Before the

**Federal Communications Commission**

**Washington, D.C. 20554**

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| In the Matter of                 | * | File No. E-94-41             |
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| Graphnet, Inc.,                  | ) |                              |
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| AT&T Corp.,                      | ) |                              |
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**MEMORANDUM OPINION AND ORDER**

**Adopted:** December 21, 2001 **Released:** January 8, 2002

By the Commission:

# INTRODUCTION

1.  In this Memorandum Opinion and Order, we deny all of the claims
    asserted in a complaint filed by Graphnet, Inc. ("Graphnet") against
    AT&T Corp. ("AT&T") pursuant to section 208 of the Communications
    Act of 1934, as amended ("Act").[^1] Specifically, we reject
    Graphnet's arguments that AT&T unlawfully routed through carriers in
    other countries telex traffic that AT&T received at its switch in
    the United States and that ultimately was destined for Graphnet's
    network.[^2] We also reject Graphnet's claim that AT&T violated
    Commission rules during the course of this proceeding.

2.  In addition, we grant one of the counterclaims filed by AT&T against
    Graphnet. In particular, we find that Graphnet's Tariff F.C.C. No. 5
    involved an unjust and unreasonable practice in contravention of
    section 201(b) of the Act.[^3]

# backgrounD

3.  Graphnet and AT&T are providers of domestic and international telex
    service, also known as "record carriers."[^4] In order to provide
    telex service to their customers, record carriers interconnect their
    networks. At the times relevant to this dispute, the Record Carrier
    Competition Act ("RCCA"), codified at former section 222 of the Act,
    contained a general interconnection standard that required record
    carriers to make available, upon reasonable request, full
    interconnection with the facilities of other record carriers that
    are used primarily to provide record communications service.[^5] The
    RCCA provided that interconnection furnished pursuant to a written
    agreement must be "upon terms and conditions which are just, fair,
    and reasonable."[^6] This dispute concerns the terms and conditions
    under which Graphnet made its facilities available to AT&T for the
    termination of domestic and international telex calls that traversed
    AT&T's network and were destined for Graphnet's subscribers.

4.  In February 1993, Graphnet and AT&T entered into a contract entitled
    "Interconnection Agreement." The Interconnection Agreement specified
    the types of trunks that would route telex traffic between the two
    carriers and established each carrier's telex termination rates:
    \$.45 per minute in whole minute increments for traffic carried by
    Graphnet and terminated on AT&T's network; and \$.78 per minute in
    whole minute increments for traffic carried by AT&T and terminated
    on Graphnet's network.[^7] The Interconnection Agreement included a
    June 30, 1993, expiration date, which could be extended by mutual
    agreement.[^8] Although Graphnet wished to continue its contractual
    relationship with AT&T after June 30, 1993, AT&T opted not to do so,
    apparently citing its then desire to "revert to the conditions of
    \[Graphnet's\] interconnect tariff \[Tariff F.C.C. No. 5\] and the
    rules of the FCC."[^9]

5.  Graphnet's Tariff F.C.C. No. 5, which took effect on March 26, 1992,
    contained rates that were significantly higher than those of the
    Interconnection Agreement. Specifically, the tariff charged \$3.00
    for each minute or fraction thereof for terminating either an
    interconnected domestic or international telex call. Moreover, the
    \$3.00 charge applied to all calls terminated on Graphnet's network
    "that have, at any point, utilized the facilities of another United
    States OCC \[Other Common Carrier\]."[^10] In other words, if AT&T
    handled traffic intended for Graphnet's network, but did not
    directly interconnect with Graphnet, it nonetheless would be liable
    to Graphnet for the \$3.00 charge. Graphnet's tariffed termination
    rate was significantly higher than the average rate of other telex
    carriers, which ranged from approximately \$.80 to \$.88.[^11]

6.  Notwithstanding its Tariff F.C.C. No. 5, Graphnet entered into
    interconnection agreements with other domestic record carriers
    specifying termination rates that were lower than \$3.00 per minute.
    For example, Graphnet contractually agreed to an \$.88 per minute
    rate for TRT Telecommunications Corp. telex messages that were
    terminated on Graphnet's network.[^12] Similarly, pursuant to a 1992
    agreement resolving a rate dispute between Graphnet and MCI
    International, Inc., Graphnet agreed to a \$1.23 per-minute
    termination rate.[^13]

7.  AT&T viewed Graphnet's tariffed rate as excessive and chose not to
    pass traffic directly to Graphnet. Instead, AT&T routed through
    foreign affiliates, such as Unitel Communications, Inc. ("Unitel"),
    domestic- and foreign-originated telex traffic that it received at
    its United States switch destined for Graphnet's network.[^14] Thus,
    instead of delivering traffic directly to Graphnet, AT&T sent the
    traffic to Unitel in Canada, which then directed the traffic to
    Graphnet in the United States. Pursuant to this relationship, AT&T
    paid Unitel its applicable charges, and Unitel paid Graphnet a \$.28
    per minute termination charge that Unitel and Graphnet had
    negotiated in an interconnection agreement.[^15]

8.  Graphnet contends that AT&T's routing practice was "inefficient" and
    "unnatural," resulted in degraded service, and unlawfully deprived
    Graphnet of revenue. On February 1, 1994, Graphnet filed a formal
    complaint against AT&T pursuant to section 208 of the Act.
    Graphnet's complaint asserts claims for (1) violation of Graphnet's
    Tariff F.C.C. No. 5 and section 203(c) of the Act; (2) violation of
    sections 203(a) and (c) and 214(a) of the Act; (3) violation of the
    Act and the "antitrust laws";[^16] (4) violation of sections
    222(b)(1) and (c)(1)(B), 202(a), and 201(b) of the Act; (5)
    violation of the Commission's International Settlements Policy;
    and (6) violation of the Commission's "No Third Country Routing Via
    Canada" Policy.[^17] The complaint seeks a cease and desist order,
    an unspecified amount of damages, and a monetary forfeiture.

9.  On April 15, 1994, AT&T answered the complaint, denying the
    violations alleged by Graphnet and advancing various affirmative
    defenses. In addition, the answer asserts three counterclaims
    against Graphnet.[^18] First, AT&T alleges that, in violation of
    section 201(b) of the Act, Graphnet's Tariff F.C.C. No. 5 contained
    unjust and unreasonable charges, terms, and practices. Second, AT&T
    claims that Graphnet engaged in unlawful discrimination, in
    violation of section 202(a) of the Act, by imposing the \$3.00
    termination charge on AT&T while charging other carriers a
    different, lower rate for the same service. Finally, AT&T avers
    that, by charging other carriers a rate that differs from the
    tariffed rate, Graphnet violated section 203 of the Act. AT&T
    requests declaratory relief, as well as a cease and desist
    order.[^19]

# DISCUSSION

## Graphnet's Claims Are Denied.

### AT&T Did Not Violate Section 203(c) of the Act.

10. Section 203(c) of the Act requires common carriers to file and
    publish schedules of their charges and practices, *i.e.*,
    tariffs.[^20] Moreover, section 203 prohibits carriers from
    deviating from the rates and practices contained in their
    tariffs.[^21]

11. Graphnet argues that AT&T violated Graphnet's Tariff F.C.C. No. 5 by
    not paying the \$3.00 per-minute termination charge contained in
    that tariff. According to Graphnet, the filed rate doctrine requires
    compliance with effective tariffs; and AT&T's "admitted
    circumvention" of Graphnet's tariff, allegedly accomplished by not
    routing traffic directly to Graphnet, purportedly constituted a
    violation of section 203(c) of the Act.[^22] In addition, Graphnet
    avers that AT&T violated its own tariffs by circuitously routing
    Graphnet's telex calls via Unitel "without adequate notice in
    writing" to Graphnet.[^23]

