Rules and Policies on Foreign Participation in the U.S. Telecommunications Market, Order and Notice of Proposed Rulemaking

Summary

On June 4, 1997, the Federal Communications Commission (Commission) released a Notice of Proposed Rulemaking (NPRM) that proposes changes to the effective competitive opportunities (ECO) test and related rules adopted in the Foreign Carrier Entry Order, 60 FR 67332 (December 29, 1995). The NPRM also proposes conforming changes to the Commission's framework for permitting flexible settlement arrangements between U.S. and foreign carriers. The Commission believes that it is time to revisit its rules in light of an agreement by the United States and 68 other countries negotiated under the auspices of the World Trade Organization (WTO) to open markets for basic telecommunications services.

Full text

SUMMARY: On June 4, 1997, the Federal Communications Commission 
(Commission) released a Notice of Proposed Rulemaking (NPRM) that 
proposes changes to the effective competitive opportunities (ECO) test 
and related rules adopted in the Foreign Carrier Entry Order, 60 FR 
67332 (December 29, 1995). The NPRM also proposes conforming changes to 
the Commission's framework for permitting flexible settlement 
arrangements between U.S. and foreign carriers. The Commission believes 
that it is time to revisit its rules in light of an agreement by the 
United States and 68 other countries negotiated under the auspices of 
the World Trade Organization (WTO) to open markets for basic 
telecommunications services.

DATES: Comments are due on or before July 9, 1997, and reply comments 
are due on or before August 12, 1997. Written comments by the public on 
the proposed and/or modified information collections are due August 18, 
1997.

ADDRESSES: Federal Communications Commission, 1919 M Street, N.W., Room 
222, Washington, D.C. 20554.

FOR FURTHER INFORMATION CONTACT: Doug Klein, Attorney-Advisor, Policy 
and Facilities Branch, Telecommunications Division, International 
Bureau, (202) 418-0424; Susan O'Connell, Attorney-Advisor, Policy and 
Facilities Branch, Telecommunications Division, International Bureau, 
(202) 418-1484. For additional information concerning the information 
collections contained in this NPRM contact Judy Boley at 202-418-0214, 
or via the Internet at jboley@fcc.gov.

SUPPLEMENTARY INFORMATION:

    1. On June 4, 1997, the Commission released a Notice of Proposed 
Rulemaking in Rules and Policies on Foreign Participation in the U.S. 
Telecommunications Market, IB Docket No. 97-142 (FCC 97-195) (NPRM) 
that proposes changes to the rules and policies governing foreign 
participation in the U.S. market for basic telecommunications services. 
These rules and policies were adopted by the Commission in the Foreign 
Carrier Entry proceeding, 60 FR 67332 (December 29, 1995). The NPRM 
also proposes changes to the Commission's framework for permitting 
flexible settlement arrangements between U.S. and foreign carriers.
    2. The NPRM proposes rules that the Commission believes would be 
more appropriate in the liberalized competitive environment that will 
exist when the recent World Trade Organization (WTO) agreement on basic 
telecommunications services takes effect on January 1, 1998. The WTO 
agreement was concluded on February 15, 1997, when 69 countries, 
including the United States and virtually all of its major trading 
partners, agreed to open their markets for basic telecommunications 
services to competition from foreign carriers. This agreement covers 95 
percent of the global market for basic telecommunications services. 
Sixty-five of these countries, including the United States, have 
committed to enforce fair rules of competition for basic 
telecommunications services that are modeled on U.S. law and 
regulations. Fifty-two of these countries, which account for 
approximately 90 percent of telecommunications revenues in WTO Member 
countries, have granted market access for international services. Thus, 
most of the world's major trading nations have made binding commitments 
to transition rapidly from monopoly provision of basic 
telecommunications services to open entry and procompetitive regulation 
of these services. Due to these changed circumstances, the Commission 
believes that it is time to revisit its rules governing foreign 
participation in the U.S. telecommunications market. The Commission 
seeks comments on a number of tentative conclusions and proposals.
    3. The NPRM tentatively concludes that it is no longer necessary to 
apply an ``effective competitive opportunities'' (ECO) analysis to 
Section 214 applications filed by carriers from WTO Member countries 
that seek to provide U.S. international services. The NPRM proposes to 
afford streamlined processing to these applications. The NPRM also 
proposes to adopt measures to improve the Commission's ability to 
detect, deter and remedy anticompetitive conduct by foreign carriers 
that have market power in particular destination countries.
    4. The NPRM also tentatively concludes that it is no longer 
necessary to apply an equivalency analysis as the basis for authorizing 
all U.S. carriers to provide switched services over resold or 
facilities-based private lines between the United States and WTO Member 
countries. In addition, the NPRM tentatively concludes that it is no 
longer necessary to apply an ECO test for cable landing licenses for 
cables between the United States and other WTO Member countries. The 
NPRM also tentatively concludes that the Commission should eliminate 
the ECO test as part of its Sec. 310(b)(4) public interest analysis of 
Title III applications for common carrier radio licenses filed by 
carriers with indirect foreign ownership from WTO Member countries.
    5. The NPRM tentatively concludes that the Commission should retain 
the existing ECO test for Section 214, Title III common carrier, and 
cable landing license applications from entities from non-WTO Member 
countries. The NPRM proposes that the Commission deny Section 214, 
Title III common carrier, and cable landing license applications from 
entities from WTO Member countries if a grant of the application would 
pose a very high risk to competition in the U.S. telecommunications 
market that could not be addressed by conditions that we could impose 
on the authorization.
    6. The NPRM tentatively concludes that, if the Commission 
eliminates the ECO test for Section 214 purposes, it should also 
eliminate the test as the basis for permitting U.S. carriers to 
negotiate alternative settlement arrangements with carriers from WTO 
Member countries. The NPRM proposes to adopt a presumption in favor of 
permitting flexibility for carriers from WTO Member countries. The NPRM 
proposes that this presumption may be rebutted by a showing that market 
conditions in the country in question are not sufficient to prevent a 
carrier with market power in that country from discriminating against 
U.S. carriers. The NPRM also proposes to continue to apply the ECO test 
as the threshold standard for permitting flexibility with carriers that 
are from countries that are not WTO Members.
    7. The NPRM proposes changes to the Commission's regulation of U.S. 
carriers classified as dominant on particular U.S. international routes 
due to an affiliation with a foreign carrier that has market power in 
the destination country. The NPRM proposes to adopt dominant carrier 
safeguards that would apply to dominant foreign-affiliated carriers 
depending on the risk of competitive harm the carrier poses. The basic 
dominant carrier regulations would consist of a minimal set of 
safeguards that would apply to U.S. carriers affiliated with foreign carriers that have market power in a 
destination country that has eliminated legal barriers to international 
facilities-based entry and authorized multiple international 
facilities-based carriers. The supplemental safeguards provide for 
greater oversight of carrier conduct and would apply to foreign 
carriers with market power that cannot meet this standard.
    8. The proposed basic dominant carrier safeguards would require 
such carriers to notify the Commission quarterly of the addition of 
circuits on the dominant route, specifying the joint owner of the 
circuit. Such carriers would also be required to file with the 
Commission quarterly traffic and revenue reports for the dominant 
route. They would also be required to maintain complete records of the 
provisioning and maintenance of basic network facilities and services 
they procure from the foreign carrier affiliate. The NPRM also seeks 
comment on whether the Commission should require some level of 
structural separation between such carriers and their affiliated 
foreign carriers.
    9. The Commission proposed that carriers subject to supplemental 
dominant carrier regulation on particular routes would be required to 
obtain Section 214 approval to add circuits on the affiliated route. 
These carriers would also be required to file quarterly circuit status 
reports for that route with the Commission, which would be made 
publicly available. In addition, they would be required to file an 
electronic summary of contracts submitted under Sec. 43.51 of the 
Commission's rules, 47 CFR 43.51. They would also be required to file 
quarterly reports summarizing their records on the provisioning and 
maintenance of basic network facilities and services procured from 
their affiliated foreign carriers. These U.S. carriers would also be 
required to comply with stricter limits on certain arrangements for the 
sharing of information, customers and joint marketing. The basic 
dominant carrier safeguards would also apply to carriers that are 
subject to supplemental safeguards, to the extent the basic safeguards 
do not conflict with them. The NPRM also seeks comment on whether the 
Commission should require some level of separation between a carrier 
subject to supplemental dominant carrier regulation and its affiliated 
foreign carrier. The Commission expresses the belief that it may be 
appropriate to apply stricter separation requirements to these U.S. 
carriers than to carriers with foreign affiliates that face competition 
in their markets. The NPRM proposes to allow all U.S. carriers 
regulated as dominant due to an affiliation with a foreign carrier to 
file tariffs on one days' notice and to accord such tariffs a 
presumption of lawfulness.
    10. The NPRM also proposes to delineate the types of arrangements 
the Commission considers to be prohibited by the Sec. 63.14 ``no 
special concessions'' rule, which applies generally to arrangements 
between U.S. and foreign carriers. It additionally proposes to modify 
the rule to apply only to concessions granted to U.S. carriers by 
foreign carriers with market power in a destination country, as opposed 
to all foreign carriers.
    11. Finally, the Commission proposes changes to its rules that 
afford streamlined processing to certain international Section 214 
applications.

