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                           Before the
                Federal Communications Commission
                     Washington, D.C. 20554


In the Matters of                )
                                )
AT&T Corp.,                      )
                            Com- )    EB-01-MD-001
plainant,                        )
           v.                    )
                                )
Business Telecom, Inc.,          )
                             De- )
fendant.                         )
                                )
                                )
Sprint  Communications  Company, )    EB-01-MD-002
L.P.,                            )
                            Com- )
plainant,                        )
                                )
          v.

Business Telecom, Inc.,
                             De-
fendant.




                  MEMORANDUM OPINION AND ORDER


   Adopted:  May 25, 2001               Released:  May 30, 2001


By the Commission:   Commissioner Furchtgott-Roth dissenting  and 
issuing a separate statement.

                         TABLE OF CONTENTS              Paragraph

I.   INTRODUCTION                                          1

II.  BACKGROUND                                            1

     A.   The Parties                                      2

     B.   The Parties' Business Relationship               3

     C.   The Procedural History                           6

III. DISCUSSION                                            9

     A.   The Commission  Has  Authority to  Adjudicate  the 
          Lawfulness of BTI's Past and Present Access Rates.
          9

     B.   BTI's Access  Rates  are Unjust  and  Unreasonable 
          Under Section 201(b).                           17

          1.   Marketplace Data,  Rather than  BTI's  Costs, 
               Provide the Principal Tools for Assessing the 
               Reasonableness of BTI's Access Rates.      17

          2.   Rates for Services  Using Comparable  Network 
               Functions are Appropriate Marketplace Data on 
               Which to Assess  the Reasonableness of  BTI's 
               Access Rates.                              23

               a.   BTI's Access Rate Greatly Exceeds ILECs' 
                    Access Rates.                         31

               b.   BTI's Access  Rate  Exceeds  the  Access 
                    Rates of Many Other CLECs.            35

               c.   The Differential  Between  BTI's  Access 
                    Rate and Reciprocal Compensation Rate is 
                    Enormous,   and    Far    Larger    than 
                    BellSouth's Differential.             37

          3.   BTI's Access  Revenue-Sharing  Practices  Are 
               Also Appropriate Marketplace Data on Which to 
               Assess the  Reasonableness  of  BTI's  Access 
               Rates.                                     42

          4.   The Foregoing Market Data Amply Indicate that 
               BTI's Access Rates  Were and  Are Unjust  and 
               Unreasonable.                              43

          5.   BTI's ``Cost Showing''  Does Not Justify  Its 
               Access Rates.                              45

          6.   AT&T Is Not  Estopped From Challenging  BTI's 
               Access Rates.                              51

     C.   The Lawful Per-Minute Access Rate for Purposes  of 
          Calculating Damages Ranges From  3.8 Cents to  2.7 
          Cents During the Relevant Period.               53

     D.   AT&T Is Not  Entitled to  Additional Relief  Under 
          Section 254(k) of the Act.                      60

IV.  Ordering Clauses                                     62

                        I.   INTRODUCTION

In this Order, we grant in part and deny in part complaints filed 
by AT&T Corp. (``AT&T'') and Sprint Communications Company, L.P. 
(``Sprint'') (collectively ``Complainants'') against Business 
Telecom, Inc. (``BTI'')1 pursuant to section 208 of the 
Communications Act of 1934, as amended (``Act'' or 
``Communications Act'').2  In particular, we grant Complainants' 
claims that BTI's access rates were and are unjust and 
unreasonable under section 201(b) of the Act.3  In conjunction 
with granting these claims, we define a just and reasonable rate 
on which Complainants' damages should be based.  Further, we deny 
AT&T's claim for relief arising from BTI's alleged cross-
subsidization, assertedly in violation of section 254(k) of the 
Act.4

                         II.  BACKGROUND

     II.A.     The Parties

AT&T and Sprint are, inter alia, non-dominant interexchange 
carriers (``IXCs''). 5  BTI is a competitive local exchange 
carrier (``CLEC'') that provides facilities-based interstate and 
intrastate exchange access services, telephone toll services, and 
local exchange services in urban areas of the southeastern United 
States, including North and South Carolina, Georgia, and 
Florida.6  BTI principally serves small business and residential 
users in the following states and cities:  South Carolina - 
Columbia, Greenville, and Charleston; North Carolina - Raleigh, 
Greensboro, and Charlotte; Florida - Jacksonville, Tampa, and 
Orlando; Tennessee - Nashville and Knoxville; and Georgia - 
Atlanta.7  As of September 2000, BTI served approximately 125,000 
access lines in at least 12 urban areas.8   In all of BTI's 
service areas, the incumbent local exchange carrier (``ILEC'') 
was either BellSouth Telecommunications, Inc. (``BellSouth'') or 
GTE Telephone Operating Companies (``GTE'').9

     II.B.     The Parties' Business Relationship

The matters at issue relate to BTI's provision of switched 
interstate access services to Complainants.10  Access service 
generally consists of ``originating'' access, by which a call is 
transported from a caller's premises over a local exchange 
carrier's network to the IXC's network, and ``terminating'' 
access, by which a call is transported from the IXC's network 
over a local exchange carrier's network to the called party's 
premises. 11 

BTI's rates for its switched interstate access services were set 
forth in its FCC Tariff No. 4, which BTI initially filed with the 
Commission in July 1998.12  At all relevant times, BTI's tariffed 
switched access rate per minute of use was 7.1823 cents per 
minute for both originating and terminating access.13  BTI did 
not base its access rates on any analysis of its costs of 
providing access service.14  Instead, BTI developed its access 
rates by simply reviewing the rates that other CLECs were 
charging in 1998.15

Beginning in 1998, BTI invoiced Complainants for access services 
it provided them.16  Complainants have only partially paid the 
invoiced amounts.17  For example, Sprint has paid BTI at a level 
approximating the interstate access rates of the ILECs operating 
in BTI's service areas, which rates are substantially below 
BTI's.18  Complainants assert that they refused to pay the 
invoiced amounts because, in their view, (1) BTI's access rates 
were unreasonably high; (2) Complainants never actually 
``ordered'' BTI's access services; and, (3) in any event, 
Complainants properly requested discontinuance of any ``ordered'' 
access services.19  

     II.C.     The Procedural History

These complaint proceedings arise from primary jurisdiction 
referral orders in Advamtel, LLC d/b/a Plan B Communications, et 
al. v. Sprint Communications Co., and Advamtel, LLC d/b/a Plan B 
Communications, et al. v. AT&T Corp. (collectively ``Advamtel 
Litigation'').20  BTI and other CLECs filed suit in the Advamtel 
Litigation against AT&T and Sprint for nonpayment of the CLECs' 
interstate access charges.21  In response, AT&T and Sprint filed 
several counterclaims against BTI and other CLECs, including 
counterclaims challenging the lawfulness of the CLECs' access 
rates under section 201(b) of the Act.22  AT&T also alleged that 
BTI and other CLECs used excess access revenues to cross-
subsidize their long distance and local exchange services, in 
violation of section 254(k) of the Act.23  

In July 2000, the federal district court granted Complainants' 
motions to refer certain of their counterclaims to the Commission 
pursuant to the doctrine of primary jurisdiction.24  
Specifically, the court referred Complainants' claims that BTI 
and other CLECs charged unreasonably high access rates, in 
violation of section 201(b) of the Act.25  The court also 
referred AT&T's claim that BTI and other CLECs engaged in cross-
subsidization prohibited by section 254(k) of the Act. 26

To effectuate the court's referrals, Complainants filed these 
formal complaints against BTI with the Commission on January 16, 
2001, and the Enforcement Bureau promptly consolidated them.27  
Complainants contend that BTI's access rates are unjustly and 
unreasonably high under section 201(b) of the Act.28  AT&T also 
contends that BTI cross-subsidized its retail local and long 
distance services with revenues from its access services, in 
violation of section 254(k) of the Act.29

                      III.      DISCUSSION

     III.A.    The Commission Has Authority to Adjudicate the 
          Lawfulness of BTI's Past and Present Access Rates.

BTI makes several arguments challenging the Commission's 
authority to review the rates at issue.30  BTI first alleges that 
its access rates are conclusively presumed to be lawful because 
the rates are contained in a validly filed tariff.31  To support 
this argument, BTI correctly observes that we must presume 
tariffed rates to be reasonable when the tariff has been validly 
filed.32  This presumption of reasonableness is rebuttable, 
however, in the context of a section 208 complaint alleging a 
violation of section 201(b).33   Consequently, even though 
Complainants do not challenge the validity of the filing of BTI's 
tariff, we have authority to conclude in this proceeding that 
BTI's tariffed access rates were and are unjust and unreasonable 
in violation of section 201(b).34  

According to BTI, any specification of a just and reasonable rate 
for past periods in order to calculate damages would constitute 
prohibited retroactive ratemaking.35  As support for its 
position, BTI points out that section 205 only permits the 
Commission to impose prospective rate changes.36  BTI's 
assertions disregard the fact that our authority to award damages 
stems from sections 207, 208, and 209 of the Act, and not section 
205.37  The adjudicatory scheme established by Congress 
specifically allows for the recovery of damages in instances such 
as this.  Section 208(b) expressly refers to complaints involving 
``the lawfulness of a charge,''38 and section 207 permits 
complainants to recover damages pursuant to section 208.39  
Moreover, section 209 states that, ``[i]f after hearing on a 
complaint, the Commission shall determine that any party 
complainant is entitled to an award of damages . . ., the 
Commission shall make an order directing the carrier to pay to 
the complainant the sum to which he is entitled . . . .''40

The Commission has repeatedly explained its statutory authority 
to award damages in section 208 complaint cases concerning the 
lawfulness of tariffed charges.  For example, the Commission has 
previously stated that, if  ``a tariff filing is subsequently 
determined to be unlawful in a complaint proceeding commenced 
under section 208 of the Act, customers who obtained service 
under the tariff prior to that determination may be entitled to 
damages.''41  The Commission also has held ``that a proper 
measure of the damages suffered by a customer as a consequence of 
a carrier's unjust and unreasonable rate is the difference 
between the unlawful rate the customer paid and a just and 
reasonable rate.''42  Consistent with this authority to award 
damages arising from unlawful rates, the Commission has stated on 
several occasions that, in lieu of directly regulating CLEC 
access rates, the Commission would, instead, rely on complaints 
filed under section 208 seeking to enforce the ``just and 
reasonable'' standard of section 201(b) to constrain and 
discipline CLEC access rates.43  

Federal court decisions confirm the Commission's statutory 
authority to award damages in section 208 complaint cases 
concerning the lawfulness of tariffed charges.  In upholding a 
Commission order invalidating a tariff, the D.C. Circuit recently 
rejected as ``clearly wrong'' the view that ``relief under 
Section 208 of the Act cannot be retroactive in effect.''44  In 
doing so, the D.C. Circuit stated that, ``insofar as Section 208 
authorizes the award of damages or other remedies, it is always 
`retroactive' in its application in that it will always be 
changing the economic consequences of a carrier's prior 
conduct.''45  Thus, we conclude that we have the authority, in 
the context of this complaint proceeding, to establish the 
reasonable rates that BTI should have charged during the period 
at issue to enable the assessment of damages.46   

BTI also argues that the Commission cannot order any prospective 
rate changes in resolving this complaint, because the 
Commission's formal complaint procedures did not afford BTI a 
``full opportunity for a hearing'' within the meaning of section 
205.47  Although we do not prescribe future rates here, we take 
this opportunity to make clear that BTI's argument is manifestly 
incorrect.  Section 205(a) of the Act states that ``[w]henever, 
after full opportunity for hearing, upon a complaint . . . the 
Commission shall be of opinion that any charge . . . is or will 
be in violation of any of the provisions of this chapter, the 
Commission is authorized and empowered to determine and prescribe 
what will be the just and reasonable charge . . . .''48  Section 
205 thus expressly authorizes the Commission to prescribe rates 
in the context of a complaint proceeding under section 208.  The 
only question is whether the formal complaint procedures employed 
in this proceeding met the ``hearing'' requirement contained in 
section 205.  

BTI acknowledges that ``the language `after full opportunity for 
hearing' contained in Section 205 does not trigger the detailed 
oral hearing requirements of Sections 556 and 557 of the 
Administrative Procedure Act [`APA'].''49  BTI asserts, 
nonetheless, that the formal complaint procedures employed here 
fall short of a ``hearing,'' because they did not amount to 
notice and comment type rulemaking.50  Again, we disagree.

The ``hearing'' requirement in section 205 means that a defendant 
in a complaint proceeding must have fair notice of, and 
reasonable opportunity to comment upon, the issues raised 
concerning the appropriate level of its future rates.51  BTI was 
amply afforded such notice and comment opportunity here.  The 
parties filed substantial pleadings and briefs, conducted 
extensive discovery - including interrogatories, document 
requests, and depositions - participated in several in-person and 
telephonic conferences with Commission staff, and submitted 
dozens of documentary exhibits.  Thus, we reject BTI's argument 
that the procedures employed here do not amount to a ``hearing.'' 

In any event, even if some type of notice and comment rulemaking 
procedures were required by section 205, we find that the 
procedures employed here more than adequately met those 
requirements.  Section 553 of the APA governs rulemaking 
procedures, and it permits the Commission to forego publication 
of a proposed rule in the Federal Register if ``persons subject 
thereto are named and either personally served or otherwise have 
actual notice thereof in accordance with law.''52  Section 553 
further requires that persons subject to the rule be given an 
opportunity to submit ``written data, views or arguments.''53  
Here BTI, the sole defendant in this complaint proceeding, had 
actual notice of this proceeding and a full opportunity to submit 
data, views, and arguments.  We thus have ample authority under 
sections 205 and 208 of the Act to prescribe a tariffed access 
rate that BTI must charge in the future.

