Federal Communications Commission DA 07-2862 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of July 1, 2007 Annual Access Charge Tariff Filings ) ) ) ) ) ) WCB/Pricing No. 07-10 ORDER Adopted: June 28, 2007 Released: June 28, 2007 By the Chief, Wireline Competition Bureau: I. INTRODUCTION 1. Price cap local exchange carriers (LECs) and certain LECs subject to rate-of-return regulation are required by sections 69.3(h) and 69.3(f)(2) of the Commission’s rules to file revisions to their interstate tariffs to become effective June 30, 2007, or July 2, 2007.1 In addition, several rate-of- return LECs that are subject to section 61.38 of the rules2 and that file their own traffic-sensitive tariffs filed tariffs. These LECs filed their original tariff transmittals on June 15, 2007, or June 22, 2007, and subsequent revisions as reflected in Appendix A. AT&T Corporation (AT&T), Qwest Communications Corporation (Qwest), Sprint Nextel Corporation (Sprint Nextel), and Verizon (the Petitioners) filed petitions to suspend and investigate the tariffs of carriers leaving the NECA traffic-sensitive pool and filing their own tariffs pursuant to section 61.39 of the Commission’s rules.3 AT&T, General Communication Incorporated (GCI), and Verizon4 filed petitions to suspend and investigate NECA’s Tariff No. 5.5 On June 26, 2007, NECA and a number of the LECs filing pursuant to section 61.39 of the 1 47 C.F.R. §§ 69.3(h) and 69.3(f)(2). 2 47 C.F.R. § 69.38. 3 July 2007 Annual Access Charge Tariff Filings, Petition of AT&T Corp. to Suspend and Investigate LEC Tariffs Filed Pursuant to Section 61.39, WCB/Pricing 07-10 (filed June 22, 2007) (AT&T Petition) (AT&T also petitioned to suspend and investigate Reasnor Telephone Company and Union Telephone Company); July 2007 Annual Access Charge Tariff Filings, Qwest Conditional Petition to Suspend and Investigate, WCB/Pricing 07-10 (filed June 19, 2007) (Qwest Petition); July 2007 Annual Access Charge Tariff Filings, Petition to Suspend and Investigate of Sprint Nextel Corporation, WCB/Pricing 07-10 (filed June 22, 2007) (Sprint Nextel Petition); July 2007 Annual Access Charge Tariff Filings, Petition of Verizon to Suspend and Investigate Tariff Filings, WCB/Pricing 07-10 (filed June 19, 2007) (Verizon Petition). 4 The Verizon companies participating in this filing are the regulated, wholly-owned subsidiaries of Verizon Communications, Inc. 5 July 2007 Annual Access Charge Tariff Filings, Petition of AT&T Corp. to Suspend for One Day and Investigate National Exchange Carrier Association Tariff F.C.C. No. 5, Transmittal No. 1172, WCB/Pricing 07-10 (filed June 22, 2007) (AT&T NECA Petition); July 2007 Annual Access Charge Tariff Filings, Petition of GCI to Reject, or, in the Alternative to Suspend and Investigate Tariff Filing, WCB/Pricing 07-10 (filed June 22, 2007); July 2007 Annual Access Charge Tariff Filings, Petition of Verizon to Suspend NECA Tariff F.C.C. No. 5, Access Service, Transmittal No. 1172, WCB/Pricing 07-10 (filed June 22, 2007) (Verizon NECA Petition). Federal Communications Commission DA 07-2862 2 Commission’s rules filed replies to the petitions.6 2. In this Order, we suspend for one day and set for investigation the switched access rates contained in the 2007 annual access tariffs of the carriers listed in Appendices B and C. II. DISCUSSION 3. The LECs’ annual tariff filings are largely compliant with Commission rules. Nevertheless, certain tariff filings require further inquiry. We find that, in their petition to suspend and investigate the LECs’ 2007 annual access tariffs, the Petitioners raise substantial questions of lawfulness that warrant investigation. 