Alaska Market Structure

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 36

[CC Docket No. 83-1376; FCC 94-116]

Alaska Market Structure

agency: Federal Communications Commission.

action: Final rule.

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summary: This order adopts a new market structure for Alaska

telecommunications in order to achieve five objectives: preservation of

universal service; continuation of rate integration; maintenance of

revenue requirement neutrality; allowance of market-based competitive

entry; and encouragement of increased efficiency. The order requires a

transition to the new market structure from July 1, 1994 to June 30,

1998. The order requires that: (1) AT&T provide interstate MTS service

at integrated rates to and from Alaska and between Alaska and Hawaii;

(2) AT&T and Alascom continue to provide service jointly under the

Joint Services Arrangement (JSA) for one and one-half years; (3) the

JSA terminates effective January 1, 1996; (4) AT&T must pay Alascom

$150 million transition payment to reduce Alascom's plant accounts; (5)

Alascom must provide interexchange carriers common carrier services

under tariff, for Bush and nonBush areas, to provide services in

Alaska; and (6) AT&T must purchase a fixed amount of service from

Alaska for two and one-half years after termination of the JSA.

effective date: June 27, 1994.

for further information contact: Rose Crellin, Policy and Program

Planning Division, (202) 632-1292 and Robert Hall, (202) 634-1861.

SUPPLEMENTARY INFORMATION:

Integration of Rates and Services for the Provision of Communications

by Authorized Common Carriers Between the Contiguous States and Alaska,

Hawaii, Puerto Rico and the Virgin Islands; Memorandum Opinion and

Order

[CC Docket No. 83-1376 RM 4436; FCC 94-116]

Adopted: May 19, 1994.

Released: May 24, 1994.

By the Commission:

I. Introduction

1. On October 26, 1993, the Federal-State Alaska Joint Board

(Board) adopted the Final Recommended Decision in CC Docket 83-1376.\1\

The Final Recommended Decision presents a carefully integrated plan to

meet the five objectives that it recommends should govern interstate

telecommunications services between Alaska and the contiguous states

(``Lower 48'') and between Alaska and Hawaii. We hereby adopt these

five objectives and agree with the Joint Board that, based on the

record, the Final Recommended Decision best achieves these five

objectives: preservation of universal service; continuation of rate

integration;\2\ maintenance of revenue requirement neutrality;\3\

allowance of market-based competitive entry; and encouragement of

increased efficiency.

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\1\Alaska Joint Board Final Recommended Decision, FCC 93J-2

(released October 29, 1993) (Final Recommended Decision) 58 FR

63345, December 1, 1993. See also Integration of Rates and Services

for the Provision of Communications by Authorized Common Carriers

between the Contiguous States and Alaska, Hawaii, Puerto Rico, and

the Virgin Islands, CC Docket No. 83-1376, RM 3376, Alaska Joint

Board Tentative Recommendation, 8 FCC Rcd 3684 (1993) 58 FR 31204,

June 1, 1993 (Tentative Recommendation).

\2\The Commission's rate integration policy requires the

integration of rates for interstate message telephone service and

wide area telecommunications service to and from Alaska into AT&T's

domestic rate pattern. In this order, those services are hereinafter

referred to as MTS. Establishment of Domestic Communications

Satellite Facilities, 35 FCC 2d 844, 856-57 (1972), aff'd on recon.,

38 FCC 2d 665 (1972), aff'd sub nom. Network Project v. FCC, 511

F.2d 786 (D.C. Cir. 1975).

\3\The Joint Board has described its objective of revenue

requirement neutrality as implementing changes in the Alaska market

structure ``without generating any material increase in the

intrastate revenue requirement.'' Supplemental Order, 4 FCC Rcd 395

(1989) 54 FR 7471, February 21, 1989.

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2. We also conclude that implementation of the new market structure

recommended by the Board will increase competition and will further

economic growth in Alaska by lowering prices and stimulating demand for

telecommunications services. Economic growth will be enhanced because

the new market structure will stimulate, through lower prices, and

facilitate, through new services, transactions between consumers and

businesses in the state of Alaska and the rest of the nation. Increased

competition should also encourage additional investment in the Alaska

telecommunications infrastructure. Under this new market structure, we

conclude that businesses and consumers can enjoy these benefits at the

same time we preserve universal service, revenue requirement

neutrality, and rate integration. In this order we thus adopt, with

clarifications and minor modifications, the recommendations of the

Board and establish implementation requirements.

II. Summary of the Final Recommended Decision

3. In the Final Recommended Decision, the Board concluded that the

Joint Services Arrangement (JSA) should be terminated, subject to the

adoption and implementation of suitable transition mechanisms.\4\ Under

the recommended market structure, the American Telephone & Telegraph

Co. (AT&T) would provide MTS services between Alaska and the Lower 48

(northbound and southbound), and between Alaska and Hawaii, at

integrated rates and under the terms and conditions applicable to

AT&T's provision of services in the Lower 48. After the JSA terminates,

Alascom, Inc. (Alascom) could offer interstate MTS independently from

AT&T under its own tariff and with no obligation to charge AT&T's

integrated rates.

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\4\Final Recommended Decision, FCC 93J-2 at paras. 2-10.

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4. Under the Final Recommended Decision, Alascom would provide

interexchange carriers (IXCs) common carrier services under tariff

offered on a non-discriminatory basis at rates that reflect the costs

of services.\5\ Alascom's tariff would have separate rate schedules for

locations subject to facilities competition (non-Bush) and for

locations where Alascom has a facilities monopoly (Bush). The costs of

service in each of these categories would be defined pursuant to a cost

allocation plan developed by Alascom and approved by the Commission.

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\5\Alascom common carrier services are 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.

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5. The Final Recommended Decision also contemplates that Alascom

would continue to provide interstate private line service upon

reasonable request under its existing federal tariffing and Section 214

obligations. If AT&T provides interstate private line service to or

from Alaska, it would be required to do so under the same rate

structures, terms, and conditions that apply to its provision of

private line services between other states.

6. The Board recommended a four-year transition period, beginning

March 1, 1994. During the transition, AT&T would be required to

purchase certain services from Alascom to meet its MTS obligations.

There would be two phases to the transition period, with the first

phase beginning on March 1, 1994, and the second phase beginning on

September 1, 1995. During the first phase, AT&T would continue to

obtain services from Alascom under the JSA for one and one-half years.

On September 1, 1995, the JSA would terminate and Alascom's common

carrier services would be offered to carrier customers under tariff.

During the second phase of the transition period, lasting two and one-

half years, AT&T would be required to purchase a fixed amount of common

carrier service from Alascom, defined as a percentage of a baseline

revenue level. This obligation would decline to zero at the end of the

second phase.

7. Finally, under the Final Recommended Decision, AT&T would make a

$150 million transition payment (in two installments of $75 million

each) to Alascom that would be applied to reduce Alascom's total plant

accounts.\6\

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\6\In the Final Recommended Decision, the Alaska Joint Board

recommended maintaining the current cost separations factor for

circuit equipment for Alascom and United Utilities, Inc. (UUI). The

Alaska Joint Board also recommended against establishing the Alaska

Fund proposed in the Tentative Recommendation.

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III. Commission Adoption of the Alaska Joint Board's Final Recommended

Decision

8. The Commission has wrestled for over 20 years with the question

of what type of telecommunications structure for Alaska would best

serve the public interest.\7\ Over this time period there have been

significant changes in the domestic telecommunications market in terms

of the number of carriers that provide interstate service, the types of

services they provide, and the technologies they use to provide

telecommunications services. While these changes have been occurring

nationally, the Commission has continued to search for the market

structure that will best meet the needs of Alaskan consumers of

telecommunications services, incorporate into Alaska telecommunications

the changes that have occurred nationally, and harmonize rate

integration, competitive policies, and universal service objectives in

Alaska.

