Petition for Rulemaking to Reclassify AT&T Corp. as Having Dominant Carrier Status

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Chapter I

[CC Docket No. 96-61; FCC 97-366]

Petition for Rulemaking to Reclassify AT&T Corp. as Having

Dominant Carrier Status

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: The Order on Reconsideration, Order Denying Petition for

Rulemaking, and Second Order on Reconsideration in CC Docket No. 96-61

(Order) released October 9, 1997 finds no new evidence or arguments

that demonstrate that a new examination of AT&T's regulatory status is

warranted. The Order also finds no basis to impose on AT&T a service

requirement not imposed on other carriers subject to the rate averaging

and rate integration rules, and that the Commission properly included

AT&T/Alascom within the scope of the reclassification of AT&T as non-

dominant in the provision of interstate, domestic, interexchange

services. Finally, the Order clarifies that, to the extent AT&T/Alascom

has been found to be dominant in the provision of certain interstate

common carrier services (which the Commission has previously defined as

``all interstate interexchange transport and switching services that

are necessary for other interexchange carriers to provide services in

Alaska up to the point of interconnection with each Alaska local

exchange carrier.''), AT&T/Alascom's regulatory obligations with

respect to those services remain unchanged.

EFFECTIVE DATE: November 28, 1997.

FOR FURTHER INFORMATION CONTACT: Christopher Heimann, Attorney, Common

Carrier Bureau, Policy and Program Planning Division, (202) 418-1580.

For additional information concerning the information collections

contained in this Order contact Judy Boley at (202) 418-0214, or via

the Internet at [email protected].

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Order

adopted October 8, 1997, and released October 9, 1997. The full text of

this Order is available for inspection and copying during normal

business hours in the FCC Reference Center, 1919 M St., N.W., Room 239,

Washington, D.C. The complete text also may be obtained through the

World Wide Web, at http://www.fcc.gov/Bureaus/Common Carrier/Orders/

fcc97-366.wp, or may be purchased from the Commission's copy

contractor, International Transcription Service, Inc., (202) 857-3800,

1231 20th St., N.W., Washington, D.C. 20036.

SYNOPSIS OF ORDER ON RECONSIDERATION

I. Introduction

1. On October 23, 1995, the Commission issued an order granting

AT&T Corporation's (AT&T's) motion to be reclassified as a non-dominant

carrier under Part 61 of the Commission's rules and regulations. On

November 22, 1995, the State of Hawaii (Hawaii) and General

Communications, Inc. (GCI) timely filed Petitions for Reconsideration

of the Commission's AT&T Reclassification Order. For the reasons stated

below, we deny the petitions of both Hawaii and GCI.

2. On January 23, 1996, more than two months past the statutory

deadline, Total Telecommunications Services, Inc. (TTS) also filed a

Petition For Reconsideration, and a Motion For Acceptance of Petition

For Reconsideration. As discussed below, we deny TTS's motion and

dismiss its petition as untimely, and therefore do not address the

merits of its petition.

3. On December 23, 1996, GCI filed a Petition for Reconsideration

or Clarification of the Commission's Tariff Forbearance Order (61 FR

59340 (November 22, 1996)). For the reasons discussed below, we grant

GCI's petition for clarification of the Tariff Forbearance Order.

4. Finally, on December 31, 1996, the United Homeowners Association

and the United Seniors Health Cooperative (UHA), filed a Petition for

Rulemaking to Reclassify AT&T as Having Dominant Carrier Status. For

the reasons discussed below, we deny UHA's petition.

II. Petitions for Reconsideration

A. Background

5. In the AT&T Reclassification Order, the Commission reclassified

AT&T as a non-dominant carrier, based on the Commission's finding that

AT&T no longer possessed individual market power in the interstate,

domestic, interexchange market taken as a whole. The Commission

acknowledged that there was evidence in the record that AT&T, MCI and

Sprint had increased basic schedule rates in lock-step, but found that

that evidence did not support a finding that AT&T retained the power

unilaterally to raise residential prices above competitive levels. In

addition, the Commission found that, to the extent that tacit price

coordination with respect to basic schedule or residential rates in

general was occurring, the problem was generic to the

[[Page 56112]]

interexchange industry and not specific to AT&T. The Commission

concluded that concerns regarding such pricing would be better

addressed by removing regulatory requirements that may have facilitated

such conduct, such as the longer advance notice period for tariff

changes then applicable only to AT&T, and by addressing the issues

raised by these concerns in the context of a proceeding to examine the

interstate, domestic, interexchange market as a whole. We recently

reiterated our concern that ``not all segments of [the interstate,

interexchange services] market appear to be subject to vigorous

competition,'' and expressed concern about the ``relative lack of

competition among carriers to serve low volume long distance

customers.''

6. In assessing whether AT&T possessed individual market power, the

Commission followed the relevant product and geographic market

definitions adopted by the Commission in the Competitive Carrier

proceeding. In that proceeding, the Commission found, for purposes of

assessing the market power of interexchange carriers covered by that

proceeding, that: ``(1) Interstate, domestic, interexchange

telecommunications services comprise the relevant product market, and

(2) the United States (including Alaska, Hawaii, Puerto Rico, U.S.

