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

In the Matter of                 )
                                )
AT&T CORP. AND                   )
AT&T OF THE VIRGIN ISLANDS,      )
INC.,                            )
                                )    File No. EB-04-MD-002
     Complainants,              )
                                )
     v.                         )
                                )
VIRGIN ISLANDS TELEPHONE         )
CORPORATION,                     )
D/B/A/ INNOVATIVE TELEPHONE,     )
                                )
     Defendant.




                  MEMORANDUM OPINION AND ORDER

 Adopted:  August 4, 2004             Released:  August 11, 2004

By the Commission:  Commissioner Martin approving in part, 
             dissenting in part, and issuing a              
             statement.


I.   INTRODUCTION

     1.   In this Memorandum Opinion and Order, we grant a formal 
complaint1 filed by AT&T Corp. and AT&T of the Virgin Islands, 
Inc., (collectively, ``AT&T'') against Virgin Islands Telephone 
Corporation, d/b/a/ Innovative Telephone (``Vitelco''), pursuant 
to section 208 of the Communications Act of 1934, as amended 
(``the Act'').2  AT&T alleges that Vitelco violated section 
201(b) of the Act3 by earning access revenues above its maximum 
allowable rate of return (``overearning'') during the period 
beginning January 1, 1997 and concluding December 31, 1998 (the 
``1997-1998 Monitoring Period'' or ``Monitoring Period'').  AT&T 
further alleges that Vitelco is liable for refunds regarding 
Vitelco's overearnings in 1997, when, in AT&T's view, Vitelco's 
access rates were not ``deemed lawful'' under section 204(a)(3) 
of the Act.4  For the reasons explained below, we agree with 
AT&T.  Accordingly, we grant AT&T's Complaint and hold Vitelco 
liable to AT&T for AT&T's portion of Vitelco's overearnings from 
rates in effect from January 1, 1997 through December 31, 1997.  

II.  BACKGROUND

     I.A.      Factual and Legal Background

          I.A.1.    The Parties

     2.   AT&T provides interexchange telecommunications 
services.5  Vitelco is a ``rate of return'' local exchange 
carrier that provides interstate access services.6  During 1997 
and 1998, AT&T purchased interstate access services from Vitelco 
pursuant to Vitelco's Interstate Access Tariff.7  

          I.A.2.    Rate-of-Return Regulation 

     3.   Under section 201(b) of the Act, a local exchange 
carrier may charge only ``just and reasonable'' rates for its 
provision of access services.8  To enforce this requirement, the 
Commission has prescribed an authorized rate of return of 11.25 
percent for rate-of-return carriers.9  To comply with this 
prescription, a rate-of-return carrier sets its tariff rates at 
levels designed to produce no more than an 11.25 percent return 
on its investment for the tariff period, based on an analysis of 
historical and projected cost data and the respective demand for 
services.10  The carrier may then file its rates on a ``non-
streamlined'' basis on at least 16 days' notice pursuant to 
section 203 of the Act11 and sections 69.3(a) and 61.58 of our 
rules.12  

     4.   The carrier's access earnings are measured over a two 
year period (the ``monitoring period'') to determine compliance 
with the maximum allowable rate of return.13  After the first 
year, the carrier files an ``interim monitoring report'' that 
reflects earnings realized during the first year.14  During the 
course of the two-year monitoring period, a rate-of-return 
carrier may make access rate adjustments to try to ensure that it 
does not exceed or fall short of its maximum allowable rate of 
return.15  Moreover, during the course of the two-year monitoring 
period, the Commission may require the carrier to change its 
rates prospectively, pursuant either to a section 205 
investigation or a section 208 complaint.16  

     5.   When the two-year monitoring period ends, the carrier 
files a ``final monitoring report'' reflecting its total access 
earnings.17  If this final monitoring report indicates that the 
carrier has exceeded its maximum allowable rate of return at the 
end of the two-year monitoring period, the Commission may then, 
in response to formal complaints for damages, require refunds of 
any such overearnings to affected access customers.18      

          I.A.3.    ``Streamlined'' Access Tariffs

     6.   In the Telecommunications Act of 1996,19 Congress 
provided all local exchange carriers, including rate-of-return 
carriers such as Vitelco, an alternative method for filing 
interstate access rates.20  Under section 204(a)(3) of the Act, a 
rate-of-return carrier may file new or revised access rates on a 
``streamlined'' basis.21  Access rates that a carrier files 
pursuant to this provision ``shall be deemed lawful and shall be 
effective 7 days (in the case of a reduction in rates) or 15 days 
(in the case of an increase in rates) after the date on which the 
rates are filed with the Commission unless the Commission takes 
action under paragraph (1) [47 U.S.C.  204(a)(1)] before the end 
of the 7-day or 15-day period, as appropriate.''22  Even if the 
carrier files a ``streamlined'' access tariff under section 
204(a)(3), the carrier must still report its earnings 
periodically, and may still revise its rates during the course of 
the monitoring period, just as if the tariff had been filed under 
section 203.  Moreover, interim monitoring reports that reveal 
overearnings can still prompt the Commission to cause the carrier 
to change its rates prospectively, pursuant to a section 205 
investigation or a section 208 complaint.  If the carrier has 
overearned at the end of the two-year monitoring period, however, 
the Commission cannot require the carrier to refund such 
overearnings to its access customers for periods during which the 
rates have been ``deemed lawful'' by operation of law. 23

          I.A.4.    Vitelco's Access Tariffs Applicable to the 
               1997-1998 Monitoring Period

     7.   Vitelco's maximum allowable rate of return was 11.65% 
for the 1997-1998 Monitoring Period.24  Four Vitelco access 
tariffs applied during different portions of the 1997-1998 
Monitoring Period. The first was effective on July 1, 1996;25 the 
second was effective on July 1, 1997;26 the third was effective 
on January 1, 1998;27 and the fourth was effective on July 1, 
1998.28  Vitelco filed the July 1996 tariff on a non-streamlined 
basis pursuant to section 203 of the Act.29  Vitelco filed the 
subsequent three tariffs on a streamlined basis pursuant to 
section 204(a)(3) of the Act.30  During the 1997-1998 Monitoring 
Period, Vitelco also filed interim monitoring reports on 
September 25, 199731 and on March 30, 1998,32 and a final 
monitoring report and a corrected final monitoring report on 
September 30, 199933 and October 5, 1999, 34 respectively.

     8.   On June 27, 1997, the Common Carrier Bureau (``CCB'')35 
issued an order suspending and setting for investigation 
Vitelco's second tariff (i.e., the July 1997 tariff).36  On July 
28, 1997, on its own motion, CCB issued an order (i) 
reconsidering its decision to suspend and investigate Vitelco's 
July 1997 tariff and (ii) declining to investigate that tariff.37  

          I.A.5.    Vitelco's Earnings During the 1997-1998 
               Monitoring Period 

     9.   The parties stipulate that Vitelco's access earnings 
exceeded its maximum allowable rate of return during the first 
six months of 1997.38  In addition, the record clearly indicates 
that Vitelco's access earnings exceeded its maximum allowable 
rate of return during the remainder of the 1997-1998 Monitoring 
Period, as well.39

