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Before the
Federal Communications Commission
Washington, D.C. 20554
In the Matters of )
)
AT&T Corp., )
Com- ) EB-01-MD-001
plainant, )
v. )
)
Business Telecom, Inc., )
De- )
fendant. )
)
)
Sprint Communications Company, ) EB-01-MD-002
L.P., )
Com- )
plainant, )
)
v.
Business Telecom, Inc.,
De-
fendant.
MEMORANDUM OPINION AND ORDER
Adopted: May 25, 2001 Released: May 30, 2001
By the Commission: Commissioner Furchtgott-Roth dissenting and
issuing a separate statement.
TABLE OF CONTENTS Paragraph
I. INTRODUCTION 1
II. BACKGROUND 1
A. The Parties 2
B. The Parties' Business Relationship 3
C. The Procedural History 6
III. DISCUSSION 9
A. The Commission Has Authority to Adjudicate the
Lawfulness of BTI's Past and Present Access Rates.
9
B. BTI's Access Rates are Unjust and Unreasonable
Under Section 201(b). 17
1. Marketplace Data, Rather than BTI's Costs,
Provide the Principal Tools for Assessing the
Reasonableness of BTI's Access Rates. 17
2. Rates for Services Using Comparable Network
Functions are Appropriate Marketplace Data on
Which to Assess the Reasonableness of BTI's
Access Rates. 23
a. BTI's Access Rate Greatly Exceeds ILECs'
Access Rates. 31
b. BTI's Access Rate Exceeds the Access
Rates of Many Other CLECs. 35
c. The Differential Between BTI's Access
Rate and Reciprocal Compensation Rate is
Enormous, and Far Larger than
BellSouth's Differential. 37
3. BTI's Access Revenue-Sharing Practices Are
Also Appropriate Marketplace Data on Which to
Assess the Reasonableness of BTI's Access
Rates. 42
4. The Foregoing Market Data Amply Indicate that
BTI's Access Rates Were and Are Unjust and
Unreasonable. 43
5. BTI's ``Cost Showing'' Does Not Justify Its
Access Rates. 45
6. AT&T Is Not Estopped From Challenging BTI's
Access Rates. 51
C. The Lawful Per-Minute Access Rate for Purposes of
Calculating Damages Ranges From 3.8 Cents to 2.7
Cents During the Relevant Period. 53
D. AT&T Is Not Entitled to Additional Relief Under
Section 254(k) of the Act. 60
IV. Ordering Clauses 62
I. INTRODUCTION
In this Order, we grant in part and deny in part complaints filed
by AT&T Corp. (``AT&T'') and Sprint Communications Company, L.P.
(``Sprint'') (collectively ``Complainants'') against Business
Telecom, Inc. (``BTI'')1 pursuant to section 208 of the
Communications Act of 1934, as amended (``Act'' or
``Communications Act'').2 In particular, we grant Complainants'
claims that BTI's access rates were and are unjust and
unreasonable under section 201(b) of the Act.3 In conjunction
with granting these claims, we define a just and reasonable rate
on which Complainants' damages should be based. Further, we deny
AT&T's claim for relief arising from BTI's alleged cross-
subsidization, assertedly in violation of section 254(k) of the
Act.4
II. BACKGROUND
II.A. The Parties
AT&T and Sprint are, inter alia, non-dominant interexchange
carriers (``IXCs''). 5 BTI is a competitive local exchange
carrier (``CLEC'') that provides facilities-based interstate and
intrastate exchange access services, telephone toll services, and
local exchange services in urban areas of the southeastern United
States, including North and South Carolina, Georgia, and
Florida.6 BTI principally serves small business and residential
users in the following states and cities: South Carolina -
Columbia, Greenville, and Charleston; North Carolina - Raleigh,
Greensboro, and Charlotte; Florida - Jacksonville, Tampa, and
Orlando; Tennessee - Nashville and Knoxville; and Georgia -
Atlanta.7 As of September 2000, BTI served approximately 125,000
access lines in at least 12 urban areas.8 In all of BTI's
service areas, the incumbent local exchange carrier (``ILEC'')
was either BellSouth Telecommunications, Inc. (``BellSouth'') or
GTE Telephone Operating Companies (``GTE'').9
II.B. The Parties' Business Relationship
The matters at issue relate to BTI's provision of switched
interstate access services to Complainants.10 Access service
generally consists of ``originating'' access, by which a call is
transported from a caller's premises over a local exchange
carrier's network to the IXC's network, and ``terminating''
access, by which a call is transported from the IXC's network
over a local exchange carrier's network to the called party's
premises. 11
BTI's rates for its switched interstate access services were set
forth in its FCC Tariff No. 4, which BTI initially filed with the
Commission in July 1998.12 At all relevant times, BTI's tariffed
switched access rate per minute of use was 7.1823 cents per
minute for both originating and terminating access.13 BTI did
not base its access rates on any analysis of its costs of
providing access service.14 Instead, BTI developed its access
rates by simply reviewing the rates that other CLECs were
charging in 1998.15
Beginning in 1998, BTI invoiced Complainants for access services
it provided them.16 Complainants have only partially paid the
invoiced amounts.17 For example, Sprint has paid BTI at a level
approximating the interstate access rates of the ILECs operating
in BTI's service areas, which rates are substantially below
BTI's.18 Complainants assert that they refused to pay the
invoiced amounts because, in their view, (1) BTI's access rates
were unreasonably high; (2) Complainants never actually
``ordered'' BTI's access services; and, (3) in any event,
Complainants properly requested discontinuance of any ``ordered''
access services.19
II.C. The Procedural History
These complaint proceedings arise from primary jurisdiction
referral orders in Advamtel, LLC d/b/a Plan B Communications, et
al. v. Sprint Communications Co., and Advamtel, LLC d/b/a Plan B
Communications, et al. v. AT&T Corp. (collectively ``Advamtel
Litigation'').20 BTI and other CLECs filed suit in the Advamtel
Litigation against AT&T and Sprint for nonpayment of the CLECs'
interstate access charges.21 In response, AT&T and Sprint filed
several counterclaims against BTI and other CLECs, including
counterclaims challenging the lawfulness of the CLECs' access
rates under section 201(b) of the Act.22 AT&T also alleged that
BTI and other CLECs used excess access revenues to cross-
subsidize their long distance and local exchange services, in
violation of section 254(k) of the Act.23
In July 2000, the federal district court granted Complainants'
motions to refer certain of their counterclaims to the Commission
pursuant to the doctrine of primary jurisdiction.24
Specifically, the court referred Complainants' claims that BTI
and other CLECs charged unreasonably high access rates, in
violation of section 201(b) of the Act.25 The court also
referred AT&T's claim that BTI and other CLECs engaged in cross-
subsidization prohibited by section 254(k) of the Act. 26
To effectuate the court's referrals, Complainants filed these
formal complaints against BTI with the Commission on January 16,
2001, and the Enforcement Bureau promptly consolidated them.27
Complainants contend that BTI's access rates are unjustly and
unreasonably high under section 201(b) of the Act.28 AT&T also
contends that BTI cross-subsidized its retail local and long
distance services with revenues from its access services, in
violation of section 254(k) of the Act.29
III. DISCUSSION
III.A. The Commission Has Authority to Adjudicate the
Lawfulness of BTI's Past and Present Access Rates.
BTI makes several arguments challenging the Commission's
authority to review the rates at issue.30 BTI first alleges that
its access rates are conclusively presumed to be lawful because
the rates are contained in a validly filed tariff.31 To support
this argument, BTI correctly observes that we must presume
tariffed rates to be reasonable when the tariff has been validly
filed.32 This presumption of reasonableness is rebuttable,
however, in the context of a section 208 complaint alleging a
violation of section 201(b).33 Consequently, even though
Complainants do not challenge the validity of the filing of BTI's
tariff, we have authority to conclude in this proceeding that
BTI's tariffed access rates were and are unjust and unreasonable
in violation of section 201(b).34
According to BTI, any specification of a just and reasonable rate
for past periods in order to calculate damages would constitute
prohibited retroactive ratemaking.35 As support for its
position, BTI points out that section 205 only permits the
Commission to impose prospective rate changes.36 BTI's
assertions disregard the fact that our authority to award damages
stems from sections 207, 208, and 209 of the Act, and not section
205.37 The adjudicatory scheme established by Congress
specifically allows for the recovery of damages in instances such
as this. Section 208(b) expressly refers to complaints involving
``the lawfulness of a charge,''38 and section 207 permits
complainants to recover damages pursuant to section 208.39
Moreover, section 209 states that, ``[i]f after hearing on a
complaint, the Commission shall determine that any party
complainant is entitled to an award of damages . . ., the
Commission shall make an order directing the carrier to pay to
the complainant the sum to which he is entitled . . . .''40
The Commission has repeatedly explained its statutory authority
to award damages in section 208 complaint cases concerning the
lawfulness of tariffed charges. For example, the Commission has
previously stated that, if ``a tariff filing is subsequently
determined to be unlawful in a complaint proceeding commenced
under section 208 of the Act, customers who obtained service
under the tariff prior to that determination may be entitled to
damages.''41 The Commission also has held ``that a proper
measure of the damages suffered by a customer as a consequence of
a carrier's unjust and unreasonable rate is the difference
between the unlawful rate the customer paid and a just and
reasonable rate.''42 Consistent with this authority to award
damages arising from unlawful rates, the Commission has stated on
several occasions that, in lieu of directly regulating CLEC
access rates, the Commission would, instead, rely on complaints
filed under section 208 seeking to enforce the ``just and
reasonable'' standard of section 201(b) to constrain and
discipline CLEC access rates.43
Federal court decisions confirm the Commission's statutory
authority to award damages in section 208 complaint cases
concerning the lawfulness of tariffed charges. In upholding a
Commission order invalidating a tariff, the D.C. Circuit recently
rejected as ``clearly wrong'' the view that ``relief under
Section 208 of the Act cannot be retroactive in effect.''44 In
doing so, the D.C. Circuit stated that, ``insofar as Section 208
authorizes the award of damages or other remedies, it is always
`retroactive' in its application in that it will always be
changing the economic consequences of a carrier's prior
conduct.''45 Thus, we conclude that we have the authority, in
the context of this complaint proceeding, to establish the
reasonable rates that BTI should have charged during the period
at issue to enable the assessment of damages.46
BTI also argues that the Commission cannot order any prospective
rate changes in resolving this complaint, because the
Commission's formal complaint procedures did not afford BTI a
``full opportunity for a hearing'' within the meaning of section
205.47 Although we do not prescribe future rates here, we take
this opportunity to make clear that BTI's argument is manifestly
incorrect. Section 205(a) of the Act states that ``[w]henever,
after full opportunity for hearing, upon a complaint . . . the
Commission shall be of opinion that any charge . . . is or will
be in violation of any of the provisions of this chapter, the
Commission is authorized and empowered to determine and prescribe
what will be the just and reasonable charge . . . .''48 Section
205 thus expressly authorizes the Commission to prescribe rates
in the context of a complaint proceeding under section 208. The
only question is whether the formal complaint procedures employed
in this proceeding met the ``hearing'' requirement contained in
section 205.
BTI acknowledges that ``the language `after full opportunity for
hearing' contained in Section 205 does not trigger the detailed
oral hearing requirements of Sections 556 and 557 of the
Administrative Procedure Act [`APA'].''49 BTI asserts,
nonetheless, that the formal complaint procedures employed here
fall short of a ``hearing,'' because they did not amount to
notice and comment type rulemaking.50 Again, we disagree.
The ``hearing'' requirement in section 205 means that a defendant
in a complaint proceeding must have fair notice of, and
reasonable opportunity to comment upon, the issues raised
concerning the appropriate level of its future rates.51 BTI was
amply afforded such notice and comment opportunity here. The
parties filed substantial pleadings and briefs, conducted
extensive discovery - including interrogatories, document
requests, and depositions - participated in several in-person and
telephonic conferences with Commission staff, and submitted
dozens of documentary exhibits. Thus, we reject BTI's argument
that the procedures employed here do not amount to a ``hearing.''
In any event, even if some type of notice and comment rulemaking
procedures were required by section 205, we find that the
procedures employed here more than adequately met those
requirements. Section 553 of the APA governs rulemaking
procedures, and it permits the Commission to forego publication
of a proposed rule in the Federal Register if ``persons subject
thereto are named and either personally served or otherwise have
actual notice thereof in accordance with law.''52 Section 553
further requires that persons subject to the rule be given an
opportunity to submit ``written data, views or arguments.''53
Here BTI, the sole defendant in this complaint proceeding, had
actual notice of this proceeding and a full opportunity to submit
data, views, and arguments. We thus have ample authority under
sections 205 and 208 of the Act to prescribe a tariffed access
rate that BTI must charge in the future.
