Attachment DA 02-463.pdf

DA 02-463.pdf

MEMORANDUM OPINION AND ORDER submitted by FCC

DA 02-463

2002-02-28

This document pretains to SCL-ASG-20011107-00023 for Assignment on a Submarine Cable Landing filing.

IBFS_SCLASG2001110700023_871693

Federal Communications Commission DA 02-463 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of ) ) British Telecommunications plc ) BT Group plc ) IB Docket No. 01-330 AT&T Corp. ) Violet License Co. L.L.C. ) ITC-T/C-20011107-00602 ) CC Docket No. 01-326 Authority to Transfer Control of Concert ) SES-T/C-20011107-02091 Global Networks USA L.L.C. and Violet ) SCL-ASG-20011107-00023 License Co. L.L.C. ) ITC-MOD-20011218-00624 ) Concert Global Networks USA L.L.C. ) BT North America Inc. ) ) Assignment of Authority under Cable Landing ) Licenses and Modification of Authority under ) Section 214 of the Communications Act for the ) Ownership and Operation of Common Carrier ) Submarine Cable Systems ) MEMORANDUM OPINION AND ORDER Adopted: February 27, 2002 Released: February 28, 2002 By the Chief, International Bureau, and Chief, Common Carrier Bureau: I. INTRODUCTION 1. In this order, we grant several applications of AT&T Corp. (AT&T), British Telecommunications plc and BT Group plc (together, BT), British Telecommunications North America Inc. (BTNA), Concert Global Networks USA L.L.C. (CGN USA), and Violet License Co. L.L.C. (Violet) (collectively, Applicants) in connection with the unwinding of the Concert global joint venture between AT&T and BT that provides international voice, data, and video communications services to customers around the world.1 1 See AT&T Corp., British Telecommunications, plc, VLT Co. L.L.C., Violet License Co. L.L.C., and TNV (Bahamas) Limited Applications For Grant of Section 214 Authority, Modification of Authorizations and Assignment of Licenses in Connection with the Proposed Joint Venture Between AT&T and British Telecommunications, plc, 14 FCC Rcd 19410 (1999) (BT/AT&T Merger Order) (granting, transferring and modifying certain licenses and authorizations in connection with the establishment of the Concert joint venture).

Federal Communications Commission DA 02-463 II. BACKGROUND 2. For business reasons, AT&T and BT have decided to terminate the Concert joint venture. As part of the proposed unwinding of the joint venture, AT&T and BT have agreed that AT&T will acquire exclusive control of CGN USA, a Concert entity that holds “blanket” international section 214 authority,2 international section 214 authority for the ownership and operation of various common carrier submarine cable systems, interests in various cable landing licenses granted pursuant to the Cable Landing License Act and Executive Order No. 10530,3 and domestic section 214 authority for interstate transmission lines,4 and of Violet, a CGN USA subsidiary with twenty-four Title III earth station licenses.5 AT&T and BT also have agreed that, upon the transfer of control to AT&T exclusively, some of the cable ownership interests now held by CGN USA will remain with CGN USA. The rest of the cable ownership interests will be temporarily transferred to CGN USA as Temporary Trustee (Trustee) and then subsequently divided between CGN USA and BTNA and transferred from Trustee to those entities.6 3. To accomplish these transactions, AT&T and BT seek authority to: (a) transfer control of CGN USA, as a holder of blanket international section 214 authority and cable landing licenses, from the joint control of AT&T and BT to AT&T;7 (b) transfer control of CGN USA, as holder of authority under section 214 for the ownership and operation of common carrier submarine cable systems, from the joint control of AT&T and BT to AT&T;8 (c) transfer control 2 See 47 U.S.C. § 214; 47 C.F.R. Part 63. See also AT&T Corp., et al., supra n. 1, which granted an international section 214 authorization to VLT Co. L.L.C. On January 27, 2000, VLT Co. L.L.C. changed its name to Concert Global Networks USA L.L.C., or CGN USA. See Letter from Lawrence J. Lafaro, General Attorney, AT&T, to Magalie Roman Salas, Secretary, Federal Communications Commission (Feb. 3, 2000). Another Concert entity, Concert Global Network Systems, Ltd., holds a “blanket” section 214 authorization, which will be relinquished as part of the unwind of Concert. See File No. ITC-MOD-20011218-00624, infra n. 8, at n. 2. 3 See An Act Relating to the Landing and Operation of Submarine Cables in the United Sates, 47 U.S.C. §§ 34-39 (Cable Landing License Act); Executive Order No. 10530, Exec. Ord. No. 10530 reprinted as amended in 3 U.S.C. § 301. 4 See 47 C.F.R. § 63.01. 5 See 47 U.S.C. Title III; 47 C.F.R. Part 25. See also File No. SES-T/C-20011107-02091, infra n. 10, at Attachment A. 6 See File No. ITC-MOD-20011218-00624, infra n. 8 at 2-3. Trustee will assign to BTNA the submarine cable capacity originally contributed to the joint venture by BT. Id. at 2. 7 See Application under Section 214 and the Cable Landing License Act for Transfer of Control of Concert Global Networks USA L.L.C. and for Assignment of Authority under Cable Landing Licenses, File Nos. ITC- T/C-20011107-00602 and SCL-ASG-20011107-0023 (filed Nov. 7, 2001). 8 See Application for Consent to Pro Forma Transfer of Control and Modification of Authority under Section 214 for Ownership and Operation of Common Carrier Submarine Cable Systems, File. No. ITC-MOD- 20011218-00624 (filed Dec. 18, 2001). 2

