Phonetele, Inc. v. American Telephone & Telegraph Co.

CLAIBORNE, District Judge

(dissenting):

The cases of DASA Corporation, etc. v. General Telephone Co. of California, et al. (No. 77-2936) [“DASA”] and Phonetele, Inc. v. American Telephone and Telegraph Co., et al., (No. 77-3877) [“Phonetele”] present the same issue: Is American Telephone & Telegraph Co. and its operating companies [“A.T. & T.”] immune from liability under the Sherman Act ( 15 U.S.C. §§ 1 et seq.) with respect to competing manufacturers of “interconnection equipment” because of the way in which they are regulated by the Federal Communications Commission (“F.C. C.”)? This issue has been heavily litigated of recent, and Courts and commentators are sharply divided. See generally, Note, AT&T and the Antitrust Law: A Strict Test for Implied Immunity, 85 Yale L.J. 254 (1975); Essential Communications Systems, Inc. v. A.T. & T., 446 F.Supp. 1090 (D.N.J. 1978), revd., 610 F.2d 1114 (3rd Cir. 1979); Litton Systems, Inc. v. A.T. & T., 487 F.Supp. 942 (S.D.N.Y.1980) [in which District Judge Conner of the Southern District of New York declined to follow the 270 page recommendation of Magistrate Sinclair on this issue].

I

Phonetele manufacturers the “Phonemaster,” which is a special purpose mini-computer, designed specifically to interface with the national telephone network. Phontele installs the Phonemaster on the customer’s premises, at his/her telephone terminal. The Phonemaster then controls the amount of telephone service by restricting outgoing calls to selected area codes, exchange prefixes, and lines; it does this by electronically observing the outgoing dial signals, translating them, comparing them to a core memory, and then allowing or disallowing the call based upon the consumer’s programmed restrictions. The Phone-master, unlike the terminal, operates on 110 volt current.

DASA manufactures a telephone call diverter known as “Divert-a-Call.” A call diverter can automatically transfer each incoming telephone call at one particular number to any other designated telephone anywhere within the United States or Canada.

The nation’s telephone system consists of a switch network that links the facilities of more than 1,700 cooperating telephone companies extending throughout the country. The four basic elements of this network are the terminal equipment (such as the telephone itself located on the customer’s premises), the pair of wires or “loop” that connects the telephone set to the central office, the switching equipment, and the trunk facilities that connect the central offices to each other. “Network control signals are electronic impulses which activate the devices that set up and take down connections between centers, control switches, and start and stop the equipment used for billing. Devices that generate or activate network control signals are a category of terminal equipment known as “network control signaling units,” or “NCSU’s.” Automatic transfer devices such as “Divert-a-Call” and “Phonemaster” are NCSU’s. Such devices, if not carefully designed, manufactured, installed, and/or maintained, can cause improper signals to be received at the central office, thereby disrupting systems operations and message accounting.

*744 In 1966, the F.C.C. commenced its Carterfone proceedings with respect to A.T. & T. Tariff 132, which blanket and unqualifiedly prohibited customer-provided equipment. In 1968, the F.C.C. concluded that Tariff 132 was overbroad as applied to ancillary devices such as the Carterfone, which was not an NCSU but which merely provided a means of achieving a form of interconnection between the public toll telephone system and private mobile radio systems by acoustic and inductive coupling. Use of the Carterfone Device in Message Telephone Service, 13 F.C.C.2d 420 (1968). The F.C.C. ordered the telephone companies to submit a new tariff which would protect the telephone system against harmful devices and, in response thereto, A.T. & T. submitted Tariff No. 263, which became effective on January 1, 1969. This tariff permitted acoustic and inductive connections under specified conditions, and continued to prohibit direct electrical connection of customer-provided NCSU equipment, unless a customer wished to use indirect interconnection through a coupling arrangement furnished and maintained by the telephone company. Immediately after filing of the same, several parties filed objections thereto; however, the F.C.C. rejected these objections, holding that Tariff No. 263 was not in conflict with the prior Carterfone ruling. 15 F.C.C.2d 605 ; 18 F.C.C.2d 871 . In its decision permitting revised tariff No. 263 to go into effect, the F.C.C. stated that it would undertake an extensive study to ascertain whether any modifications or limitations on the interconnection of customer-provided NCSU equipment were necessary, desirable and technically feasible.