Initial Regulatory Flexibility Analysis

    12. Pursuant to the Regulatory Flexibility Act of 1990, 5 U.S.C. 
Secs. 601-612, the Commission's Initial Regulatory Flexibility Analysis 
with respect to the NPRM is as follows:
    13. Reason for Action. The Commission is issuing this Notice of 
Proposed Rulemaking to seek comment on possible changes to our rules 
and policies for allowing foreign-affiliated entities to participate in 
the U.S. telecommunications market. In light of the recent agreement 
reached by Members of the World Trade Organization to liberalize the 
provision of basic telecommunications services, we believe it is 
appropriate to relax our scrutiny of applications filed by affiliates 
of entities from WTO Member countries for authority pursuant to 
Sec. 214 of the Communications Act, 47 U.S.C. Sec. 214, and the Cable 
Landing License Act, 47 U.S.C. Secs. 34-39; and to relax our scrutiny 
of indirect foreign investment in holders of common carrier radio 
licenses under Sec. 310(b)(4) of the Communications Act, 47 U.S.C. 
Sec. 310(b)(4). We also believe that other changes to our regulation of 
foreign-affiliated entities are appropriate in light of the WTO 
agreement and our experience applying our current rules.
    14. Objectives. The objective of this proceeding is to increase 
competition in the U.S. market for basic telecommunications services 
while minimizing the risk of anticompetitive harm. In light of the 
changed circumstances that will result from the WTO agreement on basic 
telecommunications and our nearly two years of experience with our 
current rules on market entry, we believe that reducing entry barriers 
for applicants affiliated with entities from WTO Member countries is 
the appropriate way to accomplish that objective. The Commission 
believes that the ``effective competitive opportunities'' test 
developed in its Foreign Carrier Entry Order is no longer necessary as 
applied to countries that are members of the WTO. Instead, we propose 
to rely primarily on regulatory safeguards and settlement-rate 
benchmarks to prevent anticompetitive conduct in the U.S. 
telecommunications marketplace. We propose some revisions to those 
regulatory safeguards in this Notice.
    15. Legal basis. This Notice of Proposed Rulemaking is adopted 
pursuant to Secs. 1, 4(i), 201(b), 214, 303(r), 307, 309(a), 310 of the 
Communications Act of 1934, as amended, 47 U.S.C. Secs. 151, 154(i), 
214, 303(r), 307, 309(a), 310.
    16. Description, potential impact, and number of small entities 
affected. The RFA generally defines small entity as having the same 
meaning as the terms small business, small organization, and small 
governmental jurisdiction and defines small business as having the same 
meaning as the term small business concern under Sec. 3 of the Small 
Business Act unless the Commission has developed one or more 
definitions that are appropriate for its activities. The Small Business 
Act defines small business concern as one that (1) is independently 
owned and operated; (2) is not dominant in its field of operation; and 
(3) satisfies any additional criteria established by the Small Business 
Administration (SBA).
    17. The rules proposed in this Notice apply only to entities 
providing international common carrier services pursuant to Section 214 
of the Communications Act; entities providing domestic or international 
wireless common carrier services under Sec. 309 of the Act; and 
entities licensed to construct and operate submarine cables under the 
Cable Landing License Act.
    18. Because the small incumbent local exchange carriers (LECs) 
subject to these rules are either dominant in their fields of 
operations or are not independently owned and operated, consistent with 
our prior practice, they are excluded from the definitions of small 
entity and small business concern. Accordingly, our use of the terms 
small entities and small businesses does not encompass small incumbent 
LECs. Out of an abundance of caution, however, for the purposes of this 
initial regulatory flexibility analysis, we will consider small 
incumbent LECs to be within this analysis, where a small incumbent LEC 
is any incumbent LEC that arguably might be defined by the SBA as a 
``small business concern.'' 19. Section 214 International Common Carrier Services. Entities 
providing international common carrier service pursuant to Section 214 
of the Act fall into the SBA's Standard Industrial Classification (SIC) 
categories for Radiotelephone Communications (SIC 4812) and Telephone 
Communications, Except Radiotelephone (SIC 4813). The SBA's definition 
of small entity for those categories is one with fewer than 1,500 
employees. We discuss below the number of small entities falling within 
these two subcategories that may be affected by the rules proposed in 
this Notice.
    20. The most reliable source of information regarding the number of 
international common carriers is the data that we collect annually in 
connection with the Telecommunications Industry Revenue: 
Telecommunications Relay Service Fund Worksheet Data (TRS Worksheet). 
In 1995, 445 toll carriers filed TRS fund worksheets. We believe that 
between 50 and 200 carriers failed to file TRS fund worksheets. We 
believe also that fewer than 10 toll carriers had 1,500 or more 
employees. Thus, at most 635 international carriers would be classified 
as small entities. Many TRS filers, however, are affiliated with other 
carriers, and therefore the number of aggregated carriers is far fewer 
than the preceding estimate. Of the 445 toll filers, 239 reported no 
carrier affiliates. Adding 50 non-filers gives a lower estimate of 289 
