NOTICE ************************************************************************* NOTICE ************************************************************************* This document was originally prepared in Word Perfect. If the original document contained-- * Footnotes * Boldface & Italics --this information is missing in this version The document format (spacing, margins, tabs, etc.) is changed too. If you need the complete document, download the Word Perfect version. For information about downloading documents (FTP) see file pnmc5021. File pnmc5021 (.txt & .wp) is in directory \pub\Public_Notices\Miscellaneous. ************************************************************************* DA 96-1169 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of) ) NYNEX Long Distance Co. ) ) Application for Authority Pursuant to ) Section 214 of the Communications Act of ) ITC-96-125 1934, as amended, to Provide ) International Services from Certain ) Parts of the United States to ) International Points through Resale ) of International Switched Services ) ) Ameritech Communications, Inc. ) ) Application for Authority Pursuant to ) Section 214 of the Communications Act, ) ITC-96-272 as amended, to Provide) International Services from the ) United States to International Points ) through Resale of International ) Switched Services ) ) Bell Atlantic Communications, Inc. ) ) Application for Authority Pursuant to ) Section 214 of the Communications Act of ) ITC-96-181 1934, as amended, to Resell ) Service of Other Common Carriers to ) Provide Switched Service from the ) United States to International Points ) through Resale of International ) Switched Services ) ORDER, AUTHORIZATION AND CERTIFICATE Adopted: July 19, 1996 Released: July 24, 1996 By the Acting Chief, International Bureau TABLE OF CONTENTS Topic Paragraph No. I. Introduction 1 II. Background A. Competitive Carrier Proceeding 3 B. 1996 Act and BOC Domestic Out-of-Region Order 6 C. Applications 9 III. Discussion A. Definition of Dominant Carrier and Interim Safeguards 14 B. Proposed Merger Between Bell Atlantic and NYNEX 22 C. Foreign Carrier Affiliations 25 IV. Conclusion 33 V. Ordering Clauses 37 I. Introduction 1. NYNEX Long Distance Company (NYNEX LD), Ameritech Communications, Inc. (ACI), and Bell Atlantic Communications, Inc. (BACI) each filed an application seeking authority pursuant to Section 214 of the Communications Act of 1934, as amended (Act), and Section 63.01 of the Commission's rules, to provide international telecommunications services originating from "out-of region" points in the United States and terminating at international points through the resale of switched services of unaffiliated common carriers. NYNEX LD, ACI, and BACI request classification as non-dominant resellers of international switched services on all routes for which they seek authorization. 2. For the reasons set forth below, we find that a grant of NYNEX LD's, ACI's, and BACI's applications, subject to the conditions set forth below, will serve the public interest under Section 214 of the Act. The conditions that we apply to our grant of NYNEX LD's, ACI's, and BACI's Section 214 applications are the same as the interim safeguards that the Commission recently adopted as a condition for non-dominant treatment of the Bell Operating Companies' (BOCs) provision of out-of-region, domestic interstate, interexchange services (including interLATA and intraLATA services). The conditions we attach to our grant of the instant Section 214 applications will remain in place pending the outcome of the Commission's Interexchange NPRM. In the meantime, we believe that our grant of NYNEX LD's, ACI's, and BACI's applications subject to the conditions set forth below will facilitate the efficient and rapid provision of international services, as contemplated by the Telecommunications Act of 1996, while still protecting ratepayers and competition in the U.S. international services market. II. Background A. Competitive Carrier Proceeding 3. In 1980, in its First Report & Order in Competitive Carrier, the Commission devised the dominant/non-dominant regulatory scheme for Title II rate and entry regulation. In a series of orders, the Commission distinguished between carriers with market power (dominant carriers) and those without market power (non-dominant carriers). The Commission also determined that, if a common carrier was determined to be "non-dominant," Title II regulatory requirements would be "streamlined." The Commission gradually relaxed its regulation of non-dominant carriers because it concluded that non-dominant carriers lacked the incentive and ability to engage in conduct that might be anticompetitive or otherwise inconsistent with the public interest. 4. The Commission has applied standard principles of antitrust analysis to determine whether a carrier possesses market power in the provision of the relevant service in the relevant geographic market. This analysis includes a focus on: (1) market share, (2) the demand elasticity of a carrier's customers, (3) the supply elasticity of the market, (4) a carrier's cost structure, size and resources, and (5) control of bottleneck facilities. 