AT&T Corp. v. Fed. Commun. Comm'n

• Decision Date: 01 August 2000
• Docket Number: No. 99-1538,99-1538
• Citation: 220 F.3d 607
• Parties: (D.C. Cir. 2000) AT&T Corporation,Appellant v. Federal Communications Commission, Appellee Bell Atlantic, U S West Communications, Inc.,Public Service Commission of the State of New York, et al.,Intervenors Consolidated with 99-1540
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 607

220 F.3d 607 (D.C. Cir. 2000)

AT&T Corporation,Appellant v. Federal Communications Commission, Appellee

Bell Atlantic, U S West Communications, Inc.,Public Service Commission of the State of New York, et al.,Intervenors

No. 99-1538 Consolidated with 99-1540

United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued April 24, 2000

Decided August 1, 2000

[Copyrighted Material Omitted] Appeals of An Order of the Federal Communications Commission David W. Carpenter argued the cause for appellants. With him on the briefs were Mark E. Haddad, Peter D. Keisler, Daniel Meron, Mark C. Rosenblum, Roy E. Hoffinger, and Jonathan Jacob Nadler.

Randall B. Lowe, Renee R. Crittendon, Russell M. Blau, Mark J. Tauber, Michael D. Hays, J. G. Harrington, and John D. Seiver were on the briefs for intervenors Prism Communication Services, RCN Telecom Services, Competitive Telecommunications Commission, Close Call America, Inc., and Global NAPs, Inc.

Jonathan E. Nuechterlein, Deputy General Counsel, Federal Communications Commission, argued the cause for appellee. With him on the brief were Christopher J. Wright, General Counsel, John E. Ingle, Deputy Associate General Counsel, and James M. Carr, Counsel. Joel Marcus, Counsel, entered an appearance.

Michael E. Glover argued the cause for intervenors Bell Atlantic and U S West Communications, Inc. With him on the brief were Randal S. Milch, Edward Shakin, Mark L. Evans, Henk Brands, William T. Lake, Lynn R. Charytan, Dan L. Poole and Robert B. McKenna, Jr. John H. Harwood, II entered an appearance.

Lawrence G. Malone and Jonathan D. Feinberg were on the brief for intervenor Public Service Commission of the State of New York.

Before: Randolph, Tatel and Garland, Circuit Judges.

Opinion for the Court filed by Circuit Judge Tatel.

Tatel, Circuit Judge:

Appellants challenge the Federal Communications Commission's approval of an application by Bell Atlantic to provide long distance service in New York, arguing that the company failed to implement two elements of a fourteen-point competitive checklist prescribed by the Telecommunications Act of 1996. The FCC's approval of Bell Atlantic's application was the first time since the 1982 breakup of AT&T that a Bell operating company received regulatory permission to offer long distance service in a state where it provides local telephone service. Finding no defect in the Commission's analysis, we affirm in all respects.

I

Historically, local telephone companies operated as monopolies. "States typically granted an exclusive franchise in each local service area to a local exchange carrier (LEC), which owned, among other things, the local loops (wires connecting telephones to switches), the switches (equipment directing calls to their destinations), and the transport trunks (wires carrying calls between switches) that constitute a local exchange network." AT&T Corp. v. Iowa Util. Bd., 119 S. Ct. 721, 726 (1999). For the better part of the twentieth century, appellant AT&T Corporation provided most local and long distance phone service throughout the country.

In 1974, the United States filed an antitrust action against AT&T alleging "monopolization by the defendants with respect to a broad variety of telecommunications services and equipment in violation of section 2 of the Sherman Act."United States v. American Tel. and Tel. Co., 552 F. Supp 131, 139 (D.D.C. 1982), aff'd sub nom. Maryland v. United States, 460 U.S. 1001 (1983). Following several years of discovery and nearly a full year of trial, AT&T and the government settled. Known as the Modification of Final Judgment ("MFJ"), the resulting consent decree required AT&T to divest itself of the twenty-two Bell operating companies, or "BOCs," that provided local telephone service.

Consolidated into seven regional holding companies (four today as a result of mergers), the BOCs continued to have a monopoly in local phone service in their respective service areas. Because "there are many ways in which the company controlling the local exchange monopoly could discriminate against competitors in the interexchange [long distance] market," the MFJ prohibited BOCs from offering so-called "interLATA" or long distance service. AT&T, 552 F. Supp. at 188.The MFJ left open the possibility that BOCs could someday provide long distance service, but only if they "los[t] the ability to leverage their monopoly power into the competitive [long distance] markets," either "as a result of technological developments which eliminate the [BOCs'] local exchange monopoly or from changes in the structures of the competitive markets." Id. at 194. No BOC ever obtained permission to provide long distance telephone service under the MFJ.

