Report No. CC-578 COMMON CARRIER ACTION June 29, 1994 TRANSFER OF AMERICATEL CORP. TO CHILEAN-CONTROLLED ENTEL INTERNATIONAL AUTHORIZED The Commission has granted the application of AmericaTel Corporation for: (1) transfer of control of AmericaTel Corp. from Northland Communications, Inc., to ENTEL International B.V.I. Corporation by increasing ENTEL's ownership stake in AmericaTel; and (2) assigning on a pro forma basis AmericaTel's Section 214 authorizations to AmericaTel Acquisition Corp (ATA) (which ENTEL controls) immediately after the transfer of control of AmericaTel to ENTEL. ENTEL is owned and controlled by ENTEL-Chile, which provides domestic and international long distance service in Chile. Telefonica de Espana S.A., Spain's government-controlled monopoly telephone company, owns 20 percent of the outstanding shares in ENTEL-Chile. Telefonica also owns a controlling interest in Compania de Telefonos de Chile (CTC), which provides local telephone service in Chile to approximately 95 percent of Chilean telephone subscribers. Telefonica has publicly stated it will divest its holdings in either ENTEL-Chile or CTC by October 1994, in compliance with Resolution 368 of Chile's Anti-Monopoly Commission. The FCC found that Chile has made commendable progress in liberalizing its telecommunications markets, fostering competition and devising competitive safeguards to enable new entrants to compete effectively. The Commission concluded that U.S. carriers have the ability to invest and obtain licenses to operate in Chile in competition with ENTEL-Chile. The Commission noted that ENTEL-Chile is one of five carriers, including a carrier wholly-owned by BellSouth, authorized by Chilean regulators to provide facilities-based international telecommunications services in Chile. (over) - 2 - The Commission, nevertheless, found that there remains some potential for discrimination by CTC in favor of ENTEL-Chile and/or ATA, and against unaffiliated U.S. carriers. This potential exists because of Telefonica's common ownership of ENTEL-Chile and CTC. The Commission also observed that certain Chilean safeguards designed to enable new entrants to compete effectively in Chile were only recently enacted, and have not yet been fully implemented. To address these concerns, the Commission imposed certain terms and conditions on its grant of operating authority to ATA. Accordingly, the Commission said it will regulate ATA as dominant for the U.S.-Chile route and nondominant for all other routes. The Commission imposed dominant carrier regulation on the U.S.-Chile route because ATA failed to demonstrate that ENTEL-Chile lacks the ability to discriminate against unaffiliated U.S. international carriers. The Commission will continue to regulate ATA as dominant for the U.S.-Chile route unless ATA demonstrates it qualifies for nondominant status pursuant to the International Services Order, 7 FCC Rcd 7334 (1992). The Commission also required, in addition to safeguards related to the international settlements process, that ATA file progress reports between 1994 and 1998 detailing the status of the telecommunications industry and regulatory regime in Chile. The Commission concluded that the regulatory safeguards it imposed as a condition of its authorization, current market conditions in Chile, and Chile's regulatory regime, were sufficient to prevent ATA from obtaining an unfair competitive advantage or any undue preferential treatment as a result of its affiliation with ENTEL-Chile. The Commission denied a request from AT&T that it condition approval of the application on a finding that comparable market access for U.S. firms is available in Chile and on ENTEL-Chile's agreement to establish immediately nondiscriminatory, cost-based accounting rates with U.S. carriers. The Commission noted that these requests raise broad policy issues that should be addressed in the context of a rulemaking proceeding rather than in a Section 214 application. The Commission emphasized that ATA will be required to comply with any requirements that the Commission may adopt in future rulemaking proceedings. - 3 - The Commission's approval of this transfer application will allow a Chilean-owned carrier to offer communications services in the United States as a facilities-based international carrier. The Commission believes grant of this application will lead to U.S. consumer benefits through increased competition in the U.S. telecommunications market. It also believes that this grant of authority may encourage other countries to open their telecommunications markets to greater competition and to liberalize their regulatory regimes. Action by the Commission June 28, 1994, by Memorandum Opinion, Order, Authorization and Certificate (FCC 94-175). Chairman Hundt, Commissioners Barrett, Ness and Chong with Commissioner Quello concurring in the result and issuing a separate statement. - FCC - News Media contact: Rosemary Kimball at (202) 418-0500. Common Carrier Bureau contacts: Susan Lee O'Connell and Diane Cornell at (202) 632-3214.