******************************************************** NOTICE ******************************************************** This document was converted from WordPerfect to ASCII Text format. Content from the original version of the document such as headers, footers, footnotes, endnotes, graphics, and page numbers will not show up in this text version. All text attributes such as bold, italic, underlining, etc. from the original document will not show up in this text version. Features of the original document layout such as columns, tables, line and letter spacing, pagination, and margins will not be preserved in the text version. 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 ) ) Teleglobe USA Inc. ) ) Application for Authority Pursuant to) ) File No. ITC-96-410 Section 214 of the Communications Act) of 1934, as Amended, to Acquire and ) Operate Facilities for the Provision of) International Services Between the ) United States and International Points) ) Application for Authority Pursuant to) ) File No. ITC-96-412 Section 214 of the Communications Act) of 1934, as Amended, to Lease Private ) Lines Between the United States and ) Canada for Provision of Switched and ) Private Line Services ) ORDER, AUTHORIZATION AND CERTIFICATE Adopted: February 3, 1998 Released: February 3, 1998 By the Chief, Telecommunications Division: I. Introduction 1. In this Order, Authorization and Certificate (Order) we grant Teleglobe USA, Inc. (TGUSA), authority to acquire and operate facilities for the provision of switched, private line, and all other authorized services from the United States to Canada. We also grant TGUSA authority to lease private lines for the provision of switched and private line services from the United States to Canada. II. Discussion A. Section 214 Authorization 1. TGUSA's Facilities-Based Application 2. The Commission determined in the Foreign Carrier Entry Order that foreign carriers seeking to provide U.S. international services to destination countries in which they have market power must demonstrate that such destination countries offer effective competitive opportunities (ECO) for U.S. carriers to offer like services. The Commission stated that it would apply the ECO analysis only to Section 214 applications from foreign carriers, or certain affiliates of foreign carriers, with market power in destination countries that potentially could be leveraged to the detriment of unaffiliated U.S. carriers providing international telecommunications services to those countries. Although TGUSA's affiliate, Teleglobe Canada Inc. (TGC), is the monopoly provider of overseas telecommunications services in Canada, neither TGC nor any of its affiliates provides service or controls bottleneck facilities on the U.S.-Canada route. We therefore agree with TGUSA that we need not conduct an ECO analysis in this case. 3. In the Foreign Carrier Entry Order, the Commission also determined that it would continue to consider other public interest factors that may weigh in favor of, or against, granting the application. AT&T and MCI argue that the public interest requires us to deny or limit authorization of TGUSA's Facilities-Based Application because Canada's regulatory environment discriminates against U.S. carriers by requiring the "maximum use of Canadian facilities" in the routing of Canadian traffic. They contend that authorization of TGUSA will put U.S. carriers at a competitive disadvantage because TGUSA will be able to carry U.S. international traffic through Canadian facilities at a time when U.S. carriers do not have the same opportunities to carry Canadian international traffic through U.S. facilities. 4. We, like AT&T and MCI, are concerned about Canada's "maximum use" policy and its impact on U.S. carriers' ability to compete in the Canadian switched hubbing market. The policy forces carriers to route Canadian traffic in ways that are not necessarily the most economically efficient and may not be consistent with Canada's international obligations. We do not, however, see it as posing a significant enough threat to competition in the U.S.-Canada international services market to warrant denial of TGUSA's application. We find that this policy would not give TGUSA a substantial competitive advantage over other U.S. carriers in routing traffic through Canada. First, we believe it unlikely that TGC would have a bargaining advantage over U.S. carriers such that it could negotiate a settlement rate with a third country that was so low that, when combined with the U.S.- Canada settlement rate or other transport cost, it would be more economically attractive than the direct U.S.-third country settlement rate. Moreover, if a U.S. carrier sends traffic to Canada over private lines and then on to a third country to which the Commission does not allow direct private line resale, our switched hubbing rules require TGUSA to purchase those services at a published rate. Thus, if TGUSA can deliver switched services from Canada into the United States "at price levels far lower than most U.S.-third country direct settlement paths," so can other U.S. carriers by taking service at the same published rate. 5. Finally, we note that the Executive Branch has not raised any national security, law enforcement, foreign policy or trade concerns with regard to this application. We therefore find that the public interest would be served by allowing TGUSA to provide the same type of service to Canada that other U.S.-licensed carriers currently provide, thereby increasing competition in the U.S. international services market. Although we do not find it necessary to impose special conditions on TGUSA in this Section 214 authorization, we reserve the right to review TGUSA's authorization and, if warranted, impose additional requirements where it appears that harm to competition is occurring on one or more international routes. 6. We decline to adopt AT&T's suggested conditions for "improv[ing] the ability of U.S. carriers to obtain the same arrangements from TGC as TGC makes available to TGUSA" when TGUSA sends traffic through Canada to third countries. AT&T requests that we attach conditions to TGUSA's authorizations requiring TGUSA to "purchase [any switched transport services from TGC] only at rates published by TGC on a publicly available price list for a minimum of sixty days . . . ." As a part of AT&T's proposed conditions, TGUSA would have to file quarterly reports with the Commission that document "all minutes sent to third countries via TGC in Canada." Our switched hubbing rules, however, already prohibit TGUSA from reselling Canadian IMTS in routing traffic to a third country unless it has taken that service at published rates. We believe our existing rules adequately address AT&T's concern and find that the proposed condition would impose an unnecessary and unwarranted burden on TGUSA. 