Opinion ID: 421797
Heading Depth: 2
Heading Rank: 2

Heading: The Challenged Orders of the FCC

Text: 31 The FCC's Extension Order, which continued the ENFIA Agreement into Phase II and determined a value for Factor P of fifty-five percent, was issued on April 14, 1982. The ENFIA Agreement, the FCC observed, conditioned such a decision on the Commission's determination that extension was in the public interest. Under the FCC's interpretation of the ENFIA Agreement, [t]his question relates to the usefulness of the agreement and the formula it establishes as an interim mechanism for the determination of certain access costs pending a more permanent resolution of the access charge issue for all interstate services. Extension Order, 90 F.C.C.2d at 9; see Acceptance Order, 71 F.C.C.2d at 447. 32 Some of the OCCs argued that the ENFIA Agreement should not be extended because it is not cost-based. But the FCC determined, on the basis of essentially the same considerations which led [it] to conclude that the public interest would be served by approving the original agreement, [229 U.S.App.D.C. 213] Extension Order, 90 F.C.C.2d at 10, that extension would promote the public interest. An investigation of BSOC 10, the Commission believed, would be wasteful, and an attempt to cure the lack of parity among interstate services before the conclusion of Docket 78-72 would prejudge the result of that proceeding and occasion needless dislocations in the marketplace. Id. at 11. In the FCC's view, [a]t this stage, the public interest is best served by an extension of an arrangement that was originally sanctioned by the parties themselves and that provides a reasonable interim solution to a very complex problem. Id. 33 After reaching this conclusion, the FCC turned to a determination of the level of payment for Phase II. It first acknowledged its obligation to ensure that the charges are reasonable, for both OCCs and local carriers, and that they are nondiscriminatory to the extent that discrimination is discerned and found unjustified. Id. at 14. But, the Commission continued, the question before us in this particular action is a narrow one. Under the terms of both the original agreement and ... the implementing tariff, the Commission is obliged to determine only the level of Factor P .... Id. (footnote omitted). A fifty-five percent discount level, the FCC concluded, would maintain a reasonable balance between the parties, but the Commission made no attempt explicitly to determine that either the fifty-five percent level or the ultimate rate produced by the ENFIA formula was in the public interest.
34 The Extension Order left open for determination the MOUs and Separations Amount variables necessary to compute the monthly charge per ENFIA line under the ENFIA Agreement. AT & T immediately filed tariff revisions addressing these variables on behalf of the Bell Operating Companies. These revisions proposed to increase the Separations Amount from $.0595 to $.0658 per minute and the MOUs from 3000 to 5823; the combined rate for Elements 2 and 3 under the proposal would have risen from $122.20 to $258.21 per month. Suspension Order, 90 F.C.C.2d at 205. The OCCs challenged both AT & T's estimation of their MOUs and its determination of the Separations Amount. 35 On April 30, 1982, the FCC issued an order suspending the tariff revisions for five months and setting for investigation the proper level of MOUs and the correct Separations Amount. To avoid any disruption of service and to protect the parties' rights during the investigation, the Commission exercised its authority under section 4(i) of the Communications Act, 47 U.S.C. § 154(i) (1976), to impose an interim billing and collection rate based on 4000 MOUs and the Separations Amount proposed by AT & T. This rate, $178.46 per line per month, was made subject to adjustment at the termination of the FCC's investigation.