Virgin Islands, and other U.S. off-shore points) comprises the relevant

geographic market for this product, with no relevant submarkets.'' The

Commission concluded that it should apply the foregoing market

definitions in assessing AT&T's market power, because those definitions

were applied in classifying all of AT&T's competitors as non-dominant

carriers. The Commission further stated that examination of the

substitutability of supply for interstate, domestic, interexchange

services also indicated that use of those definitions to evaluate

AT&T's market power was appropriate.

7. As a non-dominant interexchange carrier, AT&T is generally

subject to the same regulations as its long-distance competitors. In

the AT&T Reclassification proceeding, however, AT&T made certain

voluntary commitments that it described as transitional provisions

intended to address concerns expressed by various parties about

possible adverse effects of reclassifying AT&T. These commitments

concerned, among other things, service to and from the States of Alaska

and Hawaii, and other regions subject to the Commission's rate

integration policy, and geographic rate averaging. In the AT&T

Reclassification Order, the Commission accepted AT&T's commitments and

ordered AT&T to comply with those commitments.

8. On February 8, 1996, the Telecommunications Act of 1996 (1996

Act) was enacted. The 1996 Act seeks ``to provide for a pro-

competitive, de-regulatory national policy framework'' designed to make

available to ``all Americans'' advanced telecommunications and

information technologies and services ``by opening all

telecommunications markets to competition.'' Consistent with the 1996

Act's objective of ensuring that all Americans benefit from the

liberalization of telecommunications markets, the 1996 Act required the

Commission, within six months after the date of enactment, to:

adopt rules to require that the rates charged by providers of

interexchange telecommunications services to subscribers in rural

and high cost areas shall be no higher than the rates charged by

each such provider to its subscribers in urban areas. Such rules

shall also require that a provider of interstate interexchange

telecommunications services shall provide such services to its

subscribers in each State at rates no higher than the rates charged

to subscribers in any other State.

On August 7, 1996, the Commission adopted a Report and Order

implementing these statutory requirements.

9. On October 31, 1996, the Commission released the Tariff

Forbearance Order. In that order, the Commission determined that the

statutory criteria in section 10 of the Communications Act, as amended,

were met to detariff completely interstate, domestic, interexchange

services offered by nondominant interexchange carriers, and, therefore,

that the Commission would no longer allow such carriers to file tariffs

for such services pursuant to section 203 of the Communications Act.

B. Analysis

10. Petitioners raise three substantive arguments in seeking

reconsideration or clarification of the Commission's Order granting

AT&T's motion to be reclassified as a non-dominant carrier. First,

Hawaii argues that the Commission should strengthen AT&T's voluntary

commitments by requiring AT&T to serve on Hawaii and the State of

Alaska (Alaska) copies of any submissions that address the Commission's

geographic rate averaging and rate integration policies, in order to

ensure that Hawaii and Alaska have a meaningful opportunity to

participate in pre-effective review proceedings. Second, GCI maintains

that the reclassification of AT&T does not apply to AT&T/Alascom, Inc.

(AT&T/Alascom), because AT&T/Alascom is still dominant in the Alaska

market. Third, GCI argues that it is not clear which of the obligations

and conditions imposed on AT&T and Alascom by the Market Structure

Order (59 FR 27496 (May 27, 1994)), the Final Recommended Decision (58

FR 63345 (December 1, 1993)), and the Alascom Authorization Order

continue to apply now that AT&T has been reclassified as nondominant.

1. Whether the Commission Should Strengthen AT&T's Commitments

a. Positions of the Parties. 11. Hawaii requests that the

Commission strengthen the commitments made by AT&T in the AT&T

Reclassification proceeding by requiring AT&T to serve on Alaska and

Hawaii copies of any pleadings, tariff revisions or other submissions

to the Commission that purport to seek alteration or a specific

interpretation of, or otherwise affect, the Commission's rate

integration and geographic rate averaging policies, at the same time

AT&T files such submissions with the Commission. Hawaii argues that the

historical importance of the Commission's rate integration and

geographic rate averaging policies to Hawaii and Alaska, as well as the

alleged lack of reasonably priced telecommunications to Hawaii, warrant

assurance that Hawaii and Alaska will have the opportunity to voice

their concerns if AT&T proposes to depart from these policies. Hawaii

acknowledges that AT&T informally committed to give Hawaii notice of

tariff filings departing from geographic rate averaging, but maintains

that in some situations more time would be needed to ensure that it has

an opportunity to respond.

12. Alaska, CNMI, GTA, and Guam support Hawaii's request. Alaska

argues that requiring AT&T to serve Alaska and Hawaii with copies of

submissions affecting the Commission's rate integration and geographic

averaging policies would not impose a significant burden on AT&T, but

would ensure that the interests of citizens of Alaska and Hawaii are

heard before any action affecting these policies goes into effect.

CNMI, GTA and Guam contend that the Commission should require AT&T to

serve on all interested parties, not just Alaska and Hawaii, copies of

submissions that would alter the Commission's rate integration or

geographic rate averaging policies. Similarly, the LEC Associations

argue that AT&T should be required to serve copies of submissions that

depart from the Commission's established geographic averaging policies

in other states and in U.S. territories, because

[[Page 56113]]

geographic averaging is essential for maintaining universal service.

They also urge the Commission to commence a proceeding to codify its

geographic averaging polices.

