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DA 96-1130 Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In the Matter of ) ) TELEGLOBE USA INC. ) ) ) Application for Authority Pursuant to Section 214 ) File No. I-T-C-95-466 of the Communications Act of 1934, as Amended, ) to Resell Private Lines Not Interconnected into ) the Public Switched Network between the ) United States and International Points ) ) Application for Authority Pursuant to Section 214 ) File No. I-T-C-95-467 of the Communications Act of 1934, as Amended, ) to Provide International Services from the ) United States to International Points Through ) Resale of International Switched Services ) ) Application for Authority Pursuant to Section 214 ) File No. I-T-C-95-468 of the Communications Act of 1934, as Amended, ) to Resell Private Lines Interconnected with the ) Public Switched Network at One or Both Ends for ) Provision of Switched Services between the United ) States and the United Kingdom ) ) Application for Authority Pursuant to Section 214 ) File No. I-T-C-96-074 of the Communications Act of 1934, as Amended, ) to Resell Interconnected Private Lines Between the) United States and Sweden for the Provision of ) Switched Services ) ORDER, AUTHORIZATION AND CERTIFICATE Adopted: July 15, 1996 Released: July 15, 1996 By the Acting Chief, International Bureau: 1. In this Order, Authorization and Certificate (Order) we grant authority to Teleglobe USA Inc. (Teleglobe USA) to resell switched and non-interconnected private line services of unaffiliated U.S. international carriers for the provision of authorized international services. We also grant Teleglobe USA authority to resell interconnected private lines between the United States and the United Kingdom, and between the United States and Sweden, for the provision of switched services. I. Backgr ound 2. Teleglobe USA is a Delaware corporation which is, ultimately, a wholly-owned subsidiary of Teleglobe Inc. (TGI), a Canadian telecommunications holding company. Among TGI s holdings is Teleglobe Canada Inc. (TGC), the monopoly provider of overseas telecommunications services in Canada. However, TGC does not provide international services to the United States, which are provided on a competitive basis by a number of facilities-based and resale carriers. Teleglobe USA is also affiliated with ORBCOMM Canada, which holds a license to provide data communications service using the ORBCOMM narrowband (non-voice) mobile satellite system. TGI also owns Teleglobe International (UK) Ltd. (TGUK), which holds a license to provide international services in the United Kingdom through resale of international private lines (IPLs) interconnected with the public switched network (PSN). 3. On August 5, 1995, Teleglobe USA filed three applications pursuant to Section 214 of the Communications Act of 1934, as amended (the Act), to commence operations as an international resale carrier. Teleglobe USA requests authority to resell: (1) (IPLs not interconnected into the PSN to 69 countries, among them the United Kingdom (I-T-C-95-466) (IPL Application); (2) international switched services of U.S. carriers to all countries set forth in their tariffs (I-T-C-95-467) (Switched Resale Application); and (3) international private lines between the United States and the United Kingdom, interconnected into the PSN on one or both ends, for the provision of switched services (I- T-C-95-468) (UK Application). In each instance, Teleglobe USA proposes to acquire service for resale from unaffiliated U.S. international carriers. We placed the applications on public notice on August 18, 1995, and received petitions to deny from AT&T Corporation (AT&T Petition) and MCI Telecommunications Corporation (MCI Petition), an opposition to these petitions from Teleglobe USA (Teleglobe USA Opposition), and a reply from AT&T (AT&T Reply). 4. On January 18, 1996, we received an application from Teleglobe USA to resell IPLs between the United States and Sweden, interconnected into the PSN on one or both ends, for the provision of switched services (I-T-C-96-074) (Sweden Application). Teleglobe USA again proposes to acquire service for resale from unaffiliated U.S. international carriers. We placed this application on public notice on February 6, 1996, and received no responses. II. The Applications 5. International Private Line Resale Application. Teleglobe USA proposes to resell non- interconnected IPLs to 69 countries and initially requests varying numbers of circuits to each destination. While Teleglobe USA does not seek authority to resell IPLs to Canada, it requests authority to establish a route to the United Kingdom, where it is affiliated with TGUK, as noted above. 6. Switched Resale Application. Teleglobe USA proposes to provide international voice, data, facsimile and other switched services from the United States to international points through resale of the international switched services of unaffiliated U.S. international carriers. Teleglobe USA seeks to offer service on all routes available in its underlying carriers tariffs, including to Canada. 