**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

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| In the Matter of                 | * | Transmittal No. 133          |
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**MEMORANDUM OPINION AND ORDER**

**Adopted:** March 31, 2004 **Released:** April 5, 2004

By the Commission:

# INTRODUCTION

1.  Number range level0Number range level1Number range level2Number
    range level3Number range level4Number range level5Number range
    level6Number range level7In this order, we deny an application for
    review filed by IT&E Overseas, Inc. (IT&E).[^1] IT&E requests that
    the Commission review the decision by the Competitive Pricing
    Division (Division) of the Common Carrier Bureau (Bureau)[^2]
    allowing revisions to Micronesian Telecommunications Corporation's
    (MTC's) Tariff F.C.C. No.1 filed under Transmittal No. 133 to take
    effect on August 1, 1997.[^3] IT&E argues that MTC failed to provide
    relevant support materials for its tariffed rates as required under
    section 61.49 of the Commission's rules.[^4] IT&E further argues
    that MTC violated sections 201(a), 201(b), and 254(k) of the
    Communications Act of 1934, as amended (the Act),[^5] as well as the
    Commission's cost allocation rules.[^6] As explained below, we
    reject both arguments.

# BACKGROUND

2.  Section 254(g) of the Act says that "a provider of interexchange
    telecommunications services shall provide such services to its
    subscribers in each State at rates no higher than the rates charged
    to its subscribers in any other State."[^7] Congressional conferees
    made clear that Congress intended section 254(g) to incorporate the
    Commission's existing rate integration policy.[^8] Since 1972 that
    policy required any carrier providing domestic interstate
    interexchange service between the 48 contiguous states and various
    offshore points to integrate its rates for offshore points with its
    rates for similar services on the mainland.[^9]

3.  In the *Rate Integration Order,* the Commission adopted a rate
    integration rule mirroring the language of section 254(g), making
    the existing rate integration policy applicable to all interstate
    interexchange services as defined in the Act and to all providers of
    those services.[^10] Because the Act defines "state" to include all
    U.S. territories and possessions, the Commission concluded that
    providers of interexchange services to offshore points must do so on
    an integrated basis with services provided to other states.[^11]

4.  The Commission also concluded that a "provider" of interstate
    interexchange services under section 254(g) includes parent
    companies that, through affiliates, provide service in multiple
    states, and that such providers must integrate rates across their
    affiliates.[^12] The Commission specifically ordered GTE, the parent
    company of MTC, to integrate rates across its affiliates, including
    MTC.[^13] The Commission adopted section 64.1801 to implement this
    directive.[^14] The Commission set August 1, 1997, as the deadline
    for compliance with the new rule, and directed carriers to submit
    preliminary and final rate integration plans by February 1, 1997,
    and June 1, 1997, respectively.[^15]

5.  GTE filed a petition for reconsideration of the *Rate Integration
    Order,* challenging the Commission's authority to require rate
    integration across affiliates.[^16] GTE submitted a final rate
    integration plan on June 2, 1997 "under protest," stating that the
    plan was in accordance with the *Rate Integration Order,* but that
    GTE was still awaiting the outcome of *GTE's Rate Integration
    Petition* *for* *Reconsideration*.[^17]

6.  On July 17, 1997, MTC filed Transmittal No. 133 proposing revisions
    to Tariff F.C.C. No. 1. In its transmittal, MTC reiterated that the
    rates were in accordance with the *Rate Integration Order,* but that
    they were being filed "under protest" pending the outcome *GTE's
    Rate Integration Petition* *for* *Reconsideration*.[^18] IT&E filed
    a petition to reject the rates in MTC's tariff, arguing, as it does
    now, that (1) MTC failed to file support materials as required under
    section 61.49 of the Commission's rules, and (2) MTC's rates failed
    to incorporate access charges MTC was required to impute to
    itself.[^19]

7.  On July 30, 1997, the Commission denied *GTE's Rate Integration
    Petition* *for* *Reconsideration*, reiterating that section 254(g)
    requires rate integration across affiliated companies.[^20] The
    Commission concluded that this interpretation best comports with the
    Commission's prior rate integration policy, which had always
    required rate integration across affiliates, and Congress' intent to
    codify that policy.[^21] GTE had argued that integration across
    affiliates is inappropriate because its affiliates operate
    separately from each other and from the parent company.[^22] The
    Commission rejected GTE's argument, explaining that this would allow
    parent holding companies to establish separate affiliates to offer
    services to a state on a non-integrated basis with services offered
    in other states, effectively thwarting the achievement of rate
    integration.[^23]