12. We agree with AT&T that Graphnet has not met its burden of proving a
    violation of section 203(c). As is evident from the statute's
    language, the obligations imposed by section 203(c) apply to the
    carrier that filed the tariff.[^24] In this case, that carrier is
    Graphnet, which seeks to enforce its tariff against AT&T. Section
    203(c) simply does not control AT&T's obligations here.[^25]

13. Graphnet's claim that AT&T violated two of its own tariffs also is
    unavailing. As a preliminary matter, neither of the tariffs applied
    to traffic routed from AT&T to other carriers within the United
    States.[^26] In any event, the tariffs' notice requirements never
    were triggered. AT&T's tariffs required AT&T to provide "adequate
    notice in writing" to interconnected carriers if changes to AT&T's
    facilities or equipment "can reasonably be expected to render any
    interconnected carrier's facilities incompatible with \[AT&T's\]
    communications facilities, or require modification or alteration of
    an interconnected carrier's facilities, or otherwise materially
    affect the use or performance of an interconnected carrier's
    facilities \...."[^27] Graphnet has failed to demonstrate that AT&T
    altered its facilities in a way that necessitated changes to, or
    impaired the operation of, Graphnet's facilities. To be sure,
    Graphnet has asked the Commission to find that AT&T's routing
    practice "degrade\[d\] service" by causing routing delays and
    subjecting calls to "interruptions and incompletions."[^28] However,
    as discussed below, Graphnet has offered no probative evidence that
    these problems actually occurred.[^29]

14. Graphnet asserts that two pieces of evidence reflect service
    impairments caused by AT&T's routing practice. First, Graphnet
    describes a test that it conducted to determine how AT&T would
    reroute telex calls to Graphnet customers if AT&T's Hong Kong route
    were compromised. Specifically, Graphnet "temporarily disabl\[ed\]
    its Hong Kong circuits" and then transmitted telex calls to itself
    via AT&T.[^30] According to Graphnet, "\[n\]one of these test calls
    were transmitted by AT&T, and Graphnet received the symbol 'NA,'
    meaning not available on its test messages."[^31] In its reply brief
    and accompanying affidavit, AT&T explained that the message Graphnet
    received stands for "not admitted," which indicates an error in the
    placement of the calls, not an error in the routing of the
    calls.[^32] Graphnet does not dispute AT&T's explanation, and we
    have no reason to question its accuracy.

15. Second, Graphnet offers a chart purportedly illustrating its
    business losses. The chart states that the "record shows that
    Graphnet lost \... customers, \... some undoubtedly to AT&T, during
    the period, July-December 1993, as a result of AT&T's practices of
    circuitously routing U.S. and foreign origin telex calls via Unitel,
    Canada."[^33] But even assuming that the customers identified on the
    chart opted not to use Graphnet's service, the record contains no
    facts demonstrating why those individuals left Graphnet, let alone
    that their leaving had anything to do with service disruptions
    caused by AT&T. In the absence of such evidence, we cannot conclude
    that Graphnet's allegedly lost business is attributable to any
    claimed "degrade\[d\] service" resulting from AT&T's routing
    practices.

### AT&T Did Not Unreasonably Discriminate Against Graphnet's Customers in Violation of Section 202(a).

16. Section 202(a) makes it unlawful for any common carrier to
    discriminate unjustly or unreasonably in its provision of like
    communication service.[^34] In resolving a claim that a carrier has
    discriminated in violation of section 202(a), we employ a three-step
    inquiry: (1) whether the services at issue are "like"; (2) if the
    services are "like," whether there are differences in the terms and
    conditions pursuant to which the services are provided; and (3) if
    there are differences, whether they are reasonable.[^35] When a
    complainant establishes the first two components, the burden of
    persuasion shifts to the defendant carrier to justify the
    discrimination as reasonable.[^36]

17. Graphnet contends that AT&T's deliberate routing via non-domestic
    carriers of telex calls inbound to Graphnet's customers, but not
    telex calls inbound to AT&T's customers, constituted unreasonable
    discrimination. According to Graphnet, AT&T has succeeded in a plan
    unlawfully to induce Graphnet's subscribers to shift their business
    to AT&T.[^37]

18. Because AT&T did not argue to the contrary, we assume, without
    deciding, that the service AT&T provided to Graphnet's customers
    (*i.e.*, delivery of telex traffic to those customers) is "like" the
    service AT&T provided to its own customers, and that there is a
    disparity in the manner in which AT&T provided the service (*i.e.*,
    by routing traffic destined for Graphnet's network, but not traffic
    destined for AT&T's network, through carriers in other
    countries).[^38] Thus, the burden of persuasion shifts to AT&T to
    justify its routing practice as reasonable.

19. In our view, AT&T has met its burden. By directing traffic through
    carriers in other countries, AT&T enjoyed a dramatic cost savings
    (*e.g.*, a \$.28 per minute rate for telex calls routed to Graphnet
    via Unitel versus a \$3.00 per minute rate for telex calls routed
    directly to Graphnet). Savings of this nature constitute a
    reasonable, economic rationale for treating Graphnet's customers
    differently.[^39] Because AT&T has proffered a legitimate reason for
    its disparate treatment of Graphnet's customers, a reason that
    Graphnet does not dispute, we deny Graphnet's section 202(a) claim.

### AT&T's Routing Practices Did Not Violate the RCCA.

20. Two subsections of the RCCA -- which, as noted above, was repealed
    after Graphnet filed this case -- are at issue. The first, section
    222(b)(1), was captioned "Exercise of authorities by Commission" and
    required the Commission to "promote the development of fully
    competitive domestic and international markets in the provision of
    record communications service" and to "forbear from exercising its
    authority \... as the development of competition among record
    carriers reduces the degree of regulation necessary to protect the
    public."[^40] The second, subsection 222(c)(1)(B), established rules
    for the terms and conditions on which a United States record carrier
    must make available its separate domestic facilities to other
    international record carriers, and its separate international
    facilities to other domestic record carriers, for the origination
    and termination of international traffic.[^41]

21. Graphnet argues that section 222 was enacted for the purpose of
    promoting the development of fully-competitive domestic and
    international record communications service markets. Graphnet
    asserts that AT&T's practice of routing traffic to other countries
    contravened this pro-competitive policy, because the resultant loss
    of customers deprived Graphnet of revenue it would have used to
    compete with AT&T.[^42]

22. We reject Graphnet's claim. Section 222(b)(1) did not govern the
    conduct of record carriers. It was a general mandate to the
    Commission to promote competition in domestic and international
    telex markets and a directive to forbear from exercising its
    authority as the need for regulation decreased. Although Graphnet is
    correct that the subsection expressed a pro-competitive policy, we
    decline to transform this directive to the Commission into a basis
    for Graphnet to sue AT&T.

23. Section 222(c)(1)(B) similarly has no bearing on this case. The
    provisions of the subsection were designed to protect unaffiliated
    record carriers from discrimination by affiliated domestic and
    international carriers. Graphnet makes no allegation that AT&T
    refused to interconnect with Graphnet on the same basis that AT&T
    interconnected with its affiliated entities.

24. We find neither section 222(b)(1) nor section 222(c)(1)(B) to be
    pertinent to this case. Accordingly, we deny Graphnet's claim that
    AT&T's routing practices violated the RCCA.

