National Rural Telecom Ass'n v. F.C.C.

Citation988 F.2d 174
Decision Date26 March 1993
Docket Number91-1303,Nos. 91-1300,91-1304 and 91-1326,s. 91-1300
PartiesNATIONAL RURAL TELECOM ASSOCIATION, Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents, American Telephone and Telegraph Company, US West Communications, Inc., GTE Telephone Operating Companies, Ameritech Operating Companies, Southwestern Bell Telephone Company, Maryland People's Counsel, NYNEX, Pacific Bell and Nevada Bell, BellSouth Corporation, South Central Bell and Southern Bell Telephone and Telegraph Company, ALLTEL Service Corporation, Telephone Utilities Exchange Carrier Association, United States Telephone Association, MCI Telecommunications Corporation, National Association of Regulatory Utility Commissioners, Metropolitan Fiber Systems, Inc., Ad Hoc Telecommunications Users Committee, National Cable Television Association, Inc., International Communications Association, Tele-Communications Association, Telephone and Data Systems, Inc., Public Service Commission of the District of Columbia, United Telecommunications, Inc., Intervenors. The ORGANIZATION FOR the PROTECTION AND ADVANCEMENT OF SMALL TELEPHONE COMPANIES, Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents, American Telephone and Telegraph Company, US West Communications, Inc., GTE Telephone Operating Companies, Ameritech Operating Companies, Southwestern Bell Telephone Company, Maryland People's Counsel, NYNEX, Pacific Bell and Nevada Bell, BellSouth Corporation, South Central Bell and Southern Bell Telephone and Telegraph Company, ALLTEL Service Corporation, Telephone Utilities Exchange Carrier Association, United States Telephone Association, MCI Telecommunications Corporation, National Association of Regulatory Utility Commissioners, Metropolitan Fiber Systems, Inc., Ad Hoc Telecommunications Users Committee, National Cable Television Association, Inc., International Communications Association, Tele-Communications Association, Telephone and Data Systems, Inc., Public Service Commission of the District of Columbia
CourtUnited States Courts of Appeals. United States Court of Appeals (District of Columbia)

Petitions for Review of Orders of the Federal Communications Commission.

Frank W. Krogh, with whom Donald J. Elardo and Loretta J. Garcia were on the brief, for petitioner in case No. 91-1326.

Margot S. Humphrey, with whom David Casson, L. Marie Guillory and Lisa M. Zaina were on the joint brief, for petitioners in Nos. 91-1300, 91-1303 and 91-1304.

Laurence N. Bourne, Counsel, Federal Communications Commission (FCC), with whom Renee Licht, Acting Gen. Counsel, David M. Armstrong, Associate Gen. Counsel, John E. Ingle, Deputy Associate Gen. Counsel, FCC, and Robert B. Nicholson and Robert J. Wiggers, Attys., Dept. of Justice, were on the brief for respondents.

Alfred W. Whittaker, with whom John G. Mullan, Floyd S. Keene, John Thorne, Michael D. Lowe, Richard C. Hartgrove, Thomas A. Pajda, Gail L. Polivy, Ward W. Wueste, Jr., Richard McKenna, William B. Barfield, M. Robert Sutherland, Saul Fisher, Mary McDermott, Robert B. McKenna, James P. Tuthill, Margaret deB. Brown and Jeffrey B. Thomas were on the joint brief, for intervenors Bell Operating Companies and GTE intervenors.

John Glynn, Robert L. Duston, and Gary L. Lieber were on the brief, for intervenors Consumer and Ratepayer.

Margot S. Humphrey and Calvin Simshaw were on the joint statement in lieu of brief, for intervenors Telephone Utilities Exchange Carrier Ass'n and Telephone and Data Systems, Inc.

Carolyn C. Hill was on statement in lieu of brief, for intervenor ALLTEL Service Corp.

Alfred W. Wittaker, Floyd S. Keene, and Michael S. Pabian entered appearances, for intervenors Illinois Bell Telephone Co., Indiana Bell Telephone Co., Inc., Michigan Bell Telephone Co., The Ohio Bell Telephone Co., Wisconsin Bell, Inc. (Ameritech).

Richard C. Hartgrove and Thomas A. Pajda entered appearances, for intervenor Southwestern Bell Telephone Co.

Paul Rodgers, Charles D. Gray and James B. Ramsey, entered appearances, for intervenor Nat. Ass'n of Regulatory Utility Com'rs.

Gail L. Polivy and Richard McKenna entered appearances, for intervenor GTE Service Corp. and GTE Telephone Operating Companies.

Andrew L. Lipman entered an appearance, for intervenor Metropolitan Fiber Systems, Inc.

Marc E. Manly and Francine J. Berry entered appearances, for intervenor American Tel. and Tel. Co.

Martin T. McCue entered an appearance, for intervenor U.S. Telephone Ass'n.

Charles C. Hunter, and James S. Blaszak entered appearances, for intervenor Ad Hoc Telecommunications User Committee.

Jeffrey B. Thomas, James P. Tuthill, Margaret deB. Brown and Stanley J. Moore entered appearances, for intervenors Pacific Bell and Nevada Bell.

Brian R. Moir entered an appearance, for intervenor International Communications Ass'n.

