Petition — United States Independent Telephone Ass'n v. MCI Telecommunications Corp.

supr

i , en ae

SEP 19 1977

| i

: MICHAEL RODAK, Jp, CLERK|

No. 77 = A864

Gn the Supreme Gout of the Cited States

Ocroser TerM, 1977

FeperaAL COMMUNICATIONS COMMISSION, PETITIONER

Vv.

MCI TSLECOMMUNICATIONS CorP., BT AL., RESPONDENTS

PETITION FOR A WRIT OF CERTIORARI 70 THE UNITED STATES

COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT

DANIEL M. ARMSTRONG,

Associate General Counsel,

JOHN E. INGLE,

Counscl.

Federal Communications Commission,

Washington, D.C. 20554

(202) 632-7112.

Page

Guietens Bil Weancscccccnenccceeceubacscenaccsccccescccecccustces 1

FERRIER ecconncnscecncnassneseapessseenacdscscceccescscccesne 1

Question Presented................-------...........22..2-------- 2

GReSES BCE Encccoccnncccncussseccsnsancacesueccensccsceccsce 3

MWtatemset cncccescccncccnccccceceenacscocececcccecececceccccseco 3

A. The Industry Structure and Specialized Common Carriers... 5

BD. Dip Biesenss Wein ccceccccceewececenccscceccccascuccecs 10

©. Fe Dette DeWeacenccencssecsceassicenccccascecccescce 11

Reasons for Granting the Writ..........-.-.-~-~--~-----.---2---.. 12

A. Conflict with Other Decisions............................. 13

B. Importance of the Case_............~.-..----------.-------- 17

C. Error of Federal Statutory Construction..................... 20

Ce 23

CITATIONS

Court decisions :

American Tel, 2 Tel. Co. v. FCC, 589 F. 24 767 (D.C. Cir. 1976). 9, 15

American Tel. 4 Tel. Co. v. FCC, 487 F. 24 864 (2d Cir. 1973).... 6,18

Arkansas-Best Freight Systema, Inc. v. U.S., 399 F. Supp. 157

(W.D. Ark. 1975), afd, 425 U.S. 901 (1976) ...-..---.-..-... 16

Belt Tel. Co. of Penn, v. FCC, 003 F. 2d 1250 (3d Cir 1974), cert.

denied, 422 U.8. 1026 (1975) ......-----..--.-------.----... passim

Bowman Tranap., Inc. vy. Arkansas-Best Freight Systema, Ino.,

419 U.B. 21 (1076) ...-cncccccccncccccecnnceccccnccceccccce 16

Brady Transf. & Stor. Co. vy. U.8., 80 F. Supp. 110 (8.D. Iowa),

ef é, S88 U.B. SIE (1968) ...nccccccecccasennccocenccencconse 16

Capital Telephone Co., Inc. v. Federal Comm. Comm., 498 F. 2d 734

(BRAG. Cin. 1906) coccececenccnnccsccensccocssscescocesesscss 23

Capitol Airways, Inc. v. CAB, 202 F. 24 755 (D.C. Cir. 1961) _._- 16

Civil Aeronautics Bd. vy. American Air Tranap., 201 F. 2d 189

(D.C. Cir.), certificate diemissed, 344 U.S. 4 (1962) _........... 16

Civil Aeronautics Bd. v. State Airlines, Inc., 388 U.S. 572 (1950) _. 16

Crescent Express Lines v. U.S., 320 U.S. 401 (1048) ......-.-... 16

Federal Communications Commission v. RCA Communications

Sue, $45 UB. GB (IED) cacacceccceccceusesceesccscocesascsce passim

Flying Tiger Line v. CAB, 204 F. 24 404 (D.C, Cir. 1958) ......_. q

Hawaiian Tel. Co. v. FCC, 408 ¥F. 24 771 (D.C. Cir. 1974) ....-... 8,17

ITT World Comm., Inc. v. FCC, 555 F. 1125 (2d Cir. 1977) ...-.... 4

MCI Communications Corp. v. American Tel. & Tel. Co., 360 F.

Supp. 1004 (B.D. Penn. 1973), vacated, 406 F. 2d 214 (3d

Cir. 1974)... eeccwcccececcewccweccceccwccccoccccccocce 15, 22

Nader v. FCC, 520 F. 2d 182 (D.C. Cir. 1975) ......--....-.----. 6,18

245-896—77——-_1

Il

Court decisions—Continued Page

Network Project v. FCC, 611 F. 2d 786 (D.C. Cir, 1975) ~.....--- 22

New England Divisions Case, 261 U.S. 184 (1923) ......----.--.- 21

Noble v. United States, 319 U.S. 88 (1043) .......-...----...--.- 16

Red Lion Broadcasting Co. v. Federal Comm, Comm.,, 395 U.S.

a 23

Tevas & N.O. R. Co. vy. Northside Belt Ry. Co., 276 U.S. 475

(10BB) cnnccccccnncccccccscncesenescosces -cocecccccesseen= 3

United States v. Seatrain Lines, 329 U.S, 424 (1947)-..--.....-. 16

Washington Util. 4 Transp, Comm, v. FCC, 513 F. 2d 1142 (9th

- Cir.), cert denied, 423 U.S. 886 (1975) ....--.........--...... passim

Wilson & Co. v. FCO, 335 F. 2d 788 (7th Cir. 1964), remanded,

. 2? 7) —s

W. J. Dillner Tranaf. Co. v. U.S., 214 F. Supp. 941 (W.D. Penn.

— QO 4

Agency decisions:

Allocation of Frequencies in the Banda above 890 Me., 27 FOC

SED (2609), SD FOO GSB (1059) encuncccanceqescesavcsacecesee 7

American Tel. & Tel. Co., 27 FCC 118 (1960)_.....~-...........- 23

Bett System Tariff Offerings, 46 FCC 2d 418 (1974), aff'd sud

nom, Bell Tel. Co. of Penn. v. FCC, 503 F. 24 1250 (3d Cir.

