[Federal Register Volume 62, Number 209 (Wednesday, October 29, 1997)]
[Rules and Regulations]
[Pages 56111-56118]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-28613]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Chapter I
[CC Docket No. 96-61; FCC 97-366]
Petition for Rulemaking to Reclassify AT&T Corp. as Having
Dominant Carrier Status
AGENCY: Federal Communications Commission.
ACTION: Final rule.
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SUMMARY: The Order on Reconsideration, Order Denying Petition for
Rulemaking, and Second Order on Reconsideration in CC Docket No. 96-61
(Order) released October 9, 1997 finds no new evidence or arguments
that demonstrate that a new examination of AT&T's regulatory status is
warranted. The Order also finds no basis to impose on AT&T a service
requirement not imposed on other carriers subject to the rate averaging
and rate integration rules, and that the Commission properly included
AT&T/Alascom within the scope of the reclassification of AT&T as non-
dominant in the provision of interstate, domestic, interexchange
services. Finally, the Order clarifies that, to the extent AT&T/Alascom
has been found to be dominant in the provision of certain interstate
common carrier services (which the Commission has previously defined as
``all interstate interexchange transport and switching services that
are necessary for other interexchange carriers to provide services in
Alaska up to the point of interconnection with each Alaska local
exchange carrier.''), AT&T/Alascom's regulatory obligations with
respect to those services remain unchanged.
EFFECTIVE DATE: November 28, 1997.
FOR FURTHER INFORMATION CONTACT: Christopher Heimann, Attorney, Common
Carrier Bureau, Policy and Program Planning Division, (202) 418-1580.
For additional information concerning the information collections
contained in this Order contact Judy Boley at (202) 418-0214, or via
the Internet at jboley@fcc.gov.
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Order
adopted October 8, 1997, and released October 9, 1997. The full text of
this Order is available for inspection and copying during normal
business hours in the FCC Reference Center, 1919 M St., N.W., Room 239,
Washington, D.C. The complete text also may be obtained through the
World Wide Web, at http://www.fcc.gov/Bureaus/Common Carrier/Orders/
fcc97-366.wp, or may be purchased from the Commission's copy
contractor, International Transcription Service, Inc., (202) 857-3800,
1231 20th St., N.W., Washington, D.C. 20036.
SYNOPSIS OF ORDER ON RECONSIDERATION
I. Introduction
1. On October 23, 1995, the Commission issued an order granting
AT&T Corporation's (AT&T's) motion to be reclassified as a non-dominant
carrier under Part 61 of the Commission's rules and regulations. On
November 22, 1995, the State of Hawaii (Hawaii) and General
Communications, Inc. (GCI) timely filed Petitions for Reconsideration
of the Commission's AT&T Reclassification Order. For the reasons stated
below, we deny the petitions of both Hawaii and GCI.
2. On January 23, 1996, more than two months past the statutory
deadline, Total Telecommunications Services, Inc. (TTS) also filed a
Petition For Reconsideration, and a Motion For Acceptance of Petition
For Reconsideration. As discussed below, we deny TTS's motion and
dismiss its petition as untimely, and therefore do not address the
merits of its petition.
3. On December 23, 1996, GCI filed a Petition for Reconsideration
or Clarification of the Commission's Tariff Forbearance Order (61 FR
59340 (November 22, 1996)). For the reasons discussed below, we grant
GCI's petition for clarification of the Tariff Forbearance Order.
4. Finally, on December 31, 1996, the United Homeowners Association
and the United Seniors Health Cooperative (UHA), filed a Petition for
Rulemaking to Reclassify AT&T as Having Dominant Carrier Status. For
the reasons discussed below, we deny UHA's petition.
II. Petitions for Reconsideration
A. Background
5. In the AT&T Reclassification Order, the Commission reclassified
AT&T as a non-dominant carrier, based on the Commission's finding that
AT&T no longer possessed individual market power in the interstate,
domestic, interexchange market taken as a whole. The Commission
acknowledged that there was evidence in the record that AT&T, MCI and
Sprint had increased basic schedule rates in lock-step, but found that
that evidence did not support a finding that AT&T retained the power
unilaterally to raise residential prices above competitive levels. In
addition, the Commission found that, to the extent that tacit price
coordination with respect to basic schedule or residential rates in
general was occurring, the problem was generic to the
[[Page 56112]]
interexchange industry and not specific to AT&T. The Commission
concluded that concerns regarding such pricing would be better
addressed by removing regulatory requirements that may have facilitated
such conduct, such as the longer advance notice period for tariff
changes then applicable only to AT&T, and by addressing the issues
raised by these concerns in the context of a proceeding to examine the
interstate, domestic, interexchange market as a whole. We recently
reiterated our concern that ``not all segments of [the interstate,
interexchange services] market appear to be subject to vigorous
competition,'' and expressed concern about the ``relative lack of
competition among carriers to serve low volume long distance
customers.''
6. In assessing whether AT&T possessed individual market power, the
Commission followed the relevant product and geographic market
definitions adopted by the Commission in the Competitive Carrier
proceeding. In that proceeding, the Commission found, for purposes of
assessing the market power of interexchange carriers covered by that
proceeding, that: ``(1) Interstate, domestic, interexchange
telecommunications services comprise the relevant product market, and
(2) the United States (including Alaska, Hawaii, Puerto Rico, U.S.