international carriers that would be classified as small entities. 
Thus, our best estimate of the total number of small entities is 
between 289 and 635. We are unable at this time to estimate with 
greater precision the number of international carriers that would 
qualify as small business entities under the SBA's definition. While 
not all of these entities may have provided international service in 
1995, we expect that many of these entities will seek to do so in the 
future, as will additional entrants into the market.
    21. Title III Common Carrier Services. Cellular licensees. Neither 
the Commission nor the SBA has developed a definition of small entities 
applicable to cellular licensees. The closest applicable definition of 
small entity is the definition under the SBA rules applicable to 
radiotelephone (wireless) companies (SIC 4812). The most reliable 
source of information regarding the number of cellular services 
carriers nationwide of which we are aware appears to be the data that 
the Commission collects annually in connection with the TRS Worksheet. 
According to the most recent data, 792 companies reported that they 
were engaged in the provision of cellular services. Although it seems 
certain that some of these carriers are not independently owned and 
operated, or have more than 1,500 employees, we are unable at this time 
to estimate with greater precision the number of cellular services 
carriers that would qualify as small business concerns under the SBA's 
definition. Consequently, we estimate that there are fewer than 792 
small cellular service carriers.
    22. 220 MHz Radio Services. Because the Commission has not yet 
defined a small business with respect to 220 MHz radio services, we 
will utilize the SBA's definition applicable to radiotelephone 
companies--i.e., an entity employing less than 1,500 persons. With 
respect to the 220 MHz services, the Commission has proposed a two-
tiered definition of small business for purposes of auctions: (1) for 
Economic Area (EA) licensees, a firm with average annual gross revenues 
of not more than $6 million for the preceding three years, and (2) for 
regional and nationwide licensees, a firm with average annual gross 
revenues of not more than $15 million for the preceding three years. 
Since this definition has not yet been approved by the SBA, we will 
utilize the SBA's definition applicable to radiotelephone companies. 
Given the fact that nearly all radiotelephone companies employ fewer 
than 1,500 employees, with respect to the approximately 3,800 incumbent 
licensees in this service, we will consider them to be small businesses 
under the SBA definition.
    23. Common Carrier Paging. The Commission has proposed a two-tier 
definition of small businesses in the context of auctioning licenses in 
the Common Carrier Paging services. Under that proposal, a small 
business would be either (1) an entity that, together with its 
affiliates and controlling principals, has average gross revenues for 
the three preceding years of not more than $3 million, or (2) an entity 
that, together with affiliates and controlling principals, has average 
gross revenues for the three preceding calendar years of not more than 
$15 million. Since the SBA has not yet approved this definition for 
paging services, we will utilize the SBA's definition applicable to 
radiotelephone companies, i.e., an entity employing fewer than 1,500 
persons. At present, there are approximately 74,000 Common Carrier 
Paging licensees. We estimate that the majority of common carrier 
paging providers would qualify as small businesses under the SBA 
definition.
    24. Mobile Service Carriers. Neither the Commission nor the SBA has 
developed a definition of small entities specifically applicable to 
mobile service carriers such as paging companies. The closest 
applicable definition under the SBA rules is for radiotelephone 
(wireless) companies. The most reliable source of information regarding 
the number of mobile service carriers nationwide of which we are aware 
appears to be the data that the Commission collects annually in 
connection with the TRS Worksheet. According to the most recent data, 
117 companies reported that they were engaged in the provision of 
mobile services. Although it seems certain that some of these carriers 
are not independently owned and operated, or have more than 1,500 
employees, we are unable at this time to estimate with greater 
precision the number of mobile service carriers that would qualify 
under the SBA's definition. Consequently, we estimate that fewer than 
117 mobile service carriers are small entities.
    25. Broadband Personal Communications Services (PCS). The broadband 
PCS spectrum is divided into six frequency blocks designated A through 
F, and the Commission has held auctions for each block. The Commission 
has defined small entity in the auctions for Blocks C and F as an 
entity that has average gross revenues of less than $40 million in the 
three previous calendar years. For Block F, an additional 
classification for ``very small business'' was added and is defined as 
an entity that, together with its affiliates, has average gross revenue 
of not more than $15 million for the preceding three calendar years. 
These regulations defining small entity in the context of broadband PCS 
auctions have been approved by the SBA. No small business within the 
SBA-approved definition bid successfully for licenses in Blocks A and 
B. There were 90 winning bidders that qualified as small entities in 
the Block C auctions. A total of 93 small and very small businesses won 