13. AT&T responds that Hawaii's petition relates solely to AT&T's

voluntary commitments concerning rate integration and geographic rate

averaging, and that, since the commitments were not offered, or used,

to support the Commission's finding that AT&T lacks market power in the

overall interstate, domestic, interexchange market, the

reclassification of AT&T is appropriate. AT&T argues that the

Commission cannot modify voluntary commitments that were not the basis

for its ruling, and cannot create or impose new rules on AT&T in this

non-rulemaking proceeding. AT&T also contends that the relief sought by

the parties supporting Hawaii's petition would impose significantly

greater burdens on AT&T than are required under the Commission's tariff

filing rules for dominant carriers. AT&T concludes that the requested

relief should be rejected as unnecessary and overly burdensome, in

light of the fact that all such filings are made on the public record

at the Commission. AT&T also argues that the relief sought would exceed

the Commission's authority by requiring AT&T to make public tariff

filings not only with the Commission, but with Hawaii, Alaska, the

Northern Mariana Islands, and other state jurisdictions and U.S.

territories.

14. In reply, Hawaii argues that its petition is consistent with

the Commission's stated commitment to rate integration and geographic

averaging, and the Commission's decision to incorporate AT&T's

commitments into the AT&T Reclassification Order. It adds that its

request is also consistent with AT&T's pledge to ``work very closely on

an informal basis with representatives of the State of Hawaii on

matters affecting telecommunications there.'' Hawaii claims it is

merely seeking assurance that AT&T will honor its pledge. Hawaii

concludes that the relief it seeks would not burden AT&T or the

Commission, but would ensure that citizens of Hawaii have a meaningful

opportunity to participate in the pre-effective review of any filings

that affect these policies.

b. Discussion. 15. As noted above, on August 7, 1996, the

Commission adopted the Geographic Averaging Order (61 FR 42558 (August

16, 1996)), which implemented the geographic rate averaging and rate

integration requirements of the 1996 Act. In that Order, we adopted a

rule requiring that ``the rates charged by all providers of

interexchange telecommunications services to subscribers in rural and

high cost areas shall be no higher than the rates charged by each such

provider to its subscribers in urban areas.'' The Commission stated

that this rule ``codifies our existing geographic rate averaging

policy.'' The LEC Associations'' request that the Commission initiate a

proceeding to codify its geographic rate averaging policies is

therefore moot. The Commission also adopted a rule ``requiring that `a

provider of interstate interexchange telecommunications services shall

provide such services to its subscribers in each State at rates no

higher than the rates charged to its subscribers in any other State.'''

As required by the 1996 Act, the Commission found that the geographic

rate averaging rule applies ``to all providers of interexchange

telecommunications services, and to all interexchange

`telecommunications services,' as defined by the Act.'' Similarly, the

Commission found that the rate integration rule applies ``to all

domestic interstate interexchange telecommunications services as

defined in the 1996 Act, and all providers of such services.''

16. In the Geographic Averaging Order, the Commission also

determined that the rules adopted in that proceeding superseded the

rate averaging and rate integration commitments AT&T voluntarily made

in the AT&T Reclassification proceeding. We based this determination on

the grounds that the rules we adopted in Geographic Averaging Order

would require AT&T to provide interexchange service at geographically

averaged and integrated rates, and that these requirements incorporated

the Commission's rate averaging and rate integration policies then in

effect. We therefore released AT&T from the commitment to comply with

the Commission's earlier orders regarding rate integration and the

commitment to file any tariff containing a geographically deaveraged

rate on five business days' notice.

17. In light of Congress's codification of the Commission's rate

averaging and rate integration policies in section 254(g) of the

Communications Act, the Commission's rules implementing that section,

and the other actions taken in the Geographic Averaging Order, we find

that Hawaii's request that we impose a service requirement on AT&T has

been superseded and is now moot because AT&T cannot deaverage its rates

consistent with federal law. We also find no basis to impose on AT&T a

service requirement not imposed on other carriers subject to the rate

averaging and rate integration rules. Accordingly, for the foregoing

reasons, we find that the relief sought by Hawaii is unnecessary in

light of the Commission's implementation of the geographic rate

averaging and rate integration requirements of the Communications Act,

and of AT&T's specific voluntary commitments concerning service to

Hawaii and Alaska. We therefore deny Hawaii's petition.

2. Whether Reclassification of AT&T Applies to AT&T/Alascom

a. Position of the Parties. 18. GCI asks the Commission either to

clarify that the reclassification of AT&T does not apply to AT&T/

Alascom, Inc., or to reconsider and reverse any finding that AT&T/

Alascom is no longer dominant. GCI justifies its request on the grounds

that AT&T did not seek to reclassify Alascom as non-dominant, and that

the Commission did not address the reclassification of Alascom in the

AT&T Reclassification Order. GCI argues that the Commission found

Alascom dominant in the Alaska market in the Competitive Carrier Fifth

Report and Order (49 FR 34824 (September 4, 1984)), and has never

reversed that finding. It also contends that this finding could not be

reversed, in light of AT&T/Alascom's legally enforced monopoly in the

Alaska Bush. GCI argues that AT&T/Alascom is able to leverage its

market power beyond the Bush because of Commission policies requiring

other carriers serving Alaska to purchase Bush distribution services

from AT&T/Alascom. GCI also argues that it is unclear how long AT&T/

Alascom's market power in the Alaska Bush will persist. GCI adds that,

even if the Alaska Bush were opened immediately, it would take

significant time for the market to become workably competitive, because

of the time necessary to construct a competing network.

