American Tel. & Tel. Co. v. F. C. C.
| Citation | 572 F.2d 17 |
| Decision Date | 26 January 1978 |
| Docket Number | Nos. 1349,s. 1349 |
| Parties | AMERICAN TELEPHONE AND TELEGRAPH COMPANY, Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION and the United States of America, Respondents. INTERNATIONAL BUSINESS MACHINES CORPORATION, Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION and the United States of America, Respondents. SECURITIES INDUSTRY AUTOMATION CORPORATION, Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION and the United States of America, Respondents. UNITED SYSTEM SERVICE, INC., Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION and the United States of America, Respondents. TELENET COMMUNICATIONS CORP., Petitioners, v. FEDERAL COMMUNICATIONS COMMISSION and the United States of America, Respondents. AERONAUTICAL RADIO, INC. and Air Transport Association of America, Petitioners, v. FEDERAL COMMUNICATIONS COMMISSION and the United States of America, Respondents, MCI Telecommunications Corp., et al., Utilities Telecommunications Council, Computer & Business Equipment Manufacturers Assn., Aeronautical Radio, Inc. and Air Transport Assn. of America, American Telephone & Telegraph Co., Securities Industry Automation Corp., American Trucking Assn., Inc., Telenet Communications Corp., Western Union International Inc., RCA Global Communications Inc., United System Service, Inc., Remote Processing Services Section (RPSS) of the Ass'n of Data Processing, Service Organizations, Inc., Southern Pacific Communications Co., ITT World Communications, Inc., American Petroleum Institute, American Newspaper Publishers Assoc., et al., International Business Machines Corp., MCI Telecommunications Corporation and Microwave Communication, Inc., Graphic Systems, Inc., Graphic Scanning Corp., Intervenors. to 1354 Dockets 77-4057, 77-4067, 77-4068 and 77-4073 to 77-4075. |
| Court | U.S. Court of Appeals — Second Circuit |
Charles Lister, Washington, D. C. (Paul J. Berman, Washington, D. C., Alfred A. Green, J. Robert Fitzgerald, F. Mark Garlinghouse, New York City, Edgar Mayfield, Bedminster, N. J., of counsel), for petitioner A. T & T. Co.
J. Roger Wollenberg, Washington, D. C. (David R. Anderson, William T. Lake, Roger M. Witten, Erica A. Ward, Wilmer, Cutler & Pickering, Washington, D. C., Thomas D. Barr, Robert F. Mullen, Ronald S. Rolfe, Cravath, Swaine & Moore, New York City, J. Gordon Walter, IBM, Armonk, N. Y., of counsel), for petitioner-intervenor, IBM Corp.
Warren E. Baker, Kansas City, Mo. (Lawrence Kill, Anderson, Russell Kill & Olick, New York City, John M. Lothschuetz, Carolyn C. Hill, Washington, D. C., of counsel), for petitioner United System Service, Inc.
Donald E. Ward, Washington, D. C. (Philip M. Walker, Gen. Counsel, Telenet Communications Corp., Washington, D. C., of counsel), for petitioner Telenet Communications Corp.
Charles R. Cutler, Washington, D. C. (John L. Bartlett, Kirkland, Ellis & Rowe, Washington, D. C., James E. Landry, Gen. Counsel, Air Transport Ass'n of America, Washington, D. C., of counsel), for petitioners-intervenors Aeronautical Radio, Inc. and Air Transport Ass'n of America.
John E. Ingle, Counsel, F. C. C., Washington, D. C. (Werner K. Hartenberger, Gen. Counsel, Daniel M. Armstrong, Associate Gen. Counsel, F. C. C., Washington, D. C., John H. Shenefield, Acting Asst. Atty. Gen., Robert B. Nicholson, Joen Grant, Dept. of Justice, Washington, D. C., of counsel), for respondents.
William J. Byrnes, Washington, D. C. (Michael H. Bader, Kenneth A. Cox, Raymond C. Fay, Haley, Bader & Potts, Washington, D. C., John R. Worthington, MCI Telecommunications Corp., Washington, D. C., of counsel), for intervenors MCI Telecommunications Corp. and Microwave Communications, Inc.
Philips B. Patton, Washington, D. C. (Jeremiah Courtney, Arthur Blooston, Washington, D. C., of counsel), for intervenor American Trucking Associations, Inc.
Howard G. Kristol, Reboul, MacMurray, Hewitt, Maynard & Kristol, New York City (Thormund A. Miller, Richard S. Kopf, James M. Tobin, San Francisco, Cal., Herbert E. Forrest, Steptoe & Johnson, Washington, D. C., of counsel), for intervenor Southern Pacific Communications Co.