approximately 40 percent of the 1,479 licenses for Blocks D, E, and F. 
However, licenses for Blocks C through F have not been awarded fully; 
therefore, there are few, if any, small businesses currently providing 
PCS services. Based on this information, we conclude that the number of 
small broadband PCS licensees will include the 90 winning bidders and 
the 93 qualifying bidders in the D, E, and F Blocks, for a total of 183 
small PCS providers as defined by the SBA and the Commission's auction 
rules.
    26. Narrowband PCS. The Commission does not know how many 
narrowband PCS licenses will be granted or auctioned, as it has not yet determined the size or number 
of such licenses. Two auctions of narrowband PCS licenses have been 
conducted for a total of 41 licenses, out of which 11 were obtained by 
small businesses owned by members of minority groups and/or women. 
Small businesses were defined as those with average gross revenues for 
the prior three fiscal years of $40 million or less. For purposes of 
this initial regulatory flexibility analysis, the Commission is 
utilizing the SBA definition applicable to radiotelephone companies, 
i.e., an entity employing less than 1,500 persons. Not all of the 
narrowband PCS licenses have yet been awarded. There is therefore no 
basis to determine the number of licenses that will be awarded to small 
entities in future auctions. Given the facts that nearly all 
radiotelephone companies have fewer than 1,000 employees and that no 
reliable estimate of the number of prospective narrowband PCS licensees 
can be made, we assume, for purposes of the evaluations and conclusions 
in this Initial Regulatory Flexibility Analysis, that all the remaining 
narrowband PCS licenses will be awarded to small entities.
    27. Rural Radiotelephone Service. The Commission has not adopted a 
definition of small business specific to the Rural Radiotelephone 
Service, which is defined in Sec. 22.99 of the Commission's Rules. A 
significant subset of the Rural Radiotelephone Service is BETRS, or 
Basic Exchange Telephone Radio Systems (the parameters of which are 
defined in Sec. Sec. 22.757 and 22.759 of the Commission's Rules). 
Accordingly, we will use the SBA's definition applicable to 
radiotelephone companies, i.e., an entity employing fewer than 1,500 
persons. There are approximately 1,000 licensees in the Rural 
Radiotelephone Service, and we estimate that almost all of them have 
fewer than 1,500 employees.
    28. Air-Ground Radiotelephone. The Commission has not adopted a 
definition of small business specific to the Air-Ground Radiotelephone 
Service, which is defined in Sec. 22.99 of the Commission's Rules. 
Accordingly, we will use the SBA's definition applicable to 
radiotelephone companies, i.e., an entity employing fewer than 1,500 
persons. There are approximately 100 licensees in the Air-Ground 
Radiotelephone Service, and we estimate that almost all of them qualify 
as small under the SBA definition.
    29. Specialized Mobile Radio Licensees (SMR). Pursuant to 
Sec. 90.814(b)(1) of our rules, the Commission awards bidding credits 
in auctions for geographic area 800 MHz and 900 MHz Specialized Mobile 
Radio (SMR) licenses to firms that had revenues of less than $15 
million in each of the three previous calendar years. This regulation 
defining ``small entity'' in the context of 800 MHz and 900 MHz SMR has 
been approved by the SBA. We do not know how many firms provide 800 MHz 
or 900 MHz geographic area SMR service pursuant to extended 
implementation authorizations or how many of these providers have 
annual revenues of less than $15 million. We do know that one of these 
firms has over $15 million in revenues. We assume that all of the 
remaining existing extended implementation authorizations are held by 
small entities, as that term is defined by the SBA. The Commission 
recently held auctions for geographic area licenses in the 900 MHz SMR 
band. There were 60 winning bidders who qualified as small entities in 
the 900 MHz auction. Based on this information, we conclude that the 
number of geographic area SMR licensees affected includes these 60 
small entities.
    30. Microwave Video Services. Microwave services includes common 
carrier, private operational fixed, and broadcast auxiliary radio 
services. At present, there are 22,015 common carrier licensees. 
Inasmuch as the Commission has not yet defined small business with 
respect to microwave services, we will utilize the SBA's definition 
applicable to radiotelephone companies--i.e., an entity with less than 
1,500 employees. Although some of these companies may have more than 
1,500 employees, we are unable at this time to estimate with greater 
precision the number of common carrier microwave service providers that 
would qualify under the SBA's definition. We therefore estimate that 
there are fewer than 22,015 small common carrier licensees in the 
microwave video services.
    31. Offshore Radiotelephone Service. This service operates on 
several UHF TV broadcast channels that are not used for TV broadcasting 
in the coastal area of the states bordering the Gulf of Mexico. At 
present, there are approximately 55 licensees in this service. Some of 
those licensees are common carriers. We are unable at this time to 
estimate the number of licensees that would qualify as small under the 
SBA's definition.
    32. Local Multipoint Distribution Service (LMDS). The Commission 
has so far licensed only one licensee in this service, and that 
licensee is not providing service as a common carrier. There will be a 
total of 986 LMDS licenses. Licensees will be permitted to decide 
