Aeronautical Radio, Inc. v. Federal Communications Commission

Opinion for the Court filed by Circuit Judge ROBB.

Opinion filed by Circuit Judge WILKEY, dissenting in part.

ROBB, Circuit Judge:

This case comes to us on petitions for review of eight rulings of the Federal Communications Commission¹ dealing with (1) general ratemaking principles and (2) American Telephone and Telegraph Company’s (AT&T’s) TELPAK offering. In response to the arguments of the parties, we (1) uphold the Commission’s selection of fully distributed costs as its primary costing methodology; (2) vacate certain findings of the Commission with regard to specific rates and past rate levels; (3) uphold the Commission’s procedures; and (4) dismiss the petitions to review the Commission’s acceptance of a tariff filing.

I. BACKGROUND

AT&T provides two major categories of interstate service: public switched message service and private line service. Public switched message service is of two types, long distance message telecommunications service (MTS) and wide area telecommunications service (WATS). Under MTS (the ordinary “long distance” call), the user dials his call or is assisted by an operator and pays for the service on a per-call basis. Under WATS (a variant of MTS) the customer makes direct dialed calls anywhere within a specified service area at a monthly rate. MTS and WATS are essentially monopoly services in which AT&T does not face competition.

Private line service is of several types, primarily telephone, telegraph, audio and video program transmission and data transmission services. These services provide the customer with continuous communication between fixed points without the necessity of establishing a new circuit for each message. Unlike MTS and WATS, several specialized carriers compete against AT&T in the private line service market.

A. Docket 14251

By the end of 1960, it appeared to AT&T’s larger private line customers that it might be cheaper to construct their own private microwave systems than to pay AT&T’s private line rates. To head off this potential diversion of traffic, AT&T, in January 1961, filed tariffs for TELPAK service. Under TELPAK, a customer with substantial requirements for private line service between two points may order that service on a bulk basis, at relatively less expense than if he were to order an equivalent number of channels on an individual basis.² As originally filed, TELPAK was of four types — A, B, C, and D. These types provided, respectively, twelve, twenty-four, sixty, and two hundred forty voice-grade channels.³ TELPAK A and B were subsequently eliminated for reasons which do not presently concern us. With regard to TEL-PAK C and D, the Commission found that they were justified by competition, but ordered further proceedings to determine whether they were compensatory, i. e., would bear their own costs or would be a burden on other customers of the company.⁴ Unfortunately, as of 1967 the FCC had not established any ratemaking standards for determining whether a service was compensatory and consequently the FCC closed out Docket 14251 and transferred this issue, as it applied to TELPAK C and D, together with the entire record in Docket 14251, to a new proceeding — Docket 16258.

B. Docket 16258

In October 1965 the FCC began an investigation of the rates and services of AT&T in its General Telephone Rate Investigation (Docket 16258). Phase 1-B of that investigation was designed to establish general ratemaking principles.⁵ Of particular interest was whether fully distributed costs (FDC) and/or long-run incremental costs (LRIC) should be the appropriate measure of costs for ratemaking purposes.⁶

After lengthy hearings on the general issues of ratemaking and costing principles, the Commission initiated a conference among the parties, hoping they could reach a mutual agreement on the issues. These parties agreed to a “Statement of Ratemaking Principles and Factors” but the Commission did not approve this Statement; rather in July 1969, the Commission “noted” it.⁷ At the same time, the Commission folded the entire records of Docket 14251 and Phase 1-B of Docket 16258 into a third proceeding begun the prior year to investigate the lawfulness of substantial rate increases for TELPAK C and D — Docket 18128.⁸

C. Docket 18128

Docket 18128 was opened in April 1968 to consider, as noted above, the lawfulness of rate increases for TELPAK C and D, which had been filed in March 1968. 12 F.C.C.2d 1028 (1968). Eventually the Commission was to consider in Docket 18128 a number of other matters in addition to Phase 1-B of Docket 16258 (and the attendant record from Docket 14251). These matters consisted of (1) almost all AT&T’s other private line tariffs, 13 F.C.C.2d 853, 857 (1968); (2) new private line tariff revisions filed in October 1969, 20 F.C.C.2d 383, 388 (1969); (3) other tariff revisions for private line services filed in December 1971, 33 F.C.C.2d 522, 525 (1972).

Hearings in Docket 18128 were concluded in August 1972 and the record closed that December. More than three years later, the Chief, Common Carrier Bureau, on January 19, 1976 issued the Recommended Decision, 41 Fed.Reg. 4320. Following the filing of exceptions to the Recommended Decision, the Commission on October 1, 1976 issued its Final Decision, 61 F.C.C.2d 587, supplemented by its Rulings on Exceptions, issued February 1, 1977, 42 Fed.Reg. 8178.

In this Final Decision the Commission held as follows:

(1) Fully distributed costs, rather than long-run incremental costs, should be the primary standard by which to judge rate levels for interstate service. 61 F.C.'C.2d at 589-90, 633-49. From the seven different FDC methodologies of record, the Commission selected FDC “Method 7” as that primarily to be used. Id. at 668⁹

(2) The Commission prescribed certain guidelines under 47 U.S.C. § 205 (1976) consistent with its adoption of FDC over LRIC. 61 F.C.C.2d at 659-67.

