Federal Communications Commission Record 11 FCC Red No

FCC 95-498 Federal Communications Commission Record 11 FCC Red No. 4 I. INTRODUCTION Before the 1. In this declaratory ruling and order, we grant, subject Federal Communications Commission to certain conditions, Sprint's requests for rulings that the Washington, D.C. 20554 proposed alien ownership in Sprint of up to 28 percent is not on baJance inconsistent with Section 310(b)(4) of the Communications Act (Act), and that the proposed transac In the Matter tion is not otherwise inconsistent with the public interest. We also find that 10 percent equity investments each by SPRINT CORPORATION France Telecom (FT) and Deutsche Telekom (DT) in Sprint do not result in a transfer of control of Sprint to FT Petition for Declaratory Ruling I-S-P-95-002 and DT and thus do not require prior Commission ap proval under Section 310(d) of the Act. Concerning Section 310(b)(4) and (d) and 2. In our recently adopted Foreign Carrier Emry Order, the Public Interest Requirements of the we stated that we would evaluate, as an important part of Communications Act of 1934, as amended our overall public interest analysis under Sections 214 and 31 O(b )(4), whether effective competitive opportunities exist for U.S. entities in relevant foreign markets.1 France and DECLARATORY RULING AND ORDER Germany do not now offer effective competitive opportu nities to U.S. carriers. FT and DT are monopoly providers Adopted: December 15, 1995; Released: January 11, 1996 of basic international telecommunications facilities in these countries. Nonetheless, two other important public interest By the Commission: Commissioner Chong approving in factors weigh in favor of granting the petition: (1) the part and concurring in part; Commissioners Quello, Bar current and planned liberalization of the French and Ger rett, Ness and Chong issuing separate statements. man telecommunications mar.kets; and (2) the competitive benefits for the U.S. telecommunications markets of the FT Table of Contents and DT investment in Sprint. Paragraphs 3. A critical component of our decision is our conclu I. INTRODUCTION 1 sion that the French and German Governments are com mitted to full competition in their telecommunications II. BACKGROUND 6 markets, in which U.S. companies will be allowed to par III. COMMENTS 15 ticipate. Since our notice of proposed rulemaking (NPRM) IV. DISCUSSION on foreign carrier entry was adopted in February 1995, and A. Section 310(d) Transfer of Control 20 following di~ussions with Commission representatives, both the French and German Governments have an B. Public Interest Analysis nounced and begun to implement wide-ranging liberaliza 1. Applicability of the Foreign Carrier tion plans. Moreover, they have committed. in letters from Entry Decision 31 senior government representatives filed with the Commis sion, to open their telecommunications services and infra 2. Effective Competitive Opportunities structure markets to limited competition by July 1996 and Analysis Under Section 214 35 full competition by January l, 1998. While we do not 3. Effective Competitive Opportunities doubt the good faith of these commitments, to protect U.S. Analysis Under Section 310(b)(4) 47 interests, we find that this transaction is in the public 4. Competitive Concerns 51 interest only if Sprint and the parties' Joint Venture com ply with certain strict conditions. These conditions address 5. Countervailing Factors 61 ( 1) the potential for FT and DT to use their current de jure a. Liberalization Developments in and de facto monopoly market power to engage in France and Germany 62 anticompetitive conduct because of their financial interests in Sprint and the carriers' joint venture and (2) the pos b. Effects on Competition in U.S. Mar- sibility that the telecommunications liberalization to which kets 77 France and Germany have committed may not occur on c. Other Public Interest Factors 89 the anticipated schedule. 6. Conditions and Safeguards 96 4. First, Sprint is regulated as a dominant carrier on the V. CONCLUSION 134 U.S.-France and U.S.-Germany routes and will continue to be so regulated until we find that there is no substantial VI. ORDERING CLAUSES 138 risk of anticompetitive effects in the U.S. international services market from Sprint's affiliation with FT and DT. Second, we will not allow Sprint to operate newly acquired circuits on the U.S.-France and U.S.-Germany routes until France and Germany have liberalized two important mar kets: alternative infrastructure for already liberalized ser vices (which include most non-public voice services) and 1 Su Mar~t Emry and RtgulatWn of Follign-affiliattd Emitits, Rtport and Order, FCC 95-475 (Nov. 2R, IQQ5) (Foreign Carritr EnJry Ordtr). 1850 11 FCC Red No. 4 Federal Communications Commission Record FCC 95-498 basic switched voice resale. Third, Sprint must comply with tion, Sprint's subsidiaries provide local telephone and cel nondiscrimination and reporting requirements. Fourth, lular services. Through an affiliate, Sprint Sprint must obtain a commitment from FT to lower its Telecommunications Venture (STY), Sprint also is a sig accounting rate with U.S. carriers to the same range as the nificant partner in WirelessCo, a major licensee of U.S.