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FEDERAL COMMUNICATIONS COMMISSION
Washington, D.C. 20554
In the Matter of )
AT&T Corporation, )
v. ) File No. E-97-07
Jefferson Telephone Company, )
MEMORANDUM OPINION AND ORDER
Adopted: August 24, 2001 Released: August
By the Commission:
1. In this Memorandum Opinion and Order (``Order''), we deny a
formal complaint filed by AT&T Corporation (``AT&T'') against
Jefferson Telephone Company (``Jefferson'') pursuant to
section 208 of the Communications Act of 1934, as amended
(``Act'' or ``Communications Act'').1 AT&T challenges the
lawfulness of an access revenue-sharing arrangement that
Jefferson entered into with an information provider to which
Jefferson terminated traffic. On the basis of the facts and
arguments presented in this record, we conclude that AT&T has
failed to meet its burden of demonstrating that Jefferson (i)
engaged in discrimination prohibited by section 202(a) of the
Act,2 or (ii) violated section 201(b) of the Act3 by breaching
its duty as a common carrier to serve, in AT&T's words, as an
``objective conduit'' of communications services.
Accordingly, we deny AT&T's complaint.4
2. At all relevant times, Jefferson was an incumbent local
exchange carrier (``LEC'') located in Jefferson, Iowa that
served approximately 3,400 access lines.5 Jefferson provided
local exchange service to end user customers, and originating
and terminating exchange access services to AT&T and other
interexchange carriers (``IXCs'').6 During 1994 and 1995,
Jefferson charged IXCs access rates specified by the National
Exchange Carrier Association (``NECA'') pursuant to a tariff
filed at the Commission.7
3. During the period at issue in this dispute, one of
Jefferson's end-user customers was an information provider
called International Audiotext Network (``IAN'').8 IAN
provided its customers a kind of multiple voice bridging
service commonly known as ``chat-line'' service. This service
connects incoming calls so that two or more callers can talk
with each other simultaneously.9 This differs from
traditional conference call service in that callers to the
chat line are randomly paired with other callers. In
addition, unlike many chat-line operators, IAN did not impose
any charges on callers. Instead, IAN obtained all of its
revenues from Jefferson, as described below. Thus, callers to
IAN paid only their designated IXC for the calls, and paid
only the IXC's tariffed, long-distance toll charges.10
4. During the time period at issue here, a long distance call
by an AT&T subscriber to IAN was first routed to the
subscriber's local telephone company. Next, the call was
routed to AT&T, which transported the call across AT&T's long
distance network. AT&T then handed the call to Jefferson (the
``terminating access provider''). As the ``terminating access
provider,'' Jefferson routed the call to its end-user
customer, IAN.11 Jefferson then billed AT&T for terminating
access services at the tariffed rate.12
5. Towards the end of 1992, Jefferson entered an agreement with
IAN whereby Jefferson would make payments to IAN based on the
amount of access revenues that Jefferson received for
terminating calls to IAN.13 In return, IAN would market and
otherwise aid the chat-line operations.14 As mentioned above,
the payments that Jefferson paid to IAN based on terminating
access revenues constituted IAN's only source of revenue.15
On July 31, 1995, the agreement between Jefferson and the chat
6. In December 1996, AT&T filed the instant complaint.17
According to AT&T, Jefferson's access revenue-sharing
arrangement with IAN violated section 201(b) by contravening
the ``basic principle of common carriage'' that a carrier may
only serve as an objective conduit of communications service,
``without influenc[ing] or control[ling] . . . the destination
of a customer's calls within its authorized service area.''18
Such contravention occurred, in AT&T's view, because Jefferson
``acquired a direct interest in promoting the delivery of
calls to specific telephone numbers for the provision of a
specific communication.''19 AT&T also contends that
Jefferson's access revenue-sharing arrangement with IAN
discriminated against Jefferson's other end user customers, in
violation of section 202(a), because the arrangement ``caused
access revenues, which are intended to cover Jefferson's
legitimate costs of service and its ability to maintain high
quality service in the areas in which it operates, to be
directed elsewhere.''20 AT&T requests an order (i) declaring
that Jefferson's access revenue-sharing arrangement with IAN
was unlawful, and (ii) awarding damages in the amount of the
access fees that AT&T paid for calls to IAN, with interest.21
A. AT&T Has Not Demonstrated that the Access Revenue-Sharing
Arrangement Between Jefferson and IAN Violated Section
201(b) of the Act by Breaching Jefferson's Duty as a Common
7. According to AT&T, there are ``two essential prerequisites''
for common carriage.22 First, a common carrier must ``hold[ ]
itself out to serve indifferently with regard to the service
in question.''23 Second, a common carrier must ``allow[ ]
customers to transmit intelligence of their own design and
choosing.''24 AT&T maintains that Jefferson violated the
first of these fundamental principles (and, thus, section
201(b)) when it entered into the revenue-sharing arrangement
with IAN and acquired a direct economic interest in
terminating traffic to IAN.25
8. We agree with AT&T's general description of the fundamentals
of common carriage.26 We disagree with AT&T, however, that
Jefferson violated the first of those fundamentals when it
entered the revenue-sharing agreement with IAN.