(3) The Commission found that the present return levels for the television, audio/radio, private line, telephone, and private line telegraph service categories were unlawful and that “[pjast return levels for these services are generally found to have been unlawfully low, although in some years the return level of certain services could have been considered to have approached the zone of reasonableness.” 61 F.C.C.2d at 590. See id. at 651-52.

(4) The Commission held that the rate differentials embodied in TELPAK C and D were unlawful because they were not justified by competitive necessity; accordingly the Commission ordered that TELPAK be eliminated by June 8, 1977. 61 F.C.C.2d at 657-59, 668-69.

At this point in our chronology of events, a slight diversion must be made. Concurrently with its proceedings in Docket 18128, the Commission was conducting a separate rulemaking proceeding in Docket 20097, regarding the broad issue of whether resale and sharing of telecommunications services should be required. “Sharing” is a joint use arrangement in which several users collectively use communications services and facilities provided by a carrier, with each user paying according to its proportionate use. “Resale” is a commercial device whereby one entity subscribes to the communications services and facilities of another entity, and then reoffers these services and facilities to the public. See 60 F.C.C.2d 261, 263, 274 (1976). Finding that unlimited sharing and resale were appropriate, the Commission ordered the carriers to publish new tariffs, to be effective June 21, 1977, providing for resale and unlimited sharing of all private line services, including TELPAK. See 64 F.C.C.2d 1003, 1004 (1977).

It appeared to AT&T that a requirement of resale and unlimited sharing would destroy the economic viability of the TELPAK bulk rate offering. It was believed that in a resale and unlimited sharing environment, single-channel private line users would enter into joint use arrangements (sharing) or start purchasing resold TELPAK in order to take advantage of the lower bulk rates. This would result in the provision of substantially all voice-grade private line services at the lower TELPAK rates regardless of whether individual users would normally qualify for bulk communications services. AT&T believed that under these conditions the single-channel private line rates developed specifically on the basis of single-channel usage patterns would be meaningless, and as a practical matter would be eliminated.

Now we return to the main narrative. On March 23, 1977 AT&T filed, under Transmittal No. 12714, tariff revisions providing for the termination of TELPAK on June 8, 1977. In its letter of transmittal, AT&T noted that this action was consistent with the order in the Final Decision in Docket 18128 that TELPAK be eliminated by June 8, 1977, but was also precipitated by the impact of the rulings providing for sharing and unlimited resale by June 21, 1977. As the Transmittal stated, “It is our [AT&T’s] view that Telpak cannot exist in a resale and sharing environment.” (J.A. 445) It is noteworthy for purposes of the petitions before us that Transmittal No. 12714 did not include supporting data under Section 61.38 of the Commission’s Rules. (47 C.F.R. § 61.38)

D. First Order on Reconsideration

In an order first announced at an open meeting on June 1, 1977 and adopted on June 6, 1977, the Commission in several respects reconsidered its Final Decision in Docket 18128. 64 F.C.C.2d 97L Of most significance, the Commission revoked its order that TELPAK be eliminated, and ordered that new proceedings be undertaken to determine the lawfulness of that offering. Also, the Commission, in a departure from its Final Decision,¹⁰ considered and 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) various elements of the rates in the private line telephone, private line telegraph, and TELPAK offerings, effective May 4, 1972. In each instance, the basis of the Commission’s decision was that AT&T had failed to meet its burden of proof (which required that it show that the rates were justified), primarily because it had relied on long-run incremental cost studies. 64 F.G.C.2d at 989-91.

E. Petitions to Reject

AT&T’s March 23, 1977 tariff filing under Transmittal No. 12714, providing for termination of TELPAK, brought forth a number of pleadings from TELPAK users, requesting the Commission to suspend and investigate or reject the tariff revisions. These petitions raised a number of issues to be discussed later in this opinion. By an order adopted June 2, 1977 the Commission denied the petitions. 64 F.C.C.2d 959. The Commission noted that, although AT&T was no longer under compulsion to terminate TELPAK, the Commission having revoked its order requiring that termination, AT&T had independently concluded that TELPAK should be eliminated because of the provision requiring sharing and unlimited resale. 64 F.C.C.2d at 961; See also 64 F.C.C.2d 971, 986-87.

Following the Commission’s decision on Transmittal No. 12714, Aeronautical Radio, Inc. and General Electric filed petitions for review in this court and, along with the Department of Justice on behalf of the government agencies as TELPAK users, sought temporary relief pending judicial review. Meanwhile, in view of the Commission’s revocation of its order to eliminate TELPAK, AT&T, with the Commission's approval, extended the date for the termination of the TELPAK offering from June 8 to June 21,1977, the effective date of the resale and shared use orders as they applied to TELPAK. Subsequently, on June 17, 1977 the Court of Appeals for the Second Circuit stayed the resale and shared use orders (as applicable to TELPAK) until July 22,1977. Thereupon AT&T once again extended the effective date of the TEL-PAK termination until July 22, 1977.

