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Meetings of Working Groups, 9/1/98 pnin8214.txt Report No. SPB-137, Satellite Policy Branch Information, 8/28/98 pnin8213.txt Report No. DS-1876, Satellite Communications Services, 8/26/98 pnin8212.txt Report No. DS-1875, Sa2%x73- 'G&@6FRight-Aligned Paragraph Numbers*%- 'G.Enop` `  hh#(@- ( 74- 'G'@675- 'G(@6FDocument Style=(%8'GB(*%- 'G.EFst D*  ׃  76- 'G)@6FTechnical Document Style'GB)*%- 'G.E&uv  . 2y/P77- 'G*@6FTechnical Document Style'GB**%- 'G.E&wx  . 78- 'G+@6FTechnical Document Style'GB+*%- 'G.E*yz    79- 'G,@6FTechnical Document Style'GB,*%- 'G.E'{|   80- 'G-@6FTechnical Document Style'GB-*%- 'G.E&}~   2[e81- 'G.@6FTechnical Document Style'GB.*%- 'G.E4$     82- 'G/@6FTechnical Document Style'GB/*%- 'G.E&  . 83- 'G0@6FTechnical Document Style'GB0*%- 'G.E&  . 84- 'G1@6F9% =(%8'GB1*%- 'G.E'21G85- 'G2@6Ffootnote reference%8'GB2*%- 'G.E>#V\  PUP#86- 'G3@6FDefault Paragraph Font8'GB3*%- 'G.E87- 'G4@6Ffootnote text =(%8'GB4*%- 'G.E* ??US88- 'G5@6Fendnote reference%8'GB5*%- 'G.E>>#Xj\  PG;XP##B\  PUP#2c!gj  89- 'G6@6F_Equation Caption%8'GB6*%- 'G.E;;#XX2PQXP##I2PQP#90- 'G7@6FFormat Downloaded DocumentGB7*%- 'G.EU XX    \\ #d6X@7@#- 'G8@6FTriangle9% =(%8'GB8*%- 'G.Ea192.E+%*-Right-Aligned Paragraph Numbers !*% 'G*%8@   27$!0""#a292.E+%*-Right-Aligned Paragraph Numbers !*% 'G*%A@` `  ` ` ` a392.E+%*-Right-Aligned Paragraph Numbers !*% 'G*%J` ` @  ` `  a492.E+%*-Right-Aligned Paragraph Numbers !*% 'G*%S` `  @  a592.E+%*-Right-Aligned Paragraph Numbers !*% 'G*%\` `  @ RptNo. DS-1844, IWL Communications, Inc., Transfer Con2S'i$(%%&a692.E+%*-Right-Aligned Paragraph Numbers !*% 'G*%e` `  hh#@( hh# a792.E+%*-Right-Aligned Paragraph Numbers !*% 'G*%n` `  hh#(@- ( a892.E+%*-Right-Aligned Paragraph Numbers !*% 'G*%w` `  hh#(-@pp2 -ppp a193.E+%*-Right-Aligned Paragraph Numbers%8'GB*%8@   2'*' ((q)a293.E+%*-Right-Aligned Paragraph Numbers%8'GB*%A@` `  ` ` ` a393.E+%*-Right-Aligned Paragraph Numbers%8'GB*%J` ` @  ` `  a493.E+%*-Right-Aligned Paragraph Numbers%8'GB*%S` `  @  a593.E+%*-Right-Aligned Paragraph Numbers%8'GB*%\` `  @hh# hhh 24Y*K+KX. K1a693.E+%*-Right-Aligned Paragraph Numbers%8'GB*%e` `  hh#@( hh# "i~'^09FSS999Sq+9+/SSSSSSSSSS99qqqSggnxggxx9In]nxgxgS]xgg]]?/?FS9SSISI/SS//I/xSSSS??/SInII?C/CZ9+ZF999+999999S9S/gSgSgSgSgSnnIgIgIgIgI9/9/9/9/nSxSxSxSxSxSxSxSxS]IgSxSxSxS]IxSgSgSgSgSnInInZnIxdgIgIgIgIxSxSxSxZxSxZxS9/9S999SSZZnI]/]<]9]5]/nS/98 pnin8133.txt Report No. I-8307, Overseas Common Carriers Actions Taken, 5/21/98 pnin8132.txt Satellite Communications Services Info., DS-1841, 5/13/98 pnin8131.txt Satellite Communications Services Info., DS-1840, 5/13/98 pnin8130.txt Satellite Communications Services Info., DS-1843, 5/20/98 pnin8129.txt Satellite Communications Services Info., DS-1842, 5/20/98 pnin8128.txt Satellite Policy Branch Info.: Apps. Accept for Filing, 5/20/98 pnin8127.txt Report No. TEL-155-A, Streamlined 214 Applications Accepted for Filing, 5/20/98 pnin8126.txt Report No. I-8305 Overseas Common Carriers Actions Taken Public Notice Released May 15, 1998 pnin8125.txt IB Cancels the May 15th Roundtable Discussion of Year 2000 Issues, 5/14/98 pnin8124.txt Report No. TEL-154-B Non-Streamlined 214 Applications Accepted for Filing Released May 15, 1998 pnin8123.txt Report No. TEL-154-A Streamlined 214 Applications Accepted for Filing Released May 15, 1998 pnin8122.txt FCC grants over 200 Inter. Service Apps, New Rules, 5/14/98 pnin8121.txt Report No. TEL-153-B Non-Streamlined 214 Applications Accepted for Filing Released May 13, 1998 pnin8120.txt Report No. TEL-153-A, Streamlined 214 Applications Accepted for Filing Released May 13, 1998 pnin8119.txt Report No. IN 98-22, Permit to Deliver Prog. to Foreign Sta., 5/7/98 pnin8118.txt Report No. I-8303, Released 5/7/98 pnin8117.txt Report No. TEL-151-A Non-Streamlined 214 Applications Accepted for Filing Released May 6, 1998 pnin8116.txt Report No. TEL. 152-B, Streamlined 214 Applications Accepted for Filing, Released May 06, 1998 pnin8115.txt Report No. TEL-152-A, Streamlined 214 Apps. Accepted, 5/6/98 pnin8114.txt WRC-99 Advisory Comm. Schedules Third Meeting, Rep.2(C K 5 KJ8@;\>"i~'^:DPddDDDdp4D48dddddddddd88pppX|pDL|pp||D8D\dDXdXdXDdd88d8ddddDL8ddddX`(`lD4l\DDD4DDDDDDDDd8XXXXXX|X|X|X|XD8D8D8D8ddddddddddXdbdddpdXXXXXlX~|X|X|X|XdddldldD8DdDDDdplld|8|P|D|D|8dvddddDDDpLpLpLpl|T|8|\ddddddl|X|X|Xd|DdpL|Dd~4ddC$CWxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxNHxxH\dDXddddd8@d<@d<DDXXdDDxddzHxxHvppDXd<"dxtldpxxd*7]SS.77S_*7*.SSSSSSSSSS77___SxoxxofASoxfx]oxxxxo7.7aS7S]J]J7S].7].]S]]JA7]SxSSJB%BW7SSSS7]777SS:S7A7xx*7SSSS%S7}2S_7}SC[227`Z*727S}}}SxxxxxxxooooAAAAxx_xxxxxf]SSSSSSxJJJJJ....S]SSSSS[S]]]]S]"i~'^:DpddȨDDDdp4D48ddddddddddDDpppd|Ld|pȐD8DtdDdpXpXDdp8Dp8pdppXLDpdddXP,PhD4htDDD4DDDDDDdDp8dddddȐXXXXXJ8J8J8J8pddddppppddpddddzpdddXXhXXXXXdddhdptL8LpLDLpphhp8ZDP8pppddƐXXXpLpLpLphfDtppppppȐhXXXpDppLDd4ddC6CWxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxNHxxHjdDddddddd< 1998 pnin8087.txt Report No. TEL-144-A Streamlined 214 Applications Accepted for Filing Released April 3, 1998 pnin8086.txt Report No. SPB-122, Satellite Applications Accepted for Filing Released April 7, 1998 pnin8085.txt Report No. IN 98-15 WRC-99 Advisory Committee Meetings of Informal Working Group 4/3/98 pnin8084.txt Report No. I-8294 Overseas Common Carriers Actions Taken Public Notice Released April 2, 1998 pnin8083.txt Report No. DS-1828, Satellite Communications Services, 4/1/98 pnin8082.txt Report No. DS-1827, Satellite Communications Services, 4/1/98 pnin8081.txt Report No. TEL-143-A Streamlined 214 Applications Accepted for Filing Released April 1,1998 pnin8080.txt Report No. IN 98-13, Permit to deliver Programs to Foreign Broadcast Station, 3/31/98 pnin8079.txt Report No. SPB-121, Satellite Applications Accepted for Filing Released March 31, 1998 pnin8078.txt Report No. TEL-142-A Streamlined 214 Applications Accepted for Filing Released March 27, 1998 pnin8077.txt Rpt. IN 98-12, WRC-99 Advisory Comm. Schedules 2nd Meeting, 3/27/98 pnin8076.txt Report No. DS-1826, Satellite Communications Services, 3/25/98 pnin8075.txt Report No. DS-1825, Satellite Communications Services, 3/25/98 pnin8074.txt Report No. I-8293 Overseas Common Carriers Actions Taken Public N2^ZC:Gy.X80,X\  P6G;P2a=5,&a\  P6G;&P2e=5,&e4  pG;&\0_=5,%&_*f9 xr G;&X P:% ,J:\  P6G;JP!H5!,i,5\  P6G;,P\"{,W80,%0W*f9 xr G;X #y.