Accordingly, the F.C.C. commissioned a study of the whole matter of interconnection by the National Academy of Sciences (cf. 18 F.C.C.2d 871 ) and ordered a Federal-State Joint Board investigation of interconnection in cooperation with the state regulatory agencies under 47 U.S.C. § 410 (c) (cf. 35 F.C.C.2d 539 ). Additionally, both the National Association of Regulatory Utility Commissioners (“NARUC”) and at least 17 different state commissions — including California — undertook their own independent investigations of this same problem during the same period. This led to an order by the F.C.C. in which it asserted “paramount” jurisdiction over the terms and conditions governing the interconnection of all equipment used in interstate communications, thereby permitting the F.C.C. effectively to limit the options available to the States in this area. Telerent Leasing Corp., 45 F.C. C.2d 204, aff'd., sub. nom., North Carolina Util. Comm’n v. F.C.C., 537 F.2d 787 (4th Cir. 1976), cert. denied, 429 U.S. 1027 , 97 S.Ct. 651 , 50 L.Ed.2d 631 (1976).

Based on a Report and recommended Order of the Federal-State Joint Board and after several revisions thereof the Commission released its First Report and Order on November 7, 1975, adopting a federal registration program for the regulation of interconnection of customer-provided devices. 56 F.C.C.2d 593 . The Commission noted that former Tariff No. 263 was one manner in which to protect the network, but concluded that the approach of that tariff was unnecessarily restrictive in view of the Commission’s finding that it would be technically and administratively feasible to establish a system of equipment registration which would provide the necessary minimal protection against network harm. If so registered with the F.C.C., such equipment no longer requires a protective connecting arrangement; but if not so registered, the telephone companies may continue to require the use of a protective connecting arrangement for the interconnection of NCSU’s. The federal registration program promulgated by the F.C.C. is set forth in Sub-part 68 of the F.C.C.’s regulations ( 47 C.F.R. §§ 68.100 et seq.). A.T. & T. subsequently filed a revised tariff with the F.C.C. which purportedly reflects the requirements of the F.C.C.’s registration program. The new registration program will be subject to continuing review and modification by the Commission as. actual experience under the program warrants. 56 F.C. C.2d at 613.

Developments before the California Public Utilities Commission (“P.U.C.”) have loosely paralleled those before the F.C.C. *745 General Telephone tariffs filed with the P.U.C. prior to 1966 prohibited the connection of customer-provided equipment to the telephone system. In 1966, the P.U.C. found a call diverter functionally similar to the Divert-a-Call not to present any significant hazard to the telephone system, and the P.U.C. ordered General Telephone to allow interconnection of that device without a connecting arrangement or to purchase and supply the device itself. DASA’s predecessor-in-interest, Com-U-Trol, filed an action before the P.U.C. in February of 1972, to compel General Telephone to allow interconnection of the Divert-a-Call. Although the P.U.C. ordered that General “shall permit the direct electrical connection of Divert-a-Calls to the telephone network subject to the condition that complainant shall provide reasonable assurances that quality control, installation, and repair procedures . . . necessary for the preservation of network integrity and safety will be uniformly followed,” Com-U-Trol and General were unable to come to agreement on the necessary procedures. Subsequently, on October 24, 1973, the P.U.C. commenced a general investigation into the terms and conditions of interconnection of customer-provided equipment. On April 22, 1975, the P.U.C. issued an Interim Decision, which was eventually finalized in May, 1976 and which, like the F.C.C. First Report, adopted a dual system of direct electrical connection of certified devices and the use of protective connecting arrangements for uncertified devices.

II

The Communications Act of 1934, or Title 47, Chapter 5 of the United States Code, contains the statutory scheme by which the federal government regulates wire communications. The Act specifically confers jurisdiction over “all instrumentalities, facilities, and apparatus ... incidental to interstate communications services upon the Federal Communications Commission.” 47 U.S.C. §§ 151 , 153(a), 153(e). Under this regulatory scheme, Appellees, like other common carrier enterprises, are required to file tariffs describing all rates and practices, including the terms and conditions for the interconnection of customer-provided equipment, before service can be offered to the public. Cf. 47 U.S.C. § 203 (a). No changes can be made in the tariffs once they are filed and published, except after ninety (90) days notice to the F.C.C. and to the public ( 47 U.S.C. § 203 (b)(1)), unless the Commission exercises its discretion and does so pursuant to 47 U.S.C. § 203 (b)(2). The Commission may not prescribe a new rate or practice contained within a telephone company tariff without first granting a full opportunity for a hearing before it. 47 U.S.C. § 204 (a); A.T. & T. v. F.C.C., 487 F.2d 865, 874 (2nd Cir. 1973). The Commission has the authority to institute an inquiry on its own motion with respect to matters raised before it ( 47 U.S.C. § 403 ), and whenever it conducts an investigation it has the duty to state its conclusions in writing ( 47 U.S.C. § 404 ). The Commission also has the power to refer any matter arising in the administration of the 1934 Act to a joint board to be composed of members from each of the states in which the wire communication affected by or involved in the proceeding takes place or is proposed, pursuant to 47 U.S.C. § 410 , which power the F.C.C. in fact exercised in the case at bar.