Virgin Islands, and other U.S. off-shore points) comprises the relevant
geographic market for this product, with no relevant submarkets.'' The
Commission concluded that it should apply the foregoing market
definitions in assessing AT&T's market power, because those definitions
were applied in classifying all of AT&T's competitors as non-dominant
carriers. The Commission further stated that examination of the
substitutability of supply for interstate, domestic, interexchange
services also indicated that use of those definitions to evaluate
AT&T's market power was appropriate.
7. As a non-dominant interexchange carrier, AT&T is generally
subject to the same regulations as its long-distance competitors. In
the AT&T Reclassification proceeding, however, AT&T made certain
voluntary commitments that it described as transitional provisions
intended to address concerns expressed by various parties about
possible adverse effects of reclassifying AT&T. These commitments
concerned, among other things, service to and from the States of Alaska
and Hawaii, and other regions subject to the Commission's rate
integration policy, and geographic rate averaging. In the AT&T
Reclassification Order, the Commission accepted AT&T's commitments and
ordered AT&T to comply with those commitments.
8. On February 8, 1996, the Telecommunications Act of 1996 (1996
Act) was enacted. The 1996 Act seeks ``to provide for a pro-
competitive, de-regulatory national policy framework'' designed to make
available to ``all Americans'' advanced telecommunications and
information technologies and services ``by opening all
telecommunications markets to competition.'' Consistent with the 1996
Act's objective of ensuring that all Americans benefit from the
liberalization of telecommunications markets, the 1996 Act required the
Commission, within six months after the date of enactment, to:
adopt rules to require that the rates charged by providers of
interexchange telecommunications services to subscribers in rural
and high cost areas shall be no higher than the rates charged by
each such provider to its subscribers in urban areas. Such rules
shall also require that a provider of interstate interexchange
telecommunications services shall provide such services to its
subscribers in each State at rates no higher than the rates charged
to subscribers in any other State.
On August 7, 1996, the Commission adopted a Report and Order
implementing these statutory requirements.
9. On October 31, 1996, the Commission released the Tariff
Forbearance Order. In that order, the Commission determined that the
statutory criteria in section 10 of the Communications Act, as amended,
were met to detariff completely interstate, domestic, interexchange
services offered by nondominant interexchange carriers, and, therefore,
that the Commission would no longer allow such carriers to file tariffs
for such services pursuant to section 203 of the Communications Act.
B. Analysis
10. Petitioners raise three substantive arguments in seeking
reconsideration or clarification of the Commission's Order granting
AT&T's motion to be reclassified as a non-dominant carrier. First,
Hawaii argues that the Commission should strengthen AT&T's voluntary
commitments by requiring AT&T to serve on Hawaii and the State of
Alaska (Alaska) copies of any submissions that address the Commission's
geographic rate averaging and rate integration policies, in order to
ensure that Hawaii and Alaska have a meaningful opportunity to
participate in pre-effective review proceedings. Second, GCI maintains
that the reclassification of AT&T does not apply to AT&T/Alascom, Inc.
(AT&T/Alascom), because AT&T/Alascom is still dominant in the Alaska
market. Third, GCI argues that it is not clear which of the obligations
and conditions imposed on AT&T and Alascom by the Market Structure
Order (59 FR 27496 (May 27, 1994)), the Final Recommended Decision (58
FR 63345 (December 1, 1993)), and the Alascom Authorization Order
continue to apply now that AT&T has been reclassified as nondominant.
1. Whether the Commission Should Strengthen AT&T's Commitments
a. Positions of the Parties. 11. Hawaii requests that the
Commission strengthen the commitments made by AT&T in the AT&T
Reclassification proceeding by requiring AT&T to serve on Alaska and
Hawaii copies of any pleadings, tariff revisions or other submissions
to the Commission that purport to seek alteration or a specific
interpretation of, or otherwise affect, the Commission's rate
integration and geographic rate averaging policies, at the same time
AT&T files such submissions with the Commission. Hawaii argues that the
historical importance of the Commission's rate integration and
geographic rate averaging policies to Hawaii and Alaska, as well as the
alleged lack of reasonably priced telecommunications to Hawaii, warrant
assurance that Hawaii and Alaska will have the opportunity to voice
their concerns if AT&T proposes to depart from these policies. Hawaii
acknowledges that AT&T informally committed to give Hawaii notice of
tariff filings departing from geographic rate averaging, but maintains
that in some situations more time would be needed to ensure that it has
an opportunity to respond.
12. Alaska, CNMI, GTA, and Guam support Hawaii's request. Alaska
argues that requiring AT&T to serve Alaska and Hawaii with copies of
submissions affecting the Commission's rate integration and geographic
averaging policies would not impose a significant burden on AT&T, but
would ensure that the interests of citizens of Alaska and Hawaii are
heard before any action affecting these policies goes into effect.
CNMI, GTA and Guam contend that the Commission should require AT&T to
serve on all interested parties, not just Alaska and Hawaii, copies of
submissions that would alter the Commission's rate integration or
geographic rate averaging policies. Similarly, the LEC Associations
argue that AT&T should be required to serve copies of submissions that
depart from the Commission's established geographic averaging policies
in other states and in U.S. territories, because
[[Page 56113]]
geographic averaging is essential for maintaining universal service.
They also urge the Commission to commence a proceeding to codify its
geographic averaging polices.
