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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 ) ) NYNEX Long Distance Company ) ) Application for Authority Pursuant to) ) File No. I-T-C-96-447 Section 214 of the Communications Act) of 1934, as Amended, to Provide ) International Services from Certain Points) Within the United States to Gibraltar) Through the Resale of International) Switched Services ) ORDER, AUTHORIZATION AND CERTIFICATE Adopted: March 4, 1997 Released: March 12, 1997 By the Chief, Telecommunications Division: I. Introduction 1. NYNEX Long Distance Company ("NYNEX LD") requests authority pursuant to Section 214 of the Communications Act of 1934 to provide international telecommunications services originating from "out-of-region" points in the United States and terminating in the Crown Colony of Gibraltar through the resale of switched services of unaffiliated U.S. international carriers. We find that a grant of NYNEX LD's application, 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 application include the same interim safeguards that the International Bureau ("Bureau") adopted as conditions for non-dominant treatment of NYNEX LD's provision of switched resale and facilities-based services originating from "out-of-region" points in the United States and terminating in other foreign markets. II. Background 2. NYNEX LD, a Delaware corporation, is an indirect, wholly-owned subsidiary of NYNEX Corporation ("NYNEX"), a provider of telecommunications services in the United States and internationally. NYNEX LD requests authority to provide resold switched services to Gibraltar originating from all points in the United States except the "in-region" states served by the NYNEX telephone operating companies. 3. In its application, NYNEX LD certifies that it is affiliated with a foreign carrier in the destination country. NYNEX LD's immediate parent company, NYNEX Worldwide Services Group, Inc. ("NYNEX Worldwide"), owns 100 percent of the stock of NYNEX Network Systems Company, which holds a 50 percent interest in Gibraltar NYNEX Communications Ltd. ("Gibraltar NYNEX"). The government of Gibraltar holds the remaining 50 percent interest in Gibraltar NYNEX. 4. Gibraltar NYNEX is the only carrier authorized to provide domestic wireline telecommunications services in Gibraltar and telecommunications services between Gibraltar and Spain. Gibraltar NYNEX lacks authorization to provide international voice telecommunications services between Gibraltar and points outside of Gibraltar and Spain. Gibraltar NYNEX must terminate international calls at a point of interconnection with Gibraltar Telecommunications International Ltd. ("Gibtel"), which currently is Gibraltar's only carrier authorized to handle international switched voice traffic between Gibraltar and foreign countries other than Spain. Gibtel enters into all contractual operating arrangements with U.S. international carriers for the transmission of traffic between the United States and Gibraltar. NYNEX LD argues that, due to Gibtel's role as international gateway for all calls entering or leaving Gibraltar, except for those calls coming from or going to Spain, Gibraltar NYNEX cannot discriminate against the traffic of unaffiliated U.S. international carriers. NYNEX LD therefore maintains that it qualifies for non-dominant carrier regulation on the U.S.-Gibraltar route. No party has contested NYNEX LD's application. III. Discussion 5. The Commission has classified U.S. carriers as dominant in their provision of U.S. international services on particular routes in two circumstances: where the Commission has determined that a U.S. carrier can exercise market power on the U.S. end of a particular route; and where the Commission has determined that a foreign affiliate of the U.S. carrier has market power (i.e., the ability to discriminate against unaffiliated U.S. carriers) on the foreign end of a particular route. 6. In the In-Region and Interexchange proceedings, the Commission has sought comment on whether, and under what circumstances, a BOC or independent local exchange carrier ("LEC") should be regulated as dominant in the provision of in-region and out-of-region interLATA services because of the BOC's or the independent LEC's current retention of bottleneck facilities in the United States. The International Bureau has granted several BOC affiliates, including NYNEX LD, Section 214 authority to provide out-of-region, international switched resale and facilities-based services on a non-dominant carrier basis. The Bureau imposed on these authorizations the same interim safeguards that the Commission adopted in the BOC Domestic Interim Out-of-Region Order as a condition for non-dominant treatment of the BOCs' provision of out-of-region, domestic interstate, interexchange services. 7. The separate issue of whether a BOC, an independent local exchange carrier ("LEC"), or any other U.S. carrier should be regulated as dominant in the provision of international services because of the market power of an affiliated foreign carrier in a foreign destination market was addressed by the Commission in the Foreign Carrier Entry Order. That decision reaffirmed the basic framework for classifying and regulating a carrier as dominant based upon its foreign carrier affiliations as set forth in International Services. No carriers are exempt from this policy to the extent they have foreign affiliations. A. Interim Safeguards 8. As noted, the Bureau recently granted NYNEX LD authority to resell out-of- region the international switched services of unaffiliated U.S. carriers on a non-dominant basis subject to the same interim safeguards that the Commission adopted in the BOC Domestic Interim Out-of-Region Order as a condition for non-dominant treatment of the BOCs' provision of out-of-region, domestic interstate, interexchange services. The interim safeguards that the Bureau attached to its grant of NYNEX LD's application will remain in place pending the outcome of the Commission's Interexchange proceeding. Noting that NYNEX and Bell Atlantic had announced plans to merge their operations, the Bureau granted NYNEX LD's application subject to the additional condition that it not initiate service originating from Bell Atlantic's in-region territory prior to the issuance of an order determining the regulatory treatment of such services. NYNEX and Bell Atlantic have neither consummated their planned merger nor advised the Commission that they do not intend to do so. 9. The application at issue here is identical in all relevant parts to the application that the Bureau granted in the NYNEX LD Resale Order. We therefore grant NYNEX LD's application to provide international telecommunications services originating from out-of-region points in the United States and terminating in Gibraltar through the resale of switched services of unaffiliated U.S. carriers. For the same reasons discussed in the NYNEX LD Resale Order, we require NYNEX LD to comply with the interim safeguards applied to NYNEX LD in that order. 