After such a hearing, the F.C.C. is empowered with the duty to determine what the just and reasonable charge or the just, fair and reasonable classification, regulation or practice shall be and to make cease and desist orders accordingly. In other words, if the agency concludes that the tariff is not in compliance with the Act or regulations thereunder, it must order the tariff cancelled or modified as the circumstances warrant. 47 U.S.C. § 205 (a). If the agency accepts the tariff and permits it to become effective, the regulatory statutes specifically require the carriers to enforce the tariff fully and fairly unless and until it has been superseded by a new tariff filed and reviewed under this same procedure. 47 U.S.C. § 203 (c).

*746 The standard under which the F.C.C. acts in administering the Act is not the standard of “free and unfettered competition,” upon which the Sherman Act is premised (cf. Northern Pac. R. Co. v. United States, 356 U.S. 1, 4 , 78 S.Ct. 514, 517 , 2 L.Ed.2d 545 (1958)) but a standard broader than that, namely, the standard of protecting the public interest in communications. Cf. Scripps-Howard Radio v. F.C.C., 316 U.S. 4, 14 , 62 S.Ct. 875, 882 , 86 L.Ed. 1229 (1942). By this, it is meant that all charges, practices, classifications and regulations for and in connection with such communication service shall be just and reasonable. 47 U.S.C. § 201 (b). Thus, antitrust considerations may be relevant to the F.C.C.’s determination of the legality of a tariff under this Chapter, but they are not determinative, except where 47 U.S.C. § 202 applies directly; other factors which the F.C.C. takes into account in determining the “public interest” include network safety and efficiency, the need of the public for reliable service at reasonable rates, the proper allocation of the rate burden in the public interest, the financial integrity of the carriers, and the future needs of both the users and carriers. Compare 62 F.C.C.2d 997 (1977); 59 F.C.C.2d 344 (1976); 34 F.C.C. 949 (1963); 17 F.C.C. 152 (1952); 10 F.C.C. 244 (1943); and see Mid-Texas Communications v. American Tel. & Tel. Co., 615 F.2d 1372, 1379 (5th Cir. 1980), and cases cited therein.

Where a common carrier violates this standard or omits to do anything which is required by the Act to be done, it can be liable to the person(s) injured thereby for damages plus attorney’s fees. 47 U.S.C. § 206 . Jurisdiction is in the United States District Courts or with the Commission, but not both simultaneously. 47 U.S.C. § 207 . In fact, the F.C.C. currently has pending before it a reactivated proceeding involving alleged damages resulting from the post Carterfone interconnection tariffs. Western States Tel. Co. v. A. T. & T., 19 F.C.C.2d 1068 (1969), 62 F.C.C.2d 1170 (1977). The District Courts have jurisdiction to enforce any orders of the F.C.C. pursuant to 47 U.S.C. § 401 .

Ill

Both appellants are relatively new businesses, having spawned in the early 1970’s as a result of the post-Carterfone events heretofore described. Phonetele and DASA both filed their actions in 1974. The essence of Phonetele’s complaint is that the defendants have conspired to limit sales of the Phonemaster by restricting the manner in which the device can be “interconnected” with the national telephone system. While the complaint does not specifically so state, Phonetele must concede as a matter judicially noticeable that the sole means by which Appellees have allegedly done so is by the filing of the tariffs heretofore described. DASA apparently alleges that General Telephone and Ford Industries, Inc. (Ford), a manufacturer of a competing call diverter for General Telephone, have conspired to eliminate competition for the production, sale and leasing of automatic call diverters; that General has filed “anticompetitive” tariffs with the P.U.C. with the purpose of eliminating and restraining competition in the field of peripheral telephone equipment; that after such tariffs were determined to be unlawful, General unnecessarily required a coupler supplied by it for the attachment of the Divert-a-Call to the telephone system; that the charges for these couplers were unreasonable; that the couplers were designed to prevent the proper functioning of the call diverter; that General and co-conspirators sought to prevent DASA from obtaining rulings from the P.U.C. and other public bodies as to the validity of tariff provisions relating to the interconnection of customer-provided terminal equipment; and that General conspired with Ford so that Ford would be able to control the market for call diverters.

The District Court in both cases below granted the Appellees’ motion for judgment on the pleadings/motion to dismiss on the grounds that the subject of interconnection of terminal equipment with the telephone network system is impliedly immune from antitrust attack in the federal courts. Phonetele, Inc. v. A.T. & T., 435 F.Supp. 207, 214 (C.D.Cal.1977). These appeals follow.

*747 A

The starting point for any consideration of the issue at bar 1 are the well settled principles that repeal of the antitrust laws by implication is not favored and not casually to be allowed; only where there is a “plain repugnancy between the antitrust and regulatory provisions” will repeal be implied. United States v. Philadelphia National Bank, 374 U.S. 321, 350-351 , 83 S.Ct. 1715, 1734-1735 , 10 L.Ed.2d 915 (1963), and cases cited therein. Repeal is to be regarded as implied only if necessary to make regulatory provisions work, and even then only to the minimum extent necessary. Silver v. New York Stock Exchange, 373 U.S. 341, 357 , 83 S.Ct. 1246, 1257 , 10 L.Ed.2d 389 (1963).