### Routing of Domestic Traffic Via a Carrier in Canada Did Not Contravene AT&T's Section 214 Authority.

25. Among other things, section 214(a) of the Act prohibits a carrier
    from engaging in transmission over any line without first obtaining
    from the Commission a certificate that such transmission is required
    by the public convenience and necessity.[^43] The statute further
    forbids a carrier from discontinuing, reducing, or impairing service
    to a community, or part of a community, without first obtaining from
    the Commission a certificate that the public convenience and
    necessity will not be affected adversely.[^44]

26. Graphnet argues that, during the relevant period, the Commission
    required carriers to have "explicit country-by-country and
    product-by-product Section 214 authority" (*i.e.*, the Commission
    did not grant "beyond country" authority -- also known as "and
    beyond" authority -- by implication), and that AT&T's section 214
    authority for the United States did not permit AT&T to transmit
    telex calls from the United States to Canada, and vice versa.[^45]
    Graphnet further maintains that AT&T violated section 214 by not
    seeking FCC authority to "reduce or impair" service before
    unilaterally terminating its connections with Graphnet and routing
    traffic via Unitel.[^46]

27. We conclude that AT&T did not violate section 214(a) when it
    transmitted foreign-originated, inbound telex traffic that it
    received at its New Jersey switching center through Canada via
    Unitel, which then terminated that traffic with Graphnet.[^47] While
    this foreign-originated, inbound telex traffic constituted "foreign
    communication" within the meaning of the Act,[^48] the portion of
    this communication that AT&T routed through Canada was strictly
    domestic, contrary to Graphnet's assertion.[^49] As the Commission
    explained in its *Benchmarks Order*, there are three specific
    network elements (and their related cost components) that are used
    to provide international switched telephone (or, as here, telex)
    service: (1) international transmission facilities; (2)
    international switching facilities; and (3) national extension
    (domestic transport and termination). The international facility
    component consists of international transmission facilities, both
    cable and satellite, including the link to international switching
    facilities. The international gateway component consists of
    international switching centers and associated transmission and
    signaling equipment. The national (*i.e.*, domestic) extension
    component consists of national exchanges, national transmission, and
    the local loop facilities used to distribute international service
    within a country.[^50] The service that AT&T procured from Unitel
    fell within this domestic extension component. The fact that AT&T
    routed this domestic leg of its international telex traffic, which
    it received from its foreign carrier correspondents, through a
    foreign country prior to its termination with Graphnet, does not
    transform this leg into an international communication. Section 3 of
    the Act categorizes communication "between points within the United
    States but through a foreign country" as "interstate
    communication."[^51] Thus, the communications at issue in this case
    were strictly domestic.

28. At the time of the activity about which Graphnet complains, AT&T was
    regulated as a dominant carrier in its provision of United States
    domestic service.[^52] Consequently, AT&T's permissible activities
    were governed by the terms of its section 214 authorizations, as
    well as the Commission's rules and regulations. Graphnet does not
    cite any Commission rule or regulation prohibiting AT&T's domestic
    routing practice, nor does it point to any provision in AT&T's
    domestic or international authorizations barring AT&T from using its
    United States-Canada lines for the provision of United States
    domestic service. Absent any such prohibition, we cannot find that
    AT&T was engaged in the unauthorized provision of service.[^53]

29. Finally, we reject Graphnet's "reduce or impair" analysis. In
    determining the need for prior authority to discontinue, reduce, or
    impair service under Section 214(a), the primary focus should be on
    the end service provided by a carrier to a community or part of a
    community, *i.e.*, the using public. Thus, in situations where one
    carrier attempts to invoke Section 214(a) against another carrier,
    concern should be had for the ultimate impact on the community
    served rather than on any technical or financial impact on the
    carrier itself. We find that "service to a community or part of a
    community" was not discontinued, reduced, or impaired in this
    instance. We so find because, as discussed above, Graphnet has
    failed to produce any persuasive evidence of service disruptions
    resulting from AT&T's routing practice.

### AT&T Did Not Violate the Commission's International Settlements Policy. 

30. The Commission's International Settlements Policy ("ISP")
    requires: (1) the equal division of the accounting rate between a
    United States carrier and a foreign carrier;[^54] (2)
    nondiscriminatory treatment of United States carriers (*i.e.*, all
    United States carriers must receive the same accounting rate, with
    the same effective date); and (3) the proportionate return of
    inbound traffic.[^55] The Commission adopted the ISP to prevent
    foreign monopoly carriers from playing United States international
    common carriers against one another, or engaging in "whipsawing," to
    the disadvantage of United States carriers and United States
    consumers.[^56]

31. Graphnet claims that the ISP was designed to "curb the diversion of
    U.S. carrier revenues to foreign telecommunications entities."[^57]
    According to Graphnet, AT&T violated the policy by diverting revenue
    away from Graphnet to foreign carriers such as Unitel. In Graphnet's
    view, much of the traffic at issue was international, because it
    originated in other countries and was carried by AT&T from its
    switching center in New Jersey.[^58]

32. We reject Graphnet's claim under the ISP. The fact that much of the
    traffic that AT&T delivered to Graphnet originated in foreign points
    is irrelevant. As explained above, the portion of the international
    communication that AT&T routed via Unitel's facilities in Canada was
    strictly domestic. Once AT&T received an inbound international telex
    message at its New Jersey switching center (which was the end of the
    international leg of the message), its subsequent delivery of the
    message to Graphnet involved the provision of domestic transport
    service, notwithstanding AT&T's routing of the traffic through
    Canada.[^59] The ISP addresses only the terms and conditions under
    which a United States carrier agrees to exchange United States
    inbound and outbound international traffic with a foreign-authorized
    carrier.[^60] The ISP does not address -- and imposes no
    requirements regarding -- the domestic routing of inbound and
    outbound international traffic between United States-authorized
    carriers. Thus, the manner in which AT&T delivered inbound
    international telex traffic from its New Jersey switch to Graphnet,
    and the cost that AT&T incurred in delivering such traffic to
    Graphnet, is beyond the ISP's purview.

### Commission Decisions Requiring the Direct Routing of International Traffic Are Irrelevant to This Case.

33. Graphnet claims that AT&T's routing practices violated two related
    Commission policies, which Graphnet dubs the "Direct Routes Policy"
    and the "No Third Country Routing Via Canada Policy."[^61] As
    described by Graphnet, the Direct Routes Policy encouraged carriers
    to route traffic directly to its destination, and to ensure that
    several direct routes are available, so that service quality and
    network reliability will be maintained.[^62] Graphnet argues that
    alleged delays in the routing of Graphnet-bound telex calls and
    relegation of Graphnet traffic to a "single, tenuous, circuitous
    route" contravened this policy.[^63] According to Graphnet, the No
    Third Country Routing Via Canada Policy prohibits carriers from
    routing international traffic through Canada.[^64] Graphnet further
    maintains that AT&T is estopped from arguing in this case that its
    circuitous Canadian routings were permissible, because AT&T
    allegedly sought Commission adoption of the No Third Country Routing
    Via Canada Policy.[^65]

34. As AT&T contends,[^66] Graphnet's reliance on these policies is
    misplaced. Like the ISP, these policies pertained to the
    international transmission and switching of United States inbound
    and outbound international traffic.[^67] They did not apply to the
    domestic routing of United States international traffic. Because the
    instant case involves only the domestic component of inbound,
    foreign-originated, telex traffic,[^68] these Commission policies
    have no bearing. Accordingly, we deny Graphnet's claim that AT&T's
    re-routing practice breached Commission policy.