9. AT&T alleges that Jefferson violated the ``indifference''
requirement of common carriage, because the revenue-sharing
arrangement with IAN ``caused Jefferson to have a direct, and
greater, economic interest in delivering calls to one set of
destination telephone numbers in its service area than to
other destination numbers.''27 In AT&T's view, ``it became
Jefferson's prerogative, pursuant to the agreement, to
transmit calls to IAN as opposed to transmitting calls to
other destinations in its territory.''28
10. AT&T mischaracterizes the ``indifference'' requirement as
turning on a carrier's motive for providing service to a
particular customer. This requirement hinges not on such
intent, but rather on the carrier's conduct in actually
serving customers. The critical inquiry is whether a carrier
makes ad hoc determinations about the provision of service to
particular customers.29 Stated another way, ``a carrier will
not be a common carrier where its practice is to make
individualized decisions in particular cases whether and on
what terms to serve.''30 Thus, as Jefferson asserts, the crux
of the `indifference' inquiry is the manner in which service
is offered to customers, not the carrier's interest in
increasing the traffic carried on its network.31 As long as a
carrier provides service indifferently and indiscriminately to
all who request it, the first prong of the common carriage
test is satisfied.
11. The record does not demonstrate that Jefferson failed to
remain appropriately ``indifferent'' as a common carrier,
notwithstanding its access revenue-sharing arrangement with
IAN. In particular, the record contains no evidence that
Jefferson ever made any individualized decisions in specific
cases concerning whether and on what terms to provide
interstate access services. Jefferson provided interstate
access service at the same rate to all IXCs who ordered it
pursuant to a tariff filed with the Commission. Moreover,
Jefferson provided terminating interstate access service with
respect to calls placed to all of the telephone numbers in
Jefferson's exchange, not just to those numbers assigned to
IAN. Finally, the record contains no indication that
Jefferson ever deliberately routed to IAN an interstate call
intended for a different end user.
12. AT&T points to the fact that the agreement between
Jefferson and IAN required IAN to engage in certain marketing
practices, and required Jefferson to block certain local calls
to IAN.32 These circumstances fall far short of giving
Jefferson an unlawful interest in IAN, given that, as stated
above, Jefferson provided interstate access services
indifferently and indiscriminately to all who requested them.
13. We note that AT&T relies for support on a 1996 Notice of
Proposed Rulemaking and a 1995 advisory letter issued by the
Chief of the former Enforcement Division of the Common Carrier
Bureau.33 In the 1996 NPRM, the Commission sought comment on
whether the practice at issue at here ``could be interpreted
as not being just and reasonable under section 201(b).''34
The Marlowe Letter opined that an international long distance
carrier would violate section 201(b) if it were to share with
an information provider the toll revenues collected on calls
to the information provider.35 Neither item persuades us
here.36 For the reasons set forth above, based on the record
in this case, in which AT&T argues that Jefferson's access
revenue-sharing arrangement with IAN violated section 201(b)
solely because it allegedly breaches common carriage duties,
we conclude that AT&T has not met its burden of demonstrating
that Jefferson's practice here is unjust and unreasonable. To
the extent the former Enforcement Division's advisory letter
is inconsistent with our holding here, we overrule the
14. For these reasons, we find that AT&T has not demonstrated
that Jefferson violated its duty as a common carrier upon
entering the revenue-sharing arrangement with IAN.