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\7\As early as 1972, the Commission concluded that AT&T should

use domestic satellites to provide interstate MTS service, in

conjunction with local carriers, to Alaska, Puerto Rico, and Hawaii

to implement rate integration to these areas. Establishment of

Domestic Communications Satellite Facilities, 35 FCC 2d 844 (1972),

aff'd on recon., 38 FCC 2d 665 (1972), aff'd sub. nom. Network

Project v. FCC, 511 F.2d 786 (D.C. Cir. 1975). In 1981, AT&T and

Alascom began providing interstate MTS service to and from Alaska

under the JSA. In 1982, the Commission rejected Alascom's claim to

an exclusive right to provide interstate MTS, concluded that an open

entry policy for Alaska interstate MTS was in the public interest,

and authorized competitive entry into the Alaska interstate MTS

market for non-bush locations (areas where facilities competition is

allowed). MTS & WATS Market Structure Inquiry (Phase II), 92 FCC 2d

787 (1982) recon. denied, FCC 83-213 (released May 9, 1983). Full

rate integration was implemented in Alaska effective January 1,

1987. Memorandum Opinion and Order, CC Docket No. 83-1376, FCC 86-

602 (released January 2, 1987). The JSA arrangement was continued

between AT&T and Alascom while rate integration was implemented in

Alaska and while the Alaska Joint Board evaluated alternative market

structures. Notice of Proposed Rulemaking, CC Docket No. 83-1376,

FCC 85-520 (released September 27, 1985). 50 FR 41714, October 15,

1985.

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9. In 1985, the Commission referred questions concerning the

appropriate market structure for providing Alaska MTS to a Federal-

State Alaska Joint Board created pursuant to Section 410(c) of the

Communications Act. These questions have been under review by the Board

for over eight years. The Board has collected vast quantities of data,

received extensive comments from interested parties, reviewed numerous

proposals on this subject, and held a public hearing. The Final

Recommended Decision sets forth the market structure plan for Alaska

that the Board believes best balances its five public interest goals.

We conclude that this new market structure will allow Alaskan

telecommunications consumers to derive benefits from the changes in

telecommunications services that have occurred over the last twenty

years. We concur with the Board's evaluation of the record, and the

legal and policy analyses and recommendations that are presented in the

Final Recommended Decision.

10. We agree with the legal analysis in the Final Recommended

Decision that concludes that we have ample authority under the

Communications Act to implement the Board's specific transition

mechanisms.\8\ We conclude that, based on the record, the Board's

recommendations, with modifications and clarifications in this order,

are in the public interest as expressed in Sections 1, 201, and 202 of

the Communications Act, because they provide a comprehensive solution

to the market structure issues referred to the Board and because they

best achieve the five objectives the Board adopted earlier and that we

adopt in this Order. We conclude that the new market structure, and the

transition mechanisms included as part of the comprehensive solution,

are essential elements to that overall plan of ensuring universal

service for Alaska consumers, consistent with the Communications Act

and the Alaska Joint Board's Final Recommended Decision.

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\8\Final Recommended Decision, FCC 93J-2 at paras. 114-127. We

agree with the analysis in the Final Recommended Decision rejecting

the claims that the Alaska Joint Board committed various procedural

errors in reaching its final recommendation to the Commission. Final

Recommended Decision, FCC 93J-2 at paras. 151-78.

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11. We conclude that the resulting market structure will enhance

competition, thereby increasing the availability of new services at

lower prices for Alaska telecommunication consumers. We conclude that

more of the benefits that consumers have derived from competition in

the Lower 48 should be available to Alaskans. Competitive markets

encourage carriers to adopt new technologies, develop new and

innovative services, reduce costs by eliminating waste, provide service

more efficiently, and improve customer service. Increased competition

should ensure that there is continuing investment in the

telecommunication infrastructure for Alaska both for existing and new

services.

12. Although the Alaska MTS market was open to competition in

1982,\9\ we believe that because of limitations created by the JSA the

present market structure does not produce all the benefits available

from a competitive market.\10\ AT&T, a major competitor in the MTS

market, is unable to build facilities in Alaska or serve Alaska

independently because of the requirements of the JSA. AT&T may not take

advantage of offerings of other carriers and must instead purchase all

of its Alaska switching and transport services from Alascom. Alascom

gains a competitive advantage because it has an assured revenue source,

AT&T, that must pay all of Alascom's interstate costs, plus AT&T's own

rate of return (under price cap regulation) regardless of Alascom's

efficiency or market conditions.\11\ Thus, the JSA makes it more

difficult for carriers other than Alascom to compete effectively in

Alaska.\12\ The JSA also diminishes some of the rigor of a competitive

market that would otherwise encourage Alascom to eliminate any

potential waste and service inefficiencies. We conclude that the market

structure in Alaska should be restructured to promote more competition,

open entry, and improve efficiency subject to transition mechanisms

that will enable the new market structure to develop without causing

significant rate increases in Alaska. Accordingly, in this order,

pursuant to Sections 1, 4(i)-(j), 201-203, 214, and 220 of the

Communications Act,\13\ we adopt the Board's Final Recommended Decision

with clarifications and minor modifications and establish dates for

some of the implementation requirements.\14\

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\9\MTS and WATS Market Structure Inquiry, (Phase II), 92 FCC 2d

787 (1982), recon. denied, FCC 83-213 (released May 9, 1983).

\10\In opening the Alaska market to competition we concluded

that the benefits of competition achieved by eliminating barriers to

entry in other markets, including ``the provision of service at the

lowest possible cost, the reduction or elimination of waste, making

carriers more responsive to the needs and desires of consumers, and

making carriers respond more rapidly and efficiently to

technological change and innovation,'' were also applicable to

Alaska. Id.

\11\AT&T estimates that the current shortfall of revenues for

service under the JSA is approximately $80 million. Final

Recommended Decision. FCC 93J-2 at para. 24, n. 25.

\12\We note that at present General Communications, Inc. (GCI)

is the only other facilities-based MTS provider in Alaska.

\13\47 U.S.C. 151, 154(i)-(j), 201-203, 214, and 220.

\14\Because we adopt the Alaska market recommendation of the

Final Recommended Decision, we dismiss as moot the GCI petition,

filed January 29, 1992, requesting a new proceeding to establish a

new Alaska market structure.

We also dismiss as moot AT&T's Petition for a Lawful Interim

Division of Charges, filed November 5, 1987. The AT&T petition

requested that the Commission find the existing settlement agreement

under the JSA between AT&T and Alascom unlawful under Section 201 of

the Communications Act. In this order we conclude that it is in the

public interest to adopt the recommendation in the Final Recommended

Decision that the JSA be terminated after a suitable transition

period. We concur with the analyses in the Final Recommended

Decision that it is within our authority to establish transition

mechanisms to ensure the availability of universal service. The

continuation of the JSA for the first phase of the transition period

is an integral part of the overall plan for a new market structure

in Alaska, which includes terminating the JSA, and important to

achieving the objectives of revenue neutrality and universal service

recommended by the Alaska Joint Board. Ultimately, the termination

of the JSA is also important to achieving these objectives. Thus, we

conclude that it is unnecessary for us to evaluate the lawfulness of

the JSA as requested by AT&T in its petition.

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IV. Modifications to, and Clarifications of, the Recommendations in

the Final Recommended Decision

13. After reviewing the Final Recommended Decision, we have

concluded that we must modify and clarify our understanding of some of

the Joint Board's recommendations to ensure that the new market

structure will operate in the public interest. In our judgment, these

clarifications and modifications are consistent with the objectives

established by the Board and are consistent with the reasoning

contained in the Final Recommended Decision.\15\ The State Joint Board

Members have participated in the deliberations on this order, pursuant

to Section 410(c) of the Communications Act.

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\15\In this order, we modify the date recommended by the Joint

Board for the beginning of the transition (March 1, 1994) to adjust

for the period that the Joint Board's recommendations were under

consideration. Because the first phase of the transition will begin

July 1, 1994, other dates have been adjusted to provide for a one

and one-half year first phase and a two and one-half year second

phase.