4. Section 61.39 carriers exiting the NECA traffic-sensitive pool. AT&T, Qwest, 7 Sprint Nextel, and Verizon argue that the Commission must suspend and investigate the tariffs filed by the carriers that are leaving the NECA traffic-sensitive pool this year and filing tariffs pursuant to section 61.39 of the Commission’s rules. In support of their filing, the Petitioners contend that they have seen a pattern of access stimulation by section 61.39 carriers in recent years and they expect that many of the carriers leaving the pool will engage in such access stimulation practices.8 They also note that some of the carriers leaving the traffic-sensitive pool, or an affiliate, have engaged in access stimulation in the past.9 Because section 61.39 carriers establish rates based on historical costs (or average schedule settlements) and historical demand, the Petitioners contend that the carriers intending to engage in access stimulation know that the historical data relied on for these tariffs is not a good proxy for future demand.10 Without suspending and investigating these tariffs, the Petitioners contend that the carriers at issue will earn returns that greatly exceed that permitted by the Commission’s rules, with no remedy available because of the deemed lawful provision of section 204(a)(3) of the Communications Act of 1934, as amended.11 As a result, Petitioners argue they and their customers are being charged excessively high access rates that the carriers at issue share with the parties providing the stimulating services.12 Petitioners also contend that the access stimulation violates the intent of the Small Carrier 6 July 2007 Annual Access Charge Tariff Filings, National Exchange Carrier Association Reply, WCB/Pricing 07- 10 (filed June 26, 2007) (NECA Reply); July 2007 Annual Access Charge Tariff Filings, Reply of Group of Companies Under Consortia Consulting Tariff F.C.C. No. 1 to Petitions to Suspend and Investigate, WCB/Pricing 07-10 (filed June 26, 2007) (Consortia Reply); July 2007 Annual Access Charge Tariff Filings, Reply of Alliance Communications Cooperative, Inc. to Petitions to Suspend and Investigate, WCB/Pricing 07-10 (filed June 26, 2007) (Alliance Reply); July 2007 Annual Access Charge Tariff Filings, Reply of Elsie Communications, Inc. to Petitions to Suspend and Investigate, WCB/Pricing 07-10 (filed June 26, 2007) (Elsie Reply); July 2007 Annual Access Charge Tariff Filings, Consolidated Reply to the Petitions to Suspend and Investigate Filed by Qwest Communications Corporation, AT&T Corp., Sprint Nextel Corporation and Verizon, WCB/Pricing 07-10 (filed June 26, 2007) (Broadband Network Group/ICORE Reply). 7 The Qwest petition is conditional, requesting suspension and investigation only if the carriers refuse to certify that they have no reason to believe that their rates will increase by 300 percent during the tariff period, and that if they do, the carrier will file revised tariff rates. Qwest Petition at 9. 8 See, e.g., AT&T Petition at 10; Verizon Petition at 10; 9 See, e.g., AT&T Petition at 14; Verizon Petition at 13. 10 See, e.g., Qwest Petition at 6-7. 11 47 U.S.C. § 204(a)(3). See Sprint Nextel Petition at 2-3; 12 See, e.g., Sprint Nextel Petition at 10. Federal Communications Commission DA 07-2862 3 Tariff Order, which requires that rates filed by small LECs based on historical data be just and reasonable.13 5. Reasnor Telephone Company, LLC. AT&T argues that, while Reasnor’s local switching rate has decreased, it has more than offset the decrease by significant increases to other rates, for example, a more than 1000 percent increase in tandem switching and tandem switched termination. AT&T states that Reasnor achieved these increases by using the recently approved proposed average schedule formulas. AT&T argues that these formulas were designed to create reasonable rates for carriers whose traffic does not fluctuate, not to create just and reasonable rates for access stimulating carriers like Reasnor. AT&T asserts that Reasnor is claiming a 107, 236 percent increase in costs even though its access minutes of use grew by 12,717 percent. AT&T therefore urges the Commission to suspend Reasnor’s tariff and investigate the proper application of its average schedule rules.14 6. Section 61.38 carriers exiting the NECA traffic-sensitive pool. On our own