19. Alaska and MCI likewise claim that the Commission's

reclassification of AT&T does not affect AT&T/Alascom's classification

as a dominant carrier. Alaska argues that, in reclassifying AT&T, the

Commission noted that Alascom continues to be ``governed by dominant

carrier rules where it has a facilities monopoly, namely the Bush

areas,'' and therefore that the AT&T Reclassification Order does not

affect the classification of AT&T Alascom, Inc. MCI argues that the

Commission's reclassification of AT&T as non-dominant in the domestic

market was based on market characteristics in the

[[Page 56114]]

``lower 48'' states, which are not representative of the Alaska market.

It adds that a separate finding that AT&T/Alascom does not possess

market power in Alaska is therefore required, but that such a

determination is impossible to make and support at this time.

20. AT&T responds that there is no basis for excluding AT&T/Alascom

from the ambit of the AT&T Reclassification Order, because the

Commission expressly found that AT&T lacked market power in the

domestic interexchange market as a whole, which AT&T claims is the only

relevant market for this purpose. AT&T argues that the fact that AT&T

(or AT&T/Alascom) may be the major supplier of specific services does

not alter the analysis, and that the Commission has never definitively

held that a carrier must lack the ability to control the price of every

service in the relevant market before it can be classified as non-

dominant. AT&T maintains that its voluntary commitments to continue

rate integration for Alaska and to comply with the Commission's orders

relating to Alaska necessarily apply to AT&T/Alascom, and that the

commitments assume that AT&T/Alascom is included within the scope of

the AT&T Reclassification Order.

21. AT&T further responds that the Commission found that, to the

extent AT&T is able to control price at all, it is only with respect to

specific service segments that are either de minimis in relation to the

overall market, or exposed to increasing competition so as not to

affect materially the overall market. AT&T argues that these conditions

apply to the Alaska Bush, which generates less than five one-hundredths

of one percent (0.0005) of total industry revenue, an amount that AT&T

claims is de minimis and affords AT&T/Alascom no power in the overall

relevant market. AT&T concludes there is therefore no basis to treat

AT&T differently from its competitors, or to treat AT&T/Alascom

differently from the rest of AT&T.

22. GCI counters that AT&T does not rebut GCI's claim that AT&T

retains an absolute monopoly, and thus market power, in the Alaska

market. GCI maintains that AT&T's suggestion that Alascom's market

power in Alaska can be ignored as ``de minimis'' is contrary to prior

Commission rulings and AT&T's own statements. Specifically, GCI

contends that, in classifying Alascom as a dominant interexchange

carrier, the Commission focused solely on Alascom's position in the

Alaska market, and did not require Alascom to be dominant throughout

the U.S. market as a whole. GCI adds that, as recently as August 1995,

the Commission identified Alaska as a separate relevant interexchange

market. Specifically, GCI maintains that, while the Commission spoke of

a single national market, the Commission identified that market as

distinct from the Alaska market occupied by Alascom and in which

Alascom retained market power. GCI also claims that AT&T's own

pleadings in the Alaska Joint Board Proceeding contemplate that AT&T

could be classified as dominant in the lower 48 states, but non-

dominant in Alaska, because of different market characteristics and

circumstances. GCI concludes that the Commission classified Alascom as

a dominant carrier based on its legally protected monopoly position in

the Alaska market, which it alleges has never changed, and that AT&T's

purchase of Alascom did nothing to reduce Alascom's market power in

Alaska.

23. In its petition for reconsideration or clarification of the

Commission's Tariff Forbearance Order, GCI requests the Commission

either to clarify that the Tariff Forbearance Order did not detariff

AT&T/Alascom's provision of ``common carrier'' services, (The

Commission has defined Alascom's ``common carrier'' services as ``all

interstate interexchange transport and switching services that are

necessary for other interexchange carriers to provide services in

Alaska up to the point of interconnection with each Alaska local

exchange carrier.'') or to reconsider and reverse any finding that

AT&T/Alascom is not required to file a tariff for such services. In

support of its petition, GCI argues that AT&T, in the AT&T

Reclassification proceeding, made certain voluntary commitments,

including a commitment that AT&T/Alascom would provide ``common

carrier'' services under tariff. In response to GCI's petition, AT&T

states that it ``does not interpret the [Tariff Forbearance Order] to

require the detariffing of Alascom's Common Carrier Services.'' The

American Petroleum Institute (API) disagrees with GCI and argues that,

to the extent AT&T/Alascom's services are interstate, domestic,

interexchange services offered by a nondominant interexchange carrier,

the Tariff Forbearance Order completely detariffed those services.

b. Discussion. 24. AT&T/Alascom offers certain interstate ``common

carrier'' services. As noted above, in the Market Structure Order, the

Commission defined Alascom's ``common carrier'' services as ``all

interstate interexchange transport and switching services that are

necessary for other interexchange carriers to provide services in

Alaska up to the point of interconnection with each Alaska local

exchange carrier.'' For purposes of our discussion here, we refer to

AT&T/Alascom's ``common carrier'' services as those services were

defined in the Market Structure Order. In the Market Structure Order,

the Commission adopted the recommendation of the Federal-State Alaska

Joint Board in the Final Recommended Decision that Alascom be required

to provide such services to interexchange carriers under tariff on a

nondiscriminatory basis at rates that reflect the cost of the services

(i.e., on dominant carrier basis). AT&T concedes that, to the extent

that AT&T/Alascom's ``common carrier'' services are not interstate,

domestic, interexchange telecommunications services as addressed in the

AT&T Reclassification Order, the classification of those services is

not affected by that Order. AT&T further concedes that the Tariff

Forbearance Order does not require the detariffing of AT&T/Alascom's

``common carrier'' services. Indeed, the Commission noted in the AT&T

Reclassification Order, and we clarify here, that, to the extent AT&T/

Alascom has been found to be dominant in the provision of ``common

carrier'' services, as defined above, AT&T/Alascom's regulatory

obligations with respect to those services remain unchanged, and

therefore AT&T/Alascom is required to file tariffs for such services on

a dominant carrier basis.