     I.B.      Procedural Background

     10.  On September 10, 2001, pursuant to sections 1.716-1.717 
of our rules,40 AT&T filed an informal complaint against Vitelco 
alleging that Vitelco had earned more than its maximum allowable 
rate of return, and thus had overcharged AT&T for access 
services, during the 1997-1998 Monitoring Period.41  Also on 
September 10, 2001, AT&T and Vitelco moved jointly that the 
Enforcement Bureau (``Bureau'') instruct Vitelco not to respond 
to AT&T's informal complaint until 90 days after a certain court 
decision became final.42  The Bureau granted the Joint Request.43  
Thereafter, the relevant court decision became final, our 
informal complaint process ran its course, and AT&T timely filed 
its formal complaint.  Thus, pursuant to our informal complaint 
rules and orders, the instant formal complaint relates back to 
AT&T's September 10, 2001 informal complaint for purposes of 
tolling the applicable two-year statute of limitations set forth 
in 47 U.S.C.  415(b).44   

     11.  The formal complaint alleges that Vitelco violated 
section 201(b) of the Act by reaping access earnings over its 
11.65% maximum allowable rate of return during the 1997-1998 
Monitoring Period.45  Pursuant to section 1.722(d) of our 
rules,46 AT&T ``bifurcated'' this proceeding and requests a 
determination regarding only liability at this time.47  AT&T 
seeks a finding of liability for damages only with respect to 
Vitelco's 1997 earnings, however.  AT&T concedes that section 
204(a)(3) precludes any finding of liability for damages 
regarding Vitelco's 1998 earnings.48  

     12.  In response, Vitelco asserts that AT&T's claims for 
damages are barred by the two-year statute of limitations in 
section 415(b) of the Act.49  Vitelco also asserts that section 
204(a)(3) bars AT&T's claim for damages regarding Vitelco's 
earnings during the period July 1, 1997 through December 31, 
1997, because the Suspension Order did not deprive Vitelco's 
access rates of their ``deemed lawful'' status during that 
period.50 

III. DISCUSSION

     13.  For the reasons discussed below, we find that AT&T 
timely filed its September 10, 2001 informal complaint, and thus 
the statute of limitations in section 415(b) of the Act does not 
bar AT&T's claims for damages.  We also find that the Suspension 
Order stripped Vitelco's July 1997 access rates of their deemed 
lawful status, and that the Reconsideration Order did not 
subsequently render those rates ``lawful.''  Moreover, we find 
that Vitelco overearned in 1997 and did not underearn in 1998.  
Accordingly, we grant AT&T's Complaint and hold Vitelco liable to 
AT&T for AT&T's share of Vitelco's overearnings during 1997.  

     I.C.      AT&T's Claims Are Timely.

     14.  In Vitelco's view, AT&T's claim for damages arising 
from the overearnings that Vitelco reaped during the period 
January 1, 1997 through June 30, 1997 is barred by the two-year 
statute of limitations set forth in section 415(b) of the Act.51   
According to Vitelco, AT&T's claim for these damages accrued on 
September 30, 1997, when Vitelco filed its interim monitoring 
report reflecting its excessive earnings for the first six months 
of 1997.52   Vitelco argues, therefore, that AT&T's September 10, 
2001 complaint -  filed almost four years after Vitelco publicly 
acknowledged its overearnings on September 30, 1997 - is simply 
too late.53 

     15.  For similar reasons, Vitelco further asserts that 
AT&T's claim for damages arising from the earnings that Vitelco 
reaped during the period July 1, 1997 through December 31, 1997 
is also barred by the Act's two-year limitations period.54  
According to Vitelco, AT&T's claim for these damages accrued on 
March, 30, 1998, when Vitelco filed its interim monitoring report 
reflecting its earnings for the last six months of 1997.55   
Vitelco argues, therefore, that AT&T's September 10, 2001 
complaint - filed over three years after Vitelco publicly 
acknowledged its earnings on March 30, 1998 - is time-barred.56 

     16.  We disagree with Vitelco's assertions regarding the 
tardiness of AT&T's damages claims, for the reasons explained 
below.  In accordance with our rules and case law, we conclude 
that AT&T's claims for damages arising from Vitelco's earnings in 
1997 did not accrue until September 30, 1999, the date that 
Vitelco filed its final monitoring report for the entire 1997-
1998 Monitoring Period.57  Thus, AT&T's September 10, 2001 
complaint fell within the Act's two-year limitations period.

     17.  The Commission recognizes that rate-setting is not an 
exact science, and that the overarching goal of rate-of-return 
regulation is to ensure that rates fall within a zone of 
reasonableness.58  Consequently, ``[t]o alleviate some of the 
imprecision inherent in the prescribed rate-of-return 
methodology, . . . the Commission employs what it deems a `long 
evaluation period' allowing short term earnings `peaks' and 
`valleys' to offset each other.''59  In particular, rule 65.701 
provides, in pertinent part, that ``interstate earnings shall be 
measured over a two year period to determine compliance with the 
maximum allowable rate of return.''60  This two-year period 
allows a carrier time to minimize or eliminate overearnings that 
might otherwise result from cost and demand projections that 
prove to be inaccurate.  Specifically, if the rates that a 
carrier files at the beginning of a monitoring period begin 
unexpectedly to yield excessive earnings, the carrier has time to 
observe that situation and to file new, lower rates to correct 
for the overearnings before the monitoring period ends.61  The 
two-year monitoring period also protects carriers from having 
their rates adjudged based on unforeseen and unforeseeable 
earnings variations over short intervals.62

     18.  Based on how the rate-of-return regime works, as just 
described, the D.C. Circuit and the Commission have repeatedly 
held that overearnings claims for damages accrue when the carrier 
files its final monitoring report, and not before.63  In fact, in 
MCI v. FCC, the D.C. Circuit squarely rejected the same argument 
that Vitelco makes here - that submission of a preliminary 
monitoring report triggers the running of the statute of 
limitations.64  

     19.  This only makes sense, given the nature of rate-of-
return regulation, because it serves to protect the carrier from 
complaints filed prematurely, before the carrier has had an 
opportunity to remedy a trend of overearnings.  Here, for 
example, had Vitelco underearned during the last 12 months of the 
Monitoring Period, it would have reduced or perhaps even 
eliminated AT&T's claim for damages.  Such underearnings could 
have resulted from changed demand patterns, a voluntary tariff 
amendment, or a tariff amendment caused by Commission proceedings 
under section 205 or section 208.  Moreover, during the last 12 
months of the Monitoring Period, Vitelco might have decided, for 
some reason, to file non-streamlined rates.  Thus, prior to 
Vitelco's filing of its final monitoring report, AT&T could not 
have known whether or to what extent it had a viable claim for 
damages, even though, after the first six months of 1997, Vitelco 
filed its tariffed rates pursuant to section 204(a)(3).  
Accordingly, AT&T's claim for damages did not accrue until 
Vitelco filed its final monitoring report in September 1999.

     20.   Vitelco acknowledges the foregoing rules and case law 
concluding that a damages claim alleging overearnings in 
violation of section 201(b) does not accrue until the final 
monitoring report is filed.65  Vitelco argues, however, that 
those rules and case law did not fully survive the enactment of 
section 204(a)(3).66  Specifically, Vitelco observes that the 
foregoing rules and case law were premised on the availability of 
refunds for the entire two-year monitoring period.67  Thus, in 
Vitelco's view, where, as here, the operation of section 
204(a)(3) limits the availability of refunds to only a portion of 
the two-year monitoring period, the pre-204(a)(3) rules and case 
law regarding claim accrual simply do not apply, and the two-year 
monitoring period is no longer relevant for statute-of-
limitations purposes.68  According to Vitelco, this is precisely 
what the D.C. Circuit meant when it stated, in the context of 
circumstances identical to those here, that the two-year 
monitoring period had been ``cut short'' by the filing of rates 
deemed lawful under section 204(a)(3).69 

     21.  Vitelco is certainly correct that section 204(a)(3) 
``radically'' altered tariff rate regulation, as the Commission 
has recognized.70  Vitelco errs, however, in describing the scope 
of that alteration.