Mahlon M. Frankhauser, Michael Yourshaw, Thomas W. Queen, Kirkland, Ellis & Rowe, Washington, D. C., for intervenor Securities Industry Automation Corp.
Joseph M. Kittner, Edward P. Taptich, Norman P. Leventhal, McKenna, Wilkinson & Kittner, Washington, D. C., John S. Voorhees, Howrey, Simon, Baker & Murchison, Washington, D. C., for intervenor Computer and Business Equipment Manufacturers Ass'n.
Joseph E. Keller, Wayne V. Black, Larry S. Solomon, Christine A. Meagher, Keller & Heckman, Washington, D. C., for intervenor American Petroleum Institute.
Charles M. Meehan, Keller & Heckman, Washington, D. C., for intervenor Utilities Telecommunications Council.
Before MESKILL, Circuit Judge, and STEWART * and WARD, ** District Judges.
The type of interstate telephone service most people are familiar with the type used in most homes and offices is public telecommunications service. This includes normal long distance service. 1 Charges for this type of service are generally based on use, i. e., a "toll" is charged for each call.
In contrast, the type of telephone service involved in this case is private line service. 2 Telephone companies make this special type of service available in bulk, at rates below those for normal long distance service, to customers such as businesses and government with substantial communications needs. A subscriber to private line service typically buys the right to use telephone facilities between two or more pre-selected locations on a full-time basis. The facilities involved are generally capable of instant connection between locations. Charges for the service are made on a flat, periodic rate basis and depend, generally, on the number of connected locations and the distance between them. Private line services are used for normal voice communications, radio and television signal transmission, teletypewriter and remote meter monitoring, and specialized service for high-speed data and facsimile communications.
As is true of bulk offerings in other areas of commerce, private line services, as sold by the major carriers, are often underutilized. For example, a telephone company customer may need to communicate between two locations quickly and at any time during the day or night. It may be economical for such a customer to buy private line services at bulk rates, rather than normal long distance rates, but it would probably not be necessary to communicate between the two locations constantly. When the customer is not using the facilities, they go to waste. This underutilization makes the bulk offerings attractive to small customers, who would be willing to aggregate their needs and "share" 3 both the services and the discount, and to middlemen, who would buy the services at the discount rate and "resell" 4 them to customers at rates below the normal long distance rates.
The desire of some businesses to share or resell private line services has been frustrated by a communications industry tradition under which carriers that own and operate transmission facilities supply service to ultimate users directly, without middlemen. This tradition is embodied in carrier-initiated tariffs that forbid, in both public telecommunications service and private line service, a customer to share or resell a purchased service. There are, of course, exceptions. For example, local exchange and long distance service may not be resold (this is why a hotel may not impose a surcharge on interstate calls, see Ambassador, Inc. v. United States, 325 U.S. 317, 65 S.Ct. 1151, 89 L.Ed. 1637 (1945)), but they may be shared, so long as the subscriber does not profit from the sharing. There are also exceptions with regard to private line service. Western Union resells service obtained from American Telephone & Telegraph ("AT&T"); so do certain specialized common carriers. Some special groups, including airlines, electric utilities and the securities industry, enjoy the right to share service provided through an authorized intermediary under the so-called "single customer" tariff exception. News services enjoy a similar right under the so-called "joint use" tariff exception. A small number of organizations known as "value added" carriers are authorized to resell private line services which they augment by adding data or facsimile communications services.
Some of the businesses that would like to engage in resale or sharing of private line services, but which were barred from doing so under existing tariff restrictions, challenged those restrictions as unjust and unreasonable a refusal to provide services "upon reasonable request therefor" in violation of § 201(a) of the Communications Act of 1934 ("the Communications Act"), 47 U.S.C. § 201(a). The tariff exceptions were challenged as discriminatory, a violation of § 202(a) of the Communications Act.
The order now under review resulted from a proceeding initiated by the Federal Communications Commission ("FCC") by a Notice of Inquiry and Proposed Rulemaking. 47 F.C.C.2d 644 (1974) ("Notice"). The Notice called for three rounds of comments on the subject of sharing and resale restrictions. Over forty organizations participated by filing comments. In July of 1976, the FCC released its Report. In re Regulatory Policies Concerning Resale and Shared Use of Common Carrier Services and Facilities, 60 F.C.C.2d 261 (1976), amended on reconsideration, 62 F.C.C.2d 588 (1977) ("Report"). The FCC concluded that existing tariffs were unjust, unreasonable and discriminatory, and it prescribed unlimited resale and sharing. The FCC found that resale is common carrier activity within the meaning of 47 U.S.C. § 153(h) and decided to regulate it as such. The FCC also found that sharing was not common carriage and decided that it would not be regulated but, instead, would be monitored in...
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