5. The Commission first applied its dominant/non-dominant regulatory scheme to U.S. international carriers in 1985. In International Competitive Carrier, the Commission determined that, for international service, demand and supply elasticity revealed distinct product markets, international message telephone service (IMTS) and non-IMTS, and that every destination country constituted a separate geographic market based "primarily on the need for a carrier to obtain an operating agreement prior to providing service to a given country." The Commission also concluded that (a) AT&T was dominant in the provision of IMTS and (b) all other IMTS providers (e.g., Sprint and MCI), except the non-contiguous domestic carriers, were not dominant. The Commission determined that no carrier was dominant in the provision of non-IMTS service for any geographic market. In addition, the Commission found all foreign-owned carriers to be dominant for all services to all countries. The Commission recently found AT&T to be no longer dominant in the provision of international services. B. 1996 Act and BOC Domestic Out-of-Region Order 6. In enacting the Telecommunications Act of 1996 (1996 Act), Congress sought to establish "a pro-competitive, de-regulatory national policy framework" for the United States telecommunications industry. The 1996 Act, among other things, permitted the BOCs to provide interLATA services originating outside of their in-region states. 7. In the BOC Domestic Out-of-Region Order, the Commission adopted an interim regime to govern the BOCs' provision of out-of-region, domestic interstate, interexchange services. The regime was adopted as an interim measure "to facilitate the efficient and rapid provision of out-of-region, domestic, interstate, interexchange services by the BOCs, . . . while . . . protecting ratepayers and competition in the interexchange market" pending the Commission's establishment of final rules in the Interexchange proceeding. The interim rules remove dominant carrier regulation for BOCs that provide out-of-region, domestic interstate, interexchange services through an affiliate that complies with certain minimum safeguards. The affiliate must: (1) maintain separate books of account from the LEC; (2) not jointly own transmission or switching facilities with the LEC; and (3) take any tariffed services from the affiliated LEC pursuant to the terms and conditions of the LEC's generally applicable tariff. The interim rules also treat BOC affiliates providing out-of-region, domestic interstate, interexchange services as nonregulated affiliates under the Commission's joint cost rules and affiliate transactions rules for purposes of the BOCs' accounting. BOCs that provide out-of-region, domestic interstate, interexchange services directly rather than through an affiliate that complies with the Commission's interim requirements remain subject to dominant carrier regulation. 8. The Commission observed that a number of BOCs had announced plans to merge their operations, including Bell Atlantic and NYNEX. The Commission stated its belief that such mergers raise concerns "that, in the period prior to a merger's consummation, one partner to the merger may act in ways to favor those out-of-region services of its merger partner that originate in the first partner's service territory." Determining that the record provided an inadequate basis on which to address the specific concerns raised by the pending mergers, the Commission "exclude[d] from the services covered by th[e] Order, those out-of- region services that originate in the in-region states of a merger partner during the period prior to the consummation of the merger." The Commission also determined that, in the event the potential merging parties sought to provide out-of-region services originating in their respective partners' service territories, "those parties should request the Commission, on an individual case basis, for a determination of whether such services can be provided on a non-dominant basis." C. Applications 9. NYNEX LD requests authorization under Section 214 of the Act to resell the international switched services of unaffiliated U.S. international carriers for the "provision of international switched services originating in the contiguous United States, Hawaii, Puerto Rico, and the U.S. Virgin Islands, except the in-region states served by the NYNEX telephone operating companies, and terminating at all international points except Gibraltar." NYNEX LD states that it is a wholly-owned subsidiary of NYNEX Corp. (NYNEX), a provider of telecommunications services in the United States and internationally, and that both companies are incorporated in Delaware. NYNEX LD claims that it qualifies for non-dominant treatment on all routes for which it seeks authorization under Section 63.10(a)(1) of the rules, with the exception of the U.S.