MCI Telecommunications Corp. v. F.C.C., 85-1030
| Decision Date | 09 July 1985 |
| Docket Number | No. 85-1030,85-1030 |
| Citation | 247 U.S.App.D.C. 32,765 F.2d 1186 |
| Parties | MCI TELECOMMUNICATIONS CORPORATION, Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents, Lexitel Corporation, American Satellite Company, Teltec Saving Communications Co., Mountain States Telephone and Telegraph Co., et al., Competitive Telecommunication Association, Utilities Telecommunication Council, the Western Union Telegraph Co., GTE Sprint Communications Corporation, Network I, Inc., International Business Machines Corporation, Aeronautical Radio, Inc., Telecommunications Research and Action Center, Bell Telephone Company of Pennsylvania, et al., RCA Americom Communications, Inc., Southern Satellite Systems, Inc., Satellite Business Systems, Ad Hoc Telecommunications Users Committee, Rainbow Satellite, Inc., Intervenors. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Kenneth A. Cox, Washington, D.C., with whom Michael H. Bader, William J. Byrnes, Thomas R. Gibbon, Theodore D. Kramer and John M. Scorce, Washington, D.C., were on brief, for petitioner.
John E. Ingle, Deputy Associate Gen. Counsel, F.C.C., Washington, D.C., with whom Jack D. Smith, Gen. Counsel, Daniel M. Armstrong, Associate Gen. Counsel, Richard A. Askoff, Counsel, F.C.C., Robert B. Nicholson and Frederic Freilicher, Attys., Dept. of Justice, Washington, D.C., were on brief, for respondents.
Roger M. Witten, Washington, D.C., with whom J. Roger Wollenberg and William T. Lake, Washington, D.C., were on brief, for intervenor I.B.M. Corp Robert F. Corazzini, Washington, D.C., was on brief, for intervenor Southern Satellite Systems, Inc. Deborah Stuehrmann-Salbego, Washington, D.C., also entered an appearance for Southern Satellite Systems, Inc.
Wilhelmina Reuben Cooke, Washington, D.C., was on brief, for intervenors, Telecommunications Research and Action Center and Nat. Ass'n for Better Broadcasting.
Robert B. McKenna and Jeffrey S. Bork, Washington, D.C., were on brief, for intervenors Mountain States Tel. and Tel. Co., et al.
Peter Tannenwald and Vonya B. McCann, Washington, D.C., were on brief, for intervenor Teltec Saving Communications Co.
Rita A. Barmann, Philip M. Walker and Donald E. Ward, Washington, D.C., were on statement in lieu of brief, for intervenors GTE Sprint Communications Corp., et al.
Joseph M. Kittner, Randolph J. May, Timothy J. Cooney, Washington, D.C. and Robert J. Kaufman, New York City, ABC, Inc., Joseph DeFranco CBS, Inc., and Howard Monderer, Washington, D.C., NBC, Inc., entered appearances for intervenors ABC, Inc., et al.
Arthur H. Simms, Washington, D.C., entered an appearance for intervenor, Western Union Telegraph Co.
Joseph M. Kittner and Jean L. Kiddoo, Washington, D.C., entered appearances for intervenor Ad Hoc Telecommunications Users Committee.
Mitchell F. Brecher, Washington, D.C., entered an appearance for intervenor Lexitel Corp.
Joan M. Griffin, entered an appearance for intervenor American Satellite Co.
John A. Ligon, New York City, entered an appearance for intervenor ITT Communications Service, Inc.
Randall B. Lowe and Thomas K. Crowe, Washington, D.C., entered appearances for intervenor Competitive Telecommunications Ass'n.
Neil S. Ende, Washington, D.C., entered an appearance for intervenor Network I, Inc.
John L. Bartlett and Robert J. Butler, Washington, D.C., entered appearances for intervenor Aeronautical Radio, Inc.
Thomas L. Welch, Philadelphia. Pa., entered an appearance for intervenors Bell Telephone Co. of Pennsylvania, et al.
Donald J. Elardo, McLean, Va., entered an appearance for intervenor, Satellite Business System.
Jay E. Ricks, Washington, D.C., entered an appearance for intervenor RCA American Communications, Inc.
George R. Grange, II, Washington, D.C., entered an appearance for intervenor Rainbow Satellite, Inc.
Charles M. Meehan, Washington, D.C., entered an appearance for intervenor Utilities Telecommunications Council.
Before TAMM, MIKVA and GINSBURG, Circuit Judges.
Opinion for the Court filed by Circuit Judge GINSBURG.