\80,T\4  pG;$P=% ,4IJ=4  pG;J%z-X80,<<X9 xOG;&7jC:,9Xj\  P6G;XP 7nC:,|Xn4  pG;XG4  pQl%P/% S'    (b S' " #&J\  P6Q&P#Federal Communications Commission`(#FCC 9917 ă   yx}dddy (h`X` hp x (#%'0*,.8135@8:!XR yOR!'ЍX PanAmSat specifically stated here that separate baskets are needed for occasionaluse video and Public Switched Telephone Network ("PSTN") services. We understand its reference to PSTN as including both switchedvoice and private line services.(#> Finally, because  Sk'the Comsat NonDominant Order & NPRM eliminated structural separation requirements previously imposed on Comsat, PanAmSat asserts that accounting oversight is the only protection the public has  S'against Comsat using its market power to take unfair advantage of customers.B"4R {O&'ԍXId.(#B ""+'',,"Ԍ S'ԙ C. Analysis of Comsat's Proposals to Implement Alternative Incentive Based Regulation  S' 1.` ` SwitchedVoice Service on "Thin Routes"  S4' 15. ` ` Comsat's proposes a fourpercent annual rate reduction of switchedvoice service for  S'"noncompetitive" markets through 2002, while also agreeing that rates will not increase. Although Comsat does not specifically propose to discontinue the annual fourpercent rate reduction in 2002, it  S'does ask that the plan be reviewed at that time.D#R {O'ԍId. at 1011.D Additionally, it guarantees that the existing switchedvoice tariff rates will remain in place as an option for those customers whose aggregate  S5'circuit volume would otherwise result in a lower rate.  S'16. ` ` Comsat maintains that its proposal of a fourpercent annual rate reduction for switchedvoice service in "noncompetitive" markets will allow users to benefit from a "competitive" or "transaction" rate rather than a non-discounted tariff rate that would result from only offering a  S6 'uniform pricing commitment.H$6 ZR {O0'ԍXId. at 8.(#H It insists that this proposal will bring "thinroute" rates for low volume customers below the current "competitive" or "transaction" rate for switchedvoice service generally. Comsat claims further that users will receive the benefit of reduced rates due to increases in efficiency  S 'and productivity, since the fourpercent annual rate reduction will provide a real incentive for Comsat  Sj'to be more efficient and productive. J%jR {O'ԍXId. at 89.(#J It contends that a fourpercent annual rate reduction reflects approximately the same efficiencies that other telecommunications companies have historically achieved. Moreover, Comsat asserts that the fourpercent annual reduction compares favorably to  S'various streamlined rate regulation regimes currently employed by the Commission.K&~R {O'ԍXId. at 910.(#K Comsat, however, notes that there have been no productivity growth studies specific to the satellite industry.  Sk'  S8'17.` ` PanAmSat believes that the alternative incentivebased method chosen should not lock S'in Comsat's already "monopolistic" prices on routes and markets in which Comsat remains dominant. It insists that Comsat's rates need to be driven to competitive levels, which could be determined  S'through an annual price deflator or consumer productivity dividend. PanAmSat maintains that  Sl'Comsat's current rates reflect a regulated rate under rateofreturn regulation which may not reflect competitive prices.  S'18. ` ` AT&T argues that Comsat fails to explain why its price cap proposal for lowvolume users of switchedvoice service should not be subject to the 6.5% annual reduction in inflationadjusted  Sm'rates required under the price caps for large LECs.T'mR yO#'ԍXAT&T reply comments at 24.(#T It also asserts that Comsat's plan for an  S:'alternative incentivebased regulation of "noncompetitive" markets provides no assurance that Comsat  S'will pass through to consumers a reasonable portion of the benefits of any productivity growth.H(R {OG&'ԍXId. at 4.(#H  S' AT&T contends that without the necessary data, there can be no confidence that the price cap proposal"2 (+'',," by Comsat would require a sufficient portion of its future productivity gains to flow through to  S'consumers.J)R {O5'ԍXId. at 23.(#J Thus, AT&T argues, in the absence of such data, Comsat's "noncompetitive" services  S'should be regulated under a similar price cap regime as the large LECs.  S4'19.` ` We find that Comsat's proposal to reduce rates by fourpercent annually, while agreeing not to raise rates at any time, is reasonable. Customers for switchedvoice service to "noncompetitive" markets are afforded an immediate reduction of fourpercent from the current switched voice rate, or the geographically averaged rate that is applicable to all markets. Comsat's proposal guarantees a rate reduction as long as Comsat is regulated as a dominant carrier for the "noncompetitive" switchedvoice markets, regardless of Comsat's ability to increase productivity or manage  S'the effect of external cost factors, such as inflation.  The fourpercent reduction would reduce Comsat's rates in "noncompetitive" markets to rates below those presently charged by Comsat in "competitive" markets. In effect, customers receive the benefits of potential increases in productivity  Si 'regardless of whether such productivity increases actually occur. Further, if a subsequent "competitive" market rate reduction produces a rate lower than that achieved by the annual fourpercent reductions in "switchedvoice" "noncompetitive" markets, customers will be afforded the lower "competitive" rate.  