In the Matter of 
Federal Communications Commission 
Before the 
FEDERAL COMMUNICATIONS COMMISSION 
Washington, D.C. 20554 
Southwestern Bell Telephone Company 
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Transmittal No. 2633 
Tariff F.C.C. No. 73 
SUSPENSION ORDER 
Adopted: June 13, 1997; Released: June 13, 1997 
By the Chief, Competitive Pricing Division, Common Carrier Bureau: 
I. INTRODUCTION 
DA 97-1251 
1. On May 5, 1997, Southwestern Bell Telephone Company (SWBT) filed 
Transmittal No. 2633, which is scheduled to become effective on June 16, 1997. This 
transmittaJ proposes to add to SWBT's interstate access tariff a new Section 29, "Request for 
ˇ Proposal (RFP)," in which SWBT would include its "response[ s] to customer requests for 
proposal submitted to SWBT in competitive bid situations." 1 The Transmittal would permit 
SWBT, when responding to an RFP, to offer access services at rates below the otherwise 
tariffed rates for those services. The Transmittal would require customers to indicate in their 
RFPs that the request "involves a competitive" situation in order to obtain the reduced rates, 
and would make the rates available to "any similarly situated customer that submits a RFP 
requesting the same service" in the same quantities and at the same location.2 SWBT would 
provide service using facilities that "are the same type as that used by [SWBT] in furnishing 
its other tariffed services. "3 
2. For the reasons set forth below, we find that Transmittal 2633 raises 
significant issues of lawfulness regarding the rate levels, rate structures and terms and 
conditions of SWBT's access service. We therefore suspend Transmittal No. 2633 for five 
months and initiate an investigation into the lawfulness of its provisions. 
1 Southw~stem Bell Telephone Company TariffF.C.C. No. 73, Proposed Section 29.l. 
2 Id at Section 29.2. 
3 Id at Section 29. l. 
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II.BACKGROUND 
3. Section 202(a) of the Communications Act prohibits unjust or 
unreasonable discrimination in charges, practices, classifications and services by common 
carriers in connection with any "like" communications service. 4 In addition, the 
Commission's rules require dominant LECs, i.e., those that possess market power, to offer 
averaged rates throughout their individual study areas.5 Moreover, in its DS-3 !CB Order the 
Commission precluded dominant LECs from filing individual case basis (ICB) tariffs, that is, 
offering individualized contract rates to certain customers and not others. 6 A potential 
exception to these requirements is the "competitive necessity" doctrine. Under the competitive 
necessity test as applied by the Commission in the case of interexchange carriers (IXCs), a 
dominant carrier may off er what would otherwise be considered a discriminatory tariff under 
Section 202(a) by demonstrating that: (1) the customers of the discounted offering have a 
competitive alternative from which to choose; (2) the discounted offering responds to 
competition without undue discrimination; and (3) the discount contributes to reasonable rates 
and efficient services for all users. 7 The Commission has never held that this defense applies 
to dominant LECs. 
4. In a prior tariff investigation involving SWBT, the Commission considered 
whether the competitive necessity doctrine allows dominant LECs to offer RFP tariffs. 8 The 
Commission concluded that it need not determine whether dominant LECs should be able to 
invoke the competitive necessity doctrine, finding that SWBT could not satisfy the doctrine in 
4 47 U.S.C. § 202(a). 
5 See, e.g., 47 C.F.R. § 69.3(e)(7). 
6 Local Exchange Carriers Individual Case Basis DS-3 Service Offerings, 4 FCC Red 8634 (l989)(DS-3 /CB 
Order). 
7 See Private Line Rate Structure and Volume Discount Practices Guidelines, Report and Order, CC Docket 
No. 79-246, 97 FCC 2d 923, 948 (1984). Other limited exceptions exist to the Commission's rules and policies 
regarding geographically averaged access rates. For instance, the Commission has held that dominant LECs able 
to show a measure of competition in their markets may divide their service areas into three zones based on the 
density of customer locations, and may charge a different price in each zone for certain switched transportˇ 
elements. See Expanded Interconnection with Local Telephone Company Facilities, Report and Order and Notice 
of Proposed Rulemaking, 7 FCC Red 7369 (1992). However, Section 69.123(c) of the Commission's rules 
provides that dominant LECs must provide averaged rates within each density zone. 47 C.F.R. § 69.123(c). 
8 Southwestern Bell Telephone Company, Tariff FCC No. 73, Transmittals Nos. 2433 and 2449, Order 
Terminating1nvestigation, 11 FCC Red 1215 (199S)(Transmittals Nos. 2433 and 2449), remanded, Southwestern 
Bell Tel. Co. v. FCC, 100 F.3d 1004 (D.C. Cir. 1996). 