13. AT&T responds that Hawaii's petition relates solely to AT&T's
voluntary commitments concerning rate integration and geographic rate
averaging, and that, since the commitments were not offered, or used,
to support the Commission's finding that AT&T lacks market power in the
overall interstate, domestic, interexchange market, the
reclassification of AT&T is appropriate. AT&T argues that the
Commission cannot modify voluntary commitments that were not the basis
for its ruling, and cannot create or impose new rules on AT&T in this
non-rulemaking proceeding. AT&T also contends that the relief sought by
the parties supporting Hawaii's petition would impose significantly
greater burdens on AT&T than are required under the Commission's tariff
filing rules for dominant carriers. AT&T concludes that the requested
relief should be rejected as unnecessary and overly burdensome, in
light of the fact that all such filings are made on the public record
at the Commission. AT&T also argues that the relief sought would exceed
the Commission's authority by requiring AT&T to make public tariff
filings not only with the Commission, but with Hawaii, Alaska, the
Northern Mariana Islands, and other state jurisdictions and U.S.
territories.
14. In reply, Hawaii argues that its petition is consistent with
the Commission's stated commitment to rate integration and geographic
averaging, and the Commission's decision to incorporate AT&T's
commitments into the AT&T Reclassification Order. It adds that its
request is also consistent with AT&T's pledge to ``work very closely on
an informal basis with representatives of the State of Hawaii on
matters affecting telecommunications there.'' Hawaii claims it is
merely seeking assurance that AT&T will honor its pledge. Hawaii
concludes that the relief it seeks would not burden AT&T or the
Commission, but would ensure that citizens of Hawaii have a meaningful
opportunity to participate in the pre-effective review of any filings
that affect these policies.
b. Discussion. 15. As noted above, on August 7, 1996, the
Commission adopted the Geographic Averaging Order (61 FR 42558 (August
16, 1996)), which implemented the geographic rate averaging and rate
integration requirements of the 1996 Act. In that Order, we adopted a
rule requiring that ``the rates charged by all providers of
interexchange telecommunications services to subscribers in rural and
high cost areas shall be no higher than the rates charged by each such
provider to its subscribers in urban areas.'' The Commission stated
that this rule ``codifies our existing geographic rate averaging
policy.'' The LEC Associations'' request that the Commission initiate a
proceeding to codify its geographic rate averaging policies is
therefore moot. The Commission also adopted a rule ``requiring that `a
provider of interstate interexchange telecommunications services shall
provide such services to its subscribers in each State at rates no
higher than the rates charged to its subscribers in any other State.'''
As required by the 1996 Act, the Commission found that the geographic
rate averaging rule applies ``to all providers of interexchange
telecommunications services, and to all interexchange
`telecommunications services,' as defined by the Act.'' Similarly, the
Commission found that the rate integration rule applies ``to all
domestic interstate interexchange telecommunications services as
defined in the 1996 Act, and all providers of such services.''
16. In the Geographic Averaging Order, the Commission also
determined that the rules adopted in that proceeding superseded the
rate averaging and rate integration commitments AT&T voluntarily made
in the AT&T Reclassification proceeding. We based this determination on
the grounds that the rules we adopted in Geographic Averaging Order
would require AT&T to provide interexchange service at geographically
averaged and integrated rates, and that these requirements incorporated
the Commission's rate averaging and rate integration policies then in
effect. We therefore released AT&T from the commitment to comply with
the Commission's earlier orders regarding rate integration and the
commitment to file any tariff containing a geographically deaveraged
rate on five business days' notice.
17. In light of Congress's codification of the Commission's rate
averaging and rate integration policies in section 254(g) of the
Communications Act, the Commission's rules implementing that section,
and the other actions taken in the Geographic Averaging Order, we find
that Hawaii's request that we impose a service requirement on AT&T has
been superseded and is now moot because AT&T cannot deaverage its rates
consistent with federal law. We also find no basis to impose on AT&T a
service requirement not imposed on other carriers subject to the rate
averaging and rate integration rules. Accordingly, for the foregoing
reasons, we find that the relief sought by Hawaii is unnecessary in
light of the Commission's implementation of the geographic rate
averaging and rate integration requirements of the Communications Act,
and of AT&T's specific voluntary commitments concerning service to
Hawaii and Alaska. We therefore deny Hawaii's petition.
2. Whether Reclassification of AT&T Applies to AT&T/Alascom
a. Position of the Parties. 18. GCI asks the Commission either to
clarify that the reclassification of AT&T does not apply to AT&T/
Alascom, Inc., or to reconsider and reverse any finding that AT&T/
Alascom is no longer dominant. GCI justifies its request on the grounds
that AT&T did not seek to reclassify Alascom as non-dominant, and that
the Commission did not address the reclassification of Alascom in the
AT&T Reclassification Order. GCI argues that the Commission found
Alascom dominant in the Alaska market in the Competitive Carrier Fifth
Report and Order (49 FR 34824 (September 4, 1984)), and has never
reversed that finding. It also contends that this finding could not be
reversed, in light of AT&T/Alascom's legally enforced monopoly in the
Alaska Bush. GCI argues that AT&T/Alascom is able to leverage its
market power beyond the Bush because of Commission policies requiring
other carriers serving Alaska to purchase Bush distribution services
from AT&T/Alascom. GCI also argues that it is unclear how long AT&T/
Alascom's market power in the Alaska Bush will persist. GCI adds that,
even if the Alaska Bush were opened immediately, it would take
significant time for the market to become workably competitive, because
of the time necessary to construct a competing network.
