MCI Telecommunications Corp. v. F.C.C., 93-1464

• Citation: 57 F.3d 1136
• Decision Date: 27 June 1995
• Docket Number: No. 93-1464,93-1464
• Parties: MCI TELECOMMUNICATIONS CORPORATION, Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION; United States of America, Respondents. Sprint Communications Company, L.P., et al., Intervenors.
• Court: United States Courts of Appeals. United States Court of Appeals (District of Columbia)

Page 1136

57 F.3d 1136

313 U.S.App.D.C. 51

MCI TELECOMMUNICATIONS CORPORATION, Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION; United States of America, Respondents Sprint Communications Company, L.P., et al., Intervenors.

No. 93-1464.

United States Court of Appeals District of Columbia Circuit.

Argued Nov. 1, 1994.

Decided June 27, 1995.

Petition for Review of an Order of the Federal Communications Commission.

Paul M. Smith argued the cause for petitioner. On the briefs were Frank W. Krogh and Donald J. Elardo.

Carl D. Lawson, Counsel, F.C.C., argued the cause for respondents. With him on the briefs were Anne K. Bingaman, Asst. Atty. Gen., Catherine G. O'Sullivan and Nancy C. Garrison, Attys., U.S. Dept. of Justice, William E. Kennard, Gen. Counsel, Daniel M. Armstrong, Associate Gen. Counsel, and John Ingle, Deputy Associate Gen. Counsel, F.C.C. Laurence N. Bourne, entered an appearance for respondents.

Leon M. Kestenbaum and Michael B. Fingerhut, filed the brief for intervenor Sprint Communications Co. Harold R. Juhnke, entered an appearance for Sprint Communications Co. Genevieve Morelli, filed the brief for intervenor Competitive Telecommunications Ass'n. Roy L. Morris, filed the brief for intervenor Allnet Communications Services, Inc. Barbara J. Kern, filed the brief for intervenors Illinois Bell Telephone Co., Indiana Bell Telephone Co., Inc., Michigan Bell Telephone Co., the Ohio Bell Telephone Co. and Wisconsin Bell, Inc. John W. Bogy and James P. Tuthill, filed the brief for intervenor Pacific Bell. James L. Wurtz, entered an appearance for Pacific Bell. Edward R. Wholl and Carlos J. Sandoval, filed the brief for intervenors New York Telephone Co. and New England Tel. & Tel. Co. Shelley E. Harms, entered appearances for New York Telephone Co. and New England Tel. & Tel. Co. Robert B. McKenna, Jr. and Laurie J. Bennett, filed the brief for intervenor US West Communications, Inc. Richard C. Hartgrove, Thomas A. Pajda and Robert M. Lynch, filed the brief for intervenor Southwestern Bell Telephone Co. Mary McDermott, filed the brief for intervenor U.S. Telephone Ass'n. Martin T. McCue, entered an appearance for U.S. Telephone Ass'n. Matthew R. Sutherland, entered an appearance for intervenor BellSouth Telecommunications, Inc. James S. Blaszak and Patricia J. Whittle, entered appearances for intervenor Ad Hoc Telecommunications Users Committee. Peter D. Keisler and David W. Carpenter, entered appearances for intervenor AT & T Co. Alfred W. Whittaker, entered an appearance for intervenor Ameritech Operating Companies. James B. Ramsey and Charles D. Gray, entered appearances for intervenor Nat. Ass'n of Regulatory Utility Com'rs.

Before WILLIAMS, GINSBURG, and ROGERS, Circuit Judges.

GINSBURG, Circuit Judge:

MCI Telecommunications Corporation petitions for review of an FCC Order that (1) requires the Bell Operating Companies to unbundle and offer separately the access services they provide to long-distance carriers, and (2) allows the BOCs to phase out their bundled access offerings. Arguing that the Commission (1) provided inadequate notice of its intention to allow the BOCs to phase out their bundled access offerings, and (2) failed adequately to consider various important issues related to that decision, MCI and supporting intervenors ask the court to vacate the Commission's Order and remand the matter for further consideration. Because we hold that the Commission's notice failed to meet the requirements of the Administrative Procedure Act, we grant the petition and the relief requested.

I. BACKGROUND

The BOCs and other local exchange carriers (collectively LECs) provide both long-distance telephone companies (interexchange carriers or IXCs) and enhanced services providers (ESPs) with access to local telephone users. The manner in which the BOCs offer access service to IXCs is the subject of this case. In order to understand the present dispute, however, a brief review of access regulation may be helpful.