-U.K. route where it has foreign carrier affiliates. NYNEX LD contends that it qualifies for non-dominant treatment on the U.S.-U.K. route under Section 63.10(a)(3) of the rules because its foreign carrier affiliates in the United Kingdom have no control over bottleneck services or facilities. 10. ACI requests authority under Section 214 of the Act to resell international switched services of unaffiliated U.S. international carriers originating from U.S. points outside the five states in which its parent corporation, Ameritech Corporation (Ameritech), provides wireline local exchange services and terminating at all international points. ACI states that it is wholly-owed by Ameritech and that both are Delaware corporations. ACI asserts that it is presumptively non-dominant on all routes for which it seeks authorization under Section 63.10(a)(4) of the rules. ACI contends that, although it "owns 33.5 percent of MATAV, a Hungarian company providing local, long distance, and cellular service in Hungary, this affiliation should not alter ACI's non-dominant status on the United States/Hungary route, since ACI will be providing service to Hungary through the resale of switched international services of unaffiliated U.S. carriers[.]" 11. BACI requests Section 214 authority to resell international switched services of unaffiliated common carriers to provide international switched services originating from U.S. points that are outside the states in which Bell Atlantic Corporation's (Bell Atlantic) local telephone company subsidiaries are authorized to provide services. BACI states that it is a wholly-owned subsidiary of Bell Atlantic and that it is incorporated in Delaware. BACI asserts that it is presumptively non-dominant on all routes for which it seeks authority under Section 63.10(a)(4) of the rules, except for the U.S.-Mexico and U.S.-Chile routes where it is affiliated with foreign carriers. BACI maintains that it is eligible for non-dominant regulation on the U.S.-Mexico and the U.S.-Chile routes under Section 63.10(a)(3) of the rules because neither Iusacell nor Iusatel has the ability to discriminate against unaffiliated U.S. international carriers through control of bottleneck services or facilities. 12. NYNEX LD, ACI, and BACI each assert that a grant of their respective Section 214 applications will further the public interest, convenience, and necessity by increasing the competition in international services, expanding the range of new and innovative services, reducing the prices for international services, and allowing for the more efficient use of existing international telecommunications facilities. NYNEX LD and BACI state that they will comply with any requirements adopted in the BOC Out-of-Region Order as a condition for a grant of their application. 13. No pleadings were filed in response to NYNEX LD's application. MCI Telecommunications Corporation (MCI) filed comments in response to BACI's application, to which BACI filed a response. MCI also filed a petition to deny ACI's application, to which ACI filed a response. III. Discussion A. Definition of Dominant Carrier and Interim Safeguards 14. Under the Commission's rules, a dominant carrier is defined as "a carrier found by the Commission to have market power (i.e., the power to control prices"). A non- dominant carrier is defined as "[a] carrier not found to be dominant." As discussed above, the Commission in International Competitive Carrier held that, in applying the dominant/non- dominant regulatory scheme for international services, every destination country constituted a separate geographic market. With the possible exception of the routes where the applicants are affiliated with foreign carriers, we believe that there are no critical distinctions on the basis of NYNEX LD's, ACI's and BACI's market shares, their respective sizes and resources, demand and supply elasticities, or conditions of entry from one destination country to another which would require a route-by-route analysis of these carriers' market positions. As new applicants in the international services market, NYNEX LD, ACI, and BACI currently have no shares in the international services market. Further, the Commission has recently determined that there is no evidence to "suggest[] that entry barriers vary substantially among geographic markets." Thus, we conclude that BACI, ACI, and NYNEX LD's market position does not differ among routes and that we need not generally make specific route-by- route findings with the exception of the specific affiliated routes identified above. 