Federal Communications Commission DA 02-463 of CGN USA, as holder of domestic section 214 authority, from the joint control of AT&T and BT to AT&T;9 and (d) transfer control of Violet from the joint control of AT&T and BT to AT&T.10 Applicants also seek authority to: (a) transfer or assign interests in certain cable landing licenses held by CGN USA to Trustee and subsequently in part back to CGN USA and in remaining part to BTNA;11 and (b) modify the section 214 authority governing the ownership and operation of the common carrier submarine cable systems in which CGN USA has ownership interests to recognize the transfer of these ownership interests first to Trustee and subsequently in part back to CGN USA and in remaining part to BTNA.12 For convenience, we have consolidated the five applications into one docket, IB Docket No. 01-330. 4. The International Bureau placed the five applications on public notice, with comments and reply comments due January 3 and January 17, 2002, respectively.13 No parties filed comments. Pursuant to section 1.767(b) of the Commission’s rules,14 the Cable Landing License Act, and Executive Order No. 10530, on December 17, 2001 the International Bureau transmitted File No. SCL-ASG-20011107-00023, an application to transfer or assign interests in submarine cable landing licenses, to the U.S. Department of State, U.S. Department of Commerce/National Telecommunications and Information Administration (NTIA), and U.S. Department of Defense (DOD) for Executive Branch review.15 The International Bureau’s letter began a 30-day review period that concluded with prior approval from the Department of State, 9 See Application for Authority Pursuant to Section 214 to Transfer Corporate Control of Concert Global Networks USA L.L.C. from British Telecommunications plc and AT&T Corp. Jointly to AT&T Exclusively with Respect to Domestic Service, CC Docket No. 01-326 (filed Nov. 7, 2001). 10 See Violet License Co., L.L.C., FCC Form 312, Application for Transfer of Control, File No. SES-T/C- 20011107-02091 (filed Nov. 7, 2001). 11 See File Nos. ITC-T/C-20011107-00602 and SCL-ASG-20011107-0023, supra n. 7. 12 See File No. ITC-MOD-20011218-00624, supra n. 8. The initial transfer of such ownership interests to Trustee will permit CGN USA and BTNA to utilize their respective capacity on the submarine cables until the ultimate assignment of that capacity is implemented pursuant to the governing construction and maintenance agreements for each of the affected cables. Id. at 4; see also File Nos. ITC-T/C-20011107-00602 and SCL-ASG- 20011107-00023, supra n. 7, at 3. 13 See British Telecommunications plc, BT Group plc, and AT&T Corp. Seek Authority to Transfer Control of Concert Global Networks USA L.L.C. and of Violet License Co. L.L.C., Authority to Transfer Control of Section 214 Authority Held by Concert Global Networks USA L.L.C., and Assignment of Authority under Cable Landing Licenses, Public Notice, IB Docket No. 01-330, DA 01-2820 (Dec. 6, 2001). See also Non Streamlined International Applications Accepted For Filing, Report No. TEL-00476NS (Dec. 19, 2001). 14 47 C.F.R. § 1.767(b). 15 See Letter from George Li, Deputy Chief, Telecommunications Division, International Bureau, to Steven Lett, Deputy U.S. Coordinator, Office of International Communications and Information Policy, U.S. Department of State (Dec. 17, 2001). 3