     22.  With respect to rate-of-return regulation, what section 
204(a)(3) changed is the remedy available for ``deemed lawful'' 
rates that result in earnings above the maximum allowable rate of 
return:  the Commission can no longer require the carrier to pay 
refunds for past overearnings generated by ``deemed lawful'' 
rates.  What section 204(a)(3) did not change, however, is the 
Commission's requirement that carriers comply with the rate-of-
return prescription over a two-year period.  Specifically, even 
with respect to deemed lawful rates, the Commission can still 
cause the carrier to lower its rates prospectively via an 
investigation under section 205 of the Act or a complaint 
proceeding under section 208 of the Act to ensure compliance with 
the rate-of-return prescription during the course of the full 
two-year period.71    

     23.  In order to perform those surviving functions properly, 
the Commission must continue to assess carriers' rates in the 
context of a predetermined, specific time-frame (here, two 
years).  Otherwise, the rate-of return prescription would lose 
all meaning.72  Indeed, Vitelco itself recognized the continuing 
vitality of the Commission's rules and case law regarding the 
two-year monitoring period, as Vitelco maintained its practice of 
filing monitoring reports and amended tariffs.73  Finally, the 
D.C. Circuit's passing reference to a monitoring period being 
``cut short'' by section 204(a)(3) was, in our view, referring 
simply to the fact that damages could not arise directly from the 
``deemed lawful'' rates in effect during part of the period at 
issue.74  Thus, we conclude that section 204(a)(3) did not 
vitiate the two-year monitoring period.  And, given that the two-
year monitoring period survives the enactment of section 
204(a)(3), so, too, does the rule regarding accrual of damages 
claims for statue-of-limitations purposes.  

     24.  To further support its view on when AT&T's damages 
claim accrued, Vitelco makes another argument for why a two-year 
monitoring period does not apply here, and, thus, why the statute 
of limitations bars recovery for Vitelco's 1997 overearnings.  
Specifically, Vitelco argues that a two-year period is valid only 
if rates other than those deemed lawful are in effect for the 
entire period.75  In Vitelco's view, if deemed lawful rates are 
in effect during any portion of the two-year period, the 
Commission can no longer consider whether the carrier overearned 
during the full two-year monitoring period, because to do so 
would require the Commission to consider earnings realized during 
a period of time when deemed lawful rates were in effect.  
According to Vitelco, that would result in a carrier being held 
liable for damages despite the deemed lawful status of its rates.  
In other words, in Vitelco's view, the mere existence of deemed 
lawful rates during any portion of the two-year monitoring period 
would immunize all rates in effect during the monitoring period, 
even rates not filed pursuant to section 204(a)(3).

     25.  We disagree.  Nothing in section 204(a)(3), our rules, 
or precedent supports Vitelco's sweeping suggestion that the 
deemed lawful status of rates means not only that the earnings 
produced from those rates cannot themselves be the subject of 
refunds, but also that such earnings cannot even be considered in 
determining whether the earnings from other rates may be the 
subject of refunds.  Our conclusion does not deprive Vitelco of 
the benefit of deemed lawful protection for its 1998 rates filed 
pursuant to section 204(a)(3), or impose a penalty on Vitelco 
based in part on those deemed lawful rates.  To the extent that 
Vitelco's rates are ``deemed lawful'' under section 204(a)(3), we 
cannot and do not require Vitelco to refund ``overcharges'' to 
AT&T, because, as a legal matter, there are none.76  Even though 
we find liability arising from Vitelco's overearnings during the 
time when Vitelco's rates were not deemed lawful, Vitelco still 
receives the full benefit of section 204(a)(3) during the time 
when Vitelco's rates were deemed lawful, because Vitelco gets to 
keep all the revenues it received during that time.

     26.  In fact, were we to accept Vitelco's suggestion, we 
would likely run afoul of Virgin Islands.77  In that case, the 
court vacated the Commission's award of overearnings refunds, 
because the Commission had based the award on an examination of 
earnings during only a six-month subset of a two-year monitoring 
period.78  In doing so, the court ``held that the Commission 
could not evaluate a carrier's rate-of-return using a period 
different from the two-year period the Commission itself had 
prescribed.''79  Consequently, had Vitelco underearned during the 
last 12-18 months of the monitoring period, we would have had to 
take that fact into account in deciding whether and to what 
extent to award damages to AT&T.  Put differently, Virgin Islands 
(and the nature of our rate-of-return regime) require us to 
consider Vitelco's earnings throughout the entire 1997-1998 
Monitoring Period in order to assess whether to grant AT&T's 
claim, even though deemed lawful rates were in effect during part 
of that Monitoring Period.    

     27.  Finally, Vitelco relies on a recent court decision, 
Communications Vending, 80  to support its position on claim 
accrual.  In that case, the court held that uncertainty about the 
legal validity of a claim does not toll the running of the 
statute of limitations in section 415 of the Act; once a 
prospective claimant knows the facts supporting its claim, it 
must file its claim within the limitations period, even though 
the law supporting its claim is ambiguous.81  Here, however, the 
uncertainty that existed when Vitelco filed its interim 
monitoring reports was factual, not legal:  it was unknown 
whether Vitelco, as a factual matter, would actually overearn as 
of the end of the two-year monitoring period; thus, it was 
unknown whether AT&T would have any factual basis for an 
overearnings claim.  Such factual uncertainty is fundamentally 
different from legal uncertainty, and renders Communications 
Vending inapposite.

     28.  In sum, AT&T's claims for damages accrued when Vitelco 
filed its final monitoring report for the 1997-1998 Monitoring 
Period, not when Vitelco filed its interim monitoring reports.  
Consequently, AT&T's claims for damages arising from Vitelco's 
access earnings in 1997 are timely, and Vitelco's defense based 
on the statute of limitations set forth in section 415(b) of the 
Act fails. 

     B.   Vitelco's Access Rates for July 1997-December 31, 1997 
       Were Not ``Deemed Lawful.''

     29.  Before addressing the merits of the parties' arguments 
regarding the last six months of 1997, the facts surrounding 
Vitelco's July 1997 tariff bear repeating and elaboration.  
Vitelco initially filed the July 1997 tariff on June 16, 1997.82  
On June 27, 1997, in response to petitions filed by AT&T and MCI 
questioning the ``cash working capital'' (``CWC'') requirements 
of Vitelco and 10 other rate-of-return carriers, CCB suspended 
and set for investigation the tariffs of those 11 carriers.83  
CCB also ordered Vitelco and the other 10 carriers to ``KEEP 
ACCURATE ACCOUNT'' of all amounts received that are associated 
with the rates that are subject to this investigation.''84  CCB 
noted, however, that it would ``separately issue an order 
designating issues for investigation.''85

     30.  One month later, on July 28, 1997, CCB ``designate[d] 
for investigation issues regarding cash working capital for four 
[of the] rate of return carriers'' referenced in the Suspension 
Order.86  Vitelco was not among those four carriers.  Instead, 
with respect to Vitelco and the six other carriers, CCB held 
that, ``[p]ursuant to Sections 1.108 and 0.291 of the 
Commission's rules, we reconsider on our own motion our decision 
to suspend and investigate tariff provisions that include rate 
elements associated with cash working capital....''87  CCB did so 
because ``[e]ach of these LECs made ex parte filings in which 
they provided information sufficient to'' show compliance with 
Commission rules regarding cash working capital.88  As a result, 
CCB ``decline[d] to investigate these LECs' tariff provisions 
that relate to cash working capital.''89

