# Petition — AMERICAN TELEPHONE & TELEGRAPH CO. v. MCI (Nos. 77-421, 77-420, 77-436) > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385004_2552%3A01 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition - **Published:** January 1, 1977 ## Text Supreme Court, U. §, | IL ED SEP 16 1977 No. EAN NOT CLERK IN THE Supreme Court of the United States Ocroper TERM, 1977 97-421 AMERICAN TELEPHONE AND TELEGRAPH COMPANY, Petitioner, v. MCI TELECOMMUNICATIONS CORPORATION, ET AL., Respondents. PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT Of Counsel: ah eee auL J. Berman * og = 888 Sixteenth Street, N.W. as York NY 10007 Washington, D.C. 20006 Aurrep C, Parton. Epwarp L. FrrepMan 195 Broadway New York, New York 10007 Attorneys for American Telephone and September 1977 Telegraph Company So ae ee ae ate oS - ———— TABLE OF CONTENTS Page I ee des See es dbbe dees sees 1 I ye or Ny 2 QuEeTION PRESENTED 0.0... ccc cece eee enseeeees 2 i skbebesedeesedet 3 STATBMENT OF THE CASE ......... ccc secs cevesenes 3 A. The Regulatory Framework and Background .. 3 B. The Specialized Carrier Decision ............ 6 i I I APPPTT TTT TTITTTLL Ee 9 :, Midna dias tne dhas ahndbandnoehekievtees ll I. The Decision Below Directly Conflicts With the Decisions of the Ninth and Third Circuits on the Lawful Scope of Specialized Carrier TEE 666d 0.50:0.66466400006 69008000 60 beagess 12 II. The Lower Court Has Fundamentally Miscon- strued the Governing Statute in Disregard of Its Language, Purpose and. History ......... 18 Ill. The Lower Court’s Decision Will Seriously Impair the Regulatory Plan and Provision of Telephone Service at Affordable Rates ...... 25 Cee re a a 82 ii TABLE OF AUTHORITIES Cases AND ADMINISTRATIVE PROCEEDINGS: Page Aerovias Columbianas Limitada, 52 C.A.B. 447 (1969) 24 Arrow Transp. Co. v. Cincinnati, N.O. & T.P. Ry, 879 U.S. 642 (1965)... cece cece cece ee eeeeees AT&T, 9 F.C.C.2d 80 (1967) coc ccc ee cence er eeees 5 AT&T v. FCC, 539 F.2d 767 (D.C, Cir, 1976) ...... 17, 28 ATAT v. FCC, 2d Cir., Nos, 77-4057, et al. oc. see ees 28 Bell Telephone Company of Pennsylvania v. FCC, 503 F.2d 1250 (8d Cir. 1974), cert. denied, 422 US. | 1026 (1975) oc ccsceseeeeceeeeeeeeesesene nes passim (10GB) .ncvccrccccccvcccccscsccvscceccsccesces — ee Co. v. FCC, 258 F.2d 440 (D.C. ir. WETTTETETET ETAT TTL U Tee a Commissioner v. Gordon, 391 U.S, 83 (1968) ........ 18 Consolidated Carriers Corp., 118 M.C.C, 695 (1973) .24, 26 Domestic Communications-Satellite Facilities, F.C.C.2d 844, recon, denied, 38 F.C.C.2d 665 CRIED 0.0 dn.y000n000s0csgnaseases caccsushseaes 8, 23 Doniphan Telephone Co. v. ATA&T, 34 1'.C.C. 950, 96 1962), aff'd, 34 F.C.C, 949 (1963) ........000es 4 Eastern Microwave, Inc., 11 F.C.C, 146 (1967) ... 23 FCC v. Pottsville Broadcasting Co., 309 U.S. 134 CORED nonvacnneccccscecsecctccscepesecesseses 25 FCC v. RCA Communications, Inc., 346 U.S. 86 \ Seer ssim FCC v. Sanders Bros. Radio Station, 309 U.S. 470 (1940) vec eeeeesceeeee serene sere eestor seen ses 15, 21 Plying Tiger Line, Inc. v. CAB, 204 F.2d 404 (D.C. BD, BRU) cvccccccccccccccsgeserseeeessseocces 23, 24 Gradsky v. United States, 376 F.2d 993 (5th Cir. 1967) 28 Graphnet Systems, Inc., 61 F.C.C.2d (1975) ..... 23 Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322 WE, BES CIBER) once cccccvcopeccvcsseccseconces Idaho Power Comm'n v. Idaho Power Co., 344 U.S. BE GED ncccccessnvvccnpncccesccacpescentese 25 Microwave Communications, Inc., 18 F.C.C.2d 953 (1969), recon. denied, 21 F.C.C.2d 190 (1970) ... 5 MCI v. FCC, D.C. Cir., Nos. 76-2071, et al. ......... 29 Michigan & Nebraska Transit Co., Inc., 119 M.C.C. ee GU 0.0b0knas chase chotessces daatersoocees 26 Nader v. FCC, 520 F.2d 182 (D.C, Cir. 1975) ....... 17 Patterson v. Lamb, 329 U.S. 589 (1947) ........6055 25 Perkins v. Standard Oil Company, 487 F.2d 672 (9th Ge, BGBD ccccccvccccccccccccccccenccscccccces Table of Authorities Continued iii Page Permian Basin Area Rate Cases, 390 U.S. 747 1968) 25 eve vent Ine. v. FCC, 264 F.2d 872 (D.C. Cir. - EE cn 460s ob DRC AEs cAuselek is eodau dh tacos’ Press Wireless, Inc., 25 F.C.C. 1466 (1958), aff'd per *sfeeepeeeeeeeeeaee 21 Thorpe v. Housing Authority, 398 U.S. 268 (1969) . .12, 20 United States v. FCC, D.C. Cir., Nos. 77-1249, et al... 29 me Aaa v. Southwestern Cable Co., 392 U.S. 157 Washington Utils. & Transp. Comm'n vy. FCC, 513 F.2d 1142 (9th Cir.) cert. denied, 428 U.S. 836 RRR SR tty Sti ra ic apa pram passim Western Union Int’l., Inc., 9 F.C.C.2d 156 (1967) ... 28 Williams vy. Lee, 358 U.S. 217 ( BT 60 Ou dsb ews bake 24 ConstiruTion anp Statutes: Communications Act of 1934: Beotion 1, 47 U.S.C. 6181 ........ ccc cc cess cece, 30 Section 214, 47 U.S.C. OE i passim iv Table of Authorities Continued Page Section 214(a), 47 U.S.C. § 214(a) .... cece eens 21 Section 050) 47 U.S.C. § 214(¢) .....606.. 12, 20-21 Section 303(a), 47 U.S.C. § 30B(Aa) ... 6. cee eens 12 Section ey 47 U.S.C. §308(b) .......00 ees 12, 20 Sections , 47 U.S.C. $$ 307-09 .......00 0 6, 19 Section 309, 47 U.S.C. § B09 oc. cece eee 26 Interstate Commerce Act, Section 1(18), 49 U.S.C. GACER) scccccccccccccccvcececccvcvcvcscesevony 2B U.S.C. G$1QGA(1) cc creccccccrvvvevevvvvevevess 2 U.S. Constitution, Art. I, See. 8... 6. ee eee 28 MISCELLANEOUS: Brief for the FCC and the United States, in Bell Tele- fase someone of Pennsylvania v. FCC, 508 F.2d 1280 (8 ir, 1974), cert. denied, 422 U.S. 1026 . Brief for the FCC and the United States in Wash- ington Utils. & Transp. Comm'n v. FCC, 513 F.2d 1142 (9th Cir.), cert. denied, 423 U.S. 836 (1975) 7-8 FCC Rutes: Section 6.3, 47 C.F.R. $6.3 (1st ed. 1939) ...... 23 Section 21.2, 47 C.F.R. § 21.2 (1976) .........55. 3,5 Sector en et seq., 47 C.F.R. § 21.500, et seq. Section a: 600, et seq., 47 C.F.R. § 21.600, et seq. mi Section 21.706, 47 C.F.R. § 21.706 (1976) ........ 