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A. Transition Payment and Reduction of Alascom Plant Accounts

14. In the Final Recommended Decision, the Joint Board recommended

that in applying the transition payment installments, the ``Central

Office Switching'' Account 2210 should be designated first for

reduction and then should be reduced by an amount that would result in

little or no intrastate cost shift if AT&T decreased its usage of

Alascom switches.\16\ Consistent with the Joint Board's objective of

reducing Alascom's plant balances to reduce potential intrastate cost

shifts, we clarify that the amount necessary to reduce Central Office

Switching so as to produce little or no increase in intrastate revenue

requirements be taken entirely from the first $75 million installment.

The remaining depreciable accounts will be reduced proportionately

using both the balance of the first installment and all of the second

$75 million installment. As a result, the potential for significant

intrastate cost shifts if AT&T decreases its usage of Alascom switches

will be significantly diminished at the time of the first installment.

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\16\Final Recommended Decision, FCC 93J-2 at para. 136.

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15. The Final Recommended Decision did not consider how AT&T will

account for the $150 million payment to Alascom. We conclude that the

cost increase associated with the payment made by AT&T to Alascom is an

extraordinary cost beyond the control of AT&T that is eligible for

exogenous treatment under Sec. 61.44(c)(5) of our price cap rules,\17\

and direct AT&T to make preliminary filings forty-five days prior to

filing tariff modifications that reflect AT&T's transition payment.

AT&T shall include in its tariff filings the apportionment and

explanation of the exogenous revenue requirement effects of each

payment upon each rate that AT&T proposes to modify as a consequence of

this decision, and shall also include in that filing the anticipated

cost reduction associated with the termination of the JSA.

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\17\See 47 CFR 61.44(c)(5) (1992).

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B. AT&T's Purchase of Alascom's Services

16. The Board recommended that during the second phase of the

transition AT&T should be obligated to purchase a fixed dollar amount

of service from Alascom. The fixed dollar amount of service would

decline in six month increments until it reached zero at the

termination of the second phase of the transition period. The Board

recommended this continuing obligation after the JSA terminates to

avoid precipitous intrastate cost shifts if AT&T does not continue to

purchase Alascom services. The Board concluded that the AT&T must

purchase requirement along with other transition mechanisms will

maintain the goals of universal service and revenue neutrality. We

adopt these goals and the approach recommended by the Board, but

conclude that the fixed dollar amount AT&T must purchase as calculated

using the Board's methodology must be adjusted as discussed below.

17. In the Final Recommended Decision the Board recommended the

following methodology for calculating the fixed dollar amount of

service that AT&T must purchase during the second phase of the

transition period. The amount that AT&T must purchase for each period

of the second phase was to be computed by applying a declining

percentage for each six month period to a baseline revenue amount. The

annual baseline revenue amount was to be calculated as a function of

the demand for interstate transport and switching MTS minutes for the

last 12 months that the JSA was in effect, multiplied by the new tariff

rates for Alascom's Common Carrier Services.\18\ The percentage used to

calculate the fixed dollar amount of service for each six month period

was to decline to zero in six month increments.\19\ The required

percentage for each six month period was to be applied to one-half of

the annual revenue baseline to calculate the fixed dollar amount of

services AT&T must purchase for each six month period.

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\18\These new tariffs, as noted elsewhere in this order, would

reflect Alascom's reduced costs after application of the transition

payment installments.

\19\The percentage of the baseline revenue amount to be used for

each six month period is as follows: 90% during the first period;

80% during the second period; 65% during the third period; 45%

during the fourth period; and 20% during the last period. Final

Recommended Decision, FCC 93 J-2 at n. 181.

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18. AT&T states that the must-purchase requirement ``would require

AT&T to pay for services which it may not be able to use.''\20\ AT&T

argues that the only way to interpret the must-purchase requirement in

the Final Recommended Decision is to equate the demand used to

calculate the annual baseline revenue with the AT&T demand for

interstate services for which AT&T bills pursuant to its own tariffs

during the last 12 months of the JSA. Alascom argues that the Board

intended the demand calculations to be based on the jointly provided

services provided by both AT&T and Alascom.\21\

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\20\Ex parte letter from Karen Jeisi, AT&T, to William F. Caton,

Acting Secretary, FCC, dated December 28, 1993.

\21\Opposition of Alascom, January 12, 1994.

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19. We conclude that the must-purchase requirement applies to the

total demand to and from Alaska under the JSA for interstate transport

and switching MTS minutes for the last 12 months that the JSA was in

effect rather than just AT&T's demand under the JSA. The Alaska Joint

Board recommended a continuing obligation for AT&T to purchase some

services from Alascom during the second phase of the transition to

avoid precipitous shifts of Alascom's costs to the intrastate

jurisdiction after termination of the JSA that could result from a

sudden decrease in the use of Alascom facilities by AT&T for the

provision of interstate MTS.

20. We conclude, however, that we should modify the Board's

recommendation in this area in two respects in order to achieve the

Board's objectives. We modify the method of calculating the fixed

dollar amount of services that AT&T must purchase in order to address

factors that the Board did not consider when it selected its

recommended methodology. Without the modification we now make, the

fixed dollar amount that AT&T must purchase could give Alascom windfall

payments over and above what is necessary to address the Board's

concern about possible intrastate cost shifts. As noted supra, the

State Joint Board members have participated in reaching this

conclusion. Thus, we require two adjustments to the fixed dollar amount

that AT&T must purchase that is calculated using the Board's

recommended methodology.

21. First, intrastate cost shifts are not likely to occur if

Alascom separately provides significant interstate traffic after the

JSA is terminated. Indeed, in these circumstances, AT&T may not be able

to purchase the required fixed dollar amount of services from Alascom

to fulfill the recommended post-JSA traffic loading requirement. Since

in this case Alascom's use of its own facilities will help address the

Board's concern about intrastate shifts, the fixed dollar amount that

AT&T must purchase for each six month period should be adjusted to

reflect Alascom and AT&T's relative interstate use of those facilities.

Thus, the fixed dollar amount for each six month period during which

AT&T must purchase services from Alascom, as calculated using the

Board's recommended methodology, must be adjusted to reflect the

proportion of minutes of interstate use by Alascom and AT&T.\22\

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\22\The required adjustment is to be computed by applying the

proportion (percentage) of MTS minutes to and from Alaska, provided

by AT&T, in that six month period, relative to all the interstate

MTS minutes to and from Alaska provided in that six month period, by

AT&T and Alascom, to the unadjusted calculated fixed dollar amount

for each six month period. For example, for each six month period,

if AT&T carries 60% of the total interstate MTS minutes to and from

Alaska carried by AT&T and by Alascom, then AT&T would pay 60% of

the unadjusted fixed dollar must purchase amount for that six month

period.

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22. Second, after the JSA terminates, Alascom likely will be

obtaining revenues under tariff or through leases from carriers for use

of its facilities to provide interstate MTS. The revenues associated

with new services purchased by other interexchange carriers must be

deducted from AT&T's obligation to purchase Alascom services.\23\ This

deduction recognizes that new uses of Alascom's facilities by other

interexchange carries (for the provision of MTS services) achieves the

same policy goals as similar purchases made by AT&T. Thus, the total of

all MTS-related purchases by AT&T and new services purchased by other

carriers when added together must meet the fixed obligation identified

in the ``must purchase requirement.\24\ Again, actual interstate use of

Alascom's facilities addresses the Board's concerns about intrastate

cost shifts. Additional payments would unnecessarily burden AT&T and

provide Alascom with revenues over and above that needed to address

these concerns. Thus, the AT&T purchase level as calculated using the

Board's recommended methodology, and as adjusted for the proportion of

MTS minutes provided by AT&T and Alascom, must be adjusted also for any

revenues received by Alascom for new services purchased by other

interexchange carriers for use of its interstate MTS facilities to

provide interstate MTS.\25\

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\23\For purpose of this order, the term ``new services'' refers

to purchases of Alascom interstate services used for the purpose of

providing MTS, under lease or contract, by IXCs, other than AT&T,

that exceeds the level of services purchased over the last twelve

months ending January 1, 1996. Examples of new services would be new

leases and tariff services not otherwise offered under lease prior

to January 1, 1996. Other examples would be increases in contracts

above the levels purchased as of the last 12 months ending on

January 1, 1996. If contracts existing as of January 1, 1996 are

replaced by tariffs, only the increase above levels purchased as of

the last twelve months ending January 1, 1996 would be considered

new services. When calculating AT&T's must purchase requirement for

any 6 month period, new services would be determined based on

purchases by other IXCs in that 6 month period that exceed one-half

the level of purchases over the last twelve months ending January 1,

1996.

