Opinion ID: 388054
Heading Depth: 2
Heading Rank: 2

Heading: Unlawfulness of Certain Specific Rates

Text: 45 In its First Order on Reconsideration the Commission declared unlawful the revisions in the following rates and rate elements within the private line service categories: (1) increases in rates for teletypewriter station equipment, effective November 1, 1968; (2) changes in the TELPAK telegraph/telephone equivalency ratio, effective September 1, 1968 and February 1, 1970; and (3) several elements of the rates in the private line telephone, private line telegraph, and TELPAK offerings, effective May 4, 1972. The Commission's basic ground for this ruling was that AT&T had relied on long-run incremental cost studies to justify the increases. 64 F.C.C.2d at 989-91. 46 We have concluded that the FCC failed to take a sufficiently careful look at the problem presented, and failed to engage in reasoned decisionmaking with respect to this issue. 15 Accordingly we vacate the Commission's declaration of unlawfulness and remand the issue for further consideration. Stripped to its essentials, the Commission's reasoning is that because the increases were supported by long-run incremental cost studies, AT&T failed to meet its burden of justifying the rates. The Order contains no examination of the voluminous evidence of record, no analysis of the substance of the underlying cost studies, and no discussion of the rate element increases on their merits. This treatment cannot qualify as reasoned decisionmaking. 47 AT&T has pointed to certain record evidence, none of which is mentioned or discussed by the Commission, which substantiates its position. For example, the installation charge for new private line service terminals was being increased from $20.00 to $50.00. 16 The actual labor costs were shown to be $250.00. 17 Thus, with revenues of $50.00 and costs of $250.00, there seems to be no basis for the Commission's finding that the installation charge increases were not justified. Likewise, it would appear that the 1972 $5.00 increase in the monthly charge for private line telephone service terminals 18 would be justified. This increase would raise the average channel charge for short-haul distances of up to 25 miles to approximately $5.50 per mile, still less than the costs of $6.40. See Brief for Petitioner AT&T at 34-35. 48 A further consideration points to irrationality. The Commission concluded that LRIC data was insufficient to justify these rate increases, requiring instead that FDC data be supplied. However, LRIC understates costs, i. e., LRIC costs are lower than FDC costs because LRIC do not contain a portion of the overhead, as FDC do. If a rate increase is necessary to cover LRIC (which is what AT&T sought), it follows a fortiori that such an increase would be necessary to cover FDC. 49 Because of these considerations the Commission is directed to reconsider these rate increase requests in light of the points raised by petitioner AT&T. The Commission may of course require AT&T to furnish cost studies based on the appropriate FDC methodology prior to this reconsideration. 50