Federal Communications Commission DA 02-463 after coordination with NTIA and DOD, for the grant of File No. SCL-ASG-20011107-00023.16 III. DISCUSSION 5. The applications before us seek Commission authority to effectuate AT&T’s and BT’s decision to unwind their global joint venture. We find that grant of these applications is in the public interest, as discussed below. 6. Transfer of Control of CGN USA and Violet. AT&T and BT seek authority to transfer control of CGN USA and Violet from AT&T and BT jointly to AT&T, including transfer of CGN USA’s international section 214 authorization and domestic section 214 authority for interstate transmission lines, and of Violet’s Title III earth station licenses. Specifically, Applicants advise that BT will transfer its 50 percent interest in CGN USA to VLT US HoldCo L.L.C. (VLT), a wholly-owned indirect subsidiary of AT&T that currently holds AT&T’s 50 percent interest in CGN USA. Following this transaction VLT will own 100 percent of the stock of CGN USA, itself the parent company of Violet, and CGN USA and Violet will become wholly-owned indirect subsidiaries of AT&T.17 7. With respect to the transfer of control of the domestic section 214 authority held by CGN USA as a joint venture entity, to CGN USA as a wholly-owned subsidiary of AT&T, Applicants seek the Commission’s prior consent before transferring interstate transmission lines. Applicants state that, in furtherance of the joint venture’s purpose of providing various international telecommunications services to multinational corporations and other carriers, CGN USA also provides nationwide interstate, domestic telecommunications services.18 Applicants confirm that they will make any filings necessary to discontinue the offering of domestic and international telecommunications services by the joint venture.19 8. We agree with Applicants that the unwinding of the joint venture raises no competition-related issues; rather, the former joint venture partners once again will compete to 16 See Letter from Alan P. Larson, Under Secretary of State for Economic, Business, and Agricultural Affairs, U.S. Department of State, to Michael Powell, Chairman, Federal Communications Commission (Dec. 3, 2001) (providing prior approval for the grant of submarine cable landing license applications provided that the Commission has notified the State Department in writing of each such application and no objections are raised by the State Department within 30 days after such notification). See also www.state.gov/r/pa/prs/ps/2001/index.cfm?docid=6951 for a copy of the State Department’s press release. 17 See File Nos. ITC-T/C-20011107-00602 and SCL-ASG-20011107-00023, supra n. 7, at n. 3; ITC-MOD- 20011218-00624, supra n. 8, at n. 2; SES-T/C-20011107-02091, supra n. 10, at Public Interest Statement at 1; see also CC Docket No. 01-326, supra n. 9, at 2. 18 See CC Docket No. 01-326, supra n. 9, at 2. 19 See CC Docket No. 01-326, supra n. 9, at 2. See also 47 C.F.R. § 63.01; Common Carrier Bureau Announces Procedures for Applicants Requiring Section 214 Authorization for Acquisitions of Corporate Control, Public Notice, 16 FCC Rcd 13862 (2001). 4