\24\All interstate services purchased under lease or contract by

AT&T from Alascom may be used to meet AT&T's fixed dollar

obligation, so long as those services are employed to provide

interstate MTS service.

\25\If requested by the Commission, AT&T and Alascom must

provide all relevant information to include, at a minimum, the

interstate MTS minutes and the tariff and lease revenues used to

calculate the fixed dollar amount AT&T must purchase, including the

adjustments we require herein. Both parties also must retain

supporting documentation on interstate minutes and contract and

tariff revenues for potential audit by the Commission.

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C. Alascom's Common Carrier Tariff

23. The Final Recommended Decision stated that Alascom should be

required to file a common carrier services tariff with two geographic

rate zones. To implement this recommendation, we establish filing dates

and other requirements. In order to process Alascom's common carrier

services tariff by the required effective date, we require that Alascom

file its tariff and cost support information\26\ 120 days before the

scheduled effective date for that tariff of January 1, 1996, because a

lawful tariff must be on file prior to termination of the JSA.\27\ The

tariff must be revised annually thereafter on the schedule set forth in

Section 69.3(a) of the Commission's Rules.\28\

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\26\47 CFR 61.38 (1992). Alascom is required to file in its

tariff the minimum quality of service standards that it will employ

for the provision of its common carrier services.

\27\As recommended by the Final Recommended Decision, the

Alascom common carrier services tariff must reflect Alascom's costs

after application of the $150 million transition payment. Final

Recommended Decision, FCC 93J-2 at n. 180.

\28\47 CFR 69.3(a).

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24. The Final Recommended Decision did not recommend a rate of

return that Alascom should use in computing a revenue requirement for

the common carrier service tariff.\29\ We conclude in this order that

for purposes of computing the revenue requirement for Alascom's common

carrier tariff, Alascom shall use the authorized interstate rate of

return applicable to local exchange carriers (LECs) unless Alascom, by

clear and convincing evidence, is able to justify a different rate of

return for its interstate operations.\30\

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\29\In the Tentative Recommendation, however, the Alaska Joint

Board recommended either the authorized interstate rate of return

applicable to local exchange carriers or the intrastate rate of

return authorized for switched traffic in Alaska, whichever was

lower. Alternatively, Alascom could propose another rate of return

with justification.

\30\See Tentative Recommendation, 8 FCC Rcd at 3692, n.57.

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D. Other Modifications and Clarifications

25. AT&T has been providing interstate service to and from Alaska

at integrated rates in conjunction with Alascom under the JSA. The

Commission requires AT&T to provide interstate MTS service at

integrated rates pursuant to the Commission's rate integration policy

and sections 201(a) and 4(i) of the Communications Act. In the Final

Recommended Decision, the Alaska Joint Board recommended that AT&T be

required to provide interstate service to and from Alaska after the JSA

is terminated. In this order, we adopt that recommendation and require

that after the JSA is terminated, AT&T must provide interstate service

at integrated rates to and from Alaska under the same terms and

conditions, including service quality, technical standards, and

availability, that it provides those services in the Lower 48 states.

The Alaska Joint Board did not, however, address AT&T's potential need

to request equal access from Alaska LECs. With the termination of the

JSA, AT&T will directly provide service to subscribers in Alaska. AT&T

does not currently have the same type of access to LECs in Alaska as it

did in the Lower 48 when equal access was implemented, since it has

been providing service to the customers of Alaskan LECs only through

Alascom's facilities. In the Lower 48, because AT&T already had ``equal

access'' to the LECs, the Commission required LECs to implement equal

access only in response to requests from other interexchange

carriers.\31\ We conclude that, because in Alaska AT&T does not have

physical connections to the LECs equivalent to equal access, LECs will

have to implement equal access in response to requests from AT&T as

well as in response to requests from other interexchange carriers in

Alaska.\32\ Accordingly, AT&T may request equal access from Alaska LECs

in order to provide interstate service in Alaska. The ability to

request equal access will ensure that AT&T has more flexibility in

providing service in Alaska.\33\

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\31\The equal access requirements discussed herein are the same

equal access requirements that apply to independent telephone

companies in the rest of the nation. In the Matter of MTS and WATS

Market Structure, Phase III: Establishment of Physical Connections

and Through Routes among Carriers; Establishment of Physical

Connections by Carriers with Non-Carrier Communications Facilities;

Planning among Carriers for Provision of Interconnected Services,

and in Connection with National Defense and Emergency Communications

Services; and Regulations for and in Connection with the Foregoing,

CC Docket No. 78-72, Phase III, Report and Order, 100 FCC 2d 860;

Memorandum Opinion and Order, FCC 86-4 (released January 3, 1986) at

para 28.

\32\See MTS and WATS Market Structure, 94 FCC 2d 292 (1983);

Phase III Report and Order, 100 FCC 2d 860 (1985) recon. denied, FCC

86-4 (released January 8, 1986).

\33\The requirement that LECs implement equal access in response

to requests by AT&T and other carriers does not alter the

Commission's Bush policy that prohibits carriers other than Alascom

from building facilities in the Bush. See Earth Stations re

Tentative Decision to Establish Joint Ownership, 92 FCC 2d 736

(1982); Policies Governing the Ownership of Domestic Satellite Earth

Stations in the Bush Communities in Alaska, CC Docket 80-254, RM-

3304, 96 FCC 2d 522, 541 (1984).

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26. In the Final Recommended Decision, the Board stated, in support

of its recommendation to retain the frozen circuit equipment allocation

factor, that the factor at issue applies equally to AT&T and

Alascom.\34\ We clarify here that the frozen factor development

procedures shown in Section 36.126(d)(3) of the Commission's rules do

apply equally to AT&T and Alascom because they are both interexchange,

not exchange, carriers.\35\ However, the actual calculated frozen

factor is not the same for each carrier because it is based on carrier-

specific usage data.

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\34\See Final Recommended Decision, FCC 93J-2 at para. 92.

\35\47 CFR 36.126(d)(3).

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27. The State of Hawaii cites various portions of the Final

Recommended Decision as conflicting with Commission orders on rate

integration.\36\ We clarify in response to concerns of the State of

Hawaii that in this order we do not adopt any change in definition of

rate integration or its applicability, as required in prior Commission

orders. We merely change the market structure by which rate integration

is achieved for interstate services to and from Alaska. To eliminate

any possible misunderstanding, we also emphasize that this order only

pertains to MTS services and does not include private line services.

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\36\Ex parte letter from Herbert E. Marks and Andrew W. Cohen,

to William F. Caton, Acting Secretary, FCC, November 19, 1993.

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V. Alascom's ``Opposition'' to the Final Recommended Decision

28. Alascom filed an Application for Review of the Final

Recommended Decision on November 29, 1993, under Section 1.115 of the

Commission's rules. AT&T and GCI argue that Section 1.115 applies to a

final action taken pursuant to delegated authority under Section 5(c)

of the Communications Act and that the Alaska Joint Board's actions

were taken pursuant to Section 410(c) of the Act and do not constitute

final actions taken pursuant to delegated authority.''\37\ We agree

with AT&T and GCI that Alascom's filing is improper under Section 1.115

of our rules.\38\ Accordingly, we dismiss Alascom's petition.\39\ We,

however, will address on our own motion, certain matters raised by

Alascom's pleading.