III.B. BTI's Access Rates are Unjust and Unreasonable
Under Section 201(b).
III.B.1. Marketplace Data, Rather than BTI's Costs,
Provide the Principal Tools for Assessing the
Reasonableness of BTI's Access Rates.
The parties agree that we should assess the reasonableness of
BTI's access rates by evaluating the market for access services,
rather than by ascertaining BTI's costs of providing access
services. 54 The parties are correct, for at least two reasons.
First, the Commission has interpreted the Telecommunications Act
of 199655 as directing the Commission to refrain - whenever
possible - from applying to CLECs the legacy, cost-based
regulations long applicable to the access services of ILECs.56
For example, the Commission has found that, in light of the 1996
Act, ``[c]ompetitive markets are superior mechanisms for
protecting consumers'' by ensuring that services are provided and
priced in the most efficient possible manner.57 The Commission
also has determined that reliance on competitive market forces
``minimize[s] the potential that regulation will create and
maintain distortions in the investment decisions of competitors
as they enter local communications markets.''58 As a result, the
Commission has concluded that the policies and purposes of the
1996 Act demand a ``market-based approach'' to the regulation of
access charges.59 Consequently, the Commission has chosen not to
apply the historical ILEC rules and regulations to CLECs. 60
Examining BTI's costs as the touchstone of the reasonableness of
BTI's rates would contradict this trend towards reliance on
market factors to dictate appropriate rates.
Second, given the Commission's decision not to apply to CLECs the
accounting and separations rules applicable to ILECs, there would
be substantial ``legal and practical difficulties involved with
comparing CLEC rates to any objective [i.e., cost-based] standard
of reasonableness.''61 Moreover, precedent exists for examining
the reasonableness of rates by means other than reviewing the
costs of an individual CLEC.62
Although the parties correctly agree that we should examine
market factors rather than BTI's costs in determining whether
BTI's access rates are just and reasonable, they differ as to the
scope and nature of such examination. Complainants argue that,
because of market failures in the access services market, the
Commission should examine certain market statistics - such as
ILEC access rates, other CLECs' access rates, BTI's reciprocal
compensation rates, and BTI's local and long distance rates - to
ascertain what BTI would have charged had the access market been
truly competitive.63 BTI contends, on the other hand, that
because the Commission has previously determined that CLECs lack
market power, the Commission must essentially assume that BTI was
free to charge whatever the market would bear, regardless of
whether BTI's access rates exceeded the market indicia proffered
by Complainants.64
We agree with Complainants that we should examine certain market
data to determine the reasonableness of BTI's access rates.
Despite previous indications that market forces might constrain
CLEC access rates, the Commission recently found that, in
actuality, the market for access services is not structured in a
manner that allows competition to discipline rates. 65
Specifically, the Commission found that the originating and
terminating access markets consist of a series of bottleneck
monopolies over access to each individual end user.66 Once an
end user decides to take service from a particular LEC, that LEC
controls an essential component of the wireline system that
provides interexchange calls, and it becomes a bottleneck for
IXCs wishing to complete calls to, or carry calls from, that end
user.67 Thus, with respect to access to their own end users,
CLECs have just as much market power as ILECs.68 In addition,
the Commission determined that ``the combination of the market's
failure to constrain CLEC access rates, the Commission's
geographic rate averaging rules for IXCs, the absence of
effective limits on CLEC rates and the tariff system created an
arbitrage opportunity for CLECs to charge unreasonable access
rates.''69
Given these competitive failures in the CLEC access market, we
must decline BTI's invitation to take a laissez faire approach to
its access rates. Because the CLEC access market is not truly
competitive, we cannot simply assume that ``whatever the market
will bear'' translates into a just and reasonable rate.70
Instead, to ``correct'' retroactively the market failures
described above, we must examine market factors to try to
ascertain whether BTI's rates were just and reasonable. If our
examination of these factors reveals that BTI charged just and
reasonable access rates, despite its market power, then we must
deny Complainants' complaints. If our examination demonstrates
otherwise, then we must invalidate those access rates and
determine what reasonable access rates would have been for
purposes of calculating damages.
III.B.2. Rates for Services Using Comparable Network
Functions are Appropriate Marketplace Data on
Which to Assess the Reasonableness of BTI's Access
Rates.
Complainants argue that comparing BTI's access rates to the rates
charged by BTI and others for services using comparable network
functions is an appropriate mechanism for determining whether
BTI's access rates were and are just and reasonable pursuant to
section 201(b).71 We agree. The Commission has previously
recognized that services offered under substantially similar
circumstances using similar facilities lead to the expectation of
similar charges.72 In addition, the Commission has frequently
used rate comparisons, benchmarks, and non-cost factors to
evaluate the justness and reasonableness of rates and to
prescribe just and reasonable rates for regulated entities.73
Moreover, examining rates for services using comparable network
functions is consistent with the Commission's CLEC Access Charge
Order. 74 In that order, the Commission compared existing CLEC
access rates with what the rates likely would have been in a
properly functioning competitive market, and prospectively
limited CLEC's tariffed access rates in an effort to mimic the
actions of a competitive marketplace.75
We reject BTI's assertion that prior Commission orders or court
decisions prohibit such comparisons.76 Our approach fully
comports with the Commission's prior decisions to rely upon
market forces and complaint proceedings to constrain and
discipline CLEC access rates.77 In particular, in choosing not
to regulate CLEC access rates, the Commission has previously
concluded that, if it needed to examine the reasonableness of a
CLEC's access rates in an individual complaint case, it could do
so by taking into account all relevant factors, including
relationships to other rates.78 Similarly, the Commission has
acknowledged that an upward disparity between a CLEC's access
rates and those charged by the ILEC serving the same market may
suggest that the CLEC's access rates are excessive. 79
Moreover, the Commission has broad discretion in selecting
methods to evaluate the reasonableness of rates.80 In fact,
courts are ``particularly deferential'' when reviewing the
Commission's evaluation of rates, because such agency action is
far from an exact science and involves ``policy determinations in
which the agency is acknowledged to have expertise.'' 81 As long
as the Commission makes a ``reasonable selection from the
available alternatives,'' its selection of rate evaluation
methods will be upheld, ``even if the court thinks [that] a
different decision would have been more reasonable or
desirable.''82
Contrary to BTI's argument, we find that Sprint v. MGC 83 does
not require denial of Complainants' claims. 84 In Sprint v. MGC,
Sprint argued that MGC's tariffed access rates were unjust and
unreasonable under section 201(b) solely because they exceeded
the rates charged by the competing ILECs.85 The Commission
denied Sprint's claim, because doing otherwise would have
effectively established a per se requirement that CLEC access
rates never exceed ILEC access rates.86
Unlike in Sprint v. MGC, the competing ILEC rate is only one of
several factors on which Complainants rely to assert that BTI's
rates are unjust and unreasonable. These other factors include:
(1) the rates charged by other ILECs operating outside of BTI's
service areas; (2) BTI's rate to its end-user customers for
competitive services such as local exchange and long distance;
(3) access rates charged by other CLECs; and (4) the rate BTI
accepts as compensation for the transport and termination of
local exchange traffic.87 Thus, Sprint v. MGC is inapposite.
Moreover, we disagree with BTI that the Permian Basin Area Rate
Cases88 limit the Commission's ability to use market benchmarks
in assessing the justness and reasonableness of a purportedly
market-based rate.89 To the contrary, this decision clearly
demonstrates that there is no single regulatory formula required
in assessing the justness and reasonableness of a carrier's
rates.90
We also disagree with BTI that Beehive Telephone91 and IT&E
Overseas92 limit our ability to rely on rate comparisons to
assess the validity of BTI's access rates.93 In Beehive
Telephone, the Commission prescribed a carrier's rates using a
methodology based on industry averages for comparable carriers.94
BTI mistakenly characterizes this holding as imposing rigid rules
on the Commission's rate analysis. Rather than narrowing the
Commission's flexibility, Beehive Telephone rests on the broad
discretion that courts have afforded the Commission in "selecting
methods ... to make and oversee rates.''95 Thus, Beehive
Telephone reflects the understanding that federal agencies with
ratemaking authority similar to the Commission's may establish a
regulatory scheme that produces a ``zone of reasonableness'' for
rates, rather than insisting upon a single method of determining
whether rates are just and reasonable.96 In IT&E Overseas, the
Commission declined to find that the rates of a price cap
regulated LEC were unlawful merely because they differed from the
rates of a rate-of-return regulated LEC participating in NECA's
cost averaging pools.97 IT&E Overseas does not undermine our
approach, however, because both of the ILECs involved in that
case, unlike BTI, were subject to regulatory regimes that
operated to constrain the carriers' access pricing and to prevent
the carriers from misusing their monopoly power. Other than
section 201(b), BTI is not subject to any such regulatory
constraints.98
Accordingly, we conclude that comparing BTI's access rates to the
rates charged by BTI and others for services using comparable
network functions is an appropriate mechanism for determining the
justness and reasonableness of BTI's access rates under section
201(b). We proceed to do so below.
III.B.2.a. BTI's Access Rate Greatly Exceeds
ILECs' Access Rates.
The access rates charged by ILECs operating in BTI's service
areas are a relevant benchmark, because ILEC switched access
services are functionally equivalent to CLEC switched access
services. In addition, according to fundamental economic
principles, in a properly functioning competitive market, the
access rates of BTI's primary access competitors would have been
a substantial factor in BTI's setting of its own access rates.99
Indeed, in other markets, BTI's pricing behavior adhered to
these principles. BTI's rates for its local exchange service
were approximately 15 to 25 percent below those of its primary
competitors, BellSouth and GTE;100 and BTI's rates for long
distance service were roughly the same as those of its primary
IXC competitors.101
Nevertheless, during all relevant times, BTI's access rate was
significantly higher than the competing ILECs' rates. In July
2000, BTI's access rate of 7.1823 cents per minute was more than
15 times higher than BellSouth's average rate of approximately
0.48 cents per minute, 102 and more than 7 times higher than
GTE's average rate of approximately 1.0 cent per minute.103 In
July 1999, BTI's access rate was more than 5 times higher than
BellSouth's average rate of approximately 1.4 cents per minute,
and more than 3.5 times higher than GTE's average rate of
approximately 2.0 cents per minute.104 In July 1998, BTI's
access rate was approximately 4.5 times higher than BellSouth's
average rate of approximately 1.6 cents per minute, and more than
2.5 times higher than GTE's average rate of approximately 2.8
cents per minute.105
BTI argues that comparing its access rates with the access rates
of BellSouth and GTE yields irrelevant information, because those
carriers' rates were set by price controls rather than market
forces, and have different cost structures.106 We disagree.
Although BellSouth's and GTE's access rates are subject to price
cap regulation, those rates were, nevertheless, the prevailing
market rates that BTI would have needed to consider in pricing
its access services, had the access market been truly
competitive. Consequently, even though they are regulated,
BellSouth's and GTE's access rates provide guidance as to the
reasonableness of BTI's access rates.
Comparing BTI's access rate to those of ILECs operating outside
BTI's service areas also provides some guidance, because of the
functional equivalence of access services nationwide.107 BTI's
7.1823 cents per minute access rate is approximately 4 times
higher than the 1998 industry average ILEC rate of 1.9 cents per
minute, approximately 5 times higher than the 1999 industry
average ILEC rate of 1.4 cents per minute, and approximately 8
times higher than the 2000 industry average ILEC rate of 0.96
cents per minute.108 In addition, BTI's own expert confirmed in
a 1999 study that BTI's access rates exceeded industry average
rates for ILECs in 1999. This study reports that the average of
the access rates charged in 1999 by the Regional Bell Operating
Companies,109 GTE, and Sprint were less than 2 cents per minute,
whereas BTI's access rates were almost 4 times higher.110 This
study further reports that the average access rate of all 1,435
ILECs nationwide in 1999 was in the range of 3 cents per minute,
whereas BTI's access rates were more than twice as high.111
III.B.2.b. BTI's Access Rate Exceeds the
Access Rates of Many Other CLECs.
Comparing BTI's access rates to those of other CLECs provides
further guidance regarding the reasonableness of BTI's rates,
again, because of the functional equivalence of access services
nationwide.112 Indeed, BTI has implicitly acknowledged the
relevance of other CLECs' access rates, because BTI based its own
rates solely on a survey of some other CLECs' rates.113
According to BTI's own expert, BTI's access rates are
considerably higher than the rates charged by many other CLECs.