     III.B.    BTI's Access Rates are Unjust and Unreasonable 
          Under Section 201(b).

          III.B.1.  Marketplace Data, Rather than BTI's Costs, 
               Provide the Principal Tools for Assessing the 
               Reasonableness of BTI's Access Rates.

The parties agree that we should assess the reasonableness of 
BTI's access rates by evaluating the market for access services, 
rather than by ascertaining BTI's costs of providing access 
services. 54   The parties are correct, for at least two reasons.  

First, the Commission has interpreted the Telecommunications Act 
of 199655 as directing the Commission to refrain - whenever 
possible - from applying to CLECs the legacy, cost-based 
regulations long applicable to the access services of ILECs.56  
For example, the Commission has found that, in light of the 1996 
Act, ``[c]ompetitive markets are superior mechanisms for 
protecting consumers'' by ensuring that services are provided and 
priced in the most efficient possible manner.57  The Commission 
also has determined that reliance on competitive market forces 
``minimize[s] the potential that regulation will create and 
maintain distortions in the investment decisions of competitors 
as they enter local communications markets.''58  As a result, the 
Commission has concluded that the policies and purposes of the 
1996 Act demand a ``market-based approach'' to the regulation of 
access charges.59  Consequently, the Commission has chosen not to 
apply the historical ILEC rules and regulations to CLECs. 60  
Examining BTI's costs as the touchstone of the reasonableness of 
BTI's rates would contradict this trend towards reliance on 
market factors to dictate appropriate rates.

Second, given the Commission's decision not to apply to CLECs the 
accounting and separations rules applicable to ILECs, there would 
be substantial ``legal and practical difficulties involved with 
comparing CLEC rates to any objective [i.e., cost-based] standard 
of reasonableness.''61  Moreover, precedent exists for examining 
the reasonableness of rates by means other than reviewing the 
costs of an individual CLEC.62

Although the parties correctly agree that we should examine 
market factors rather than BTI's costs in determining whether 
BTI's access rates are just and reasonable, they differ as to the 
scope and nature of such examination.  Complainants argue that, 
because of market failures in the access services market, the 
Commission should examine certain market statistics - such as 
ILEC access rates, other CLECs' access rates, BTI's reciprocal 
compensation rates, and BTI's local and long distance rates - to 
ascertain what BTI would have charged had the access market been 
truly competitive.63  BTI contends, on the other hand, that 
because the Commission has previously determined that CLECs lack 
market power, the Commission must essentially assume that BTI was 
free to charge whatever the market would bear, regardless of 
whether BTI's access rates exceeded the market indicia proffered 
by Complainants.64 

We agree with Complainants that we should examine certain market 
data to determine the reasonableness of BTI's access rates.  
Despite previous indications that market forces might constrain 
CLEC access rates, the Commission recently found that, in 
actuality, the market for access services is not structured in a 
manner that allows competition to discipline rates. 65  
Specifically, the Commission found that the originating and 
terminating access markets consist of a series of bottleneck 
monopolies over access to each individual end user.66  Once an 
end user decides to take service from a particular LEC, that LEC 
controls an essential component of the wireline system that 
provides interexchange calls, and it becomes a bottleneck for 
IXCs wishing to complete calls to, or carry calls from, that end 
user.67  Thus, with respect to access to their own end users, 
CLECs have just as much market power as ILECs.68  In addition, 
the Commission determined that ``the combination of the market's 
failure to constrain CLEC access rates, the Commission's 
geographic rate averaging rules for IXCs, the absence of 
effective limits on CLEC rates and the tariff system created an 
arbitrage opportunity for CLECs to charge unreasonable access 
rates.''69  

Given these competitive failures in the CLEC access market, we 
must decline BTI's invitation to take a laissez faire approach to 
its access rates.  Because the CLEC access market is not truly 
competitive, we cannot simply assume that ``whatever the market 
will bear'' translates into a just and reasonable rate.70  
Instead, to ``correct'' retroactively the market failures 
described above, we must examine market factors to try to 
ascertain whether BTI's rates were just and reasonable.  If our 
examination of these factors reveals that BTI charged just and 
reasonable access rates, despite its market power, then we must 
deny Complainants' complaints.  If our examination demonstrates 
otherwise, then we must invalidate those access rates and 
determine what reasonable access rates would have been for 
purposes of calculating damages.

          III.B.2.  Rates for Services Using Comparable Network 
               Functions are Appropriate Marketplace Data on 
               Which to Assess the Reasonableness of BTI's Access 
               Rates.

Complainants argue that comparing BTI's access rates to the rates 
charged by BTI and others for services using comparable network 
functions is an appropriate mechanism for determining whether 
BTI's access rates were and are just and reasonable pursuant to 
section 201(b).71   We agree.  The Commission has previously 
recognized that services offered under substantially similar 
circumstances using similar facilities lead to the expectation of 
similar charges.72  In addition, the Commission has frequently 
used rate comparisons, benchmarks, and non-cost factors to 
evaluate the justness and reasonableness of rates and to 
prescribe just and reasonable rates for regulated entities.73  
Moreover, examining rates for services using comparable network 
functions is consistent with the Commission's CLEC Access Charge 
Order. 74  In that order, the Commission compared existing CLEC 
access rates with what the rates likely would have been in a 
properly functioning competitive market, and prospectively 
limited CLEC's tariffed access rates in an effort to mimic the 
actions of a competitive marketplace.75

We reject BTI's assertion that prior Commission orders or court 
decisions prohibit such comparisons.76  Our approach fully 
comports with the Commission's prior decisions to rely upon 
market forces and complaint proceedings to constrain and 
discipline CLEC access rates.77  In particular, in choosing not 
to regulate CLEC access rates, the Commission has previously 
concluded that, if it needed to examine the reasonableness of a 
CLEC's access rates in an individual complaint case, it could do 
so by taking into account all relevant factors, including 
relationships to other rates.78  Similarly, the Commission has 
acknowledged that an upward disparity between a CLEC's access 
rates and those charged by the ILEC serving the same market may 
suggest that the CLEC's access rates are excessive. 79

Moreover, the Commission has broad discretion in selecting 
methods to evaluate the reasonableness of rates.80  In fact, 
courts are ``particularly deferential'' when reviewing the 
Commission's evaluation of rates, because such agency action is 
far from an exact science and involves ``policy determinations in 
which the agency is acknowledged to have expertise.'' 81  As long 
as the Commission makes a ``reasonable selection from the 
available alternatives,'' its selection of rate evaluation 
methods will be upheld, ``even if the court thinks [that] a 
different decision would have been more reasonable or 
desirable.''82  

Contrary to BTI's argument, we find that Sprint v. MGC 83 does 
not require denial of Complainants' claims. 84  In Sprint v. MGC, 
Sprint argued that MGC's tariffed access rates were unjust and 
unreasonable under section 201(b) solely because they exceeded 
the rates charged by the competing ILECs.85  The Commission 
denied Sprint's claim, because doing otherwise would have 
effectively established a per se requirement that CLEC access 
rates never exceed ILEC access rates.86 

Unlike in Sprint v. MGC, the competing ILEC rate is only one of 
several factors on which Complainants rely to assert that BTI's 
rates are unjust and unreasonable.  These other factors include: 
(1) the rates charged by other ILECs operating outside of BTI's 
service areas; (2) BTI's rate to its end-user customers for 
competitive services such as local exchange and long distance; 
(3) access rates charged by other CLECs; and (4) the rate BTI 
accepts as compensation for the transport and termination of 
local exchange traffic.87  Thus, Sprint v. MGC is inapposite.

Moreover, we disagree with BTI that the Permian Basin Area Rate 
Cases88 limit the Commission's ability to use market benchmarks 
in assessing the justness and reasonableness of a purportedly 
market-based rate.89  To the contrary, this decision clearly 
demonstrates that there is no single regulatory formula required 
in assessing the justness and reasonableness of a carrier's 
rates.90 

We also disagree with BTI that Beehive Telephone91 and IT&E 
Overseas92 limit our ability to rely on rate comparisons to 
assess the validity of BTI's access rates.93  In Beehive 
Telephone, the Commission prescribed a carrier's rates using a 
methodology based on industry averages for comparable carriers.94  
BTI mistakenly characterizes this holding as imposing rigid rules 
on the Commission's rate analysis.  Rather than narrowing the 
Commission's flexibility, Beehive Telephone rests on the broad 
discretion that courts have afforded the Commission in "selecting 
methods ... to make and oversee rates.''95  Thus, Beehive 
Telephone reflects the understanding that federal agencies with 
ratemaking authority similar to the Commission's may establish a 
regulatory scheme that produces a ``zone of reasonableness'' for 
rates, rather than insisting upon a single method of determining 
whether rates are just and reasonable.96  In IT&E Overseas, the 
Commission declined to find that the rates of a price cap 
regulated LEC were unlawful merely because they differed from the 
rates of a rate-of-return regulated LEC participating in NECA's 
cost averaging pools.97  IT&E Overseas does not undermine our 
approach, however, because both of the ILECs involved in that 
case, unlike BTI, were subject to regulatory regimes that 
operated to constrain the carriers' access pricing and to prevent 
the carriers from misusing their monopoly power.  Other than 
section 201(b), BTI is not subject to any such regulatory 
constraints.98   

Accordingly, we conclude that comparing BTI's access rates to the 
rates charged by BTI and others for services using comparable 
network functions is an appropriate mechanism for determining the 
justness and reasonableness of BTI's access rates under section 
201(b).  We proceed to do so below.

               III.B.2.a.     BTI's Access Rate Greatly Exceeds 
                    ILECs' Access Rates.

The access rates charged by ILECs operating in BTI's service 
areas are a relevant benchmark, because ILEC switched access 
services are functionally equivalent to CLEC switched access 
services.  In addition, according to fundamental economic 
principles, in a properly functioning competitive market, the 
access rates of BTI's primary access competitors would have been 
a substantial factor in BTI's setting of its own access rates.99  
Indeed, in other markets, BTI's pricing behavior  adhered to 
these principles.  BTI's rates for its local exchange service 
were approximately 15 to 25 percent below those of its primary 
competitors, BellSouth and GTE;100 and BTI's rates for long 
distance service were roughly the same as those of its primary 
IXC competitors.101

Nevertheless, during all relevant times, BTI's access rate was 
significantly higher than the competing ILECs' rates.  In July 
2000, BTI's access rate of 7.1823 cents per minute was more than 
15 times higher than BellSouth's average rate of approximately 
0.48 cents per minute, 102 and more than 7 times higher than 
GTE's average rate of approximately 1.0 cent per minute.103   In 
July 1999, BTI's access rate was more than 5 times higher than 
BellSouth's average rate of approximately 1.4 cents per minute, 
and more than 3.5 times higher than GTE's average rate of 
approximately 2.0 cents per minute.104  In July 1998, BTI's 
access rate was approximately 4.5 times higher than BellSouth's 
average rate of approximately 1.6 cents per minute, and more than 
2.5 times higher than GTE's average rate of approximately 2.8 
cents per minute.105 

BTI argues that comparing its access rates with the access rates 
of BellSouth and GTE yields irrelevant information, because those 
carriers' rates were set by price controls rather than market 
forces, and have different cost structures.106  We disagree.  
Although BellSouth's and GTE's access rates are subject to price 
cap regulation, those rates were, nevertheless, the prevailing 
market rates that BTI would have needed to consider in pricing 
its access services, had the access market been truly 
competitive.  Consequently, even though they are regulated, 
BellSouth's and GTE's access rates provide guidance as to the 
reasonableness of BTI's access rates.

Comparing BTI's access rate to those of ILECs operating outside 
BTI's service areas also provides some guidance, because of the 
functional equivalence of access services nationwide.107  BTI's 
7.1823 cents per minute access rate is approximately 4 times 
higher than the 1998 industry average ILEC rate of 1.9 cents per 
minute, approximately 5 times higher than the 1999 industry 
average ILEC rate of 1.4 cents per minute, and approximately 8 
times higher than the 2000 industry average ILEC rate of 0.96 
cents per minute.108  In addition, BTI's own expert confirmed in 
a 1999 study that BTI's access rates exceeded industry average 
rates for ILECs in 1999.  This study reports that the average of 
the access rates charged in 1999 by the Regional Bell Operating 
Companies,109 GTE, and Sprint were less than 2 cents per minute, 
whereas BTI's access rates were almost 4 times higher.110  This 
study further reports that the average access rate of all 1,435 
ILECs nationwide in 1999 was in the range of 3 cents per minute, 
whereas BTI's access rates were more than twice as high.111

               III.B.2.b.     BTI's Access Rate Exceeds the 
                    Access Rates of Many Other CLECs.

Comparing BTI's access rates to those of other CLECs provides 
further guidance regarding the reasonableness of BTI's rates, 
again, because of the functional equivalence of access services 
nationwide.112  Indeed, BTI has implicitly acknowledged the 
relevance of other CLECs' access rates, because BTI based its own 
rates solely on a survey of some other CLECs' rates.113

According to BTI's own expert, BTI's access rates are 
considerably higher than the rates charged by many other CLECs. 
114  For example, of the 36 CLECs that BTI's expert surveyed in 
December 2000, only five had access rates as high as BTI's.115  
Moreover, BTI's expert determined that the average access rate of 
the 36 CLECs was 4.19293 and 4.18519 cents per minute for 
originating and terminating access, respectively, well below 
BTI's rate of 7.1823 cents per minute for originating and 
terminating access.116  

               III.B.2.c.     The Differential Between BTI's 
                    Access Rate and Reciprocal Compensation Rate 
                    is Enormous, and Far Larger than BellSouth's 
                    Differential.