A further stay of the Commission’s resale and shared use orders was denied by the Second Circuit Court on July 21, 1977. On that same day this court denied the various motions filed by the TELPAK users, seeking a stay, mandatory injunction, and summary reversal of the Commission’s decision which allowed AT&T’s Transmittal No. 12714 to take effect. However this court on July 21, 1977 ordered, sua sponte, that AT&T be “enjoined from discontinuing the TELPAK offering to customers served and under the terms and conditions existing as of the date of this order,” pending this court’s review of the Commission’s order on Transmittal No. 12714. Pursuant to our order, AT&T filed with the Commission tariff revisions which (1) provided that the TELPAK offering be discontinued as of July 22, 1977 in accordance with AT&T’s previous tariff filing which the Commission had declined to suspend or reject, but (2) preserved the terms and conditions of the TELPAK offering as to existing customers. Thus, the status quo of the TELPAK offering has been maintained during the pendency of judicial review.¹¹

On January 26,1978 the Court of Appeals for the Second Circuit affirmed the Commission’s resale and shared use orders, and the Supreme Court thereafter denied petitions for a writ of certiorari. American Tel. & Tel. Co. v. FCC, 572 F.2d 17 (2d Cir.), cert. denied, 439 U.S. 875, 99 S.Ct. 213, 58 L.Ed.2d 190 (1978).

II. ANALYSIS

We will discuss the issues in an order which does not necessarily correspond to the order in which they arose in these proceedings.

A. FDC v. LRIC

The Department of Justice filed a brief on behalf of the United States as a statutory respondent; it did not file a petition for review on behalf of any agency which it represents. See United States v. ICC, 337 U.S. 426, 69 S.Ct. 1410, 93 L.Ed. 1451 (1949). Nevertheless the Department contends that the Commission acted arbitrarily and capriciously in adopting fully distributed costs as its costing methodology. We reject this contention and affirm the Commission with respect to this issue.¹²

We emphasize that the question is not whether this court, if it were examining the merits of FDC Method 1, FDC Method 7, LRIC, or any other method, as a matter of first impression, would have selected one over the others. Rather, the question is whether the FCC made a reasonable selection from the available alternatives. The court does not substitute its judgment for that of the agency, but merely confines the agency within the areas within which it may reasonably exercise its discretion. See Greater Boston Television Corp. v. FCC, 143 U.S.App.D.C. 383, 393, 444 F.2d 841, 851 (1970), cert. denied, 403 U.S. 923, 91 S.Ct. 2223, 29 L.Ed.2d 701 (1971). And of course the Commission has broad discretion in selecting methods for the exercise of its powers to make and oversee rates. FPC v. Texaco, Inc., 417 U.S. 380, 387-89, 94 S.Ct. 2315, 2321-22, 41 L.Ed.2d 141 (1974); Permian Basin Area Rate Cases, 390 U.S. 747, 776, 88 S.Ct. 1344, 1364, 20 L.Ed.2d 312 (1968).

In Docket No. 18,128 the Commission attempted to deal with AT&T’s ratemaking in a way that would permit the company to compete fully in any markets without allowing it to use revenues from captive monopoly markets as a source for cross-subsidies. To accomplish this it was necessary for the Commission to learn as much as possible about the relevant cost of providing the different classes of service. The question was, which costs were relevant.

The Commission found that the relevant costs were fully distributed costs, which it prescribed as the standard for judging AT&T's rates. We cannot say that this standard is either impermissibly rigid and restrictive of AT&T’s ability to compete, as the Department of Justice contends, or impermissibly vague as AT&T argues. We recognize that the Commission will not allow rates to depart from full costs without a strong public interest showing, and that guidelines remain to be worked out in negotiations with the FCC staff and in Commission actions on specific rate filings. We think however that the Commission’s standard is both sufficiently flexible and sufficiently informative.

The Commission explained that FDC was in its judgment the standard most consistent with its regulatory responsibility and objectives. 61 F.C.C.2d at 589. In particular, the Commission found:

1. That knowledge of the full costs of service is essential to holding the carrier accountable for investment and pricing decisions, which, in turn, is the “touchstone” of just and reasonable ratemaking. 61 F.C. C.2d at 609-12.

2. That allocation of full costs to each service, with exceptions where “cost economies will be realized and can be demonstrated,” is essential to avoid discriminatory pricing. Id. at 612-14, 626-27, 632-33.

3. That full cost definition and allocation are consistent with encouraging efficiency and innovation in providing service. Id. at 614-15.

4. That full cost standards are essential to enable potential and actual competitors to judge the attractiveness of markets with full knowledge of the “market rules.” Id. at 615-18, 632-33.

Conceding that there was no perfect set of principles and that other methods than FDC also were plausible, id. at 606-07, 668, the Commission concluded:

[I]n order to determine whether rate levels and rate level relationships are just, reasonable or not unduly discriminatory the actual full costs of providing service must be known and certain, irrespective of whether rates are in direct relationship to costs or depart therefrom. In the latter case the ascertainment of actual full costs still provides the relevant standard to aid in the determination of lawfulness of rates. .

Id. at 668.

The Department of Justice appears to assume that FDC pricing erects a “protective umbrella” over new entrants in private line markets, leaving AT&T with “virtually no freedom” to price competitively. (DOJ Br., pp. 34-40) The Department says the Commission’s failure “rationally to consider” this effect on competition in private line market requires reversal.

In fact, competition was central to the proceeding. A prime objective was to establish market rules for established and emerging carriers.¹³ And the agency was at pains to avoid placing a “protective umbrella” over new carriers. 61 F.C.C.2d at 615-19. On the other hand there was legitimate concern that failure to “get a handle” on AT&T’s costs would enable the company to use cross-subsidies from monopoly services as an “anticompetitive ‘protective umbrella’ ” of its own. Id. at 616.