This regulatory landscape remained largely unchanged until Congress enacted the Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56. That Act fundamentally restructured local telephone markets by ending the BOCs' local monopoly. Designed to "open[ ] all telecommunications markets to competition," the Act established "a procompetitive, de-regulatory national policy framework" that sought to eliminate the barriers that competitive local exchange carriers, known as "CLECs," faced in offering local telephone service. S. Conf. Rep. No. 230, 104th Cong., 2d Sess. 1 (1996). To this end, the 1996 Act requires BOCs to offer CLECs access to their local telephone networks in three ways: by selling local telephone services to competitors at wholesale rates for resale to end users; by leasing network elements to competitors on an unbundled basis; and by interconnecting a requesting competitor's network with their own. See 47 U.S.C. § 251(c)(2)-(4). The 1996 Act requires BOCs to offer the latter two services on "rates, terms, and conditions that are just, reasonable, and nondiscriminatory."Id. § 251(c)(2)(D), (c)(3). Through any of these three routes, CLECs may offer local phone service in competition with BOCs.

Added by the 1996 Act, section 252 of the Communications Act of 1934 established procedures for CLECs to request and obtain access to network elements and other facilities. The requesting carrier and the BOC "may" first attempt to negotiate an agreement governing the rates, terms, and conditions under which the CLEC accesses the BOC's facilities. See id. § 252(a)(1). If the parties reach an agreement, they must submit it to the appropriate state commission for approval. See id. § 252(a)(1), (e)(1). If an agreement is not reached, section 252 directs the state commission to arbitrate and resolve the dispute. Id. § 252(b)(1), (b)(4)(C). The state commission must "ensure that such resolution and conditions meet the requirements of section 251" and "establish any rates for interconnection, services, or network elements according to subsection (d) of this section." Id. § 252(c)(1)-(2). Subsection (d) requires rates to be "based on the cost ... of providing the interconnection or network element (whichever is applicable), and [ ] nondiscriminatory." Id. § 252(d)(1)(A).Subsection (f) permits a BOC to file with the appropriate state commission "a statement of the terms and conditions that such company generally offers within that State to comply with the requirements of section 251." Id. § 252(f)(1).It also requires states to review such statements for compliance with sections 251 and 252(d). Id. § 252(f)(2).

Section 601(a)(1) of the 1996 Act frees BOCs from all restrictions and obligations imposed by the MFJ, including the prohibition against providing long distance service. Telecommunications Act of 1996 § 601(a)(1), Pub. L. No. 104-104, 110 Stat. at 143. To encourage BOCs to open their markets to competition as quickly as possible, the Act permits them to provide "in-region" long distance service (long distance service originating in a state in which they offered local service under the MFJ) if they demonstrate that they have opened their local markets in that state to competition by fulfilling the requirements of section 271. See 47 U.S.C. § 271(b)(1).BOCs may immediately begin providing "out-of-region" long distance service (long distance service originating outside the states in which the particular BOC offered local service under the MFJ). See id. § 271(b)(2).

Under section 271, a BOC wishing to provide in-region long distance service must apply to the FCC for approval. Id. § 271(b)(1). In its application, the BOC must first demonstrate that it has satisfied either section 271(c)(1)(A), known as "Track A," or section 271(c)(1)(B), known as "Track B."To satisfy Track A, the BOC must show that it has entered into an agreement to provide access and interconnection to "one or more unaffiliated competing providers of telephone exchange service ... to residential and business subscribers."Id. § 271(c)(1)(A). If no such request for access and interconnection has been made, Track B requires the BOC to show that "a statement of the terms and conditions that the [BOC] generally offers to provide such access and interconnection has been approved or permitted to take effect by the State commission." Id. § 271(c)(1)(B).

Once the BOC has shown that it has satisfied either Track A or Track B, it must establish that its offering of services to CLECs meets the fourteen requirements of a "competitive checklist" contained in section 271(c)(2)(B). The checklist incorporates by reference many of the substantive requirements of the Act's local competition provisions, sections 251 and 252, described supra at 611-12. See id. § 271(c)(2)(B). For example, the BOC must demonstrate that it provides "[i]nterconnection in accordance with the requirements of sections 251(c)(2) and 252(d)(1)"; "[n]ondiscriminatory access to network elements in accordance with the requirements of sections 251(c)(3) and 252(d)(1)"; "[l]ocal loop transmission ... unbundled from local switching"; "[l]ocal switching unbundled from transport, local loop transmission, or other services";...