Gte Midwest v. Fed. Commun. Comm'n, 6
| Decision Date | 15 November 2000 |
| Docket Number | 98-3203,6 |
| Parties | GTE Midwest, Inc.(98-3167); BellSouth Corporation (98-3203), Petitioners, U.S. West, Inc.; Bell Atlantic; MCI Telecommunications Corporation; Airtouch Communications, Inc. (98-3167/3203);United States Telephone Association; Alltel Communications, Inc.; SBC Communications, Inc., et al. (98-3167), Intervenors, v. Federal Communications Commission; United States of America, Respondents./3203 UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT Argued: |
| Court | United States Courts of Appeals. United States Court of Appeals (6th Circuit) |
COUNSEL ARGUED: L. Andrew Tollin, WILKINSON, BARKER, KNAUER & QUINN, Washington, D.C., for Petitioners. Joel Marcus, FEDERAL COMMUNICATIONS COMMISSION, OFFICE OF GENERAL COUNSEL, Washington, D.C., for Respondents.
ON BRIEF: L. Andrew Tollin, Craig E. Gilmore, Robert G. Kirk, Michael D. Sulllivan, WILKINSON, BARKER, KNAUER & QUINN, Washington, D.C., John P. Frantz, Steven G. Bradbury, KIRKLAND & ELLIS, Washington, D.C., William P. Barr, Ward W. Wueste, Jr., Washington, D.C., M. Edward Whelan III, GTE SERVICE CORPORATION, Washington, D.C., William B. Barfield, Jim O. Llewellyn, BELLSOUTH CORPORATION, Atlanta, Georgia, M. Robert Sutherland, BELLSOUTH TELECOMMUNICATIONS, INC., Atlanta, Georgia, for Petitioners. Carl D. Lawson, FEDERAL COMMUNICATIONS COMMISSION, OFFICE OF GENERAL COUNSEL, Washington, D.C., Robert J. Wiggers, Cathrine G. O'Sullivan, U.S. DEPARTMENT OF JUSTICE, ANTITRUST DIVISION, Washington, D.C., for Respondents.
Before: MARTIN, Chief Judge; DAUGHTREY, Circuit Judge; HILLMAN, District Judge. (*)
These cases come before us on petitions for review of a final order of the Federal Communications Commission issued in response to our decision in Cincinnati Bell Tel. Co. v. Federal Communications Commission, 69 F.3d 752 (6th Cir. 1995). For the reasons stated below, we AFFIRM.
The Commission had jurisdiction over this matter pursuant to 47 U.S.C. §§ 154(i) and 303(r), and 5 U.S.C. § 553. We have jurisdiction to review the Commission's final order under 47 U.S.C. § 402(a) and 28 U.S.C. § 2342(l). In a prior order, the Commission concluded that all local telephone companies, including the Bell operating companies, could provide personal communications service, or "PCS," without establishing a structurally separate corporate affiliate. See New Personal Communications Services, GN Docket 90-314, Second Report and Order, 8 F.C.C.R. 7700 (1993), recon., Memorandum Opinion and Order, 9 F.C.C.R. 4957, further recon., Third Memorandum Opinion and Order, 9 F.C.C.R. 6908 (1994). At the same time, the Commission decided to maintain a pre-existing structural separation requirement for the provision of cellular service by the Bell operating companies, even though the Commission recognized that cellular service is functionally equivalent to PCS. See id. at 7751 n.98.
In Cincinnati Bell, we granted a petition for review of the order and held that the Commission's decision to retain the narrow structural separation requirement for Bell company cellular service was arbitrary and capricious in light of the Commission's conclusion that PCS could be provided directly by all local telephone companies without raising significant competitive concerns. 69 F.3d at 765-68. We remanded the order for the Commission to "determine as soon as possible whether the structural separation requirement placed upon the Bells is necessary and in the public interest." Id. at 768.
The Commission issued the order at issue in this case on October 3, 1997. See Competitive Service Safeguards for Local Exchange Carrier Provision of Commercial Mobile Radio Services, WT Docket 96-162, Report and Order, 12 F.C.C.R. 15,668, clarified, Order, 12 F.C.C.R. 17,983 (1997) ("Report and Order"). The order imposes separate affiliate requirements on all local telephone companies providing commercial mobile radio services. See id. It applies to both Bell companies and non-Bell companies and encompasses all kinds of commercial mobile radio services, not just cellular services. See id. Furthermore, the order adopts regulations governing joint marketing of commercial mobile radio services and local telephone services. See id.