15. In applying the Commission's standard principles of antitrust analysis to determine whether a carrier possesses market power, it is clear that NYNEX LD, BACI, and ACI as proposed new entrants do not possess any share in the market for international services. The Commission recently found that customers in the international services market are highly demand-elastic and will switch carriers in order to obtain price reductions and desired services. The Commission also found that the elasticities of supply in the international services market are high. Further, we do not envision that NYNEX LD's, BACI's, and ACI's cost structure, size, and resources will allow them to control prices or exclude competition insofar as they are new entrants into the international services market and will face a number of large, well-financed competitors, including MCI, Sprint, and AT&T. 16. Nevertheless, the instant applications raise the question of whether NYNEX LD, BACI, and ACI may be able to leverage the market power of their LEC affiliates in their in-region states in the provision of local exchange and exchange access services to gain market power in the provision of international service originating from out-of-region states. The Commission raised substantially the same issue in the BOC Domestic Out-of-Region Order in considering the appropriate treatment of the BOCs' provision of out-of-region, domestic interstate, interexchange services, i.e., "whether a firm with market power in one relevant market (the local exchange and exchange access market) can leverage that power to gain market power or an unfair advantage in another, related market (the interexchange market)." In order to provide some protection against "cost-shifting and anticompetitive conduct," the Commission adopted interim safeguards. The Commission adopted these minimum safeguards as an interim measure pending a further comprehensive analysis of the interexchange services of both BOCs and independent LECs in the Interexchange proceeding. 17. We believe that application of the interim safeguards adopted in the BOC Domestic Out-of-Region Order as a condition of our granting the instant applications provides necessary and sufficient interim protection against potential abuses by NYNEX LD, ACI, and BACI in their provision of solely out-of-region international switched resale services. We find no practical distinctions between a BOC's ability and incentive to improperly allocate costs, discriminate against, or otherwise disadvantage unaffiliated domestic interexchange as opposed to international service competitors. We also believe that the application of the interim safeguards will not impose an unreasonable burden on the applicants in their provision of out-of-region international services. The conditional safeguards will remain in place at least until completion of the Interexchange proceeding. We therefore reserve the right to modify the conditions of the applicants' authorizations, as necessary, upon adoption of final rules for the BOCs' provision of out-of-region domestic interstate, interexchange services. In the meantime, it is our view that granting the instant Section 214 applications subject to the safeguards as set forth below will facilitate the efficient and rapid provision of out-of-region international services by NYNEX LD, ACI, and BACI, as contemplated by the 1996 Act, while still protecting ratepayers and competition in the U.S. international services market. 18. Specifically, we grant NYNEX LD's, ACI's and BACI's Section 214 applications to resell international switched services of unaffiliated U.S. carriers on a non- dominant basis subject to the condition that they (1) maintain separate books of account from the LEC; (2) not jointly own transmission or switching facilities with the LEC; and (3) take any tariffed services from the affiliated LEC pursuant to the terms and conditions of the LEC's generally applicable tariff. Except for the ban on joint ownership of transmission and switching facilities, we will permit NYNEX LD, ACI, and BACI and their respective affiliated LECs to share personnel and other resources or assets. Further, although we require NYNEX LD, ACI, and BACI to maintain their corporate structures as separate legal entities from their LEC affiliates, we do not require that these international service affiliates' separate books of account comply with our Part 32 rules. 19. In addition, we will require NYNEX LD, ACI, and BACI to be treated as nonregulated affiliates for purposes of BOC accounting under the Commission's joint cost and affiliate transactions rules. The Commission's existing accounting safeguards for affiliate transactions were developed in the Joint Cost Order and are codified in Parts 32 and 64 of our Rules. The Part 64 cost allocation rules prescribe how carriers separate the costs of regulated activities from the costs of nonregulated activities, where the nonregulated activities are performed directly by the carrier rather than through an affiliate. The Part 32 affiliate transactions rules prescribe the way costs are recorded, for Title II accounting purposes, when a regulated carrier does business with its nonregulated affiliates. These rules are designed to prevent local exchange carriers from imposing the costs and risks of their competitive ventures on local telephone ratepayers. These rules do not require carriers or their affiliates to charge any particular prices for assets transferred or services provided; rather, they require carriers to use certain specified valuation methods in determining the amounts to record in their Part 32 accounts, regardless of the prices charged. 