In the end, the FCC found that LRIC pricing, whatever its merit in a purely competitive environment, should not be applied selectively to AT&T’s competitive services in a manner that would burden monopoly service customers with all residual costs. Id. at 627-49. The Commission also considered and rejected the Defense Department’s “alternative” marginal costing approach, finding it to have essentially the same defects as AT&T’s LRIC. Id. at 632 n.77. Defense urged the adoption of FDC Method 7 if incremental costing were not acceptable. Id. at 661.

FDC is not the inflexible barrier to rate competition that the Department of Justice suggests. Although the Commission requires full cost data in support of all rate filings, its order expressly contemplates departures from full costs when the carrier can justify them on the ground of efficiency or other public interest grounds. Id. at 663, 666, 668. Competitive necessity is one basis for departing from full costs. Id. at 654-55. The standard for judging competitive necessity is essentially the same standard the Second Circuit approved in American Tel. & Tel. Co. v. FCC, 449 F.2d 439, 449-50 (2d Cir.1971).

A persuasive argument for FDC pricing rather than LRIC was made in comments filed by the Department of Justice in 1970 in the Specialized Common Carrier Services proceeding, Docket No. 18,920. (FCC Br., Attachment B) These comments were incorporated in Docket No. 18,128. Responding to AT&T’s claim that it should be allowed to compete in the private line market by offering rates based on long-run incremental costs, the Department stated that:

1. Such costs are “too difficult to determine objectively, accurately or promptly.”

2. The difficulty of determining the real costs would create the danger that AT&T would drive out or discourage new entrants “even if its cost is higher.”

3. Low rates are not the only goal of communications policy, but must be considered along with innovation in services and improvements in quality that might come with new entry.

4. The Commission “should judge rates as predatory by means of a standard based on long run fully distributed costs.”

5. “It is certainly true that the determination of ‘fully distributed’ or ‘long-run average’ costs involves estimates and somewhat arbitrary allocation formulas. Nevertheless, this standard is considerably more susceptible to regulatory control, and leaves less discretion in the regulated carrier, than in incremental cost approach.”

The Commission rejected LRIC after considering the Department’s current arguments in the light of its 1970 representations, together with the other relevant factors and policies. We cannot say that the Commission’s conclusion, reached in the exercise of its discretion, was arbitrary or capricious and therefore we will not disturb it.¹⁴

B. Unlawfulness of Certain Specific Rates

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.

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.

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 $25(j.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 terminals¹⁸ 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.

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.

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.

C. Past Rate Levels for Private Line Services

With respect to the rate levels for the private line service categories (other than TELPAK) the Commission, in its Final Decision, declared that: “Past levels of return for these services have generally been unlawfully low, although in some years the level of return for some services could be considered to have approached the zone of reasonableness.” 61 F.C.C.2d at 652. Because the Commission reached this conclusion solely on the basis of the retroactive application of its newly-established FDC standard¹⁹ without also (1) considering the non-cost factors which it takes into account, in determining the reasonableness of rate levels, or (2) explaining its failure to consider these factors, this action must be vacated and this issue remanded to the Commission for further consideration. Reasoned decisionmaking is again absent. See Greater Boston Television Corp. v. FCC, supra, 143 U.S.App.D.C. at 393-94, 444 F.2d at 851-52. To illustrate our conclusion, we point out the following: the Commission found that the return level for television program transmission service had been “unlawfully low” since 1971²⁰ without considering (1) its own requirement of reduced rates for educational television transmission;²¹ (2) its own refusal to accept tariff filings during 1972-73 increasing commercial television rates;²² and (3) its own sanction in 1973 of a stipulation freezing television rates for at least a two-year period.²³ Likewise, the Commission’s finding that the rate level for the audio/radio program transmission category was too low in the 1967 — 75 period (61 F.C.C.2d at 651-52) does not take into consideration the stipulation, approved by the Administrative Law Judge in Docket 18128, preventing rate changes in that category for at least two years. FCC 70M-941 (1970) (J.A. 344). And it fails to factor in the Commission’s requirement that reduced rates for radio transmission service be offered to the Corporation for Public Broadcasting and National Public Radio. See, e. g., 31 F.C.C.2d 496 (1971).²⁴

Consequently, this portion of the Commission’s decision is vacated and the issue is remanded for further consideration.

D. Separation of Bureau Staff

Several petitioners have contended that the Commission’s procedures were unfair because of the multiple roles of the Common Carrier Bureau staff in presenting evidence, drafting the Recommended Decision, and advising the Commission on its Final Decision. We observe with approval that the Commission in 1974 amended its rules to provide for a separated trial staff in proceedings such as those in this case, although the new rule is not being applied to proceedings already under way, including this one, due to the disruption and delay this would cause.²⁵

We note that this same argument²⁶ was made at the beginning of these TELPAK proceedings but this court was not persuaded.²⁷ We decline to consider the point anew.²⁸

E. Failure to Prescribe Telpak Rates

Petitioner Aeronautical Radio, Inc. contends that the Commission unlawfully failed to prescribe rates for TELPAK service under 47 U.S.C. § 205(a). That section empowers the Commission to prescribe rates if, after full opportunity for a hearing, the Commission is of the view that the rates set by the carrier are unlawful. Here the Commission has made no finding that TELPAK is unlawful and has, indeed, stated that the TELPAK rate levels “appear to be within the zone of reasonableness.” 61 F.C.C.2d at 659. In any event, we are of the view that, considering the circumstances of this case, the Commission has not abused its discretion in this matter and therefore we will not interfere.

