Bellsouth Advertising v Tn Regulatory et al, 98-00987

CourtCourt of Appeals of Tennessee
PartiesBELLSOUTH ADVERTISING & PUBLISHING CORPORATION v. TENNESSEE REGULATORY AUTHORITY, ET AL.& M1998-01012-IN THE COURT OF APPEALS OF TENNESSEE AT NASHVILLE
Docket Number98-00987
Decision Date16 February 2001

BELLSOUTH ADVERTISING & PUBLISHING CORPORATION
v.
TENNESSEE REGULATORY AUTHORITY, ET AL.

No. M1998-00987-COA-R12-CV & M1998-01012-COA-R12-CV

IN THE COURT OF APPEALS OF TENNESSEE AT NASHVILLE

May 3, 1999 Session

Filed February 16, 2001

Appeal from the Tennessee Regulatory Authority at Nashville, Tennessee: Nos. 96-01692 & 98-00654

In these cases consolidated on appeal, Bellsouth Advertising & Publishing Corporation (BAPCO) appeals from the action of the Tennessee Regulatory Authority requiring it to brand the covers of its "White Pages Directory" with the names and commercial logos of local telecommunication companies in competition with its parent corporation Bellsouth Telecommunications, Inc. (BST). We reverse the judgment of the Tennessee Regulatory Authority. Judge Cottrell dissents.

Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Tennessee Regulatory Authority Reversed

WILLIAM B. CAIN, J., delivered the opinion of the court. WILLIAM C. KOCH, JR., J., filed a concurring opinion with Judge Cain specifically concurring in Part VI thereof. PATRICIA J. COTTRELL, J., filed a dissenting opinion.

Paul S. Davidson and Guilford F. Thornton, Jr., Nashville, Tennessee, and James F. Bogan, III and Daniel J. Thompson, Jr., Atlanta, Georgia, for the appellant, Bellsouth Advertising & Publishing Corporation.

Henry Walker and K. David Waddell, Nashville, Tennessee, for the appellees, Nextlink Tennessee, L.L.C. and Tennessee Regulatory Authority.

OPINION

This case represents the consolidation of two different, but intricately linked, administrative appeals concerning BellSouth Advertising & Publishing Corporation (BAPCO). The first, BellSouth Advertising and Pubublishing Corp. v. Tennessee Regulatory Authority, et al (the AT&T case hereinafter) concerned a claim originally brought by American Telephone & Telegraph, Inc. (AT&T) seeking to have its name and logo placed on the covers of the "White Pages" directories published by BAPCO. By order entered March 19, 1998, the Tennessee Regulatory Authority (TRA) Required BAPCO to place AT&T's name and logo on the cover of its "White Pages".

The aforementioned AT&T declaratory order was interpreted and applied in a proceeding wherein NEXTLINK L.L.C., and similarly situated telecommunications companies sought to "brand" BAPCO's "White Pages" cover along with AT&T. Because of the substantial similarity of the issues, these two cases were consolidated for consideration in this court. While certain issues raised in the Nextlink case are of no consequence in the AT&T case, and thus must be considered separately, the crucial issues are common to both cases.

This crucial, sub-constitutional issue presents the question of whether or not the TRA, under Tennessee law and Tennessee Regulatory Authority Rule 1220-4-2-.15, can compel BellSouth Advertising and Publishing Corporation to display, on the cover of its "White Pages" telephone directory, the name and commercial logo of local telecommunication companies that are competitors of BellSouth Telecommunications, Inc., giving such competing names and commercial logos equal prominence with the "BellSouth" name and logo.

I.HISTORICAL BACKGROUND

In the decade of the 1990's, many states, including Tennessee, were running legislatively parallel to the Congress of the United States in converting, from a monopoly environment to a competitive environment, the providing of local telephone services.

On January 25, 1999, the United States Supreme Court issued its decision in AT&T Corp. v. Iowa Utilities Bd., 525 U.S. 366 (1999). This decision was a detailed construction of the Telecommunications Act of 1996, 47 U.S.C. 251 et seq. Justice Thomas, concurring in part and dissenting in part, traced the history of telecommunications in the United States and the effect of the Telecommunications Act of 1996.

From the time that the commercial offering of telephone service began in 1877 until the expiration of key patents in 1893 and 1894, Alexander Graham Bell's telephone company--which came to be known as the American Telephone and Telegraph Company--enjoyed a monopoly. In the decades that followed, thousands of independent phone companies emerged to fill in the gaps left by the telephone giant and, in most larger markets, to build rival networks in direct competition with it. As competition developed, many municipalities began to adopt ordinances regulating telephone service.

