FCC Partially Denies Two AT&T Petitions in Long-Standing Rate Dispute with Aureon

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The FCC has released both an Order on Reconsideration and a Second Order on Reconsideration in the long-standing dispute between AT&T and Iowa Network Access Division d/b/a Aureon (Aureon) involving rates and tariffs. In the Order on Reconsideration, the Commission dismisses or alternatively denies an AT&T Petition for Reconsideration seeking partial reconsideration of an earlier Memorandum Opinion and Order. In the July 2018 Memorandum Opinion and Order, Aureon was ordered by the Commission to recalculate its interstate switched transport access rate contained in its “Transmittal No. 36 of Tariff F.C.C. No. 1.” In its Petition for Reconsideration, AT&T argued that while the Commission correctly identified CenturyLink as the competing ILEC that would transport the same traffic as Aureon, the Commission mistakenly calculated the composite rate that should be applied between the carriers by instructing Aueron to base its applicable rate for tandem switching and transport on the Iowa carrier’s “weighted average mileage.” Specifically, AT&T asked the Commission to require Aureon to calculate the benchmark rate for Aureon’s Centralized Equal Access (CEA) service “based on the mileage that CenturyLink would charge for the [same] competitive service.” In its Order on Reconsideration resolving the dispute, the Commission denied AT&T’s request based on both procedural and substantive grounds.

In the Second Order on Reconsideration, the Commission considered a Petition for Further Reconsideration that AT&T filed in response to a separate (and partially redacted) August 2018 Order on Reconsideration. In this other Order on Reconsideration, the Commission rejected Aureon’s contention that the FCC “failed to provide fair notice that it would apply its rate cap and rate parity rules to Aureon” and would instead classify Aureon as a CLEC. The Commission justified this determination by relying on the unambiguous language in the landmark USF/ICC Transformation Order that stipulated that “at the outset of the [USF/ICC] transition, all switched access and reciprocal compensation rates will be capped at rates in effect as of the effective date of the rules.” Accordingly, the Commission affirmed that Aureon is indeed a CLEC and furthermore that similar to judicial determinations, the “norm in agency adjudications” is that appropriate rate determinations are applied to parties retroactively. Despite the Commission’s Order on Reconsideration mostly siding with AT&T, the larger carrier petitioned one aspect of the Commission’s decision: to have Auereon’s 2012 tariffs remain in effect “unless and until AT&T establishes in the damages phase that Aureon furtively employed improper accounting practices to conceal potential rate of return violations.” AT&T argued in its Petition for Further Reconsideration, and a subsequent reply petition, that the imposition of the 2012 tariffs was premature, arbitrary, based on “unlawful” methodologies, and resulted in rates that were higher than Aureon’s actual cost-of-service rate. None of AT&T’s arguments was deemed persuasive, so while the higher 2013 proposed tariffs were declared void ab initio, the 2012 tariff rates were both lawful and lower than the rate cap.

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