S ' ` `  Sj'20. ` ` We disagree with AT&T's assertion that an appropriate rate adjustment would be the  S7'6.5 percent annual rate reduction as applied to the large dominant local exchange carriers ("LECs"). AT&T fails to explain why a rate adjustment as applied to Comsat, an international satellite services provider, must equal the rate adjustment factor as applied to large LECs, given the differences in  S'technology employed and the type of services provided. Absent a productivity study of the satellite industry, we have no basis for concluding that increases in productivity and efficiency are necessarily the same for a satellite services provider and a large LEC. Further, no commenter has provided or  S'referred to any productivity growth studies specific to the satellite industry.Q*ZR yO'ԍXNetworks comments at 5. (#Q Conducting a valid productivity study would involve a detailed complex analysis of the operating performance and cost structure of the fixed satellite services industry over a period of time. A study based on examining only Comsat, which represents only a small portion of an entire industry, will not necessarily yield an accurate assessment of the productivity and efficiency gains experienced by a typical firm in that  S'industry.+R yO'ЍXIn price cap theory, a productivity factor based on an industry average is considered the normative benchmark which an individual firm must match in the future in order to create an incentive for each company to behave at least as efficiently as the "average firm" has in the past. Basing a productivity factor on Comsat's past performance alone would not enable the Commission to determine such an industrywide productivity measure.(# A productivity study of the fixed satellite industry would also be highly resource and time intensive. For example, the Commission's request for comments on the various elements of the LECs' price cap regulation elicited responses from a broad and diverse array of parties representing virtually every segment of the telecommunications industry, including LECs, interexchange carriers ("IXCs"),  S:'telecommunications user groups, and consumer groups.,:R {Ot%'ЍXSee Policy and Rules Concerning Rates for Dominant Carriers, CC Docket No. 87313, Second Report  yO>&'and Order, 5 FCC Rcd 6786 (1990).(# " ,+'',,"Ԍ S'21.` ` We believe that conducting our own study would not be an efficient use of Commission resources given the small size of the markets under consideration. We note that switchedvoice and private line services to "thinroute" markets accounted for only approximately $18 million in revenue in 1997; whereas interstate access service revenues accounted for approximately $20 billion. In addition, any study that measures past productivity trends in satellite technology is unlikely to yield an accurate prediction of future productivity trends because satellite technology is evolving so quickly. Therefore, given the small size of this market in terms of revenue, and the  S'evolving nature of satellite technology, we believe that the benefits of engaging in a complex study, as measured by determining the most appropriate rate adjustment factor, are unlikely to exceed the costs, as measured by the consumption of Commission time and resources.  S'   S' 22. ` ` We conclude that Comsat's proposal of a fourpercent annual rate reduction of switchedvoice service for "noncompetitive" markets is reasonable. The proposal reduces current rates in order to reflect a competitive or transaction rate and will, in effect, pass on the benefits of  S6 'productivity improvements to its customers. Comsat's plan also satisfies our objective of adopting a regulatory scheme that would be simple and nonburdensome. While we decline to adopt Comsat's  S 'proposal that our incentivebased policy be reviewed on a particular date, Comsat, along with any other party, may petition the Commission in the future to conduct a review of this alternative incentivebased plan if they believe market conditions have changed enough to warrant a modification  S7'of the plan.  S' ` `  S'  2.` ` Private Line Service on "Thin Routes"  S'  Sk' 23.` ` Comsat proposes to cap its current tariff rates for private line service to "noncompetitive" markets at the rates offered in "competitive" markets and pledges not to raise rates in the  S'future. O-R yOm'ԍXComsat comments at 12.(#O It also offers to apply any tariff reduction in "competitive" markets to "noncompetitive"  S'markets, consistent with its policy of uniform tariff rates across all geographic markets.B.XR {O'ԍXId.(#B As a result, Comsat asserts that its customers on "thinroute" markets will benefit from the competition on "thick  Sl'route" markets.B/lR {O'ԍXId.(#B It notes that it does not provide volume discounts for private line services and thus  S9'customers on "thin" and "thick" routes would pay the same rate regardless of the volume.O09|R yOU'ԍXComsat comments at 11.(#O Comsat states that it lowered its private line tariff rates in response to competition by an average of eight S'percent in June 1997, but the Commission did not take this into account in the Comsat NonDominant  S'Order & NPRM. Comsat maintains that its proposal meets the criteria proposed by the Commission of  So'(a) no definite ending, (b) similar treatment for "thick" and "thin" routes, and (c) protecting customers against rate hikes while at the same time allowing Comsat to respond to competitive marketplace  S 'incentives to increase its efficiency and productivity.I1  R {O$'ԍXId. at 12.(#I  S'24.` ` AT&T contends that Comsat's proposal fails to ensure just and reasonable rates on" 1+'',,^"  S'"noncompetitive" routes, since the price cap proposal relies on uniform tariff rates across all  S'geographic markets capped at current levels.R2R yO5'ԍXAT&T reply comments at 4.(#R AT&T asserts that Comsat's claim that uniform rates are competitive because they "were designed to meet competition in the "thickroute" market for  Sg'private line services" was rejected by the Commission in the Comsat NonDominant Order & NPRM. J3gXR {O_'ԍXId. at 45.(#J AT&T contends that Comsat's steep market share declines in switchedvoice and private line markets  S'was the result of charging high prices in "competitive" markets.B4R {O 'ԍXId.(#B Regarding Comsat's statement that  S'the Commission overlooked its 1997 private line price decrease of eight percent, AT&T asserts that  S'the price reduction occurred after Comsat lost a major portion of its market share and, therefore, does  Si'not demonstrate that Comsat will be responsive to competitive forces.H5i|R {O 'ԍXId. at 5.