F. Refusal to Reject Transmittal No. 12714

1. 47 U.S.C. § 214(a)

Several petitioners say that the Commission erroneously failed to reject Transmittal No. 12714 when that filing, which would eliminate TELPAK, was not accompanied by the requisite authority under section 214(a) of the Communications Act (47 U.S.C. § 214(a) (1976)). Section 214(a) requires that

No carrier shall discontinue, reduce, or impair service to a community or part of a community, unless and until there shall first have been obtained from the Commission a certificate that neither the present nor future public convenience and necessity will be adversely affected thereby . .

AT&T did not seek, and the FCC did not purport to grant, a § 214(a) certificate in this case.

The Commission held that “Section 214 does not apply to the instant tariff revisions” because the termination of TELPAK constituted a tariff change rather than the discontinuance of a service. 64 F.C.C.2d at 965.

On a question of statutory interpretation like that involving Section 214, this court must show “great deference to the interpretation given the statute by the officers or agency charged with its administration.” Udall v. Tallman, 380 U.S. 1, 16, 85 S.Ct. 792, 801, 13 L.Ed.2d 616 (1965). The agency’s interpretation “should be followed unless there are compelling indications that it is wrong.” Red Lion Broadcasting Co. v. FCC, 395 U.S. 367, 381, 89 S.Ct. 1794, 1802, 23 L.Ed.2d 371 (1969). There are not such indications here.

We agree with the FCC’s holding that § 214(a) did not apply in this case. The termination of the TELPAK “service” did not in fact discontinue, reduce, or impair any service at all; all it did was eliminate a rate discount, thereby effectuating a rate increase. All the services which had been offered under the TELPAK tariff were still available thereafter from AT&T pursuant to other tariffs or other sections of the same tariff; only the rates differed. See 64 F.C.C.2d at 965. See also American Tel. & Tel. Co. v. FCC, 449 F.2d 439, 446 n.5 (2d Cir. 1971) (“[T]he customer uses precisely the same physical facilities whether his service is ordinary private-line, Telpak, or shared Telpak.”) Were we to accept petitioner’s view, virtually every rate increase might be argued to be a discontinuance of “service” requiring a prior finding of convenience and necessity by the Commission. The attendant burdens would be enormous. Likewise, such a construction would be at odds with the scheme of carrier-initiated tariff filings which is at the heart of the Communications Act. 47 U.S.C. §§ 203-205 (1976).

2. Reviewability and 47 C.F.R. § 61.38

Section 61.38 of the Commission’s rules, 47 C.F.R. § 61.38, requires certain supporting economic data to be filed with proposed tariff changes.²⁹ In this case the Commission held that § 61.38 was not applicable to the TELPAK filing. 64 F.C.C.2d at 966. In addition, the Commission held that, even if § 61.38 were applicable, it would exercise its discretion and waive the rule. Id. Petitioners asserts that because § 61.38 was applicable and its waiver by the Commission was an abuse of discretion, we must order the agency to reject the tariff filing. (Jt. Br. of Aeronautical Radio and Air Transport Ass’n of America at 26). We hold that this court cannot review the Commission’s decision to accept the tariff filing at this time. Failure to comply with the tariff filing rule of § 61.38 creates no power in this court to compel rejection.

a. The Commission’s acceptance of the tariff filing is not reviewable at this time.

This court has repeatedly held that agency decisions relating to the acceptance of a tariff filing are non-final orders, generally not subject to judicial review.³⁰ Most recently in Pagago Tribal Utility Authority v. FERC, 628 F.2d 235 (D.C. Cir. 1980), cert. denied,- U.S. -, 101 S.Ct. 784, 66 L.Ed.2d 604 (1980) this court declined to review the acceptance by the FERC of a rate filing under the Federal Power Act where patent defects in form or content were alleged.³¹ At 247. The court asserted that acceptance orders are generally unreviewable when they are (1) non-final, (2) result in no irreparable harm to the party seeking review, and (3) constitute a province reserved to agency discretion. At 239.

The decision of the FCC to accept the AT&T tariff filing satisfies the Papago criteria of unreviewability. The acceptance is non-final because it is the initiation of an administrative proceeding. The Commission merely accepted the tariff and did not rule on the lawfulness of the rates to be paid by former TELPAK customers. The act of acceptance creates no irreparable harm because investigatory hearings are available for examination of the filing on the merits. 47 U.S.C. §§ 206-209, Papago, at 240-41. Finally, the decision to accept the filing is reserved to Commission discretion because it is a “necessary adjunct to the unreviewable decision to suspend and investigate.” Papago, at 243. See Southern Railway Co. v. Seaboard Allied Milling Corp., 442 U.S. 444, 454, 99 S.Ct. 2388, 2394, 60 L.Ed.2d 1017 (1979); Arrow Transportation Co. v. Southern Railway Co., 372 U.S. 658, 667-669, 83 S.Ct. 984, 988-990, 10 L.Ed.2d 52 (1963). As the court in Papago observed, “It would make little sense to declare orders concerning suspension and investigation unreviewable if the courts may review the related order to accept a rate filing.” (At 243)³²