114 For example, of the 36 CLECs that BTI's expert surveyed in
December 2000, only five had access rates as high as BTI's.115
Moreover, BTI's expert determined that the average access rate of
the 36 CLECs was 4.19293 and 4.18519 cents per minute for
originating and terminating access, respectively, well below
BTI's rate of 7.1823 cents per minute for originating and
terminating access.116
III.B.2.c. The Differential Between BTI's
Access Rate and Reciprocal Compensation Rate
is Enormous, and Far Larger than BellSouth's
Differential.
Complainants argue that we should consider BTI's reciprocal
compensation rates in assessing the justness and reasonableness
of BTI's access rates.117 Generally speaking, reciprocal
compensation is the manner in which local exchange carriers
operating in the same territory compensate each other for the
transport and termination of a local call from a customer of one
carrier to a customer of another carrier.118 The Commission has
found that ``the transport and termination of traffic, whether it
originates locally or from a distant exchange, involves the same
network functions.''119 Therefore, in determining the
reasonableness of BTI's access rates (i.e., rates for
transporting and terminating long distance traffic), it is
relevant to compare them to BTI's reciprocal compensation rates
(i.e., rates for transporting and terminating local traffic).
We must assess this comparison differently from the other
comparisons described above, however, and give it far less
weight. Access rates and reciprocal compensation rates derive
from substantially different regulatory regimes, with markedly
different histories. As a result, even ILECs' present access
rates lawfully and significantly exceed their reciprocal
compensation rates (although, as historical subsidies in access
rates diminish, the rates for local transport and termination
services and for exchange access services should converge).120
Therefore, we cannot focus merely on whether BTI's access rates
exceed its reciprocal compensation rates, but must examine the
magnitude of such disparity, and whether it exceeds the disparity
between the competing ILEC's access and reciprocal compensation
rates.
Here, BTI's reciprocal compensation rate in 2000 was the same as
BellSouth's reciprocal compensation rate - less than 0.3 cents
per minute - far lower than BTI's access rate of 7.1823 cents per
minute.121 Furthermore, in 2000, BTI's access rate was
approximately 24 times higher than its reciprocal compensation
rate, whereas BellSouth's access rate was only about 1.5 times
higher than its reciprocal compensation rate.
BTI argues that its reciprocal compensation rate is not a fair
basis for comparison, because its local transport and termination
services and its exchange access services use different network
functions.122 But BTI's evidence fails to demonstrate that its
network is substantially different from most other carriers'
networks, which, as described above, the Commission has found use
essentially the same functions to provide these two services.123
BTI further argues that its decision to mirror BellSouth's
reciprocal compensation rate was not an acknowledgement of the
rate's reasonableness, but merely a pragmatic decision based on
the regulatory cost of trying to seek a higher rate.124 This
actually bolsters the usefulness of the reciprocal compensation
rate as a benchmark, however, at least in the absence of record
evidence that BTI anticipated a traffic imbalance that would
diminish the appeal of seeking asymmetrical compensation. If the
cost of trying to obtain a higher rate exceeded the benefit of
doing so, then BTI likely viewed the ILEC's rate as being close
to on the mark.
BTI further contends that, if we use its reciprocal compensation
rate as a benchmark, we will effectively require ILEC access
rates to equal ILEC reciprocal compensation rates. 125 This
contention mischaracterizes the nature of our comparison. As
described above, we are not deeming relevant the mere existence
of a rate differential, but rather examining the magnitude of the
rate differential and comparing it to the competing ILEC's rate
differential.
III.B.3. BTI's Access Revenue-Sharing Practices Are
Also Appropriate Marketplace Data on Which to
Assess the Reasonableness of BTI's Access Rates.
Although BTI contends otherwise,126 the record indicates that BTI
offered certain of its customers a cash payment or credit of up
to 24% of BTI's access revenues generated by the customers' toll
traffic.127 BTI's ability to share such a large portion of its
access revenues with its customers is relevant in determining
whether the level of BTI's access rates was just and reasonable.
III.B.4. The Foregoing Market Data Amply Indicate that
BTI's Access Rates Were and Are Unjust and
Unreasonable.
As described above, BTI's access rates greatly exceeded each
relevant market benchmark during the applicable period, and BTI
has failed to demonstrate any lawful reason for the huge
disparities. First, BTI's access rates substantially exceeded
its ILEC competitors' rates; and BTI has not demonstrated (1) any
legitimate reason why it should escape the general economic
principle that a new entrant's rates should not significantly
exceed those of a primary incumbent; or (2) any material
difference in its service offering, network architecture, or
service quality that would explain such a rate differential.
Second, BTI's access rates substantially exceeded both ILEC and
CLEC industry averages; and BTI again has not demonstrated any
material differences in its service offering, network
architecture, or service quality that would explain such a rate
differential. Third, BTI met or beat the rates of its
competitors in the local exchange and long distance markets, but
greatly exceeded the rates of its competitors in the access
market; and BTI has proffered no legitimate explanation for its
disparate pricing policies across markets. Fourth, BTI shared
with certain of its customers up to 24% of the access revenues
generated by the customers' toll traffic; and BTI has not
explained how revenues from a truly reasonable access charge
could profitably permit such arrangements. Finally, the
differential between BTI's access rates and its reciprocal
compensation rates was enormous - and far greater than
BellSouth's differential; yet BTI has not demonstrated any
material differences in its network functions, network
architecture, or service quality that would explain such
disparities.
All of these factors confirm what the Commission concluded in the
CLEC Access Charge Order - that the access market in which BTI
participates is not truly competitive, and that CLECs, such as
BTI, possess market power with respect to access to their end
users.128 These factors also clearly reveal that the level of
BTI's access rates derives from abuse of such market power.
Consequently, we find that, taken together as a whole, these
factors clearly demonstrate that BTI's access rate of 7.1823
cents per minute was and is unjust and unreasonable under section
201(b).
III.B.5. BTI's ``Cost Showing'' Does Not Justify Its
Access Rates.
For the reasons described above, we agree with the parties that
we should examine marketplace factors, rather than BTI's costs,
to determine whether BTI's rate was and is just and
reasonable.129 BTI argues, however, that if we decline to adopt
its version of a marketplace analysis, i.e., whatever the market
would bear was reasonable, then we must examine BTI's costs,
after all.130 As described above, we reject BTI's version of a
marketplace analysis, but we do not believe that an examination
of BTI's costs is either necessary or appropriate. However, even
if such an examination were deemed necessary or appropriate, we
would find with little difficulty that BTI's attempt to justify
its rates on the basis of costs fails, for the reasons described
below.
Before addressing BTI's cost-based defense, we reject BTI's
contention that, as the parties seeking relief in this
proceeding, Complainants bear the burden of showing that BTI's
costs did not justify its rates, rather than BTI bearing the
burden of showing that its costs did justify its rates.131
Because BTI had exclusive possession of the information needed to
assess its own costs,132 and BTI pled cost-justification as an
affirmative defense,133 BTI bears the burden of proving the cost-
basis of its access rates.134
To shoulder this burden, BTI submitted a ``cost showing.''135 As
an initial matter, we view BTI's cost showing with substantial
skepticism, for several reasons. First, despite full knowledge
of the exigencies created by the five-month statutory deadline
applicable to these kinds of complaints, BTI repeatedly failed to
comply with our rules regarding production of supporting
information,136 and repeatedly failed to comply in a timely
manner with Commission staff's discovery rulings.137 Second,
BTI's pricing practices for long distance services belie the
assertion that its access services are cost-based. 138 Third,
BTI offered certain of its customers a credit of up to 24% of
BTI's access revenues generated by the customer's toll
traffic.139 BTI's ability to essentially share such a large
portion of its access revenues with its customers further
undermines the assertion that BTI's access rates were cost-based.
Finally, because BTI admits that it did not examine its costs
when it set its access rates in July 1998, it would appear to be
a remarkable coincidence - but nothing more - if BTI were able to
generate a cost analysis three years after the fact that
justifies the previously selected rate.
In any event, BTI's cost justification is so riddled with
conceptual flaws and factual errors as to be of minimal
evidentiary value in assessing the cost basis of BTI's access
rates. Although these deficiencies are too numerous to discuss
in detail, the following examples demonstrate their egregious
nature.140 BTI's purported switching expert, who admitted under
oath that he was not an expert on switching,141 failed to
consider a number of relevant factors in assessing BTI's ability
to utilize its switches efficiently.142 He omitted such basic
criteria as the actual cost for each of BTI's switches. In
addition, BTI's capital costs analysis included a number of
significant errors. For example, in calculating the cost of the
debt component of BTI's capital structure, BTI's expert used the
wrong interest rate for a $250 million bond offering.143 When
this error alone was corrected, BTI's expert's calculation of the
cost of capital was reduced from 25 percent to approximately 18
percent.144 Likewise, BTI's experts included BTI's marketing and
advertising expenses, which accounted for 50 percent of BTI's
common costs,145 in their estimate of common costs that could be
recovered through access services, without determining whether
BTI expended any marketing expenses for access services.146
During discovery, BTI's own expert conceded that including costs
not attributable to a specific service in the rates for such
service was an improper attribution.147
Nevertheless, even when viewed in the light most favorable to
BTI, its cost showing, as described by its own expert,
demonstrates, at best, that BTI's access costs ``may'' be
``higher than the access charge costs of large ILECs,'' and that
BTI's access costs ``are more likely to approach those of
smaller'' ILECs.148 Thus, there is hardly any record basis to
conclude that BTI's costs exceeded those of its ILEC competitors
at all, much less that such disparity justified an access rate 15
times greater than that of the competing ILEC.149 Indeed,
although the fundamental purpose of the cost showing was to
demonstrate the cost justification of BTI's access rates, neither
of BTI's experts ever stated unequivocally - in either their
affidavits or their depositions - that BTI's costs justified its
access rate of 7.1823 cents per minute.150
In sum, we find that BTI's cost showing, even when reviewed in
the light most favorable to BTI, does little more than suggest
that BTI's access costs might exceed those of BellSouth or GTE by
some indeterminate, small amount. Thus, we conclude that, even
if it were relevant, BTI's cost showing would fall far short of
cost-justifying its access rate of over 7 cents per minute.
III.B.6. AT&T Is Not Estopped From Challenging BTI's
Access Rates.
BTI asserts as an affirmative defense that we should equitably
estop AT&T from challenging BTI's access rates because ACC Corp.
(``ACC''), AT&T's wholly owned CLEC subsidiary, allegedly charges
even higher access rates than BTI.151 In support of this
affirmative defense of equitable estoppel,152 BTI contends that
ACC charges exchange access rates of nearly 9 cents per minute to
IXCs other than AT&T.153
We conclude that BTI's estoppel argument fails as a matter of
law. BTI did not properly plead the essential elements of
estoppel in its Amended Answer.154 The Commission has repeatedly
held that, in order to invoke equitable estoppel to preclude a
party from asserting a right he would otherwise possess, but has
forfeited because of his conduct, ``[t]he aggrieved party must
have justifiably relied upon such conduct and changed his
position so that he will suffer injury if the other is allowed to
repudiate his conduct.''155 BTI made no such showing in either
its Amended Answer or its briefs. Thus, the record is devoid of
evidence that BTI relied upon AT&T's or ACC's conduct in any way
in setting its access rates or that, because of AT&T's or ACC's
actions, BTI changed its behavior in a manner that caused it
harm.
III.C. The Lawful Per-Minute Access Rate for Purposes of
Calculating Damages Ranges From 3.8 Cents to 2.7 Cents
During the Relevant Period.
We conclude above that BTI's access rate of 7.1823 cents per
minute was and is unjust and unreasonable under section 201(b) of
the Act. Consequently, we must determine what a reasonable rate
would have been during the relevant period so that the court may
calculate Complainants' damages arising from BTI's violation of
section 201(b). In this regard, we note that neither side has
provided much in the way of useful guidance on what a reasonable
rate would have been. In particular, BTI has contented itself
with bald assertions that, because its rate appeared in a filed
tariff, the rate was necessarily reasonable. BTI has failed to
include in the record any factors or useful analogies that could
guide our consideration of what rate other than 7.1823 cents per
minute would have been a reasonable rate during the time period
at issue. On the other hand, the Complainants have restricted
themselves to asserting that the competing ILEC rate is the only
alternative for a reasonable rate. These record deficiencies,
combined with the absence of clear CLEC access pricing rules
during the relevant period, make the task of establishing a
specific benchmark rate for calculating damages a challenging
one.