(#H Finally, AT&T challenges Comsat's claim that its proposals are warranted because of the "relatively tiny size of its thinroute'  S'markets." AT&T notes that the Comsat NonDominant Order & NPRM made clear that neither the  S'routes nor the regulatory issues involved here are "de minimis" in nature.C6R {O'ԍXId. (#C  S '  Sl '25. ` ` We conclude that Comsat's proposal for the noncompetitive private line services  S9 'market is reasonable under the circumstances presented. In the Comsat NonDominant Order &  NPRM, we said that we were unconvinced that Comsat's proposal to cap its current tariff rates in its "noncompetitive" markets and apply its uniform pricing policy to these "noncompetitive" rates would  S 'be sufficient to ensure that rates are just and reasonable, absent enforcement of our tariff rules.7 R {O'ЍXSee Comsat NonDominant Order & NPRM at  145.  See also 47 C.F.R.  61.1 et seq.(#ƭ We did not believe that Comsat's uniform pricing commitment would yield a "competitive" rate, given that Comsat's steep decline in market share in the "competitive" markets may have been attributable to  S 'charging tariff rates above "competitive" levels with no reduction in its rates over a number of years.v8 2 R {O'ЍXComsat NonDominant Order & NPRM at  145.(#v  S'The Comsat NonDominant Order & NPRM states that Comsat did not lower its tariff rates for private line service during the period from 1988 to 1996, when its market share for switchedvoice and private  Sq'line traffic decreased from 70 percent to 21 percent.B9q R {O'ԍXId.(#B We find in this proceeding, however, that  S>'Comsat did reduce its private line tariff rates by an average of eightpercent in June of 1997.O:>V R yO4"'ԍXComsat comments at 11.(#O This  S '1997 rate adjustment demonstrates that Comsat is likely to reduce rates in the "noncompetitive"  S'market s in the future through its uniform pricing scheme as competition increases in the nondominant markets. Given that the vast majority of Comsat's private line revenues are derived from "competitive" markets, we believe Comsat has a strong incentive to respond to competitive pressures on its "thick routes" in order to extract monopoly profits on its "thin route" services. In addition, while we agree with AT&T that the amount of private line revenues and number of circuits involved"  :+'',,"  S'in these routes is more than de minimis, nevertheless, they are small in absolute amounts relative to Comsat's overall business and especially to the communications industry as a whole. The costs of implementing a comprehensive price cap program that would entail conducting a productivity study outweighs the potential benefits of such a program for reasons discussed in paragraphs 20 and 21. No party suggests that private line service merits continued rateofreturn regulation. Also, as noted in  S'paragraph 43 below, we have initiated a rulemaking to consider direct access to INTELSAT which , if adopted, could result in additional consumer choice for these services and downward pressure on rates. Therefore, we accept Comsat's pricing proposal for private line service to the noncompetitive markets in light of Comsat's (a) recent decision to decrease rates by an average of eight percent, (b)  S6'commitment to uniform pricing where Comsat does not provide any volume discounts, and (c) promise not to raise rates at any time.  S ' 3.OccasionalUse Video to "OccasionalUse Single Carrier Markets"  Sj '  S7 ' 26. ` ` Comsat proposes to implement an immediate onetime fourpercent rate reduction in  S 'its occasionaluse video television service for both "competitive" and "noncompetitive" markets.c; R {Ol'Ѝ XSee Comsat Letter. (#c It  S 'also proposes not to raise its occasionaluse video service rates for an indefinite period.O< ZR yO'ԍXComsat comments at 13.(#O Further, Comsat states it will apply any tariff reduction in "competitive" markets to "noncompetitive" markets,  Sk'consistent with its policy of uniform tariff rates across all geographic markets.B=kR {O'ԍXId.(#B Comsat notes that volume discounts do not apply to occasionaluse video services and that customers accessing the  S'"competitive" and "noncompetitive" markets pay the same "competitive" or "transaction" rate,  S'regardless of volume used.B>|R {O'ԍXId.(#B  Sl'27.` ` The Networks argue that Comsat's proposal lacks any immediate and regular rate  S9'reduction for the occasionaluse video service market.V?9R yO'ԍXNetworks reply comments at 2.(#V The Networks urge the Commission to require  S'an annual downward adjustment for expected productivity improvements at a rate of 6.5 percent,  S'which reflects the annual rate reduction applied to the dominant LECs.a@R {O'ЍXId. at 23. The productivity factor or "Xfactor" of 6.5 percent represents the degree to which annual productivity improvements in the provision of interstate access services by the LECs exceed, on average, annual productivity gains in the economy as a whole. In each annual filing , LECs are permitted to increase their access charges no more than economywide inflation minus the Xfactor, plus or minus certain other limited changes beyond the LECs' control and not otherwise reflected in the economy as a whole.(#a The Networks assert that the  S'Commission should establish a separate price cap basket for occasionaluse video.JAR {OX%'ԍXId. at 45.(#J They contend, that since occasionaluse video service is less competitive than switchedvoice service, Comsat might target its rate concessions towards its switchedvoice customers, absent a separate "basket" for": A+'',,"  S'occasionaluse video. They also note, that due to the shortterm commitments involved, there is a disincentive for satellite carriers to invest the resources and time necessary to develop competing  S'alternatives.HBR {O'ԍXId. at 6.(#H  S4'28.