     31.  Vitelco filed the July 1997 tariff pursuant to section 
204(a)(3) of the Act, and asserts that its rates for July through 
December 1997 were deemed lawful by operation of that section.  
AT&T asserts that the rates were not deemed lawful.  As explained 
below, we agree with AT&T.  Section 204(a)(3) states that rates 
filed pursuant to its terms shall be deemed lawful ``unless the 
Commission takes action under paragraph (1) [i.e., section 
204(a)(1)] before the end'' of the applicable 7 or 15-day notice 
period.90  Section 204(a)(1) encompasses the following actions:  
suspension of a new or revised tariffed charge; ``enter[ing] upon 
a hearing concerning [its] lawfulness''; ordering a carrier ``to 
keep accurate account of all amounts received by reason of such 
charge'' pending such completion of the hearing; and making such 
order as the Commission deems proper regarding the lawfulness of 
the tariffed charge.91

     32.  Based upon the language of the statute, as interpreted 
by the Commission in the Streamlined Tariff Order, we find that 
the rates in the July 1997 tariff were never deemed lawful.  
According to the statute, a rate is deemed lawful ``unless the 
Commission takes action under paragraph [204(a)(1)] before the 
end of [the] 7-day or 15-day period.''  In this case, the 
Commission, through CCB acting on delegated authority, took a 
number of actions under section 204(a)(1).  In the Suspension 
Order, CCB suspended Vitelco's tariff, began a hearing concerning 
the lawfulness of the tariff, and issued an accounting order.  

     33.  Vitelco argues, however, that the Commission does not 
``take action'' within the meaning of section 204(a)(3) unless 
and until a tariffed charge has been suspended and  investigated 
and ruled upon.92  That is, according to Vitelco, an 
investigation ``must be conducted and concluded'' in order for 
section 204(a)(3)'s ``takes action'' language to be implicated.  
Vitelco asserts, therefore, that the access rates in the July 
tariff were deemed lawful by operation of section 204(a)(3), 
notwithstanding the Suspension Order.93  

     34.  We disagree.  The language of section 204(a)(3) does 
not require an investigation to be concluded prior to removing 
deemed lawful status from tariffed rates.  Moreover, the 
Commission has already rejected this view in the Streamlined 
Tariff Order, which holds that the deemed lawful status of rates 
is removed upon the issuance of an order suspending the rates and 
setting them for investigation; an order concluding the 
investigation is not required:94  

     [T]he ``deemed lawful'' language does not govern 
     streamlined tariff filings that become effective after 
     suspension in those instances where the Commission 
     suspends and initiates an investigation of a LEC tariff 
     within the 7 or 15 day notice periods specified in 
     section 204(a)(3).  In those cases, the LEC streamlined 
     tariffs would not be ``deemed lawful'' under section 
     204(a)(3) because they were suspended and set for 
     investigation. 95

     35.  Vitelco's interpretation of the statute is, moreover, 
illogical.  As noted, the statute requires the Commission to 
``take[] action . . . before the end of that 7-day or 15-day 
period. . . .''  If the action required to remove deemed lawful 
status were an order concluding the investigation, as Vitelco 
contends, the Commission could never accomplish this as a 
practical matter within the 7 or 15-day period specified in the 
statute.96  Thus, Vitelco's interpretation of the statute would 
render it virtually impossible to remove deemed lawful status, an 
illogical result given the statute's explicit contemplation that 
deemed lawful status can and will be removed in appropriate 
circumstances.  
     36.  Vitelco further argues that, even if the Suspension 
Order had stripped deemed lawful status from the access rates 
contained in Vitelco's July 1997 tariff, the Reconsideration 
Order restored the rates' deemed lawful status.97  Thus, in 
Vitelco's view, the access rates contained in its July 1997 
tariff reclaimed their deemed lawful status, which bars AT&T's 
claim for damages regarding Vitelco's earnings during the last 
six months of 1997.98
     37.  We reject this contention as well.  We find that the 
Suspension Order stripped the access rates in the July 1997 
tariff of their deemed lawful status, and the Reconsideration 
Order did not restore such status.  As explained in the 
Streamlined Tariff Order, after rates are suspended and 
investigated, they can become the lawful rates only if the 
Commission issues an order affirmatively finding the rates to be 
lawful:99
      [The rates] would be ``legal'' until the Commission 
      concluded an investigation as to their lawfulness.  
      The lawfulness of such tariffs would be determined by 
      the orders issued by the Commission at the conclusion 
      of those proceedings.100  
     38.  Here, there was no order finding the rates lawful.  The 
Reconsideration Order did not adjudge the lawfulness of Vitelco's 
rates, but merely decided not to investigate them.  Moreover, 
because it was issued by CCB rather than the full Commission, the 
Reconsideration Order cannot have adjudged the lawfulness of 
Vitelco's rates, as CCB did not have the authority to issue such 
an order.  Under section 5(c) of the Act, the Commission may not 
delegate to a Bureau the authority to take action under section 
204(a)(2), i.e., to issue an order concluding a tariff 
investigation.  Both AT&T and Vitelco recognize that CCB did not 
have authority to rule on the lawfulness of Vitelco's tariff.101  
Thus, in light of the suspension and investigation, Vitelco's 
rates were not deemed lawful by operation of law.  Nor were those 
rates ever adjudged to be lawful.  Accordingly, the July to 
December 1997 access rates were legal, but not lawful, and those 
rates may therefore form the basis of liability to AT&T for 
damages.102
     39.  Finally, Vitelco asserts that the Reconsideration Order 
``rendered the suspension and investigation a nullity.  As such, 
[Vitelco's] rates were neither suspended nor investigated under 
Section 204(a)(1).''103  We find nothing in the Reconsideration 
Order, however, that suggests it was intended to have such 
retroactive effect. 

     C.   Vitelco Violated Section 201(b) by Overearning During 
       the 1997-1998 Monitoring Period, and is Liable for 
       Damages Arising from its Overearnings in 1997.

     40.  It is well established that the Commission's rate-of-
return prescription has the force of a statute, so exceeding that 
prescription subjects a carrier to liability:

      We have repeatedly held that a rate-of-return 
      prescription has the force of law and that the 
      Commission may therefore treat a violation of the 
      prescription as a per se violation of the requirement 
      of the Communications Act that a common carrier 
      maintain ``just and reasonable'' rates. . . .104 

     41.  If a carrier exceeds its maximum allowable rate of 
return, the Commission can order refunds and award damages to 
aggrieved customers in the context of a formal complaint case.105  
Damages may be based on the difference between the amount the 
customer paid to the carrier and the amount the customer would 
have paid to the carrier if the carrier had charged and applied 
its rates in a manner that produced earnings within the maximum-
allowable rate-of-return ceiling.106 

     42.  As stated above, the record indicates that Vitelco 
exceeded its maximum allowable rate of return during 1997 and 
continued to do so in 1998, resulting in access earnings above 
the maximum allowable rate of return for the 1997-1998 Monitoring 
Period.107  As the record further indicates, Vitelco's access 
rates in effect during 1998 were deemed lawful.108  As we have 
held herein, however, Vitelco's access rates in effect during 
1997 were not deemed lawful.  As even Vitelco acknowledges,109 
the Commission can still award damages for overearnings accrued 
during any portion of the monitoring period when the rates in 
effect were not deemed lawful.  Accordingly, we conclude that 
Vitelco has violated section 201(b) of the Act and that Vitelco 
is liable to AT&T for AT&T's share of Vitelco's overearnings 
accrued during 1997.