Accordingly, we deny Counts One and Two of the Complaint.37
B. AT&T Has Not Demonstrated that the Access Revenue-Sharing
Arrangement Between Jefferson and IAN Violated Section
202(a) of the Act.
15. AT&T cursorily contends that Jefferson discriminated against
its end users, in violation of section 202(a) of the Act,38 by
failing to use all of its access revenues to maintain its
network.39 AT&T's contention fails to state a discrimination
claim under section 202(a), because AT&T fails to allege that
Jefferson treated one customer differently from another.40
Notably, AT&T fails to allege either that (i) Jefferson
offered a better deal to IAN than to other similarly situated
end-user customers, or (ii) Jefferson treated one IXC
differently than others in its provision of interstate access
services. AT&T simply argues that Jefferson's network as a
whole could have been better, had Jefferson not shared
revenues with IAN. Whatever claim this odd argument may
state, it is not one under section 202(a). Thus, we deny
Count Three of AT&T's Complaint.41
16. Although we deny AT&T's complaint, we emphasize the
narrowness of our holding in this proceeding. We find simply
that, based on the specific facts and arguments presented
here, AT&T has failed to demonstrate that Jefferson violated
its duty as a common carrier or section 202(a) by entering
into an access revenue-sharing agreement with an end-user
information provider. We express no view on whether a
different record could have demonstrated that the revenue-
sharing agreement at issue in this complaint (or other
revenue-sharing agreements between LECs and end user
customers) ran afoul of sections 201(b), 202(a), or other
statutory or regulatory requirements.
V. ORDERING CLAUSES
17. ACCORDINGLY, IT IS ORDERED, pursuant to sections 1, 4(i),
4(j), 201, 202, and 208 of the Communications Act of 1934, as
amended, 47 U.S.C. §§ 151, 154(i), 154(j), 201, 202, and 208,
that the above-captioned complaint filed by AT&T IS DENIED IN
ITS ENTIRETY, and this proceeding is TERMINATED WITH
18. IT IS FURTHER ORDERED, pursuant to sections 1, 4(i), 4(j),
201, 202, and 208 of the Communications Act of 1934, as
amended, 47 U.S.C. §§ 151, 154(i), 154(j), 201, 202, and 208,
that Jefferson's Motion to Dismiss (filed February 18, 1997),
Jefferson's Motion to Compel (filed May 6, 1997), and AT&T's
Motion to Compel (filed May 6, 1997) are DENIED.
FEDERAL COMMUNICATIONS COMMISSION
Magalie Roman Salas
1 47 U.S.C. § 208.
2 47 U.S.C. § 202(a).
3 47 U.S.C. § 201(b).
4 See generally Hi-Tech Furnace Systems, Inc. v. FCC, 224
F.3d 781, 787 (D.C. Cir. 2000) (affirming that the burden of
proof is on the complainant in a proceeding conducted under 47
U.S.C. § 208).
5 AT&T Corp. v. Jefferson Telephone Company, Complaint,
File No. E-97-07 (filed Dec. 23, 1996) at 2, ¶ 4 (``Complaint'');
AT&T Corp. v. Jefferson Telephone Company, Answer of Jefferson
Telephone Company, File No. E-97-07 (filed Feb. 18, 1997) at 1, ¶
4 (``Answer''); AT&T Corp. v. Jefferson Telephone Company,
Initial Brief of AT&T Corp., File No. E-97-07 (filed Oct. 31,
1997) at 1 (``AT&T Brief''). Jefferson claims that it was a
connecting carrier within the meaning of section 2(b)(2) of the
Act. Jefferson Brief at 3-4, citing 47 U.S.C. § 152(b)(2).