Federal Communications Commission DA 02-463 serve multinational corporations and other customers.20 Further, with respect to the transfer of control of CGN USA and Violet to AT&T, AT&T, CGN USA, and Violet currently are licensees and authorization holders and, as Applicants state,21 no question has been raised as to the qualifications of these entities to hold Commission licenses and authorizations. Therefore, we find no public interest concerns implicated by grant of the transfer of control applications. Additionally, we find that, upon the transfer of control of CGN USA to AT&T, CGN USA will warrant reclassification as a nondominant carrier on the U.S.-U.K. route.22 The transfer of control of CGN USA to AT&T raises no other foreign carrier affiliation issues. AT&T lists its foreign carrier affiliations and certifies that all of its foreign carrier affiliates lack market power and cannot adversely affect competition in the U.S. market.23 9. Assignment or Transfer of Authority under Cable Landing Licenses and Modification of Authority under Section 214 for the Ownership and Operation of Common Carrier Submarine Cable Systems. In unwinding the Concert venture, the parties have agreed to return the submarine capacity currently held by CGN USA to the original owners.24 The submarine cable interests listed in Attachment A to this order will continue to be held by CGN USA and control of these cable interests will vest exclusively with AT&T upon consummation of the transfer of control. Control of the interests listed in Attachment B will be temporarily transferred to Trustee for the benefit of AT&T and BTNA.25 Subsequently these interests will be divided between CGN USA and BTNA, as specified in Attachment B, and control of these interests will be transferred from Trustee to CGN USA and BTNA pursuant to each cable system’s governing construction and maintenance agreement.26 All cables listed in Attachments A and B, with the exception of the China-U.S., Guam-Philippines, Japan-U.S., St. Thomas-St. Croix, and TAT-14 cables,27 are licensed as common carrier cables under section 214 of the 20 See File Nos. ITC-T/C-20011107-00602 and SCL-ASG-20011107-00023, supra n. 7, at 4; ITC-MOD- 20011218-00624, supra n. 8, at 6; SES-T/C-20011107-02091, supra n. 10, at Public Interest Statement at 2-3; see also CC Docket No. 01-326, supra n. 9, at 3. 21 See, e.g., File No. ITC-MOD-20011218-00624, supra n. 8, at 6. 22 In the BT/AT&T Merger Order, the Commission classified CGN USA (formerly VLT Co. L.L.C.) as a dominant carrier on the U.S.-U.K. route, pursuant to § 63.10 of the rules. See BT/AT&T Merger Order, supra n. 1, at paras. 84-86, 107. 23 See File No. ITC-MOD-20011218-00624, supra n. 8, at 11. 24 See File Nos. ITC-T/C-20011107-00602 and SCL-ASG-20011107-00023, supra n. 7, at 2. 25 See supra n. 12. 26 See File Nos. ITC-T/C-20011107-00602 and SCL-ASG-20011107-00023, supra n. 7, at 2-3; ITC-MOD- 20011218-00624, supra n. 8, at 4. 27 See International Bureau Report: 2000 Section 43.82 Circuit Status Data, Table 7 at 34-35 (June 2001), available at www.fcc.gov/ib/td/pf/csmanual.html; see also AT&T Telephone and Telegraph Company et al., Application for Amended Authorization under Section 214 of the Communications Act of 1934, as Amended, to Construct and Operate High Capacity Digital Submarine Cable System Between and Among the Island of Guam the (continued….) 5