Complainants argue that we should consider BTI's reciprocal 
compensation rates in assessing the justness and reasonableness 
of BTI's access rates.117  Generally speaking, reciprocal 
compensation is the manner in which local exchange carriers 
operating in the same territory compensate each other for the 
transport and termination of a local call from a customer of one 
carrier to a customer of another carrier.118  The Commission has 
found that ``the transport and termination of traffic, whether it 
originates locally or from a distant exchange, involves the same 
network functions.''119  Therefore, in determining the 
reasonableness of BTI's access rates (i.e., rates for 
transporting and terminating long distance traffic), it is 
relevant to compare them to BTI's reciprocal compensation rates 
(i.e., rates for transporting and terminating local traffic).

We must assess this comparison differently from the other 
comparisons described above, however, and give it far less 
weight.  Access rates and reciprocal compensation rates derive 
from substantially different regulatory regimes, with markedly 
different histories.  As a result, even ILECs' present access 
rates lawfully and significantly exceed their reciprocal 
compensation rates (although, as historical subsidies in access 
rates diminish, the rates for local transport and termination 
services and for exchange access services should converge).120  
Therefore, we cannot focus merely on whether BTI's access rates 
exceed its reciprocal compensation rates, but must examine the 
magnitude of such disparity, and whether it exceeds the disparity 
between the competing ILEC's access and reciprocal compensation 
rates.   

Here, BTI's reciprocal compensation rate in 2000 was the same as 
BellSouth's reciprocal compensation rate - less than 0.3 cents 
per minute - far lower than BTI's access rate of 7.1823 cents per 
minute.121  Furthermore, in 2000, BTI's access rate was 
approximately 24 times higher than its reciprocal compensation 
rate, whereas BellSouth's access rate was only about 1.5 times 
higher than its reciprocal compensation rate.

BTI argues that its reciprocal compensation rate is not a fair 
basis for comparison, because its local transport and termination 
services and its exchange access services use different network 
functions.122  But BTI's evidence fails to demonstrate that its 
network is substantially different from most other carriers' 
networks, which, as described above, the Commission has found use 
essentially the same functions to provide these two services.123  
BTI further argues that its decision to mirror BellSouth's 
reciprocal compensation rate was not an acknowledgement of the 
rate's reasonableness, but merely a pragmatic decision based on 
the regulatory cost of trying to seek a higher rate.124  This 
actually bolsters the usefulness of the reciprocal compensation 
rate as a benchmark, however, at least in the absence of record 
evidence that BTI anticipated a traffic imbalance that would 
diminish the appeal of seeking asymmetrical compensation.  If the 
cost of trying to obtain a higher rate exceeded the benefit of 
doing so, then BTI likely viewed the ILEC's rate as being close 
to on the mark.

BTI further contends that, if we use its reciprocal compensation 
rate as a benchmark, we will effectively require ILEC access 
rates to equal ILEC reciprocal compensation rates. 125  This 
contention mischaracterizes the nature of our comparison.  As 
described above, we are not deeming relevant the mere existence 
of a rate differential, but rather examining the magnitude of the 
rate differential and comparing it to the competing ILEC's rate 
differential.  

          III.B.3.  BTI's Access Revenue-Sharing Practices Are 
               Also Appropriate Marketplace Data on Which to 
               Assess the Reasonableness of BTI's Access Rates.

Although BTI contends otherwise,126 the record indicates that BTI 
offered certain of its customers a cash payment or credit of up 
to 24% of BTI's access revenues generated by the customers' toll 
traffic.127  BTI's ability to share such a large portion of its 
access revenues with its customers is relevant in determining 
whether the level of BTI's access rates was just and reasonable.

          III.B.4.  The Foregoing Market Data Amply Indicate that 
               BTI's  Access  Rates  Were  and  Are  Unjust   and 
               Unreasonable.

As described above, BTI's access rates greatly exceeded each 
relevant market benchmark during the applicable period, and BTI 
has failed to demonstrate any lawful reason for the huge 
disparities.  First, BTI's access rates substantially exceeded 
its ILEC competitors' rates; and BTI has not demonstrated (1) any 
legitimate reason why it should escape the general economic 
principle that a new entrant's rates should not significantly 
exceed those of a primary incumbent; or (2) any material 
difference in its service offering, network architecture, or 
service quality that would explain such a rate differential.  
Second, BTI's access rates substantially exceeded both ILEC and 
CLEC industry averages; and BTI again has not demonstrated any 
material differences in its service offering, network 
architecture, or service quality that would explain such a rate 
differential.  Third, BTI met or beat the rates of its 
competitors in the local exchange and long distance markets, but 
greatly exceeded the rates of its competitors in the access 
market; and BTI has proffered no legitimate explanation for its 
disparate pricing policies across markets.  Fourth, BTI shared 
with certain of its customers up to 24% of the access revenues 
generated by the customers' toll traffic; and BTI has not 
explained how revenues from a truly reasonable access charge 
could profitably permit such arrangements.  Finally, the 
differential between BTI's access rates and its reciprocal 
compensation rates was enormous - and far greater than 
BellSouth's differential; yet BTI has not demonstrated any 
material differences in its network functions, network 
architecture, or service quality that would explain such 
disparities.  

All of these factors confirm what the Commission concluded in the 
CLEC Access Charge Order - that the access market in which BTI 
participates is not truly competitive, and that CLECs, such as 
BTI, possess market power with respect to access to their end 
users.128  These factors also clearly reveal that the level of 
BTI's access rates derives from abuse of such market power.  
Consequently, we find that, taken together as a whole, these 
factors clearly demonstrate that BTI's access rate of 7.1823 
cents per minute was and is unjust and unreasonable under section 
201(b). 

          III.B.5.  BTI's ``Cost Showing'' Does Not Justify Its 
               Access Rates.

For the reasons described above, we agree with the parties that 
we should examine marketplace factors, rather than BTI's costs, 
to determine whether BTI's rate was and is just and 
reasonable.129   BTI argues, however, that if we decline to adopt 
its version of a marketplace analysis, i.e., whatever the market 
would bear was reasonable, then we must examine BTI's costs, 
after all.130  As described above, we reject BTI's version of a 
marketplace analysis, but we do not believe that an examination 
of BTI's costs is either necessary or appropriate.  However, even 
if such an examination were deemed necessary or appropriate, we 
would find with little difficulty that BTI's attempt to justify 
its rates on the basis of costs fails, for the reasons described 
below.

Before addressing BTI's cost-based defense, we reject BTI's 
contention that, as the parties seeking relief in this 
proceeding, Complainants bear the burden of showing that BTI's 
costs did not justify its rates, rather than BTI bearing the 
burden of showing that its costs did justify its rates.131  
Because BTI had exclusive possession of the information needed to 
assess its own costs,132 and BTI pled cost-justification as an 
affirmative defense,133 BTI bears the burden of proving the cost-
basis of its access rates.134

To shoulder this burden, BTI submitted a ``cost showing.''135  As 
an initial matter, we view BTI's cost showing with substantial 
skepticism, for several reasons.  First, despite full knowledge 
of the exigencies created by the five-month statutory deadline 
applicable to these kinds of complaints, BTI repeatedly failed to 
comply with our rules regarding production of supporting 
information,136 and repeatedly failed to comply in a timely 
manner with Commission staff's discovery rulings.137   Second, 
BTI's pricing practices for long distance services belie the 
assertion that its access services are cost-based. 138  Third, 
BTI offered certain of its customers a credit of up to 24% of 
BTI's access revenues generated by the customer's toll 
traffic.139  BTI's ability to essentially share such a large 
portion of its access revenues with its customers further 
undermines the assertion that BTI's access rates were cost-based.  
Finally, because BTI admits that it did not examine its costs 
when it set its access rates in July 1998, it would appear to be 
a remarkable coincidence - but nothing more - if BTI were able to 
generate a cost analysis three years after the fact that 
justifies the previously selected rate.  

In any event, BTI's cost justification is so riddled with 
conceptual flaws and factual errors as to be of minimal 
evidentiary value in assessing the cost basis of BTI's access 
rates.  Although these deficiencies are too numerous to discuss 
in detail, the following examples demonstrate their egregious 
nature.140  BTI's purported switching expert, who admitted under 
oath that he was not an expert on switching,141 failed to 
consider a number of relevant factors in assessing BTI's ability 
to utilize its switches efficiently.142  He omitted such basic 
criteria as the actual cost for each of BTI's switches.  In 
addition, BTI's capital costs analysis included a number of 
significant errors.  For example, in calculating the cost of the 
debt component of BTI's capital structure, BTI's expert used the 
wrong interest rate for a $250 million bond offering.143  When 
this error alone was corrected, BTI's expert's calculation of the 
cost of capital was reduced from 25 percent to approximately 18 
percent.144  Likewise, BTI's experts included BTI's marketing and 
advertising expenses, which accounted for 50 percent of BTI's 
common costs,145 in their estimate of common costs that could be 
recovered through access services, without determining whether 
BTI expended any marketing expenses for access services.146  
During discovery, BTI's own expert conceded that including costs 
not attributable to a specific service in the rates for such 
service was an improper attribution.147 

Nevertheless, even when viewed in the light most favorable to 
BTI, its cost showing, as described by its own expert, 
demonstrates, at best, that BTI's access costs ``may'' be 
``higher than the access charge costs of large ILECs,'' and that 
BTI's access costs ``are more likely to approach those of 
smaller'' ILECs.148  Thus, there is hardly any record basis to 
conclude that BTI's costs exceeded those of its ILEC competitors 
at all, much less that such disparity justified an access rate 15 
times greater than that of the competing ILEC.149  Indeed, 
although the fundamental purpose of the cost showing was to 
demonstrate the cost justification of BTI's access rates, neither 
of BTI's experts ever stated unequivocally - in either their 
affidavits or their depositions - that BTI's costs justified its 
access rate of 7.1823 cents per minute.150

In sum, we find that BTI's cost showing, even when reviewed in 
the light most favorable to BTI, does little more than suggest 
that BTI's access costs might exceed those of BellSouth or GTE by 
some indeterminate, small amount.  Thus, we conclude that, even 
if it were relevant, BTI's cost showing would fall far short of 
cost-justifying its access rate of over 7 cents per minute.  

          III.B.6.  AT&T Is Not Estopped From Challenging BTI's 
               Access Rates.

BTI asserts as an affirmative defense that we should equitably 
estop AT&T from challenging BTI's access rates because ACC Corp. 
(``ACC''), AT&T's wholly owned CLEC subsidiary, allegedly charges 
even higher access rates than BTI.151  In support of this 
affirmative defense of equitable estoppel,152 BTI contends that 
ACC charges exchange access rates of nearly 9 cents per minute to 
IXCs other than AT&T.153 

We conclude that BTI's estoppel argument fails as a matter of 
law.  BTI did not properly plead the essential elements of 
estoppel in its Amended Answer.154  The Commission has repeatedly 
held that, in order to invoke equitable estoppel to preclude a 
party from asserting a right he would otherwise possess, but has 
forfeited because of his conduct, ``[t]he aggrieved party must 
have justifiably relied upon such conduct and changed his 
position so that he will suffer injury if the other is allowed to 
repudiate his conduct.''155  BTI made no such showing in either 
its Amended Answer or its briefs.  Thus, the record is devoid of 
evidence that BTI relied upon AT&T's or ACC's conduct in any way 
in setting its access rates or that, because of AT&T's or ACC's 
actions, BTI changed its behavior in a manner that caused it 
harm. 

     III.C.    The Lawful Per-Minute Access Rate for Purposes of 
          Calculating Damages Ranges From 3.8 Cents to 2.7 Cents 
          During the Relevant Period.

We conclude above that BTI's access rate of 7.1823 cents per 
minute was and is unjust and unreasonable under section 201(b) of 
the Act.  Consequently, we must determine what a reasonable rate 
would have been during the relevant period so that the court may 
calculate Complainants' damages arising from BTI's violation of 
section 201(b).  In this regard, we note that neither side has 
provided much in the way of useful guidance on what a reasonable 
rate would have been.  In particular, BTI has contented itself 
with bald assertions that, because its rate appeared in a filed 
tariff, the rate was necessarily reasonable.  BTI has failed to 
include in the record any factors or useful analogies that could 
guide our consideration of what rate other than 7.1823 cents per 
minute would have been a reasonable rate during the time period 
at issue.  On the other hand, the Complainants have restricted 
themselves to asserting that the competing ILEC rate is the only 
alternative for a reasonable rate.  These record deficiencies, 
combined with the absence of clear CLEC access pricing rules 
during the relevant period, make the task of establishing a 
specific benchmark rate for calculating damages a challenging 
one.

We recently determined in the CLEC Access Order that, in a 
properly functioning competitive market, CLECs would charge no 
more for their access services than do the ILECs with which they 
compete.  Nevertheless, because of the lack of clear regulatory 
guidance on the pricing issue, and because of concerns about 
industry dislocations resulting from a flash-cut to the ILEC 
rate, the Commission established a declining benchmark to define 
the reasonableness of CLEC rates in the future.156  The lack of 
clear rules to guide previous CLEC access rates similarly 
motivates us here - in seeking to achieve fairness in hindsight - 
to adopt as reasonable a rate somewhat above that charged by the 
competing ILEC during the relevant period.157  

To determine the level of that rate, and faced with the gaping 
holes in this record, we find substantial guidance in the CLEC 
Access Charge Order's determination that, for a year after its 
issuance, a rate of up to 2.5 cents per minute will be 
presumptively reasonable for CLEC access.158  Nothing in this 
record indicates that the considerations bearing on rate 
reasonableness during the retrospective period at issue here were 
markedly different from the circumstances the Commission 
considered in setting prospective tariff benchmarks.  Thus, the 
record in this proceeding provides no basis for concluding that a 
reasonable rate for the damages period should diverge greatly 
from 2.5 cents per minute.  We note, however, that during the 
three-year period at issue in this proceeding, access rates 
generally declined due to a variety of Commission initiatives.159  
Accordingly, we conclude that a reasonable access rate for BTI to 
have charged back in 1998, 1999, and 2000, should be at least 
marginally higher than the 2.5 cents that we have determined to 
be reasonable prospectively. 