19 a — et seq., 47 C.F.R. § 21.800, et seq. Section 2 1000, et seq., 47 C.F.R. § 21.1000, et seq. ‘ Section 63.01, 47 C.F.R. § 63.01 (1976) .......... 19 Hearings Before the Subcommittee on Communica- tions of the House Committee on Interstate and Foreign Commerce, 94th Cong., lst Sess., March in SEE, €0.0b.0k0 000 nde cunbanaekseidestidbanies 9 Table of Authorities Continued v Page Hearings Before the Subcommittee on Communica- tions of the Senate Committee on Commerce, Science and Transportation, March 21,1977 .... 9 _ spemmnente, FCC Docket No. 18920, October 1, pb 6d6 000s ¥o05 06 beendadesbactdukdaeranaeen 6 MCI Reply Comments, FCC Docket No. 18920, Decem- Ge SO ore nkcbenccunsedusrdaustaateindaaad 20 Opposition of the Government, Sup. Ct. No. 74-1550 . .8, 20 Opposition of MCI, Sup. Ct. No. 74-1229 ............ 8 President’s Task Force on Communications Policy, PE GE GE ode sh chek eles dc accedeusa Supreme Court Rule 19(1)(b) ..................... 13 IN THE Supreme Court of the United States OcToBER TERM, 1977 No. AMERICAN TELEPHONE AND TELEGRAPH COMPANY, 3 Petitioner, Vv. MCI TELECOMMUNICATIONS CORPORATION, ET AL., Respondents. PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT Petitioner American Telephone and Telegraph Com- pany requests that a writ of certiorari issue to review the judgment of the United States Court of Appeals for the District of Columbia Circuit in this case. OPINIONS BELOW The opinion of the Court of Appeals, which is not yet officially reported, appears at Appendix A to this 2 petition,’ The decision of the Federal Communications Commission, which is reported at 60 F.C.C.2d 25, ap- pears as Appendix B.’ JURISDICTION The decision of the Court of Appeals, which consti- tutes its judgment in this case, was entered on July 28, 1977. The jurisdiction of this Court is invoked under 28 U.S.C. § 1254(1). QUESTION PRESENTED Ordinary long distance telephone service in the United States has been provided on a regulated, non- competitive basis for over a half century. By statute, new competitors require prior FCC authority before they begin to operate, and the FCC may authorize a new carrier to provide only a particular type or ‘‘elass’’ of service. Construing its own prior decisions and grants to “‘specialized carriers’’ the FCC held in this case that such carriers have been authorized to provide a class of service known as ‘‘private line’’ but have not been authorized to provide ordinary long dis- tance telephone service. The question presented is: Whether the Court of Appeals for the District of Columbia Cireuit erred when, in direct conflict with decisions of the Ninth and Third Circuits, it deter- mined that a leading specialized carrier is authorized 1The appendices are separately bound in a companion volume cited as ‘‘ Pet. App.’”’ *A prior letter-order of the FCC, reaffirmed by its principal decision, is reprinted in the principal decision and appears at Pet. App. 70b. 3 to provide ordinary long distance telephone service, de- spite repeated pronouncements by the FCC that it has authorized specialized carriers to provide only private line service and has never authorized such carriers to provide ordinary long distance service and never found that such competition for that class of service would serve the public interest. STATUTES INVOLVED Pertinent provisions of the Communications Act appear as Appendix C. ; STATEMENT OF THE CASE A. The Regulatory Framework and Background For over half a century, AT&T has managed and operated the interstate switched telephone network to provide ‘‘switched public message services’’* through- out the United States in cooperation with local tele- phone companies. The most familiar service is “MTS”, or ordinary long distance service,’ which * The FCC’s rules define a ‘‘public message service’’ as one of- fered on ‘‘a non-exclusive message by message basis, contemplating a separate connection for each occasion of use.’’ 47 C.F.R. § 21.2 (1976). * AT&T and the local telephone companies, which include 23 Bell System operating companies and about 1,600 independent tele- phone companies, operate as partners and do not compete with each other ; in general, AT&T carries the call over its interstate network between local exchanges, and the local operating company at the origin and destination cities is responsible for local distribution of the call through its local facilities. *MTS means Message Telecommunications Service. WATS, or Wide Area Telephone Service, i is another familiar switched public message service. + allows any person to use any telephone connected to the network in one city to call long distance to any other connected telephone in the destination city. The eall travels over a complex network of intercity cir- cuits and is routed by switching equipment along the most efficient path available. The caller must establish a new connection for each call and pays for MTS on a per call basis. See generally Doniphon Telephone Co. v. AT&T, 34 F.C.C. 950, 962 (1962), aff'd, 34 F.C.C. 949 (1963). The unified switched public network has achieved extraordinary benefits for the public. By concentrating all of the MTS traffic on this integrated system, AT&T is able to utilize high capacity transmission systems and drastically reduce unit costs;* in fact, a long dis- tance call costs less today than it did prior to World War II despite rising prices in almost every other field. Provision of MTS under regulation, on a non- competitive basis, has also permitted nationwide MTS rates to be based on average costs so that along less heavily used routes, where the cost of providing serv- ice is relatively high, telephone service can be made available at affordable rates.’ * For example, the investment for a small capacity cable system providing 1,800 two way voice circuits is about $17.22 per circuit mile, while the investment for a giant cable system providing 132,000 cireuits is about $1.68 per circuit mile. Realizing such unit cost savings requires that sufficient traffic be concentrated on the main routes of the unified network to justify the necessary in- vestment in hi) capacity systems. * Without such rate averaging—which has been sanctioned by both the FCC and state regulatory agencies—long distance calls between many points, especially small cities and rural areas, would be much higher. In addition, the revenues generated by MTS con- tribute through the ‘‘separations’’ process to holding down local 5 In addition to services like MTS, AT&T and the local telephone companies have long provided various types of ‘private line’’ service.’ A private line pro- vides the user, for a fixed monthly charge, with an ex- clusive circuit or circuits available for communication by him between two or more fixed locations. For ex- ample, a ‘“‘tie line’? that connects a manufacturer’s warehouse in Baltimore with its bookkeeping center in New York is a private line. Since the private line cir- cuits are normally dedicated to the use of a partien- lar customer, they can be tailored to meet his special- ized needs such as the points to be connected, circuit capacity provided, and type of circuit. Although MTS has always been provided on a regu- lated, non-competitive basis, the FCC has recently taken a different approach to private line service. In 1969, it allowed the respondent MCT to construct on an experimental basis a single system between Chi- eago and St. Louis to provide private line service. Microwave Communications, Inc., 18 F.C.0.2d 953 (1969), recon, denied, 21 F.C.C.2d 190 (1970). In 1970, the FCC found itself faced with a large number of applications from so-called ‘‘specialized carrier’’ ap- plicants—including MCI—seeking to provide private line service in competition with AT&T. telephone rates, particularly basic residential rates, throughout the country; this is accomplished by the use of interstate revenues to defray local costs under procedures approved by the FCC and state regulatory agencies. See AT&T, 9 F.C.C.2d 30, 88-94 (1967). *A “‘private line service’’ is one ‘‘whereby facilities for com- munication between two or more designated points are set aside for the exclusive use or availability for use of a particular customer and authorized users during stated periods of time.’’ 47 C.F.R. § 21.2 (1976). 6 Under the Communications Act and this Court’s de- cision in FCC v. RCA Communications, Inc., 346 U.S. 86 (1953), the new carriers could not provide such serv- ice or even initiate construction of the necessary facili- ties without first obtaining FCC authorization based on public interest findings of need and public benefit.’ MCI, like other applicants, represented to the FCC that ‘‘MClI-type applicants propose to offer only cus- tomized point-to-point services and have no intention of attempting to compete with [AT&T] in providing local exchange or long distance toll telephone service, which account for the bulk of [AT&T] revenues,’’ MCT comments, FCC Docket No. 18920, October 1, 1970, pp. _ 27-28 (emphasis added). B. The Specialized Carrier Decision Instead of holding hundreds of route by route hear- ings, the FCC determined to resolve the basic public interest questions posed by the applications and es- tablish the framework for future specialized carrier operations in a single rulemaking proceeding. In its 1971 Specialized Carrier decision, the FCC created a new class of limited-service ‘‘specialized carriers’’ to provide private line service.” In the decision, the FCC * Section 214 of the Communications Act, 47 U.S.C, § 214, re- quires certificates of public convenience and necessity for new in- terstate ‘‘lines’'—defined as ‘‘any channel of communication’’— whether established by cable or radio. In addition, Sections 307-09 of the Act, 47 U.S.C. §§ 307-09, require station licenses based on public interest findings wherever radio frequencies are to be used. Specialized carriers use microwave radio to create lines and there- fore need both certificates and licenses, and the FCC ordinarily makes a single public interest determination in such cases. Specialized Common Carrier Services, 29 F.C.C.2d 870, recon. denied, 31 F.C.C.2d 1106 (1971), aff’d sub nome Washington Utils. & Transp. Comm’n v. FCC, 513 F.2d 1142 (9th Cir.), cert. denied, 423 U.S. 836 (1975). The specialized carriers which have resulted 7 repeatedly said that it was authorizing specialized car- riers to provide ‘‘private line’’ service; and its affirma- tive public interest findings, including the erucial find- ing of benefit required under FCC v. RCA Communi- cations, Inc., related specifically to ‘private line serv- ices proposed by [MCT] and other applicants.’’ " Conversely, in considering the possible adverse im- pact of the new competition, the FOO made elear that it was not authorizing specialized carriers to provide switched public message service such as MTS and therefore saw no threat of increased MTS rates for the public. Thus, it found the bulk of the Bell Svstem’s revenues came from services (MTS and WATS) ‘which the applicants do not seek to provide,”’ whereas interstate private line revenues amounted to onlv about 4 percent of total Bell System revenues, 29 F.0.C.2d at 911. In addition, the Commission coneluded that na- tionwide rate averaging used by the existing carriers for MTS and WATS would not be jeopardized (see p. 30, below), since the specialized carriers had not sought to provide such services: Jd. at 915. On review in the Ninth Cirenit, the FCC and the Department of Justice represented that “the Com- mission’s decision . .. to allow competition . . . involves essentially private line offerings as distinguished from local telephone exchange and long distance toll tele- from that decision are merely one of a number of classes of limited- service carriers which the FCC has created from time to time to provide particular types of common carrier service. See p, 23, below. 