BellSouth Corp. v. F.C.C.

Citation162 F.3d 678
Decision Date22 December 1998
Docket NumberNo. 98-1019,98-1019
Parties, 1998-2 Trade Cases P 72,381, 14 Communications Reg. (P&F) 770 BELLSOUTH CORPORATION, et al., Appellants, v. FEDERAL COMMUNICATIONS COMMISSION, Appellee. AT&T Corporation, et al., Intervenors.
CourtUnited States Courts of Appeals. United States Court of Appeals (District of Columbia)

Laurence H. Tribe argued the cause for appellants. With him on the briefs were Jonathan S. Massey, Michael K. Kellogg, Charles R. Morgan, William B. Barfield, M. Robert Sutherland, Jim O. Llewellyn and David G. Frolio. Walter H. Alford entered an appearance.

Christopher J. Wright, General Counsel, Federal Communications Commission, argued the cause for appellee. With him on the briefs were Daniel M. Armstrong, Associate General Counsel, John E. Ingle, Deputy Associate General Counsel, Laurence N. Bourne, Counsel, and Brian M. Hoffstadt, Special Counsel.

David W. Carpenter argued the cause for intervenors AT&T Corporation, et al. With him on the briefs were Peter D. Keisler, Mark C. Rosenblum, Roy E. Hoffinger, Donald B. Verrilli, Jr., Anthony C. Epstein, Ian Heath Gershengorn, William Single, IV, Sue D. Blumenfeld, David P. Murray, Charles C. Hunter, Catherine M. Hannan, Daniel L. Brenner, Neal M. Goldberg, David L. Nicoll, Richard J. Metzger, Emily M. Williams, Genevieve Morelli, Robert J. Aamoth, Richard S. Whitt, Riley M. Murphy, Danny E. Adams, Brad E. Mutschelknaus, John J. Heitmann, Jonathan E. Canis and James J. Freeman. Theodore. Whitehouse entered an appearance.

Joel I. Klein, Assistant Attorney General, U.S. Department of Justice, Philip D. Bartz, Acting Assistant Attorney General, Catherine G. O'Sullivan, Nancy C. Garrison, Robert B. Nicholson, Mark B. Stern, Jacob M. Lewis, and Alisa B. Klein, Attorneys, were on the briefs for intervenor United States of America.

William T. Lake, John H. Harwood, II and Robert B. McKenna were on the brief for intervenor U S WEST, Inc.

Kenneth S. Geller, Donald M. Falk, Harold S. Reeves, Theodore A. Livingston and John E. Muench were on the brief for intervenor Ameritech Corporation.

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

Opinion for the Court filed by Chief Judge EDWARDS.

Separate statement filed by Circuit Judge SENTELLE, concurring in the result.

HARRY T. EDWARDS, Chief Judge:

This petition for review represents yet another attack by BellSouth Corporation on the constitutionality of the Telecommunications Act of 1996 (the "Act"). Just this past term, BellSouth challenged the validity of § 274 of the Act, 47 U.S.C. § 274 (Supp. II 1996), which limits the ability of Bell operating companies ("BOCs") to provide "electronic publishing." See BellSouth Corp. v. FCC, 144 F.3d 58 (D.C.Cir.1998) ("BellSouth I "). In this earlier case, BellSouth claimed that § 274 was an unconstitutional bill of attainder, because the subjects of its restrictions, the BOCs, are singled out by name. In the instant case, BellSouth Corporation, BellSouth Telecommunications, Inc., and BellSouth Long Distance, Inc. (collectively "BellSouth") challenge the validity of § 271 of the Act, 47 U.S.C. § 271 (Supp. II 1996), which prevents the BOCs from immediately providing in-region long distance telephone service absent satisfaction of certain statutory criteria.

Once again, BellSouth claims that the challenged provision, here § 271, is an unconstitutional bill of attainder and, in addition, that it results in a denial of equal protection and a violation of the separation of powers doctrine. BellSouth also seeks to overturn the Federal Communications Commission's ("FCC") denial of its application to provide long distance service in South Carolina, see Application of BellSouth Corp., et al. Pursuant to Section 271 of the Communications Act of 1934, as amended, To Provide In-Region, InterLATA Services In South Carolina, 13 F.C.C.R. 539 (1997) ("Order"), contesting both the FCC's finding that BellSouth is foreclosed from petitioning to provide service under § 271(c)(1)(B), and the FCC's findings regarding BellSouth's compliance with certain "competitive checklist" items under § 271. We found no merit in the claims raised in BellSouth I and this challenge fares no better.