whether to provide common carrier service, and we have no way of 
estimating how many will choose to do so. Because there will be no 
restrictions on the number of licenses a given entity may acquire, we 
have no way of estimating how many total licensees there will be. We 
also cannot estimate the number of common carrier licensees that will 
qualify as small entities.
    33. Space Stations (Geostationary). Very few systems are currently 
operated on a common carrier basis. Because we do not collect 
information on annual revenue or number of employees of all these 
licensees, we cannot estimate with precision the number of such 
licensees that may constitute a small business entity. It is likely 
that no more than one such entity that is currently operating as a 
common carrier would constitute a small business entity. There may be a 
small increase in the number of such entities in the future as a result 
of recent licensing action in the Ka-band.
    34. Space Stations (Non-geostationary). These systems by and large 
do not operate as common carriers. Because we do not collect 
information on annual revenue or number of employees, we cannot 
estimate with precision whether any carrier that may choose to operate 
on a common carrier basis constitutes a small business entity. The 
trend is for such systems to operate on a non-common carrier basis. 
These systems, of which there will be a limited number, by and large 
are not yet operational and are still being licensed and constructed.
    35. Earth Stations. The vast majority of earth stations licensed by 
the Commission are not operated on a common carrier basis. Earth 
stations that communicate with non-geostationary and Ka-band satellite 
systems may operate on a common carrier basis but these systems are not 
yet operational and are still being licensed and constructed. We are 
unable to estimate at this time the number of earth stations 
communicating with such systems that may operate on a common carrier 
basis and, of those, the number that will be licensed to small business 
entities.
    36. Submarine Cable Landing Licenses. Our proposals would affect 
all holders of and future applicants for cable landing licenses, 
whether or not they operate their cables as common carriers. We have no 
way of knowing how many applications for cable landing licenses will be 
filed in coming years, but that number will likely increase if we adopt 
our proposal to lower the barriers to granting licenses for cables to WTO Member countries. Since 1992, there have been 
approximately 35 applications for cable landing licenses. The total 
number of licensees is difficult to determine, because many licenses 
are jointly held by several licensees. Our rules will also permit more 
current licensees to accept additional investment from entities from 
WTO Member countries.
    37. Reporting, recordkeeping, and other compliance requirements. 
The actions contained in this Notice of Proposed Rulemaking may affect 
large and small carriers. We propose to require that U.S. carriers 
whose foreign affiliates have market power maintain or provide certain 
records regarding their foreign affiliates. Our proposals would in most 
cases reduce the burdens that are currently imposed on such carriers, 
and we anticipate that the remaining requirements would not impose a 
significant economic burden on small entities. A variety of skills may 
be required to comply with the proposed requirements, but all of the 
skills that may be required are of the type needed to conduct a 
carrier's normal course of business. No additional outside professional 
skills should be required, with the possible exception of preparing an 
initial Section 214 or cable landing license application and of 
preparing a submission for our consideration under Sec. 310(b)(4), all 
of which would be simplified by our proposals.
    38. Section 214 and the Cable Landing License Act. The proposed 
revisions to our rules and policies pursuant to Section 214 and the 
Cable Landing License Act would significantly reduce the burdens on 
international common carriers. Our proposal would reduce the burden on 
foreign-affiliated carriers seeking to enter the market by requiring 
only that they show that their foreign affiliate is from a country that 
is a Member of the World Trade Organization. We believe this to be a 
minimal burden for most small entities and a significant reduction of 
burdens relative to our current application requirements.
    39. The proposed ``basic dominant carrier safeguards'' would be 
less burdensome to most international common carriers than our current 
regulations. Carriers would no longer be required to obtain approval 
before adding or discontinuing circuits. Instead, they would be 
required only to file quarterly notification of additions of circuits. 
We propose to eliminate the requirement that dominant carriers file 
their international service tariffs on no less than 14 days' notice. 
Instead, we would allow those carriers to file their international 
service tariffs on one day's notice and accord them a presumption of 
lawfulness. This change would reduce regulatory burdens and increase 
the ability of carriers to innovate and efficiently respond to changes 
in demand and cost. We propose to retain the requirements that carriers 
file quarterly traffic and revenue reports and keep records of 
provisioning and maintenance of basic network facilities and services 
procured from the foreign affiliate. We anticipate that most of the 
entities subject to dominant carrier regulation would not be small 
entities, but we seek comment on that tentative conclusion.
    40. This Notice proposes to impose supplemental dominant carrier 