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\37\AT&T filed an Opposition (December 10, 1993) and GCI filed a

Motion to Strike Application for Review (December 14, 1993).

\38\See 47 U.S.C. Sec. 410(c); 47 CFR 1.115 (1992).

\39\We also dismiss Alascom's related motion (November 29, 1993)

to exceed the page limitation provided in Sec. 1.115(f)(1) of the

Commission's rules, 47 CFR 1.115(f)(1).

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29. In its pleading Alascom makes a number of charges regarding

supposed substantive and procedural infirmities in the Alaska

proceeding.\40\ For the most part, these arguments were thoroughly

discussed and rejected in the Final Recommended Decision. We

incorporate by reference the Joint Board discussion on substantive and

procedural issues and, unless noted otherwise, we adopt the Joint

Board's analysis as our own. Nevertheless, we think that some of the

matters raised by Alascom deserve further attention here.

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\40\AT&T opposes Alascom's claims and reserves the right to

respond further when these claims are raised properly. AT&T

Opposition at 2 n. 4. GCI does not respond to Alascom's substantive

claims, arguing that Alascom raises issues that were already raised

in the Final Recommended Decision and elsewhere in this proceeding.

GCI Contingent Opposition at 2, n. 2.

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A. Alascom's Substantive Arguments

30. Alascom claims that the Board has ``elevated the policy goals

of efficiency and competition,'' above other Board objectives.\41\

There is no merit to Alascom's claim. First, we do not agree that

efficiency and competition are lesser objectives than the other Board

objectives. As stated in the Board's Supplemental Order tentatively

adopting these objectives, ``a proper resolution of the issues before

us must represent a balanced effort to achieve each of these goals.\42\

Second, we find that the Board has balanced the five Board objectives

in a manner that best serves the public interest. The Board has

addressed the efficiency and competition objectives by recommending the

termination of the JSA. It has addressed the objectives of universal

service and revenue requirement neutrality by recommending several

transition mechanisms including the continuation of the JSA for the

first phase of the transition period, the AT&T payment of $150 million

to Alascom, and the AT&T second phase must-purchase requirement. Thus,

the Board's recommendations will not affect the Commission's policy on

rate integration for interstate MTS services for Alaska.

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\41\Alascom Application for Review at 3.

\42\Supplemental Order, 4 FCC Rcd at 398, para. 24.

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31. Alascom's claim that the Board must identify ``relevant,

material changes of fact'' before it can ``justify radical

restructuring of the Alaska telecommunications market structure,

including the termination of the JSA'' is unsupported. It is well

settled that an agency may take such action, ```either with or without

a change in circumstances,'''\43\ as long as it supplies a ```reasoned

analysis' of its decision.''\44\ The Joint Board has supplied a

``reasoned analysis'' for its proposal and we adopt it as our own.

Moreover, we disagree that circumstances have not changed in Alaska.

This entire proceeding is a result of changes in the Alaska market: In

1972, the rate integration policy was adopted for Alaska, in 1980,

Alascom and AT&T entered into the JSA, and in 1982, the Alaska market

was opened to competition. Indeed, the Joint Board was formed for the

express purpose of addressing the harmonization of competition in

Alaska with rate integration, and the proposals it makes are consistent

with that task. Thus, contrary to Alascom's claim, significant changes

have occurred in the Alaska market, and Alascom's objection is without

merit.

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\43\Center for Science v. Dept. of Treasury, 797 F.2d 995, 999

(D.C. Cir. 1986), quoting Motor Vehicle Manufacturers Assoc. v.

State Farm Mutual Automobile Ins. Co., 463 U.S. 29 (1983).

\44\Id.

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32. Alascom contends that the proposed market structure

``eliminates the foundation for the frozen allocator, destroying any

reasonable prospect to preserve revenue requirement neutrality.''\45\

We disagree with Alascom's arguments. First, the Board recommended

retaining the frozen allocator specifically to prevent potential

intrastate cost shifts that Alascom reported in its proposed

implementation plan, and which Alascom estimates are worth

approximately $30 million annually. Second, contrary to Alascom's claim

that it will not have interstate business, after termination of the

JSA, Alascom will remain free to provide interstate services

independently and to supply interstate common carrier services to all

other IXCs. In addition to retaining the frozen allocator, the Board

recommended the continuation of the JSA during the first phase of the

transition period, a $150 million payment by AT&T to Alascom to reduce

Alascom's plant accounts and the AT&T must-purchase requirement to

preserve revenue requirement neutrality. We are convinced that these

recommendations as part of the Board's comprehensive solution will

preserve revenue requirement neutrality.

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\45\Alascom Application for Review at 5.

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33. In addition, we note that the Part 36 frozen allocator

procedures apply to other IXCs, AT&T, and UUI, not just Alascom. The

Docket 80-286 Joint Board retained a distance sensitive allocator for

the IXCs to recognize the extent of distance sensitive circuit

equipment in service for those carriers, and to avoid the substantial

adverse revenue requirement impact associated with the adoption of a

nondistance sensitive allocator.\46\ In its Report and Order, the

Commission agreed with the Docket 80-286 Joint Board's recommendation

that a distance sensitive allocator, frozen at 1985 levels, be retained

for use by the IXCs.\47\ In addition to our concern for intrastate cost

shifts, we support this Board's recommendation to leave the frozen

allocator intact recognizing the broader considerations which caused it

to be retained for Alascom and other IXCs in 1987 by another Joint

Board.

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\46\Recommended Decision and Order, 2 FCC Rcd 2562-2565 (Joint

Board 1987).

\47\Report and Order, 2 FCC Rcd, 2639 (1987).

---------------------------------------------------------------------------

34. Alascom argues that universal service in the Bush is more

tenuous under the Final Recommended Decision because the Board cannot

assume that AT&T would be responsible for satellite service to the

Bush. Alascom further contends that universal service in the Bush will

be undermined because Alascom, not AT&T, is the only carrier that has

constructed, launched, and operated a satellite for Alaska service.\48\

Alascom's concern about AT&T's provision of service to the Bush appears

disingenuous since this service is now, and remains, Alascom's

responsibility.\49\ The Board's recommendations do not address or

otherwise reduce Alascom's current obligation to provide satellite

service on a monopoly basis nor do the Board's recommendations lift the

Commission prohibition against construction of earth station facilities

in the Bush by companies other than Alascom. Alascom may not ignore,

evade, or transfer its responsibility to provide rural Alaska satellite

service without first obtaining Commission approval under Section 214

of the Communications Act to discontinue service. To approve a Section

214 request by Alascom to discontinue service, the Commission would

have to find that ``neither the present or future public convenience

and necessity will be adversely affected.'' Both AT&T and GCI have

offered to provide service to the Bush if Alascom no longer desires to

serve as the monopoly provider to the Bush.\50\ However, if no other

carrier was willing to assume Alascom's responsibilities to serve the

Bush voluntarily, the Commission would, pursuant to Sections 1, 201,

205, and 214 of the Communications Act, require another carrier, such

as AT&T, to provide service by satellite or other appropriate

technology.

---------------------------------------------------------------------------

\48\Alascom Application for Review at 9-15.

\49\The Commission prohibits carriers other than Alascom from

building facilities to the Bush. See Earth Stations re Tentative

Decision to Establish Joint Ownership, 92 FCC 2d 736 (1982);

Policies Governing the Ownership of Domestic Satellite Earth

Stations in the Bush Communities in Alaska, CC Docket 80-254, RM-

3304, 96 FCC 2d 522, 541 (1984). The common carrier tariff rates

charged by Alascom for service to the Bush must be just and

reasonable and enable Alascom to recover the costs of replacing and

maintaining the satellite and other equipment necessary to meet its

interstate service obligation to the Bush.

\50\AT&T Reply Comments, July 12, 1993, at 7; GCI Petition, RM-

7246.