We recently determined in the CLEC Access Order that, in a
properly functioning competitive market, CLECs would charge no
more for their access services than do the ILECs with which they
compete. Nevertheless, because of the lack of clear regulatory
guidance on the pricing issue, and because of concerns about
industry dislocations resulting from a flash-cut to the ILEC
rate, the Commission established a declining benchmark to define
the reasonableness of CLEC rates in the future.156 The lack of
clear rules to guide previous CLEC access rates similarly
motivates us here - in seeking to achieve fairness in hindsight -
to adopt as reasonable a rate somewhat above that charged by the
competing ILEC during the relevant period.157
To determine the level of that rate, and faced with the gaping
holes in this record, we find substantial guidance in the CLEC
Access Charge Order's determination that, for a year after its
issuance, a rate of up to 2.5 cents per minute will be
presumptively reasonable for CLEC access.158 Nothing in this
record indicates that the considerations bearing on rate
reasonableness during the retrospective period at issue here were
markedly different from the circumstances the Commission
considered in setting prospective tariff benchmarks. Thus, the
record in this proceeding provides no basis for concluding that a
reasonable rate for the damages period should diverge greatly
from 2.5 cents per minute. We note, however, that during the
three-year period at issue in this proceeding, access rates
generally declined due to a variety of Commission initiatives.159
Accordingly, we conclude that a reasonable access rate for BTI to
have charged back in 1998, 1999, and 2000, should be at least
marginally higher than the 2.5 cents that we have determined to
be reasonable prospectively.
Here again, the record provides little guidance in determining
the level of this marginal difference. To determine the path
that BTI's reasonable rate should have followed, therefore, we
look to the rates of the only alternative category of carriers
that the record provides any basis for viewing as even arguably
similar to BTI. In a context unrelated to damages, BTI argued
that it somewhat resembles a small ILEC.160 The record
demonstrates that BTI had about 125,000 access lines, scattered
throughout approximately 12 urban or concentrated areas, and
lacked the resources of larger ILECs. 161 Based on this
evidence, which is all the record provides on point, we conclude
that, although the ``fit'' is far from exact, BTI bears at least
some resemblance to a small, urban ILEC, given its size, business
operations, and service areas.
Many such small ILECs operating in concentrated areas participate
in the National Exchange Carriers Association (``NECA'') tariffs,
and they generally fit into the lowest rate band in NECA's
tariff.162 Therefore, although BTI did not and does not qualify
to participate in NECA tariffs, in the absence of any record
evidence suggesting an alternative damages methodology consistent
with our liability finding, and in light of the fact that the
five-month statutory deadline precludes a supplemental briefing
period, we find that the changes in these low-band NECA rates
over the past three years is instructive on the question of how a
reasonable rate for BTI should have declined over the same
period.
In 1998, 1999, and 2000, the lowest NECA rate band for access
services was approximately 3.8, 3.0, and 2.7 cents per minute,
respectively.163 We note that this declining path provides a
final rate that is very close to the 2.5 cents per minute that is
deemed reasonable on a prospective basis in the CLEC Access
Charge Order. Accordingly, solely for purposes of calculating
damages in this proceeding, we find that the just and reasonable
rates for both originating and terminating access services during
the relevant time period are as follows:164
· July 1, 1998 through June 30, 1999 3.8 cents per
minute
· July 1, 1999 through June 30, 2000 3.0 cents per
minute
· July 1, 2000 through the release date 2.7 cents
per minute
of this order.165
We emphasize, however, that this tool for calculating damages
here should not be taken as a finding, as a general matter, that
CLECs are similar to low-band NECA carriers or that such NECA
rates would be appropriate on a prospective basis. To the
contrary, the CLEC Access Charge Order determined, based on a
full record and numerous competing considerations, what
presumptively reasonable CLEC access rates will be in the future.
We adopt the proxy of low-band NECA carriers here only for the
purpose of defining the retrospective path that BTI's reasonable
rate should have followed, given the dearth of record information
on the question.
III.D. AT&T Is Not Entitled to Additional Relief Under
Section 254(k) of the Act.
AT&T argues that BTI violated section 254(k) of the Act by using
the revenues derived from its high access rates to cross-
subsidize BTI's efforts to compete in the provision of local and
long distance services.166 AT&T contends that this cross-
subsidization is evidenced by the enormous disparity between (1)
the high level of BTI's access rates in relation to the rates of
competing access providers, and (2) the low level of BTI's rates
for competitive local and long distance services in relation to
the rates of competing local and long distance service
providers.167 AT&T further contends that BTI's calling plans
that use the revenues earned by BTI's provision of access service
to lower the price of BTI's competitive services to its end users
are an explicit cross-subsidy.168 In response, BTI contends that
AT&T's claim fails as a matter of law, because the exchange
access market is ``competitive'' within the meaning of section
254(k), and the Commission has never found otherwise.169 BTI
further argues that there is no evidence that its rates for
competitive services are at below-cost levels, or that BTI
actually used revenues from its access services to offset the
costs of its other services.170
BTI is subject to section 254(k)'s prohibition against cross-
subsidization.171 However, in light of our ruling in Part III C.
above, which effectively reduces BTI's access rate by
approximately half during the entire period at issue, AT&T's
claim for relief under section 254(k) fails for insufficient
evidence. In particular, although AT&T submitted evidence that
might have supported a conclusion that revenues derived from an
access rate of over 7 cents per minute subsidized BTI's
competitive services, such evidence does not support a conclusion
that revenues derived from an access rate of approximately half
of BTI's rate would have been sufficient to do so. Therefore, by
limiting BTI's ability to recover access revenues from AT&T to
the lower rates specified herein, AT&T has received all of the
monetary relief to which it is entitled on this record.
Accordingly, we decline to provide what would be merely an
advisory opinion on the lawfulness of BTI's conduct under section
254(k). Therefore, we deny AT&T's claim under section 254(k).
IV. ORDERING CLAUSES
Accordingly, IT IS ORDERED, pursuant to sections 4(i), 4(j),
201(b), and 208 of the Communications Act of 1934, as amended, 47
U.S.C. §§ 154(i), 154(j), 201(b), and 208, that Count I of AT&T's
Second Amended Complaint and Counts I, II, and III of Sprint's
Complaint ARE GRANTED as against defendant BTI to the extent
described herein, and are in all other respects DENIED.
IT IS FURTHER ORDERED, pursuant to sections 4(i), 4(j), 208, and
254(k) of the Communications Act of 1934, as amended, 47 U.S.C.
§§ 154(i), 154(j), 208, and 254(k), that Count II of AT&T's
Second Amended Complaint IS DENIED as against defendant BTI.
IT IS FURTHER ORDERED, pursuant to sections 4(i), 4(j), 201(b),
and 208 of the Communications Act of 1934, as amended, 47 U.S.C.
§§ 154(i), 154(j), 201(b), and 208, that BTI's tariffed switched
access rate per minute as specified in paragraph 4, supra, WAS
AND IS UNJUST AND UNREASONABLE in violation of section 201(b) of
the Communications Act.
IT IS FURTHER ORDERED, pursuant to sections 4(i), 4(j), 201(b),
207, 208, and 209 of the Communications Act of 1934, as amended,
47 U.S.C. §§ 154(i), 154(j), 201(b), 207, 208, and 209, that
BTI's tariffed switched access rate per minute for access
services, for purposes of calculating damages during the relevant
time period, are the rates specified in paragraph 58, supra.
IT IS FURTHER ORDERED, pursuant to sections 4(i), 4(j), and 208
of the Communications Act of 1934, as amended, 47 U.S.C. §§
154(i),154(j), and 208, and section 1.115 of the Commission's
rules, 47 C.F.R. § 1.115, that BTI's Motion to Dismiss and
Application for Review are DISMISSED AS MOOT.
FEDERAL COMMUNICATIONS COMMISSION
Magalie Roman Salas
Secretary
DISSENTING STATEMENT OF
COMMISSIONER HAROLD FURCHTGOTT-ROTH
RE: AT&T CORP. V. BUSINESS TELECOM, INC.; SPRINT
COMMUNICATIONS COMPANY, L.P. V. BUSINESS TELECOM, INC.,
MEMORANDUM OPINION AND ORDER, FILE NOS. EB 01-MD-001 & EB-
01-MD-002.
Until April of 2001, the Commission had no rules in effect
governing CLEC access charges. Instead, the Commission
explicitly stated that such charges should be set by the market.
See, e.g., Access Charge Reform, First Report and Order, 12 FCC
Rcd 15982, ¶ 361 (1997); see also Order ¶ 18. Nevertheless, in
today's order, the Commission holds that for a period of time
between 1998 and 2000, the access charges assessed by Business
Telecom, Inc. (``BTI'') were ``unjust and unreasonable under
section 201(b)'' of the Communications Act of 1934. Order ¶ 1.
The Commission comes to this conclusion through a purported
``market-based'' approach - an approach that largely ignores the
actual market for exchange access, but instead looks at
particular, mostly regulated rates in other markets - to
determine how BTI should have priced its access charges were
market failures in the access charge market ``correct[ed]
retroactively.'' Order ¶ 22 (internal quotation marks omitted).
The Commission then holds that BTI is liable for roughly the
difference between its rates and what it should have charged in a
properly functioning market. See Order ¶ 53. I respectfully
dissent.
First, the Commission's purported ``market-based'' approach
has no basis in law or logic. Rather than look at the actual
rates set in the access charge market, the Commission looks at
isolated examples of other rates for other services, most of
which are set by regulation, to determine how the market should
have set access charge rates. This methodology is, on its face,
in direct conflict with the very idea of market-based rates.
Second, the Commission failed to provide BTI any notice that
its access charges would be retroactively judged according to the
standard announced in this order. To the contrary, the
Commission invited BTI and other CLECs to use the market to set
rates, an invitation that necessarily sanctioned the use of any
rate-setting methodology, or, indeed, no methodology at all.
Moreover, to add insult to injury, the particular rate-setting
methodology adopted here - which refuses to examine BTI's costs
(order ¶ 44) - is directly at odds with the Commission's decision
in Sprint Communications Company, L.P. v. MGC Communications,
Inc., Memorandum Opinion and Order, 15 FCC Rcd. 14027 (2000). In
that decision, the Commission held that CLEC access charges
higher than ILEC charges are not necessarily unreasonable, in
part, because ``a review of the reasonableness of a CLEC's rates
[may] depend[] on a carrier-specific review of the costs of
providing service.'' Id. ¶ 6.
This failure to provide BTI any notice of the rate-setting
standard that would govern its liability retroactively renders
the Commission's order legally suspect at best. Indeed, I am
unaware of any decision in the history of the Commission in which
damages were awarded for unreasonable rates when there were in
effect no rules governing how rates should be set. Accordingly,
I dissent.
_________________________
1 Second Amended Complaint of AT&T Corp., AT&T Corp. v.
Business Telecom, Inc., File No. EB-01-MD-001 (filed Jan. 29,
2001) (``AT&T Second Amended Complaint''); Complaint of Sprint
Communications Company, L.P., Sprint Communications Company,
L.P. v. Business Telecom, Inc., File No. EB-01-MD-002 (filed
Jan. 16, 2001) (``Sprint Complaint'').
2 47 U.S.C. § 208.
3 47 U.S.C. § 201(b).
4 47 U.S.C. § 254(k).
5 Second Consolidated Joint Statement of Stipulated Facts,
Disputed Facts, and Key Legal Issues of AT&T Corp., Sprint
Communications Company, L.P., and Business Telecom, Inc., AT&T
Corp. v. Business Telecom, Inc., File No. EB-01-MD-001 and
Sprint Communications Company, L.P. v. Business Telecom, Inc.,
File No. EB-01-MD-002 (filed Mar. 12, 2001) (``Joint
Statement''), at ¶¶ 7-8.
6 Joint Statement at ¶ 10.
7 Joint Appendix, AT&T Corp. v. Business Telecom, Inc., File
No. EB-01-MD-001 and Sprint Communications Company, L.P. v.
Business Telecom, Inc., File No. EB-01-MD-002 (filed Mar. 26,
2001) (``Joint Appendix''), at Exhibit 3, Deposition of Sean
Pflaging at 45 (``Pflaging Deposition'').
8 Opening Brief of AT&T Corp., AT&T Corp. v. Business
Telecom, Inc., File No. EB-01-MD-001 and Sprint Communications
Company, L.P. v. Business Telecom, Inc., File No. EB-01-MD-002,
(filed Mar. 26, 2001) (``AT&T Opening Brief''), at Exhibit 12,
Business Telecom Inc.'s November 11, 2000 SEC Form 10-Q.
9 Joint Statement at ¶ 15. GTE merged with Bell Atlantic
Telephone Companies in June 2000, and the successor entity is
now known as Verizon, Inc.
10 Joint Statement at ¶ 11.
11 Id.
12 Joint Appendix, at Exhibit 4, Deposition of Jean Houck at
21-22 (``Houck Deposition''). See Joint Statement at ¶ 13.