7. UK and Sweden Applications. Teleglobe USA proposes to acquire IPLs between the United States and United Kingdom, and between the United States and Sweden, and to interconnect these IPLs into the PSN at one or both ends for the provision of switched basic services. 8. AT&T & MCI Petitions to Deny. AT&T and MCI oppose grant of the Teleglobe USA applications. The basic underpinning of the petitions is that Canada does not offer "effective market access" to the Canadian international services market for U.S. carriers, and any resale authorization granted Teleglobe USA would permit it to obtain asymmetric market access to the United States. Resale entry in the United States, according to AT&T and MCI, is unmatched in the Canadian market for three reasons: (1) TGC's exclusive monopoly on Canada-overseas facilities-based services through at least March 1997; (2) Canadian law promoting the "maximum use" of Canadian facilities for Canada-originating and terminating traffic (which limits the ability of U.S. carriers to route Canadian traffic over U.S. facilities); and (3) Canadian law limiting foreign ownership of voting stock in Canadian carriers (other than TGC) to 20% and prohibiting non-Canadian telecommunications common carriers from owning any equity in TGC. AT&T and MCI declare that the public interest benefits of allowing Teleglobe USA entry are outweighed by the diminishment in competition in the provision of international services to U.S. customers that would ensue from Teleglobe USA's entry into the U.S. resale market. AT&T and MCI both conclude that Teleglobe USA's applications should be denied until these policies are changed to allow U.S. carriers effective access to the Canadian international services market. 9. Teleglobe USA Opposition. Teleglobe USA responds that in a context unrelated to the present proceeding the Commission concluded that Canada affords equivalent resale opportunities. Teleglobe USA also points out that, while conditions in Canada's international facilities market are irrelevant to its pending resale applications, TGC's exclusive Canada-overseas mandate, the Canadian maximum use policy, and Canadian law limiting foreign ownership of Canadian common carriers are all under review by the Canadian government. 10. AT&T Reply. AT&T submits that the Commission's general policy in favor of open entry for resale has always been balanced by a case-by-case assessment of relevant public interest factors, which include the openness of a foreign carrier's market. Here, AT&T contends that balance tips in favor of denial. III. Discussion 11. Foreign Carrier Entry Order. On November 30, 1995, after the close of the pleading cycle in this proceeding, the Commission issued the Foreign Carrier Entry Order in a rulemaking proceeding which commenced several months before the Teleglobe USA filings. In that decision, the Commission adopted standards for regulating the entry of foreign carriers into the U.S. international telecommunications services market. In the Sprint Declaratory Ruling we reaffirmed the Commission's well-established policy to apply newly adopted rules to applications filed during the pendency of a rulemaking proceeding, and applied the Foreign Carrier Entry Order standards to the Sprint proceeding. We do likewise here. 12. In the Foreign Carrier Entry Order, the Commission announced that, as part of the its overall public interest analysis under Section 214 of the Act, it will examine whether effective competitive opportunities exist for U.S. carriers in the destination markets of foreign carriers seeking to enter the U.S. international services market through affiliation with a new or existing carrier. The Commission stated that it would only apply this examination to applications from foreign carriers that have market power, or are affiliated with such carriers, in the destination markets they seek to serve. The Foreign Carrier Entry Order defines market power as "the ability of the carrier to act anticompetitively against unaffiliated U.S. carriers through the control of bottleneck services or facilities on the foreign end." The Commission stated there was no need to apply an effective competitive opportunities analysis when a foreign carrier seeks to serve countries where it does not own or control bottleneck facilities that give it a dominant market position and the ability to discriminate against unaffiliated U.S. carriers. 