Here again, the record provides little guidance in determining 
the level of this marginal difference.  To determine the path 
that BTI's reasonable rate should have followed, therefore, we 
look to the rates of the only alternative category of carriers 
that the record provides any basis for viewing as even arguably 
similar to BTI.  In a context unrelated to damages, BTI argued 
that it somewhat resembles a small ILEC.160  The record 
demonstrates that BTI had about 125,000 access lines, scattered 
throughout approximately 12 urban or concentrated areas, and 
lacked the resources of larger ILECs. 161  Based on this 
evidence, which is all the record provides on point, we conclude 
that, although the ``fit'' is far from exact, BTI bears at least 
some resemblance to a small, urban ILEC, given its size, business 
operations, and service areas.   

Many such small ILECs operating in concentrated areas participate 
in the National Exchange Carriers Association (``NECA'') tariffs, 
and they generally fit into the lowest rate band in NECA's 
tariff.162  Therefore, although BTI did not and does not qualify 
to participate in NECA tariffs, in the absence of any record 
evidence suggesting an alternative damages methodology consistent 
with our liability finding, and in light of the fact that the 
five-month statutory deadline precludes a supplemental briefing 
period, we find that the changes in these low-band NECA rates 
over the past three years is instructive on the question of how a 
reasonable rate for BTI should have declined over the same 
period. 

In 1998, 1999, and 2000, the lowest NECA rate band for access 
services was approximately 3.8, 3.0, and 2.7 cents per minute, 
respectively.163  We note that this declining path provides a 
final rate that is very close to the 2.5 cents per minute that is 
deemed reasonable on a prospective basis in the CLEC Access 
Charge Order.  Accordingly, solely for purposes of calculating 
damages in this proceeding, we find that the just and reasonable 
rates for both originating and terminating access services during 
the relevant time period are as follows:164

         July 1, 1998 through June 30, 1999      3.8  cents  per 
          minute

         July 1, 1999 through June 30, 2000      3.0  cents  per 
          minute

         July 1, 2000 through the release date        2.7  cents 
          per minute
       of this order.165

We emphasize, however, that this tool for calculating damages 
here should not be taken as a finding, as a general matter, that 
CLECs are similar to low-band NECA carriers or that such NECA 
rates would be appropriate on a prospective basis.  To the 
contrary, the CLEC Access Charge Order determined, based on a 
full record and numerous competing considerations, what 
presumptively reasonable CLEC access rates will be in the future.  
We adopt the proxy of low-band NECA carriers here only for the 
purpose of defining the retrospective path that BTI's reasonable 
rate should have followed, given the dearth of record information 
on the question.

     III.D.    AT&T Is Not Entitled to Additional Relief Under 
          Section 254(k) of the Act.

AT&T argues that BTI violated section 254(k) of the Act by using 
the revenues derived from its high access rates to cross-
subsidize BTI's efforts to compete in the provision of local and 
long distance services.166  AT&T contends that this cross-
subsidization is evidenced by the enormous disparity between (1) 
the high level of BTI's access rates in relation to the rates of 
competing access providers, and (2) the low level of BTI's rates 
for competitive local and long distance services in relation to 
the rates of competing local and long distance service 
providers.167  AT&T further contends that BTI's calling plans 
that use the revenues earned by BTI's provision of access service 
to lower the price of BTI's competitive services to its end users 
are an explicit cross-subsidy.168  In response, BTI contends that 
AT&T's claim fails as a matter of law, because the exchange 
access market is ``competitive'' within the meaning of section 
254(k), and the Commission has never found otherwise.169  BTI 
further argues that there is no evidence that its rates for 
competitive services are at below-cost levels, or that BTI 
actually used revenues from its access services to offset the 
costs of its other services.170

BTI is subject to section 254(k)'s prohibition against cross-
subsidization.171  However, in light of our ruling in Part III C. 
above, which effectively reduces BTI's access rate by 
approximately half during the entire period at issue, AT&T's 
claim for relief under section 254(k) fails for insufficient 
evidence.  In particular, although AT&T submitted evidence that 
might have supported a conclusion that revenues derived from an 
access rate of over 7 cents per minute subsidized BTI's 
competitive services, such evidence does not support a conclusion 
that revenues derived from an access rate of approximately  half 
of BTI's rate would have been sufficient to do so.  Therefore, by 
limiting BTI's ability to recover access revenues from AT&T to 
the lower rates specified herein, AT&T has received all of the 
monetary relief to which it is entitled on this record.  
Accordingly, we decline to provide what would be merely an 
advisory opinion on the lawfulness of BTI's conduct under section 
254(k).  Therefore, we deny AT&T's claim under section 254(k).

                      IV.  ORDERING CLAUSES

Accordingly, IT IS ORDERED, pursuant to sections 4(i), 4(j), 
201(b), and 208 of the Communications Act of 1934, as amended, 47 
U.S.C.  154(i), 154(j), 201(b), and 208, that Count I of AT&T's 
Second Amended Complaint and Counts I, II, and III of Sprint's 
Complaint ARE GRANTED as against defendant BTI to the extent 
described herein, and are in all other respects DENIED.

IT IS FURTHER ORDERED, pursuant to sections 4(i), 4(j), 208, and 
254(k) of the Communications Act of 1934, as amended, 47 U.S.C. 
 154(i), 154(j), 208, and 254(k), that Count II of AT&T's 
Second Amended Complaint IS DENIED as against defendant BTI.

IT IS FURTHER ORDERED, pursuant to sections 4(i), 4(j), 201(b), 
and 208 of the Communications Act of 1934, as amended, 47 U.S.C. 
 154(i), 154(j), 201(b), and 208, that BTI's tariffed switched 
access rate per minute as specified in paragraph 4, supra, WAS 
AND IS UNJUST AND UNREASONABLE in violation of section 201(b) of 
the Communications Act.

IT IS FURTHER ORDERED, pursuant to sections 4(i), 4(j), 201(b), 
207, 208, and 209 of the Communications Act of 1934, as amended, 
47 U.S.C.  154(i), 154(j), 201(b), 207, 208, and 209, that 
BTI's tariffed switched access rate per minute for access 
services, for purposes of calculating damages during the relevant 
time period, are the rates specified in paragraph 58, supra.
IT IS FURTHER ORDERED, pursuant to sections 4(i), 4(j), and 208 
of the Communications Act of 1934, as amended, 47 U.S.C.  
154(i),154(j), and 208, and section 1.115 of the Commission's 
rules, 47 C.F.R.  1.115, that BTI's Motion to Dismiss and 
Application for Review are DISMISSED AS MOOT.


                         FEDERAL COMMUNICATIONS COMMISSION




                         Magalie Roman Salas
                         Secretary
                     DISSENTING STATEMENT OF
               COMMISSIONER HAROLD FURCHTGOTT-ROTH

     RE:  AT&T CORP. V. BUSINESS TELECOM, INC.; SPRINT 
     COMMUNICATIONS COMPANY, L.P. V. BUSINESS TELECOM, INC., 
     MEMORANDUM OPINION AND ORDER, FILE NOS. EB 01-MD-001 & EB-
     01-MD-002.


     Until April of 2001, the Commission had no rules in effect 
governing CLEC access charges.  Instead, the Commission 
explicitly stated that such charges should be set by the market.  
See, e.g., Access Charge Reform, First Report and Order, 12 FCC 
Rcd 15982,  361 (1997); see also Order  18.  Nevertheless, in 
today's order, the Commission holds that for a period of time 
between 1998 and 2000, the access charges assessed by Business 
Telecom, Inc. (``BTI'') were ``unjust and unreasonable under 
section 201(b)'' of the Communications Act of 1934.  Order  1.  
The Commission comes to this conclusion through a purported 
``market-based'' approach - an approach that largely ignores the 
actual market for exchange access, but instead looks at 
particular, mostly regulated rates in other markets - to 
determine how BTI should have priced its access charges were 
market failures in the access charge market ``correct[ed] 
retroactively.''  Order  22 (internal quotation marks omitted).  
The Commission then holds that BTI is liable for roughly the 
difference between its rates and what it should have charged in a 
properly functioning market.  See Order  53.  I respectfully 
dissent.

     First, the Commission's purported ``market-based'' approach 
has no basis in law or logic.  Rather than look at the actual 
rates set in the access charge market, the Commission looks at 
isolated examples of other rates for other services, most of 
which are set by regulation, to determine how the market should 
have set access charge rates.  This methodology is, on its face, 
in direct conflict with the very idea of market-based rates.

     Second, the Commission failed to provide BTI any notice that 
its access charges would be retroactively judged according to the 
standard announced in this order.  To the contrary, the 
Commission invited BTI and other CLECs to use the market to set 
rates, an invitation that necessarily sanctioned the use of any 
rate-setting methodology, or, indeed, no methodology at all.  
Moreover, to add insult to injury, the particular rate-setting 
methodology adopted here - which refuses to examine BTI's costs 
(order  44) - is directly at odds with the Commission's decision 
in Sprint Communications Company, L.P. v. MGC Communications, 
Inc., Memorandum Opinion and Order, 15 FCC Rcd. 14027 (2000).  In 
that decision, the Commission held that CLEC access charges 
higher than ILEC charges are not necessarily unreasonable, in 
part, because ``a review of the reasonableness of a CLEC's rates 
[may] depend[] on a carrier-specific review of the costs of 
providing service.''  Id. 6.

     This failure to provide BTI any notice of the rate-setting 
standard that would govern its liability retroactively renders 
the Commission's order legally suspect at best.  Indeed, I am 
unaware of any decision in the history of the Commission in which 
damages were awarded for unreasonable rates when there were in 
effect no rules governing how rates should be set.  Accordingly, 
I dissent.


_________________________

1    Second Amended  Complaint  of  AT&T Corp.,  AT&T  Corp.  v. 
Business Telecom, Inc.,  File No. EB-01-MD-001  (filed Jan.  29, 
2001) (``AT&T Second Amended  Complaint''); Complaint of  Sprint 
Communications Company,  L.P.,  Sprint  Communications  Company, 
L.P. v.  Business Telecom,  Inc., File  No. EB-01-MD-002  (filed 
Jan. 16, 2001) (``Sprint Complaint'').

2    47 U.S.C.  208.

3    47 U.S.C.  201(b).

4    47 U.S.C.  254(k).

5    Second Consolidated  Joint Statement  of Stipulated  Facts, 
Disputed Facts,  and  Key Legal  Issues  of AT&T  Corp.,  Sprint 
Communications Company, L.P., and  Business Telecom, Inc.,  AT&T 
Corp. v.  Business  Telecom,  Inc., File  No.  EB-01-MD-001  and 
Sprint Communications Company, L.P.  v. Business Telecom,  Inc., 
File  No.   EB-01-MD-002   (filed  Mar.   12,   2001)   (``Joint 
Statement''), at  7-8.

6    Joint Statement at  10.  

7    Joint Appendix, AT&T Corp. v. Business Telecom, Inc.,  File 
No. EB-01-MD-001  and  Sprint Communications  Company,  L.P.  v. 
Business Telecom, Inc.,  File No. EB-01-MD-002  (filed Mar.  26, 
2001) (``Joint  Appendix''), at  Exhibit 3,  Deposition of  Sean 
Pflaging at 45 (``Pflaging Deposition'').

8    Opening  Brief  of  AT&T  Corp.,  AT&T  Corp.  v.  Business 
Telecom, Inc., File No.  EB-01-MD-001 and Sprint  Communications 
Company, L.P. v. Business Telecom, Inc., File No.  EB-01-MD-002, 
(filed Mar. 26, 2001) (``AT&T  Opening Brief''), at Exhibit  12, 
Business Telecom Inc.'s November 11, 2000 SEC Form 10-Q.  

9    Joint Statement at   15.   GTE merged  with Bell  Atlantic 
Telephone Companies in  June 2000, and  the successor entity  is 
now known as Verizon, Inc.

10   Joint Statement at  11.

11   Id.

12   Joint Appendix, at Exhibit 4,  Deposition of Jean Houck  at 
21-22 (``Houck Deposition'').  See Joint Statement at  13.  

13   BTI's access rate is the sum of its local switching  charge 
per minute of use ($0.063)  and its transport charge per  minute 
of use ($0.0084),  for a  total of  $0.0714 per  minute, plus  a 
charge of  $0.000423 per minute  per mile for transport  mileage 
(the total  rate in  the text  above  is based  on one  mile  of 
transport mileage).  BTI also charges, where appropriate, an 800 
database per query charge ($0.0079).  Joint Statement at   19-
20.    

14   Joint Statement at  23.  BTI contends that it did not have 
the resources to conduct any financial analyses, cost models, or 
cost studies.   See  Joint  Appendix,  at  Exhibit  3,  Pflaging 
Deposition at 129.

