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Before the
Federal Communications Commission
Washington, D.C. 20554
In the Matter of )
)
AT&T CORP. AND )
AT&T OF THE VIRGIN ISLANDS, )
INC., )
) File No. EB-04-MD-002
Complainants, )
)
v. )
)
VIRGIN ISLANDS TELEPHONE )
CORPORATION, )
D/B/A/ INNOVATIVE TELEPHONE, )
)
Defendant.
MEMORANDUM OPINION AND ORDER
Adopted: August 4, 2004 Released: August 11, 2004
By the Commission: Commissioner Martin approving in part,
dissenting in part, and issuing a
statement.
I. INTRODUCTION
1. In this Memorandum Opinion and Order, we grant a formal
complaint1 filed by AT&T Corp. and AT&T of the Virgin Islands,
Inc., (collectively, ``AT&T'') against Virgin Islands Telephone
Corporation, d/b/a/ Innovative Telephone (``Vitelco''), pursuant
to section 208 of the Communications Act of 1934, as amended
(``the Act'').2 AT&T alleges that Vitelco violated section
201(b) of the Act3 by earning access revenues above its maximum
allowable rate of return (``overearning'') during the period
beginning January 1, 1997 and concluding December 31, 1998 (the
``1997-1998 Monitoring Period'' or ``Monitoring Period''). AT&T
further alleges that Vitelco is liable for refunds regarding
Vitelco's overearnings in 1997, when, in AT&T's view, Vitelco's
access rates were not ``deemed lawful'' under section 204(a)(3)
of the Act.4 For the reasons explained below, we agree with
AT&T. Accordingly, we grant AT&T's Complaint and hold Vitelco
liable to AT&T for AT&T's portion of Vitelco's overearnings from
rates in effect from January 1, 1997 through December 31, 1997.
II. BACKGROUND
I.A. Factual and Legal Background
I.A.1. The Parties
2. AT&T provides interexchange telecommunications
services.5 Vitelco is a ``rate of return'' local exchange
carrier that provides interstate access services.6 During 1997
and 1998, AT&T purchased interstate access services from Vitelco
pursuant to Vitelco's Interstate Access Tariff.7
I.A.2. Rate-of-Return Regulation
3. Under section 201(b) of the Act, a local exchange
carrier may charge only ``just and reasonable'' rates for its
provision of access services.8 To enforce this requirement, the
Commission has prescribed an authorized rate of return of 11.25
percent for rate-of-return carriers.9 To comply with this
prescription, a rate-of-return carrier sets its tariff rates at
levels designed to produce no more than an 11.25 percent return
on its investment for the tariff period, based on an analysis of
historical and projected cost data and the respective demand for
services.10 The carrier may then file its rates on a ``non-
streamlined'' basis on at least 16 days' notice pursuant to
section 203 of the Act11 and sections 69.3(a) and 61.58 of our
rules.12
4. The carrier's access earnings are measured over a two
year period (the ``monitoring period'') to determine compliance
with the maximum allowable rate of return.13 After the first
year, the carrier files an ``interim monitoring report'' that
reflects earnings realized during the first year.14 During the
course of the two-year monitoring period, a rate-of-return
carrier may make access rate adjustments to try to ensure that it
does not exceed or fall short of its maximum allowable rate of
return.15 Moreover, during the course of the two-year monitoring
period, the Commission may require the carrier to change its
rates prospectively, pursuant either to a section 205
investigation or a section 208 complaint.16
5. When the two-year monitoring period ends, the carrier
files a ``final monitoring report'' reflecting its total access
earnings.17 If this final monitoring report indicates that the
carrier has exceeded its maximum allowable rate of return at the
end of the two-year monitoring period, the Commission may then,
in response to formal complaints for damages, require refunds of
any such overearnings to affected access customers.18
I.A.3. ``Streamlined'' Access Tariffs
6. In the Telecommunications Act of 1996,19 Congress
provided all local exchange carriers, including rate-of-return
carriers such as Vitelco, an alternative method for filing
interstate access rates.20 Under section 204(a)(3) of the Act, a
rate-of-return carrier may file new or revised access rates on a
``streamlined'' basis.21 Access rates that a carrier files
pursuant to this provision ``shall be deemed lawful and shall be
effective 7 days (in the case of a reduction in rates) or 15 days
(in the case of an increase in rates) after the date on which the
rates are filed with the Commission unless the Commission takes
action under paragraph (1) [47 U.S.C. § 204(a)(1)] before the end
of the 7-day or 15-day period, as appropriate.''22 Even if the
carrier files a ``streamlined'' access tariff under section
204(a)(3), the carrier must still report its earnings
periodically, and may still revise its rates during the course of
the monitoring period, just as if the tariff had been filed under
section 203. Moreover, interim monitoring reports that reveal
overearnings can still prompt the Commission to cause the carrier
to change its rates prospectively, pursuant to a section 205
investigation or a section 208 complaint. If the carrier has
overearned at the end of the two-year monitoring period, however,
the Commission cannot require the carrier to refund such
overearnings to its access customers for periods during which the
rates have been ``deemed lawful'' by operation of law. 23
I.A.4. Vitelco's Access Tariffs Applicable to the
1997-1998 Monitoring Period
7. Vitelco's maximum allowable rate of return was 11.65%
for the 1997-1998 Monitoring Period.24 Four Vitelco access
tariffs applied during different portions of the 1997-1998
Monitoring Period. The first was effective on July 1, 1996;25 the
second was effective on July 1, 1997;26 the third was effective
on January 1, 1998;27 and the fourth was effective on July 1,
1998.28 Vitelco filed the July 1996 tariff on a non-streamlined
basis pursuant to section 203 of the Act.29 Vitelco filed the
subsequent three tariffs on a streamlined basis pursuant to
section 204(a)(3) of the Act.30 During the 1997-1998 Monitoring
Period, Vitelco also filed interim monitoring reports on
September 25, 199731 and on March 30, 1998,32 and a final
monitoring report and a corrected final monitoring report on
September 30, 199933 and October 5, 1999, 34 respectively.
