Alarm Industry Communications Comittee v. F.C.C.

• Decision Date: 30 December 1997
• Docket Number: No. 97-1218,97-1218
• Citation: 131 F.3d 1066
• Parties: , 10 Communications Reg. (P&F) 644 ALARM INDUSTRY COMMUNICATIONS COMMITTEE, Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents, Ameritech Corporation, Intervenor.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 1066

131 F.3d 1066

327 U.S.App.D.C. 412, 10 Communications Reg.

(P&F) 644

ALARM INDUSTRY COMMUNICATIONS COMMITTEE, Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION and United States of

America, Respondents,

Ameritech Corporation, Intervenor.

No. 97-1218.

United States Court of Appeals, District of Columbia Circuit.

Argued Nov. 14, 1997.

Decided Dec. 30, 1997.

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

Danny E. Adams, Washington, DC, argued the cause for petitioner. With him on the briefs was Steven A. Augustino.

Stewart A. Block, Counsel, Federal Communications Commission, Washington, DC, argued the cause for respondents. With him on the brief were William E. Kennard, General Counsel at the time the brief was filed, Daniel M. Armstrong, Associate General Counsel, and John E. Ingle, Deputy Associate General Counsel. Andrea Limmer and Robert B. Nicholson, Attorneys, U.S. Department of Justice, entered appearances.

Kenneth S. Geller, Washington, DC, argued the cause for intervenor Ameritech Corporation. With him on the brief was Evan M. Tager.

Before: EDWARDS, Chief Judge, WALD and RANDOLPH, Circuit Judges.

Opinion for the Court filed by Circuit Judge RANDOLPH.

RANDOLPH, Circuit Judge:

Do a corporation's assets, when organized in a separate operating division and dedicated to a particular line of business, constitute an "entity"? This and related questions, in less abstract form, are posed by a provision in the Telecommunications Act of 1996. Pub.L. No. 104-104, 110 Stat. 56 (to be codified in various sections of 47 U.S.C.). The provision, 47 U.S.C. § 275(a), forbids any Bell Operating Company or affiliate from providing "alarm monitoring services" for 5 years from February 8, 1996--unless the company was already in that market. Only Ameritech Corporation qualified for the exemption. Ameritech thus could continue providing alarm monitoring services, but during the 5 year period § 275(a)(2) prohibited it from acquiring "any equity interest in," or obtaining "financial control of, any unaffiliated alarm monitoring service entity." The Federal Communications Commission thought the word "entity" in this clause had a clear and precise meaning--it included only an object with a separate legal existence such as a corporation. Ameritech therefore could, the Commission ruled, purchase alarm monitoring assets organized and operated in an unincorporated division of Circuit City Stores, Inc.

I

There is no need to repeat the description, found in many of our opinions, of the 1982 AT&T modified final judgment; the consolidation of the Bell Operating Companies, or BOCs, into seven (now only five) regional holding companies, including Ameritech Corporation; or the "line of business" restrictions contained in the judgment. One such restriction prohibited the BOCs from entering the "information services market." United States v. American Tel. & Tel. Co., 552 F.Supp. 131, 189 (D.D.C.1982), aff'd mem. sub nom. Maryland v. United States, 460 U.S. 1001, 103 S.Ct. 1240, 75 L.Ed.2d 472 (1983). This market included alarm monitoring services. Providers of such services place devices on a customer's property to detect possible threats from burglary, fire, vandalism, and the like; when triggered, the devices transmit signals to a remote center, alerting monitors there of the need to inform the customer or police, fire, rescue, security, or public safety personnel. See 47 U.S.C. § 275(e).

By 1991, the district court had lifted the "information services" ban. See United States v. Western Elec. Co., 993 F.2d 1572 (D.C.Cir.1993). But only Ameritech thereafter entered the alarm services market. It did so in late 1994 when it purchased the assets of a security alarm monitoring company based near Chicago. In early fall 1995, Ameritech expanded operations by acquiring the stock of The National Guardian Corporation, a company with accounts nationwide. Through SecurityLink, a wholly-owned subsidiary, Ameritech now serves some 367,000 customers and is the second-largest provider of alarm services in the country.

The Telecommunications Act of 1996 added a new Part III to Title II of the Communications Act of 1934. Entitled "Special Provisions Concerning Bell Operating Companies," this portion of the Act regulated the entry of BOCs into certain markets. See 47 U.S.C. §§ 271--76. We are concerned here with 47 U.S.C. § 275(a):

(a) Delayed entry into alarm monitoring

(1) Prohibition

No Bell operating company or affiliate thereof shall engage in the provision of alarm monitoring services before the date which is 5 years after February 8, 1996.

