Before the

**Federal Communications Commission**

**Washington, D.C. 20554**

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| In the Matter of                 | * | EB-00-MD-016                 |
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| GENERAL COMMUNICATION, INC.,     | ) |                              |
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| > Complainant,                   | * |                              |
| >                                |   |                              |
| > v\.                            | * |                              |
|                                  | * |                              |
| ALASKA COMMUNICATIONS SYSTEMS    | ) |                              |
| HOLDINGS, INC. and ALASKA        | * |                              |
| COMMUNICATIONS SYSTEMS, INC.     | * |                              |
| d/b/a ATU TELECOMMUNICATIONS     |   |                              |
| d/b/a ANCHORAGE TELEPHONE        | * |                              |
| UTILITY,                         | * |                              |
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+----------------------------------+---+------------------------------+

**MEMORANDUM OPINION AND ORDER**

**Adopted:** January 23, 2001 **Released:** January 24, 2001

By the Commission:

> TABLE OF CONTENTS Paragraph

I. introduction [2](#introduction)

II\. background [3](#background)

III\. discussion [6](#discussion)

A. ATU Exceeded its Prescribed Rate of Return for the 1997-1998
Monitoring Period, in Violation of Section 201(b) of the Act.
[7](#atu-exceeded-its-prescribed-rate-of-return-for-the-1997-1998-monitoring-period-in-violation-of-section-201b-of-the-act.)

1\. ATU's Allocation of ISP Traffic Costs to the Interstate Jurisdiction
for Separations Purposes Was Unlawful.
[7](#atus-allocation-of-isp-traffic-costs-to-the-interstate-jurisdiction-for-separations-purposes-was-unlawful.)

a\. ATU's Allocation of ISP Traffic Costs to the Interstate Jurisdiction
Violated Commission Orders.
[7](#atus-allocation-of-isp-traffic-costs-to-the-interstate-jurisdiction-violated-commission-orders.)

b\. The Commission Has Jurisdiction to Require Carriers to Assign ISP
Traffic Costs to the Intrastate Jurisdiction for Separations Purposes.
[10](#the-commission-has-jurisdiction-to-require-carriers-to-assign-isp-traffic-costs-to-the-intrastate-jurisdiction-for-separations-purposes.)

c\. Assigning ISP Traffic Costs to the Intrastate Jurisdiction Is
Consistent With Separations Rules.
[12](#assigning-isp-traffic-costs-to-the-intrastate-jurisdiction-is-consistent-with-separations-rules.)

2\. ATU Improperly Counted Only One, Rather Than Two, DEMs for Each
Minute of Intraoffice Calls.
[17](#atu-improperly-counted-only-one-rather-than-two-dems-for-each-minute-of-intraoffice-calls.)

3\. ATU's Improper Allocation of ISP Traffic Costs and Counting of DEMs
for Intraoffice Calls Result in a Violation of the Rate-of-Return
Prescription for the 1997-1998 Monitoring Period.
[20](#atus-improper-allocation-of-isp-traffic-costs-and-counting-of-dems-for-intraoffice-calls-result-in-a-violation-of-the-rate-of-return-prescription-for-the-1997-1998-monitoring-period.)

4\. Section 204(a)(3) of the Act Does Not Preclude the Commission From
Awarding Damages to GCI Based On ATU's Violation of the Rate-of-Return
Prescription.
[21](#section-204a3-of-the-act-does-not-preclude-the-commission-from-awarding-damages-to-gci-based-on-atus-violation-of-the-rate-of-return-prescription.)

5\. The Statute of Limitations Does Not Bar GCI's Recovery for ATU's
Overearnings in 1997.
[26](#the-statute-of-limitations-does-not-bar-gcis-recovery-for-atus-overearnings-in-1997.)

B. GCI's Remaining Claims Are Dismissed As Moot.
[28](#gcis-remaining-claims-are-dismissed-as-moot.)

C. ACS Holdings Is Dismissed From the Case.
[28](#acs-holdings-is-dismissed-from-the-case.)

D. We Calculate the Amount of Prejudgment Interest Due On GCI's Damages
Award Based on the I.R.S. Interest Rate for Tax Overpayments.
[29](#we-calculate-the-amount-of-prejudgment-interest-due-on-gcis-damages-award-based-on-the-i.r.s.-interest-rate-for-tax-overpayments.)

IV\. conclusion [30](#conclusion)

V. ordering clauses [30](#ordering-clauses)

# introduction

1.  In this Order, we grant in part and deny in part a complaint filed
    on August 24, 2000 by GCI Communication, Inc. ("GCI") against Alaska
    Communications Systems, Inc. d/b/a ATU Telecommunications d/b/a
    Anchorage Telephone Utility (collectively "ATU") and Alaska
    Communications Systems Holdings, Inc. ("ACS Holdings") pursuant to
    section 208 of the Communications Act of 1934, as amended
    ("Act").[^1] We find that ATU unlawfully earned more than its
    allowable rate of return for the period from January 1, 1997 through
    December 31, 1998 ("1997-1998 Monitoring Period") by 1) improperly
    assigning to the interstate jurisdiction for separations purposes
    the traffic-sensitive costs of carrying Internet Service Provider
    ("ISP") traffic, and 2) improperly calculating dial equipment
    minutes ("DEMs") for intraoffice calls. ATU's violation of its
    prescribed rate of return constitutes a violation of section 201(b)
    of the Act.[^2] Accordingly, we grant Counts 1 through 3 of GCI's
    complaint. Given our ruling on Counts 1 through 3, we dismiss the
    remaining Counts of GCI's complaint (Counts 4 through 6) as moot,
    because, although they allege different legal violations, they seek
    the same relief for the same ATU conduct specified in Counts 1
    though 3.

2.  In conjunction with our ruling in GCI's favor on Counts 1 through 3
    of its complaint, we award damages, with prejudgment interest, to
    GCI for ATU's overearnings. Further, we direct ATU to: 1) revise its
    1997-1998 Monitoring Report in accordance with this Order; 2)
    allocate to the intrastate jurisdiction for separations purposes the
    traffic-sensitive costs of carrying ISP traffic from January 1, 1999
    forward, until otherwise ordered by the Commission; and 3) count
    each minute of intraoffice calls as two DEMs from January 1, 1999
    forward, until otherwise ordered by the Commission.

3.  Finally, we dismiss all of GCI's claims against defendant ACS
    Holdings. GCI has not alleged that ACS Holdings overcharged it for
    any services or overearned in violation of the Act or any Commission
    order or rule.

# background

4.  ATU is the incumbent local exchange carrier ("LEC") in Anchorage,
    Alaska.[^3] ATU is wholly owned and controlled by ACS Holdings.[^4]
    GCI provides facilities-based interstate and intrastate
    interexchange services in the state of Alaska, and competitive local
    exchange services in Anchorage, Alaska.[^5] GCI purchased interstate
    access services from ATU throughout the 1997-1998 Monitoring Period
    for the origination and termination of GCI's interstate
    interexchange traffic from and to customers located in
    Anchorage.[^6] GCI continues to purchase interstate interexchange
    services from ATU.

5.  ATU is a "rate-of-return" carrier. Rate-of-return carriers are
    permitted to earn no more than a Commission-prescribed return on the
    investments they make in providing exchange access services.[^7] To
    comply with this prescription, rate-of-return carriers estimate
    their costs of providing exchange access services and project their
    demand for such services for a two-year period in the future
    (*i.e*., the monitoring or enforcement period).[^8] They then file
    tariffs containing rates for their access services that they
    believe, given their estimate of costs and demand, will result in
    earnings within the prescribed rate of return at the end of the
    two-year forecast period. During the course of the two-year
    monitoring period, rate-of-return carriers must review how their
    actual costs and demand calculations compare to their earlier
    projections, and make rate adjustments, if necessary, to ensure that
    they do not exceed their prescribed rate of return.[^9] If a
    rate-of-return carrier ultimately exceeds its rate of return at the
    end of the two-year monitoring period, the Commission may then
    require refunds of any such overearnings to affected customers.[^10]

6.  In estimating their access services costs to prepare their tariffs
    in a manner that will allow them to earn no more than their
    prescribed rate of return, rate-of-return carriers must apply,
    *inter alia*, the Commission's jurisdictional separations rules and
    Commission orders implementing and interpreting those rules.[^11]
    Jurisdictional separations, generally speaking, is the process by
    which carriers apportion the costs of providing telecommunications
    services to either the intrastate or interstate jurisdiction,
    depending on the use of their equipment and other resources in
    providing those services.[^12]

7.  Pursuant to the foregoing regulatory regime, on April 2, 1996, ATU
    filed an annual access tariff setting forth its rates for interstate
    access service, effective from July 1, 1996 through June 30, 1998
    ("1997 Tariff").[^13] ATU's 1997 Tariff contained no statement
    indicating how ATU would allocate ISP traffic costs[^14] for
    separations purposes or how it would count DEMs for intraoffice
    calls.[^15]

8.  On December 17, 1997, ATU filed an access tariff containing revised
    rates for interstate access service for the period from January 1,
    1998 through June 30, 1998 ("January 1998 Tariff").[^16] This tariff
    was filed on 15-days' notice, purportedly pursuant to the
    "streamlining" provisions of section 204(a)(3) of the Act.[^17] Like
    its 1997 Tariff, ATU's January 1998 Tariff did not indicate how ATU
    intended to assign ISP traffic costs for separations purposes or how
    it would count DEMs for intraoffice calls.[^18] During the course of
    the instant proceeding, ATU has stated that it treated ISP traffic
    costs as *intrastate* and counted each minute of intraoffice calls
    as *two DEMs* in preparing its January 1998 Tariff.[^19]

9.  On March 31, 1998, ATU submitted a preliminary monitoring report for
    the period January 1, 1997 to December 31, 1997.[^20] ATU noted on
    the back of the report that "THESE RESULTS REFLECT THE FOLLOWING: 1.
    RECORDING OF INTRAOFFICE CALLS AS ONE DEM\[;\] 2. INTERNET SERVICE
    PROVIDER TRAFFIC HAS BEEN CATEGORIZED AS INTERSTATE."[^21]

10. On June 24, 1998, ATU filed an annual access tariff setting forth
    its rates for interstate access service for the period from July 1,
    1998 through June 30, 2000 ("July 1998 Tariff").[^22] ATU filed this
    tariff on seven-days' notice, also purportedly pursuant to the
    streamlining provisions of section 204(a)(3). The "Description and
    Justification" section of ATU's July 1998 Tariff indicated that
    "\[t\]his filing reflects the recording of intraoffice traffic as
    one (1) dial equipment minutes (DEM) and the treatment of all
    identifiable Internet Service Provider (ISP) traffic as
    interstate."[^23] This was the first time that ATU had indicated, in
    a tariff filing, how it intended to allocate ISP traffic costs and
    count DEMs for intraoffice calls. Moreover, these statements
    differed from the way that ATU had allocated ISP traffic costs and
    counted DEMs for intraoffice calls in preparing its January 1998
    Tariff.[^24]

11. On September 30, 1999, ATU filed its 1997-1998 Monitoring
    Report.[^25] The reported cumulative rate of return for the Switched
    Traffic Sensitive Category was 7.86 percent.[^26] On the back of the
    1997-1998 Monitoring Report, ATU stated: "THESE RESULTS REFLECT THE
    FOLLOWING: 1. INTRAOFFICE CALLS HAVE BEEN COUNTED AS ONE DEM\[;\] 2.
    INTERNET SERVICE PROVIDER TRAFFIC HAS BEEN CATEGORIZED AS
    INTERSTATE."[^27]

12. The parties agree that if, for the 1997-1998 Monitoring Period, ATU
    had assigned the costs for ISP traffic to the intrastate
    jurisdiction and counted two DEMs for each minute of intraoffice
    calls, then ATU's rate of return for the interstate switched traffic
    sensitive category would have been 32.12 %, far in excess of the
    maximum allowable rate of return of 11.65%.[^28]

13. GCI filed this Complaint on August 24, 2000. GCI alleges that ATU's
    conduct during the 1997-1998 Monitoring Period violated the Act in
    several ways. In Count 1, GCI alleges that ATU violated Commission
    orders requiring ISP traffic costs to be assigned to the intrastate
    jurisdiction for jurisdictional separations purposes.[^29] In Count
    2, GCI alleges that ATU violated section 36.125(a)(3) of the
    Commission's rules by counting only one DEM for each minute of an
    intraoffice call.[^30] In Count 3, GCI alleges that ATU unlawfully
    exceeded its prescribed rate of return, in violation of 201(b) of
    the Act, by improperly assigning ISP traffic costs for separations
    purposes and improperly counting DEMs for intraoffice calls.[^31] In
    Count 4, GCI alleges that ATU's tariffs are unjust and unreasonable
    in violation of section 201(b) of the Act, because they permitted
    ATU to exceed its prescribed rate of return.[^32] In Counts 5 and 6,
    respectively, GCI alleges that ATU's assignment to the interstate
    jurisdiction of ISP traffic costs unjustly and unreasonably imposed
    charges on GCI for a service to which it did not subscribe, and
    violated the Commission's "ESP exemption."[^33]

# discussion

14. Counts 1 through 3 of GCI's Complaint collectively allege that ATU
    unlawfully exceeded its prescribed rate of return, in violation of
    section 201(b) of the Act, by improperly 1) assigning to the
    interstate jurisdiction for separations purposes the costs of ISP
    traffic, and 2) counting each minute of intraoffice calls as one
    DEM, rather than two. For the following reasons, we agree with GCI.