Section 2(b)(2) of the Act provides, in pertinent part:
``[N]othing in the Act shall be construed to apply or to give the
Commission jurisdiction with respect to . . . any carrier engaged
in interstate or foreign communication solely through physical
connection with the facilities of another carrier . . . , except
that sections 201 through 205 of this Act, both inclusive, shall
. . . apply to [such] carriers . . . .'' 47 U.S.C. § 152(b)(2).
Jefferson asserts that it is engaged in interstate communication
solely through physical connection with other carriers, so
section 2(b)(2) immunizes it from complaints filed pursuant to
section 208 of the Act; in Jefferson's view, only sections 201
through 205 of the Act apply to it, and not section 208.
Jefferson Brief at 3-4, citing Comtronics, Inc. v. Puerto Rico
Telephone Co., 553 F.2d 701, 704-07 (1st Cir. 1977). The
Commission has consistently rejected this interpretation of
section 2(b)(2) of the Act, and held that section 208 applies
even to connecting carriers. See, e.g., Com Services, Inc. v.
The Murraysville Telephone Co., Memorandum Opinion and Order, 100
FCC 2d 210, 217, ¶ 16 (1985); TPI Transmission Services, Inc. v.
Puerto Rico Telephone Co., Memorandum Opinion and Order, 4 FCC
Rcd 2246, 2248 n.19 (Com. Car. Bur. 1989)(both declining to
follow Comtronics, and relying on Ward v. Northern Ohio Telephone
Co., 300 F.2d 816, 819-21 (6th Cir. 1962), instead).
Accordingly, even assuming, arguendo, that Jefferson was a
``connecting carrier'' under section 2(b)(2) of the Act, we
reject Jefferson's assertion that it is immune from complaints
filed pursuant to section 208.
6 Complaint at 2, ¶ 4; Answer at 1, ¶ 4.
7 Complaint at 2, ¶ 5; Answer at 1, ¶ 5; AT&T Brief at 1;
AT&T Corp. v. Jefferson Telephone Company, Initial Brief of
Jefferson Telephone Company, File No. E-97-07 (filed Oct. 31,
1997) at 2 (``Jefferson Brief). The applicable NECA rate for
terminating access service at that time was between $.06 and $.07
per minute. Complaint at 2, ¶ 5; Answer at 1, ¶ 5.
8 AT&T Brief at 2, Ex. 2; Jefferson Brief at 1-2.
9 Complaint at 3, ¶ 6 n.1; Answer at 1-2. ¶ 6; AT&T Brief
at 3; Jefferson Brief at 2.
10 Complaint at 3, ¶ 6; Answer at 2, ¶ 6; Jefferson Brief
at 2; AT&T Brief at 3. See Jefferson Brief at Exhibit 1,
Declaration of James L. Daubendiek, at 2-3, ¶ 6 (``Daubendiek
Declaration'') (stating that ``[t]he caller paid the tariffed
long-distance rates assessed by whichever interexchange carrier
the caller chose to use.'').
11 See generally Total Telecommunications Services, Inc.,
and Atlas Telephone Company, Inc. v. AT&T Corp., Memorandum
Opinion and Order, FCC 01-84, 16 FCC Rcd 5726, 5729, ¶ 6 (2001).
12 Complaint at 4, ¶ 8; AT&T Brief at 4; Jefferson Brief
at 2; Daubendiek Declaration at 2-3, ¶ 6.
13 Complaint at 2-3, ¶ 6; Answer at 2, ¶ 6; AT&T Brief at
1-2; Jefferson Brief at 2. See Daubendiek Declaration at 2, ¶ 5.
14 See AT&T Brief at Confidential Exhibit 4, paragraph 2,
detailing the obligations of IAN pursuant to the agreement
between Jefferson and IAN. In a letter dated June 11, 2001,
Jefferson explicitly granted the Commission permission to discuss
publicly this section of the agreement. See AT&T Corp. v.
Jefferson Telephone Company, Letter from James U. Troup and James
H. Lister, Counsel for Jefferson Telephone Co., to Warren
Firschein, Attorney, Enforcement Bureau, FCC, File No. E-97-07
(dated June 11, 2001).