8. On June 27, 1997, the Common Carrier Bureau (``CCB'')35
issued an order suspending and setting for investigation
Vitelco's second tariff (i.e., the July 1997 tariff).36 On July
28, 1997, on its own motion, CCB issued an order (i)
reconsidering its decision to suspend and investigate Vitelco's
July 1997 tariff and (ii) declining to investigate that tariff.37
I.A.5. Vitelco's Earnings During the 1997-1998
Monitoring Period
9. The parties stipulate that Vitelco's access earnings
exceeded its maximum allowable rate of return during the first
six months of 1997.38 In addition, the record clearly indicates
that Vitelco's access earnings exceeded its maximum allowable
rate of return during the remainder of the 1997-1998 Monitoring
Period, as well.39
I.B. Procedural Background
10. On September 10, 2001, pursuant to sections 1.716-1.717
of our rules,40 AT&T filed an informal complaint against Vitelco
alleging that Vitelco had earned more than its maximum allowable
rate of return, and thus had overcharged AT&T for access
services, during the 1997-1998 Monitoring Period.41 Also on
September 10, 2001, AT&T and Vitelco moved jointly that the
Enforcement Bureau (``Bureau'') instruct Vitelco not to respond
to AT&T's informal complaint until 90 days after a certain court
decision became final.42 The Bureau granted the Joint Request.43
Thereafter, the relevant court decision became final, our
informal complaint process ran its course, and AT&T timely filed
its formal complaint. Thus, pursuant to our informal complaint
rules and orders, the instant formal complaint relates back to
AT&T's September 10, 2001 informal complaint for purposes of
tolling the applicable two-year statute of limitations set forth
in 47 U.S.C. § 415(b).44
11. The formal complaint alleges that Vitelco violated
section 201(b) of the Act by reaping access earnings over its
11.65% maximum allowable rate of return during the 1997-1998
Monitoring Period.45 Pursuant to section 1.722(d) of our
rules,46 AT&T ``bifurcated'' this proceeding and requests a
determination regarding only liability at this time.47 AT&T
seeks a finding of liability for damages only with respect to
Vitelco's 1997 earnings, however. AT&T concedes that section
204(a)(3) precludes any finding of liability for damages
regarding Vitelco's 1998 earnings.48
12. In response, Vitelco asserts that AT&T's claims for
damages are barred by the two-year statute of limitations in
section 415(b) of the Act.49 Vitelco also asserts that section
204(a)(3) bars AT&T's claim for damages regarding Vitelco's
earnings during the period July 1, 1997 through December 31,
1997, because the Suspension Order did not deprive Vitelco's
access rates of their ``deemed lawful'' status during that
period.50
III. DISCUSSION
13. For the reasons discussed below, we find that AT&T
timely filed its September 10, 2001 informal complaint, and thus
the statute of limitations in section 415(b) of the Act does not
bar AT&T's claims for damages. We also find that the Suspension
Order stripped Vitelco's July 1997 access rates of their deemed
lawful status, and that the Reconsideration Order did not
subsequently render those rates ``lawful.'' Moreover, we find
that Vitelco overearned in 1997 and did not underearn in 1998.
Accordingly, we grant AT&T's Complaint and hold Vitelco liable to
AT&T for AT&T's share of Vitelco's overearnings during 1997.
I.C. AT&T's Claims Are Timely.
14. In Vitelco's view, AT&T's claim for damages arising
from the overearnings that Vitelco reaped during the period
January 1, 1997 through June 30, 1997 is barred by the two-year
statute of limitations set forth in section 415(b) of the Act.51
According to Vitelco, AT&T's claim for these damages accrued on
September 30, 1997, when Vitelco filed its interim monitoring
report reflecting its excessive earnings for the first six months
of 1997.52 Vitelco argues, therefore, that AT&T's September 10,
2001 complaint - filed almost four years after Vitelco publicly
acknowledged its overearnings on September 30, 1997 - is simply
too late.53
15. For similar reasons, Vitelco further asserts that
AT&T's claim for damages arising from the earnings that Vitelco
reaped during the period July 1, 1997 through December 31, 1997
is also barred by the Act's two-year limitations period.54
According to Vitelco, AT&T's claim for these damages accrued on
March, 30, 1998, when Vitelco filed its interim monitoring report
reflecting its earnings for the last six months of 1997.55
Vitelco argues, therefore, that AT&T's September 10, 2001
complaint - filed over three years after Vitelco publicly
acknowledged its earnings on March 30, 1998 - is time-barred.56
16. We disagree with Vitelco's assertions regarding the
tardiness of AT&T's damages claims, for the reasons explained
below. In accordance with our rules and case law, we conclude
that AT&T's claims for damages arising from Vitelco's earnings in
1997 did not accrue until September 30, 1999, the date that
Vitelco filed its final monitoring report for the entire 1997-
1998 Monitoring Period.57 Thus, AT&T's September 10, 2001
complaint fell within the Act's two-year limitations period.
17. The Commission recognizes that rate-setting is not an
exact science, and that the overarching goal of rate-of-return
regulation is to ensure that rates fall within a zone of
reasonableness.58 Consequently, ``[t]o alleviate some of the
imprecision inherent in the prescribed rate-of-return
methodology, . . . the Commission employs what it deems a `long
evaluation period' allowing short term earnings `peaks' and
`valleys' to offset each other.''59 In particular, rule 65.701
provides, in pertinent part, that ``interstate earnings shall be
measured over a two year period to determine compliance with the
maximum allowable rate of return.''60 This two-year period
allows a carrier time to minimize or eliminate overearnings that
might otherwise result from cost and demand projections that
prove to be inaccurate. Specifically, if the rates that a
carrier files at the beginning of a monitoring period begin
unexpectedly to yield excessive earnings, the carrier has time to
observe that situation and to file new, lower rates to correct
for the overearnings before the monitoring period ends.61 The
two-year monitoring period also protects carriers from having
their rates adjudged based on unforeseen and unforeseeable
earnings variations over short intervals.62
18. Based on how the rate-of-return regime works, as just
described, the D.C. Circuit and the Commission have repeatedly
held that overearnings claims for damages accrue when the carrier
files its final monitoring report, and not before.63 In fact, in
MCI v. FCC, the D.C. Circuit squarely rejected the same argument
that Vitelco makes here - that submission of a preliminary
monitoring report triggers the running of the statute of
limitations.64
19. This only makes sense, given the nature of rate-of-
return regulation, because it serves to protect the carrier from
complaints filed prematurely, before the carrier has had an
opportunity to remedy a trend of overearnings. Here, for
example, had Vitelco underearned during the last 12 months of the
Monitoring Period, it would have reduced or perhaps even
eliminated AT&T's claim for damages. Such underearnings could
have resulted from changed demand patterns, a voluntary tariff
amendment, or a tariff amendment caused by Commission proceedings
under section 205 or section 208. Moreover, during the last 12
months of the Monitoring Period, Vitelco might have decided, for
some reason, to file non-streamlined rates. Thus, prior to
Vitelco's filing of its final monitoring report, AT&T could not
have known whether or to what extent it had a viable claim for
damages, even though, after the first six months of 1997, Vitelco
filed its tariffed rates pursuant to section 204(a)(3).
Accordingly, AT&T's claim for damages did not accrue until
Vitelco filed its final monitoring report in September 1999.
20. Vitelco acknowledges the foregoing rules and case law
concluding that a damages claim alleging overearnings in
violation of section 201(b) does not accrue until the final
monitoring report is filed.65 Vitelco argues, however, that
those rules and case law did not fully survive the enactment of
section 204(a)(3).66 Specifically, Vitelco observes that the
foregoing rules and case law were premised on the availability of
refunds for the entire two-year monitoring period.67 Thus, in
Vitelco's view, where, as here, the operation of section
204(a)(3) limits the availability of refunds to only a portion of
the two-year monitoring period, the pre-204(a)(3) rules and case
law regarding claim accrual simply do not apply, and the two-year
monitoring period is no longer relevant for statute-of-
limitations purposes.68 According to Vitelco, this is precisely
what the D.C. Circuit meant when it stated, in the context of
circumstances identical to those here, that the two-year
monitoring period had been ``cut short'' by the filing of rates
deemed lawful under section 204(a)(3).69
21. Vitelco is certainly correct that section 204(a)(3)
``radically'' altered tariff rate regulation, as the Commission
has recognized.70 Vitelco errs, however, in describing the scope
of that alteration.