While these principles tend to lead in the direction of the majority opinion, they cannot be considered in a vacuum. Rather, one must examine them in operation in recent Supreme Court cases, and see where this case fits within the spectrum already established by the Supreme Court. The four most recent Supreme Court opinions on the issue of implied antitrust immunity are: Gordon v. New York Stock Exchange, 422 U.S. 659 , 95 S.Ct. 2598 , 45 L.Ed.2d 463 (1975); United States v. National Association of Securities Dealers, Inc., 422 U.S. 694 , 95 S.Ct. 2427 , 45 L.Ed.2d 486 (1975) [“NASD”]; Hughes Tool Company v. Trans World Airlines, Inc., 409 U.S. 363 , 93 S.Ct. 647 , 34 L.Ed.2d 577 (1973); and Cantor v. Detroit Edison Co., 428 U.S. 579 , 96 S.Ct. 3110 , 49 L.Ed.2d 1141 (1976). After reading these cases and gleaning their intelligence, I believe that any Court faced with the issue at bar must ask the following questions: 1) Has Congress conferred upon the regulatory agency sufficient authority to regulate the conduct which is alleged to be anticompetitive? 2) Does the history of the regulatory agency’s activities with respect to the regulation of this conduct suggest no laxity in the exercise of this authority? 3) If the federal antitrust laws were to be construed by a federal court as outlawing the regulated activity, is there reason to believe that the agency’s regulation of the industry in question will no longer be able to function effectively? If a Court answers all three questions in the affirmative, then it must find implied immunity and dismiss the antitrust action.

The Gordon case involved an action against the New York Stock Exchange (NYSE), the American Stock Exchange (AMEX) and two member firms thereof, claiming that the system of fixed commission rates utilized by the Exchanges for the periods of time in question violated §§ 1 and 2 of the Sherman Act. The Supreme Court affirmed the dismissal of the complaint. First, the Court noted that the general policy of the Securities Exchange Act of 1934 was of self-regulation by the exchanges coupled with oversight by the Securities and Exchange Commission (S.E.C.). 422 U.S. at 666-667, 95 S.Ct. at 2603-2604. The Court then thoroughly examined the actual post-1934 experience of S.E.C. — imposed rates on the NYSE and AMEX; to summarize, the S.E.C. gradually abolished said rates between 1934 and 1975, refusing to take the position that fixed rates were required in all instances, but recognizing the established practice of minimum rates and the practicality that some level of fixed rates was necessary for a large period of time in order to insure the financial health of the brokers in question and that an immediate withdrawal of minimum rates could have disastrous financial consequences upon the brokers as well as indirect but consequential harm to investors. The *748 Court also noted that Congress, while expressing some dissatisfaction with the progress of the S.E.C. in implementing competitive rates, was generally content to allow the S.E.C. to proceed without new legislation. 422 U.S. at 668-682, 95 S.Ct. at 2606-2611. The Court then stated:

. . . [T]o deny antitrust immunity with respect to commission rates would be to subject the exchanges and their members to conflicting standards. It is clear from our discussion . . . that the commission rate practices of the exchanges have been subjected to the scrutiny and approval of the S.E.C. If antitrust courts were to impose different standards or requirements, the exchanges might find themselves unable to proceed without violation of the mandate of the courts or of the S.E.C. Such different standards are likely to result because the sole aim of antitrust legislation is to protect competition, whereas the S.E.C. must consider, in addition, the economic health of the investors, the exchanges, and the securities industry. Given the expertise of the S.E.C., the confidence the Congress has placed in the agency, and the active roles the S.E.C. and the Congress have taken, permitting courts throughout the country to conduct their own antitrust proceedings would conflict with the regulatory scheme authorized by Congress rather than supplement the scheme.

422 U.S. at 689-690, 95 S.Ct. at 2614-2615.

The NASD case involved, inter alia, an alleged conspiracy and horizontal combination among NASD’s members to prevent the growth of a secondary dealer market in the purchase and sale of mutual-fund shares. 2 Section 22(f) of the Investment Company Act of 1940 authorizes mutual funds to impose restrictions on the negotiability and transferability of shares, provided they conform with the fund’s registration statement and do not contravene any rules and regulations that the S.E.C. may prescribe in the interests of the holders of the outstanding securities. Section 22(d) provides that no dealer shall sell mutual fund shares to any person except a dealer, a principal underwriter, or the issuer, except at a current public offering price described in the prospectus. The Maloney Act of 1938 (§ 15A of the Securities Exchange Act of 1934) supplements the S.E.C.’s regulation of over-the-counter markets by providing a system of cooperative self-regulation through voluntary associations of brokers and dealers. In affirming the dismissal of the complaint as to Count I, the Supreme Court held that where Count I alleged activities which were neither required by Section 22(d) nor authorized by Section 22(f), but where the S.E.C.’s supervisory powers over the NASD is extensive, and weighs competitive concerns as a factor in regulating the secondary market of mutual fund shares purchases and sales, Count I is immune from antitrust liability. 422 U.S. at 730-733, 95 S.Ct. at 2428-2429. In particular, the Court stated:

There can be little question that the broad regulatory authority conferred upon the S.E.C. by the Maloney and Investment Company Acts enables it to monitor the activities questioned in Count I, and the history of Commission regulations suggests no laxity in the exercise of this authority. To the extent that any of appellees’ ancillary activities frustrate the S.E.C.’s regulatory objectives it has ample authority to eliminate them.

Here implied repeal of the antitrust laws is necessary to make the regulatory scheme work, [cite] In generally similar situations, we have implied immunity in particular and discrete instances to assure that the federal agency entrusted with regulation in the public interest could carry out that responsibility free from the disruption of conflicting judgments that might be voiced by courts exercising jurisdiction under the antitrust laws, [cites] In this instance, maintenance of an antitrust action for activities so directly related to the S.E.C.’s responsibilities *749 poses a substantial danger that appellees would be subjected to duplicative and inconsistent standards. This is hardly a result that Congress would have mandated. We therefore hold that with respect to the activities challenged in Count I of the complaint, the Sherman Act has been displaced by the pervasive regulatory scheme established by the Maloney and Investment Company Acts.

422 U.S. at 734-735, 95 S.Ct. at 2450.

In TWA, the appellee brought an antitrust action against Hughes Tool Co. (Tool-co) and others under the Sherman Act as a result of the manner in which Toolco had exercised its controlling interest in TWA, with particular reference to Toolco’s asserted acts to control and dictate the acquisition and financing of aircraft by TWA. As an organization engaged in phases of aeronautics, Toolco could not acquire control of an air carrier such as TWA without consent of the Civil Aeronautics Board (C.A.B.). In 1944, the C.A.B. approved de facto control of TWA by Toolco as comporting with the provision of § 408 of the Federal Aviation Act. That provision permits acquisitions of control that the C.A.B. finds are not inconsistent with the public interest and that will not result in monopoly. Section 415 of the Act endows the C.A.B. with the power to supervise all transactions between carriers and their owners on a continuing basis. And, Section 414 immunizes any conduct approved by a C.A.B. order issued under § 408 from antitrust liability. The C.A.B., after full hearings into the Toolco-TWA relationship, found that Toolco’s financial and other support was of great importance to TWA and concluded that the continued interest of Toolco in TWA appears to' be essential to the best interests of the carrier and the public. The C.A.B.’s approval was made subject to the conditions of the 1944 order. As a result, from 1944 to 1960, every acquisition and lease of aircraft by TWA from Toolco and each financing by TWA from Toolco received C.A.B. approval pursuant to § 408.

The Supreme Court reversed a default judgment in favor of TWA, holding that the conduct of Toolco was impliedly immune from the sanctions of the antitrust laws. Appellants herein seek to distinguish this case and the case upon which the Supreme Court based its ruling in TWA, Pan American Worid Airways, Inc. v. United States, 371 U.S. 296 , 83 S.Ct. 476 , 9 L.Ed.2d 325 (1963), on the basis that the Communications Act of 1934 does not have provisions similar to Sections 408 and 414 of the Federal Aviation Act. While this fact is true, the distinction is without a difference since it is clear that the TWA Court did not base its holding or restrict its holding to a strict interpretation of those two sections. Rather, the Court stated:

Competition and monopoly — two ingredients of the antitrust laws — are thus standards governing the CAB’s exercise of authority in granting, allowing, or expanding or contracting the control which Toolco had over TWA by reason of the various orders issued by the CAB under § 408. In this context, the authority of the Board to grant the power to “control” and to investigate and alter the manner in which that “control” is exercised leads us to conclude that this phase of CAB jurisdiction ... preempts the antitrust field.

409 U.S. at 385 , 93 S.Ct. at 659-660 .

We repeat, however, what we said in the Pan American case that the Federal Aviation Act does not completely displace the antitrust laws ... One of the most conspicuous exceptions would be the combination or agreement between two air carriers involving trade restraints, [cite] There may be other exceptions. But where, as here, the CAB authorizes control of an air carrier to be acquired by another person or corporation, and where it specifically authorizes as in the public interest specific transactions between the parent and the subsidiary, the way in which that control is exercised in those precise situations is under the surveillance of the CAB, not in the hands of those who can invoke the sanctions of the antitrust laws.