19. Alaska and MCI likewise claim that the Commission's
reclassification of AT&T does not affect AT&T/Alascom's classification
as a dominant carrier. Alaska argues that, in reclassifying AT&T, the
Commission noted that Alascom continues to be ``governed by dominant
carrier rules where it has a facilities monopoly, namely the Bush
areas,'' and therefore that the AT&T Reclassification Order does not
affect the classification of AT&T Alascom, Inc. MCI argues that the
Commission's reclassification of AT&T as non-dominant in the domestic
market was based on market characteristics in the
[[Page 56114]]
``lower 48'' states, which are not representative of the Alaska market.
It adds that a separate finding that AT&T/Alascom does not possess
market power in Alaska is therefore required, but that such a
determination is impossible to make and support at this time.
20. AT&T responds that there is no basis for excluding AT&T/Alascom
from the ambit of the AT&T Reclassification Order, because the
Commission expressly found that AT&T lacked market power in the
domestic interexchange market as a whole, which AT&T claims is the only
relevant market for this purpose. AT&T argues that the fact that AT&T
(or AT&T/Alascom) may be the major supplier of specific services does
not alter the analysis, and that the Commission has never definitively
held that a carrier must lack the ability to control the price of every
service in the relevant market before it can be classified as non-
dominant. AT&T maintains that its voluntary commitments to continue
rate integration for Alaska and to comply with the Commission's orders
relating to Alaska necessarily apply to AT&T/Alascom, and that the
commitments assume that AT&T/Alascom is included within the scope of
the AT&T Reclassification Order.
21. AT&T further responds that the Commission found that, to the
extent AT&T is able to control price at all, it is only with respect to
specific service segments that are either de minimis in relation to the
overall market, or exposed to increasing competition so as not to
affect materially the overall market. AT&T argues that these conditions
apply to the Alaska Bush, which generates less than five one-hundredths
of one percent (0.0005) of total industry revenue, an amount that AT&T
claims is de minimis and affords AT&T/Alascom no power in the overall
relevant market. AT&T concludes there is therefore no basis to treat
AT&T differently from its competitors, or to treat AT&T/Alascom
differently from the rest of AT&T.
22. GCI counters that AT&T does not rebut GCI's claim that AT&T
retains an absolute monopoly, and thus market power, in the Alaska
market. GCI maintains that AT&T's suggestion that Alascom's market
power in Alaska can be ignored as ``de minimis'' is contrary to prior
Commission rulings and AT&T's own statements. Specifically, GCI
contends that, in classifying Alascom as a dominant interexchange
carrier, the Commission focused solely on Alascom's position in the
Alaska market, and did not require Alascom to be dominant throughout
the U.S. market as a whole. GCI adds that, as recently as August 1995,
the Commission identified Alaska as a separate relevant interexchange
market. Specifically, GCI maintains that, while the Commission spoke of
a single national market, the Commission identified that market as
distinct from the Alaska market occupied by Alascom and in which
Alascom retained market power. GCI also claims that AT&T's own
pleadings in the Alaska Joint Board Proceeding contemplate that AT&T
could be classified as dominant in the lower 48 states, but non-
dominant in Alaska, because of different market characteristics and
circumstances. GCI concludes that the Commission classified Alascom as
a dominant carrier based on its legally protected monopoly position in
the Alaska market, which it alleges has never changed, and that AT&T's
purchase of Alascom did nothing to reduce Alascom's market power in
Alaska.
23. In its petition for reconsideration or clarification of the
Commission's Tariff Forbearance Order, GCI requests the Commission
either to clarify that the Tariff Forbearance Order did not detariff
AT&T/Alascom's provision of ``common carrier'' services, (The
Commission has defined Alascom's ``common carrier'' services as ``all
interstate interexchange transport and switching services that are
necessary for other interexchange carriers to provide services in
Alaska up to the point of interconnection with each Alaska local
exchange carrier.'') or to reconsider and reverse any finding that
AT&T/Alascom is not required to file a tariff for such services. In
support of its petition, GCI argues that AT&T, in the AT&T
Reclassification proceeding, made certain voluntary commitments,
including a commitment that AT&T/Alascom would provide ``common
carrier'' services under tariff. In response to GCI's petition, AT&T
states that it ``does not interpret the [Tariff Forbearance Order] to
require the detariffing of Alascom's Common Carrier Services.'' The
American Petroleum Institute (API) disagrees with GCI and argues that,
to the extent AT&T/Alascom's services are interstate, domestic,
interexchange services offered by a nondominant interexchange carrier,
the Tariff Forbearance Order completely detariffed those services.
b. Discussion. 24. AT&T/Alascom offers certain interstate ``common
carrier'' services. As noted above, in the Market Structure Order, the
Commission defined Alascom's ``common carrier'' services as ``all
interstate interexchange transport and switching services that are
necessary for other interexchange carriers to provide services in
Alaska up to the point of interconnection with each Alaska local
exchange carrier.'' For purposes of our discussion here, we refer to
AT&T/Alascom's ``common carrier'' services as those services were
defined in the Market Structure Order. In the Market Structure Order,
the Commission adopted the recommendation of the Federal-State Alaska
Joint Board in the Final Recommended Decision that Alascom be required
to provide such services to interexchange carriers under tariff on a
nondiscriminatory basis at rates that reflect the cost of the services
(i.e., on dominant carrier basis). AT&T concedes that, to the extent
that AT&T/Alascom's ``common carrier'' services are not interstate,
domestic, interexchange telecommunications services as addressed in the
AT&T Reclassification Order, the classification of those services is
not affected by that Order. AT&T further concedes that the Tariff
Forbearance Order does not require the detariffing of AT&T/Alascom's
``common carrier'' services. Indeed, the Commission noted in the AT&T
Reclassification Order, and we clarify here, that, to the extent AT&T/
Alascom has been found to be dominant in the provision of ``common
carrier'' services, as defined above, AT&T/Alascom's regulatory
obligations with respect to those services remain unchanged, and
therefore AT&T/Alascom is required to file tariffs for such services on
a dominant carrier basis.
