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

In the Matter of                 )
Graphnet, Inc.,                  )
            Complainant,         )
            v.                   )    File No. E-94-41
AT&T Corp.,                      )
            Defendant.           )


   Adopted:  December 21, 2001          Released:    January   8, 


By the Commission:

                        I.   INTRODUCTION

In this Memorandum Opinion and Order, we deny all of the claims 
asserted in a complaint filed by Graphnet, Inc. (``Graphnet'') 
against AT&T Corp. (``AT&T'') pursuant to section 208 of the 
Communications Act of 1934, as amended (``Act'').1  Specifically, 
we reject Graphnet's arguments that AT&T unlawfully routed 
through carriers in other countries telex traffic that AT&T 
received at its switch in the United States and that ultimately 
was destined for Graphnet's network.2  We also reject Graphnet's 
claim that AT&T violated Commission rules during the course of 
this proceeding.

In addition, we grant one of the counterclaims filed by AT&T 
against Graphnet.  In particular, we find that Graphnet's Tariff 
F.C.C. No. 5 involved an unjust and unreasonable practice in 
contravention of section 201(b) of the Act.3

                         II.  BACKGROUND

Graphnet and AT&T are providers of domestic and international 
telex service, also known as ``record carriers.''4  In order to 
provide telex service to their customers, record carriers 
interconnect their networks.  At the times relevant to this 
dispute, the Record Carrier Competition Act (``RCCA''), codified 
at former section 222 of the Act, contained a general 
interconnection standard that required record carriers to make 
available, upon reasonable request, full interconnection with the 
facilities of other record carriers that are used primarily to 
provide record communications service.5  The RCCA provided that 
interconnection furnished pursuant to a written agreement must be 
``upon terms and conditions which are just, fair, and 
reasonable.''6 This dispute concerns the terms and conditions 
under which Graphnet made its facilities available to AT&T for 
the termination of domestic and international telex calls that 
traversed AT&T's network and were destined for Graphnet's 

In February 1993, Graphnet and AT&T entered into a contract 
entitled ``Interconnection Agreement.''  The Interconnection 
Agreement specified the types of trunks that would route telex 
traffic between the two carriers and established each carrier's 
telex termination rates:  $.45 per minute in whole minute 
increments for traffic carried by Graphnet and terminated on 
AT&T's network; and $.78 per minute in whole minute increments 
for traffic carried by AT&T and terminated on Graphnet's 
network.7  The Interconnection Agreement included a June 30, 
1993, expiration date, which could be extended by mutual 
agreement.8  Although Graphnet wished to continue its contractual 
relationship with AT&T after June 30, 1993, AT&T opted not to do 
so, apparently citing its then desire to ``revert to the 
conditions of [Graphnet's] interconnect tariff [Tariff F.C.C. No. 
5] and the rules of the FCC.''9

Graphnet's Tariff F.C.C. No. 5, which took effect on March 26, 
1992, contained rates that were significantly higher than those 
of the Interconnection Agreement.  Specifically, the tariff 
charged $3.00 for each minute or fraction thereof for terminating 
either an interconnected domestic or international telex call.  
Moreover, the $3.00 charge applied to all calls terminated on 
Graphnet's network ``that have, at any point, utilized the 
facilities of another United States OCC [Other Common 
Carrier].''10  In other words, if AT&T handled traffic intended 
for Graphnet's network, but did not directly interconnect with 
Graphnet, it nonetheless would be liable to Graphnet for the 
$3.00 charge.  Graphnet's tariffed termination rate was 
significantly higher than the average rate of other telex 
carriers, which ranged from approximately $.80 to $.88.11

Notwithstanding its Tariff F.C.C. No. 5, Graphnet entered into 
interconnection agreements with other domestic record carriers 
specifying termination rates that were lower than $3.00 per 
minute.  For example, Graphnet contractually agreed to an $.88 
per minute rate for TRT Telecommunications Corp. telex messages 
that were terminated on Graphnet's network.12  Similarly, 
pursuant to a 1992 agreement resolving a rate dispute between 
Graphnet and MCI International, Inc., Graphnet agreed to a $1.23 
per-minute termination rate.13

AT&T viewed Graphnet's tariffed rate as excessive and chose not 
to pass traffic directly to Graphnet.  Instead, AT&T routed 
through foreign affiliates, such as Unitel Communications, Inc. 
(``Unitel''), domestic- and foreign-originated telex traffic that 
it received at its United States switch destined for Graphnet's 
network.14  Thus, instead of delivering traffic directly to 
Graphnet, AT&T sent the traffic to Unitel in Canada, which then 
directed the traffic to Graphnet in the United States.  Pursuant 
to this relationship, AT&T paid Unitel its applicable charges, 
and Unitel paid Graphnet a $.28 per minute termination charge 
that Unitel and Graphnet had negotiated in an interconnection 

Graphnet contends that AT&T's routing practice was 
``inefficient'' and ``unnatural,'' resulted in degraded service, 
and unlawfully deprived Graphnet of revenue.  On February 1, 
1994, Graphnet filed a formal complaint against AT&T pursuant to 
section 208 of the Act.  Graphnet's complaint asserts claims for 
(1) violation of Graphnet's Tariff F.C.C. No. 5 and section 
203(c) of the Act; (2) violation of sections 203(a) and (c) and 
214(a) of the Act; (3) violation of the Act and the ``antitrust 
laws'';16 (4) violation of sections 222(b)(1) and (c)(1)(B), 
202(a), and 201(b) of the Act; (5) violation of the Commission's 
International Settlements Policy; and (6) violation of the 
Commission's ``No Third Country Routing Via Canada'' Policy.17 
The complaint seeks a cease and desist order, an unspecified 
amount of damages, and a monetary forfeiture.

On April 15, 1994, AT&T answered the complaint, denying the 
violations alleged by Graphnet and advancing various affirmative 
defenses.  In addition, the answer asserts three counterclaims 
against Graphnet.18  First, AT&T alleges that, in violation of 
section 201(b) of the Act, Graphnet's Tariff  F.C.C. No. 5 
contained unjust and unreasonable charges, terms, and practices.  
Second, AT&T claims that Graphnet engaged in unlawful 
discrimination, in violation of section 202(a) of the Act, by 
imposing the $3.00 termination charge on AT&T while charging 
other carriers a different, lower rate for the same service.  
Finally, AT&T avers that, by charging other carriers a rate that 
differs from the tariffed rate, Graphnet violated section 203 of 
the Act.  AT&T requests declaratory relief, as well as a cease 
and desist order.19

                      III.      DISCUSSION

     III.A.    Graphnet's Claims Are Denied.