Federal Communications Commission DA 02-463 Communications Act. Applicants state that they do not seek to change the regulatory classification of any of the cable systems.28 Applicants also state that they will notify the Commission in writing within 30 days of the dissolution of each cable-trust and transfer of ownership interests from Trustee to CGN USA and BTNA.29 10. There is no question as to AT&T’s and CGN USA’s fitness to hold the cable landing license interests or the associated interests in section 214 authorizations following dissolution of the joint venture. Virtually all of the cable landing license interests that, pursuant to Attachments A and B, will be assigned to CGN USA as owned by AT&T, originally were owned by AT&T and then assigned to the joint venture. 30 11. We also find no question as to BTNA’s qualifications to acquire the cable landing license interests and associated section 214 authority for the submarine cable segments delineated in Attachment B. Although BTNA previously has not been authorized by the Commission to hold interests in cable landing licenses, or in associated section 214 authorizations for common carrier submarine cables, it now seeks such authority for certain cable system interests delineated in Attachment B. BTNA, a wholly-owned indirect subsidiary of BT,31 is authorized to own and operate satellite circuits and to provide international facilities- based and resold basic telecommunications services pursuant to various section 214 authorizations.32 Applicants state that BTNA is a leading provider of international services and has a record of complying with applicable Commission rules and regulations.33 Moreover, BTNA certifies that its foreign affiliates lack market power in the cables’ destination markets except in the United Kingdom where BTNA is affiliated with its parent BT.34 BTNA agrees to be classified, under section 63.10 of the Commission’s rules, as a dominant carrier on the U.S.- U.K. route.35 Specifically, this dominant carrier classification applies to BTNA’s interests in the U.S.-U.K. segments of TAT-9, TAT-11, and TAT-12/13, as delineated in Attachment B. The other cable in which BTNA is assigned an interest on the U.S.-U.K. route, TAT-14, is a non- (Continued from previous page) Island of Luzon, Philippines, and Taiwan, File No. ITC-88-094, 3 FCC Rcd 5091 (1988) (G-P-T Cable); AT&T Submarine Systems, Inc., File No. SCL-94-006, 11 FCC Rcd 14885 (1996) (St. Thomas-St. Croix Cable). 28 See File Nos. ITC-T/C-20011107-00602 and SCL-ASG-20011107-00023, supra n. 7, at 7. 29 See File Nos. ITC-T/C-20011107-00602 and SCL-ASG-20011107-00023, supra n. 7, at 3; ITC-MOD- 20011218-00624, supra n. 8, at 5. 30 See File Nos. ITC-T/C-20011107-00602 and SCL-ASG-20011107-00023, supra n. 7, at 3. 31 See File Nos. ITC-T/C-20011107-0002 and SCL-ASG-20011107-00023, supra n. 7, at 8-9. 32 See File No. ITC-MOD-20011218-00624, supra n. 8, at 8-9. 33 See File Nos. ITC-T/C-20011107-00602 and SCL-ASG-20011107-00023, supra n. 7, at 3; ITC-MOD- 20011218-00624, supra n. 8, at 6. 34 See File No. ITC-MOD-20011218-00624, supra n. 8, at 20. 35 See File No. ITC-MOD-20011218-00624, supra n. 8, at 21. 6

Federal Communications Commission DA 02-463 common carrier cable.36 12. We find that because BTNA is affiliated with its parent BT, a market-power carrier in the United Kingdom, a World Trade Organization (WTO) Member country,37 the public interest requires that we condition the assignment to BTNA of the interests in the four submarine cable landing licenses for the U.S.-U.K. route on two reporting requirements adopted by the Commission in the Submarine Cable Report and Order.38 These conditions require BTNA to file quarterly provisioning and maintenance and quarterly circuit status reports for those U.S.-U.K. route cable landing license interests delineated in Attachment B, as set out in the ordering clauses below. These competitive safeguard conditions are designed to detect and deter any discrimination by BTNA’s foreign affiliate BT, as a market-power carrier in the U.K. destination market, in any of the submarine cable foreign input markets that could result in harm to competition in the U.S. market.39 IV. CONCLUSION 13. We grant the several applications in this docket and authorize: (1) the transfer of control of CGN USA, as a holder of blanket international section 214 authority, cable landing licenses, section 214 authority to own and operate common carrier submarine cables, and domestic section 214 authority, from the joint control of AT&T and BT to AT&T exclusively; (2) the transfer of control of Violet, a Title III earth station licensee, from the joint control of AT&T and BT to AT&T exclusively; and (3) the transfer or assignment of the cable landing licenses, and the modification of the associated section 214 authority governing ownership and operation of common carrier submarine cable systems held by CGN USA, to CGN USA as Temporary Trustee, and subsequently in part back to CGN USA and in remaining part to BTNA, as set out in Attachment B of this order and as conditioned below. 36 BTNA’s use of its TAT-14 circuits for the provision of basic telecommunications services on the U.S.- U.K. route is subject to dominant carrier regulation pursuant to BTNA’s specific section 214 authority to serve that route. See 47 C.F.R. § 63.10. 37 See File No. ITC-MOD-20011218-00624, supra n. 8, at 19-20. 38 See Review of Commission Consideration of Applications under the Cable Landing License Act, Report and Order, IB Docket No. 00-106, FCC01-332 (rel. Dec. 14, 2001) (Submarine Cable Report and Order). See also Telefonica SAM USA, Inc. and Telefonica SAM de Puerto Rico, Inc, Application for a License to Land and Operate in the United States a Private Submarine Fiber Optic Cable Network, Cable Landing License, 15 FCC Rcd 14915 (IB/TD 2000); Australia-Japan Cable (Guam) Limited, Application for License to Land and Operate in the United States a Private Submarine Fiber Optic Cable Extending Between Australia, Guam, and Japan, Cable Landing License, 15 FCC Rcd 24057 (IB/TD 2000). Telefonica SAM and AJC imposed additional conditions that we do not impose here. 39 See, e.g., Submarine Cable Report and Order, supra n. 36, at para. 25; see also Rules and Policies on Foreign Participation in the U.S. Telecommunications Market, Market Entry and Regulation of Foreign-Affiliated Entities, IB Docket Nos. 97-142 and 95-22, Report and Order and Order on Reconsideration, 12 FCC Rcd 23891 (1997) (Foreign Participation Order). 7