15   Joint Statement at  24.

16   Joint Statement at  17-18.

17   Joint Statement at  35-36, 54. 

18   Joint Statement at  53.

19   AT&T  Second  Amended  Complaint,     4,  14-18;   Sprint 
Complaint,  9-10.

20   Advamtel LLC, et  al., v.  AT&T Corp., 105  F. Supp.2d  507 
(E.D. Va. 2000); Advamtel LLC, et al., v. Sprint  Communications 
Company, L.P.,  105  F.  Supp.2d  476  (E.D.  Va.  2000);  Joint 
Statement at  1.

21   Advamtel, LLC, et al. v.  AT&T Corp., Civil Action No.  00-
643 (E.D. Va.  Jan. 5, 2000);  Advamtel, LLC, et  al. v.  Sprint 
Communications Company, L.P., Civil  Action No. 00-1074-A  (E.D. 
Va. Jan. 5, 2000).  

22   Joint  Statement  at    2.   Section  201(b)  of  the  Act 
provides,  in   pertinent  part:    ``All  charges,   practices, 
classifications, and regulations for and in connection with such 
communication service,  shall be  just and  reasonable, and  any 
such charge,  practice, classification,  or regulation  that  is 
unjust or unreasonable  is hereby  declared to be  unlawful .  . 
..''  47 U.S.C.  201(b).

23   AT&T Opening  Brief,  at  Exhibit 57,  Counterclaim  IV  of 
Answer to  Second Amended  Complaint and  Counterclaims of  AT&T 
Corp., Advamtel, LLC, et al. v. AT&T Corp., Civil Action No. 00-
643 (filed  Aug. 18,  2000);  Advamtel. v.  AT&T Corp.,  105  F. 
Supp.2d at 510.

24   Advamtel v.  AT&T,  105  F. Supp.2d  at  515;  Advamtel  v. 
Sprint, 105 F. Supp.2d at 483. 

25   Advamtel v. AT&T,  105 F.  Supp.2d at  511-12; Advamtel  v. 
Sprint, 105 F. Supp.2d at 481.  

26   Advamtel v. AT&T, 105 F. Supp.2d at 511-12; Joint Statement 
at  3.  Subsequently,  on January 5,  2001, the court  referred 
two additional issues  to the Commission  under the doctrine  of 
primary  jurisdiction.    Advamtel  LLC,   et  al.   v.   Sprint 
Communications Company,  L.P.,  125  F. Supp.2d  800  (E.D.  Va. 
2001).  Pursuant  to this  latter referral,  Complainants  filed 
with  the  Commission  two  Petitions  for  Declaratory   Ruling 
regarding the following  issues:  (1) whether  any statutory  or 
regulatory constraints  prevent  an IXC  from  declining  access 
services, or from terminating access services previously ordered 
or constructively ordered; and if not, (2) what steps must  IXCs 
take either  to  avoid  ordering access  service  or  to  cancel 
service after  it has  been ordered  or constructively  ordered.  
AT&T and Sprint  File Petitions for  Declaratory Ruling on  CLEC 
Access Charge Issues, CCB/CPD File No. 01-02, Public Notice, DA-
01-301,  2001  WL   92220  (Com.   Car.  Bur.   Feb.  5,   2001) 
(establishing a public comment period ending on March 2, 2001).

27   Joint Statement  at    4.   See  Letter  from  Anthony  J. 
DeLaurentis,  Attorney,  Market  Disputes  Resolution  Division, 
Enforcement Bureau,  to  James Bendernagel,  Counsel  for  AT&T; 
Jonathan E. Canis, Counsel for BTI; and Cheryl A. Tritt, Counsel 
for Sprint, AT&T Corp. v.  Business Telecom, Inc., File No.  EB-
01-MD-001 and Sprint  Communications Company,  L.P. v.  Business 
Telecom, Inc., File No. EB-01-MD-002  (dated Feb. 15, 2001).  To 
effectuate further the court's  referrals, both AT&T and  Sprint 
filed  informal  complaints  against  all  of  the  other  CLECs 
remaining in the Advamtel Litigation pursuant to sections 1.716-
18 of the Commission's rules.  47 C.F.R.  1.716-18.

28   AT&T Second  Amended Complaint,   3,  5-6, 20-35;  Sprint 
Complaint,  2, 12-23.  This claim appears in Counts I, II,  and 
III of Sprint's Complaint, which we consider collectively rather 
than individually,  and  in Count  I  of AT&T's  Second  Amended 
Complaint.   

29   AT&T Second  Amended  Complaint,    36-42.   Complainants 
request that the Commission (1) declare that BTI's access  rates 
were and are unjust and  unreasonable; (2) determine the  lawful 
rate for the  disputed past period  for purposes of  calculating 
damages; (3) prescribe a just and reasonable rate going forward; 
and (4) require  BTI to revise  its tariff to  lower its  access 
charges to  such prescribed  level.  Complainants  also  request 
damages in an amount to be determined in a supplemental  damages 
proceeding.  AT&T Second Amended Complaint, Prayer for Relief  
1-5; Sprint Complaint,  25-26. 

30   BTI included some of these arguments - as well as others  - 
in a motion to dismiss.  Motion to Dismiss of Business  Telecom, 
Inc., AT&T Corp. v. Business  Telecom, Inc., File No.  EB-01-MD-
001 and Sprint Communications Company, L.P. v. Business Telecom, 
Inc., File No.  EB-01-MD-002 (filed Mar.  8, 2001).  Because  we 
address in this Order  all of the arguments  made by BTI in  its 
Motion to Dismiss, we dismiss the Motion as moot.

31   Initial Brief  of Business  Telecom,  Inc., AT&T  Corp.  v. 
Business  Telecom,  Inc.,  File  No.  EB-01-MD-001  and   Sprint 
Communications Company, L.P. v. Business Telecom, Inc., File No. 
EB-01-MD-002 (filed Mar. 26,  2001) (``BTI Initial Brief''),  at 
6-7.

32   BTI   Initial   Brief   at   6-10,   13.    See   generally 
Implementation of Section 402(b)(1)(A) of the Telecommunications 
Act of 1996, Report and Order,  12 FCC Rcd 2170, 2181-82  (1997) 
(``Section 402 Order'').

33   See, e.g., Arizona  Grocery Co.  v. Atchison, T.  & S.  Ry. 
Co., et al., 284 U.S. 370 (1932) (holding that damages  relating 
to tariffed  charges are  recoverable if  the tariffed  rate  is 
proven to be unreasonable) (``Arizona Grocery''); Access  Charge 
Reform, Seventh Report and Order and Further Notice of  Proposed 
Rulemaking, FCC No. 01-146, 2001 WL 431685,  21 (rel. Apr.  27, 
2001) (``CLEC  Access  Charge  Order'');  New  Valley  Corp.  v. 
Pacific Bell, Memorandum  Opinion and  Order, 15  FCC Rcd  5128, 
5133 (2000)  (``New Valley  Corp. v.  Pacific Bell'');  Halprin, 
Temple, Goodman & Sugrue v. MCI Telecommunications  Corporation, 
et al., Memorandum Opinion  and Order, 13  FCC Rcd 22568,  22573 
(1998) (``Halprin  Order''), recon.  denied,  14 FCC  Rcd  21092 
(1999);   Hyperion   Telecommunications,   Inc.   Petition   for 
Forebearance, Memorandum  Opinion and  Order, 12  FCC Rcd  8596, 
8609 (1997) (``Hyperion Order''); Section 402 Order, 12 FCC  Rcd 
at  2182;  Communications   Satellite  Corporation,   Memorandum 
Opinion and  Order,  3  FCC  Rcd  2643,  2647  (1988);  National 
Exchange  Carrier  Association,  Inc.,  Memorandum  Opinion  and 
Order, 2 FCC Rcd 3679, at  5 (1987).

34   Despite its argument  to the  contrary, BTI  admits in  its 
Amended Answer  to  Sprint's  Complaint that,  even  as  a  non-
dominant carrier, its rates are  subject to section 201(b),  and 
that its  tariffs may  be challenged  under section  208 of  the 
Communications Act.  Amended Answer of Business Telecom, Inc. to 
Sprint  Complaint,  Sprint   Communications  Company,  L.P.   v. 
Business Telecom, Inc.,  File No. EB-01-MD-002  (filed Feb.  14, 
2000), at  11.

35   BTI Initial  Brief at  60-62; Consolidated  Reply Brief  of 
Business Telecom, Inc.,  AT&T Corp. v.  Business Telecom,  Inc., 
File No. EB-01-MD-001 and Sprint Communications Company, L.P. v. 
Business Telecom,  Inc., File  No. EB-01-MD-002  (filed Apr.  2, 
2001) (``BTI Reply Brief''), at 54-57.   

36   BTI Reply Brief at 55-56.  Section 205 of the Act provides, 
in  pertinent  part:   ``[T]he  Commission  is  authorized   and 
empowered to determine and prescribe  what will be the just  and 
reasonable charge  or the  maximum or  minimum, or  maximum  and 
minimum, charge or charges to be thereafter observed  . . .  .''  
47 U.S.C.  205.

37   47 U.S.C.   207-09.   Hence, BTI's  reliance on  Illinois 
Bell Telephone Co.  v. FCC, 966  F.2d 1478 (D.C.  Cir. 1992)  is 
misplaced.  BTI Reply Brief at 55.  In Illinois Bell, the  Court 
held that, absent  a pre-existing tariff  suspension order,  the 
Commission lacks authority under sections 204 and 205 of the Act 
to invalidate  a tariffed  rate and  direct the  carrier to  pay 
refunds to its  customers based  on the  difference between  the 
tariffed rate  and a  newly  prescribed, reasonable  rate.   The 
Commission had not acted under  and the court therefore did not 
address    the  Commission's  damage-awarding  authority  under 
sections 207 - 209 of  the Act.  Accordingly, as the  Commission 
has repeatedly ruled,  sections 204 and  205 of the  Act do  not 
preclude the Commission from awarding damages under sections 207 
- 209 of the Act arising from a carrier's unreasonable  tariffed 
rates.  See, e.g., AT&T v. Telephone Utilities Exchange  Carrier 
Association, Memorandum  Opinion and  Order,  10 FCC  Rcd  8405, 
8414-15 (1995) (emphasizing that  actions brought under  section 
208 are different  from those brought  under sections  204-205); 
Complaints  Alleging   Violations   of  Section   208   of   the 
Commission's  Rate  of  Return  Prescription  for  the   1989-90 
Monitoring Period,  Memorandum Opinion  and  Order, 10  FCC  Rcd 
3657, 3664-65 (1994).

38   47 U.S.C.  208(b)(1).

39   47 U.S.C. 207  (stating, in pertinent  part, that  ``[a]ny 
person claiming to be damaged  by any common carrier subject  to 
the provisions  of this  Act may  make .  . .  complaint to  the 
Commission as  hereinafter provided  for .  . .  .'')  (emphasis 
added).

40   47 U.S.C.  209.

41   Section 402 Order, 15 FCC  Rcd at 2183.  See also  footnote 
33, supra.

42   New Valley Corp. v. Pacific Bell, 15 FCC Rcd at 5133.

43   See Access Charge  Reform, First Report  and Order, 12  FCC 
Rcd 15982,  16141,  at   363  (1997)  (``Access  Charge  Reform 
Order''); Hyperion Order, 12 FCC Rcd  at 8597,  2, 8609,   25.  
Thus, BTI had ample  notice that there was  an outside limit  on 
the level of access rates that it could lawfully charge  without 
risking the imposition of damages in a complaint proceeding.

44   Global NAPs v. Federal  Communications Commission, et  al., 
247 F.3d 252, 2001 WL 427607, at *7 (D.C. Cir. 2001).

45   Global Naps v. FCC,  247 F.3d 252, 2001  WL 427607, at  *7.  
See Hi-Tech  Furnace Systems,  Inc. v.  FCC, 224  F.3d 781,  786 
(D.C.  Cir.  2000)  (stating   that  section  208  enables   the 
Commission, upon complaint  by an injured  party, to  adjudicate 
the lawfulness of a carrier's past and present rates).  See also 
ACC Long Distance Corp. v. New York Tel. Co., Memorandum Opinion 
and Order, 9 FCC Rcd 1659,  1661-1662, at  11  (1994);   Allnet 
Communication Services,  Inc.  v.  U S  West,  Inc.,  Memorandum 
Opinion and  Order,  8 FCC  Rcd  3017, 3021-3022,  at    22-24 
(1993).

46   See, e.g.,  Arizona  Grocery,  supra;  CLEC  Access  Charge 
Order, 2001 WL 431685,  21;  New Valley Corp. v. Pacific  Bell, 
15 FCC Rcd at 5133; Halprin  Order, 13 FCC Rcd at 22573;  Access 
Charge Reform Order, 12 FCC Rcd at 16141; Hyperion Order, 12 FCC 
Rcd  at  8609;  Section   402  Order,  12   FCC  Rcd  at   2182; 
Communications  Satellite  Corporation,  3  FCC  Rcd  at   2647; 
National Exchange Carrier Association, Inc., 2 FCC Rcd at 3679.

47   BTI Initial Brief at 58-60; BTI Reply Brief at 34-37.

48   47 U.S.C.  205 (emphasis added).

49   BTI Reply Brief at 34.

50   Id.

51   See generally United States, et  al. v. Florida East  Coast 
Railway, Co. 410 U.S.  224, 239 (1973)  (finding that a  similar 
hearing requirement  in  the  Interstate Commerce  Act  did  not 
trigger the detailed oral  hearing requirements of sections  556 
and 557 of the APA; AT&T v. FCC, 572 F.2d 17, 22 (2d Cir. 1978), 
cert. denied,  439  U.S.  875  (1978);  American  Telephone  and 
Telegraph Co. Wide Area Telecommunications Services,  Memorandum 
Opinion and Order, 67  FCC 2d 246, 248,  at  5 (1977)  (stating 
that section 205 requirements can  be met via a paper  hearing); 
Implementation of the Non-Accounting Safeguards of Sections  271 
and 272 of the  Communications Act of  1934, Notice of  Proposed 
Rulemaking, 11 FCC  Rcd 18877,  18928, at   106 (1996)  (noting 
that section  205 proceedings  generally occur  through  written 
responses).