25. In addition to the foregoing ``common carrier'' services
offered to interexchange carriers, AT&T/Alascom provides interstate,
domestic, interexchange services to end-user customers in Alaska. For
the reasons set forth below, we reject GCI's petition for
reconsideration and find no basis to exclude AT&T/Alascom's provision
of these services from the scope of the AT&T Reclassification Order.
26. We reject the suggestion by GCI, MCI and Alaska, that, in order
to reclassify AT&T/Alascom as a non-dominant carrier with respect to
its provision of interstate, domestic, interexchange services, the
Commission must assess AT&T/Alascom's market power in the Alaska
market, rather than in the overall interstate, domestic, interexchange
services market. The Commission's decision in the Competitive Carrier
Fifth Report and Order to regulate Alascom as a dominant carrier did
not, as GCI implies, disavow or modify the ``all interstate, domestic,
interexchange services'' market definition adopted in the Competitive
Carrier Fourth Report and Order (48 FR 52452 (November 18,
[[Page 56115]]
1983)) by ``focus[ing] solely on Alascom's position within the Alaska
market.'' Rather, the Commission concluded that Alascom should be
regulated as dominant, without reaching the issue of relevant market
definitions, because it was concerned that the Commission's rate-
integration policy for interstate MTS and WATS services to
noncontiguous domestic points, which limited rate-integration payments
only to Alascom, might limit the ability of other carriers to compete
in serving Alaska.
27. In addition, we find that GCI mischaracterizes the Alascom
Authorization Order, in arguing that the Commission there identified
Alaska as a separate relevant interexchange market and therefore that
we are required to analyze separately AT&T/Alascom's market power in
Alaska, for purposes of classifying AT&T/Alascom as non-dominant in the
interstate, domestic, interexchange market. While, in the Alascom
Authorization Order, the Commission did identify two relevant product
markets for purposes of evaluating the proposed merger of AT&T and
Alascom, the markets it identified were: (1) ``interexchange
telecommunications services within Alaska (the `Alaska market'),''
which was the principal business of Alascom; and (2) ``interstate
interexchange telecommunications (`the All Interexchange Market'),''
which AT&T provided, and which included Alascom's and Alaska Telecom's
proposed undersea fiber cable services. In that Order, the Commission
did not identify the provision of interstate, domestic, interexchange
services to Alaska as a separate relevant product or geographic market.
Indeed, the Commission specifically noted that its identification of
interstate interexchange telecommunications (including Alascom's and
Alaska Telecom's proposed undersea fiber cable services) as a relevant
product market was ``consistent with the Commission's earlier findings
of a single market for all interstate interexchange services.'' We note
that GCI, in quoting the foregoing sentence, failed to include the word
``interstate,'' which qualified the term ``interexchange services.'' We
believe that the Commission's reference to ``interstate interexchange
services,'' and not to ``interexchange services'' generally, is central
to the meaning of the Commission's statement and hence to a complete
understanding of this statement's relevance in the present context.
Thus, the Commission did not, in the Alascom Authorization Order,
disavow or modify in any way, the ``all interstate, domestic,
interexchange services'' market definition adopted in the Competitive
Carrier Fourth Report and Order.
28. Accordingly, we reject GCI's argument that, based on the
Alascom Authorization Order and the Competitive Carrier Fifth Report
and Order, the Commission must analyze separately AT&T/Alascom's market
power in Alaska for purposes of classifying AT&T/Alascom as non-
dominant in the interstate, domestic, interexchange market. Rather, we
affirm our determination in the AT&T Reclassification Order that,
consistent with the conclusions reached in Competitive Carrier Fifth
Report and Order, the appropriate relevant geographic market for
purposes of assessing AT&T's market power was a ``'single national
relevant geographic market (including Alaska, Hawaii, Puerto Rico, U.S.
Virgin Islands, and other U.S. offshore points).''' We conclude that,
pursuant to Commission policy in effect at the time of the AT&T
Reclassification Order, the Commission properly included AT&T/Alascom
within the scope of the classification of AT&T as non-dominant in the
provision of interstate, domestic, interexchange services.
29. Subsequent to GCI's filing of its Petition for Reconsideration,
the Commission adopted the LEC Interexchange Order (62 FR 35974 (July
3, 1997)), which revises the Commission's approach to defining relevant
geographic and product markets for purposes of determining whether a
carrier should be regulated as dominant or non-dominant in the
provision of interstate, domestic, interexchange services.
Specifically, in the LEC Interexchange Order, we defined the relevant
geographic market for interstate, domestic, interexchange services as
``all possible routes that allow for a connection from one particular
location to another particular location (i.e., a point-to-point
market).'' We clarified, however, that we would
treat, in general, interstate, long distance calling as a single
national market unless there is credible evidence suggesting that
there is or could be a lack of competition in a particular point-to-
point market or group of point-to-point markets, and there is a
showing that geographic rate averaging will not sufficiently
mitigate the exercise of market power, we will refrain from
employing the more burdensome approach of analyzing separately data
from each point-to-point market.
