Before the

Federal Communications Commission

Washington, D.C. 20554

+----------------------------------+----+------------------------------+
| In the Matter of                 | )  | File No. EB-04-MD-002        |
|                                  |    |                              |
| AT&T CORP. AND                   | )  |                              |
|                                  |    |                              |
| AT&T OF THE VIRGIN ISLANDS,      | )  |                              |
| INC.,                            |    |                              |
|                                  | )  |                              |
| > Complainants,                  |    |                              |
| >                                | )  |                              |
| > v\.                            |    |                              |
|                                  | )  |                              |
| VIRGIN ISLANDS TELEPHONE         |    |                              |
| CORPORATION,                     | )  |                              |
|                                  |    |                              |
| D/B/A/ INNOVATIVE TELEPHONE,     | )  |                              |
|                                  |    |                              |
| > Defendant.                     | )  |                              |
|                                  |    |                              |
|                                  | )  |                              |
|                                  |    |                              |
|                                  | )  |                              |
|                                  |    |                              |
|                                  | )  |                              |
|                                  |    |                              |
|                                  | )  |                              |
|                                  |    |                              |
|                                  | )  |                              |
+----------------------------------+----+------------------------------+

Memorandum opinion and order

Adopted: August 4, 2004 Released: August 11, 2004

By the Commission: Commissioner Martin approving in part, dissenting in
part, and issuing a statement.

# I. introduction {#i.-introduction .unnumbered}

1.  In this Memorandum Opinion and Order, we grant a formal
    complaint[^1] filed by AT&T Corp. and AT&T of the Virgin Islands,
    Inc., (collectively, "AT&T") against Virgin Islands Telephone
    Corporation, d/b/a/ Innovative Telephone ("Vitelco"), pursuant to
    section 208 of the Communications Act of 1934, as amended ("the
    Act").[^2] AT&T alleges that Vitelco violated section 201(b) of the
    Act[^3] by earning access revenues above its maximum allowable rate
    of return ("overearning") during the period beginning January 1,
    1997 and concluding December 31, 1998 (the "1997-1998 Monitoring
    Period" or "Monitoring Period"). AT&T further alleges that Vitelco
    is liable for refunds regarding Vitelco's overearnings in 1997,
    when, in AT&T's view, Vitelco's access rates were not "deemed
    lawful" under section 204(a)(3) of the Act.[^4] For the reasons
    explained below, we agree with AT&T. Accordingly, we grant AT&T's
    Complaint and hold Vitelco liable to AT&T for AT&T's portion of
    Vitelco's overearnings from rates in effect from January 1, 1997
    through December 31, 1997.

# II. background {#ii.-background .unnumbered}

## Factual and Legal Background

### The Parties

2.  AT&T provides interexchange telecommunications services.[^5] Vitelco
    is a "rate of return" local exchange carrier that provides
    interstate access services.[^6] During 1997 and 1998, AT&T purchased
    interstate access services from Vitelco pursuant to Vitelco's
    Interstate Access Tariff.[^7]

### Rate-of-Return Regulation 

3.  Under section 201(b) of the Act, a local exchange carrier may charge
    only "just and reasonable" rates for its provision of access
    services.[^8] To enforce this requirement, the Commission has
    prescribed an authorized rate of return of 11.25 percent for
    rate-of-return carriers.[^9] To comply with this prescription, a
    rate-of-return carrier sets its tariff rates at levels designed to
    produce no more than an 11.25 percent return on its investment for
    the tariff period, based on an analysis of historical and projected
    cost data and the respective demand for services.[^10] The carrier
    may then file its rates on a "non-streamlined" basis on at least 16
    days' notice pursuant to section 203 of the Act[^11] and sections
    69.3(a) and 61.58 of our rules.[^12]

4.  The carrier's access earnings are measured over a two year period
    (the "monitoring period") to determine compliance with the maximum
    allowable rate of return.[^13] After the first year, the carrier
    files an "interim monitoring report" that reflects earnings realized
    during the first year.[^14] During the course of the two-year
    monitoring period, a rate-of-return carrier may make access rate
    adjustments to try to ensure that it does not exceed or fall short
    of its maximum allowable rate of return.[^15] Moreover, during the
    course of the two-year monitoring period, the Commission may require
    the carrier to change its rates prospectively, pursuant either to a
    section 205 investigation or a section 208 complaint.[^16]

5.  When the two-year monitoring period ends, the carrier files a "final
    monitoring report" reflecting its total access earnings.[^17] If
    this final monitoring report indicates that the carrier has exceeded
    its maximum allowable rate of return at the end of the two-year
    monitoring period, the Commission may then, in response to formal
    complaints for damages, require refunds of any such overearnings to
    affected access customers.[^18]

### "Streamlined" Access Tariffs

6.  In the Telecommunications Act of 1996,[^19] Congress provided all
    local exchange carriers, including rate-of-return carriers such as
    Vitelco, an alternative method for filing interstate access
    rates.[^20] Under section 204(a)(3) of the Act, a rate-of-return
    carrier may file new or revised access rates on a "streamlined"
    basis.[^21] Access rates that a carrier files pursuant to this
    provision "shall be *deemed lawful* and shall be effective 7 days
    (in the case of a reduction in rates) or 15 days (in the case of an
    increase in rates) after the date on which the rates are filed with
    the Commission unless the Commission takes action under
    paragraph (1) \[47 U.S.C. § 204(a)(1)\] before the end of the 7-day
    or 15-day period, as appropriate."[^22] Even if the carrier files a
    "streamlined" access tariff under section 204(a)(3), the carrier
    must still report its earnings periodically, and may still revise
    its rates during the course of the monitoring period, just as if the
    tariff had been filed under section 203. Moreover, interim
    monitoring reports that reveal overearnings can still prompt the
    Commission to cause the carrier to change its rates prospectively,
    pursuant to a section 205 investigation or a section 208 complaint.
    If the carrier has overearned at the end of the two-year monitoring
    period, however, the Commission cannot require the carrier to refund
    such overearnings to its access customers for periods during which
    the rates have been "deemed lawful" by operation of law. [^23]

### Vitelco's Access Tariffs Applicable to the 1997-1998 Monitoring Period

7.  Vitelco's maximum allowable rate of return was 11.65% for the
    1997-1998 Monitoring Period.[^24] Four Vitelco access tariffs
    applied during different portions of the 1997-1998 Monitoring
    Period. The first was effective on July 1, 1996;[^25] the second was
    effective on July 1, 1997;[^26] the third was effective on January
    1, 1998;[^27] and the fourth was effective on July 1, 1998.[^28]
    Vitelco filed the July 1996 tariff on a non-streamlined basis
    pursuant to section 203 of the Act.[^29] Vitelco filed the
    subsequent three tariffs on a streamlined basis pursuant to section
    204(a)(3) of the Act.[^30] During the 1997-1998 Monitoring Period,
    Vitelco also filed interim monitoring reports on September 25,
    1997[^31] and on March 30, 1998,[^32] and a final monitoring report
    and a corrected final monitoring report on September 30, 1999[^33]
    and October 5, 1999, [^34] respectively.