## ATU Exceeded its Prescribed Rate of Return for the 1997-1998 Monitoring Period, in Violation of Section 201(b) of the Act.

15. For the reasons described below, we conclude that, by allocating ISP
    traffic costs to the interstate jurisdiction for separations
    purposes, and by counting one DEM rather than two DEMs for each
    minute of intraoffice calls, ATU erroneously inflated its interstate
    cost base. This enabled ATU to charge its interstate access service
    customers, like GCI, more than it would have been able to charge if
    it had properly allocated ISP traffic costs and counted DEMs for
    intraoffice calls. These two practices collectively resulted in
    ATU's unlawfully earning more than its allowable rate of return
    during the 1997-1998 Monitoring Period.

### ATU's Allocation of ISP Traffic Costs to the Interstate Jurisdiction for Separations Purposes Was Unlawful.

#### ATU's Allocation of ISP Traffic Costs to the Interstate Jurisdiction Violated Commission Orders.

16. GCI argues that the Commission requires carriers to assign ISP
    traffic costs to the intrastate jurisdiction for separations
    purposes.[^34] In response, ATU asserts that the Commission has
    never issued such a *requirement*, but has only expressed a
    *preference* for such treatment of ISP traffic costs.[^35] We agree
    with GCI that the assignment of ISP traffic costs to the intrastate
    jurisdiction is a legal requirement, rather than merely a
    suggestion.

17. Our requirement that ISP traffic costs be assigned to the intrastate
    jurisdiction derives from our decision to exempt enhanced service
    providers ("ESPs"), including ISPs, from purchasing interstate
    access services from interstate access tariffs. The Commission
    determined long ago that ESPs should obtain interstate access
    services by paying the local business exchange service rates
    contained in intrastate tariffs, rather than the access rates
    contained in interstate tariffs. The Commission made this
    determination to avoid severe rate impacts that would affect the
    continuing viability of the ESP industry.[^36] The Commission
    recently retained that policy for the present, largely because it
    would have been illogical to apply the existing, inefficient
    interstate access charge rate structure to ISP traffic for the first
    time, just as the Commission is modifying that structure to
    eliminate implicit universal service subsidies from access charges
    and to move such charges toward competitive levels.[^37]

18. In conjunction with affirming the ESP exemption, the Commission has
    explained how the ESP exemption affects carriers' assignment of
    costs for separations purposes. For example, in the *ONA NPRM*, in a
    section entitled "Analysis of the Existing Exemption," the
    Commission stated:

    ESP traffic over local business lines is classified as local traffic
    for separations purposes, with the result that TS \[traffic
    sensitive\] costs associated with ESP traffic are apportioned to the
    intrastate jurisdiction, and are recovered through intrastate
    charges paid by ESPs and other purchasers of intrastate
    services.[^38]

    This statement stemmed from the Commission's examination and
    tentative rejection of two alternatives to the ESP exemption.
    Significantly, both alternatives that the Commission considered
    encompassed the same separations treatment of ISP traffic costs that
    ATU adopted in this case -- assignment of ISP traffic costs to the
    interstate jurisdiction rather than the intrastate jurisdiction for
    separations purposes. The Commission tentatively rejected these
    alternatives, noting that this "reclassification of ESP traffic that
    has been deemed to be intrastate for separations purposes would
    increase TS \[traffic sensitive\] costs apportioned to the
    interstate jurisdiction," and would "tend to increase the TS rates
    that other interstate access customers would bear, at a pace
    proportionate to the increase in ESP interstate traffic."[^39] That
    is precisely what ATU tried to accomplish here. ATU reclassified ISP
    traffic costs from the intrastate to the interstate jurisdiction for
    separations purposes, which increased the traffic sensitive costs
    apportioned to the interstate jurisdiction. This, in turn, increased
    the interstate access rates that GCI had to bear as ISP traffic
    increased.

19. The Commission acted on the *ONA NPRM* and issued an order
    "conclud\[ing\] that the best approach is the adoption of the
    tentative conclusion of the Notice: retention of the current form of
    the \[ESP\] exemption," which "maintain\[ed\] the status quo."[^40]
    The Commission rejected the two alternatives described in the *ONA
    NPRM* that would have allowed for the separations treatment of ISP
    traffic costs implemented by ATU here.[^41] Although the Commission
    did not expressly discuss the separations treatment encompassed in
    the tentative conclusion of the *ONA NPRM*, the Commission
    implicitly adopted the separations treatment set forth therein by
    adopting the tentative conclusion of the *ONA NPRM*.

20. Moreover, in the *First Access Charge Reform Order*, the Commission
    concluded that "the *existing pricing structure* for ISPs should
    remain in place. . . ."[^42] The Commission did not explicitly
    reference the separations treatment of ISP traffic costs set forth
    in the *ONA NPRM* and subsequently adopted in the *ONA Order.*
    However, the "existing pricing structure" maintained by the *First
    Access Charge Reform Order* necessarily encompassed that separations
    treatment. Most recently, in the *Reciprocal Compensation Order*,
    the Commission recognized this history of the ESP exemption and did
    not disturb the attendant "long-standing determination" by the
    Commission that, for jurisdictional separations purposes, both the
    revenues and traffic-sensitive costs of ISP traffic "will continue
    to be accounted for as intrastate."[^43]

21. On two recent occasions, the Commission's Common Carrier Bureau has
    implemented the Commission's rulings regarding the ESP exemption and
    concomitant separations requirements. In particular, two local
    exchange carriers tried to do exactly what ATU has done here --
    assign ISP traffic costs to the interstate jurisdiction for
    separations purposes. In both situations, the Common Carrier Bureau
    ordered the carriers to change their conduct and assign ISP traffic
    costs to the intrastate jurisdiction for separations purposes.[^44]
    The Bureau further ordered the carriers to revise reports that they
    had previously filed containing the incorrect assignment of ISP
    traffic costs.[^45]

22. In our view, the foregoing refutes ATU's assertion that the
    Commission has only expressed a preference, rather than a
    requirement, concerning how ISP traffic costs should be allocated
    for separations purposes.[^46] The Commission has made clear that
    local exchange carriers *must* assign ISP traffic costs to the
    intrastate jurisdiction for separations purposes.[^47] Accordingly,
    we find that ATU's allocation of ISP traffic costs to the interstate
    jurisdiction for separations purposes during the 1997-1998
    Monitoring Period violated Commission orders.[^48]

#### The Commission Has Jurisdiction to Require Carriers to Assign ISP Traffic Costs to the Intrastate Jurisdiction for Separations Purposes.

23. ATU next asserts that, even if the Commission has purported to
    require that ISP traffic costs be assigned to the intrastate
    jurisdiction, the Commission was (and is) without jurisdiction to
    impose such a requirement. ATU relies on section 2 of the Act, which
    restricts federal regulation to "interstate" communication and
    reserves to the states authority to regulate "intrastate"
    communication.[^49] According to ATU, because ISP traffic is largely
    interstate, forcing ATU to characterize such traffic as intrastate
    for separations purposes runs afoul of the section 2 jurisdictional
    boundaries, because it permits states to regulate or set rates for
    interstate communications.[^50] We disagree, for the following
    reasons.

24. It is well-settled that when communications, such as ISP traffic,
    are jurisdictionally mixed, containing both interstate and
    intrastate components, the Commission has authority to regulate such
    communications.[^51] This exercise of federal regulation over
    jurisdictionally mixed traffic necessarily encompasses the
    regulation and treatment of such traffic within the ambit of the
    Commission's separations rules.[^52] Although the Commission's
    exercise of its discretion in treating jurisdictionally mixed
    communications in a particular manner under its separations rules
    may be subject to challenge as arbitrary and capricious, the
    Commission's *authority* to regulate such traffic in the first
    instance cannot seriously be challenged.

25. The United States Court of Appeals for the Eighth Circuit recently
    rejected essentially the same jurisdictional challenge ATU presents
    here. In *Southwestern Bell Tel. Co. v. FCC* ("*SBC*"), local
    exchange carriers appealed the Commission's decision to retain the
    ESP exemption and argued, just as ATU does here, that the ESP
    exemption unlawfully "forces state regulators to set rates for the
    recovery of interstate costs," because ISP traffic costs are
    "undeniably interstate costs."[^53] The carriers argued that the ESP
    exemption, and the concomitant recovery by carriers of the costs of
    carrying ISP traffic only from local business tariffs, "amount\[ed\]
    to a dereliction of the Commission's obligation to retain exclusive
    jurisdiction over interstate communications and forces state
    regulatory commissions to overstep their authority by recovering
    interstate costs."[^54]

26. The Eighth Circuit rejected these jurisdictional contentions. The
    court noted that ISP traffic is jurisdictionally mixed and includes
    both interstate and intrastate components.[^55] Because of the
    jurisdictionally mixed nature of this traffic, and because the
    Commission had valid policy reasons for creating the ESP exemption
    in the first place (*i.e*., preserving the competitiveness and
    vitality of the emerging ESP industry), the court concluded that the
    Commission had "appropriately exercised its discretion to require an
    ISP to pay intrastate charges for its line . . . but not to pay the
    per-minute interstate access charge."[^56] The court noted that the
    Commission's action left states free "to assess intrastate tariffs
    as they see fit."[^57] Thus, the court concluded that the Commission
    had neither "shirked its responsibility to regulate interstate
    telecommunications nor . . . directed States to inflate intrastate
    tariffs to cover otherwise unrecoverable interstate costs, thereby
    exceeding its statutory authority \[under section 2 of the
    Act\]."[^58]

27. Our well-established authority over jurisdictionally mixed traffic
    requires rejection of ATU's jurisdictional argument here. As in
    *SBC*, our requirement that ISP traffic costs be assigned to the
    intrastate jurisdiction for separations purposes does not result in
    an impermissible delegation of regulation of interstate
    communications to the states. In particular, our action does not
    impose any intrastate rates and states remain free to assess
    intrastate tariffs as they see fit. Thus, our action does not cross
    the jurisdictional line drawn by section 2 of the Act.[^59]

28. At bottom, ATU's disagreement with the Commission's treatment of ISP
    traffic costs for separations purposes is not so much a challenge to
    the Commission's ultimate "jurisdiction" or authority over such
    traffic under section 2 of the Act as it is a challenge to the
    *manner* in which the Commission exercised its jurisdiction over
    such traffic in the circumstances presented. We address this
    challenge in the next section.

#### Assigning ISP Traffic Costs to the Intrastate Jurisdiction Is Consistent With Separations Rules.

29. ATU asserts that the Commission abused its discretion by requiring
    carriers to allocate ISP traffic costs to the intrastate
    jurisdiction for separations purposes.[^60] In ATU's view, the
    Commission's decision to define ISP traffic as intrastate for
    separations purposes, even while acknowledging that such traffic is
    "largely interstate," is arbitrary and improperly ignores the actual
    usage of the local equipment that processes ISP traffic.[^61]
    Because ISP traffic is largely interstate, according to ATU, the
    costs of such traffic must be assigned to the interstate
    jurisdiction, in accordance with the holding of *Smith v. Illinois
    Bell,* the seminal case concerning jurisdictional separations.[^62]
    ATU argues that the principles espoused in *Smith* are contravened
    if ATU is required, merely as a matter of convenience, to allocate
    entirely to one jurisdiction its costs of providing ISP services,
    and this allocation bears no relationship to the actual usage of its
    equipment used in providing such services.[^63]

30. ATU's argument reflects an overexpansive reading of *Smith*. *Smith*
    concerned a situation in which a state commission failed to require
    a carrier to make *any* separations at all of equipment costs
    between interstate and intrastate uses. The Supreme Court stated
    that the state commission's failure to require any allocation at all
    violated the statutory predecessor to section 2 of the Act.[^64]
    Here, the Commission has not failed to require ATU to allocate the
    costs of its local switching equipment between jurisdictions.
    Moreover, ATU does not contend that it has made no allocation of the
    costs of its local switching equipment between the interstate and
    intrastate jurisdictions. Instead, ATU's concern is that the
    Commission has allegedly required ATU to assign too much of certain
    traffic passing through its equipment to the intrastate jurisdiction
    for separations purposes. Thus, *Smith* does not help ATU.

