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


In the Matter of                 )
                                )
GENERAL COMMUNICATION, INC.,     )
              Complainant,      )
                                )
              v.                )    EB-00-MD-016
                                )
ALASKA COMMUNICATIONS SYSTEMS    )
HOLDINGS, INC. and ALASKA        )
COMMUNICATIONS SYSTEMS, INC.     )
d/b/a ATU TELECOMMUNICATIONS     )
d/b/a ANCHORAGE TELEPHONE        )
UTILITY,                         )
              Defendants.


                  MEMORANDUM OPINION AND ORDER

   Adopted:  January 23, 2001           Released:   January   24, 

2001

By the Commission:

                         TABLE OF CONTENTS                   
                    Paragraph

I.   Introduction                                          1

II.  Background                                            4

III. Discussion                                           14

     A.   ATU Exceeded its Prescribed Rate of Return for the 
          1997-1998  Monitoring  Period,  in  Violation   of 
          Section 201(b) of the Act.                      15

          1.   ATU's Allocation of ISP Traffic Costs to  the 
               Interstate   Jurisdiction   for   Separations 
               Purposes Was Unlawful.                     16

               a.   ATU's Allocation of ISP Traffic Costs to 
                    the  Interstate  Jurisdiction   Violated 
                    Commission Orders.                    16

               b.   The  Commission   Has  Jurisdiction   to 
                    Require Carriers to  Assign ISP  Traffic 
                    Costs to the Intrastate Jurisdiction for 
                    Separations Purposes.                 23

               c.   Assigning  ISP  Traffic  Costs  to   the 
                    Intrastate  Jurisdiction  Is  Consistent 
                    With Separations Rules.               29

          2.   ATU Improperly Counted Only One, Rather  Than 
               Two, DEMs  for  Each  Minute  of  Intraoffice 
               Calls.                                     40

          3.   ATU's  Improper  Allocation  of  ISP  Traffic 
               Costs and  Counting of  DEMs for  Intraoffice 
               Calls Result in a  Violation of the  Rate-of-
               Return   Prescription   for   the   1997-1998 
               Monitoring Period.                         49

          4.   Section  204(a)(3)  of   the  Act  Does   Not 
               Preclude the Commission From Awarding Damages 
               to GCI Based On ATU's Violation of the  Rate-
               of-Return Prescription.                    51

          5.   The Statute of Limitations Does Not Bar GCI's 
               Recovery for ATU's Overearnings in 1997.   65

     B.   GCI's Remaining Claims Are Dismissed As Moot.   69

     C.   ACS Holdings Is Dismissed From the Case.        70

     D.   We Calculate  the Amount  of Prejudgment  Interest 
          Due On  GCI's Damages  Award Based  on the  I.R.S. 
          Interest Rate for Tax Overpayments.             72

IV.  Conclusion                                           75

V.   Ordering Clauses                                     76

                        I.   INTRODUCTION

In this Order, we grant in part and deny in part a complaint 
filed on August 24, 2000 by GCI Communication, Inc. (``GCI'') 
against Alaska Communications Systems, Inc. d/b/a ATU 
Telecommunications d/b/a Anchorage Telephone Utility 
(collectively ``ATU'') and Alaska Communications Systems 
Holdings, Inc. (``ACS Holdings'') pursuant to section 208 of the 
Communications Act of 1934, as amended (``Act'').1 We find that 
ATU unlawfully earned more than its allowable rate of return for 
the period from January 1, 1997 through December 31, 1998 
(``1997-1998 Monitoring Period'') by 1) improperly assigning to 
the interstate jurisdiction for separations purposes the traffic-
sensitive costs of carrying Internet Service Provider (``ISP'') 
traffic, and 2) improperly calculating dial equipment minutes 
(``DEMs'') for intraoffice calls.  ATU's violation of its 
prescribed rate of return constitutes a violation of section 
201(b) of the Act.2  Accordingly, we grant Counts 1 through 3 of 
GCI's complaint.  Given our ruling on Counts 1 through 3, we 
dismiss the remaining Counts of GCI's complaint (Counts 4 through 
6) as moot, because, although they allege different legal 
violations, they seek the same relief for the same ATU conduct 
specified in Counts 1 though 3.  

In conjunction with our ruling in GCI's favor on Counts 1 through 
3 of its complaint, we award damages, with prejudgment interest, 
to GCI for ATU's overearnings.  Further, we direct ATU to:  1) 
revise its 1997-1998 Monitoring Report in accordance with this 
Order; 2) allocate to the intrastate jurisdiction for separations 
purposes the traffic-sensitive costs of carrying ISP traffic from 
January 1, 1999 forward, until otherwise ordered by the 
Commission; and 3) count each minute of intraoffice calls as two 
DEMs from January 1, 1999 forward, until otherwise ordered by the 
Commission.

Finally, we dismiss all of GCI's claims against defendant ACS 
Holdings.  GCI has not alleged that ACS Holdings overcharged it 
for any services or overearned in violation of the Act or any 
Commission order or rule.  

                         II.  BACKGROUND

ATU is the incumbent local exchange carrier (``LEC'') in 
Anchorage, Alaska.3  ATU is wholly owned and controlled by ACS 
Holdings.4  GCI provides facilities-based interstate and 
intrastate interexchange services in the state of Alaska, and 
competitive local exchange services in Anchorage, Alaska.5  GCI 
purchased interstate access services from ATU throughout the 
1997-1998 Monitoring Period for the origination and termination 
of GCI's interstate interexchange traffic from and to customers 
located in Anchorage.6  GCI continues to purchase interstate 
interexchange services from ATU.

ATU is a ``rate-of-return'' carrier.  Rate-of-return carriers are 
permitted to earn no more than a Commission-prescribed return on 
the investments they make in providing exchange access services.7  
To comply with this prescription, rate-of-return carriers 
estimate their costs of providing exchange access services and 
project their demand for such services for a two-year period in 
the future (i.e., the monitoring or enforcement period).8  They 
then file tariffs containing rates for their access services that 
they believe, given their estimate of costs and demand, will 
result in earnings within the prescribed rate of return at the 
end of the two-year forecast period.  During the course of the 
two-year monitoring period, rate-of-return carriers must review 
how their actual costs and demand calculations compare to their 
earlier projections, and make rate adjustments, if necessary, to 
ensure that they do not exceed their prescribed rate of return.9  
If a rate-of-return carrier ultimately exceeds its rate of return 
at the end of the two-year monitoring period, the Commission may 
then require refunds of any such overearnings to affected 
customers.10

In estimating their access services costs to prepare their 
tariffs in a manner that will allow them to earn no more than 
their prescribed rate of return, rate-of-return carriers must 
apply, inter alia, the Commission's jurisdictional separations 
rules and Commission orders implementing and interpreting those 
rules.11  Jurisdictional separations, generally speaking, is the 
process by which carriers apportion the costs of providing 
telecommunications services to either the intrastate or 
interstate jurisdiction, depending on the use of their equipment 
and other resources in providing those services.12

Pursuant to the foregoing regulatory regime, on April 2, 1996, 
ATU filed an annual access tariff setting forth its rates for 
interstate access service, effective from July 1, 1996 through 
June 30, 1998 (``1997 Tariff'').13  ATU's 1997 Tariff contained 
no statement indicating how ATU would allocate ISP traffic 
costs14 for separations purposes or how it would count DEMs for 
intraoffice calls.15 

On December 17, 1997, ATU filed an access tariff containing 
revised rates for interstate access service for the period from 
January 1, 1998 through June 30, 1998 (``January 1998 
Tariff'').16  This tariff was filed on 15-days' notice, 
purportedly pursuant to the ``streamlining'' provisions of 
section 204(a)(3) of the Act.17  Like its 1997 Tariff, ATU's 
January 1998 Tariff did not indicate how ATU intended to assign 
ISP traffic costs for separations purposes or how it would count 
DEMs for intraoffice calls.18  During the course of the instant 
proceeding, ATU has stated that it treated ISP traffic costs as 
intrastate and counted each minute of intraoffice calls as two 
DEMs in preparing its January 1998 Tariff.19  

On March 31, 1998, ATU submitted a preliminary monitoring report 
for the period January 1, 1997 to December 31, 1997.20  ATU noted 
on the back of the report that ``THESE RESULTS REFLECT THE 
FOLLOWING: 1. RECORDING OF INTRAOFFICE CALLS AS ONE DEM[;] 2. 
INTERNET SERVICE PROVIDER TRAFFIC HAS BEEN CATEGORIZED AS 
INTERSTATE.''21

On June 24, 1998, ATU filed an annual access tariff setting forth 
its rates for interstate access service for the period from July 
1, 1998 through June 30, 2000 (``July 1998 Tariff'').22  ATU 
filed this tariff on seven-days' notice, also purportedly 
pursuant to the streamlining provisions of section 204(a)(3).  
The ``Description and Justification'' section of ATU's July 1998 
Tariff indicated that ``[t]his filing reflects the recording of 
intraoffice traffic as one (1) dial equipment minutes (DEM) and 
the treatment of all identifiable Internet Service Provider (ISP) 
traffic as interstate.''23  This was the first time that ATU had 
indicated, in a tariff filing, how it intended to allocate ISP 
traffic costs and count DEMs for intraoffice calls.  Moreover, 
these statements differed from the way that ATU had allocated ISP 
traffic costs and counted DEMs for intraoffice calls in preparing 
its January 1998 Tariff.24

On September 30, 1999, ATU filed its 1997-1998 Monitoring 
Report.25  The reported cumulative rate of return for the 
Switched Traffic Sensitive Category was 7.86 percent.26  On the 
back of the 1997-1998 Monitoring Report, ATU stated:  ``THESE 
RESULTS REFLECT THE FOLLOWING: 1. INTRAOFFICE CALLS HAVE BEEN 
COUNTED AS ONE DEM[;] 2. INTERNET SERVICE PROVIDER TRAFFIC HAS 
BEEN CATEGORIZED AS INTERSTATE.''27

The parties agree that if, for the 1997-1998 Monitoring Period, 
ATU had assigned the costs for ISP traffic to the intrastate 
jurisdiction and counted two DEMs for each minute of intraoffice 
calls, then ATU's rate of return for the interstate switched 
traffic sensitive category would have been 32.12 %, far in excess 
of the maximum allowable rate of return of 11.65%.28

GCI filed this Complaint on August 24, 2000.  GCI alleges that 
ATU's conduct during the 1997-1998 Monitoring Period violated the 
Act in several ways.  In Count 1, GCI alleges that ATU violated 
Commission orders requiring ISP traffic costs to be assigned to 
the intrastate jurisdiction for jurisdictional separations 
purposes.29  In Count 2, GCI alleges that ATU violated section 
36.125(a)(3) of the Commission's rules by counting only one DEM 
for each minute of an intraoffice call.30  In Count 3, GCI 
alleges that ATU unlawfully exceeded its prescribed rate of 
return, in violation of 201(b) of the Act, by improperly 
assigning ISP traffic costs for separations purposes and 
improperly counting DEMs for intraoffice calls.31  In Count 4, 
GCI alleges that ATU's tariffs are unjust and unreasonable in 
violation of section 201(b) of the Act, because they permitted 
ATU to exceed its prescribed rate of return.32  In Counts 5 and 
6, respectively, GCI alleges that ATU's assignment to the 
interstate jurisdiction of ISP traffic costs unjustly and 
unreasonably imposed charges on GCI for a service to which it did 
not subscribe, and violated the Commission's ``ESP exemption.''33

                      III.      DISCUSSION

Counts 1 through 3 of GCI's Complaint collectively allege that 
ATU unlawfully exceeded its prescribed rate of return, in 
violation of section 201(b) of the Act, by improperly 1) 
assigning to the interstate jurisdiction for separations purposes 
the costs of ISP traffic, and 2) counting each minute of 
intraoffice calls as one DEM, rather than two.  For the following 
reasons, we agree with GCI.

     III.A.    ATU Exceeded its Prescribed Rate of Return for the 
          1997-1998 Monitoring Period, in Violation of Section 
          201(b) of the Act.

For the reasons described below, we conclude that, by allocating 
ISP traffic costs to the interstate jurisdiction for separations 
purposes, and by counting one DEM rather than two DEMs for each 
minute of intraoffice calls, ATU erroneously inflated its 
interstate cost base.  This enabled ATU to charge its interstate 
access service customers, like GCI, more than it would have been 
able to charge if it had properly allocated ISP traffic costs and 
counted DEMs for intraoffice calls.  These two practices 
collectively resulted in ATU's unlawfully earning more than its 
allowable rate of return during the 1997-1998 Monitoring Period.

          III.A.1.  ATU's Allocation of ISP Traffic Costs to the 
               Interstate Jurisdiction for Separations Purposes 
               Was Unlawful.

