Capital Network System, Inc. v. F.C.C.
| Decision Date | 17 September 1993 |
| Docket Number | Nos. 91-1280,91-1291,s. 91-1280 |
| Citation | 3 F.3d 1526 |
| Parties | , 147 P.U.R.4th 427 CAPITAL NETWORK SYSTEM, INC., Petitioner, NYCOM Information Services, Inc., Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents, US WEST Communications, Inc., et al., Intervenors. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Petitions for Review of an Order of the Federal Communications Commission.
Mitchell F. Brecher, Washington, DC, argued the cause for petitioners. With him on the joint brief were Kathleen J. Masterton, Washington, DC, and Amy S. Gross, Stamford, CT.
Laurel R. Bergold, Counsel, Federal Communications Com'n ("FCC"), Washington, DC, argued the cause for respondents. With her on the brief were Renee Licht, Acting Gen. Counsel, Daniel M. Armstrong, Associate Gen. Counsel, and John E. Ingle, Deputy Associate Gen. Counsel, FCC, and Robert B. Nicholson and Robert J. Wiggers, Attorneys, U.S. Dept. of Justice, Washington, DC. Robert L. Pettit, Washington, DC, also entered an appearance for respondents.
Robert B. McKenna, Denver, CO, entered an appearance for intervenor US WEST Communications, Inc.
Andrew D. Lipman, Washington, DC, entered an appearance for intervenor Zero Plus Dialing, Inc. Donald W. Boecke, Washington, DC, entered an appearance for intervenor NYNEX Telephone Cos.
Martin T. McCue, Washington, DC, entered an appearance for intervenor United States Telephone Ass'n.
John W. Bogy, James P. Tuthill, and Stanley J. Moore, San Francisco, CA, entered appearances for intervenors Pacific Bell and Nevada Bell.
Alfred W. Whittaker, Washington, DC, and Floyd S. Keene, Hoffman Estates, IL, entered appearances for intervenors Ameritech Operating Cos.-Illinois Bell Telephone Co., et al.
Albert H. Kramer and Robert F. Aldrich, Washington, DC, entered appearances for intervenor American Public Communications Council of the North American Telecommunications Ass'n.
John Paul Walters, Edmond, OK, and Richard C. Hartgrove, St. Louis, MO, entered appearances for intervenor Southwestern Bell Telephone Co.
Theodore D. Frank and Vonya B. McCann, Washington, DC, entered appearances for intervenor Central Telephone Co. in No. 91-1291.
Before EDWARDS, BUCKLEY, and SENTELLE, Circuit Judges.
Opinion for the court filed by Circuit Judge BUCKLEY.
Capital Network System, Inc. and NYCOM Information Services, Inc. are providers of interexchange telephone service. They petition for review of a ruling of the Federal Communications Commission denying a request for the initiation of a rulemaking or other measures that would reinstate the regulation of billing and collection services provided by local exchange telephone companies to interexchange companies for tolls arising from operator-assisted long distance calls. Because petitioners have failed to adduce sufficient evidence of the need for regulation, we deny their petitions.
The Communications Act, 47 U.S.C. Secs. 151-613 (1988), authorizes the Federal Communications Commission ("FCC" or "Commission") to regulate interstate and foreign telephone and radio communication. 47 U.S.C. Secs. 151, 152(a). Under Title II of the Act, 47 U.S.C. Secs. 201-224, the Commission is given explicit authority to regulate rates charged for "communication service" by interstate and international communications common carriers. See 47 U.S.C. Sec. 201(a). In addition, Title I of the Act, 47 U.S.C. Secs. 151-58, grants the Commission "ancillary" authority to regulate activities of communications carriers that are not subject to regulation under Title II. See 47 U.S.C. Sec. 152(a) (); 47 U.S.C. Sec. 153(a) () (emphasis added); 47 U.S.C. Sec. 154(i) (); see also United States v. Southwestern Cable Co., 392 U.S. 157, 178, 88 S.Ct. 1994, 2005, 20 L.Ed.2d 1001 (1968) ().