25. In addition to the foregoing ``common carrier'' services

offered to interexchange carriers, AT&T/Alascom provides interstate,

domestic, interexchange services to end-user customers in Alaska. For

the reasons set forth below, we reject GCI's petition for

reconsideration and find no basis to exclude AT&T/Alascom's provision

of these services from the scope of the AT&T Reclassification Order.

26. We reject the suggestion by GCI, MCI and Alaska, that, in order

to reclassify AT&T/Alascom as a non-dominant carrier with respect to

its provision of interstate, domestic, interexchange services, the

Commission must assess AT&T/Alascom's market power in the Alaska

market, rather than in the overall interstate, domestic, interexchange

services market. The Commission's decision in the Competitive Carrier

Fifth Report and Order to regulate Alascom as a dominant carrier did

not, as GCI implies, disavow or modify the ``all interstate, domestic,

interexchange services'' market definition adopted in the Competitive

Carrier Fourth Report and Order (48 FR 52452 (November 18,

[[Page 56115]]

1983)) by ``focus[ing] solely on Alascom's position within the Alaska

market.'' Rather, the Commission concluded that Alascom should be

regulated as dominant, without reaching the issue of relevant market

definitions, because it was concerned that the Commission's rate-

integration policy for interstate MTS and WATS services to

noncontiguous domestic points, which limited rate-integration payments

only to Alascom, might limit the ability of other carriers to compete

in serving Alaska.

27. In addition, we find that GCI mischaracterizes the Alascom

Authorization Order, in arguing that the Commission there identified

Alaska as a separate relevant interexchange market and therefore that

we are required to analyze separately AT&T/Alascom's market power in

Alaska, for purposes of classifying AT&T/Alascom as non-dominant in the

interstate, domestic, interexchange market. While, in the Alascom

Authorization Order, the Commission did identify two relevant product

markets for purposes of evaluating the proposed merger of AT&T and

Alascom, the markets it identified were: (1) ``interexchange

telecommunications services within Alaska (the `Alaska market'),''

which was the principal business of Alascom; and (2) ``interstate

interexchange telecommunications (`the All Interexchange Market'),''

which AT&T provided, and which included Alascom's and Alaska Telecom's

proposed undersea fiber cable services. In that Order, the Commission

did not identify the provision of interstate, domestic, interexchange

services to Alaska as a separate relevant product or geographic market.

Indeed, the Commission specifically noted that its identification of

interstate interexchange telecommunications (including Alascom's and

Alaska Telecom's proposed undersea fiber cable services) as a relevant

product market was ``consistent with the Commission's earlier findings

of a single market for all interstate interexchange services.'' We note

that GCI, in quoting the foregoing sentence, failed to include the word

``interstate,'' which qualified the term ``interexchange services.'' We

believe that the Commission's reference to ``interstate interexchange

services,'' and not to ``interexchange services'' generally, is central

to the meaning of the Commission's statement and hence to a complete

understanding of this statement's relevance in the present context.

Thus, the Commission did not, in the Alascom Authorization Order,

disavow or modify in any way, the ``all interstate, domestic,

interexchange services'' market definition adopted in the Competitive

Carrier Fourth Report and Order.

28. Accordingly, we reject GCI's argument that, based on the

Alascom Authorization Order and the Competitive Carrier Fifth Report

and Order, the Commission must analyze separately AT&T/Alascom's market

power in Alaska for purposes of classifying AT&T/Alascom as non-

dominant in the interstate, domestic, interexchange market. Rather, we

affirm our determination in the AT&T Reclassification Order that,

consistent with the conclusions reached in Competitive Carrier Fifth

Report and Order, the appropriate relevant geographic market for

purposes of assessing AT&T's market power was a ``'single national

relevant geographic market (including Alaska, Hawaii, Puerto Rico, U.S.

Virgin Islands, and other U.S. offshore points).''' We conclude that,

pursuant to Commission policy in effect at the time of the AT&T

Reclassification Order, the Commission properly included AT&T/Alascom

within the scope of the classification of AT&T as non-dominant in the

provision of interstate, domestic, interexchange services.

29. Subsequent to GCI's filing of its Petition for Reconsideration,

the Commission adopted the LEC Interexchange Order (62 FR 35974 (July

3, 1997)), which revises the Commission's approach to defining relevant

geographic and product markets for purposes of determining whether a

carrier should be regulated as dominant or non-dominant in the

provision of interstate, domestic, interexchange services.

Specifically, in the LEC Interexchange Order, we defined the relevant

geographic market for interstate, domestic, interexchange services as

``all possible routes that allow for a connection from one particular

location to another particular location (i.e., a point-to-point

market).'' We clarified, however, that we would

treat, in general, interstate, long distance calling as a single

national market unless there is credible evidence suggesting that

there is or could be a lack of competition in a particular point-to-

point market or group of point-to-point markets, and there is a

showing that geographic rate averaging will not sufficiently

mitigate the exercise of market power, we will refrain from

employing the more burdensome approach of analyzing separately data

from each point-to-point market.

