North Carolina Utilities Commission v. F.C.C.

• Decision Date: 22 March 1977
• Docket Number: 76-1415,76-1443,76-1467,76-1152,76-1292,Nos. 76-1002,s. 76-1002
• Citation: 552 F.2d 1036
• Parties: NORTH CAROLINA UTILITIES COMMISSION et al., Petitioners, v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents, Computer and Business Equipment Manufacturers Association et al., Intervenors. , and 76-1502.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 1036

552 F.2d 1036

NORTH CAROLINA UTILITIES COMMISSION et al., Petitioners, v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents Computer and Business Equipment Manufacturers Association et al., Intervenors.

Nos. 76-1002, 76-1152, 76-1292, 76-1415, 76-1443, 76-1467,

and 76-1502.

United States Court of Appeals Fourth Circuit.

Argued Sept. 21, 1976.

Decided March 22, 1977.

Edward B. Hipp, Raleigh, N.C., for State of North Carolina Utilities Commission.

Carl E. Sanders, Augusta, Ga. (John L. Taylor, Jr., Atlanta, Ga., on brief) for Southeastern Association of Regulatory Utilities Commission.

William L. Leonard, New York City, Ohio (F. Mark Garlinghouse Edward L. Friedman and Alfred C. Partoll, New York City, Michael Boudin, Stuart C. Stock, Washington, D.C., on brief), for Bell System Companies.

Thomas J. O'Reilly, Washington, D.C. (Lloyd D. Young, Washington, D.C., on brief), for United States Independent Telephone Association (William J. Brown, Charles S. Rawlings and Cheryl Hachman, Columbus, Ohio, on brief for Public Utilities Commission of Ohio; Marshall Cox, New York City, on brief for Continental Telephone Corp.; Richard R. Zaragoza, and Clifford M. Harrington, Washington, D.C., on brief for Rixon, Inc.; Michael T. Tomaino, Rochester, N. Y., on brief for Rochester Telephone Corporation; John M. Lothschuetz, Mansfield, Ohio, and Carolyn C. Hill, Washington, D.C., on brief; Warren E. Baker and Richard J. Croker, Kansas City, Mo., on brief for United System Service Inc. and the United Telephone System operating companies).

Daniel M. Armstrong, Associate Gen. Counsel, FCC, Washington, D.C. (Werner K. Hartenberger, Acting Gen. Counsel, Sheldon M. Guttman and Jack D. Smith, Counsel, FCC, Washington, D.C., on brief).

Joseph M. Kittner, Washington, D.C. (Edward P. Taptich and Virginia S. Carson, McKenna, Wilkinson & Kittner, Washington, D.C., on brief), for Computer and Business Equipment Manufacturers Association.

Edwin B. Spievack, Washington, D.C. (Joel H. Levy, Cohn & Marks, Washington, D.C., on brief), for North American Telephone Association.

Stephen R. Bell, Washington, D.C. (Herbert E. Marks, Wilkinson, Cragun & Barker, Washington, D.C., on brief), for Independent Data Communications Manufacturers Association, Inc. (Donald I. Baker, Acting Asst. Atty. Gen., Washington, D.C., Robert B. Nicholson and James Ponsoldt, Attys. Dept. of Justice, Washington, D.C., on brief; Charles R. Cutler, John L. Bartlett, John B. Wyss, Kirkland, Ellis & Rowe, Washington, D.C. on brief for Aeronautical Radio, Inc.; John S. Voorhees, Howrey & Simon, Washington, D.C., on brief; Robert E. McKee, New York City, on brief for International Telephone and Telegraph Corp.; Grant S. Lewis, Jay G. Safer, LeBoeuf, Lamb, Leiby & MacRae, New York City, on brief; Jay E. Ricks, Robert R. Bruce, Hogan & Hartson, Washington, D.C., on brief for Phone-Mate, Inc.; Irving K. Kaler, Lawrence J. Movshin, Kaler, Karesh & Frankel, Atlanta, Ga., on brief for Rollins Protective Services Co.; Joseph E. Keller, Wayne V. Black, Larry S. Solomon, Keller & Heckman, Washington, D.C., on brief for Central Committee on Telecommunications of the American Petroleum Institute; William H. Borghesani, Jr., Keller & Heckman, Washington, D.C., on brief for Dasa Corp.; J. Roger Wollenberg, David R. Anderson, Neil J. King, Michael S. Schooler, Wilmer, Cutler & Pickering, Washington, D.C., on brief for International Business Machines Corp.; J. Gordon Walter, Armonk, N. Y., on brief for International Business Machines Corp.; Rich M. Stein, Sigelman & Stein, Beverly Hills, Cal., on brief for Phonetele, Inc.; Charles M. Meehan, Carole C. Harris, Keller & Heckman, Washington, D.C., on brief for Utilities Telecommunications Council).

Paul L. Douglas, Atty. Gen., C. C. Sheldon, Asst. Atty. Gen., Lincoln, Neb., on brief, for amicus curiae State of Nebraska ex rel. Nebraska Public Service Commission.