22. With respect to rate-of-return regulation, what section
204(a)(3) changed is the remedy available for ``deemed lawful''
rates that result in earnings above the maximum allowable rate of
return: the Commission can no longer require the carrier to pay
refunds for past overearnings generated by ``deemed lawful''
rates. What section 204(a)(3) did not change, however, is the
Commission's requirement that carriers comply with the rate-of-
return prescription over a two-year period. Specifically, even
with respect to deemed lawful rates, the Commission can still
cause the carrier to lower its rates prospectively via an
investigation under section 205 of the Act or a complaint
proceeding under section 208 of the Act to ensure compliance with
the rate-of-return prescription during the course of the full
two-year period.71
23. In order to perform those surviving functions properly,
the Commission must continue to assess carriers' rates in the
context of a predetermined, specific time-frame (here, two
years). Otherwise, the rate-of return prescription would lose
all meaning.72 Indeed, Vitelco itself recognized the continuing
vitality of the Commission's rules and case law regarding the
two-year monitoring period, as Vitelco maintained its practice of
filing monitoring reports and amended tariffs.73 Finally, the
D.C. Circuit's passing reference to a monitoring period being
``cut short'' by section 204(a)(3) was, in our view, referring
simply to the fact that damages could not arise directly from the
``deemed lawful'' rates in effect during part of the period at
issue.74 Thus, we conclude that section 204(a)(3) did not
vitiate the two-year monitoring period. And, given that the two-
year monitoring period survives the enactment of section
204(a)(3), so, too, does the rule regarding accrual of damages
claims for statue-of-limitations purposes.
24. To further support its view on when AT&T's damages
claim accrued, Vitelco makes another argument for why a two-year
monitoring period does not apply here, and, thus, why the statute
of limitations bars recovery for Vitelco's 1997 overearnings.
Specifically, Vitelco argues that a two-year period is valid only
if rates other than those deemed lawful are in effect for the
entire period.75 In Vitelco's view, if deemed lawful rates are
in effect during any portion of the two-year period, the
Commission can no longer consider whether the carrier overearned
during the full two-year monitoring period, because to do so
would require the Commission to consider earnings realized during
a period of time when deemed lawful rates were in effect.
According to Vitelco, that would result in a carrier being held
liable for damages despite the deemed lawful status of its rates.
In other words, in Vitelco's view, the mere existence of deemed
lawful rates during any portion of the two-year monitoring period
would immunize all rates in effect during the monitoring period,
even rates not filed pursuant to section 204(a)(3).
25. We disagree. Nothing in section 204(a)(3), our rules,
or precedent supports Vitelco's sweeping suggestion that the
deemed lawful status of rates means not only that the earnings
produced from those rates cannot themselves be the subject of
refunds, but also that such earnings cannot even be considered in
determining whether the earnings from other rates may be the
subject of refunds. Our conclusion does not deprive Vitelco of
the benefit of deemed lawful protection for its 1998 rates filed
pursuant to section 204(a)(3), or impose a penalty on Vitelco
based in part on those deemed lawful rates. To the extent that
Vitelco's rates are ``deemed lawful'' under section 204(a)(3), we
cannot and do not require Vitelco to refund ``overcharges'' to
AT&T, because, as a legal matter, there are none.76 Even though
we find liability arising from Vitelco's overearnings during the
time when Vitelco's rates were not deemed lawful, Vitelco still
receives the full benefit of section 204(a)(3) during the time
when Vitelco's rates were deemed lawful, because Vitelco gets to
keep all the revenues it received during that time.
26. In fact, were we to accept Vitelco's suggestion, we
would likely run afoul of Virgin Islands.77 In that case, the
court vacated the Commission's award of overearnings refunds,
because the Commission had based the award on an examination of
earnings during only a six-month subset of a two-year monitoring
period.78 In doing so, the court ``held that the Commission
could not evaluate a carrier's rate-of-return using a period
different from the two-year period the Commission itself had
prescribed.''79 Consequently, had Vitelco underearned during the
last 12-18 months of the monitoring period, we would have had to
take that fact into account in deciding whether and to what
extent to award damages to AT&T. Put differently, Virgin Islands
(and the nature of our rate-of-return regime) require us to
consider Vitelco's earnings throughout the entire 1997-1998
Monitoring Period in order to assess whether to grant AT&T's
claim, even though deemed lawful rates were in effect during part
of that Monitoring Period.
27. Finally, Vitelco relies on a recent court decision,
Communications Vending, 80 to support its position on claim
accrual. In that case, the court held that uncertainty about the
legal validity of a claim does not toll the running of the
statute of limitations in section 415 of the Act; once a
prospective claimant knows the facts supporting its claim, it
must file its claim within the limitations period, even though
the law supporting its claim is ambiguous.81 Here, however, the
uncertainty that existed when Vitelco filed its interim
monitoring reports was factual, not legal: it was unknown
whether Vitelco, as a factual matter, would actually overearn as
of the end of the two-year monitoring period; thus, it was
unknown whether AT&T would have any factual basis for an
overearnings claim. Such factual uncertainty is fundamentally
different from legal uncertainty, and renders Communications
Vending inapposite.
28. In sum, AT&T's claims for damages accrued when Vitelco
filed its final monitoring report for the 1997-1998 Monitoring
Period, not when Vitelco filed its interim monitoring reports.
Consequently, AT&T's claims for damages arising from Vitelco's
access earnings in 1997 are timely, and Vitelco's defense based
on the statute of limitations set forth in section 415(b) of the
Act fails.
B. Vitelco's Access Rates for July 1997-December 31, 1997
Were Not ``Deemed Lawful.''
29. Before addressing the merits of the parties' arguments
regarding the last six months of 1997, the facts surrounding
Vitelco's July 1997 tariff bear repeating and elaboration.
Vitelco initially filed the July 1997 tariff on June 16, 1997.82
On June 27, 1997, in response to petitions filed by AT&T and MCI
questioning the ``cash working capital'' (``CWC'') requirements
of Vitelco and 10 other rate-of-return carriers, CCB suspended
and set for investigation the tariffs of those 11 carriers.83
CCB also ordered Vitelco and the other 10 carriers to ``KEEP
ACCURATE ACCOUNT'' of all amounts received that are associated
with the rates that are subject to this investigation.''84 CCB
noted, however, that it would ``separately issue an order
designating issues for investigation.''85
30. One month later, on July 28, 1997, CCB ``designate[d]
for investigation issues regarding cash working capital for four
[of the] rate of return carriers'' referenced in the Suspension
Order.86 Vitelco was not among those four carriers. Instead,
with respect to Vitelco and the six other carriers, CCB held
that, ``[p]ursuant to Sections 1.108 and 0.291 of the
Commission's rules, we reconsider on our own motion our decision
to suspend and investigate tariff provisions that include rate
elements associated with cash working capital....''87 CCB did so
because ``[e]ach of these LECs made ex parte filings in which
they provided information sufficient to'' show compliance with
Commission rules regarding cash working capital.88 As a result,
CCB ``decline[d] to investigate these LECs' tariff provisions
that relate to cash working capital.''89
31. Vitelco filed the July 1997 tariff pursuant to section
204(a)(3) of the Act, and asserts that its rates for July through
December 1997 were deemed lawful by operation of that section.