` ` Comsat maintains that productivity gains are inapplicable to occasionaluse video service since there is still a large amount of analog traffic for occasionaluse video traffic in developing countries where earth stations do not have digital capability. It further contends that digital technology as applied to a multiuser occasionaluse video service may actually decrease the space segment supplier's cost efficiency because it uses less space segment capacity and may reduce  S5'transponder fill factors, as well as increase the cost of network management. Additionally, Comsat asserts that efficiencies afforded customers by compression technology are already reflected in the  S'narrower bandwidth offerings it has made available on all routes. Finally, Comsat notes that occasionaluse video, by nature, is a highcost service in which efficiencies are difficult to achieve due to shortterm and unpredictable commitments.  S '29. ` ` We find that Comsat's proposal is reasonable and we adopt it. It will remain in effect  S 'for an indefinite period of time, consistent with the tentative conclusions in the Comsat NonDominant  S 'Order & NPRM. Comsat's proposal implements an immediate fourpercent rate reduction for all occasionaluse video markets. This reduction will benefit customers immediately. While we would favorably view a proposal to reduce rates by a given percentage annually for occasionaluse video service, similar to Comsat's proposal in the noncompetitive switchedvoice market, we find the present proposal to be reasonable because it assures occasionaluse video customers in "noncompetitive" markets that rates will not increase at any time, and that any future rate reductions to Comsat's tariffs in "competitive" markets will be applied to tariffs in "noncompetitive" markets.  S' 30. ` ` In regard to the Networks' proposal that the Commission require an annual downward adjustment for expected productivity improvements at a rate of 6.5 percent, which reflects the annual  S'rate reduction applied to interstate access services of the dominant LECs, we find this proposal unreasonable for the same reasons discussed in paragraph 20 above. The Networks fail to justify why  S;'the price cap methods used for the dominant LECs should be applied to Comsat. Specifically, they fail to explain how a price cap methodology applied to the local telephone companies, that control the majority of the United States local access lines, is necessarily appropriate for a satellite company that provides services to other common carriers and enables them to connect to INTELSAT, an international satellite organization. Moreover, as discussed in paragraphs 20 and 21 above in  S<'connection with switchedvoice services, we believe that the benefits of engaging in a complex,  S 'resourceintensive study are unlikely to exceed the costs. Occasionaluse video service on "thinroutes" generated less than $850,000 total revenues in 1997.  Sp' 31.` ` In regard to the Networks' proposal that a separate "basket" be created for occasionaluse video service, we note that the Commission does not place these three different service markets switchedvoice, private line, and occasionaluse video under one encompassing price "basket". Our evaluation of the proposals has been particular to each individual "noncompetitive" service. Additionally, the Networks concern that Comsat may crosssubsidize other services with occasionaluse revenues has little merit, given the relatively small degree of revenue generated in the "noncompetitive" markets, which was $850,000 in 1997. The Commission has already discussed and  S $'dismissed this issue in the Comsat NonDominant Order & NPRM, where we concluded that existing" $ ZB+'',,$" cost allocation and accounting requirements provide sufficient oversight of Comsat.  S' D. Predatory Pricing  S4'32.` ` PanAmSat argues that price caps are generally not an effective guard against predatory  S'pricing.PCR yOi'ԍXPanAmSat comments at 1.(#P Therefore, it asks the Commission to include a limit on sudden or large price increases or  S'decreases, which could be used in support of predatory practices.HDXR {O'ԍXId. at 2.(#H PanAmSat also asserts that close regulatory oversight of Comsat's accounting practices is necessary to protect further against predatory  Sh'pricing. PanAmSat also notes, that since the Comsat NonDominant Order & NPRM eliminated structural separation requirements between Comsat's INTELSAT and nonINTELSAT activities, accounting oversight is the only protection the public has against Comsat taking unfair advantage of its  S'market power.BER {OZ'ԍXId.(#B  Sj ' 33.` ` PanAmSat's arguments on the potential for predatory pricing are unpersuasive. First, the courts have recognized that predatory pricing is a business strategy that would be extremely  S 'difficult to implement successfully.F |R {O ' x ԍX  See, e.g., Matsushita Elec. Ind. Co. v. Zenith radio corp., 475 U.S. 574, 594 (1986) (economic realities make predatory pricing schemes selfdeterring).(# The Supreme Court has stated that for a predatory pricing claim  S 'to be sustained, there must be evidence of pricing below cost for a long period.G R {OG'ԍX  See Brooke group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 225 (1993) ("Brooke Group").(#ƶ Moreover, evidence must also support that the party charged with predatory pricing kept prices above a competitive level  Sk'for a long enough period to be able to recoup the money lost on the predation.^Hkh R {Os'ЍX  Id.(#^ Without such an expectation of recoupment, the Courts found that "predatory pricing" actually benefits competition by  S'lowering prices in the marketplace.^I R {O'ЍX  Id.(#^ It is for these reasons the Commission has also been skeptical of predatory pricing claims in the domestic local exchange market, even where carrier market shares  S'exceed 95%..J R {O' x ԍXAccess Charge Reform, 11 FCC Rcd at 21488. See also PanAmSat Corp. v. Comsat Corp. Comsat World  {O 'Systems, 12 FCC Rcd 6952, 6958 (1997); Access Charge Reform, 11 FCC Rcd 21354, 2148788 (1996).(#.  S9' !34. ` ` We find that PanAmSat fails to establish the essential elements of a predatory pricing strategy by Comsat. The alternative incentivebased price regulatory scheme that we adopt today does not allow Comsat to increase rates in the future for any of its noncompetitive markets. Thus, Comsat would be unable to recoup the money lost on the predation because it will be prevented from raising prices in the future on its dominant routes. In view of the fact that Comsat cannot raise rates, we find that there is no need to setup additional regulatory safeguards against an unlikely potential predatory pricing scheme by Comsat." J+'',,"Ԍ S'ԙ E.XRedesignating "Noncompetitive" Routes that become "Competitive" (#  S'  S'"35. ` ` Comsat proposes that the Commission clarify the procedural mechanism by which newlycompetitive geographic markets may be reclassified as nondominant once marketplace  S4'competition develops.OK4R yO'ԍXComsat Comments at 14.