13. International Private Line and Switched Resale Applications. In its applications, Teleglobe USA certified that it is affiliated with TGC and TGUK, and that all three carriers are wholly-owned subsidiaries of TGI. TGC is the monopoly provider of Canada-overseas traffic. However, TGC does not provide transborder services between the United States and Canada. TGUK is licensed to provide international simple resale (ISR) services from the United Kingdom to authorized points, including the United States, Sweden, Australia and Canada. Teleglobe USA has stated that TGUK is one of numerous ISR licensees in the United Kingdom, and neither owns nor controls international telecommunications facilities in the United Kingdom, which AT&T and MCI do not dispute. 14. We conclude that an effective competitive opportunities analysis is not required for either application. Although TGC is the monopoly provider of Canada-overseas telecommunications facilities in Canada, the relevant market for our analysis of Teleglobe's Switched Resale Application is the one for services and facilities on the U.S./Canada route. As TGC does not provide services, or own or control any facilities on this route, Teleglobe USA's affiliate lacks the ability to act anticompetitively against unaffiliated U.S. carriers competing for traffic on this route. Accordingly, we conclude Teleglobe USA does not possess market power in the relevant market under our analysis. Further, because TGUK does not control bottleneck facilities or services in the United Kingdom, Teleglobe USA's affiliate does not possess market power in the United Kingdom as well. 15. The effective competitive opportunities analysis is one component of our public interest mandate under Section 214 of the Act. Additional public interest considerations include: the general significance of the proposed entry to the promotion of competition in the U.S. communications market; any national security, law enforcement, foreign policy, or trade concerns raised by the Executive Branch; and the presence of cost-based accounting rates. We conclude that the public interest argues in favor of granting Teleglobe USA's switched resale and IPL applications. New resale entrants will improve competition in the U.S. international services market by providing additional choice for consumers leading to heightened price and service competition. AT&T and MCI's concerns about TGC's Canada-overseas monopoly and the Canadian foreign ownership restrictions on facilities are not directly relevant in our consideration of these resale applications. We reiterate that TGC does not own or control facilities or provide service on the U.S.-Canada route. Moreover, as Canada places no foreign ownership restrictions on resellers, AT&T and MCI's arguments on this point are not relevant to the concerns expressed by the Commission in the Foreign Carrier Entry Order. 16. Although we generally share AT&T's and MCI's concerns about Canada's maximum use policy, we also do not find this policy a bar to granting these resale applications. As we noted in fONOROLA, Canada's regulatory policy requires that all Canadian traffic, including intra-Canadian as well as Canada-overseas traffic, be routed to the maximum extent possible over Canadian facilities. However, the fact that all Canadian carriers route their Canada-overseas traffic via TGC's facilities results directly from TGC's monopoly, not from Canada's maximum use policy. Moreover, we have previously declined to use as a basis for denying a Section 214 resale authorization to any Canadian- based carrier the fact that Canadian carriers must use Canadian facilities to the maximum extent possible for intra-Canada traffic. We see no reason now to deviate from this position. 17. Our main concern in this proceeding is the potential ability of Teleglobe USA to act anticompetitively and leverage any market power it might have in Canada to the detriment of unaffiliated U.S. carriers. We do not believe that our decision to grant Teleglobe USA's applications here will result in such anticompetitive behavior. However, we emphasize that our decision should not be interpreted as condoning the TGC exclusive mandate or the maximum use policy. We share the concerns of AT&T and MCI that these policies could hinder the competitive status of U.S.-based carriers in other contexts. We will continue to monitor Canada's pending review of the TGC exclusive mandate and the maximum use policy, as well as the foreign ownership limitations. Further, we will consider these issues, where appropriate, in the context of our Section 214 review of other Teleglobe USA applications. 18. In addition, as a specific condition of Teleglobe USA's switched resale authorization (which includes service to Canada), we will require that Teleglobe USA file with the Commission all agreements between Teleglobe USA and TGC (including oral agreements) related to routing U.S. traffic through TGC's facilities, and that Teleglobe USA take TGC services at published rates. In general, these agreements will be available for public inspection. Due to TGC's exclusive mandate, any carrier handling Canada-overseas traffic must use TGC's facilities. Thus, the possibility exists that TGC may engage in discriminatory treatment to the benefit of its affiliate, Teleglobe USA, and to the detriment of other carriers, including U.S.