8.  On June 27, 1997, the Common Carrier Bureau ("CCB")[^35] issued an
    order suspending and setting for investigation Vitelco's second
    tariff (*i.e.*, the July 1997 tariff).[^36] On July 28, 1997, on its
    own motion, CCB issued an order (i) reconsidering its decision to
    suspend and investigate Vitelco's July 1997 tariff and (ii)
    declining to investigate that tariff.[^37]

### Vitelco's Earnings During the 1997-1998 Monitoring Period 

9.  The parties stipulate that Vitelco's access earnings exceeded its
    maximum allowable rate of return during the first six months of
    1997.[^38] In addition, the record clearly indicates that Vitelco's
    access earnings exceeded its maximum allowable rate of return during
    the remainder of the 1997-1998 Monitoring Period, as well.[^39]

## Procedural Background

10. On September 10, 2001, pursuant to sections 1.716-1.717 of our
    rules,[^40] AT&T filed an informal complaint against Vitelco
    alleging that Vitelco had earned more than its maximum allowable
    rate of return, and thus had overcharged AT&T for access services,
    during the 1997-1998 Monitoring Period.[^41] Also on September 10,
    2001, AT&T and Vitelco moved jointly that the Enforcement Bureau
    ("Bureau") instruct Vitelco not to respond to AT&T's informal
    complaint until 90 days after a certain court decision became
    final.[^42] The Bureau granted the Joint Request.[^43] Thereafter,
    the relevant court decision became final, our informal complaint
    process ran its course, and AT&T timely filed its formal complaint.
    Thus, pursuant to our informal complaint rules and orders, the
    instant formal complaint relates back to AT&T's September 10, 2001
    informal complaint for purposes of tolling the applicable two-year
    statute of limitations set forth in 47 U.S.C. § 415(b).[^44]

11. The formal complaint alleges that Vitelco violated section 201(b) of
    the Act by reaping access earnings over its 11.65% maximum allowable
    rate of return during the 1997-1998 Monitoring Period.[^45] Pursuant
    to section 1.722(d) of our rules,[^46] AT&T "bifurcated" this
    proceeding and requests a determination regarding only liability at
    this time.[^47] AT&T seeks a finding of liability for damages only
    with respect to Vitelco's 1997 earnings, however. AT&T concedes that
    section 204(a)(3) precludes any finding of liability for damages
    regarding Vitelco's 1998 earnings.[^48]

12. In response, Vitelco asserts that AT&T's claims for damages are
    barred by the two-year statute of limitations in section 415(b) of
    the Act.[^49] Vitelco also asserts that section 204(a)(3) bars
    AT&T's claim for damages regarding Vitelco's earnings during the
    period July 1, 1997 through December 31, 1997, because the
    *Suspension Order* did *not* deprive Vitelco's access rates of their
    "deemed lawful" status during that period.[^50]

# III. Discussion {#iii.-discussion .unnumbered}

13. For the reasons discussed below, we find that AT&T timely filed its
    September 10, 2001 informal complaint, and thus the statute of
    limitations in section 415(b) of the Act does not bar AT&T's claims
    for damages. We also find that the *Suspension Order* stripped
    Vitelco's July 1997 access rates of their deemed lawful status, and
    that the *Reconsideration Order* did not subsequently render those
    rates "lawful." Moreover, we find that Vitelco overearned in 1997
    and did not underearn in 1998. Accordingly, we grant AT&T's
    Complaint and hold Vitelco liable to AT&T for AT&T's share of
    Vitelco's overearnings during 1997.

## AT&T's Claims Are Timely.

14. In Vitelco's view, AT&T's claim for damages arising from the
    overearnings that Vitelco reaped during the period January 1, 1997
    through June 30, 1997 is barred by the two-year statute of
    limitations set forth in section 415(b) of the Act.[^51] According
    to Vitelco, AT&T's claim for these damages accrued on September 30,
    1997, when Vitelco filed its interim monitoring report reflecting
    its excessive earnings for the first six months of 1997.[^52]
    Vitelco argues, therefore, that AT&T's September 10, 2001 complaint
    -- filed almost four years after Vitelco publicly acknowledged its
    overearnings on September 30, 1997 -- is simply too late.[^53]

15. For similar reasons, Vitelco further asserts that AT&T's claim for
    damages arising from the earnings that Vitelco reaped during the
    period July 1, 1997 through December 31, 1997 is also barred by the
    Act's two-year limitations period.[^54] According to Vitelco, AT&T's
    claim for these damages accrued on March, 30, 1998, when Vitelco
    filed its interim monitoring report reflecting its earnings for the
    last six months of 1997.[^55] Vitelco argues, therefore, that AT&T's
    September 10, 2001 complaint -- filed over three years after Vitelco
    publicly acknowledged its earnings on March 30, 1998 -- is
    time-barred.[^56]

16. We disagree with Vitelco's assertions regarding the tardiness of
    AT&T's damages claims, for the reasons explained below. In
    accordance with our rules and case law, we conclude that AT&T's
    claims for damages arising from Vitelco's earnings in 1997 did not
    accrue until September 30, 1999, the date that Vitelco filed its
    final monitoring report for the entire 1997-1998 Monitoring
    Period.[^57] Thus, AT&T's September 10, 2001 complaint fell within
    the Act's two-year limitations period.

17. The Commission recognizes that rate-setting is not an exact science,
    and that the overarching goal of rate-of-return regulation is to
    ensure that rates fall within a zone of reasonableness.[^58]
    Consequently, "\[t\]o alleviate some of the imprecision inherent in
    the prescribed rate-of-return methodology, . . . the Commission
    employs what it deems a 'long evaluation period' allowing short term
    earnings 'peaks' and 'valleys' to offset each other."[^59] In
    particular, rule 65.701 provides, in pertinent part, that
    "interstate earnings shall be measured over a two year period to
    determine compliance with the maximum allowable rate of
    return."[^60] This two-year period allows a carrier time to minimize
    or eliminate overearnings that might otherwise result from cost and
    demand projections that prove to be inaccurate. Specifically, if the
    rates that a carrier files at the beginning of a monitoring period
    begin unexpectedly to yield excessive earnings, the carrier has time
    to observe that situation and to file new, lower rates to correct
    for the overearnings before the monitoring period ends.[^61] The
    two-year monitoring period also protects carriers from having their
    rates adjudged based on unforeseen and unforeseeable earnings
    variations over short intervals.[^62]

18. Based on how the rate-of-return regime works, as just described, the
    D.C. Circuit and the Commission have repeatedly held that
    overearnings claims for damages accrue when the carrier files its
    final monitoring report, and not before.[^63] In fact, in *MCI v.
    FCC*, the D.C. Circuit squarely rejected the same argument that
    Vitelco makes here -- that submission of a preliminary monitoring
    report triggers the running of the statute of limitations.[^64]

19. This only makes sense, given the nature of rate-of-return
    regulation, because it serves to protect the carrier from complaints
    filed prematurely, before the carrier has had an opportunity to
    remedy a trend of overearnings. Here, for example, had Vitelco
    underearned during the last 12 months of the Monitoring Period, it
    would have reduced or perhaps even eliminated AT&T's claim for
    damages. Such underearnings could have resulted from changed demand
    patterns, a voluntary tariff amendment, or a tariff amendment caused
    by Commission proceedings under section 205 or section 208.
    Moreover, during the last 12 months of the Monitoring Period,
    Vitelco might have decided, for some reason, to file non-streamlined
    rates. Thus, prior to Vitelco's filing of its final monitoring
    report, AT&T could not have known whether or to what extent it had a
    viable claim for damages, even though, after the first six months of
    1997, Vitelco filed its tariffed rates pursuant to section
    204(a)(3). Accordingly, AT&T's claim for damages did not accrue
    until Vitelco filed its final monitoring report in September 1999.

20. Vitelco acknowledges the foregoing rules and case law concluding
    that a damages claim alleging overearnings in violation of section
    201(b) does not accrue until the final monitoring report is
    filed.[^65] Vitelco argues, however, that those rules and case law
    did not fully survive the enactment of section 204(a)(3).[^66]
    Specifically, Vitelco observes that the foregoing rules and case law
    were premised on the availability of refunds for the entire two-year
    monitoring period.[^67] Thus, in Vitelco's view, where, as here, the
    operation of section 204(a)(3) limits the availability of refunds to
    only a portion of the two-year monitoring period, the pre-204(a)(3)
    rules and case law regarding claim accrual simply do not apply, and
    the two-year monitoring period is no longer relevant for
    statute-of-limitations purposes.[^68] According to Vitelco, this is
    precisely what the D.C. Circuit meant when it stated, in the context
    of circumstances identical to those here, that the two-year
    monitoring period had been "cut short" by the filing of rates deemed
    lawful under section 204(a)(3).[^69]

21. Vitelco is certainly correct that section 204(a)(3) "radically"
    altered tariff rate regulation, as the Commission has
    recognized.[^70] Vitelco errs, however, in describing the scope of
    that alteration.