15 This arrangement stimulated traffic and boosted
Jefferson's terminating access revenues. While the arrangement
was in place, Jefferson terminated as much as 2,000,000 minutes
per month, whereas after the arrangement ended, Jefferson
terminated about 130,000 minutes per month. Complaint at 3-4, ¶
7; Answer at 2, ¶ 7; AT&T Brief at 4; AT&T Brief at Ex. 9, AT&T
Corp. v. Jefferson Telephone Company, Defendant's Response to
AT&T Corp.'s First Set of Interrogatories, File No. E-97-07
(filed Apr. 21, 1997), Response to Interrogatory No. 4.
16 Jefferson Brief at 1; Daubendiek Declaration at 2, ¶ 4.
17 Jefferson argues that AT&T's claims are time-barred
because AT&T knew or should have known of Jefferson's revenue-
sharing arrangement with IAN more than two years prior to the
filing of the complaint. AT&T Corp. v. Jefferson Telephone
Company, Reply Brief of Jefferson Telephone Company, File No. E-
97-07 (filed Nov. 7, 1997) at 3-4 (``Jefferson Reply''). See 47
U.S.C. § 415(a) (providing that an action to recover charges must
be initiated within two years from the time the cause of action
accrues). In support of its argument, Jefferson relies solely on
the fact that AT&T appended to its Initial Brief a newspaper
article from the San Diego Union-Tribune dated November 14, 1994
that describes the revenue-sharing arrangement. Jefferson Reply
at 3. See AT&T Brief at Ex. 2. Thus, according to Jefferson,
``the window of opportunity to file a complaint closed on
November 14, 1996.'' Jefferson Reply at 3. We disagree. Just
because AT&T submitted the newspaper article in this record does
not demonstrate that an AT&T representative read the article at
the time it was published. Without more, it would be equally
reasonable to conclude that AT&T first learned of the article in
the course of prosecuting this case. Thus, the record does not
support a conclusion that AT&T's claims are time-barred.
18 Complaint at 4, ¶ 10. See id. at 4-6, ¶¶ 11-16. AT&T
asserts this claim in two substantively identical causes of
action (Counts One and Two), which we consider collectively. In
its Initial Brief, AT&T cursorily maintains for the first time
that the revenue-sharing arrangement between Jefferson and IAN
also violated section 201(b) by ``evading the requirements'' of
section 228 of the Act, 47 U.S.C. § 228, known as the Telephone
Disclosure and Dispute Resolution Act (``TDDRA''). AT&T Brief at
15-17. AT&T failed to raise this issue in its Complaint,
however. Therefore, the record provides an inadequate basis on
which to assess the merits of this potentially challenging
argument. See, e.g., Consumer.Net v. AT&T Corp., Order, 15 FCC
Rcd 281, 300, ¶ 40 n.93 (1999) (declining to consider an argument
raised for the first time in the briefs); Building Owners and
Managers Association International v. FCC, ¾ F.3d ¾ , 2001 WL
754910, n.14 (D.C. Cir. 2001) (declining to address an issue
raised cursorily in the brief). Accordingly, we decline to
address this issue, and restrict our discussion of section 201(b)
to AT&T's ``common carriage'' claim.
19 Complaint at 4, ¶ 11. See id. at 4-6, ¶¶ 11-16.
20 Complaint at 7, ¶ 20. See id. at 6-7, ¶¶ 18-21.
21 Complaint at 7-8.
22 AT&T Brief at 7-15. See Complaint at 4-5, ¶¶ 10-12;
AT&T Reply at 5-8.
23 AT&T Brief at 7, relying on Southwestern Bell Telephone
Co. v. FCC, 19 F.3d 1475, 1479 (D.C. Cir. 1994); National Ass'n
of Regulatory Utility Commissioners v. FCC, 533 F.2d 601, 608-09
(D.C. Cir. 1976); National Ass'n of Regulatory Utility
Commissioners v. FCC, 525 F.2d 630, 641-42 (D.C. Cir. 1976).
24 AT&T Brief at 7-8, relying on Southwestern Bell
Telephone Co. v. FCC, 19 F.3d at 1480; NARUC v. FCC, 525 F.2d at
25 Complaint at 4-5, ¶¶ 10-13; AT&T Brief at 7-15; AT&T
Reply at 5-9; AT&T Corp. v. Jefferson Telephone Company,
Opposition to Motion to Dismiss, File No. E-97-07 (filed Mar. 5,
1997) at 3-4 (``Opposition to Motion to Dismiss'').