The Papago decision relied upon a series of Supreme Court cases,³³ including the held that appellate courts have no power to interfere with agency discretion by undertaking to review suspension, investigation, and rejection decisions. 442 U.S. at 452, 99 S.Ct. at 2393, 60 L.Ed.2d 1017 (1979). In the Southern Railway case the Interstate Commerce Commission accepted a railroad tariff increase without suspension, investigation, or hearing, despite assertions by protestant shippers that the rates were patently illegal. 442 U.S. at 449, 99 S.Ct. at 2391. The Court held the ICC actions to be non-final and unreviewable because the complaint procedure of the Interstate Commerce Act, “which allows shippers to initiate mandatory post-effective proceedings to inquire into and remedy violations of the Act, would still be available to ‘protect' persons aggrieved by the rates.” 442 U.S. at 450, 99 S.Ct. at 2392 (footnote omitted). In the present case, as in Southern Railway, there has been an acceptance of a tariff increase without suspension, investigation, or a hearing, and a complaint procedure under the Communications Act comparable to that of the Interstate Commerce Act is available for former TELPAK customers.³⁴ The Papago and Southern Railway cases require us to hold that the availability of a statutory complaint procedure renders the FCC’s acceptance decision in this case non-final.

b. The Commission’s waiver of Rule 61.-38 is not reviewable.

Cost justification information is submitted pursuant to the FCC’s tariff filing rules primarily to aid the Commission in exercising its discretion as to investigation and suspension of tariff filings. Tariffs-Evidence, 40 F.C.C.2d 149, 152-153 (1973). It follows that the FCC’s determination as to what data it requires in making this discretionary decision cannot provide a basis for this court to mandate rejection of the tariff filing. Although another purpose of the tariff filing rules is to provide customers, competitors, and the public with information that will serve as a basis for comment,³⁵ the rules were not “intended primarily to confer important procedural benefits upon individuals.” American Farm Lines v. Black Ball Freight Service, 397 U.S. 532, 538, 90 S.Ct. 1288, 25 L.Ed.2d 547 (1970); Associated Press v. FCC, 145 U.S.App.D.C. 172, 181, 448 F.2d 1095, 1104 (1971). An agency is permitted to relax, modify, or waive its filing requirements, City of Groton v. FERC, 190 U.S. App.D.C. 86, 89 n.8, 584 F.2d 1067, 1070 n.8 (1978), and such action is not reviewable except upon a showing of substantial prejudice to the complaining party. Papago, slip op. at 22. Given the complaint remedy under the Communications Act, no substantial prejudice of an irreparable nature exists in this case.³⁶

This court nevertheless regrets the Commission’s summary procedures as applied here. Such actions deprive the public of potentially valuable information and force protestants to institute a cumbersome complaint procedure to address the merits of the tariff revision. For the reasons noted above, however, we cannot review the Commission’s orders until the statutory complaint procedures have been followed. Because we find that there has been no reviewable final order in the Commission’s proceedings, we direct that the petition for review be dismissed.

Judgment in accordance with this opinion And it is

FURTHER ORDERED, by the court, that intervenor’s petition for rehearing is granted, for the reasons set forth in the panel opinion on rehearing filed this date.

1 . In the Matter of American Telephone & Telegraph Co., et al. (F.C.C. Docket No. 18128): 61 F.C.C.2d 587 (1976); 42 Fed.Reg. 8178 (1977); 64 F.C.C.2d 971 (1977); 65 F.C.C.2d 621 (1977); 67 F.C.C.2d 1441 (1978). In the Matter of American Telephone & Telegraph Co. (Transmittal No. 12714): 64 F.C.C.2d 958 (1977); 64 F.C.C.2d 959 (1977); 65 F.C.C.2d 7 (1977).

2 . For a detailed description of TELPAK and how is works, see American Trucking Associations, Inc. v. F.C.C., 126 U.S.App.D.C. 236, 239-42, 377 F.2d 121, 124-27 (1966), cert. denied, 386 U.S. 943, 87 S.Ct. 973, 17 L.Ed.2d 874 (1967).

3 . For a description of voice-grade channels, see id. at 240-41, 377 F.2d at 125-26.

4 . TELPAK, 37 F.C.C. 1111 (1964).

5 . Once these ratemaking principles were established, it was intended that it would be determined whether TELPAK was compensatory.

Phase 1-A of the investigation related to AT&T’s then current interstate rate of return and interstate rate base, see 9 F.C.C.2d 30, 9 F.C.C.2d 960 (1967), but is of no further interest to us here.

6 . The measurement of long-run incremental costs (LRIC) involves computing all directly attributable investment and expenses incurred for the purpose of furnishing a particular service, including any additional common costs. Fully distributed costs (FDC) include not only the directly attributable costs, but also an allocation of costs which are inherently unattributable to any service.

7 . 18 F.C.C.2d 761, 764 (1969).

8 . Id. at 764-65.

9 . The seven methods evolved over the years, with “Method 1” appearing in 1965. The later developed allocation methods, exemplified by Method 7, were designed to distribute costs more on the basis of historic cost responsibility. The earlier methods, exemplified by Method 1, were designed to distribute costs more on the basis of relative use. See 61 F.C.C.2d at 642-44.