13 BTI's access rate is the sum of its local switching charge
per minute of use ($0.063) and its transport charge per minute
of use ($0.0084), for a total of $0.0714 per minute, plus a
charge of $0.000423 per minute per mile for transport mileage
(the total rate in the text above is based on one mile of
transport mileage). BTI also charges, where appropriate, an 800
database per query charge ($0.0079). Joint Statement at ¶¶ 19-
20.
14 Joint Statement at ¶ 23. BTI contends that it did not have
the resources to conduct any financial analyses, cost models, or
cost studies. See Joint Appendix, at Exhibit 3, Pflaging
Deposition at 129.
15 Joint Statement at ¶ 24.
16 Joint Statement at ¶¶ 17-18.
17 Joint Statement at ¶¶ 35-36, 54.
18 Joint Statement at ¶ 53.
19 AT&T Second Amended Complaint, ¶¶ 4, 14-18; Sprint
Complaint, ¶¶ 9-10.
20 Advamtel LLC, et al., v. AT&T Corp., 105 F. Supp.2d 507
(E.D. Va. 2000); Advamtel LLC, et al., v. Sprint Communications
Company, L.P., 105 F. Supp.2d 476 (E.D. Va. 2000); Joint
Statement at ¶ 1.
21 Advamtel, LLC, et al. v. AT&T Corp., Civil Action No. 00-
643 (E.D. Va. Jan. 5, 2000); Advamtel, LLC, et al. v. Sprint
Communications Company, L.P., Civil Action No. 00-1074-A (E.D.
Va. Jan. 5, 2000).
22 Joint Statement at ¶ 2. Section 201(b) of the Act
provides, in pertinent part: ``All charges, practices,
classifications, and regulations for and in connection with such
communication service, shall be just and reasonable, and any
such charge, practice, classification, or regulation that is
unjust or unreasonable is hereby declared to be unlawful . .
..'' 47 U.S.C. § 201(b).
23 AT&T Opening Brief, at Exhibit 57, Counterclaim IV of
Answer to Second Amended Complaint and Counterclaims of AT&T
Corp., Advamtel, LLC, et al. v. AT&T Corp., Civil Action No. 00-
643 (filed Aug. 18, 2000); Advamtel. v. AT&T Corp., 105 F.
Supp.2d at 510.
24 Advamtel v. AT&T, 105 F. Supp.2d at 515; Advamtel v.
Sprint, 105 F. Supp.2d at 483.
25 Advamtel v. AT&T, 105 F. Supp.2d at 511-12; Advamtel v.
Sprint, 105 F. Supp.2d at 481.
26 Advamtel v. AT&T, 105 F. Supp.2d at 511-12; Joint Statement
at ¶ 3. Subsequently, on January 5, 2001, the court referred
two additional issues to the Commission under the doctrine of
primary jurisdiction. Advamtel LLC, et al. v. Sprint
Communications Company, L.P., 125 F. Supp.2d 800 (E.D. Va.
2001). Pursuant to this latter referral, Complainants filed
with the Commission two Petitions for Declaratory Ruling
regarding the following issues: (1) whether any statutory or
regulatory constraints prevent an IXC from declining access
services, or from terminating access services previously ordered
or constructively ordered; and if not, (2) what steps must IXCs
take either to avoid ordering access service or to cancel
service after it has been ordered or constructively ordered.
AT&T and Sprint File Petitions for Declaratory Ruling on CLEC
Access Charge Issues, CCB/CPD File No. 01-02, Public Notice, DA-
01-301, 2001 WL 92220 (Com. Car. Bur. Feb. 5, 2001)
(establishing a public comment period ending on March 2, 2001).
27 Joint Statement at ¶ 4. See Letter from Anthony J.
DeLaurentis, Attorney, Market Disputes Resolution Division,
Enforcement Bureau, to James Bendernagel, Counsel for AT&T;
Jonathan E. Canis, Counsel for BTI; and Cheryl A. Tritt, Counsel
for Sprint, AT&T Corp. v. Business Telecom, Inc., File No. EB-
01-MD-001 and Sprint Communications Company, L.P. v. Business
Telecom, Inc., File No. EB-01-MD-002 (dated Feb. 15, 2001). To
effectuate further the court's referrals, both AT&T and Sprint
filed informal complaints against all of the other CLECs
remaining in the Advamtel Litigation pursuant to sections 1.716-
18 of the Commission's rules. 47 C.F.R. §§ 1.716-18.
28 AT&T Second Amended Complaint, ¶¶ 3, 5-6, 20-35; Sprint
Complaint, ¶ 2, 12-23. This claim appears in Counts I, II, and
III of Sprint's Complaint, which we consider collectively rather
than individually, and in Count I of AT&T's Second Amended
Complaint.
29 AT&T Second Amended Complaint, ¶¶ 36-42. Complainants
request that the Commission (1) declare that BTI's access rates
were and are unjust and unreasonable; (2) determine the lawful
rate for the disputed past period for purposes of calculating
damages; (3) prescribe a just and reasonable rate going forward;
and (4) require BTI to revise its tariff to lower its access
charges to such prescribed level. Complainants also request
damages in an amount to be determined in a supplemental damages
proceeding. AT&T Second Amended Complaint, Prayer for Relief ¶¶
1-5; Sprint Complaint, ¶¶ 25-26.
30 BTI included some of these arguments - as well as others -
in a motion to dismiss. Motion to Dismiss of Business Telecom,
Inc., AT&T Corp. v. Business Telecom, Inc., File No. EB-01-MD-
001 and Sprint Communications Company, L.P. v. Business Telecom,
Inc., File No. EB-01-MD-002 (filed Mar. 8, 2001). Because we
address in this Order all of the arguments made by BTI in its
Motion to Dismiss, we dismiss the Motion as moot.
31 Initial Brief of Business Telecom, Inc., AT&T Corp. v.
Business Telecom, Inc., File No. EB-01-MD-001 and Sprint
Communications Company, L.P. v. Business Telecom, Inc., File No.
EB-01-MD-002 (filed Mar. 26, 2001) (``BTI Initial Brief''), at
6-7.
32 BTI Initial Brief at 6-10, 13. See generally
Implementation of Section 402(b)(1)(A) of the Telecommunications
Act of 1996, Report and Order, 12 FCC Rcd 2170, 2181-82 (1997)
(``Section 402 Order'').
33 See, e.g., Arizona Grocery Co. v. Atchison, T. & S. Ry.
Co., et al., 284 U.S. 370 (1932) (holding that damages relating
to tariffed charges are recoverable if the tariffed rate is
proven to be unreasonable) (``Arizona Grocery''); Access Charge
Reform, Seventh Report and Order and Further Notice of Proposed
Rulemaking, FCC No. 01-146, 2001 WL 431685, ¶ 21 (rel. Apr. 27,
2001) (``CLEC Access Charge Order''); New Valley Corp. v.
Pacific Bell, Memorandum Opinion and Order, 15 FCC Rcd 5128,
5133 (2000) (``New Valley Corp. v. Pacific Bell''); Halprin,
Temple, Goodman & Sugrue v. MCI Telecommunications Corporation,
et al., Memorandum Opinion and Order, 13 FCC Rcd 22568, 22573
(1998) (``Halprin Order''), recon. denied, 14 FCC Rcd 21092
(1999); Hyperion Telecommunications, Inc. Petition for
Forebearance, Memorandum Opinion and Order, 12 FCC Rcd 8596,
8609 (1997) (``Hyperion Order''); Section 402 Order, 12 FCC Rcd
at 2182; Communications Satellite Corporation, Memorandum
Opinion and Order, 3 FCC Rcd 2643, 2647 (1988); National
Exchange Carrier Association, Inc., Memorandum Opinion and
Order, 2 FCC Rcd 3679, at ¶ 5 (1987).
34 Despite its argument to the contrary, BTI admits in its
Amended Answer to Sprint's Complaint that, even as a non-
dominant carrier, its rates are subject to section 201(b), and
that its tariffs may be challenged under section 208 of the
Communications Act. Amended Answer of Business Telecom, Inc. to
Sprint Complaint, Sprint Communications Company, L.P. v.
Business Telecom, Inc., File No. EB-01-MD-002 (filed Feb. 14,
2000), at ¶ 11.
35 BTI Initial Brief at 60-62; Consolidated Reply Brief of
Business Telecom, Inc., AT&T Corp. v. Business Telecom, Inc.,
File No. EB-01-MD-001 and Sprint Communications Company, L.P. v.
Business Telecom, Inc., File No. EB-01-MD-002 (filed Apr. 2,
2001) (``BTI Reply Brief''), at 54-57.
36 BTI Reply Brief at 55-56. Section 205 of the Act provides,
in pertinent part: ``[T]he Commission is authorized and
empowered to determine and prescribe what will be the just and
reasonable charge or the maximum or minimum, or maximum and
minimum, charge or charges to be thereafter observed . . . .''
47 U.S.C. § 205.
37 47 U.S.C. §§ 207-09. Hence, BTI's reliance on Illinois
Bell Telephone Co. v. FCC, 966 F.2d 1478 (D.C. Cir. 1992) is
misplaced. BTI Reply Brief at 55. In Illinois Bell, the Court
held that, absent a pre-existing tariff suspension order, the
Commission lacks authority under sections 204 and 205 of the Act
to invalidate a tariffed rate and direct the carrier to pay
refunds to its customers based on the difference between the
tariffed rate and a newly prescribed, reasonable rate. The
Commission had not acted under ¾ and the court therefore did not
address ¾ the Commission's damage-awarding authority under
sections 207 - 209 of the Act. Accordingly, as the Commission
has repeatedly ruled, sections 204 and 205 of the Act do not
preclude the Commission from awarding damages under sections 207
- 209 of the Act arising from a carrier's unreasonable tariffed
rates. See, e.g., AT&T v. Telephone Utilities Exchange Carrier
Association, Memorandum Opinion and Order, 10 FCC Rcd 8405,
8414-15 (1995) (emphasizing that actions brought under section
208 are different from those brought under sections 204-205);
Complaints Alleging Violations of Section 208 of the
Commission's Rate of Return Prescription for the 1989-90
Monitoring Period, Memorandum Opinion and Order, 10 FCC Rcd
3657, 3664-65 (1994).
38 47 U.S.C. § 208(b)(1).
39 47 U.S.C. §207 (stating, in pertinent part, that ``[a]ny
person claiming to be damaged by any common carrier subject to
the provisions of this Act may make . . . complaint to the
Commission as hereinafter provided for . . . .'') (emphasis
added).
40 47 U.S.C. § 209.
41 Section 402 Order, 15 FCC Rcd at 2183. See also footnote
33, supra.
42 New Valley Corp. v. Pacific Bell, 15 FCC Rcd at 5133.
43 See Access Charge Reform, First Report and Order, 12 FCC
Rcd 15982, 16141, at ¶ 363 (1997) (``Access Charge Reform
Order''); Hyperion Order, 12 FCC Rcd at 8597, ¶ 2, 8609, ¶ 25.
Thus, BTI had ample notice that there was an outside limit on
the level of access rates that it could lawfully charge without
risking the imposition of damages in a complaint proceeding.
44 Global NAPs v. Federal Communications Commission, et al.,
247 F.3d 252, 2001 WL 427607, at *7 (D.C. Cir. 2001).
45 Global Naps v. FCC, 247 F.3d 252, 2001 WL 427607, at *7.
See Hi-Tech Furnace Systems, Inc. v. FCC, 224 F.3d 781, 786
(D.C. Cir. 2000) (stating that section 208 enables the
Commission, upon complaint by an injured party, to adjudicate
the lawfulness of a carrier's past and present rates). See also
ACC Long Distance Corp. v. New York Tel. Co., Memorandum Opinion
and Order, 9 FCC Rcd 1659, 1661-1662, at ¶ 11 (1994); Allnet
Communication Services, Inc. v. U S West, Inc., Memorandum
Opinion and Order, 8 FCC Rcd 3017, 3021-3022, at ¶¶ 22-24
(1993).
46 See, e.g., Arizona Grocery, supra; CLEC Access Charge
Order, 2001 WL 431685, ¶ 21; New Valley Corp. v. Pacific Bell,
15 FCC Rcd at 5133; Halprin Order, 13 FCC Rcd at 22573; Access
Charge Reform Order, 12 FCC Rcd at 16141; Hyperion Order, 12 FCC
Rcd at 8609; Section 402 Order, 12 FCC Rcd at 2182;
Communications Satellite Corporation, 3 FCC Rcd at 2647;
National Exchange Carrier Association, Inc., 2 FCC Rcd at 3679.
