[Federal Register Volume 59, Number 102 (Friday, May 27, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-13107]


[[Page Unknown]]

[Federal Register: May 27, 1994]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 36

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

 

Alaska Market Structure

agency: Federal Communications Commission.

action: Final rule.

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summary: This order adopts a new market structure for Alaska 
telecommunications in order to achieve five objectives: preservation of 
universal service; continuation of rate integration; maintenance of 
revenue requirement neutrality; allowance of market-based competitive 
entry; and encouragement of increased efficiency. The order requires a 
transition to the new market structure from July 1, 1994 to June 30, 
1998. The order requires that: (1) AT&T provide interstate MTS service 
at integrated rates to and from Alaska and between Alaska and Hawaii; 
(2) AT&T and Alascom continue to provide service jointly under the 
Joint Services Arrangement (JSA) for one and one-half years; (3) the 
JSA terminates effective January 1, 1996; (4) AT&T must pay Alascom 
$150 million transition payment to reduce Alascom's plant accounts; (5) 
Alascom must provide interexchange carriers common carrier services 
under tariff, for Bush and nonBush areas, to provide services in 
Alaska; and (6) AT&T must purchase a fixed amount of service from 
Alaska for two and one-half years after termination of the JSA.

effective date: June 27, 1994.

for further information contact: Rose Crellin, Policy and Program 
Planning Division, (202) 632-1292 and Robert Hall, (202) 634-1861.

SUPPLEMENTARY INFORMATION:

Integration of Rates and Services for the Provision of Communications 
by Authorized Common Carriers Between the Contiguous States and Alaska, 
Hawaii, Puerto Rico and the Virgin Islands; Memorandum Opinion and 
Order

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

    Adopted: May 19, 1994.
    Released: May 24, 1994.

    By the Commission:

I. Introduction

    1. On October 26, 1993, the Federal-State Alaska Joint Board 
(Board) adopted the Final Recommended Decision in CC Docket 83-1376.\1\ 
The Final Recommended Decision presents a carefully integrated plan to 
meet the five objectives that it recommends should govern interstate 
telecommunications services between Alaska and the contiguous states 
(``Lower 48'') and between Alaska and Hawaii. We hereby adopt these 
five objectives and agree with the Joint Board that, based on the 
record, the Final Recommended Decision best achieves these five 
objectives: preservation of universal service; continuation of rate 
integration;\2\ maintenance of revenue requirement neutrality;\3\ 
allowance of market-based competitive entry; and encouragement of 
increased efficiency.
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    \1\Alaska Joint Board Final Recommended Decision, FCC 93J-2 
(released October 29, 1993) (Final Recommended Decision) 58 FR 
63345, December 1, 1993. See also Integration of Rates and Services 
for the Provision of Communications by Authorized Common Carriers 
between the Contiguous States and Alaska, Hawaii, Puerto Rico, and 
the Virgin Islands, CC Docket No. 83-1376, RM 3376, Alaska Joint 
Board Tentative Recommendation, 8 FCC Rcd 3684 (1993) 58 FR 31204, 
June 1, 1993 (Tentative Recommendation).
    \2\The Commission's rate integration policy requires the 
integration of rates for interstate message telephone service and 
wide area telecommunications service to and from Alaska into AT&T's 
domestic rate pattern. In this order, those services are hereinafter 
referred to as MTS. Establishment of Domestic Communications 
Satellite Facilities, 35 FCC 2d 844, 856-57 (1972), aff'd on recon., 
38 FCC 2d 665 (1972), aff'd sub nom. Network Project v. FCC, 511 
F.2d 786 (D.C. Cir. 1975).
    \3\The Joint Board has described its objective of revenue 
requirement neutrality as implementing changes in the Alaska market 
structure ``without generating any material increase in the 
intrastate revenue requirement.'' Supplemental Order, 4 FCC Rcd 395 
(1989) 54 FR 7471, February 21, 1989.
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    2. We also conclude that implementation of the new market structure 
recommended by the Board will increase competition and will further 
economic growth in Alaska by lowering prices and stimulating demand for 
telecommunications services. Economic growth will be enhanced because 
the new market structure will stimulate, through lower prices, and 
facilitate, through new services, transactions between consumers and 
businesses in the state of Alaska and the rest of the nation. Increased 
competition should also encourage additional investment in the Alaska 
telecommunications infrastructure. Under this new market structure, we 
conclude that businesses and consumers can enjoy these benefits at the 
same time we preserve universal service, revenue requirement 
neutrality, and rate integration. In this order we thus adopt, with 
clarifications and minor modifications, the recommendations of the 
Board and establish implementation requirements.