IV.  ORDERING CLAUSE

     43.  Accordingly, IT IS ORDERED, pursuant to sections 4(i), 
4(j), 201(b), 204, 206, 207, and 208 of the Communications Act of 
1934, as amended, 47 U.S.C.  154(i), 154(j), 201(b), 204, 206, 
207, and 208, that AT&T's formal complaint is GRANTED.    



                         FEDERAL COMMUNICATIONS COMMISSION

                         
                         
                         Marlene H. Dortch 
                         Secretary





                      SEPARATE STATEMENT OF 
                  COMMISSIONER KEVIN J. MARTIN
              Approving in Part, Dissenting in Part

Re:  AT&T Corp. and AT&T of the Virgin Islands, Inc. v. Virgin 
     Islands Telephone Corporation, D/B/A/ Innovative Telephone ( 
     File No. EB-04-MD-002)

     I am troubled by today's decision that finds the Virgin 
Islands Telephone Corporation (``Vitelco'') liable for refunds 
for overearnings on 1997 interstate access rates on the basis 
that such rates were not ``deemed lawful'' under section 
204(a)(3) of the Communications Act.

     Under section 204(a)(3), a local exchange carrier's access 
tariff, filed on a streamlined basis, is ``deemed lawful and 
shall be effective 7 days (in the case of a reduction in rates) 
or 15 days (in the case of an increase in rates) after the date 
on which it is filed with the Commission unless the Commission 
takes action...before the end of that 7 day or 15-day period, as 
appropriate.110   The ``deemed lawful'' language in section 
204(a)(3) immunizes from challenge those rates that are not 
suspended or investigated before a finding of unlawfulness.111   
Filing carriers are not subject to liability for damages when 
tariffs take effect, without suspension, under section 204(a)(3) 
and even if they are subsequently determined to be unlawful in a 
section 205 investigation or a section 208 complaint proceeding. 

     On June 27, 1997, the Common Carrier Bureau (``Bureau'') 
issued an order suspending and setting for investigation 
Vitelco's July 1997 to December 1997 tariff filing.112 On July 
28, 1997, on its own motion, the Bureau issued an order 
reconsidering its decision to suspend and investigate Vitelco's 
tariff and declining to investigate that tariff.113

     Today's action finds that the Bureau's Suspension Order 
``stripped Vitelco's July 1997 tariff of their deemed lawful 
status,''114 even though in the subsequent Reconsideration Order 
the Bureau reversed its decision to investigate the tariff.  The 
Commission finds that while the Bureau had the authority to strip 
the ``deemed lawful'' status from Vitelco's 1997 access rates, 
the Reconsideration Order cannot restore the lawfulness of 
Vitelco's rates because the Bureau does not have the authority to 
issue such order.115   
     
     Today's decision essentially endorses the Bureau's ability, 
on delegated authority, to deny the presumed ``deemed lawful'' 
status associated with a carrier's streamlined tariff filing and 
effectively foreclose Commission review of that decision.  On its 
own, the Bureau suspended and set for investigation Vitelco's 
tariff filing.  That action revoked the ``deemed lawful'' status 
of the tariff.  One month later, however, the Bureau reversed its 
decision to investigate the tariff and the lawfulness of 
Vitelco's tariff was thus never subsequently addressed.   A 
procedural mechanism that enables the Bureau to strip carrier 
tariffs of their presumed lawfulness through a one-day suspension 
and subsequent failure to follow through on an investigation is 
inherently unfair and inconsistent with the intent of Section 
204(a)(3).  Accordingly, I approve in part and dissent in part 
from the order. 






                         