26 See Southwestern Bell v. FCC, 19 F.3d at 1480-81
(stating that, ``[i]f the carrier chooses its clients on an
individualized basis and determines in each particular case
`whether and on what terms to serve' and there is no specific
regulatory compulsion to serve all indifferently, the entry is a
private carrier for that particular service.''). See also NARUC
v. FCC, 525 F.2d at 640-42.
27 AT&T Brief at 5. See Complaint at 5, ¶ 12.
28 AT&T Brief at 9. See Complaint at 4-5, ¶¶ 10-13; AT&T
Brief at 7-15; AT&T Reply at 5-9; Opposition to Motion to Dismiss
29 See Southwestern Bell v. FCC, 19 F.3d at 1480-81; NARUC
v. FCC, 533 F.2d at 608-09; NARUC v. FCC, 525 F.2d at 641.
30 NARUC v. FCC, 533 F.2d at 608-09. See NARUC v. FCC,
525 F.2d at 641 (stating that ``to be a common carrier one must
hold oneself out indiscriminately to the clientele one is suited
to serve . . . .'').
31 Jefferson Brief at 7.
32 See note 16, supra.
33 Policies and Rules Governing Interstate Pay-Per-Call
and Other Information Services Pursuant to the Telecommunications
Act of 1996, Order and Notice of Proposed Rule Making, 11 FCC Rcd
14738 (1996) (``Pay-Per-Call NPRM''); Ronald J. Marlowe, 10 FCC
Rcd 10945 (CCB-ED 1995), application for review pending
34 Pay-Per-Call NPRM, 11 FCC Rcd at 14752, ¶ 41. See id.
at 14755-56, ¶¶ 47-48.
35 See Marlowe Letter, 10 FCC Rcd at 10945.
36 For example, the Marlowe Letter suggested that,
``[t]hrough payments to an information provider . . . , a carrier
would abandon objectivity and acquire a direct interest in
promoting the delivery of calls to a particular number for the
provision of a particular communication.'' Marlowe Letter, 10
FCC Rcd at 10945. As described above, we disagree. As long as a
carrier does not make individualized decisions in specific cases
concerning whether and on what terms to provide service, a
carrier does not abandon the requisite ``objectivity'' by sharing
revenues with an information provider.
37 We note that AT&T explicitly disavowed any claim that
the terminating access rate charged by Jefferson was unjust and
unreasonable under section 201(b). AT&T Brief at 12. We express
no view on the reasonableness of Jefferson's rates.
38 Section 202(a) of the Act makes it unlawful ``for any
common carrier to make any unjust or unreasonable discrimination
in charges, practices, . . . facilities, or services . . . or to
make or give any undue or unreasonable preference or advantage to
any particular person.'' 47 U.S.C. § 202(a).
39 Complaint at 6-7, ¶¶ 17-21; AT&T Brief at 17-19.
40 See generally PanAmSat Corp. v. COMSAT Corp.,
Memorandum Opinion and Order, 12 FCC Rcd 6952, 6965, ¶ 34 (1997);
American Message Centers v. FCC, 50 F.3d 35, 40 (D.C. Cir. 1995);
Competitive Telecommunications Association v. FCC, 998 F.2d 1058,
1062 (D.C. Cir. 1993).
41 In light of all of the foregoing rulings, Jefferson's
Motion to Dismiss, Jefferson's Motion to Compel, and AT&T's
Motion to Compel are denied as moot. AT&T Corp. v. Jefferson
Telephone Company, Motion to Dismiss, File No. E-97-07 (filed
Feb. 18, 1997) (``Jefferson's Motion to Dismiss''); AT&T Corp. v.
Jefferson Telephone Company, Motion to Compel, File No. E-97-07
(filed May 6, 1997) (``Jefferson's Motion to Compel''); AT&T
Corp. v. Jefferson Telephone Company, Motion to Compel, File No.
E-97-07 (filed May 6, 1997) (``AT&T's Motion to Compel'').