# Alaska Market Structure > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A94-13107 ## Record - **Collection:** Federal Register - **Document type:** Uncategorized Document - **Published:** May 27, 1994 ## Text 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. ----------------------------------------------------------------------- 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. --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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. --------------------------------------------------------------------------- \4\Final Recommended Decision, FCC 93J-2 at paras. 2-10. --------------------------------------------------------------------------- 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. --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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\ --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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. --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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. --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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\ --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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. --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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. --------------------------------------------------------------------------- \16\Final Recommended Decision, FCC 93J-2 at para. 136. --------------------------------------------------------------------------- 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. --------------------------------------------------------------------------- \17\See 47 CFR 61.44(c)(5) (1992). --------------------------------------------------------------------------- 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. --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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\ --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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\ --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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\ --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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\ --------------------------------------------------------------------------- \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). --------------------------------------------------------------------------- 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\ --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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\ --------------------------------------------------------------------------- \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). --------------------------------------------------------------------------- 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. --------------------------------------------------------------------------- \34\See Final Recommended Decision, FCC 93J-2 at para. 92. \35\47 CFR 36.126(d)(3). --------------------------------------------------------------------------- 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. --------------------------------------------------------------------------- \36\Ex parte letter from Herbert E. Marks and Andrew W. Cohen, to William F. Caton, Acting Secretary, FCC, November 19, 1993. --------------------------------------------------------------------------- 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. --------------------------------------------------------------------------- \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). --------------------------------------------------------------------------- 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. --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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. --------------------------------------------------------------------------- \41\Alascom Application for Review at 3. \42\Supplemental Order, 4 FCC Rcd at 398, para. 24. --------------------------------------------------------------------------- 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. --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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. --------------------------------------------------------------------------- \45\Alascom Application for Review at 5. --------------------------------------------------------------------------- 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. --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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\ --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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. --------------------------------------------------------------------------- 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. --------------------------------------------------------------------------- \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). --------------------------------------------------------------------------- 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). --------------------------------------------------------------------------- 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. --------------------------------------------------------------------------- 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\ --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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\ --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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. --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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. --------------------------------------------------------------------------- \70\Federal Personnel Manual, Chapter 304. --------------------------------------------------------------------------- 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. --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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\ --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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\ --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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\ --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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\ --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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\ --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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\ --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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\ --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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 --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A94-13107. Public record. Not legal advice.