_________________________

1 AT&T Corp. and AT&T of the Virgin Islands, Inc. v. Virgin 
Islands Telephone Corporation, d/b/a/ Innovative Telephone, 
Formal Complaint, File No. EB-04-MD-002 (filed Jan. 27, 2004; 
supplemented to cure deficiencies Mar. 4, 2004) (``Complaint'').    
2 47 U.S.C.  208.
3 47 U.S.C.  201(b).
4 47 U.S.C.  204(a)(3).  AT&T does not dispute the lawfulness of 
Vitelco's earnings in 1998.  Joint Statement at 4,  22-23.  
5 AT&T Corp. and AT&T of the Virgin Islands, Inc. v. Virgin 
Islands Telephone Corporation, d/b/a/ Innovative Telephone, Joint 
Statements of Complainant and Defendants, File No. EB-04-MD-002 
(filed Apr. 7, 2004) (``Joint Statement'') at 3,  1-3.    
6 AT&T Corp. and AT&T of the Virgin Islands, Inc. v. Virgin 
Islands Telephone Corporation, d/b/a/ Innovative Telephone, List 
of Further Stipulations to Supplement the Joint Statement of 
Complainants and Defendant, File No. EB-04-MD-002 (filed Apr. 20, 
2004) (``Further Stipulations'') at 1,  2; Joint Statement at 3, 
 5, 6.
7 Joint Statement at 3,  8.
8 47 U.S.C.  201(b). 
9 See, e.g., MCI Telecom. Corp. v. FCC, 59 F.3d 1407 (D.C. Cir. 
1995) (``MCI v. FCC''); Virgin Islands Telephone Corp. v. FCC , 
989 F.2d 1231 (D.C. Cir. 1993) (``Virgin Islands''); 
Represcribing the Authorized Rate of Return for Interstate 
Services of Local Exchange Carriers, Order, 5 FCC Rcd 7507, 7532 
at  1, 216 (1990) (``Rate-of-Return Prescription Order'') 
(subsequent history omitted).  
10 See, e.g., 47 C.F.R.  61.38, 61.39.
11 47 U.S.C.  203.
12 47 C.F.R.  69.3(a), 61.58(a)(2)(ii).  Annual tariffs for 
access services generally become effective July 1.  47 C.F.R. 
69.3(f).
13 The maximum allowable rate of return is equal to the 
prescribed rate of return plus the amount specified in sections 
65.700(a) or (b), of our rules, 47 C.F.R.  65.700(a),(b), which 
is a margin that the carrier may earn from legal tariff rates 
before any refund obligation arises.  See, e.g., 47 C.F.R.  
65.600(b), 65.700-702; MCI v. FCC, 59 F.3d at 1415.  The two-year 
monitoring period for determining compliance with the maximum 
allowable rate of return begins on January 1 of odd-numbered 
years and ends on December 31 of even-numbered years.  47 C.F.R. 
 65.701. 
14 47 C.F.R.  65.600(d)(1). 
15 See, e.g., MCI v. FCC, 59 F.3d at 1415; Virgin Islands, 989 
F.2d at 1238-39; 47 C.F.R.  69.3(b); In the Matter of Amendment 
of Part 65, Interstate Rate of Return Prescription: Procedures 
and Methodologies to Establish Reporting Requirements, Report and 
Order, 1 FCC Rcd 952, 954 at  10 (1986) (``Rate-of-Return 
Methodologies Order'') (subsequent history omitted).  
16 47 U.S.C.  205, 208.  See In the Matter of Implementation of 
Section 402(b)(1)(A) of the Telecommunications Act of 1996, 
Report and Order, 12 FCC Rcd 2170, 2170, 2175-78, 2181-84, 2197 
at  8, 11, 12, 19-21, 23, 24, 51 (1997) (``Streamlined Tariff 
Order''). 
17 47 C.F.R.  65.600(b).
18 See, e.g., MCI v. FCC.  Id., 59 F.3d at 1414.
19 Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 
56 (1996) (``1996 Act'').
20 47 U.S.C.  204.
21 47 U.S.C.  204(a)(3).  See Streamlined Tariff Order.  
22 47 U.S.C.  204(a)(3) (emphasis added).
23 See, e.g., ACS of Anchorage, Inc. v. FCC, 290 F.3d 403, 403, 
410-411 (D.C. Cir. 2002) (``ACS v. FCC ''); Streamlined Tariff 
Order, 12 FCC Rcd at 2181-83,  18-20. 
24 See, e.g., 47 C.F.R.  65.700; Rate-of-Return Prescription 
Order, 5 FCC Rcd at 7509,  13 (1990).  See also Joint Statement 
at 4,  14; AT&T of the Virgin Islands, Inc. v. Virgin Islands 
Telephone Corporation, d/b/a/ Innovative Telephone, Answer of 
Innovative Telephone, EB-04-MD-002 (Mar. 24, 2001) (``Answer'') 
at C-8 (Calculations of [Vitelco's] Interstate Access Earnings in 
Excess of 11.65% for the Period July - December 1997).
25 Complaint, Att. F, Item 2, Transmittal No. 28, Letter from 
Jonathan E. Canis, Counsel for Vitelco, to William F. Caton, 
Acting Secretary, Federal Communications Commission, Annual 
Access Filing Tariff (filed Apr. 2, 1996; effective July 1, 1996) 
(``July 1996 Tariff'').  
26 Complaint, Att. F, Item 3, Transmittal No. 34, Letter from 
Gregory J. Vogt, Counsel for Vitelco, to Secretary, Federal 
Communications Commission, Annual Access Filing Tariff (filed 
June 16, 1997; effective July 1, 1997); Complaint, Att. F, Item 
4, Transmittal No. 35, Letter from Gregory J. Vogt, Counsel for 
Vitelco, to Secretary, Federal Communications Commission, 
Supplement Tariff (filed June 30, 1997; effective June 30, 
suspended for one day) (``July 1997 Tariff'').  For convenience, 
the reference in the text encompasses both tariff transmittals. 
27 Complaint, Att. F, Item 5, Transmittal No. 36, Letter from 
Gregory J. Vogt, Counsel for Vitelco, to Magalie Roman Salas, 
Secretary, Federal Communications Commission, Access Filing 
Tariff (filed Dec. 17, 1997; effective January 1, 1998) 
(``January 1998 Tariff''). 
28 Complaint, Att. F, Item 6, Transmittal No. 37, Letter from 
Gregory J. Vogt, Counsel for Vitelco, to Magalie Roman Salas, 
Secretary, Federal Communications Commission, Annual Access 
Filing Tariff (filed June 16, 1998; effective July 1, 1998) 
(``July 1998 Tariff''). 
29 July 1996 Tariff; Joint Statement at 3,  10. 
30 July 1997 Tariff; January 1998 Tariff; July 1998 Tariff; Joint 
Statement at 4,  18, 22. 
31 Answer, D-2; AT&T Corp. and AT&T of the Virgin Islands, Inc. 
v. Virgin Islands Telephone Corporation, d/b/a/ Innovative 
Telephone, Supplemental Complaint, File No. EB-04-MD-002 (filed 
Mar. 3, 2004) (``Supplemental Complaint'') Supp. Exh. C, Item 2, 
Letter from Griselda Dobbins, Chief Financial Officer, to William 
F. Caton, Acting Secretary, Federal Communications Commission, 
FCC Form 492 for the period January 1, 1997 to June 30, 1997 
(filed Sept. 25, 1997) (``September 1997 492''). 
32 Answer, D-2; Supplemental Complaint, Supp. Exh. D, Letter from 
Griselda Dobbins, Chief Financial Officer, to William F. Caton, 
Acting Secretary, Federal Communications Commission, FCC Form 492 
for the period January 1, 1997 to December 31, 1997 (dated Mar. 
30, 1998) (``March 1998 492'').   
33 Answer, D-2; Supplemental Complaint, Supp. Exh. C, Item 3, 
Letter from Elisa G. Hodge, Acting Chief Financial Officer, to 
Magalie R. Salas, Secretary, Federal Communications Commission, 
FCC Form 492 for the period January 1, 1997 to December 31, 1998 
(filed Sept. 30, 1999) (``September 1999 492'').   
34   Answer, D-2; Exh. G-3, Rate of Return Report, FCC Form 492 
for the period January 1, 1997 to December 31, 1998 (dated Oct. 
5, 1999) (``October 1999 492'').  AT&T questions whether the 
reports dated March 30, 1998 and October 5, 1999 were actually 
filed, see, e.g., AT&T Corp. and AT&T of the Virgin Islands, Inc. 
v. Virgin Islands Telephone Corporation, d/b/a/ Innovative 
Telephone, AT&T Corp.'s Reply to [Vitelco's] Answer, File No. EB-
04-MD-002 (filed Mar. 29, 2004) (``Reply'') at 29,  S-3, S-4, 
but we need not and do not resolve that question in order to make 
the liability determination herein.
35 The Common Carrier Bureau is now the Wireline Competition 
Bureau.
