MCI Telecommunications Corp. v. F.C.C., s. 86-1181
| Decision Date | 29 March 1988 |
| Docket Number | 86-1248,Nos. 86-1181,s. 86-1181 |
| Citation | 842 F.2d 1296 |
| Parties | MCI TELECOMMUNICATIONS CORPORATION, Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents, American Telephone & Telegraph Co., et al., Intervenors. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Ellen G. Block, with whom John M. Scorce and Ruth S. Baker-Battist, Washington, D.C., were on brief, for petitioner. William J. Byrnes, Washington, D.C., also entered an appearance for petitioner.
John Ingle, Deputy Associate Gen. Counsel, F.C.C., with whom Diane S. Killory, Gen. Counsel, Daniel M. Armstrong, Associate Gen. Counsel, Linda L. Oliver and Laurel R. Bergold, Counsel, F.C.C., and Robert Nicholson and Andrea Limmer, Attys., U.S. Dept. of Justice, Washington, D.C., were on the brief, for respondents. Catherine G. O'Sullivan, Atty., U.S. Dept. of Justice, Washington, D.C., also entered an appearance for respondent U.S.
William R. Drexel, St. Louis, Mo. (for Southwestern Bell), with whom Raymond F. Scully, Alan B. Sternstein, St. Louis Mo., and John W. Berresford, Philadelphia, Pa. (for Bell intervenors); Jonathan S. Hoak, David W. Carpenter, Chicago, Ill., and Francine J. Berry, New York City (for American Tel. & Tel. Co.); Alfred Winchell Whittaker, Washington, D.C. (for Ameritech Operating Companies); R. Frost Branon, Jr., Atlanta, Ga. (for BellSouth Telephone Companies); Saul Fisher, Bedminster, N.J. (for NYNEX Telephone Companies); Dan T. Foley, Oklahoma City, Okl. (for Southwestern Bell Telephone Co.); and Robert B. McKenna, Washington, D.C. (for U.S. West Telephone Companies) were on the joint brief, for intervenors.
Thomas J. Reiman, Chicago, Ill., entered an appearance for intervenors Ameritech Operating Companies, et al.
Katherine I. Hall, Washington, D.C., entered an appearance for intervenors the Bell Telephone Co. of Pennsylvania, et al.
Martin J. Silverman, White Plains, N.Y., entered an appearance for intervenor NYNEX Telephone Companies.
Robert L. Barada and Stanley J. Moore, San Francisco, Cal., entered appearances for intervenor Pacific Telesis Telephone.
T. Michael Payne, St. Louis, Mo., entered an appearance for intervenor Southwestern Bell Telephone Co.
Jules M. Perlberg and Dale E. Thomas, Chicago, Ill., entered appearances for intervenor AT & T.
Lawrence W. Katz, James R. Young, Washington, D.C., and J. Manning Lee entered appearances for intervenor Bell Atlantic Telephone Companies.
H. Richard Juhnke and Peter G. Wolfe, Washington, D.C., entered appearances for intervenor Western Union Corp. in No. 86-1181.
John A. Ligon, New York City, entered an appearance for intervenor U.S. Sprint in No. 86-1181.
Randolph J. May, Timothy J. Cooney, Joseph DeFranco, Howard Monderer, and Daniel A. Huber, Washington, D.C., entered appearances for intervenors American Broadcasting Companies, et al. in No. 86-1181.
Dana A. Rasmussen and Robert B. McKenna, Washington, D.C., entered appearances for intervenor Mountain States Tel. & Tel. Co., et al.
Before MIKVA, EDWARDS, and BUCKLEY, Circuit Judges.
Opinion for the court filed by Circuit Judge EDWARDS.
In this case MCI Telecommunications Corporation ("MCI") has petitioned for review of an order by the Federal Communications Commission ("FCC") in Investigation of Special Access Tariffs of Local Exchange Carriers, FCC 86-52 (Jan. 24, 1986) ("Special Access Order "), reprinted in Joint Appendix ("J.A.") 771. 1 MCI alleges that the special access tariffs charged by local exchange carriers, the Bell Operating Companies ("BOCs"), are unreasonably discriminatory in light of the amounts that American Telephone and Telegraph Company ("AT & T") is required to pay to lease equipment used to perform identical functions pursuant to Shared Network Facilities Agreements ("SNFAs") with the BOCs. The FCC found to the contrary in its Special Access Order and MCI now challenges that ruling as arbitrary and capricious. MCI further contends that the FCC was statutorily obliged to require AT & T and the BOCs to file copies of the SNFAs and associated price information, and that it failed to do so.
Although we reject the latter contention because MCI did not clearly raise the issue of mandatory filing before the FCC, we find that MCI's first charge has merit. We therefore remand the case to the FCC for further consideration of MCI's allegation of price discrimination.