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35. Alascom also incorrectly argues that replacing the JSA with the

new market structure will somehow undermine its ability to provide

satellite service. We conclude that this contention is incorrect for

several reasons. First, Alascom, as the facilities-based carrier for

the Bush, will be able to recover the cost of furnishing service to

that region. Other carriers must use Alascom's facilities to provide

service to the Bush. As required in this order, Alascom will tariff

interstate access to the Bush separately so that related costs,

including the costs of the satellite, are borne by all interstate

carriers using Alascom's Bush facilities. Second, AT&T must pay Alascom

$150 million to reduce its plant accounts. This payment will make

Alascom more competitive. Third, we have retained the jurisdictional

separations frozen allocator, which would assign 86% of circuit

equipment investments and expenses, including a new satellite, to the

interstate jurisdiction. Finally, we have required AT&T to purchase a

fixed amount of common carrier services from Alascom during the second

phase of the transition period. Thus, Alascom has not demonstrated that

its ability to provide telecommunications service in Alaska will be

undermined by the competitive environment under the new market

structure.\51\

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\51\In an ex parte filing dated May 12, 1994, Alascom requests

that the Commission establish a pleading cycle to address universal

service issues regarding who will serve the Bush, how a satellite to

serve the Bush will be financed, and whether revenues are sufficient

to ``maintain universal service at integrated rates and levels of

quality enjoyed today.'' We deny Alascom's request. These issues

were considered by the Joint Board in making its recommendations to

the Commission on the new market structure for Alaska and have been

addressed by parties commenting in this proceeding. As discussed

above, the Joint Board has recommended, and we have adopted in this

order, a number of mechanisms to ensure that universal service is

available to the Bush areas of Alaska. Those mechanisms make

provisions for satellite replacement, rate integrated interstate

service to the Bush, and universal service to the Bush. Since

Alascom has not requested, nor received, approval for a Section 214

application to discontinue service to the Bush, Alascom remains the

carrier responsible for providing facilities in the Bush.

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36. Alascom also argues that: (1) AT&T will not be harmed by

continuing the JSA; (2) there will not be benefits from eliminating the

JSA; (3) if other carriers want to provide service to and from Alaska,

they have been able to do so under the current market structure; (4)

the Alascom ARC plan is better than the Board's recommended market

structure; and; (5) Alascom is efficient and would be more efficient

than AT&T in providing service in Alaska.\52\ All of these issues have

been raised previously in this proceeding, and the Board has previously

addressed and rejected Alascom's arguments. We concur with the Board's

interpretation of the record. The new market structure in Alaska will

enable Alascom to compete with other interstate carriers on price and

service. Consumers will benefit from reduced prices, additional

providers, and new services. Additional competition in Alaska under the

new market structure will provide greater opportunity for AT&T to

provide service independently, for other IXCs to take Alascom's common

carrier transport services to provide interstate service to Alaska, and

for consumers to receive lower prices and additional services than the

current mandated structure under the JSA.

---------------------------------------------------------------------------

\52\Alascom Application for Review at 1-23.

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B. Alascom's Procedural Arguments

37. Alascom argues that the Commission erred in convening this

proceeding pursuant to nonrestricted rulemaking procedures. This was

not an error. In the Final Recommended Decision the Joint Board fully

explained why Alascom's argument is not supported by the language of

Section 410 or any other law.\53\ Since we agree completely with the

Joint Board's analysis, there is no reason to repeat that discussion

now.

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\53\Final Recommended Decision, FCC 93J-2 at paras. 152-160.

---------------------------------------------------------------------------

38. Alascom also is wrong in its contention that the D.C. Circuit's

decision in Sangamon Valley Television Corp v. USA, 269 F.2d 221 (D.C.

Cir. 1959), compels the use of the Commission's ex parte procedures

applicable to restricted proceedings.\54\ To the extent that Sangamon

Valley still is good law,\55\ this situation is plainly

distinguishable. First, this proceeding is unlike Sangamon Valley

because here the Commission and the Joint Board had ex parte procedures

in place since the inception of the rulemaking to ensure that

interested parties had ample opportunity to participate in the

proceeding and to respond to all presentations made to

decisionmakers.\56\ Thus, under the ex parte procedures used in this

proceeding, all written presentations and summaries of all oral

presentations that go beyond the written comments have been placed in

the public record. See 47 CFR 1.1206. Over the course of this lengthy

proceeding many parties, including Alascom, took advantage of these

``permit but disclose'' ex parte rules, and it is hard to see how

Alascom can argue now that it was not accorded due process.

---------------------------------------------------------------------------

\54\See 47 CFR 1.1208.

\55\As the Joint Board stated in the Final Recommended Decision,

``subsequent to Sangamon Valley, the Supreme Court admonished the

courts not to force an agency to provide procedures more demanding

than those required by statute or the Constitution absent `extremely

compelling circumstances.' Vermont Yankee Nuclear Power Corp. v.

NRDC, 435 U.S. 519, 543 (1978). Such circumstances do not exist

here.'' Final Recommended Decision, FCC 93J-2 at n. 195. We note

further that the Commission has construed Sangamon Valley to apply

only to proceedings involving changes to the table of allotments. In

the Matter of Amendment of Subpart H, Part 1 of the Commission's

Rules and Regulations Concerning Ex Parte Communications and

Presentation in Commission Proceedings, Gen Dkt No. 86-255, 2 FCC

Rcd. 3011 52 FR 21051, June 4, 1987, para. 38 n. 30 (1987). Alascom

does not argue that this case has anything to do with such subject

matter.

\56\See Notice of Proposed Rulemaking, CC Docket No. 83-1376,

FCC 85-520 (released Sept. 27, 1985), 50 FR 41714 (1985). See also

Amendment of Part 67 of the Commission's Rules and Establishment of

a Joint Board, CC Docket No. 80-286, FCC 82-106 (released May 5,

1982), 89 FCC 2d 36 (1982).

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39. Second, the Alaska proceeding is not like Sangamon Valley

because, as the Joint Board explained, this situation does not involve

``conflicting claims to a valuable privilege.'' While the JSA is a

private contract, it was ``crafted and approved by the Commission on an

interim basis.''\57\ Indeed, Alascom itself recognized in an earlier

stage of the proceeding that the contractual arrangement was

established only as a result of Commission regulatory action

implementing steps to assure that rate integration would be provided to

the Alaska interstate market.\58\ The JSA does not confer any

particular privilege on Alascom, as Alascom's authority to serve the

Alaska interstate market is not derived therefrom. Moreover, Alascom

has been on notice since the inception of this proceeding that the cost

recovery arrangement provided by AT&T under the JSA was not likely to

be permanent.\59\

---------------------------------------------------------------------------

\57\Final Recommended Decision, FCC 93J-2 at para. 28.

\58\See Opposition of Alascom, Inc. to AT&T Petition for a

``Lawful Interim Division of Charges'' at 7, citing Domestic

Communications-Satellite Facilities, 35 FCC 2d 844, 856 (1972);

aff'd. on recon., 38 FCC 2d 665 (1972); aff'd. sub. nom., Network

Project v. FCC, 511 F.2d 786 (D.C. Cir. 1975).

\59\See supra note 7 and accompanying text. See also AT&T

Comments on the Proposal of the State Members of the Federal-State

Joint Board at 6 (Dec. 18, 1992).

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40. Alascom's claim that it was somehow harmed by the Joint Board's

use of nonrestricted procedures is especially curious because, at the

outset of the proceeding, the Commission unequivocally put the public

on notice that such procedures would be used. As Alascom acknowledges,

the 1985 Order convening the Joint Board expressly classified the

proceeding as a nonrestricted notice and comment rulemaking.\60\ In

fact, Alascom itself has taken full advantage of the ex parte rules at

every stage of the proceeding, and only now complains that it was error

for the Commission and Joint Board to employ them. One of the main

purposes of providing notice of ex parte procedures at the commencement

of proceedings is to obtain timely public comment on those procedures.