### AT&T Did Not Violate the Commission's Rules During the Course of This Proceeding.

35. In its briefs and subsequent submissions, Graphnet maintains that a
    number of AT&T's actions during this litigation violated the
    Commission's rules. The alleged transgressions include AT&T's
    alleged failure (1) to be candid and forthcoming to the Commission
    regarding AT&T's relationship with, and participation in,
    Unitel; (2) to file a timely answer to Graphnet's first Supplemental
    Complaint; (3) to send a company representative to a status
    conference at the Commission; (4) to pay a filing fee with its
    counterclaim; and (5) to file an answer to Graphnet's second and
    third supplemental complaints.[^69]

36. We conclude that AT&T did not violate the Commission's rules. First,
    we agree with AT&T that statements it made in reporting its equity
    ownership in Unitel are not germane to the case. AT&T ordered
    service from Unitel pursuant to Unitel's tariff and, therefore, paid
    the same rates and was subject to the same terms and conditions as
    other carriers.[^70] Accordingly, Graphnet's allegations of a
    conspiracy between AT&T and Unitel have no force.[^71] Second, we
    credit AT&T's explanation for failing to timely file an answer to
    the first Supplemental Complaint (*i.e.*, that AT&T was unable to
    locate a service copy of the pleading),[^72] and, therefore, accept
    AT&T's late-filed answer. Third, although it appears that AT&T
    failed to pay a filing fee in connection with its 1994 counterclaim,
    the rules at that time were not clear as to whether a defendant
    filing a counterclaim must pay a fee.[^73] We decline Graphnet's
    invitation to penalize AT&T for violating this requirement. Finally,
    there was no requirement in 1995 (when the status conference at
    issue took place) that a company representative (as opposed to
    outside counsel) attend a status conference, absent a directive from
    Commission staff.[^74] Consequently, AT&T's failure to send a
    corporate representative to the 1995 status conference is not
    actionable.

### There Is No Basis for Graphnet's Section 201(b) Claim.

37. Graphnet asserts a "catch-all" claim that AT&T's alleged violations
    of the Act and the Commission's rules and policies constitute unjust
    and unreasonable practices in violation of section 201(b).[^75] For
    the reasons stated above, we find that no such violations occurred
    and therefore reject Graphnet's section 201(b) claim.

### Conclusion

38. In sum, we deny all of Graphnet's claims against AT&T. Graphnet has
    failed to establish that AT&T's decision not to order Graphnet's
    tariffed service and instead to route calls through affiliates in
    foreign countries violated any provision of the Act or the
    Commission's policies. In addition, Graphnet has not proven that
    AT&T's conduct during this proceeding contravened any Commission
    rule.

## AT&T's Section 201(b) Counterclaim Is Granted, Because Graphnet's Tariff Violated the RCCA.

39. As noted above, section 201(b) of the Act requires a common
    carrier's charges and practices in connection with communication
    service to be "just and reasonable."[^76] AT&T challenges as unjust
    and unreasonable, *inter alia*, Graphnet's practice of imposing the
    \$3.00 per-minute termination charge contained in Tariff F.C.C. No.
    5 on carriers with whom Graphnet does not directly
    interconnect.[^77]

40. To support its claim, AT&T contends that there is no cost
    justification for the challenged practice.[^78] According to AT&T,
    Graphnet negotiated settlement payments so that they would cover its
    costs, and Graphnet received such payments from the carriers with
    whom it directly interconnected (*e.g.*, Unitel).[^79] Moreover,
    AT&T claims that Graphnet's costs for terminating traffic received
    from Unitel did not differ depending on whether the traffic
    originated on Unitel's network or on AT&T's network.[^80] Thus, when
    Graphnet received AT&T-originated traffic from Unitel, it
    purportedly recovered *from Unitel* all of Graphnet's costs for
    terminating such traffic.[^81] Accordingly, AT&T maintains that the
    practice of recovering an additional fee from any carrier whose
    network also was used in transmission of a telex message amounts to
    double recovery and "extort\[ing\] payments \... when \[a carrier\]
    chooses *not* to subscribe to Graphnet's services."[^82]

41. Because the RCCA was in effect at the time AT&T filed its
    counterclaims, we apply the statute in this case.[^83] Section
    222(c)(2) of the RCCA directed the Commission, insofar as possible,
    to require interconnection "*based upon the costs of the record
    communications service*."[^84] The Commission has characterized
    section 222(c)(2) as a "mandate of establishing cost based rates for
    interconnection."[^85] Therefore, to comply with the RCCA,
    Graphnet's practice of imposing a termination charge on carriers
    with which it did not interconnect must have had a cost
    justification.[^86]

42. Given the *prima facie* validity of AT&T's arguments,[^87] and the
    RCCA's requirement of cost-based rates, we conclude that, in order
    to prevail against AT&T's assertions, Graphnet was required to
    produce some cost justification for its practice of charging
    non-interconnecting carriers a termination fee.[^88] Graphnet has
    failed utterly to meet this burden of production, offering no
    substantive cost rationale whatsoever for the challenged practice.
    Indeed, the only response Graphnet provides is speculation that the
    cost of terminating calls that are routed through carriers in other
    countries was "*probably* higher than for direct calls, given the
    unplanned-for circuit congestion and resulting lost revenues."[^89]
    In our view, this solitary and equivocal representation is
    inadequate.

43. We reject the other arguments Graphnet posits, none of which is
    cost-based. Specifically, contrary to Graphnet's assertion, the
    Commission's decisions not to reject or suspend Graphnet's tariff
    are not dispositive of the section 201(b) claim.[^90] Those
    decisions merely constitute a determination by the Commission that
    the challenged tariff is not patently unlawful. They do not preclude
    AT&T from initiating a section 208 complaint proceeding to determine
    whether the tariff is in fact lawful.[^91] Thus, in a section 208
    complaint, the Commission "examine\[s\] legal, and, where
    appropriate, policy matters to give full effect to the requirements
    that a carrier's rates, terms, and conditions are just, reasonable,
    and not unreasonably discriminatory."[^92]

44. We similarly find Graphnet's estoppel defense to be without
    merit.[^93] Section 208 of the Act provides that "any person" may
    bring a complaint against a common carrier for any violation of the
    Act.[^94] Graphnet cites no authority (and provides no legal
    analysis) supporting its contention that AT&T's participation in the
    Interconnection Agreement with Graphnet precludes AT&T subsequently
    from challenging Graphnet's tariffed termination rate.

45. In sum, applying the RCCA, we conclude that Graphnet has failed to
    rebut AT&T's *prima facie* showing that charging a
    non-interconnecting record carrier a termination fee was not a
    cost-based practice and, therefore, was unreasonable. Because we
    find a violation of the RCCA, we rule in favor of AT&T on its
    section 201(b) counterclaim.[^95]

## We Need Not and Do Not Reach AT&T's Remaining Counterclaims.

46. We conclude above that Graphnet's practice of imposing the
    termination charge on AT&T was unlawful, and, consequently, that
    Graphnet cannot enforce the tariff against AT&T. Because our
    conclusion in this regard results in AT&T receiving all the relief
    it seeks, we need not and do not reach its remaining
    counterclaims.[^96]

# motions

47. Each of the parties has filed a variety of motions in this
    proceeding, a number of which already have been the subject of oral
    rulings. We herein rule on the outstanding motions.