regulation on U.S. carriers whose foreign affiliates do not face 
facilities-based competition for international services in the 
destination countries in which they have market power. We believe that 
additional regulation of those carriers is necessary to ensure that the 
foreign carrier does not discriminate in favor of its U.S. affiliate. 
These additional requirements may include stricter structural 
separation between the U.S. carrier and its foreign affiliate; stricter 
limits on certain arrangements for the sharing of information, 
customers, and joint marketing; prior approval for addition of 
circuits; quarterly circuit status reports; filing an electronic 
summary of Sec. 43.51 contracts; and quarterly provisioning and 
maintenance reports. We anticipate that few if any small entities would 
be subject to supplemental regulation, but we seek comment on that 
tentative conclusion.
    41. The Notice also seeks comment on whether, in light of our 
proposal to liberalize our rules on market entry, we need to impose as 
a dominant carrier safeguard some level of structural separation 
between the U.S. carrier and its foreign affiliate.
    42. We have considered the impact on small and large entities in 
developing these proposals, and we view these proposed regulations as 
critical to preventing anticompetitive conduct. We also believe that 
these safeguards would protect small entities from entities that are 
affiliated with large foreign carriers by preventing foreign affiliates 
from leveraging their market power to the disadvantage of small, 
independent entities. We seek comment on whether we can further reduce 
the burdens on small entities and still achieve our goal of preventing 
anticompetitive behavior in the U.S. market.
    43. Section 310(b)(4). We also propose to reduce the burdens on 
common carrier licensees with foreign investment from WTO Member 
countries. Section 310(b)(4) of the Communications Act has always 
required that we make a finding about whether indirect foreign 
investment in excess of 25 percent would serve the public interest. Our 
proposal here would, in many cases, greatly simplify the required 
showing by licensees or potential licensees. An applicant that could 
show that its foreign investor's principal place of business is in a 
country that is a Member of the WTO would in most cases have to make no 
further showing. An applicant whose foreign investment comes from a 
country that is not a WTO Member would still have to show that it 
satisfies the effective competitive opportunities test, but that burden 
would not be greater than that imposed by our current requirements.
    44. This Notice asks for comment on whether we should adopt 
specific criteria for denial of Title III common carrier (and Section 
214) applications that present such an unusual danger of 
anticompetitive effects that they should be denied even though the 
foreign investment is from WTO Member countries. We also ask whether we 
can further reduce regulatory burdens by eliminating our review of 
increases in foreign ownership by licensees that already have more than 
25 percent foreign ownership. We also seek comment on other ways in 
which the consideration of foreign investment under Sec. 310(b)(4) 
could be made less burdensome for small entities.
    45. Accounting Rate Flexibility. We propose to reduce the burden on 
U.S. carriers that seek approval of alternative settlement rate 
arrangements with foreign carriers from WTO Member countries. 
Currently, a carrier seeking such approval must file a detailed 
petition for declaratory ruling showing that the alternative 
arrangement is permitted under the criteria adopted in our Flexibility 
Order, Regulation of International Accounting Rates, Docket No. CC 90-
337, Phase II, Fourth Report and Order, 62 FR 5535, February 6, 1997) 
(Flexibility Order). We propose here to require only that an applicant 
show that the foreign carrier is operating in a country that is a 
Member of the WTO. An opposing party would have the burden of showing 
that market conditions in the country in question are not sufficient to 
prevent a carrier with market power from discriminating against U.S. 
carriers.
    46. Federal rules that overlap, duplicate, or conflict with the 
Commission's proposal. None.
    47. Any significant alternatives minimizing impact on small 
entities and consistent with stated objectives. In developing the proposals contained in this Notice, we have attempted to 
minimize the burdens on all entities in order to allow maximum 
participation in the U.S. telecommunications markets while achieving 
our other objectives. We seek comment on the impact of our proposals on 
small entities and on any possible alternatives that could minimize the 
impact of our rules on small entities. In particular, we seek comment 
on alternatives to the reporting, recordkeeping, and other compliance 
requirements discussed above. We also seek specific comment on the 
impact on small entities of our proposals to modify our dominant 
carrier safeguards.
    48. Comments are solicited Written comments are requested on this 
Initial Regulatory Flexibility Analysis. These comments must be filed 
in accordance with the same filing deadlines set for comments on the 
other issues in this Notice of Proposed Rulemaking, but they must have 
a separate and distinct heading designating them as responses to the 
Regulatory Flexibility Analysis. The Secretary shall send a copy of 
this Notice to the Chief Counsel for Advocacy of the Small Business 
Administration in accordance with Sec. 603(a) of the Regulatory 
Flexibility Act.