II. Summary of the Final Recommended Decision

    3. In the Final Recommended Decision, the Board concluded that the 
Joint Services Arrangement (JSA) should be terminated, subject to the 
adoption and implementation of suitable transition mechanisms.\4\ Under 
the recommended market structure, the American Telephone & Telegraph 
Co. (AT&T) would provide MTS services between Alaska and the Lower 48 
(northbound and southbound), and between Alaska and Hawaii, at 
integrated rates and under the terms and conditions applicable to 
AT&T's provision of services in the Lower 48. After the JSA terminates, 
Alascom, Inc. (Alascom) could offer interstate MTS independently from 
AT&T under its own tariff and with no obligation to charge AT&T's 
integrated rates.
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    \4\Final Recommended Decision, FCC 93J-2 at paras. 2-10.
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    4. Under the Final Recommended Decision, Alascom would provide 
interexchange carriers (IXCs) common carrier services under tariff 
offered on a non-discriminatory basis at rates that reflect the costs 
of services.\5\ Alascom's tariff would have separate rate schedules for 
locations subject to facilities competition (non-Bush) and for 
locations where Alascom has a facilities monopoly (Bush). The costs of 
service in each of these categories would be defined pursuant to a cost 
allocation plan developed by Alascom and approved by the Commission.
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    \5\Alascom common carrier services are all interstate 
interexchange transport and switching services that are necessary 
for other interexchange carriers to provide services in Alaska up to 
the point of interconnection with each Alaska local exchange 
carrier.
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    5. The Final Recommended Decision also contemplates that Alascom 
would continue to provide interstate private line service upon 
reasonable request under its existing federal tariffing and Section 214 
obligations. If AT&T provides interstate private line service to or 
from Alaska, it would be required to do so under the same rate 
structures, terms, and conditions that apply to its provision of 
private line services between other states.
    6. The Board recommended a four-year transition period, beginning 
March 1, 1994. During the transition, AT&T would be required to 
purchase certain services from Alascom to meet its MTS obligations. 
There would be two phases to the transition period, with the first 
phase beginning on March 1, 1994, and the second phase beginning on 
September 1, 1995. During the first phase, AT&T would continue to 
obtain services from Alascom under the JSA for one and one-half years. 
On September 1, 1995, the JSA would terminate and Alascom's common 
carrier services would be offered to carrier customers under tariff. 
During the second phase of the transition period, lasting two and one-
half years, AT&T would be required to purchase a fixed amount of common 
carrier service from Alascom, defined as a percentage of a baseline 
revenue level. This obligation would decline to zero at the end of the 
second phase.
    7. Finally, under the Final Recommended Decision, AT&T would make a 
$150 million transition payment (in two installments of $75 million 
each) to Alascom that would be applied to reduce Alascom's total plant 
accounts.\6\
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    \6\In the Final Recommended Decision, the Alaska Joint Board 
recommended maintaining the current cost separations factor for 
circuit equipment for Alascom and United Utilities, Inc. (UUI). The 
Alaska Joint Board also recommended against establishing the Alaska 
Fund proposed in the Tentative Recommendation.
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III. Commission Adoption of the Alaska Joint Board's Final Recommended 
Decision