AT&T asserts that the rates were not deemed lawful. As explained
below, we agree with AT&T. Section 204(a)(3) states that rates
filed pursuant to its terms shall be deemed lawful ``unless the
Commission takes action under paragraph (1) [i.e., section
204(a)(1)] before the end'' of the applicable 7 or 15-day notice
period.90 Section 204(a)(1) encompasses the following actions:
suspension of a new or revised tariffed charge; ``enter[ing] upon
a hearing concerning [its] lawfulness''; ordering a carrier ``to
keep accurate account of all amounts received by reason of such
charge'' pending such completion of the hearing; and making such
order as the Commission deems proper regarding the lawfulness of
the tariffed charge.91
32. Based upon the language of the statute, as interpreted
by the Commission in the Streamlined Tariff Order, we find that
the rates in the July 1997 tariff were never deemed lawful.
According to the statute, a rate is deemed lawful ``unless the
Commission takes action under paragraph [204(a)(1)] before the
end of [the] 7-day or 15-day period.'' In this case, the
Commission, through CCB acting on delegated authority, took a
number of actions under section 204(a)(1). In the Suspension
Order, CCB suspended Vitelco's tariff, began a hearing concerning
the lawfulness of the tariff, and issued an accounting order.
33. Vitelco argues, however, that the Commission does not
``take action'' within the meaning of section 204(a)(3) unless
and until a tariffed charge has been suspended and investigated
and ruled upon.92 That is, according to Vitelco, an
investigation ``must be conducted and concluded'' in order for
section 204(a)(3)'s ``takes action'' language to be implicated.
Vitelco asserts, therefore, that the access rates in the July
tariff were deemed lawful by operation of section 204(a)(3),
notwithstanding the Suspension Order.93
34. We disagree. The language of section 204(a)(3) does
not require an investigation to be concluded prior to removing
deemed lawful status from tariffed rates. Moreover, the
Commission has already rejected this view in the Streamlined
Tariff Order, which holds that the deemed lawful status of rates
is removed upon the issuance of an order suspending the rates and
setting them for investigation; an order concluding the
investigation is not required:94
[T]he ``deemed lawful'' language does not govern
streamlined tariff filings that become effective after
suspension in those instances where the Commission
suspends and initiates an investigation of a LEC tariff
within the 7 or 15 day notice periods specified in
section 204(a)(3). In those cases, the LEC streamlined
tariffs would not be ``deemed lawful'' under section
204(a)(3) because they were suspended and set for
investigation. 95
35. Vitelco's interpretation of the statute is, moreover,
illogical. As noted, the statute requires the Commission to
``take[] action . . . before the end of that 7-day or 15-day
period. . . .'' If the action required to remove deemed lawful
status were an order concluding the investigation, as Vitelco
contends, the Commission could never accomplish this as a
practical matter within the 7 or 15-day period specified in the
statute.96 Thus, Vitelco's interpretation of the statute would
render it virtually impossible to remove deemed lawful status, an
illogical result given the statute's explicit contemplation that
deemed lawful status can and will be removed in appropriate
circumstances.
36. Vitelco further argues that, even if the Suspension
Order had stripped deemed lawful status from the access rates
contained in Vitelco's July 1997 tariff, the Reconsideration
Order restored the rates' deemed lawful status.97 Thus, in
Vitelco's view, the access rates contained in its July 1997
tariff reclaimed their deemed lawful status, which bars AT&T's
claim for damages regarding Vitelco's earnings during the last
six months of 1997.98
37. We reject this contention as well. We find that the
Suspension Order stripped the access rates in the July 1997
tariff of their deemed lawful status, and the Reconsideration
Order did not restore such status. As explained in the
Streamlined Tariff Order, after rates are suspended and
investigated, they can become the lawful rates only if the
Commission issues an order affirmatively finding the rates to be
lawful:99
[The rates] would be ``legal'' until the Commission
concluded an investigation as to their lawfulness.
The lawfulness of such tariffs would be determined by
the orders issued by the Commission at the conclusion
of those proceedings.100
38. Here, there was no order finding the rates lawful. The
Reconsideration Order did not adjudge the lawfulness of Vitelco's
rates, but merely decided not to investigate them. Moreover,
because it was issued by CCB rather than the full Commission, the
Reconsideration Order cannot have adjudged the lawfulness of
Vitelco's rates, as CCB did not have the authority to issue such
an order. Under section 5(c) of the Act, the Commission may not
delegate to a Bureau the authority to take action under section
204(a)(2), i.e., to issue an order concluding a tariff
investigation. Both AT&T and Vitelco recognize that CCB did not
have authority to rule on the lawfulness of Vitelco's tariff.101
Thus, in light of the suspension and investigation, Vitelco's
rates were not deemed lawful by operation of law. Nor were those
rates ever adjudged to be lawful. Accordingly, the July to
December 1997 access rates were legal, but not lawful, and those
rates may therefore form the basis of liability to AT&T for
damages.102
39. Finally, Vitelco asserts that the Reconsideration Order
``rendered the suspension and investigation a nullity. As such,
[Vitelco's] rates were neither suspended nor investigated under
Section 204(a)(1).''103 We find nothing in the Reconsideration
Order, however, that suggests it was intended to have such
retroactive effect.
C. Vitelco Violated Section 201(b) by Overearning During
the 1997-1998 Monitoring Period, and is Liable for
Damages Arising from its Overearnings in 1997.
40. It is well established that the Commission's rate-of-
return prescription has the force of a statute, so exceeding that
prescription subjects a carrier to liability:
We have repeatedly held that a rate-of-return
prescription has the force of law and that the
Commission may therefore treat a violation of the
prescription as a per se violation of the requirement
of the Communications Act that a common carrier
maintain ``just and reasonable'' rates. . . .104
41. If a carrier exceeds its maximum allowable rate of
return, the Commission can order refunds and award damages to
aggrieved customers in the context of a formal complaint case.105
Damages may be based on the difference between the amount the
customer paid to the carrier and the amount the customer would
have paid to the carrier if the carrier had charged and applied
its rates in a manner that produced earnings within the maximum-
allowable rate-of-return ceiling.106
42. As stated above, the record indicates that Vitelco
exceeded its maximum allowable rate of return during 1997 and
continued to do so in 1998, resulting in access earnings above
the maximum allowable rate of return for the 1997-1998 Monitoring
Period.107 As the record further indicates, Vitelco's access
rates in effect during 1998 were deemed lawful.108 As we have
held herein, however, Vitelco's access rates in effect during
1997 were not deemed lawful. As even Vitelco acknowledges,109
the Commission can still award damages for overearnings accrued
during any portion of the monitoring period when the rates in
effect were not deemed lawful. Accordingly, we conclude that
Vitelco has violated section 201(b) of the Act and that Vitelco
is liable to AT&T for AT&T's share of Vitelco's overearnings
accrued during 1997.
IV. ORDERING CLAUSE
43. Accordingly, IT IS ORDERED, pursuant to sections 4(i),
4(j), 201(b), 204, 206, 207, and 208 of the Communications Act of
1934, as amended, 47 U.S.C. §§ 154(i), 154(j), 201(b), 204, 206,
207, and 208, that AT&T's formal complaint is GRANTED.