31. In fact, *Smith* supports our conclusion here, because *Smith*
    recognizes that it is inherently difficult, if not impossible, to
    apportion with mathematical precision the uses of exchange plant
    equipment. The Court stated that, in ascertaining the proper
    apportionment of costs, "extreme nicety is not required, only
    reasonable measures being essential."[^65] Further, as the D.C.
    Circuit has recognized, "\[c\]ost allocation is not purely an
    economic issue -- it necessarily involves policy choices that are
    not constitutionally prescribed."[^66]

32. Assigning ISP traffic costs to the intrastate jurisdiction is a
    "reasonable measure" based on sound "policy choices." First, as
    explained above, the Commission was justified in treating ISP
    traffic-sensitive costs as intrastate for separations purposes, in
    conjunction with the ESP exemption, to preserve the viability of the
    still-growing ISP industry. More recently, the Commission retained
    this policy because it would have been illogical to apply the
    admittedly inefficient access charge rate structure to ISP traffic
    for the first time, when the Commission is in the process of
    modifying that structure.[^67] The Commission's decision to retain
    the ESP exemption has been affirmed as a lawful exercise of the
    Commission's discretion.[^68] The assignment of the
    traffic-sensitive costs of ISP traffic to the intrastate
    jurisdiction that follows from the ESP exemption is also lawful,
    because it derives from the application of our general separations
    principles to ISP traffic in implementing the ESP exemption. As
    explained below, the treatment of ISP traffic costs as intrastate
    for separations purposes prevents a cost-revenue mismatch that the
    separations rules are designed to avoid.

33. Under Commission rules, separations is "\[t\]he process by which
    telecommunications property costs, revenues, expenses, taxes and
    reserves are apportioned among the \[carrier's\] *operations*."[^69]
    Further, "\[t\]he fundamental basis on which separations are made is
    the use of the telecommunications plant in each of the \[carrier's\]
    *operations*."[^70] Finally, "operations" is defined as "the general
    classifications of services rendered to the public for which
    separate *tariffs* are filed, namely exchange, state toll and
    interstate toll."[^71] Thus, our rules generally link the
    apportionment of "operations" and the filing of tariffs. The
    "operation" at issue here is local exchange service, of which ISP
    services are a part pursuant to the ESP exemption. Local exchange
    service is provided under intrastate tariffs. Thus, as the
    "operation" at issue is tariffed at the intrastate level, the
    carrier should also allocate the costs associated with that
    operation to the intrastate jurisdiction.[^72] To do otherwise would
    result in the carrier incurring costs for a service in one
    jurisdiction, while charging rates to recover those costs in the
    other jurisdiction, thereby creating a mismatch that the foregoing
    rules were designed, in part, to prevent.[^73]

34. The Commission has previously considered the advisability of
    permitting such a jurisdictional mismatch between the costs and
    revenues associated with ISP traffic, and has expressly rejected it.
    In the *ONA NPRM*, several parties supported allowing ISP traffic
    costs and revenues to be apportioned to different jurisdictions as
    an alternative to the ESP exemption.[^74] The Commission tentatively
    rejected this proposal, noting that it would lead to a cost-revenue
    mismatch between the jurisdictions.[^75] Because the Commission had,
    for valid policy reasons, already required that carriers earn
    revenues for ISP traffic from the intrastate jurisdiction, the
    Commission continued to require that costs for such traffic be
    allocated to the intrastate jurisdiction.[^76] Subsequently, in the
    *ONA Order*, the Commission formally rejected the cost-revenue
    mismatch proposal.[^77]

35. Similarly, in the *Reciprocal Compensation Order*, the Commission
    acknowledged that one objective of assigning ISP traffic costs to
    the intrastate jurisdiction for separations purposes is *to avoid* a
    cost-revenue mismatch associated with such traffic. Significantly,
    the Commission did not alter this separations treatment even though
    it acknowledged that ISP traffic is "largely interstate."[^78]
    Indeed, the Commission saw no reason to depart from the
    "long-standing determination" that, for purposes of jurisdictional
    separations, "both the costs and the revenues associated with such
    \[ISP traffic\] will continue to be accounted for as
    intrastate."[^79] The Commission was mindful of concerns that a
    different separations treatment of ISP traffic "may result in
    allocation to different jurisdictions of the costs and revenues
    associated with ISP-bound traffic," and the Commission emphasized
    the undesirability of permitting such a "mismatch" to occur.[^80]

36. ATU does not dispute that its conduct caused a cost-revenue
    mismatch, but argues that the proper remedy is elimination of the
    ESP exemption, not allocation of ISP traffic costs to the intrastate
    jurisdiction.[^81] ATU's contention ignores the many policy reasons
    supporting the ESP exemption, which we need not repeat here.
    Moreover, elimination of the ESP exemption could have prospective
    effect only, and thus would have no bearing on GCI's damages
    claims.[^82] Thus, we decline ATU's invitation to alter the existing
    rule in the context of this adjudication.

37. ATU also argues that the Commission's requirement that ISP traffic
    costs be assigned to the intrastate jurisdiction for separations
    purposes contravenes section 36.125(b) of the Commission's rules,
    which generally requires that traffic sensitive costs be separated
    based on the relative number of interstate and intrastate minutes
    that pass through the carrier's local switching equipment.[^83]
    However, because the Commission has determined previously that end
    user access charge rules apply to ISP-bound traffic,[^84] and that
    ISPs must, therefore, purchase their access services pursuant to
    *intrastate* tariffs,[^85] ISP traffic cannot be considered
    *interstate* for purposes of section 36.125.

38. Finally, ATU argues that, if it must assign ISP traffic costs to the
    intrastate jurisdiction, then it will not recover revenues adequate
    to compensate it for the costs of carrying ISP traffic.[^86] The
    Commission addressed this same contention in the *First Access
    Charge Reform Order*, and rejected it as a basis for eliminating the
    ESP exemption*.* There, the Commission considered whether continuing
    to preclude local exchange carriers from assessing access charges on
    ESPs imposed uncompensated costs on local exchange carriers. The
    Commission observed that, in addition to the business line rates and
    subscriber line charges that local exchange carriers receive from
    ISP customers, local carriers earn additional revenue from ISP usage
    "through higher demand for second lines by consumers, usage of
    dedicated data lines by ISPs, and subscription to incumbent LEC
    Internet usage services."[^87] Although the Commission acknowledged
    that intrastate rates might insufficiently compensate local exchange
    carriers, like ATU, for the costs of carrying ISP traffic, the
    Commission expressly noted that carriers could address their
    concerns in this regard to state regulators.[^88] The Eighth Circuit
    affirmed this analysis in *SBC*.[^89] ATU has apparently chosen not
    to seek such relief from the state regulatory authority for any
    revenue shortfall it may be experiencing.[^90]

39. In sum, we conclude that ATU's assignment of traffic-sensitive ISP
    traffic costs to the interstate jurisdiction for separations
    purposes during the 1997-1998 Monitoring Period violated valid
    Commission orders that the Commission had jurisdiction to issue and
    that are consistent with separations principles and rules. This
    improper assignment permitted ATU erroneously to increase its
    interstate costs for the 1997-1998 Monitoring Period and thereby
    unlawfully to earn more than its prescribed rate of return.[^91]

### ATU Improperly Counted Only One, Rather Than Two, DEMs for Each Minute of Intraoffice Calls.

40. DEMs are one of the factors that a local exchange carrier must
    consider in determining how to allocate for separations purposes the
    costs of local switching equipment. Section 36.125(a)(3) of our
    rules defines DEM as follows:

    Dial equipment minutes of use (DEM) is defined as the minutes of
    holding time of the originating and terminating local switching
    equipment.[^92]

    The Glossary for Part 36 defines "Holding Time" as:

    The time in which an item of telephone plant is in actual use either
    by a customer or an operator. For example, holding time includes
    conversation time as well as other time in use. . . .[^93]

41. As part of the separations process, a local exchange carrier must
    determine how many DEMs it incurred to carry interstate traffic and
    how many DEMs it incurred to carry intrastate traffic. For
    rate-of-return carriers, such as ATU, the greater the proportion of
    interstate DEMs to the total DEMs, the greater the revenues that the
    local exchange carrier can obtain from its interstate access
    customers, such as GCI.

42. The parties disagree concerning how section 36.125(a)(3) of the
    separations rules should be interpreted and applied to intraoffice
    calls. Intraoffice calls are intrastate calls that originate and
    terminate in the same central office. ATU argues that the proper
    application of section 36.125(a)(3) differs depending on whether the
    central office at issue employs a digital or an analog switch.[^94]
    According to ATU, when a call originates and terminates at the same
    central office served by an analog switch, two separate pieces of
    equipment are actually used (a piece for originating traffic and a
    piece for terminating traffic), and section 36.125(a)(3) requires
    that a one-minute call be counted as two DEMs; however "when a call
    originates and terminates at the same central office served by a
    digital switch, the relevant 'item of telephone plant' that is 'in
    actual use' is the single digital switch. . . . Because that single
    digital switch is the 'originating and terminating' equipment for
    intraoffice calls, the plain text of Section 36.125 requires that
    one minute of holding time on that switch be counted as one
    DEM."[^95] ATU asserts, therefore, that because its central offices
    use digital switches, it properly counted each minute of intraoffice
    calls as one DEM.

43. We disagree with ATU's approach. The text of section 36.125(a)(3)
    makes no distinction between digital and analog switches, and it
    requires carriers to count each minute of intraoffice calls as two
    DEMs in all circumstances. In particular, the rule requires carriers
    to count the holding time for both the originating *and* the
    terminating equipment. Thus, for an intraoffice call lasting one
    minute, the holding time of the originating local switching
    equipment is one DEM, and the holding time for the terminating local
    switching equipment is one DEM, regardless of whether or not the
    originating and terminating equipment is the same physical device.
    Accordingly, under section 36.125(a)(3), a one-minute intraoffice
    call generates two DEMs, not one.

44. Indeed, in 1987, the Federal State Joint Board on Separations
    ("Joint Board")[^96] interpreted DEM and its application to
    intraoffice calls in precisely the manner described above:

    DEM is a measurement of local dial central office switching
    equipment for jurisdictional separations purposes, where one minute
    of use is recorded per minute of an originating interoffice or
    intraoffice call and one minute of use is recorded per minute of a
    terminating interoffice or intraoffice call.[^97]

    The Joint Board recognized that this definition meant that each
    minute of use would be counted as two DEMs for intraoffice
    calls.[^98]

45. Moreover, the Joint Board considered the same argument that ATU
    asserts here -- that it is inappropriate to count two DEMs for each
    minute of intraoffice calls where a single digital switch, rather
    than two analog switches, is employed to originate and terminate
    intraoffice calls.[^99] However, instead of accepting that argument
    and recommending to the Commission that DEM be defined or construed
    differently to accommodate the digital/analog distinction, the Joint
    Board sought comment on whether a different cost allocator --
    Switched Minute of Use (SMOU) -- should be adopted for digital
    central office equipment.[^100] The effect of using SMOU as a cost
    allocator would have been exactly that advocated by ATU here -- one
    minute of use would be counted for each minute of an intraoffice
    call.[^101] As even ATU acknowledges, the Commission subsequently
    declined to take any action to adopt the SMOU cost allocation
    factor. Thus, DEM has remained the applicable factor for all kinds
    of local switching equipment since 1987.[^102]

46. Finally, ATU challenges the consistent, thirteen-year history of DEM
    allocation and treatment under section 36.125(a)(3) by arguing that
    requiring DEM to be counted twice for intraoffice calls using a
    single digital switch would somehow contravene the general principle
    that rates be cost-based.[^103] ATU essentially contends that
    requiring carriers to count as two DEMs each minute of intraoffice
    calls switched through digital equipment conflicts with general
    separations principles, which provide that "the fundamental basis on
    which separations are made is the use of the telecommunications
    plant in each of the operations."[^104] According to ATU, if the
    costs are not properly allocated in the separations process, then
    the rates set as a result of that process will not be cost-based.