36 1997 Annual Access Tariff Filings, Memorandum Opinion and 
Order, 13 FCC Rcd 5677, 5677, 5700, 5679, 5702, 5708-09 at  1, 
65, 67, 91, 92 (Com. Car. Bur. June 27, 1997) (``Suspension 
Order'').
37 1997 Annual Access Tariff Filings, Order Designating Issues 
for Investigation Memorandum Opinion and Order and Order on 
Reconsideration, 12 FCC Rcd 11417, 11417-18, 11445, 11449, 11452 
at  2, 63, 75, 87 (Com. Car. Bur. July 28, 1997) 
(``Reconsideration Order''). 
38 Joint Statement at 4,  13-14; Further Stipulations at 1,  
3. 
39 See, e.g., September 1999 492; October 1999 492.  
40 47 C.F.R.  1.716-717.
41 AT&T Corp. and AT&T of the Virgin Islands, Inc. v. Virgin 
Islands Telephone Corporation, d/b/a/ Innovative Telephone, 
Informal Complaint, EB-01-MDIC-0552 (filed Sept. 10, 2001) 
(``Informal Complaint'').
42 AT&T Corp. and AT&T of the Virgin Islands, Inc. v. Virgin 
Islands Telephone Corporation, d/b/a/ Innovative Telephone, Joint 
Motion Regarding Procedure for Response to Informal Complaint, 
EB-01-MDIC-0552 (filed Sept. 10, 2001) (``Joint Motion'').  The 
court decision at issue was ACS v. FCC, supra, which involved 
many of the same questions raised in AT&T's informal complaint 
against Vitelco.  
43 Order, EB-01-MDIC-0552 (Enf. Bur.- MDRD, Nov. 21, 2001).
44 47 U.S.C.  415(b); 47 C.F.R.  1.716-718.
45 See, e.g., Complaint at 2, 5, 6,  2, 13, 15.  
46 47 C.F.R.  1.722(d).
47 See, e.g., Joint Statement at 2.  Given that we find in favor 
of AT&T on liability, AT&T may now file a supplemental complaint 
for damages in accordance with 47 C.F.R.  1.722.  If Vitelco 
plans to seek court review of this Order, however, the parties 
may wish to seek a waiver and extension of our 60-day deadline 
for filing a supplemental complaint for damages.
48 Complaint at 10,  30; Joint Statement at 4,  23.
49 Answer at pp. 3-4, A-7-9, A-34, A-17-20, A-22-23, A-24-25, A-
27-28, A-30-31, A-33-35,  14, 19, 31, 33, 47- 48, 55, 59, 64-
66.
50 Answer at pp. 2-3, A-2, A-5, A-7-8, A-13, A-36-37, A-9-12, A-
14-17, A-25, A-31-33, A-36-41  2, 12, 14, 18-20, 22, 25, 29-30, 
49, 60-63, 71-78.
51 Answer at pp. 3-4, A-7-8, A-17-19, A-20, A-22-25, A-27-28, A-
30-31, A-33-35,  14, 31, 33, 47, 48, 55, 59, 64-66; 47 U.S.C.  
415(b).
52 Answer at A-8-9, A-22-23, A-34,  19, 47, 65-66; September 
1997 492.
53 Answer at A-8-9, A-22-23, A-34-35,  19, 47, 65-66, 68.
54 Answer at pp. 3-4, A-8, A-19, A-23-25, A-34-35, A-47,  14, 
31, 47- 48, 66-68.
55 Answer at pp. 3-4, A-19, A-25, A-34-35, A-47,  31, 48, 66-
68; March 1998 492.  For purposes of this Order only, we will 
assume, without deciding, that Vitelco did, in fact, file an 
interim monitoring report on March 30, 1998.
56 Answer at pp. 3-4, A-20, A-22, A-25, A-33-35,  34, 47-48, 
65, 67-68.
57 See, e.g., ACS v. FCC, 290 F.3d at 407 n.1; MCI v. FCC, 59 
F.3d at 1416-17; Virgin Islands, 989 F.2d at 1238-39; Allnet 
Communications Serv., Inc. v. US West, Inc., Memorandum Opinion 
and Order, 8 FCC Rcd 3017, 3019 at  13 (1993) (subsequent 
history omitted) (``Allnet''); US Sprint Communications Ltd. 
Partnership v. Pacific Northwest Bell Tel. Co., Memorandum 
Opinion and Order, 8 FCC Rcd 1288, 1291-92 at  16 (1993) 
(subsequent history omitted).  
58 See, e.g., 47 U.S.C.  201(b); Virgin Islands, 989 F.2d at 
1239 (``[T]he Commission's prescribed rate of return is not 
Mosaic law, but a single point within a broad range of reasonable 
rates.''); Nader v. FCC, 520 F.2d 182, 193 (D.C. Cir. 1975) (``In 
terms of ratemaking, the agency's expertise allows us to accept 
its judgment after it defines the zone of reasonableness.'').  
59 Virgin Islands, 989 F.2d at 1233.
60 47 C.F.R.  65.701.
61 See, e.g., MCI v. FCC, 59 F.3d at 1415 (``During any 
monitoring period in which its rates appeared destined to yield 
earnings above (or for that matter below) its authorized rate of 
return, the LEC could have revised its tariffs to avoid that 
result.''); Virgin Islands, 989 F.2d at 1233 (observing that 
carriers ``may correct for erroneous projections in the first 
year through rate adjustments in the second year.'').
62 Virgin Islands, 989 F.2d at 1238.    
63 See, e.g., MCI. v. FCC, 59 F.3d at 1416-17; Virgin Islands, 
989 F.2d at 1238-39 (observing that ``the target `authorized 
return' is a number that has meaning only in relation to the full 
two-year monitoring period.''); AT&T v. Telephone Utils. Exch. 
Carrier Ass'n., Memorandum Opinion and Order, 10 FCC Rcd 8405, 
8415 at  22 (``[T]he date of the filing of the final monitoring 
report is dispositive with regard to the date a complainant 
discovers the right or wrong or the facts on which such knowledge 
is chargeable as a matter of law.''); Allnet, 8 FCC Rcd at 3019, 
 13; US Sprint Communications Ltd. Partnership v. Pacific 
Northwest Bell Tel. Co., Memorandum Opinion and Order, 8 FCC Rcd 
1288, 1291-92 at  16 (1993) (subsequent history omitted); MCI 
Telecom. Corp. v. Pacific Bell Tel. Co. et al., Memorandum 
Opinion and Order, 5 FCC Rcd 3463, 3464 at  6 (1990) (subsequent 
history omitted).
64 MCI. v. FCC, 59 F.3d at 1416-17 (holding that ``a cause of 
action for damages [ . . . ] does not accrue until after [the 
carrier] files its final monitoring report.''). 
65 Answer at A-18-19, A-24-25, A-29,  31-32, 48, 56.    
66 Answer at A-5, A-18-19, A-24-25, A-27, A-29,  11, 31-32, 48, 
53, 55-56.
67 Answer at A-18-19, A-24,  31-32, 48. 
68 Answer at A-18-19, A-24-25, A-29,  31-32, 48, 56.
69 Answer at 3, A-5, A-7, A-24-25, A-29,  12 n.9, 13, 48-49, 56 
(all referencing ACS v. FCC, 290 F.3d at 415).  See Joint 
Statement at 4,  17.
70 Answer at A-18,  31 (citing Streamlined Tariff Order, 12 FCC 
Rcd at 2175-76,  8).
71 See Streamlined Tariff Order, 12 FCC Rcd at 2183, 21 (``The 
`deemed lawful' language in section 204(a)(3) changes the current 
regulatory scheme only by immunizing from challenge those rates 
that are not suspended or investigated before a finding of 
unlawfulness.  It does nothing to change the Commission's ability 
to prescribe rates as to the future under section 205 or to find 
under section 208 that a rate will be unlawful if charged in the 
future.''); id. at 2181-83,  19-20.  Unlike a complaint for 
damages, such a complaint for prospective relief would not be 
premature, even if filed before the end of the monitoring period, 
because the alleged violation of the Act in that circumstance - 
charging rates that are likely to result in period-end earnings 
above the maximum allowable rate of return - accrues when that 
likelihood becomes evident.  Otherwise, meaningful prospective 
relief (as opposed to damages) would never be available via a 
complaint proceeding.
72 See, e.g., Virgin Islands, 989 F.2d at 1238-39 (stating that 
``the target `authorized return' is a number that has meaning 
only in relation to the full two-year monitoring period.'').
73 January 1998 Tariff; July 1998 Tariff; March 1998 492; 
September1999 492; October 1999 492.
74 See ACS v. FCC, 290 F.2d at 415.    
75  Answer at A-20,  32 (``Under new section 204(a)(3), 
retroactive damages are evaluated during the entire two-year 