In light of that, we believe it was incumbent upon Alascom to voice its

complaints on this process in a much more timely manner. Alascom,

however, remained silent on this issue until the eve of the Joint

Board's recommendation. Accordingly, for all of the reasons stated here

and in the Final Recommended Decision, we reject Alascom's tardy claims

that incorrect procedures were used in this proceeding.

---------------------------------------------------------------------------

\60\Alascom Application for Review at 28.

---------------------------------------------------------------------------

41. Likewise, Alascom's argument that the Sunshine Act was violated

has no merit. The Joint Board explained in detail why a gathering of

Joint Board members with no FCC commissioners present cannot properly

be called a meeting for purposes of the Sunshine Act.\61\ It also

discussed why the same is true when only one FCC commissioner is in

attendance, or when two FCC commissioners attend a nondeliberative

portion of a gathering.\62\ Since we are not faced with the various

hypotheticals posited by Alascom in its Application, there is no reason

to address whether the Sunshine Act might apply in such situation.\63\

---------------------------------------------------------------------------

\61\Final Recommended Decision, FCC 93J-2 at para. 174.

\62\Id. at paras. 175-76. Thus despite Alascom's insinuations,

the subject matter of the various meetings among the state members

of the Joint Board has no relevance because the meetings were not

subject to the Sunshine Act requirements.

\63\While Alascom states that it believes that the full Joint

Board met and deliberated in Washington, D.C. in March 1993, it

provides no basis for this allegation. In fact, no such meeting of

the Alaska Joint Board occurred. From its pleading, it appears the

Alascom inexplicably has confused the Alaska Joint Board with the

Separations Joint Board convened in CC Docket 80-286, which did

conduct an open meeting in Washington, D.C. during the month of

March 1993, after notice to the public. See Alascom Application for

Review at Attachment A.

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42. The remainder of Alascom's contentions with regard to the

Sunshine Act stem from its mistaken impression that the FCC's ex parte

rules and Sunshine ``open meeting'' rules are one and the same. The ex

parte provisions, which are contained in Sections 1.1200 through 1.1216

of the Commission's rules, deal with contacts between the public and

the Commission and specify certain time periods when such contact is

prohibited (e.g., the Sunshine Agenda period). In contrast, the

Sunshine rules, which appear in Section 0.601 through 0.607 of the

rules, implement the Sunshine Act and relate to the manner in which the

FCC conducts its open meetings. Thus, Alascom's conclusion is incorrect

that the language in the Order convening the Joint Board providing that

state commissioners be considered FCC commissioners for purposes of the

FCC's ex parte rules necessarily required Joint Board compliance with

the Sunshine rules governing open meetings.\64\ Alascom also is

incorrect that the Joint Board was subject to the open meeting rules

because it stated in the Tentative Recommendation that ex parte

presentations would be permitted ``except during the Sunshine Agenda

period.''\65\ Simply stated, the imposition of the FCC's ex parte

procedures in a Joint Board proceeding would not subject the Board to

the Sunshine Act's open meeting requirements.\66\

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\64\We note that in some circumstances, Joint Board gatherings

in this rulemaking proceeding clearly would be subject to the open

meeting requirement, e.g., when three FCC commissioners attend (a

quorum of the Commission). Also, the meeting at which we considered

the Board's Final Recommended Decision and adopted this order was

subject to the open meeting requirement.

\65\Alascom Application for Review at 28-29.

\66\Alascom offers no support for its contention that the Joint

Board meeting at which the Final Recommended Decision was adopted

somehow evaded the purpose of the Sunshine Act because little debate

or discussion occurred there, and we are unwilling to presume a

violation of the Sunshine Act based on this bald assertion. Indeed,

the October 26, 1993 open meeting was convened and conducted in

accordance with the FCC's usual procedures.

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43. Quoting language from the Final Recommended Decision that

``only the full Joint Board (of which the FCC Commissioners are a

minority) is authorized to make recommendations to the Commission,''

Alascom argues that the state members acted beyond their delegated

authority when they held state member-only meetings and issued data

requests. Even assuming arguendo that only the full Board may make

``recommendations'' to the FCC, it does not follow that the state

members are precluded from ``acting'' altogether. We find no basis for

Alascom's conclusion that the Communications Act or any other law

prohibits the state members from conferring among themselves about

Alaska issues or from asking for information from parties to the

proceeding.\67\

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\67\Even if Alascom is correct that the state members' data

requests do not appear on the record, it is hard to see how it

suffered any harm when, as Alascom acknowledges, the responses to

the data requests are in the record.

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44. Alascom further argues that the employment of Overland

Consulting, Inc. (Overland) by the Alaska Public Utilities Commission

(APUC) was tantamount to according the private consultants of other

parties to the proceeding the status of Joint Board staff. There is no

basis for this contention. At the outset, we note that just because the

State of Alaska is responsible for the APUC's funding does not mean

that the APUC stands in the shoes of the State, which is a party to

this proceeding. Likewise, the APUC's payment of Overland's fees does

not establish that Overland is acting on behalf of the state

commission. Therefore, even assuming arguendo that the APUC filed

comments in this docket, we do not think that, in the unique context of

a Joint Board proceeding, such ``advocacy'' makes a difference.\68\ All

of the state decision-makers on the Board are members of, and paid by,

state commissions. The fact that a state commission may also act as a

party on matters within its interest (e.g., jurisdictional issues) does

not mandate disqualification of the Joint Board member from that state.

In contrast to its attack on Overland, Alascom does not argue, for

example, that Commissioner Knowles or other members of her staff paid

by the APUC should have been removed from the Board. For the purposes

discussed herein, we see no distinction between Overland and

Commissioner Knowles and her staff. This is especially the case when

Alascom fails to point to any evidence demonstrating that the APUC

controlled the activities of Overland or that Overland's actions were

in any way distinguishable from those of other persons advising

Commissioner Knowles. Indeed, one of the APUC submissions cited by

Alascom shows just the opposite. In that letter, the APUC Chairman

pointed out to Alascom that Overland was hired to assist Commissioner

Knowles and staff member Lorraine Kenyon in their official Joint Board

duties, and that Alascom's request for Overland's help in preparing

data filings was a matter to be decided by the state members who issued

the data requests, not by the APUC. The contents of this submission

establish that Commissioner Knowles, in her Joint Board capacity,

rather than the APUC or the State of Alaska, directed the activities of

Overland.\69\ We agree with the Final Recommended Decision that

Overland was not representing an interested party to the proceeding

and, therefore, its participation was not improper and did not, for

example, constitute an impermissible ex parte contact.

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\68\The joint APUC/State of Alaska pleadings referred to by

Alascom all were filed in 1984-85, before the matters involved in

this proceeding were referred to the Joint Board. And, while the

APUC Chairman did make three submissions to the record in 1992 and

1993, these letters do not support Alascom's theory that the APUC

acted as an advocate on the merits in this proceeding. The first two

simply deal with matters of overlapping state/federal jurisdiction,

and request that the Commission refrain from acting on matters under

the APUC's authority. See Ex Parte Letters to Alfred C. Sikes,

Chairman, FCC, to Don Schroer, Chairman, APUC, dated July 17, 1992

and December 18, 1992. The last letter answers a request from

Alascom that the APUC Chairman intervene in the operations of the

Joint Board to direct Overland to assist Alascom in responding to

certain data requests. See Ex Parte Letter to John R. Ayers,

Executive Vice President and General Manager, Alascom, to Don

Schroer, Chairman, APUC, dated July 22, 1993. Finally, we note that

the recent letter from the APUC Chairman, concerning the

Commission's consideration of the Joint Board's recommendations,

represents under Alaskan regulations, Mr. Schroer's position, not

that of the APUC. Ex Parte Letter from Mr. Schroer to Mr. Reed

Hundt, dated May 10, 1994; Alaska Stat. Sec. 42.05.071; 3 Alaska

Admin. Code 48.020(f). In any event, this letter was filed long

after the Overland involvement of which Alascom complains.