47 BTI Initial Brief at 58-60; BTI Reply Brief at 34-37.
48 47 U.S.C. § 205 (emphasis added).
49 BTI Reply Brief at 34.
50 Id.
51 See generally United States, et al. v. Florida East Coast
Railway, Co. 410 U.S. 224, 239 (1973) (finding that a similar
hearing requirement in the Interstate Commerce Act did not
trigger the detailed oral hearing requirements of sections 556
and 557 of the APA; AT&T v. FCC, 572 F.2d 17, 22 (2d Cir. 1978),
cert. denied, 439 U.S. 875 (1978); American Telephone and
Telegraph Co. Wide Area Telecommunications Services, Memorandum
Opinion and Order, 67 FCC 2d 246, 248, at ¶ 5 (1977) (stating
that section 205 requirements can be met via a paper hearing);
Implementation of the Non-Accounting Safeguards of Sections 271
and 272 of the Communications Act of 1934, Notice of Proposed
Rulemaking, 11 FCC Rcd 18877, 18928, at ¶ 106 (1996) (noting
that section 205 proceedings generally occur through written
responses).
52 5 U.S.C.§ 553(b).
53 5 U.S.C. § 553(c).
54 BTI Initial Brief at 7-13, 21; AT&T Opening Brief at 11-14;
Opening Brief of Sprint Communications Company, L.P., AT&T Corp.
v. Business Telecom, Inc., File No. EB-01-MD-001 and Sprint
Communications Company, L.P. v. Business Telecom, Inc., File No.
EB-01-MD-002 (filed Mar. 26, 2001) (``Sprint Opening Brief''),
at 18-23.
55 Telecommunications Act of 1996, Pub. L. No. 104-104, 110
Stat. 56 (codified at 47 U.S.C. §§ 151 et. seq.) (``1996 Act'').
56 See, e.g., Access Charge Reform Order, 12 FCC Rcd at 16094-
105, ¶¶ 262-84. In contrast to the situation with CLECs, the
Commission's rules prescribe the precise manner in which ILECs
may assess interstate access charges on interexchange carriers
and end users. First, an ILEC must keep its books in accordance
with the Uniform System of Accounts set forth in Part 32 of the
Commission rules. See 47 C.F.R. §§ 32.1 - 32.9000. Second,
Part 64 of the Commission's rules divides an ILEC's costs
between those associated with regulated telecommunications
services and those associated with non-regulated activities.
See 47 C.F.R. §§ 64.901 - 64.904. Third, Part 36 separations
rules determine the fraction of the ILEC's regulated costs,
expenses, and investment that should be allocated to the
interstate jurisdiction. See 47 C.F.R. §§ 36.1 - 36.741. After
the total amount of regulated, interstate cost is identified,
the access charge and price cap rules translate these interstate
costs into charges for the specific interstate access services
and rate elements. Part 69 specifies in detail the rate
structure for recovering these costs. See 47 C.F.R. §§ 69.1 -
69.731. Finally, Part 61 requires ILECs to publish their rates
in tariffs, and the rules restrict how and when incumbents may
change their rates. See 47 C.F.R. §§ 61.1 - 61.193.
Additionally, the Commission regulates the rate levels ILECs may
charge for their access services, requiring them to comply with
either the rate-of-return or the price-cap regulations. Compare
47 C.F.R. §§ 65.1 - 65.830 (relating to rate of return that
certain non-price-cap ILECs may earn on interstate access
service) with Access Charge Reform, Sixth Report and Order in CC
Docket Nos. 96-262 and 94-1, Report and Order in CC Docket No.
99-249, Eleventh Report and Order in CC Docket No. 96-45, 15 FCC
Rcd 12962, 13026-13039, at ¶¶ 151-84 (2000) (``CALLS Order'')
(adopting rate level components for price-cap carriers).
57 Access Charge Reform Order, 12 FCC Rcd at 16094-95, ¶ 263.
58 Id.
59 Id.
60 See, e.g., Access Charge Reform, Notice of Proposed
Rulemaking, 11 FCC Rcd 21354, 21472, at ¶ 271 (1996) (``Access
Reform NPRM''); Access Charge Reform Order, 12 FCC Rcd at 16140,
¶ 360.
61 CLEC Access Charge Order, 2001 WL 431685, at ¶ 41.
62 See CLEC Access Charge Order, 2001 WL 431685, at ¶ 46 and
n.105. See also footnotes 72 and 73, infra.
63 AT&T Opening Brief at 11-21; Sprint Opening Brief at 18-32;
Reply Brief of AT&T Corp., AT&T Corp. v. Business Telecom, Inc.,
File No. EB-01-MD-001 and Sprint Communications Company, L.P. v.
Business Telecom, Inc., File No. EB-01-MD-002 (filed Apr. 2,
2001) (``AT&T Reply Brief''), at 4-12; Reply Brief of Sprint
Communications Company, L.P., AT&T Corp. v. Business Telecom,
Inc., File No. EB-01-MD-001 and Sprint Communications Company,
L.P. v. Business Telecom, Inc., File No. EB-01-MD-002 (filed
Apr. 2, 2001) (``Sprint Reply Brief''), at 13-25.
64 BTI Initial Brief at 6-14, 16-34.
65 CLEC Access Charge Order, 2001 WL 431685, at ¶¶ 30-32.
66 Id.
67 Id.
68 Id.
69 CLEC Access Charge Order, 2001 WL 431685, at ¶ 34.
70 In any event, in this case, the market did not really
``bear'' BTI's access rates, as demonstrated by Complainants'
refusal to pay those rates.
71 AT&T Opening Brief at 11-21; Sprint Opening Brief at 18-32;
AT&T Reply Brief at 4-12; Sprint Reply Brief at 13-25.
72 See Local Exchange Carriers' Rates, Terms, and Conditions
for Expanded Interconnection Through Physical Collocation for
Special Access and Switched Transport, Second Report and Order,
12 FCC Rcd 18730, 18790-93 (1997) (``Expanded Interconnection
Order''), aff'd, Southwestern Bell Telephone Company v. Federal
Communications Commission, 168 F.3d 1344 (D.C. Cir. 1999)
(``Southwestern Bell v. FCC''); U.S. Dept. of Defense v.
Hawaiian Telephone Company, Memorandum Opinion and Order, 61 FCC
2d 565, 566-68 (1976).
73 See, e.g., Access Charge Reform Order, 12 FCC Rcd at 16141-
42, ¶ 364; Expanded Interconnection Order, 12 FCC Rcd at 18790-
93; Annual 1990 Access Tariff Filings, Memorandum Opinion and
Order, 5 FCC Rcd 7487 (1990) (rejecting rates 8 times higher
than benchmark rate); Beehive Telephone Co., Memorandum Opinion
and Order, 13 FCC Rcd 12275 (1998) (rejecting rate above
``industry averages'' for comparable companies); Operator
Communications, Inc. d.b.a. Oncor Communications, Inc.,
Memorandum Opinion and Order and Order to Show Cause, DA-95-02,
1995 WL 248343 (Com. Car. Bur. Apr. 27, 1995) (``Oncor
Communications'') (finding that rates that ``substantially
exceed'' rates charged by other service providers for comparable
services in the same market to be unjust and unreasonable);
Capital Network System, Inc., Memorandum Opinion and Order and
Order to Show Cause, 10 FCC Rcd 13732 (1995) (same as Oncor
Communications); International Settlement Rates, Report and
Order, 12 FCC Rcd 19806, 19943 at ¶ 295 (1997), aff'd, Cable &
Wireless PLC v. Federal Communications Commission, 166 F.3d 1224
(D.C. Cir. 1999) (establishing benchmark governing international
settlement rates based, in part, upon non-cost factors). Cases
decided under the Interstate Commerce Act, from which the
Communications Act derived, also determine the reasonableness of
a carrier's rates by comparing them to the rates of other
carriers and other rates of the same carrier. See, e.g.,
Railroad Comm'rs of Fla. v. Seaboard Air Line Ry., 16 ICC 1, 5
(1909) (examining charges by carrier's competitor for similar
services to determine the reasonable rate); Freight Bureau v.
Cincinnati, N.O. & Tx. Pac. Ry. Co., 4 ICC 92 (1894) (``where
the reasonableness of rates is in question, comparison may be
made, not only with rates on another line of the same carrier,
but also with those on the lines of other and distinct
carriers'').
74 CLEC Access Charge Order, 2001 WL 431685, at ¶ 60.
75 CLEC Access Charge Order, 2001 WL 431685, at ¶¶ 44-45.
76 BTI Initial Brief at 16-25; BTI Reply Brief at 38-41.
77 See, e.g., Access Reform NPRM, 11 FCC Rcd at 21472, at ¶
271; Access Charge Reform Order, 12 FCC Rcd at 16140, ¶ 360;
Hyperion Order, 12 FCC Rcd at 8609, ¶ 25.
78 See Access Charge Reform Order, 12 FCC Rcd at 16141, ¶ 363.
See also Hyperion Order, 12 FCC Rcd at 8609, ¶ 25.
79 See Access Charge Reform Order, 12 FCC Rcd at 16142, ¶ 364.
See also Hyperion Order, 12 FCC Rcd at 8609, ¶ 25.
80 See, e.g., Southwestern Bell v. FCC, 168 F.3d at 1352; MCI
Telecommunications Corp. v. FCC, 675 F.2d 408, 413 (D.C. Cir.
1982); Aeronautical Radio, Inc. v. FCC, 642 F.2d 1221, 1228
(D.C. Cir. 1980), cert. denied, 451 U.S. 920 (1981).
81 Southwestern Bell v. FCC, 168 F.3d at 1352 (internal
quotations omitted). See Time Warner Entertainment v. FCC, 56
F.3d 151, 163 (D.C. Cir. 1995) (quoting United States v. FCC,
707 F.2d 610, 618 (D.C. Cir. 1983)).
82 Southwestern Bell v. FCC, 168 F.3d at 1352 (quoting MCI v.
FCC, 675 F. 2d at 413).
83 Sprint Communications Company, L.P. v. MGC Communications,
Inc., Memorandum Opinion and Order, 15 FCC Rcd 14027 (2000)
(``Sprint v. MGC'').
84 BTI Initial Brief at 17-19, 22, 35-36; BTI Reply Brief at
9, n. 10, 12-15, 28. Although Sprint v. MGC does not preclude
Complainants' claims that BTI's total access rates are unjust
and unreasonable under section 201(b), we find that it does
affect Complainants' claim that BTI's 800 database query charge
of 0.79 cents per call is unjust and unreasonable. AT&T Second
Amended Complaint, ¶ 14, n.4; Sprint Complaint, ¶ 12.
Complainants cursorily assert that BTI's 800 database query
charge is unjust and unreasonable solely because it exceeded
BellSouth's 800 database query charge in 2000. AT&T Opening
Brief at 14, n. 15; Sprint Opening Brief at 19. This evidence
alone is insufficient under Sprint v. MGC. Moreover, BTI's
charge in 2000 was actually less than the average of GTE's
charges in the relevant region (i.e., .84 cents per call).
Therefore, to the extent that Complainants' allegations
concerning BTI's 800 database query charge can be deemed to
constitute a stand-alone claim, the claim is denied; and we do
not consider this query charge in the rest of our analysis
above.
85 Sprint v. MGC, 15 FCC Rcd at 14028-29.
86 Sprint v. MGC, 15 FCC Rcd at 14029 (``Relying, as it does,
solely on the competing ILEC rate as a benchmark for what is
just and reasonable, Sprint has failed to meet its burden in
this action.'').
87 AT&T Opening Brief at 11-21; Sprint Opening Brief at 18-32;
AT&T Reply Brief at 4-12; Sprint Reply Brief at 13-25.
88 Permian Basin Area Rate Cases, 390 U.S. 747 (1968)
(``Permian Rate Base Cases'').
89 BTI Reply Brief at 38-41.
90 See CLEC Access Charge Order, 2001 WL 431685, at ¶ 46,
n.105. In the Permian Basin Area Rate Cases, the Supreme Court
stated that ``rate-making agencies are not bound to the service
of any single regulatory formula'' and are permitted ``to make
the pragmatic adjustments which may be called for by particular
circumstances.'' Permian Rate Base Cases, 390 U.S. at 776-77
(citing FPC v. Natural Gas Pipeline Co., 315 U.S. 575, 586
(1942)). See FERC v. Pennzoil Producing Co., 439 U.S. 508, 517
(1979) (holding that agency is not required ``to adhere rigidly
to a cost-based determination of rates, much less to one that
bases each producer's rates on his own costs'') (internal
quotations omitted); American Public Gas Association v. Federal
Power Commission, 576 F.2d 1016, 1037 (D.C. Cir. 1977)
(approving economic modeling as basis for ratemaking).