FEDERAL COMMUNICATIONS COMMISSION
Marlene H. Dortch
Secretary
SEPARATE STATEMENT OF
COMMISSIONER KEVIN J. MARTIN
Approving in Part, Dissenting in Part
Re: AT&T Corp. and AT&T of the Virgin Islands, Inc. v. Virgin
Islands Telephone Corporation, D/B/A/ Innovative Telephone (
File No. EB-04-MD-002)
I am troubled by today's decision that finds the Virgin
Islands Telephone Corporation (``Vitelco'') liable for refunds
for overearnings on 1997 interstate access rates on the basis
that such rates were not ``deemed lawful'' under section
204(a)(3) of the Communications Act.
Under section 204(a)(3), a local exchange carrier's access
tariff, filed on a streamlined basis, is ``deemed lawful and
shall be effective 7 days (in the case of a reduction in rates)
or 15 days (in the case of an increase in rates) after the date
on which it is filed with the Commission unless the Commission
takes action...before the end of that 7 day or 15-day period, as
appropriate.110 The ``deemed lawful'' language in section
204(a)(3) immunizes from challenge those rates that are not
suspended or investigated before a finding of unlawfulness.111
Filing carriers are not subject to liability for damages when
tariffs take effect, without suspension, under section 204(a)(3)
and even if they are subsequently determined to be unlawful in a
section 205 investigation or a section 208 complaint proceeding.
On June 27, 1997, the Common Carrier Bureau (``Bureau'')
issued an order suspending and setting for investigation
Vitelco's July 1997 to December 1997 tariff filing.112 On July
28, 1997, on its own motion, the Bureau issued an order
reconsidering its decision to suspend and investigate Vitelco's
tariff and declining to investigate that tariff.113
Today's action finds that the Bureau's Suspension Order
``stripped Vitelco's July 1997 tariff of their deemed lawful
status,''114 even though in the subsequent Reconsideration Order
the Bureau reversed its decision to investigate the tariff. The
Commission finds that while the Bureau had the authority to strip
the ``deemed lawful'' status from Vitelco's 1997 access rates,
the Reconsideration Order cannot restore the lawfulness of
Vitelco's rates because the Bureau does not have the authority to
issue such order.115
Today's decision essentially endorses the Bureau's ability,
on delegated authority, to deny the presumed ``deemed lawful''
status associated with a carrier's streamlined tariff filing and
effectively foreclose Commission review of that decision. On its
own, the Bureau suspended and set for investigation Vitelco's
tariff filing. That action revoked the ``deemed lawful'' status
of the tariff. One month later, however, the Bureau reversed its
decision to investigate the tariff and the lawfulness of
Vitelco's tariff was thus never subsequently addressed. A
procedural mechanism that enables the Bureau to strip carrier
tariffs of their presumed lawfulness through a one-day suspension
and subsequent failure to follow through on an investigation is
inherently unfair and inconsistent with the intent of Section
204(a)(3). Accordingly, I approve in part and dissent in part
from the order.
_________________________
1 AT&T Corp. and AT&T of the Virgin Islands, Inc. v. Virgin
Islands Telephone Corporation, d/b/a/ Innovative Telephone,
Formal Complaint, File No. EB-04-MD-002 (filed Jan. 27, 2004;
supplemented to cure deficiencies Mar. 4, 2004) (``Complaint'').
2 47 U.S.C. § 208.
3 47 U.S.C. § 201(b).
4 47 U.S.C. § 204(a)(3). AT&T does not dispute the lawfulness of
Vitelco's earnings in 1998. Joint Statement at 4, ¶¶ 22-23.
5 AT&T Corp. and AT&T of the Virgin Islands, Inc. v. Virgin
Islands Telephone Corporation, d/b/a/ Innovative Telephone, Joint
Statements of Complainant and Defendants, File No. EB-04-MD-002
(filed Apr. 7, 2004) (``Joint Statement'') at 3, ¶¶ 1-3.
6 AT&T Corp. and AT&T of the Virgin Islands, Inc. v. Virgin
Islands Telephone Corporation, d/b/a/ Innovative Telephone, List
of Further Stipulations to Supplement the Joint Statement of
Complainants and Defendant, File No. EB-04-MD-002 (filed Apr. 20,
2004) (``Further Stipulations'') at 1, ¶ 2; Joint Statement at 3,
¶¶ 5, 6.
7 Joint Statement at 3, ¶ 8.
8 47 U.S.C. § 201(b).
9 See, e.g., MCI Telecom. Corp. v. FCC, 59 F.3d 1407 (D.C. Cir.
1995) (``MCI v. FCC''); Virgin Islands Telephone Corp. v. FCC ,
989 F.2d 1231 (D.C. Cir. 1993) (``Virgin Islands'');
Represcribing the Authorized Rate of Return for Interstate
Services of Local Exchange Carriers, Order, 5 FCC Rcd 7507, 7532
at ¶¶ 1, 216 (1990) (``Rate-of-Return Prescription Order'')
(subsequent history omitted).
10 See, e.g., 47 C.F.R. §§ 61.38, 61.39.
11 47 U.S.C. § 203.
12 47 C.F.R. §§ 69.3(a), 61.58(a)(2)(ii). Annual tariffs for
access services generally become effective July 1. 47 C.F.R.
§ 69.3(f).
13 The maximum allowable rate of return is equal to the
prescribed rate of return plus the amount specified in sections
65.700(a) or (b), of our rules, 47 C.F.R. §§ 65.700(a),(b), which
is a margin that the carrier may earn from legal tariff rates
before any refund obligation arises. See, e.g., 47 C.F.R. §§
65.600(b), 65.700-702; MCI v. FCC, 59 F.3d at 1415. The two-year
monitoring period for determining compliance with the maximum
allowable rate of return begins on January 1 of odd-numbered
years and ends on December 31 of even-numbered years. 47 C.F.R.
§ 65.701.
14 47 C.F.R. § 65.600(d)(1).
15 See, e.g., MCI v. FCC, 59 F.3d at 1415; Virgin Islands, 989
F.2d at 1238-39; 47 C.F.R. § 69.3(b); In the Matter of Amendment
of Part 65, Interstate Rate of Return Prescription: Procedures
and Methodologies to Establish Reporting Requirements, Report and
Order, 1 FCC Rcd 952, 954 at ¶ 10 (1986) (``Rate-of-Return
Methodologies Order'') (subsequent history omitted).
16 47 U.S.C. §§ 205, 208. See In the Matter of Implementation of
Section 402(b)(1)(A) of the Telecommunications Act of 1996,
Report and Order, 12 FCC Rcd 2170, 2170, 2175-78, 2181-84, 2197
at ¶¶ 8, 11, 12, 19-21, 23, 24, 51 (1997) (``Streamlined Tariff
Order'').
17 47 C.F.R. § 65.600(b).
18 See, e.g., MCI v. FCC. Id., 59 F.3d at 1414.
19 Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat.
56 (1996) (``1996 Act'').
20 47 U.S.C. § 204.
21 47 U.S.C. § 204(a)(3). See Streamlined Tariff Order.
22 47 U.S.C. § 204(a)(3) (emphasis added).
23 See, e.g., ACS of Anchorage, Inc. v. FCC, 290 F.3d 403, 403,
410-411 (D.C. Cir. 2002) (``ACS v. FCC ''); Streamlined Tariff
Order, 12 FCC Rcd at 2181-83, ¶¶ 18-20.