20. Because the cost allocation and affiliate transactions rules are an important component of our accounting safeguards, we find, as did the Commission in the BOC Domestic Out-of-Region Order, that these rules should apply to NYNEX LD's, ACI's, and BACI's provision of out-of-region international switched resale services. Even though NYNEX LD's, ACI's, and BACI's provision of out-of-region international switched resale services are services regulated under Title II, we will require these carriers to be treated for BOC accounting purposes as nonregulated affiliates and therefore subject to our cost allocation and affiliate transaction rules. The fact that international switched resale services are regulated services in and of itself does not eliminate the potential for improper allocation of costs between the carriers' competitive (international) and noncompetitive (local exchange and exchange access) services. Thus, we believe that application of our cost allocation and affiliate transaction rules is necessary to minimize the possibility that NYNEX LD, ACI, or BACI could improperly shift the costs of their international switched resale operations to their regulated local exchange and exchange access ratepayers. 21. We find that requiring the applicants to treat affiliates providing out-of-region services as nonregulated will not be unduly burdensome. All the BOCs currently have systems in place to account for transactions between their nonregulated affiliates (e.g., for transactions between a BOC and any of its information services which are not regulated under Title II). Such a requirement will not entail extensive modification of existing company procedures because, prior to the passage of the 1996 Act, BOCs were prohibited from providing international services. B. Proposed Merger Between Bell Atlantic and NYNEX 22. Noting that a number of BOCs had recently announced plans to merge (including Bell Atlantic and NYNEX), the Commission expressed concern in the BOC Domestic Out-of-Region Order that, in the period prior to a merger's consummation, a partner to the merger might act in ways to favor those out-of-region services of its merger partner that originate in the first partner's service territory. Stating its belief that the record before it provided an inadequate basis on which to address the specific concerns raised by the pending mergers, the Commission excluded from the services covered by the interim rules adopted in the BOC Domestic Out-of-Region Order those out-of-region services that originate in the in- region states of a merger partner during the period prior to the consummation of a merger. Potential merging parties that seek to provide out-of-region services originating in their respective partners' service territories are required to request the Commission, on an individual case basis, for a determination of whether such services can be provided on a non- dominant basis. The Commission also determined that if an announced merger is not consummated, then the interim rules established in the BOC Domestic Out-of-Region Order would apply to all out-of-region services provided by the parties to the proposed merger. 23. We believe that the Commission's concerns regarding a BOC's provision of out-of-region, domestic interstate, interexchange services in a merger partner's territory are equally relevant in the international context. We also believe that these concerns are relevant not only with respect to merger agreements, but also with respect to acquisition agreements among and between the BOCs. For example, with the signing of the merger agreement, Bell Atlantic may favor NYNEX's international services operations originating in Bell Atlantic's territory because Bell Atlantic may eventually share in NYNEX's profits. We have no record basis or guidance from the Commission to address the specific concerns raised by the pending Bell Atlantic and NYNEX merger. We therefore defer a decision on what conditions should apply to any out-of-region international services provided by BACI or NYNEX LD that originate in each other's respective service territories. We will consider under what conditions they may initiate such services upon the filing by BACI or NYNEX LD of a letter stating their desire to provide these services. We will endeavor to act upon such a request expeditiously. Given that the safeguards adopted in this order are subject to modification upon final action in the Interexchange proceeding and the fact that we are not aware of plans by BACI and NYNEX LD to provide such services, we believe that this approach likely will not impose any burdens on BACI and NYNEX LD. 