8.  On July 31, 1997, the Division denied the *IT&E Petition to Reject,*
    concluding that IT&E's petition did not present compelling arguments
    that the transmittal was so unlawful as to require rejection, and
    that the issues raised did not present significant questions of
    lawfulness requiring a tariff investigation.[^24] In response to
    that decision, IT&E filed the instant application for review. MTC
    filed an opposition, and IT&E filed a reply.[^25]

9.  On March 9, 1998, IT&E filed a separate formal complaint alleging,
    as it does in the instant application for review, that MTC violated
    sections 201(b), 201(a) and 254(k) of the Act by imposing excessive
    interstate access charges, failing to impute access charges to
    itself, and cross-subsidizing its interexchange operations with
    revenue collected from its local services.[^26] The Commission
    denied IT&E's claims in an order released on August 10, 1998.[^27]

# DISCUSSION

10. [Support Materials.]{.underline} We deny IT&E's claim that MTC
    violated section 61.49 of the Commission's rules by failing to
    provide relevant support materials.[^28] MTC's rates are those
    contained in the June 2, 1997 rate integration plan, filed pursuant
    to the *Rate Integration Order.*[^29] As reflected in Transmittal
    No. 133, MTC's Actual Price Index of 32.98 percent is below the
    Price Cap Index (PCI) of 93.98 percent. Where, as here, the price
    cap tariff filing proposes rates resulting in an API value equal to
    or less than the applicable PCI value, and where the rates are
    within applicable bands under rule section 61.47, the filing must be
    accompanied by support establishing compliance with the applicable
    bands, and sufficient to calculate the necessary adjustment to the
    affected APIs and Service Band Indexes (SBI) pursuant to rule
    sections 61.46 and 61.47.[^30] In this case, MTC is not required to
    show the effect on the SBI because there are no service bands in the
    fourth price cap basket, the basket containing the local exchange
    carrier's interexchange service. As reflected in the transmittal
    letter, MTC did recalculate the API, which was reduced significantly
    from 93.98 percent to 32.98 percent as a result of rate
    integration.[^31] Accordingly, we find that MTC did comply with
    section 61.49 of the Commission's rules.

11. [Lawfulness of MTC's Transmittal No. 133.]{.underline} We reject
    IT&E's claim that MTC fails to impute access charges to itself,
    engages in predatory pricing, unreasonably discriminates against its
    competitors, and engages in improper cross-subsidization, in
    violation of sections 201(b), 202(a), and 254(k) of the Act, and the
    Commission's cost allocation rules. These same arguments were raised
    by IT&E in a formal complaint proceeding, and were rejected by the
    Commission in the *IT&E-MTC Formal Complaint Order.*[^32] As it did
    in the formal complaint proceeding, IT&E bases its claims on the
    assertion that MTC's rates are below cost.[^33] At the conclusion of
    that proceeding, the Commission found that IT&E failed to make the
    required evidentiary showing on any of its claims. Because these
    issues have already been decided by the Commission in the course of
    a formal complaint proceeding, and IT&E offers no new evidence, we
    need not revisit these issues here.

# CONCLUSION AND ORDERING CLAUSES

12. For the reasons stated above, we affirm the Bureau's order denying
    IT&E's Petition to Reject Micronesian Telecommunications Corporation
    Transmittal No. 133, and deny the application for review filed by
    IT&E.

13. ACCORDINGLY, IT IS ORDERED, pursuant to section 1.115 of the
    Commission's rules, that the Application for Review filed by IT&E
    Overseas, Inc. IS DENIED.

FEDERAL COMMUNICATIONS COMMISSION

Marlene H. Dortch

Secretary

[^1]: *See Application for Review,* filed by IT&E Overseas, Inc.,
    CCB/CPD 97-45 (Sep. 2, 1997) *(IT&E AFR).* *See also Pleading Cycle
    Established -- IT&E Overseas, Inc. Files Application for Review of
    Micronesian Telecommunications Corporation*, Public Notice, 12 FCC
    Rcd 13,427, DA 97-1926 (rel. Jul. 31, 1997).

[^2]: Pursuant to a Commission reorganization in March 2002, the Common
    Carrier Bureau was re-named the Wireline Competition Bureau and the
    Competitive Pricing Division was re-named the Pricing Policy
    Division.

