National Ass'n of Regulatory Utility Com'rs v. F.C.C., s. 83-1354
| Citation | 746 F.2d 1492 |
| Decision Date | 26 October 1984 |
| Docket Number | 83-1360,Nos. 83-1354,s. 83-1354 |
| Parties | NATIONAL ASSOCIATION OF REGULATORY UTILITY COMMISSIONERS, Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents, Satellite Business Systems, ISA Communications Services, Inc., Aeronautical Radio, Inc., American Telephone and Telegraph Company, Missouri Public Service Commission, Arizona Corporation Commission, New York State Department of Public Service, Southern Pacific Communications Company, State of Michigan, et al., Pacific Telephone and Telegraph Company, Mountain States Telephone and Telegraph Company, et al., New Jersey Bell Telephone Company, Intervenors. The PEOPLE OF the STATE OF CALIFORNIA and the Public Utilities Commission of the State of California, Petitioners, v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents, Satellite Business Systems, ISA Communications Services, Inc., Aeronautical Radio, Inc., American Telephone and Telegraph Company, Southern Pacific Communications Company, Mountain States Telephone and Telegraph Company, et al., Pacific Telephone and Telegraph Company, New Jersey Bell Telephone Company, Intervenors. |
| Court | United States Courts of Appeals. United States Court of Appeals (District of Columbia) |
Petitions for Review of an Order of the Federal Communications commission.
Jeffrey B. Thomas, Sacramento, Cal., with whom Janice E. Kerr and J. Calvin Simpson, San Francisco, Cal., were on the brief for petitioners, The People of the State of California, et al., in No. 83-1360.
Genevieve Morelli, Washington, D.C., with whom Paul Rodgers and Charles D. Gray, Washington, D.C., were on the brief for petitioner, NARUC, in No. 83-1354. Deborah A. DuPont, Washington, D.C., also entered an appearance for NARUC.
John E. Ingle, Deputy Associate Gen. Counsel, Washington, D.C., with whom Bruce E. Fein, Gen. Counsel, Daniel M Armstrong, Associate Gen. Counsel, and C. Grey Pash, Jr., Counsel, F.C.C., Barry Grossman and Nancy C. Garrison, Attys., U.S. Dept. of Justice, Washington, D.C., were on the brief for respondents in Nos. 83-1354 and 83-1360. Linda L. Oliver, Counsel, F.C.C., Washington, D.C., also entered an appearance for respondent F.C.C. Robert B. Nicholson, Atty., U.S. Dept. of Justice, Washington, D.C., also entered an appearance for respondent United States of America.
J. Laurent Scharff, Washington, D.C., with whom W. Theodore Pierson, Jr., Richard M. Singer, Washington, D.C., F. Thomas Tuttle, Kevin H. Cassidy, J. Manning Lee and Jeffrey H. Matsuura, McLean, Va., were on the brief for intervenor Satellite Business Systems in Nos. 83-1354 and 83-1360.
John W. Hunter, Richard E. Wiley, Danny E. Adams and Robert J. Butler, Washington, D.C., were on the brief for intervenor ISA Communications Services, Inc. in Nos. 83-1354 and 83-1360.
Robert W. Barker and Robert B. McKenna, Washington, D.C., were on the brief for intervenor Mountain States Telephone and Telegraph Company, et al. in Nos. 83-1354 and 83-1360.
James S. Hamasaki, Washington, D.C., was on the brief for intervenor Pacific Telephone and Telegraph Company in Nos. 83-1354 and 83-1360.
Louis J. Caruso, Sol. Gen., and R. Phillip Brown, Asst. Atty. Gen., State of Michigan, Lansing, Mich., were on the brief for intervenors State of Michigan, et al. in No. 83-1354. Ronald D. Eastman and Lynda S. Mounts, Washington, D.C., also entered appearances for State of Michigan, et al.
John L. Bartlett and Robert J. Butler, Washington, D.C., entered appearances for intervenor Aeronautical Radio, Inc. in Nos. 83-1354 and 83-1360.
Raymond F. Scully, Philadelphia, Pa., and Saul Fisher, Bedminster, N.J., entered appearances for intervenors American Telephone and Telegraph Company and New Jersey Bell Telephone Company in Nos. 83-1354 and 83-1360.
Eric A. Eisen, Washington, D.C., entered an appearance for intervenor Missouri Public Service Commission in No. 83-1354.
Mark P. Bresnahan, Washington, D.C., entered an appearance for intervenor Southern Pacific Communications Company in Nos. 83-1354 and 83-1360.
Timothy P. Sheehan, Albany, N.Y., entered an appearance for intervenor New York State Department of Public Services in No. 83-1354.
Lynwood J. Evans, Phoenix, Ariz., entered an appearance for intervenor Arizona Corporation Commission in No. 83-1354.
Before WILKEY, MIKVA and BORK, Circuit Judges.