motion, we conclude that the tariffs of those carriers exiting the NECA traffic-sensitive pool and filing their own tariffs pursuant to section 61.38 of the Commission’s rules raise questions of whether rates would remain just and reasonable in the face of access stimulation.15 Section 61.38 carriers set rates based on projected costs and demand and may establish high rates based on low demand. If these carriers then enter into access stimulation activities, they, like section 61.39 carriers, can generate increased revenues that likely would result in rates that are unjust and unreasonable, but which would be protected by the deemed lawful provision of the Act.16 Our review of the access minutes of use data for section 61.38 carriers reentering the NECA pool indicates a likelihood that some of those carriers have participated in access stimulation activities.17 We find that this information raises substantial questions of the lawfulness of the switched access rates filed by carriers under section 61.38 of our rules. 7. After reviewing the petitions against the tariffs, and on our own motion, we conclude that substantial questions of lawfulness exist that warrant further investigation of certain of the 2007 annual access tariffs. We accordingly suspend the switched access rates contained in the 2007 annual access tariffs of the carriers listed in Appendices B and C for one day. The specific issues that will be the subject of the investigation will be identified in an upcoming designation order and may include, but not be limited to, the issues identified in paragraphs 4-6, supra. We may also, by order, identify discrete issues that do not warrant further investigation. III. EX PARTE REQUIREMENTS 8. This investigation is a permit-but-disclose proceeding and subject to the requirements of section 1.1206(b) of the rules.18 Persons making oral ex parte presentations are reminded that 13 Regulation of Small Telephone Companies, 2 FCC Rcd 3811, 3812, para. 7 (1987) (Small Carrier Tariff Order). 14 AT&T Petition at 23. 15 47 C.F.R. § 61.38. We note that the group of Century Tel companies exiting the NECA pool filed averaged rates along with CenturyTel of Wisconsin, which had an existing tariff. Therefore, we also suspend the tariff of CenturyTel of Wisconsin. 16 See 47 U.S.C. § 204(a)(3). 17 See NECA Reply, Appendix 1. 18 47 C.F.R. § 1.1206(b). Federal Communications Commission DA 07-2862 4 memoranda summarizing the presentations must contain a summary of the substance of the presentation and not merely a listing of the subjects discussed. More than a one-sentence or two-sentence description of the views and arguments presented is generally required.19 IV. ORDERING CLAUSES 9. ACCORDINGLY, IT IS ORDERED that, pursuant to section 204(a) of the Communications Act of 1934, as amended, 47 U.S.C. § 204(a), and through the authority delegated pursuant to sections 0.91 and 0.291 of the Commission’s rules, 47 C.F.R. §§ 0.91 and 0.291, the switched access rates contained in the 2007 annual access tariffs of the carriers listed in Appendices B and C are SUSPENDED for one day and an investigation IS INSTITUTED. 10. IT IS FURTHER ORDERED that the carriers listed in Appendices B and C MAY FILE a supplement advancing the currently scheduled effective date to June 29, 2007, and then SUSPEND its tariff revision for one day, until June 30, 2007. For this purpose, we waive sections 61.58 and 61.59 of the Commission’s rules, 47 C.F.R. §§ 61.58, 61.59. 11. IT IS FURTHER ORDERED that, pursuant to sections 4(i) and 204(a) of the Communications Act of 1934, as amended, 47 U.S.C. §§ 154(i) and 204(a), and pursuant to the authority delegated by sections 0.91 and 0.291 of the Commission’s rules, 47 C.F.R. §§ 0.91 and 0.291, the carriers listed in Appendices B and C SHALL KEEP ACCURATE ACCOUNT of all amounts received that are associated with the rates that are subject to this investigation. 