    8. The Commission has wrestled for over 20 years with the question 
of what type of telecommunications structure for Alaska would best 
serve the public interest.\7\ Over this time period there have been 
significant changes in the domestic telecommunications market in terms 
of the number of carriers that provide interstate service, the types of 
services they provide, and the technologies they use to provide 
telecommunications services. While these changes have been occurring 
nationally, the Commission has continued to search for the market 
structure that will best meet the needs of Alaskan consumers of 
telecommunications services, incorporate into Alaska telecommunications 
the changes that have occurred nationally, and harmonize rate 
integration, competitive policies, and universal service objectives in 
Alaska.
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    \7\As early as 1972, the Commission concluded that AT&T should 
use domestic satellites to provide interstate MTS service, in 
conjunction with local carriers, to Alaska, Puerto Rico, and Hawaii 
to implement rate integration to these areas. Establishment of 
Domestic Communications Satellite Facilities, 35 FCC 2d 844 (1972), 
aff'd on recon., 38 FCC 2d 665 (1972), aff'd sub. nom. Network 
Project v. FCC, 511 F.2d 786 (D.C. Cir. 1975). In 1981, AT&T and 
Alascom began providing interstate MTS service to and from Alaska 
under the JSA. In 1982, the Commission rejected Alascom's claim to 
an exclusive right to provide interstate MTS, concluded that an open 
entry policy for Alaska interstate MTS was in the public interest, 
and authorized competitive entry into the Alaska interstate MTS 
market for non-bush locations (areas where facilities competition is 
allowed). MTS & WATS Market Structure Inquiry (Phase II), 92 FCC 2d 
787 (1982) recon. denied, FCC 83-213 (released May 9, 1983). Full 
rate integration was implemented in Alaska effective January 1, 
1987. Memorandum Opinion and Order, CC Docket No. 83-1376, FCC 86-
602 (released January 2, 1987). The JSA arrangement was continued 
between AT&T and Alascom while rate integration was implemented in 
Alaska and while the Alaska Joint Board evaluated alternative market 
structures. Notice of Proposed Rulemaking, CC Docket No. 83-1376, 
FCC 85-520 (released September 27, 1985). 50 FR 41714, October 15, 
1985.
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    9. In 1985, the Commission referred questions concerning the 
appropriate market structure for providing Alaska MTS to a Federal-
State Alaska Joint Board created pursuant to Section 410(c) of the 
Communications Act. These questions have been under review by the Board 
for over eight years. The Board has collected vast quantities of data, 
received extensive comments from interested parties, reviewed numerous 
proposals on this subject, and held a public hearing. The Final 
Recommended Decision sets forth the market structure plan for Alaska 
that the Board believes best balances its five public interest goals. 
We conclude that this new market structure will allow Alaskan 
telecommunications consumers to derive benefits from the changes in 
telecommunications services that have occurred over the last twenty 
years. We concur with the Board's evaluation of the record, and the 
legal and policy analyses and recommendations that are presented in the 
Final Recommended Decision.
    10. We agree with the legal analysis in the Final Recommended 
Decision that concludes that we have ample authority under the 
Communications Act to implement the Board's specific transition 
mechanisms.\8\ We conclude that, based on the record, the Board's 
recommendations, with modifications and clarifications in this order, 
are in the public interest as expressed in Sections 1, 201, and 202 of 
the Communications Act, because they provide a comprehensive solution 
to the market structure issues referred to the Board and because they 
best achieve the five objectives the Board adopted earlier and that we 
adopt in this Order. We conclude that the new market structure, and the 
transition mechanisms included as part of the comprehensive solution, 
are essential elements to that overall plan of ensuring universal 
service for Alaska consumers, consistent with the Communications Act 
and the Alaska Joint Board's Final Recommended Decision.
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    \8\Final Recommended Decision, FCC 93J-2 at paras. 114-127. We 
agree with the analysis in the Final Recommended Decision rejecting 
the claims that the Alaska Joint Board committed various procedural 
errors in reaching its final recommendation to the Commission. Final 
Recommended Decision, FCC 93J-2 at paras. 151-78.
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    11. We conclude that the resulting market structure will enhance 
competition, thereby increasing the availability of new services at 
lower prices for Alaska telecommunication consumers. We conclude that 
more of the benefits that consumers have derived from competition in 
the Lower 48 should be available to Alaskans. Competitive markets 
encourage carriers to adopt new technologies, develop new and 
innovative services, reduce costs by eliminating waste, provide service 
more efficiently, and improve customer service. Increased competition 
should ensure that there is continuing investment in the 
telecommunication infrastructure for Alaska both for existing and new 
services.
    12. Although the Alaska MTS market was open to competition in 
1982,\9\ we believe that because of limitations created by the JSA the 
present market structure does not produce all the benefits available 
from a competitive market.\10\ AT&T, a major competitor in the MTS 
market, is unable to build facilities in Alaska or serve Alaska 
independently because of the requirements of the JSA. AT&T may not take 
advantage of offerings of other carriers and must instead purchase all 
of its Alaska switching and transport services from Alascom. Alascom 
gains a competitive advantage because it has an assured revenue source, 
AT&T, that must pay all of Alascom's interstate costs, plus AT&T's own 
rate of return (under price cap regulation) regardless of Alascom's 
efficiency or market conditions.\11\ Thus, the JSA makes it more 
difficult for carriers other than Alascom to compete effectively in 
Alaska.\12\ The JSA also diminishes some of the rigor of a competitive 
market that would otherwise encourage Alascom to eliminate any 
potential waste and service inefficiencies. We conclude that the market 
structure in Alaska should be restructured to promote more competition, 
open entry, and improve efficiency subject to transition mechanisms 
that will enable the new market structure to develop without causing 
significant rate increases in Alaska. Accordingly, in this order, 
pursuant to Sections 1, 4(i)-(j), 201-203, 214, and 220 of the 
Communications Act,\13\ we adopt the Board's Final Recommended Decision 
with clarifications and minor modifications and establish dates for 
some of the implementation requirements.\14\
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    \9\MTS and WATS Market Structure Inquiry, (Phase II), 92 FCC 2d 
787 (1982), recon. denied, FCC 83-213 (released May 9, 1983).
    \10\In opening the Alaska market to competition we concluded 
that the benefits of competition achieved by eliminating barriers to 
entry in other markets, including ``the provision of service at the 
lowest possible cost, the reduction or elimination of waste, making 
carriers more responsive to the needs and desires of consumers, and 
making carriers respond more rapidly and efficiently to 
technological change and innovation,'' were also applicable to 
Alaska. Id.
    \11\AT&T estimates that the current shortfall of revenues for 
service under the JSA is approximately $80 million. Final 
Recommended Decision. FCC 93J-2 at para. 24, n. 25.
    \12\We note that at present General Communications, Inc. (GCI) 
is the only other facilities-based MTS provider in Alaska.
    \13\47 U.S.C. 151, 154(i)-(j), 201-203, 214, and 220.
    \14\Because we adopt the Alaska market recommendation of the 
Final Recommended Decision, we dismiss as moot the GCI petition, 
filed January 29, 1992, requesting a new proceeding to establish a 
new Alaska market structure.
    We also dismiss as moot AT&T's Petition for a Lawful Interim 
Division of Charges, filed November 5, 1987. The AT&T petition 
requested that the Commission find the existing settlement agreement 
under the JSA between AT&T and Alascom unlawful under Section 201 of 
the Communications Act. In this order we conclude that it is in the 
public interest to adopt the recommendation in the Final Recommended 
Decision that the JSA be terminated after a suitable transition 
period. We concur with the analyses in the Final Recommended 
Decision that it is within our authority to establish transition 
mechanisms to ensure the availability of universal service. The 
continuation of the JSA for the first phase of the transition period 
is an integral part of the overall plan for a new market structure 
in Alaska, which includes terminating the JSA, and important to 
achieving the objectives of revenue neutrality and universal service 
recommended by the Alaska Joint Board. Ultimately, the termination 
of the JSA is also important to achieving these objectives. Thus, we 
conclude that it is unnecessary for us to evaluate the lawfulness of 
the JSA as requested by AT&T in its petition.
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IV. Modifications to, and Clarifications of, the Recommendations in 
the Final Recommended Decision