(#O Comsat states that the procedure should be similar to the procedure adopted in  S'the 1996 Partial Relief Order.L\XR {O'ЍXComsat Comments at 14. See Petition of Comsat Corporation for Partial Relief From the Current Regulatory Treatment of Comsat World Systems' Switched Voice, Private Line, and Video and Audio  {O 'Services, 11 FCC Rcd 9622 (1996) ("1996 Partial Relief Order "). (#ƍ In it, we granted Comsat's request to file tariffs on 14 days' notice, with a presumption of lawfulness, and with minimal cost support data for its switchedvoice and  S'private line services.dM|R {O 'ԍX1996 Partial Relief Order at  36.(#d In addition, we required Comsat to include an evaluation of the effect of the filing on "thinroute" markets, and demonstrate that tariff filings do not restrict the availability of service in "thinroute" countries and have the same rate impact of "thinroute" users as on high volume  S'users.]NR {O'ЍXId at  26.(#] We directed Comsat to update the list of "thickroute" countries included in the 1996 Partial  S'Relief Order whenever United States carriers' Monthly Circuit Status Reports show that cable service  S 'has become available to additional countries.O R {O'ЍX1996 Partial Relief Order at  26. Circuit status reports are now required only once a year. (#Ƶ  Sl '  S9 '#36.` ` The specific procedure Comsat proposes would allow it to recommend reclassifying a  S ' geographic route for a service as "competitive" upon what would be considered a prima facie showing  S 'of competition, whether that evidence takes the form of the carrier's circuit status reports or other  S 'factual data showing that a facilitiesbased competitor can provide service on a specific route.JP 2 R yOs'ԍComsat Comments at 1516.J The  Sn'burden of proof would then fall on opposing parties to explain why dominant classification would still  S;'be required.GQ; R yO'ԍComsat Comments at 16.G If this burden is not met, the particular route would then be reclassified as non S'dominant and deleted from the list of "thinroute" or singlecarrier "noncompetitive" market set forth  S'in Appendix A or B of this Order.R&R R {O'ЍXSee infra, e.g., Appendix A and B. We additionally note, that in making the country/market  {O 'determinations for Appendix A regarding switchedvoice and private line in the NonDominant Order &  {O[!'NPRM, we included those countries/markets where announcements of competition in the form of  yO%"'planned cable construction were forthcoming. (#  Sp'$37.` ` The Networks object to Comsat's proposal and instead support a notice and comment  S='rulemaking process prior to making any determinations regarding changes in market classification.VS=@R yO&'ԍXNetworks reply comments at 5.(#V  S ' The Networks argue that whatever procedure the Commission adopts should be one in which affected" S+'',," parties are afforded adequate and effective notice of a proposed change and a full opportunity to be  S'heard. PanAmSat asserts that Title I and II of the Communications Act, and precedent require applicants seeking a change in regulatory status to bear the burden of proof. It contends that if the  Sg'burden of proof is not on Comsat, its customers will be put in the difficult position of having to prove the negative that "competition" on the route or market in question is not an adequate check on  S'Comsat's market power. VTR yOi'ԍXPanAmSat reply comments at 2.(#V The Networks also assert that a market does not necessarily become  S'competitive simply because another competitor begins providing service in a particular market.HUXR yO'ԍNetwork Comments at 2. H PanAmSat argues that Comsat has not provided any compelling or substantial reason for the  Sh'Commission to place the burden of proof on Comsat's customers.XVhR yO 'ԍXPanAmSat reply comments at 23.(#X  S'%38.` ` We agree that procedures should be promulgated so that alternative incentivebased  S'price regulation will no longer appl y in markets where Comsat can no longer exercise market power. We disagree with the Networks' proposal that the Commission initiate a rulemaking proceeding  Si 'whenever Comsat petitions the Commission to reclassify a route. The Comsat NonDominant Order &  S7 'NPRM has established a standard for determining whether a market or country is "competitive" or  S '"noncompetitive". Furthermore, using the rulemaking process would be overly burdensome and  S 'unnecessary to assure adequate notice and comment. The Commission also has always had discretion  S 'to choose either an adjudicatory or rulemaking proceeding to address a petition.?W\ xR {O'ЍXSee SEC v. Chenery Corp., 332 U.S. 203 (1947) ("the choice made between proceeding by general rule  {O'or by individual ad hoc litigation is one that lies primarily in the informed discretion of the administrative agency.").(#? An adjudicatory proceeding can offer adequate protection for the rights of interested parties. A streamlined process here balances the need of Comsat to quickly respond to market conditions, while still requiring Comsat  S'to show that "competition" has been introduced.  S'&39.