This case is one of many arising from the breakup of the American Telephone and Telegraph Company. Before the breakup, the Bell Companies (the local telephone exchange companies then affiliated with AT & T) performed the billing and collection task in connection with AT & T's long distance services. As part of the "Modification of Final Judgment" ("MFJ"), the antitrust consent decree that required AT & T to divest itself of the Bell companies, these newly divested companies were permitted to continue these services but were required to offer them on the same terms to all long distance service providers. See United States v. American Tel. & Tel. Co., 552 F.Supp. 131, 234 (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). Shortly after the MFJ took effect, similar terms were imposed by another settlement decree on the local telephone exchange companies controlled by GTE Corporation. See United States v. GTE Corp., 603 F.Supp. 730, 743 & n. 55 (D.D.C.1984). Together, the Bell and GTE companies provide about 90 percent of all local telephone exchange service in the United States. See id. at 733-34.
In the immediate aftermath of the AT & T breakup, the FCC brought billing and collection services under regulation, requiring compliance with approved rate schedules and prohibiting discrimination in the provision of such services. See MTS and WATS Market Structure, 97 F.C.C.2d 682, 741-42 (1983), aff'd in part and remanded in part on other grounds, National Ass'n of Regulatory Util. Comm'rs v. FCC, 737 F.2d 1095 (D.C.Cir.1984). The FCC asserted authority to impose these requirements under Title II of the Communications Act. See id. at 741.
In January 1986, the Commission ordered the deregulation of billing and collection services. Detariffing of Billing and Collection Services, 102 F.C.C.2d 1150 (1986) ("Detariffing Order "). That order held that billing and collection in connection with telephone service was not a "communication service," and that even if it were deemed a communication service, it was "doubtful" that it could qualify as a "common carrier service," id. at 1168-69; hence, such services were not, as the Commission had previously thought, subject to regulation under Title II of the Act. Although the Commission found that it could perpetuate its regulatory regime on the authority of its "ancillary jurisdiction" under Title I, it declined to do so. See id. at 1169-71. Having established that "there is sufficient competition to allow market forces to respond to excessive rates or unreasonable billing," the FCC concluded that "no statutory purpose would be served by continuing to regulate billing and collection service." Id. at 1170.
In promulgating the Detariffing Order, the Commission's focus was almost exclusively on the market for "subscriber," or "1+," long-distance service, for which tolls are charged to the account of the telephone that originates the call. When the Detariffing Order was issued, competition in the other segment of the long-distance market, that for "operator-assisted," or "0+," service was still in its infancy. Operator-assisted calling, as the term is used here, includes all calls for which tolls are not automatically charged to the owner of the line originating the call, whether or not an actual operator assists in the call's completion. Credit card, collect, and bill-to-third party calls are all examples of operator-assisted services.
A surge of competition in the operator-assisted segment of the market followed in the wake of the AT & T breakup, and, amidst this surge, several interexchange carriers ("IXCs") became convinced that certain local exchange carriers ("LECs") were subjecting them to exorbitant rates and discrimination in billing and collecting for operator-assisted calls. In particular, these IXCs were concerned with the practices of the "independent" LECs who, because they had not been affiliated with AT & T or GTE, were not bound by the nondiscrimination strictures of the two consent decrees. The independents number about 1,400, and they control approximately 10 percent of the local exchange market.
Many independent LECs have continued to provide billing and collection services to AT & T while refusing to provide them to other interexchange carriers. Thus, if a person walks into a telephone booth connected to AT & T and places a collect call to a number assigned by an independent LEC, AT & T will complete the call, the independent LEC will bill the call on its customer's regular bill, and AT & T will receive reimbursement, less a collection fee, from the LEC. But if that same person walks into a booth connected, say, to petitioner Capital Network Systems ("CNS") and seeks to place the same collect call, in many instances the independent LEC will refuse to bill and collect for the call as it would have for AT & T. Under such circumstances, CNS must either transfer the call to AT & T for completion or complete the call itself and then try to bill the party who accepted it.
On June 1, 1989, CNS and the Competitive Telecommunications Association ("CompTel"), an industry group, filed a petition with the FCC asking it to consider three actions. Petition to Mandate Availability of Essential Billing and Collection Services and Access to Call...
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