Initial Paperwork Reduction Act of 1995 Analysis

    49. This Notice of Proposed Rulemaking contains either a proposed 
or a modified information collection. As part of our continuing effort 
to reduce paperwork burdens, we invite the general public and the 
Office of Management and Budget (OMB) to comment on the information 
collections contained in this NPRM, as required by the Paperwork 
Reduction Act of 1995, Public Law 104-13. Public and agency comments 
are due August 18, 1997. Comments should address: (a) whether the 
proposed collection of information is necessary for the proper 
performance of the functions of the Commission, including whether the 
information shall have practical utility; (b) the accuracy of the 
Commission's burden estimates; (c) ways to enhance the quality, 
utility, and clarity of the information collected; and (d) ways to 
minimize the burden of the collection of information on the 
respondents, including the use of automated collection techniques or 
other forms of information technology.
    50. We do not anticipate that the proposed rules will have any 
impact on the paperwork burden imposed under the Commission's 
Flexibility Policy established in the Fourth Report and Order, CC 
Docket No. 90-337, Phase I [62 FR 5535, February 6, 1997]; [OMB Control 
Nos. 3060-0160 and 3060-0764].
    51. The rule changes proposed here have been analyzed with respect 
to the Paperwork Reduction Act of 1980 and found to impose no new or 
modified requirements or burdens on the public. Accordingly, their 
implementation is not subject to approval by the Office of Management 
and Budget under that Act.
    OMB Approval Number: 3060-0686.
    Title: Streamlining the International Section 214 Authorization 
Process and Tariff Requirements.
    Type of Review: Revision of existing collection.
    Respondents: Business or other For-Profit.
    Number of Respondents: 3,238.
    Estimated Time Per Response: 14 hours.
    Total Annual Burden: 23,603 hours.
    Estimated costs per respondent: $263.
    Needs and Uses: The information collections are necessary largely 
to determine the qualifications of applicants to provide common carrier 
international telecommunications services, or to construct and operate 
submarine cables, including applicants that are affiliated with foreign 
carriers, and to determine whether and under what conditions the 
authorizations are in the public interest, convenience, and necessity. 
The information collections are necessary for the Commission to 
maintain effective oversight of U.S. carriers that are affiliated with, 
or involved in certain co-marketing or similar arrangements with, 
foreign carriers that have market power. The information collected is 
necessary for the Commission to ensure that rates, terms and conditions 
for international service are just and reasonable, as required by the 
Communications Act of 1934.
    52. The information collections under Sec. 310(b)(4) of the Act are 
necessary to determine, under that section, whether a greater than 25 
percent indirect foreign ownership interest in a U.S. common carrier 
ratio licensee would be inconsistent with the public interest.

Ordering Clauses

    53. Accordingly, it is ordered that, pursuant to Secs. 1, 4(i), 
201(b), 214, 303(r), 307, 309(a), and 310 of the Communications Act of 
1934, as amended, 47 U.S.C. Secs. 151, 154(i), 214, 303(r), 307, 
309(a), 310, this notice of proposed rulemaking is hereby adopted.
    54. The Commission's decision also included minor changes to part 
63 of the Commission's rules, which are published elsewhere in this 
issue.
    55. It is further ordered that the Secretary shall send a copy of 
this notice of proposed rulemaking, including the regulatory 
flexibility certification, to the Chief Counsel for Advocacy of the 
Small Business Administration, in accordance with paragraph 603(a) of 
the Regulatory Flexibility Act, 5 U.S.C. Secs. 601 et seq.

List of Subjects in 47 CFR Part 63

    Communications common carriers, Reporting and recordkeeping 
requirements.

Federal Communications Commission.
William F. Caton,
Acting Secretary.
[FR Doc. 97-15703 Filed 6-16-97; 8:45 am]
BILLING CODE 6712-01-P  

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