Under AT & T's antitrust settlement with the Government, and following divestiture on January 1, 1984, the BOCs were required to provide all interexchange carriers, such as MCI, with access to local exchange facilities "on an unbundled, tariffed basis, that is equal in type, quality, and price to that provided to AT & T and its affiliates." United States v. AT & T, 552 F.Supp. 131, 227 (D.D.C.1982), aff'd mem. sub nom. Maryland v. United States, 460 U.S. 1001, 103 S.Ct. 1240, 75 L.Ed.2d 472 (1983). The FCC distinguished two broad categories of services provided by the BOCs to interexchange carriers. "Switched" access involves the shared use of local exchange facilities to originate and complete long-distance calls. "Special" access involves the exclusive use of certain BOC facilities, generally private communications lines linking the end user's premises to a BOC wire center and linking the wire center to the premises of an interexchange carrier. Although special access circuits may be used to transmit ordinary voice communications, they are also used extensively to transmit telex, telegraph, video and other types of signals between end users and interexchange carriers, as well as between different offices of the same interexchange carrier. In its Special Access Order, the FCC approved the set of special access tariffs that MCI is now challenging.
MCI's contention is not that the tariffs themselves differ among interexchange carriers, but rather that they are unreasonably discriminatory by comparison with a separate set of charges paid by AT & T to the BOCs for the use of local exchange facilities. It is therefore essential to review one aspect of the AT & T divestiture in greater detail. Pursuant to the antitrust consent decree, assets were divided between AT & T and the BOCs according to the functions they were used to perform. Assets used to provide local exchange services and exchange access were assigned to the BOCs, whereas those used to supply interexchange services remained with AT & T. See 552 F.Supp. at 206. Approximately twenty percent of the existing assets, however, were used to provide both types of service. The decree required that ownership of these multifunction assets would be assigned according to the predominant use that was made of them. Id. at 207. It further provided that the entity that did not acquire a certain item of multifunction property could lease that property from the owner, in order to obviate the wasteful construction of duplicate facilities. See id. at 227 (Modification of Final Judgment Sec. I(A)(2)); see also id. at 197 n. 278, 207 n. 316. Under the terms of the Plan of Reorganization filed by AT & T and approved by the District Court, these lease agreements, dubbed Shared Network Facilities Agreements ("SNFAs"), were to employ the same cost-based pricing system regardless of whether AT & T or a BOC was the lessor. See Plan of Reorganization (D.D.C., filed Dec. 16, 1982), reprinted in J.A. 2, 41-53. 2
During 1983, that is, prior to the date of divestiture, AT & T negotiated close to 17,000 SNFAs with what were then its subsidiaries. Approximately half were leases from AT & T to a BOC; the remainder were leases from a BOC to AT & T. See Special Access Order at 22 n. 72, J.A. 792 n. 72. In seeking FCC approval of the transfer of ownership necessary to consummate divestiture, AT & T submitted in the public record a draft master SNFA in excess of 750 pages, along with a Standard Costing Manual in excess of 200 pages describing the method to be used to calculate lease charges. 3 AT & T did not, however, file copies of actual lease agreements, nor did the FCC order AT & T or the BOCs to submit copies of the SNFAs. In spite of its lack of precise information concerning lease charges, the FCC approved the transfer. It further refused to require the BOCs to lease equipment covered by the SNFAs to other interexchange carriers or to eliminate any disparities between those lease charges and corresponding cost elements of the special access tariffs. 4 The FCC explained:
[T]he record [does not] contain[ ] sufficient information to justify imposition of this condition. At this time, we have no information showing that AT & T will be obtaining discriminatory access to operating company facilities. If it becomes necessary in the future, we have sufficient authority under Section 211 of the Communications Act, 47 U.S.C. Sec. 211, to require the submission of the shared facilities agreements and any other agreements between the carriers. In addition, under Section 201 of the Act, 47 U.S.C. Sec. 201, we may require the [BOCs] to provide facilities to other carriers should we find such a requirement to be in the public interest.
Consolidated Application of AT & T and Specified Bell System Companies, 96 F.C.C.2d 18, 57-58 (1983) (footnote omitted).
In late 1983, the FCC opened an investigation into the first group of post-divestiture access tariffs filed by the BOCs. See Investigation of Access and Divestiture Related Tariffs, 54 Rad.Reg.2d (P & F) 1119 (1983). During this investigation, the question arose whether the services offered under tariff were "like" those available to AT & T under the SNFAs, and, if so, whether the disparity in charges was unreasonably discriminatory. In attempting to answer it, the FCC's Common Carrier Bureau requested information about existing SNFAs from three of the...
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