[^3]: MTC Tariff F.C.C. No. 1, Transmittal No. 133, filed July 17, 1997,
    effective August 1, 1997. Through this filing, MTC proposed
    integrated message toll service rates for service from the
    Commonwealth of the Northern Marianas Islands to domestic points in
    response to a Commission order requiring rate integration. *See
    Policy and Rules Concerning the Interstate, Interexchange
    Marketplace, Implementation of Section 254(g) of the Communications
    Act of 1934, as amended,* CC Docket No. 96-61, Report and Order, 11
    FCC Rcd 9564 (1996) *(Rate Integration Order)*.

[^4]: *See IT&E AFR* at 2-4.

[^5]: *See* 47 U.S.C. §§ 201(b), 201(a), and 254(k).

[^6]: *See* 47 C.F.R. §§ 64.901-904.

[^7]: 47 U.S.C. § 254(g).

[^8]: S. Rep. No. 230, 104^th^ Congress, 2d Sess. 1, 132 (1996) (Joint
    Explanatory Statement).

[^9]: *Rate Integration Order,* 11 FCC Rcd at 9586, para. 47.

[^10]: *Id.* at 9588, para. 52. *See also* 47 C.F.R. § 64.1801(b).

[^11]: *Rate Integration Order,* 11 FCC Rcd at 9596, para. 66.

[^12]: *Id.* at 9598, para. 69.

[^13]: *Id.*

[^14]: *See* 47 C.F.R. § 64.1801; *see also Rate Integration Order,* 11
    FCC Rcd at 9596, 9605, paras. 66, 89.

[^15]: *Rate Integration Order,* 11 FCC Rcd at 9597, para. 68.

[^16]: Petition for Reconsideration and Clarification, filed by GTE
    Service Corporation, CC Docket No. 96-61 (Sep. 16, 1996) *(GTE's
    Rate Integration Petition for Reconsideration).*

[^17]: Letter from F. Gordon Maxson, Director-Regulatory Affairs, GTE
    Service Corporation, to William F. Caton, Acting Secretary, FCC, CC
    Docket No. 96-61 (filed June 2, 1997).

[^18]: Letter from Del E. Jenkins, General Manager, MTC, to William F.
    Caton, Acting Secretary, FCC, Transmittal No. 133 (filed July 17,
    1997) (Transmittal No. 133 Letter).

[^19]: In the Matter of Micronesian Telecommunications Corporation,
    Revision to Tariff No. 4, Transmittal No. 133, Petition to Reject,
    or Alternatively, to Suspend and Investigate, filed by IT&E (Jul.
    24, 1997) *(IT&E Petition to Reject).*

[^20]: *Policy and Rules Concerning the Interstate, Interexchange
    Marketplace, Implementation of Section 254(g) of the Communications
    Act of 1934, as amended,* CC Docket No. 96-61, First Memorandum
    Opinion and Order on Reconsideration, 12 FCC Rcd 11812, 11819-21,
    paras. 14-17 (1997) *(Separate Affiliates Order).*

[^21]: *Id.* at 11819, para. 14.

[^22]: *See Separate Affiliates Order,* 12 FCC Rcd at 11814-15, para. 5.

[^23]: *Separate Affiliates Order,* 12 FCC Rcd at 11819-20, para. 15.

[^24]: *Protested Tariff Transmittals Actions Taken*, Report No.
    CCB/CPD-37, Public Notice, 12 FCC Rcd 11,613, DA 97-1647 (July 31,
    1997).

[^25]: *See* Opposition of MTC, CCB/CPD 97-45 (Sept. 22, 1997); and
    Reply of IT&E Overseas, Inc., CCB/CPD 97-45 (Sept. 30, 1997).

[^26]: *See* *IT&E Overseas, Inc. v. Micronesian Telecommunications
    Corporation,* File No. E-98-31, Memorandum Opinion and Order, 13 FCC
    Rcd 16058, 16058, para. 1 (1998) *(IT&E-MTC* *Formal Complaint
    Order*) (citing IT&E Overseas, Inc. Complaint, filed March 9, 1998).

[^27]: *See Formal Complaint Order*, 13 FCC Rcd at 16073-74, paras.
    25-26.

[^28]: *See* 47 C.F.R. § 61.49.

[^29]: *See Rate Integration Order,* 11 FCC Rcd at 9605, para. 92.

[^30]: *See* 47 C.F.R. § 61.49(b).

[^31]: Transmittal No. 133 Letter at 2.

[^32]: *IT&E-MTC Formal Complaint Order,* 13 FCC Rcd at 16064-65,
    16067-73, paras. 10, 16-24.

[^33]: *IT&E AFR* at 4.