24. We therefore grant BACI's and NYNEX LD's applications to provide out-of- region international switched services subject to the condition that they do not initiate service originating from each other's territory until we issue an order determining the regulatory treatment of such services. We similarly reserve the right to impose additional conditions on the provision of service by ACI should it enter into a merger or acquisition agreement with another BOC. If Bell Atlantic and NYNEX decide not to consummate the announced merger and seek to provide out-of-region international switched services originating from each other's territory, they may do so upon the filing of a letter with the Commission stating their decision not to consummate the announced merger and provided BACI and NYNEX LD comply with the safeguards established in this authorization. C. Foreign Carrier Affiliations 25. In 1992, the Commission modified its 1985 policy that treated U.S. foreign- owned common carriers as dominant in their provision of all international services to all foreign markets. Specifically, the Commission adopted a framework for regulating U.S. international carriers as dominant on routes where an affiliated foreign carrier has the ability to discriminate in favor of its U.S. affiliate through control of bottleneck services or facilities in the destination market. Under this framework, a U.S. international carrier that serves a destination market solely through the resale of the switched services of a U.S. facilities-based carrier with which the reseller is not affiliated is presumptively non-dominant for that route -- "regardless of any foreign affiliations." The Commission has found that the resale of an unaffiliated U.S. facilities-based carrier's switched services "presents no substantial possibility of anticompetitive effects in the U.S. international service market, because the reseller's foreign affiliate is negotiating the terms and conditions of access to the destination market with an unaffiliated carrier on the U.S. end[.]" NYNEX LD, ACI and BACI request Section 214 authorization to resell the services of other unaffiliated U.S. international carriers to provide international switched telecommunications services between out-of-region points in the United States and international points. Under the framework adopted in International Services and Section 63.10(a)(4) of the rules, we find that NYNEX LD, ACI, and BACI qualify as non-dominant resellers of international switched services on all routes for which they seek Section 214 authorization, including those routes where they are affiliated with, or have ownership interests in, foreign carriers. 26. MCI contends that ACI "mistakenly claims it is 'presumptively nondominant' under Section 63.10 of the Rules on the U.S-Hungary route [where it is affiliated with MATAV.]" MCI asserts that, pursuant to the Commission's recent decision in the Streamlining Order, ACI must be presumed dominant on the U.S.-Hungary route because "the Commission has made no finding concerning MATAV's market power." MCI avers that MATAV "has no local exchange competition in Hungary, and [that] long distance and international service competition in that country is incipient at best." MCI maintains that ACI has submitted no evidence to overcome the heavy burden of presumption that it should be regulated as a dominant carrier on the U.S.-Hungary route. 27. MCI's assertion that, pursuant to the Commission's recent decision in the Streamlining Order, ACI must be presumed dominant on the U.S.-Hungary route because "the Commission has made no finding concerning MATAV's market power" is without merit. In the Streamlining Order, the Commission decided not to streamline process applications for Section 214 resale authority if the applicant has an affiliation with a foreign carrier in a destination country and the Commission had not already determined the carrier's market power in the destination country. That decision, however, did not shift the burden of proof in Section 63.10(b) of the rules from MCI to ACI. Nor did it modify the presumption of non- dominance accorded ACI under Section 63.10(a)(4) of the rules. MCI offers no credible evidence to defeat the presumption that ACI should be classified as non-dominant on the U.S.-Hungary route. We therefore deny MCI's request on this issue. 28. MCI also recommends that, if the Commission grants BACI's application, conditions be imposed on the authorization to ensure that BACI is not afforded preferential treatment by Telecom Corporation of New Zealand Limited (TCNZ) and its wholly-owned subsidiary Telecom New Zealand International (TNZI). MCI states that, although Bell Atlantic's ownership interest in TCNZ is less than the 25 percent standard of "affiliation" defined in the rules, the Commission has indicated it would scrutinize such ownership interests if discriminatory practices are likely or if a situation presents a significant potential impact on competition. 