AT&T Corp. v. F.C.C., 96-1147

• Decision Date: 16 May 1997
• Docket Number: No. 96-1147,96-1147
• Citation: 113 F.3d 225
• Parties: , 8 Communications Reg. (P&F) 222 AT&T CORPORATION, Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents. MCI Telecommunications Corporation, et al., Intervenors.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 225

113 F.3d 225

324 U.S.App.D.C. 272, 8 Communications Reg. (P&F) 222

AT&T CORPORATION, Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents MCI Telecommunications Corporation, et al., Intervenors.

No. 96-1147.

United States Court of Appeals District of Columbia Circuit.

Argued April 14, 1997.

Decided May 16, 1997

On Petition for Review of Orders of the Federal Communications Commission.

Jules M. Perlberg, Chicago, IL, argued the cause, for petitioner, with whom Peter D. Keisler, Mark C. Rosenblum, and Peter H. Jacoby, Washington, DC, were on the briefs.

Stewart A. Block, Counsel, Federal Communications Commission, Washington, DC, argued the cause, for respondent, with whom William E. Kennard, General Counsel, Daniel M. Armstrong, Associate General Counsel, John E. Ingle, Deputy Associate General Counsel, Laurel R. Bergold, Counsel, Joel I. Klein, Acting Assistant Attorney General, U.S. Department of Justice, Catherine G. O'Sullivan, and Nancy C. Garrison, Attorneys, were on brief.

Donald J. Elardo and Frank W. Krogh, Washington, DC, entered appearances for intervenor MCI Telecommunications Corporation.

Before: SENTELLE, RANDOLPH and ROGERS, Circuit Judges.

ROGERS, Circuit Judge:

AT&T Corporation, joined by intervenor MCI Telecommunications Corporation, petitions for review of an order of the Federal Communications Commission ("FCC") that purported to clarify a portion of a regulation on access to billing names and addresses issued earlier in the same rulemaking proceeding. AT&T contends that the "clarification," prohibiting use of the names and addresses for marketing purposes, is a substantive modification of the regulation and that the FCC has failed to give any reasoned explanation for the change. We conclude that the FCC provided an adequate explanation for its interpretation of the rule, and accordingly, we deny the petition.

I.

In 1992, the FCC adopted rules setting forth requirements for local exchange carriers to provide long distance carriers, known as interexchange carriers, access to validation data in the form of billing names and addresses ("BNA") needed to enable the long distance carriers to verify that callers had authorization to use the joint calling card numbers they supplied to the carriers. In the Matter of Policies and Rules Concerning Local Exchange Carrier Validation and Billing Information for Joint Use Calling Cards, 7 F.C.C.R. 3528 (1992) ("Validation Order"). Thereafter, the FCC addressed issues relating to access by interexchange carriers to other BNA data in three rulemaking orders adopted between June and December, 1993. Second Report and Order, 8 F.C.C.R. 4478 (1993) ("BNA Order"); Order (Reconsideration and Petitions for Stay), 8 F.C.C.R. 6393 (1993) and Second Order on Reconsideration, 8 F.C.C.R. 8798 (1993). These orders culminated in the regulation, codified at 47 C.F.R. § 64.1201 (1996), which permits local carriers to disclose BNA information to interexchange carriers, such as AT&T and MCI, for limited purposes, including billing customers for long-distance calls and collecting amounts due, purposes "associated with meeting the 'equal access' requirement of United States v. AT&T, 552 F.Supp. 131 (D.D.C.1982)," verification of service orders for new customers, identification of customers who have moved, and fraud prevention. See 47 C.F.R. § 64.1201(c)(1).

The Third Order on Reconsideration, dismissing as repetitious a petition for reconsideration of the original BNA Order and granting in part and denying in part a petition for reconsideration of the Second Order on Reconsideration, was issued in February, 1996. 11 F.C.C.R. 6835 (1996). In that order the FCC interpreted 47 C.F.R. § 64.1201(c) to bar interexchange carriers from using BNA information for marketing purposes, including the marketing of long-distance service to telephone customers. 11 FCC at 6846-47. Petitioners contend that this interpretation is inconsistent with 47 C.F.R. § 64.102(c)(1)(ii), which provides that BNA may be used for purposes associated with the "equal access" regime of United States v. AT&T, 552 F.Supp. 131 (D.D.C.1982), aff'd sub nom. Maryland v. United States, 460 U.S. 1001, 103 S.Ct. 1240, 75 L.Ed.2d 472 (1983) included in the consent decree entered to disaggregate the Bell System. See 552 F.Supp. at 232-34, App. B. Since the introduction of the "equal access" policy, AT&T, MCI, and other interexchange carriers have competed for customers to "presubscribe" to their services, selecting a primary long-distance carrier that can be accessed from any phone by dialing "1" before the area code and telephone number. See AT&T Corp.--Reclassification as a Non-Dominant Carrier Order, 11 F.C.C.R. 3271, 3300 (1995). Because access to the BNA would provide interexchange carriers with a ready means to contact potential customers, in the course of the regulatory proceeding that culminated in the Third Order on Reconsideration, these companies have argued, essentially as do petitioner and intervenor here, that the FCC's limitation is inconsistent with the section of the regulation that permits BNA to be used to promote "equal access" and competition in the interexchange market.