409 U.S. at 387 , 93 S.Ct. at 661 .

Finally, in Cantor, the respondent, a private utility which was the sole supplier of *750 electricity in southeastern Michigan, also furnished its residential customers, without additional charge, with almost 50% of the most frequently used standard-sized light bulbs under a longstanding practice antedating state regulation of electric utilities. This marketing practice for light bulbs is approved, as part of respondent’s rate structure, by the Michigan Public Service Commission, and may not be changed unless and until respondent files, and the Commission approves, a new tariff. The Supreme Court held that the respondent’s marketing practice was not immune from antitrust liability, stating:

Michigan’s regulatory scheme does not conflict with federal antitrust policy and, conversely, if the federal antitrust laws should be construed to outlaw respondent’s light bulb-exchange program, there is no reason to believe that Michigan’s regulation of its electric utilities will no longer be able to function effectively. Regardless of the outcome of this case, Michigan’s interest in regulating its utilities’ distribution of electricity will be almost entirely unimpaired. We conclude that neither Michigan’s approval of the tariff filed by respondent, nor the fact that the lamp-exchange program may not be terminated until a new tariff is filed, is a sufficient basis for implying an exemption from the federal antitrust laws for that program.

428 U.S. at 598 , 96 S.Ct. at 3121 .

With these four cases, the statutory scheme and the activity of the F.C.C. in regulating the interconnect industry in mind, it is readily apparent to me that the three aforementioned questions must be answered in the affirmative. On this basis, then, I respectfully dissent.

As to the first question, Congress has given the power to private individuals to sue A.T. & T. and its operating companies for damages where it implements a tariff which constitutes an unjust or unreasonable practice. As heretofore stated, the standard of “unjust and unreasonable” can include but is not necessarily restricted to anticompetitive practices.

As to the second question, it is clear that the F.C.C. has taken an active interest in regulating the entire field of interconnection, to the point of preempting the state public utility/service commissions in this regard. And, after seven years of concentrated study, it has adopted a “middle ground.” That is to say, it has neither adopted A.T. & T.’s position of totally restricted competition nor Appellants’ position of totally unfettered competition, but a registration program which is designed to protect the companies with sound interconnection products against the tariff practices of A.T. & T. and simultaneously to protect A.T. & T. and the public from companies with unsound interconnection products.

As to the third question, since the Court is to deal in theoretical possibility, I must conclude that circumstances could exist whereby the judgment of a federal court would disenable the F.C.C. to function effectively in this particular field of regulation. If I assume for the time being that Phonemaster’s requirement of 110-volt current to operate must require a coupling arrangement which requires A.T. & T. engineering expertise, and if I assume for the time being that Divert-a-Call is or will become a hazard to the network system and cause both annoyances to the customers and disruption to A.T. & T.’s billing procedures, then it becomes obvious that the F.C.C. should have the power to prevent or restrict Appellants’ ability to compete in the marketplace; the public interest would require no less. However, anticompetitive practices on the part of A.T. & T. could constitute per se violations of the Sherman Act and thereby require that Appellants be allowed to compete and A.T. & T. pay treble damages. Of course, these assumptions may well prove to be totally without foundation in time. However, the point is clear: this is not a case of a public utility commission whose legislative mandate clearly has nothing to do with the regulation of the light bulb sales industry, as in Cantor . The F.C.C. is to act in the public interest in the regulation of the communications industry, and the history surrounding this action indi *751 cates that the F.C.C. has deemed the public interest in the interconnect industry to be vital. Whether wisely or not, it has formulated a plan by which to regulate that industry, and an antitrust judgment could well indeed make a mockery of that plan.

B

I am aware that in urging the affirmance of the Courts below I would create a conflict, in that the Third Circuit in Essential, supra, faced with the same precise issue and the same operating facts, held that A.T. & T. and its operating companies could not be shielded impliedly from antitrust immunity. After studying that opinion, however, and with all due respect for the Third Circuit, I simply find it to be unpersuasive, especially in light of Gordon and NASD and the total lack of attention which the Essential Court gave to those two cases.

In arriving at its holding, the Essential Court drew a distinction between a customer for communications services and a competitor for communications services. The Court reasoned that the F.C.C. has the primary responsibility to insure that enforcement of the common carrier’s duty to offer service to- all who seek it on reasonable terms and conditions, but the federal courts, not the F.C.C., has the primary responsibility for the enforcement of antitrust laws which implies the permission of potential competitors in communications services to have access to the Bell System network. 610 F.2d at 1122 .

It is difficult to glean the authority from which the Essential Court derived that distinction; most certainly, it did not derive the distinction from the NASD and Gordon cases, which involved alleged restrictions of competitors of the regulated industries in question and nonetheless found implied antitrust immunity to exist. It appears from the Elssential opinion that that Court derived the distinction from some dictum in Keogh v. Chicago & Northwestern Ry. Co., 260 U.S. 156, 161-163 , 43 S.Ct. 47, 49-50 , 67 L.Ed. 183 (1922), involving an action against a shipper who had filed tariffs with the I.C.C. by a customer.