24 See, e.g., 47 C.F.R. § 65.700; Rate-of-Return Prescription
Order, 5 FCC Rcd at 7509, ¶ 13 (1990). See also Joint Statement
at 4, ¶ 14; AT&T of the Virgin Islands, Inc. v. Virgin Islands
Telephone Corporation, d/b/a/ Innovative Telephone, Answer of
Innovative Telephone, EB-04-MD-002 (Mar. 24, 2001) (``Answer'')
at C-8 (Calculations of [Vitelco's] Interstate Access Earnings in
Excess of 11.65% for the Period July - December 1997).
25 Complaint, Att. F, Item 2, Transmittal No. 28, Letter from
Jonathan E. Canis, Counsel for Vitelco, to William F. Caton,
Acting Secretary, Federal Communications Commission, Annual
Access Filing Tariff (filed Apr. 2, 1996; effective July 1, 1996)
(``July 1996 Tariff'').
26 Complaint, Att. F, Item 3, Transmittal No. 34, Letter from
Gregory J. Vogt, Counsel for Vitelco, to Secretary, Federal
Communications Commission, Annual Access Filing Tariff (filed
June 16, 1997; effective July 1, 1997); Complaint, Att. F, Item
4, Transmittal No. 35, Letter from Gregory J. Vogt, Counsel for
Vitelco, to Secretary, Federal Communications Commission,
Supplement Tariff (filed June 30, 1997; effective June 30,
suspended for one day) (``July 1997 Tariff''). For convenience,
the reference in the text encompasses both tariff transmittals.
27 Complaint, Att. F, Item 5, Transmittal No. 36, Letter from
Gregory J. Vogt, Counsel for Vitelco, to Magalie Roman Salas,
Secretary, Federal Communications Commission, Access Filing
Tariff (filed Dec. 17, 1997; effective January 1, 1998)
(``January 1998 Tariff'').
28 Complaint, Att. F, Item 6, Transmittal No. 37, Letter from
Gregory J. Vogt, Counsel for Vitelco, to Magalie Roman Salas,
Secretary, Federal Communications Commission, Annual Access
Filing Tariff (filed June 16, 1998; effective July 1, 1998)
(``July 1998 Tariff'').
29 July 1996 Tariff; Joint Statement at 3, ¶ 10.
30 July 1997 Tariff; January 1998 Tariff; July 1998 Tariff; Joint
Statement at 4, ¶¶ 18, 22.
31 Answer, D-2; AT&T Corp. and AT&T of the Virgin Islands, Inc.
v. Virgin Islands Telephone Corporation, d/b/a/ Innovative
Telephone, Supplemental Complaint, File No. EB-04-MD-002 (filed
Mar. 3, 2004) (``Supplemental Complaint'') Supp. Exh. C, Item 2,
Letter from Griselda Dobbins, Chief Financial Officer, to William
F. Caton, Acting Secretary, Federal Communications Commission,
FCC Form 492 for the period January 1, 1997 to June 30, 1997
(filed Sept. 25, 1997) (``September 1997 492'').
32 Answer, D-2; Supplemental Complaint, Supp. Exh. D, Letter from
Griselda Dobbins, Chief Financial Officer, to William F. Caton,
Acting Secretary, Federal Communications Commission, FCC Form 492
for the period January 1, 1997 to December 31, 1997 (dated Mar.
30, 1998) (``March 1998 492'').
33 Answer, D-2; Supplemental Complaint, Supp. Exh. C, Item 3,
Letter from Elisa G. Hodge, Acting Chief Financial Officer, to
Magalie R. Salas, Secretary, Federal Communications Commission,
FCC Form 492 for the period January 1, 1997 to December 31, 1998
(filed Sept. 30, 1999) (``September 1999 492'').
34 Answer, D-2; Exh. G-3, Rate of Return Report, FCC Form 492
for the period January 1, 1997 to December 31, 1998 (dated Oct.
5, 1999) (``October 1999 492''). AT&T questions whether the
reports dated March 30, 1998 and October 5, 1999 were actually
filed, see, e.g., AT&T Corp. and AT&T of the Virgin Islands, Inc.
v. Virgin Islands Telephone Corporation, d/b/a/ Innovative
Telephone, AT&T Corp.'s Reply to [Vitelco's] Answer, File No. EB-
04-MD-002 (filed Mar. 29, 2004) (``Reply'') at 29, ¶¶ S-3, S-4,
but we need not and do not resolve that question in order to make
the liability determination herein.
35 The Common Carrier Bureau is now the Wireline Competition
Bureau.
36 1997 Annual Access Tariff Filings, Memorandum Opinion and
Order, 13 FCC Rcd 5677, 5677, 5700, 5679, 5702, 5708-09 at ¶¶ 1,
65, 67, 91, 92 (Com. Car. Bur. June 27, 1997) (``Suspension
Order'').
37 1997 Annual Access Tariff Filings, Order Designating Issues
for Investigation Memorandum Opinion and Order and Order on
Reconsideration, 12 FCC Rcd 11417, 11417-18, 11445, 11449, 11452
at ¶¶ 2, 63, 75, 87 (Com. Car. Bur. July 28, 1997)
(``Reconsideration Order'').
38 Joint Statement at 4, ¶¶ 13-14; Further Stipulations at 1, ¶
3.
39 See, e.g., September 1999 492; October 1999 492.
40 47 C.F.R. §§ 1.716-717.
41 AT&T Corp. and AT&T of the Virgin Islands, Inc. v. Virgin
Islands Telephone Corporation, d/b/a/ Innovative Telephone,
Informal Complaint, EB-01-MDIC-0552 (filed Sept. 10, 2001)
(``Informal Complaint'').
42 AT&T Corp. and AT&T of the Virgin Islands, Inc. v. Virgin
Islands Telephone Corporation, d/b/a/ Innovative Telephone, Joint
Motion Regarding Procedure for Response to Informal Complaint,
EB-01-MDIC-0552 (filed Sept. 10, 2001) (``Joint Motion''). The
court decision at issue was ACS v. FCC, supra, which involved
many of the same questions raised in AT&T's informal complaint
against Vitelco.
43 Order, EB-01-MDIC-0552 (Enf. Bur.- MDRD, Nov. 21, 2001).
44 47 U.S.C. § 415(b); 47 C.F.R. §§ 1.716-718.
45 See, e.g., Complaint at 2, 5, 6, ¶¶ 2, 13, 15.
46 47 C.F.R. § 1.722(d).
47 See, e.g., Joint Statement at 2. Given that we find in favor
of AT&T on liability, AT&T may now file a supplemental complaint
for damages in accordance with 47 C.F.R. § 1.722. If Vitelco
plans to seek court review of this Order, however, the parties
may wish to seek a waiver and extension of our 60-day deadline
for filing a supplemental complaint for damages.
48 Complaint at 10, ¶ 30; Joint Statement at 4, ¶ 23.
49 Answer at pp. 3-4, A-7-9, A-34, A-17-20, A-22-23, A-24-25, A-
27-28, A-30-31, A-33-35, ¶¶ 14, 19, 31, 33, 47- 48, 55, 59, 64-
66.
50 Answer at pp. 2-3, A-2, A-5, A-7-8, A-13, A-36-37, A-9-12, A-
14-17, A-25, A-31-33, A-36-41 ¶¶ 2, 12, 14, 18-20, 22, 25, 29-30,
49, 60-63, 71-78.