10 . In the Final Decision, the Commission had indicated that the issues in Docket 18128 had been narrowed so as to exclude the issues of specific rates. 61 F.C.C.2d at 596 & n. 36; Rulings on Exceptions, 42 Fed.Reg. 8178, 8199 (1977) (Rigs, on UPf Excpt. 1-1, AP Excpt. 9).

11 . This court has subsequently denied a motion requesting that AT&T be required to offer Telpak under the terms and conditions of unlimited resale and sharing (Order, August 18, 1977) and denied a motion seeking the expansion of the Telpak offering to new customers (Order, April 11, 1978).

12 . This court’s jurisdiction to review the FCC’s Order prescribing fully distributed costs as the relevant standard for ratemaking (FDC Order) is invoked pursuant to section 402(a) of the Communications Act, 47 U.S.C. § 402(a) (1976), and 28 U.S.C. § 2342 (1976). The FDC Order is final for purposes of judicial review for several reasons. The denial by the FCC of the petitions for reconsideration of its FDC Order (64 F.C.C.2d 971) constitutes exhaustion of the administrative remedies available under 47 U.S.C. § 405 (1976). Although the FDC Order was issued pursuant to the FCC’s statutory mandate under 47 U.S.C. §§ 201(b), 205 (1976) to prescribe “just and reasonable” rates (64 F.C. C.2d at 972), this not the type of order which must be challenged pursuant to the mandatory complaint procedures of 47 U.S.C. §§ 206-209 (1976) prior to judicial review. As discussed infra at page 24, et seq., the mandatory complaint procedure is appropriate when damages for allegedly illegal rate levels are being sought. The cost standard inquiry at issue here, on the other hand, “is not primarily a typical ‘rate case’ designed to test the lawfulness of specific charges .... ” (64 F.C.C.2d at 972) In prescribing fully distributed costs and rejecting long run incremental costs as the relevant standard for ratemaking, the FCC was engaged in rulemaking. As the FCC admitted, “the purpose and effect of this proceeding is to establish basic principles and standards of general applicability for determining cost of service and corresponding rate levels, by service category.” (64 F.C.C.2d at 972). The question now is whether the FCC Order was the product of arbitrary and capricious action, not whether a rate is just and reasonable.

Moreover, because this court holds in this case that TELPAK users must first pursue statutory complaint procedures to test the legality of the new rates (see page 1234, et seq., infra), common sense suggests that this is the appropriate time for judicial review of the validity of the relevant standard for assessing the legality of the rates. Postponement of judicial review of the FDC Order until after the final order regarding the legality of the new rates would be to place the cart before the horse.

13 . This court had underscored the importance of the factor of competition in its order requiring the expeditious resolution of Docket No. 18,128:

[T]he very reason for the Commission’s 1965 rate investigation into AT&T’s rates was the seven-way cost study which showed wide variations among the returns earned by AT&T’s investment in monopoly and competitive service.

Nader v. FCC, 172 U.S.App.D.C. 1, 25, 520 F.2d 182, 206 (1975). See also, id. at 29-30, 520 F.2d at 210-11 (Fahy, J., dissenting).

14 . The theoretical benefits of LRIC pricing described in Judge Wilkey’s separate opinion were also explored by the Supreme Court in American Commercial Lines v. Louisville & Nashville R. Co., 392 U.S. 571, 88 S.Ct. 2105, 20 L.Ed.2d 1289 (1968). As the Court stated there, the courts are “not particularly suited to pass on the merits of the[se] economic arguments . . . Id. at 586 n.16, 88 S.Ct. at 2113 n.16. In light of Judge Wilkey’s separate opinion, however, one or two observations may be in order.

LRIC pricing has been developed only recently, primarily as a theoretical construct. To the extent it has been applied to regulated industries, it apparently has been confined to the monopolized markets for which it was originally devised. See Docket 18,128, 61 F.C.C.2d at 622 (quoting Recommended Decision). Indeed, considerable controversy remains as to whether LRIC pricing is either appropriate or capable of being administered in the far more complex and less well-understood regulatory environment of a mixed monopoly and competitive enterprise. Id. at 623-26. Thus, while the Commission’s Opinion demonstrates a general sensitivity to the theoretical benefits of marginal cost pricing (of which LRIC is one species), it is tempered by the recognition that many of the conditions favoring such pricing in a mixed monopoly/competitive environment have not yet been clearly demonstrated. Id.

In his separate opinion, Judge Wilkey nevertheless argues that the Commission’s action cannot be upheld because it relies on “some fundamentally unsound economics.” Opinion of Wilkey, J., at 2. As we understand his opinion, Judge Wilkey maintains that the Commission irrationally assumed that LRIC pricing automatically results in the addition of extra, fixed costs on monopoly customers, and that therefore the Commission rejected LRIC pricing without fairly considering its pro-competitive advantage. Id. at 8. We would not agree. The passages from the Commission’s Opinion cited by Judge Wilkey can fairly be read simply as a recognition that when common or joint unattributable costs are carried solely by a company’s monopoly customers, those customers are called upon to carry a more onerous burden than all others. This, in the Commission’s terminology, may result in “cross-subsidization,” see, e. g., 61 F.C.C.2d at 652, giving monopolists capable of loading their fixed costs entirely on monopoly customers a special advantage when they enter competitive markets. So read, in our view it was a matter for the Commission, in its discretion, to determine whether this aspect of LRIC pricing in mixed economic environments poses a serious drawback.