Before RIVES, ^* TUTTLE,* and WIDENER, Circuit Judges.

TUTTLE, Circuit Judge:

This is a case of second impression. In North Carolina Utilities Commission v. FCC, 537 F.2d 787 (4th Cir. 1976), petition for cert. denied, --- U.S. ----, 97 S.Ct. 651, 50 L.Ed.2d 631, (1976), this Court upheld a declaratory ruling of the Federal Communications Commission that the Communications Act of 1934 preempts state regulation of telephone terminal equipment used for both interstate and local communication when such regulation conflicts with federal rules governing the same equipment. This appeal concerns the validity of the FCC's attempt to exercise that primary authority.

I. THE TERMINAL EQUIPMENT REGISTRATION PROGRAM

The phrase "terminal equipment" refers to devices utilized for transmission or reception of communications when attached to the national telecommunication line network. Items of terminal equipment include common residential telephones (both main station and extension phones), key telephones, answering devices, dialers, computer terminals and private branch exchanges (PBX's). Although most telephone customers rent or purchase terminal equipment directly from telephone companies, the carriers themselves purchase a substantial portion of their terminal equipment from independent manufacturers as well as carrier-controlled subsidiaries.

In Docket 19528, the present case, the Federal Communications Commission (FCC) has by rule established a registration program for all terminal equipment attached to the interstate telephone line network. Attachment of terminal equipment is currently restricted by telephone company tariffs which allow customer connection of non-carrier-supplied terminal equipment to the telephone lines only if the customer effects connection through a carrier-supplied connecting arrangement (CA) and employs a carrier-supplied network control signaling unit (NCSU). The proposed FCC program would permit customers to attach any registered terminal equipment to the network without being forced to use the carrier-supplied intermediary devices.

To be registered with the FCC, equipment must meet technical specifications that ensure proper performance and safety without the intermediary CAs and NCSUs. Nonregistered equipment can still be attached provided the intermediary devices are employed. All terminal equipment, including that provided by carriers directly to customers, must be registered (or attached using CAs and NCSUs). Individual items of terminal equipment, however, need not be registered; instead, manufacturers will be required to register types or models of equipment.

II. THE CONDITIONS OF CONTEST

A. The Statutory Scheme. The Communications Act of 1934, 47 U.S.C.A. §§ 151-609 (1962 & Supp. 1976), created the Federal Communications Commission for "the purpose of regulating interstate and foreign commerce in communications by wire and radio so as to make available . . . a rapid, efficient, Nationwide, and world-wide wire and radio communication service with adequate facilities at reasonable charges," Communications Act § 1, 47 U.S.C.A. § 151. Section 2(a) of the Act, 47 U.S.C.A. § 152(a), provides that the Act and the FCC's jurisdiction "shall apply to all interstate and foreign communication by wire." This general grant of authority to the FCC is amplified by section 3(a), 47 U.S.C.A. § 153(a), to encompass "the transmission of writing, signs, signals, pictures, and sounds of all kinds by aid of wire . . . including all instrumentalities, facilities, apparatus, and services incidental to such transmission.." (Emphasis added.)

The Commission's major substantive powers over common carriers are described by sections 201-205 of the Act, 47 U.S.C.A. §§ 201-205. Section 201(b) requires that all "charges, practices, classifications, and regulations for and in connection with (interstate) communication service, shall be just and reasonable." Section 202(a) declares it to be "unlawful for any common carrier to make any unjust or unreasonable discrimination in charges, practices, classifications, regulations, facilities, or services" of interstate communication. Section 203 and 204 mandate procedures for tariff filings by carriers and for FCC review of proposed tariffs. Although the FCC may simply disapprove a proposed tariff provision and require refiling by a carrier, section 205 also gives the FCC power to "prescribe what will be the just and reasonable charge . . . and what classification, regulation, or practice is or will be just, fair, and reasonable, to be thereafter followed" by the carrier.

The Communications Act also reserves some regulatory jurisdiction to the states. Section 2(b)(1) of the Act, 47 U.S.C.A. § 152(b)(1), provides that "nothing" in the Act shall be construed to give the Commission jurisdiction "with respect to . . . charges, classifications, practices, services, facilities or regulations for or in connection with intrastate communication service." (Emphasis added.) Section 221(b) of the Act, 47 U.S.C.A. § 221(b), carves out a second area of state regulatory hegemony by denying the Commission jurisdiction with respect to "charges, classifications, practices, services, facilities or regulations for or in connection with . . . telephone exchange service" where "such matters are subject to regulation by a State commission or by local governmental authority" even though "a portion of such exchange service constitutes interstate or foreign communication."

The tension between the powers granted to the FCC by sections 2(a) and 3(a), and the powers reserved to the states by sections 2(b)(1) and 221(b), generates this particular appeal. The validity of the Commission's registration program, however, cannot be properly determined without reference to the development of the Commission's interconnection policy.

B. The Interconnection Policy and North Carolina I. Prior to 1969, AT&T tariffs filed with the Commission prohibited attachment of any non-carrier-supplied terminal equipment to the telephone line...