A. Interexchange Carriers

In its 1983 Access Order, the Commission held that there was no rational justification for the disparate nature of the access services and rates that the LECs were then offering to different IXCs. See MTS and WATS Market Structure, Third Report and Order, CC Docket No. 78-72, 93 FCC 2d 241 (1983) (Access Order ), modified on recon., 97 FCC 2d 682 (1983), modified on further recon., 97 FCC 2d 834 (1984), aff'd in principal part and remanded in part, Nat'l Ass'n of Regulatory Utility Comm'rs v. FCC, 737 F.2d 1095 (D.C.Cir.1984), cert. denied, 469 U.S. 1227, 105 S.Ct. 1224, 84 L.Ed.2d 364 (1985), modified on further recon., 99 FCC 2d 708 (1984), aff'd, American Tel. and Tel. Co. v. FCC, 832 F.2d 1285 (D.C.Cir.1987), modified on further recon., 101 F.2d 1222 (1985), further recon. denied, 102 FCC 2d 849 (1985). Specifically, the Commission concluded that "a single, uniform, and nondiscriminatory structure for interstate access tariffs covering those services that make identical or similar use of access facilities is required by the Communications Act." Id. at 250. Accordingly, the Commission prescribed the "rate elements," i.e., components of service, that every LEC must offer, the methodology it must use to set rates, and the type of charge (e.g., per minute, per line) it may make for each element. See 47 C.F.R. Sec. 69.

Under this regulatory regime, the LECs have filed with the Commission tariffs offering access service to the IXCs in so-called "feature groups." A feature group bundles the basic rate elements set out in 49 C.F.R. Sec. 69 together with specific features that the IXCs tend to find appropriate and useful. Because these feature group offerings are relatively uniform across LECs, the IXCs have been able to develop and use automated ordering, auditing, and payment systems for their purchase of local access services. In order to preserve this convenience, the IXCs strongly oppose any measure that would facilitate the abolition of feature groups.

B. Enhanced Service Providers

The Commission defines enhanced services as

services, offered over common carrier transmission facilities used in interstate commerce, which employ computer processing applications that act on the format, content, code, protocol or similar aspects of the subscriber's transmitted information; provide the subscriber additional, different, or restructured information; or involve subscriber interaction with stored information.

47 C.F.R. Sec. 64.702(a). In simpler terms, an ESP offers data processing services that use the telephone network to transmit information among customers and computers. California v. FCC, 905 F.2d 1217, 1223 n. 3 (9th Cir.1990). Familiar examples of enhanced services include "[d]atabase services, in which a customer dials a number to obtain access to stored information, such as Dow Jones News, Lexis, and 'Dial It' sports scores...." Id.

Because the BOCs both provide enhanced services themselves and provide local access to other ESPs, the Commission has long been concerned that a BOC might seek to maintain an advantage over competing ESPs by discriminating against them in the provision of local access services. See Policy and Rules Concerning the Furnishing of Customer Premises Equipment, Enhanced Services and Cellular Communications Services by the Bell Operating Companies, Report and Order, CC Docket No. 83-115, 95 FCC 2d 1117, 1132-37 (1983). Initially the Commission relied upon a structural safeguard--the requirement that each BOC offer enhanced services only through a separate subsidiary--in order to preclude such discrimination. Id. at 1120-21. In 1986, however, the Commission repealed the separate subsidiary requirement and promulgated "non-structural" safeguards against discrimination in access to the local exchange, including a requirement that for each enhanced service a BOC offers it provide a "comparably efficient interconnection" (CEI) to competing ESPs. Amendment of Section 64.702 of the Commission's Rules and Regulations (Third Computer Inquiry), Report and Order, CC Docket No. 85-229,104 FCC 2d 958, 1018-28 (1986) (Computer III Order ).

At the same time, the Commission noted that several commenters had suggested that service-by-service CEI plans could be avoided if the FCC were instead to require that each BOC develop an "open network architecture" (ONA); this would entail each BOC breaking its access service down into its component parts and offering each so-called basic service element (BSE) separately and upon an equal basis to all ESPs (including, for regulatory accounting purposes, itself). Id. at 1059-68. The FCC agreed with this approach, which it thought could both prevent the BOCs from discriminating in the provision of local access and make access for ESPs more efficient. Id. at 1063-64. Hence, the Commission set general guidelines for ONA and required each BOC to file an ONA plan setting forth the BSEs it would initially offer. Id. at 1064-68. Moreover, the Commission required each BOC to allow other ESPs to participate in the development of its ONA offerings in order to "decrease the potential for possible discrimination by the [BOC] in designing [BSEs]." Id. at 1065-66.

MCI and the Commission agree that the BSEs in the ONA plans originally submitted by the BOCs were primarily just the unbundled components of the services that the BOCs were already offering. The Commission approved those plans in substantial part but required some augmentation; in particular, it directed each BOC to review each other BOC's proposals for additional unbundling ideas and to develop plans for the application of ONA principles to new technologies, such as ISDN (Integrated Services Digital Network). Filing and Review of Open Network Architecture Plans, Memorandum Opinion and Order, CC Docket No. 88-2, 4 FCC Rcd 1, 10-17 (1988) (BOC ONA Order ). The Commission later approved the ONA filings as thus amended, and refused various requests that it...