30. Considering GCI's Petition for Reconsideration according to the
market definition approach established in the recent LEC Interexchange
Order, we conclude that, even assuming arguendo that GCI's petition
presents credible evidence suggesting a lack of competition with
respect to domestic, interstate, interexchange service in Alaska, GCI's
petition fails to demonstrate that geographic rate averaging will not
sufficiently mitigate the exercise of market power, if any, by AT&T/
Alascom in Alaska.
31. In the Geographic Averaging Order, we found that the 1996 Act
required the Commission to mandate rate integration among all states,
territories and possessions, and held that ``this goal is best achieved
by interpreting `provider' to include parent companies that, through
affiliates, provide service in more than one state.'' We stated that
``nothing in the record supports a finding that Congress intended to
allow [interexchange carriers] to avoid rate integration by
establishing subsidiaries that provide service in limited areas.''
Applying this general rule in a specific context, we held that GTE, for
purposes of section 254(g), was required to integrate its rates for
domestic, interstate, interexchange services across affiliates. We find
that, pursuant to the rule established in the Geographic Averaging
proceeding, AT&T, like GTE, is required to integrate and average its
rates across affiliates, including AT&T/Alascom.
32. Because AT&T is required to integrate and average its rates
geographically for interstate, domestic, interexchange services across
all of its affiliates, including AT&T/Alascom, we believe that AT&T/
Alascom could not raise and sustain prices for such services above the
competitive level in Alaska, unless AT&T were able profitably to charge
supracompetitive prices in the ``lower 48'' states. Nothing in the
record of this reconsideration proceeding supports a reversal of our
determination in the AT&T Reclassification Order, that ``AT&T neither
possesses nor can unilaterally exercise market power within the
interstate, domestic, interexchange market taken as a whole,'' which
includes the ``lower 48'' states. Nor is there any evidence in the
record on reconsideration to support a finding that geographic rate
averaging, together with AT&T's lack of market power in the ``lower
48,'' will not mitigate the exercise of market power, if any, by AT&T/
Alascom in Alaska. Therefore, we find no reason to analyze separately
AT&T/Alascom's market power in Alaska. Accordingly, we find that AT&T/
Alascom is appropriately classified, as established in the AT&T
Reclassification Order, as non-dominant
[[Page 56116]]
in the provision of interstate, domestic, interexchange services.
3. Whether the Commission Should Clarify the Requirements of the Alaska
Orders That Continue to Apply to AT&T and AT&T/Alascom
a. Position of the Parties. 33. GCI requests that the Commission
clarify which requirements of the Commission's Alaska Orders continue
to apply to AT&T and AT&T/Alascom. GCI argues that, while AT&T made a
generalized promise to comply with outstanding Commission orders
relating to Alaska in the AT&T Reclassification proceeding, it is
impossible to determine which requirements of the Alaska Orders AT&T
has specifically agreed to follow, and which it will try to contest or
ignore.
34. GCI adds that, as a non-dominant carrier, AT&T may be able to
discriminate and to deaverage its Alaska rates by providing Alaska
services through two entities--AT&T and AT&T/Alascom. GCI argues that,
although the Final Recommended Decision provided that AT&T would remain
subject to Section 214 entry and exit certification requirements, non-
dominant status removes the requirement that AT&T obtain Section 214
authority to serve the Alaska market. GCI further argues that, if AT&T
provides separate service to Alaska pursuant to separate tariffs from
those filed by AT&T/Alascom, AT&T will be able to discriminate between
customers served by AT&T and customers served by AT&T/Alascom. GCI also
claims that it will be impossible to determine whether AT&T is
integrating Alaska rates into its domestic rate schedule, and that any
difference in rates or offerings between AT&T and AT&T/Alascom would
call into question which rate is appropriate for purposes of judging
rate integration.
35. Finally, GCI argues that separate service by AT&T would
disadvantage captive monopoly customers that buy service under the
AT&T/Alascom common carrier services tariff, because, to the extent
AT&T provides separate service to Alaska and does not use the carrier
services of AT&T/Alascom, AT&T will reduce traffic on the AT&T/Alascom
network and drive up rates for AT&T/Alascom's captive monopoly
customers. GCI states that all carriers, including AT&T, are required
to buy Alaska distribution services under the AT&T/Alascom carrier
services tariff.
36. Alaska, supporting GCI's request for clarification, notes that
AT&T committed to comply with the Commission's orders regarding rate
integration and with all the obligations and conditions set forth in
the Alaska Joint Board Proceeding and the Alascom Authorization Order.
Alaska requests the Commission to clarify the AT&T Reclassification
Order if there is any uncertainty on these points.