29 F.C.C.2d at 882, quoting staff analysis. Numerous other ref- erences to private line service in the Specialized Carrier decision are reprinted in a compilation contained in Appendix D to this petition, Pet. App. 8d-10d. 8 phone services.’’ “ In affirming the Specialized Carrier decision, the Ninth Circuit expressly adopted this in- terpretation. 513 F.2d at 1155-56. The same interpreta- tion was adopted by the Third Circuit, after similar representations by the Government (Pet. App. 13d- 15d), in reviewing a related, subsequent order of the FCC. Bell Telephone Company of Pennsylvania v. FCC, 508 F.2d 1250, 1254-55, 1273-74 (3d Cir. 1974), cert, denied, 422 U.S. 1026 (1975).” Following the Specialized Carrier decision, the FCC has issued thousands of grants and licenses to special- ized carriers in reliance on its main decision and with- out any further public interest findings. The applica- tions and grants, excerpts of which are included in Ap- pendix F to this petition, repeatedly either refer to private line service or incorporate by reference the Specialized Carrier decision itself. The central prem- ise that the Specialized Carrier decision was confined to authorizing only private line competition has been repeated in subsequent FCC decisions," in briefs sub- mitted by the FCC and the Department of Justice in * Brief for the FCC and the United States, pp. 4-5, in Washing- ton Utils, & Transp. Comm’n v. FCC, supra, MCI expressly adopted the Government's statement of facts in its own brief (p. 1). "In addition, both the Government and MCI represented to this Court, in opposing certiorari, that the Spectalized Carrier case was concerned with ‘private line’’ service. See opposition of the Gov- ernment, Sup.-Ct. No. 74-1550, pp. 2-3 (Ninth Circuit) ; opposition of MCI, Sup. Ct, No. 74-1229, p. 3 (Third Cireuit). % B.g., Domestic Communications-Satellite Facilities, 35 F.C.C.2d 844, 853, recon. denied, 38 F.C.C.2d 665 (1972) ; Resale and Shared Use of Common Services, 60 F.C.C.2d 261, 293 (1976), recon. denied, 62 F.C.C.2d 588, 602-03 (1977), appeal pending sub nom. AT&T v. FCC, 24 Cir., Nos, 77-4057, et al. 9 at least three circuits * and to this Court (see p. 8, n. 13, above), and in statements by the FCC to Congress." C. Proceedings Below Although MCT began to provide private line service in 1972, neither then nor later did MCT seek authority to provide MTS. Instead, beginning in late 1974, MOT sought to introduce a form of MTS under the pseu- donym ‘‘Execunet.’’ What MCT did was to connect its intercity lines to local telephone company exchanges at both ends,” configure the circuits so that any cus- tomer could utilize any telephone or intercity circuit “EB.g., ‘‘The Specialized Common Carrier Services proceeding involved rulemaking for the determination of basic, broad policies with respect to provision of the full range of private line services ....* Brief of the FCC and the United States, pp. 41-42, in Bell Telephone Company of Pennsylvania v. FCC, supra. Extracts from briefs of the Government in the Third, Ninth and District of Columbia Circuits appear at Pet. App, 10d, 12d-13d, 144-154. “FE .g., ‘One thing you must understand—the competition we have introduced has been in the private line and not the message toll service... .’’ Hearings Before the Subcommittee on Communi- cations of the House Committee on Interstate and Forcign Com- merce, 94th Cong., Ist Sess., March 11, 1975, p. 46 (Statement of Chairman Wiley). Various conaressional statements reflect the same understanding, B.9., ‘‘It should be emphasized that the private line and terminal equipment sectors of the industry are the only two areas that the FCC has opened to competition. The public telephone network has remained a regulated monopoly .. . .’’ Hearings Before the Subcommittee on Communications of the Senate Committee on Commerce, Science and Transportation, March 21, 1977, p. 14 (Statement of Senator Hart). "The specialized carriers use local facilities of the telephone companies to connect the end points of their intercity cireuits with the customer's premises. However, use of the local facilities has been mandated only for the specialized carriers’ authorized private line services, See Beil Telephone Company of Pennsylvania v. FCC, supra, 503 F.2d at 1273-74, 10 in turn, and thereby offer customers essentially the same service as they currently receive from MTS." As with MTS, an Execunet customer has access from any telephone in one city to any telephone in a distant city on a eall-by-call basis. Pet. App. 31b-32b, 64b-70h. Subject to a monthly minimum charge, an Execunet customer, like the MTS customer, is charged for each call at a rate dependent on the distance called and the length of the call. 7d. Neither Execunet nor MTS pro- vides a customer with the exclusive use of an intercity circuit; the Execunet customer, like his MTS counter- part, uses whatever MCT intercity cireuits are avail- able, as well as local telephone switching facilities and eirenits. Id. After a lengthy investigation, the FCC released its decision in this case on July 13, 1976, unanimously af- firming that Execunet was an unlawful service. MCI Telecommunications Corp., 60 F.C.C.2d 25 (Pet. App. 1b). In its detailed decision, the FCC construed its own Specialized Carrier decision and confirmed that specialized carriers such as MCT have been authorized to provide only private line service.” The FCC further Charts comparing Execunet and MTS, introduced by AT&T in the FCC proceeding, appear at Appendix E to this petition. The chart of Execunet depicts its operation consistent with the FCC's own