During the 1900's, state legislatures came under increasing pressure to centralize the regulation of telephone service. Although the quasicompetitive system had significant drawbacks from the consumers' standpoint--principally the refusal of competing systems to interconnect--perhaps the strongest advocate of state regulation was AT&T itself. The company's arguments that telephone service was naturally monopolistic and that competition was resulting in wasteful duplication of facilities appealed to Progressive-era legislatures. By 1915, most States had established public utility commissions and charged them with regulating telephone service. Over time, the Bell Companies' policy of buying out independent providers coupled with the state commissions' practice of prohibiting competitive entry led back to the monopoly provision of local telephone service.

. . . .

In the Communications Act of 1934, 48 Stat. 1064, as amended, 47 U.S.C. 151 et seq., Congress transferred authority over interstate communications from the ICC to the newly created Federal Communications Commission (FCC or Commission). As in the Mann-Elkins Act, Congress chose not to displace the States' authority over intrastate communications. . . .

Congress enacted the Telecommunications Act of 1996 (Act), Pub. L. 104-104, 110 Stat. 56, against this backdrop. To be sure, the 1996 Act marked a significant change in federal tele-communications policy. Most important, Congress ended the States' longstanding practice of granting and maintaining local exchange monopolies. It also required incumbent local exchange carriers to allow their competitors to access their facilities in three different ways. . . . [I]ncumbents must: interconnect their networks with requesting carriers' facilities and equipment, provide nondiscriminatory access to network elements on an unbundled basis at any technically feasible point, and offer to resell at wholesale rates any telecommunications service that they provide to subscribers who are not telecommunications carriers. The Act sets forth additional obligations applicable to all telecommunications carriers and all local exchange carriers. To facilitate rapid transition from monopoly to competitive provision of local telephone service, Congress set forth a process to ensure that the incumbent and competing carriers fulfill these obligations.

Section 252 sets up a preference for negotiated interconnection agreements. To the extent that the incumbent and competing carriers cannot agree, the Act gives the state commissions primary responsibility for mediating and arbitrating agreements. Specifically, Congress directed the state commissions to mediate disputes between carriers during the voluntary negotiation period and--after the negotiations have run their course--to arbitrate any "open issues." In conducting these arbitrations, state commissions are directed to ensure that open issues are resolved in accordance with the requirements of 251, "establish . . . rates for interconnection, services, or network elements" according to the standards that Congress set forth in 252(d), and to provide a schedule for implementing the agreement reached during arbitration.(FN1)

AT&T Corp., 525 U.S. at 402-06. (Thomas, J., concurring in part and dissenting in part).

While both cases at bar are based on Tennessee law, it is well to note that this dispute first came before the TRA in 1996 when American Telephone and Telegraph Company filed a petition for arbitration against BellSouth Telecommunications, Inc. (BST), the incumbent local exchange carrier, under section 252 of the Federal Telecommunications Act of 1996. In this action, AT&T asserted that the T R A should resolve, under the federal act, the question of whether AT&T had the right to have its commercial logo displayed on the cover of directories published by BAPCO for BST. Following the lead of Georgia (Georgia PSC Docket No. 6801-U Sept. 26, 1996), Massachusetts (Order of Massachusetts DPU in NYTEX/AT&T/MCI/Sprint Arbitration Dec. 4, 1996), and North Carolina (Order of North Carolina Utilities Commission in AT&T/BST Arbitration Dec. 23, 1996), the TRA held that the directory cover issue was not arbitrable under the federal act and stated that "private negotiations are the preferred method of resolving this issue, and the parties are encouraged to resolve this matter through negotiation." Private negotiations, however, reached an impasse because AT&T would not agree to cease the display of its commercial logo on the covers of directories published by competitors of BAPCO.

II.CHRONOLOGY OF THE TENNESSEE LITIGATION

BAPCO is a wholly owned subsidiary of BellSouth Enterprises, Incorporated, which is itself a wholly owned subsidiary of BellSouth Corporation. BST is the "incumbent local exchange telephone company" as defined in our state act, Tennessee Code Annotated section 65-4-101(d) (1999) and is also a wholly owned subsidiary of BellSouth Corporation.

AT&T and interveners Nextlink Tennessee, L.L.C. (Nextlink), M.C.I. telecommunications Corporation (MCI), and American Communications Services, Inc. (ACSI) are "competing telecommunications service providers" within the meaning of Tennessee Code Annotated section 65-4-101(e).

Both federal law [47 U.S.C. 271(c)(2)(B)(viii)] and Tennessee law [Tenn .Code Ann. 65-4-124(c)] require BST to publish a directory of "White Pages", containing not only the names of its own subscribers but also the names of subscribers of competing carriers. It is undisputed that the...

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