-based carriers, in the routing of U.S. traffic to overseas points via Canada. Our objective in conditioning switched resale authorization on the filing of routing agreements between TGC and Teleglobe USA, and on taking at published rates, is to ensure that such discriminatory treatment does not occur. 19. Regarding the other public interest factors, the Executive Branch has not brought any concerns about Teleglobe USA's applications to the Commission's attention. Further, carriers in Canada and the United Kingdom have been cooperating in bringing already low accounting rates with the United States down towards the cost of providing service. Therefore, because it will serve the public interest, the Bureau grants Teleglobe USA's applications for non-interconnected IPL and switched resale services. 20. UK and Sweden Applications. In the Foreign Carrier Entry Order, the Commission restated the equivalency test for applications for switched service over resold private lines in terms of the effective competitive opportunities test. The Commission required that such applications include a demonstration that the foreign country at the other end of the private line provided U.S. carriers with: (1) the legal right to resell international private lines, interconnected at both ends, for the provision of switched services; (2) nondiscriminatory charges, terms and conditions for interconnection to foreign domestic carrier facilities for termination and origination of international services, with adequate means of enforcement; (3) competitive safeguards to protect against anticompetitive and discriminatory practices affecting private line resale; and (4) fair and transparent regulatory procedures, including separation between the regulator and operator of international facilities-based services. Notably, the Commission declared that this restatement of the equivalency standard did not represent a substantive change, and that a finding of "equivalent resale opportunities" was a finding of "effective competitive opportunities" to resell international private lines for the provision of switched services. 21. As Teleglobe USA notes in its applications, the Commission has previously determined that equivalent resale opportunities exist between the United States and the United Kingdom, and between the United States and Sweden. Furthermore, for the same reasons identified supra, we find that the public interest supports grant of these applications. Therefore, we also grant Teleglobe USA's request to resell interconnected private lines for the provision of switched services between the United States and the United Kingdom, and between the United States and Sweden. 22. Request for Non-dominant Carrier Regulation. Teleglobe USA requests that it be classified as non-dominant on all routes on which it seeks to resell switched and non-interconnected IPLs. Section 63.10(a)(1) of the Commission's Rules states that U.S. carriers unaffiliated with carriers in the destination country shall be presumptively non-dominant. Section 63.10(a)(3) of the Rules provides that a U.S. carriers affiliated with foreign carrier that is not a monopoly in the destination country and that seeks to be regulated as non-dominant has the burden of showing that the foreign affiliate lacks the ability to discriminate via control of bottleneck services or facilities. Finally, Section 63.10(a)(4) of the Rules states that carriers serving a destination route solely through the resale of switched services of unaffiliated U.S international carriers will be deemed presumptively non-dominant. 23. Teleglobe USA seeks to resell IPLs to 68 countries in which it does not have an affiliate and to one country (the United Kingdom) where its affiliate does not have the ability to discriminate through control of bottleneck facilities and services. We see nothing in the record to rebut the presumption of non-dominance for non-interconnected IPL as well as for switched resale. Therefore, under Sections 63.10(a)(1), 63.10(a)(3), and 63.10(a)(4) of the Rules, we grant non- dominant status to Teleglobe USA with respect to these services. 