51 Answer at pp. 3-4, A-7-8, A-17-19, A-20, A-22-25, A-27-28, A-
30-31, A-33-35, ¶¶ 14, 31, 33, 47, 48, 55, 59, 64-66; 47 U.S.C. §
415(b).
52 Answer at A-8-9, A-22-23, A-34, ¶¶ 19, 47, 65-66; September
1997 492.
53 Answer at A-8-9, A-22-23, A-34-35, ¶¶ 19, 47, 65-66, 68.
54 Answer at pp. 3-4, A-8, A-19, A-23-25, A-34-35, A-47, ¶¶ 14,
31, 47- 48, 66-68.
55 Answer at pp. 3-4, A-19, A-25, A-34-35, A-47, ¶¶ 31, 48, 66-
68; March 1998 492. For purposes of this Order only, we will
assume, without deciding, that Vitelco did, in fact, file an
interim monitoring report on March 30, 1998.
56 Answer at pp. 3-4, A-20, A-22, A-25, A-33-35, ¶¶ 34, 47-48,
65, 67-68.
57 See, e.g., ACS v. FCC, 290 F.3d at 407 n.1; MCI v. FCC, 59
F.3d at 1416-17; Virgin Islands, 989 F.2d at 1238-39; Allnet
Communications Serv., Inc. v. US West, Inc., Memorandum Opinion
and Order, 8 FCC Rcd 3017, 3019 at ¶ 13 (1993) (subsequent
history omitted) (``Allnet''); US Sprint Communications Ltd.
Partnership v. Pacific Northwest Bell Tel. Co., Memorandum
Opinion and Order, 8 FCC Rcd 1288, 1291-92 at ¶ 16 (1993)
(subsequent history omitted).
58 See, e.g., 47 U.S.C. § 201(b); Virgin Islands, 989 F.2d at
1239 (``[T]he Commission's prescribed rate of return is not
Mosaic law, but a single point within a broad range of reasonable
rates.''); Nader v. FCC, 520 F.2d 182, 193 (D.C. Cir. 1975) (``In
terms of ratemaking, the agency's expertise allows us to accept
its judgment after it defines the zone of reasonableness.'').
59 Virgin Islands, 989 F.2d at 1233.
60 47 C.F.R. § 65.701.
61 See, e.g., MCI v. FCC, 59 F.3d at 1415 (``During any
monitoring period in which its rates appeared destined to yield
earnings above (or for that matter below) its authorized rate of
return, the LEC could have revised its tariffs to avoid that
result.''); Virgin Islands, 989 F.2d at 1233 (observing that
carriers ``may correct for erroneous projections in the first
year through rate adjustments in the second year.'').
62 Virgin Islands, 989 F.2d at 1238.
63 See, e.g., MCI. v. FCC, 59 F.3d at 1416-17; Virgin Islands,
989 F.2d at 1238-39 (observing that ``the target `authorized
return' is a number that has meaning only in relation to the full
two-year monitoring period.''); AT&T v. Telephone Utils. Exch.
Carrier Ass'n., Memorandum Opinion and Order, 10 FCC Rcd 8405,
8415 at ¶ 22 (``[T]he date of the filing of the final monitoring
report is dispositive with regard to the date a complainant
discovers the right or wrong or the facts on which such knowledge
is chargeable as a matter of law.''); Allnet, 8 FCC Rcd at 3019,
¶ 13; US Sprint Communications Ltd. Partnership v. Pacific
Northwest Bell Tel. Co., Memorandum Opinion and Order, 8 FCC Rcd
1288, 1291-92 at ¶ 16 (1993) (subsequent history omitted); MCI
Telecom. Corp. v. Pacific Bell Tel. Co. et al., Memorandum
Opinion and Order, 5 FCC Rcd 3463, 3464 at ¶ 6 (1990) (subsequent
history omitted).
64 MCI. v. FCC, 59 F.3d at 1416-17 (holding that ``a cause of
action for damages [ . . . ] does not accrue until after [the
carrier] files its final monitoring report.'').
65 Answer at A-18-19, A-24-25, A-29, ¶ 31-32, 48, 56.
66 Answer at A-5, A-18-19, A-24-25, A-27, A-29, ¶ 11, 31-32, 48,
53, 55-56.
67 Answer at A-18-19, A-24, ¶ 31-32, 48.
68 Answer at A-18-19, A-24-25, A-29, ¶ 31-32, 48, 56.
69 Answer at 3, A-5, A-7, A-24-25, A-29, ¶¶ 12 n.9, 13, 48-49, 56
(all referencing ACS v. FCC, 290 F.3d at 415). See Joint
Statement at 4, ¶ 17.
70 Answer at A-18, ¶ 31 (citing Streamlined Tariff Order, 12 FCC
Rcd at 2175-76, ¶ 8).
71 See Streamlined Tariff Order, 12 FCC Rcd at 2183, ¶21 (``The
`deemed lawful' language in section 204(a)(3) changes the current
regulatory scheme only by immunizing from challenge those rates
that are not suspended or investigated before a finding of
unlawfulness. It does nothing to change the Commission's ability
to prescribe rates as to the future under section 205 or to find
under section 208 that a rate will be unlawful if charged in the
future.''); id. at 2181-83, ¶¶ 19-20. Unlike a complaint for
damages, such a complaint for prospective relief would not be
premature, even if filed before the end of the monitoring period,
because the alleged violation of the Act in that circumstance -
charging rates that are likely to result in period-end earnings
above the maximum allowable rate of return - accrues when that
likelihood becomes evident. Otherwise, meaningful prospective
relief (as opposed to damages) would never be available via a
complaint proceeding.
72 See, e.g., Virgin Islands, 989 F.2d at 1238-39 (stating that
``the target `authorized return' is a number that has meaning
only in relation to the full two-year monitoring period.'').
73 January 1998 Tariff; July 1998 Tariff; March 1998 492;
September1999 492; October 1999 492.
74 See ACS v. FCC, 290 F.2d at 415.
75 Answer at A-20, ¶ 32 (``Under new section 204(a)(3),
retroactive damages are evaluated during the entire two-year
period only if ``non-deemed lawful'' rates are in effect for that
whole period. To decide otherwise would allow damages from rates
that are deemed lawful.''); A-29, ¶ 55 (``The use of a two-year
monitoring period to ensure that rates are reasonable, when a
portion of the rates being monitored are already conclusively
presumed to be reasonable, would result in the recovery of
damages for ``deemed lawful rates.''); A-31, ¶ 60 (``Without a
two-year monitoring period, there is no refund obligation.'').
76 Streamlined Tariff Order, 12 FCC Rcd at 1275-76, ¶ 8. See id.
at 2181-82, ¶ 19.
77 Virgin Islands, 989 F.2d at 1238-39. For the reasons
explained in paragraphs 21-23, supra, we reject Vitelco's
argument that, after the enactment of section 204(a)(3), Virgin
Islands is no longer instructive regarding the existence and
operation of the two-year monitoring period.
78 Virgin Islands, 989 F.2d at 1238-39.
79 ACS v. FCC, 290 F.2d at 413, citing Virgin Islands, 989 F.2d
at 1238. It merits mention that the D.C. Circuit's recent
reliance on Virgin Islands in the ACS case further undermines
Vitelco's assertion that section 204(a)(3) has superceded pre-
1997 case law regarding rate-of-return regulation.