\69\Id. See also Final Recommended Decision, FCC 93J-2 at para.

166 and n. 200.

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45. Likewise, Alascom's analysis of the relevant law is faulty when

it asserts that the use of Overland's services was impermissible

because the FCC itself lacks authority to hire the consultant. In fact,

a number of statutory provisions grant the Commission explicit

authority for such purposes. Indeed, section 410(b) of the

Communications Act permits the FCC to accept services from a state

commission. 47 U.S.C. 410(b). Likewise, section 3109 of Title 5 of the

U.S. Code (which is incorrectly cited by Alascom for the opposite

proposition) often is used by the Commission to hire experts and

consultants. Moreover, the Office of Personnel Management guidelines

construing section 3109 allow the Commission to accept such services,

with or without payment.\70\ Thus, we reject Alascom's argument that

the use of Overland's services was impermissible.

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\70\Federal Personnel Manual, Chapter 304.

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46. Finally, we conclude that there was no harm to the Alaska

public as a result of the July 1, 1993 public hearing in Anchorage. As

stated in the Final Recommended Decision, it is not apparent that the

FCC rule regarding notice for public hearings applies to this situation

since it was a Joint Board, rather than Commission, meeting. But, even

if the rule is applicable, it is hard to see how anyone was injured.

Reply comments to the hearing were accepted for almost two weeks after

the meeting, and ex parte presentations were permitted thereafter.

Indeed, Alascom acknowledges that this opportunity to file comments

elicited 39 submissions from the Alaska public.\71\ Moreover, this

proceeding has been ongoing for more than eight years, with ample

opportunity for public comment at every stage. It appears that any

person with an interest in the Alaska telephone market would have had

more than adequate notice and the occasion to present his or her views

on the subject long before the Final Recommended Decision was adopted

by the Joint Board.

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\71\It is well settled that the Commission is not required to

respond to, or to address, all pleadings. The fact that the Joint

Board may not have explicitly referred to the Alaska public's reply

comments in the Final Recommended Decision has no bearing on the

sufficiency of notice before the hearing. In any event, in reaching

our decision herein, we have considered the entire record.

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47. Accordingly, for the reasons stated above, we reject Alascom's

substantive and procedural arguments.

VI. Ordering Clauses

48. Accordingly, pursuant to the authority contained in Sections 1,

4(i)-(j), 201-203, 214, and 220 of the Communications Act of 1934 As

Amended, it is ordered that AT&T and Alascom must comply with the

recommendations of the Alaska Joint Board in the Final Recommended

Decision, which is incorporated herein by reference and clarified and

modified in this Order.

49. It is further ordered that the JSA is terminated effective

January 1, 1996.

50. It is further ordered that AT&T must file its section 214

application consistent with the requirements of this Order no later

than March 1, 1995.\72\

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\72\The Final Recommended Decision did not establish a date for

AT&T to file a section 214 application to serve Alaska. In this

order we establish a date to ensure that AT&T is prepared to serve

Alaska consistent with the requirements and time schedule of the

Final Recommended Decision as modified in this order. Because we

require in this order that AT&T file a section 214 application

consistent with the requirements of the Final Recommended Decision

as clarified and modified herein, we reject Alascom's arguments

regarding the effect of AT&T's withdrawal of its earlier filed

section 214 application to serve Alaska. See Response of Alascom,

January 12, 1994.

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51 It is further ordered that the implementation of the revised

market structure transition period begins July 1, 1994 and terminates

as of June 30, 1998. The first phase will begin on July 1, 1994 and the

second phase will begin on January 1, 1996.

52. It is further ordered that AT&T must fund a reduction in

Alascom's plant balances by a transition payment to Alascom of $150

million, in two installments ($75 million on July 1, 1994; and $75

million upon termination of the JSA).

53. It is further ordered that AT&T and Alascom SHALL FILE within

60 days of the effective date of this order, requests with the United

States Internal Revenue Service (``IRS'') and with the State of Alaska

for expedited rulings on whether the transition payment is, in whole or

in part, taxable income.\73\

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\73\We delegate to the Chief, Common Carrier Bureau the

authority to modify the AT&T transition payment to reflect the IRS

and State of Alaska tax rulings as recommended in the Final

Recommended Decision, FCC 93J-2, at para. 128, n. 170.

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54. It is further ordered that Alascom MUST PROVIDE on July 1,

1994, account balances for gross investment, depreciation reserve, and

net investment, as of March 30, 1994. Alascom MUST PROVIDE the same

information, as of September 30, 1995.\74\

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\74\The Final Recommended Decision did not establish a filing

date for this information. We conclude that this information is

required on the same dates as the installments paid by AT&T to

Alascom so that Commission staff can review the effect of the

installments on Alascom's plant accounts.

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55. It is further ordered that the transition payment SHALL BE

applied by Alascom exclusively to offset certain designated plant

account balances consistent with the Final Recommended Decision and

this order. Alascom MUST FILE with the Commission detailed proposals

for its treatment of each of the two installments of the transition

payment by July 1, 1994 and January 1, 1996, respectively.\75\

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\75\We delegate to the Chief, Common Carrier Bureau the

authority to review and dispose of Alascom's detailed proposal for

the treatment of the transition payment to verify that the $150

million transition payment is applied in accordance with this order.

We require that Alascom file its proposals for treatment of the

installments on the dates scheduled for payment by AT&T of the two

installments so that Commission staff can review the proposals in a

timely fashion.

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56 It is further ordered that AT&T must purchase a fixed dollar

amount of common carrier services from Alascom for each six month

period of the second phase of the transition period according to the

methodology adopted in the Final Recommended Decision and modified in

this order.\76\

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\76\We delegate to the Chief, Common Carrier Bureau authority to

decide issues arising with respect to the calculation of the fixed

dollar amount of Alascom services AT&T must purchase for each six

month period of the second phase of the transition period.

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57. It is further ordered that no later than September 1, 1995,

AT&T and Alascom may propose jointly an alternative method for

calculating the fixed dollar amount of Alascom's Services AT&T must

purchase for the provision of interstate MTS during the second phase of

the transition period.\77\

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\77\A deadline was not established in the Final Recommended

Decision for AT&T and Alascom to propose an alternative method for

calculating AT&T's fixed dollar purchase obligation during the

second phase of the transition period. Final Recommended Decision,

FCC 93J-2, para. 141. We establish a date to provide sufficient time

to evaluate any AT&T and Alascom proposal. We delegate to the Chief,

Common Carrier Bureau authority to review and dispose of the

proposal.

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58. It is further ordered that Alascom must file a Cost Allocation

Plan, including the categorization and allocation methodology, within

three months of the release of this Order.\78\

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\78\We delegate to the Chief, Common Carrier Bureau authority to

review and dispose of Alascom's Cost Allocation Plan submission and

to require any subsequent revision(s) based on the results of

analysis and consideration of public comment, if any.

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59. It is further ordered that ALASCOM must file common carrier

service tariffs for switching and transport for the Bush and non-Bush

areas of Alaska and cost support data no later than September 1, 1995

with a scheduled effective date of January 1, 1996.

60. It is further ordered that AT&T will treat the cost increase

associated with the $150 million payment to Alascom and the cost

decrease related to the cancellation of the JSA as exogenous costs

under our price caps rules.

61. It is further ordered that the Alascom Application for Review

filed November 29, 1993 is dismissed as an improper filing under

Section 1.115 of the Commission's rules.

62. It is further ordered that AT&T Petition for a Lawful Interim

Division of Charges, filed November 5, 1987, is dismissed as moot.

63. It is further ordered that the GCI Petition, filed January 29,

1992, is dismissed as moot.

64. It is further ordered that this order is effective thirty days

after publication in the Federal Register.

Federal Communications Commission.

William F. Caton,

Acting Secretary.

[FR Doc. 94-13107 Filed 5-26-94; 8:45 am]

BILLING CODE 6712-01-M