29. MCI claims that there is no regulatory framework in New Zealand to deter TCNZ from engaging in anticompetitive practices favoring TNZI and discriminating against unaffiliated U.S. carriers. MCI asserts that the absence of regulatory constraints would allow TCNZ and TNZI to "afford BACI unfair, preferential access to the New Zealand market[.]" Although MCI acknowledges that TNZI does not have Section 214 authority to provide facilities-based international telecommunications service between the United States and New Zealand and that BACI does not here request authorization to resell TNZI's services, MCI asserts that the Commission must "address the anticompetitive implications raised by the possibility of such resale" in the context of this proceeding because "once authorized to engage in resale, BACI could resell TNZI's international services without obtaining further authority[.]" 30. In response, BACI argues that because Bell Atlantic's ownership interest in TCNZ is less than 25 percent, Bell Atlantic is presumed non-dominant in the provision of international services on the U.S.-New Zealand route under the Commission's rules. BACI further argues that "MCI's arguments must fail because they relate only to potential harms from U.S. facilities-based international carriers." 31. The concerns raised by MCI that TNZI and TCNZ might engage in unfair discriminatory and anticompetitive activity in favor of BACI in the event the Commission grants TNZI's pending application to provide facilities-based international telecommunications service between the United States and New Zealand are not appropriately considered in the context of this proceeding. Because TNZI is not authorized to provide international telecommunications services between the United States and New Zealand under Section 214 of the Act, consideration of the issues raised by MCI is premature. The issues raised by MCI, however, are appropriately considered in the context of assessing whether, and under what conditions, the public interest would benefit from a grant of TNZI's pending application under Section 214 of the Act. Because the issues raised by MCI are relevant to our review of TNZI's pending application, we will incorporate MCI's comments and BACI's reply in this proceeding as part of the record in considering TNZI's application to provide facilities-based international telecommunications service between the United States and New Zealand. 32. We therefore find no basis at this time to regulate NYNEX LD, BACI, or ACI as a dominant carrier on any U.S. international route where they are affiliated with a foreign carrier in the destination market. IV. Conclusion 33. In light of the above, we find that a grant of NYNEX LD's, BACI's, and ACI's applications, subject to the conditions and restrictions set forth above, will serve the public interest under Section 214 of the Act by increasing competition in international services, expanding the range of new and innovative services, and allowing for the more efficient use of existing international telecommunications facilities. We also find that NYNEX LD, BACI, and ACI qualify for non-dominant carrier regulation on the routes for which they request authority to provide international service. We therefore grant NYNEX LD's, BACI's, and ACI's applications for authority to resell the switched services of other common carriers to provide international switched telecommunications services between the United States and international points. The conditions we attach to our grant of the instant Section 214 applications will remain in place pending the outcome of the Commission's Interexchange NPRM. We reserve the right to modify the conditions of the authorizations granted in this order, as necessary, upon the Commission's adoption of final rules for BOC out-of-region, domestic interstate, interexchange services. We defer a decision regarding the regulatory treatment of and the conditions that should apply to NYNEX LD's provision of international switched resale services originating from Bell Atlantic's in-region states and BACI's provision of international switched resale services originating from NYNEX's in-region states to such time as these applicants inform the Commission in writing of their intention to provide such services. 34. As non-dominant resellers of international switched services, NYNEX LD, ACI, and BACI will be allowed to file tariffs on no less than one days' notice, without economic or cost support, and the tariffs will be presumed lawful. They also will be subject to the Section 214 requirements of non-dominant U.S. international carriers. 35. As non-dominant carriers, NYNEX LD, ACI, and BACI will be subject to regulation under Title II of the Act. Specifically, Title II requires carriers to offer international services under rates, terms and conditions that are just, reasonable and not unduly discriminatory (Sections 201 and 202), and Title II carriers are subject to the Commission's complaint process (Sections 206-209). Title II carriers also are required to file tariffs pursuant to our streamlined tariffing procedures (Sections 203 and 205). Non- dominant U.S. international switched resellers also are subject to the requirements of Sections 43.51, 43.61, 63.14 and 63.19 of the Commission's rules. 