          III.A.1.  AT&T Did Not Violate Section 203(c) of the 

Section 203(c) of the Act requires common carriers to file and 
publish schedules of their charges and practices, i.e., 
tariffs.20  Moreover, section 203 prohibits carriers from 
deviating from the rates and practices contained in their 

Graphnet argues that AT&T violated Graphnet's Tariff F.C.C. No. 5 
by not paying the $3.00 per-minute termination charge contained 
in that tariff.  According to Graphnet, the filed rate doctrine 
requires compliance with effective tariffs; and AT&T's ``admitted 
circumvention'' of Graphnet's tariff, allegedly accomplished by 
not routing traffic directly to Graphnet, purportedly constituted 
a violation of section 203(c) of the Act.22  In addition, 
Graphnet avers that AT&T violated its own tariffs by circuitously 
routing Graphnet's telex calls via Unitel ``without adequate 
notice in writing'' to Graphnet.23

We agree with AT&T that Graphnet has not met its burden of 
proving a violation of section 203(c).  As is evident from the 
statute's language, the obligations imposed by section 203(c) 
apply to the carrier that filed the tariff.24  In this case, that 
carrier is Graphnet, which seeks to enforce its tariff against 
AT&T.  Section 203(c) simply does not control AT&T's obligations 

Graphnet's claim that AT&T violated two of its own tariffs also 
is unavailing.  As a preliminary matter, neither of the tariffs 
applied to traffic routed from AT&T to other carriers within the 
United States.26  In any event, the tariffs' notice requirements 
never were triggered.  AT&T's tariffs required AT&T to provide 
``adequate notice in writing'' to interconnected carriers if 
changes to AT&T's facilities or equipment ``can reasonably be 
expected to render any interconnected carrier's facilities 
incompatible with [AT&T's] communications facilities, or require 
modification or alteration of an interconnected carrier's 
facilities, or otherwise materially affect the use or performance 
of an interconnected carrier's facilities ....''27  Graphnet has 
failed to demonstrate that AT&T altered its facilities in a way 
that necessitated changes to, or impaired the operation of, 
Graphnet's facilities.  To be sure, Graphnet has asked the 
Commission to find that AT&T's routing practice ``degrade[d] 
service'' by causing routing delays and subjecting calls to 
``interruptions and incompletions.''28  However, as discussed 
below, Graphnet has offered no probative evidence that these 
problems actually occurred.29

Graphnet asserts that two pieces of evidence reflect service 
impairments caused by AT&T's routing practice.  First, Graphnet 
describes a test that it conducted to determine how AT&T would 
reroute telex calls to Graphnet customers if AT&T's Hong Kong 
route were compromised.  Specifically, Graphnet ``temporarily 
disabl[ed] its Hong Kong circuits'' and then transmitted telex 
calls to itself via AT&T.30  According to Graphnet, ``[n]one of 
these test calls were transmitted by AT&T, and Graphnet received 
the symbol `NA,' meaning not available on its test messages.''31  
In its reply brief and accompanying affidavit, AT&T explained 
that the message Graphnet received stands for ``not admitted,'' 
which indicates an error in the placement of the calls, not an 
error in the routing of the calls.32  Graphnet does not dispute 
AT&T's explanation, and we have no reason to question its 

Second, Graphnet offers a chart purportedly illustrating its 
business losses.  The chart states that the ``record shows that 
Graphnet lost ... customers, ... some undoubtedly to AT&T, during 
the period, July-December 1993, as a result of AT&T's practices 
of circuitously routing U.S. and foreign origin telex calls via 
Unitel, Canada.''33  But even assuming that the customers 
identified on the chart opted not to use Graphnet's service, the 
record contains no facts demonstrating why those individuals left 
Graphnet, let alone that their leaving had anything to do with 
service disruptions caused by AT&T.  In the absence of such 
evidence, we cannot conclude that Graphnet's allegedly lost 
business is attributable to any claimed ``degrade[d] service'' 
resulting from AT&T's routing practices.
          III.A.2.  AT&T Did Not Unreasonably Discriminate 
               Against Graphnet's Customers in Violation of 
               Section 202(a).

Section 202(a) makes it unlawful for any common carrier to 
discriminate unjustly or unreasonably in its provision of like 
communication service.34  In resolving a claim that a carrier has 
discriminated in violation of section 202(a), we employ a three-
step inquiry:  (1) whether the services at issue are ``like''; 
(2) if the services are ``like,'' whether there are differences 
in the terms and conditions pursuant to which the services are 
provided; and (3) if there are differences, whether they are 
reasonable.35  When a complainant establishes the first two 
components, the burden of persuasion shifts to the defendant 
carrier to justify the discrimination as reasonable.36

Graphnet contends that AT&T's deliberate routing via non-domestic 
carriers of telex calls inbound to Graphnet's customers, but not 
telex calls inbound to AT&T's customers, constituted unreasonable 
discrimination.  According to Graphnet, AT&T has succeeded in a 
plan unlawfully to induce Graphnet's subscribers to shift their 
business to AT&T.37

Because AT&T did not argue to the contrary, we assume, without 
deciding, that the service AT&T provided to Graphnet's customers 
(i.e., delivery of telex traffic to those customers) is ``like'' 
the service AT&T provided to its own customers, and that there is 
a disparity in the manner in which AT&T provided the service 
(i.e., by routing traffic destined for Graphnet's network, but 
not traffic destined for AT&T's network, through carriers in 
other countries).38  Thus, the burden of persuasion shifts to 
AT&T to justify its routing practice as reasonable.

In our view, AT&T has met its burden.  By directing traffic 
through carriers in other countries, AT&T enjoyed a dramatic cost 
savings (e.g., a $.28 per minute rate for telex calls routed to 
Graphnet via Unitel versus a $3.00 per minute rate for telex 
calls routed directly to Graphnet).  Savings of this nature 
constitute a reasonable, economic rationale for treating 
Graphnet's customers differently.39  Because AT&T has proffered a 
legitimate reason for its disparate treatment of Graphnet's 
customers, a reason that Graphnet does not dispute, we deny 
Graphnet's section 202(a) claim.

          III.A.3.  AT&T's Routing Practices Did Not Violate  the 

Two subsections of the RCCA - which, as noted above, was repealed 
after Graphnet filed this case - are at issue.  The first, 
section 222(b)(1), was captioned ``Exercise of authorities by 
Commission'' and required the Commission to ``promote the 
development of fully competitive domestic and international 
markets in the provision of record communications service'' and 
to ``forbear from exercising its authority ... as the development 
of competition among record carriers reduces the degree of 
regulation necessary to protect the public.''40  The second, 
subsection 222(c)(1)(B), established rules for the terms and 
conditions on which a United States record carrier must make 
available its separate domestic facilities to other international 
record carriers, and its separate international facilities to 
other domestic record carriers, for the origination and 
termination of international traffic.41

Graphnet argues that section 222 was enacted for the purpose of 
promoting the development of fully-competitive domestic and 
international record communications service markets.  Graphnet 
asserts that AT&T's practice of routing traffic to other 
countries contravened this pro-competitive policy, because the 
resultant loss of customers deprived Graphnet of revenue it would 
have used to compete with AT&T.42

We reject Graphnet's claim.  Section 222(b)(1) did not govern the 
conduct of record carriers.  It was a general mandate to the 
Commission to promote competition in domestic and international 
telex markets and a directive to forbear from exercising its 
authority as the need for regulation decreased.  Although 
Graphnet is correct that the subsection expressed a pro-
competitive policy, we decline to transform this directive to the 
Commission into a basis for Graphnet to sue AT&T. 

Section 222(c)(1)(B) similarly has no bearing on this case.  The 
provisions of the subsection were designed to protect 
unaffiliated record carriers from discrimination by affiliated 
domestic and international carriers.  Graphnet makes no 
allegation that AT&T refused to interconnect with Graphnet on the 
same basis that AT&T interconnected with its affiliated entities.

We find neither section 222(b)(1) nor section 222(c)(1)(B) to be 
pertinent to this case.  Accordingly, we deny Graphnet's claim 
that AT&T's routing practices violated the RCCA.