    13. After reviewing the Final Recommended Decision, we have 
concluded that we must modify and clarify our understanding of some of 
the Joint Board's recommendations to ensure that the new market 
structure will operate in the public interest. In our judgment, these 
clarifications and modifications are consistent with the objectives 
established by the Board and are consistent with the reasoning 
contained in the Final Recommended Decision.\15\ The State Joint Board 
Members have participated in the deliberations on this order, pursuant 
to Section 410(c) of the Communications Act.
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    \15\In this order, we modify the date recommended by the Joint 
Board for the beginning of the transition (March 1, 1994) to adjust 
for the period that the Joint Board's recommendations were under 
consideration. Because the first phase of the transition will begin 
July 1, 1994, other dates have been adjusted to provide for a one 
and one-half year first phase and a two and one-half year second 
phase.
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A. Transition Payment and Reduction of Alascom Plant Accounts

    14. In the Final Recommended Decision, the Joint Board recommended 
that in applying the transition payment installments, the ``Central 
Office Switching'' Account 2210 should be designated first for 
reduction and then should be reduced by an amount that would result in 
little or no intrastate cost shift if AT&T decreased its usage of 
Alascom switches.\16\ Consistent with the Joint Board's objective of 
reducing Alascom's plant balances to reduce potential intrastate cost 
shifts, we clarify that the amount necessary to reduce Central Office 
Switching so as to produce little or no increase in intrastate revenue 
requirements be taken entirely from the first $75 million installment. 
The remaining depreciable accounts will be reduced proportionately 
using both the balance of the first installment and all of the second 
$75 million installment. As a result, the potential for significant 
intrastate cost shifts if AT&T decreases its usage of Alascom switches 
will be significantly diminished at the time of the first installment.
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    \16\Final Recommended Decision, FCC 93J-2 at para. 136.
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    15. The Final Recommended Decision did not consider how AT&T will 
account for the $150 million payment to Alascom. We conclude that the 
cost increase associated with the payment made by AT&T to Alascom is an 
extraordinary cost beyond the control of AT&T that is eligible for 
exogenous treatment under Sec. 61.44(c)(5) of our price cap rules,\17\ 
and direct AT&T to make preliminary filings forty-five days prior to 
filing tariff modifications that reflect AT&T's transition payment. 
AT&T shall include in its tariff filings the apportionment and 
explanation of the exogenous revenue requirement effects of each 
payment upon each rate that AT&T proposes to modify as a consequence of 
this decision, and shall also include in that filing the anticipated 
cost reduction associated with the termination of the JSA.
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    \17\See 47 CFR 61.44(c)(5) (1992).
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B. AT&T's Purchase of Alascom's Services