37. AT&T responds that GCI's request for clarification is
inappropriate, because it seeks to inject into this proceeding issues
already litigated in other dockets. AT&T adds that its voluntary
commitments assume that both AT&T and its AT&T/Alascom affiliate will
continue to adhere to the Commission's orders regarding the
restructuring of the Alaska market. In addition, AT&T notes that the
Commission defined Alascom's ``common carrier'' services as interstate
interexchange transport and switching services necessary for other
interexchange carriers to provide service in Alaska up to the point of
interconnection with LECs. As previously noted, AT&T concedes that, to
the extent AT&T/Alascom's ``common carrier'' services are not domestic
interstate interexchange services as addressed in the AT&T
Reclassification Order, the classification of those ``common carrier''
services is not affected by that Order, and, therefore, that, to the
extent Alascom's ``common carrier'' services have been found to be
dominant, AT&T/Alascom's regulatory obligations relating to those
services remain unchanged.
b. Discussion. 38. We believe that there is no ambiguity concerning
the requirements of the Alaska Orders that continue to apply to AT&T
and AT&T/Alascom, but for the sake of clarity we note that the AT&T
Reclassification Order contains a lengthy and detailed statement of
both AT&T's and AT&T/Alascom's obligations with respect to Alaska. In
addition, AT&T has committed to comply voluntarily with all the
conditions and obligations set forth in the Alaska Orders, and has
specifically acknowledged that AT&T's commitment applies to AT&T/
Alascom. Moreover, as the Commission noted in the AT&T Reclassification
Order, any failure by AT&T or AT&T/Alascom to comply with any of the
conditions and obligations in the Alaska Orders may result in the
imposition of forfeitures on AT&T or AT&T/Alascom, or a revocation of
their Commission licenses. In addition, if GCI believes that either
AT&T or AT&T/Alascom has failed to honor the commitment to comply with
all of the conditions and obligations in the Alaska Orders, GCI may
seek relief under Section 208 of the Communications Act.
39. We also reject GCI's claim that AT&T may be able to deaverage
its Alaska rates by providing Alaska services through two entities. As
an initial matter, we note that, contrary to GCI's suggestion, the
reclassification of AT&T as a non-dominant carrier did not remove the
requirement that AT&T obtain Section 214 authority to serve the Alaska
market. As we stated in the AT&T Reclassification Order, AT&T may build
or lease facilities to serve the Alaska market subject to dominant
carrier authorization rules. Moreover, as discussed above, in the
Geographic Averaging Order, we found that Congress did not intend to
allow interexchange carriers to avoid the rate integration requirements
of the 1996 Act by establishing subsidiaries that provide service in
limited areas. As noted above, we find that, pursuant to the rule
established in the Geographic Averaging Order, AT&T must integrate and
average its rates across its affiliates. Accordingly, AT&T may not
deaverage its Alaska rates by providing services to Alaska through two
entities.
4. Other Matters
40. On January 23, 1996, well after the statutory deadline for
filing petitions for reconsideration of the AT&T Reclassification
Order, TTS filed a Petition for Reconsideration requesting that the
Commission reclassify AT&T as dominant on the grounds that AT&T retains
a dominant position in the interstate, domestic, interexchange market,
and has abused, and is likely to continue to abuse, its dominant
position in the market. On the same date, TTS filed a motion for
acceptance of its late-filed petition for reconsideration. TTS states
that it was unable to file its petition before the statutory deadline
because AT&T's ``bad acts,'' on which TTS's petition is based, did not
occur until November 22, 1995, the due date for filing petitions. TTS
alleges that its petition was delayed further by its attempt to
negotiate with AT&T to resolve their dispute, and by the blizzard in
Washington, D.C., in January, 1996. TTS maintains that these facts
establish substantial justification and good cause for the Commission
to accept TTS's late-filed petition.
41. On April 15, 1997, TTS filed, in the record of the UHA Petition
for Rulemaking proceeding, a Supplement to Petition for Reconsideration
and a Motion to Accept Supplement to Petition for Reconsideration. TTS
states that the information in its supplement was not available to TTS
at the time it filed its petition for reconsideration and that the
information is necessary in order for the Commission to have a complete
record.
42. Section 405 of the Communications Act, provides, in
[[Page 56117]]
relevant part, that: ``[a] petition for reconsideration must be filed
within thirty days from the day upon which public notice is given of
the order, decision, report, or action complained of.'' Section 1.4(b)
of the Commission's rules defines the date of public notice of the
final Commission action. Section 1.4(b)(2) provides that, for ``non-
rulemaking documents released by the Commission or staff, whether or
not published in the Federal Register, the release date'' is date of
public notice. Accordingly, public notice in this case was given on
October 23, 1995, the date on which the AT&T Reclassification Order was
released. Therefore, petitions to reconsider that decision were, as TTS
concedes, due on or before November 22, 1995.
43. Because the period for filing petitions for reconsideration is
prescribed by statute, the Commission may not, with one narrow
exception articulated by the courts, waive or extend the filing period.
The narrow exception to this statutory filing period allows the
Commission to extend or waive the 30-day filing period only in an
``extraordinary case,'' such as where the late-filing is due to the
Commission's failure to give a party timely notice of the action for
which reconsideration is sought. In such circumstances, the petitioner
must demonstrate that the delay in filing is attributable to Commission
error in giving notice and that it acted promptly upon discovering the
adoption of the Commission's decision.