48. The following motions are denied as moot: (1) Motion to Dismiss or,
    Alternatively, to Sever and Defer AT&T's Counterclaims;[^97] (2)
    Motion for Severance and Expedited Adjudication of Liability Phase
    of Graphnet Complaint Proceeding;[^98] (3) Motion of AT&T Corp. for
    Expedited Consideration.[^99] In the interest of a complete record,
    we grant the following motions: (1) Request of Graphnet for Leave to
    File Reply to AT&T Opposition;[^100] (2) Graphnet Request for
    Official Notice;[^101] and (3) Motion to Accept Additional
    Pleading.[^102]

49. On three occasions, Graphnet amended its complaint.[^103] AT&T
    maintains that, well after the close of discovery and briefing,
    these filings improperly sought to introduce new allegations against
    AT&T, and asserts that the pleadings therefore should be
    stricken.[^104] Although our current formal complaint rules do not
    allow amendments to complaints,[^105] the rules in place when this
    action was brought did not contain a similar prohibition. We agree
    with AT&T that the supplemental complaints to some extent broaden
    the factual allegations pertaining to Graphnet's causes of action.
    In our view, however, the new averments are sufficiently related to
    the core claims presented in Graphnet's original Complaint to make
    striking the supplemental complaints inappropriate. Accordingly, we
    deny AT&T's motions.

50. We further deny Graphnet's motions for default judgment, which
    Graphnet filed in response to AT&T's motions to strike.[^106] We
    believe that, in combination with AT&T's original Answer and answer
    to the Supplemental Complaint, the averments in AT&T's motions to
    strike adequately addressed Graphnet's allegations.[^107]

# conclusion

51. We conclude that Graphnet has failed to prove its allegations that
    AT&T violated sections 201(b), 202(a), 203(c), 214(a), 222(b)(1),
    and 222(c)(1)(B) of the Act; the ISP; the "Direct Routes Policy" and
    "No Third Country Routing Via Canada Policy"; and the Commission's
    rules. Consequently, we deny Graphnet's claims against AT&T in their
    entirety.

52. We further conclude that Graphnet's Tariff F.C.C. No. 5 involves an
    unjust and unreasonable practice, in violation of section 201(b) of
    the Act. We therefore grant AT&T's first counterclaim.

# ordering clauses

53. ACCORDINGLY, IT IS ORDERED, pursuant to sections 1, 4(i), 4(j),
    201(b), 202(a), 203(c), 214(a), 222(b)(1), and 222(c)(1)(B) of the
    Communications Act of 1934, as amended, 47 U.S.C. §§ 151, 154(i),
    154(j), 201(b), 202(a), 203(c), 214(a), 222(b)(1), and 222(c)(1)(B),
    that the complaint filed by Graphnet, Inc. against AT&T Corp. IS
    DENIED in its entirety.

54. IT IS FURTHER ORDERED, pursuant to sections 1, 4(i), 4(j), 201(b),
    and 222(c)(2) of the Communications Act of 1934, as amended, 47
    U.S.C. §§ 151, 154(i), 154(j), 201(b), and 222(c)(2), that the First
    Counterclaim filed by AT&T Corp. against Graphnet, Inc. IS GRANTED
    IN PART, to the extent specified herein, and otherwise IS DISMISSED
    WITHOUT PREJUDICE.

55. IT IS FURTHER ORDERED, pursuant to sections 1, 4(i), 4(j), 202(a),
    and 203(c) of the Communications Act of 1934, as amended, 47 U.S.C.
    §§ 151, 154(i), 154(j), 202(a), and 203(c), that the Second and
    Third Counterclaims filed by AT&T Corp. against Graphnet, Inc. ARE
    DISMISSED WITHOUT PREJUDICE.

56. IT IS FURTHER ORDERED, that the Motion to Dismiss or, Alternatively,
    to Sever and Defer AT&T's Counterclaims, filed on May 18, 1994; the
    Motion for Severance and Expedited Adjudication of Liability Phase
    of Graphnet Complaint Proceeding, filed on March 12, 1996; and the
    Motion of AT&T Corp. for Expedited Consideration, filed on May 3,
    1996, ARE DENIED as moot.

57. IT IS FURTHER ORDERED, that the Request of Graphnet for Leave to
    File Reply to AT&T Opposition, filed June 13, 1994; the Motion of
    AT&T Corp. to Accept Late Filed Answer, filed March 1, 1996; the
    Graphnet Request for Official Notice, filed April 1, 1996; and the
    Motion to Accept Additional Pleading, filed January 8, 1998, ARE
    GRANTED.

58. IT IS FURTHER ORDERED, that the Motion to Strike the Second
    Supplemental Complaint of Graphnet, Inc., filed December 8, 1997;
    and the Motion to Strike the Third Supplemental Complaint of
    Graphnet, Inc., filed January 19, 1999, ARE DENIED.

59. IT IS FURTHER ORDERED, that the Graphnet Opposition to AT&T Motion
    to Strike, filed December 22, 1997; and the Motion for Partial
    Default Judgment, filed January 26, 1999, ARE DENIED.

    FEDERAL COMMUNICATIONS COMMISSION

> Magalie Roman Salas
>
> Secretary

[^1]: 47 U.S.C. § 208.

[^2]: Telex service is a teleprinter exchange circuit service involving
    a message originated at a teletypewriter at one location and sent to
    a teletypewriter at a different location. *ITT World Communications,
    Inc. v. FCC*, 635 F.2d 32, 35-36 (D.C. Cir. 1980).

[^3]: 47 U.S.C. § 201(b).

[^4]: Complaint, File No. E-94-41 (filed Feb. 1, 1994) ("Complaint") at
    1, ¶ 1; Initial Brief of AT&T Corp., File No. E-94-41 (filed Oct. 2,
    1996) ("AT&T's Initial Brief") at iii.

[^5]: 47 U.S.C. § 222(c)(1)(A)(i). The RCCA was repealed in 1994. *See*
    Pub. L. No. 103-414, 108 Stat. 4296-97 (Oct. 25, 1994). Nonetheless,
    the statute applies to this case, which Graphnet instituted on
    February 1, 1994, because it concerns conduct commencing in July
    1993.

[^6]: 47 U.S.C. § 222(c)(1)(A)(i).

[^7]: Initial Brief of Graphnet, Inc., File No. E-94-41 (filed Oct. 2,
    1996) ("Graphnet's Initial Brief"), Attachment 4 (Interconnection
    Agreement §§ I, II).

[^8]: *Id.*, Attachment 4 (Interconnection Agreement § II).

[^9]: Answer of Graphnet, Inc. to AT&T's Counterclaims, File No. E-94-41
    (filed May 18, 1994) ("Answer to Counterclaims") at 8, ¶ 17.

[^10]: Graphnet's Initial Brief, Attachment 2 (Graphnet's Tariff F.C.C.
    No. 5 §§ 5.1.1, 5.1.3, and 5.2).

[^11]: Verified Answer and Counterclaims of American Telephone and
    Telegraph Company, File No. E-94-41 (filed Apr. 15, 1994) ("Answer")
    at 15, ¶ 46.

[^12]: Answer at 15-16, ¶ 47; Answer to Counterclaims at 7, ¶ 16.

[^13]: Answer at 7, ¶ 26; Answer to Counterclaims at 7, ¶ 16.