47. As we have previously held, however, the specific separations rules
    govern the general principles: "These general rules \[those
    contained in sections 36.1 and 36.2\], are not intended . . . to
    have primacy over the specific rules."[^105] The general separations
    principle of tying costs to actual usage for rate-making purposes
    "is intended to supplement, not override, the more detailed
    procedures prescribed for apportioning specific costs."[^106] Thus,
    even assuming, *arguendo*, that some degree of tension exists
    between sections 36.1(c) and 36.125(a)(3), section 36.125(a)(3)
    still governs.

48. In sum, we conclude that ATU's counting of one DEM, rather than two
    DEMs, for each minute of intraoffice calls violated section
    36.125(a)(3) of our rules. This improper counting of DEMs raised the
    proportion of interstate DEMs to the total DEMs, which permitted ATU
    erroneously to increase its interstate costs for the 1997-1998
    Monitoring Period. This, in turn, enabled ATU unlawfully to earn
    more than its prescribed rate of return.

### ATU's Improper Allocation of ISP Traffic Costs and Counting of DEMs for Intraoffice Calls Result in a Violation of the Rate-of-Return Prescription for the 1997-1998 Monitoring Period.

49. 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. . . .[^107]

If a carrier exceeds its prescribed rate of return, the Commission can
order refunds and award damages to aggrieved customers.[^108] 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 prescribed rate-of-return ceiling.[^109]

50. The parties agree that, if ATU had assigned ISP traffic costs to the
    intrastate jurisdiction and counted each minute of intraoffice calls
    as two DEMs during the 1997-1998 Monitoring Period, then ATU's rate
    of return would have been approximately 32%, well above its
    allowable rate of return of 11.65%.[^110] Thus, absent some means of
    "immunity," ATU owes GCI for the difference between the amount of
    access charges GCI paid to ATU during the 1997-1998 Monitoring
    period and the amount of access charges that GCI would have paid to
    ATU during the 1997-1998 Monitoring Period if ATU had achieved
    earnings within the 11.65% ceiling.

### Section 204(a)(3) of the Act Does Not Preclude the Commission From Awarding Damages to GCI Based On ATU's Violation of the Rate-of-Return Prescription.

51. ATU argues that the Commission cannot award damages to GCI for ATU's
    rate-of-return violation in connection with its January 1998 and
    July 1998 Tariffs, because ATU filed those tariffs under section
    204(a)(3) of the Act.[^111] According to ATU, section 204(a)(3) and
    Commission precedent construing that provision immunize ATU from any
    liability for damages for exceeding its prescribed rate of return
    for the period covered by the January 1998 and July 1998
    Tariffs.[^112] For the following reasons, we disagree with ATU.

52. Section 402(b)(1)(A)(iii) of the Telecommunications Act of 1996
    added a new section 204(a)(3) to the Communications Act.[^113]
    Section 204(a)(3) provides:

> A local exchange carrier may file with the Commission a new or revised
> charge, classification, regulation, or practice on a streamlined
> basis. Any such charge, classification, regulation, or practice 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 it is filed with the Commission unless the
> Commission takes action under paragraph \[204 (a)(1)\] before the end
> of that 7-day or 15-day period, as is appropriate.[^114]

53. In 1997, the Commission addressed the meaning of the phrase "deemed
    lawful," as used in section 204(a)(3) of the Act.[^115] The
    Commission concluded that this language provides certain new
    protections to local exchange carriers who elect to file tariffs on
    a streamlined basis pursuant to section 204(a)(3). In particular,
    section 204(a)(3) "immuniz\[es\] from challenge those rates that are
    not suspended or investigated before a finding of
    unlawfulness."[^116] The Commission further concluded that, although
    section 204(a)(3) does not preclude the Commission from requiring a
    carrier, on a prospective basis, to change a rate or practice that
    the Commission finds unlawful, section 204(a)(3) does preclude the
    Commission from subjecting a carrier to liability for damages in a
    section 208 complaint proceeding for charging such a rate or
    engaging in such a practice during the period that the streamlined
    tariff was in effect and prior to the determination of
    unlawfulness.[^117] This conclusion stemmed, in part, from judicial
    interpretations of the same "deemed lawful" language in other
    statutes.[^118] However, it also stemmed, in part, from the fact
    that section 204(a)(3)'s notice periods provide the Commission and
    the public with a meaningful, albeit stringent, opportunity to
    contest filed rates and practices before they become
    effective.[^119]

54. We conclude that section 204(a)(3) affords ATU no relief from GCI's
    rate-of-return claim in connection with either of ATU's two 1998
    tariffs. Regarding the January 1998 Tariff, section 204(a)(3) does
    not protect ATU, because ATU's violation of the rate-of-return
    prescription was not ascertainable from the information contained in
    that Tariff. Regarding the July 1998 Tariff, section 204(a)(3) does
    not protect ATU, because that Tariff failed to comply with the
    notice requirements of section 204(a)(3).

55. The text of section 204(a)(3) provides that a LEC "may *file* with
    the Commission a new or revised charge, classification, regulation,
    or practice on a streamlined basis," and that any such "charge,
    classification, regulation, or practice shall be deemed lawful"
    within a specified time "after the date on which it is *filed*. . .
    ."[^120] Therefore, under the plain language of section 204(a)(3), a
    practice can be "deemed lawful" only if it is "filed" in a tariff
    pursuant to the requirements of that section.

56. GCI's rate-of-return claim is predicated on two unlawful practices
    (*i.e.*, assigning ISP traffic costs to the interstate jurisdiction
    and counting only one DEM for each minute of intraoffice calls), and
    neither of these practices appeared in any way in ATU's January 1998
    Tariff.[^121] Thus, ATU's practices of assigning ISP traffic costs
    to the interstate jurisdiction for separations purposes and counting
    only one DEM for each minute of intraoffice calls were not "filed"
    within the meaning of section 204(a)(3). As a result, these
    practices cannot be "deemed lawful" under section 204(a)(3).
    Accordingly, GCI's rate-of-return claim supports an award of
    damages, because it is based on "practices" that were not "filed" in
    ATU's January 1998 Tariff in accordance with section 204(a)(3).

57. Our conclusion is supported by the Commission's and courts' prior
    acknowledgments of the basic differences between a challenge to the
    lawfulness of a carrier's tariffed rate and a challenge to the
    lawfulness of a carrier's rate of return. A challenge to the
    lawfulness of a rate focuses on the reasonableness of the rate in
    question. A rate-of-return challenge, on the other hand, focuses not
    on the reasonableness of an individual rate in a tariff, but on the
    cumulative effect of the tariffed rates on the carrier's earnings at
    the end of a monitoring period, well after the tariff in question
    was filed.[^122] Thus, as the D.C. Circuit has pointed out, a
    carrier's tariff typically will not provide notice of a future
    rate-of-return violation, because it is usually difficult, if not
    impossible, to determine, at the time a tariff is filed, whether the
    rates set forth in the tariff will produce earnings within the
    prescribed rate of return at some defined point in the future.[^123]
    This is particularly true here, because ATU failed to include in its
    January 1998 Tariff any information concerning the two practices
    that enabled it subsequently to exceed its rate of return.
    Accordingly, the requirement in section 204(a)(3) that only
    practices that are "filed" in a tariff warrant "deemed lawful"
    protection avoids the anomalous result of immunizing from a damage
    award a violation that was not apparent from the tariff filing
    involved.

58. ATU argues that the information it includes or fails to include in
    its tariff is irrelevant for purposes of determining whether section
    204(a)(3) applies. In ATU's view, unless a customer or the
    Commission acts to challenge a carrier's tariff within the seven or
    fifteen-day period provided for pre-effective tariff reviews in
    section 204(a)(3), then the carrier is immunized from liability for
    any subsequent rate-of-return violation covering a period in which
    the subject tariff was in effect.[^124] However, neither the
    Commission nor the carrier's customers would have any reason or
    basis to challenge a carrier's tariff filing unless the tariff
    provides advance notice of a prospective rate-of-return
    violation.[^125] Indeed, ATU's contention that section 204(a)(3)
    protects it from a rate-of-return violation, regardless of whether
    it identified certain practices in its tariff is belied by the
    Commission's emphasis on pre-effective tariff reviews in the
    *Streamlined Tariff Order*. As the Commission explained, the
    pre-effective review of tariff filings protects against the
    imposition of unjust and unreasonable practices and rates. Although
    the Commission noted that customers and the Commission must conduct
    swift pre-effective reviews of tariffs filed on a streamlined basis
    under 204(a)(3), the Commission nevertheless concluded that such
    reviews are available and meaningful.[^126] If a carrier does not
    "file" in its tariff the practices that will cause an excessive
    rate-of-return, then the pre-effective tariff review process is
    rendered futile for purposes of identifying potential rate-of-return
    violations, rather than merely difficult.[^127]

59. Our rejection of ATU's position finds additional support in the fact
    that neither the text nor the legislative history of section
    204(a)(3) even references, much less vitiates, the Commission's
    long-standing rules concerning liability for rate-of-return
    violations.[^128] Similarly, the *Streamlined Tariff Order* does not
    address the impact of its interpretation of the phrase "deemed
    lawful" on the rate-of-return prescription. The absence of any
    discussion by Congress or the Commission of the potential impact of
    section 204(a)(3) on the rate-of-return prescription strongly
    suggests that neither Congress nor the Commission intended the
    drastic change to rate-of-return regulation that ATU argues for
    here.

60. Finally, our conclusion with respect to ATU's section 204(a)(3)
    argument is not undermined by the fact that, in its July 1998
    Tariff, ATU *did* state how it would allocate the costs of ISP
    traffic and count DEMs for intraoffice calls. This is because, as
    explained below, the July 1998 Tariff did not satisfy the filing
    requirements of section 204(a)(3).

61. Under the *Streamlined Tariff Order*, tariffs "that change terms and
    conditions or apply to new services even where there is no rate
    increase or decrease" must be filed on 15-days' notice.[^129] In
    fact, "*all* LEC tariff transmittals, other than those that *solely*
    reduce rates, shall be filed on 15-day's notice."[^130]

62. ATU's July 1998 Tariff filing indicated, for the first time, that
    ATU would engage in "the recording of intraoffice calls as one (1)
    dial equipment minutes (DEM) and the treatment of all identifiable
    Internet Service Provider (ISP) traffic as interstate."[^131] ATU
    concedes that those practices differed from those that ATU used in
    preparing its 1997 and January 1998 Tariffs: "the 1997 and January
    1998 Tariffs treated ISP traffic as intrastate and counted
    intraoffice calls as two DEMs and the July 1998 Tariff treated ISP
    traffic as interstate and counted intraoffice calls as one
    DEM."[^132] Thus, ATU's treatment of ISP traffic costs and counting
    of DEMs for intraoffice calls were "change\[d\] terms and
    conditions" under the *Streamlined Tariff Order*, and ATU was
    obligated to file the July 1998 Tariff on 15-days' notice. ATU,
    however, filed its July 1998 Tariff on only 7-days' notice.[^133]

63. It is clear, and the parties do not dispute, that failure to comply
    with governing notice requirements renders a tariff ineligible for
    "deemed lawful" treatment under section 204(a)(3).[^134] Because ATU
    failed to comply with the notice requirements applicable to the July
    1998 Tariff by filing the tariff on only seven, rather than 15-days'
    notice, the July 1998 Tariff is not "deemed lawful" under section
    204(a)(3).[^135]

64. In sum, we conclude that section 204(a)(3) of the Act does not
    immunize ATU from a damages award for exceeding its prescribed rate
    of return during the 1997-1998 Monitoring Period. We so conclude
    because (1) the rate-of-return violation was not ascertainable from
    the information contained in the January 1998 Tariff, and (2) the
    July 1998 Tariff did not satisfy the notice requirements of section
    204(a)(3).