` ` Based on the comments received, we conclude that the process to reclassify the "thin route" markets for switchedvoice and private line service and singlecarrier markets for occasionaluse video as nondominant should include the following. Initially, Comsat must file a petition with the Commission asking that a particular market or markets be reclassified as nondominant. For the "noncompetitive" switchedvoice and private line service markets, Comsat must include evidence that the market is served by a United States carrier through submarine cable facilities. For occasionaluse video markets, Comsat must include evidence that another satellite carrier is providing transmit and receive (uplink and downlink) occasionaluse video service. The type of information required in this showing shall include the (a) name of the cable or satellite provider, (b) the country or countries  S'where the new cable circuit or occasionaluse video services provision exists, and (c) the estimated  S'capacity available from the competitor./XR yO#'ЍX In our recent decision approving the World Com/MCI merger, we noted that upgrades in recently constructed underseas fiber cables can substantially increase transport capacity on existing cables and can be implemented in less than a year. While we found that the World Com/MCI merger would increase concentration in each of three international transport market regions, we also found that it was unlikely to result in anticompetitive effects, given the low barriers to entry and substantial amounts of transport"&W+'''"  {O'capacity not controlled by MCI or World Com. See Memorandum Opinion and Order, CC Docket No. 97211, FCC 98255, released Sept. 14, 1998 at  100101.(#/ Comsat must support its filing with an affidavit. For""X+'',,A" switchedvoice and private line services, we agree that a country listed as being served by cable on the  S'Circuit Status Reports shall be considered prima facie evidence that the market is competitive because the capacity available on a submarine cable can be rapidly expanded to meet demand. The showing  Sh'requirements of this process is consistent with our analysis in the Comsat NonDominant Order &  S6'NPRM, in which evidence of a cable circuit for switchedvoice and private line service, and evidence of another carrier for occasionaluse video service, provided the standard from which to assess Comsat's market power.  Sk''40. ` ` Additionally, parties would have the opportunity to challenge Comsat's petition for  S8'reclassification by either refuting the evidence submitted by Comsat or showing that the particular market at issue has unique characteristics that would allow Comsat to exercise market power, despite the presence of a cable circuit for switchedvoice and private line service or service being provided by another satellite carrier for occasionaluse video service.  S9 '(41.` ` The Networks state that the Commission's market power analysis is too simplistic, and  S 'that the mere existence of one competitor in a market generally does not create effective competition.GY "R yO'ԍNetwork Comments at 2.G  S 'We disagree with the Networks' claim that the market power analysis in the Comsat NonDominant  S 'Order and NPRM was too simplistic. The market power analysis was based on a variety of factors, including demand elasticity, market share, supply elasticity, cost advantages, possible cross subsidies, size, and access to resources. While we did not analyze each market separately, we concluded that these factors used to analyze market power led to the general conclusion that Comsat did not have market power in "thickroute" switchedvoice and private line service markets and "multiplecarrier" satellite markets for occasionaluse video service. We also concluded that Comsat did have market power in "thinroute" switchedvoice and private line service markets and "singlecarrier" satellite markets for occasionaluse video service. No party filed a petition for reconsideration disagreeing with  S 'this analysis or our findings. Nevertheless, if any party feels that the Commission should not reclassify a market as nondominant based upon a Comsat filing purporting to show that a cable circuit for switchedvoice and private line service or another carrier provides service for occasionaluse video service, then that party may file the necessary evidence to demonstrate that the analytical approach  S>'used in the Comsat NonDominant Order and NPRM would not be sufficient to conclude that Comsat no longer holds market power due to the unique circumstances of that market. The Commission  S'delegates authority to the International Bureau to approve requests from Comsat for reclassification of  S'"noncompetitive" markets, only the Commission, however, may deny such requests.  Ss'  S '. IV. Administrative Requirements Đc  S' A.Regulatory Flexibility Act "tY+'',,"Ԍ S')42.` ` As required by Section 603 of the Regulatory Flexibility Act ("RFA"),uZZR {Oh'ЍXSee 5 U.S.C.  603. The RFA, see 5 U.S.C.  601 et seq., has been amended by the Contract With America Advancement Act of 1996, Pub. L. No. 104121, 110 Stat. 847 (1996) ("CWAAA"). Title II of the CWAAA is the Small Business Regulatory Enforcement Fairness Act of 1996 ("SBREFA").(#u an Initial  S'Regulatory Flexibility Analysis ("IRFA") was incorporated in the Comsat NonDominant Order &  S'NPRM.[R {O%'ЍXSee Comsat Corporation, Order and Notice of Proposed Rulemaking, 13 FCC Rcd 14083 (1998) at Appendix C.(#Ƽ The Commission then sought written public comment in that proceeding, including  Si'comments on the IRFA. No party filed comments in response to the IRFA. Further, this Report and  S7'Order promulgates no new rules and our action here does not affect the previous analysis in the  S'Comsat NonDominant Order & NPRM. The Commission certifies that there will be no significant  S'effect on a substantial number of small entities.  S:'$ V. Conclusion and Ordering Clauses Đc  S'*43.` ` We find that adoption of this alternative incentivebased price regulation for Comsat's provision of INTELSAT "noncompetitive" switchedvoice, private line, and occasionaluse video  Sn 'services is in the public interest. This simple and less regulatory burdensome approach of Comsat's "thinroute" and "occasionaluse single carrier" markets will immediately benefit customers until  S 'effective competition in these "noncompetitive" markets develop. The implementation of this alternative incentivebased price regulation and the streamlining of our procedures to redesignate Comsat's "noncompetitive" routes as they become "competitive", however, is only one more step toward achieving greater competition in the provision of satellite services and streamlining our regulatory approach to Comsat in this area. We recently initiated a rulemaking to consider permitting  S 'direct access to the INTELSAT system in the United States.