[^14]: Answer at 2, ¶¶ 6-7. Unitel is a Canadian carrier in which AT&T
    owns a thirty-three percent interest. Graphnet Pleading to Update
    Record, File No. E-94-41 (filed Jan. 11, 1996) ("Pleading to Update
    Record") at 5. Graphnet's allegations originally pertained
    exclusively to the AT&T-Unitel relationship. Complaint at 3, ¶ 6. In
    subsequent pleadings, Graphnet averred that AT&T also diverted
    traffic to affiliates in Hong Kong and Europe. Pleading to Update
    Record at 6-7; Graphnet Opposition to AT&T Motion to Strike, File
    No. E-94-41 (filed Dec. 18, 1997) at 2. In our view, the pertinent
    fact (which AT&T does not dispute) is that AT&T routed
    Graphnet-bound traffic to carriers in other countries, and those
    carriers routed the traffic back to the United States. The precise
    identities of the carriers is irrelevant to whether AT&T's routing
    practice was unlawful.

[^15]: Complaint at 4, ¶ 8.

[^16]: Graphnet appears to have withdrawn its antitrust claim. Motion to
    Dismiss or, Alternatively, to Sever and Defer AT&T's Counterclaims,
    File No. E-94-41 (filed May 18, 1994) at 5-6, n.2 ("Graphnet's
    citation of the federal antitrust laws in paragraph 16 of its
    Complaint was not for the purpose of seeking FCC enforcement of such
    laws or even FCC consideration of AT&T's anticompetitive activities
    on their merits under the antitrust laws. The antitrust laws were
    cited in the Complaint merely for the purpose of enabling the FCC to
    consider such laws incidentally as one part of the public
    interest.").

[^17]: Complaint at 5-9, ¶¶ 11-20.

[^18]: Our current formal complaint rules prohibit the filing of
    "cross-complaints," which include counterclaims. 47 C.F.R. § 1.725.
    The rules that existed in 1994, however, did not.

[^19]: Answer at 14-19, ¶¶ 44-57.

[^20]: 47 U.S.C. § 203(c).

[^21]: *Id*.

[^22]: Although Graphnet's initial complaint refers to "Sections
    203(a)(c)," Complaint at 6, ¶ 14, Graphnet's briefs make clear that
    the alleged violation concerns section 203(c). *See* Graphnet's
    Initial Brief at 10-11; Reply Brief of Graphnet, Inc., File No.
    E-94-41 (filed Oct. 22, 1996) ("Graphnet's Reply Brief") at 7-9.

[^23]: Graphnet's Initial Brief at 10-11 (citing AT&T's F.C.C. Tariff
    No. 21, § 2.4.C.; AT&T's F.C.C. Tariff No. 25, § 2.4.C.); Graphnet's
    Reply Brief at 7-8.

[^24]: *See* 47 U.S.C. § 203(c) (except as otherwise provided by or
    under the authority of the Act, no carrier shall (1) engage in
    communications unless it has filed a tariff; (2) charge an amount
    different from the amount specified in the tariff; (3) refund any
    amounts charged under the tariff; or (4) extend any privileges
    except as specified in the tariff).

[^25]: In its Answer, AT&T argues that "Graphnet's allegations in Count
    I must be dismissed because they fail to state a cause of action
    cognizable under the Commission's complaint proceedings." Answer at
    10, ¶ 28 (citing *Illinois Bell Telephone Co. v. AT&T*, 4 FCC Rcd
    5268, 5270 (1989) ("*Illinois Bell*")). In *Illinois Bell*, the
    Commission held, *inter alia*, that a complaint filed by Bell
    Atlantic Operating Companies ("BOCs") against AT&T, in which the
    BOCs challenged AT&T's failure to pay tariff rates for Special
    Access services, "would subvert th\[e\] design \[of sections 206-209
    of the Act\] and turn the complaint procedures into a collection
    mechanism for the carriers." *Illinois Bell*, 4 FCC Rcd at 5270. As
    discussed above, we find Graphnet's effort to enforce its tariff
    pursuant to section 203(c) of the Act to be unavailing on the
    merits. Consequently, we do not address the question of whether
    Graphnet's claim is barred under *Illinois Bell*.

[^26]: AT&T's Tariff 21 described the service provided as (1) the
    transmission of inbound international telex calls received from
    international record carriers in New York and Miami to AT&T's telex
    subscriber stations; (2) the transmission of outbound international
    telex calls originated by AT&T's telex subscriber stations to
    store-and-forward facilities of international record carriers in New
    York and Miami; and (3) the transmission of inbound and outbound
    international calls between international record carriers in New
    York City and Miami and telex stations in Alaska. Tariff 25 provided
    for the use of the international component of AT&T's international
    telex service to overseas points. *See* AT&T's Reply Brief, Exhibit
    A (AT&T's F.C.C. Tariff No. 21, §§ 1.1.1, 1.2; AT&T's F.C.C. Tariff
    No. 25, §§ 1.1.1, 1.2).

[^27]: Graphnet's Initial Brief, Attachment 3 (AT&T's F.C.C. Tariff No.
    21, § 2.4.C; AT&T's F.C.C. Tariff No. 25, § 2.4.C).

[^28]: Graphnet's Initial Brief at 4.

[^29]: AT&T contends that, if routing delays occurred, they were minimal
    (*i.e.*, 10-15 seconds) and transpired before call set-up and
    billing. Answer at 8, ¶ 27. We do not view this statement as an
    admission that such delays actually took place. And even if such 10
    to15 second delays did occur, we are not prepared to find, on the
    record of this case, that they "materially" affected the performance
    of Graphnet's facilities.

[^30]: Graphnet's Initial Brief at 6 (citing *id.*, Attachment 1
    \[Letter dated Apr. 11, 1996, to Regina M. Keeney, Chief, Common
    Carrier Bureau, from Robert E. Conn, counsel for Graphnet, at 2\]).

[^31]: *Id.*

[^32]: AT&T's Reply Brief at 15-16 and Exhibit C (Affidavit of Sharon
    Eberhard).

[^33]: Graphnet's Initial Brief at 4.

[^34]: 47 U.S.C. § 202(a).

[^35]: *See, e.g., MCI Telecommunications Corp. v. FCC,* 917 F.2d 30, 39
    (D.C. Cir. 1990).

[^36]: *See id. See also* *National Communications Ass'n, Inc. v. AT&T
    Corp.*, 238 F.3d 124, 129-30 (2^nd^ Cir. 2001); *Implementation of
    the Telecommunications Act of 1996: Amendment of Rules Governing
    Procedures to Be Followed When Formal Complaints Are Filed Against
    Common Carriers*, Report and Order, 12 FCC Rcd 22497, 22615, ¶ 291 &
    n.782 (1997), *recon. denied*, 16 FCC Rcd 5681 (2001); *PanAmSat
    Corp. v. Comsat Corp.*, Memorandum Opinion and Order, 12 FCC Rcd
    6952, 6965, ¶ 34 n.90 (1997).

[^37]: Graphnet's Initial Brief at 11; Graphnet's Reply Brief at 12-13.

[^38]: The parties' arguments regarding discrimination appear to be
    premised on an assumption of "like" service and disparate treatment.
    *See* Graphnet's Initial Brief at 11; AT&T's Initial Brief at 8-12;
    Graphnet's Reply Brief at 9-10; AT&T's Reply Brief at 5-7. We need
    not decide whether, in fact, the services are "like" or were
    provided disparately, because, as discussed below, we find that AT&T
    has met its burden of demonstrating the reasonableness of its
    routing practice.

[^39]: Moreover, as discussed above, Graphnet has adduced no persuasive
    evidence that it has incurred any harm as a result of AT&T's
    actions.

[^40]: 47 U.S.C. § 222(b)(1).

[^41]: 47 U.S.C. § 222(c)(1)(B).