    16. The Board recommended that during the second phase of the 
transition AT&T should be obligated to purchase a fixed dollar amount 
of service from Alascom. The fixed dollar amount of service would 
decline in six month increments until it reached zero at the 
termination of the second phase of the transition period. The Board 
recommended this continuing obligation after the JSA terminates to 
avoid precipitous intrastate cost shifts if AT&T does not continue to 
purchase Alascom services. The Board concluded that the AT&T must 
purchase requirement along with other transition mechanisms will 
maintain the goals of universal service and revenue neutrality. We 
adopt these goals and the approach recommended by the Board, but 
conclude that the fixed dollar amount AT&T must purchase as calculated 
using the Board's methodology must be adjusted as discussed below.
    17. In the Final Recommended Decision the Board recommended the 
following methodology for calculating the fixed dollar amount of 
service that AT&T must purchase during the second phase of the 
transition period. The amount that AT&T must purchase for each period 
of the second phase was to be computed by applying a declining 
percentage for each six month period to a baseline revenue amount. The 
annual baseline revenue amount was to be calculated as a function of 
the demand for interstate transport and switching MTS minutes for the 
last 12 months that the JSA was in effect, multiplied by the new tariff 
rates for Alascom's Common Carrier Services.\18\ The percentage used to 
calculate the fixed dollar amount of service for each six month period 
was to decline to zero in six month increments.\19\ The required 
percentage for each six month period was to be applied to one-half of 
the annual revenue baseline to calculate the fixed dollar amount of 
services AT&T must purchase for each six month period.
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    \18\These new tariffs, as noted elsewhere in this order, would 
reflect Alascom's reduced costs after application of the transition 
payment installments.
    \19\The percentage of the baseline revenue amount to be used for 
each six month period is as follows: 90% during the first period; 
80% during the second period; 65% during the third period; 45% 
during the fourth period; and 20% during the last period. Final 
Recommended Decision, FCC 93 J-2 at n. 181.
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    18. AT&T states that the must-purchase requirement ``would require 
AT&T to pay for services which it may not be able to use.''\20\ AT&T 
argues that the only way to interpret the must-purchase requirement in 
the Final Recommended Decision is to equate the demand used to 
calculate the annual baseline revenue with the AT&T demand for 
interstate services for which AT&T bills pursuant to its own tariffs 
during the last 12 months of the JSA. Alascom argues that the Board 
intended the demand calculations to be based on the jointly provided 
services provided by both AT&T and Alascom.\21\
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    \20\Ex parte letter from Karen Jeisi, AT&T, to William F. Caton, 
Acting Secretary, FCC, dated December 28, 1993.
    \21\Opposition of Alascom, January 12, 1994.
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    19. We conclude that the must-purchase requirement applies to the 
total demand to and from Alaska under the JSA for interstate transport 
and switching MTS minutes for the last 12 months that the JSA was in 
effect rather than just AT&T's demand under the JSA. The Alaska Joint 
Board recommended a continuing obligation for AT&T to purchase some 
services from Alascom during the second phase of the transition to 
avoid precipitous shifts of Alascom's costs to the intrastate 
jurisdiction after termination of the JSA that could result from a 
sudden decrease in the use of Alascom facilities by AT&T for the 
provision of interstate MTS.
    20. We conclude, however, that we should modify the Board's 
recommendation in this area in two respects in order to achieve the 
Board's objectives. We modify the method of calculating the fixed 
dollar amount of services that AT&T must purchase in order to address 
factors that the Board did not consider when it selected its 
recommended methodology. Without the modification we now make, the 
fixed dollar amount that AT&T must purchase could give Alascom windfall 
payments over and above what is necessary to address the Board's 
concern about possible intrastate cost shifts. As noted supra, the 
State Joint Board members have participated in reaching this 
conclusion. Thus, we require two adjustments to the fixed dollar amount 
that AT&T must purchase that is calculated using the Board's 
recommended methodology.
    21. First, intrastate cost shifts are not likely to occur if 
Alascom separately provides significant interstate traffic after the 
JSA is terminated. Indeed, in these circumstances, AT&T may not be able 
to purchase the required fixed dollar amount of services from Alascom 
to fulfill the recommended post-JSA traffic loading requirement. Since 
in this case Alascom's use of its own facilities will help address the 
Board's concern about intrastate shifts, the fixed dollar amount that 
AT&T must purchase for each six month period should be adjusted to 
reflect Alascom and AT&T's relative interstate use of those facilities. 
Thus, the fixed dollar amount for each six month period during which 
AT&T must purchase services from Alascom, as calculated using the 
Board's recommended methodology, must be adjusted to reflect the 
proportion of minutes of interstate use by Alascom and AT&T.\22\
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    \22\The required adjustment is to be computed by applying the 
proportion (percentage) of MTS minutes to and from Alaska, provided 
by AT&T, in that six month period, relative to all the interstate 
MTS minutes to and from Alaska provided in that six month period, by 
AT&T and Alascom, to the unadjusted calculated fixed dollar amount 
for each six month period. For example, for each six month period, 
if AT&T carries 60% of the total interstate MTS minutes to and from 
Alaska carried by AT&T and by Alascom, then AT&T would pay 60% of 
the unadjusted fixed dollar must purchase amount for that six month 
period.
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    22. Second, after the JSA terminates, Alascom likely will be 
obtaining revenues under tariff or through leases from carriers for use 
of its facilities to provide interstate MTS. The revenues associated 
with new services purchased by other interexchange carriers must be 
deducted from AT&T's obligation to purchase Alascom services.\23\ This 
deduction recognizes that new uses of Alascom's facilities by other 
interexchange carries (for the provision of MTS services) achieves the 
same policy goals as similar purchases made by AT&T. Thus, the total of 
all MTS-related purchases by AT&T and new services purchased by other 
carriers when added together must meet the fixed obligation identified 
in the ``must purchase requirement.\24\ Again, actual interstate use of 
Alascom's facilities addresses the Board's concerns about intrastate 
cost shifts. Additional payments would unnecessarily burden AT&T and 
provide Alascom with revenues over and above that needed to address 
these concerns. Thus, the AT&T purchase level as calculated using the 
Board's recommended methodology, and as adjusted for the proportion of 
MTS minutes provided by AT&T and Alascom, must be adjusted also for any 
revenues received by Alascom for new services purchased by other 
interexchange carriers for use of its interstate MTS facilities to 
provide interstate MTS.\25\
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    \23\For purpose of this order, the term ``new services'' refers 
to purchases of Alascom interstate services used for the purpose of 
providing MTS, under lease or contract, by IXCs, other than AT&T, 
that exceeds the level of services purchased over the last twelve 
months ending January 1, 1996. Examples of new services would be new 
leases and tariff services not otherwise offered under lease prior 
to January 1, 1996. Other examples would be increases in contracts 
above the levels purchased as of the last 12 months ending on 
January 1, 1996. If contracts existing as of January 1, 1996 are 
replaced by tariffs, only the increase above levels purchased as of 
the last twelve months ending January 1, 1996 would be considered 
new services. When calculating AT&T's must purchase requirement for 
any 6 month period, new services would be determined based on 
purchases by other IXCs in that 6 month period that exceed one-half 
the level of purchases over the last twelve months ending January 1, 
1996.
    \24\All interstate services purchased under lease or contract by 
AT&T from Alascom may be used to meet AT&T's fixed dollar 
obligation, so long as those services are employed to provide 
interstate MTS service.
    \25\If requested by the Commission, AT&T and Alascom must 
provide all relevant information to include, at a minimum, the 
interstate MTS minutes and the tariff and lease revenues used to 
calculate the fixed dollar amount AT&T must purchase, including the 
adjustments we require herein. Both parties also must retain 
supporting documentation on interstate minutes and contract and 
tariff revenues for potential audit by the Commission.
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C. Alascom's Common Carrier Tariff