15 . See Greater Boston Television Corp. v. FCC, supra.

16 . J.A. 932.

17 . J.A. 924.

18 . A service terminal is used to terminate private line channels at the telephone company central office serving the customer’s premises.

19 . 61 F.C.C.2d at 651-52.

20 . 61 F.C.C.2d at 652.

21 . Free or Reduced Rate Interconnection Service for Non-Commercial Educational Broadcasting, 31 F.C.C.2d 496 (1971).

22 . See American Telephone & Telegraph Co. v. FCC, 487 F.2d 865 (2d Cir. 1973).

23 . 44 F.C.C.2d 525, 527-29 (1973).

24 . Other examples appear in Brief for Petitioner AT&T at 43. As far as the court is able to ascertain, no party (including the Commission), either in a brief or at oral argument, has attempted to defend the agency’s action with respect to this issue.

25 . Restricted Rulemaking Proceedings, 47 F.C. C.2d 1183, 1184 n.9 (1974).

26 . See Joint and Several Brief for Aeronautical Radio, Inc., Air Transport Ass’n of America, American Airlines, Inc. and Eastern Air Lines, Inc. filed Sept. 3, 1965 in D.C.Cir. Docket No. 19,466, at 23-29.

27 . American Trucking Associations, Inc. v. FCC, 126 U.S.App.D.C. 236, 248, 377 F.2d 121, 133 (1966), cert. denied, 386 U.S. 943, 87 S.Ct. 973, 17 L.Ed.2d 874 (1967) (“Examination of this record satisfies us that the Commission complied with all procedural requirements”).

28 . Other courts have addressed the underlying issue. See Wilson & Co. v. United States, 335 F.2d 788, 796-97 (7th Cir. 1964); remanded for consent settlement, 382 U.S. 454, 86 S.Ct. 643, 15 L.Ed.2d 523 (1966); American Tel. & Tel. Co. v. FCC, 449 F.2d 439, 453-55 (2d Cir. 1971).

29 . Such data must include a cost of service study for all elements of cost for the most recent 12-month period and a projection of costs for a three-year period beginning at the date of the filing of the tariff matter. 47 C.F.R. § 61.38(a)(2)(i). Also, the carrier must submit estimates of the effects of the tariff change on the carrier’s traffic and revenues for the prior year and the succeeding three years. Id, § 61.38(a)(2)(ii). Finally, for tariff changes embodying rate increases of the magnitude proposed by AT&T, all cost, marketing, and other data relied on to justify the change must be filed. Id., § 61.38(d).

30 . See, e.g., Asphalt Roofing Mfg. Assoc. v. ICC, 186 U.S.App.D.C. 1, 8, 567 F.2d 994, 1001 (1977); Texas Gas Corp. v. FPC, 102 U.S.App. D.C. 59, 61, 250 F.2d 27, 29 (1957).

31 . Section 205(d) of the Federal Power Act, 16 U.S.C § 824d(d) (1976) is comparable to the notice provisions of the Communications Act, 47 C.F.R. § 61.58 (1977).

32 . The court in Papago also observed that “[w]e are not concerned in this case with orders that accept tariff filings and allow them to take effect without investigation or refund obligation. Such orders would present different questions of reviewability.” (At 238 n.8) For the reasons discussed above and in the Opinion on Petition for Rehearing, we nevertheless consider the Papago decision to be applicable to the facts of this case.

33 . See, e.g., Arrow Transportation Co. v. Southern Railway Co., 372 U.S. 658, 83 S.Ct. 984, 10 L.Ed.2d 52 (1963); American Farm Lines v. Black Ball Freight Service, 397 U.S. 532, 90 S.Ct. 1288, 25 L.Ed.2d 547 (1970).

34 .47 U.S.C. §§ 206-209 (1976). Under these provisions protestants may seek actual damages if they believe rates are unlawfully high. Here, as in Southern Railway, the complaint procedure shifts the burden of proof onto the aggrieved party and may restrict his ultimate relief to actual damages rather than to the full overcharge that would have been available had the FCC ordered an investigation. Id As the Court noted in Southern Railway, however, neither of these two determinations “necessarily affects any citizen’s ultimate rights” so as to permit judicial review. 442 U.S. at 454 — 455 & n.8 99 S.Ct. at 2394, 60 L.Ed.2d 1017 (footnote omitted).

The complaint procedures of the Communications Act are a realistic remedy for TELPAK customers. Because we find TELPAK to be a discount bulk rate offering (slip op. at 23-24) customers can allege that the remaining private line rates are unlawfully high. We need not concern ourselves with the Commission’s possible lack of power to mandate reinstitution of a service.

35 . See Amendment of Part 61, 25 F.C.C.2d 957, 970-71 (1970); Part 0 — Commission Organization, 57 F.C.C.2d 1122, 1123 (1976); Amendment of Parts 0, 1 and 61, 62 F.C.C.2d 474, 476 (1976).

36 . See note 6 supra. Furthermore, the Court in Papago asserted that Southern Railway and Arrow Transportation show that “a nonfinal administrative order may be unreviewable— even though it might result in serious irreparable injury to a party — if immediate judicial review would undermine the authority of the agency acting within the scope of its discretion.” (628 F.2d at 243) (Emphasis added)