22. With respect to rate-of-return regulation, what section 204(a)(3)
    changed is the remedy available for "deemed lawful" rates that
    result in earnings above the maximum allowable rate of return: the
    Commission can no longer require the carrier to pay refunds for past
    overearnings generated by "deemed lawful" rates. What section
    204(a)(3) did *not* change, however, is the Commission's requirement
    that carriers comply with the rate-of-return prescription over a
    two-year period. Specifically, even with respect to deemed lawful
    rates, the Commission can still cause the carrier to lower its rates
    prospectively via an investigation under section 205 of the Act or a
    complaint proceeding under section 208 of the Act to ensure
    compliance with the rate-of-return prescription during the course of
    the full two-year period.[^71]

23. In order to perform those surviving functions properly, the
    Commission must continue to assess carriers' rates in the context of
    a predetermined, specific time-frame (here, two years). Otherwise,
    the rate-of return prescription would lose all meaning.[^72] Indeed,
    Vitelco itself recognized the continuing vitality of the
    Commission's rules and case law regarding the two-year monitoring
    period, as Vitelco maintained its practice of filing monitoring
    reports and amended tariffs.[^73] Finally, the D.C. Circuit's
    passing reference to a monitoring period being "cut short" by
    section 204(a)(3) was, in our view, referring simply to the fact
    that damages could not arise directly from the "deemed lawful" rates
    in effect during part of the period at issue.[^74] Thus, we conclude
    that section 204(a)(3) did not vitiate the two-year monitoring
    period. And, given that the two-year monitoring period survives the
    enactment of section 204(a)(3), so, too, does the rule regarding
    accrual of damages claims for statue-of-limitations purposes.

24. To further support its view on when AT&T's damages claim accrued,
    Vitelco makes another argument for why a two-year monitoring period
    does not apply here, and, thus, why the statute of limitations bars
    recovery for Vitelco's 1997 overearnings. Specifically, Vitelco
    argues that a two-year period is valid only if rates other than
    those deemed lawful are in effect for the entire period.[^75] In
    Vitelco's view, if deemed lawful rates are in effect during any
    portion of the two-year period, the Commission can no longer
    consider whether the carrier overearned during the full two-year
    monitoring period, because to do so would require the Commission to
    consider earnings realized during a period of time when deemed
    lawful rates were in effect. According to Vitelco, that would result
    in a carrier being held liable for damages despite the deemed lawful
    status of its rates. In other words, in Vitelco's view, the mere
    existence of deemed lawful rates during any portion of the two-year
    monitoring period would immunize all rates in effect during the
    monitoring period, even rates not filed pursuant to section
    204(a)(3).

25. We disagree. Nothing in section 204(a)(3), our rules, or precedent
    supports Vitelco's sweeping suggestion that the deemed lawful status
    of rates means not only that the earnings produced from those rates
    cannot themselves be the subject of refunds, but also that such
    earnings cannot even be considered in determining whether the
    earnings from *other* rates may be the subject of refunds. Our
    conclusion does not deprive Vitelco of the benefit of deemed lawful
    protection for its 1998 rates filed pursuant to section 204(a)(3),
    or impose a penalty on Vitelco based in part on those deemed lawful
    rates. To the extent that Vitelco's rates are "deemed lawful" under
    section 204(a)(3), we cannot and do not require Vitelco to refund
    "overcharges" to AT&T, because, as a legal matter, there are
    none.[^76] Even though we find liability arising from Vitelco's
    overearnings during the time when Vitelco's rates were *not* deemed
    lawful, Vitelco still receives the full benefit of section 204(a)(3)
    during the time when Vitelco's rates *were* deemed lawful, because
    Vitelco gets to keep all the revenues it received during that time.

26. In fact, were we to accept Vitelco's suggestion, we would likely run
    afoul of *Virgin Islands*.[^77] In that case, the court vacated the
    Commission's award of overearnings refunds, because the Commission
    had based the award on an examination of earnings during only a
    six-month subset of a two-year monitoring period.[^78] In doing so,
    the court "held that the Commission could not evaluate a carrier's
    rate-of-return using a period different from the two-year period the
    Commission itself had prescribed."[^79] Consequently, had Vitelco
    underearned during the last 12-18 months of the monitoring period,
    we would have had to take that fact into account in deciding whether
    and to what extent to award damages to AT&T. Put differently,
    *Virgin Islands* (and the nature of our rate-of-return regime)
    require us to consider Vitelco's earnings throughout the entire
    1997-1998 Monitoring Period in order to assess whether to grant
    AT&T's claim, even though deemed lawful rates were in effect during
    part of that Monitoring Period.

27. Finally, Vitelco relies on a recent court decision, *Communications
    Vending*, [^80] to support its position on claim accrual. In that
    case, the court held that uncertainty about the legal validity of a
    claim does not toll the running of the statute of limitations in
    section 415 of the Act; once a prospective claimant knows the
    *facts* supporting its claim, it must file its claim within the
    limitations period, even though the *law* supporting its claim is
    ambiguous.[^81] Here, however, the uncertainty that existed when
    Vitelco filed its interim monitoring reports was factual, not legal:
    it was unknown whether Vitelco, as a factual matter, would actually
    overearn as of the end of the two-year monitoring period; thus, it
    was unknown whether AT&T would have any factual basis for an
    overearnings claim. Such factual uncertainty is fundamentally
    different from legal uncertainty, and renders *Communications
    Vending* inapposite.

28. In sum, AT&T's claims for damages accrued when Vitelco filed its
    final monitoring report for the 1997-1998 Monitoring Period, not
    when Vitelco filed its interim monitoring reports. Consequently,
    AT&T's claims for damages arising from Vitelco's access earnings in
    1997 are timely, and Vitelco's defense based on the statute of
    limitations set forth in section 415(b) of the Act fails.

## Vitelco's Access Rates for July 1997-December 31, 1997 Were Not "Deemed Lawful."

29. Before addressing the merits of the parties' arguments regarding the
    last six months of 1997, the facts surrounding Vitelco's July 1997
    tariff bear repeating and elaboration. Vitelco initially filed the
    July 1997 tariff on June 16, 1997.[^82] On June 27, 1997, in
    response to petitions filed by AT&T and MCI questioning the "cash
    working capital" ("CWC") requirements of Vitelco and 10 other
    rate-of-return carriers, CCB suspended and set for investigation the
    tariffs of those 11 carriers.[^83] CCB also ordered Vitelco and the
    other 10 carriers to "KEEP ACCURATE ACCOUNT" of all amounts received
    that are associated with the rates that are subject to this
    investigation."[^84] CCB noted, however, that it would "separately
    issue an order designating issues for investigation."[^85]

30. One month later, on July 28, 1997, CCB "designate\[d\] for
    investigation issues regarding cash working capital for four \[of
    the\] rate of return carriers" referenced in the *Suspension
    Order*.[^86] Vitelco was not among those four carriers. Instead,
    with respect to Vitelco and the six other carriers, CCB held that,
    "\[p\]ursuant to Sections 1.108 and 0.291 of the Commission's rules,
    we reconsider on our own motion our decision to suspend and
    investigate tariff provisions that include rate elements associated
    with cash working capital...."[^87] CCB did so because "\[e\]ach of
    these LECs made ex parte filings in which they provided information
    sufficient to" show compliance with Commission rules regarding cash
    working capital.[^88] As a result, CCB "decline\[d\] to investigate
    these LECs' tariff provisions that relate to cash working
    capital."[^89]