52   5 U.S.C. 553(b).

53   5 U.S.C.  553(c).

54   BTI Initial Brief at 7-13, 21; AT&T Opening Brief at 11-14; 
Opening Brief of Sprint Communications Company, L.P., AT&T Corp. 
v. Business  Telecom, Inc.,  File  No. EB-01-MD-001  and  Sprint 
Communications Company, L.P. v. Business Telecom, Inc., File No. 
EB-01-MD-002 (filed Mar. 26,  2001) (``Sprint Opening  Brief''), 
at 18-23.

55   Telecommunications Act of  1996, Pub. L.  No. 104-104,  110 
Stat. 56 (codified at 47 U.S.C.  151 et. seq.) (``1996 Act'').

56   See, e.g., Access Charge Reform Order, 12 FCC Rcd at 16094-
105,  262-84.  In  contrast to the  situation with CLECs,  the 
Commission's rules prescribe the  precise manner in which  ILECs 
may assess interstate access  charges on interexchange  carriers 
and end users.  First, an ILEC must keep its books in accordance 
with the Uniform System of Accounts set forth in Part 32 of  the 
Commission rules.  See  47 C.F.R.   32.1  - 32.9000.   Second, 
Part 64  of  the  Commission's rules  divides  an  ILEC's  costs 
between  those  associated  with  regulated   telecommunications 
services and  those  associated with  non-regulated  activities.  
See 47 C.F.R.   64.901 - 64.904.   Third, Part 36  separations 
rules determine  the fraction  of  the ILEC's  regulated  costs, 
expenses,  and  investment  that  should  be  allocated  to  the 
interstate jurisdiction.  See 47 C.F.R.  36.1 - 36.741.  After 
the total amount  of regulated, interstate  cost is  identified, 
the access charge and price cap rules translate these interstate 
costs into charges for  the specific interstate access  services 
and rate  elements.   Part  69  specifies  in  detail  the  rate 
structure for recovering these costs.   See 47 C.F.R.  69.1  - 
69.731.  Finally, Part 61 requires ILECs to publish their  rates 
in tariffs, and the rules  restrict how and when incumbents  may 
change  their  rates.    See  47  C.F.R.     61.1  -   61.193.  
Additionally, the Commission regulates the rate levels ILECs may 
charge for their access services, requiring them to comply  with 
either the rate-of-return or the price-cap regulations.  Compare 
47 C.F.R.   65.1 -  65.830 (relating  to rate  of return  that 
certain  non-price-cap  ILECs  may  earn  on  interstate  access 
service) with Access Charge Reform, Sixth Report and Order in CC 
Docket Nos. 96-262 and 94-1, Report  and Order in CC Docket  No. 
99-249, Eleventh Report and Order in CC Docket No. 96-45, 15 FCC 
Rcd 12962, 13026-13039,  at  151-84  (2000) (``CALLS  Order'') 
(adopting rate level components for price-cap carriers).  

57   Access Charge Reform Order, 12 FCC Rcd at 16094-95,  263.

58   Id.

59   Id.

60   See,  e.g.,  Access  Charge  Reform,  Notice  of   Proposed 
Rulemaking, 11 FCC Rcd 21354,  21472, at  271 (1996)  (``Access 
Reform NPRM''); Access Charge Reform Order, 12 FCC Rcd at 16140, 
 360.  

61   CLEC Access Charge Order, 2001 WL 431685, at  41.

62   See CLEC Access Charge Order, 2001  WL 431685, at  46  and 
n.105.  See also footnotes 72 and 73, infra.

63   AT&T Opening Brief at 11-21; Sprint Opening Brief at 18-32; 
Reply Brief of AT&T Corp., AT&T Corp. v. Business Telecom, Inc., 
File No. EB-01-MD-001 and Sprint Communications Company, L.P. v. 
Business Telecom,  Inc., File  No. EB-01-MD-002  (filed Apr.  2, 
2001) (``AT&T Reply  Brief''), at  4-12; Reply  Brief of  Sprint 
Communications Company, L.P.,  AT&T Corp.  v. Business  Telecom, 
Inc., File No. EB-01-MD-001  and Sprint Communications  Company, 
L.P. v.  Business Telecom,  Inc., File  No. EB-01-MD-002  (filed 
Apr. 2, 2001) (``Sprint Reply Brief''), at 13-25.

64   BTI Initial Brief at 6-14, 16-34. 

65   CLEC Access Charge Order, 2001 WL 431685, at  30-32.  

66   Id.

67   Id.

68   Id. 

69   CLEC Access Charge Order, 2001 WL 431685, at  34. 

70   In any  event, in  this  case, the  market did  not  really 
``bear'' BTI's access  rates, as  demonstrated by  Complainants' 
refusal to pay those rates.

71   AT&T Opening Brief at 11-21; Sprint Opening Brief at 18-32; 
AT&T Reply Brief at 4-12; Sprint Reply Brief at 13-25.

72   See Local Exchange Carriers'  Rates, Terms, and  Conditions 
for Expanded  Interconnection Through  Physical Collocation  for 
Special Access and Switched Transport, Second Report and  Order, 
12 FCC Rcd  18730, 18790-93  (1997) (``Expanded  Interconnection 
Order''), aff'd, Southwestern Bell Telephone Company v.  Federal 
Communications  Commission,  168  F.3d  1344  (D.C.  Cir.  1999) 
(``Southwestern  Bell  v.  FCC'');  U.S.  Dept.  of  Defense  v. 
Hawaiian Telephone Company, Memorandum Opinion and Order, 61 FCC 
2d 565, 566-68 (1976). 

73   See, e.g., Access Charge Reform Order, 12 FCC Rcd at 16141-
42,  364; Expanded Interconnection Order, 12 FCC Rcd at  18790-
93; Annual 1990  Access Tariff Filings,  Memorandum Opinion  and 
Order, 5 FCC  Rcd 7487  (1990) (rejecting rates  8 times  higher 
than benchmark rate); Beehive Telephone Co., Memorandum  Opinion 
and Order,  13  FCC  Rcd  12275  (1998)  (rejecting  rate  above 
``industry  averages''  for   comparable  companies);   Operator 
Communications,  Inc.   d.b.a.   Oncor   Communications,   Inc., 
Memorandum Opinion and Order and Order to Show Cause,  DA-95-02, 
1995  WL  248343  (Com.  Car.  Bur.   Apr.  27,  1995)  (``Oncor 
Communications'')  (finding  that  rates  that   ``substantially 
exceed'' rates charged by other service providers for comparable 
services in  the same  market to  be unjust  and  unreasonable); 
Capital Network System, Inc.,  Memorandum Opinion and Order  and 
Order to Show  Cause, 10  FCC Rcd  13732 (1995)  (same as  Oncor 
Communications);  International  Settlement  Rates,  Report  and 
Order, 12 FCC Rcd 19806, 19943  at  295 (1997), aff'd, Cable  & 
Wireless PLC v. Federal Communications Commission, 166 F.3d 1224 
(D.C. Cir. 1999) (establishing benchmark governing international 
settlement rates based, in part, upon non-cost factors).   Cases 
decided under  the  Interstate  Commerce  Act,  from  which  the 
Communications Act derived, also determine the reasonableness of 
a carrier's  rates  by comparing  them  to the  rates  of  other 
carriers and  other  rates  of the  same  carrier.   See,  e.g., 
Railroad Comm'rs of Fla. v. Seaboard  Air Line Ry., 16 ICC 1,  5 
(1909) (examining charges  by carrier's  competitor for  similar 
services to determine  the reasonable rate);  Freight Bureau  v. 
Cincinnati, N.O. & Tx.  Pac. Ry. Co., 4  ICC 92 (1894)  (``where 
the reasonableness of  rates is in  question, comparison may  be 
made, not only with rates on  another line of the same  carrier, 
but  also  with  those  on  the  lines  of  other  and  distinct 
carriers'').

74   CLEC Access Charge Order, 2001 WL 431685, at  60.

75   CLEC Access Charge Order, 2001 WL 431685, at  44-45.

76   BTI Initial Brief at 16-25; BTI Reply Brief at 38-41.

77   See, e.g., Access Reform  NPRM, 11 FCC Rcd  at 21472, at   
271; Access Charge  Reform Order, 12  FCC Rcd at  16140,   360; 
Hyperion Order, 12 FCC Rcd at 8609,  25. 

78   See Access Charge Reform Order, 12 FCC Rcd at 16141,  363.  
See also Hyperion Order, 12 FCC Rcd at 8609,  25. 

79   See Access Charge Reform Order, 12 FCC Rcd at 16142,  364.  
See also Hyperion Order, 12 FCC Rcd at 8609,  25.

80   See, e.g., Southwestern Bell v. FCC, 168 F.3d at 1352;  MCI 
Telecommunications Corp. v.  FCC, 675 F.2d  408, 413 (D.C.  Cir. 
1982); Aeronautical  Radio, Inc.  v. FCC,  642 F.2d  1221,  1228 
(D.C. Cir. 1980), cert. denied, 451 U.S. 920 (1981).

81   Southwestern Bell  v.  FCC,  168  F.3d  at  1352  (internal 
quotations omitted).  See Time  Warner Entertainment v. FCC,  56 
F.3d 151, 163 (D.C.  Cir. 1995) (quoting  United States v.  FCC, 
707 F.2d 610, 618 (D.C. Cir. 1983)).

82   Southwestern Bell v. FCC, 168 F.3d at 1352 (quoting MCI  v. 
FCC, 675 F. 2d at 413).

83   Sprint Communications Company, L.P. v. MGC  Communications, 
Inc., Memorandum  Opinion and  Order, 15  FCC Rcd  14027  (2000) 
(``Sprint v. MGC'').

84   BTI Initial Brief at 17-19,  22, 35-36; BTI Reply Brief  at 
9, n. 10, 12-15, 28.  Although  Sprint v. MGC does not  preclude 
Complainants' claims that  BTI's total access  rates are  unjust 
and unreasonable  under section  201(b), we  find that  it  does 
affect Complainants' claim that BTI's 800 database query  charge 
of 0.79 cents per call is unjust and unreasonable.  AT&T  Second 
Amended  Complaint,     14,  n.4;  Sprint   Complaint,     12.  
Complainants cursorily  assert  that BTI's  800  database  query 
charge is  unjust and  unreasonable solely  because it  exceeded 
BellSouth's 800  database query  charge in  2000.  AT&T  Opening 
Brief at 14, n. 15; Sprint  Opening Brief at 19.  This  evidence 
alone is  insufficient under  Sprint  v. MGC.   Moreover,  BTI's 
charge in  2000 was  actually  less than  the average  of  GTE's 
charges in  the  relevant region  (i.e.,  .84 cents  per  call).  
Therefore,  to   the  extent   that  Complainants'   allegations 
concerning BTI's  800 database  query charge  can be  deemed  to 
constitute a stand-alone claim, the  claim is denied; and we  do 
not consider  this query  charge  in the  rest of  our  analysis 
above.

85   Sprint v. MGC, 15 FCC Rcd at 14028-29.

86   Sprint v. MGC, 15 FCC Rcd at 14029 (``Relying, as it  does, 
solely on the  competing ILEC rate  as a benchmark  for what  is 
just and reasonable,  Sprint has  failed to meet  its burden  in 
this action.'').

87   AT&T Opening Brief at 11-21; Sprint Opening Brief at 18-32; 
AT&T Reply Brief at 4-12; Sprint Reply Brief at 13-25.

88   Permian  Basin  Area  Rate  Cases,  390  U.S.  747   (1968) 
(``Permian Rate Base Cases'').

89   BTI Reply Brief at 38-41.

90   See CLEC  Access Charge  Order, 2001  WL 431685,  at   46, 
n.105.  In the Permian Basin Area Rate Cases, the Supreme  Court 
stated that ``rate-making agencies are not bound to the  service 
of any single regulatory formula''  and are permitted ``to  make 
the pragmatic adjustments which may be called for by  particular 
circumstances.''  Permian Rate  Base Cases, 390  U.S. at  776-77 
(citing FPC  v. Natural  Gas  Pipeline Co.,  315 U.S.  575,  586 
(1942)).  See FERC v. Pennzoil Producing Co., 439 U.S. 508,  517 
(1979) (holding that agency is not required ``to adhere  rigidly 
to a cost-based determination  of rates, much  less to one  that 
bases each  producer's  rates  on  his  own  costs'')  (internal 
quotations omitted); American Public Gas Association v.  Federal 
Power  Commission,  576  F.2d   1016,  1037  (D.C.  Cir.   1977) 
(approving economic modeling as basis for ratemaking).  

91   Beehive Telephone  Company,  Inc., Memorandum  Opinion  and 
Order, 13 FCC Rcd 12275 (1998) (``Beehive Telephone'').

92   IT&E  Overseas,  Inc.  v.  Micronesian   Telecommunications 
Corporation, Memorandum  Opinion and  Order,  13 FCC  Rcd  16058 
(1998) (``IT&E Overseas'').