               III.A.1.a.     ATU's Allocation of ISP Traffic 
                    Costs to the Interstate Jurisdiction Violated 
                    Commission Orders.

GCI argues that the Commission requires carriers to assign ISP 
traffic costs to the intrastate jurisdiction for separations 
purposes.34  In response, ATU asserts that the Commission has 
never issued such a requirement, but has only expressed a 
preference for such treatment of ISP traffic costs.35  We agree 
with GCI that the assignment of ISP traffic costs to the 
intrastate jurisdiction is a legal requirement, rather than 
merely a suggestion.

Our requirement that ISP traffic costs be assigned to the 
intrastate jurisdiction derives from our decision to exempt 
enhanced service providers (``ESPs''), including ISPs, from 
purchasing interstate access services from interstate access 
tariffs.  The Commission determined long ago that ESPs should 
obtain interstate access services by paying the local business 
exchange service rates contained in intrastate tariffs, rather 
than the access rates contained in interstate tariffs.  The 
Commission made this determination to avoid severe rate impacts 
that would affect the continuing viability of the ESP industry.36  
The Commission recently retained that policy for the present, 
largely because it would have been illogical to apply the 
existing, inefficient interstate access charge rate structure to 
ISP traffic for the first time, just as the Commission is 
modifying that structure to eliminate implicit universal service 
subsidies from access charges and to move such charges toward 
competitive levels.37

In conjunction with affirming the ESP exemption, the Commission 
has explained how the ESP exemption affects carriers' assignment 
of costs for separations purposes. For example, in the ONA NPRM, 
in a section entitled ``Analysis of the Existing Exemption,'' the 
Commission stated:

          ESP traffic over local business lines is 
          classified as local traffic for separations 
          purposes, with the result that TS [traffic 
          sensitive] costs associated with ESP traffic are 
          apportioned to the intrastate jurisdiction, and 
          are recovered through intrastate charges paid by 
          ESPs and other purchasers of intrastate 
          services.38  

This statement stemmed from the Commission's examination and 
tentative rejection of two alternatives to the ESP exemption.  
Significantly, both alternatives that the Commission considered 
encompassed the same separations treatment of ISP traffic costs 
that ATU adopted in this case - assignment of ISP traffic costs 
to the interstate jurisdiction rather than the intrastate 
jurisdiction for separations purposes.  The Commission 
tentatively rejected these alternatives, noting that this 
``reclassification of ESP traffic that has been deemed to be 
intrastate for separations purposes would increase TS [traffic 
sensitive] costs apportioned to the interstate jurisdiction,'' 
and would ``tend to increase the TS rates that other interstate 
access customers would bear, at a pace proportionate to the 
increase in ESP interstate traffic.''39  That is precisely what 
ATU tried to accomplish here.  ATU reclassified ISP traffic costs 
from the intrastate to the interstate jurisdiction for 
separations purposes, which increased the traffic sensitive costs 
apportioned to the interstate jurisdiction.  This, in turn, 
increased the interstate access rates that GCI had to bear as ISP 
traffic increased.

The Commission acted on the ONA NPRM and issued an order 
``conclud[ing] that the best approach is the adoption of the 
tentative conclusion of the Notice:  retention of the current 
form of the [ESP] exemption,'' which ``maintain[ed] the status 
quo.''40  The Commission rejected the two alternatives described 
in the ONA NPRM that would have allowed for the separations 
treatment of ISP traffic costs implemented by ATU here.41  
Although the Commission did not expressly discuss the separations 
treatment encompassed in the tentative conclusion of the ONA 
NPRM, the Commission implicitly adopted the separations treatment 
set forth therein by adopting the tentative conclusion of the ONA 
NPRM. 

Moreover, in the First Access Charge Reform Order, the Commission 
concluded that ``the existing pricing structure for ISPs should 
remain in place. . . .''42 The Commission did not explicitly 
reference the separations treatment of ISP traffic costs set 
forth in the ONA NPRM and subsequently adopted in the ONA Order.  
However, the ``existing pricing structure'' maintained by the 
First Access Charge Reform Order necessarily encompassed that 
separations treatment.  Most recently, in the Reciprocal 
Compensation Order, the Commission recognized this history of the 
ESP exemption and did not disturb the attendant ``long-standing 
determination'' by the Commission that, for jurisdictional 
separations purposes, both the revenues and traffic-sensitive 
costs of ISP traffic ``will continue to be accounted for as 
intrastate.''43 

On two recent occasions, the Commission's Common Carrier Bureau 
has implemented the Commission's rulings regarding the ESP 
exemption and concomitant separations requirements.  In 
particular, two local exchange carriers tried to do exactly what 
ATU has done here - assign ISP traffic costs to the interstate 
jurisdiction for separations purposes.  In both situations, the 
Common Carrier Bureau ordered the carriers to change their 
conduct and assign ISP traffic costs to the intrastate 
jurisdiction for separations purposes.44  The Bureau further 
ordered the carriers to revise reports that they had previously 
filed containing the incorrect assignment of ISP traffic costs.45

In our view, the foregoing refutes ATU's assertion that the 
Commission has only expressed a preference, rather than a 
requirement, concerning how ISP traffic costs should be allocated 
for separations purposes.46  The Commission has made clear that 
local exchange carriers must assign ISP traffic costs to the 
intrastate jurisdiction for separations purposes.47  Accordingly, 
we find that ATU's allocation of ISP traffic costs to the 
interstate jurisdiction for separations purposes during the 1997-
1998 Monitoring Period violated Commission orders.48

               III.A.1.b.     The Commission Has Jurisdiction to 
                    Require Carriers to Assign ISP Traffic Costs 
                    to the Intrastate Jurisdiction for 
                    Separations Purposes.

ATU next asserts that, even if the Commission has purported to 
require that ISP traffic costs be assigned to the intrastate 
jurisdiction, the Commission was (and is) without jurisdiction to 
impose such a requirement.  ATU relies on section 2 of the Act, 
which restricts federal regulation to ``interstate'' 
communication and reserves to the states authority to regulate 
``intrastate'' communication.49  According to ATU, because ISP 
traffic is largely interstate, forcing ATU to characterize such 
traffic as intrastate for separations purposes runs afoul of the 
section 2 jurisdictional boundaries, because it permits states to 
regulate or set rates for interstate communications.50  We 
disagree, for the following reasons.

It is well-settled that when communications, such as ISP traffic, 
are jurisdictionally mixed, containing both interstate and 
intrastate components, the Commission has authority to regulate 
such communications.51  This exercise of federal regulation over 
jurisdictionally mixed traffic necessarily encompasses the 
regulation and treatment of such traffic within the ambit of the 
Commission's separations rules.52  Although the Commission's 
exercise of its discretion in treating jurisdictionally mixed 
communications in a particular manner under its separations rules 
may be subject to challenge as arbitrary and capricious, the 
Commission's authority to regulate such traffic in the first 
instance cannot seriously be challenged.

The United States Court of Appeals for the Eighth Circuit 
recently rejected essentially the same jurisdictional challenge 
ATU presents here.  In Southwestern Bell Tel. Co. v. FCC 
(``SBC''), local exchange carriers appealed the Commission's 
decision to retain the ESP exemption and argued, just as ATU does 
here, that the ESP exemption unlawfully ``forces state regulators 
to set rates for the recovery of interstate costs,'' because ISP 
traffic costs are ``undeniably interstate costs.''53  The 
carriers argued that the ESP exemption, and the concomitant 
recovery by carriers of the costs of carrying ISP traffic only 
from local business tariffs, ``amount[ed] to a dereliction of the 
Commission's obligation to retain exclusive jurisdiction over 
interstate communications and forces state regulatory commissions 
to overstep their authority by recovering interstate costs.''54  

The Eighth Circuit rejected these jurisdictional contentions.  
The court noted that ISP traffic is jurisdictionally mixed and 
includes both interstate and intrastate components.55  Because of 
the jurisdictionally mixed nature of this traffic, and because 
the Commission had valid policy reasons for creating the ESP 
exemption in the first place (i.e., preserving the 
competitiveness and vitality of the emerging ESP industry), the 
court concluded that the Commission had ``appropriately exercised 
its discretion to require an ISP to pay intrastate charges for 
its line . . . but not to pay the per-minute interstate access 
charge.''56  The court noted that the Commission's action left 
states free ``to assess intrastate tariffs as they see fit.''57  
Thus, the court concluded that the Commission had neither 
``shirked its responsibility to regulate interstate 
telecommunications nor . . . directed States to inflate 
intrastate tariffs to cover otherwise unrecoverable interstate 
costs, thereby exceeding its statutory authority [under section 2 
of the Act].''58  

Our well-established authority over jurisdictionally mixed 
traffic requires rejection of ATU's jurisdictional argument here.  
As in SBC, our requirement that ISP traffic costs be assigned to 
the intrastate jurisdiction for separations purposes does not 
result in an impermissible delegation of regulation of interstate 
communications to the states.  In particular, our action does not 
impose any intrastate rates and states remain free to assess 
intrastate tariffs as they see fit.  Thus, our action does not 
cross the jurisdictional line drawn by section 2 of the Act.59

At bottom, ATU's disagreement with the Commission's treatment of 
ISP traffic costs for separations purposes is not so much a 
challenge to the Commission's ultimate ``jurisdiction'' or 
authority over such traffic under section 2 of the Act as it is a 
challenge to the manner in which the Commission exercised its 
jurisdiction over such traffic in the circumstances presented.  
We address this challenge in the next section.

               III.A.1.c.     Assigning ISP Traffic Costs to the 
                    Intrastate Jurisdiction Is Consistent With 
                    Separations Rules.

ATU asserts that the Commission abused its discretion by 
requiring carriers to allocate ISP traffic costs to the 
intrastate jurisdiction for separations purposes.60  In ATU's 
view, the Commission's decision to define ISP traffic as 
intrastate for separations purposes, even while acknowledging 
that such traffic is ``largely interstate,'' is arbitrary and 
improperly ignores the actual usage of the local equipment that 
processes ISP traffic.61  Because ISP traffic is largely 
interstate, according to ATU, the costs of such traffic must be 
assigned to the interstate jurisdiction, in accordance with the 
holding of Smith v. Illinois Bell, the seminal case concerning 
jurisdictional separations.62  ATU argues that the principles 
espoused in Smith are contravened if ATU is required, merely as a 
matter of convenience, to allocate entirely to one jurisdiction 
its costs of providing ISP services, and this allocation bears no 
relationship to the actual usage of its equipment used in 
providing such services.63  

ATU's argument reflects an overexpansive reading of Smith.  Smith 
concerned a situation in which a state commission failed to 
require a carrier to make any separations at all of equipment 
costs between interstate and intrastate uses.  The Supreme Court 
stated that the state commission's failure to require any 
allocation at all violated the statutory predecessor to section 2 
of the Act.64  Here, the Commission has not failed to require ATU 
to allocate the costs of its local switching equipment between 
jurisdictions.  Moreover, ATU does not contend that it has made 
no allocation of the costs of its local switching equipment 
between the interstate and intrastate jurisdictions.  Instead, 
ATU's concern is that the Commission has allegedly required ATU 
to assign too much of certain traffic passing through its 
equipment to the intrastate jurisdiction for separations 
purposes.  Thus, Smith does not help ATU.

In fact, Smith supports our conclusion here, because Smith 
recognizes that it is inherently difficult, if not impossible, to 
apportion with mathematical precision the uses of exchange plant 
equipment.  The Court stated that, in ascertaining the proper 
apportionment of costs, ``extreme nicety is not required, only 
reasonable measures being essential.''65  Further, as the D.C. 
Circuit has recognized, ``[c]ost allocation is not purely an 
economic issue - it necessarily involves policy choices that are 
not constitutionally prescribed.''66

Assigning ISP traffic costs to the intrastate jurisdiction is a 
``reasonable measure'' based on sound ``policy choices.''  First, 
as explained above, the Commission was justified in treating ISP 
traffic-sensitive costs as intrastate for separations purposes, 
in conjunction with the ESP exemption, to preserve the viability 
of the still-growing ISP industry.  More recently, the Commission 
retained this policy because it would have been illogical to 
apply the admittedly inefficient access charge rate structure to 
ISP traffic for the first time, when the Commission is in the 
process of modifying that structure.67  The Commission's decision 
to retain the ESP exemption has been affirmed as a lawful 
exercise of the Commission's discretion.68  The assignment of the 
traffic-sensitive costs of ISP traffic to the intrastate 
jurisdiction that follows from the ESP exemption is also lawful, 
because it derives from the application of our general 
separations principles to ISP traffic in implementing the ESP 
exemption.  As explained below, the treatment of ISP traffic 
costs as intrastate for separations purposes prevents a cost-
revenue mismatch that the separations rules are designed to 
avoid. 

Under Commission rules, separations is ``[t]he process by which 
telecommunications property costs, revenues, expenses, taxes and 
reserves are apportioned among the [carrier's] operations.''69  
Further, ``[t]he fundamental basis on which separations are made 
is the use of the telecommunications plant in each of the 
[carrier's] operations.''70  Finally, ``operations'' is defined 
as ``the general classifications of services rendered to the 
public for which separate tariffs are filed, namely exchange, 
state toll and interstate toll.''71  Thus, our rules generally 
link the apportionment of ``operations'' and the filing of 
tariffs.  The ``operation'' at issue here is local exchange 
service, of which ISP services are a part pursuant to the ESP 
exemption.  Local exchange service is provided under intrastate 
tariffs.  Thus, as the ``operation'' at issue is tariffed at the 
intrastate level, the carrier should also allocate the costs 
associated with that operation to the intrastate jurisdiction.72  
To do otherwise would result in the carrier incurring costs for a 
service in one jurisdiction, while charging rates to recover 
those costs in the other jurisdiction, thereby creating a 
mismatch that the foregoing rules were designed, in part, to 
prevent.73

The Commission has previously considered the advisability of 
permitting such a jurisdictional mismatch between the costs and 
revenues associated with ISP traffic, and has expressly rejected 
it.  In the ONA NPRM, several parties supported allowing ISP 
traffic costs and revenues to be apportioned to different 
jurisdictions as an alternative to the ESP exemption.74  The 
Commission tentatively rejected this proposal, noting that it 
would lead to a cost-revenue mismatch between the 
jurisdictions.75  Because the Commission had, for valid policy 
reasons, already required that carriers earn revenues for ISP 
traffic from the intrastate jurisdiction, the Commission 
continued to require that costs for such traffic be allocated to 
the intrastate jurisdiction.76  Subsequently, in the ONA Order, 
the Commission formally rejected the cost-revenue mismatch 
proposal.77

Similarly, in the Reciprocal Compensation Order, the Commission 
acknowledged that one objective of assigning ISP traffic costs to 
the intrastate jurisdiction for separations purposes is to avoid 
a cost-revenue mismatch associated with such traffic.  
Significantly, the Commission did not alter this separations 
treatment even though it acknowledged that ISP traffic is 
``largely interstate.''78  Indeed, the Commission saw no reason 
to depart from the ``long-standing determination'' that, for 
purposes of jurisdictional separations, ``both the costs and the 
revenues associated with such [ISP traffic] will continue to be 
accounted for as intrastate.''79  The Commission was mindful of 
concerns that a different separations treatment of ISP traffic 
``may result in allocation to different jurisdictions of the 
costs and revenues associated with ISP-bound traffic,'' and the 
Commission emphasized the undesirability of permitting such a 
``mismatch'' to occur.80

ATU does not dispute that its conduct caused a cost-revenue 
mismatch, but argues that the proper remedy is elimination of the 
ESP exemption, not allocation of ISP traffic costs to the 
intrastate jurisdiction.81  ATU's contention ignores the many 
policy reasons supporting the ESP exemption, which we need not 
repeat here.  Moreover, elimination of the ESP exemption could 
have prospective effect only, and thus would have no bearing on 
GCI's damages claims.82  Thus, we decline ATU's invitation to 
alter the existing rule in the context of this adjudication. 

ATU also argues that the Commission's requirement that ISP 
traffic costs be assigned to the intrastate jurisdiction for 
separations purposes contravenes section 36.125(b) of the 
Commission's rules, which generally requires that traffic 
sensitive costs be separated based on the relative number of 
interstate and intrastate minutes that pass through the carrier's 
local switching equipment.83  However, because the Commission has 
determined previously that end user access charge rules apply to 
ISP-bound traffic,84 and that ISPs must, therefore, purchase 
their access services pursuant to intrastate tariffs,85 ISP 
traffic cannot be considered interstate for purposes of section 
36.125. 

Finally, ATU argues that, if it must assign ISP traffic costs to 
the intrastate jurisdiction, then it will not recover revenues 
adequate to compensate it for the costs of carrying ISP 
traffic.86  The Commission addressed this same contention in the 
First Access Charge Reform Order, and rejected it as a basis for 
eliminating the ESP exemption.  There, the Commission considered 
whether continuing to preclude local exchange carriers from 
assessing access charges on ESPs imposed uncompensated costs on 
local exchange carriers.  The Commission observed that, in 
addition to the business line rates and subscriber line charges 
that local exchange carriers receive from ISP customers, local 
carriers earn additional revenue from ISP usage ``through higher 
demand for second lines by consumers, usage of dedicated data 
lines by ISPs, and subscription to incumbent LEC Internet usage 
services.''87  Although the Commission acknowledged that 
intrastate rates might insufficiently compensate local exchange 
carriers, like ATU, for the costs of carrying ISP traffic, the 
Commission expressly noted that carriers could address their 
concerns in this regard to state regulators.88  The Eighth 
Circuit affirmed this analysis in SBC.89  ATU has apparently 
chosen not to seek such relief from the state regulatory 
authority for any revenue shortfall it may be experiencing.90

In sum, we conclude that ATU's assignment of traffic-sensitive 
ISP traffic costs to the interstate jurisdiction for separations 
purposes during the 1997-1998 Monitoring Period violated valid 
Commission orders that the Commission had jurisdiction to issue 
and that are consistent with separations principles and rules.  
This improper assignment permitted ATU erroneously to increase 
its interstate costs for the 1997-1998 Monitoring Period and 
thereby unlawfully to earn more than its prescribed rate of 
return.91

          III.A.2.  ATU Improperly Counted Only One, Rather Than 
               Two, DEMs for Each Minute of Intraoffice Calls.

DEMs are one of the factors that a local exchange carrier must 
consider in determining how to allocate for separations purposes 
the costs of local switching equipment.  Section 36.125(a)(3) of 
our rules defines DEM as follows:

          Dial equipment minutes of use (DEM) is defined as 
          the minutes of holding time of the originating and 
          terminating local switching equipment.92

The Glossary for Part 36 defines ``Holding Time'' as:

          The time in which an item of telephone plant is in 
          actual use either by a customer or an operator.  
          For example, holding time includes conversation 
          time as well as other time in use. . . .93

As part of the separations process, a local exchange carrier must 
determine how many DEMs it incurred to carry interstate traffic 
and how many DEMs it incurred to carry intrastate traffic.  For 
rate-of-return carriers, such as ATU, the greater the proportion 
of interstate DEMs to the total DEMs, the greater the revenues 
that the local exchange carrier can obtain from its interstate 
access customers, such as GCI.  

The parties disagree concerning how section 36.125(a)(3) of the 
separations rules should be interpreted and applied to 
intraoffice calls.  Intraoffice calls are intrastate calls that 
originate and terminate in the same central office.  ATU argues 
that the proper application of section 36.125(a)(3) differs 
depending on whether the central office at issue employs a 
digital or an analog switch.94  According to ATU, when a call 
originates and terminates at the same central office served by an 
analog switch, two separate pieces of equipment are actually used 
(a piece for originating traffic and a piece for terminating 
traffic), and section 36.125(a)(3) requires that a one-minute 
call be counted as two DEMs; however ``when a call originates and 
terminates at the same central office served by a digital switch, 
the relevant `item of telephone plant' that is `in actual use' is 
the single digital switch. . . .  Because that single digital 
switch is the `originating and terminating' equipment for 
intraoffice calls, the plain text of Section 36.125 requires that 
one minute of holding time on that switch be counted as one 
DEM.''95  ATU asserts, therefore, that because its central 
offices use digital switches, it properly counted each minute of 
intraoffice calls as one DEM.

We disagree with ATU's approach.  The text of section 
36.125(a)(3) makes no distinction between digital and analog 
switches, and it requires carriers to count each minute of 
intraoffice calls as two DEMs in all circumstances.  In 
particular, the rule requires carriers to count the holding time 
for both the originating and the terminating equipment.  Thus, 
for an intraoffice call lasting one minute, the holding time of 
the originating local switching equipment is one DEM, and the 
holding time for the terminating local switching equipment is one 
DEM, regardless of whether or not the originating and terminating 
equipment is the same physical device.  Accordingly, under 
section 36.125(a)(3), a one-minute intraoffice call generates two 
DEMs, not one. 

Indeed, in 1987, the Federal State Joint Board on Separations 
(``Joint Board'')96 interpreted DEM and its application to 
intraoffice calls in precisely the manner described above:

          DEM is a measurement of local dial central office 
          switching equipment for jurisdictional separations 
          purposes, where one minute of use is recorded per 
          minute of an originating interoffice or 
          intraoffice call and one minute of use is recorded 
          per minute of a terminating interoffice or 
          intraoffice call.97

The Joint Board recognized that this definition meant that each 
minute of use would be counted as two DEMs for intraoffice 
calls.98  

Moreover, the Joint Board considered the same argument that ATU 
asserts here - that it is inappropriate to count two DEMs for 
each minute of intraoffice calls where a single digital switch, 
rather than two analog switches, is employed to originate and 
terminate intraoffice calls.99  However, instead of accepting 
that argument and recommending to the Commission that DEM be 
defined or construed differently to accommodate the 
digital/analog distinction, the Joint Board sought comment on 
whether a different cost allocator - Switched Minute of Use 
(SMOU) - should be adopted for digital central office 
equipment.100  The effect of using SMOU as a cost allocator would 
have been exactly that advocated by ATU here - one minute of use 
would be counted for each minute of an intraoffice call.101  As 
even ATU acknowledges, the Commission subsequently declined to 
take any action to adopt the SMOU cost allocation factor.  Thus, 
DEM has remained the applicable factor for all kinds of local 
switching equipment since 1987.102

Finally, ATU challenges the consistent, thirteen-year history of 
DEM allocation and treatment under section 36.125(a)(3) by 
arguing that requiring DEM to be counted twice for intraoffice 
calls using a single digital switch would somehow contravene the 
general principle that rates be cost-based.103  ATU essentially 
contends that requiring carriers to count as two DEMs each minute 
of intraoffice calls switched through digital equipment conflicts 
with general separations principles, which provide that ``the 
fundamental basis on which separations are made is the use of the 
telecommunications plant in each of the operations.''104  
According to ATU, if the costs are not properly allocated in the 
separations process, then the rates set as a result of that 
process will not be cost-based.  

As we have previously held, however, the specific separations 
rules govern the general principles:  ``These general rules 
[those contained in sections 36.1 and 36.2], are not intended . . 
. to have primacy over the specific rules.''105  The general 
separations principle of tying costs to actual usage for rate-
making purposes ``is intended to supplement, not override, the 
more detailed procedures prescribed for apportioning specific 
costs.''106  Thus, even assuming, arguendo, that some degree of 
tension exists between sections 36.1(c) and 36.125(a)(3), section 
36.125(a)(3) still governs.

In sum, we conclude that ATU's counting of one DEM, rather than 
two DEMs, for each minute of intraoffice calls violated section 
36.125(a)(3) of our rules.  This improper counting of DEMs raised 
the proportion of interstate DEMs to the total DEMs, which 
permitted ATU erroneously to increase its interstate costs for 
the 1997-1998 Monitoring Period.  This, in turn, enabled ATU 
unlawfully to earn more than its prescribed rate of return. 

          III.A.3.  ATU's Improper Allocation of ISP Traffic 
               Costs and Counting of DEMs for Intraoffice Calls 
               Result in a Violation of the Rate-of-Return 
               Prescription for the 1997-1998 Monitoring Period.

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

          We have repeatedly held that a rate-of-return 
          prescription has the force of law and that the 
          Commission may therefore treat a violation of the 
          prescription as a per se violation of the 
          requirement of the Communications Act that a 
          common carrier maintain ``just and reasonable'' 
          rates. . . .107 

If a carrier exceeds its prescribed rate of return, the 
Commission can order refunds and award damages to aggrieved 
customers.108  Damages may be based on the difference between the 
amount the customer paid to the carrier and the amount the 
customer would have paid to the carrier if the carrier had 
charged and applied its rates in a manner that produced earnings 
within the prescribed rate-of-return ceiling.109  

The parties agree that, if ATU had assigned ISP traffic costs to 
the intrastate jurisdiction and counted each minute of 
intraoffice calls as two DEMs during the 1997-1998 Monitoring 
Period, then ATU's rate of return would have been approximately 
32%, well above its allowable rate of return of 11.65%.110  Thus, 
absent some means of ``immunity,'' ATU owes GCI for the 
difference between the amount of access charges GCI paid to ATU 
during the 1997-1998 Monitoring period and the amount of access 
charges that GCI would have paid to ATU during the 1997-1998 
Monitoring Period if ATU had achieved earnings within the 11.65% 
ceiling.  

          III.A.4.  Section 204(a)(3) of the Act Does Not 
               Preclude the Commission From Awarding Damages to 
               GCI Based On ATU's Violation of the Rate-of-Return 
               Prescription.

ATU argues that the Commission cannot award damages to GCI for 
ATU's rate-of-return violation in connection with its January 
1998 and July 1998 Tariffs, because ATU filed those tariffs under 
section 204(a)(3) of the Act.111  According to ATU, section 
204(a)(3) and Commission precedent construing that provision 
immunize ATU from any liability for damages for exceeding its 
prescribed rate of return for the period covered by the January 
1998 and July 1998 Tariffs.112  For the following reasons, we 
disagree with ATU.

Section 402(b)(1)(A)(iii) of the Telecommunications Act of 1996 
added a new section 204(a)(3) to the Communications Act.113  
Section 204(a)(3) provides:

          A local exchange carrier may file with the 
          Commission a new or revised charge, 
          classification, regulation, or practice on a 
          streamlined basis.  Any such charge, 
          classification, regulation, or practice shall be 
          deemed lawful and shall be effective 7 days (in 
          the case of a reduction in rates) or 15 days (in 
          the case of an increase in rates) after the date 
          on which it is filed with the Commission unless 
          the Commission takes action under paragraph [204 
          (a)(1)] before the end of that 7-day or 15-day 
          period, as is appropriate.114

In 1997, the Commission addressed the meaning of the phrase 
``deemed lawful,'' as used in section 204(a)(3) of the Act.115  
The Commission concluded that this language provides certain new 
protections to local exchange carriers who elect to file tariffs 
on a streamlined basis pursuant to section 204(a)(3).  In 
particular, section 204(a)(3) ``immuniz[es] from challenge those 
rates that are not suspended or investigated before a finding of 
unlawfulness.''116  The Commission further concluded that, 
although section 204(a)(3) does not preclude the Commission from 
requiring a carrier, on a prospective basis, to change a rate or 
practice that the Commission finds unlawful, section 204(a)(3) 
does preclude the Commission from subjecting a carrier to 
liability for damages in a section 208 complaint proceeding for 
charging such a rate or engaging in such a practice during the 
period that the streamlined tariff was in effect and prior to the 
determination of unlawfulness.117  This conclusion stemmed, in 
part, from judicial interpretations of the same ``deemed lawful'' 
language in other statutes.118  However, it also stemmed, in 
part, from the fact that section 204(a)(3)'s notice periods 
provide the Commission and the public with a meaningful, albeit 
stringent, opportunity to contest filed rates and practices 
before they become effective.119

We conclude that section 204(a)(3) affords ATU no relief from 
GCI's rate-of-return claim in connection with either of ATU's two 
1998 tariffs.  Regarding the January 1998 Tariff, section 
204(a)(3) does not protect ATU, because ATU's violation of the 
rate-of-return prescription was not ascertainable from the 
information contained in that Tariff.  Regarding the July 1998 
Tariff, section 204(a)(3) does not protect ATU, because that 
Tariff failed to comply with the notice requirements of section 
204(a)(3).

The text of section 204(a)(3) provides that a LEC ``may file with 
the Commission a new or revised charge, classification, 
regulation, or practice on a streamlined basis,'' and that any 
such ``charge, classification, regulation, or practice shall be 
deemed lawful'' within a specified time ``after the date on which 
it is filed. . . .''120  Therefore, under the plain language of 
section 204(a)(3), a practice can be ``deemed lawful'' only if it 
is ``filed'' in a tariff pursuant to the requirements of that 
section.  

GCI's rate-of-return claim is predicated on two unlawful 
practices (i.e., assigning ISP traffic costs to the interstate 
jurisdiction and counting only one DEM for each minute of 
intraoffice calls), and neither of these practices appeared in 
any way in ATU's January 1998 Tariff.121  Thus, ATU's practices 
of assigning ISP traffic costs to the interstate jurisdiction for 
separations purposes and counting only one DEM for each minute of 
intraoffice calls were not ``filed'' within the meaning of 
section 204(a)(3).  As a result, these practices cannot be 
``deemed lawful'' under section 204(a)(3).  Accordingly, GCI's 
rate-of-return claim supports an award of damages, because it is 
based on ``practices'' that were not ``filed'' in ATU's January 
1998 Tariff in accordance with section 204(a)(3).

Our conclusion is supported by the Commission's and courts' prior 
acknowledgments of the basic differences between a challenge to 
the lawfulness of a carrier's tariffed rate and a challenge to 
the lawfulness of a carrier's rate of return.  A challenge to the 
lawfulness of a rate focuses on the reasonableness of the rate in 
question.  A rate-of-return challenge, on the other hand, focuses 
not on the reasonableness of an individual rate in a tariff, but 
on the cumulative effect of the tariffed rates on the carrier's 
earnings at the end of a monitoring period, well after the tariff 
in question was filed.122  Thus, as the D.C. Circuit has pointed 
out, a carrier's tariff typically will not provide notice of a 
future rate-of-return violation, because it is usually difficult, 
if not impossible, to determine, at the time a tariff is filed, 
whether the rates set forth in the tariff will produce earnings 
within the prescribed rate of return at some defined point in the 
future.123  This is particularly true here, because ATU failed to 
include in its January 1998 Tariff any information concerning the 
two practices that enabled it subsequently to exceed its rate of 
return.  Accordingly, the requirement in section 204(a)(3) that 
only practices that are ``filed'' in a tariff warrant ``deemed 
lawful'' protection avoids the anomalous result of immunizing 
from a damage award a violation that was not apparent from the 
tariff filing involved.

ATU argues that the information it includes or fails to include 
in its tariff is irrelevant for purposes of determining whether 
section 204(a)(3) applies.  In ATU's view, unless a customer or 
the Commission acts to challenge a carrier's tariff within the 
seven or fifteen-day period provided for pre-effective tariff 
reviews in section 204(a)(3), then the carrier is immunized from 
liability for any subsequent rate-of-return violation covering a 
period in which the subject tariff was in effect.124  However, 
neither the Commission nor the carrier's customers would have any 
reason or basis to challenge a carrier's tariff filing unless the 
tariff provides advance notice of a prospective rate-of-return 
violation.125  Indeed, ATU's contention that section 204(a)(3) 
protects it from a rate-of-return violation, regardless of 
whether it identified certain practices in its tariff is belied 
by the Commission's emphasis on pre-effective tariff reviews in 
the Streamlined Tariff Order.  As the Commission explained, the 
pre-effective review of tariff filings protects against the 
imposition of unjust and unreasonable practices and rates.  
Although the Commission noted that customers and the Commission 
must conduct swift pre-effective reviews of tariffs filed on a 
streamlined basis under 204(a)(3), the Commission nevertheless 
concluded that such reviews are available and meaningful.126  If 
a carrier does not ``file'' in its tariff the practices that will 
cause an excessive rate-of-return, then the pre-effective tariff 
review process is rendered futile for purposes of identifying 
potential rate-of-return violations, rather than merely 
difficult.127  

Our rejection of ATU's position finds additional support in the 
fact that neither the text nor the legislative history of section 
204(a)(3) even references, much less vitiates, the Commission's 
long-standing rules concerning liability for rate-of-return 
violations.128  Similarly, the Streamlined Tariff Order does not 
address the impact of its interpretation of the phrase ``deemed 
lawful'' on the rate-of-return prescription.  The absence of any 
discussion by Congress or the Commission of the potential impact 
of section 204(a)(3) on the rate-of-return prescription strongly 
suggests that neither Congress nor the Commission intended the 
drastic change to rate-of-return regulation that ATU argues for 
here.

Finally, our conclusion with respect to ATU's section 204(a)(3) 
argument is not undermined by the fact that, in its July 1998 
Tariff, ATU did state how it would allocate the costs of ISP 
traffic and count DEMs for intraoffice calls.  This is because, 
as explained below, the July 1998 Tariff did not satisfy the 
filing requirements of section 204(a)(3).

Under the Streamlined Tariff Order, tariffs ``that change terms 
and conditions or apply to new services even where there is no 
rate increase or decrease'' must be filed on 15-days' notice.129  
In fact, ``all LEC tariff transmittals, other than those that 
solely reduce rates, shall be filed on 15-day's notice.''130  

ATU's July 1998 Tariff filing indicated, for the first time, that 
ATU would engage in ``the recording of intraoffice calls as one 
(1) dial equipment minutes (DEM) and the treatment of all 
identifiable Internet Service Provider (ISP) traffic as 
interstate.''131  ATU concedes that those practices differed from 
those that ATU used in preparing its 1997 and January 1998 
Tariffs:  ``the 1997 and January 1998 Tariffs treated ISP traffic 
as intrastate and counted intraoffice calls as two DEMs and the 
July 1998 Tariff treated ISP traffic as interstate and counted 
intraoffice calls as one DEM.''132  Thus, ATU's treatment of ISP 
traffic costs and counting of DEMs for intraoffice calls were 
``change[d] terms and conditions'' under the Streamlined Tariff 
Order, and ATU was obligated to file the July 1998 Tariff on 15-
days' notice.  ATU, however, filed its July 1998 Tariff on only 
7-days' notice.133

It is clear, and the parties do not dispute, that failure to 
comply with governing notice requirements renders a tariff 
ineligible for ``deemed lawful'' treatment under section 
204(a)(3).134  Because ATU failed to comply with the notice 
requirements applicable to the July 1998 Tariff by filing the 
tariff on only seven, rather than 15-days' notice, the July 1998 
Tariff is not ``deemed lawful'' under section 204(a)(3).135

In sum, we conclude that section 204(a)(3) of the Act does not 
immunize ATU from a damages award for exceeding its prescribed 
rate of return during the 1997-1998 Monitoring Period.  We so 
conclude because (1) the rate-of-return violation was not 
ascertainable from the information contained in the January 1998 
Tariff, and (2) the July 1998 Tariff did not satisfy the notice 
requirements of section 204(a)(3).

          III.A.5.  The Statute of Limitations Does Not Bar GCI's 
               Recovery for ATU's Overearnings in 1997.

Section 415(c) of the Act provides that complaints against 
carriers for recovery of damages based on overcharges shall be 
filed within two years from the time the cause of action 
accrues.136  ATU argues that GCI's cause of action accrued in 
March 1998, when GCI allegedly knew or should have known of the 
conduct at issue here; ATU further argues, therefore, that the 
two-year statute of limitations bars GCI's claims for damages for 
any overcharges in calendar year 1997, because GCI failed to take 
action as required until more than two years later.137

ATU's statute of limitations argument is premised on its 
submission of a preliminary rate-of-return report, dated March 
31, 1998, which covered the period January 1, 1997 to December 
31, 1997 (Preliminary Monitoring Report).138  The Preliminary 
Monitoring Report stated that ATU's preliminary earnings 
reflected that each minute of intraoffice calls was recorded as 
one DEM and ISP traffic costs were categorized as interstate.139  
ATU asserts that, because it put GCI on notice on March 31, 1998, 
as to how it was counting intraoffice calls and treating ISP 
traffic for calendar year 1997, then GCI was obligated to serve 
its complaint letter, under section 415(c), or file suit to 
recover for any damages or overcharges relating to 1997, no later 
than March 31, 2000.140  Because GCI did not serve ATU with its 
complaint letter until April 4, 2000, GCI's claims relating to 
1997 are barred, according to ATU.141  

In MCI v. FCC, the D.C. Circuit considered when a cause of action 
accrues for violation of a rate-of-return carrier's prescribed 
rate of return.142  The defendant carriers made the same argument 
that ATU makes here - that submission of a preliminary monitoring 
report triggered the running of the statute of limitations.  The 
court squarely rejected this argument.  The court noted that, 
until the final monitoring report is submitted, the carrier has 
the right and opportunity to adjust information contained in 
preliminary reports.143  The court explained that ``it would be 
passing strange to require [a complainant] to assume that the 
preliminary report is a reliable indicator of whether the 
[carrier] has earned more than allowed.''144  Thus, the court 
``agree[d] with the Commission that a cause of action for damages 
[ . . . ] does not accrue until after [the carrier] files its 
final monitoring report.''145  

MCI v. FCC provides ample support for our conclusion that the 
statute of limitations did not begin to run until ATU submitted 
its final monitoring report in September 1999.146  ATU had the 
ability to adjust its practices at any time between the time it 
filed its preliminary report in March 1998 and the time it filed 
its final report in September 1999.147  Accordingly, it would be 
inappropriate to bind GCI to the representations contained in 
ATU's preliminary report, and we conclude that the statute of 
limitations does not bar any portion of GCI's claims for damages 
here.148

     III.B.    GCI's Remaining Claims Are Dismissed As Moot.

In addition to the section 201(b) violation that GCI alleges for 
ATU's violation of its prescribed rate of return, GCI also 
alleges that:  1) ATU's tariffs are unjust and unreasonable in 
violation of section 201(b) of the Act (Count 4); 2) ATU's 
assignment of ISP traffic costs unjustly and unreasonably imposed 
charges on GCI for services to which it did not subscribe (Count 
5); and 3) ATU's assignment of ISP traffic costs violated the 
Commission's ESP exemption (Count 6).  As explained, supra, these 
counts are based on the same facts and seek the same relief as 
Counts 1 through 3, which we grant herein.  Because we find in 
favor of GCI and against ATU on Counts 1 through 3 and award the 
relief GCI seeks in all its counts against ATU,149 Counts 4 
through 6 of GCI's Complaint are rendered moot and are dismissed.

     III.C.    ACS Holdings Is Dismissed From the Case.

GCI named the parent company of ATU, ACS Holdings, as a party 
defendant.  GCI claims that ACS Holdings ``acted in concert'' 
with ATU in preparing the 1997-1998 Monitoring Report that 
provided notice of ATU's overearnings.150  GCI claims that this 
participation by ACS Holdings makes ACS Holdings a proper party 
under section 411(a) of the Act, despite the fact that ACS 
Holdings is not a carrier.151 

GCI's allegation that employees of ACS Holdings assisted ATU in 
the preparation and filing of the 1997-1998 Monitoring Report 
that is the subject of the Complaint is insufficient to state a 
claim against ACS Holdings.  GCI does not allege that ACS 
Holdings itself charged GCI for any services, that ACS Holdings 
is subject to a rate-of-return prescription, or that ACS Holdings 
unlawfully exceeded any applicable rate of return.  Although the 
preparation of the 1997-1998 Monitoring Report is relevant to 
GCI's claims, it is not conduct that, by itself, injured GCI.  
Because GCI has not alleged that ACS Holdings is responsible for 
any overcharges to GCI or overearnings by ATU that damaged GCI, 
we dismiss ACS Holdings from the case.

     III.D.    We Calculate the Amount of Prejudgment Interest 
          Due On GCI's Damages Award Based on the I.R.S. Interest 
          Rate for Tax Overpayments.

The parties agree that an award of prejudgment interest is 
appropriate should GCI prevail on its overcharge claim, and that 
such interest begins to accrue on the date the Monitoring Period 
ended.152  The parties disagree, however, concerning which of the 
following three I.R.S. interest rates should apply to GCI's 
damages claim (listed here in ascending order of magnitude):  1) 
the rate for tax underpayments; 2) the rate for tax overpayments; 
or 3) the rate for large corporate tax overpayments exceeding 
$10,000.153  GCI asserts that the first and largest rate is most 
appropriate here, given that ATU engaged in ``willful 
misconduct.''154  ATU counters that the Commission has never 
applied the I.R.S. rate for tax underpayments in a case such as 
this one, and there is no justification to do so here.155  
Further, since the ``overpayment'' here exceeds $10,000, ATU 
asserts that the I.R.S. rate for large corporate overpayments 
should be applied.156  

The award of interest in complaint proceedings under section 208 
is a matter left to our sound discretion.157  In awarding 
interest, we are guided by considerations of fairness.  As part 
of this analysis, we consider the defendant's conduct in 
determining which interest rate to apply.158

We conclude that the I.R.S. rate for tax overpayments, but not 
large corporate overpayments, is the most appropriate rate to be 
applied in this case.159  First, this is the overpayment rate 
that the Commission has most recently applied, despite the 
apparent availability of the rate for large corporate 
overpayments.160  Further, although we do not necessarily agree 
with GCI that ATU engaged in ``willful misconduct,'' which might 
merit awarding the highest interest rate as a penalty, we do note 
that ATU had at least constructive knowledge, before it prepared 
its final Monitoring Report, that the Commission had rejected 
other carriers' attempts to assign ISP traffic to the interstate 
jurisdiction, and would similarly reject ATU's attempt.161  
Despite this knowledge, ATU improperly assigned its ISP traffic 
costs to the interstate jurisdiction for separations purposes, 
which enabled it to reflect an apparently lawful rate of return 
on its 1997-1998 Monitoring Report.  Because ATU acted in a 
manner that it at least should have known the Commission had 
already rejected as unlawful, it is proper to award interest at 
the higher of the two rates for corporate overpayments.  Although 
we might appropriately apply the rate for large corporate 
overpayments exceeding $10,000 when a defendant has simply 
miscalculated revenue or demand and accidently exceeded its rate 
of return, such is not the case here.

                         IV.  CONCLUSION

As explained herein, we conclude that ATU violated Commission 
orders and rules by assigning to the interstate jurisdiction for 
separations purposes the costs of carrying ISP traffic, and 
improperly counted each minute of intraoffice calls as one DEM.  
These improper practices allowed ATU unlawfully to exceed its 
prescribed rate of return for the 1997-1998 Monitoring Period, in 
violation of section 201(b) of the Act.  We award damages to GCI 
for this violation and order additional relief as set forth 
below.

                      V.   ORDERING CLAUSES

Accordingly, IT IS ORDERED, pursuant to sections 4(i), 4(j), 
201(b), 206, 207, 208, and 209 of the Communications Act of 1934, 
as amended, 47 U.S.C. §§ 154(i), 154(j), 201(b), 206, 207, 208, 
and 209, that Counts 1, 2, and 3 of the Complaint of GCI ARE 
GRANTED as against defendant ATU. 

IT IS FURTHER ORDERED, pursuant to sections 4(i), 4(j), 201(b), 
206, 207, 208, and 209 of the Communications Act of 1934, as 
amended, 47 U.S.C. §§ 154(i), 154(j), 201(b), 206, 207, 208, and 
209, that ATU shall pay GCI damages in the amount of 
$2,765,371,162 plus prejudgment interest computed from January 1, 
1999 to the date of release of this Order at the I.R.S. rate for 
corporate overpayments (but not large corporate overpayments 
exceeding $10,000).  ATU shall pay this amount to GCI within 90 
days of the date of release of this Order. 

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 ATU shall revise its 
1997-1998 Monitoring Report in accordance with this Order, and 
submit the revised report within 90 days of the date of release 
of this Order.  

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, until further ordered 
otherwise by the Commission, ATU shall (i) assign to the 
intrastate jurisdiction for separations purposes the traffic-
sensitive costs of carrying ISP traffic, and (ii) count DEMs for 
intraoffice calls in the manner specified herein.163

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 Counts 4, 5, and 6 of 
the Complaint of GCI ARE DISMISSED as moot.

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 defendant Alaska 
Communications Systems Holdings, Inc. IS DISMISSED as a defendant 
in each and every count of the Complaint.

     1.   FEDERAL COMMUNICATIONS COMMISSION
     2.   
     3.   
     4.   
     5.   Magalie Roman Salas
     6.   Secretary
_________________________

1    47 U.S.C. § 208.

2    47 U.S.C. § 201(b).

3    Joint Statement of General  Communication, Inc. and  Alaska 
Communications Systems Holdings, Inc. and Alaska  Communications 
Systems,  Inc.,  File  No.  EB-00-MD-016  (September  29,  2000) 
(``Joint Statement''), at ¶ 3.

4    Id. at ¶ 4.

5    Id. at ¶ 1.

6    Id. at ¶ 5.

7    See generally Represcribing the  Authorized Rate of  Return 
for Interstate Services of Local Exchange Carriers, Order, 5 FCC 
Rcd  7507,   7532  at   ¶¶  1,   216  (1990)   (``Rate-of-Return 
Prescription Order''); 47 C.F.R. § 65.700.

8    See 47 C.F.R. §§ 65.700-702; see also MCI Telecom. Corp. v. 
FCC, 59 F.3d 1407, 1415 (D.C. Cir. 1995) (discussing the general 
process carriers  follow in  setting rates  to comply  with  the 
rate-of-return prescription).

9    MCI, 59 F.3d  at 1415; see  In the Matter  of Amendment  of 
Part 65, Interstate Rate of Return Prescription: Procedures  and 
Methodologies to  Establish Reporting  Requirements, Report  and 
Order, 1 FCC Rcd 952, 954 at ¶ 10 (1986).

10   MCI, 59 F.3d at 1414.

11   See 47 C.F.R. Part 36.

12   See generally 47 C.F.R. §§ 36.1 and 36.2.

13   Formal Complaint of General  Communication, Inc., File  No. 
EB-00-MD-016 (August 24, 2000) (``Complaint''), at Exhibit 1.

14   ISP traffic  consists of  communications traffic  from  end 
users dialing up connections to ISPs.  Our references herein  to 
``ISP traffic costs'' refer only to the traffic-sensitive  costs 
of ISP traffic, unless otherwise indicated.

15   Id.   Intraoffice  calls  are  calls  that  originate   and 
terminate in the same central  office.  DEMs are defined as  the 
minutes of holding time of the originating and terminating local 
switching equipment, where holding time is defined generally  as 
the time the equipment is in use.  47 C.F.R. § 36.125(a)(3).

16   Complaint at Exhibit 3.

17   47 U.S.C.  § 204(a)(3)  (providing  that a  local  exchange 
carrier may  file  a  new  or  revised  charge,  classification, 
regulation, or practice  on a streamlined  basis, and that  such 
charge, classification, regulation or  practice shall be  deemed 
lawful and effective either 7 days or 15 days after the date  on 
which it is  filed (depending  on the contents  of the  filing), 
unless the Commission  takes action to  suspend and  investigate 
the filing).  

18   ATU has stipulated  that its  January 1998  Tariff did  not 
provide  notice  that  ATU   would  assign  to  the   interstate 
jurisdiction for separations purposes  the costs of ISP  traffic 
or would count each minute of intraoffice calls as one DEM.  See 
Letter from  Christopher  N. Olsen,  Attorney,  Market  Disputes 
Resolution Division, Enforcement Bureau, to Joe D. Edge, et al., 
Drinker Biddle & Reath LLP, and Karen Brinkmann, et al.,  Latham 
& Watkins,  File No.  EB-00-MD-016 (October  6, 2000),  at  1-2; 
Stipulation  of   Defendants   Alaska   Communications   Systems 
Holdings, Inc. and ACS of Anchorage, Inc., File No. EB-00-MD-016 
(October 20, 2000), at 1.

19   Reply Brief  of  Defendants Alaska  Communications  Systems 
Holdings, Inc. and ACS of Anchorage, Inc., File No. EB-00-MD-016 
(November 3, 2000) (``ATU Reply  Br.'') at 12, n.11 (``the  1997 
and January 1998 Tariffs treated  ISP traffic as intrastate  and 
counted intraoffice calls as two DEMs. . .''). 

20   Answer  of   Defendants   Alaska   Communications   Systems 
Holdings, Inc. and ACS of Anchorage, Inc., File No. EB-00-MD-016 
(September 13,  2000) (``Answer''),  at  Exhibit 2.   ATU,  like 
other rate-of-return carriers, is required to file a preliminary 
monitoring report each year  of the two-year monitoring  period.  
See 47 C.F.R. §§ 65.600,  65.701.  The final monitoring  report, 
which includes  any  required  adjustments  to  the  preliminary 
reports, must be filed by September 30 of the year following the 
conclusion of the monitoring period.  46 C.F.R. § 65.600.

21   Answer at Exhibit 2.

22   Complaint at Exhibit 4.

23   Id. at Description and Justification, Section 4 at 14.

24   See ATU Reply Br. at 12, n.11 (``the 1997 and January  1998 
Tariffs  treated   ISP  traffic   as  intrastate   and   counted 
intraoffice calls as two DEMs  and the July 1998 Tariff  treated 
ISP traffic as interstate and  counted intraoffice calls as  one 
DEM'').  

25   Complaint at Exhibit 5.

26   Rate-of-return carriers  must  compute  their  returns  for 
several access service categories.  47 C.F.R. § 65.702(a).   The 
switched traffic  sensitive  category, which  includes  services 
provided by local exchange  carriers to their access  customers, 
such as line  termination and local  switching, is the  category 
affected by ATU's allocation of  ISP traffic costs and  counting 
of DEMs for intraoffice calls.

27   Complaint at Exhibit 5.  

28   Joint Statement at ¶  14.  See Rate-of-Return  Prescription 
Order, 5 FCC  Rcd at 7532,  ¶ 216 (prescribing  maximum rate  of 
return of 11.25%);  47 C.F.R.  § 65.700(a)  (providing that  the 
maximum allowable rate  of return is  determined by adding  four 
tenths of one percent to the maximum prescribed rate of return).  
The total amount in dispute for the 1997-1998 Monitoring  Period 
is $2,765,371,  excluding interest.   Joint Statement  at ¶  15.  
This amount  represents the  difference between  the amount  GCI 
paid to ATU for  interstate access services  and the amount  GCI 
would have paid to ATU if ATU had not assigned ISP traffic costs 
to the interstate  jurisdiction or counted  DEMs improperly  and 
had not thereby exceeded its prescribed rate of return.

29   Complaint at ¶¶ 25-31.

30   47 C.F.R. § 36.125(a)(3); Complaint  at ¶¶ 32-35.  ATU  has 
agreed, at the  Commission's request,  to count  each minute  of 
intraoffice  calls  as  two  DEMs  on  a  going-forward   basis.  
Complaint at Exhibit 10. 

31   Complaint at ¶¶ 36-41.

32   Id. at ¶¶ 42-44.

33   Id. at ¶¶ 45-52.  See Part III(A)(1)(a), infra.

34   Complaint at  ¶¶  27-30; Brief  of  General  Communication, 
Inc., File No. EB-00-MD-016 (October 27, 2000) (``GCI Br.'')  at 
3-6.

35   Answer at ¶ 76; ATU Reply Br. at 9-11.

36   MTS and  WATS  Market  Structure,  Memorandum  Opinion  and 
Order, 97 FCC 2d 682, 715 at  ¶ 83 (1983), aff'd, NARUC v.  FCC, 
737 F.2d  1095,  1137  (D.C. Cir.  1984).   The  Commission  has 
affirmed this  ``ESP  exemption''  several  times.   See,  e.g., 
Implementation  of  the  Local  Competition  Provisions  in  the 
Telecommunications Act of  1996; Inter-Carrier Compensation  for 
ISP-Bound Traffic,  Declaratory Ruling  and Notice  of  Proposed 
Rulemaking, 14 FCC Rcd 3689,  3702 at ¶ 20 (1999)  (``Reciprocal 
Compensation Order''); In  the Matter of  Access Charge  Reform, 
First Report and Order, 12 FCC Rcd 15982, 16133 at ¶ 344  (1997) 
(``First Access Charge Reform Order''); Amendments of Part 69 of 
the Commission's Rules Relating to the Creation of Access Charge 
Subelements for Open Network Architecture, Report and Order  and 
Order on  Further  Reconsideration and  Supplemental  Notice  of 
Proposed Rulemaking, 6 FCC Rcd 4524, 4535 at ¶ 60 (1991)  (``ONA 
Order''); Amendments  of  Part  69  of  the  Commission's  Rules 
Relating to the Creation of  Access Charge Subelements for  Open 
Network Architecture, Notice of  Proposed Rulemaking, 4 FCC  Rcd 
3983, 3987 at ¶¶ 33-34 (1989)  (``ONA NPRM''); In the Matter  of 
Filing and Review of Open Network Architecture Plans, Memorandum 
Opinion and Order,  4 FCC  Rcd 1,  167-68 at  ¶¶ 318-20  (1988); 
Amendments of  Part 69  of the  Commission's Rules  Relating  to 
Enhanced Service Providers, Order, 3 FCC Rcd 2631, 2635, nn.  8, 
53 (1988).

37   See First Access Charge Reform Order, 12 FCC Rcd at  16133, 
¶¶ 343-45; Southwestern Bell Tel. Co. v. FCC, 153 F.3d 523, 541-
42 (8th  Cir. 1998)  (``SBC''), petition  for rehearing  denied, 
2000 U.S. App. LEXIS 16086 (June 7, 2000).

38   ONA NPRM, 4 FCC Rcd at 3987-88, ¶ 34.  The Commission cited 
section 36.125  of the  separations rules  as support  for  this 
separations treatment.  Id.  at 3987, n.82  (citing 47 C.F.R.  § 
36.125).  Section 36.125  governs the  separations treatment  of 
local switching equipment. 

39   Id. at 3988, ¶¶ 35-37.

40   ONA Order, 6 FCC Rcd at 4535, ¶ 60. 

41   Id.

42   First Access Charge Reform  Order, 12 FCC  Rcd at 16133,  ¶ 
344 (emphasis added).

43   Reciprocal Compensation Order,  14 FCC Rcd  at 3710, ¶  36.  
We  acknowledge  that   the  D.C.  Circuit   Court  of   Appeals 
subsequently vacated  and remanded  the Reciprocal  Compensation 
Order.  Bell Atlantic Tel.  Cos. v. FCC, 206  F.3d 1 (D.C.  Cir. 
2000).  However,  as both  parties agree,  the vacatur  did  not 
affect  the  ESP  exemption  or  the  corresponding  separations 
treatment of  ISP  traffic  costs addressed  in  the  Reciprocal 
Compensation Order.  GCI Br. at 9-10; Brief of Defendants Alaska 
Communications Systems  Holdings,  Inc. and  ACS  of  Anchorage, 
Inc., File No. EB-00-MD-016 (October 27, 2000) (``ATU Br.'')  at 
3, 7-9.

44   Common Carrier Bureau  Issues Letter to  SBC Regarding  its 
Jurisdictional Separations Treatment of Internet Traffic, Public 
Notice, 14 FCC Rcd 8178 (Com. Car. Bur. 1999) (``SBC  Letter''), 
application for  review pending;  Common Carrier  Bureau  Issues 
Letter to  Bell  Atlantic Regarding  Jurisdictional  Separations 
Treatment  of  Reciprocal  Compensation  for  Internet  Traffic, 
Public Notice, 14 FCC  Rcd 13148 (Com.  Car. Bur. 1999)  (``Bell 
Atlantic Letter'').

45   SBC Letter, 14 FCC Rcd at 8180-81; Bell Atlantic Letter, 14 
FCC Rcd at 13149-150.  

46   See generally In the  Matter of Jurisdictional  Separations 
Reform  and   Referral  to   the  Federal-State   Joint   Board, 
Recommended Decision, CC Docket No. 80-286, FCC 00J-2 (July  21, 
2000)  (``Recommended   Decision  on   Separations'')  at   n.66 
(pointing   out   that   the   Reciprocal   Compensation   Order 
acknowledged a Commission requirement  that carriers assign  the 
traffic-sensitive  costs  of  ISP  traffic  to  the   intrastate 
jurisdiction for separations purposes).

47   We note  that the  Commission  is currently  considering  a 
recommendation   from   the   Federal-State   Joint   Board   on 
Jurisdictional Separations  that  may address  how  ISP  traffic 
costs should be allocated for separations in the future.  See In 
the Matter of Jurisdictional Separations Reform and Referral  to 
the Federal-State Joint Board,  Recommended Decision, CC  Docket 
No. 80-286, FCC 00J-2 (July  21, 2000).  However, this does  not 
affect our enforcement of the existing separations rules.

48   ATU does not argue  that it was  unaware of the  Commission 
and Common Carrier Bureau pronouncements concerning how to treat 
ISP  traffic  costs  for  separations  purposes.   Further,  ATU 
acknowledges that it complied with the Commission's requirements 
at least until  the time  it filed  its July  1998 Tariff.   ATU 
Reply Br. at 12,  n.11.  These facts  strongly suggest that  ATU 
understood the Commission's  requirements for  the treatment  of 
ISP traffic costs for  separations purposes.  Nevertheless,  ATU 
now  contends  that   the  numerous  Commission   pronouncements 
discussed herein have no merit  or binding effect.  Answer at  ¶ 
76; ATU Reply Br. at 9-11.

49   Answer at ¶¶ 78-80 (citing  47 U.S.C. §§ 152(a), (b));  ATU 
Reply Br. at 7-9.

50   Answer at ¶¶ 78-80; ATU Reply Br. at 7-9.

51   See, e.g., Louisiana  Pub. Serv. Comm'n.  v. FCC, 476  U.S. 
355, 376 n.4 (1986) (stating that federal regulation of  traffic 
is  appropriate  where  it  is  not  possible  to  separate  the 
interstate   and   intrastate   components   of   the   asserted 
regulation); SBC,  153 F.3d  at  541-42  (holding  that  federal 
regulation   of    ``jurisdictionally   mixed''    traffic    is 
appropriate).

52   See, e.g., 47 U.S.C. §  221(c) (allowing the Commission  to 
classify the property used by wireline communications  providers 
for  interstate  communications  services).   The   Commission's 
separations rules  were adopted  pursuant to  and in  accordance 
with section  221(c).  See  Crockett Tel  Co. v.  FCC, 963  F.2d 
1564, 1566-67  (D.C. Cir.  1992) (describing  that the  Part  36 
separations rules were  adopted pursuant to  section 221(c)  and 
pointing out that  the separations rules  necessarily have  some 
affect on state  ratemaking authority  to the  extent that  they 
apply to companies operating within state jurisdictions).  

53   153 F.3d at 541-42. 

54   Id. at 542.

55   Id. at 543.

56   Id. at 543-44.

57   Id. at 543.

58   Id.  See also Reciprocal Compensation Order, 14 FCC Rcd  at 
3700-01, ¶ 16 (citing with approval the jurisdictional  analysis 
employed  in  SBC  and   stating,  ``[w]e  emphasize  that   the 
Commission's decision  to treat  ISPs as  end users  for  access 
charge purposes and, hence, to treat ISP-bound traffic as local, 
does  not   affect   the  Commission's   ability   to   exercise 
jurisdiction over such traffic.'').

59   Louisiana Pub. Serv. Comm'n, relied upon by ATU (ATU  Reply 
Br. at 7-8), does not dictate a contrary result.  Louisiana Pub. 
Serv. Comm'n held that the  Commission could not pre-empt  state 
regulation concerning depreciation of dual-jurisdiction property 
for rate-making  purposes.   No such  pre-emption  is  occurring 
here, because  the Commission  is not  directing states  to  set 
rates to recover for interstate costs.  As in SBC, ``states  are 
free to assess intrastate tariffs  as they see fit.''  SBC,  153 
F.3d at 543.   ATU's other cited  authority on the  jurisdiction 
issue  is  equally  unavailing,   as  it  merely  supports   the 
uncontroverted proposition that the federal government regulates 
interstate  communications,  while  state  governments  regulate 
intrastate communications.   See, e.g.,  Crockett, 963  F.2d  at 
1569 (``[A]ny  attempt  to  impose intrastate  rates  is  beyond 
federal  authority;  conversely,  states  may  not  trench  upon 
interstate matters.''); Competitive Telecommunications Ass'n  v. 
FCC, 117 F.3d 1068, 1075, n.5 (8th Cir. 1997) (same).

60   Answer at ¶¶ 77, 83-84; ATU Br. at 3-8; ATU Reply Br. at 9-
11.

61   Answer at ¶¶ 77, 83-84; ATU Br. at 7-9; ATU Reply Br. at 9-
11.

62   Answer at ¶  78; ATU  Reply Br.  at 9-11  (citing Smith  v. 
Illinois Bell, 282 U.S. 133 (1930)).

63   Id.

64   Smith, 282 U.S. at 149-50.

65   Id.  See also Recommended Decision  on Separations at ¶  12 
(``Smith v. Illinois  Bell does not  require absolute  precision 
for   cost   allocation   between   the   federal   and    state 
jurisdictions''); In the  Matter of Applications  for Review  of 
the Common Carrier Bureau's  Letter of Interpretation  Regarding 
the Clarification  of  the  Role of  Direct  Assignment  in  the 
Jurisdictional  Separations  Process,  Memorandum  Opinion   and 
Order, 8  FCC  Rcd  1558,  1560-61  at  ¶  10  (1993)  (``Direct 
Assignment Order'') (concluding that  Smith does not require  an 
exact apportionment  of  interstate  and  intrastate  usages  of 
property,  but   only  a   reasonable  apportionment;   further, 
separations procedures ``provide a  balance between the need  to 
reasonably reflect  cost causation  principles and  the goal  of 
simplification'').

66   MCI Telecom. Corp.  v. FCC,  750 F.2d 135,  141 (D.C.  Cir. 
1984).  The  Commission's separations  rules repeatedly  reflect 
such policy considerations.   See, e.g., 47  C.F.R. §  36.125(f) 
(DEM weighting for small carriers);  47 C.F.R. § 36.154(a)  (the 
ten percent  ``contamination''  rule);  47  C.F.R.  §  36.154(c) 
(allocating  25  percent  of  local  loop  costs  to  interstate 
jurisdiction).

67   First Access Charge Reform Order,  12 FCC Rcd at 16133,  ¶¶ 
344-45.

68   SBC, 153 F.3d at 543-44.

69   47 C.F.R. Part 36, Glossary (emphasis added).

70   Id.

71   47 C.F.R. § 36.1(c); 47 C.F.R. Part 36, Glossary  (emphasis 
added).

72   Matching the  costs  with the  revenues  is not  a  perfect 
process, and the separations rules do not require it to be.   As 
explained, supra,  at n.  76, there  may be  a small  amount  of 
costs, non-traffic-sensitive costs, associated with ISP  traffic 
that are assigned to the interstate jurisdiction pursuant to the 
flat rate  allocator  rule embodied  in  rule 36.154(c)  of  our 
rules.  

73   Further,  if   costs   are   assigned   to   a   particular 
jurisdiction,  but  revenues   cannot  be   recovered  in   that 
jurisdiction to recover those costs, then a carrier may rely  on 
that cost-revenue mismatch to assert a ``takings'' claim  (i.e., 
a claim  that the  Commission has,  by regulation,  prevented  a 
carrier from recovering the costs of providing its services).

74   ONA NPRM, 4 FCC Rcd at 3989, ¶ 44.  

75   Id.

76   ONA NPRM, 4 FCC  Rcd at 3987-88, ¶  34.  We note that  this 
separations treatment of ISP  traffic costs applies to  traffic-
sensitive costs  of ISP  traffic, which  represent the  bulk  of 
costs that local exchange carriers incur to process ISP traffic.  
Any non-traffic-sensitive  costs  associated with  ISP  service, 
such as local loop costs, are subject to a flat rate  allocation 
of 75% to the intrastate jurisdiction and 25% to the  interstate 
jurisdiction.  47 C.F.R. § 36.154(c).  However, ATU's assignment 
of non-traffic-sensitive costs  is not  at issue  in this  case.  
Moreover, the Commission's separations  treatment of ISP  costs, 
and the desire to avoid a cost-revenue mismatch, focuses on  the 
traffic-sensitive costs of ISP  traffic, not the application  of 
the flat  rate allocator  to non-traffic-sensitive  costs.   ONA 
NPRM, 4 FCC Rcd at 3987-88, ¶ 34.

77   ONA Order, 6 FCC Rcd at 4535, ¶ 65.

78   Reciprocal Compensation Order, 14 FCC  Rcd at 3702, ¶¶  18-
20.

79   Id. at 3710, ¶ 36.

80   Id. 

81   ATU Br. at 9-10.  Of course, in so arguing, ATU essentially 
concedes, as it  must, that the  Commission has jurisdiction  to 
regulate ISP traffic, contrary to its assertions addressed above 
based on section 2(b) of the Act.

82   See, e.g., Motion Picture Assn.  of America, Inc. v.  Oman, 
969 F.2d 1154, 1156 (D.C. Cir. 1992) (holding that agencies  are 
not  permitted  to  engage  in  retroactive  rulemaking   unless 
expressly   authorized   by   Congress);   McElroy   Electronics 
Corporation For  Authorization  to  Service  Unserved  Areas  in 
Metropolitan Statistical Area Market No. 2B, Memorandum  Opinion 
and Order, 10  FCC Rcd  6762, 6768 (1995)  (``the Supreme  Court 
made clear  .  . .  retroactive  rulemaking is  unlawful  unless 
permitted by statute'').

83   Answer at ¶ 77 (citing 47  C.F.R. § 36.125(b)); ATU Br.  at 
8-9; ATU Reply Br. at 3-4.

84   See, e.g., ONA NPRM, 4 FCC Rcd at 3988, ¶ 39.

85   Id. at 3988, n. 71.

86   Answer at ¶¶ 81-82;  ATU Reply Br.  at 7-8.  ATU  initially 
appeared to argue that not allowing it to recover costs for  ISP 
traffic  in   the  interstate   jurisdiction  would   constitute 
confiscatory rate-making.  Id.  Subsequently, ATU clarified that 
it was not making such a ``takings'' claim here.  ATU Reply  Br. 
at 8, n.7.

87   12 FCC Rcd at 16133-34, ¶ 346.  ATU has not suggested  that 
it fails to earn such ancillary revenues from ISP traffic.

88   Id. at 16133, ¶ 345.  

89   153 F.3d at 542.

90   ATU has not cited any evidence of such a request for relief 
from state regulatory authorities.  Similarly, ATU has not cited 
any evidence that it has requested a waiver from the  Commission 
for the separations treatment of ISP traffic costs at issue here 
or for  a  declaratory  ruling  that  its  proposed  separations 
treatment is permissible.  

91   The parties do not  dispute that, if  ATU had assigned  ISP 
traffic costs to the  intrastate jurisdiction for the  1997-1998 
Monitoring Period, ATU would  have exceeded its prescribed  rate 
of return.  Joint Statement at ¶ 14.

92   47 C.F.R. § 36.125(a)(3).

93   47 C.F.R. § 36 at Appendix-Glossary.

94   Answer at ¶ 92; ATU Br. at 10-11.

95   ATU Br. at 10-11.

96   The Joint Board was convened  in 1980, pursuant to  section 
410(c) of the  Act, to consider  various separations  procedures 
and issues and  to make recommendations  concerning the same  to 
the Commission.  47 U.S.C. §  410(c).  It is comprised of  three 
members of the Commission and four state commissioners.  

97   In the Matter of Amendment  of Part 67 of the  Commission's 
Rules  and  Establishment  of  a  Joint  Board,  Order  Inviting 
Comments, 2 FCC  Rcd 3787, 3800,  n.17 (1987) (``Order  Inviting 
Comments'').   The  Order  Inviting  Comments  cited  to  former 
section 67.138(c) of our  rules for the  definition of DEM.   47 
C.F.R. § 67.138(c) (1987).  Section 67.138 was later replaced by 
section 36.125, with no substantive change to the definition  of 
DEM.

98   Id. at 3788, ¶ 7.

99   Id.

100  Id. at 3788, ¶¶ 6-12.  SMOU was defined as follows:  ``SMOU 
is defined  as  a  measurement  of  local  dial  central  office 
switching  equipment  for  jurisdictional  separations  purposes 
where one minute of use is recorded per minute of an originating 
interoffice call, one  minute of  use recorded per  minute of  a 
terminating interoffice call, and one minute of use is  recorded 
per minute of  an originating intraoffice  call.'' Id. at  3800, 
n.20.  See also, In  the Matter of Amendment  of Part 67 of  the 
Commission's  Rules  and   Establishment  of   a  Joint   Board, 
Recommended Decision and Order, 2 FCC Rcd 2551, 2560 at ¶¶ 53-54 
(1987) (recognizing that various parties were arguing that SMOU, 
rather than DEM, should be utilized as the allocation factor for 
central offices employing digital switches).

101  Id.   The  Order   Inviting  Comments   reveals  that   the 
application of DEM  to intraoffice calls  over digital  switches 
that we affirm here was clear  not only to the Joint Board,  but 
to those who disagreed with that application, as well.  Had  DEM 
been interpreted  as ATU  suggests now  (i.e., that  intraoffice 
calls using a digital  switch would generate  only a single  DEM 
for each minute of use), then it would have been unnecessary for 
parties to argue that SMOU should be used instead of DEM as  the 
allocation factor for digital switches.  The DEM factor, had  it 
been defined as  ATU proposes, would  have already provided  for 
the result the parties hoped to attain by employing SMOU as  the 
allocation factor.   Thus,  the  fact  that  parties  urged  the 
adoption of SMOU as an  allocation factor for intraoffice  calls 
using digital  switches, rather  than  relying on  an  expansive 
construction of DEM, supports our conclusion that DEM has  never 
been defined or applied, and  should not be defined or  applied, 
as ATU suggests it should be here.

102  ATU Br. at  11.  ATU  cites no rule,  regulation, or  order 
suggesting that  the  interpretation  of DEM  discussed  by  the 
Commission in 1987  has been altered  or amended.  Further,  ATU 
apparently understood,  at least  until recently,  that  section 
36.125(a)(3) requires  it to  count each  minute of  intraoffice 
calls as  two DEMs.   ATU  concedes that  even  as late  as  its 
January 1998 Tariff filing, it counted intraoffice calls as  two 
DEMs.  Responses of Alaska Communications Systems Holdings, Inc. 
and ACS of Anchorage, Inc.  to Interrogatories, File No.  EB-00-
MD-16 (filed October 20, 2000), at Response to Interrogatory No. 
6.  If ATU now believes that 36.125(a)(3) should be  interpreted 
differently than it has been in  the past, ATU should seek  such 
relief  through  appropriate  means,  such  as  a  petition  for 
declaratory ruling,  rather  than unilaterally  adopting  a  new 
interpretation of the rule.  

103  Answer at ¶ 90; ATU Reply Br. at 11-12.

104  47 C.F.R. § 36.1(c).  See 47 C.F.R. § 36.2(a).

105  Direct Assignment Order, 8 FCC Rcd at 1560, ¶ 8.

106  Id. at 1559, ¶ 4.

107  MCI, 59  F.3d  at 1414  (citing  and quoting  47  U.S.C.  § 
201(b)).  See American Tel.  & Tel. Co. v.  FCC, 836 F.2d  1386, 
1392 (D.C. Cir. 1988); New England  Tel. & Tel. Co. v. FCC,  826 
F.2d 1101, 1106-07 (D.C. Cir. 1987); Nader v. FCC, 520 F.2d  182 
(D.C. Cir. 1975).

108  See New England  Tel., 826  F.2d at  1107-08 (stating  that 
section 4(i)  of  the  Act  provides  the  Commission  with  the 
authority to enforce the rate-of-return prescription by ordering 
refunds); see also In the Matter of Amendment of Parts 65 and 69 
of the  Commission's  Rules to  Reform  the Interstate  Rate  of 
Return Represcription  and  Enforcement  Processes,  Report  and 
Order, 10 FCC Rcd 6788, 6848-49 at ¶ 137 (1995) (noting that the 
complaint process embodied in section 208 of the Act provides  a 
useful tool in  enforcing the  rate-of-return prescription,  and 
that  the  Commission  is   authorized  to  award  damages   for 
violations of the rate-of-return prescription).

109  MCI, 59 F.3d at 1415.

110  Joint Statement at ¶  14.  See Rate-of-Return  Prescription 
Order, 5 FCC Rcd at 7532, ¶ 216; 47 C.F.R. § 65.700(a).

111  Answer at ¶¶ 94-96; ATU Br. at 11-20; ATU Reply Br. at  14-
18.

112  ATU Br. at  11-20; ATU  Reply Br. at  14-18.  ATU  concedes 
that  its  arguments  based  on  section  204(a)(3)  afford   no 
protection against calendar year 1997 damages, because ATU filed 
its  1997  Tariff  prior  to  the  effective  date  of   section 
204(a)(3).  Answer at ¶ 96.  The parties agree that the  damages 
amount for  1997,  excluding  interest,  is  $1,329,442.   Joint 
Statement at ¶ 15.

113  Telecommunications Act of  1996, Pub. L.  No. 104-104,  110 
Stat. 56, § 402(b)(1)(A)(iii); 47 U.S.C. § 204(a)(3).

114  Id. (emphasis added).

115  In the Matter of Implementation of Section 402(b)(1)(A)  of 
the Telecommunications Act of 1996, Report and Order, 12 FCC Rcd 
2170 (1997) (``Streamlined Tariff Order'').

116  Id. at 2183, ¶ 21.

117  Id. at 2182-83, ¶¶ 20-21.

118  Id. at 2182, ¶ 19.

119  Id. at 2183, ¶ 24.

120  47 U.S.C. § 204(a)(3) (emphases added).

121  ATU acknowledges  that  its  January 1998  Tariff  did  not 
contain information that provided notice that it would assign to 
the interstate jurisdiction for  separations purposes the  costs 
of ISP traffic or would  count each minute of intraoffice  calls 
as one DEM.   See, Letter from  Christopher N. Olsen,  Attorney, 
Market Disputes Resolution Division, Enforcement Bureau, to  Joe 
D. Edge, et al., Drinker Biddle & Reath LLP and Karen Brinkmann, 
et al.,  Latham &  Watkins, File  No. EB-00-MD-016  (October  6, 
2000), at 1-2; Stipulation  of Defendants Alaska  Communications 
Systems Holdings, Inc. and ACS of Anchorage, Inc., File No.  EB-
00-MD-016 (October 20, 2000), at 1.

122  See, e.g., MCI, 59  F.3d at 1415;  AT&T Corp. v.  Telephone 
Util. Exch. Carrier Assoc., Memorandum Opinion and Order, 10 FCC 
Rcd 8405,  8409,  n.20  (1995)  (stating  that  an  overearnings 
complaint  does  not  allege  that  any  individual  rates   are 
unlawful, but rather alleges that the cumulative application  of 
those rates produced an excessive rate of return).  See also New 
England Tel.,  826  F.2d  at  1107  (explaining  the  difference 
between an order  prescribing a  maximum rate of  return and  an 
order requiring a  carrier to set  individual rates at  specific 
levels).

123  MCI, 59 F.3d at 1415 (``[A]ny calculation of the rate  that 
will produce a targeted  rate of return, whether  it is done  by 
the Commission,  [a customer],  or  for that  matter a  LEC,  is 
necessarily but  an  estimate.   It  is  not  possible  to  know 
precisely the  effect that  any  given rate,  or change  from  a 
prevailing rate, will have upon revenues (and therefore upon the 
LEC's rate of return); that  depends upon the elasticity of  the 
demand for the  service, which  cannot be known  for certain.  . 
.'').

124  ATU Br. at 12-13; ATU Reply Br. at 15-17.

125  The D.C. Circuit has pointed out the difficulties  inherent 
in  predicting   rate-of-return  violations   from   information 
typically contained in tariffs: ``If the LEC, with its  superior 
information, could not (or did not) accurately establish such  a 
rate [that would lead to a lawful rate of return], then it seems 
obvious that the [customer] could not (or should not be expected 
to) establish such a rate  from the outside looking in.''   MCI, 
59 F.3d at 1415.

126  12 FCC Rcd at 2184, ¶ 24.

127  GCI asserts that the ``deemed lawful'' language of  section 
204(a)(3)  has  no  application  at  all  to  a   rate-of-return 
violation,  even  where  the  tariff  at  issue  describes   the 
practices that cause the violation.  GCI Br. at 22-25; Reply  of 
General Communication,  Inc., File  No. EB-00-MD-016  (September 
18, 2000) (``GCI Reply'') at 5-10.  We need not and do not reach 
this issue  here.  We  conclude only  that where,  as here,  the 
tariff at issue failed to specify the practices that caused  the 
rate-of-return  violation,   the   carrier  who   exceeded   its 
prescribed rate of return is not immunized by section  204(a)(3) 
from a damages  award in  a complaint  proceeding under  section 
208.

128  Joint Statement  of Managers,  S. Conf.  Rep. No.  104-230, 
104th Cong.,  2d Sess.  at Section  402 (1996);  141 Cong.  Rec. 
S7881-7902 at 7898 (1995); 141 Cong. Rec. S7926-27 (1995).   ATU 
does not dispute that, prior to the 1996 Act, the Commission had 
long required a carrier who exceeds its allowable rate of return 
to refund the excess to the affected customers.

129  12 FCC Rcd at 2202-03, ¶¶ 67-68.

130  Id. at 2203, ¶ 68 (emphasis added).

131  Complaint, Ex. 4 at 14.

132  ATU Reply Br. at 12, n.11.  ATU's discovery responses state 
that, for the  January 1998  Tariff, ATU ``did  not include  ISP 
traffic in  its  demand  projections or  the  projected  traffic 
sensitive costs  associated with  such  traffic in  its  revenue 
requirement.''  ATU Response to Interrogatory No. 5.  It is  not 
clear whether these two assertions by ATU are consistent  (i.e., 
whether ATU treated  ISP traffic as  intrastate for purposes  of 
its January 1998 Tariff, or whether it simply failed to  account 
for ISP  traffic at  all  in its  January 1998  Tariff).   Under 
either scenario,  however, ATU's  treatment  of ISP  traffic  as 
interstate in its July 1998  Tariff represents a new or  revised 
treatment of such  traffic by  ATU, as compared  to the  January 
1998 Tariff.

133  We need not determine whether the language ATU included  in 
the ``Description and Justification''  section of its July  1998 
Tariff filing  concerning  ISP  traffic  and  DEM  counting  for 
intraoffice   calls   necessarily   constitutes   a    ``charge, 
classification, regulation, or practice'' within the meaning  of 
section  204(a)(3).   We  need  only  conclude  that,  if  ATU's 
statement  is  considered  to  be  a  ``charge,  classification, 
regulation,  or  practice''  within   the  meaning  of   section 
204(a)(3), then  ATU failed  to  comply with  applicable  notice 
requirements  and  cannot,   therefore,  benefit  from   section 
204(a)(3).  Alternatively, if ATU's statement as to ISP  traffic 
costs and DEM counting for  intraoffice calls is not  considered 
to be  a  ``charge, classification,  regulation,  or  practice'' 
within the meaning of section 204(a)(3), then section  204(a)(3) 
simply does not apply at all.

134  See 1997 Annual Access  Tariff Filings, Memorandum  Opinion 
and Order, 13 FCC Rcd 5677, 5705-06 at ¶¶ 78-79 (Com. Car.  Bur. 
1997) (concluding that tariffs filed on eight and sixteen  day's 
notice  not   ``deemed   lawful''  under   section   204(a)(3)); 
Streamlined Tariff Order, 12 FCC Rcd at 2181-84, 2189 at ¶¶  25-
34 and 62-71.  

135  GCI also contends that the  July 1998 Tariff is not  deemed 
lawful, because it allegedly reflected an increase in one of the 
rates from that set  forth in the January  1998 Tariff, and  ATU 
failed to file it  on 15-days' notice, as  is required for  rate 
increases.  GCI Reply  at ¶  11; GCI  Reply Br.  at 14-16.   ATU 
disputes whether the July 1998 Tariff reflects a rate  increase.  
ATU Br. at 19-20.  However, we need not and do not resolve  this 
dispute, because we have concluded that the July 1998 Tariff  is 
not ``deemed lawful'' for a separate reason. 

136  47 U.S.C. § 415(c).

137  ATU Br.  at  20-21.   Although ATU  failed  to  allege  the 
statute of limitations as an  affirmative defense in its  Answer 
and may, therefore, have waived it, we address the argument,  in 
any  event,  because  the  statute  of  limitations  might  have 
affected our  jurisdiction  to  decide  GCI's  claims  for  1997 
damages.  

138  Answer at Exhibit 2.

139  Id.

140  ATU Br. at 20-21.

141  Id. 

142  59 F.3d at 1416-17.

143  Id.

144  Id. 

145  Id. (emphasis added).

146  See also AT&T v. TUECA, 10 FCC Rcd at 8415 (``[T]he date of 
the filing of  the final monitoring  report is dispositive  with 
regard to the date a complainant discovers the right or wrong or 
the facts on which such knowledge  is chargeable as a matter  of 
law''); Allnet  Communications Serv.,  Inc.  v. US  West,  Inc., 
Memorandum Opinion  and Order,  8 FCC  Rcd 3017,  3019 at  ¶  13 
(1993); US  Sprint Communications  Ltd. Partnership  v.  Pacific 
Northwest Bell Tel. Co., Memorandum Opinion and Order, 8 FCC Rcd 
1288, 1291-92  at  ¶  16  (1993).  The  D.C.  Circuit  has  also 
previously rejected the notion  that a rate-of-return  violation 
claim can be analyzed for a period less than the full monitoring 
period.  Virgin Islands Tel. Corp. v. FCC, 989 F.2d 1231,  1238-
39 (D.C.  Cir.  1993) (``the  target  `authorized return'  is  a 
number that has meaning  only in relation  to the full  two-year 
monitoring period.   Thus, it  makes no  sense to  speak of  the 
`authorized return' for [a six month period]. . . .  In order to 
assess the reasonableness of [the carrier's] earnings as against 
the authorized rate  of return, the  Commission was required  to 
consider  earnings  for  the  entire  period  during  which  the 
authorized rate was in effect.'')

147  See 47 C.F.R. § 65.600(b) (allowing final adjustments to be 
made to the enforcement period monitoring report until September 
30 of the year following the monitoring period in question).

148  ATU makes a half-hearted attempt to distinguish MCI v. FCC, 
but ultimately ATU ``generally agrees that a cause of action  in 
an overearnings case  accrues on the  date the final  monitoring 
report was filed.''  ATU Reply Br.  at 18.  ATU argues that  the 
statute  of  limitations  may  bar  GCI's  claims  that  do  not 
constitute a claim  for overearnings.  Id.   Because we  dismiss 
these other claims (i.e., Counts 4-6 of the Complaint) as  moot, 
see Part III(B), infra, we  need not decide whether the  statute 
of limitations defense would have barred any portion of  damages 
to which GCI would otherwise have been entitled for such claims.

149  We do  not find  in  GCI's favor,  however, on  its  claims 
against ACS Holdings, and we dismiss ACS Holdings from the case.  
See Part III(C), infra.

150  Complaint at ¶ 4; GCI Br. at 29; GCI Reply at 11.

151  47 U.S.C. § 411(a) (providing that it is lawful to  include 
in any proceeding to  enforce the provisions  of the Act,  ``all 
persons interested in or affected by the charge, regulation,  or 
practice under  consideration,  and  inquiries,  investigations, 
orders, and decrees may  be with reference  to and against  such 
additional parties in the same  manner, to the same extent,  and 
subject to the same provisions as are or shall be authorized  by 
law with respect to  carriers'').  The parties apparently  agree 
that ACS Holdings is not itself a carrier within the meaning  of 
the Act.

152  Complaint at  ¶ 61;  Answer at  ¶¶ 97-98.   See, e.g.,  MCI 
Telecom. Corp. v. Pacific Northwest Tel. Co., Memorandum Opinion 
and Order, 8 FCC Rcd 1517, 1529-30 at ¶¶ 46-48 (1993).

153  See 2000-25 I.R.B. 1262 (GCI Reply at Exhibit 21).

154  GCI Reply Br. at 17-18.

155  ATU Br. at 22-23.

156  Id.

157  MCI, 8 FCC Rcd at 1529, ¶ 46.

158  See, Mile Hi Cable  Partners, L.P. v.  Public Serv. Co.  of 
Colorado, Order, 15  FCC Rcd 11450,  11458 at ¶  14 (Cab.  Serv. 
Bur.  2000);  Long  Term  Telephone  Number  Portability  Tariff 
Filings, 14 FCC Rcd at 17341, n.15 (suggesting that there may be 
instances where the IRS  tax underpayment rate is  appropriately 
applied as a penalty). 

159  See 2000-25 I.R.B. 1262 (GCI Reply at Exhibit 21). 

160  See Long Term Telephone  Number Portability Tariff  Filings 
of Ameritech  Operating Cos.,  Pacific Bell,  Southwestern  Bell 
Tel. Co.  and  U.S. West  Comm.,  Inc., Memorandum  Opinion  and 
Order, 14  FCC Rcd  17339,  17341 at  ¶  5 (1999);  Time  Warner 
Entertainment/Advance-Newhouse Partnership  v. Florida  Power  & 
Light Co., Order,  14 FCC Rcd  9149, 9154, n.36  (1999); In  the 
Matter of  Section  208  Complaint Alleging  Violations  of  the 
Commission's Rate of Return Prescription, Memorandum Opinion and 
Order, 12 FCC Rcd 4007, Attachment A (1997).  ATU concedes  that 
it is not  aware of any  situation in which  the Commission  has 
awarded interest at  the rate for  large corporate  overpayments 
(those exceeding  $10,000)  and  suggests that  this  dearth  of 
precedent exists because  the large  corporate overpayment  rate 
was not established until 1995.  ATU Br. at 23-24.  However, the 
decisions cited herein were rendered  after the adoption of  the 
large corporate overpayment rate in 1995, and we assume that the 
amount involved  in  the  orders  described  herein,  given  the 
significant rate actions described, exceeded $10,000.

161  See supra at ¶ 21. 

162  The parties agree on the  amount of damages at issue  here, 
excluding interest.  The parties concluded that ATU's assignment 
of  ISP  traffic  costs  to  the  interstate  jurisdiction   and 
calculation of  one DEM  for each  minute of  interoffice  calls 
resulted in disputed charges of $2,765,371 to GCI for the  1997-
1998 Monitoring Period.  Joint Statement at ¶ 15.

163  ATU initially  challenged  the  Commission's  authority  to 
order any relief other than damages  in this case.  Answer at  ¶ 
102.  ATU subsequently retreated  from that position and  agreed 
to comply with  any Commission  order requiring it  to submit  a 
revised monitoring report  and to  treat ISP  traffic costs  and 
count intraoffice calls as dictated by the Commission.  ATU  Br. 
at  24-25.  In  any  event,  we  note  that  we  do  have  broad 
authority, under section 4(i) of the Act, to order relief  other 
than  damages.   See,   e.g.,  Amendment   of  Rules   Governing 
Procedures to  be  Followed  When Formal  Complaints  Are  Filed 
Against Common Carriers,  Report and  Order, 12  FCC Rcd  22497, 
22566 at  ¶ 159  and n.  464 (stating  that the  Commission  has 
authority under  section 4(i)  of the  Act to  award  injunctive 
relief);  Streamlined  Tariff  Order,  12  FCC  Rcd  at  2182-83 
(recognizing the Commission's ability  to direct that a  carrier 
cease charging a particular rate for future periods);  Ashtabula 
Cable TV, Inc. v. Ashtabula Tel.  Co., Decision, 17 FCC 2d  113, 
119 at ¶ 16,  recon. denied, 18 FCC  2d 193, Memorandum  Opinion 
and Order, (1969) (section 4(i) permits the Commission to tailor 
remedies to ``best meet the particular factual situation  before 
[it]'').