During the course of this rulemaking, the BNA regulation underwent several modifications. In its initial BNA Order, the FCC reiterated its view, expressed in the 1992 Validation Order, 7 F.C.C.R. at 3539, that telephone users ("end users") generally did not expect BNA information to be used for purposes other than billing, and that use of this data for other purposes would raise privacy concerns. 8 F.C.C.R. at 4484. Accordingly, the FCC adopted, in its BNA Order, 47 C.F.R. § 64.1201, which provided in relevant part:

(c) No telecommunications service provider or authorized billing and collection agent of a telecommunications service provider shall use billing name and address information for any purpose other than billing customers for using telecommunications services of that service provider and collecting amounts due.

(d)(1) No local exchange carrier shall disclose billing name and address information on a bulk basis.

(2) Nothing in paragraph (d)(1) of this section shall preclude local exchange carriers from providing to an interexchange carrier the billing name and address information for all customers presubscribed to that interexchange carrier.

8 F.C.C.R. at 4489.

The FCC received petitions for clarification and reconsideration from local and interexchange carriers, that argued that this rule was too restrictive. In particular, carriers criticized the prohibition in (c) on the release of BNA information for purposes other than billing and collection, and the prohibition in (d)(1) on the disclosure of bulk BNA for any purpose. Carriers argued that they should be permitted to use this information for a variety of purposes, including maintenance of interexchange accounts, prevention of fraud, and marketing of interexchange service. The FCC agreed that several of these uses should be permitted, but adhered to its view that BNA information should not be used for marketing purposes. Accordingly, in its Second Order on Reconsideration, the FCC revised § 64.1201, deleting subsection (d) and adopting the current language of subsection (c), which provides in relevant part:

(c)(1) No telecommunications service provider or authorized billing and collection agent of a telecommunications service provider shall use billing name and address information for any purpose other than the following:

(i) Billing customers for using telecommunications services of that service provider and collecting amounts due;

(ii) Any purpose associated with the "equal access" requirement of United States v. AT&T, 552 F.Supp. 131 (D.D.C.1982).

(iii) Verification of service orders of new customers, identification of customers who have moved to a new address, fraud prevention, and similar nonmarketing services.

8 F.C.C.R. at 8813.

The Second Order on Reconsideration did not elaborate on the meaning of purposes "associated with the 'equal access' requirement" of the AT&T consent decree, which required each of the Bell Operating Companies formerly owned by AT&T "to offer to all interexchange carriers access on an unbundled, tariffed basis, that is equal in type or quality to that provided for the interexchange telecommunications services of AT&T and its affiliates." AT&T, 552 F.Supp. at 232-33, App. B. In a comment on the revised regulation, International Telecharge, Inc., doing business as Oncor Communications, argued that the revised regulation appeared to permit interexchange carriers to use BNA information to market their services to end users because the "equal access" decree required the Bell Operating Companies to permit customers to choose between interexchange carriers, necessitating, in Oncor's view, a process whereby carriers marketed their services to prospective customers. Oncor asked the FCC to clarify that such uses were permitted under the revised regulation.

The FCC declined to adopt Oncor's interpretation. In its Third Order on Reconsideration, the FCC stated that:

we did not intend Section 64.1201(c)(1)(ii) to be a loophole that would eviscerate the rest of the privacy protections adopted in the BNA Order and the Second BNA Reconsideration Order. Rather, we intended Section 64.1201(c)(1)(ii) to permit bulk BNA disclosure for the activities associated with the initial conversion to equal access at a particular central office, and to permit the bulk disclosure of BNA presubscribed to a particular [interexchange carrier] to that [interexchange carrier].

11 F.C.C.R. at 6853. AT&T thereafter filed this petition, requesting review of the...