\ DR yO' x ԍXIn the Matter of Direct Access to the INTELSAT System, Notice of Proposed Rulemaking, FCC 98192,  {O'rel. October 28, 1998 ("Direct Access NPRM").(# We have tentatively found in the  S'Comsat NonDominant Order that Level Three direct access would (a) reduce Comsat's control over INTELSAT capacity serving noncompetitive markets, (b) give United States carriers and users the  Sq'option of using another supplier, and (c) reduce Comsat's market power in these markets.e]qR {O'ԍXComsat NonDominant Order at  155.(#e Moreover,  S>'Level Three direct access would allow users to directly obtain INTELSAT capacity from INTELSAT at the INTELSAT Utilization Charge ("IUC") rate, which is the rate INTELSAT charges its own  S'Signatories.\^0 R {O 'ԍXDirect Access NPRM at  8.(#\  Sr' +44.` ` Our adoption of this incentivebased price regulation for Comsat's "noncompetitive" INTELSAT switchedvoice, private line, and occasionaluse video services markets, is based on a Comsat commitment to comply with the requirements made herein. If Comsat fails to abide by these requirements, the Commission will reassess our regulatory approach toward Comsat's dominant markets. Comsat has the opportunity to expressly decline to accept this alternative price regulation within 30 days of the release of this item. "@ ^+'',,"Ԍ S',45.` ` Accordingly, IT IS ORDERED, that Comsat Corporation's proposal in IB Docket I&z  No. I&z   S'9860, to establish an alternative incentivebased price regulation in lieu of rateofreturn regulation in "noncompetitive" INTELSAT service markets for the provision of switchedvoice, private line, and occasionaluse video, IS GRANTED, to the extent indicated herein, and Comsat shall be subject to an alternative incentivebased price regulation in the markets for which it remains dominant, as described  S'in this Order. See Appendix A and B.  S' -46.` ` IT IS FURTHER ORDERED, pursuant to authority contained in Sections 4(i), 201(b), and 203205 of the Communications Act of 1934, as amended, 47 U.S.C.  154(i) and 201(b), and 203205, respectively, and Sections 201(c)(5), 201(c)(11), and 401 of the Communications Satellite Act, as amended, 47 U.S.C.  721(c)(5), 721 (c)(11), and 741, respectively, we ADOPT the incentivebased price regulation to the extent indicated herein.  Sj '.47.` ` IT IS FURTHER ORDERED, that the International Bureau shall have delegated  S7 'authority to approve petitions from Comsat to redefine any markets served by Comsat from a dominant to a nondominant status.  S ' /48.` ` Comsat Corporation is afforded 30 days from the date of release of this Order to decline the alternative incentivebased price regulation as specified herein. Failure to respond within this period will constitute formal acceptance of the requirements in this Order. ` `  ,hh]FEDERAL COMMUNICATIONS COMMISSION ` `  ,hh]Magalie Roman Salas ` `  ,hh]Secretary"m^+'',,"  S'y APPENDIX A Đc  Sg'$ List of Thin Route Market Countries ă (#  yO'ԇ #X\  P}G;P#1.Algeria  yO'2.American Samoa  yO{'3.Angola  yO8'4.Armenia   yO'5.Azerbaijan ,  yO'6.Benin   yOo'7.Bolivia   yO, '8.Bosnia & Herzegovina  yO '9.Botswana  yO '10.Burkina  yOc '11.Cameroon  yO '12.Cape Verde  yO '13.Central African Republic  yO '14.Chad  yOW'15.Congo  yO'16.Cote d'Ivoire  yO'17.Estonia  yO'18.Ethiopia  yOK'19.French Polynesia  yO'20.Gabon  yO'21.Ghana  yO'22.Guinea  yO?'23.Iran  yO'24.Iraq  yO'25.Jordan  yOv'26.Kenya  yO3'27.Lesotho  yO'28.Libya  yO'29.Lithuania  yOj'30.Malawi  yO''31.Mali  yO'32.Maritime -Atlantic  yO'33.Maritime -Pacific  yO^'34.Mauritania  yO'35.Mauritius  yO'36.Micronesia, Federated States of  yO'37.Midway Atoll ,  yOR'38.Moldova  yO '39.Mozambique  yO '40.Namibia  yO!'41.Nauru  yOF"' 42.New Caledonia  yO#'43.Nicaragua  yO#'44.Niger  yO}$' 45.Northern Mariana Islands  yO%'46.Pacific Islands (Palau)  yO&'47.Paraguay "&^+'',,'"Ԍ yO'48.ppRwanda  yO'49.ppSaint Helena  yO{'50.ppSenegal  yO8'51.ppSierra Leone  yO'52.ppSomalia  yO'53.ppSudan  yOo'54.ppSuriname  yO, '55.ppSwaziland  yO '56.ppTanzania  yO '57.ppTogo  yOc '58.ppTonga  yO '59.ppTurks and Caicos Islands  yO '60.ppUganda  yO '61.ppWestern Samoa  yOW'62.ppZaire  yO'63.ppZambia H^+'',,$|'#*m '',,H  X4Ԉ(#H 8(# #Xj\  P}G; 9XP# uAPPENDIX B ă  S'# &a\  P6G;&P#  S'-  List of OccasionalUse Video Single Carrier Market Countries  Sw'H 8(#(#҇  SD' South America  ,  S' Central America /  S' Caribbean Saint Kitts & Nevis Saint Lucia Saint Vincent  S 'Turks & Caicos  SF 'Western Europe  S ' Cyprus Greenland Iceland Malta Norway  S' Eastern Europe Albania Belarus Bulgaria Czech Republic Estonia Lithuania Macedonia Moldova Russia Serbia  SJ'Slovenia   S'Middle East Bahrain Iran Israel Jordan Kuwait Lebanon Oman  S$' Qatar Saudi Arabia Syria United Arab Emirates"&^+'',,'"Ԍ Yemen  S' Columbia French Guiana Guyana Paraguay Suriname Trinidad & Tobago  S ' Central America /  Sy ' Caribbean Anguilla Antigua Aruba Bahamas Belize Bermuda British Virgin Islands Cayman Islands Chagos Archipelago Costa Rica Dominica  S'  Dominican Republic El Salvador Gibraltar Grenada Guadeloupe Guatemala Haiti Honduras Martinique Montserrat Netherlands Antilles Panama  S~'  SK'Africa Algeria Angola Benin Botswana Burkina Faso  S$'Cameroon Cape Verde Central African RepublicH&^+'',,['$X'$w$'',,HԌ S'ԙ Africa (continued) Chad Congo Cote d'Ivoire Dem Rep Congo Djibouti Egypt Ethiopia Gabon Gambia Ghana Guinea Guinea Bissau Kenya  S 'Lesotho  Liberia Libya  Sj'Malawi Mali Mauritania  S'Mauritius Morocco Mozambique Namibia Niger Nigeria Rwanda Saint Helana Senegal  S'Sierra Leone Somalia South Africa  Sm' Sudan Swaziland Tanzania Togo  S' Tunisia Uganda Zaire Zambia Zimbabwe  S!'  So"' "p&^+'',,['"ԌCentral Asia  S' Armenia Azerbaijan Georgia Kazakhstan    Kyrgystan Mongola Uzbekistan  S5'  S'South Asia Bangladesh India Maldives Nepal Pakistan Sri Lanka  Sj'  S7' Far East Brunei Cambodia Malaysia South Korea Thailand Vietnam  Sl' Pacific Rim American Somoa Fiji French Polynesia Macau Marshall Islands Micronesia Midway Island  S'Nauru New Caledonia New Zealand Palau Papua New Guinea Tonga  So"' Western Somoa  S<#' pp