          III.A.4.  Routing of Domestic Traffic Via a Carrier in 
               Canada Did Not Contravene AT&T's Section 214 

Among other things, section 214(a) of the Act prohibits a carrier 
from engaging in transmission over any line without first 
obtaining from the Commission a certificate that such 
transmission is required by the public convenience and 
necessity.43  The statute further forbids a carrier from 
discontinuing, reducing, or impairing service to a community, or 
part of a community, without first obtaining from the Commission 
a certificate that the public convenience and necessity will not 
be affected adversely.44

Graphnet argues that, during the relevant period, the Commission 
required carriers to have ``explicit country-by-country and 
product-by-product Section 214 authority'' (i.e., the Commission 
did not grant ``beyond country'' authority - also known as ``and 
beyond'' authority - by implication), and that AT&T's section 214 
authority for the United States did not permit AT&T to transmit 
telex calls from the United States to Canada, and vice versa.45  
Graphnet further maintains that AT&T violated section 214 by not 
seeking FCC authority to ``reduce or impair'' service before 
unilaterally terminating its connections with Graphnet and 
routing traffic via Unitel.46

We conclude that AT&T did not violate section 214(a) when it 
transmitted foreign-originated, inbound telex traffic that it 
received at its New Jersey switching center through Canada via 
Unitel, which then terminated that traffic with Graphnet.47  
While this foreign-originated, inbound telex traffic constituted 
``foreign communication'' within the meaning of the Act,48 the 
portion of this communication that AT&T routed through Canada was 
strictly domestic, contrary to Graphnet's assertion.49  As the 
Commission explained in its Benchmarks Order, there are three 
specific network elements (and their related cost components) 
that are used to provide international switched telephone (or, as 
here, telex) service:  (1) international transmission facilities; 
(2) international switching facilities; and (3) national 
extension (domestic transport and termination).  The 
international facility component consists of international 
transmission facilities, both cable and satellite, including the 
link to international switching facilities.  The international 
gateway component consists of international switching centers and 
associated transmission and signaling equipment.  The national 
(i.e., domestic) extension component consists of national 
exchanges, national transmission, and the local loop facilities 
used to distribute international service within a country.50  The 
service that AT&T procured from Unitel fell within this domestic 
extension component.  The fact that AT&T routed this domestic leg 
of its international telex traffic, which it received from its 
foreign carrier correspondents, through a foreign country prior 
to its termination with Graphnet, does not transform this leg 
into an international communication.  Section 3 of the Act 
categorizes communication ``between points within the United 
States but through a foreign country'' as ``interstate 
communication.''51  Thus, the communications at issue in this 
case were strictly domestic.

At the time of the activity about which Graphnet complains, AT&T 
was regulated as a dominant carrier in its provision of United 
States domestic service.52  Consequently, AT&T's permissible 
activities were governed by the terms of its section 214 
authorizations, as well as the Commission's rules and 
regulations.  Graphnet does not cite any Commission rule or 
regulation prohibiting AT&T's domestic routing practice, nor does 
it point to any provision in AT&T's domestic or international 
authorizations barring AT&T from using its United States-Canada 
lines for the provision of United States domestic service.  
Absent any such prohibition, we cannot find that AT&T was engaged 
in the unauthorized provision of service.53

Finally, we reject Graphnet's ``reduce or impair'' analysis.  In 
determining the need for prior authority to discontinue, reduce, 
or impair service under Section 214(a), the primary focus should 
be on the end service provided by a carrier to a community or 
part of a community, i.e., the using public.  Thus, in situations 
where one carrier attempts to invoke Section 214(a) against 
another carrier, concern should be had for the ultimate impact on 
the community served rather than on any technical or financial 
impact on the carrier itself.  We find that ``service to a 
community or part of a community'' was not discontinued, reduced, 
or impaired in this instance.  We so find because, as discussed 
above, Graphnet has failed to produce any persuasive evidence of 
service disruptions resulting from AT&T's routing practice.

          III.A.5.  AT&T Did Not Violate the Commission's 
               International Settlements Policy. 

The Commission's International Settlements Policy (``ISP'') 
requires:  (1) the equal division of the accounting rate between 
a United States carrier and a foreign carrier;54 (2) 
nondiscriminatory treatment of United States carriers (i.e., all 
United States carriers must receive the same accounting rate, 
with the same effective date); and (3) the proportionate return 
of inbound traffic.55  The Commission adopted the ISP to prevent 
foreign monopoly carriers from playing United States 
international common carriers against one another, or engaging in 
``whipsawing,'' to the disadvantage of United States carriers and 
United States consumers.56

Graphnet claims that the ISP was designed to ``curb the diversion 
of U.S. carrier revenues to foreign telecommunications 
entities.''57  According to Graphnet, AT&T violated the policy by 
diverting revenue away from Graphnet to foreign carriers such as 
Unitel.  In Graphnet's view, much of the traffic at issue was 
international, because it originated in other countries and was 
carried by AT&T from its switching center in New Jersey.58

We reject Graphnet's claim under the ISP.  The fact that much of 
the traffic that AT&T delivered to Graphnet originated in foreign 
points is irrelevant.  As explained above, the portion of the 
international communication that AT&T routed via Unitel's 
facilities in Canada was strictly domestic.  Once AT&T received 
an inbound international telex message at its New Jersey 
switching center (which was the end of the international leg of 
the message), its subsequent delivery of the message to Graphnet 
involved the provision of domestic transport service, 
notwithstanding AT&T's routing of the traffic through Canada.59  
The ISP addresses only the terms and conditions under which a 
United States carrier agrees to exchange United States inbound 
and outbound international traffic with a foreign-authorized 
carrier.60  The ISP does not address - and imposes no 
requirements regarding - the domestic routing of inbound and 
outbound international traffic between United States-authorized 
carriers.  Thus, the manner in which AT&T delivered inbound 
international telex traffic from its New Jersey switch to 
Graphnet, and the cost that AT&T incurred in delivering such 
traffic to Graphnet, is beyond the ISP's purview.

          III.A.6.  Commission Decisions Requiring the Direct 
               Routing of International Traffic Are Irrelevant to 
               This Case.

Graphnet claims that AT&T's routing practices violated two 
related Commission policies, which Graphnet dubs the ``Direct 
Routes Policy'' and the ``No Third Country Routing Via Canada 
Policy.''61  As described by Graphnet, the Direct Routes Policy 
encouraged carriers to route traffic directly to its destination, 
and to ensure that several direct routes are available, so that 
service quality and network reliability will be maintained.62  
Graphnet argues that alleged delays in the routing of Graphnet-
bound telex calls and relegation of Graphnet traffic to a 
``single, tenuous, circuitous route'' contravened this policy.63  
According to Graphnet, the No Third Country Routing Via Canada 
Policy prohibits carriers from routing international traffic 
through Canada.64  Graphnet further maintains that AT&T is 
estopped from arguing in this case that its circuitous Canadian 
routings were permissible, because AT&T allegedly sought 
Commission adoption of the No Third Country Routing Via Canada 

As AT&T contends,66 Graphnet's reliance on these policies is 
misplaced.  Like the ISP, these policies pertained to the 
international transmission and switching of United States inbound 
and outbound international traffic.67  They did not apply to the 
domestic routing of United States international traffic.  Because 
the instant case involves only the domestic component of inbound, 
foreign-originated, telex traffic,68 these Commission policies 
have no bearing.  Accordingly, we deny Graphnet's claim that 
AT&T's re-routing practice breached Commission policy.

          III.A.7.  AT&T Did Not Violate the Commission's Rules 
               During the Course of This Proceeding.