### The Statute of Limitations Does Not Bar GCI's Recovery for ATU's Overearnings in 1997.

65. Section 415(c) of the Act provides that complaints against carriers
    for recovery of damages based on overcharges shall be filed within
    two years from the time the cause of action accrues.[^136] ATU
    argues that GCI's cause of action accrued in March 1998, when GCI
    allegedly knew or should have known of the conduct at issue here;
    ATU further argues, therefore, that the two-year statute of
    limitations bars GCI's claims for damages for any overcharges in
    calendar year 1997, because GCI failed to take action as required
    until more than two years later.[^137]

66. ATU's statute of limitations argument is premised on its submission
    of a preliminary rate-of-return report, dated March 31, 1998, which
    covered the period January 1, 1997 to December 31, 1997 (Preliminary
    Monitoring Report).[^138] The Preliminary Monitoring Report stated
    that ATU's preliminary earnings reflected that each minute of
    intraoffice calls was recorded as one DEM and ISP traffic costs were
    categorized as interstate.[^139] ATU asserts that, because it put
    GCI on notice on March 31, 1998, as to how it was counting
    intraoffice calls and treating ISP traffic for calendar year 1997,
    then GCI was obligated to serve its complaint letter, under section
    415(c), or file suit to recover for any damages or overcharges
    relating to 1997, no later than March 31, 2000.[^140] Because GCI
    did not serve ATU with its complaint letter until April 4, 2000,
    GCI's claims relating to 1997 are barred, according to ATU.[^141]

67. In *MCI v. FCC*, the D.C. Circuit considered when a cause of action
    accrues for violation of a rate-of-return carrier's prescribed rate
    of return.[^142] The defendant carriers made the same argument that
    ATU makes here -- that submission of a preliminary monitoring report
    triggered the running of the statute of limitations. The court
    squarely rejected this argument. The court noted that, until the
    final monitoring report is submitted, the carrier has the right and
    opportunity to adjust information contained in preliminary
    reports.[^143] The court explained that "it would be passing strange
    to require \[a complainant\] to assume that the preliminary report
    is a reliable indicator of whether the \[carrier\] has earned more
    than allowed."[^144] Thus, the court "agree\[d\] with the Commission
    that a cause of action for damages \[ . . . \] does not accrue until
    after \[the carrier\] files its *final* monitoring report."[^145]

68. *MCI v. FCC* provides ample support for our conclusion that the
    statute of limitations did not begin to run until ATU submitted its
    final monitoring report in September 1999.[^146] ATU had the ability
    to adjust its practices at any time between the time it filed its
    preliminary report in March 1998 and the time it filed its final
    report in September 1999.[^147] Accordingly, it would be
    inappropriate to bind GCI to the representations contained in ATU's
    preliminary report, and we conclude that the statute of limitations
    does not bar any portion of GCI's claims for damages here.[^148]

## GCI's Remaining Claims Are Dismissed As Moot.

69. In addition to the section 201(b) violation that GCI alleges for
    ATU's violation of its prescribed rate of return, GCI also alleges
    that: 1) ATU's tariffs are unjust and unreasonable in violation of
    section 201(b) of the Act (Count 4); 2) ATU's assignment of ISP
    traffic costs unjustly and unreasonably imposed charges on GCI for
    services to which it did not subscribe (Count 5); and 3) ATU's
    assignment of ISP traffic costs violated the Commission's ESP
    exemption (Count 6). As explained, *supra*, these counts are based
    on the same facts and seek the same relief as Counts 1 through 3,
    which we grant herein. Because we find in favor of GCI and against
    ATU on Counts 1 through 3 and award the relief GCI seeks in all its
    counts against ATU,[^149] Counts 4 through 6 of GCI's Complaint are
    rendered moot and are dismissed.

## ACS Holdings Is Dismissed From the Case.

70. GCI named the parent company of ATU, ACS Holdings, as a party
    defendant. GCI claims that ACS Holdings "acted in concert" with ATU
    in preparing the 1997-1998 Monitoring Report that provided notice of
    ATU's overearnings.[^150] GCI claims that this participation by ACS
    Holdings makes ACS Holdings a proper party under section 411(a) of
    the Act, despite the fact that ACS Holdings is not a carrier.[^151]

71. GCI's allegation that employees of ACS Holdings assisted ATU in the
    preparation and filing of the 1997-1998 Monitoring Report that is
    the subject of the Complaint is insufficient to state a claim
    against ACS Holdings. GCI does not allege that ACS Holdings itself
    charged GCI for any services, that ACS Holdings is subject to a
    rate-of-return prescription, or that ACS Holdings unlawfully
    exceeded any applicable rate of return. Although the preparation of
    the 1997-1998 Monitoring Report is relevant to GCI's claims, it is
    not conduct that, by itself, injured GCI. Because GCI has not
    alleged that ACS Holdings is responsible for any overcharges to GCI
    or overearnings by ATU that damaged GCI, we dismiss ACS Holdings
    from the case.

## We Calculate the Amount of Prejudgment Interest Due On GCI's Damages Award Based on the I.R.S. Interest Rate for Tax Overpayments.

72. The parties agree that an award of prejudgment interest is
    appropriate should GCI prevail on its overcharge claim, and that
    such interest begins to accrue on the date the Monitoring Period
    ended.[^152] The parties disagree, however, concerning which of the
    following three I.R.S. interest rates should apply to GCI's damages
    claim (listed here in ascending order of magnitude): 1) the rate for
    tax underpayments; 2) the rate for tax overpayments; or 3) the rate
    for large corporate tax overpayments exceeding \$10,000.[^153] GCI
    asserts that the first and largest rate is most appropriate here,
    given that ATU engaged in "willful misconduct."[^154] ATU counters
    that the Commission has never applied the I.R.S. rate for tax
    underpayments in a case such as this one, and there is no
    justification to do so here.[^155] Further, since the "overpayment"
    here exceeds \$10,000, ATU asserts that the I.R.S. rate for large
    corporate overpayments should be applied.[^156]

73. The award of interest in complaint proceedings under section 208 is
    a matter left to our sound discretion.[^157] In awarding interest,
    we are guided by considerations of fairness. As part of this
    analysis, we consider the defendant's conduct in determining which
    interest rate to apply.[^158]

74. We conclude that the I.R.S. rate for tax overpayments, but not large
    corporate overpayments, is the most appropriate rate to be applied
    in this case.[^159] First, this is the overpayment rate that the
    Commission has most recently applied, despite the apparent
    availability of the rate for large corporate overpayments.[^160]
    Further, although we do not necessarily agree with GCI that ATU
    engaged in "willful misconduct," which might merit awarding the
    highest interest rate as a penalty, we do note that ATU had at least
    constructive knowledge, before it prepared its final Monitoring
    Report, that the Commission had rejected other carriers' attempts to
    assign ISP traffic to the interstate jurisdiction, and would
    similarly reject ATU's attempt.[^161] Despite this knowledge, ATU
    improperly assigned its ISP traffic costs to the interstate
    jurisdiction for separations purposes, which enabled it to reflect
    an apparently lawful rate of return on its 1997-1998 Monitoring
    Report. Because ATU acted in a manner that it at least should have
    known the Commission had already rejected as unlawful, it is proper
    to award interest at the higher of the two rates for corporate
    overpayments. Although we might appropriately apply the rate for
    large corporate overpayments exceeding \$10,000 when a defendant has
    simply miscalculated revenue or demand and accidently exceeded its
    rate of return, such is not the case here.

# conclusion

75. As explained herein, we conclude that ATU violated Commission orders
    and rules by assigning to the interstate jurisdiction for
    separations purposes the costs of carrying ISP traffic, and
    improperly counted each minute of intraoffice calls as one DEM.
    These improper practices allowed ATU unlawfully to exceed its
    prescribed rate of return for the 1997-1998 Monitoring Period, in
    violation of section 201(b) of the Act. We award damages to GCI for
    this violation and order additional relief as set forth below.

# ordering clauses

76. Accordingly, IT IS ORDERED, pursuant to sections 4(i), 4(j), 201(b),
    206, 207, 208, and 209 of the Communications Act of 1934, as
    amended, 47 U.S.C. §§ 154(i), 154(j), 201(b), 206, 207, 208, and
    209, that Counts 1, 2, and 3 of the Complaint of GCI ARE GRANTED as
    against defendant ATU.

77. IT IS FURTHER ORDERED, pursuant to sections 4(i), 4(j), 201(b), 206,
    207, 208, and 209 of the Communications Act of 1934, as amended, 47
    U.S.C. §§ 154(i), 154(j), 201(b), 206, 207, 208, and 209, that ATU
    shall pay GCI damages in the amount of \$2,765,371,[^162] plus
    prejudgment interest computed from January 1, 1999 to the date of
    release of this Order at the I.R.S. rate for corporate overpayments
    (but not large corporate overpayments exceeding \$10,000). ATU shall
    pay this amount to GCI within 90 days of the date of release of this
    Order.

78. IT IS FURTHER ORDERED, pursuant to sections 4(i), 4(j), 201(b), and
    208 of the Communications Act of 1934, as amended, 47 U.S.C. §§
    154(i), 154(j), 201(b), and 208, that ATU shall revise its 1997-1998
    Monitoring Report in accordance with this Order, and submit the
    revised report within 90 days of the date of release of this Order.

79. IT IS FURTHER ORDERED, pursuant to sections 4(i), 4(j), 201(b), and
    208 of the Communications Act of 1934, as amended, 47 U.S.C. §§
    154(i), 154(j), 201(b), and 208, that, until further ordered
    otherwise by the Commission, ATU shall (i) assign to the intrastate
    jurisdiction for separations purposes the traffic-sensitive costs of
    carrying ISP traffic, and (ii) count DEMs for intraoffice calls in
    the manner specified herein.[^163]

80. IT IS FURTHER ORDERED, pursuant to sections 4(i), 4(j), 201(b), and
    208 of the Communications Act of 1934, as amended, 47 U.S.C. §§
    154(i), 154(j), 201(b), and 208, that Counts 4, 5, and 6 of the
    Complaint of GCI ARE DISMISSED as moot.

81. IT IS FURTHER ORDERED, pursuant to sections 4(i), 4(j), 201(b), and
    208 of the Communications Act of 1934, as amended, 47 U.S.C. §§
    154(i), 154(j), 201(b), and 208, that defendant Alaska
    Communications Systems Holdings, Inc. IS DISMISSED as a defendant in
    each and every count of the Complaint.

FEDERAL COMMUNICATIONS COMMISSION

Magalie Roman Salas

Secretary

[^1]: 47 U.S.C. § 208.

[^2]: 47 U.S.C. § 201(b).

[^3]: Joint Statement of General Communication, Inc. and Alaska
    Communications Systems Holdings, Inc. and Alaska Communications
    Systems, Inc., File No. EB-00-MD-016 (September 29, 2000) ("Joint
    Statement"), at ¶ 3.

[^4]: *Id.* at ¶ 4.

[^5]: *Id.* at ¶ 1.

[^6]: *Id*. at ¶ 5.

[^7]: *See generally 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*"); 47 C.F.R. § 65.700.

[^8]: *See* 47 C.F.R. §§ 65.700-702; *see also* *MCI Telecom. Corp. v.
    FCC*, 59 F.3d 1407, 1415 (D.C. Cir. 1995) (discussing the general
    process carriers follow in setting rates to comply with the
    rate-of-return prescription).

[^9]: *MCI*, 59 F.3d at 1415; *see* *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).

[^10]: *MCI*, 59 F.3d at 1414.

[^11]: *See* 47 C.F.R. Part 36.

[^12]: *See generally* 47 C.F.R. §§ 36.1 and 36.2.

[^13]: Formal Complaint of General Communication, Inc., File No.
    EB-00-MD-016 (August 24, 2000) ("Complaint"), at Exhibit 1.

[^14]: ISP traffic consists of communications traffic from end users
    dialing up connections to ISPs. Our references herein to "ISP
    traffic costs" refer only to the traffic-sensitive costs of ISP
    traffic, unless otherwise indicated.

[^15]: *Id*. Intraoffice calls are calls that originate and terminate in
    the same central office. DEMs are defined as the minutes of holding
    time of the originating and terminating local switching equipment,
    where holding time is defined generally as the time the equipment is
    in use. 47 C.F.R. § 36.125(a)(3).

[^16]: Complaint at Exhibit 3.

[^17]: 47 U.S.C. § 204(a)(3) (providing that a local exchange carrier
    may file a new or revised charge, classification, regulation, or
    practice on a streamlined basis, and that such charge,
    classification, regulation or practice shall be deemed lawful and
    effective either 7 days or 15 days after the date on which it is
    filed (depending on the contents of the filing), unless the
    Commission takes action to suspend and investigate the filing).

[^18]: ATU has stipulated that its January 1998 Tariff did not provide
    notice that ATU would assign to the *interstate* jurisdiction for
    separations purposes the costs of ISP traffic or would count each
    minute of intraoffice calls as *one DEM*. *See* Letter from
    Christopher N. Olsen, Attorney, Market Disputes Resolution Division,
    Enforcement Bureau, to Joe D. Edge, et al., Drinker Biddle & Reath
    LLP, and Karen Brinkmann, et al., Latham & Watkins, File No.
    EB-00-MD-016 (October 6, 2000), at 1-2; Stipulation of Defendants
    Alaska Communications Systems Holdings, Inc. and ACS of Anchorage,
    Inc., File No. EB-00-MD-016 (October 20, 2000), at 1.