36. This Order will be effective upon its adoption. V. Ordering Clauses 37. Upon consideration of the applications and in view of the foregoing, IT IS HEREBY CERTIFIED that the present and future public convenience and necessity require the provision of resale of international switched services by the applicants subject to the conditions set forth below. 38. Accordingly, IT IS HEREBY ORDERED that application File No. ITC-96-125 filed by NYNEX Long Distance Co. (NYNEX LD) IS GRANTED and NYNEX LD is authorized to resell on a non-dominant carrier basis international switched services of unaffiliated U.S. international carriers for the provision of international switched services originating from U.S. points except the in-region states served by the NYNEX telephone operating companies and terminating at all international points except Gibraltar. 39. IT IS FURTHER ORDERED that application File No. ITC-96-272 filed by Ameritech Communications, Inc. (ACI) IS GRANTED and ACI is authorized to resell on a non-dominant carrier basis international switched services of unaffiliated U.S. international carriers for the provision of international switched services originating from U.S. points except the in-region states served by the Ameritech telephone operating companies and terminating at all international points. 40. IT IS FURTHER ORDERED that application File No. ITC-96-181 filed by Bell Atlantic Communications, Inc. (BACI) IS GRANTED and BACI is authorized to resell on a non-dominant carrier basis international switched services of unaffiliated U.S. international carriers originating from U.S. points except the in-region states served by the Bell Atlantic telephone operating companies and terminating at all international points. 41. IT IS FURTHER ORDERED that NYNEX LD, ACI, and BACI shall (1) maintain separate books of account from any affiliated local exchange carrier (LEC); (2) not jointly own transmission or switching facilities with any affiliated LEC; and (3) take any tariffed services from the affiliated LEC pursuant to the terms and conditions of the LEC's generally applicable tariff. 42. IT IS FURTHER ORDERED that these authorizations are subject to the condition that NYNEX LD, ACI, and BACI be treated as nonregulated affiliates for purposes of Bell Operating Company (BOC) accounting under the Commission's joint cost and affiliate transactions rules as set forth in Parts 32 and 64 of the Commission's rules. 43. IT IS FURTHER ORDERED that the conditions that attach to the grant of NYNEX LD's, ACI's, and BACI's applications as set forth in paragraphs 41 and 42 of this order will remain in place pending the outcome of the Commission's decision in Policy and Rules Concerning the Interstate, Interexchange Marketplace and Implementation of Section 254(g) of the Communications Act of 1934, CC Docket No. 96-61, FCC 96-123 (released Mar. 25, 1996). The International Bureau reserves the right to modify the conditions of the authorizations granted in this order, as necessary, upon the Commission's adoption of final rules for BOC out-of-region, domestic interstate, interexchange services. 44. IT IS FURTHER ORDERED that BACI may not initiate international switched resale service originating in NYNEX Corporation's (NYNEX) in-region territory and that NYNEX LD may not initiate international switched resale service originating in Bell Atlantic Corporation's (Bell Atlantic) in-region territory until BACI and NYNEX LD inform the Commission in writing of their intention to provide such services and an order is issued determining the regulatory treatment of such services. 45. IT IS FURTHER ORDERED that, if Bell Atlantic and NYNEX decide not to consummate their announced merger and they seek to provide out-of-region international switched services originating from each other's territory, they may do so upon the filing of a letter with the Commission stating their decision not to consummate the announced merger and provided BACI and NYNEX LD comply with the conditions set forth in paragraghs 41, 42, and 47 of this order in the provision of such services. 46. IT IS FURTHER ORDERED that the Commission reserves the right to impose additional conditions on the provision of service by ACI as authorized in this order should ACI reach an agreement with another BOC to merge their operations. 47. IT IS FURTHER ORDERED that the applicants shall comply with the requirements specified in Section 63.21 of the Commission's rules, 47 C.F.R.  63.21. 48. 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 date of the public notice of this order (see Section 1.4(b)(2)). FEDERAL COMMUNICATIONS COMMISSION Donald H. Gips Acting Chief, International Bureau