In its briefs and subsequent submissions, Graphnet maintains that 
a number of AT&T's actions during this litigation violated the 
Commission's rules.  The alleged transgressions include AT&T's 
alleged failure (1) to be candid and forthcoming to the 
Commission regarding AT&T's relationship with, and participation 
in, Unitel; (2) to file a timely answer to Graphnet's first 
Supplemental Complaint; (3) to send a company representative to a 
status conference at the Commission; (4) to pay a filing fee with 
its counterclaim; and (5) to file an answer to Graphnet's second 
and third supplemental complaints.69

We conclude that AT&T did not violate the Commission's rules.  
First, we agree with AT&T that statements it made in reporting 
its equity ownership in Unitel are not germane to the case.  AT&T 
ordered service from Unitel pursuant to Unitel's tariff and, 
therefore, paid the same rates and was subject to the same terms 
and conditions as other carriers.70  Accordingly, Graphnet's 
allegations of a conspiracy between AT&T and Unitel have no 
force.71  Second, we credit AT&T's explanation for failing to 
timely file an answer to the first Supplemental Complaint (i.e., 
that AT&T was unable to locate a service copy of the pleading),72 
and, therefore, accept AT&T's late-filed answer.  Third, although 
it appears that AT&T failed to pay a filing fee in connection 
with its 1994 counterclaim, the rules at that time were not clear 
as to whether a defendant filing a counterclaim must pay a fee.73  
We decline Graphnet's invitation to penalize AT&T for violating 
this requirement.  Finally, there was no requirement in 1995 
(when the status conference at issue took place) that a company 
representative (as opposed to outside counsel) attend a status 
conference, absent a directive from Commission staff.74  
Consequently, AT&T's failure to send a corporate representative 
to the 1995 status conference is not actionable.

          III.A.8.  There Is No Basis for Graphnet's Section 
               201(b) Claim.

Graphnet asserts a ``catch-all'' claim that AT&T's alleged 
violations of the Act and the Commission's rules and policies 
constitute unjust and unreasonable practices in violation of 
section 201(b).75  For the reasons stated above, we find that no 
such violations occurred and therefore reject Graphnet's section 
201(b) claim.

          III.A.9.  Conclusion

In sum, we deny all of Graphnet's claims against AT&T.  Graphnet 
has failed to establish that AT&T's decision not to order 
Graphnet's tariffed service and instead to route calls through 
affiliates in foreign countries violated any provision of the Act 
or the Commission's policies.  In addition, Graphnet has not 
proven that AT&T's conduct during this proceeding contravened any 
Commission rule.

     III.B.    AT&T's Section 201(b) Counterclaim Is Granted, 
          Because Graphnet's Tariff Violated the RCCA.

As noted above, section 201(b) of the Act requires a common 
carrier's charges and practices in connection with communication 
service to be ``just and reasonable.''76 AT&T challenges as 
unjust and unreasonable, inter alia, Graphnet's practice of 
imposing the $3.00 per-minute termination charge contained in 
Tariff F.C.C. No. 5 on carriers with whom Graphnet does not 
directly interconnect.77

To support its claim, AT&T contends that there is no cost 
justification for the challenged practice.78  According to AT&T, 
Graphnet negotiated settlement payments so that they would cover 
its costs, and Graphnet received such payments from the carriers 
with whom it directly interconnected (e.g., Unitel).79  Moreover, 
AT&T claims that Graphnet's costs for terminating traffic 
received from Unitel did not differ depending on whether the 
traffic originated on Unitel's network or on AT&T's network.80  
Thus, when Graphnet received AT&T-originated traffic from Unitel, 
it purportedly recovered from Unitel all of Graphnet's costs for 
terminating such traffic.81  Accordingly, AT&T maintains that the 
practice of recovering an additional fee from any carrier whose 
network also was used in transmission of a telex message amounts 
to double recovery and ``extort[ing] payments ... when [a 
carrier] chooses not to subscribe to Graphnet's services.''82

Because the RCCA was in effect at the time AT&T filed its 
counterclaims, we apply the statute in this case.83  Section 
222(c)(2) of the RCCA directed the Commission, insofar as 
possible, to require interconnection ``based upon the costs of 
the record communications service.''84  The Commission has 
characterized section 222(c)(2) as a ``mandate of establishing 
cost based rates for interconnection.''85  Therefore, to comply 
with the RCCA, Graphnet's practice of imposing a termination 
charge on carriers with which it did not interconnect must have 
had a cost justification.86

Given the prima facie validity of AT&T's arguments,87 and the 
RCCA's requirement of cost-based rates, we conclude that, in 
order to prevail against AT&T's assertions, Graphnet was required 
to produce some cost justification for its practice of charging 
non-interconnecting carriers a termination fee.88  Graphnet has 
failed utterly to meet this burden of production, offering no 
substantive cost rationale whatsoever for the challenged 
practice.  Indeed, the only response Graphnet provides is 
speculation that the cost of terminating calls that are routed 
through carriers in other countries was ``probably higher than 
for direct calls, given the unplanned-for circuit congestion and 
resulting lost revenues.''89  In our view, this solitary and 
equivocal representation is inadequate.

We reject the other arguments Graphnet posits, none of which is 
cost-based.  Specifically, contrary to Graphnet's assertion, the 
Commission's decisions not to reject or suspend Graphnet's tariff 
are not dispositive of the section 201(b) claim.90  Those 
decisions merely constitute a determination by the Commission 
that the challenged tariff is not patently unlawful.  They do not 
preclude AT&T from initiating a section 208 complaint proceeding 
to determine whether the tariff is in fact lawful.91  Thus, in a 
section 208 complaint, the Commission ``examine[s] legal, and, 
where appropriate, policy matters to give full effect to the 
requirements that a carrier's rates, terms, and conditions are 
just, reasonable, and not unreasonably discriminatory.''92

We similarly find Graphnet's estoppel defense to be without 
merit.93  Section 208 of the Act provides that ``any person'' may 
bring a complaint against a common carrier for any violation of 
the Act.94  Graphnet cites no authority (and provides no legal 
analysis) supporting its contention that AT&T's participation in 
the Interconnection Agreement with Graphnet precludes AT&T 
subsequently from challenging Graphnet's tariffed termination 

In sum, applying the RCCA, we conclude that Graphnet has failed 
to rebut AT&T's prima facie showing that charging a non-
interconnecting record carrier a termination fee was not a cost-
based practice and, therefore, was unreasonable.  Because we find 
a violation of the RCCA, we rule in favor of AT&T on its section 
201(b) counterclaim.95

     III.C.    We Need  Not and  Do  Not Reach  AT&T's  Remaining 

We conclude above that Graphnet's practice of imposing the 
termination charge on AT&T was unlawful, and, consequently, that 
Graphnet cannot enforce the tariff against AT&T.  Because our 
conclusion in this regard results in AT&T receiving all the 
relief it seeks, we need not and do not reach its remaining 

                          IV.  MOTIONS

Each of the parties has filed a variety of motions in this 
proceeding, a number of which already have been the subject of 
oral rulings.  We herein rule on the outstanding motions.