BellSouth Corporation and GTE Midwest Corporation filed these petitions for review along with several intervenors alleging that the Commission's rulemaking was arbitrary and capricious and that the Telecommunications Act of 1996 precludes the Commission from imposing regulations on joint marketing of wireless and local telephone service.
Cellular service and personal communications service are the two categories of commercial mobile radio services at issue in this case. Cellular has been commercially available since the early 1980s. Personal communications service first became available in 1993. Because every call between a wireless subscriber and a landline customer originates or terminates on the local telephone company's network, providers of cellular and PCS rely on interconnection with the facilities of local telephone companies. The Commission refers to these local telephone companies as "local exchange carriers," or "LECs."
From the onset of cellular communications, the Commission required Bell operating companies to offer their cellular service through structurally separate affiliates. Because the Bell companies held exclusive franchises for local telephone service in certain markets, this structural separation requirement was intended to prevent the Bell companies from using their power in the local telephone market to engage in anti-competitive practices in the cellular market. The Commission was concerned specifically with cross-subsidization and discriminatory interconnection. (FN1) By requiring the Bell companies to offer cellular service through separate affiliates, the Commission had a means to monitor their operations and thereby ensure that they were not engaging in anti-competitive practices. Unlike the Bell companies, the independent local telephone companies were not subject to the structural separation requirements in their provision of cellular services. The Commission instead relied on non-structural safeguards to protect against anti-competitive practices for these companies.
With the advent of PCS, the Commission revisited the issue of what safeguards were necessary to prevent anti-competitive practices by local telephone companies providing PCS services. The Commission concluded that non-structural safeguards were sufficient to ensure competition and that separate subsidiary requirements for any local exchange carrier providing PCS were not in the public interest. Although the Commission concluded that PCS and cellular services were structurally similar, the Commission declined to decide whether the structural separation requirements for the Bell companies' provision of cellular service should be repealed. In Cincinnati Bell, we held that the record was sufficient to require the Commission to decide whether to repeal the cellular separation requirement and remanded the matter to the Commission.
After the Cincinnati Bell decision, Congress enacted the Telecommunications Act of 1996. Congress's stated intent was to reduce regulation and encourage competition in the industry. Among other things, the Act prescribed an extensive regulatory structure for interconnection, including requiring state commissions to ensure reasonable and nondiscriminatory prices for interconnection. The Act also abolished the system of local exchange franchises and imposed numerous obligations on the local telephone companies to encourage greater competition in the local exchange markets. Furthermore, the Act allowed Bell companies to engage in joint marketing of commercial mobile radio services and landline telephone services.
In August 1996, the Commission issued a Notice of Proposed Rulemaking proposing two options: keeping the separate affiliate requirement for Bell company cellular service for a period of time and then "sunsetting" the rule once a Bell company met the requirements of the Telecommunications Act for entry into the long-distance market; or replacing the rule with a new rule requiring all large local telephone companies to provide all commercial mobile radio services through separate affiliates. In October 1997, the Commission released the Report and Order at issue in this case. The Order adopts the second option.
Under the Administrative Procedure Act, this Court must "hold unlawful and set aside agency action, findings and conclusions found to be . . . arbitrary and capricious, an abuse of discretion, or otherwise not in accordance with the law." 5 U.S.C. § 706(2)(A) (1988). Under this standard, our inquiry is "'searching and careful,' yet in the last analysis, diffident and deferential." Natural Resources Defense Council v. Securities Exch. Comm'n, 606 F.2d 1031, 1041 (D.C. Cir. 1979) (quoting Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 416 (1971)). Nonetheless, the agency must articulate a "rational connection between the facts found and the choice made," City of Brookings Mun. Tel. Co. v. Federal Communications Comm'n, 822 F.2d 1153, 1165 (D.C. Cir. 1987), and must "provide something in the way of documentary support" for its action. Cincinnati Bell, 69 F.3d at 764. BellSouth and GTE both argue that the Commission fails to present adequate justification for the expansion of the separate affiliate requirement to all local telephone companies. Specifically, BellSouth and GTE argue that the rule is arbitrary and capricious because the FCC failed to explain why existing non-structural safeguards are insufficient, failed to consider simply eliminating the cellular separation requirement altogether, and issued a rule that was contrary to Congressional intent underlying the 1996 Act.
In the Report and Order, the Commission points to...
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