91 Beehive Telephone Company, Inc., Memorandum Opinion and
Order, 13 FCC Rcd 12275 (1998) (``Beehive Telephone'').
92 IT&E Overseas, Inc. v. Micronesian Telecommunications
Corporation, Memorandum Opinion and Order, 13 FCC Rcd 16058
(1998) (``IT&E Overseas'').
93 BTI Initial Brief at 16-22 ; BTI Reply Brief at 38-41.
94 Beehive Telephone, 13 FCC Rcd at 12286.
95 Beehive Telephone, 13 FCC Rcd at 12286-86. See MCI v. FCC,
675 F.2d at 413 (quoting Aeronautical Radio v. FCC, 642 F.2d at
1228).
96 See, e.g., FERC v. Pennzoil Producing Co.¸439 U.S. at 517;
American Telephone & Telegraph Company v. Federal Communications
Commission, 836 F.2d 1386, 1390 (D.C. Cir. 1988) (quoting Jersey
Cent. Power & Light v. FERC, 810 F.2d 1168, 1177 (D.C. Cir.
1987)). See also Wisconsin v. FPC, 373 U.S. 294, 309 (1963);
FPC v. Natural Gas Pipeline Co., 315 U.S. 575, 585-86 (1942).
97 IT&E Overseas, 13 FCC Rcd at 16062-16064.
98 See BTI Initial Brief at 13.
99 See CLEC Access Charge Order, 2001 WL 431685, at ¶¶ 37, 45.
AT&T Opening Brief, at Exhibit 11, Affidavit of Frederick R.
Warren-Boulton (``Warren-Boulton Affidavit''), ¶ 20.
100 Joint Appendix, at Exhibit 3, Pflaging Deposition at 175-
76, 191-93.
101 See Joint Appendix, at Exhibit 3, Pflaging Deposition at
206-09.
102 We derive BellSouth's access rates by averaging the
originating and terminating access rates in BellSouth's tariff
filings in effect on July 1, 2000 for the following access rate
elements for the relevant service areas in which BTI competes
(based upon hypothetical one-mile transport mileage): access
tandem (facility), access tandem (termination), access tandem
(switching), carrier common line charge (originating), carrier
common line (terminating), local switching, information
surcharge, transport interconnection charge, and common
multiplexing. See BellSouth Telecommunications, Inc., Tariff
F.C.C. No. 1 (effective July 1, 2000); AT&T Opening Brief at 14-
15. This information is publicly available in the Federal
Communications Commission's Information Center at 445 12th
Street, N.W., Washington, D.C. 20554. See also Sprint Opening
Brief, Exhibit 12; AT&T Opening Brief at 14-15; AT&T Opening
Brief, Exhibit 10. We do not include the primary interexchange
carrier charge (``PICC'') in this calculation or our GTE
calculation, because nothing timely submitted in this record
proposed a methodology for ``per-minutizing'' this flat per-line
charge or proffered data suggesting that the level of this
charge was significant on a per-minute basis. On May 22, 2001,
well after the record had closed, and only three weeks before
the statutory deadline for resolving these complaints, BTI
submitted approximately 500 pages of information that, inter
alia, purports to show what BellSouth and GTE charged for
access, and to ``per-minutize'' GTE's and BellSouth's PICC
rates, in the relevant regions during the relevant period.
Letter from Ronald J. Jarvis, Counsel for BTI, to Anthony J.
DeLaurentis, Attorney, Market Dispute Resolution Division,
Enforcement Bureau, AT&T Corp. v. Business Telecom, Inc., File
No. EB-01-MD-001 and Sprint Communications Company, L.P. v.
Business Telecom, Inc., File No. EB-01-MD-002 (filed May 22,
2001). We decline to consider this information, because it was
untimely filed, depriving both the Commission and Complainants
of a fair opportunity to rigorously assess its complex contents.
103 We derive GTE's access rates by averaging the originating
and terminating access rates in GTE's tariff filings in effect
on July 1, 2000 for the following access rate elements for the
relevant service areas and zones in which BTI competes (based
upon hypothetical one mile transport mileage): access tandem
(facility), access tandem (termination), access tandem
(switching), carrier common line charge (originating), carrier
common line (terminating), local switching, information
surcharge, transport interconnection charge, and common
multiplexing. See GTE Telephone Operating Companies, Tariff
F.C.C. No. 1 in effect on July 1, 2000. This information is
publicly available in the Federal Communications Commission's
Information Center at 445 12th Street, N.W., Washington, D.C.
20554.
104 We derive BellSouth's and GTE's access rates in 1999 in the
same manner as those calculated for 2000, based upon BellSouth's
and GTE's tariff filings in effect on July 1, 1999. See
BellSouth Telecommunications, Inc., Tariff F.C.C. No. 1
(effective July 1, 1999); GTE Telephone Operating Companies,
Tariff F.C.C. No. 1 in effect on July 1, 1999. This information
is publicly available in the Federal Communications Commission's
Information Center at 445 12th Street, N.W., Washington, D.C.
20554.
105 We derive BellSouth's and GTE's access rates in 1998 in the
same manner as those calculated for 2000, based upon BellSouth's
and GTE's tariff filings in effect on July 1, 1998. See
BellSouth Telecommunications, Inc., Tariff F.C.C. No. 1 in
effect on July 1, 1998; GTE Telephone Operating Companies,
Tariff F.C.C. No. 1 in effect on July 1, 1998. This information
is publicly available in the Federal Communications Commission's
Information Center at 445 12th Street, N.W., Washington, D.C.
20554.
106 BTI Initial Brief at 17-22; BTI Reply Brief at 19-20.
107 See Southwestern Bell v. FCC, 168 F.3d at 1353 (explaining
that ``the use of industry-wide averages is one commonly-
employed technique in evaluating the reasonableness of rates
charged by regulated entities'').
108 See Industry Analysis Division, Federal Communications
Commission, TRENDS IN TLECOMMUNICATIONS SERVICE (December 2000),
Table 1.2. See also Industry Analysis Division, Federal
Communications Commission, TELECOMMUNICATIONS INDUSTRY REVENUES
1999 (September 2000). This information is publicly available in
the Federal Communications Commission's Information Center at
445 12th Street, N.W., Washington, D.C. 20554 and at
. See generally AT&T Opening
Brief, Exhibit 20.
109 See 47 U.S.C. § 153(4) (defining Bell Operating Companies).
110 AT&T Opening Brief, at Exhibit 22, QSI Survey.
Complainants attribute the data differences in the reports
prepared by BTI's experts and by the Commission to the fact that
BTI's experts included rate elements that BTI itself does not
consider to be part of access. AT&T Opening Brief, at Exhibit
8, Business Telecom, Inc's Responses to AT&T Corp. Interrogatory
No. 1; AT&T Opening Brief at 16, n.18.
111 AT&T Opening Brief, Exhibit 22.
112 See generally, Southwestern Bell v. FCC, 168 F.3d at 1352-
53 (approving the use of composite industry data or other
averaging methods in evaluating reasonableness of rates).
113 Joint Statement at ¶¶ 23-24.
114 Joint Statement at ¶ 31. See Amended Answer of Business
Telecom, Inc. to AT&T Second Amended Complaint, AT&T Corp. v.
Business Telecom, Inc., File No. EB-01-MD-001 (filed Feb. 14,
2001) (``BTI Amended Answer to AT&T Complaint''), Exhibit 4.
115 Joint Appendix, at Exhibit 2, Deposition of Peter J. Gose
(``Gose Deposition''), at 202. AT&T Opening Brief, Exhibit 33.
116 AT&T Opening Brief, Exhibit 33.
117 AT&T Opening Brief at 17-19; Sprint Opening Brief at 23-28.
118 See 47 U.S.C. § 251(b)(4).
119 Joint Statement at ¶ 29, quoting Implementation of the
Local Competition Provisions in the Telecommunications Act of
1996, First Report and Order, 11 FCC Rcd 15499, 16012 (1996)
(``Local Competition Order'') (subsequent history omitted). See
Sprint Complaint, Exhibit 12, Declaration of Kent W. Dickerson
at ¶ 3.
120 Local Competition Order, 11 FCC Rcd at 16012. Although our
analysis utilizes a comparison of the disparities between access
rates and reciprocal compensation rates for BTI and BellSouth,
respectively, nothing in our discussion should be construed as
an endorsement of any such disparity in rates. See Developing a
Unified Intercarrier Compensation Regime, CC Docket No. 01-92,
Notice of Proposed Rulemaking, FCC 01-132, 2001 WL 455872, ¶ 5
(rel. Apr. 27, 2001) (seeking comment on reforming the existing
access charge and reciprocal compensation regulations because,
among other things, "[t]hese regulations treat different types
of carriers and different types of services disparately, even
though there may be no significant differences in the costs
among carriers or services").
121 The record does not contain any of the reciprocal
compensation rates that BTI and GTE charged each other during
the relevant time period. The record also does not contain the
reciprocal compensation rates that BTI and BellSouth charged
each other in 1998 and 1999.
122 BTI Initial Brief at 22-25; BTI Reply Brief at 18.
123 The record in this case supports the Commission's prior
conclusion that the transport and termination of local calls
between a CLEC and an ILEC involves the use of similar, if not
identical, switching and transport facilities as the provision
of interstate switched access services for long distance calls.
See AT&T Opening Brief at Exhibit 23, Affidavit of John C. Klick
(``Klick Affidavit'') at ¶ 11; AT&T Opening Brief at Exhibit 1,
Affidavit of William J. Taggart, III (``Taggart Affidavit'') at
¶ 10; Sprint Complaint, Exhibit 12, Declaration of Kent W.
Dickerson at ¶ 3; Joint Appendix, at Exhibit, 3, Plfaging
Deposition at 55-77, 118-20.
124 BTI Initial Brief at 24-25. A CLEC and an ILEC operating
in the same area establish rates for reciprocal compensation
through the negotiation and arbitration processes provided in
sections 251 and 252 of the Act. 47 U.S.C. §§ 251-252. In the
arbitration process, a state commission can order the ILEC to
pay more than the CLEC (i.e., ``asymetrical compensation'') only
if the CLEC demonstrates that its costs for transporting and
terminating local traffic exceed those of the ILEC. 47 C.F.R. §
51.711(b).
125 BTI Initial Brief at 24.
126 BTI Initial Brief at 68. Joint Appendix, at Exhibit 3,
Pflaging Deposition, Exhibit 7 at 1304-05.
127 Joint Appendix, at Exhibit 3, Pflaging Deposition at 143-
48; Joint Appendix, at Exhibit 3, Plfaging Deposition Exhibit 7,
at 1302-06 (BTI's ``Local Business Partner's Plan''). BTI's
marketing materials clearly describe this program as ``a product
that pays the customer to use it'' and as a means for its
customers' toll-traffic to help the customer recapture lost
revenue and pay for the cost of the customer's local and other
telecommunications needs. Id. (emphasis added). Although BTI's
current program offers customers a credit against BTI services,
BTI previously offered the customers the option of receiving a
cash payment. Joint Appendix, at Exhibit 3, Pflaging Deposition
at 146-47.
128 CLEC Access Charge Order, 2001 WL 431685, at ¶¶ 28, 31-34.
129 See Part III.B.1, supra.
130 BTI Initial Brief at 34-35.
131 BTI Initial Brief at 30-34.
132 BTI Amended Answer to AT&T Second Amended Complaint at ¶
28.
133 BTI Amended Answer to AT&T Second Amended Complaint at ¶¶
84-85; BTI Amended Answer to Sprint Complaint at ¶¶ 42-43.
134 See General Plumbing v. New York Tel. Co. and MCI
Telecommunications Corp., Memorandum Opinion and Order, 11 FCC
Rcd 11799, 11809 n. 63 (1996). See also Environmental Defense
Fund, Inc. v. Environmental Protection Agency, 548 F.2d 998,
1014 (D.C. Cir. 1976).
135 See Letter from Ronald J. Jarvis, Counsel for BTI, to David
M. Miles, Counsel for AT&T, and Frank Krogh, Counsel for Sprint,
AT&T Corp. v. Business Telecom, Inc., File No. EB-01-MD-001 and
Sprint Communications Company, L.P. v. Business Telecom, Inc.,
File No. EB-01-MD-002 (filed Feb. 20, 2001).