[^42]: Graphnet's Initial Brief at 11-12; Graphnet's Reply Brief at
    10-12.

[^43]: 47 U.S.C. § 214(a).

[^44]: *Id.*

[^45]: Graphnet's Initial Brief at 12.

[^46]: Graphnet's Reply Brief at 13-14

[^47]: Graphnet contends that AT&T unlawfully re-routed domestic telex
    traffic and foreign-originated, United States-bound international
    telex traffic. Complaint at 3, ¶ 6. Graphnet does not maintain that
    traffic originating and terminating in the United States is anything
    other than domestic communication. *See* Graphnet\'s Reply Brief at
    5-7. Consequently, sections III.A.4 through III.A.6 of this order
    discuss the appropriate categorization of traffic originating in
    foreign countries and terminating in the United States, which
    Graphnet claims constitutes international communication.

[^48]: *See* 47 U.S.C. § 153(3)(17) (formerly codified at 47 U.S.C. §
    153(f) (1994)) ("The term 'foreign communication' or 'foreign
    transmission' means communication or transmission from or to any
    place in the United States to or from a foreign country, or between
    a station in the United States and a mobile station located outside
    the United States.").

[^49]: Graphnet's Reply Brief at 5-7.

[^50]: *See International Settlement Rates*, Report and Order, 12 FCC
    Rcd 19806, 19829-30, ¶ 49 (1997), Report and Order on
    Reconsideration and Order Lifting Stay, 14 FCC Rcd 9256 (1999),
    *aff'd sub nom.* *Cable & Wireless, P.L.C. v. FCC*, 166 F.3d 1224
    (D.C. Cir. 1999).

[^51]: 47 U.S.C. § 153(22) (formerly codified at 47 U.S.C. § 153(e)
    (1994)). As used in the Act, the term "interstate communication"
    refers to United States domestic, as opposed to United States
    international, communication service.

[^52]: *See Motion of AT&T Corp. to Be Reclassified as a Non-Dominant
    Carrier*, Order, 11 FCC Rcd 3271 (1995) (reclassifying AT&T as a
    non-dominant carrier in its provision of domestic, interstate
    interexchange service).

[^53]: *See MCI Telecommunications Corp. v. FCC*, 561 F.2d 365, 374
    (D.C. Cir. 1977), *cert. denied*, 434 U.S. 1040 (1978) (absent an
    explicit statement to the contrary, a carrier is free to use its
    facilities for any lawful purpose upon receiving section 214
    authorization).

[^54]: An accounting rate is the price a United States facilities-based
    carrier negotiates with a foreign carrier for handling one minute of
    international telecommunications service. Each carrier's portion of
    the accounting rate is referred to as the settlement rate. In almost
    all cases, the settlement rate is equal to one-half of the
    negotiated accounting rate. *See* *1998 Biennial Regulatory Review,
    Reform of the International Settlements Policy and Associated Filing
    Requirements*, Report and Order and Order on Reconsideration, 14 FCC
    Rcd 7963, 7966, ¶ 9 n.8 (1999) ("*ISP Reform Order*").

[^55]: *Id.* at 7966, ¶ 9.

[^56]: *See* *Implementation and Scope of the Uniform Settlements Policy
    for Parallel International Communications*, Report and Order, 51
    Fed. Reg. 4736, 4737, ¶ 3 (1986), *recon.*, 2 FCC Rcd 1118 (1987),
    *further recon.*, 3 FCC Rcd 1614 (1988).

[^57]: Graphnet's Initial Brief at 16.

[^58]: Graphnet's Reply Brief at 16.

[^59]: *See* *supra* section III.A.4.

[^60]: The ISP, which is codified in section 43.51(e) of the
    Commission's rules, 47 C.F.R. § 43.51(e), was developed as part of
    the regulatory tradition in which international telecommunications
    services were supplied through a bilateral correspondent
    relationship between national monopoly carriers. *See ISP Reform
    Order*, 14 FCC Rcd at 7966, ¶ 9 n.8.

[^61]: Graphnet's Initial Brief at 13-16; Graphnet's Reply Brief at
    14-15.

[^62]: Graphnet's Initial Brief at 13 (citing *Optel Communications,
    Inc. Application for a License to Land and Operate in the United
    States a Submarine Cable Extending Between Canada and the United
    States*, Conditional Cable Landing License, 8 FCC Rcd 2267 (1993)
    ("*Optel*"); *Implementation and Scope of the Uniform Settlements
    Policy for Parallel International Communications*, 59 Rad. Reg. 2d
    (Pike & Fischer) 982, 996 (1986)).

[^63]: Graphnet's Initial Brief at 13.

[^64]: Graphnet's Initial Brief at 14-16 (citing *Optel;* *fONOROLA
    Corporation Application for Authority under Section 214 of the
    Communications Act to Resell Facilities of Other Common Carriers to
    Provide Domestic Carriers Interconnection with Canadian Carriers,*
    Memorandum Opinion, Order and Certification, 7 FCC Rcd 7312 (1992),
    *recon.*, 9 FCC Rcd 4066 (1994) ("*fONOROLA*")).

[^65]: Graphnet's Initial Brief at 14-16; Graphnet's Reply Brief at
    15-16.

[^66]: AT&T's Initial Brief at 23-24.

[^67]: *See, e.g.*, *fONOROLA*, 7 FCC Rcd at 7316, ¶ 15 ("In order to
    safeguard against the circumvention of our *International Resale
    Order*, we find it necessary to adopt a policy with respect to
    international private live resale between the United States and
    Canada that prohibits the routing of *U.S.-overseas traffic* through
    Canada.") (emphasis added).

[^68]: *See supra* section III.A.4.

[^69]: Graphnet's Initial Brief at 17-18; Graphnet's Reply Brief at
    17-18; Motion for Partial Default Judgment, File No. E-94-41 (filed
    Jan. 28, 1999) at 5-6. We address the last of these purported
    violations *infra* section IV.

[^70]: Contrary to Graphnet's assertion (Graphnet's Reply Brief at
    17-18), a subsequent decision by Canadian regulators to move toward
    detariffing does not establish that AT&T availed itself of unique
    advantages with respect to Unitel.

[^71]: Furthermore, Graphnet has produced no evidence that disclosures
    made by AT&T to the Commission regarding AT&T's relationship with
    Unitel were intentionally misleading or otherwise inadequate under
    the Commission's rules.

[^72]: Motion of AT&T Corp. to Accept Late Filed Answer, File No.
    E-94-41 (filed Mar. 1, 1996) at 2-3.

[^73]: *See Implementation of the Telecommunications Act of 1996:
    Amendment of Rules Governing Procedures to Be Followed When Formal
    Complaints Are Filed Against Common Carriers*, Notice of Proposed
    Rulemaking, 11 FCC Rcd 20823, 20856, ¶ 71 (1996).

[^74]: *See* 47 C.F.R. § 1.733(a) (1995) ("In any complaint proceeding,
    the Commission may in its discretion direct the attorneys and/or the
    parties to appear before it for a conference \....").

[^75]: Section 201(b) states, in pertinent part, that "\[a\]ll charges,
    practices, classifications, and regulations for and in connection
    with \... communication service, shall be just and reasonable, and
    any such charge, practice, classification, or regulation that is
    unjust or unreasonable is hereby declared to be unlawful." 47 U.S.C.
    § 201(b).

[^76]: 47 U.S.C. § 201(b).

[^77]: Answer at 16, ¶ 48; AT&T's Initial Brief at 30.

