AT&T Vows Commitment to Packet Service Following FCC Accunet Withdrawal Order

Communications News, August, 1985

AT&T Communications (AT&T-C) reaffirmed its commitment to offer common-user, packet-switching service in the wake of an FCC order that it withdraw it Accunet Packet Service (APS).

FCC said the APS rate structure is unlawful because it gives AT&T Information Systems (AT&T-IS) unreasonable preference in its provision of services. AT&T-IS was given rates lower than those offered other customers, prompting FCC concern that other AT&T-C ratepayers, rather than stockholders, were subsidizing the money-losing APS. AT&T-IS was the primary user of APS at 94.8 percent.

FCC also said AT&T-C could restructure its tarriffs to provide for non-preferential pricing of transmission components. It also said AT&T-C could continue the internal use of packet-switching technology to improve the efficiency and economics of offering the technology. AT&T-C must also account separately for revenues, costs, investment and net earnings associated with APS until its withdrawal.

Sam Willcoxon, executive vice president of marketing for AT&T-C, said the company plans to expand APS availability.

"We will take appropriate actions, including filing new tariffs as necessary, to assure our customers that we will be in the basic-packet-switching market with a service to meet the growing list of customers applications," Willcoxon said.

The FCC ruling came as a result of an investigation into what it called "unduly optimistic demand estimates" and the potential for not recovering service costs, which would burden other AT&T rate-payers.

The agency said its investigation revealed that even if AT&T's forecasts would have been realized, ratepayers would have had to pay for sustaining a service that "did not need to be offered as a regulated basis offering, but could have been provided by AT&T-IS with cost allocated to shareholders." It said AT&T-IS APS rates were not enough to recover costs comparable to those sustained by a competitor employing unbundled AT&T-C transmission facilities.

The service was approved in 1983 by the FCC as Basic Packet Switching Service (BPSS) with the understanding basic and enhanced services were demarcated sufficiently so that revenues from traditional common carrier offerings would not artificially subsidize enhanced offerings. AT&T then renamed BPSS as Accunet and bundled its packet switches and interswitch transmission lines. It permitted users to share transmission lines and switching under AT&T's basic packet service offerings and pay lower usage charges instead of monthly line and switch fees.

APS was approved, pending the investigation, last September.

Willcoxon said AT&T has confidence in its APS demand forecasts.