Brenda L. Fox and David L. Nicoll entered appearances, for intervenor Nat. Cable Television Ass'n, Inc.

Frank W. Krogh, Donald J. Elardo and Loretta J. Garcia entered appearances, for intervenor MCI Telecommunications Corp.

Robert B. McKenna entered an appearance, for intervenor US West Communications, Inc.

William B. Barfield, R. Frost Branon, Jr., and M. Robert Sutherland entered appearances, for intervenors BellSouth Corporation, South Central Bell Telephone Co., et al.

Gary L. Lieber, J. Thomas Esslinger, Denise Bonn, Robert L. Dunston and John M. Glynn entered appearances, for intervenor Maryland People's Counsel.

R. Michael Senkowski entered an appearance, for intervenor Tele-Communications Ass'n.

Peter G. Wolfe entered an appearance, for intervenor Public Service Com'n of District of Columbia.

H. Richard Juhnke entered an appearance, for intervenor United Telecommunications, Inc.

Donald W. Boecke, Mary McDermott and Saul Fisher entered appearances, for intervenors New York Telephone Co. and New England Telephone, et al. (NYNEX).

Before: MIKVA, Chief Judge, WILLIAMS and SENTELLE, Circuit Judges.

Opinion for the Court filed by Circuit Judge STEPHEN F. WILLIAMS.

STEPHEN F. WILLIAMS, Circuit Judge:

At issue in this appeal are two Federal Communications Commission orders implementing "price cap" rate regulation for the interstate services of local telephone exchange companies ("LECs"). Policy and Rules Concerning Rates for Dominant Carriers, Second Report and Order, 5 FCC Rcd 6786 (1990) ("LEC Price Cap Order "), on reconsideration, 6 FCC Rcd 2637 (1991) ("LEC Reconsideration Order "). Under the orders, all the Bell and GTE companies must shift to price cap regulation; all other LECs may but need not make the change. Although no party challenges the Commission's basic decision to move to price caps, petitioners here attack special aspects of the plan.

On one side, small local telephone companies, represented by various associations, claim that ancillary rules adopted to preserve the effectiveness of price caps unduly restrain telephone company mergers and acquisitions. On the other, MCI, a major user of LEC's services, attacks the rules on the ground (in essence) that the Commission has failed to preserve certain restraints provided by rate-of-return regulation. We start by briefly stating the overall purposes of the Commission in shifting from rate-of-return to price cap regulation and then turn to the specific challenges. Finding the Commission orders neither arbitrary nor capricious, we affirm.

Background

Rate-of-return regulation is based directly on cost. Firms so regulated can charge rates no higher than necessary to obtain "sufficient revenue to cover their costs and achieve a fair return on equity." Policy and Rules Concerning Rates for Dominant Carriers, Further Notice of Proposed Rulemaking, 3 FCC Rcd 3195, 3211 (1988) ("Further Notice "). As one virtue of perfect competition is that it drives prices down to cost, rate-of-return regulation seems on its face a promising way to regulate natural monopolies, in principle roughly duplicating the benefits of competition.

By the late 1980s, however, the FCC began to take serious note of...

To continue reading

Request your trial
31 cases
  • Time Warner Entertainment Co., L.P. v. F.C.C., s. 93-1723
    • United States
    • U.S. Court of Appeals — District of Columbia Circuit
    • July 17, 1995
    ...regulation--while still ensuring that rates remain reasonable. Rate Order, 8 F.C.C.R. at 5776-77; cf. National Rural Telecom Ass'n v. FCC, 988 F.2d 174, 177-78 (D.C.Cir.1993) (describing incentive to be efficient under price cap The cities advance an array of arguments that these rules are ......
  • U.S. Telecom Ass'n v. Fed. Commc'ns Comm'n
    • United States
    • U.S. Court of Appeals — District of Columbia Circuit
    • June 14, 2016
    ...limits the incentive to innovate to a fraction of what it would be under competitive conditions. See National Rural Telecom Association v. FCC , 988 F.2d 174, 177–78 (D.C. Cir. 1993). Price cap regulation, by contrast, looks to general trends in the cost inputs for providers, typically buil......
  • Totah Commc'ns, Inc. v. Fed. Commc'ns Comm'n (In re FCC 11-161. Direct Commc'ns Cedar Valley, LLC)
    • United States
    • U.S. Court of Appeals — Tenth Circuit
    • May 23, 2014
    ...or below a price cap, and “rate-of-return ILECs” are allowed to charge based on a set rate of return. Nat'l Rural Telecomm. Ass'n v. FCC, 988 F.2d 174, 177–78 (D.C.Cir.1993). For price-cap ILECs, the FCC set a six-year period to gradually decrease reciprocal compensation charges and access ......
  • People ex rel. Madigan v. Ill. Commerce Comm'n
    • United States
    • Illinois Supreme Court
    • January 23, 2015
    ...principles at the core of the Act, which do attempt to duplicate competition. See also National Rural Telecom Ass'n v. Federal Communications Comm'n, 988 F.2d 174, 178 (D.C.Cir.1993) (“As one virtue of perfect competition is that it drives prices down to cost, rate-of-return regulation seem......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT