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Before the
Federal Communications Commission
Washington, D.C. 20554
In the Matter of )
)
Graphnet, Inc., )
)
Complainant, )
)
v. ) File No. E-94-41
)
AT&T Corp., )
)
Defendant. )
MEMORANDUM OPINION AND ORDER
Adopted: December 21, 2001 Released: January 8,
2002
By the Commission:
I. INTRODUCTION
In this Memorandum Opinion and Order, we deny all of the claims
asserted in a complaint filed by Graphnet, Inc. (``Graphnet'')
against AT&T Corp. (``AT&T'') pursuant to section 208 of the
Communications Act of 1934, as amended (``Act'').1 Specifically,
we reject Graphnet's arguments that AT&T unlawfully routed
through carriers in other countries telex traffic that AT&T
received at its switch in the United States and that ultimately
was destined for Graphnet's network.2 We also reject Graphnet's
claim that AT&T violated Commission rules during the course of
this proceeding.
In addition, we grant one of the counterclaims filed by AT&T
against Graphnet. In particular, we find that Graphnet's Tariff
F.C.C. No. 5 involved an unjust and unreasonable practice in
contravention of section 201(b) of the Act.3
II. BACKGROUND
Graphnet and AT&T are providers of domestic and international
telex service, also known as ``record carriers.''4 In order to
provide telex service to their customers, record carriers
interconnect their networks. At the times relevant to this
dispute, the Record Carrier Competition Act (``RCCA''), codified
at former section 222 of the Act, contained a general
interconnection standard that required record carriers to make
available, upon reasonable request, full interconnection with the
facilities of other record carriers that are used primarily to
provide record communications service.5 The RCCA provided that
interconnection furnished pursuant to a written agreement must be
``upon terms and conditions which are just, fair, and
reasonable.''6 This dispute concerns the terms and conditions
under which Graphnet made its facilities available to AT&T for
the termination of domestic and international telex calls that
traversed AT&T's network and were destined for Graphnet's
subscribers.
In February 1993, Graphnet and AT&T entered into a contract
entitled ``Interconnection Agreement.'' The Interconnection
Agreement specified the types of trunks that would route telex
traffic between the two carriers and established each carrier's
telex termination rates: $.45 per minute in whole minute
increments for traffic carried by Graphnet and terminated on
AT&T's network; and $.78 per minute in whole minute increments
for traffic carried by AT&T and terminated on Graphnet's
network.7 The Interconnection Agreement included a June 30,
1993, expiration date, which could be extended by mutual
agreement.8 Although Graphnet wished to continue its contractual
relationship with AT&T after June 30, 1993, AT&T opted not to do
so, apparently citing its then desire to ``revert to the
conditions of [Graphnet's] interconnect tariff [Tariff F.C.C. No.
5] and the rules of the FCC.''9
Graphnet's Tariff F.C.C. No. 5, which took effect on March 26,
1992, contained rates that were significantly higher than those
of the Interconnection Agreement. Specifically, the tariff
charged $3.00 for each minute or fraction thereof for terminating
either an interconnected domestic or international telex call.
Moreover, the $3.00 charge applied to all calls terminated on
Graphnet's network ``that have, at any point, utilized the
facilities of another United States OCC [Other Common
Carrier].''10 In other words, if AT&T handled traffic intended
for Graphnet's network, but did not directly interconnect with
Graphnet, it nonetheless would be liable to Graphnet for the
$3.00 charge. Graphnet's tariffed termination rate was
significantly higher than the average rate of other telex
carriers, which ranged from approximately $.80 to $.88.11
Notwithstanding its Tariff F.C.C. No. 5, Graphnet entered into
interconnection agreements with other domestic record carriers
specifying termination rates that were lower than $3.00 per
minute. For example, Graphnet contractually agreed to an $.88
per minute rate for TRT Telecommunications Corp. telex messages
that were terminated on Graphnet's network.12 Similarly,
pursuant to a 1992 agreement resolving a rate dispute between
Graphnet and MCI International, Inc., Graphnet agreed to a $1.23
per-minute termination rate.13
AT&T viewed Graphnet's tariffed rate as excessive and chose not
to pass traffic directly to Graphnet. Instead, AT&T routed
through foreign affiliates, such as Unitel Communications, Inc.
(``Unitel''), domestic- and foreign-originated telex traffic that
it received at its United States switch destined for Graphnet's
network.14 Thus, instead of delivering traffic directly to
Graphnet, AT&T sent the traffic to Unitel in Canada, which then
directed the traffic to Graphnet in the United States. Pursuant
to this relationship, AT&T paid Unitel its applicable charges,
and Unitel paid Graphnet a $.28 per minute termination charge
that Unitel and Graphnet had negotiated in an interconnection
agreement.15
Graphnet contends that AT&T's routing practice was
``inefficient'' and ``unnatural,'' resulted in degraded service,
and unlawfully deprived Graphnet of revenue. On February 1,
1994, Graphnet filed a formal complaint against AT&T pursuant to
section 208 of the Act. Graphnet's complaint asserts claims for
(1) violation of Graphnet's Tariff F.C.C. No. 5 and section
203(c) of the Act; (2) violation of sections 203(a) and (c) and
214(a) of the Act; (3) violation of the Act and the ``antitrust
laws'';16 (4) violation of sections 222(b)(1) and (c)(1)(B),
202(a), and 201(b) of the Act; (5) violation of the Commission's
International Settlements Policy; and (6) violation of the
Commission's ``No Third Country Routing Via Canada'' Policy.17
The complaint seeks a cease and desist order, an unspecified
amount of damages, and a monetary forfeiture.
On April 15, 1994, AT&T answered the complaint, denying the
violations alleged by Graphnet and advancing various affirmative
defenses. In addition, the answer asserts three counterclaims
against Graphnet.18 First, AT&T alleges that, in violation of
section 201(b) of the Act, Graphnet's Tariff F.C.C. No. 5
contained unjust and unreasonable charges, terms, and practices.
Second, AT&T claims that Graphnet engaged in unlawful
discrimination, in violation of section 202(a) of the Act, by
imposing the $3.00 termination charge on AT&T while charging
other carriers a different, lower rate for the same service.
Finally, AT&T avers that, by charging other carriers a rate that
differs from the tariffed rate, Graphnet violated section 203 of
the Act. AT&T requests declaratory relief, as well as a cease
and desist order.19
III. DISCUSSION
III.A. Graphnet's Claims Are Denied.
III.A.1. AT&T Did Not Violate Section 203(c) of the
Act.
Section 203(c) of the Act requires common carriers to file and
publish schedules of their charges and practices, i.e.,
tariffs.20 Moreover, section 203 prohibits carriers from
deviating from the rates and practices contained in their
tariffs.21
Graphnet argues that AT&T violated Graphnet's Tariff F.C.C. No. 5
by not paying the $3.00 per-minute termination charge contained
in that tariff. According to Graphnet, the filed rate doctrine
requires compliance with effective tariffs; and AT&T's ``admitted
circumvention'' of Graphnet's tariff, allegedly accomplished by
not routing traffic directly to Graphnet, purportedly constituted
a violation of section 203(c) of the Act.22 In addition,
Graphnet avers that AT&T violated its own tariffs by circuitously
routing Graphnet's telex calls via Unitel ``without adequate
notice in writing'' to Graphnet.23
We agree with AT&T that Graphnet has not met its burden of
proving a violation of section 203(c). As is evident from the
statute's language, the obligations imposed by section 203(c)
apply to the carrier that filed the tariff.24 In this case, that
carrier is Graphnet, which seeks to enforce its tariff against
AT&T. Section 203(c) simply does not control AT&T's obligations
here.25
Graphnet's claim that AT&T violated two of its own tariffs also
is unavailing. As a preliminary matter, neither of the tariffs
applied to traffic routed from AT&T to other carriers within the
United States.26 In any event, the tariffs' notice requirements
never were triggered. AT&T's tariffs required AT&T to provide
``adequate notice in writing'' to interconnected carriers if
changes to AT&T's facilities or equipment ``can reasonably be
expected to render any interconnected carrier's facilities
incompatible with [AT&T's] communications facilities, or require
modification or alteration of an interconnected carrier's
facilities, or otherwise materially affect the use or performance
of an interconnected carrier's facilities ....''27 Graphnet has
failed to demonstrate that AT&T altered its facilities in a way
that necessitated changes to, or impaired the operation of,
Graphnet's facilities. To be sure, Graphnet has asked the
Commission to find that AT&T's routing practice ``degrade[d]
service'' by causing routing delays and subjecting calls to
``interruptions and incompletions.''28 However, as discussed
below, Graphnet has offered no probative evidence that these
problems actually occurred.29
Graphnet asserts that two pieces of evidence reflect service
impairments caused by AT&T's routing practice. First, Graphnet
describes a test that it conducted to determine how AT&T would
reroute telex calls to Graphnet customers if AT&T's Hong Kong
route were compromised. Specifically, Graphnet ``temporarily
disabl[ed] its Hong Kong circuits'' and then transmitted telex
calls to itself via AT&T.30 According to Graphnet, ``[n]one of
these test calls were transmitted by AT&T, and Graphnet received
the symbol `NA,' meaning not available on its test messages.''31
In its reply brief and accompanying affidavit, AT&T explained
that the message Graphnet received stands for ``not admitted,''
which indicates an error in the placement of the calls, not an
error in the routing of the calls.32 Graphnet does not dispute
AT&T's explanation, and we have no reason to question its
accuracy.
Second, Graphnet offers a chart purportedly illustrating its
business losses. The chart states that the ``record shows that
Graphnet lost ... customers, ... some undoubtedly to AT&T, during
the period, July-December 1993, as a result of AT&T's practices
of circuitously routing U.S. and foreign origin telex calls via
Unitel, Canada.''33 But even assuming that the customers
identified on the chart opted not to use Graphnet's service, the
record contains no facts demonstrating why those individuals left
Graphnet, let alone that their leaving had anything to do with
service disruptions caused by AT&T. In the absence of such
evidence, we cannot conclude that Graphnet's allegedly lost
business is attributable to any claimed ``degrade[d] service''
resulting from AT&T's routing practices.
III.A.2. AT&T Did Not Unreasonably Discriminate
Against Graphnet's Customers in Violation of
Section 202(a).
Section 202(a) makes it unlawful for any common carrier to
discriminate unjustly or unreasonably in its provision of like
communication service.34 In resolving a claim that a carrier has
discriminated in violation of section 202(a), we employ a three-
step inquiry: (1) whether the services at issue are ``like'';
(2) if the services are ``like,'' whether there are differences
in the terms and conditions pursuant to which the services are
provided; and (3) if there are differences, whether they are
reasonable.35 When a complainant establishes the first two
components, the burden of persuasion shifts to the defendant
carrier to justify the discrimination as reasonable.36
Graphnet contends that AT&T's deliberate routing via non-domestic
carriers of telex calls inbound to Graphnet's customers, but not
telex calls inbound to AT&T's customers, constituted unreasonable
discrimination. According to Graphnet, AT&T has succeeded in a
plan unlawfully to induce Graphnet's subscribers to shift their
business to AT&T.37
Because AT&T did not argue to the contrary, we assume, without
deciding, that the service AT&T provided to Graphnet's customers
(i.e., delivery of telex traffic to those customers) is ``like''
the service AT&T provided to its own customers, and that there is
a disparity in the manner in which AT&T provided the service
(i.e., by routing traffic destined for Graphnet's network, but
not traffic destined for AT&T's network, through carriers in
other countries).38 Thus, the burden of persuasion shifts to
AT&T to justify its routing practice as reasonable.
In our view, AT&T has met its burden. By directing traffic
through carriers in other countries, AT&T enjoyed a dramatic cost
savings (e.g., a $.28 per minute rate for telex calls routed to
Graphnet via Unitel versus a $3.00 per minute rate for telex
calls routed directly to Graphnet). Savings of this nature
constitute a reasonable, economic rationale for treating
Graphnet's customers differently.39 Because AT&T has proffered a
legitimate reason for its disparate treatment of Graphnet's
customers, a reason that Graphnet does not dispute, we deny
Graphnet's section 202(a) claim.
III.A.3. AT&T's Routing Practices Did Not Violate the
RCCA.
Two subsections of the RCCA - which, as noted above, was repealed
after Graphnet filed this case - are at issue. The first,
section 222(b)(1), was captioned ``Exercise of authorities by
Commission'' and required the Commission to ``promote the
development of fully competitive domestic and international
markets in the provision of record communications service'' and
to ``forbear from exercising its authority ... as the development
of competition among record carriers reduces the degree of
regulation necessary to protect the public.''40 The second,
subsection 222(c)(1)(B), established rules for the terms and
conditions on which a United States record carrier must make
available its separate domestic facilities to other international
record carriers, and its separate international facilities to
other domestic record carriers, for the origination and
termination of international traffic.41
Graphnet argues that section 222 was enacted for the purpose of
promoting the development of fully-competitive domestic and
international record communications service markets. Graphnet
asserts that AT&T's practice of routing traffic to other
countries contravened this pro-competitive policy, because the
resultant loss of customers deprived Graphnet of revenue it would
have used to compete with AT&T.42
We reject Graphnet's claim. Section 222(b)(1) did not govern the
conduct of record carriers. It was a general mandate to the
Commission to promote competition in domestic and international
telex markets and a directive to forbear from exercising its
authority as the need for regulation decreased. Although
Graphnet is correct that the subsection expressed a pro-
competitive policy, we decline to transform this directive to the
Commission into a basis for Graphnet to sue AT&T.
Section 222(c)(1)(B) similarly has no bearing on this case. The
provisions of the subsection were designed to protect
unaffiliated record carriers from discrimination by affiliated
domestic and international carriers. Graphnet makes no
allegation that AT&T refused to interconnect with Graphnet on the
same basis that AT&T interconnected with its affiliated entities.
We find neither section 222(b)(1) nor section 222(c)(1)(B) to be
pertinent to this case. Accordingly, we deny Graphnet's claim
that AT&T's routing practices violated the RCCA.
III.A.4. Routing of Domestic Traffic Via a Carrier in
Canada Did Not Contravene AT&T's Section 214
Authority.
Among other things, section 214(a) of the Act prohibits a carrier
from engaging in transmission over any line without first
obtaining from the Commission a certificate that such
transmission is required by the public convenience and
necessity.43 The statute further forbids a carrier from
discontinuing, reducing, or impairing service to a community, or
part of a community, without first obtaining from the Commission
a certificate that the public convenience and necessity will not
be affected adversely.44
Graphnet argues that, during the relevant period, the Commission
required carriers to have ``explicit country-by-country and
product-by-product Section 214 authority'' (i.e., the Commission
did not grant ``beyond country'' authority - also known as ``and
beyond'' authority - by implication), and that AT&T's section 214
authority for the United States did not permit AT&T to transmit
telex calls from the United States to Canada, and vice versa.45
Graphnet further maintains that AT&T violated section 214 by not
seeking FCC authority to ``reduce or impair'' service before
unilaterally terminating its connections with Graphnet and
routing traffic via Unitel.46
We conclude that AT&T did not violate section 214(a) when it
transmitted foreign-originated, inbound telex traffic that it
received at its New Jersey switching center through Canada via
Unitel, which then terminated that traffic with Graphnet.47
While this foreign-originated, inbound telex traffic constituted
``foreign communication'' within the meaning of the Act,48 the
portion of this communication that AT&T routed through Canada was
strictly domestic, contrary to Graphnet's assertion.49 As the
Commission explained in its Benchmarks Order, there are three
specific network elements (and their related cost components)
that are used to provide international switched telephone (or, as
here, telex) service: (1) international transmission facilities;
(2) international switching facilities; and (3) national
extension (domestic transport and termination). The
international facility component consists of international
transmission facilities, both cable and satellite, including the
link to international switching facilities. The international
gateway component consists of international switching centers and
associated transmission and signaling equipment. The national
(i.e., domestic) extension component consists of national
exchanges, national transmission, and the local loop facilities
used to distribute international service within a country.50 The
service that AT&T procured from Unitel fell within this domestic
extension component. The fact that AT&T routed this domestic leg
of its international telex traffic, which it received from its
foreign carrier correspondents, through a foreign country prior
to its termination with Graphnet, does not transform this leg
into an international communication. Section 3 of the Act
categorizes communication ``between points within the United
States but through a foreign country'' as ``interstate
communication.''51 Thus, the communications at issue in this
case were strictly domestic.
At the time of the activity about which Graphnet complains, AT&T
was regulated as a dominant carrier in its provision of United
States domestic service.52 Consequently, AT&T's permissible
activities were governed by the terms of its section 214
authorizations, as well as the Commission's rules and
regulations. Graphnet does not cite any Commission rule or
regulation prohibiting AT&T's domestic routing practice, nor does
it point to any provision in AT&T's domestic or international
authorizations barring AT&T from using its United States-Canada
lines for the provision of United States domestic service.
Absent any such prohibition, we cannot find that AT&T was engaged
in the unauthorized provision of service.53
Finally, we reject Graphnet's ``reduce or impair'' analysis. In
determining the need for prior authority to discontinue, reduce,
or impair service under Section 214(a), the primary focus should
be on the end service provided by a carrier to a community or
part of a community, i.e., the using public. Thus, in situations
where one carrier attempts to invoke Section 214(a) against
another carrier, concern should be had for the ultimate impact on
the community served rather than on any technical or financial
impact on the carrier itself. We find that ``service to a
community or part of a community'' was not discontinued, reduced,
or impaired in this instance. We so find because, as discussed
above, Graphnet has failed to produce any persuasive evidence of
service disruptions resulting from AT&T's routing practice.
III.A.5. AT&T Did Not Violate the Commission's
International Settlements Policy.
The Commission's International Settlements Policy (``ISP'')
requires: (1) the equal division of the accounting rate between
a United States carrier and a foreign carrier;54 (2)
nondiscriminatory treatment of United States carriers (i.e., all
United States carriers must receive the same accounting rate,
with the same effective date); and (3) the proportionate return
of inbound traffic.55 The Commission adopted the ISP to prevent
foreign monopoly carriers from playing United States
international common carriers against one another, or engaging in
``whipsawing,'' to the disadvantage of United States carriers and
United States consumers.56
Graphnet claims that the ISP was designed to ``curb the diversion
of U.S. carrier revenues to foreign telecommunications
entities.''57 According to Graphnet, AT&T violated the policy by
diverting revenue away from Graphnet to foreign carriers such as
Unitel. In Graphnet's view, much of the traffic at issue was
international, because it originated in other countries and was
carried by AT&T from its switching center in New Jersey.58
We reject Graphnet's claim under the ISP. The fact that much of
the traffic that AT&T delivered to Graphnet originated in foreign
points is irrelevant. As explained above, the portion of the
international communication that AT&T routed via Unitel's
facilities in Canada was strictly domestic. Once AT&T received
an inbound international telex message at its New Jersey
switching center (which was the end of the international leg of
the message), its subsequent delivery of the message to Graphnet
involved the provision of domestic transport service,
notwithstanding AT&T's routing of the traffic through Canada.59
The ISP addresses only the terms and conditions under which a
United States carrier agrees to exchange United States inbound
and outbound international traffic with a foreign-authorized
carrier.60 The ISP does not address - and imposes no
requirements regarding - the domestic routing of inbound and
outbound international traffic between United States-authorized
carriers. Thus, the manner in which AT&T delivered inbound
international telex traffic from its New Jersey switch to
Graphnet, and the cost that AT&T incurred in delivering such
traffic to Graphnet, is beyond the ISP's purview.
III.A.6. Commission Decisions Requiring the Direct
Routing of International Traffic Are Irrelevant to
This Case.
Graphnet claims that AT&T's routing practices violated two
related Commission policies, which Graphnet dubs the ``Direct
Routes Policy'' and the ``No Third Country Routing Via Canada
Policy.''61 As described by Graphnet, the Direct Routes Policy
encouraged carriers to route traffic directly to its destination,
and to ensure that several direct routes are available, so that
service quality and network reliability will be maintained.62
Graphnet argues that alleged delays in the routing of Graphnet-
bound telex calls and relegation of Graphnet traffic to a
``single, tenuous, circuitous route'' contravened this policy.63
According to Graphnet, the No Third Country Routing Via Canada
Policy prohibits carriers from routing international traffic
through Canada.64 Graphnet further maintains that AT&T is
estopped from arguing in this case that its circuitous Canadian
routings were permissible, because AT&T allegedly sought
Commission adoption of the No Third Country Routing Via Canada
Policy.65
As AT&T contends,66 Graphnet's reliance on these policies is
misplaced. Like the ISP, these policies pertained to the
international transmission and switching of United States inbound
and outbound international traffic.67 They did not apply to the
domestic routing of United States international traffic. Because
the instant case involves only the domestic component of inbound,
foreign-originated, telex traffic,68 these Commission policies
have no bearing. Accordingly, we deny Graphnet's claim that
AT&T's re-routing practice breached Commission policy.
III.A.7. AT&T Did Not Violate the Commission's Rules
During the Course of This Proceeding.
In its briefs and subsequent submissions, Graphnet maintains that
a number of AT&T's actions during this litigation violated the
Commission's rules. The alleged transgressions include AT&T's
alleged failure (1) to be candid and forthcoming to the
Commission regarding AT&T's relationship with, and participation
in, Unitel; (2) to file a timely answer to Graphnet's first
Supplemental Complaint; (3) to send a company representative to a
status conference at the Commission; (4) to pay a filing fee with
its counterclaim; and (5) to file an answer to Graphnet's second
and third supplemental complaints.69
We conclude that AT&T did not violate the Commission's rules.
First, we agree with AT&T that statements it made in reporting
its equity ownership in Unitel are not germane to the case. AT&T
ordered service from Unitel pursuant to Unitel's tariff and,
therefore, paid the same rates and was subject to the same terms
and conditions as other carriers.70 Accordingly, Graphnet's
allegations of a conspiracy between AT&T and Unitel have no
force.71 Second, we credit AT&T's explanation for failing to
timely file an answer to the first Supplemental Complaint (i.e.,
that AT&T was unable to locate a service copy of the pleading),72
and, therefore, accept AT&T's late-filed answer. Third, although
it appears that AT&T failed to pay a filing fee in connection
with its 1994 counterclaim, the rules at that time were not clear
as to whether a defendant filing a counterclaim must pay a fee.73
We decline Graphnet's invitation to penalize AT&T for violating
this requirement. Finally, there was no requirement in 1995
(when the status conference at issue took place) that a company
representative (as opposed to outside counsel) attend a status
conference, absent a directive from Commission staff.74
Consequently, AT&T's failure to send a corporate representative
to the 1995 status conference is not actionable.
III.A.8. There Is No Basis for Graphnet's Section
201(b) Claim.
Graphnet asserts a ``catch-all'' claim that AT&T's alleged
violations of the Act and the Commission's rules and policies
constitute unjust and unreasonable practices in violation of
section 201(b).75 For the reasons stated above, we find that no
such violations occurred and therefore reject Graphnet's section
201(b) claim.
III.A.9. Conclusion
In sum, we deny all of Graphnet's claims against AT&T. Graphnet
has failed to establish that AT&T's decision not to order
Graphnet's tariffed service and instead to route calls through
affiliates in foreign countries violated any provision of the Act
or the Commission's policies. In addition, Graphnet has not
proven that AT&T's conduct during this proceeding contravened any
Commission rule.
III.B. AT&T's Section 201(b) Counterclaim Is Granted,
Because Graphnet's Tariff Violated the RCCA.
As noted above, section 201(b) of the Act requires a common
carrier's charges and practices in connection with communication
service to be ``just and reasonable.''76 AT&T challenges as
unjust and unreasonable, inter alia, Graphnet's practice of
imposing the $3.00 per-minute termination charge contained in
Tariff F.C.C. No. 5 on carriers with whom Graphnet does not
directly interconnect.77
To support its claim, AT&T contends that there is no cost
justification for the challenged practice.78 According to AT&T,
Graphnet negotiated settlement payments so that they would cover
its costs, and Graphnet received such payments from the carriers
with whom it directly interconnected (e.g., Unitel).79 Moreover,
AT&T claims that Graphnet's costs for terminating traffic
received from Unitel did not differ depending on whether the
traffic originated on Unitel's network or on AT&T's network.80
Thus, when Graphnet received AT&T-originated traffic from Unitel,
it purportedly recovered from Unitel all of Graphnet's costs for
terminating such traffic.81 Accordingly, AT&T maintains that the
practice of recovering an additional fee from any carrier whose
network also was used in transmission of a telex message amounts
to double recovery and ``extort[ing] payments ... when [a
carrier] chooses not to subscribe to Graphnet's services.''82
Because the RCCA was in effect at the time AT&T filed its
counterclaims, we apply the statute in this case.83 Section
222(c)(2) of the RCCA directed the Commission, insofar as
possible, to require interconnection ``based upon the costs of
the record communications service.''84 The Commission has
characterized section 222(c)(2) as a ``mandate of establishing
cost based rates for interconnection.''85 Therefore, to comply
with the RCCA, Graphnet's practice of imposing a termination
charge on carriers with which it did not interconnect must have
had a cost justification.86
Given the prima facie validity of AT&T's arguments,87 and the
RCCA's requirement of cost-based rates, we conclude that, in
order to prevail against AT&T's assertions, Graphnet was required
to produce some cost justification for its practice of charging
non-interconnecting carriers a termination fee.88 Graphnet has
failed utterly to meet this burden of production, offering no
substantive cost rationale whatsoever for the challenged
practice. Indeed, the only response Graphnet provides is
speculation that the cost of terminating calls that are routed
through carriers in other countries was ``probably higher than
for direct calls, given the unplanned-for circuit congestion and
resulting lost revenues.''89 In our view, this solitary and
equivocal representation is inadequate.
We reject the other arguments Graphnet posits, none of which is
cost-based. Specifically, contrary to Graphnet's assertion, the
Commission's decisions not to reject or suspend Graphnet's tariff
are not dispositive of the section 201(b) claim.90 Those
decisions merely constitute a determination by the Commission
that the challenged tariff is not patently unlawful. They do not
preclude AT&T from initiating a section 208 complaint proceeding
to determine whether the tariff is in fact lawful.91 Thus, in a
section 208 complaint, the Commission ``examine[s] legal, and,
where appropriate, policy matters to give full effect to the
requirements that a carrier's rates, terms, and conditions are
just, reasonable, and not unreasonably discriminatory.''92
We similarly find Graphnet's estoppel defense to be without
merit.93 Section 208 of the Act provides that ``any person'' may
bring a complaint against a common carrier for any violation of
the Act.94 Graphnet cites no authority (and provides no legal
analysis) supporting its contention that AT&T's participation in
the Interconnection Agreement with Graphnet precludes AT&T
subsequently from challenging Graphnet's tariffed termination
rate.
In sum, applying the RCCA, we conclude that Graphnet has failed
to rebut AT&T's prima facie showing that charging a non-
interconnecting record carrier a termination fee was not a cost-
based practice and, therefore, was unreasonable. Because we find
a violation of the RCCA, we rule in favor of AT&T on its section
201(b) counterclaim.95
III.C. We Need Not and Do Not Reach AT&T's Remaining
Counterclaims.
We conclude above that Graphnet's practice of imposing the
termination charge on AT&T was unlawful, and, consequently, that
Graphnet cannot enforce the tariff against AT&T. Because our
conclusion in this regard results in AT&T receiving all the
relief it seeks, we need not and do not reach its remaining
counterclaims.96
IV. MOTIONS
Each of the parties has filed a variety of motions in this
proceeding, a number of which already have been the subject of
oral rulings. We herein rule on the outstanding motions.
The following motions are denied as moot: (1) Motion to Dismiss
or, Alternatively, to Sever and Defer AT&T's Counterclaims;97 (2)
Motion for Severance and Expedited Adjudication of Liability
Phase of Graphnet Complaint Proceeding;98 (3) Motion of AT&T
Corp. for Expedited Consideration.99 In the interest of a
complete record, we grant the following motions: (1) Request of
Graphnet for Leave to File Reply to AT&T Opposition;100 (2)
Graphnet Request for Official Notice;101 and (3) Motion to Accept
Additional Pleading.102
On three occasions, Graphnet amended its complaint.103 AT&T
maintains that, well after the close of discovery and briefing,
these filings improperly sought to introduce new allegations
against AT&T, and asserts that the pleadings therefore should be
stricken.104 Although our current formal complaint rules do not
allow amendments to complaints,105 the rules in place when this
action was brought did not contain a similar prohibition. We
agree with AT&T that the supplemental complaints to some extent
broaden the factual allegations pertaining to Graphnet's causes
of action. In our view, however, the new averments are
sufficiently related to the core claims presented in Graphnet's
original Complaint to make striking the supplemental complaints
inappropriate. Accordingly, we deny AT&T's motions.
We further deny Graphnet's motions for default judgment, which
Graphnet filed in response to AT&T's motions to strike.106 We
believe that, in combination with AT&T's original Answer and
answer to the Supplemental Complaint, the averments in AT&T's
motions to strike adequately addressed Graphnet's allegations.107
V. CONCLUSION
We conclude that Graphnet has failed to prove its allegations
that AT&T violated sections 201(b), 202(a), 203(c), 214(a),
222(b)(1), and 222(c)(1)(B) of the Act; the ISP; the ``Direct
Routes Policy'' and ``No Third Country Routing Via Canada
Policy''; and the Commission's rules. Consequently, we deny
Graphnet's claims against AT&T in their entirety.
We further conclude that Graphnet's Tariff F.C.C. No. 5 involves
an unjust and unreasonable practice, in violation of section
201(b) of the Act. We therefore grant AT&T's first counterclaim.
VI. ORDERING CLAUSES
ACCORDINGLY, IT IS ORDERED, pursuant to sections 1, 4(i), 4(j),
201(b), 202(a), 203(c), 214(a), 222(b)(1), and 222(c)(1)(B) of
the Communications Act of 1934, as amended, 47 U.S.C. §§ 151,
154(i), 154(j), 201(b), 202(a), 203(c), 214(a), 222(b)(1), and
222(c)(1)(B), that the complaint filed by Graphnet, Inc. against
AT&T Corp. IS DENIED in its entirety.
IT IS FURTHER ORDERED, pursuant to sections 1, 4(i), 4(j),
201(b), and 222(c)(2) of the Communications Act of 1934, as
amended, 47 U.S.C. §§ 151, 154(i), 154(j), 201(b), and 222(c)(2),
that the First Counterclaim filed by AT&T Corp. against Graphnet,
Inc. IS GRANTED IN PART, to the extent specified herein, and
otherwise IS DISMISSED WITHOUT PREJUDICE.
IT IS FURTHER ORDERED, pursuant to sections 1, 4(i), 4(j),
202(a), and 203(c) of the Communications Act of 1934, as amended,
47 U.S.C. §§ 151, 154(i), 154(j), 202(a), and 203(c), that the
Second and Third Counterclaims filed by AT&T Corp. against
Graphnet, Inc. ARE DISMISSED WITHOUT PREJUDICE.
IT IS FURTHER ORDERED, that the Motion to Dismiss or,
Alternatively, to Sever and Defer AT&T's Counterclaims, filed on
May 18, 1994; the Motion for Severance and Expedited Adjudication
of Liability Phase of Graphnet Complaint Proceeding, filed on
March 12, 1996; and the Motion of AT&T Corp. for Expedited
Consideration, filed on May 3, 1996, ARE DENIED as moot.
IT IS FURTHER ORDERED, that the Request of Graphnet for Leave to
File Reply to AT&T Opposition, filed June 13, 1994; the Motion of
AT&T Corp. to Accept Late Filed Answer, filed March 1, 1996; the
Graphnet Request for Official Notice, filed April 1, 1996; and
the Motion to Accept Additional Pleading, filed January 8, 1998,
ARE GRANTED.
IT IS FURTHER ORDERED, that the Motion to Strike the Second
Supplemental Complaint of Graphnet, Inc., filed December 8, 1997;
and the Motion to Strike the Third Supplemental Complaint of
Graphnet, Inc., filed January 19, 1999, ARE DENIED.
IT IS FURTHER ORDERED, that the Graphnet Opposition to AT&T
Motion to Strike, filed December 22, 1997; and the Motion for
Partial Default Judgment, filed January 26, 1999, ARE DENIED.
FEDERAL COMMUNICATIONS COMMISSION
Magalie Roman Salas
Secretary
_________________________
1 47 U.S.C. § 208.
2 Telex service is a teleprinter exchange circuit service
involving a message originated at a teletypewriter at one
location and sent to a teletypewriter at a different location.
ITT World Communications, Inc. v. FCC, 635 F.2d 32, 35-36 (D.C.
Cir. 1980).
3 47 U.S.C. § 201(b).
4 Complaint, File No. E-94-41 (filed Feb. 1, 1994)
(``Complaint'') at 1, ¶ 1; Initial Brief of AT&T Corp., File No.
E-94-41 (filed Oct. 2, 1996) (``AT&T's Initial Brief'') at iii.
5 47 U.S.C. § 222(c)(1)(A)(i). The RCCA was repealed in 1994.
See Pub. L. No. 103-414, 108 Stat. 4296-97 (Oct. 25, 1994).
Nonetheless, the statute applies to this case, which Graphnet
instituted on February 1, 1994, because it concerns conduct
commencing in July 1993.
6 47 U.S.C. § 222(c)(1)(A)(i).
7 Initial Brief of Graphnet, Inc., File No. E-94-41 (filed Oct.
2, 1996) (``Graphnet's Initial Brief''), Attachment 4
(Interconnection Agreement §§ I, II).
8 Id., Attachment 4 (Interconnection Agreement § II).
9 Answer of Graphnet, Inc. to AT&T's Counterclaims, File No. E-
94-41 (filed May 18, 1994) (``Answer to Counterclaims'') at 8, ¶
17.
10 Graphnet's Initial Brief, Attachment 2 (Graphnet's Tariff
F.C.C. No. 5 §§ 5.1.1, 5.1.3, and 5.2).
11 Verified Answer and Counterclaims of American Telephone and
Telegraph Company, File No. E-94-41 (filed Apr. 15, 1994)
(``Answer'') at 15, ¶ 46.
12 Answer at 15-16, ¶ 47; Answer to Counterclaims at 7, ¶ 16.
13 Answer at 7, ¶ 26; Answer to Counterclaims at 7, ¶ 16.
14 Answer at 2, ¶¶ 6-7. Unitel is a Canadian carrier in which
AT&T owns a thirty-three percent interest. Graphnet Pleading to
Update Record, File No. E-94-41 (filed Jan. 11, 1996)
(``Pleading to Update Record'') at 5. Graphnet's allegations
originally pertained exclusively to the AT&T-Unitel
relationship. Complaint at 3, ¶ 6. In subsequent pleadings,
Graphnet averred that AT&T also diverted traffic to affiliates
in Hong Kong and Europe. Pleading to Update Record at 6-7;
Graphnet Opposition to AT&T Motion to Strike, File No. E-94-41
(filed Dec. 18, 1997) at 2. In our view, the pertinent fact
(which AT&T does not dispute) is that AT&T routed Graphnet-bound
traffic to carriers in other countries, and those carriers
routed the traffic back to the United States. The precise
identities of the carriers is irrelevant to whether AT&T's
routing practice was unlawful.
15 Complaint at 4, ¶ 8.
16 Graphnet appears to have withdrawn its antitrust claim.
Motion to Dismiss or, Alternatively, to Sever and Defer AT&T's
Counterclaims, File No. E-94-41 (filed May 18, 1994) at 5-6, n.2
(``Graphnet's citation of the federal antitrust laws in
paragraph 16 of its Complaint was not for the purpose of seeking
FCC enforcement of such laws or even FCC consideration of AT&T's
anticompetitive activities on their merits under the antitrust
laws. The antitrust laws were cited in the Complaint merely for
the purpose of enabling the FCC to consider such laws
incidentally as one part of the public interest.'').
17 Complaint at 5-9, ¶¶ 11-20.
18 Our current formal complaint rules prohibit the filing of
``cross-complaints,'' which include counterclaims. 47 C.F.R. §
1.725. The rules that existed in 1994, however, did not.
19 Answer at 14-19, ¶¶ 44-57.
20 47 U.S.C. § 203(c).
21 Id.
22 Although Graphnet's initial complaint refers to ``Sections
203(a)(c),'' Complaint at 6, ¶ 14, Graphnet's briefs make clear
that the alleged violation concerns section 203(c). See
Graphnet's Initial Brief at 10-11; Reply Brief of Graphnet,
Inc., File No. E-94-41 (filed Oct. 22, 1996) (``Graphnet's Reply
Brief'') at 7-9.
23 Graphnet's Initial Brief at 10-11 (citing AT&T's F.C.C.
Tariff No. 21, § 2.4.C.; AT&T's F.C.C. Tariff No. 25, § 2.4.C.);
Graphnet's Reply Brief at 7-8.
24 See 47 U.S.C. § 203(c) (except as otherwise provided by or
under the authority of the Act, no carrier shall (1) engage in
communications unless it has filed a tariff; (2) charge an
amount different from the amount specified in the tariff; (3)
refund any amounts charged under the tariff; or (4) extend any
privileges except as specified in the tariff).
25 In its Answer, AT&T argues that ``Graphnet's allegations in
Count I must be dismissed because they fail to state a cause of
action cognizable under the Commission's complaint
proceedings.'' Answer at 10, ¶ 28 (citing Illinois Bell
Telephone Co. v. AT&T, 4 FCC Rcd 5268, 5270 (1989) (``Illinois
Bell'')). In Illinois Bell, the Commission held, inter alia,
that a complaint filed by Bell Atlantic Operating Companies
(``BOCs'') against AT&T, in which the BOCs challenged AT&T's
failure to pay tariff rates for Special Access services, ``would
subvert th[e] design [of sections 206-209 of the Act] and turn
the complaint procedures into a collection mechanism for the
carriers.'' Illinois Bell, 4 FCC Rcd at 5270. As discussed
above, we find Graphnet's effort to enforce its tariff pursuant
to section 203(c) of the Act to be unavailing on the merits.
Consequently, we do not address the question of whether
Graphnet's claim is barred under Illinois Bell.
26 AT&T's Tariff 21 described the service provided as (1) the
transmission of inbound international telex calls received from
international record carriers in New York and Miami to AT&T's
telex subscriber stations; (2) the transmission of outbound
international telex calls originated by AT&T's telex subscriber
stations to store-and-forward facilities of international record
carriers in New York and Miami; and (3) the transmission of
inbound and outbound international calls between international
record carriers in New York City and Miami and telex stations in
Alaska. Tariff 25 provided for the use of the international
component of AT&T's international telex service to overseas
points. See AT&T's Reply Brief, Exhibit A (AT&T's F.C.C. Tariff
No. 21, §§ 1.1.1, 1.2; AT&T's F.C.C. Tariff No. 25, §§ 1.1.1,
1.2).
27 Graphnet's Initial Brief, Attachment 3 (AT&T's F.C.C. Tariff
No. 21, § 2.4.C; AT&T's F.C.C. Tariff No. 25, § 2.4.C).
28 Graphnet's Initial Brief at 4.
29 AT&T contends that, if routing delays occurred, they were
minimal (i.e., 10-15 seconds) and transpired before call set-up
and billing. Answer at 8, ¶ 27. We do not view this statement
as an admission that such delays actually took place. And even
if such 10 to15 second delays did occur, we are not prepared to
find, on the record of this case, that they ``materially''
affected the performance of Graphnet's facilities.
30 Graphnet's Initial Brief at 6 (citing id., Attachment 1
[Letter dated Apr. 11, 1996, to Regina M. Keeney, Chief, Common
Carrier Bureau, from Robert E. Conn, counsel for Graphnet, at
2]).
31 Id.
32 AT&T's Reply Brief at 15-16 and Exhibit C (Affidavit of
Sharon Eberhard).
33 Graphnet's Initial Brief at 4.
34 47 U.S.C. § 202(a).
35 See, e.g., MCI Telecommunications Corp. v. FCC, 917 F.2d 30,
39 (D.C. Cir. 1990).
36 See id. See also National Communications Ass'n, Inc. v.
AT&T Corp., 238 F.3d 124, 129-30 (2nd Cir. 2001);
Implementation of the Telecommunications Act of 1996:
Amendment of Rules Governing Procedures to Be Followed When
Formal Complaints Are Filed Against Common Carriers, Report
and Order, 12 FCC Rcd 22497, 22615, ¶ 291 & n.782 (1997),
recon. denied, 16 FCC Rcd 5681 (2001); PanAmSat Corp. v.
Comsat Corp., Memorandum Opinion and Order, 12 FCC Rcd 6952,
6965, ¶ 34 n.90 (1997).
37 Graphnet's Initial Brief at 11; Graphnet's Reply Brief at 12-
13.
38 The parties' arguments regarding discrimination appear to be
premised on an assumption of ``like'' service and disparate
treatment. See Graphnet's Initial Brief at 11; AT&T's Initial
Brief at 8-12; Graphnet's Reply Brief at 9-10; AT&T's Reply
Brief at 5-7. We need not decide whether, in fact, the services
are ``like'' or were provided disparately, because, as discussed
below, we find that AT&T has met its burden of demonstrating the
reasonableness of its routing practice.
39 Moreover, as discussed above, Graphnet has adduced no
persuasive evidence that it has incurred any harm as a result of
AT&T's actions.
40 47 U.S.C. § 222(b)(1).
41 47 U.S.C. § 222(c)(1)(B).
42 Graphnet's Initial Brief at 11-12; Graphnet's Reply Brief at
10-12.
43 47 U.S.C. § 214(a).
44 Id.
45 Graphnet's Initial Brief at 12.
46 Graphnet's Reply Brief at 13-14
47 Graphnet contends that AT&T unlawfully re-routed domestic
telex traffic and foreign-originated, United States-bound
international telex traffic. Complaint at 3, ¶ 6. Graphnet
does not maintain that traffic originating and terminating in
the United States is anything other than domestic communication.
See Graphnet's Reply Brief at 5-7. Consequently, sections
III.A.4 through III.A.6 of this order discuss the appropriate
categorization of traffic originating in foreign countries and
terminating in the United States, which Graphnet claims
constitutes international communication.
48 See 47 U.S.C. § 153(3)(17) (formerly codified at 47 U.S.C. §
153(f) (1994)) (``The term `foreign communication' or `foreign
transmission' means communication or transmission from or to any
place in the United States to or from a foreign country, or
between a station in the United States and a mobile station
located outside the United States.'').
49 Graphnet's Reply Brief at 5-7.
50 See International Settlement Rates, Report and Order, 12 FCC
Rcd 19806, 19829-30, ¶ 49 (1997), Report and Order on
Reconsideration and Order Lifting Stay, 14 FCC Rcd 9256 (1999),
aff'd sub nom. Cable & Wireless, P.L.C. v. FCC, 166 F.3d 1224
(D.C. Cir. 1999).
51 47 U.S.C. § 153(22) (formerly codified at 47 U.S.C. § 153(e)
(1994)). As used in the Act, the term ``interstate
communication'' refers to United States domestic, as opposed to
United States international, communication service.
52 See Motion of AT&T Corp. to Be Reclassified as a Non-Dominant
Carrier, Order, 11 FCC Rcd 3271 (1995) (reclassifying AT&T as a
non-dominant carrier in its provision of domestic, interstate
interexchange service).
53 See MCI Telecommunications Corp. v. FCC, 561 F.2d 365, 374
(D.C. Cir. 1977), cert. denied, 434 U.S. 1040 (1978) (absent an
explicit statement to the contrary, a carrier is free to use its
facilities for any lawful purpose upon receiving section 214
authorization).
54 An accounting rate is the price a United States facilities-
based carrier negotiates with a foreign carrier for handling one
minute of international telecommunications service. Each
carrier's portion of the accounting rate is referred to as the
settlement rate. In almost all cases, the settlement rate is
equal to one-half of the negotiated accounting rate. See 1998
Biennial Regulatory Review, Reform of the International
Settlements Policy and Associated Filing Requirements, Report
and Order and Order on Reconsideration, 14 FCC Rcd 7963, 7966, ¶
9 n.8 (1999) (``ISP Reform Order'').
55 Id. at 7966, ¶ 9.
56 See Implementation and Scope of the Uniform Settlements
Policy for Parallel International Communications, Report and
Order, 51 Fed. Reg. 4736, 4737, ¶ 3 (1986), recon., 2 FCC Rcd
1118 (1987), further recon., 3 FCC Rcd 1614 (1988).
57 Graphnet's Initial Brief at 16.
58 Graphnet's Reply Brief at 16.
59 See supra section III.A.4.
60 The ISP, which is codified in section 43.51(e) of the
Commission's rules, 47 C.F.R. § 43.51(e), was developed as part
of the regulatory tradition in which international
telecommunications services were supplied through a bilateral
correspondent relationship between national monopoly carriers.
See ISP Reform Order, 14 FCC Rcd at 7966, ¶ 9 n.8.
61 Graphnet's Initial Brief at 13-16; Graphnet's Reply Brief at
14-15.
62 Graphnet's Initial Brief at 13 (citing Optel Communications,
Inc. Application for a License to Land and Operate in the United
States a Submarine Cable Extending Between Canada and the United
States, Conditional Cable Landing License, 8 FCC Rcd 2267 (1993)
(``Optel''); Implementation and Scope of the Uniform Settlements
Policy for Parallel International Communications, 59 Rad. Reg.
2d (Pike & Fischer) 982, 996 (1986)).
63 Graphnet's Initial Brief at 13.
64 Graphnet's Initial Brief at 14-16 (citing Optel; fONOROLA
Corporation Application for Authority under Section 214 of the
Communications Act to Resell Facilities of Other Common Carriers
to Provide Domestic Carriers Interconnection with Canadian
Carriers, Memorandum Opinion, Order and Certification, 7 FCC Rcd
7312 (1992), recon., 9 FCC Rcd 4066 (1994) (``fONOROLA'')).
65 Graphnet's Initial Brief at 14-16; Graphnet's Reply Brief at
15-16.
66 AT&T's Initial Brief at 23-24.
67 See, e.g., fONOROLA, 7 FCC Rcd at 7316, ¶ 15 (``In order to
safeguard against the circumvention of our International Resale
Order, we find it necessary to adopt a policy with respect to
international private live resale between the United States and
Canada that prohibits the routing of U.S.-overseas traffic
through Canada.'') (emphasis added).
68 See supra section III.A.4.
69 Graphnet's Initial Brief at 17-18; Graphnet's Reply Brief at
17-18; Motion for Partial Default Judgment, File No. E-94-41
(filed Jan. 28, 1999) at 5-6. We address the last of these
purported violations infra section IV.
70 Contrary to Graphnet's assertion (Graphnet's Reply Brief at
17-18), a subsequent decision by Canadian regulators to move
toward detariffing does not establish that AT&T availed itself
of unique advantages with respect to Unitel.
71 Furthermore, Graphnet has produced no evidence that
disclosures made by AT&T to the Commission regarding AT&T's
relationship with Unitel were intentionally misleading or
otherwise inadequate under the Commission's rules.
72 Motion of AT&T Corp. to Accept Late Filed Answer, File No. E-
94-41 (filed Mar. 1, 1996) at 2-3.
73 See Implementation of the Telecommunications Act of 1996:
Amendment of Rules Governing Procedures to Be Followed When
Formal Complaints Are Filed Against Common Carriers, Notice of
Proposed Rulemaking, 11 FCC Rcd 20823, 20856, ¶ 71 (1996).
74 See 47 C.F.R. § 1.733(a) (1995) (``In any complaint
proceeding, the Commission may in its discretion direct the
attorneys and/or the parties to appear before it for a
conference ....'').
75 Section 201(b) states, in pertinent part, that ``[a]ll
charges, practices, classifications, and regulations for and in
connection with ... communication service, shall be just and
reasonable, and any such charge, practice, classification, or
regulation that is unjust or unreasonable is hereby declared to
be unlawful.'' 47 U.S.C. § 201(b).
76 47 U.S.C. § 201(b).