31. Vitelco filed the July 1997 tariff pursuant to section 204(a)(3) of
    the Act, and asserts that its rates for July through December 1997
    were deemed lawful by operation of that section. AT&T asserts that
    the rates were not deemed lawful. As explained below, we agree with
    AT&T. Section 204(a)(3) states that rates filed pursuant to its
    terms shall be deemed lawful "unless the Commission *takes action
    under paragraph (1)* \[*i.e.,* section 204(a)(1)\] before the end"
    of the applicable 7 or 15-day notice period.[^90] Section 204(a)(1)
    encompasses the following actions: suspension of a new or revised
    tariffed charge; "enter\[ing\] upon a hearing concerning \[its\]
    lawfulness"; ordering a carrier "to keep accurate account of all
    amounts received by reason of such charge" pending such completion
    of the hearing; and making such order as the Commission deems proper
    regarding the lawfulness of the tariffed charge.[^91]

32. Based upon the language of the statute, as interpreted by the
    Commission in the *Streamlined Tariff Order,* we find that the rates
    in the July 1997 tariff were never deemed lawful. According to the
    statute, a rate is deemed lawful "*unless* the Commission takes
    action under paragraph \[204(a)(1)\] before the end of \[the\] 7-day
    or 15-day period." In this case, the Commission, through CCB acting
    on delegated authority, took a number of actions under section
    204(a)(1). In the *Suspension Order*, CCB suspended Vitelco's
    tariff, began a hearing concerning the lawfulness of the tariff, and
    issued an accounting order.

33. Vitelco argues, however, that the Commission does not "take action"
    within the meaning of section 204(a)(3) unless and until a tariffed
    charge has been suspended *and* investigated *and* ruled upon.[^92]
    That is, according to Vitelco, an investigation "must be conducted
    and concluded" in order for section 204(a)(3)'s "takes action"
    language to be implicated. Vitelco asserts, therefore, that the
    access rates in the July tariff were deemed lawful by operation of
    section 204(a)(3), notwithstanding the *Suspension Order.*[^93]

34. We disagree. The language of section 204(a)(3) does not require an
    investigation to be concluded prior to removing deemed lawful status
    from tariffed rates. Moreover, the Commission has already rejected
    this view in the *Streamlined Tariff Order,* which holds that the
    deemed lawful status of rates is removed upon the issuance of an
    order suspending the rates and setting them for investigation; an
    order concluding the investigation is not required:[^94]

    \[T\]he "deemed lawful" language does not govern streamlined tariff
    filings that become effective after *suspension* in those instances
    where the Commission *suspends and initiates* an investigation of a
    LEC tariff within the 7 or 15 day notice periods specified in
    section 204(a)(3). In those cases, the LEC streamlined tariffs would
    *not* be "deemed lawful" under section 204(a)(3) because they were
    *suspended and set for investigation*. [^95]

35. Vitelco's interpretation of the statute is, moreover, illogical. As
    noted, the statute requires the Commission to "take\[\] action . . .
    before the end of that 7-day or 15-day period. . . ." If the action
    required to remove deemed lawful status were an order concluding the
    investigation, as Vitelco contends, the Commission could never
    accomplish this as a practical matter within the 7 or 15-day period
    specified in the statute.[^96] Thus, Vitelco\'s interpretation of
    the statute would render it virtually impossible to remove deemed
    lawful status, an illogical result given the statute\'s explicit
    contemplation that deemed lawful status can and will be removed in
    appropriate circumstances.

36. Vitelco further argues that, even if the *Suspension Order* had
    stripped deemed lawful status from the access rates contained in
    Vitelco's July 1997 tariff, the *Reconsideration Order* restored the
    rates' deemed lawful status.[^97] Thus, in Vitelco's view, the
    access rates contained in its July 1997 tariff reclaimed their
    deemed lawful status, which bars AT&T's claim for damages regarding
    Vitelco's earnings during the last six months of 1997.[^98]

37. We reject this contention as well. We find that the *Suspension
    Order* stripped the access rates in the July 1997 tariff of their
    deemed lawful status, and the *Reconsideration Order* did not
    restore such status. As explained in the *Streamlined Tariff Order,*
    after rates are suspended and investigated, they can become the
    lawful rates only if the Commission issues an order affirmatively
    finding the rates to be lawful:[^99]

> \[The rates\] would be "legal" until the Commission concluded an
> investigation as to their lawfulness. The lawfulness of such tariffs
> would be determined by the orders issued by the Commission at the
> conclusion of those proceedings.[^100]

38. Here, there was no order finding the rates lawful. The
    *Reconsideration Order* did not adjudge the lawfulness of Vitelco's
    rates, but merely decided not to investigate them. Moreover, because
    it was issued by CCB rather than the full Commission, the
    *Reconsideration Order* cannot have adjudged the lawfulness of
    Vitelco's rates, as CCB did not have the authority to issue such an
    order. Under section 5(c) of the Act, the Commission may not
    delegate to a Bureau the authority to take action under section
    204(a)(2), *i.e.,* to issue an order concluding a tariff
    investigation. Both AT&T and Vitelco recognize that CCB did not have
    authority to rule on the lawfulness of Vitelco's tariff.[^101] Thus,
    in light of the suspension and investigation, Vitelco's rates were
    not deemed lawful by operation of law. Nor were those rates ever
    adjudged to be lawful. Accordingly, the July to December 1997 access
    rates were legal, but not lawful, and those rates may therefore form
    the basis of liability to AT&T for damages.[^102]

39. Finally, Vitelco asserts that the *Reconsideration Order* "rendered
    the suspension and investigation a nullity. As such, \[Vitelco's\]
    rates were neither suspended nor investigated under Section
    204(a)(1)."[^103] We find nothing in the *Reconsideration Order*,
    however, that suggests it was intended to have such retroactive
    effect.

## Vitelco Violated Section 201(b) by Overearning During the 1997-1998 Monitoring Period, and is Liable for Damages Arising from its Overearnings in 1997.

40. It is well established that the Commission's rate-of-return
    prescription has the force of a statute, so exceeding that
    prescription subjects a carrier to liability:

> We have repeatedly held that a rate-of-return prescription has the
> force of law and that the Commission may therefore treat a violation
> of the prescription as a per se violation of the requirement of the
> Communications Act that a common carrier maintain "just and
> reasonable" rates. . . .[^104]

41. If a carrier exceeds its maximum allowable rate of return, the
    Commission can order refunds and award damages to aggrieved
    customers in the context of a formal complaint case.[^105] Damages
    may be based on the difference between the amount the customer paid
    to the carrier and the amount the customer would have paid to the
    carrier if the carrier had charged and applied its rates in a manner
    that produced earnings within the maximum-allowable rate-of-return
    ceiling.[^106]

42. As stated above, the record indicates that Vitelco exceeded its
    maximum allowable rate of return during 1997 and continued to do so
    in 1998, resulting in access earnings above the maximum allowable
    rate of return for the 1997-1998 Monitoring Period.[^107] As the
    record further indicates, Vitelco's access rates in effect during
    1998 were deemed lawful.[^108] As we have held herein, however,
    Vitelco's access rates in effect during 1997 were not deemed lawful.
    As even Vitelco acknowledges,[^109] the Commission can still award
    damages for overearnings accrued during any portion of the
    monitoring period when the rates in effect were not deemed lawful.
    Accordingly, we conclude that Vitelco has violated section 201(b) of
    the Act and that Vitelco is liable to AT&T for AT&T's share of
    Vitelco's overearnings accrued during 1997.

# IV. ordering clause {#iv.-ordering-clause .unnumbered}

43. Accordingly, IT IS ORDERED, pursuant to sections 4(i), 4(j), 201(b),
    204, 206, 207, and 208 of the Communications Act of 1934, as
    amended, 47 U.S.C. §§ 154(i), 154(j), 201(b), 204, 206, 207, and
    208, that AT&T's formal complaint is GRANTED.