[^19]: Reply Brief of Defendants Alaska Communications Systems Holdings,
    Inc. and ACS of Anchorage, Inc., File No. EB-00-MD-016 (November 3,
    2000) ("ATU Reply Br.") at 12, n.11 ("the 1997 and January 1998
    Tariffs treated ISP traffic as intrastate and counted intraoffice
    calls as two DEMs. . .").

[^20]: Answer of Defendants Alaska Communications Systems Holdings, Inc.
    and ACS of Anchorage, Inc., File No. EB-00-MD-016 (September 13,
    2000) ("Answer"), at Exhibit 2. ATU, like other rate-of-return
    carriers, is required to file a preliminary monitoring report each
    year of the two-year monitoring period. *See* 47 C.F.R. §§ 65.600,
    65.701. The final monitoring report, which includes any required
    adjustments to the preliminary reports, must be filed by September
    30 of the year following the conclusion of the monitoring period. 46
    C.F.R. § 65.600.

[^21]: Answer at Exhibit 2.

[^22]: Complaint at Exhibit 4.

[^23]: *Id.* at Description and Justification, Section 4 at 14.

[^24]: *See* ATU Reply Br. at 12, n.11 ("the 1997 and January 1998
    Tariffs treated ISP traffic as intrastate and counted intraoffice
    calls as two DEMs and the July 1998 Tariff treated ISP traffic as
    interstate and counted intraoffice calls as one DEM").

[^25]: Complaint at Exhibit 5.

[^26]: Rate-of-return carriers must compute their returns for several
    access service categories. 47 C.F.R. § 65.702(a). The switched
    traffic sensitive category, which includes services provided by
    local exchange carriers to their access customers, such as line
    termination and local switching, is the category affected by ATU's
    allocation of ISP traffic costs and counting of DEMs for intraoffice
    calls.

[^27]: Complaint at Exhibit 5*.*

[^28]: Joint Statement at ¶ 14. *See Rate-of-Return Prescription Order*,
    5 FCC Rcd at 7532, ¶ 216 (prescribing maximum rate of return of
    11.25%); 47 C.F.R. § 65.700(a) (providing that the maximum allowable
    rate of return is determined by adding four tenths of one percent to
    the maximum prescribed rate of return). The total amount in dispute
    for the 1997-1998 Monitoring Period is \$2,765,371, excluding
    interest. Joint Statement at ¶ 15. This amount represents the
    difference between the amount GCI paid to ATU for interstate access
    services and the amount GCI would have paid to ATU if ATU had not
    assigned ISP traffic costs to the interstate jurisdiction or counted
    DEMs improperly and had not thereby exceeded its prescribed rate of
    return.

[^29]: Complaint at ¶¶ 25-31.

[^30]: 47 C.F.R. § 36.125(a)(3); Complaint at ¶¶ 32-35. ATU has agreed,
    at the Commission's request, to count each minute of intraoffice
    calls as two DEMs on a going-forward basis. Complaint at Exhibit 10.

[^31]: Complaint at ¶¶ 36-41.

[^32]: *Id.* at ¶¶ 42-44.

[^33]: *Id.* at ¶¶ 45-52. *See* Part III(A)(1)(a), *infra*.

[^34]: Complaint at ¶¶ 27-30; Brief of General Communication, Inc., File
    No. EB-00-MD-016 (October 27, 2000) ("GCI Br.") at 3-6.

[^35]: Answer at ¶ 76; ATU Reply Br. at 9-11.

[^36]: *MTS and WATS Market Structure,* Memorandum Opinion and Order, 97
    FCC 2d 682, 715 at ¶ 83 (1983), *aff'd, NARUC v. FCC*, 737 F.2d
    1095, 1137 (D.C. Cir. 1984). The Commission has affirmed this "ESP
    exemption" several times. *See, e.g., Implementation of the Local
    Competition Provisions in the Telecommunications Act of 1996;
    Inter-Carrier Compensation for ISP-Bound Traffic,* Declaratory
    Ruling and Notice of Proposed Rulemaking*,* 14 FCC Rcd 3689, 3702 at
    ¶ 20 (1999) ("*Reciprocal Compensation Order*"); *In the Matter of
    Access Charge Reform*, First Report and Order, 12 FCC Rcd 15982,
    16133 at ¶ 344 (1997) ("*First Access Charge Reform Order*");
    *Amendments of Part 69 of the Commission's Rules Relating to the
    Creation of Access Charge Subelements for Open Network
    Architecture,* Report and Order and Order on Further Reconsideration
    and Supplemental Notice of Proposed Rulemaking, 6 FCC Rcd 4524, 4535
    at ¶ 60 (1991) ("*ONA Order*"); *Amendments of Part 69 of the
    Commission's Rules Relating to the Creation of Access Charge
    Subelements for Open Network Architecture*, Notice of Proposed
    Rulemaking*,* 4 FCC Rcd 3983, 3987 at ¶¶ 33-34 (1989) ("*ONA
    NPRM*"); *In the Matter of Filing and Review of Open Network
    Architecture Plans*, Memorandum Opinion and Order, 4 FCC Rcd 1,
    167-68 at ¶¶ 318-20 (1988); *Amendments of Part 69 of the
    Commission's Rules Relating to Enhanced Service Providers,* Order, 3
    FCC Rcd 2631, 2635, nn. 8, 53 (1988).

[^37]: *See First Access Charge Reform Order*, 12 FCC Rcd at 16133, ¶¶
    343-45; *Southwestern Bell Tel. Co. v. FCC,* 153 F.3d 523, 541-42
    (8^th^ Cir. 1998) ("*SBC*"), *petition for rehearing denied,* 2000
    U.S. App. LEXIS 16086 (June 7, 2000).

[^38]: *ONA NPRM*, 4 FCC Rcd at 3987-88, ¶ 34. The Commission cited
    section 36.125 of the separations rules as support for this
    separations treatment. *Id.* at 3987, n.82 (citing 47 C.F.R. §
    36.125). Section 36.125 governs the separations treatment of local
    switching equipment.

[^39]: *Id.* at 3988, ¶¶ 35-37.

[^40]: *ONA Order,* 6 FCC Rcd at 4535, ¶ 60.

[^41]: *Id.*

[^42]: *First Access Charge Reform Order*, 12 FCC Rcd at 16133, ¶ 344
    (emphasis added).

[^43]: *Reciprocal Compensation Order,* 14 FCC Rcd at 3710, ¶ 36. We
    acknowledge that the D.C. Circuit Court of Appeals subsequently
    vacated and remanded the *Reciprocal Compensation Order*. *Bell
    Atlantic Tel. Cos. v. FCC*, 206 F.3d 1 (D.C. Cir. 2000). However, as
    both parties agree, the vacatur did not affect the ESP exemption or
    the corresponding separations treatment of ISP traffic costs
    addressed in the *Reciprocal Compensation Order*. GCI Br. at 9-10;
    Brief of Defendants Alaska Communications Systems Holdings, Inc. and
    ACS of Anchorage, Inc., File No. EB-00-MD-016 (October 27, 2000)
    ("ATU Br.") at 3, 7-9.

[^44]: *Common Carrier Bureau Issues Letter to SBC Regarding its
    Jurisdictional Separations Treatment of Internet Traffic,* Public
    Notice, 14 FCC Rcd 8178 (Com. Car. Bur. 1999) ("*SBC Letter*"),
    *application for review pending*; *Common Carrier Bureau Issues
    Letter to Bell Atlantic Regarding Jurisdictional Separations
    Treatment of Reciprocal Compensation for Internet Traffic,* Public
    Notice, 14 FCC Rcd 13148 (Com. Car. Bur. 1999) ("*Bell Atlantic
    Letter*").

[^45]: *SBC Letter*, 14 FCC Rcd at 8180-81; *Bell Atlantic Letter*, 14
    FCC Rcd at 13149-150.

[^46]: *See generally In the Matter of Jurisdictional Separations Reform
    and Referral to the Federal-State Joint Board*, Recommended
    Decision, CC Docket No. 80-286, FCC 00J-2 (July 21, 2000)
    ("*Recommended Decision on* *Separations*") at n.66 (pointing out
    that the *Reciprocal Compensation Order* acknowledged a Commission
    *requirement* that carriers assign the traffic-sensitive costs of
    ISP traffic to the intrastate jurisdiction for separations
    purposes).

[^47]: We note that the Commission is currently considering a
    recommendation from the Federal-State Joint Board on Jurisdictional
    Separations that may address how ISP traffic costs should be
    allocated for separations in the future. *See In the Matter of
    Jurisdictional Separations Reform and Referral to the Federal-State
    Joint Board*, Recommended Decision, CC Docket No. 80-286, FCC 00J-2
    (July 21, 2000). However, this does not affect our enforcement of
    the existing separations rules.

[^48]: ATU does not argue that it was unaware of the Commission and
    Common Carrier Bureau pronouncements concerning how to treat ISP
    traffic costs for separations purposes. Further, ATU acknowledges
    that it complied with the Commission's requirements at least until
    the time it filed its July 1998 Tariff. ATU Reply Br. at 12, n.11.
    These facts strongly suggest that ATU understood the Commission's
    requirements for the treatment of ISP traffic costs for separations
    purposes. Nevertheless, ATU now contends that the numerous
    Commission pronouncements discussed herein have no merit or binding
    effect. Answer at ¶ 76; ATU Reply Br. at 9-11.

[^49]: Answer at ¶¶ 78-80 (citing 47 U.S.C. §§ 152(a), (b)); ATU Reply
    Br. at 7-9.

[^50]: Answer at ¶¶ 78-80; ATU Reply Br. at 7-9.

[^51]: *See, e.g., Louisiana Pub. Serv. Comm'n. v. FCC,* 476 U.S. 355,
    376 n.4 (1986) (stating that federal regulation of traffic is
    appropriate where it is not possible to separate the interstate and
    intrastate components of the asserted regulation); *SBC,* 153 F.3d
    at 541-42 (holding that federal regulation of "jurisdictionally
    mixed" traffic is appropriate).

[^52]: *See, e.g.,* 47 U.S.C. § 221(c) (allowing the Commission to
    classify the property used by wireline communications providers for
    interstate communications services). The Commission's separations
    rules were adopted pursuant to and in accordance with section
    221(c). *See Crockett Tel Co. v. FCC*, 963 F.2d 1564, 1566-67 (D.C.
    Cir. 1992) (describing that the Part 36 separations rules were
    adopted pursuant to section 221(c) and pointing out that the
    separations rules necessarily have some affect on state ratemaking
    authority to the extent that they apply to companies operating
    within state jurisdictions).

[^53]: 153 F.3d at 541-42.

[^54]: *Id*. at 542.

[^55]: *Id.* at 543.

[^56]: *Id*. at 543-44.

[^57]: *Id*. at 543.

[^58]: *Id. See also Reciprocal Compensation Order*, 14 FCC Rcd at
    3700-01, ¶ 16 (citing with approval the jurisdictional analysis
    employed in *SBC* and stating, "\[w\]e emphasize that the
    Commission's decision to treat ISPs as end users for access charge
    purposes and, hence, to treat ISP-bound traffic as local, does not
    affect the Commission's ability to exercise jurisdiction over such
    traffic.").

[^59]: *Louisiana Pub. Serv. Comm'n*, relied upon by ATU (ATU Reply Br.
    at 7-8), does not dictate a contrary result. *Louisiana Pub. Serv.
    Comm'n* held that the Commission could not pre-empt state regulation
    concerning depreciation of dual-jurisdiction property for
    rate-making purposes. No such pre-emption is occurring here, because
    the Commission is not directing states to set rates to recover for
    interstate costs. As in *SBC*, "states are free to assess intrastate
    tariffs as they see fit." *SBC*, 153 F.3d at 543. ATU's other cited
    authority on the jurisdiction issue is equally unavailing, as it
    merely supports the uncontroverted proposition that the federal
    government regulates interstate communications, while state
    governments regulate intrastate communications. *See, e.g.,
    Crockett*, 963 F.2d at 1569 ("\[A\]ny attempt to impose intrastate
    rates is beyond federal authority; conversely, states may not trench
    upon interstate matters."); *Competitive Telecommunications Ass'n v.
    FCC,* 117 F.3d 1068, 1075, n.5 (8^th^ Cir. 1997) (same).

[^60]: Answer at ¶¶ 77, 83-84; ATU Br. at 3-8; ATU Reply Br. at 9-11.

[^61]: Answer at ¶¶ 77, 83-84; ATU Br. at 7-9; ATU Reply Br. at 9-11.

[^62]: Answer at ¶ 78; ATU Reply Br. at 9-11 (citing *Smith v. Illinois
    Bell*, 282 U.S. 133 (1930)).

[^63]: *Id.*

[^64]: *Smith,* 282 U.S. at 149-50.