12. IT IS FURTHER ORDERED that each local exchange carrier required to suspend its tariff revisions pursuant to this order SHALL FILE a supplement within five business days from the release date of this order reflecting the suspension. Carriers should cite the “DA” number on the instant order as the authority for the filings. 13. IT IS FURTHER ORDERED that the petitions to suspend and investigate the 2007 Annual Access Tariff Filings filed by AT&T Corporation, Qwest Communications Corporation, Sprint Nextel Corporation, GCI and Verizon ARE GRANTED to the extent indicated herein and otherwise ARE DENIED. FEDERAL COMMUNICATIONS COMMISSION Thomas J. Navin Chief, Wireline Competition Bureau 19 47 C.F.R. § 1.1206(b)(2). Federal Communications Commission DA 07-2862 5 APPENDIX A-2007 ACCESS FILINGS MADE BY ILECS Issued: June 15, 2007 Price Cap ILECs Ameritech Operating Companies Transmittal No. 1629 Tariff FCC No. 2 BellSouth Telecommunications, Inc. Transmittal No. 1080 Tariff FCC No. 1 CenturyTel Operating Companies Transmittal No. 55 Tariff FCC Nos 2&31 Cincinnati Bell Telephone Transmittal No. 818 Tariff FCC No. 35 Citizens Telecommunications Companies Transmittal No. 174 Tariff FCC No. 1 Embarq Local Operating Companies Transmittal No. 31 Tariff FCC No. 1 Frontier Tel. Of Minnesota and Iowa TRP only Frontier Telephone of Rochester TRP only Hawaiian Telcom, Inc. TRP only Tariff FCC No. 1 Iowa Telecommunications Services, Inc. Transmittal No. 64 Tariff FCC No. 1 Micronesian Telecommunications Corp. Transmittal No. 7 Tariff FCC No.1 Nevada Bell Telephone Company Transmittal No. 159 Tariff FCC No. 1 Pacific Bell Telephone Company Transmittal No. 355 Tariff FCC No. 1 Qwest Corporation Transmittal No. 325 Tariff FCC No. 1 Southern New England Telephone Co. Transmittal No. 947 Tariff FCC No. 39 Southwestern Bell Telephone Company Transmittal No. 3212 Tariff FCC No. 73 Valor Telecommunications Enterprises Transmittal No. 65 Tariff FCC Nos. 1 Verizon Telephone Companies Transmittal No. 821 Tariff FCC Nos. 1, 11, 14, 16 & 20 Windstream Telephone System Transmittal No. 6 Tariff FCC Nos.1&3 Issued: June 15, 2007 Non-Price Cap ILECs Alliance Communications Cooperative Transmittal Nos. 7 Tariff FCC No. Alliance Communications Cooperative Transmittal Nos. 8 Tariff FCC No. 1 Beehive Telephone Companies Transmittal No. 342 Tariff FCC No. 1 The Blair Telephone Company Transmittal No. 93 Tariff FCC No. 1 Broadband Network Group Transmittal No. 1 Tariff FCC No. 1 CenturyTel Operating Companies Transmittal No. 55 Tariff FCC No. 14 Chariton Valley Telephone Corporation Transmittal No 13 Tariff FCC No. 1 Columbus Telephone Company Transmittal No. 13 Tariff FCC No. 1 1 Century’s Tariff FCC Nos. 2 & 3 are subject to price cap regulation. 2 This filing cancels Beehive’s access tariff. 3 This filing cancels Blair’s access tariff. 4 Century’s Tariff FCC No. 1 is subject to rate of return regulation. Federal Communications Commission DA 07-2862 6 APPENDIX A-2007 ACCESS FILINGS MADE BY ILECS (CONT’D) Issued: June 15, 2007 Non-Price Cap ILECs Consortia Consulting Transmittal No. 1 Tariff FCC No. 1 Dalton Telephone Company Transmittal No. 55 Tariff FCC No. 1 Elsie Communications, Inc. Transmittal No. 1 Tariff FCC No. 1 Etex Telephone Cooperative Transmittal No. 12 Tariff FCC No. 1 Farmers Mutual Telephone Company (ID) Transmittal No. 1 Tariff FCC No. 1 Geneseo Telephone Company Transmittal No. 12 Tariff FCC No. 1 Glenwood Telephone Membership Transmittal No. 36 Tariff FCC No. 1 Great Plains Communications Transmittal No. 84 Tariff FCC No. 3 Gridley Telephone Company Transmittal No. 15 Tariff FCC No. 1 GVNW Inc./ Management Transmittal No. 206 Tariff FCC No. 2 Harrisonville Telephone Company Transmittal No. 38 Tariff FCC No. 2 ICORE Transmittal No. 80 Tariff FCC No. 2 James Valley Cooperative Telephone Co. Transmittal No. 10 Tariff FCC No. 1 John Staurulakis, Inc. (JSI) Transmittal No. 1297 Tariff FCC No. 1 John Staurulakis, Inc. (JSI) Transmittal No. 130 Tariff FCC No. 1 Kiesling Associates Transmittal No. 68 Tariff FCC No. 1 National Exchange Carrier Association