36 In its Order After Investigation, issued on September 29, 1982, the FCC expressly recognized its obligation to ensure that AT & T's tariff revisions conform to the terms of the ENFIA agreement and do not undermine [its] finding that the agreement is reasonable and in the public interest. Order After Investigation, 91 F.C.C.2d at 1086. Applying this standard, the Commission rejected AT & T's proposed rate increases and directed AT & T to file a replacement tariff using a [Separations] Amount no higher than $.0595, a billed minute factor no higher than 4474, and an overall Element 2 and 3 rate no higher than $183.46. Id. at 1093. 11 37 These conclusions rested largely on the FCC's interpretation of the ENFIA Agreement. After noting the ambiguity of certain contract terms and the disagreements among the parties concerning how those [229 U.S.App.D.C. 214] terms should be applied to the changed circumstances of the OCC industry, the FCC endeavored to apply the agreement in a manner consistent with the intent of the parties. Id. at 1086. In the Commission's view, 38 [t]he parties intended that ENFIA rates would reflect a compromise between rates based upon the full cost assigned to interstate jurisdiction ... and the rates for local service ... which the OCCs had been paying. Put simply, the ENFIA agreement was a rough justice compromise intended to maintain a reasonable balance between the parties until Commission-prescribed access arrangements could be put into place. 39 Id. 40 With that background, the FCC made two determinations that are challenged in these proceedings. It held, first, that the OCCs' off-peak MOUs should be discounted by the same percentage as AT & T's off-peak subscriber rates, and authorized a forty-percent evening discount and a sixty-percent discount for nighttime and weekend calls. The question of nonbusiness or off-peak minutes, the Commission believed, had not been contemplated when the ENFIA Agreement was negotiated because the OCCs had little or no business outside peak periods at that time. This lack of specific consideration, the Commission concluded, left it free reasonably to apply the original intent of the parties to the altered characteristics of OCC services by adopting a middle-ground approach between the OCCs' position that off-peak MOUs should not be counted at all and AT & T's position that all MOUs should be counted equally. Id. at 1091. 41 In its second challenged determination, the FCC held that AT & T's calculation of the Separations Amount must be adjusted to reflect and accommodate [the Commission's] recent decision to freeze SPF at 1981 average levels, a development neither anticipated nor provided for under the [ENFIA] agreement. Id.; see note 4 supra. Although the Commission previously had rejected the OCCs' contention that the viability of the ENFIA Agreement had been vitiated by the SPF freeze, Extension Order, 90 F.C.C.2d at 11, it concluded that the freeze would deny the OCCs the benefit of a discount contemplated by the signatories. Implementing a corresponding freeze of the Separations Amount at the 1981 level of $.0595, the FCC held, would 42 maintain the proper status quo of interstate subscriber plant costs for the OCCs until new interstate allocative measures are put into effect, and will help prevent disruptive and inequitable rate increases to the OCCs in the remaining interval before the completion of the Commission's work ... [in Docket 78-72 ]. 43 Order After Investigation, 91 F.C.C.2d at 1092. The Commission ultimately concluded that the rates produced by its interpretations of the disputed contract terms should strike a reasonable balance as an interim measure. Id. at 1093.
44 Just before the oral argument in these cases, the FCC released its disposition of the petitions for reconsideration filed by AT & T, SBS, USTS, and SPCC. See AT & T, FCC 83-125 (Apr. 5, 1983) (Order on Reconsideration ). 12 SBS' petition, which objected to the imposition of the increased ENFIA rates on carriers that had not [229 U.S.App.D.C. 215] signed the ENFIA Agreement, was rejected on the grounds that the 45 agreement was an industry-wide arrangement negotiated to resolve an industry-wide conflict, and that, by its terms, the ENFIA tariff is applicable to any carrier that requires the use of local exchange facilities in the provision of end-to-end MTS/WATS-type interstate services. 46 Id. at 29 n. 65. 13 The USTS and SPCC petitions, which challenged the provision of the Order After Investigation requiring retroactive payments for the five-month suspension period, also were rejected on the ground that the two-way retroactive adjustment provision was a necessary and suitable concomitant of the interim rate that was fully authorized by section 4(i) of the Communications Act. Id. at 21. AT & T's petition, which argued that the FCC had erred in computing the off-peak discounts, was granted in part. As a result of the adjustments made in the Order on Reconsideration, the weighted average monthly OCC minutes per line were increased to 4555, and the overall Elements 2 and 3 rate rose to $186.72 per line per month. Id. at 19. 14