136 For example, BTI's initial Answers to Complainants'
Complaints were stricken without prejudice because of numerous
failures by BTI to comply with the Commission's formal complaint
rules regarding production of supporting information. See
Letter from Anthony J. DeLaurentis, Attorney, Market Disputes
Resolution Division, Enforcement Bureau, to Jonathan E. Canis,
Counsel for BTI; James F. Bendernagel, Counsel for AT&T; and
Cheryl A. Tritt, Counsel for Sprint (Feb. 12, 2001), AT&T Corp.
v. Business Telecom, Inc., File No. EB-01-MD-001 and Sprint
Communications Company, L.P. v. Business Telecom, Inc., File No.
EB-01-MD-002. BTI's Amended Answers also contained many of the
same deficiencies as BTI's initial Answers, but were accepted by
Commission staff because of the time constraints resulting from
the five-month statutory deadline applicable to these
complaints. See Letter from Anthony J. DeLaurentis, Attorney,
Market Disputes Resolution Division, Enforcement Bureau, to
Jonathan E. Canis, Counsel for BTI; James F. Bendernagel,
Counsel for AT&T; and Cheryl A.Tritt, Counsel for Sprint (Feb.
23, 2001), AT&T Corp. v. Business Telecom, Inc., File No. EB-01-
MD-001 and Sprint Communications Company, L.P. v. Business
Telecom, Inc., File No. EB-01-MD-002.
137 For example, despite staff rulings directing them to do so,
BTI failed or refused to produce, among other things, documents
collected and created by BTI's cost accounting group reflecting
BTI's costs; documents reflecting the amounts BTI paid for
facilities it owns or leases; documents reflecting BTI's margins
on relevant revenue streams; bills sent by BTI to itself for
access services; and documents relating to BTI's costs that were
available to BTI personnel when they established BTI's access
rates. See Letters from Anthony J. DeLaurentis, Attorney,
Market Disputes Resolution Division, Enforcement Bureau, to
Jonathan E. Canis, Counsel for BTI; James F. Bendernagel,
Counsel for AT&T; and Cheryl A. Tritt, Counsel for Sprint (Feb.
23, 2001 and Mar. 5, 2001), AT&T Corp. v. Business Telecom,
Inc., File No. EB-01-MD-001 and Sprint Communications Company,
L.P. v. Business Telecom, Inc., File No. EB-01-MD-002; Letter
from James F. Bengernagel, Counsel for AT&T, to Jonathan E.
Canis, Counsel for BTI (Feb. 26, 2001), AT&T Corp. v. Business
Telecom, Inc., File No. EB-01-MD-001 and Sprint Communications
Company, L.P. v. Business Telecom, Inc., File No. EB-01-MD-002;
Letter from James F. Bengernagel, Counsel for AT&T, to Anthony
J. DeLaurentis, Attorney, Market Disputes Resolution Division,
Enforcement Bureau (Mar. 13, 2001), AT&T Corp. v. Business
Telecom, Inc., File No. EB-01-MD-001 and Sprint Communications
Company, L.P. v. Business Telecom, Inc., File No. EB-01-MD-002.
See also Joint Appendix, at Exhibit 3, Pflaging Deposition at
10-11, 19-21, 58-60, 66-70, 74-76, 87-88, 98-100, 108-110, 130-
31, 146-48, 168-71, 180-81, 196-200, 216-17, 219-20, 227-28,
260, and 238-40; AT&T Opening Brief at 34-35. BTI has filed an
application for review of one of the Enforcement Bureau's
rulings requiring BTI to produce certain customer information
relied upon by its experts in support of BTI's cost showing.
Application for Review of Business Telecom, Inc., AT&T Corp. v.
Business Telecom, Inc., File No. EB-01-MD-001 and Sprint
Communications Company, L.P. v. Business Telecom, Inc., File No.
EB-01-MD-002 (filed Apr. 4, 2001). Because we do not rely upon
the presence or absence of the specified information, we hereby
dismiss BTI's Application for Review as moot.
138 AT&T Reply Brief at 28-29. In particular, although access
is one - and only one - cost of providing long distance service,
BTI priced its long distance service roughly at or below the
price of its access service. If BTI's access rate were truly
cost-based, BTI would have had to price its long distance
service much higher in order to make a profit.
139 Joint Appendix, at Exhibit 3, Pflaging Deposition at 143-
48; Joint Appendix, at Exhibit 3, Pflaging Deposition, Exhibit
7, at 1302-06.
140 For fuller discussions of the cost showing's inadequacies,
good sources are Complainants' briefs, which we find provide, by
and large, a fair analysis. AT&T Opening Brief at 21-39; Sprint
Opening Brief at 42-52; AT&T Reply Brief at 12-24.
141 Joint Appendix, at Exhibit 1, Deposition of Warren R.
Fischer (``Fischer Deposition''), at 74, 290.
142 Joint Appendix, at Exhibit 1, Fischer Deposition at 290.
AT&T Opening Brief at 23.
143 AT&T Opening Brief, at Exhibit 23, Klick Affidavit at ¶ 25;
AT&T Opening Brief at 27.
144 AT&T Opening Brief, at Exhibit 23, Klick Affidavit at ¶ 25.
See also Joint Appendix, at Exhibit 1, Fischer Deposition at
167-70, 189-90.
145 See AT&T Opening Brief, at Exhibit 23, Klick Affidavit at
¶¶ 34-5.
146 Joint Appendix, at Exhibit 1, Fischer Deposition at 226-27.
147 Joint Appendix, at Exhibit 2, Gose Deposition, at 225. For
example, when asked about the inclusion of various expenses in
BTI's common costs, such as a $65,000 expense for the company
Christmas party, BTI's expert replied: ``The only thing I
specifically excluded as being inappropriate was the corporate
jet.'' Joint Appendix, at Exhibit 1, Fischer Deposition at 193-
94.
148 Letter from Ronald J. Jarvis, Counsel for BTI, to Magalie
Roman Salas, Secretary, Federal Communications Commission,
attaching Affidavit of Peter J. Gose, AT&T Corp. v. Business
Telecom, Inc., File No. EB-01-MD-110 and Sprint Communications
Company, L.P. v. Business Telecom, Inc., File No. EB-01-MD-002
(filed Feb. 23, 2001) (``Gose Affidavit'') at ¶ 21 (emphasis
added).
149 Although BTI acknowledges that its ``cost showing'' has
problems, it blames Commission staff for not allowing it
additional time to complete a more comprehensive ``cost study.''
BTI Initial Brief at 30-31; BTI Consolidated Reply Brief at 30-
31. For the reasons previously stated in these proceedings, we
categorically reject BTI's assertion that any flaws in BTI's
cost justification defense derive from Commission staff's
imposition of the strict schedule needed to allow us to comply
with the five-month statutory deadline applicable to this kind
of complaint under section 208(b)(1) of the Act. 47 U.S.C. §
208(b)(1). See Letter Ruling from Anthony J. DeLaurentis,
Attorney, Market Disputes Resolution Division, Enforcement
Bureau, to Jonathan E. Canis, Counsel for BTI; James F.
Bendernagel, Counsel for AT&T; and Cheryl A. Tritt, Counsel for
Sprint, AT&T Corp. v. Business Telecom, Inc., File No. EB-01-MD-
001 and Sprint Communications Company, L.P. v. Business Telecom,
Inc., File No. EB-01-MD-002 (Feb. 15, 2001).
150 See Gose Affidavit at ¶ 21; see also Letter from Ronald J.
Jarvis, Counsel for BTI, to Magalie Roman Salas, Secretary,
Federal Communications Commission, attaching Affidavit of Warren
R. Fischer, AT&T Corp. v. Business Telecom, Inc., File No. EB-
01-MD-110 and Sprint Communications Company, L.P. v. Business
Telecom, Inc., File No. EB-01-MD-002 (filed Feb. 23, 2001)
(``Fischer Affidavit'') at ¶¶ 24-26.
151 BTI Amended Answer to AT&T Second Amended Complaint, ¶¶ 70-
71; BTI Initial Brief at 14-15.
152 Although BTI affirmatively pled ``equitable estoppel'' in
its Amended Answer, it modified this legal argument in its
Initial Brief to a ``quasi-estoppel'' argument. BTI Amended
Answer to AT&T Second Amended Complaint, at ¶¶ 35, 54-55, 70-71;
BTI Initial Brief at 14-15; BTI Reply Brief at 31-34. Our
conclusion is the same under either legal theory, however.
153 BTI Initial Brief at 14. BTI also contends that ACC
charges AT&T the competing ILEC access rate rather than the
tariffed rate. BTI Amended Answer to AT&T Second Amended
Complaint, ¶ 26.
154 In any event, BTI's attempt to plead an estoppel defense in
its Amended Answer does not comply with the Commission's rules,
see 47 C.F.R. §§ 1.724(b), 1.720(b), because BTI failed to cite
any legal authority supporting the affirmative defense and
failed to allege and provide evidentiary support for facts
which, if true, would establish an estoppel defense. See BTI
Amended Answer to AT&T Second Amended Complaint, ¶ 70-71.
155 See Bell Atlantic Delaware, et al. v. Global NAPS, Inc.,
Memorandum Opinion and Order, FCC No. 00-383, 2000 WL 1593346,
¶ 17 (Oct. 26, 2000); NextWave Personal Comm, Inc., Order on
Reconsideration, 15 FCC Rcd 17500, 17515 at ¶ 28 (2000);
Communique Telecommunications, Inc., Declaratory Ruling and
Order, 10 FCC Rcd 10399, 10404 at ¶ 30 (Com. Car. Bur. rel. May
25, 1995).
156 CLEC Access Charge Order, 2001 WL 431685, at ¶¶ 52-53.
157 This approach comports with Sprint v. MGC, wherein the
Commission ruled that, during some of the same period at issue
here, a CLEC's access rate was not per se unreasonable solely
because it exceeded the competing ILEC's access rate.
158 Over the course of the three subsequent years, subject to
certain qualifications, the presumptively reasonable tariffed
rate drops to the rate of the competing ILEC. See CLEC Access
Charge Order, 2001 WL 431685, at ¶ 52.
159 See Industry Analysis Division, Federal Communications
Commission, TRENDS IN TELECOMMUNICATION SERVICE (December 2000),
Table 1.2. This information is publically available in the
Federal Communications Commission's Information Center at 445
12th Street, N.W., Washington, D.C. 20554 and at
.
160 BTI Initial Brief at 47-55.
161 See Part II.A, supra; see also Joint Appendix, at Exhibit
3, Pflaging Deposition at 129.
162 Cf., AT&T Opening Brief, Exhibit 22.
163 See National Exchange Carrier Association, Inc., Tariff
F.C.C. No. 5. This information is publicly available at the
Federal Communications Commission's Electronic Tariff Filing
System located on the Commission's E-Filing website located at
. These rates derive from the average of
the originating and terminating access rates for the following
access rate elements in the lowest rate band of NECA's tariff
filings effective January 1, 1999, January 1, 2000, and January
1, 2001: access tandem (facility), access tandem (termination),
access tandem (switching), carrier common line charge
(originating), carrier common line charge (terminating), local
switching, information surcharge, transport interconnection
charge, and common multiplexing. See CLEC Access Charge Order,
2001 WL 431685, ¶ 55 and n.126.
164 Because BTI's initial tariff was filed with the Commission
in July 1998, we align the yearly time periods for purposes of
calculating damages to correspond with the effective date of the
annual access tariff filings of price-cap carriers pursuant to
Commission rules. 47 C.F.R. § 69(h). In setting a just and
reasonable rate for purposes of calculating damages, we decline
to set specific rates for originating and terminating access or
for each of BTI's access elements. Rather, the rate chosen
reflects the total amount that BTI could have lawfully charged
per access minute for the local switching, transport
termination, and transport mileage associated with providing
originating and terminating access services. This approach is
consistent with the Commission's recent limitation on the total
access charges CLECs may tariff. CLEC Access Charge Order, 2001
WL 431685, at ¶ 55.
165 We do not prescribe a rate for the future, as Complainants
requested, because the CLEC Access Charge Order will govern
BTI's future conduct.
166 AT&T Second Amended Complaint, ¶¶ 36-42. AT&T Opening
Brief at 48. Section 254(k) of the Act provides, in pertinent
part: ``A telecommunications carrier may not use services that
are not competitive to subsidize services that are subject to
competition.'' 47 U.S.C. § 254(k).
167 AT&T Second Amended Complaint, ¶¶ 37-41. AT&T Opening
Brief at 46-52; AT&T Reply Brief at 25-30.
168 AT&T Opening Brief at 48-52.
169 BTI Initial Brief at 26-30, 63-68; BTI Reply Brief at 51-
54.
170 BTI Initial Brief at 26-30.
171 Implementation of Section 254(k) of the Communications Act
of 1934, as Amended, Order, 12 FCC Rcd 6415, 6421 (1997).