findings. See Pet. App. 2b-3b & n.1, 1” Previously, the FCC had determined in a letter-order of July 2, 1975, thaf Execunet was beyond MCT's authority. Pet. App. 70b-76b, On review in the lower court, MCI raised new arguments ; accordingly, the lower court held the case in abeyance so that MCI could make its full presentation to the FCC. The jurisdiction of the Court of Appeals rests on 28 U.S.C, § 2342. *” The FCC cited the language and reasoning of its own Special- ized Carrier decision, which ‘‘makes it quite clear that we intended 11 found on the undisputed facts that Execunet had ‘‘all the essential characteristics’’ of switched public mes- sage service and none of the characteristics of private line service. Pet. App. 35b. On July 28, 1977, the lower court reversed. It held that MCI was free to provide any service, includ- ing MTS, over the communication facilities which the FCC had previously authorized and held to be limited to private line service. Pet. App. la. The court did not deny that Execunet was a form of switched public message service (Pet. App. 26a), and it ac- knowledged that the FCC had never specifically au- thorized competition in the switched public message service field or found that such competition would serve the public interest. Pet. App. 29a, 31a. Neverthe- less, the court asserted that the FCC could not grant authorization limited to proposed services without addressing the services the applicants do not propose to provide and affirmatively finding that it would be contrary to the public interest for them to provide such additional, never-proposed services. Pet. App. 29a-30a. Certiorari is warranted and urgently required on several independent grounds. The lower court decision is in direct conflict with decisions of the Ninth Circuit and the Third Circuit. The latter two circuits clearly construed the Specialized Carrier decision as properly confined to authorizing private line service. That con- struction is supported by the language and reasoning and did open competition only in . .. private line services’’ (Pet. App. 20b), and the FCC relied directly on the decisions of the Ninth and Third Circuits. Pet. App. 22b-23b. 12 of the agency and by its consistent, subsequent ad- ministrative interpretation. See generally Thorpe v. Housing Authority, 393 U.S. 268 (1969). In addition, the lower court’s decision involves clear statutory error. The Communications Act permits ap- plications to be granted ‘‘as applied for’’ (Section 214(c)) and allows the FCC to ‘‘classify’’ stations and services (Section 303(a), (b)). MCI-type carriers only applied for authority to provide private line service and have never been authorized to provide switched publie message service. Contrary to FCC v. RCA Com- munications, Inc., the lower court’s reading of the stat- ute would authorize competition for switched public message service, even though the FCC has never found that it would serve the public interest. Finally, among numerous other adverse conse- quences, the lower court’s decision undermines decades of settled practice by which limited service carriers have been created by the FCC and by similar agencies, and it threatens the validity of dozens of classifications and thousands of grants. Because of the lower court’s statutory holding, this situation—which will cause se- rious administrative and judicial disruption—can be rectified only on certiorari and not by further agency proceedings. I. The Decision Below Directly Conflicts With the Decisions of the Ninth and Third Circuits on the Lawtul Scope of Special- ized Carrier Service. The holding of the District of Columbia Circuit, that specialized carriers are free to offer switched public message service, conflicts with the decisions of the Ninth Circuit in Washington Utils. & Transp. Comm’n 13 v. FCC and the Third Circuit in Bell Telephone Com- pany of Pennsylvania v. FCC. In each ease, the Gov- ernment represented that the FCC had only authorized competition for private line service (see Pet. App. 10d, 14d-15d) ; and in each, this representation was an essential preinise of the court’s decision. Unquestion- ably, this is a case where a ‘‘court of appeals has ren- dered a decision in conflict with a decision of another court of appeals on the same matter,’’ so as to warrant review by this Court. Sup. Ct. Rule 19(1) (b). The Ninth Circuit, in affirming the Specialized Car- rier decision, expressly found: “The business involved is that of providing spe- cializéd private or leased line communication services through microwave transmission facilities as distinguished from public exchange and lonq distance toll telephone service.”’ 513 F.2d at 1155 (emvhasis added). Summarizing the FCC’s own determinations, the Ninth Circuit stated that new. entry in the specialized field would not adversely affect existing carriers be- cause the specialized services in question represented only a ‘‘very small percentage of A.T.&T.’s total mar- ket”’ and “‘[t]he market for standard voice communi- cations services is not affected.’’™ The premise that specialized carriers were limited to private line service was essential to the Ninth Circuit’s decision in two different respects. ™ Id. at 1156 n.21 (emphasis added). The court also stated that “‘[t]he record as a whole indicates that entry by more than one private line carrier should generally be reasonably feasible... .’’ Id. at 1167 n.33 (emphasis added). 