(2) Existing Activities

Paragraph (1) does not prohibit or limit the provision, directly or through an affiliate, of alarm monitoring services by a Bell operating company that was engaged in providing alarm monitoring services as of November 30, 1995, directly or through an affiliate. Such Bell operating company may not acquire any equity interest in, or obtain financial control of, any unaffiliated alarm monitoring service entity after November 30, 1995, and until 5 years after February 8, 1996, except that this sentence shall not prohibit an exchange of customers for the customers of an unaffiliated alarm monitoring service entity.

Several months after § 275 became law, Ameritech purchased all of the alarm monitoring assets of Circuit City Stores, Inc., and integrated them into SecurityLink. Circuit City had organized the assets--customer contracts, monitoring center hardware and software, and alarm equipment inventory--in its Home Security Division, an unincorporated operating division. Ameritech extended offers of employment to all Circuit City employees whose work had been fully dedicated to the Home Security Division. After the asset purchase, the Home Security Division ceased to exist and Circuit City ceased providing alarm monitoring services.

In August 1996, petitioner Alarm Industry Communications Committee ("AICC"), representing the trade group Central Station Alarm Association, asked the Federal Communications Commission to issue an order to show cause why Ameritech's "acquisition of the alarm monitoring business of Circuit City ... is not in violation of" § 275(a)(2). It further requested that the Commission issue a cease and desist order directing Ameritech "to rescind its Circuit City purchase and to refrain from soliciting for or engaging in any additional acquisitions of alarm monitoring businesses" until the expiration of the five-year statutory moratorium. AICC argued that the purchase of Circuit City's alarm monitoring assets constituted obtaining "financial control" of an alarm monitoring entity because the existence of the alarm monitoring business depended on the control of such assets. It maintained that "Congress did not intend to give Ameritech free reign to use the five year moratorium period to acquire its competitors and dominate the alarm industry."

Ameritech responded that "the statute is silent about, and thus does not bar, asset acquisitions." According to Ameritech, the "failure to prohibit asset acquisitions expressly" suggested that "Congress believed that there is a valid distinction between acquiring assets and acquiring equity and/or financial control.... Congress could well have concluded that alarm businesses should be shielded from 'hostile' takeovers by Ameritech, but that there is no need to prevent them from engaging in voluntary transactions with Ameritech."

A split Commission denied AICC's motion, concluding that Ameritech's asset acquisition did not violate § 275(a)(2). See In re Enforcement of Section 275(a)(2) of the Communications Act of 1934, as Amended by the Telecommunications Act of 1996, Against Ameritech Corporation, 12 F.C.C.R. 3855 (1997) ("In re Ameritech"). The Commission held that "the statutory language regarding 'alarm monitoring service entity' is unambiguous and ... the plain meaning of the term requires that an 'entity' have an independent legal existence." Id. at 3859, p 9. Since Home Security Division was not "legally separate" from Circuit City, it did not constitute an "alarm monitoring service entity." Id.

Commissioner Ness dissented. To her, § 275(a)(2) had neither a clear meaning nor the meaning the Commission ascribed to it. Rather, she found that the answer lay "in an effort to discern the logic of the underlying congressional policy." 12 F.C.C.R. at 3863. This policy, she believed, was to allow a grandfathered BOC to expand its alarm business only through competition. Id. at 3864.

II

The phrase in § 275(a)(2)--"alarm monitoring service entity"--had, the Commission thought, a plain meaning because Black's Law Dictionary contained this definition of "entity": "an organization or being that possesses separate existence for tax purposes." See BLACK'S LAW DICTIONARY 532 (6th ed.1990). Only the Circuit City corporation, as distinguished from its Home Security Division, fits this description. Hence, the "alarm monitoring service entity" consisted of the corporation, not its operating division. When Ameritech made its asset purchase, it did not "obtain financial control of" or "acquire any equity interest in" the corporation, and thus, in the Commission's view, Ameritech had not violated § 275(a)(2).

When the purported "plain meaning" of a statute's word or phrase happens to render the statute senseless, we are encountering ambiguity rather than clarity. So here. The Commission's interpretation means that although § 275(a)(2) precluded Ameritech from acquiring even one share of Circuit City's stock, Ameritech was free to acquire the company's entire alarm monitoring services division--lock, stock, and barrel. We asked Commission counsel at oral argument what possible rationale Congress could have had in mind if this is what it intended. Counsel replied: "I'm not saying that the statute makes perfect sense." This answer assumes, of course, that the problem is with the statute...