    23. The Final Recommended Decision stated that Alascom should be 
required to file a common carrier services tariff with two geographic 
rate zones. To implement this recommendation, we establish filing dates 
and other requirements. In order to process Alascom's common carrier 
services tariff by the required effective date, we require that Alascom 
file its tariff and cost support information\26\ 120 days before the 
scheduled effective date for that tariff of January 1, 1996, because a 
lawful tariff must be on file prior to termination of the JSA.\27\ The 
tariff must be revised annually thereafter on the schedule set forth in 
Section 69.3(a) of the Commission's Rules.\28\
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    \26\47 CFR 61.38 (1992). Alascom is required to file in its 
tariff the minimum quality of service standards that it will employ 
for the provision of its common carrier services.
    \27\As recommended by the Final Recommended Decision, the 
Alascom common carrier services tariff must reflect Alascom's costs 
after application of the $150 million transition payment. Final 
Recommended Decision, FCC 93J-2 at n. 180.
    \28\47 CFR 69.3(a).
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    24. The Final Recommended Decision did not recommend a rate of 
return that Alascom should use in computing a revenue requirement for 
the common carrier service tariff.\29\ We conclude in this order that 
for purposes of computing the revenue requirement for Alascom's common 
carrier tariff, Alascom shall use the authorized interstate rate of 
return applicable to local exchange carriers (LECs) unless Alascom, by 
clear and convincing evidence, is able to justify a different rate of 
return for its interstate operations.\30\
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    \29\In the Tentative Recommendation, however, the Alaska Joint 
Board recommended either the authorized interstate rate of return 
applicable to local exchange carriers or the intrastate rate of 
return authorized for switched traffic in Alaska, whichever was 
lower. Alternatively, Alascom could propose another rate of return 
with justification.
    \30\See Tentative Recommendation, 8 FCC Rcd at 3692, n.57.
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D. Other Modifications and Clarifications

    25. AT&T has been providing interstate service to and from Alaska 
at integrated rates in conjunction with Alascom under the JSA. The 
Commission requires AT&T to provide interstate MTS service at 
integrated rates pursuant to the Commission's rate integration policy 
and sections 201(a) and 4(i) of the Communications Act. In the Final 
Recommended Decision, the Alaska Joint Board recommended that AT&T be 
required to provide interstate service to and from Alaska after the JSA 
is terminated. In this order, we adopt that recommendation and require 
that after the JSA is terminated, AT&T must provide interstate service 
at integrated rates to and from Alaska under the same terms and 
conditions, including service quality, technical standards, and 
availability, that it provides those services in the Lower 48 states. 
The Alaska Joint Board did not, however, address AT&T's potential need 
to request equal access from Alaska LECs. With the termination of the 
JSA, AT&T will directly provide service to subscribers in Alaska. AT&T 
does not currently have the same type of access to LECs in Alaska as it 
did in the Lower 48 when equal access was implemented, since it has 
been providing service to the customers of Alaskan LECs only through 
Alascom's facilities. In the Lower 48, because AT&T already had ``equal 
access'' to the LECs, the Commission required LECs to implement equal 
access only in response to requests from other interexchange 
carriers.\31\ We conclude that, because in Alaska AT&T does not have 
physical connections to the LECs equivalent to equal access, LECs will 
have to implement equal access in response to requests from AT&T as 
well as in response to requests from other interexchange carriers in 
Alaska.\32\ Accordingly, AT&T may request equal access from Alaska LECs 
in order to provide interstate service in Alaska. The ability to 
request equal access will ensure that AT&T has more flexibility in 
providing service in Alaska.\33\
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    \31\The equal access requirements discussed herein are the same 
equal access requirements that apply to independent telephone 
companies in the rest of the nation. In the Matter of MTS and WATS 
Market Structure, Phase III: Establishment of Physical Connections 
and Through Routes among Carriers; Establishment of Physical 
Connections by Carriers with Non-Carrier Communications Facilities; 
Planning among Carriers for Provision of Interconnected Services, 
and in Connection with National Defense and Emergency Communications 
Services; and Regulations for and in Connection with the Foregoing, 
CC Docket No. 78-72, Phase III, Report and Order, 100 FCC 2d 860; 
Memorandum Opinion and Order, FCC 86-4 (released January 3, 1986) at 
para 28.
    \32\See MTS and WATS Market Structure, 94 FCC 2d 292 (1983); 
Phase III Report and Order, 100 FCC 2d 860 (1985) recon. denied, FCC 
86-4 (released January 8, 1986).
    \33\The requirement that LECs implement equal access in response 
to requests by AT&T and other carriers does not alter the 
Commission's Bush policy that prohibits carriers other than Alascom 
from building facilities in the Bush. See Earth Stations re 
Tentative Decision to Establish Joint Ownership, 92 FCC 2d 736 
(1982); Policies Governing the Ownership of Domestic Satellite Earth 
Stations in the Bush Communities in Alaska, CC Docket 80-254, RM-
3304, 96 FCC 2d 522, 541 (1984).
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    26. In the Final Recommended Decision, the Board stated, in support 
of its recommendation to retain the frozen circuit equipment allocation 
factor, that the factor at issue applies equally to AT&T and 
Alascom.\34\ We clarify here that the frozen factor development 
procedures shown in Section 36.126(d)(3) of the Commission's rules do 
apply equally to AT&T and Alascom because they are both interexchange, 
not exchange, carriers.\35\ However, the actual calculated frozen 
factor is not the same for each carrier because it is based on carrier-
specific usage data.
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    \34\See Final Recommended Decision, FCC 93J-2 at para. 92.
    \35\47 CFR 36.126(d)(3).
---------------------------------------------------------------------------