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Federal Communications Commission DA 97-1251 
any event, under the circumstances presented there.9 The United States Court of Appeals for 
the District of Columbia Circuit remanded this order to the Commission stating the 
Commission had inadequately explained its decision. 10 That matter is currently pending 
before the Commission. The Commission also is currently considering the issue of 
competitive response tariffs in its Access Reform docket, No. 96-262. 11 In addition, in a 
recent order designating issues for investigation regarding SWBT tariff Transmittal No. 2622, 
the Bureau stated that the competitive necessity doctrine may not be applicable to dominant 
LECs. 12 SWBT later withdrew Transmittal No. 2622, and the Bureau issued an order 
terminating that investigation. 13 
III. PLEADINGS SUMMARY 
5. In its Description and Justification, SWBT recognizes that a tariff that 
would respond to individual RFPs with rates below those offered in SWBT's general tariffs 
would require an exception to the Commission's rules requiring incumbent LECs to offer 
geographically averaged access rates. SWBT contends, however, that Commission orders 
recognize the "competitive necessity" doctrine as a justification for differential pricing of LEC 
access services14 that renders lawful Transmittal No. 2633 's differential treatment of similarly 
situated customers. SWBT argues that because it satisfies the Commission's competitive 
necessity test, it may offer this transmittal without seeking a waiver of the DS-3 /CB Order's 
requirement that LECs file averaged rates for their DS-3 offerings.15 Alternatively, SWBT 
argues that the DS-3 /CB Order can be interpreted to provide carriers with sufficient pricing 
flexibilicy: to offer customer-specific tariffs. 
6. According to SWBT, the existence of RFPs from two customers 
demonstrates that competition exists, and thus, Transmittal No. 2633 satisfies the "competitive 
9Transmittals Nos. 2433 and 2449, 11 FCC Red at 1220. 
10 Southwestern Beil Tel. Co. v. FCC, 100 F.3d 1004, 1008 (D.C. Cir. 1996). 
11 In the Matter of Access Charge Reform, First Report and Order, FCC No. 97-158, CC Docket No. 96-262 
(rel. May 16, 1991)("Access Reform First Report and Order"). 
12 Southwestern Bell Telephone Company Tariff F.C.C. No. 73, Transmittal 2622, Order Designating Issues 
for Investigation, (Com. Car. Bur. rel. May 23, 1997) at para. 11 (SWBT Designation Order). 
13 Southwestern Bell Telephone Company Tariff F.C.C. No. 73, Transmittal 2622, Order Terminating 
Investigation, (Com. Car. Bur. rel. June 5, 1997). 
14 See Transmittal 2633, Section 1.2 (arguing that Commission has recognized competitive necessity as a 
justification for individual case basis (ICB) pricing and citing DS-3 /CB Order, 4 FCC Red at 8634). 
15 DS-3 /CB Order, 4 FCC Red at 8644. 
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alternative" prong of the competitive necessity test. SWBT argues that the transmittal satisfies 
the second prong because the promotion is available to all "similarly situated" customers. 16 
Finally, SWBT argues that the transmittal satisfies the third prong because the promotion will 
attempt to "keep this business" on SWBT's network, resulting in additional revenue that will 
contribute to overall reasonable rates and efficient services for all users.17 SWBT argues its 
pricing is reasonable and in the public interest because Transmittal No. 2633 will provide 
revenue contribution that will help lower other customers' rates overall. 
7. On May 16, 1997, AT&T Corp. (AT&T), MCI Communications 
Corporation (MCI), and Sprint Communications Company L.P. (Sprint) filed oppositions 
urging the Commission to reject or, alternatively, to suspend and investigate SWBT's 
Transmittal No. 2633. 18 Sprint argues SWBT has failed to satisfy the competitive necessity 
defense. 19 MCI and AT&T contend that the transmittal will enable SWBT to engage in anti­
competitive behavior such as cross-subsidizing prices where competition exists with revenues 
from customers where competition does not exist,20 which MCI argues violates Section 202(a) 
of the Communications Act.21 AT&T and MCI assert Transmittal No. 2633 will enable 
SWBT to quash competition before it has gained a foothold in the market.22 AT&T further 
argues that the transmittal violates section 69 .3( e )(7) of the Commission's rules, which ˇ 
prohibits geographic deaveraging and disaggregation.23 MCI also asserts the transmittal 
should be rejected because it would predetermine pricing flexibility issues that the 
Commission has :,toposed to consider it its Access Reform docket.24 MCI further argues that 
16 Transmittal No. 2633, Section 1.5. 
i1 Id. 