Opinion for the Court filed by Circuit Judge BORK.
The National Association of Regulatory Utility Commissioners ("NARUC"), et al., challenges a ruling of the Federal Communications Commission prohibiting restrictions on the resale and sharing of all intrastate Wide Area Telecommunications Services ("WATS"). NARUC claims that the FCC lacks authority under the Communications Act of 1934, 47 U.S.C. Sec. 151 et seq. (1982) (the "Act"), and relevant case law to regulate the use of an intrastate WATS service, even when that service is used as part of an interstate communications network. NARUC also claims that the FCC acted arbitrarily and capriciously because it failed to make new findings of fact to support its decision in addition to findings it had made in 1980. We affirm the FCC's decision.
The American Telephone and Telegraph Company ("AT & T") operates an interstate telecommunications network and offers several different forms of long distance service. Long Distance Message Telecommunications Service ("MTS") is the ordinary long distance service, and it allows users both to place and receive calls. Charges for MTS calls are based on use with a toll being assessed for each call. In contrast, AT & T's WATS subscribers are usually entitled to unlimited use of the WATS service in exchange for a fixed fee. Accordingly, WATS is widely used by businesses and other high volume consumers in the long distance telecommunications market.
The WATS and MTS systems are both heavily regulated by the FCC, which has substantial authority over the entire telecommunications industry. The Commission's authority allows it to control entry into and exit from the industry, to require just and reasonable rates, and to mandate interconnections between carriers. 47 U.S.C. Secs. 214(a), 201(a) & (b) (1982). Since the early 1960's, the telephone carriers have been allowed to offer interstate WATS systems through tariffs on file with the FCC. Intrastate WATS systems on the other hand have been made available only subject to tariffs approved by the appropriate state regulatory commissions.
For many years AT & T and the other long distance carriers limited resale and sharing of their services through restrictions in their tariffs. As a result, it was illegal for any entity to subscribe to a long distance service and then, after adding value, resell it for a profit. See Report & Order, 60 F.C.C.2d 261, 271 (1976). Similarly, it was also illegal for several consumers to combine and use a single long distance service collectively with each consumer paying according to his pro rata usage. See 60 F.C.C.2d at 263. Both the practices of resale and sharing were viewed as threatening because they would have undermined AT & T's legal monopoly as the sole provider of long distance service.
Beginning in 1974, the FCC became concerned that the prohibition of resale and sharing was working to segment markets and sustain harmful price discrimination. Prohibition was having this effect because it prevented resellers and sharers from putting pressure on AT & T to help insure that its rates were cost-based. Such pressure might have been generated if arbitragers had been allowed to purchase discounted services such as WATS and then resell them to smaller users as a substitute for MTS. In that situation, AT & T would be forced to reset its long distance WATS and MTS rates to make them cost-based.
In light of these concerns, the FCC commenced a proceeding that led to a 1976 decision outlawing tariff restrictions on the resale and sharing of long distance private line services. See Resale & Shared Use, Notice of Inquiry & Proposed Rulemaking, 47 F.C.C.2d 644, 48 F.C.C.2d 1077 (1974), Report & Order, 60 F.C.C.2d 261 (1976), Reconsideration Order, 62 F.C.C.2d 588 (1977), aff'd, American Telephone & Telegraph Co. v. FCC, 572 F.2d 17 (2d Cir.), cert. denied, 439 U.S. 875, 99 S.Ct. 213, 58 L.Ed.2d 190 (1978). These services differ from MTS and WATS in that they are made available in bulk at low rates for consumers with substantial long distance communications needs between two or more selected locations. In its 1976 decision, the Commission expressly left open the question of the lawfulness of resale and sharing restrictions on MTS and WATS, explaining that issues involving those services had not been adequately addressed in the record. In an opinion by Judge Meskill, the Second Circuit sustained the Commission's action after accepting its conclusion that resale and sharing would encourage cost-related pricing, thus leading to more efficient utilization of communications facilities. American Telephone & Telegraph Co. v. FCC, 572 F.2d at 23.
On July 27, 1979, MCI Telecommunications Corp. ("MCI") petitioned the FCC to institute a new rulemaking that would extend the 1976 decision to AT & T's interstate WATS services. Specifically, MCI asked the Commission to outlaw all of AT & T's prohibitions on resale and sharing in its WATS and MTS tariffs in the interstate market. On December 18, 1980, the Commission granted MCI's petition after concluding that the tariff restrictions on resale and sharing were "unjust, unreasonable ... discriminatory, and hence unlawful under Sections 201(b) and 202(a) of the Communications Act." Resale & Shared Use, 83 F.C.C.2d 167, 168 (1980). The Commission based its decision in part on an extensive analysis of the economic impact of legalizing resale and sharing. The Commission concluded that resale and sharing would reduce harmful price discrimination by pressuring AT & T to make its...
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