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

    28. Alascom filed an Application for Review of the Final 
Recommended Decision on November 29, 1993, under Section 1.115 of the 
Commission's rules. AT&T and GCI argue that Section 1.115 applies to a 
final action taken pursuant to delegated authority under Section 5(c) 
of the Communications Act and that the Alaska Joint Board's actions 
were taken pursuant to Section 410(c) of the Act and do not constitute 
final actions taken pursuant to delegated authority.''\37\ We agree 
with AT&T and GCI that Alascom's filing is improper under Section 1.115 
of our rules.\38\ Accordingly, we dismiss Alascom's petition.\39\ We, 
however, will address on our own motion, certain matters raised by 
Alascom's pleading.
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    \37\AT&T filed an Opposition (December 10, 1993) and GCI filed a 
Motion to Strike Application for Review (December 14, 1993).
    \38\See 47 U.S.C. Sec. 410(c); 47 CFR 1.115 (1992).
    \39\We also dismiss Alascom's related motion (November 29, 1993) 
to exceed the page limitation provided in Sec. 1.115(f)(1) of the 
Commission's rules, 47 CFR 1.115(f)(1).
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    29. In its pleading Alascom makes a number of charges regarding 
supposed substantive and procedural infirmities in the Alaska 
proceeding.\40\ For the most part, these arguments were thoroughly 
discussed and rejected in the Final Recommended Decision. We 
incorporate by reference the Joint Board discussion on substantive and 
procedural issues and, unless noted otherwise, we adopt the Joint 
Board's analysis as our own. Nevertheless, we think that some of the 
matters raised by Alascom deserve further attention here.
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    \40\AT&T opposes Alascom's claims and reserves the right to 
respond further when these claims are raised properly. AT&T 
Opposition at 2 n. 4. GCI does not respond to Alascom's substantive 
claims, arguing that Alascom raises issues that were already raised 
in the Final Recommended Decision and elsewhere in this proceeding. 
GCI Contingent Opposition at 2, n. 2.
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A. Alascom's Substantive Arguments

    30. Alascom claims that the Board has ``elevated the policy goals 
of efficiency and competition,'' above other Board objectives.\41\ 
There is no merit to Alascom's claim. First, we do not agree that 
efficiency and competition are lesser objectives than the other Board 
objectives. As stated in the Board's Supplemental Order tentatively 
adopting these objectives, ``a proper resolution of the issues before 
us must represent a balanced effort to achieve each of these goals.\42\ 
Second, we find that the Board has balanced the five Board objectives 
in a manner that best serves the public interest. The Board has 
addressed the efficiency and competition objectives by recommending the 
termination of the JSA. It has addressed the objectives of universal 
service and revenue requirement neutrality by recommending several 
transition mechanisms including the continuation of the JSA for the 
first phase of the transition period, the AT&T payment of $150 million 
to Alascom, and the AT&T second phase must-purchase requirement. Thus, 
the Board's recommendations will not affect the Commission's policy on 
rate integration for interstate MTS services for Alaska.
---------------------------------------------------------------------------

    \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.
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    45. Likewise, Alascom's analysis of the relevant law is faulty when 
it asserts that the use of Overland's services was impermissible 
because the FCC itself lacks authority to hire the consultant. In fact, 
a number of statutory provisions grant the Commission explicit 
authority for such purposes. Indeed, section 410(b) of the 
Communications Act permits the FCC to accept services from a state 
commission. 47 U.S.C. 410(b). Likewise, section 3109 of Title 5 of the 
U.S. Code (which is incorrectly cited by Alascom for the opposite 
proposition) often is used by the Commission to hire experts and 
consultants. Moreover, the Office of Personnel Management guidelines 
construing section 3109 allow the Commission to accept such services, 
with or without payment.\70\ Thus, we reject Alascom's argument that 
the use of Overland's services was impermissible.
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    \70\Federal Personnel Manual, Chapter 304.
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    46. Finally, we conclude that there was no harm to the Alaska 
public as a result of the July 1, 1993 public hearing in Anchorage. As 
stated in the Final Recommended Decision, it is not apparent that the 
FCC rule regarding notice for public hearings applies to this situation 
since it was a Joint Board, rather than Commission, meeting. But, even 
if the rule is applicable, it is hard to see how anyone was injured. 
Reply comments to the hearing were accepted for almost two weeks after 
the meeting, and ex parte presentations were permitted thereafter. 
Indeed, Alascom acknowledges that this opportunity to file comments 
elicited 39 submissions from the Alaska public.\71\ Moreover, this 
proceeding has been ongoing for more than eight years, with ample 
opportunity for public comment at every stage. It appears that any 
person with an interest in the Alaska telephone market would have had 
more than adequate notice and the occasion to present his or her views 
on the subject long before the Final Recommended Decision was adopted 
by the Joint Board.
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    \71\It is well settled that the Commission is not required to 
respond to, or to address, all pleadings. The fact that the Joint 
Board may not have explicitly referred to the Alaska public's reply 
comments in the Final Recommended Decision has no bearing on the 
sufficiency of notice before the hearing. In any event, in reaching 
our decision herein, we have considered the entire record.
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    47. Accordingly, for the reasons stated above, we reject Alascom's 
substantive and procedural arguments.