10. In brief, these interim safeguards require that NYNEX LD (1) maintain separate books of accounts from any affiliated LEC; (2) not jointly own transmission or switching facilities with the 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. We also require NYNEX LD to be treated as a nonregulated affiliate for BOC accounting purposes under the Commission's joint cost and affiliate transactions rules. In addition, we order NYNEX LD to refrain from providing out-of-region resold switched services originating in Bell Atlantic's in-region territory and terminating in Gibraltar until it informs the Commission in writing of its intention to do so and an order has been issued determining the regulatory treatment of such services. The interim safeguards imposed on NYNEX LD's authorization will remain in place pending the outcome of the Commission's Interexchange proceeding. B. Foreign Affiliation 11. In 1992, the Commission adopted a framework for regulating U.S. international carriers as dominant only 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. This framework establishes a presumption that a U.S. international carrier that serves a destination market solely through the resale of switched services of unaffiliated U.S. carriers is non-dominant for that route "regardless of any foreign affiliations." The Commission based this presumption on its finding that resale of switched services of unaffiliated U.S. facilities-based carriers "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." 12. NYNEX LD's application requests authorization to provide international telecommunications services originating from "out-of-region" points in the United States and terminating in the destination market of Gibraltar solely through the resale of switched services of unaffiliated U.S. carriers. We find no evidence to rebut the presumption established in International Services that NYNEX LD warrants non-dominant carrier treatment on the U.S.- Gibraltar route. We therefore agree with NYNEX LD that it qualifies as a non-dominant reseller of international switched services of unaffiliated U.S. carriers on the U.S.-Gibraltar route. IV. Conclusion 13. We find that a grant of NYNEX LD's application, subject to the interim safeguards and conditions, 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 more efficient use of existing international telecommunications facilities. We also find that NYNEX LD qualifies for non-dominant carrier treatment on the U.S.-Gibraltar route. We therefore grant NYNEX LD's application for authority to provide, on a non-dominant basis, international telecommunications services originating from "out-of-region" points in the United States and terminating in Gibraltar through the resale of switched services of unaffiliated U.S. carriers. The conditions we attach to this grant will remain in place pending the outcome of the Commission's Interexchange NPRM. We reserve the right to modify the conditions of this authorization, as necessary, upon the Commission's adoption of final rules for BOC provision of 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 in Bell Atlantic's in-region states and terminating in Gibraltar until such time NYNEX LD informs the Commission in writing of its intention to provide such services. V. Ordering Clauses 14. Upon consideration of NYNEX LD's application, IT IS CERTIFIED that the present and future public convenience and necessity require a grant of NYNEX LD's application to provide international telecommunication services through the resale of switched services of unaffiliated U.S. carriers originating from out-of-region points in the United States and terminating in Gibraltar subject to the conditions set forth herein. 15. Accordingly, IT IS ORDERED, pursuant to Section 214 of the Communications Act of 1934, as amended, 47 U.S.C.  214, and Sections 63.10 and 63.18 of the Commission's Rules, 47 C.F.R.  63.10 & 63.18, that the application of NYNEX LD, File No. I-T-C-96-447, IS GRANTED, authorizing NYNEX LD to resell on a non-dominant carrier basis international switched services originating from out-of-region points in the United States and terminating in Gibraltar. 16. IT IS FURTHER ORDERED that NYNEX LD shall (1) maintain separate books of accounts 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. 17. IT IS FURTHER ORDERED that NYNEX LD shall be treated as a nonregulated affiliate for Bell Operating Company ("BOC") accounting purposes under the Commission's joint cost and affiliate transactions rules as set forth in Parts 32 and 64 of the Commission's rules, 47 C.F.R. Parts 32 & 64. 18. IT IS FURTHER ORDERED that the conditions set forth in paragraphs 16 and 17 above 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. The conditions of this authorization may be modified, as necessary, to reflect the final rules the Commission adopts to govern the provision of out-of-region, domestic interstate, interexchange services by the BOCs. 19. IT IS FURTHER ORDERED that NYNEX LD may not initiate international switched resale service originating in Bell Atlantic's in-region territory and terminating in Gibraltar until NYNEX LD informs the Commission in writing of its intention to do so and an order has been issued determining the regulatory treatment of such services. 20. IT IS FURTHER ORDERED that, if Bell Atlantic and NYNEX decide not to consummate their announced merger, NYNEX LD may provide out-of-region international switched services originating from Bell Atlantic's in-region territory provided it files a letter stating the decision has been reached not to merge and provided it complies with the conditions set forth in paragraphs 16 and 17 above in the provision of such services. 21. IT IS FURTHER ORDERED that NYNEX LD shall comply with the requirements specified in Section 63.21 of the Commission's rules, 47 C.F.R.  63.21. 22. This Order is issued pursuant to Section 0.261 of the Commission's Rules, 47 C.F.R.  0.261, and is effective upon adoption. Petitions for reconsideration under Section 1.106 of the Commission's Rules, 47 C.F.R.  1.106, or applications for review under Section 1.115 of the Commission's Rules, 47 C.F.R.  1.115, may be filed within 30 days of the public notice of this Order (see Section 1.4(b)(2) of the Commission's Rules, 47 C.F.R.  1.4(b)(2)). FEDERAL COMMUNICATIONS COMMISSION Diane Cornell Chief, Telecommunications Division International Bureau