In this regard the Essential Court plainly misread Keogh , as that case had nothing to do with the doctrine of implied antitrust immunity. The holding of Keogh is that a railroad shipper may not bring an action under 15 U.S.C. § 15 for rebate of rates found by the I.C.C. to be reasonable and nondiscriminatory and fixed accordingly; this holding is clearly a resolution of a conflict between the Interstate Commerce Act and the Clayton Act. Cf. 260 U.S. at 162-163 , 43 S.Ct. at 49 . The Keogh Court did say, though, that under 15 U.S.C. §§ 1 et seq. a combination of carriers to fix reasonable and nondiscriminatory rates may be illegal, and this would be actionable under the antitrust laws. Cf. 260 U.S. at 161-162 , 43 S.Ct. at 49 .

I do not think that an “implied immunity distinction” can be read into Keogh , since that case dealt not with the pervasive regulation of a regulatory agency with broad powers, as here, but statutory construction with respect to specifically defined powers of a regulatory agency. To the extent that I am wrong in that regard, however, it is correct to say that the Supreme Court rendered the “Keogh distinction” meaningless ten years later in United States Navigation. Co., Inc. v. Cunard S. S. Co., Inc., 284 U.S. 474 , 52 S.Ct. 247 , 76 L.Ed. 408 (1932). Cunard involved an antitrust action against shippers who allegedly conspired to fix general tariff rates and establish lower contract rates for shipping among the general members with the intent of driving the plaintiff, a competitor, out of business. In other words, in the lingo of the Essential Court, this action involved not customers of a regulated industry, but competitors. Nonetheless, the Supreme Court affirmed the dismissal of the action. Noting that this matter as well lay within the jurisdiction of the I.C.C. under the Shipping Act ( 46 U.S.C. §§ 801 et seq.), the Cunard Court actually extended, as opposed to distinguished, the Keogh opinion as follows:

A comparison of the enumeration of wrongs charged in the bill with the provisions of the sections of the Shipping Act above outlined conclusively shows, with *752 out going into detail, that the allegations either constitute direct and basic charges of violations of these provisions, or are so interrelated with such charges as to be, in effect, a component part of them; and the remedy is that afforded by the Shipping Act, which to that extent supersedes the antitrust laws. Compare Keogh v. C. & N. W. Ry. Co. [cite omitted]. The matter therefore is within the exclusive preliminary jurisdiction of the Shipping Board. The scope and evident purpose of the Shipping Act, as in the case of the Interstate Commerce Act, is demonstrative of this conclusion ....

284 U.S. at 485 , 52 S.Ct. at 250-251 . See also Far East Conference v. United States, 342 U.S. 570 , 72 S.Ct. 492 , 96 L.Ed. 576 (1952).

While that was the holding of the Essential Court, three other factors appeared to play a part in that Court’s ratio decidendi: first, that nothing in the 1934 Act explicitly directs the F.C.C. when exercising its authority to take into account antitrust considerations ( 610 F.2d at 1120 ) second, the statutory scheme also includes a “savings clause,” Section 414 which, combined with 47 U.S.C. § 221 (a), conferring express immunity from antitrust litigation in a situation not applicable herein, demonstrates that no blanket immunity from antitrust law was intended by Congress ( 610 F.2d at 1120 ); and third, that in the Essential Court’s opinion, the fact that the F.C.C. suspended its judgment on the question of interconnection did not rise to the level of agency activity requiring a finding of implied immunity ( 610 F.2d at 1124 ).

The first and the third factors fly in the face of the Gordon and the NASD opinions. Neither statutory scheme in those cases involved a specific statute which required the S.E.C. to consider competitive considerations in regulating the broker-dealers in question; yet, the Supreme Court demonstrated that the history and practice of that regulatory agency was to consider that factor, along with other factors, in determining the public interest. So it is here. And, the F.C.C. suspended its judgment with respect to the enormous problem of interconnection for a period of time exceeded by the S.E.C.’s suspension of its judgment pending further study and review in Gordon; yet, all nine justices of the Gordon Court were satisfied that the S.E.C. was active enough in the regulation of broker commission rates to find implied immunity therein.

The second factor states the key argument presented by Appellant Phonetele and the United States, appearing as amicus curiae, 47 U.S.C. § 221 (a), or the Willis-Graham Act, grants the F.C.C. the exclusive right to consolidate telephone companies or allow existing companies to acquire the whole or part of another, free from any potentially or actually conflicting Acts of Congress. 47 U.S.C. § 414 states that “nothing in this chapter contained shall in any way abridge or alter the remedies now existing at common law or by statute but the provisions of this chapter are in addition to such remedies.” From these two statutes the argument is that Congress clearly expressed its intent that A.T. & T. be subject to antitrust remedies, except in the limited situation of Section 221(a); and since Section 221(a) clearly has no application to this lawsuit, Appellees must be subject to potential treble damages under the Sherman Act.