93   BTI Initial Brief at 16-22 ; BTI Reply Brief at 38-41.

94   Beehive Telephone, 13 FCC Rcd at 12286.

95   Beehive Telephone, 13 FCC Rcd at 12286-86.  See MCI v. FCC, 
675 F.2d at 413 (quoting Aeronautical Radio v. FCC, 642 F.2d  at 
1228).

96   See, e.g., FERC v. Pennzoil Producing Co.439 U.S. at  517; 
American Telephone & Telegraph Company v. Federal Communications 
Commission, 836 F.2d 1386, 1390 (D.C. Cir. 1988) (quoting Jersey 
Cent. Power &  Light v.  FERC, 810  F.2d 1168,  1177 (D.C.  Cir. 
1987)).  See also Wisconsin  v. FPC, 373  U.S. 294, 309  (1963); 
FPC v. Natural Gas Pipeline Co., 315 U.S. 575, 585-86 (1942). 

97   IT&E Overseas, 13 FCC Rcd at 16062-16064.

98   See BTI Initial Brief at 13.

99   See CLEC Access Charge Order, 2001 WL 431685, at  37, 45.  
AT&T Opening Brief,  at Exhibit  11, Affidavit  of Frederick  R. 
Warren-Boulton (``Warren-Boulton Affidavit''),  20.

100  Joint Appendix, at Exhibit  3, Pflaging Deposition at  175-
76, 191-93.

101  See Joint Appendix,  at Exhibit 3,  Pflaging Deposition  at 
206-09.    

102  We  derive  BellSouth's  access  rates  by  averaging   the 
originating and terminating access  rates in BellSouth's  tariff 
filings in effect on July 1, 2000 for the following access  rate 
elements for the  relevant service areas  in which BTI  competes 
(based upon  hypothetical one-mile  transport mileage):   access 
tandem (facility),  access tandem  (termination), access  tandem 
(switching), carrier common  line charge (originating),  carrier 
common  line   (terminating),   local   switching,   information 
surcharge,  transport   interconnection   charge,   and   common 
multiplexing.  See  BellSouth Telecommunications,  Inc.,  Tariff 
F.C.C. No. 1 (effective July 1, 2000); AT&T Opening Brief at 14-
15.  This  information  is  publicly available  in  the  Federal 
Communications  Commission's  Information  Center  at  445  12th 
Street, N.W., Washington, D.C.  20554.  See also Sprint  Opening 
Brief, Exhibit 12;  AT&T Opening  Brief at  14-15; AT&T  Opening 
Brief, Exhibit 10.  We do not include the primary  interexchange 
carrier  charge  (``PICC'')  in  this  calculation  or  our  GTE 
calculation, because  nothing timely  submitted in  this  record 
proposed a methodology for ``per-minutizing'' this flat per-line 
charge or  proffered  data suggesting  that  the level  of  this 
charge was significant on a per-minute basis.  On May 22,  2001, 
well after the record  had closed, and  only three weeks  before 
the statutory  deadline  for  resolving  these  complaints,  BTI 
submitted approximately  500 pages  of information  that,  inter 
alia, purports  to  show  what BellSouth  and  GTE  charged  for 
access, and  to  ``per-minutize''  GTE's  and  BellSouth's  PICC 
rates, in  the  relevant  regions during  the  relevant  period.  
Letter from Ronald  J. Jarvis,  Counsel for BTI,  to Anthony  J. 
DeLaurentis,  Attorney,  Market  Dispute  Resolution   Division, 
Enforcement Bureau, AT&T Corp.  v. Business Telecom, Inc.,  File 
No. EB-01-MD-001  and  Sprint Communications  Company,  L.P.  v. 
Business Telecom,  Inc., File  No. EB-01-MD-002  (filed May  22, 
2001).  We decline to consider this information, because it  was 
untimely filed, depriving both  the Commission and  Complainants 
of a fair opportunity to rigorously assess its complex contents.

103  We derive GTE's access  rates by averaging the  originating 
and terminating access rates in  GTE's tariff filings in  effect 
on July 1, 2000 for the  following access rate elements for  the 
relevant service areas  and zones in  which BTI competes  (based 
upon hypothetical one  mile transport  mileage):  access  tandem 
(facility),   access   tandem   (termination),   access   tandem 
(switching), carrier common  line charge (originating),  carrier 
common  line   (terminating),   local   switching,   information 
surcharge,  transport   interconnection   charge,   and   common 
multiplexing.  See  GTE  Telephone Operating  Companies,  Tariff 
F.C.C. No. 1  in effect on  July 1, 2000.   This information  is 
publicly available  in the  Federal Communications  Commission's 
Information Center at  445 12th Street,  N.W., Washington,  D.C. 
20554.   

104  We derive BellSouth's and GTE's access rates in 1999 in the 
same manner as those calculated for 2000, based upon BellSouth's 
and GTE's  tariff  filings  in  effect on  July  1,  1999.   See 
BellSouth  Telecommunications,   Inc.,  Tariff   F.C.C.  No.   1 
(effective July  1, 1999);  GTE Telephone  Operating  Companies, 
Tariff F.C.C. No. 1 in effect on July 1, 1999.  This information 
is publicly available in the Federal Communications Commission's 
Information Center at  445 12th Street,  N.W., Washington,  D.C. 
20554.

105  We derive BellSouth's and GTE's access rates in 1998 in the 
same manner as those calculated for 2000, based upon BellSouth's 
and GTE's  tariff  filings  in  effect on  July  1,  1998.   See 
BellSouth Telecommunications,  Inc.,  Tariff  F.C.C.  No.  1  in 
effect on  July  1,  1998; GTE  Telephone  Operating  Companies, 
Tariff F.C.C. No. 1 in effect on July 1, 1998.  This information 
is publicly available in the Federal Communications Commission's 
Information Center at  445 12th Street,  N.W., Washington,  D.C. 
20554.

106  BTI Initial Brief at 17-22; BTI Reply Brief at 19-20.

107  See Southwestern Bell v. FCC, 168 F.3d at 1353  (explaining 
that ``the  use  of  industry-wide  averages  is  one  commonly-
employed technique  in evaluating  the reasonableness  of  rates 
charged by regulated entities'').

108  See  Industry  Analysis  Division,  Federal  Communications 
Commission, TRENDS IN TLECOMMUNICATIONS SERVICE (December 2000), 
Table  1.2.    See  also  Industry  Analysis  Division,  Federal 
Communications Commission, TELECOMMUNICATIONS INDUSTRY  REVENUES 
1999 (September 2000). This information is publicly available in 
the Federal  Communications Commission's  Information Center  at 
445  12th   Street,  N.W.,   Washington,  D.C.   20554  and   at 
.   See  generally  AT&T   Opening 
Brief, Exhibit 20.

109  See 47 U.S.C.  153(4) (defining Bell Operating Companies).

110  AT&T  Opening   Brief,   at   Exhibit   22,   QSI   Survey.  
Complainants attribute  the  data  differences  in  the  reports 
prepared by BTI's experts and by the Commission to the fact that 
BTI's experts included  rate elements that  BTI itself does  not 
consider to be part of  access.  AT&T Opening Brief, at  Exhibit 
8, Business Telecom, Inc's Responses to AT&T Corp. Interrogatory 
No. 1; AT&T Opening Brief at 16, n.18. 

111  AT&T Opening Brief, Exhibit 22.

112  See generally, Southwestern Bell v. FCC, 168 F.3d at  1352-
53 (approving  the  use  of composite  industry  data  or  other 
averaging methods in evaluating reasonableness of rates).

113  Joint Statement at  23-24.  

114  Joint Statement at   31.  See  Amended Answer of  Business 
Telecom, Inc. to  AT&T Second Amended  Complaint, AT&T Corp.  v. 
Business Telecom, Inc.,  File No. EB-01-MD-001  (filed Feb.  14, 
2001) (``BTI Amended Answer to AT&T Complaint''), Exhibit 4.   

115  Joint Appendix, at Exhibit 2,  Deposition of Peter J.  Gose 
(``Gose Deposition''), at 202.  AT&T Opening Brief, Exhibit 33.

116  AT&T Opening Brief, Exhibit 33.

117  AT&T Opening Brief at 17-19; Sprint Opening Brief at 23-28.

118  See 47 U.S.C.  251(b)(4).

119  Joint Statement  at   29,  quoting Implementation  of  the 
Local Competition Provisions  in the  Telecommunications Act  of 
1996, First Report  and Order,  11 FCC Rcd  15499, 16012  (1996) 
(``Local Competition Order'') (subsequent history omitted).  See 
Sprint Complaint, Exhibit 12,  Declaration of Kent W.  Dickerson 
at  3.

120  Local Competition Order, 11 FCC Rcd at 16012.  Although our 
analysis utilizes a comparison of the disparities between access 
rates and reciprocal compensation  rates for BTI and  BellSouth, 
respectively, nothing in our  discussion should be construed  as 
an endorsement of any such disparity in rates.  See Developing a 
Unified Intercarrier Compensation Regime,  CC Docket No.  01-92, 
Notice of Proposed Rulemaking, FCC  01-132, 2001 WL 455872,   5 
(rel. Apr. 27, 2001) (seeking comment on reforming the  existing 
access charge and  reciprocal compensation regulations  because, 
among other things, "[t]hese  regulations treat different  types 
of carriers and  different types of  services disparately,  even 
though there  may be  no significant  differences in  the  costs 
among carriers or services").

121  The  record  does  not   contain  any  of  the   reciprocal 
compensation rates that  BTI and GTE  charged each other  during 
the relevant time period.  The record also does not contain  the 
reciprocal compensation  rates that  BTI and  BellSouth  charged 
each other in 1998 and 1999.

122  BTI Initial Brief at 22-25; BTI Reply Brief at 18.

123  The record  in this  case supports  the Commission's  prior 
conclusion that  the transport  and termination  of local  calls 
between a CLEC and an ILEC  involves the use of similar, if  not 
identical, switching and transport  facilities as the  provision 
of interstate switched access services for long distance  calls.  
See AT&T Opening Brief at Exhibit 23, Affidavit of John C. Klick 
(``Klick Affidavit'') at  11; AT&T Opening Brief at Exhibit  1, 
Affidavit of William J. Taggart, III (``Taggart Affidavit'')  at 
 10;  Sprint  Complaint, Exhibit  12,  Declaration of  Kent  W. 
Dickerson at    3;  Joint Appendix,  at  Exhibit,  3,  Plfaging 
Deposition at 55-77, 118-20.

124  BTI Initial Brief at 24-25.   A CLEC and an ILEC  operating 
in the  same area  establish rates  for reciprocal  compensation 
through the negotiation  and arbitration  processes provided  in 
sections 251 and 252 of the Act.  47 U.S.C.  251-252.  In  the 
arbitration process, a  state commission can  order the ILEC  to 
pay more than the CLEC (i.e., ``asymetrical compensation'') only 
if the CLEC  demonstrates that  its costs  for transporting  and 
terminating local traffic exceed those of the ILEC.  47 C.F.R.  
51.711(b).

125  BTI Initial Brief at 24.  

126  BTI Initial Brief  at 68.   Joint Appendix,  at Exhibit  3, 
Pflaging Deposition, Exhibit 7 at 1304-05.

127  Joint Appendix, at Exhibit  3, Pflaging Deposition at  143-
48; Joint Appendix, at Exhibit 3, Plfaging Deposition Exhibit 7, 
at 1302-06  (BTI's ``Local  Business Partner's  Plan'').   BTI's 
marketing materials clearly describe this program as ``a product 
that pays  the customer  to use  it''  and as  a means  for  its 
customers' toll-traffic  to  help the  customer  recapture  lost 
revenue and pay for the cost  of the customer's local and  other 
telecommunications needs.  Id. (emphasis added).  Although BTI's 
current program offers customers a credit against BTI  services, 
BTI previously offered the customers  the option of receiving  a 
cash payment.  Joint Appendix, at Exhibit 3, Pflaging Deposition 
at 146-47.

128  CLEC Access Charge Order, 2001 WL 431685, at  28, 31-34.

129  See Part III.B.1, supra. 

130  BTI Initial Brief at 34-35.

131  BTI Initial Brief at 30-34.

132  BTI Amended Answer  to AT&T Second  Amended Complaint at   
28.

133  BTI Amended Answer to AT&T  Second Amended Complaint at   
84-85; BTI Amended Answer to Sprint Complaint at  42-43.

134  See  General  Plumbing  v.  New  York  Tel.  Co.  and   MCI 
Telecommunications Corp., Memorandum Opinion  and Order, 11  FCC 
Rcd 11799, 11809 n. 63  (1996).  See also Environmental  Defense 
Fund, Inc.  v. Environmental  Protection Agency,  548 F.2d  998, 
1014 (D.C. Cir. 1976).   

135  See Letter from Ronald J. Jarvis, Counsel for BTI, to David 
M. Miles, Counsel for AT&T, and Frank Krogh, Counsel for Sprint, 
AT&T Corp. v. Business Telecom, Inc., File No. EB-01-MD-001  and 
Sprint Communications Company, L.P.  v. Business Telecom,  Inc., 
File No. EB-01-MD-002 (filed Feb. 20, 2001). 