    FEDERAL COMMUNICATIONS COMMISSION

    Marlene H. Dortch

    Secretary

SEPARATE STATEMENT OF

COMMISSIONER KEVIN J. MARTIN

Approving in Part, Dissenting in Part

Re: *AT&T Corp. and AT&T of the Virgin Islands, Inc. v. Virgin Islands
Telephone Corporation, D/B/A/ Innovative Telephone ( File No.
EB-04-MD-002)*

I am troubled by today's decision that finds the Virgin Islands
Telephone Corporation ("Vitelco") liable for refunds for overearnings on
1997 interstate access rates on the basis that such rates were not
"deemed lawful" under section 204(a)(3) of the Communications Act.

Under section 204(a)(3), a local exchange carrier's access tariff, filed
on a streamlined basis, is "deemed lawful and shall be effective 7 days
(in the case of a reduction in rates) or 15 days (in the case of an
increase in rates) after the date on which it is filed with the
Commission unless the Commission takes action...before the end of that 7
day or 15-day period, as appropriate.[^110] The "deemed lawful" language
in section 204(a)(3) immunizes from challenge those rates that are not
suspended or investigated before a finding of unlawfulness.[^111] Filing
carriers are not subject to liability for damages when tariffs take
effect, without suspension, under section 204(a)(3) and even if they are
subsequently determined to be unlawful in a section 205 investigation or
a section 208 complaint proceeding.

On June 27, 1997, the Common Carrier Bureau ("Bureau") issued an order
suspending and setting for investigation Vitelco's July 1997 to December
1997 tariff filing.[^112] On July 28, 1997, on its own motion, the
Bureau issued an order reconsidering its decision to suspend and
investigate Vitelco's tariff and declining to investigate that
tariff.[^113]

Today's action finds that the Bureau's *Suspension Order* "stripped
Vitelco's July 1997 tariff of their deemed lawful status,"[^114] even
though in the subsequent *Reconsideration Order* the Bureau reversed its
decision to investigate the tariff. The Commission finds that while the
Bureau had the authority to strip the "deemed lawful" status from
Vitelco's 1997 access rates, the *Reconsideration Order* cannot restore
the lawfulness of Vitelco's rates because the Bureau does not have the
authority to issue such order.[^115]

Today's decision essentially endorses the Bureau's ability, on delegated
authority, to deny the presumed "deemed lawful" status associated with a
carrier's streamlined tariff filing and effectively foreclose Commission
review of that decision. On its own, the Bureau suspended and set for
investigation Vitelco's tariff filing. That action revoked the "deemed
lawful" status of the tariff. One month later, however, the Bureau
reversed its decision to investigate the tariff and the lawfulness of
Vitelco's tariff was thus never subsequently addressed. A procedural
mechanism that enables the Bureau to strip carrier tariffs of their
presumed lawfulness through a one-day suspension and subsequent failure
to follow through on an investigation is inherently unfair and
inconsistent with the intent of Section 204(a)(3). Accordingly, I
approve in part and dissent in part from the order.

[^1]: AT&T Corp. and AT&T of the Virgin Islands, Inc. v. Virgin Islands
    Telephone Corporation, d/b/a/ Innovative Telephone, *Formal
    Complaint*, File No. EB-04-MD-002 (filed Jan. 27, 2004; supplemented
    to cure deficiencies Mar. 4, 2004) ("Complaint").

[^2]: 47 U.S.C. § 208.

[^3]: 47 U.S.C. § 201(b).

[^4]: 47 U.S.C. § 204(a)(3). AT&T does not dispute the lawfulness of
    Vitelco's earnings in 1998. Joint Statement at 4, ¶¶ 22-23.

[^5]: AT&T Corp. and AT&T of the Virgin Islands, Inc. v. Virgin Islands
    Telephone Corporation, d/b/a/ Innovative Telephone, *Joint
    Statements of Complainant and Defendants*, File No. EB-04-MD-002
    (filed Apr. 7, 2004) ("Joint Statement") at 3, ¶¶ 1-3.

[^6]: AT&T Corp. and AT&T of the Virgin Islands, Inc. v. Virgin Islands
    Telephone Corporation, d/b/a/ Innovative Telephone, *List of Further
    Stipulations to Supplement the Joint Statement of Complainants and
    Defendant*, File No. EB-04-MD-002 (filed Apr. 20, 2004) ("Further
    Stipulations") at 1, ¶ 2; Joint Statement at 3, ¶¶ 5, 6.

[^7]: Joint Statement at 3, ¶ 8.

[^8]: 47 U.S.C. § 201(b).

[^9]: *See, e.g.*, *MCI Telecom. Corp. v. FCC*, 59 F.3d 1407 (D.C. Cir.
    1995) ("*MCI v. FCC*"); *Virgin Islands Telephone Corp. v. FCC ,*
    989 F.2d 1231 (D.C. Cir. 1993) ("*Virgin Islands*"); *Represcribing
    the Authorized Rate of Return for Interstate Services of Local
    Exchange Carriers,* Order, 5 FCC Rcd 7507, 7532 at ¶¶ 1, 216 (1990)
    ("*Rate-of-Return Prescription Order*") (subsequent history
    omitted).

[^10]: *See, e.g.*, 47 C.F.R. §§ 61.38, 61.39.

[^11]: 47 U.S.C. § 203.

[^12]: 47 C.F.R. §§ 69.3(a), 61.58(a)(2)(ii). Annual tariffs for access
    services generally become effective July 1. 47 C.F.R. § 69.3(f).

[^13]: The maximum allowable rate of return is equal to the prescribed
    rate of return plus the amount specified in sections 65.700(a) or
    (b), of our rules, 47 C.F.R. §§ 65.700(a),(b), which is a margin
    that the carrier may earn from legal tariff rates before any refund
    obligation arises. *See, e.g.*, 47 C.F.R. §§ 65.600(b), 65.700-702;
    *MCI v. FCC*, 59 F.3d at 1415. The two-year monitoring period for
    determining compliance with the maximum allowable rate of return
    begins on January 1 of odd-numbered years and ends on December 31 of
    even-numbered years. 47 C.F.R. § 65.701.

[^14]: 47 C.F.R. § 65.600(d)(1).

[^15]: *See, e.g.*, *MCI v. FCC*, 59 F.3d at 1415; *Virgin Islands*, 989
    F.2d at 1238-39; 47 C.F.R. § 69.3(b); *In the Matter of Amendment of
    Part 65, Interstate Rate of Return Prescription: Procedures and
    Methodologies to Establish Reporting Requirements*, Report and
    Order, 1 FCC Rcd 952, 954 at ¶ 10 (1986) ("*Rate-of-Return
    Methodologies Order*") (subsequent history omitted).

[^16]: 47 U.S.C. §§ 205, 208. *See In the Matter of Implementation of
    Section 402(b)(1)(A) of the Telecommunications Act of 1996*, Report
    and Order, 12 FCC Rcd 2170, 2170, 2175-78, 2181-84, 2197 at ¶¶ 8,
    11, 12, 19-21, 23, 24, 51 (1997) ("*Streamlined Tariff Order*").

[^17]: 47 C.F.R. § 65.600(b).

[^18]: *See, e.g.,* *MCI v. FCC. Id.*, 59 F.3d at 1414.

[^19]: Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56
    (1996) ("1996 Act").

[^20]: 47 U.S.C. § 204.

[^21]: 47 U.S.C. § 204(a)(3). *See* *Streamlined Tariff Order*.

[^22]: 47 U.S.C. § 204(a)(3) (emphasis added).

[^23]: *See, e.g.,* *ACS of Anchorage, Inc. v. FCC*, 290 F.3d 403, 403,
    410-411 (D.C. Cir. 2002) ("*ACS v. FCC* "); *Streamlined Tariff
    Order*, 12 FCC Rcd at 2181-83, ¶¶ 18-20.

[^24]: *See, e.g.,* 47 C.F.R. § 65.700; *Rate-of-Return Prescription
    Order*, 5 FCC Rcd at 7509, ¶ 13 (1990). *See also* Joint Statement
    at 4, ¶ 14; AT&T of the Virgin Islands, Inc. v. Virgin Islands
    Telephone Corporation, d/b/a/ Innovative Telephone, *Answer of
    Innovative Telephone*, EB-04-MD-002 (Mar. 24, 2001) ("Answer") at
    C-8 (Calculations of \[Vitelco's\] Interstate Access Earnings in
    Excess of 11.65% for the Period July -- December 1997).

[^25]: Complaint, Att. F, Item 2, Transmittal No. 28, Letter from
    Jonathan E. Canis, Counsel for Vitelco, to William F. Caton, Acting
    Secretary, Federal Communications Commission, Annual Access Filing
    Tariff (filed Apr. 2, 1996; effective July 1, 1996) ("July 1996
    Tariff").

[^26]: Complaint, Att. F, Item 3, Transmittal No. 34, Letter from
    Gregory J. Vogt, Counsel for Vitelco, to Secretary, Federal
    Communications Commission, Annual Access Filing Tariff (filed June
    16, 1997; effective July 1, 1997); Complaint, Att. F, Item 4,
    Transmittal No. 35, Letter from Gregory J. Vogt, Counsel for
    Vitelco, to Secretary, Federal Communications Commission, Supplement
    Tariff (filed June 30, 1997; effective June 30, suspended for one
    day) ("July 1997 Tariff"). For convenience, the reference in the
    text encompasses both tariff transmittals.

[^27]: Complaint, Att. F, Item 5, Transmittal No. 36, Letter from
    Gregory J. Vogt, Counsel for Vitelco, to Magalie Roman Salas,
    Secretary, Federal Communications Commission, Access Filing Tariff
    (filed Dec. 17, 1997; effective January 1, 1998) ("January 1998
    Tariff").

[^28]: Complaint, Att. F, Item 6, Transmittal No. 37, Letter from
    Gregory J. Vogt, Counsel for Vitelco, to Magalie Roman Salas,
    Secretary, Federal Communications Commission, Annual Access Filing
    Tariff (filed June 16, 1998; effective July 1, 1998) ("July 1998
    Tariff").

[^29]: July 1996 Tariff; Joint Statement at 3, ¶ 10.

[^30]: July 1997 Tariff; January 1998 Tariff; July 1998 Tariff; Joint
    Statement at 4, ¶¶ 18, 22.

[^31]: Answer, D-2; AT&T Corp. and AT&T of the Virgin Islands, Inc. v.
    Virgin Islands Telephone Corporation, d/b/a/ Innovative Telephone,
    *Supplemental Complaint*, File No. EB-04-MD-002 (filed Mar. 3, 2004)
    ("*Supplemental Complaint*") Supp. Exh. C, Item 2, Letter from
    Griselda Dobbins, Chief Financial Officer, to William F. Caton,
    Acting Secretary, Federal Communications Commission, FCC Form 492
    for the period January 1, 1997 to June 30, 1997 (filed Sept. 25,
    1997) ("September 1997 492").

[^32]: Answer, D-2; *Supplemental Complaint*, Supp. Exh. D, Letter from
    Griselda Dobbins, Chief Financial Officer, to William F. Caton,
    Acting Secretary, Federal Communications Commission, FCC Form 492
    for the period January 1, 1997 to December 31, 1997 (dated Mar. 30,
    1998) ("March 1998 492").

[^33]: Answer, D-2; *Supplemental Complaint*, Supp. Exh. C, Item 3,
    Letter from Elisa G. Hodge, Acting Chief Financial Officer, to
    Magalie R. Salas, Secretary, Federal Communications Commission, FCC
    Form 492 for the period January 1, 1997 to December 31, 1998 (filed
    Sept. 30, 1999) ("September 1999 492").

[^34]: Answer, D-2; Exh. G-3, Rate of Return Report, FCC Form 492 for
    the period January 1, 1997 to December 31, 1998 (dated Oct. 5, 1999)
    ("October 1999 492"). AT&T questions whether the reports dated March
    30, 1998 and October 5, 1999 were actually filed, s*ee, e.g.*, AT&T
    Corp. and AT&T of the Virgin Islands, Inc. v. Virgin Islands
    Telephone Corporation, d/b/a/ Innovative Telephone, *AT&T Corp.'s
    Reply to \[Vitelco's\] Answer*, File No. EB-04-MD-002 (filed Mar.
    29, 2004) ("Reply") at 29, ¶¶ S-3, S-4, but we need not and do not
    resolve that question in order to make the liability determination
    herein.

[^35]: The Common Carrier Bureau is now the Wireline Competition Bureau.

[^36]: 1997 Annual Access Tariff Filings, *Memorandum Opinion and
    Order*, 13 FCC Rcd 5677, 5677, 5700, 5679, 5702, 5708-09 at ¶¶ 1,
    65, 67, 91, 92 (Com. Car. Bur. June 27, 1997) ("*Suspension
    Order*").

[^37]: 1997 Annual Access Tariff Filings, *Order Designating Issues for
    Investigation Memorandum Opinion and Order and Order on
    Reconsideration*, 12 FCC Rcd 11417, 11417-18, 11445, 11449, 11452 at
    ¶¶ 2, 63, 75, 87 (Com. Car. Bur. July 28, 1997) ("*Reconsideration
    Order*").

[^38]: Joint Statement at 4, ¶¶ 13-14; Further Stipulations at 1, ¶ 3.

[^39]: *See, e.g.*, September 1999 492; October 1999 492.

[^40]: 47 C.F.R. §§ 1.716-717.

[^41]: AT&T Corp. and AT&T of the Virgin Islands, Inc. v. Virgin Islands
    Telephone Corporation, d/b/a/ Innovative Telephone, *Informal
    Complaint*, EB-01-MDIC-0552 (filed Sept. 10, 2001) ("Informal
    Complaint").

[^42]: AT&T Corp. and AT&T of the Virgin Islands, Inc. v. Virgin Islands
    Telephone Corporation, d/b/a/ Innovative Telephone, *Joint Motion
    Regarding Procedure for Response to* *Informal Complaint*,
    EB-01-MDIC-0552 (filed Sept. 10, 2001) ("Joint Motion"). The court
    decision at issue was *ACS v. FCC*, *supra,* which involved many of
    the same questions raised in AT&T's informal complaint against
    Vitelco.

[^43]: *Order*, EB-01-MDIC-0552 (Enf. Bur.-- MDRD, Nov. 21, 2001).

[^44]: 47 U.S.C. § 415(b); 47 C.F.R. §§ 1.716-718.

[^45]: *See, e.g.*, Complaint at 2, 5, 6, ¶¶ 2, 13, 15.

[^46]: 47 C.F.R. § 1.722(d).

[^47]: *See, e.g.*, Joint Statement at 2. Given that we find in favor of
    AT&T on liability, AT&T may now file a supplemental complaint for
    damages in accordance with 47 C.F.R. § 1.722. If Vitelco plans to
    seek court review of this Order, however, the parties may wish to
    seek a waiver and extension of our 60-day deadline for filing a
    supplemental complaint for damages.

[^48]: Complaint at 10, ¶ 30; Joint Statement at 4, ¶ 23.

[^49]: Answer at pp. 3-4, A-7-9, A-34, A-17-20, A-22-23, A-24-25,
    A-27-28, A-30-31, A-33-35, ¶¶ 14, 19, 31, 33, 47- 48, 55, 59, 64-66.

[^50]: Answer at pp. 2-3, A-2, A-5, A-7-8, A-13, A-36-37, A-9-12,
    A-14-17, A-25, A-31-33, A-36-41 ¶¶ 2, 12, 14, 18-20, 22, 25, 29-30,
    49, 60-63, 71-78.

[^51]: Answer at pp. 3-4, A-7-8, A-17-19, A-20, A-22-25, A-27-28,
    A-30-31, A-33-35, ¶¶ 14, 31, 33, 47, 48, 55, 59, 64-66; 47 U.S.C. §
    415(b).

[^52]: Answer at A-8-9, A-22-23, A-34, ¶¶ 19, 47, 65-66; September 1997
    492.

[^53]: Answer at A-8-9, A-22-23, A-34-35, ¶¶ 19, 47, 65-66, 68.

[^54]: Answer at pp. 3-4, A-8, A-19, A-23-25, A-34-35, A-47, ¶¶ 14, 31,
    47- 48, 66-68.

[^55]: Answer at pp. 3-4, A-19, A-25, A-34-35, A-47, ¶¶ 31, 48, 66-68;
    March 1998 492. For purposes of this Order only, we will assume,
    without deciding, that Vitelco did, in fact, file an interim
    monitoring report on March 30, 1998.

[^56]: Answer at pp. 3-4, A-20, A-22, A-25, A-33-35, ¶¶ 34, 47-48, 65,
    67-68.

[^57]: *See, e.g.,* *ACS v. FCC*, 290 F.3d at 407 n.1; *MCI v. FCC*, 59
    F.3d at 1416-17; *Virgin Islands,* 989 F.2d at 1238-39; *Allnet
    Communications Serv., Inc. v. US West, Inc*.*,* Memorandum Opinion
    and Order, 8 FCC Rcd 3017, 3019 at ¶ 13 (1993) (subsequent history
    omitted) ("*Allnet*"); *US Sprint Communications Ltd. Partnership v.
    Pacific Northwest Bell Tel. Co*., Memorandum Opinion and Order, 8
    FCC Rcd 1288, 1291-92 at ¶ 16 (1993) (subsequent history omitted).

[^58]: *See, e.g.*, 47 U.S.C. § 201(b); *Virgin Islands*, 989 F.2d at
    1239 ("\[T\]he Commission\'s prescribed rate of return is not Mosaic
    law, but a single point within a broad range of reasonable rates.");
    *Nader v. FCC*, 520 F.2d 182, 193 (D.C. Cir. 1975) ("In terms of
    ratemaking, the agency\'s expertise allows us to accept its judgment
    after it defines the zone of reasonableness.").

[^59]: *Virgin Islands,* 989 F.2d at 1233.

[^60]: 47 C.F.R. § 65.701.

[^61]: *See, e.g., MCI v. FCC*, 59 F.3d at 1415 ("During any monitoring
    period in which its rates appeared destined to yield earnings above
    (or for that matter below) its authorized rate of return, the LEC
    could have revised its tariffs to avoid that result."); *Virgin
    Islands*, 989 F.2d at 1233 (observing that carriers "may correct for
    erroneous projections in the first year through rate adjustments in
    the second year.").

[^62]: *Virgin Islands*, 989 F.2d at 1238.

[^63]: *See, e.g.*, *MCI. v. FCC*, 59 F.3d at 1416-17; *Virgin Islands,*
    989 F.2d at 1238-39 (observing that "the target 'authorized return'
    is a number that has meaning only in relation to the full two-year
    monitoring period."); *AT&T v. Telephone Utils. Exch. Carrier
    Ass'n.*, Memorandum Opinion and Order, 10 FCC Rcd 8405, 8415 at ¶ 22
    ("\[T\]he date of the filing of the final monitoring report is
    dispositive with regard to the date a complainant discovers the
    right or wrong or the facts on which such knowledge is chargeable as
    a matter of law."); *Allnet*, 8 FCC Rcd at 3019, ¶ 13; *US Sprint
    Communications Ltd. Partnership v. Pacific Northwest Bell Tel. Co*.,
    Memorandum Opinion and Order, 8 FCC Rcd 1288, 1291-92 at ¶ 16 (1993)
    (subsequent history omitted); *MCI Telecom. Corp. v. Pacific Bell
    Tel. Co. et al*., Memorandum Opinion and Order, 5 FCC Rcd 3463, 3464
    at ¶ 6 (1990) (subsequent history omitted).

[^64]: *MCI. v. FCC*, 59 F.3d at 1416-17 (holding that "a cause of
    action for damages \[ . . . \] does not accrue until after \[the
    carrier\] files its final monitoring report.").

[^65]: Answer at A-18-19, A-24-25, A-29, ¶ 31-32, 48, 56.

[^66]: Answer at A-5, A-18-19, A-24-25, A-27, A-29, ¶ 11, 31-32, 48, 53,
    55-56.

[^67]: Answer at A-18-19, A-24, ¶ 31-32, 48.

[^68]: Answer at A-18-19, A-24-25, A-29, ¶ 31-32, 48, 56.

[^69]: Answer at 3, A-5, A-7, A-24-25, A-29, ¶¶ 12 n.9, 13, 48-49, 56
    (all referencing *ACS v. FCC*, 290 F.3d at 415). *See* Joint
    Statement at 4, ¶ 17.

[^70]: Answer at A-18, ¶ 31 (citing *Streamlined Tariff Order*, 12 FCC
    Rcd at 2175-76, ¶ 8).

[^71]: *See* *Streamlined Tariff Order*, 12 FCC Rcd at 2183, ¶21 ("The
    'deemed lawful' language in section 204(a)(3) changes the current
    regulatory scheme only by immunizing from challenge those rates that
    are not suspended or investigated before a finding of unlawfulness.
    It does nothing to change the Commission's ability to prescribe
    rates as to the future under section 205 or to find under section
    208 that a rate will be unlawful if charged in the future."); *id*.
    at 2181-83, ¶¶ 19-20. Unlike a complaint for damages, such a
    complaint for prospective relief would not be premature, even if
    filed before the end of the monitoring period, because the alleged
    violation of the Act in that circumstance -- charging rates that are
    likely to result in period-end earnings above the maximum allowable
    rate of return -- accrues when that likelihood becomes evident.
    Otherwise, meaningful prospective relief (as opposed to damages)
    would never be available via a complaint proceeding.

[^72]: *See, e.g.,* *Virgin Islands,* 989 F.2d at 1238-39 (stating that
    "the target 'authorized return' is a number that has meaning only in
    relation to the full two-year monitoring period.").

[^73]: January 1998 Tariff; July 1998 Tariff; March 1998 492;
    September1999 492; October 1999 492.

[^74]: *See* *ACS v. FCC*, 290 F.2d at 415.

[^75]: Answer at A-20, ¶ 32 ("Under new section 204(a)(3), retroactive
    damages are evaluated during the entire two-year period only if
    "non-deemed lawful" rates are in effect for that whole period. To
    decide otherwise would allow damages from rates that are deemed
    lawful."); A-29, ¶ 55 ("The use of a two-year monitoring period to
    ensure that rates are reasonable, when a portion of the rates being
    monitored are already conclusively presumed to be reasonable, would
    result in the recovery of damages for "deemed lawful rates."); A-31,
    ¶ 60 ("Without a two-year monitoring period, there is no refund
    obligation.").

[^76]: *Streamlined Tariff Order*, 12 FCC Rcd at 1275-76, ¶ 8. *See id.*
    at 2181-82, ¶ 19.

[^77]: *Virgin Islands,* 989 F.2d at 1238-39. For the reasons explained
    in paragraphs 21-23, *supra*, we reject Vitelco's argument that,
    after the enactment of section 204(a)(3), *Virgin Islands* is no
    longer instructive regarding the existence and operation of the
    two-year monitoring period.

[^78]: *Virgin Islands,* 989 F.2d at 1238-39.

[^79]: *ACS v. FCC*, 290 F.2d at 413, citing *Virgin Islands*, 989 F.2d
    at 1238. It merits mention that the D.C. Circuit's recent reliance
    on *Virgin Islands* in the ACS case further undermines Vitelco's
    assertion that section 204(a)(3) has superceded pre-1997 case law
    regarding rate-of-return regulation.

[^80]: *Communications Vending Corp. of Arizona, Inc. v. FCC*, 365 F.3d
    1064 (D.C. Cir. 2004) ("*Communications Vending*)".