14 First, the Ninth Circuit had to determine whether the introduction of new competition rested on a show- ing of public interest need, as required by the Act and by this Court in FCC v. RCA Communications, Inc.” The Ninth Cireuit found that the FCC had made such a showing with respect to private line service.” The Ninth Cireuit did not and could not make any such finding with respect to switched public message service. Thus, had the FCC authorized such competition in the Specialized Carrier decision, the Ninth Cireuit would have been compelled to reverse based on its own reason- ing and the principles of RCA. Second, the Ninth Circuit took note of the FCC’s ultimate finding that ‘‘there is no reason to anticipate that new entry would have any adverse impact on service to the public by existing carriers”’ so as to out- weigh the benefits of new entry. 513 F.2d at 1155-56. However, as the Ninth Cireuit recognized, this deter- mination itself rested on subsidiary FCC findings confirming that specialized carrier competition would 22 The RCA decision, which the Ninth Circuit canvassed at length (513 F.2d at 1158-59), determined that Congress had not intended the FCC to permit new common carrier entry merely on the as- sumption that ‘‘competition is bound to be of advantage ... .”’ 346 U.S. at 97. Rather, this Court found that ‘‘the Commission must at least warrant ... that competition would serve some beneficial purpose’’ and that there be ‘‘ground for reasonable expectation’’ that this benefit would be achieved. Id. at 97. 23 The Ninth Circuit quoted the FCC’s ultimate finding that ‘‘a public need and demand [existed] for the proposed facilities and services’ (513 F.2d at 1155) and summarized the supporting sub- sidiary findings, including the FCC’s view that existing carriers alone might not meet the needs of the specialized market ‘‘and still meet the increasing requirements of the public monopoly services {MTS and WATS]... .’’ 7d. at 1156 n.21. 15 not include MTS.” If these findings had not been aec- cepted, the Ninth Circuit clearly could not have af- firmed. Id. at 1159-60.” The lower court decision also conflicts with the de- cision of the Third Circuit in Bell Telephone Company of Pennsylvania v. FCC. There, the Third Cireuit had before it an order requiring local telephone companies to provide local distribution facilities to specialized carriers (see p. 9, n. 17, above) for two types of serv- ice denominated FX and CCSA (described at 503 F.2d at 1254 n.4). The scope of the Specialized Carrier de- cision was directly in issue because the telephone com- panies claimed that it did not authorize spec‘alized carriers to provide FX or CCSA service. The tele- phone companies also argued that the FCC’s intercon- nection order before the court was too broad and am- biguous to be sustained. The Third Circuit concluded that the Specialized Carrier decision was co-extensive with private line service and therefore included FX and CCSA because *In summarizing the supporting findings, the Ninth Circuit mentioned inter alia the small percentage of the market involved (td. at 1156 n.21), an obvious reference to the FCC’s determination that private line services being opened to competition represented only 4 percent of Bell System revenues. 29 F.C.C.2d at 911. In noting that ‘‘ [t]he market for standard voice communications serv- ice is not affected’’ and this ‘‘accounts for the bulk of A.T.&T.’s revenue’’ (513 F.2d at 1156 n.21), the Ninth Circuit necessarily referred to the FCC’s finding that MTS and WATS represented 87 percent of Bell System interstate revenues (29 F.C.C.2d at 911) and were services the FCC did not authorize the specialized car- riers to provide. 7d. at 915. * See generally FCC v. Sanders Bros. Radio Station, 309 U.S. 470, 476 (1940) ; Carroll Broadcasting Co. v. FCC, 258 F.2d 440, 443 (D.C. Cir. 1958). 16 the FCC deemed them to be private line services. In parsing the Specialized Carrier decision, the Third Cir- euit found that specialized carriers were permitted to provide services ‘‘within the rubric of ‘private line services’? (503 F.2d at 1260-61), and that the FCC’s evaluation demonstrated that ‘‘the public interest fa- vored the entry of specialized carriers into the full field of private line services.” Id. at 1270. If the Third Cir- cuit had regarded the Specialized Carrier decision as authorizing competition for any service including MTS, then its entire course of reasoning would have been superfluous and mistaken.” Moreover, the Third Circuit made clear that it was rejecting the overbreadth and vagueness attacks on the interconnection order because of the limited class of competitive services involved. The Third Circuit’s decision said that it ‘‘would be inclined to agree with [the telephone companies] that the order is somewhat vague and, to a certain extent, overbroad’”’ if the order were read in the abstract. 503 F.2d at 1273. However, it found that the order took on adequate specificity as a result of its context, which related the order to the FCC’s determination to permit ‘‘competition in the provision of the interstate private line communications .... Id. (quoting the FCC’s own description of the Specialized Carrier case). In light of the language and reasoning of the Ninth and Third Circuit decisions, the lower court in this case * Not only would it have been unnecessary for the Third Circuit to ascertain that the Specialized Carrier decision included the ‘‘full field’’ of private line services (see id. at 1270), but it would have been pointless for the Third Circuit to consider carefully, as it did, whether FX and CCSA fell within the private line ‘‘rubric.’’ See id, at 1261. 