VI. Ordering Clauses

    48. Accordingly, pursuant to the authority contained in Sections 1, 
4(i)-(j), 201-203, 214, and 220 of the Communications Act of 1934 As 
Amended, it is ordered that AT&T and Alascom must comply with the 
recommendations of the Alaska Joint Board in the Final Recommended 
Decision, which is incorporated herein by reference and clarified and 
modified in this Order.
    49. It is further ordered that the JSA is terminated effective 
January 1, 1996.
    50. It is further ordered that AT&T must file its section 214 
application consistent with the requirements of this Order no later 
than March 1, 1995.\72\
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    \72\The Final Recommended Decision did not establish a date for 
AT&T to file a section 214 application to serve Alaska. In this 
order we establish a date to ensure that AT&T is prepared to serve 
Alaska consistent with the requirements and time schedule of the 
Final Recommended Decision as modified in this order. Because we 
require in this order that AT&T file a section 214 application 
consistent with the requirements of the Final Recommended Decision 
as clarified and modified herein, we reject Alascom's arguments 
regarding the effect of AT&T's withdrawal of its earlier filed 
section 214 application to serve Alaska. See Response of Alascom, 
January 12, 1994.
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    51 It is further ordered that the implementation of the revised 
market structure transition period begins July 1, 1994 and terminates 
as of June 30, 1998. The first phase will begin on July 1, 1994 and the 
second phase will begin on January 1, 1996.
    52. It is further ordered that AT&T must fund a reduction in 
Alascom's plant balances by a transition payment to Alascom of $150 
million, in two installments ($75 million on July 1, 1994; and $75 
million upon termination of the JSA).
    53. It is further ordered that AT&T and Alascom SHALL FILE within 
60 days of the effective date of this order, requests with the United 
States Internal Revenue Service (``IRS'') and with the State of Alaska 
for expedited rulings on whether the transition payment is, in whole or 
in part, taxable income.\73\
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    \73\We delegate to the Chief, Common Carrier Bureau the 
authority to modify the AT&T transition payment to reflect the IRS 
and State of Alaska tax rulings as recommended in the Final 
Recommended Decision, FCC 93J-2, at para. 128, n. 170.
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    54. It is further ordered that Alascom MUST PROVIDE on July 1, 
1994, account balances for gross investment, depreciation reserve, and 
net investment, as of March 30, 1994. Alascom MUST PROVIDE the same 
information, as of September 30, 1995.\74\
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    \74\The Final Recommended Decision did not establish a filing 
date for this information. We conclude that this information is 
required on the same dates as the installments paid by AT&T to 
Alascom so that Commission staff can review the effect of the 
installments on Alascom's plant accounts.
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    55. It is further ordered that the transition payment SHALL BE 
applied by Alascom exclusively to offset certain designated plant 
account balances consistent with the Final Recommended Decision and 
this order. Alascom MUST FILE with the Commission detailed proposals 
for its treatment of each of the two installments of the transition 
payment by July 1, 1994 and January 1, 1996, respectively.\75\
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    \75\We delegate to the Chief, Common Carrier Bureau the 
authority to review and dispose of Alascom's detailed proposal for 
the treatment of the transition payment to verify that the $150 
million transition payment is applied in accordance with this order. 
We require that Alascom file its proposals for treatment of the 
installments on the dates scheduled for payment by AT&T of the two 
installments so that Commission staff can review the proposals in a 
timely fashion.
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    56 It is further ordered that AT&T must purchase a fixed dollar 
amount of common carrier services from Alascom for each six month 
period of the second phase of the transition period according to the 
methodology adopted in the Final Recommended Decision and modified in 
this order.\76\
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    \76\We delegate to the Chief, Common Carrier Bureau authority to 
decide issues arising with respect to the calculation of the fixed 
dollar amount of Alascom services AT&T must purchase for each six 
month period of the second phase of the transition period.
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    57. It is further ordered that no later than September 1, 1995, 
AT&T and Alascom may propose jointly an alternative method for 
calculating the fixed dollar amount of Alascom's Services AT&T must 
purchase for the provision of interstate MTS during the second phase of 
the transition period.\77\
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    \77\A deadline was not established in the Final Recommended 
Decision for AT&T and Alascom to propose an alternative method for 
calculating AT&T's fixed dollar purchase obligation during the 
second phase of the transition period. Final Recommended Decision, 
FCC 93J-2, para. 141. We establish a date to provide sufficient time 
to evaluate any AT&T and Alascom proposal. We delegate to the Chief, 
Common Carrier Bureau authority to review and dispose of the 
proposal.
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    58. It is further ordered that Alascom must file a Cost Allocation 
Plan, including the categorization and allocation methodology, within 
three months of the release of this Order.\78\
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    \78\We delegate to the Chief, Common Carrier Bureau authority to 
review and dispose of Alascom's Cost Allocation Plan submission and 
to require any subsequent revision(s) based on the results of 
analysis and consideration of public comment, if any.
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    59. It is further ordered that ALASCOM must file common carrier 
service tariffs for switching and transport for the Bush and non-Bush 
areas of Alaska and cost support data no later than September 1, 1995 
with a scheduled effective date of January 1, 1996.
    60. It is further ordered that AT&T will treat the cost increase 
associated with the $150 million payment to Alascom and the cost 
decrease related to the cancellation of the JSA as exogenous costs 
under our price caps rules.
    61. It is further ordered that the Alascom Application for Review 
filed November 29, 1993 is dismissed as an improper filing under 
Section 1.115 of the Commission's rules.
    62. It is further ordered that AT&T Petition for a Lawful Interim 
Division of Charges, filed November 5, 1987, is dismissed as moot.
    63. It is further ordered that the GCI Petition, filed January 29, 
1992, is dismissed as moot.
    64. It is further ordered that this order is effective thirty days 
after publication in the Federal Register.

Federal Communications Commission.
William F. Caton,
Acting Secretary.
[FR Doc. 94-13107 Filed 5-26-94; 8:45 am]
BILLING CODE 6712-01-M