period only if ``non-deemed lawful'' rates are in effect for that 
whole period.  To decide otherwise would allow damages from rates 
that are deemed lawful.''); A-29,  55 (``The use of a two-year 
monitoring period to ensure that rates are reasonable, when a 
portion of the rates being monitored are already conclusively 
presumed to be reasonable, would result in the recovery of 
damages for ``deemed lawful rates.''); A-31,  60 (``Without a 
two-year monitoring period, there is no refund obligation.'').
76 Streamlined Tariff Order, 12 FCC Rcd at 1275-76,  8.  See id. 
at 2181-82,  19.
77 Virgin Islands, 989 F.2d at 1238-39.  For the reasons 
explained in paragraphs 21-23, supra, we reject Vitelco's 
argument that, after the enactment of section 204(a)(3), Virgin 
Islands is no longer instructive regarding the existence and 
operation of the two-year monitoring period.
78 Virgin Islands, 989 F.2d at 1238-39.
79 ACS v. FCC, 290 F.2d at 413, citing Virgin Islands, 989 F.2d 
at 1238.  It merits mention that the D.C. Circuit's recent 
reliance on Virgin Islands in the ACS case further undermines 
Vitelco's assertion that section 204(a)(3) has superceded pre-
1997 case law regarding rate-of-return regulation.
80 Communications Vending Corp. of Arizona, Inc. v. FCC, 365 F.3d 
1064 (D.C. Cir. 2004) (``Communications Vending)''. 
81 Communications Vending, 365 F.3d at 1074.
82 July 1997 Tariff; Further Stipulations at 1,  5.
83 Suspension Order, 13 FCC Rcd at 5700,  65.  See id. at 5679, 
 1 (``we suspend for one day and set for investigation'' the 
carriers' tariffs); id. at 5702,  67 (``We will therefore 
suspend these LECs' tariff filings for one day and initiate an 
investigation into the lawfulness of their proposed CWC 
requirements.''); id. at 5708,  91 (``the tariff filings filed 
by ... [Vitelco and the 10 other carriers] ... ARE SUSPENDED for 
one day and an investigation is instituted.'').
84 Suspension Order, 13 FCC Rcd at 5708-09,  92.  See 
Reconsideration Order, 12 FCC Rcd at 11418,  1 (``On June 27, 
1997, we released the [Suspension Order], which, inter alia, 
suspended for one day the annual access tariffs filed by several 
incumbent local exchange carriers, imposed an accounting order, 
and initiated an investigation into the lawfulness of a number of 
issues raised by these tariff filings.'').
85 Suspension Order, 13 FCC Rcd at 5679,  3.
86 Reconsideration Order, 12 FCC Rcd at 11418,  2.  See id. at 
11444-46,  62-66. 
87 Reconsideration Order, 12 FCC Rcd at 11449,  75 (footnote 
referencing 47 C.F.R.  1.108 and 0.291 omitted).  See id. at 
11418,  2.
88 Reconsideration Order, 12 FCC Rcd at 11449,  75.  See id. at 
11445,  63 (``We decline to investigate most of these Class B 
carriers because they have now provided information that verifies 
that their net lags are close to 15 days.'').
89 Reconsideration Order, 12 FCC Rcd at 11449,  75.  See id. at 
11452,  87 (``IT IS FURTHER ORDERED that pursuant to Sections 
0.291 and 1.108 of the Commission's rules, 47 C.F.R.   0.291, 
1.108, we reconsider on our own motion our decision in the 1997 
Annual Access Tariff Suspension Order to suspend and investigate 
tariff provisions that include rate elements associated with cash 
working capital for . . . Virgin Island Telephone Company,  . . . 
and, for the reasons stated herein, we decline to investigate 
these LECs' tariff provisions that relate to cash working 
capital.''); id. at 11445,  63.
90 47 U.S.C.  204(a)(3) (emphasis added).
91 47 U.S.C.  204(a)(1).
92 Answer at A-4, A-9-12, A-15-16, A-36-37, A-40-41,  10, 19, 
29, 71, 78; AT&T of the Virgin Islands, Inc. v. Virgin Islands 
Telephone Corporation, d/b/a/ Innovative Telephone, Supplemental 
Brief of Innovative Telephone, File No. EB-04-MD-002 (Apr. 26, 
2004) at 1-5 (Vitelco's Delegation Brief).
93 Answer at 2, A-9-16, A-32-33, A-37-40,  19, 21-26, 29, 61, 
63, 71-77. 
94 Streamlined Tariff Order, 12 FCC Rcd at 2182, 2220,  19, 103.
95 Streamlined Tariff Order, 12 FCC Rcd at 2182,  19 (emphasis 
added).
96 Indeed, the statute gives the Commission five months to 
conclude such an investigation.  47 U.S.C.  204(a)(2).
97 Answer at 2-3, A-15-16, A-32-33, A-40  29, 61-62, 78; 
Vitelco's Delegation Brief at 1-6.
98 Answer at A-7, A-9-16, A-32-33, A-36-41,  14, 19, 22-26, 29, 
61-63, 71-78.
99 Streamlined Tariff Order, 12 FCC Rcd at 2182, 2220,  19, 103.
100 Streamlined Tariff Order, 12 FCC Rcd at 2182,  19 (emphases 
added).
101 Vitelco's Delegation Brief at 1-5; AT&T of the Virgin 
Islands, Inc. v. Virgin Islands Telephone Corporation, d/b/a/ 
Innovative Telephone, Supplemental Brief of AT&T Corp., File No. 
EB-04-MD-002 (May 4, 2004) at 2-3 (``AT&T's Delegation Brief'').
102 Streamlined Tariff Order, 12 FCC Rcd at 2181-82,  18-19.
103 Vitelco's Delegation Brief at 5.
104 MCI v. FCC, 59 F.3d at 1414 (citing and quoting 47 U.S.C.  
201(b)).  See, e.g., American Tel. & Tel. Co. v. FCC, 836 F.2d 
1386, 1392 (D.C. Cir. 1988); New England Tel. & Tel. Co. v. FCC, 
826 F.2d 1101, 1106-07 (D.C. Cir. 1987) (``New England Tel.''); 
Nader v. FCC, 520 F.2d 182 (D.C. Cir. 1975).
105 See, e.g., New England Tel., 826 F.2d at 1107-08 (stating 
that section 4(i) of the Act provides the Commission with the 
authority to enforce the rate-of-return prescription by ordering 
refunds); see also In the Matter of Amendment of Parts 65 and 69 
of the Commission's Rules to Reform the Interstate Rate of Return 
Represcription and Enforcement Processes, Report and Order, 10 
FCC Rcd 6788, 6848-49 at  137 (1995) (subsequent history 
omitted) (noting that the complaint process embodied in section 
208 of the Act provides a useful tool in enforcing the rate-of-
return prescription, and that the Commission is authorized to 
award damages for violations of the rate-of-return prescription).
106 MCI v. FCC, 59 F.3d at 1415.
107 September 1997 492 (cumulative interstate access rate of 
return 12.98%); March 1998 492 (cumulative interstate access rate 
of return 12.94%); September 1999 492 (cumulative interstate 
access rate of return 14.78%); October 1999 492 (cumulative 
interstate access rate of return 14.79%). 
108 See, e.g., Joint Statement at 4,  22, 23; Complaint at 10, 
 30.
109 Further Stipulations at  3; Answer at A-5-6, A-8-9, A-24-25, 
A-27-28, A-30-31,  12, 14, 19, 48, 55, 58, 60.
110  47 USC 204(a)(3).
111  See, In the Matter of Implementation of Section 402(b)(1)(A) 
of the Telecommunications Act of 1996, Report and Order, 12 FCC 
Rcd 2170 at paras.19-21 (1997) (``Streamlined Tariff Order'').  
112  1997 Annual Access Tariff Filings, Memorandum Opinion and 
Order, Suspension Order, 13 FCC Rcd 5677 (Com. Car. Bur. June 27, 
1997) (``Suspension Order'').
113  1997 Annual Access Tariff Filings, Order Designating issues 
for Investigation Memorandum Opinion and Order and Order on 
Reconsideration, 12 FCC Rcd 11417 (Com. Car. Bur. July 28, 1997) 
(``Reconsideration Order'')
114 Order at paras. 13, 37.
115 Under section 5(c)  of the Act, the Commission may not 
delegate to a Bureau the authority to take action under section 
204(a)(2), i.e., to issue an order concluding a tariff 
investigation.