18 Petition of AT&T Corp. to Suspend and Investigate SWBT Transmittal No. 2633 (AT&T petition); MCI 
Petition to Reject, or, Alternatively Suspend and Investigate SWBT Transmittal No. 2633 (MCI petition); Sprint 
Communications Company L.P.'s Petition to Reject, or Alternatively Suspend and Investigate SWBT Transmittal 
No. 2633 (Sprint petition). 
19 Sprint petition at 4-6. 
20 AT&T petition at 4; MCI petition at 11-12. 
21 MCI peiition at 12. 
22 AT&T petition at 4; MCI petition at 5. 
23 AT&T petition at 3. 
24 MCI petition at 2. See In the Matter of Access Charge Refonn, Notice of Proposed Rulemaking and Third 
Report and Order, FCC No. 96-488, CC Docket No. 96-262 (rel. Dec. 24, 1996) at para. 195-196 (proposing that 
LECs shoulcfbe permitted to offer competitive response tariffs upon a showing that a certain level of competition 
exists in the access market). The Commission did not resolve this issue in its First Report and Order in the 
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Federal Communications Commission DA 97-1251 
theˇstreamlined tariff process under which SWBT has filed Transmittal No. 2633 is the 
incorrect forum for resolving these issues because it offers parties less opportunity to build an 
adequate record. 25 
8. Sprint and MCI argue the tariff is unreasonably discriminatory in violation 
of Section 202(a).26 Specifically, Sprint argues that Transmittal 2633, in practical effect, 
would be available only to a specific customer that instituted an RFP, and that to offer both 
individual case basis tariffs and averaged rates for the same service violates the conditions set 
out in DS-3 !CB Order.21 MCI argues that Transmittal 2633 is a contract tariff. MCI asserts 
that Commission policy prohibits contract tariffs for dominant carriers in the absence of 
"substantial competition," which MCI contends does not exist here.28 According to MCI, 
Section 204 of the Communications Act places the burden on SWBT to justify its filing by 
demonstrating substantial competition exists, and that SWBT has failed to do so here. 29 
Additionally, MCI argues SWBT has violated Commission policies by filing cost infonnation 
for its tariff under seal. 30 
IV. DISCUSSION 
9. We find that Transmittal No. 2633 raises significant questions as to its 
lawfulness, including whether it: 1) offers rates that are unreasonably discriminatory in 
vioJ.ation of Section 202( a) of the Communications Act; 2) violates Section 69 .3( e )(7) of the 
Commissions rules requiring dominant LECs to offer averaged rates throughout their 
individual. study areas; 3) violates the Commission's policy prohibiting dominant LECs from 
offering contract tariffs; and 4) complies with the DS-3 !CB Order's restrictions on individual 
case basis tariff offerings by dominant LECs.We therefore shall suspend Transmittal No. 2633 
for five months and initiate an investigation into the lawfulness of its provisions. In addition, 
we will issue a separate order designating the issues to be investigated and establishing a 
pleading cycle. 
Access Reform docket, but stated it would consider these issues in a forthcoming rulemaking. See Access Reform 
First Report and Order at para. 14. 
is MCI petition at 2. 
26 Sprint petition at 2-3; MCI petition at 11-12. 
27 Sprint petition at 3-4. 
28 MCI petition at 4-5. 
29 MCI petition at 8. 
30 MCI petition at 12-13. 
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V. ORDERING CLAUSES 
10. Accordingly, IT IS ORDERED that, pursuant to Sections 204(a) of the 
Communications Act of 1934, as amended, 47 U.S.C. §§ 204(a), and Section 0.291 of the 
Commission's Rules, 47 C.F.R. § 0.291, SWBT's Transmittal No. 2633 IS SUSPENDED 
FOR FIVE MONTHS and an investigation of the provisions of this transmittal IS 
INSTITUTED. 
11. IT IS FURTHER ORDERED that SWBT SHALL FILE tariff 
revisions within five business days of the release date of this Order to reflect this suspension. 
12. IT IS FURTHER ORDERED that the petitions to suspend and 
investigate filed by MCI Communications Corporation, Inc., Sprint Communications Company 
L.P. and AT&T Corporation ARE GRANTED. 
FEDERAL COMMUNICATIONS COMMISSION 
d?~:~~ 
Chief, 
Competitive Pricing Division 
Common Carrier Bureau 
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