Transmittal No. 1172 Tariff FCC No. 5 Royal Telephone Company Transmittal No. 1 Tariff FCC No. 1 South Central Telephone Assn. (Kansas) Transmittal No. 169 Tariff FCC No. 2 Superior Telephone Cooperative Transmittal No. 210 Tariff FCC No. 1 Tri-County Telephone Association Transmittal No. 911 Tariff FCC No. 1 Union Telephone Company (WY/UT) Transmittal No. 77 Tariff FCC No. 2 United Telephone Association Transmittal No. 612 Tariff FCC No. 1 Wheat State Telephone Company Transmittal No. 313 Tariff FCC No. 1 Issued: June 18, 2007 GVNW Inc./ Management Transmittal No. 207 Tariff FCC No. 2 5 This filing cancels Dalton’s access tariff. 6 This filing cancels Glenwood’s access tariff. 7 This filing is only regulations for carriers entering JSI’s access tariff. 8 This filing cancels Kiesling’s access tariff. 9 This filing cancels South Central- Kansas’ access tariff. 10 This filing cancels Superior’s access tariff. 11 Tri-County’s filing was made on 16 days’ notice, effective 7/1/07. 12 This filing cancels United Telephone’s access tariff. 13 This filing cancels Wheat State’s access tariff. Federal Communications Commission DA 07-2862 7 APPENDIX A-2007 ACCESS FILINGS MADE BY ILECS (CONT’D) Issued: June 20, 2007 Alliance Communications Cooperative Transmittal No. 9 Tariff FCC Nos. 1&2 James Valley Cooperative Telephone Co. Transmittal No. 11 Tariff FCC No. 1 Issued: June 25, 2007 East Ascension Telephone Company Transmittal No. 13 Tariff FCC No. 1 Smithville Telephone Company Transmittal No. 10 Tariff FCC No. 1 Issued: June 28, 2007 ICORE Transmittal No. 81 Tariff FCC No. 2 Federal Communications Commission DA 07-2862 8 APPENDIX B-COMPANIES LEAVING NECA AND ASSOCIATED TRANSMITTALS AFFECTED BY SUSPENSION Alliance Communications Cooperative Transmittal Nos. 7 & 9 Tariff F.C.C. No. 2 Broadband Network Group, LLC Transmittal No. 1 Tariff F.C.C. No. 1 Arthur Mutual Telephone Company Bascom Mutual Telephone Company Benton Ridge Telephone Company Buckland Telephone Company Fort Jennings Telephone Company Glandorf Telephone Company, Inc. Kalida Telephone Company, Inc. Middle Point Home Telephone Company Ottoville Mutual Telephone Company Ridgeville Telephone Company Sherwood Mutual Telephone Association, Inc. Vaughnsville Telephone Company CenturyTel Operating Companies Transmittal No. 55 Tariff F.C.C. No. 1 CenturyTel of Central Wisconsin, LLC Spectra Communications Group, LLC Telephone USA of Wisconsin, LLC Consortia Consulting Transmittal No. 1 Tariff F.C.C. No. 1 Beresford Municipal Telephone Company McCook Cooperative Telephone Company Roberts County Telephone Cooperative Assn/ RC Communications, Inc. Western Telephone Company Elsie Communications, Inc. Transmittal No. 1 Tariff F.C.C. No. 1 Farmers Mutual Telephone Company (ID) Transmittal No. 1 Tariff F.C.C. No. 1 ICORE Transmittal No. 80 Tariff F.C.C. No. 2 Jordan-Soldier Valley Telephone Company Killduff Telephone Company Lynnville Telephone Company Northeast Iowa Telephone Company, Inc. Sully Telephone Association Federal Communications Commission DA 07-2862 9 APPENDIX B-COMPANIES LEAVING NECA AND ASSOCIATED TRANSMITTALS AFFECTED BY SUSPENSION (CONT’D) John Staurulakis, Inc. Transmittal No. 130 Tariff F.C.C. No. 1 Camden Telephone & Telgraph Company, Inc. Chesnee Telephone Company Gearheart Communications Company, Inc. d/b/a Coalfields Telephone Company Mt. Vernon Telephone Company Oklahoma Communication Systems, Inc. Skyline Telephone Membership Corporation Tennesee Telephone Company Yadkin Valley Telephone Membership Corp Royal Telephone Company Transmittal No. 1 Tariff F.C.C. No. 1 Windstream Telephone System Transmittal No. 6 Tariff F.C.C. No. 1 Windstream Communications Kerrville, L.P Windstream Standard, Inc. Federal Communications Commission DA 07-2862 10 APPENDIX C-COMPANIES WITH EXISTING TARIFFS AFFECTED BY SUSPENSION ICORE Transmittal Nos. 80 & 81 Tariff F.C.C. No. 2 Reasnor Telephone Company CenturyTel Operating Companies Transmittal No. 55 Tariff F.C.C. No. 1 CenturyTel of Wisconsin