The following motions are denied as moot:  (1) Motion to Dismiss 
or, Alternatively, to Sever and Defer AT&T's Counterclaims;97 (2) 
Motion for Severance and Expedited Adjudication of Liability 
Phase of Graphnet Complaint Proceeding;98 (3) Motion of AT&T 
Corp. for Expedited Consideration.99  In the interest of a 
complete record, we grant the following motions:  (1) Request of 
Graphnet for Leave to File Reply to AT&T Opposition;100 (2) 
Graphnet Request for Official Notice;101 and (3) Motion to Accept 
Additional Pleading.102

On three occasions, Graphnet amended its complaint.103  AT&T 
maintains that, well after the close of discovery and briefing, 
these filings improperly sought to introduce new allegations 
against AT&T, and asserts that the pleadings therefore should be 
stricken.104  Although our current formal complaint rules do not 
allow amendments to complaints,105 the rules in place when this 
action was brought did not contain a similar prohibition.  We 
agree with AT&T that the supplemental complaints to some extent 
broaden the factual allegations pertaining to Graphnet's causes 
of action.  In our view, however, the new averments are 
sufficiently related to the core claims presented in Graphnet's 
original Complaint to make striking the supplemental complaints 
inappropriate.  Accordingly, we deny AT&T's motions.

We further deny Graphnet's motions for default judgment, which 
Graphnet filed in response to AT&T's motions to strike.106  We 
believe that, in combination with AT&T's original Answer and 
answer to the Supplemental Complaint, the averments in AT&T's 
motions to strike adequately addressed Graphnet's allegations.107

                         V.   CONCLUSION

We conclude that Graphnet has failed to prove its allegations 
that AT&T violated sections 201(b), 202(a), 203(c), 214(a), 
222(b)(1), and 222(c)(1)(B) of the Act; the ISP; the ``Direct 
Routes Policy'' and ``No Third Country Routing Via Canada 
Policy''; and the Commission's rules.  Consequently, we deny 
Graphnet's claims against AT&T in their entirety.

We further conclude that Graphnet's Tariff F.C.C. No. 5 involves 
an unjust and unreasonable practice, in violation of section 
201(b) of the Act.  We therefore grant AT&T's first counterclaim.

                      VI.  ORDERING CLAUSES

ACCORDINGLY, IT IS ORDERED, pursuant to sections 1, 4(i), 4(j), 
201(b), 202(a), 203(c), 214(a), 222(b)(1), and 222(c)(1)(B) of 
the Communications Act of 1934, as amended, 47 U.S.C. §§ 151, 
154(i), 154(j), 201(b), 202(a), 203(c), 214(a), 222(b)(1), and 
222(c)(1)(B), that the complaint filed by Graphnet, Inc. against 
AT&T Corp. IS DENIED in its entirety.

IT IS FURTHER ORDERED, pursuant to sections 1, 4(i), 4(j), 
201(b), and 222(c)(2) of the Communications Act of 1934, as 
amended, 47 U.S.C. §§ 151, 154(i), 154(j), 201(b), and 222(c)(2), 
that the First Counterclaim filed by AT&T Corp. against Graphnet, 
Inc. IS GRANTED IN PART, to the extent specified herein, and 

IT IS FURTHER ORDERED, pursuant to sections 1, 4(i), 4(j), 
202(a), and 203(c) of the Communications Act of 1934, as amended, 
47 U.S.C. §§ 151, 154(i), 154(j), 202(a), and 203(c), that the 
Second and Third Counterclaims filed by AT&T Corp. against 

IT IS FURTHER ORDERED, that the Motion to Dismiss or, 
Alternatively, to Sever and Defer AT&T's Counterclaims, filed on 
May 18, 1994; the Motion for Severance and Expedited Adjudication 
of Liability Phase of Graphnet Complaint Proceeding, filed on 
March 12, 1996; and the Motion of AT&T Corp. for Expedited 
Consideration, filed on May 3, 1996, ARE DENIED as moot.

IT IS FURTHER ORDERED, that the Request of Graphnet for Leave to 
File Reply to AT&T Opposition, filed June 13, 1994; the Motion of 
AT&T Corp. to Accept Late Filed Answer, filed March 1, 1996; the 
Graphnet Request for Official Notice, filed April 1, 1996; and 
the Motion to Accept Additional Pleading, filed January 8, 1998, 

IT IS FURTHER ORDERED, that the Motion to Strike the Second 
Supplemental Complaint of Graphnet, Inc., filed December 8, 1997; 
and the Motion to Strike the Third Supplemental Complaint of 
Graphnet, Inc., filed January 19, 1999, ARE DENIED.

IT IS FURTHER ORDERED, that the Graphnet Opposition to AT&T 
Motion to Strike, filed December 22, 1997; and the Motion for 
Partial Default Judgment, filed January 26, 1999, ARE DENIED.


                         Magalie Roman Salas

1 47 U.S.C. § 208.

2 Telex  service  is  a  teleprinter  exchange  circuit  service 
involving a  message  originated  at  a  teletypewriter  at  one 
location and sent to a  teletypewriter at a different  location.  
ITT World Communications, Inc. v. FCC, 635 F.2d 32, 35-36  (D.C. 
Cir. 1980).

3 47 U.S.C. § 201(b).

4  Complaint,   File   No.   E-94-41  (filed   Feb.   1,   1994) 
(``Complaint'') at 1, ¶ 1; Initial Brief of AT&T Corp., File No. 
E-94-41 (filed Oct. 2, 1996) (``AT&T's Initial Brief'') at iii.

5 47 U.S.C. § 222(c)(1)(A)(i).   The RCCA was repealed in  1994.  
See Pub.  L. No.  103-414, 108  Stat. 4296-97  (Oct. 25,  1994).  
Nonetheless, the statute  applies to this  case, which  Graphnet 
instituted on  February 1,  1994, because  it  concerns  conduct 
commencing in July 1993.

6 47 U.S.C. § 222(c)(1)(A)(i).

7 Initial Brief of Graphnet, Inc., File No. E-94-41 (filed  Oct. 
2,  1996)   (``Graphnet's   Initial   Brief''),   Attachment   4 
(Interconnection Agreement §§ I, II).

8 Id., Attachment 4 (Interconnection Agreement § II).

9 Answer of Graphnet, Inc. to AT&T's Counterclaims, File No.  E-
94-41 (filed May 18, 1994) (``Answer to Counterclaims'') at 8, ¶ 

10 Graphnet's  Initial Brief,  Attachment 2  (Graphnet's  Tariff 
F.C.C. No. 5 §§ 5.1.1, 5.1.3, and 5.2).

11 Verified Answer and  Counterclaims of American Telephone  and 
Telegraph Company,  File  No.  E-94-41  (filed  Apr.  15,  1994) 
(``Answer'') at 15, ¶ 46.

12 Answer at 15-16, ¶ 47; Answer to Counterclaims at 7, ¶ 16.

13 Answer at 7, ¶ 26; Answer to Counterclaims at 7, ¶ 16.

14 Answer at 2, ¶¶ 6-7.   Unitel is a Canadian carrier in  which 
AT&T owns a thirty-three percent interest.  Graphnet Pleading to 
Update  Record,  File   No.  E-94-41  (filed   Jan.  11,   1996) 
(``Pleading to Update  Record'') at  5.  Graphnet's  allegations 
originally   pertained    exclusively   to    the    AT&T-Unitel 
relationship.  Complaint at  3, ¶ 6.   In subsequent  pleadings, 
Graphnet averred that AT&T  also diverted traffic to  affiliates 
in Hong  Kong and  Europe.  Pleading  to Update  Record at  6-7; 
Graphnet Opposition to AT&T Motion  to Strike, File No.  E-94-41 
(filed Dec. 18,  1997) at 2.   In our view,  the pertinent  fact 
(which AT&T does not dispute) is that AT&T routed Graphnet-bound 
traffic to  carriers  in  other countries,  and  those  carriers 
routed the  traffic  back to  the  United States.   The  precise 
identities of  the  carriers  is irrelevant  to  whether  AT&T's 
routing practice was unlawful.