[^81]: *Communications Vending*, 365 F.3d at 1074.

[^82]: July 1997 Tariff; Further Stipulations at 1, ¶ 5.

[^83]: *Suspension Order*, 13 FCC Rcd at 5700, ¶ 65. *See id.* at 5679,
    ¶ 1 ("we suspend for one day and set for investigation" the
    carriers' tariffs); *id*. at 5702, ¶ 67 ("We will therefore suspend
    these LECs' tariff filings for one day and initiate an investigation
    into the lawfulness of their proposed CWC requirements."); *id*. at
    5708, ¶ 91 ("the tariff filings filed by ... \[Vitelco and the 10
    other carriers\] ... ARE SUSPENDED for one day and an investigation
    is instituted.").

[^84]: *Suspension Order*, 13 FCC Rcd at 5708-09, ¶ 92. *See
    Reconsideration Order,* 12 FCC Rcd at 11418, ¶ 1 ("On June 27, 1997,
    we released the \[*Suspension Order*\], which, *inter alia*,
    suspended for one day the annual access tariffs filed by several
    incumbent local exchange carriers, imposed an accounting order, and
    initiated an investigation into the lawfulness of a number of issues
    raised by these tariff filings.").

[^85]: *Suspension Order*, 13 FCC Rcd at 5679, ¶ 3.

[^86]: *Reconsideration Order,* 12 FCC Rcd at 11418, ¶ 2. *See id*. at
    11444-46, ¶¶ 62-66.

[^87]: *Reconsideration Order,* 12 FCC Rcd at 11449, ¶ 75 (footnote
    referencing 47 C.F.R. §§ 1.108 and 0.291 omitted). *See id*. at
    11418, ¶ 2.

[^88]: *Reconsideration Order*, 12 FCC Rcd at 11449, ¶ 75. *See id*. at
    11445, ¶ 63 ("We decline to investigate most of these Class B
    carriers because they have now provided information that verifies
    that their net lags are close to 15 days.").

[^89]: *Reconsideration Order,* 12 FCC Rcd at 11449, ¶ 75. *See id*. at
    11452, ¶ 87 ("IT IS FURTHER ORDERED that pursuant to Sections 0.291
    and 1.108 of the Commission\'s rules, 47 C.F.R. §§ 0.291, 1.108, we
    reconsider on our own motion our decision in the 1997 Annual Access
    Tariff *Suspension Order* to suspend and investigate tariff
    provisions that include rate elements associated with cash working
    capital for . . . Virgin Island Telephone Company, . . . and, for
    the reasons stated herein, we decline to investigate these LECs'
    tariff provisions that relate to cash working capital."); *id*. at
    11445, ¶ 63.

[^90]: 47 U.S.C. § 204(a)(3) (emphasis added).

[^91]: 47 U.S.C. § 204(a)(1).

[^92]: Answer at A-4, A-9-12, A-15-16, A-36-37, A-40-41, ¶¶ 10, 19, 29,
    71, 78; AT&T of the Virgin Islands, Inc. v. Virgin Islands Telephone
    Corporation, d/b/a/ Innovative Telephone, *Supplemental Brief of
    Innovative Telephone,* File No. EB-04-MD-002 (Apr. 26, 2004) at 1-5
    (Vitelco's Delegation Brief).

[^93]: Answer at 2, A-9-16, A-32-33, A-37-40, ¶¶ 19, 21-26, 29, 61, 63,
    71-77.

[^94]: *Streamlined Tariff Order*, 12 FCC Rcd at 2182, 2220, ¶ 19, 103.

[^95]: *Streamlined Tariff Order*, 12 FCC Rcd at 2182, ¶ 19 (emphasis
    added).

[^96]: Indeed, the statute gives the Commission five months to conclude
    such an investigation. 47 U.S.C. § 204(a)(2).

[^97]: Answer at 2-3, A-15-16, A-32-33, A-40 ¶¶ 29, 61-62, 78; Vitelco's
    Delegation Brief at 1-6.

[^98]: Answer at A-7, A-9-16, A-32-33, A-36-41, ¶¶ 14, 19, 22-26, 29,
    61-63, 71-78.

[^99]: *Streamlined Tariff Order*, 12 FCC Rcd at 2182, 2220, ¶ 19, 103.

[^100]: *Streamlined Tariff Order*, 12 FCC Rcd at 2182, ¶ 19 (emphases
    added).

[^101]: Vitelco's Delegation Brief at 1-5; AT&T of the Virgin Islands,
    Inc. v. Virgin Islands Telephone Corporation, d/b/a/ Innovative
    Telephone, *Supplemental Brief of AT&T Corp*., File No. EB-04-MD-002
    (May 4, 2004) at 2-3 ("AT&T's Delegation Brief").

[^102]: *Streamlined Tariff Order*, 12 FCC Rcd at 2181-82, ¶¶ 18-19.

[^103]: Vitelco's Delegation Brief at 5.

[^104]: *MCI v. FCC*, 59 F.3d at 1414 (citing and quoting 47 U.S.C. §
    201(b)). *See, e.g., American Tel. & Tel. Co. v. FCC,* 836 F.2d
    1386, 1392 (D.C. Cir. 1988); *New England Tel. & Tel. Co. v. FCC*,
    826 F.2d 1101, 1106-07 (D.C. Cir. 1987) ("*New England Tel."*);
    *Nader v. FCC*, 520 F.2d 182 (D.C. Cir. 1975).

[^105]: *See, e.g., New England Tel.*, 826 F.2d at 1107-08 (stating that
    section 4(i) of the Act provides the Commission with the authority
    to enforce the rate-of-return prescription by ordering refunds);
    *see also In the Matter of Amendment of Parts 65 and 69 of the
    Commission's Rules to Reform the Interstate Rate of Return
    Represcription and Enforcement Processes*, Report and Order, 10 FCC
    Rcd 6788, 6848-49 at ¶ 137 (1995) (subsequent history omitted)
    (noting that the complaint process embodied in section 208 of the
    Act provides a useful tool in enforcing the rate-of-return
    prescription, and that the Commission is authorized to award damages
    for violations of the rate-of-return prescription).

[^106]: *MCI v. FCC*, 59 F.3d at 1415.

[^107]: September 1997 492 (cumulative interstate access rate of return
    12.98%); March 1998 492 (cumulative interstate access rate of return
    12.94%); September 1999 492 (cumulative interstate access rate of
    return 14.78%); October 1999 492 (cumulative interstate access rate
    of return 14.79%).

[^108]: *See, e.g*., Joint Statement at 4, ¶¶ 22, 23; Complaint at 10, ¶
    30.

[^109]: Further Stipulations at ¶ 3; Answer at A-5-6, A-8-9, A-24-25,
    A-27-28, A-30-31, ¶¶ 12, 14, 19, 48, 55, 58, 60.

[^110]: 47 USC 204(a)(3).

[^111]: See, *In the Matter of Implementation of Section 402(b)(1)(A) of
    the Telecommunications Act of 1996,* Report and Order, 12 FCC Rcd
    2170 at paras.19-21 (1997) ("*Streamlined Tariff Order").*

[^112]: *1997 Annual Access Tariff Filings*, Memorandum Opinion and
    Order, [Suspension Order]{.underline}, 13 FCC Rcd 5677 (Com. Car.
    Bur. June 27, 1997) ("*Suspension Order*").

[^113]: *1997 Annual Access Tariff Filings*, Order Designating issues
    for Investigation Memorandum Opinion and Order and Order on
    Reconsideration, 12 FCC Rcd 11417 (Com. Car. Bur. July 28, 1997)
    ("*Reconsideration Order*")

[^114]: *Order* at paras. 13, 37.

[^115]: Under section 5(c) of the Act, the Commission may not delegate
    to a Bureau the authority to take action under section 204(a)(2),
    i.e., to issue an order concluding a tariff investigation.