A. IV. ง. 1996 Act and BOC Domestic Out-of-Region Order Discussion Definition of Dominant Carrier and Interim Safeguards C. 369 1. NYNEX Long Distance Company (NYNEX LD), Ameritech Communications, Inc. (ACI), and Bell Atlantic Communications, Inc. (BACI) each filed an application seeking authority pursuant to Section 214 of the Communications Act of 1934, as amended (Act), and Section 63.01 of the Commission's rules,' to provide international telecommunications services originating from "out-of region" points in the United States and terminating at international points through the resale of switched services of unaffiliated common carriers. NYNEX LD, ACI, and BACI request classification as non-dominant resellers of international switched services on all routes for which they seek authorization. 2. For the reasons set forth below, we find that a grant of NYNEX LD's, ACI's, and BACI's applications, 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, ACI's, and BACI's Section 214 applications are the same as the interim safeguards that the Commission recently adopted as a condition for non-dominant treatment of the Bell Operating Companies' (BOCs) provision of out-of-region, domestic interstate, interexchange services (including interLATA and intraLATA services). The conditions we attach to our grant of the instant Section 214 applications will remain in place pending the outcome of the Commission's Interexchange NPRM.3 In the meantime, we believe that our grant of NYNEX LD's, ACI's, and BACI's applications subject to the conditions set forth below will facilitate the efficient and rapid provision of international services, as contemplated by the Telecommunications Act of 1996, while still protecting ratepayers and competition in the U.S. international services market. 3. In 1980, in its First Report & Order in Competitive Carrier, the Commission devised the dominant/non-dominant regulatory scheme for Title II rate and entry regulation.* In a series of orders, the Commission distinguished between carriers with market power (dominant carriers) and those without market power (non-dominant carriers). The 2 Bell Operating Company Provision of Out-of-Region Interstate, Interexchange Services, CC Docket No. 96-21, Report and Order, FCC 96-288 (released July 1, 1996) (BOC Domestic Out-of-Region Order). The Commission did not determine the appropriate regulation of a BOC's provision of international service in the BOC Domestic Out-of-Region Order. See id. at n.5. 3 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, FCC 96-123 (released Mar. 25, 1996) (Interexchange NPRM or Interexchange proceeding) (seeking comment on whether to modify or eliminate the separation requirements that apply as a condition of non-dominant treatment of independent local exchange carrier (LEC) provision of out-of-region, domestic interstate, interexchange services, and whether, if it modifies or eliminates these requirements for independent LECs, it should also modify or eliminate its requirements for BOC out-of-region domestic interstate, interexchange services). See Policy & Rules Concerning Rates for Competitive Common Carrier Services and Facilities Authorizations Therefor, CC Docket No. 79-252 (Competitive Carrier), First Report & Order, 85 FCC 2d 1 (1980); Second Report & Order, 91 FCC 2d 59 (1982); recon., 93 FCC 2d 54 (1983); Third Report & Order, 48 Fed. Reg. 46,791 (1983); Fourth Report & Order, 95 FCC 2d 554 (1983), vacated, AT&T v. FCC, 978 F.2d 727 (1992), cert. denied, MCI Telecommunications Corp. v. AT&T, 113 S.Ct. 3020 (1993); Fifth Report & Order, 98 FCC 2d 1191 (1984); Sixth Report & Order, 99 FCC 2d 1020 (1985), rev'd, MCI Telecommunications Corp. v. FCC, 765 F.2d 1186 (D.C. Cir. 1985). S See 47 C.F.R. § 61.3(o) (Dominant carrier is defined as "[a] carrier found by the Commission to have market power (i.e., power to control prices)"). Title II regulatory requirements would be "streamlined." The Commission gradually relaxed its regulation of non-dominant carriers because it concluded that non-dominant carriers lacked the incentive and ability to engage in conduct that might be anticompetitive or otherwise inconsistent with the public interest." 4. The Commission has applied standard principles of antitrust analysis to determine whether a carrier possesses market power in the provision of the relevant service in the relevant geographic market.' This analysis includes a focus on: (1) market share, (2) the demand elasticity of a carrier's customers,3 (3) the supply elasticity of the market,' (4) a carrier's cost structure, size and resources, and (5) control of bottleneck facilities. 