15 Complaint at 4, ¶ 8.

16 Graphnet  appears  to  have withdrawn  its  antitrust  claim.  
Motion to Dismiss or, Alternatively,  to Sever and Defer  AT&T's 
Counterclaims, File No. E-94-41 (filed May 18, 1994) at 5-6, n.2 
(``Graphnet's  citation  of  the   federal  antitrust  laws   in 
paragraph 16 of its Complaint was not for the purpose of seeking 
FCC enforcement of such laws or even FCC consideration of AT&T's 
anticompetitive activities on their  merits under the  antitrust 
laws.  The antitrust laws were cited in the Complaint merely for 
the  purpose  of  enabling  the   FCC  to  consider  such   laws 
incidentally as one part of the public interest.'').

17 Complaint at 5-9, ¶¶ 11-20.

18 Our current  formal complaint  rules prohibit  the filing  of 
``cross-complaints,'' which include counterclaims.  47 C.F.R.  § 
1.725.  The rules that existed in 1994, however, did not. 

19 Answer at 14-19, ¶¶ 44-57.

20 47 U.S.C. § 203(c).

21 Id.

22 Although Graphnet's  initial complaint  refers to  ``Sections 
203(a)(c),'' Complaint at 6, ¶ 14, Graphnet's briefs make  clear 
that  the  alleged  violation  concerns  section  203(c).    See 
Graphnet's Initial  Brief at  10-11;  Reply Brief  of  Graphnet, 
Inc., File No. E-94-41 (filed Oct. 22, 1996) (``Graphnet's Reply 
Brief'') at 7-9.

23 Graphnet's  Initial  Brief  at 10-11  (citing  AT&T's  F.C.C. 
Tariff No. 21, § 2.4.C.; AT&T's F.C.C. Tariff No. 25, § 2.4.C.); 
Graphnet's Reply Brief at 7-8.

24 See 47 U.S.C.  § 203(c) (except as  otherwise provided by  or 
under the authority of the Act,  no carrier shall (1) engage  in 
communications unless  it  has filed  a  tariff; (2)  charge  an 
amount different from  the amount specified  in the tariff;  (3) 
refund any amounts charged under  the tariff; or (4) extend  any 
privileges except as specified in the tariff).

25 In its Answer, AT&T  argues that ``Graphnet's allegations  in 
Count I must be dismissed because they fail to state a cause  of 
action   cognizable    under    the    Commission's    complaint 
proceedings.''   Answer  at  10,  ¶  28  (citing  Illinois  Bell 
Telephone Co. v. AT&T, 4  FCC Rcd 5268, 5270 (1989)  (``Illinois 
Bell'')).  In Illinois  Bell, the Commission  held, inter  alia,  
that a  complaint filed  by  Bell Atlantic  Operating  Companies 
(``BOCs'') against  AT&T, in  which the  BOCs challenged  AT&T's 
failure to pay tariff rates for Special Access services, ``would 
subvert th[e] design [of sections  206-209 of the Act] and  turn 
the complaint  procedures into  a collection  mechanism for  the 
carriers.''  Illinois Bell,  4 FCC  Rcd at  5270.  As  discussed 
above, we find Graphnet's effort to enforce its tariff  pursuant 
to section 203(c)  of the Act  to be unavailing  on the  merits.  
Consequently,  we  do  not  address  the  question  of   whether 
Graphnet's claim is barred under Illinois Bell.

26 AT&T's Tariff 21  described the service  provided as (1)  the 
transmission of inbound international telex calls received  from 
international record carriers  in New York  and Miami to  AT&T's 
telex subscriber  stations;  (2) the  transmission  of  outbound 
international telex calls originated by AT&T's telex  subscriber 
stations to store-and-forward facilities of international record 
carriers in  New York  and Miami;  and (3)  the transmission  of 
inbound and outbound  international calls between  international 
record carriers in New York City and Miami and telex stations in 
Alaska.  Tariff 25  provided for  the use  of the  international 
component of  AT&T's  international telex  service  to  overseas 
points.  See AT&T's Reply Brief, Exhibit A (AT&T's F.C.C. Tariff 
No. 21, §§ 1.1.1,  1.2; AT&T's F.C.C. Tariff  No. 25, §§  1.1.1, 

27 Graphnet's Initial Brief, Attachment 3 (AT&T's F.C.C.  Tariff 
No. 21, § 2.4.C; AT&T's F.C.C. Tariff No. 25, § 2.4.C).

28 Graphnet's Initial Brief at 4.

29 AT&T contends  that, if  routing delays  occurred, they  were 
minimal (i.e., 10-15 seconds) and transpired before call  set-up 
and billing.  Answer at 8, ¶ 27.  We do not view this  statement 
as an admission that such delays actually took place.  And  even 
if such 10 to15 second delays did occur, we are not prepared  to 
find, on  the  record of  this  case, that  they  ``materially'' 
affected the performance of Graphnet's facilities.

30 Graphnet's  Initial  Brief at  6  (citing id.,  Attachment  1 
[Letter dated Apr. 11, 1996, to Regina M. Keeney, Chief,  Common 
Carrier Bureau, from  Robert E. Conn,  counsel for Graphnet,  at 

31 Id.

32 AT&T's  Reply Brief  at  15-16 and  Exhibit C  (Affidavit  of 
Sharon Eberhard).

33 Graphnet's Initial Brief at 4.  

34 47 U.S.C. § 202(a).

35 See, e.g., MCI Telecommunications Corp. v. FCC, 917 F.2d  30, 
39 (D.C. Cir. 1990).

36 See id.  See also National Communications Ass'n, Inc. v. 
AT&T Corp., 238 F.3d 124, 129-30 (2nd Cir. 2001); 
Implementation of the Telecommunications Act of 1996:  
Amendment of Rules Governing Procedures to Be Followed When 
Formal Complaints Are Filed Against Common Carriers, Report 
and Order, 12 FCC Rcd 22497, 22615, ¶ 291 & n.782 (1997), 
recon. denied, 16 FCC Rcd 5681 (2001);  PanAmSat Corp. v. 
Comsat Corp., Memorandum Opinion and Order, 12 FCC Rcd 6952, 
6965, ¶ 34 n.90 (1997).

37 Graphnet's Initial Brief at 11; Graphnet's Reply Brief at 12-

38 The parties' arguments regarding discrimination appear to  be 
premised on  an assumption  of  ``like'' service  and  disparate 
treatment.  See Graphnet's Initial  Brief at 11; AT&T's  Initial 
Brief at  8-12; Graphnet's  Reply Brief  at 9-10;  AT&T's  Reply 
Brief at 5-7.  We need not decide whether, in fact, the services 
are ``like'' or were provided disparately, because, as discussed 
below, we find that AT&T has met its burden of demonstrating the 
reasonableness of its routing practice.

39  Moreover,  as  discussed  above,  Graphnet  has  adduced  no 
persuasive evidence that it has incurred any harm as a result of 
AT&T's actions.

40 47 U.S.C. § 222(b)(1).

41 47 U.S.C. § 222(c)(1)(B).

42 Graphnet's Initial Brief at 11-12; Graphnet's Reply Brief  at 

43 47 U.S.C. § 214(a).