17 clearly erred when it sought to distinguish those deci- sions on the ground that the ‘‘issues’’ in those eases dif- fered. Pet. App. 25a-26a n.59. The Ninth and Third Circuits did consider and had to conclude, as their own language and reasoning showed, that the specialized carriers had been authorized to provide private line service but that competition beyond this boundary had not been contemplated or authorized. Accordingly, there is a direct conflict among the circuits.” The conflict in the circuits is not limited to an ab- stract or hypothetical disagreement. If the lower court’s view of the Specialized Carrier decision were correct, that decision—which is the basis for all of MCI’s subsequent grants—would not have been sus- tained by the Ninth Ciruit, and today MCI could offer no service whatever, let alone Execunet. See p. 14, above.” In short, the conflict has produced a result re- ** In fact, prior to the present case, the District of Columbia Cir- cuit had itself rendered decisions that are inconsistent with the de- cision below. In Nader v. FCC, 520 F.2d 182, 187 (D.C. Cir. 1975), the court stated that ‘‘MTS and WATS are essentially monopoly services .... AT&T’s [other] interstate revenue accrues from pri- vate line service .... Unlike MTS and WATS, several specialized earriers, including MCI, compete with AT&T in this part of the market.’’ In an even more recent decision, the court construed the Special- ized Carrier decision thusly: ‘‘In announcing a general policy in favor of competitive entry the Commission decided broadly [in the Specialized Carrier case] that the public interest, convenience, and necessity would be served by permitting specialized common carriers to provide a full range of private line communications services ....’ AT&T v. FCC, 539 F.2d 767, 773-74 (D.C. Cir. 1976) (emphasis added). ** The FCC’s findings and the Ninth Cireuit’s affirmance clearly do not provide a public interest basis for authorizing competition 18 specting Execunet itself that is logically impossible and creates a special warrant for Supreme Court re- view to resolve the conflict. Commissioner v. Gordon, 391 U.S. 83 (1968) (conflict on tax consequences of same transaction). Finally, the conflict involves a serious element of misdirection. If the District of Columbia Circuit de- cision stands, then the Ninth and Third Circuit each acted on the basis of crucial misstatements by the Gov- ernment and MCI concerning the scope of the Special- ized Carrier decision. See Pet. App. 1d-16d. Indeed, the representations were repeated not only in the cir- euit courts but to this Court as well when the Govern- ment and MCT successfully opposed certiorari from the Ninth and Third Circuit decisions. See p. 8, above. Accordingly, judicial review of this conflict is required in order to vindicate the courts’ own processes. II. The Lower Court Has Fundamentally Misconstrued the Gov- erning Statute In Disregard of Its Language, Purpose and History. In holding that MCI could provide any service it chose, the lower court construed the Communications Act as precluding the FCC from granting a carrier only limited authority—even though the carrier had applied only for limited authority—‘‘unless [the FCC] has affirmatively determined that ‘the public conve- for switched public message services such as MTS, a necessary predicate under the Act and RCA for validly authorizing un- limited service. See p. 14, above. Accordingly if MCI's certificates are read as unlimited, then they are themselves invalid. 19 nience and necessity [so] require’ ’’ such a limitation. Pet. App. 24a. Since it discerned no such ‘‘affirmative determination”’ in the Specialized Carrier decision (id. at 29a-30a), the lower court concluded that MCI was free to provide switched public message service includ- ing MTS. The lower court’s reading of the statute is at odds with the language of the Act. with its purpose, with rationality, and with the FCC’s continuing ad- ministrative construction of the Act for almost half a century. The Communications Act clearly forbids a carrier to construct or operate any channel of communication (Section 214) or transmit any radio signal (Sections 301, 307-09) until the FCC has determined that the public interest so warrants. In determining whether the public interest would be served, the FCC necessar- ily must first determine what service or class of serv- ices the carrier proposes to provide, so that it can eval- uate the public interest need and any adverse effects that may result. Not surprisingly, Section 63.01 of the FCC’s rules, which specifies the ‘‘contents of applica- tions’’ under Section 214 of the Act, provides that the application shall include a statement of ‘‘the nature and classification of the communication services to be provided (e.g.,... private line ... ete.).’’” In the Specialized Carrier case, the FCC was econ- fronted with applications from MOCT-type carriers * 47 C.F.R. § 63.01 (1976) (emphasis added). Similarly, Sec- tion 21.706 of the FCC’s rules which includes requirements for applications to establish radio stations in the frequencies utilized by MCI, requires the applicant te specify ‘‘[t]he nature and type of services to be rendered (¢.¢., . . . private line . . . ete.).’’ 47 C.F.R § 21.706 (1976) (emphasis adde/). 20 solely to provide private line service.” The FCC’s lan- guage and its findings, both as to need and adverse ef- fect, contemplated that only private line service was being authorized. See p. 7, above. The FCO has re- peatedly and uniformly construed its decision in this way." Accordingly, the only remaining question is whether such a limited grant of authority could law- fully be made in the absence of the ‘‘affirmative de- termination’’ which the lower court deemed necessary under the statute. Section 214(c) of the Act expressly states that the Commission ‘‘shall have power to issue such certificate as applied for’’; and Section 303(b) of the Act, also ex- pressly relied on in the Specialized Carrier decision (29 F.C.0.2d at 941), allows the FCC to prescribe ‘‘the nature of the service to be rendered by each class of licensed stations and each station within any class.”’ Since the MCI-type carriers had only sought authority to provide private line service, the FCC was entitled under the plain language of the Act to establish such % MCI itself stressed that it was not seeking authority to provide ‘‘long distance toll telephone service’’ (see p. 6, above), and it also said that ‘‘the switched voice services’’ were the field ‘which we do not seek to enter.’ MCI reply comments, FCC Docket No. 18920, Dee. 2, 1970, p. 27. Similarly, the Government advised this Court that the FCC was faced with ‘40 applications . . . collec- tively seeking more than 1,700 licenses’’ in order ‘‘to provide 4 variety of interstate private line services.’ Opposition of the Gov- ernment, Sup. Ct. No, 74-1550, pp. 2-3. "In view of the repeated references to private line service in the decision and its uniform interpretation in subsequent FCC deci- sions (see Pet. App. 8d-9d, 11d-12d), the FCC’s construction of the intent of the decision is controlling. E.g., Thorpe v. Housing Authority, 393 U.S. 268, 276 (1969) ; Udall v. Tallman, 380 U.S. 1, 16-17 my ; Bowles v. Seminole Rock & Sand Co., 325 U.S. 410, 414 (1945). 21 a ‘‘class’’ and grant MCI authority ‘‘as applied for.’’ Nothing in the statute compelled the Commission to make any qualifying ‘‘affirmative determination”’ when it granted limited authority to the specialized carriers to do only what they themselves had pro- posed.” The purpose of the Act also supports the FCC’s understanding. In requiring prior approval, Con- gress recognized ‘‘that competition between carriers may result in harm to the public as well as in benefit’’ and ‘‘that when a [earrier] inflicts injury upon its rival, it may be the publie which ultimately bears the loss.’’"* Yet, on the lower court’s reading, the FCC authorized duplicative new facilities to provide com- "In affirming the Specialized Carrier decision, the Ninth Circuit observed that ‘‘the Commission may determine general questions relating to the public interest, convenience, and necessity in rule- making proceedings ; and, specifically, mav determine that competi- tion in the furnishing of a class of regulated service will lead not to poorer but to better service to the public, and will otherwise be in the public interest.’’ 513 F.2d at 1166 (emphasis added), ** The lower court's two statutory references to support its ‘‘af- firmative determination’’ requirement are more puzzling than per- suasive, It said that the FCC must ‘‘strictly follow the terms of Section 214(c)'’ (Pet. App. 24a), but that provision itself says the FCC may grant the certificate ‘as applied for’’ and does not refer to ‘‘affirmative determinations.’’ The court also relied on ‘‘the final proviso’’ of Section 214(a) (id. at 23a), but that merely permits carriers to make minor alterations in the course of providing exist- ing service and has nothing to do with attempts to provide new services beyond the scope of the carrier's basic authority. * These grounds are attributed by this Court to Section 1(18) of the Interstate Commerce Act, 49 U.S.C. § 1(18), which was tho direct predecessor of Section 214 of the Communications Act. Texas & P. Ry. v. Gulf, C. & 8.F. Ry., 270 U.S, 266, 277 (1926) (Brand- eis, J.), See also FCC v. Sanders Bros. Radio Station, 309 U.S. 470, 474 (1940) (analogizing the regulation of rail and telecom- munications common carriers). 22 petition for MT'S even though on the lower court ’s own view the FCC has never determined whether such ‘competition between carriers’? would result in harm or benefit or whether it would inflict ‘‘injury’’ result- ing in public ‘‘loss.’’ Compare FCC v. RCA Communi- cations, Inc., supra, 346 U.S. at 96-97." The lower court’s construction also fails the test of rationality. It would be time-consuming and pointless for an agency, asked to authorize new facilities or ra- dio transmission for a limited use or service, to make affirmative determinations about other uses or services neither requested by the applicant nor intended to be authorized by the agency. If and when a limited serv- ice carrier wishes to expand operations beyond the scope of its basic authority, it can always return to the agency and apply for a broader certificate upon a showing that such a grant would serve the publie in- terest." Delay and needless litigation would result if the agency were forced, before granting a limited serv- ice certificate, to make findings about myriad other possible activities which the carrier has not sought to provide and which the agency does not propose to au- * The lower court's reading is especially incongruous because the Specialized Carrier decision, in its references to switched public message service, recognized the serious public interest problems that would be presented by MTS competition and made clear that no such competition was being authorized, 29 F.C.C.2d at 910-15, * Contrary to the lower court's suggestion, this procedure is not in any respect ‘‘in derogation of’’ the tariff filing provisions of the Act. (Pet. App. 24a). Although new tariffs may be filed on the carrier’s own initiative, the tariff filing provisions ‘‘ presuppose that a tariff tendered for filing relates to communications subject to the act which a carrier may legally handle.’’ Press Wireless, Inc., 25 F.C.C. 1466, 1472 (1958), aff'd per curiam sub nom. Press Wireless, Inc. v. FCC, 264 F.2d 372 (D.C. Cir. 1959). 23 thorize. See Flying Tiger Line, Inc. v. CAB, 204 F.2d 404 (D.C, Cir. 1953), In addition, the lower court’s decision disregards the FCC’s understanding of the Act reflected in the entire history of FCC classification of, and grants to, limited service carriers. Compare Red Lion Broadcast- ing Co. v. FCC, 395 U.S. 367, 381 (1969). The FCC has repeatedly created classes of common carriers to pro- vide only limited types of service;" and it has done so in numerous different ways including codified rule," general rulemaking proceedings,” and decisions and grants in individual cases.” So far as we are aware, the FCC has never in any of these situations made the ‘‘af- firmative