136  For  example,  BTI's   initial  Answers  to   Complainants' 
Complaints were stricken without  prejudice because of  numerous 
failures by BTI to comply with the Commission's formal complaint 
rules  regarding  production  of  supporting  information.   See 
Letter from Anthony  J. DeLaurentis,  Attorney, Market  Disputes 
Resolution Division, Enforcement Bureau,  to Jonathan E.  Canis, 
Counsel for BTI;  James F.  Bendernagel, Counsel  for AT&T;  and 
Cheryl A. Tritt, Counsel for Sprint (Feb. 12, 2001), AT&T  Corp. 
v. Business  Telecom, Inc.,  File  No. EB-01-MD-001  and  Sprint 
Communications Company, L.P. v. Business Telecom, Inc., File No. 
EB-01-MD-002.  BTI's Amended Answers also contained many of  the 
same deficiencies as BTI's initial Answers, but were accepted by 
Commission staff because of the time constraints resulting  from 
the  five-month   statutory   deadline   applicable   to   these 
complaints.  See Letter from  Anthony J. DeLaurentis,  Attorney, 
Market Disputes  Resolution  Division,  Enforcement  Bureau,  to 
Jonathan E.  Canis,  Counsel  for  BTI;  James  F.  Bendernagel, 
Counsel for AT&T; and Cheryl  A.Tritt, Counsel for Sprint  (Feb. 
23, 2001), AT&T Corp. v. Business Telecom, Inc., File No. EB-01-
MD-001 and  Sprint  Communications  Company,  L.P.  v.  Business 
Telecom, Inc., File No. EB-01-MD-002.

137  For example, despite staff rulings directing them to do so, 
BTI failed or refused to produce, among other things,  documents 
collected and created by BTI's cost accounting group  reflecting 
BTI's costs;  documents  reflecting  the amounts  BTI  paid  for 
facilities it owns or leases; documents reflecting BTI's margins 
on relevant revenue  streams; bills  sent by BTI  to itself  for 
access services; and documents relating to BTI's costs that were 
available to BTI  personnel when they  established BTI's  access 
rates.  See  Letters  from  Anthony  J.  DeLaurentis,  Attorney, 
Market Disputes  Resolution  Division,  Enforcement  Bureau,  to 
Jonathan E.  Canis,  Counsel  for  BTI;  James  F.  Bendernagel, 
Counsel for AT&T; and Cheryl A. Tritt, Counsel for Sprint  (Feb. 
23, 2001  and Mar.  5, 2001),  AT&T Corp.  v. Business  Telecom, 
Inc., File No. EB-01-MD-001  and Sprint Communications  Company, 
L.P. v. Business  Telecom, Inc., File  No. EB-01-MD-002;  Letter 
from James  F. Bengernagel,  Counsel for  AT&T, to  Jonathan  E. 
Canis, Counsel for BTI (Feb.  26, 2001), AT&T Corp. v.  Business 
Telecom, Inc., File No.  EB-01-MD-001 and Sprint  Communications 
Company, L.P. v. Business Telecom, Inc., File No.  EB-01-MD-002; 
Letter from James F. Bengernagel,  Counsel for AT&T, to  Anthony 
J. DeLaurentis, Attorney,  Market Disputes Resolution  Division, 
Enforcement Bureau  (Mar.  13,  2001), AT&T  Corp.  v.  Business 
Telecom, Inc., File No.  EB-01-MD-001 and Sprint  Communications 
Company, L.P. v. Business Telecom, Inc., File No.  EB-01-MD-002.  
See also Joint  Appendix, at Exhibit  3, Pflaging Deposition  at 
10-11, 19-21, 58-60, 66-70, 74-76, 87-88, 98-100, 108-110,  130-
31, 146-48,  168-71, 180-81,  196-200, 216-17,  219-20,  227-28, 
260, and 238-40; AT&T Opening Brief at 34-35.  BTI has filed  an 
application for  review  of  one  of  the  Enforcement  Bureau's 
rulings requiring BTI  to produce  certain customer  information 
relied upon by  its experts  in support of  BTI's cost  showing.  
Application for Review of Business Telecom, Inc., AT&T Corp.  v. 
Business  Telecom,  Inc.,  File  No.  EB-01-MD-001  and   Sprint 
Communications Company, L.P. v. Business Telecom, Inc., File No. 
EB-01-MD-002 (filed Apr. 4, 2001).  Because we do not rely  upon 
the presence or absence of the specified information, we  hereby 
dismiss BTI's Application for Review as moot.

138  AT&T Reply Brief at 28-29.  In particular, although  access 
is one - and only one - cost of providing long distance service, 
BTI priced its  long distance  service roughly at  or below  the 
price of its access  service.  If BTI's  access rate were  truly 
cost-based, BTI  would  have  had to  price  its  long  distance 
service much higher in order to make a profit.

139  Joint Appendix, at Exhibit  3, Pflaging Deposition at  143-
48; Joint Appendix, at  Exhibit 3, Pflaging Deposition,  Exhibit 
7, at 1302-06.

140  For fuller discussions of the cost showing's  inadequacies, 
good sources are Complainants' briefs, which we find provide, by 
and large, a fair analysis.  AT&T Opening Brief at 21-39; Sprint 
Opening Brief at 42-52; AT&T Reply Brief at 12-24.

141  Joint Appendix,  at  Exhibit  1, Deposition  of  Warren  R. 
Fischer (``Fischer Deposition''), at 74, 290.

142  Joint Appendix, at  Exhibit 1, Fischer  Deposition at  290.  
AT&T Opening Brief at 23.

143  AT&T Opening Brief, at Exhibit 23, Klick Affidavit at  25; 
AT&T Opening Brief at 27.  

144  AT&T Opening Brief, at Exhibit 23, Klick Affidavit at  25.  
See also Joint  Appendix, at  Exhibit 1,  Fischer Deposition  at 
167-70, 189-90.

145  See AT&T Opening Brief, at  Exhibit 23, Klick Affidavit  at 
 34-5.

146  Joint Appendix, at Exhibit 1, Fischer Deposition at 226-27.

147  Joint Appendix, at Exhibit 2, Gose Deposition, at 225.  For 
example, when asked about the  inclusion of various expenses  in 
BTI's common costs, such  as a $65,000  expense for the  company 
Christmas party,  BTI's  expert  replied:  ``The  only  thing  I 
specifically excluded as being  inappropriate was the  corporate 
jet.''  Joint Appendix, at Exhibit 1, Fischer Deposition at 193-
94.

148  Letter from Ronald J. Jarvis,  Counsel for BTI, to  Magalie 
Roman  Salas,  Secretary,  Federal  Communications   Commission, 
attaching Affidavit of  Peter J.  Gose, AT&T  Corp. v.  Business 
Telecom, Inc., File No.  EB-01-MD-110 and Sprint  Communications 
Company, L.P. v. Business  Telecom, Inc., File No.  EB-01-MD-002 
(filed Feb. 23,  2001) (``Gose  Affidavit'') at   21  (emphasis 
added).

149  Although BTI  acknowledges that  its ``cost  showing''  has 
problems,  it  blames  Commission  staff  for  not  allowing  it 
additional time to complete a more comprehensive ``cost study.''  
BTI Initial Brief at 30-31; BTI Consolidated Reply Brief at  30-
31.  For the reasons previously stated in these proceedings,  we 
categorically reject  BTI's assertion  that any  flaws in  BTI's 
cost  justification  defense  derive  from  Commission   staff's 
imposition of the strict schedule  needed to allow us to  comply 
with the five-month statutory  deadline applicable to this  kind 
of complaint under section  208(b)(1) of the  Act.  47 U.S.C.   
208(b)(1).  See  Letter  Ruling  from  Anthony  J.  DeLaurentis, 
Attorney,  Market  Disputes  Resolution  Division,   Enforcement 
Bureau,  to  Jonathan  E.  Canis,  Counsel  for  BTI;  James  F. 
Bendernagel, Counsel for AT&T; and Cheryl A. Tritt, Counsel  for 
Sprint, AT&T Corp. v. Business Telecom, Inc., File No. EB-01-MD-
001 and Sprint Communications Company, L.P. v. Business Telecom, 
Inc., File No. EB-01-MD-002 (Feb. 15, 2001).

150  See  Gose Affidavit at  21; see also Letter from Ronald J. 
Jarvis, Counsel  for BTI,  to  Magalie Roman  Salas,  Secretary, 
Federal Communications Commission, attaching Affidavit of Warren 
R. Fischer, AT&T Corp. v.  Business Telecom, Inc., File No.  EB-
01-MD-110 and Sprint  Communications Company,  L.P. v.  Business 
Telecom, Inc.,  File  No.  EB-01-MD-002 (filed  Feb.  23,  2001) 
(``Fischer Affidavit'') at  24-26.

151  BTI Amended Answer to AT&T Second Amended Complaint,  70-
71; BTI Initial Brief at 14-15.

152  Although BTI affirmatively  pled ``equitable estoppel''  in 
its Amended  Answer,  it modified  this  legal argument  in  its 
Initial Brief  to a  ``quasi-estoppel'' argument.   BTI  Amended 
Answer to AT&T Second Amended Complaint, at  35, 54-55, 70-71; 
BTI Initial  Brief at  14-15;  BTI Reply  Brief at  31-34.   Our 
conclusion is the same under either legal theory, however.

153  BTI Initial  Brief  at  14.  BTI  also  contends  that  ACC 
charges AT&T  the competing  ILEC access  rate rather  than  the 
tariffed rate.   BTI  Amended  Answer  to  AT&T  Second  Amended 
Complaint,  26. 

154  In any event, BTI's attempt to plead an estoppel defense in 
its Amended Answer does not comply with the Commission's  rules, 
see 47 C.F.R.  1.724(b), 1.720(b), because BTI failed to  cite 
any legal  authority  supporting  the  affirmative  defense  and 
failed to  allege  and  provide evidentiary  support  for  facts 
which, if true,  would establish an  estoppel defense.  See  BTI 
Amended Answer to AT&T Second Amended Complaint,  70-71.

155  See Bell Atlantic  Delaware, et al.  v. Global NAPS,  Inc., 
Memorandum Opinion and Order, FCC  No. 00-383, 2000 WL  1593346, 
17 (Oct. 26,  2000); NextWave  Personal Comm,  Inc., Order  on 
Reconsideration,  15  FCC  Rcd  17500,  17515  at  28  (2000); 
Communique  Telecommunications,  Inc.,  Declaratory  Ruling  and 
Order, 10 FCC Rcd 10399, 10404 at 30 (Com. Car. Bur. rel.  May 
25, 1995).  

156  CLEC Access Charge Order, 2001 WL 431685, at  52-53.

157  This approach  comports with  Sprint  v. MGC,  wherein  the 
Commission ruled that, during some  of the same period at  issue 
here, a CLEC's access  rate was not  per se unreasonable  solely 
because it exceeded the competing ILEC's access rate.

158  Over the course of the  three subsequent years, subject  to 
certain qualifications,  the presumptively  reasonable  tariffed 
rate drops to the rate of  the competing ILEC.  See CLEC  Access 
Charge Order, 2001 WL 431685, at  52.

159  See  Industry  Analysis  Division,  Federal  Communications 
Commission, TRENDS IN TELECOMMUNICATION SERVICE (December 2000), 
Table 1.2.   This information  is  publically available  in  the 
Federal Communications  Commission's Information  Center at  445 
12th   Street,   N.W.,   Washington,    D.C.   20554   and    at 
.

160  BTI Initial Brief at 47-55.

161  See Part II.A, supra; see  also Joint Appendix, at  Exhibit 
3, Pflaging Deposition at 129.

162  Cf., AT&T Opening Brief, Exhibit 22.   

163  See National  Exchange  Carrier Association,  Inc.,  Tariff 
F.C.C. No. 5.   This information  is publicly  available at  the 
Federal Communications  Commission's  Electronic  Tariff  Filing 
System located on the  Commission's E-Filing website located  at 
.  These rates  derive from  the average  of 
the originating and terminating  access rates for the  following 
access rate elements in  the lowest rate  band of NECA's  tariff 
filings effective January 1, 1999, January 1, 2000, and  January 
1, 2001:  access tandem (facility), access tandem (termination), 
access  tandem   (switching),   carrier   common   line   charge 
(originating), carrier common  line charge (terminating),  local 
switching,  information  surcharge,  transport   interconnection 
charge, and common multiplexing.  See CLEC Access Charge  Order, 
2001 WL 431685,  55 and n.126.  

164  Because BTI's initial tariff was filed with the  Commission 
in July 1998, we align the  yearly time periods for purposes  of 
calculating damages to correspond with the effective date of the 
annual access tariff filings  of price-cap carriers pursuant  to 
Commission rules.  47  C.F.R.   69(h).  In setting  a just  and 
reasonable rate for purposes of calculating damages, we  decline 
to set specific rates for originating and terminating access  or 
for each  of BTI's  access elements.   Rather, the  rate  chosen 
reflects the total amount that  BTI could have lawfully  charged 
per  access   minute   for  the   local   switching,   transport 
termination, and  transport  mileage associated  with  providing 
originating and terminating access  services.  This approach  is 
consistent with the Commission's recent limitation on the  total 
access charges CLECs may tariff.  CLEC Access Charge Order, 2001 
WL 431685, at  55.

165  We do not prescribe a rate for the future, as  Complainants 
requested, because  the CLEC  Access  Charge Order  will  govern 
BTI's future conduct.

166  AT&T Second  Amended  Complaint,   36-42.   AT&T  Opening 
Brief at 48.  Section 254(k)  of the Act provides, in  pertinent 
part: ``A telecommunications carrier  may not use services  that 
are not competitive  to subsidize services  that are subject  to 
competition.''  47 U.S.C.  254(k).

167  AT&T Second  Amended  Complaint,   37-41.   AT&T  Opening 
Brief at 46-52; AT&T Reply Brief at 25-30.

168  AT&T Opening Brief at 48-52.

169  BTI Initial Brief at 26-30,  63-68; BTI Reply Brief at  51-
54.

170  BTI Initial Brief at 26-30.

171  Implementation of Section 254(k) of the Communications  Act 
of 1934, as Amended, Order, 12 FCC Rcd 6415, 6421 (1997).