Federal Communications Commission DA 02-463 V. ORDERING CLAUSES 14. Consistent with the foregoing and pursuant to the Cable Landing License Act, Executive Order No. 10530, and section 214 and Title III of the Communications Act of 1934, as amended, IT IS ORDERED THAT the five applications in IB Docket No. 01-330, File Nos. ITC-T/C-20011107-00602, SCL-ASG-20011107-00023, ITC-MOD-20011218-00624, and SES- T/C-20011107-02091 and CC Docket No. 01-326, ARE GRANTED. These grants are subject to all rules and regulations of the Commission; any treaties or conventions relating to communications to which the United States is or may hereafter become a party; any action by the Commission or the Congress of the United States rescinding, changing, modifying, or amending any rights accruing to any person under the cable landing licenses; the conditions of the cable landing licenses and section 214 authorizations; and the following conditions: 15. IT IS FURTHER ORDERED that BTNA shall be regulated as a dominant carrier, pursuant to section 214 of the Communications Act, 47 U.S.C. § 214, and section 63.10 of the Commission’s rules, 47 C.F.R. § 63.10, on the U.S.-U.K. route, and that BTNA shall comply with the dominant carrier provisions of Part 63 of the Commission’s rules with respect to its interests in common carrier submarine cables on the U.S.-U.K. route. 16. IT IS FURTHER ORDERED that, on the U.S.-U.K. route of the TAT-14 cable, BTNA shall file quarterly provisioning and maintenance reports in accordance with section 63.10(c)(4) of the Commission’s rules, and quarterly circuit status reports in the format set out by the section 43.82 annual circuit status manual and in accordance with section 63.10(c)(5) of the Communication’s rules, within ninety days from the end of each calendar quarter. 17. IT IS FURTHER ORDERED that AT&T, CGN USA and BTNA shall notify the Commission in writing within 30 days after transferring each of the ownership interests delineated in Attachment B from CGN USA as Temporary Trustee to CGN USA or BTNA, and contemporaneously shall transmit a copy of each notification to the Chief, International Bureau. 18. This order is issued pursuant to authority delegated by sections 0.261 and 0.331 of the Commission’s rules, 47 C.F.R. §§ 0.261, 0.331, and is effective upon release. Petitions for reconsideration under section 1.106 or applications for review under section 1.115 of the Commission’s rules, 47 C.F.R. §§ 1.106, 1.115, may be filed within thirty days of the date of public notice of this order. FEDERAL COMMUNICATIONS COMMISSION Donald Abelson Chief, International Bureau Dorothy Attwood Chief, Common Carrier Bureau 8

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Document Created: 2002-03-15 10:53:02
Document Modified: 2002-03-15 10:53:02
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