We hold that § 271 does not violate any of the constitutional provisions raised by BellSouth. The section does not violate the bill of attainder clause, because it does not inflict "punishment" on BellSouth. Instead, it is a rational and nonpunitive congressional enactment that serves to open telecommunications markets. Section 271 also does not violate the equal protection clause, because Congress had a rational basis for singling out the BOCs, i.e., the unique nature of their control over their local exchange areas. Finally, § 271 does not violate the separation of powers doctrine, because Congress did not substitute its judgment for that of a court; rather it simply altered the prospective effects of a consent decree, which it was surely free to do.

We also find that the FCC was correct in concluding that BellSouth is foreclosed from petitioning to provide service under § 271(c)(1)(B), because BellSouth has failed to demonstrate that no "qualifying requests" for access and interconnection have been made. Moreover, given our finding that BellSouth is foreclosed from providing service under § 271(c)(1)(B), we can find no reason to address the competitive checklist issues.

I. BACKGROUND

As we noted in BellSouth I, the Telecommunications Act of 1996, Pub.L. No. 104-104, 110 Stat. 56 (1996), "changed the entire telecommunications landscape." 144 F.3d at 61. Therefore, in order to put the instant case in proper focus, we begin with an overview of the industry landscape prior to the passage of the Act, as well as the Act itself.

A. The Telecommunications Market and the 1996 Act

In 1982, the American Telephone & Telegraph Company ("AT&T") executed a consent decree, settling an antitrust suit brought by the Government in 1974. That decree, as modified by the District Court, is known as the Modification of Final Judgment ("MFJ"). United States v. American Tel. and Tel. Co., 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). The principal element of the MFJ was the requirement that AT&T divest itself of its local exchange monopolies. BellSouth's two local operating companies, Southern Bell Telephone and Telegraph Company and South Central Bell Telephone Company, were among the twenty-two BOCs spun off as a result of the decree. Each of the twenty-two BOCs were grouped into seven unaffiliated regional Bell operating companies ("RBOCs"). Due to mergers, there are now only five RBOCs, one of which is BellSouth.

The MFJ prohibited the BOCs from certain lines of business, including the provision of long distance services across different "Local Access and Transit Areas" ("interLATA services"), because of the BOCs' "bottleneck" power over the local exchange facilities. See 552 F.Supp. at 223-24. (For the remainder of this opinion, we will refer to interLATA services as long distance services.) The MFJ also provided that the BOCs could petition for relief from these prohibitions, including the prohibition against providing long distance services, if the petitioning BOC could show "that there is no substantial possibility that it could use its monopoly power to impede competition in the market it seeks to enter." Id. at 231.

Over the life of the MFJ, the District Court granted nearly 300 waivers easing the restrictions of the decree. A few of these waivers were related to the long distance service restriction, but they were limited to the provision of services such as paging, time-of-day information, toll-free services, 911 services, international services, and cellular services. However, no BOC ever successfully petitioned under the MFJ to provide long distance telephone services.

In 1996, Congress passed the Act, by which it sought to open all telecommunications markets, including local telephone markets. To this end, many provisions of the Act were made generally applicable to incumbent local exchange carriers. For example, §§ 251 and 252 require all incumbents to permit new carriers to compete for local customers and set forth procedures that incumbents must follow in order to open their local markets to competition. See 47 U.S.C. §§ 251-252 (Supp. II 1996).

A critical feature of the Act is found in § 601(a)(1). This provision eliminated the prospective effects of the MFJ by providing that "[a]ny conduct or activity that was, before the date of enactment of this Act, subject to any restriction or obligation imposed by the [MFJ] shall, on and after such date, be subject to the restrictions and obligations imposed by the Communications Act of 1934 as amended by this Act and shall not be subject to the restrictions and the obligations imposed by [the MFJ]." Telecommunications Act of 1996 § 601(a)(1), 110 Stat. at 143.

In addition to the Act's generally applicable provisions and the elimination of the future effects of the MFJ, Congress enacted §§ 271 through 276, special provisions applicable only to the BOCs listed in § 153(4) of the Act. BellSouth is governed by these provisions. As noted in BellSouth I, "[i]n general these provisions simply maintained, and in most cases loosened, various restrictions to which the BOCs were already subject under the MFJ." 144 F.3d at 61. In other words, generally speaking, the BOCs were better off in terms of business market opportunities under the Act than they had been under the MFJ.

Section 271, the section at issue in this case, provides that the BOCs may immediately begin providing some categories of long distance services that were previously restricted under the MFJ. These services include "out-of-region" long distance services, i.e., long distance services originating outside the state(s) in which a BOC is authorized to...

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