[^65]: *Id.* *See also* *Recommended Decision on Separations* at ¶ 12
    ("*Smith v. Illinois Bell* does not require absolute precision for
    cost allocation between the federal and state jurisdictions"); *In
    the Matter of Applications for Review of the Common Carrier Bureau's
    Letter of Interpretation Regarding the Clarification of the Role of
    Direct Assignment in the Jurisdictional Separations Process,*
    Memorandum Opinion and Order, 8 FCC Rcd 1558, 1560-61 at ¶ 10 (1993)
    ("*Direct Assignment Order*") (concluding that *Smith* does not
    require an exact apportionment of interstate and intrastate usages
    of property, but only a reasonable apportionment; further,
    separations procedures "provide a balance between the need to
    reasonably reflect cost causation principles and the goal of
    simplification").

[^66]: *MCI Telecom. Corp. v. FCC*, 750 F.2d 135, 141 (D.C. Cir. 1984).
    The Commission's separations rules repeatedly reflect such policy
    considerations. *See, e.g.,* 47 C.F.R. § 36.125(f) (DEM weighting
    for small carriers); 47 C.F.R. § 36.154(a) (the ten percent
    "contamination" rule); 47 C.F.R. § 36.154(c) (allocating 25 percent
    of local loop costs to interstate jurisdiction).

[^67]: *First Access Charge Reform Order*, 12 FCC Rcd at 16133, ¶¶
    344-45.

[^68]: *SBC*, 153 F.3d at 543-44.

[^69]: 47 C.F.R. Part 36, Glossary (emphasis added).

[^70]: *Id.*

[^71]: 47 C.F.R. § 36.1(c); 47 C.F.R. Part 36, Glossary (emphasis
    added).

[^72]: Matching the costs with the revenues is not a perfect process,
    and the separations rules do not require it to be. As explained,
    *supra,* at n. 76, there may be a small amount of costs,
    non-traffic-sensitive costs, associated with ISP traffic that are
    assigned to the interstate jurisdiction pursuant to the flat rate
    allocator rule embodied in rule 36.154(c) of our rules.

[^73]: Further, if costs are assigned to a particular jurisdiction, but
    revenues cannot be recovered in that jurisdiction to recover those
    costs, then a carrier may rely on that cost-revenue mismatch to
    assert a "takings" claim (*i.e.*, a claim that the Commission has,
    by regulation, prevented a carrier from recovering the costs of
    providing its services).

[^74]: *ONA NPRM,* 4 FCC Rcd at 3989, ¶ 44.

[^75]: *Id.*

[^76]: *ONA NPRM*, 4 FCC Rcd at 3987-88, ¶ 34. We note that this
    separations treatment of ISP traffic costs applies to
    traffic-sensitive costs of ISP traffic, which represent the bulk of
    costs that local exchange carriers incur to process ISP traffic. Any
    non-traffic-sensitive costs associated with ISP service, such as
    local loop costs, are subject to a flat rate allocation of 75% to
    the intrastate jurisdiction and 25% to the interstate jurisdiction.
    47 C.F.R. § 36.154(c). However, ATU's assignment of
    non-traffic-sensitive costs is not at issue in this case. Moreover,
    the Commission's separations treatment of ISP costs, and the desire
    to avoid a cost-revenue mismatch, focuses on the traffic-sensitive
    costs of ISP traffic, not the application of the flat rate allocator
    to non-traffic-sensitive costs. *ONA NPRM*, 4 FCC Rcd at 3987-88, ¶
    34.

[^77]: *ONA Order*, 6 FCC Rcd at 4535, ¶ 65.

[^78]: *Reciprocal Compensation Order*, 14 FCC Rcd at 3702, ¶¶ 18-20.

[^79]: *Id.* at 3710, ¶ 36.

[^80]: *Id.*

[^81]: ATU Br. at 9-10. Of course, in so arguing, ATU essentially
    concedes, as it must, that the Commission has jurisdiction to
    regulate ISP traffic, contrary to its assertions addressed above
    based on section 2(b) of the Act.

[^82]: *See, e.g., Motion Picture Assn. of America, Inc. v. Oman*, 969
    F.2d 1154, 1156 (D.C. Cir. 1992) (holding that agencies are not
    permitted to engage in retroactive rulemaking unless expressly
    authorized by Congress); *McElroy Electronics Corporation For
    Authorization to Service Unserved Areas in Metropolitan Statistical
    Area Market No. 2B*, Memorandum Opinion and Order, 10 FCC Rcd 6762,
    6768 (1995) ("the Supreme Court made clear . . . retroactive
    rulemaking is unlawful unless permitted by statute").

[^83]: Answer at ¶ 77 (citing 47 C.F.R. § 36.125(b)); ATU Br. at 8-9;
    ATU Reply Br. at 3-4.

[^84]: *See, e.g., ONA NPRM*, 4 FCC Rcd at 3988, ¶ 39.

[^85]: *Id.* at 3988, n. 71.

[^86]: Answer at ¶¶ 81-82; ATU Reply Br. at 7-8. ATU initially appeared
    to argue that not allowing it to recover costs for ISP traffic in
    the interstate jurisdiction would constitute confiscatory
    rate-making. *Id.* Subsequently, ATU clarified that it was not
    making such a "takings" claim here. ATU Reply Br. at 8, n.7.

[^87]: 12 FCC Rcd at 16133-34, ¶ 346. ATU has not suggested that it
    fails to earn such ancillary revenues from ISP traffic.

[^88]: *Id*. at 16133, ¶ 345.

[^89]: 153 F.3d at 542.

[^90]: ATU has not cited any evidence of such a request for relief from
    state regulatory authorities. Similarly, ATU has not cited any
    evidence that it has requested a waiver from the Commission for the
    separations treatment of ISP traffic costs at issue here or for a
    declaratory ruling that its proposed separations treatment is
    permissible.

[^91]: The parties do not dispute that, if ATU had assigned ISP traffic
    costs to the intrastate jurisdiction for the 1997-1998 Monitoring
    Period, ATU would have exceeded its prescribed rate of return. Joint
    Statement at ¶ 14.

[^92]: 47 C.F.R. § 36.125(a)(3).

[^93]: 47 C.F.R. § 36 at Appendix-Glossary.

[^94]: Answer at ¶ 92; ATU Br. at 10-11.

[^95]: ATU Br. at 10-11.

[^96]: The Joint Board was convened in 1980, pursuant to section 410(c)
    of the Act, to consider various separations procedures and issues
    and to make recommendations concerning the same to the Commission.
    47 U.S.C. § 410(c). It is comprised of three members of the
    Commission and four state commissioners.

[^97]: *In the Matter of Amendment of Part 67 of the Commission's Rules
    and Establishment of a Joint Board*, Order Inviting Comments, 2 FCC
    Rcd 3787, 3800, n.17 (1987) ("*Order Inviting Comments*"). The
    *Order Inviting Comments* cited to former section 67.138(c) of our
    rules for the definition of DEM. 47 C.F.R. § 67.138(c) (1987).
    Section 67.138 was later replaced by section 36.125, with no
    substantive change to the definition of DEM.

[^98]: *Id*. at 3788, ¶ 7.

[^99]: *Id.*

[^100]: *Id*. at 3788, ¶¶ 6-12. SMOU was defined as follows: "SMOU is
    defined as a measurement of local dial central office switching
    equipment for jurisdictional separations purposes where one minute
    of use is recorded per minute of an originating interoffice call,
    one minute of use recorded per minute of a terminating interoffice
    call, and one minute of use is recorded per minute of an originating
    intraoffice call." *Id*. at 3800, n.20. *See also, In the Matter of
    Amendment of Part 67 of the Commission's Rules and Establishment of
    a Joint Board*, Recommended Decision and Order, 2 FCC Rcd 2551, 2560
    at ¶¶ 53-54 (1987) (recognizing that various parties were arguing
    that SMOU, rather than DEM, should be utilized as the allocation
    factor for central offices employing digital switches).

[^101]: *Id.* The *Order Inviting Comments* reveals that the application
    of DEM to intraoffice calls over digital switches that we affirm
    here was clear not only to the Joint Board, but to those who
    disagreed with that application, as well. Had DEM been interpreted
    as ATU suggests now (*i.e*., that intraoffice calls using a digital
    switch would generate only a single DEM for each minute of use),
    then it would have been unnecessary for parties to argue that SMOU
    should be used instead of DEM as the allocation factor for digital
    switches. The DEM factor, had it been defined as ATU proposes, would
    have already provided for the result the parties hoped to attain by
    employing SMOU as the allocation factor. Thus, the fact that parties
    urged the adoption of SMOU as an allocation factor for intraoffice
    calls using digital switches, rather than relying on an expansive
    construction of DEM, supports our conclusion that DEM has never been
    defined or applied, and should not be defined or applied, as ATU
    suggests it should be here.

[^102]: ATU Br. at 11. ATU cites no rule, regulation, or order
    suggesting that the interpretation of DEM discussed by the
    Commission in 1987 has been altered or amended. Further, ATU
    apparently understood, at least until recently, that section
    36.125(a)(3) requires it to count each minute of intraoffice calls
    as two DEMs. ATU concedes that even as late as its January 1998
    Tariff filing, it counted intraoffice calls as two DEMs. Responses
    of Alaska Communications Systems Holdings, Inc. and ACS of
    Anchorage, Inc. to Interrogatories, File No. EB-00-MD-16 (filed
    October 20, 2000), at Response to Interrogatory No. 6. If ATU now
    believes that 36.125(a)(3) should be interpreted differently than it
    has been in the past, ATU should seek such relief through
    appropriate means, such as a petition for declaratory ruling, rather
    than unilaterally adopting a new interpretation of the rule.

[^103]: Answer at ¶ 90; ATU Reply Br. at 11-12.

[^104]: 47 C.F.R. § 36.1(c). *See* 47 C.F.R. § 36.2(a).

[^105]: *Direct Assignment Order*, 8 FCC Rcd at 1560, ¶ 8.

[^106]: *Id*. at 1559, ¶ 4.

[^107]: *MCI*, 59 F.3d at 1414 (citing and quoting 47 U.S.C. § 201(b)).
    *See 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); *Nader v. FCC*, 520 F.2d 182 (D.C. Cir.
    1975).

[^108]: *See 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) (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).

[^109]: *MCI*, 59 F.3d at 1415.

[^110]: Joint Statement at ¶ 14. *See Rate-of-Return Prescription
    Order*, 5 FCC Rcd at 7532, ¶ 216; 47 C.F.R. § 65.700(a).

[^111]: Answer at ¶¶ 94-96; ATU Br. at 11-20; ATU Reply Br. at 14-18.

[^112]: ATU Br. at 11-20; ATU Reply Br. at 14-18. ATU concedes that its
    arguments based on section 204(a)(3) afford no protection against
    calendar year 1997 damages, because ATU filed its 1997 Tariff prior
    to the effective date of section 204(a)(3). Answer at ¶ 96. The
    parties agree that the damages amount for 1997, excluding interest,
    is \$1,329,442. Joint Statement at ¶ 15.

[^113]: Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat.
    56, § 402(b)(1)(A)(iii); 47 U.S.C. § 204(a)(3).

[^114]: *Id.* (emphasis added).

[^115]: *In the Matter of Implementation of Section 402(b)(1)(A) of the
    Telecommunications Act of 1996*, Report and Order, 12 FCC Rcd 2170
    (1997) ("*Streamlined Tariff Order*"*)*.

[^116]: *Id.* at 2183, ¶ 21.

[^117]: *Id.* at 2182-83, ¶¶ 20-21.

[^118]: *Id.* at 2182, ¶ 19.

[^119]: *Id.* at 2183, ¶ 24.

[^120]: 47 U.S.C. § 204(a)(3) (emphases added).

[^121]: ATU acknowledges that its January 1998 Tariff did not contain
    information that provided notice that it would assign to the
    interstate jurisdiction for separations purposes the costs of ISP
    traffic or would count each minute of intraoffice calls as one DEM.
    *See,* Letter from Christopher N. Olsen, Attorney, Market Disputes
    Resolution Division, Enforcement Bureau, to Joe D. Edge, et al.,
    Drinker Biddle & Reath LLP and Karen Brinkmann, et al., Latham &
    Watkins, File No. EB-00-MD-016 (October 6, 2000), at 1-2;
    Stipulation of Defendants Alaska Communications Systems Holdings,
    Inc. and ACS of Anchorage, Inc., File No. EB-00-MD-016 (October 20,
    2000), at 1.