-U.K. and U.S.-Germany accounting rates in the near broadband personal communications services (PCS). future and in no event later than two years from the 8. FT is the de jure monopoly service provider in France effective date of this Order. Finally, Sprint must report by of local, long distance and international public switched March 31, 1998 whether the anticipated liberalization has services, and of terrestrial infrastructure for the provision occurred. If we find it has not, we will take further action, of telecommunications services to the public. It also offers including designating for hearing the issue of whether the a range of other telecommunications products and services, public interest would no longer be served by Sprint's hold including private line circuits and cellular services. FT is ing of Section 214 facilities authorizations on the 100 percent owned by the French government, and is U.S.-France and U .S.-Germany routes. subject to regulation by the French Directorate General of 5. We note that the Department of Justice (Justice De Posts and Telecommunications (DGPT). partment) has conducted its own review of this transaction 9. Similarly, OT is the de jure monopoly service pro under its antitrust enforcement responsibilities. The con vider in Germany of local, long distance and international ditions and requirements we impose here reflect our public switched services. DT also offers, among other tele broader mandate to protect the public interest and welfare communications products and services, private line circuits of U.S. consumers. So long as the parties comply with and cellular services. It is the monopoly provider of terres these conditions and requirements in conjunctio n with this trial infrastructure for the provision of telecommunications transaction, we find that this transaction is in the public services to the public. DT is 100 percent owned by the interest. German government, and is subject to regulation by the German Federal Ministry for Posts and Telecommunica tions (BMPT). II.BACKGROUND 10. On June 14, 1995, Sprint, FT and DT announced a 6. On October 14, 1994, Sprint Corporation (Sprint) global alliance, which involves FT and DT each acquiring filed a petition for declaratory ruling regarding the pro up to 10 percent of the voting equity in Sprint. The cost of posed equity investments by FT and DT in Sprint and the these investments would be based on a complex formula proposed joint venture among the three carriers.2 First, designed to anticipate the possible divestment of Sprint's Sprint seeks a ruling that the investments by FT and OT do U.S. cellular operations, and fluctuations in Sprint's public not result in a transfer of control of Sprint and that prior stock price. Under this formula, the investment price could Commission approval thus is not required under Section · vary from approximately S3.5 to $4.2 billio~.s The global 310(d) of the Act of 1934.3 Second, Sprint requests a ruling partnership among Sprint, FT and OT also involves the that alien ownership in Sprint of up to 28 percent, as part creation of "Joint Venture Company" (Joint Venture), an of the proposed transaction. is not inconsistent with Sec alliance to provide enhanced and certain basic telecom tion 310(b)(4) of the Act. Finally, Sprint seeks a ruling that munications services to multinational corporate and busi the proposed transaction is otherwise consistent with the ness customers on a global basis. These services inctude: (l) public interest. international data, voice and video; (2) international card 7. Sprint is a publicly-traded U.S. corporation that owns based services for travellers: and (3) international transport or controls subsidiaries that hold domestic common carrier services for other carriers. microwave licenses, international facility authorizations. ca 11. On July 28, 1995, Sprint filed the final agreements of ble landing licenses. and other Commission licenses and the parties with the Commission." Pursuant to these agree aut horizations . ~ Sprint conducts its business through subsid ments", the Joint Venture will be run by a Global Partner iaries. Sprint's long distance subsidiary is the third largest ship Board. Each party will have three equal votes on the U.S. carrier of long distance services, providing voice, data Board, which will oversee two operating groups, each fo and video services over a nationwide digital. fiber optic cused on specific geographic territories or activities. In network. Its international services are provided primarily addition, the parties will create a Global Backbone Net via submarine cable systems and satellite facilities. In addi- work to carry the Joint Venture's services.

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