44 Id.

45 Graphnet's Initial Brief at 12.

46 Graphnet's Reply Brief at 13-14

47 Graphnet  contends that  AT&T unlawfully  re-routed  domestic 
telex  traffic  and   foreign-originated,  United   States-bound 
international telex  traffic.  Complaint  at 3,  ¶ 6.   Graphnet 
does not maintain  that traffic originating  and terminating  in 
the United States is anything other than domestic communication.  
See Graphnet's  Reply  Brief  at  5-7.   Consequently,  sections 
III.A.4 through III.A.6  of this order  discuss the  appropriate 
categorization of traffic originating  in foreign countries  and 
terminating  in  the  United   States,  which  Graphnet   claims 
constitutes international communication.

48 See 47 U.S.C. § 153(3)(17) (formerly codified at 47 U.S.C.  § 
153(f) (1994)) (``The term  `foreign communication' or  `foreign 
transmission' means communication or transmission from or to any 
place in the  United States  to or  from a  foreign country,  or 
between a  station in  the United  States and  a mobile  station 
located outside the United States.'').

49 Graphnet's Reply Brief at 5-7. 

50 See International Settlement Rates, Report and Order, 12  FCC 
Rcd  19806,  19829-30,  ¶  49   (1997),  Report  and  Order   on 
Reconsideration and Order Lifting Stay, 14 FCC Rcd 9256  (1999), 
aff'd sub nom. Cable  & Wireless, P.L.C. v.  FCC, 166 F.3d  1224 
(D.C. Cir. 1999).

51 47 U.S.C. § 153(22) (formerly codified at 47 U.S.C. §  153(e) 
(1994)).   As   used  in   the   Act,  the   term   ``interstate 
communication'' refers to United States domestic, as opposed  to 
United States international, communication service.

52 See Motion of AT&T Corp. to Be Reclassified as a Non-Dominant 
Carrier, Order, 11 FCC Rcd 3271 (1995) (reclassifying AT&T as  a 
non-dominant carrier in  its provision  of domestic,  interstate 
interexchange service).

53 See MCI Telecommunications  Corp. v. FCC,  561 F.2d 365,  374 
(D.C. Cir. 1977), cert. denied, 434 U.S. 1040 (1978) (absent  an 
explicit statement to the contrary, a carrier is free to use its 
facilities for  any lawful  purpose upon  receiving section  214 

54 An accounting rate is  the price a United States  facilities-
based carrier negotiates with a foreign carrier for handling one 
minute  of  international   telecommunications  service.    Each 
carrier's portion of the accounting  rate is referred to as  the 
settlement rate.  In  almost all cases,  the settlement rate  is 
equal to one-half of the  negotiated accounting rate.  See  1998 
Biennial  Regulatory   Review,  Reform   of  the   International 
Settlements Policy  and Associated  Filing Requirements,  Report 
and Order and Order on Reconsideration, 14 FCC Rcd 7963, 7966, ¶ 
9 n.8 (1999) (``ISP Reform Order'').

55  Id. at 7966, ¶ 9.

56 See  Implementation  and  Scope of  the  Uniform  Settlements 
Policy for  Parallel  International Communications,  Report  and 
Order, 51 Fed. Reg.  4736, 4737, ¶ 3  (1986), recon., 2 FCC  Rcd 
1118 (1987),  further recon., 3 FCC Rcd 1614 (1988).

57 Graphnet's Initial Brief at 16.

58 Graphnet's Reply Brief at 16.

59 See supra section III.A.4.  

60   The  ISP, which  is  codified in  section 43.51(e)  of  the 
Commission's rules, 47 C.F.R. § 43.51(e), was developed as  part 
of    the   regulatory   tradition   in   which    international 
telecommunications services  were supplied  through a  bilateral 
correspondent relationship between  national monopoly  carriers.  
See ISP Reform Order, 14 FCC Rcd at 7966, ¶ 9 n.8.

61 Graphnet's Initial Brief at 13-16; Graphnet's Reply Brief  at 

62 Graphnet's Initial Brief at 13 (citing Optel  Communications, 
Inc. Application for a License to Land and Operate in the United 
States a Submarine Cable Extending Between Canada and the United 
States, Conditional Cable Landing License, 8 FCC Rcd 2267 (1993) 
(``Optel''); Implementation and Scope of the Uniform Settlements 
Policy for Parallel International  Communications, 59 Rad.  Reg. 
2d (Pike & Fischer) 982, 996 (1986)).

63 Graphnet's Initial Brief at 13.

64 Graphnet's  Initial Brief  at 14-16  (citing Optel;  fONOROLA 
Corporation Application for Authority  under Section 214 of  the 
Communications Act to Resell Facilities of Other Common Carriers 
to  Provide  Domestic  Carriers  Interconnection  with  Canadian 
Carriers, Memorandum Opinion, Order and Certification, 7 FCC Rcd 
7312 (1992), recon., 9 FCC Rcd 4066 (1994) (``fONOROLA'')).

65 Graphnet's Initial Brief at 14-16; Graphnet's Reply Brief  at 

66 AT&T's Initial Brief at 23-24.

67 See, e.g.,  fONOROLA, 7 FCC Rcd at 7316, ¶ 15 (``In order  to 
safeguard against the circumvention of our International  Resale 
Order, we find it  necessary to adopt a  policy with respect  to 
international private live resale between the United States  and 
Canada that  prohibits  the  routing  of  U.S.-overseas  traffic 
through Canada.'') (emphasis added).

68 See supra section III.A.4.

69 Graphnet's Initial Brief at 17-18; Graphnet's Reply Brief  at 
17-18; Motion  for Partial  Default Judgment,  File No.  E-94-41 
(filed Jan. 28,  1999) at  5-6.  We  address the  last of  these 
purported violations infra section IV.

70 Contrary to Graphnet's  assertion (Graphnet's Reply Brief  at 
17-18), a  subsequent decision  by Canadian  regulators to  move 
toward detariffing does not  establish that AT&T availed  itself 
of unique advantages with respect to Unitel.

71  Furthermore,  Graphnet   has  produced   no  evidence   that 
disclosures made  by AT&T  to  the Commission  regarding  AT&T's 
relationship  with  Unitel  were  intentionally  misleading   or 
otherwise inadequate under the Commission's rules.

72 Motion of AT&T Corp. to Accept Late Filed Answer, File No. E-
94-41 (filed Mar. 1, 1996) at 2-3.

73 See  Implementation of  the Telecommunications  Act of  1996:  
Amendment of  Rules Governing  Procedures  to Be  Followed  When 
Formal Complaints Are Filed  Against Common Carriers, Notice  of 
Proposed Rulemaking, 11 FCC Rcd 20823, 20856, ¶ 71 (1996).

74  See  47  C.F.R.  §  1.733(a)  (1995)  (``In  any   complaint 
proceeding, the  Commission may  in  its discretion  direct  the 
attorneys  and/or  the  parties  to  appear  before  it  for   a 
conference ....'').

75 Section  201(b)  states,  in  pertinent  part,  that  ``[a]ll 
charges, practices, classifications, and regulations for and  in 
connection with  ... 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).

76 47 U.S.C. § 201(b).

77 Answer at 16, ¶ 48; AT&T's Initial Brief at 30.

78 Id.

79 Id.   See  also Graphnet's  Initial  Brief  at 7-8,  ¶  12  & 
Attachment 3 (Unitel/Graphnet Interconnect Settlement).