Petitioner MCI Telecommunications Corporation (MCI) challenges a Federal Communications Commission (FCC or Commission) directive, captioned the Sixth Report and Order, issued in the Commission's long-evolving Competitive Carrier rulemaking. 1 The Sixth Report (1) requires all The parties tender three issues for review: (1) whether MCI's challenge is timely; (2) whether the Commission has statutory authority to prohibit common carriers from filing tariffs; and (3) whether, assuming the Commission's authority, the Sixth Report was arbitrary and capricious. We conclude that MCI's petition for review is timely and that the Commission lacks authority to prohibit MCI and similarly situated common carriers from filing tariffs that, by statute, every common carrier shall file. See Communications Act of 1934 (Communications Act), Sec. 203(a), 47 U.S.C. Sec. 203(a) (1982). We therefore vacate the Sixth Report and remand this matter to the Commission for further consideration. In view of our conclusion that the FCC's order exceeds the agency's statutory authority, we do not reach the question whether the Sixth Report was arbitrary and capricious.
non-dominant common carriers of interstate telephone service, including MCI, to cancel their tariffs on file with the Commission within six months of the effective date of the order; and (2) declares that the Commission will not accept tariff filings from the non-dominant carriers in the future. MCI moved for a stay of the Sixth Report; on April 11, 1985, this court granted the motion and ordered expedited briefing and oral argument. MCI Telecommunications Corp. v. FCC, No. 85-1030 (D.C.Cir. Apr. 11, 1985).
In 1979, the FCC commenced its Competitive Carrier rulemaking, a proceeding shaped with a view toward gradual deregulation of the non-dominant common carrier interstate telephone industry. The Commission's initial Notice observed that non-dominant companies--those lacking market power--had no ability to charge supra-competitive rates or to engage in predatory pricing. Notice, 77 F.C.C.2d at 334. The FCC sought comments on a broad range of options, and its First Report, issued in 1980, announced streamlined regulations for non-dominant common carriers. First Report, 85 F.C.C.2d at 30-49. 2
In its 1981 Further Notice, the Commission focused on whether to undertake "definitional" or "forbearance" deregulation. The definitional approach entailed classifying certain non-dominant carriers of communication services as noncommon carriers. Because Title II of the Communications Act, 47 U.S.C. Secs. 201-224 (1982), applies only to common carriers, this approach would have exempted non-dominant carriers from all Title II regulation. See Further Notice, 84 F.C.C.2d at 463-70. The forebearance approach involved abstaining from applying to non-dominant carriers certain Title II procedural requirements while maintaining the basic substantive requirements that carriers charge "just and reasonable" rates and not engage in "unreasonable discrimination." 47 U.S.C. Secs. 201-202 (1982); see Further Notice, 84 F.C.C.2d at 471-91.
In its Second Report, released in 1982, the Commission adopted a forbearance position, Second Report, 91 F.C.C.2d at 61-62, which permitted resellers of basic services who owned no transmission facilities to cancel tariffs filed with the Commission and to convert to service on a private contract basis. Id. at 73. In subsequent 1983 and 1984 orders, the Commission extended permissive forbearance first to specialized common carriers (including MCI) and all resellers, Fourth Report, 95 F.C.C.2d at 557, and later to domestic satellite carriers providing domestic interstate service, miscellaneous common carriers, carriers providing domestic, interstate, and interexchange
digital transmission networks, and affiliates of exchange carriers providing interstate interexchange services. Fifth Report, 98 F.C.C.2d at 1209-10.
The Sixth Report, target of MCI's petition for review, changed the permissive forbearance arrangement to a mandatory one. Under the previous orders, "forborne" carriers could elect to continue offering service pursuant to filed tariffs, or to cancel their filed tariffs and convert to private contracts. Many new entrants apparently chose not to file tariffs, but the vast majority of existing forborne carriers opted to maintain their services under the tariff system. The Commission's Fourth Further Notice requested comment on whether forborne carriers should be required to cancel their tariffs and convert to a carrier-customer individual contract system. Fourth Further Notice, 49 Fed.Reg. at 11,857.
In the Sixth Report the Commission replied to the comments of numerous parties. The principal arguments confronting the FCC were these: (1) the Commission lacks authority to abolish tariffs, Sixth Report, 50 RAD.REG.2d at 1393; (2) the abolition of tariffs would eliminate the repository of information consumers need to detect discriminatory practices, id. at 1394; (3) conversion to private contracts would impose an excessive burden on carriers, id. at 1394-95; and (4) there are less drastic alternatives, id. at 1395-96.
The Commission responded first that it found in section 203(b)(2) of the Communications Act, 47 U.S.C. Sec. 203(b)(2) (1982), "express authority to exempt carriers from tariff filing requirements where appropriate." Sixth Report, 57 RAD.REG.2d at 1398. Consumers would benefit in several ways, the Commission reported. Dropping tariff filings would eliminate delay and opportunities for collusive pricing tactics. Furthermore, the absence of filed tariffs could be expected to stimulate the development of customer-specific and innovative service offerings. Id. at 1399-400. The Commission acknowledged that...
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