FOR RECORD ONLY ///newjob/// $///DA 95-120,2/3/95,RO///$ DA 95-120 Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In the Matter of) ) BT North America, Inc.) File No. I-T-C-93-126 ) Application for Authority ) Under Section 214 of the Communications) Act to Provide International Resale ) Services as a Nondominant ) Common Carrier ) MEMORANDUM OPINION, ORDER AND AUTHORIZATION Adopted: January 27, 1995 Released: January 30, 1995 By the Chief, International Bureau: I. INTRODUCTION 1. On March 8, 1993, BT North America ("BTNA") requested authority, pursuant to Section 214 of the Communications Act, 47 U.S.C.  214, to resell, as a nondominant carrier: (i) switched services between the United States and various international points; (ii) international private lines for the provision of non-interconnected private line services between the United States and Australia, Canada, France, Germany, the Netherlands, Sweden and the United Kingdom; and (iii) international private lines, interconnected at one end or both ends to the public switched network, for the provision of switched services between the United States and the United Kingdom and between the United States and Canada . II. BACKGROUND 2. We placed the original application on public notice on March 17, 1993. We received six petitions to deny or comments in opposition, and three other sets of comments. Subsequently, BTNA filed an opposition to the petitions to deny and a response to the comments. We received ten filings responding to BTNA's pleadings. 3. On October 6, 1994, the Commission released an order granting two applications for authorization to resell international private lines for the provision of switched services between the United States and the United Kingdom. In that order the Commission found that: On balance. . . the evidence submitted in the record demonstrates that equivalent international private line resale opportunities exist in the United Kingdom for U.S.-based carriers seeking to provide service between the United States and the United Kingdom. ACC/Alanna Order at para. 2. 4. On November 14, 1994, we released an order that granted BTNA authority, as a dominant carrier, to resell switched services between the United States and various international points and to resell international private lines for the provision of non- interconnected private line services between the United States and the above-referenced countries. That order deferred consideration of BTNA's request for authority to resell interconnected international private lines for the provision of switched services between the United States and Canada and the United Kingdom and deferred consideration of BTNA's request to be regulated as a nondominant carrier. We now grant BTNA authority to resell international private lines, subject to the conditions outlined in this order. III. DISCUSSION 5. Most of the comments filed in response to BTNA's application argue that the United Kingdom does not afford resale opportunities equivalent to those available under U.S. law. Commenters' principal contentions include assertions that there are significant barriers to entry into the U.K. market and that the U.K. regulatory regime does not provide adequate protection against abuse of BT's market power. The substance of these arguments is not different from arguments addressed by the Commission in the ACC/Alanna Order. After giving these arguments full consideration, the Commission concluded that the United Kingdom affords equivalent resale opportunities to those available under U.S. law. We therefore need not revisit that issue in this order. 6. Similarly, a number of commenters oppose BTNA's request that it be regulated as a nondominant carrier. In order to expedite consideration of its application, BTNA on February 4, 1994, stated that it would accept dominant carrier regulation on all of its proposed routes. In the November 14 Order we deferred consideration of BTNA's request that it be regulated as a nondominant carrier and concluded that we would continue to regulate BTNA as dominant for the services authorized in that order. 7. We conclude that BTNA must be regulated as a dominant carrier for all authorized services on the U.S-U.K. route. BTNA's parent, BT, controls bottleneck facilities in the United Kingdom. BT is currently the dominant carrier in a duopoly for the provision of international facilities-based services, controls over 90 percent of the local termination points, and has the most fully developed long distance network to which interconnection is essential for the distribution of international traffic. On this basis, we find that BT has the ability to discriminate against unaffiliated U.S. carriers. We therefore conclude that the public interest requires that we continue to regulate BTNA as a dominant carrier for the services authorized in this order and in the November 14 Order on the U.S-U.K. route. We find no reason on this record to regulate BTNA as dominant for the provision of any authorized services on any other certified routes. 8. AT&T also argues that we should condition any grant of resale authority to BTNA on BTNA's agreement to reduce accounting rates "towards cost-based, competitive levels." AT&T argues that granting resale authority will allow BTNA to bypass the settlements process and thereby exacerbate the U.S. net settlements deficit with the United Kingdom. In response, BTNA argues that we should impose no such condition because granting its application will increase resale competition and thus exert downward pressure on accounting rates. BTNA also notes that BT's accounting rate is within the benchmark range that the Commission established in its Accounting Rates docket. Finally, BTNA asserts that AT&T and other U.S. carriers are largely to blame for the U.S. net settlements deficit due to their promotion of country-direct services. 9. We agree with AT&T that, although BT's accounting rates with U.S. carriers are within the benchmark range, these rates are still significantly above cost. BTNA does not deny this. We understand AT&T to ask that we delay the introduction of additional competition on the U.S.-U.K. route until AT&T is able to negotiate lower accounting rates with BT. We do not believe delaying competition is in the public interest. 10. Nevertheless, reducing accounting rates surely is in the public interest and we must consider the impact that this authorization of the United Kingdom's dominant carrier will have on our goal of reducing accounting rates to cost. As we have noted, BTNA contends that grant of its application will exert downward pressure on accounting rates. Of course, BTNA's parent, BT, can negotiate lower accounting rates with U.S. carriers at any time. Indeed, BT and U.S. carriers have made progress in recent years in reducing accounting rates. To ensure this progress continues -- and is not slowed by this authorization -- we will require as a condition of this authorization that BTNA file (within sixty days of release of this order) a plan setting forth further significant reductions by BT towards cost- based accounting rates with U.S. carriers over the next two years. 11. We conclude that the public interest will be served by the grant of this application in that it introduces additional competition in the resale of international telecommunications services. Competition fosters lower prices, innovative services and increased responsiveness to consumer needs, all of which in turn should help to stimulate U.S. economic growth. Grant of BTNA's application is also in the public interest because it should encourage liberalization of other telecommunications markets around the world. The success of the United States and the United Kingdom in opening their markets to competition may encourage other countries to emulate these procompetitive policies and make their telecommunications markets more open to foreign investment and increased competition. 12. Accordingly, we find that the present and future public convenience and necessity require the grant of authorization to BTNA to resell international interconnected private lines between the United States and the United Kingdom and the United States and Canada. IV. ORDERING CLAUSES 13. Upon consideration of the above-captioned application, IT IS HEREBY CERTIFIED that the present and future public convenience and necessity require the resale by BTNA of international private lines interconnected to the public switched network at one end or both ends for the provision of switched services to the general public between the United States and Canada and between the United States and the United Kingdom. 14. Accordingly, IT IS ORDERED that application File I-T-C-93-126 IS GRANTED and BTNA is authorized to resell the tariffed international private lines of authorized U.S. common carriers. BTNA is authorized to resell up to 16 E-1 circuits to Canada and up to 29 E-1 circuits to the United Kingdom, as requested in its application. 15. IT IS FURTHER ORDERED that neither BTNA nor any persons or companies directly or indirectly controlling it or controlled by it, or under direct or indirect common control with it, shall acquire or enjoy any right, for the purposes of handling or interchanging traffic to or from the United States, its territories or possessions which is denied to any other United States carrier by reason of any concession, contract, understanding, or working arrangement to which BTNA or any such persons or companies controlling or controlled by BTNA are parties. See also 47 C.F.R.  63.14. 16. IT IS FURTHER ORDERED that BTNA shall comply with Section 203 of the Communications Act, 47 U.S.C. 203, Part 61, and Sections 43.51 and 43.61 of the Commission's Rules, 47 C.F.R. Part 61, and 43.51 and 43.61. 17. IT IS FURTHER ORDERED that BTNA, as a dominant carrier on the U.S.-U.K. route, shall request Section 214 authorization for all circuit additions to the United Kingdom pursuant to Section 63.01 of the Commission's Rules, 47 C.F.R. 63.01. 18. IT IS FURTHER ORDERED that BTNA, as a dominant carrier on the U.S.-U.K. route, shall file quarterly reports of revenue, number of messages, and number of minutes of both originating and terminating traffic for all international services between the United States and the United Kingdom 90 days after the end of each calendar quarter. 19. IT IS FURTHER ORDERED that BTNA, as a nondominant international private line reseller between the United States and Canada, shall file on a semi-annual basis with the Commission the information contained in the annual reports of overseas telecommunications traffic filed pursuant to Section 43.61 of the Commission's rules, 47 C.F.R.  43.61. 20. IT IS FURTHER ORDERED that BTNA shall file semi-annual circuit additions to Canada, pursuant to Section 63.15 of the Commission's rules, 47 C.F.R.  63.15. 21. IT IS FURTHER ORDERED that BTNA shall comply with any current and future Commission policies and requirements concerning international accounting and settlement rates and shall file copies of any operating agreements which it enters into with its foreign correspondents within 30 days of their execution. BTNA shall also file with the Commission copies of any operating agreements entered into by its parent/affiliate that affect traffic or revenue flow between the United States and the United Kingdom within 30 days of their execution. 22. IT IS FURTHER ORDERED that BTNA shall (within 60 days of release of this order) file with the Commission a plan setting forth significant reductions by BT towards cost-based accounting rates with U.S. carriers over the next two years. 23. This Order is issued under Section 0.261 of the Commission's Rules and is effective upon adoption. Petitions for reconsideration under Section 1.106 or applications for review under Section 1.115 of the Commission's Rules may be filed within 30 days of the public notice of this Order (see Section 1.4(b)(2)). FEDERAL COMMUNICATIONS COMMISSION Scott Blake Harris Chief, International Bureau