44. TTS has not demonstrated that its delay in filing is
attributable to Commission error in giving notice. Indeed, TTS does not
dispute that the Commission gave appropriate notice by the release of
the AT&T Reconsideration Order on October 23, 1995. As noted above, TTS
states only that its petition was delayed because the alleged actions
on which TTS's petition is based, did not occur until the due date for
filing petitions for reconsideration, and that its petition was further
delayed by its attempt to negotiate with AT&T as well as by the
blizzard in Washington, D.C., in January, 1996. Accordingly, we find
that TTS does not meet the narrow exception of an ``extraordinary
case'' in which the Commission may extend or waive the statutory
deadline for filing petitions for reconsideration. We, therefore, deny
TTS's Motion for Acceptance of Petition for Reconsideration, and
dismiss its petition as untimely. Because we dismiss TTS's petition for
reconsideration, we also deny TTS's Motion to Accept Supplement to
Petition for Reconsideration and dismiss TTS's Supplement to Petition
for Reconsideration.
III. Petition for Rulemaking
45. On December 31, 1996, the United Homeowners Association and the
United Seniors Health Cooperative (UHA) filed with the Commission a
Petition for Rulemaking to Reclassify AT&T as Having Dominant Carrier
Status. UHA requests that the Commission undertake a review and
``reinstate AT&T's dominant carrier status.'' We note that UHA refers
generally to AT&T's status as a carrier of ``long distance service,''
rather than more specifically to AT&T's status as a provider of
domestic, interstate, interexchange service. Because UHA consistently
refers in its petition only to the Commission's October 23, 1995,
decision, we are treating the petition as applying only to AT&T's
regulatory status with respect to domestic, interstate, interexchange
service, and not international services. In support of its petition,
UHA argues that consumers are adversely affected by the classification
of AT&T as a non-dominant interexchange carrier, as demonstrated by a
rate increase AT&T instituted in November 1996. UHA argues that,
``without regulatory supervision, AT&T consumers will have no
protection from unjust rates increases,'' and that classifying AT&T as
dominant is necessary in order to monitor AT&T's rate increases until
there is meaningful competition in the long-distance market. UHA also
points to what it alleges is AT&T's 54.2 percent market share as
evidence that AT&T has market power in the long distance market and
therefore should be classified as dominant.
46. TTS submitted comments in support of UHA's petition. TTS cites
to alleged discriminatory conduct by AT&T against TTS as evidence of
AT&T's abuse of its market power and the need therefore to reclassify
AT&T as a dominant carrier.
47. In opposition to UHA's petition, AT&T argues that the Petition
for Rulemaking should be denied because UHA's arguments already were
addressed and properly rejected in the orders classifying AT&T as non-
dominant for domestic and international services. AT&T also maintains
that UHA's allegations, even if true, are immaterial under the
Commission's rules defining dominant carriers. AT&T notes that the
Commission examined and found in the AT&T Reclassification Order that
AT&T does not retain market power in the domestic, interstate,
interexchange market. In addition, AT&T maintains that UHA is mistaken
in arguing that a change in AT&T's regulatory classification would
affect AT&T's ability to make the price changes referenced by UHA. AT&T
claims that, even as a dominant carrier subject to price cap
regulation, AT&T did not need Commission approval to raise rates within
price cap limits. AT&T further argues that UHA's ``unsupported claims
of `tacit collusion' '' among various interexchange carriers does not
support regulatory action aimed solely at AT&T, and that ``any attempt
to paint the long distance industry as an oligopoly must fail.''
Finally, relying on the Commission's AT&T Reclassification Order, AT&T
maintains that market share is not the sole determining factor of
whether a firm possesses market power, and that the 54.2 percent market
share figure referenced by UHA ``is even lower than the market share
cited in the [AT&T Reclassification Order], and shows a further erosion
of AT&T's market share since the Order was released.''
48. In reply to AT&T's Opposition, Pacific takes no position on
whether AT&T should be reclassified as a dominant carrier. Pacific only
responds to AT&T's argument that there is no evidence of tacit
collusion among the big interexchange carriers. Pacific argues that the
evidence of tacit collusion ``is not `inconclusive' anymore,'' that
AT&T has continued to raise prices after reclassification, and that new
facilities-based entry by the Regional Bell Operating Companies is the
best solution to rising prices.
49. We find that the arguments raised by UHA's petition were
addressed and decided in the AT&T Reclassification Order. Neither UHA,
Pacific nor TTS has presented any new evidence or arguments that
demonstrate that a new examination of AT&T's regulatory status is
warranted. We thus decline to initiate a proceeding at this time to
classify AT&T as a dominant carrier. ``Petitions [for rulemaking] * * *
which plainly do not warrant consideration by the Commission may be
denied or dismissed without prejudice to the petitioner.'' Accordingly,
we deny without prejudice UHA's Petition for Rulemaking.
IV. Ordering Clauses
50. Accordingly, it is ordered That Hawaii's Petition for
Reconsideration is hereby denied.
51. It is further ordered That GCI's Petition for Reconsideration
or Clarification of the AT&T Reclassification Order is hereby denied.
[[Page 56118]]
52. It is further ordered That GCI's Petition for Clarification of
the Tariff Forbearance Order is granted.
53. It is further ordered That TTS's Motion for Acceptance of
Petition for Reconsideration is hereby denied, and TTS's Petition for
Reconsideration is hereby dismissed.
54. It is further ordered That TTS's Motion to Accept Supplement to
Petition for Reconsideration is hereby denied, and TTS's Supplement to
Petition for Reconsideration is hereby dismissed.
55. It is further ordered That the United Homeowners Association
and United Seniors Health Cooperative's Petition for Rulemaking is
hereby denied.
Federal Communications Commission.
William F. Caton,
Acting Secretary.
[FR Doc. 97-28613 Filed 10-28-97; 8:45 am]
BILLING CODE 6712-01-P