7. In its recent Benchmarks Order, the Commission adopted a condition, which took effect on January 1, 1998, that applies to a carrier's authorization to provide facilities- based switched and private line service between the United States and a market in which the authorized carrier has an affiliate. The condition provides that a carrier may not use its authorization until such time as its foreign affiliate offers U.S. carriers a settlement rate to terminate U.S.-originated traffic on the affiliated route that is at or below the relevant benchmark. Because TGUSA's affiliate, TGC, does not provide service from Canada to the United States, TGC does not have a settlement rate with U.S. carriers. Thus, TGUSA currently satisfies the benchmarks condition. Moreover, we note that all settlement rates for international message telephone service (IMTS) on the U.S.-Canada route are significantly below the relevant benchmark of 15 cents. 2. TGUSA's Private Line Resale Application 8. The Commission's rules require that applicants requesting authorization to provide switched service over resold private lines show that the destination foreign country provides U.S. carriers with equivalent resale opportunities, that is: (1) the legal right to resell international private lines, interconnected at both ends, for the provision of switched services; (2) nondiscriminatory charges, terms and conditions for interconnection of foreign domestic carrier facilities for termination and origination of international services, with adequate means of enforcement; (3) competitive safeguards to protect against anticompetitive and discriminatory practices affecting private line resale; and (4) fair and transparent regulatory procedures, including separation between the regulator and the operator of international facilities-based services. The Commission has already determined that Canada affords U.S. carriers resale opportunities equivalent to those available under U.S. law. In approving applications for interconnected private line resale, the Commission also considers other public interest factors that may weigh in favor of, or against, granting a Section 214 authorization. AT&T argues that the public interest requires us to limit authorization of TGUSA's Private Line Resale Application because Canada's regulatory environment discriminates against U.S. carriers by requiring the "maximum use of Canadian facilities" in the routing of Canadian traffic. AT&T contends that authorization will put U.S. carriers at a competitive disadvantage because TGUSA will be able to carry U.S. international traffic through Canadian facilities at a time when U.S. carriers do not have the same opportunities to carry Canadian international traffic through U.S. facilities. 9. For the same reasons discussed in paragraph 4 above, we find that it would be contrary to the public interest to restrict TGUSA's ability to send traffic over resold private lines to a greater degree than its U.S.-licensed competitors. Although we do not find it necessary to impose special conditions on TGUSA in this Section 214 authorization, we reserve the right to review TGUSA's authorization and, if warranted, impose additional requirements where it appears that harm to competition is occurring on one or more international routes. 10. In its recent Benchmarks Order, the Commission adopted a condition, which took effect on January 1, 1998, that applies to authorizations to provide switched services over international private lines. The condition provides that carriers may not use their authorized international private lines for the provision of switched basic services "unless and until the Commission has determined that the country at the foreign end of the private line provides equivalent resale opportunities and that settlement rates for 50 percent of the settled U.S.-billed traffic between the United States and that country are at or below the benchmark." Commission data indicate that the benchmarks condition has been satisfied because settlement rates for more than 50 percent of the settled U.S.-billed traffic between the United States and Canada are below the relevant benchmark of 15 cents. B. Non-Dominant Treatment 11. In the International Services Order and the Foreign Carrier Entry Order, 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. Because neither TGUSA nor any of its affiliates control bottleneck facilities between the United States and any destination country, we find that TGUSA qualifies for non-dominant treatment. III. Conclusion 12. In light of the above, we find that a grant of TGUSA's applications will serve the public interest under Section 214 of the Act by increasing competition in the U.S. international services market, expanding the range of new and innovative services and allowing more efficient use of existing international telecommunications facilities. We also find that TGUSA qualifies for non-dominant regulatory treatment. We therefore grant TGUSA's application for authority to acquire and operate facilities for the provision of international services between the United States and Canada and TGUSA's application for authority to lease private lines between the United States and Canada for the provision of switched and private line services. We do not limit TGUSA's authorization to the provision of U.S.-Canada service only, except that TGUSA is subject to the generally applicable requirement that a U.S.-licensed carrier may not route switched traffic over resold private lines through Canada to a third country unless engaged in switched hubbing. IV. Ordering Clauses 13. Upon consideration of TGUSA's applications, IT IS CERTIFIED that the present and future public convenience and necessity require a grant of TGUSA's application for authority to acquire and operate facilities for the provision of international services between the United States and Canada and TGUSA's application for authority to lease private lines between the United States and Canada for the provision of switched and private line services. 14. 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 TGUSA, File No. ITC-96-410, IS GRANTED, authorizing TGUSA to acquire and operate facilities for the provision, on a non-dominant basis, of international services between the United States and Canada. 15. IT IS FURTHER 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 TGUSA, File No. ITC-96-412, IS GRANTED, authorizing TGUSA to lease private lines between the United States and Canada for the provision of switched and private line services. 16. 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 J. Cornell Chief, Telecommunications Division International Bureau