 of the Commission's Rules, 47 C.F.R.  63.17; and (b) the applicants may provide U.S. inbound or outbound switched, basic services over their authorized resold and facilities-based private lines extending between the United States and Hong Kong, as well as the United Kingdom, Sweden, New Zealand, Australia, the Netherlands, Luxembourg, Norway, Denmark, France, Germany, Belgium, Austria, Switzerland, Japan, Italy, and Ireland, provided the applicants are authorized to provide switched services over private lines between the United States and those countries; 11. IT IS FURTHER ORDERED that Hong Kong Telecommunications (Pacific) Ltd. will be regulated as a dominant carrier on the U.S.-Hong Kong route, pursuant to Section 214 of the Act, 47 U.S.C.  214, and Section 63.10 of the Commission's rules, 47 C.F.R.  63.10, and will comply with the requirements of paragraph (c) of that section. The quarterly traffic reports filed pursuant to Section 63.10(c) must include the information required by Section 43.61 of the Commission's rules, 47 C.F.R.  43.61, for "facilities resale" on the U.S.-Hong Kong route; 12. IT IS FURTHER ORDERED that Hong Kong Telecommunications (Pacific) Ltd. AT&T Corp., AT&T Alascom, AT&T Puerto Rico, and AT&T Virgin Islands will comply with Sections 63.21 of the Commission's rules, 47 C.F.R.  63.21; 13. This Order is issued under Section 0.261 of the Commission's rules, 47 C.F.R.  0.261, and is effective on January 1, 1999. 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, Authorization and Certificate (see 47 C.F.R.  1.4(b)(2)). FEDERAL COMMUNICATIONS COMMISSION Diane J. Cornell Chief, Telecommunications Division International Bureau