[^78]: *Id.*

[^79]: *Id. See also* Graphnet's Initial Brief at 7-8, ¶ 12 & Attachment
    3 (Unitel/Graphnet Interconnect Settlement).

[^80]: Answer, Exhibit 1 (Letter dated Dec. 30, 1993, to William F.
    Caton, Acting Secretary, FCC, from Elaine R. McHale, counsel for
    AT&T, at 4 n.5).

[^81]: *Id.*

[^82]: AT&T's Initial Brief at 30.

[^83]: AT&T filed its counterclaims on April 15, 1994. The RCCA was not
    repealed until approximately six months later, on October 25, 1994.

[^84]: 47 U.S.C. § 222(c)(2) (emphasis added). *See* *Interconnection
    Arrangements Between and Among the Domestic and International Record
    Carriers*, Memorandum Opinion, Order and Request for Further
    Comments, 93 FCC Rcd 845, 868, ¶ 67 (1983) (section 222(c)(2)
    "ensure\[d\] a fair opportunity for new carriers to compete,
    certainly an opportunity equal to that of a company seeking to enter
    a typical competitive market").

[^85]: *Interconnection Arrangements Between and Among the Domestic and
    International Record Carriers*, Memorandum Opinion and Order on
    Reconsideration, 2 FCC Rcd 2999, 3006, ¶ 52 (1987)
    ("*Interconnection Arrangements*"). In *Interconnection
    Arrangements*, the Commission rejected an argument by record
    carriers who interconnected with Western Union Telegraph Company
    ("Western Union") that an interim discount of Western Union's
    charges was appropriate. Applying section 222(c)(2), the Commission
    found that the discount could not be justified on the basis of cost
    and, therefore, was inappropriate.

[^86]: We recognize that sections 222(b)(1) and 222(c)(2) of the RCCA
    both contained directives to the Commission, and that we declined to
    enforce section 222(b)(1) against AT&T. *See supra* section III.A.3.
    That is because section 222(b)(1) articulated a general,
    pro-competitive policy that did not implicate a specific aspect of
    carrier operations. In contrast, section 222(c)(2) instructed the
    Commission to ensure interconnection based particularly upon
    cost-based rates. Because section 222(c)(2) articulates a standard
    to which carriers can be held, we are able to apply it in deciding
    AT&T's section 201(b) counterclaim.

[^87]: AT&T's arguments regarding Graphnet's pricing of its termination
    service make sense. Specifically, with respect to any particular
    inbound call, Graphnet had no way of determining in advance how many
    carriers would precede it in the handling of the traffic. Graphnet,
    accordingly, had every incentive to price its termination service
    such that it would recover its costs of terminating the traffic from
    the carrier from whom it directly received the traffic and with whom
    it was directly interconnected.

[^88]: We emphasize that our focus on costs stems from the mandatory
    language of section 222(c)(2). We express no opinion as to whether,
    in any other context, Graphnet would be required to justify the
    challenged practice on a cost basis.

[^89]: Graphnet's Reply Brief at 22 (emphasis added).

[^90]: Graphnet's Initial Brief at 23-25, ¶¶ 46-49 (citing *TRT/FTC
    Communications, Inc. Revisions to Tariff F.C.C. Nos. 8, 9, and 11;
    Graphnet, Inc. Revisions to Tariff F.C.C. No. 5*, Order, 5 FCC Rcd
    7733 (Comm. Car. Bur. 1990)*; Graphnet, Inc. Revisions to Tariff
    F.C.C. No. 5*, Order, 6 FCC Rcd 1444 (Comm. Car. Bur. 1991), *review
    denied, Western Union International, Inc. Revisions to Tariff F.C.C.
    No. 24; Graphnet, Inc. Revisions to Tariff F.C.C. No. 5 Applications
    for Review*, Memorandum Opinion and Order, 7 FCC Rcd 3787 (1992));
    Graphnet's Reply Brief at 22, ¶ 46.

[^91]: *Bell Atlantic Telephone Cos. Tariff F.C.C. No. 1 Application for
    Review*, Memorandum Opinion and Order, 8 FCC Rcd 2732, 2733, ¶ 7
    (1993). *See Arizona Grocery Co. v. Atchison T.&S.F. Ry. Co.*, 284
    U.S. 378, 384 (1932).

[^92]: *Policy and Rules Concerning the Interstate, Interexchange
    Marketplace*, Second Report and Order, 11 FCC Rcd 20730, 20746, ¶ 26
    (1996), *recon.,* 12 FCC 15014 (1997), *further recon.,*14 FCC Rcd
    6004 (1999).

[^93]: *See* Graphnet's Initial Brief at 20-23; Graphnet's Reply Brief
    at 20.

[^94]: 47 U.S.C. § 208.

[^95]: We do not hold that it would be impossible for Graphnet to
    justify on a cost basis the practice that AT&T challenges. We merely
    find that, on this record, Graphnet has not met its evidentiary
    burden of production.

[^96]: These include the other aspect of AT&T's counterclaim under
    section 201(b) (*i.e.*, that the \$3.00 per-minute termination rate
    was itself unjust and unreasonable because it was not cost-based
    \[Answer at 15-16, ¶ 47\]); its section 202(a) counterclaim (*i.e.*,
    that Graphnet's interconnection agreements with other carriers
    unreasonably contained rates for identical telex service that were
    significantly less than Graphnet's tariffed rate \[Answer at 17-18,
    ¶ 52\]); and its section 203 counterclaim (*i.e.*, that Graphnet
    failed to file its interconnection agreements with MCI
    International, Inc. ("MCII") and TRT Telecommunications Corp.
    ("TRT"), or otherwise to amend its tariffed rate to reflect the
    rates offered to MCII and TRT \[Answer at 19, ¶ 56\]).

[^97]: File No. E-94-41 (filed May 18, 1994).

[^98]: File No. E-94-41 (filed Mar. 12, 1996).

[^99]: File No. E-94-41 (filed May 3, 1996).

[^100]: File No. E-94-41 (filed June 13, 1994).

[^101]: File No. E-94-41 (filed Apr. 1, 1996).

[^102]: File No. E-94-41 (filed Jan. 8, 1998).

[^103]: Supplemental Complaint, File No. E-94-41 (filed Nov. 7, 1995);
    Second Supplemental Complaint, File No. E-94-41 (filed Nov. 6,
    1997); Third Supplemental Complaint, File No. E-94-41 (filed Dec.
    21, 1998).

[^104]: Motion to Strike the Second Supplemental Complaint of Graphnet,
    Inc., File No. E-94-41 (filed Dec. 8, 1997) at 2-3; Motion to Strike
    the Third Supplemental Complaint of Graphnet, Inc., File No. E-94-41
    (filed Jan. 19, 1999) at 3-4.

[^105]: 47 C.F.R. § 1.727(h).

[^106]: Graphnet Opposition to AT&T Motion to Strike, File No. E-94-41
    (filed Dec. 18, 1997) at 7-11; Motion for Partial Default Judgment,
    File No. E-94-41 (filed Jan. 26, 1999).

[^107]: Verified Answer of AT&T Corp. to Supplemental Complaint of
    Graphnet, Inc., File No. E-94-41 (filed Mar. 1, 1996); Motion to
    Strike the Second Supplemental Complaint of Graphnet, Inc., File No.
    E-94-41 (filed Dec. 8, 1997) at 3 n.4; Motion to Strike the Third
    Supplemental Complaint of Graphnet, Inc., File No. E-94-41 (filed
    Jan. 19, 1999) at 5 n.1.