80 Communications Vending Corp. of Arizona, Inc. v. FCC, 365 F.3d
1064 (D.C. Cir. 2004) (``Communications Vending)''.
81 Communications Vending, 365 F.3d at 1074.
82 July 1997 Tariff; Further Stipulations at 1, ¶ 5.
83 Suspension Order, 13 FCC Rcd at 5700, ¶ 65. See id. at 5679,
¶ 1 (``we suspend for one day and set for investigation'' the
carriers' tariffs); id. at 5702, ¶ 67 (``We will therefore
suspend these LECs' tariff filings for one day and initiate an
investigation into the lawfulness of their proposed CWC
requirements.''); id. at 5708, ¶ 91 (``the tariff filings filed
by ... [Vitelco and the 10 other carriers] ... ARE SUSPENDED for
one day and an investigation is instituted.'').
84 Suspension Order, 13 FCC Rcd at 5708-09, ¶ 92. See
Reconsideration Order, 12 FCC Rcd at 11418, ¶ 1 (``On June 27,
1997, we released the [Suspension Order], which, inter alia,
suspended for one day the annual access tariffs filed by several
incumbent local exchange carriers, imposed an accounting order,
and initiated an investigation into the lawfulness of a number of
issues raised by these tariff filings.'').
85 Suspension Order, 13 FCC Rcd at 5679, ¶ 3.
86 Reconsideration Order, 12 FCC Rcd at 11418, ¶ 2. See id. at
11444-46, ¶¶ 62-66.
87 Reconsideration Order, 12 FCC Rcd at 11449, ¶ 75 (footnote
referencing 47 C.F.R. §§ 1.108 and 0.291 omitted). See id. at
11418, ¶ 2.
88 Reconsideration Order, 12 FCC Rcd at 11449, ¶ 75. See id. at
11445, ¶ 63 (``We decline to investigate most of these Class B
carriers because they have now provided information that verifies
that their net lags are close to 15 days.'').
89 Reconsideration Order, 12 FCC Rcd at 11449, ¶ 75. See id. at
11452, ¶ 87 (``IT IS FURTHER ORDERED that pursuant to Sections
0.291 and 1.108 of the Commission's rules, 47 C.F.R. §§ 0.291,
1.108, we reconsider on our own motion our decision in the 1997
Annual Access Tariff Suspension Order to suspend and investigate
tariff provisions that include rate elements associated with cash
working capital for . . . Virgin Island Telephone Company, . . .
and, for the reasons stated herein, we decline to investigate
these LECs' tariff provisions that relate to cash working
capital.''); id. at 11445, ¶ 63.
90 47 U.S.C. § 204(a)(3) (emphasis added).
91 47 U.S.C. § 204(a)(1).
92 Answer at A-4, A-9-12, A-15-16, A-36-37, A-40-41, ¶¶ 10, 19,
29, 71, 78; AT&T of the Virgin Islands, Inc. v. Virgin Islands
Telephone Corporation, d/b/a/ Innovative Telephone, Supplemental
Brief of Innovative Telephone, File No. EB-04-MD-002 (Apr. 26,
2004) at 1-5 (Vitelco's Delegation Brief).
93 Answer at 2, A-9-16, A-32-33, A-37-40, ¶¶ 19, 21-26, 29, 61,
63, 71-77.
94 Streamlined Tariff Order, 12 FCC Rcd at 2182, 2220, ¶ 19, 103.
95 Streamlined Tariff Order, 12 FCC Rcd at 2182, ¶ 19 (emphasis
added).
96 Indeed, the statute gives the Commission five months to
conclude such an investigation. 47 U.S.C. § 204(a)(2).
97 Answer at 2-3, A-15-16, A-32-33, A-40 ¶¶ 29, 61-62, 78;
Vitelco's Delegation Brief at 1-6.
98 Answer at A-7, A-9-16, A-32-33, A-36-41, ¶¶ 14, 19, 22-26, 29,
61-63, 71-78.
99 Streamlined Tariff Order, 12 FCC Rcd at 2182, 2220, ¶ 19, 103.
100 Streamlined Tariff Order, 12 FCC Rcd at 2182, ¶ 19 (emphases
added).
101 Vitelco's Delegation Brief at 1-5; AT&T of the Virgin
Islands, Inc. v. Virgin Islands Telephone Corporation, d/b/a/
Innovative Telephone, Supplemental Brief of AT&T Corp., File No.
EB-04-MD-002 (May 4, 2004) at 2-3 (``AT&T's Delegation Brief'').
102 Streamlined Tariff Order, 12 FCC Rcd at 2181-82, ¶¶ 18-19.
103 Vitelco's Delegation Brief at 5.
104 MCI v. FCC, 59 F.3d at 1414 (citing and quoting 47 U.S.C. §
201(b)). See, e.g., American Tel. & Tel. Co. v. FCC, 836 F.2d
1386, 1392 (D.C. Cir. 1988); New England Tel. & Tel. Co. v. FCC,
826 F.2d 1101, 1106-07 (D.C. Cir. 1987) (``New England Tel.'');
Nader v. FCC, 520 F.2d 182 (D.C. Cir. 1975).
105 See, e.g., New England Tel., 826 F.2d at 1107-08 (stating
that section 4(i) of the Act provides the Commission with the
authority to enforce the rate-of-return prescription by ordering
refunds); see also In the Matter of Amendment of Parts 65 and 69
of the Commission's Rules to Reform the Interstate Rate of Return
Represcription and Enforcement Processes, Report and Order, 10
FCC Rcd 6788, 6848-49 at ¶ 137 (1995) (subsequent history
omitted) (noting that the complaint process embodied in section
208 of the Act provides a useful tool in enforcing the rate-of-
return prescription, and that the Commission is authorized to
award damages for violations of the rate-of-return prescription).
106 MCI v. FCC, 59 F.3d at 1415.
107 September 1997 492 (cumulative interstate access rate of
return 12.98%); March 1998 492 (cumulative interstate access rate
of return 12.94%); September 1999 492 (cumulative interstate
access rate of return 14.78%); October 1999 492 (cumulative
interstate access rate of return 14.79%).
108 See, e.g., Joint Statement at 4, ¶¶ 22, 23; Complaint at 10,
¶ 30.
109 Further Stipulations at ¶ 3; Answer at A-5-6, A-8-9, A-24-25,
A-27-28, A-30-31, ¶¶ 12, 14, 19, 48, 55, 58, 60.
110 47 USC 204(a)(3).
111 See, In the Matter of Implementation of Section 402(b)(1)(A)
of the Telecommunications Act of 1996, Report and Order, 12 FCC
Rcd 2170 at paras.19-21 (1997) (``Streamlined Tariff Order'').
112 1997 Annual Access Tariff Filings, Memorandum Opinion and
Order, Suspension Order, 13 FCC Rcd 5677 (Com. Car. Bur. June 27,
1997) (``Suspension Order'').
113 1997 Annual Access Tariff Filings, Order Designating issues
for Investigation Memorandum Opinion and Order and Order on
Reconsideration, 12 FCC Rcd 11417 (Com. Car. Bur. July 28, 1997)
(``Reconsideration Order'')
114 Order at paras. 13, 37.
115 Under section 5(c) of the Act, the Commission may not
delegate to a Bureau the authority to take action under section
204(a)(2), i.e., to issue an order concluding a tariff
investigation.