[^122]: *See, e.g., MCI*, 59 F.3d at 1415; *AT&T Corp. v. Telephone
    Util. Exch. Carrier Assoc.,* Memorandum Opinion and Order*,* 10 FCC
    Rcd 8405, 8409, n.20 (1995) (stating that an overearnings complaint
    does not allege that any individual rates are unlawful, but rather
    alleges that the cumulative application of those rates produced an
    excessive rate of return). *See also New England Tel.*, 826 F.2d at
    1107 (explaining the difference between an order prescribing a
    maximum rate of return and an order requiring a carrier to set
    individual rates at specific levels).

[^123]: *MCI,* 59 F.3d at 1415 ("\[A\]ny calculation of the rate that
    will produce a targeted rate of return, whether it is done by the
    Commission, \[a customer\], or for that matter a LEC, is necessarily
    but an estimate. It is not possible to know precisely the effect
    that any given rate, or change from a prevailing rate, will have
    upon revenues (and therefore upon the LEC's rate of return); that
    depends upon the elasticity of the demand for the service, which
    cannot be known for certain. . .")*.*

[^124]: ATU Br. at 12-13; ATU Reply Br. at 15-17.

[^125]: The D.C. Circuit has pointed out the difficulties inherent in
    predicting rate-of-return violations from information typically
    contained in tariffs: "If the LEC, with its superior information,
    could not (or did not) accurately establish such a rate \[that would
    lead to a lawful rate of return\], then it seems obvious that the
    \[customer\] could not (or should not be expected to) establish such
    a rate from the outside looking in." *MCI*, 59 F.3d at 1415.

[^126]: 12 FCC Rcd at 2184, ¶ 24.

[^127]: GCI asserts that the "deemed lawful" language of section
    204(a)(3) has no application at all to a rate-of-return violation,
    even where the tariff at issue describes the practices that cause
    the violation. GCI Br. at 22-25; Reply of General Communication,
    Inc., File No. EB-00-MD-016 (September 18, 2000) ("GCI Reply") at
    5-10. We need not and do not reach this issue here. We conclude only
    that where, as here, the tariff at issue failed to specify the
    practices that caused the rate-of-return violation, the carrier who
    exceeded its prescribed rate of return is not immunized by section
    204(a)(3) from a damages award in a complaint proceeding under
    section 208.

[^128]: Joint Statement of Managers, S. Conf. Rep. No. 104-230, 104^th^
    Cong., 2d Sess. at Section 402 (1996); 141 Cong. Rec. S7881-7902 at
    7898 (1995); 141 Cong. Rec. S7926-27 (1995). ATU does not dispute
    that, prior to the 1996 Act, the Commission had long required a
    carrier who exceeds its allowable rate of return to refund the
    excess to the affected customers.

[^129]: 12 FCC Rcd at 2202-03, ¶¶ 67-68.

[^130]: *Id.* at 2203, ¶ 68 (emphasis added).

[^131]: Complaint, Ex. 4 at 14.

[^132]: ATU Reply Br. at 12, n.11. ATU's discovery responses state that,
    for the January 1998 Tariff, ATU "did not include ISP traffic in its
    demand projections or the projected traffic sensitive costs
    associated with such traffic in its revenue requirement." ATU
    Response to Interrogatory No. 5. It is not clear whether these two
    assertions by ATU are consistent (*i.e*., whether ATU treated ISP
    traffic as intrastate for purposes of its January 1998 Tariff, or
    whether it simply failed to account for ISP traffic at all in its
    January 1998 Tariff). Under either scenario, however, ATU's
    treatment of ISP traffic as interstate in its July 1998 Tariff
    represents a new or revised treatment of such traffic by ATU, as
    compared to the January 1998 Tariff.

[^133]: We need not determine whether the language ATU included in the
    "Description and Justification" section of its July 1998 Tariff
    filing concerning ISP traffic and DEM counting for intraoffice calls
    necessarily constitutes a "charge, classification, regulation, or
    practice" within the meaning of section 204(a)(3). We need only
    conclude that, if ATU's statement *is* considered to be a "charge,
    classification, regulation, or practice" within the meaning of
    section 204(a)(3), then ATU failed to comply with applicable notice
    requirements and cannot, therefore, benefit from section 204(a)(3).
    Alternatively, if ATU's statement as to ISP traffic costs and DEM
    counting for intraoffice calls is *not* considered to be a "charge,
    classification, regulation, or practice" within the meaning of
    section 204(a)(3), then section 204(a)(3) simply does not apply at
    all.

[^134]: *See 1997 Annual Access Tariff Filings*, Memorandum Opinion and
    Order, 13 FCC Rcd 5677, 5705-06 at ¶¶ 78-79 (Com. Car. Bur. 1997)
    (concluding that tariffs filed on eight and sixteen day's notice not
    "deemed lawful" under section 204(a)(3)); *Streamlined Tariff
    Order,* 12 FCC Rcd at 2181-84, 2189 at ¶¶ 25-34 and 62-71.

[^135]: GCI also contends that the July 1998 Tariff is not deemed
    lawful, because it allegedly reflected an increase in one of the
    rates from that set forth in the January 1998 Tariff, and ATU failed
    to file it on 15-days' notice, as is required for rate increases.
    GCI Reply at ¶ 11; GCI Reply Br. at 14-16. ATU disputes whether the
    July 1998 Tariff reflects a rate increase. ATU Br. at 19-20.
    However, we need not and do not resolve this dispute, because we
    have concluded that the July 1998 Tariff is not "deemed lawful" for
    a separate reason.

[^136]: 47 U.S.C. § 415(c).

[^137]: ATU Br. at 20-21. Although ATU failed to allege the statute of
    limitations as an affirmative defense in its Answer and may,
    therefore, have waived it, we address the argument, in any event,
    because the statute of limitations might have affected our
    jurisdiction to decide GCI's claims for 1997 damages.

[^138]: Answer at Exhibit 2.

[^139]: *Id*.

[^140]: ATU Br. at 20-21.

[^141]: *Id.*

[^142]: 59 F.3d at 1416-17.

[^143]: *Id.*

[^144]: *Id*.

[^145]: *Id*. (emphasis added).

[^146]: *See also AT&T v. TUECA*, 10 FCC Rcd at 8415 ("\[T\]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
    Communications Serv., Inc. v. US West, Inc*.*,* Memorandum Opinion
    and Order, 8 FCC Rcd 3017, 3019 at ¶ 13 (1993); *US Sprint
    Communications Ltd. Partnership v. Pacific Northwest Bell Tel. Co*.,
    Memorandum Opinion and Order, 8 FCC Rcd 1288, 1291-92 at ¶ 16
    (1993). The D.C. Circuit has also previously rejected the notion
    that a rate-of-return violation claim can be analyzed for a period
    less than the full monitoring period. *Virgin Islands Tel. Corp. v.
    FCC*, 989 F.2d 1231, 1238-39 (D.C. Cir. 1993) ("the target
    'authorized return' is a number that has meaning only in relation to
    the full two-year monitoring period. Thus, it makes no sense to
    speak of the 'authorized return' for \[a six month period\]. . . .
    In order to assess the reasonableness of \[the carrier's\] earnings
    as against the authorized rate of return, the Commission was
    required to consider earnings for the entire period during which the
    authorized rate was in effect.")

[^147]: *See* 47 C.F.R. § 65.600(b) (allowing final adjustments to be
    made to the enforcement period monitoring report until September 30
    of the year following the monitoring period in question).

[^148]: ATU makes a half-hearted attempt to distinguish *MCI v. FCC,*
    but ultimately ATU "generally agrees that a cause of action in an
    overearnings case accrues on the date the final monitoring report
    was filed." ATU Reply Br. at 18. ATU argues that the statute of
    limitations may bar GCI's claims that do not constitute a claim for
    overearnings. *Id.* Because we dismiss these other claims (*i.e.*,
    Counts 4-6 of the Complaint) as moot, *see* Part III(B), *infra*, we
    need not decide whether the statute of limitations defense would
    have barred any portion of damages to which GCI would otherwise have
    been entitled for such claims.

[^149]: We do not find in GCI's favor, however, on its claims against
    ACS Holdings, and we dismiss ACS Holdings from the case. *See* Part
    III(C), *infra*.

[^150]: Complaint at ¶ 4; GCI Br. at 29; GCI Reply at 11.

[^151]: 47 U.S.C. § 411(a) (providing that it is lawful to include in
    any proceeding to enforce the provisions of the Act, "all persons
    interested in or affected by the charge, regulation, or practice
    under consideration, and inquiries, investigations, orders, and
    decrees may be with reference to and against such additional parties
    in the same manner, to the same extent, and subject to the same
    provisions as are or shall be authorized by law with respect to
    carriers"). The parties apparently agree that ACS Holdings is not
    itself a carrier within the meaning of the Act.

[^152]: Complaint at ¶ 61; Answer at ¶¶ 97-98. *See, e.g., MCI Telecom.
    Corp. v. Pacific Northwest Tel. Co.,* Memorandum Opinion and Order,
    8 FCC Rcd 1517, 1529-30 at ¶¶ 46-48 (1993)*.*

[^153]: *See* 2000-25 I.R.B. 1262 (GCI Reply at Exhibit 21).

[^154]: GCI Reply Br. at 17-18.

[^155]: ATU Br. at 22-23.

[^156]: *Id.*

[^157]: *MCI,* 8 FCC Rcd at 1529, ¶ 46.

[^158]: *See, Mile Hi Cable Partners, L.P. v. Public Serv. Co. of
    Colorado*, Order, 15 FCC Rcd 11450, 11458 at ¶ 14 (Cab. Serv. Bur.
    2000); *Long Term Telephone Number Portability Tariff Filings*, 14
    FCC Rcd at 17341, n.15 (suggesting that there may be instances where
    the IRS tax underpayment rate is appropriately applied as a
    penalty).

[^159]: *See* 2000-25 I.R.B. 1262 (GCI Reply at Exhibit 21).

[^160]: *See Long Term Telephone Number Portability Tariff Filings of
    Ameritech Operating Cos., Pacific Bell, Southwestern Bell Tel. Co.
    and U.S. West Comm., Inc.*, Memorandum Opinion and Order, 14 FCC Rcd
    17339, 17341 at ¶ 5 (1999); *Time Warner
    Entertainment/Advance-Newhouse Partnership v. Florida Power & Light
    Co.,* Order, 14 FCC Rcd 9149, 9154, n.36 (1999); *In the Matter of
    Section 208 Complaint Alleging Violations of the Commission's Rate
    of Return Prescription,* Memorandum Opinion and Order, 12 FCC Rcd
    4007, Attachment A (1997). ATU concedes that it is not aware of any
    situation in which the Commission has awarded interest at the rate
    for large corporate overpayments (those exceeding \$10,000) and
    suggests that this dearth of precedent exists because the large
    corporate overpayment rate was not established until 1995. ATU Br.
    at 23-24. However, the decisions cited herein were rendered after
    the adoption of the large corporate overpayment rate in 1995, and we
    assume that the amount involved in the orders described herein,
    given the significant rate actions described, exceeded \$10,000.

[^161]: *See* *supra* at ¶ 21.

[^162]: The parties agree on the amount of damages at issue here,
    excluding interest. The parties concluded that ATU's assignment of
    ISP traffic costs to the interstate jurisdiction and calculation of
    one DEM for each minute of interoffice calls resulted in disputed
    charges of \$2,765,371 to GCI for the 1997-1998 Monitoring Period.
    Joint Statement at ¶ 15.

[^163]: ATU initially challenged the Commission's authority to order any
    relief other than damages in this case. Answer at ¶ 102. ATU
    subsequently retreated from that position and agreed to comply with
    any Commission order requiring it to submit a revised monitoring
    report and to treat ISP traffic costs and count intraoffice calls as
    dictated by the Commission. ATU Br. at 24-25. In any event, we note
    that we do have broad authority, under section 4(i) of the Act, to
    order relief other than damages. *See, e.g.,* *Amendment of Rules
    Governing Procedures to be Followed When Formal Complaints Are Filed
    Against Common* Carriers, Report and Order, 12 FCC Rcd 22497, 22566
    at ¶ 159 and n. 464 (stating that the Commission has authority under
    section 4(i) of the Act to award injunctive relief); *Streamlined
    Tariff Order*, 12 FCC Rcd at 2182-83 (recognizing the Commission's
    ability to direct that a carrier cease charging a particular rate
    for future periods); *Ashtabula Cable TV, Inc. v. Ashtabula Tel.
    Co.,* Decision, 17 FCC 2d 113, 119 at ¶ 16, *recon. denied*, 18 FCC
    2d 193, Memorandum Opinion and Order, (1969) (section 4(i) permits
    the Commission to tailor remedies to "best meet the particular
    factual situation before \[it\]").