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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 ) Sprint Communications Company L.P.) ) ITC-97-636 Application to Operate Additional Facilities) on the U.S.-France Route Pursuant to) Section 214 of the Communications Act ) of 1934, as amended ) ORDER AND AUTHORIZATION Adopted: April 15, 1998 Released: April 16, 1998 By the Chief, International Bureau: I. INTRODUCTION 1. In December 1995, the Commission granted, subject to certain conditions, Sprint Corporation's ("Sprint") petition to allow Deutsche Telekom ("DT") and France Telecom ("FT") to make ten percent equity investments each in Sprint. As one condition of its decision, the Commission ruled that two competitive milestones must be met in France and Germany before Sprint would be allowed to operate additional circuits on its U.S.-France and U.S.-Germany routes. On June 26, 1997, the Commission granted Sprint authority to operate additional circuits on the U.S.-Germany route. In this order, we find that Sprint has demonstrated that the two milestones, alternative infrastructure and switched resale, have been met in France and authorize Sprint to operate additional circuits on its U.S.-France route. II. BACKGROUND 2. In the Sprint Declaratory Ruling, the Commission concluded that the proposed ten percent equity investments each by DT and FT in Sprint were not inconsistent with the public interest, and the Commission thus approved Sprint's petition. In granting the petition, however, the Commission concluded that Sprint's alliance with DT and FT, at that time the monopoly carriers in Germany and France respectively, created an unfair advantage over other U.S. carriers offering services to those markets. The Commission therefore imposed a number of conditions and safeguards on Sprint's operation of circuits on its U.S.-Germany and U.S.-France routes. For example, the Commission imposed dominant carrier regulation on Sprint's provision of U.S. international services on these two routes. At that time, dominant carriers had to obtain prior Section 214 authority to acquire and operate additional circuits. The Commission also ruled that Sprint would not be allowed to operate any additional circuits on its U.S.-Germany and U.S.-France routes until two milestones had been met in Germany and France: the "implementation of alternative infrastructure competition" and "the existence of opportunities to provide basic switched voice resale." 3. To meet the first milestone, the Commission required that U.S.-affiliated entities be allowed to develop alternative infrastructure networks to provide already liberalized services. The second milestone, basic switched voice resale, involves voice services offered to the public using the facilities of an underlying carrier. U.S.-affiliated entities must be allowed to offer such service, and the service must be able to carry traffic to and from the United States. The Commission explained that these two milestones are "two forms of competition [that] will start the process of adapting to competition" as Germany and France allow full facilities and services competition beginning on January 1, 1998. 4. On October 17, 1997, Sprint filed an application seeking to remove the circuit restriction on its U.S.-France route and to operate additional circuits on that route. Sprint asserts that the two milestones have been met in France. Sprint requests authority under Section 214 to operate an additional 155 Mbps STM-1 on the TAT-12/13 submarine cable system with connecting terrestrial facilities in order to provide service between the United States and France. Cegetel S.A. ("Cegetel"), which provides facilities-based services in competition with France Telecom, filed a petition to deny the application. Sprint filed an opposition in response and Cegetel filed a response to Sprint's opposition. On March 25, Cegetel filed an additional pleading, reiterating its opposition to grant of Sprint's petition. III. DISCUSSION A. Alternative Infrastructure 5. Sprint states that Article 22(I) of the French "Law of July 26, 1996 on the Regulation of Telecommunications" (Law No. 96-659) authorizes the licensing, as of July 1, 1996, of alternative public networks for the provision of "all telecommunications services other than the public telephone service between fixed points." In addition, public voice telephony in France was opened to competition as of January 1, 1998. Cegetel agrees that France has implemented alternative infrastructure competition. We agree that the first milestone has been satisfied. B. Basic Switched Voice Resale 6. Sprint asserts that FT offers volume discounts to entities wishing to provide switched resale for both international and domestic long distance calls. Sprint says that the French regulatory authority, Autorit‚ de R‚gulation des T‚l‚communications ("ART"), has been notified of such offers. Cegetel contends, however, that resale is not available in France because French law does not expressly authorize resale. Even if resale is legally available, Cegetel contends the Commission requires that Sprint show competitors have real opportunities to resell. In this respect, Cegetel argues that the French Government has taken no action to compel FT to provide resale and FT does not provide actual opportunities for resale. Cegetel states that Sprint must demonstrate that the volume discount offered by France Telecom complies with the pricing standard established by the Commission in implementing the Telecommunications Act of 1996 or is otherwise adequate. In addition, according to Cegetel, France Telecom must provide switchless resale and resale on the local level to meet the second milestone. In its latest pleading, Cegetel argues that Sprint provides no direct evidence that France Telecom allows resale, that resale -- if it exists -- requires "double-dialing," and that Cegetel has not been able to confirm that resale is available. In support of its argument, Cegetel offers two letters, one to France Telecom asking a series of questions about service and tariffs for resale, and the second a response from France Telecom that it will respond if Cegetel precisely indicates its needs. Cegetel also contends that the petition should be denied because the French regulatory process lacks transparency. 