30. Considering GCI's Petition for Reconsideration according to the

market definition approach established in the recent LEC Interexchange

Order, we conclude that, even assuming arguendo that GCI's petition

presents credible evidence suggesting a lack of competition with

respect to domestic, interstate, interexchange service in Alaska, GCI's

petition fails to demonstrate that geographic rate averaging will not

sufficiently mitigate the exercise of market power, if any, by AT&T/

Alascom in Alaska.

31. In the Geographic Averaging Order, we found that the 1996 Act

required the Commission to mandate rate integration among all states,

territories and possessions, and held that ``this goal is best achieved

by interpreting `provider' to include parent companies that, through

affiliates, provide service in more than one state.'' We stated that

``nothing in the record supports a finding that Congress intended to

allow [interexchange carriers] to avoid rate integration by

establishing subsidiaries that provide service in limited areas.''

Applying this general rule in a specific context, we held that GTE, for

purposes of section 254(g), was required to integrate its rates for

domestic, interstate, interexchange services across affiliates. We find

that, pursuant to the rule established in the Geographic Averaging

proceeding, AT&T, like GTE, is required to integrate and average its

rates across affiliates, including AT&T/Alascom.

32. Because AT&T is required to integrate and average its rates

geographically for interstate, domestic, interexchange services across

all of its affiliates, including AT&T/Alascom, we believe that AT&T/

Alascom could not raise and sustain prices for such services above the

competitive level in Alaska, unless AT&T were able profitably to charge

supracompetitive prices in the ``lower 48'' states. Nothing in the

record of this reconsideration proceeding supports a reversal of our

determination in the AT&T Reclassification Order, that ``AT&T neither

possesses nor can unilaterally exercise market power within the

interstate, domestic, interexchange market taken as a whole,'' which

includes the ``lower 48'' states. Nor is there any evidence in the

record on reconsideration to support a finding that geographic rate

averaging, together with AT&T's lack of market power in the ``lower

48,'' will not mitigate the exercise of market power, if any, by AT&T/

Alascom in Alaska. Therefore, we find no reason to analyze separately

AT&T/Alascom's market power in Alaska. Accordingly, we find that AT&T/

Alascom is appropriately classified, as established in the AT&T

Reclassification Order, as non-dominant

[[Page 56116]]

in the provision of interstate, domestic, interexchange services.

3. Whether the Commission Should Clarify the Requirements of the Alaska

Orders That Continue to Apply to AT&T and AT&T/Alascom

a. Position of the Parties. 33. GCI requests that the Commission

clarify which requirements of the Commission's Alaska Orders continue

to apply to AT&T and AT&T/Alascom. GCI argues that, while AT&T made a

generalized promise to comply with outstanding Commission orders

relating to Alaska in the AT&T Reclassification proceeding, it is

impossible to determine which requirements of the Alaska Orders AT&T

has specifically agreed to follow, and which it will try to contest or

ignore.

34. GCI adds that, as a non-dominant carrier, AT&T may be able to

discriminate and to deaverage its Alaska rates by providing Alaska

services through two entities--AT&T and AT&T/Alascom. GCI argues that,

although the Final Recommended Decision provided that AT&T would remain

subject to Section 214 entry and exit certification requirements, non-

dominant status removes the requirement that AT&T obtain Section 214

authority to serve the Alaska market. GCI further argues that, if AT&T

provides separate service to Alaska pursuant to separate tariffs from

those filed by AT&T/Alascom, AT&T will be able to discriminate between

customers served by AT&T and customers served by AT&T/Alascom. GCI also

claims that it will be impossible to determine whether AT&T is

integrating Alaska rates into its domestic rate schedule, and that any

difference in rates or offerings between AT&T and AT&T/Alascom would

call into question which rate is appropriate for purposes of judging

rate integration.

35. Finally, GCI argues that separate service by AT&T would

disadvantage captive monopoly customers that buy service under the

AT&T/Alascom common carrier services tariff, because, to the extent

AT&T provides separate service to Alaska and does not use the carrier

services of AT&T/Alascom, AT&T will reduce traffic on the AT&T/Alascom

network and drive up rates for AT&T/Alascom's captive monopoly

customers. GCI states that all carriers, including AT&T, are required

to buy Alaska distribution services under the AT&T/Alascom carrier

services tariff.

36. Alaska, supporting GCI's request for clarification, notes that

AT&T committed to comply with the Commission's orders regarding rate

integration and with all the obligations and conditions set forth in

the Alaska Joint Board Proceeding and the Alascom Authorization Order.

Alaska requests the Commission to clarify the AT&T Reclassification

Order if there is any uncertainty on these points.