The existence of the saving clause does not alter the well-settled principle that persons such as the Appellants must exhaust their administrative remedies prior to bringing an action in a court of law. United States Navigation Co. v. Cunard S. S. Co., supra, 284 U.S. at 485-486 , 52 S.Ct. at 251 , and cases cited therein. And, in the field of antitrust litigation, dismissal of antitrust suit, where an administrative remedy has superseded the judicial one, is the usual course. Pan American World Airways, Inc. v. United States, supra, 371 U.S. at 313, n. 19 , 83 S.Ct. at 486-487, n. 19, and cases cited therein. Thus, the existence of the saving clause has no effect upon the doctrine of implied immunity. See also Pan American World Airways, Inc., supra, 371 U.S. at 321 , 83 S.Ct. at 490 (J. BRENNAN, Dissenting).

*753 More fundamentally, this Court rejected the argument presented based upon Section 221(a) five years ago in the case of International T. & T. Corp. v. General T. & E. Corp., 518 F.2d 913 (9th Cir. 1975). That case involved an antitrust action brought by I.T. & T. against G.T. & E., alleging that G.T. & E.’s acquisitions of 33 telephone operating companies had enabled it to effect a growing foreclosure of competition within the telecommunications equipment-manufacturing industry. In dictum the Court stated:

. . . The availability of a statutory exemption upon application to the FCC greatly reduces the danger of collision between the “two regimes ...” and even if a statutory exemption is not obtained [under 47 U.S.C. § 221 (a)] or is not available a defendant can make a claim of implied immunity which will be tested under the “repugnancy” standards of Philadelphia National Bank [supra] and its successors, thus insuring that the policies of the regulatory statute will not be thwarted.

518 F.2d at 918-919 . There are two circumstances in which a court may look beyond the express language of a statute in order to give force to Congressional intent: where the statutory language is ambiguous; and where a literal interpretation would thwart the purpose of the overall statutory scheme or lead to an absurd result. International T. & T. Corp. v. General T. & E. Corp., supra at 917-918, and cases cited therein. In this case, if one were to interpret Section 221(a) to mean that that was the only instance in which telephone companies were immune from antitrust litigation, such an interpretation would thwart the purpose of the overall statutory scheme. If the F.C.C. had no power to consider the anticompetitive acts of the common carriers under its jurisdiction, the result might well be different. But, it is undisputed that the F.C.C.’s powers are very broad and its mandate to protect the public interest includes the power to consider such anticompetitive acts which, in the case of the interconnect industry, it has done. And, as is evident from the decisions of the F.C.C. heretofore cited, the F.C.C. does not and cannot consider itself bound exclusively by principles of competition in protecting the public interest.

I cannot agree with the majority’s decision to remand. The majority states:

We thus recognize that those considerations advanced in favor of implied immunity, while not providing a blanket exemption, do bear on the case in a limited way. The logic of complying with a regulatory mandate is relevant as an antitrust defense, but the same logic has internal limits which do not justify any and all acts ostensibly taken in response to the FCA. There is no absolute antitrust immunity or exemption by virtue of federal or state law in this case, but the defendants below may offer to show that their actions were justified by the constraints of the regulatory schemes in which they operated.

These were the issues squarely before the trial judge and decided by him in an eloquent and brilliant decision. It defies logic to remand issues already heard and decided.

I recognize that this dissent is authored in a time in which it is politically fashionable to criticize regulatory agencies for their very existence and to criticize the telephone companies for their very existence as a monopoly. Nonetheless, we are first and foremost a nation of laws and the principle of stare decisis is the single most important key to the cohesiveness of our society. After examining the principles of law in the factual settings of Gordon and NASD, and after examining the extent to which the F.C.C. has attempted to regulate the interconnection industry, I find it inconceivable to do anything but affirm. Therefore, I respectfully dissent.

. At oral argument we requested supplemental briefs on the issue of whether the activities of Appellees were immune from antitrust litigation due to state regulation under the doctrine of Parker v. Brown, 317 U.S. 341 , 63 S.Ct. 307 , 87 L.Ed. 315 (1943) and its progeny. Upon reconsideration, this case is inappropriate for a consideration of that issue. First of all, it was not raised to either Court below. Secondly, the F.C.C. in its Telerent decision effectively preempted the states from regulating the area of the interconnection industry: to the extent that the states regulate at all, at least with respect to the California P.U.C., it is in a manner perfectly consistent with the F.C.C. registration program of 47 C.F.R. §§ 68.100 et seq. See Phonetele, Inc. v. American Telephone & Telegraph, 435 F.Supp. at 213, n. 12 .

. For the sake of brevity discussion of the alleged vertical conspiracy and Counts II-VHI of that complaint is omitted here.