77 Answer at 16, ¶ 48; AT&T's Initial Brief at 30.
78 Id.
79 Id. See also Graphnet's Initial Brief at 7-8, ¶ 12 &
Attachment 3 (Unitel/Graphnet Interconnect Settlement).
80 Answer, Exhibit 1 (Letter dated Dec. 30, 1993, to William F.
Caton, Acting Secretary, FCC, from Elaine R. McHale, counsel for
AT&T, at 4 n.5).
81 Id.
82 AT&T's Initial Brief at 30.
83 AT&T filed its counterclaims on April 15, 1994. The RCCA was
not repealed until approximately six months later, on October
25, 1994.
84 47 U.S.C. § 222(c)(2) (emphasis added). See Interconnection
Arrangements Between and Among the Domestic and International
Record Carriers, Memorandum Opinion, Order and Request for
Further Comments, 93 FCC Rcd 845, 868, ¶ 67 (1983) (section
222(c)(2) ``ensure[d] a fair opportunity for new carriers to
compete, certainly an opportunity equal to that of a company
seeking to enter a typical competitive market'').
85 Interconnection Arrangements Between and Among the Domestic
and International Record Carriers, Memorandum Opinion and Order
on Reconsideration, 2 FCC Rcd 2999, 3006, ¶ 52 (1987)
(``Interconnection Arrangements''). In Interconnection
Arrangements, the Commission rejected an argument by record
carriers who interconnected with Western Union Telegraph Company
(``Western Union'') that an interim discount of Western Union's
charges was appropriate. Applying section 222(c)(2), the
Commission found that the discount could not be justified on the
basis of cost and, therefore, was inappropriate.
86 We recognize that sections 222(b)(1) and 222(c)(2) of the
RCCA both contained directives to the Commission, and that we
declined to enforce section 222(b)(1) against AT&T. See supra
section III.A.3. That is because section 222(b)(1) articulated
a general, pro-competitive policy that did not implicate a
specific aspect of carrier operations. In contrast, section
222(c)(2) instructed the Commission to ensure interconnection
based particularly upon cost-based rates. Because section
222(c)(2) articulates a standard to which carriers can be held,
we are able to apply it in deciding AT&T's section 201(b)
counterclaim.
87 AT&T's arguments regarding Graphnet's pricing of its
termination service make sense. Specifically, with respect to
any particular inbound call, Graphnet had no way of determining
in advance how many carriers would precede it in the handling of
the traffic. Graphnet, accordingly, had every incentive to
price its termination service such that it would recover its
costs of terminating the traffic from the carrier from whom it
directly received the traffic and with whom it was directly
interconnected.
88 We emphasize that our focus on costs stems from the mandatory
language of section 222(c)(2). We express no opinion as to
whether, in any other context, Graphnet would be required to
justify the challenged practice on a cost basis.
89 Graphnet's Reply Brief at 22 (emphasis added).
90 Graphnet's Initial Brief at 23-25, ¶¶ 46-49 (citing TRT/FTC
Communications, Inc. Revisions to Tariff F.C.C. Nos. 8, 9, and
11; Graphnet, Inc. Revisions to Tariff F.C.C. No. 5, Order, 5
FCC Rcd 7733 (Comm. Car. Bur. 1990); Graphnet, Inc. Revisions to
Tariff F.C.C. No. 5, Order, 6 FCC Rcd 1444 (Comm. Car. Bur.
1991), review denied, Western Union International, Inc.
Revisions to Tariff F.C.C. No. 24; Graphnet, Inc. Revisions to
Tariff F.C.C. No. 5 Applications for Review, Memorandum Opinion
and Order, 7 FCC Rcd 3787 (1992)); Graphnet's Reply Brief at 22,
¶ 46.
91 Bell Atlantic Telephone Cos. Tariff F.C.C. No. 1 Application
for Review, Memorandum Opinion and Order, 8 FCC Rcd 2732, 2733,
¶ 7 (1993). See Arizona Grocery Co. v. Atchison T.&S.F. Ry.
Co., 284 U.S. 378, 384 (1932).
92 Policy and Rules Concerning the Interstate, Interexchange
Marketplace, Second Report and Order, 11 FCC Rcd 20730, 20746, ¶
26 (1996), recon., 12 FCC 15014 (1997), further recon.,14 FCC
Rcd 6004 (1999).
93 See Graphnet's Initial Brief at 20-23; Graphnet's Reply Brief
at 20.
94 47 U.S.C. § 208.
95 We do not hold that it would be impossible for Graphnet to
justify on a cost basis the practice that AT&T challenges. We
merely find that, on this record, Graphnet has not met its
evidentiary burden of production.
96 These include the other aspect of AT&T's counterclaim under
section 201(b) (i.e., that the $3.00 per-minute termination rate
was itself unjust and unreasonable because it was not cost-based
[Answer at 15-16, ¶ 47]); its section 202(a) counterclaim (i.e.,
that Graphnet's interconnection agreements with other carriers
unreasonably contained rates for identical telex service that
were significantly less than Graphnet's tariffed rate [Answer at
17-18, ¶ 52]); and its section 203 counterclaim (i.e., that
Graphnet failed to file its interconnection agreements with MCI
International, Inc. (``MCII'') and TRT Telecommunications Corp.
(``TRT''), or otherwise to amend its tariffed rate to reflect
the rates offered to MCII and TRT [Answer at 19, ¶ 56]).
97 File No. E-94-41 (filed May 18, 1994).
98 File No. E-94-41 (filed Mar. 12, 1996).
99 File No. E-94-41 (filed May 3, 1996).
100 File No. E-94-41 (filed June 13, 1994).
101 File No. E-94-41 (filed Apr. 1, 1996).
102 File No. E-94-41 (filed Jan. 8, 1998).
103 Supplemental Complaint, File No. E-94-41 (filed Nov. 7,
1995); Second Supplemental Complaint, File No. E-94-41 (filed
Nov. 6, 1997); Third Supplemental Complaint, File No. E-94-41
(filed Dec. 21, 1998).
104 Motion to Strike the Second Supplemental Complaint of
Graphnet, Inc., File No. E-94-41 (filed Dec. 8, 1997) at 2-3;
Motion to Strike the Third Supplemental Complaint of Graphnet,
Inc., File No. E-94-41 (filed Jan. 19, 1999) at 3-4.
105 47 C.F.R. § 1.727(h).
106 Graphnet Opposition to AT&T Motion to Strike, File No. E-94-
41 (filed Dec. 18, 1997) at 7-11; Motion for Partial Default
Judgment, File No. E-94-41 (filed Jan. 26, 1999).
107 Verified Answer of AT&T Corp. to Supplemental Complaint of
Graphnet, Inc., File No. E-94-41 (filed Mar. 1, 1996); Motion to
Strike the Second Supplemental Complaint of Graphnet, Inc., File
No. E-94-41 (filed Dec. 8, 1997) at 3 n.4; Motion to Strike the
Third Supplemental Complaint of Graphnet, Inc., File No. E-94-41
(filed Jan. 19, 1999) at 5 n.1.