24. Teleglobe USA also seeks non-dominant status in its applications to resell interconnected IPLs for the provision of switched services to the United Kingdom and to Sweden. As Teleglobe USA is unaffiliated with a carrier in Sweden, and because its affiliate in the United Kingdom lacks the ability to discriminate via control of bottleneck services and facilities, the presumption of non-dominance applies under Sections 63.10(a)(1) and 63.10(a)(3), respectively, of the Rules. Again, there is nothing in the record to rebut the presumption of non-dominance in either instance. Therefore, we also grant non-dominant status with respect to Teleglobe USA's application for interconnected IPL resale to the United Kingdom and to Sweden. IV. Conclusion 25. We conclude the public interest supports granting Teleglobe USA authority to resell switched services of unaffiliated U.S. international carriers, and to resell non-interconnected IPL service to those countries listed in Appendix A to this Order. We also grant Teleglobe USA authority to resell interconnected IPLs between the United States and the United Kingdom, and between the United States and Sweden, for the provision of switched services. V. Ordering Clauses 26. Accordingly, it is CERTIFIED that the present and future public convenience and necessity require grant of these applications, and it is hereby ORDERED that application File Nos. I- T-C-95-466, I-T-C-95-467, I-T-C-95-468, and I-T-C-96-074 are GRANTED. Teleglobe USA Inc. is authorized to resell the services of unaffiliated U.S. international carriers to provide: (1) private lines not interconnected into the public switched network to the destinations set forth in Appendix A to this Order; (2) international switched services to destinations set forth in the tariffs of its underlying carriers, subject to the conditions expressed below; (3) international private lines for the provision of switched services between the United States and the United Kingdom; and (4) international private lines for the provision of switched services between the United States and Sweden. 27. It is FURTHER ORDERED that Teleglobe USA Inc.'s authorization to provide switched resale services is subject to the following conditions: (a) Teleglobe USA must file with the Commission all agreements between it and Teleglobe Canada Inc., including all oral agreements, related to routing U.S. traffic through Teleglobe Canada's facilities; and (b) Teleglobe USA must take Teleglobe Canada's services at published rates. 28. It is FURTHER ORDERED that Teleglobe USA Inc.'s authorization to resell non- interconnected international private line service is limited to the provision of such service only to the destination countries listed in Appendix A to this Order, that is, private lines that originate in the United States and terminate in one of the listed destination countries. In addition, Teleglobe USA may not -- and Teleglobe USA's tariffs must state that its customers may not -- connect private lines provided over these facilities to the public switched network at either the U.S. or foreign end or both, for the provision of international switched basic services, unless authorized to do so by the Commission upon a finding that the foreign administration affords resale opportunities equivalent to those available under U.S. law, in accordance with the Foreign Carrier Entry Order, 11 FCC Rcd 3873, 3924-3925 (1995). 29. It is FURTHER ORDERED that Teleglobe USA Inc.'s authorization to resell international private lines for the provision of switched services between the United States and the United Kingdom, and between the United States and Sweden, is limited to the provision of such services between these countries only, that is, private lines which carry traffic that originates in the United States and terminates in the United Kingdom or vice-versa, or traffic that originates in the United States and terminates in Sweden or vice-versa. This restriction is subject to the following exceptions: (a) Teleglobe USA may engage in "switched hubbing" through the United Kingdom and through Sweden consistent with the rules adopted in Foreign Carrier Entry Order, 11 FCC Rcd at 3938-3939; and (b) Teleglobe USA may provide U.S.-inbound or outbound switched basic service by connecting its authorized private lines between the United States, Sweden, and the United Kingdom. 30. It is FURTHER ORDERED that the Petitions to Deny filed by AT&T Corporation and MCI Telecommunications Corporation are DENIED. 31. It is FURTHER ORDERED that Teleglobe USA Inc. shall comply with Sections 63.21 and 63.15(b) of the Commission's Rules. 32. 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 of the Rules, or applications for review under Section 1.115 of the Rules, may be filed within 30 days of the public notice of this Order (see Section 1.4(b)(2) of the Rules). FEDERAL COMMUNICATIONS COMMISSION Donald H. Gips Acting Chief, International Bureau APPENDIX A Non-in terconnected Private Line Destinations Argentina Australia Austria Bahamas Bangladesh Belarus Belgium Bermuda Bolivia Brazil Bulgaria Chile China Colombia Costa Rica Czech Republic Denmark Dominican Republic Ecuador Egypt El Salvador Finland France Germany Greece Haiti Honduras Hong Kong Hungary India Indonesia Ireland Israel Italy Jamaica Japan Lithuania Luxembourg Malaysia Mexico Monaco Netherlands New Zealand Nicaragua Norway Pakistan Panama Paraguay Peru Philippines Poland Portugal Romania Russia Saudi Arabia Singapore South Africa South Korea Spain Sweden Switzerland Taiwan Thailand Turkey Ukraine United Kingdom Uruguay Venezuela Vietnam