37. AT&T responds that GCI's request for clarification is

inappropriate, because it seeks to inject into this proceeding issues

already litigated in other dockets. AT&T adds that its voluntary

commitments assume that both AT&T and its AT&T/Alascom affiliate will

continue to adhere to the Commission's orders regarding the

restructuring of the Alaska market. In addition, AT&T notes that the

Commission defined Alascom's ``common carrier'' services as interstate

interexchange transport and switching services necessary for other

interexchange carriers to provide service in Alaska up to the point of

interconnection with LECs. As previously noted, AT&T concedes that, to

the extent AT&T/Alascom's ``common carrier'' services are not domestic

interstate interexchange services as addressed in the AT&T

Reclassification Order, the classification of those ``common carrier''

services is not affected by that Order, and, therefore, that, to the

extent Alascom's ``common carrier'' services have been found to be

dominant, AT&T/Alascom's regulatory obligations relating to those

services remain unchanged.

b. Discussion. 38. We believe that there is no ambiguity concerning

the requirements of the Alaska Orders that continue to apply to AT&T

and AT&T/Alascom, but for the sake of clarity we note that the AT&T

Reclassification Order contains a lengthy and detailed statement of

both AT&T's and AT&T/Alascom's obligations with respect to Alaska. In

addition, AT&T has committed to comply voluntarily with all the

conditions and obligations set forth in the Alaska Orders, and has

specifically acknowledged that AT&T's commitment applies to AT&T/

Alascom. Moreover, as the Commission noted in the AT&T Reclassification

Order, any failure by AT&T or AT&T/Alascom to comply with any of the

conditions and obligations in the Alaska Orders may result in the

imposition of forfeitures on AT&T or AT&T/Alascom, or a revocation of

their Commission licenses. In addition, if GCI believes that either

AT&T or AT&T/Alascom has failed to honor the commitment to comply with

all of the conditions and obligations in the Alaska Orders, GCI may

seek relief under Section 208 of the Communications Act.

39. We also reject GCI's claim that AT&T may be able to deaverage

its Alaska rates by providing Alaska services through two entities. As

an initial matter, we note that, contrary to GCI's suggestion, the

reclassification of AT&T as a non-dominant carrier did not remove the

requirement that AT&T obtain Section 214 authority to serve the Alaska

market. As we stated in the AT&T Reclassification Order, AT&T may build

or lease facilities to serve the Alaska market subject to dominant

carrier authorization rules. Moreover, as discussed above, in the

Geographic Averaging Order, we found that Congress did not intend to

allow interexchange carriers to avoid the rate integration requirements

of the 1996 Act by establishing subsidiaries that provide service in

limited areas. As noted above, we find that, pursuant to the rule

established in the Geographic Averaging Order, AT&T must integrate and

average its rates across its affiliates. Accordingly, AT&T may not

deaverage its Alaska rates by providing services to Alaska through two

entities.

4. Other Matters

40. On January 23, 1996, well after the statutory deadline for

filing petitions for reconsideration of the AT&T Reclassification

Order, TTS filed a Petition for Reconsideration requesting that the

Commission reclassify AT&T as dominant on the grounds that AT&T retains

a dominant position in the interstate, domestic, interexchange market,

and has abused, and is likely to continue to abuse, its dominant

position in the market. On the same date, TTS filed a motion for

acceptance of its late-filed petition for reconsideration. TTS states

that it was unable to file its petition before the statutory deadline

because AT&T's ``bad acts,'' on which TTS's petition is based, did not

occur until November 22, 1995, the due date for filing petitions. TTS

alleges that its petition was delayed further by its attempt to

negotiate with AT&T to resolve their dispute, and by the blizzard in

Washington, D.C., in January, 1996. TTS maintains that these facts

establish substantial justification and good cause for the Commission

to accept TTS's late-filed petition.

41. On April 15, 1997, TTS filed, in the record of the UHA Petition

for Rulemaking proceeding, a Supplement to Petition for Reconsideration

and a Motion to Accept Supplement to Petition for Reconsideration. TTS

states that the information in its supplement was not available to TTS

at the time it filed its petition for reconsideration and that the

information is necessary in order for the Commission to have a complete

record.

42. Section 405 of the Communications Act, provides, in

[[Page 56117]]

relevant part, that: ``[a] petition for reconsideration must be filed

within thirty days from the day upon which public notice is given of

the order, decision, report, or action complained of.'' Section 1.4(b)

of the Commission's rules defines the date of public notice of the

final Commission action. Section 1.4(b)(2) provides that, for ``non-

rulemaking documents released by the Commission or staff, whether or

not published in the Federal Register, the release date'' is date of

public notice. Accordingly, public notice in this case was given on

October 23, 1995, the date on which the AT&T Reclassification Order was

released. Therefore, petitions to reconsider that decision were, as TTS

concedes, due on or before November 22, 1995.

43. Because the period for filing petitions for reconsideration is

prescribed by statute, the Commission may not, with one narrow

exception articulated by the courts, waive or extend the filing period.

The narrow exception to this statutory filing period allows the

Commission to extend or waive the 30-day filing period only in an

``extraordinary case,'' such as where the late-filing is due to the

Commission's failure to give a party timely notice of the action for

which reconsideration is sought. In such circumstances, the petitioner

must demonstrate that the delay in filing is attributable to Commission

error in giving notice and that it acted promptly upon discovering the

adoption of the Commission's decision.

44. TTS has not demonstrated that its delay in filing is

attributable to Commission error in giving notice. Indeed, TTS does not

dispute that the Commission gave appropriate notice by the release of

the AT&T Reconsideration Order on October 23, 1995. As noted above, TTS

states only that its petition was delayed because the alleged actions

on which TTS's petition is based, did not occur until the due date for

filing petitions for reconsideration, and that its petition was further

delayed by its attempt to negotiate with AT&T as well as by the

blizzard in Washington, D.C., in January, 1996. Accordingly, we find

that TTS does not meet the narrow exception of an ``extraordinary

case'' in which the Commission may extend or waive the statutory

deadline for filing petitions for reconsideration. We, therefore, deny

TTS's Motion for Acceptance of Petition for Reconsideration, and

dismiss its petition as untimely. Because we dismiss TTS's petition for

reconsideration, we also deny TTS's Motion to Accept Supplement to

Petition for Reconsideration and dismiss TTS's Supplement to Petition

for Reconsideration.

III. Petition for Rulemaking

45. On December 31, 1996, the United Homeowners Association and the

United Seniors Health Cooperative (UHA) filed with the Commission a

Petition for Rulemaking to Reclassify AT&T as Having Dominant Carrier

Status. UHA requests that the Commission undertake a review and

``reinstate AT&T's dominant carrier status.'' We note that UHA refers

generally to AT&T's status as a carrier of ``long distance service,''

rather than more specifically to AT&T's status as a provider of

domestic, interstate, interexchange service. Because UHA consistently

refers in its petition only to the Commission's October 23, 1995,

decision, we are treating the petition as applying only to AT&T's

regulatory status with respect to domestic, interstate, interexchange

service, and not international services. In support of its petition,

UHA argues that consumers are adversely affected by the classification

of AT&T as a non-dominant interexchange carrier, as demonstrated by a

rate increase AT&T instituted in November 1996. UHA argues that,

``without regulatory supervision, AT&T consumers will have no

protection from unjust rates increases,'' and that classifying AT&T as

dominant is necessary in order to monitor AT&T's rate increases until

there is meaningful competition in the long-distance market. UHA also

points to what it alleges is AT&T's 54.2 percent market share as

evidence that AT&T has market power in the long distance market and

therefore should be classified as dominant.

46. TTS submitted comments in support of UHA's petition. TTS cites

to alleged discriminatory conduct by AT&T against TTS as evidence of

AT&T's abuse of its market power and the need therefore to reclassify

AT&T as a dominant carrier.

47. In opposition to UHA's petition, AT&T argues that the Petition

for Rulemaking should be denied because UHA's arguments already were

addressed and properly rejected in the orders classifying AT&T as non-

dominant for domestic and international services. AT&T also maintains

that UHA's allegations, even if true, are immaterial under the

Commission's rules defining dominant carriers. AT&T notes that the

Commission examined and found in the AT&T Reclassification Order that

AT&T does not retain market power in the domestic, interstate,

interexchange market. In addition, AT&T maintains that UHA is mistaken

in arguing that a change in AT&T's regulatory classification would

affect AT&T's ability to make the price changes referenced by UHA. AT&T

claims that, even as a dominant carrier subject to price cap

regulation, AT&T did not need Commission approval to raise rates within

price cap limits. AT&T further argues that UHA's ``unsupported claims

of `tacit collusion' '' among various interexchange carriers does not

support regulatory action aimed solely at AT&T, and that ``any attempt

to paint the long distance industry as an oligopoly must fail.''

Finally, relying on the Commission's AT&T Reclassification Order, AT&T

maintains that market share is not the sole determining factor of

whether a firm possesses market power, and that the 54.2 percent market

share figure referenced by UHA ``is even lower than the market share

cited in the [AT&T Reclassification Order], and shows a further erosion

of AT&T's market share since the Order was released.''

48. In reply to AT&T's Opposition, Pacific takes no position on

whether AT&T should be reclassified as a dominant carrier. Pacific only

responds to AT&T's argument that there is no evidence of tacit

collusion among the big interexchange carriers. Pacific argues that the

evidence of tacit collusion ``is not `inconclusive' anymore,'' that

AT&T has continued to raise prices after reclassification, and that new

facilities-based entry by the Regional Bell Operating Companies is the

best solution to rising prices.

49. We find that the arguments raised by UHA's petition were

addressed and decided in the AT&T Reclassification Order. Neither UHA,

Pacific nor TTS has presented any new evidence or arguments that

demonstrate that a new examination of AT&T's regulatory status is

warranted. We thus decline to initiate a proceeding at this time to

classify AT&T as a dominant carrier. ``Petitions [for rulemaking] * * *

which plainly do not warrant consideration by the Commission may be

denied or dismissed without prejudice to the petitioner.'' Accordingly,

we deny without prejudice UHA's Petition for Rulemaking.

IV. Ordering Clauses

50. Accordingly, it is ordered That Hawaii's Petition for

Reconsideration is hereby denied.

51. It is further ordered That GCI's Petition for Reconsideration

or Clarification of the AT&T Reclassification Order is hereby denied.

[[Page 56118]]

52. It is further ordered That GCI's Petition for Clarification of

the Tariff Forbearance Order is granted.

53. It is further ordered That TTS's Motion for Acceptance of

Petition for Reconsideration is hereby denied, and TTS's Petition for

Reconsideration is hereby dismissed.

54. It is further ordered That TTS's Motion to Accept Supplement to

Petition for Reconsideration is hereby denied, and TTS's Supplement to

Petition for Reconsideration is hereby dismissed.

55. It is further ordered That the United Homeowners Association

and United Seniors Health Cooperative's Petition for Rulemaking is

hereby denied.

Federal Communications Commission.

William F. Caton,

Acting Secretary.

[FR Doc. 97-28613 Filed 10-28-97; 8:45 am]

BILLING CODE 6712-01-P