7. In the Sprint Declaratory Ruling, the Commission ruled that the resale milestone is achieved once there "is the existence of opportunities to provide basic switched voice resale." Sprint has provided a copy of a press release issued by France Telecom announcing the availability of volume discounts for the provision of resale services, and ART has confirmed that it considers France Telecom's volume discount for resellers to be in effect. In addition, FT states that it is currently negotiating agreements with several potential resellers and has signed two resale agreements already. Therefore, based on the evidence in the record, we conclude resellers have the opportunity to operate in France. We do not find persuasive Cegetel's arguments that resale is not available. The correspondence between Cegetel and France Telecom does not demonstrate that resale is unavailable. It merely states that France Telecom does not have a standard offer covering the activities about which Cegetel inquired but is willing to study any request Cegetel may make. 8. We next address the issue of whether the milestone looks beyond the de jure ability to provide resale and requires more. In effect, by asking us to look at "real opportunities" and by basing its argument upon the lack of transparency in the French regulatory process, Cegetel is reading the Sprint Declaratory Ruling to require a showing that effective competitive opportunities (ECO) exist for resale. The ECO test examines whether U.S. carriers have the legal ability to provide the service sought by the applicant. Next, it focuses on the actual conditions of entry, including the terms and conditions of interconnection, competitive safeguards, and the regulatory framework. We agree with Sprint that such a showing is unnecessary to meet the second milestone. The Commission imposed circuit restrictions and other conditions on Sprint because it found that effective competitive opportunities for U.S. carriers did not exist in the French or German markets. The Commission was concerned that, in the absence of effective competitive opportunities, Sprint, FT and DT had an unfair competitive advantage in providing international service. To mitigate that unfair advantage, while still allowing the transaction to go forward, the Commission required availability of resale but not effective competitive opportunities for resale. Thus, the transparency of the French regulatory system, while of concern, is not a basis for denying Sprint's request. 9. We agree with Sprint that FT's volume tariffs create opportunities for basic switched resale. The reduced tariffs allow entities to offer switched resale to domestic and international customers, as required in the Sprint Declaratory Ruling. Again, we note that the record contains no evidence that resale is not available to U.S. carriers or that the tariffs are being applied in a discriminatory manner. 10. The Sprint Declaratory Ruling did not establish pricing standards for resale. In fact, the Interconnection Order cited by Cegetel was issued after the Sprint Declaratory Ruling. Further, the Sprint Declaratory Ruling did not mandate the form in which resale is provided. Nor did the Commission mandate that FT provide local resale in order to meet the standard set in the Sprint Declaratory Ruling. The Commission focused particularly on international resale in that order, defining "liberalized basic switched voice resale to include public switched voice services which may be offered to the public using facilities provided by a separate underlying carrier, and may be provided to and from the United States." We believe, however, local resale is necessary to allow competitors of FT, DT and Sprint to market themselves as "full service" providers. Therefore, we remain concerned about whether a healthy, viable resale market can develop in France without the presence of all types of resale on economically viable terms and conditions. 11. Despite these concerns, we find that the availability of the long distance and international resale tariff serves as an adequate "interim step" towards full-fledged competition in the French market. We believe that the development of switched voice resale services on a node by node or niche market basis satisfies the Commission's requirement that France permit the provision of basic switched voice resale "offered to the public." We also note that, effective January 1, 1998, facilities-based competition is permitted in France. This will create additional opportunities for resellers to expand their networks by using facilities of new suppliers. 12. We expect that competition will begin to develop under the direction of ART. The Commission will be following carefully developments of actual competition in France and elsewhere. In regard to the current proceeding, however, we find that Sprint has demonstrated that the two milestones have been met in France. C. Application to Operate Additional Circuits 13. As noted above, Sprint is subject to dominant carrier regulation on its U.S.-France circuits. Sprint's application seeks to expand its existing Section 214 authority by operating one 155 Mbps STM-1 on the TAT-12/13 submarine cable system with connecting terrestrial facilities in order to provide service between the United States and France. In the Sprint Declaratory Ruling, the Commission stated that "[u]pon Sprint's demonstration to the Commission that these two milestones have been met, the Commission will promptly lift this [circuit] restriction from all previously conditioned Section 214 authorizations." Given our findings above that these two milestones have been satisfied, we find that the public interest would be served by lifting the freeze and granting Sprint's application to operate additional capacity up to one 155 Mbps STM-1 on the U.S.-France route. Further, we note that under the Commission's new rules, effective February 9, 1998, dominant carriers no longer need prior approval to add additional circuits. Therefore, Sprint will be able to add additional circuits on this route without coming back to the Commission for authority to do so. IV. CONCLUSION 14. We conclude that the public interest will be served by lifting the circuit restriction imposed on Sprint's U.S.-France route and allowing Sprint to operate the additional requested capacity on that route. As a result, we lift the circuit restriction and authorize Sprint to increase its capacity on the TAT-12/13 submarine cable system with connecting terrestrial facilities in order to provide service between the United States and France. V. ORDERING CLAUSES 15. Accordingly, IT IS ORDERED that the circuit restriction imposed on Sprint's U.S.-France route is hereby removed. 16. IT IS FURTHER ORDERED that Sprint's application to operate additional capacity in order to provide service between the United States and France IS GRANTED pursuant to Section 214 of the Communications Act. 17. IT IS FURTHER ORDERED that Cegetel's Petition to Deny Sprint's application IS DENIED. 18. This order is effective upon adoption. Petitions for reconsideration under Section 1.106 of the Commission's rules may be filed within 30 days of the public notice of this order (see Section 1.4(b)(2) of the Commission's rules). FEDERAL COMMUNICATIONS COMMISSION Regina M. Keeney Chief, International Bureau