5. The Commission first applied its dominant/non-dominant regulatory scheme to U.S. international carriers in 1985.10 In International Competitive Carrier, the Commission determined that, for international service, demand and supply elasticity revealed distinct See BOC Domestic Out-of-Region Order at ¶¶ 4-6 for a comparison of the regulatory requirements imposed on dominant and non-dominant domestic carriers. 7 Revisions to Price Cap Rules for AT&T Corp., 10 FCC Rcd 3009, 3016 (1995) (Commercial Services Order); Competition in the Interstate Interexchange Marketplace, CC Docket No. 90-132, Report and Order, 6 FCC Rcd 5880, 5888 (1991) (First Interexchange Competition Order), recon., 6 FCC Rcd 7569 (1991), further recon., 7 FCC Rcd 2677 (1992); Motion of AT&T Corp. to be Declared Non-Dominant for International Service, Order, FCC 96-209 (released May 14, 1996) (AT&T International Non-Dominance Order); Competitive Carrier, First Report and Order, 85 FCC 2d at 21; Motion of AT&T to be Reclassified as a Non-Dominant Carrier, 11 FCC Rcd 3271, 3293-94 (1995). Commercial Services Order at 3016 (demand elasticity or responsiveness is the propensity of customers to switch carriers or otherwise change the amount of services they purchase from a carrier in response to relative changes in price and quality). The Commission has explained that there are two factors that determine supply elasticities in the market. The first is the supply capacity of existing competitors. Supply elasticities tend to be high if existing competitors have or can easily acquire significant additional capacity in a relatively short time period. The second factor is low entry barriers. Supply elasticities tend to be high even if existing suppliers lack excess capacity if new suppliers can enter the market relatively easily and add to existing capacity. First Interexchange Competition Order at 5888. 10 See International Competitive Carrier Policies, Report & Order, 102 FCC 2d 812 (1985) (International Competitive Carrier), recon. denied, 60 RR 2d 1435 (1986). product markets, international message telephone service (IMTS) and non-IMTS," and that every destination country constituted a separate geographic market based "primarily on the need for a carrier to obtain an operating agreement prior to providing service to a given country. 12 The Commission also concluded that (a) AT&T was dominant in the provision of IMTS and (b) all other IMTS providers (e.g., Sprint and MCI), except the non-contiguous domestic carriers, were not dominant.13 The Commission determined that no carrier was dominant in the provision of non-IMTS service for any geographic market.1 In addition, the Commission found all foreign-owned carriers to be dominant for all services to all countries." The Commission recently found AT&T to be no longer dominant in the provision of international services." B. 6. 1996 Act and BOC Domestic Out-of-Region Order 15 In enacting the Telecommunications Act of 1996 (1996 Act)," Congress sought to establish "a pro-competitive, de-regulatory national policy framework" for the United States telecommunications industry.18 The 1996 Act, among other things, permitted the BOCs to provide interLATA19 services20 originating outside of their in-region states.2 21 International Competitive Carrier at ¶ 22; see also id. at ¶ 22, and n.20 (also treating television, space segment and multi-purpose earth station services as separate products); see also id. at ¶ 6, n.6 ("[e]xamples of non-IMTS services are telex, telegram. . . private line, high and low speed data, [and] videoconferencing"). 13 Id. at 47 (identifying "Hawaiian Telephone for Hawaii; Alascom for Alaska; All American Cable & Radio for Puerto Rico; ITT-CIVI for the U.S. Virgin Islands and RCA Globcom for Guam" as the carriers providing international service for non-contiguous domestic points). 16 AT&T International Non-Dominance Order. The Commission also recently further streamlined the Title Il regulation of non-dominant international carriers. See Streamlining the International Section 214 Authorization Process and Tariff Requirements, IB Docket No. 95-118, FCC 96-79, 11 77, and 80-81 (released Mar. 13, 1996) (Streamlining Order). 17 Pub. L. No. 104-104, 110 Stat. 56 (1996), codified at 47 U.S.C. §§ 151 et seq. 19 Under the 1996 Act, a "local access and transport area" (LATA) is "a contiguous geographic area (A) established before the date of enactment of the [1996 Act] by a [BOC] such that no exchange area includes points within more than 1 metropolitan statistical area, consolidated metropolitan statistical area, or State, except as expressly permitted under the AT&T Consent Decree; or (B) established or modified by a [BOC] after such date of enactment and approved by the Commission." LATAs were created as part of the Modification of Final Judgment's (MFJ) "plan of reorganization" by which the BOCs were divested from AT&T. See United (continued...) |