80 Answer, Exhibit 1 (Letter dated Dec. 30, 1993, to William  F. 
Caton, Acting Secretary, FCC, from Elaine R. McHale, counsel for 
AT&T, at 4 n.5).

81 Id.

82 AT&T's Initial Brief at 30.

83 AT&T filed its counterclaims on April 15, 1994.  The RCCA was 
not repealed until  approximately six months  later, on  October 
25, 1994.

84 47 U.S.C. § 222(c)(2) (emphasis added).  See  Interconnection 
Arrangements Between and  Among the  Domestic and  International 
Record Carriers,  Memorandum  Opinion,  Order  and  Request  for 
Further Comments,  93 FCC  Rcd 845,  868, ¶  67 (1983)  (section 
222(c)(2) ``ensure[d]  a fair  opportunity for  new carriers  to 
compete, certainly an  opportunity equal  to that  of a  company 
seeking to enter a typical competitive market'').

85 Interconnection Arrangements Between  and Among the  Domestic 
and International Record Carriers, Memorandum Opinion and  Order 
on  Reconsideration,  2  FCC  Rcd   2999,  3006,  ¶  52   (1987) 
(``Interconnection    Arrangements'').     In    Interconnection 
Arrangements, the  Commission  rejected an  argument  by  record 
carriers who interconnected with Western Union Telegraph Company 
(``Western Union'') that an interim discount of Western  Union's 
charges  was  appropriate.   Applying  section  222(c)(2),   the 
Commission found that the discount could not be justified on the 
basis of cost and, therefore, was inappropriate.  

86 We recognize  that sections  222(b)(1) and  222(c)(2) of  the 
RCCA both contained  directives to the  Commission, and that  we 
declined to enforce section  222(b)(1) against AT&T.  See  supra 
section III.A.3.  That is because section 222(b)(1)  articulated 
a general,  pro-competitive  policy  that did  not  implicate  a 
specific aspect  of carrier  operations.  In  contrast,  section 
222(c)(2) instructed  the Commission  to ensure  interconnection 
based  particularly  upon  cost-based  rates.   Because  section 
222(c)(2) articulates a standard to which carriers can be  held, 
we are  able  to apply  it  in deciding  AT&T's  section  201(b) 

87  AT&T's  arguments  regarding   Graphnet's  pricing  of   its 
termination service make sense.   Specifically, with respect  to 
any particular inbound call, Graphnet had no way of  determining 
in advance how many carriers would precede it in the handling of 
the traffic.   Graphnet,  accordingly, had  every  incentive  to 
price its termination  service such  that it  would recover  its 
costs of terminating the traffic  from the carrier from whom  it 
directly received  the traffic  and with  whom it  was  directly 

88 We emphasize that our focus on costs stems from the mandatory 
language of  section 222(c)(2).   We express  no opinion  as  to 
whether, in any  other context,  Graphnet would  be required  to 
justify the challenged practice on a cost basis.

89 Graphnet's Reply Brief at 22 (emphasis added).

90 Graphnet's Initial Brief at  23-25, ¶¶ 46-49 (citing  TRT/FTC 
Communications, Inc. Revisions to Tariff  F.C.C. Nos. 8, 9,  and 
11; Graphnet, Inc. Revisions  to Tariff F.C.C.  No. 5, Order,  5 
FCC Rcd 7733 (Comm. Car. Bur. 1990); Graphnet, Inc. Revisions to 
Tariff F.C.C. No.  5, Order,  6 FCC  Rcd 1444  (Comm. Car.  Bur. 
1991),  review   denied,  Western   Union  International,   Inc. 
Revisions to Tariff F.C.C. No.  24; Graphnet, Inc. Revisions  to 
Tariff F.C.C. No. 5 Applications for Review, Memorandum  Opinion 
and Order, 7 FCC Rcd 3787 (1992)); Graphnet's Reply Brief at 22, 
¶ 46.

91 Bell Atlantic Telephone Cos. Tariff F.C.C. No. 1  Application 
for Review, Memorandum Opinion and Order, 8 FCC Rcd 2732,  2733, 
¶ 7 (1993).   See Arizona  Grocery Co. v.  Atchison T.&S.F.  Ry. 
Co., 284 U.S. 378, 384 (1932).

92 Policy  and Rules  Concerning the  Interstate,  Interexchange 
Marketplace, Second Report and Order, 11 FCC Rcd 20730, 20746, ¶ 
26 (1996), recon.,  12 FCC 15014  (1997), further recon.,14  FCC 
Rcd 6004 (1999).

93 See Graphnet's Initial Brief at 20-23; Graphnet's Reply Brief 
at 20.

94 47 U.S.C. § 208.

95 We do not  hold that it would  be impossible for Graphnet  to 
justify on a cost basis  the practice that AT&T challenges.   We 
merely find  that, on  this  record, Graphnet  has not  met  its 
evidentiary burden of production.

96 These include the other  aspect of AT&T's counterclaim  under 
section 201(b) (i.e., that the $3.00 per-minute termination rate 
was itself unjust and unreasonable because it was not cost-based 
[Answer at 15-16, ¶ 47]); its section 202(a) counterclaim (i.e., 
that Graphnet's interconnection  agreements with other  carriers 
unreasonably contained rates  for identical  telex service  that 
were significantly less than Graphnet's tariffed rate [Answer at 
17-18, ¶  52]); and  its section  203 counterclaim  (i.e.,  that 
Graphnet failed to file its interconnection agreements with  MCI 
International, Inc. (``MCII'') and TRT Telecommunications  Corp. 
(``TRT''), or otherwise  to amend its  tariffed rate to  reflect 
the rates offered to MCII and TRT [Answer at 19, ¶ 56]).

97 File No. E-94-41 (filed May 18, 1994).

98 File No. E-94-41 (filed Mar. 12, 1996).

99 File No. E-94-41 (filed May 3, 1996).

100 File No. E-94-41 (filed June 13, 1994).

101 File No. E-94-41 (filed Apr. 1, 1996).

102 File No. E-94-41 (filed Jan. 8, 1998).

103 Supplemental  Complaint, File  No.  E-94-41 (filed  Nov.  7,  
1995); Second Supplemental  Complaint, File  No. E-94-41  (filed 
Nov. 6, 1997);  Third Supplemental Complaint,  File No.  E-94-41 
(filed Dec. 21, 1998).

104 Motion  to  Strike  the  Second  Supplemental  Complaint  of 
Graphnet, Inc., File No.  E-94-41 (filed Dec.  8, 1997) at  2-3; 
Motion to Strike the  Third Supplemental Complaint of  Graphnet, 
Inc., File No. E-94-41 (filed Jan. 19, 1999) at 3-4.

105 47 C.F.R. § 1.727(h).

106 Graphnet Opposition to AT&T Motion to Strike, File No. E-94-
41 (filed Dec.  18, 1997)  at 7-11; Motion  for Partial  Default 
Judgment, File No. E-94-41 (filed Jan. 26, 1999).

107 Verified Answer of AT&T  Corp. to Supplemental Complaint  of 
Graphnet, Inc., File No. E-94-41 (filed Mar. 1, 1996); Motion to 
Strike the Second Supplemental Complaint of Graphnet, Inc., File 
No. E-94-41 (filed Dec. 8, 1997) at 3 n.4; Motion to Strike  the 
Third Supplemental Complaint of Graphnet, Inc., File No. E-94-41 
(filed Jan. 19, 1999) at 5 n.1.