NTIA letter, Rules and Policies on Foreign Participation in the U.S. Telecommunications Market
Honorable William E. Kennard
Federal Communications Commission
1919 M Street, N.W.
Washington, D.C. 20554
Re: Rules and Policies on Foreign Participation in the
U.S. Telecommunications Market, IB Docket No. 97-142
Dear Chairman Kennard:
NTIA is pleased to share its views regarding the Commission's pending proceeding to revise existing foreign entry rules.(1)
The Effective Competitive Opportunities Test is No Longer Necessary.(2)
NTIA concurs with the Commission's assessment that it is no longer necessary to perform an equivalent competitive opportunities (ECO) analysis as part of its public interest assessment for applications from carriers affiliated with carriers in WTO member countries. Moreover, NTIA shares the Commission's belief that the WTO commitments made by 68 other governments will, when fully implemented, substantially achieve the goal of promoting effective competition in the international services market.(3)
As part of its public interest inquiry the Commission proposes to establish a "rebuttable presumption" in favor of granting a Section 214 application filed by a carrier from a WTO member country to provide international facilities-based, resold switched, or resold non-interconnected private line services. We recognize that the Commission intends this proposed approach to streamline the application process for foreign applicants from WTO member countries.
NTIA also commends the Commission for recognizing that some applications may pose such an unacceptable risk to competition that approval would not be in the public interest.(4) In proposing to adopt a "very high risk to competition" standard, we assume the Commission is seeking to apply this standard only in the context of the possible denial of particular applications. NTIA strongly suggests that the Commission provide additional guidance to potential petitioners regarding the application of the "very high risk" standard for such purposes.(5) NTIA also understands that the Commission intends to retain its existing "substantial risk"(6) standard for purposes of determining whether particular applications warrant the application of specific competitive safeguards, including a determination of which safeguards would be appropriate to deter anti-competitive conduct. We concur with this approach, as the "substantial risk" standard has been an effective means of preventing a foreign carrier from using its foreign market power to the disadvantage of other carriers and U.S. consumers.(7)
NTIA supports the Commission's proposal to grant most applications for submarine cable landing licenses from WTO members, unless the State Department disapproves or the Commission determines there is some other compelling public interest reason for not doing so. We are also pleased that the Commission is prepared to apply specific conditions on cable landing licenses as necessary.(8) In addition, NTIA supports the Commission's proposal that the ECO test be eliminated as part of its Section 310(b)(4) public interest analysis for common carrier radio licensees or applicants with foreign investment from WTO members, with a presumption that denial of the application would not serve the public interest.
The Public Interest Can be Maintained Through the Application of Appropriate Safeguards.
NTIA believes the FCC can rely on other regulatory mechanisms to address remaining concerns regarding possible anti-competitive behavior. Specifically, NTIA agrees that it is imperative that the Commission apply regulatory safeguards to prevent anti-competitive behavior in order to promote the public interest. We also believe the Commission's proposed approach is consistent with the WTO agreement.(9)
NTIA supports the Commission's proposed safeguards for prevention of anti-competitive effects in the United States, including: dominant carrier regulation for carriers with foreign affiliates that have market power; possible structural separation (or non-structural safeguards such as separate accounts); no special concessions conditions; and benchmark settlement rates conditions. NTIA also supports the Commission's intention to impose specific and significant sanctions on foreign-affiliated carriers that engage in anti-competitive conduct in the U.S. market.(10)
NTIA believes the Commission should clarify the application of its new rules and competitive safeguards to applicants seeking to provide international switched resale services, particularly in those cases where authorization is sought for service to markets where the applicant is affiliated with the incumbent, dominant provider of facilities and services.(11) As the Commission stated in the Foreign Carrier Entry Order: "a foreign carrier's ability to provide switched service via resale to a closed market where it possesses market power will provide that carrier with an unfair advantage in marketing global network services. Such unmeritorious advantages create a risk of anti-competitive effects in the emerging market for global network solutions."(12) While NTIA concurs with the Commission's assessment that the ability to market service on an end-to-end basis via resold U.S. circuits does not provide as great a potential for anti-competitive effects in the U.S. international services market as does facilities-based entry,(13) we believe the Commission has appropriately continued to recognize the potential for anti-competitive practices related to the provisioning of switched resale to those markets where there is an affiliation with an incumbent with market power.(14)
In addition, NTIA would expect the Commission to scrutinize much more closely applications for switched resale involving an affiliation with an entity possessing market power in the foreign market, as well as an affiliation with the underlying U.S.-facilities based carrier whose service would be resold. It is in those cases where an applicant is affiliated with facilities-based carriers at both ends of a route that there appears to be both greater incentive and ability to engage in anti-competitive behavior. In response to these cases, NTIA believes the Commission should be prepared to apply safeguards, if necessary and as appropriate, to prevent anti-competitive effects on the U.S. market and consumers.
Finally, NTIA supports the Commission's stated intention to continue to accord deference to Executive Branch agencies with regard to national security, law enforcement, foreign policy, or trade concerns.(15)
cc: Commissioner Susan Ness
Commissioner Harold Furchtgott-Roth
Commissioner Michael K. Powell
Commissioner Gloria Tristani
1. Rules and Policies on Foreign Participation in the U.S. Telecommunication Market, Order and Notice of Proposed Rulemaking, IB Docket No 97-142, FCC 97-195 (rel. June 4, 1997) [hereinafter Foreign Participation NPRM or NPRM]. Unless otherwise indicated, all subsequent citations to "Comments" or "Reply comments" refer to pleadings filed in IB Docket 97-142.
5. In this regard, we note that a number of U.S. carriers have raised questions regarding the introduction of the proposed "very high risk" standard for demonstrating anti-competitive harms. See WorldCom comments at 5-6, AT&T comments at 20-21, and Ameritech comments at 6-7.
7. See NPRM, supra note 1, ¶ 90; see generally NPRM ¶ 26, and Section III (D)(1). see also Foreign Carrier Entry Order, supra note 2, ¶¶ 5, 109, 230, & 247; Regulation of International Common Carrier Services, Report and Order, 7 FCC Rcd 7331, ¶¶ 6, 11, & 31 (1992) [hereinafter International Services].
9. See Comments of the United States Trade Representative (USTR) at 2 (noting that the U.S. and 55 other countries also committed to a specific set of pro-competitive regulatory principles) and USTR reply comments generally.
12. See Foreign Carrier Entry Order, supra note 2, ¶¶ 142-146. As a result, the Commission determined that it would apply the equivalent competitive opportunities test to those applicants seeking to provide international service via switched resale to markets in which they possess market power.
14. For example, in a 1996 Order the Commission deferred action on a portion of a GTE application involving the provision of switched resale services to the Dominican Republic and Venezuela, because the FCC was concerned that GTE might be able to use the market power of its foreign carrier affiliates "in ways that directly undermine the public interest in an effectively competitive U.S. international services market." See In the Matter of GTE Telecom Inc., Order, Authorization and Certificate, ITC-95-443, DA 96-1546 (rel. Sept. 16, 1996), ¶¶ 2, 34, & 43-45 (finding that the application to resell international switched services to the Dominican Republic and Venezuela raised issues relating to the settlements process that must be resolved before any there was any resolution that the public interest would be served by granting the license for those affiliated routes).