1974), cert denied, 422 U.S. 1026 (1975) ............-.....-..- +)

Computer Inquiry, 28 FCC 2d 201 (1970), aff'd in part sub nom.

GTR Service Corp. v. FOC, 474 F. 2d 724 (2d Cir. 1978) -....... 7

Customer Interconnection, 61 FCC 24 766 (1976) .....-.-.--...- 7,15

Domestic Communication-Satellite Facilities, 35 FCC 2d 844, 38

POO 96 GS (IGE cncancascnccsscanccessuasssesneuesceanese 5

Graphnet Systema, Inc., 44 FCC 2d 800 (1974)... 5

Microwave Communications, Inc., 31 Fed. Reg. 2666 (1966) _...__ 7

Microwave Communications, Inc., 18 FCC 24 958 (1969), 21

, 7 |} 7 ee 7,18

Packet Communications, Inc., 48 FCC 2d as 5

Press Wireless, Inc., 25 FCC 1466 (1958), aff'd sub nom. Presa

Wireless, Ino. v. FCC, 264 F. 24 872 (D.C. Cir. 1950) .........- 4

Private Line Cases, 34 FCO 244 (1061) (Initial Decision), afd,

34 FOC 217 (1968), aff'd sub nom. Wilson & Co. v. FCC, 335

F. 2d 788 (7th Cir. 1964), remanded, 882 U.S. 454 (1966) ....._. 6

Regulatory Policies Concerning Resale and Shared Use of Com-

mon Carrier Services and Facilitics, 60 FCC 2d 261 (1976), 62

FOC 2d 588 (1977), review pending sub nom. American Tel. 4

Tel. Co. v. FCC, No. 77-4067, Second Circuit................-- 5,19

Specialized Common Carrier Services, 24 FCC 2d 318 (1970) _.___ &, 21

Specialized Common Carrier Services, 20 FCC 24 870, 31 FCC 2d

1106 (1971), aff'd sub nom. Washington Util. & Transp. Comm.

v. FOC, 518 F. 24 1142 (9th Cir.), cert. denied, 423 U.S. 836

(TRUE) cccuncceceecnnnnccnsescssesccosecocesscsanesssenesce passim

Specialized Common Carriers, 44 FCC 2d 467 (1978), 50 FCC 24

en 9

Telenct Communicationa, Inc., 46 FCC 2d 680 (1974)... 5

United States Tranemission Systema, Inc., 48 FCC 2d 859 (1974),

aff'd sub nom. Amer, Tel. & Tel. Co. v. FCC, 589 F. 24 767 (D.C.

GER, SREP cece sceccnunscnucesencencenseasanacescussanuseces 9

Other citations:

Statutes and regulations: Page

1 OBE, Bets pecocanceesaseessescssescssesensescescse 1

Communications Act of 1984, 48 Stat. 1064, as amended, 47

U.S.C, §§ 151-609 :

SRE Bvccaceceneassecnessccscnesesscessusessesse 3

On 3

0 4,10

SR Si wacnncssneeusennessecnsesasnessseqnsesecs 8, 10

te Tin cceaseurenennasnasesnasenauasenassensuee 3

Ce 3

GED Bi teewcccseccuncusensesesecascesesssauscessse passim

Rs Gl ncocrenennsccescesecssencecassenesssesssse 8, 21

CC 3

EE 3

> Ge ee Gpeteeneuseqsenennccccasececcececavecess 8, 23

Dil acaveeesceussncesssnccasessassuscasaveasse 3

BE euaseeneenesenescse SS 3

@ Ga Ge casnnensencncccescccenecssseacesse 5

SS Gas Ge nencenccnsececesaccncasensescases 5

@ GPR. BERGE GER cacccececceeccncececenccccescecese 5

@ GRR, GGG eancnccnccscsccscacccscesesessaceve 16, 19, 21

Agenda for Opersight (Committee Print), 94th Cong., 2d Sess.,

prepared by the staff for use of the Subcommittee on Communi-

cations of the House Committee on Interstate and Foreign

Brief for Federal Respondents in Opposition, National Ass'n of

Reg. Util. Comm're v. FCO, No. 74-1550, cert. denied, 423 U.S.

GBB (IR cccnccncecesecsssescsesceussnsesssessosesccscsce 15, 16

Brief for Respondents in Opposition, American Tel. @& Tel. Co. v.

FCC, No, 74-1229, cert. denied, 422 U.S. 1026 (1975) _.........- 15

H.R. Report No. 1850, 78d Cong., 2d Seas. (1984) .............-. 8

Note, Competition in the Telephone Equipment Industry, 86 Yale

BJ, GED (GREE) cocecencacensnesesesenesecesassacencescessco 16

Note, Resale and Sharing of Private Line Communications Serv-

toon, G3 Va. E. Ese. GED (S508) cncccccnceccccscecscsescesscce 16

M. Irwin, The Telecommunications Industry (1971) ............- 5

Gu the Supreme Court of the Gnited States

Octoser TERM, 1977

No. —

FepERAL COMMUNICATIONS COMMISSION, PETITIONER,

v.

MCI TeLecoMMUNICATIONS CorRP., ET AL, RESPONDENTS.

PETITION FOR WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT

°

The Federal Communications Commission respectfully asks

this Court to issue a writ of certiorari to review the judgment of

the Court of Appeals for the District of Columbia Circuit in

this case.

OPINIONS BELOW

The opinion of the court of appeals (App. A) ' is not yet re-

ported. The decision of the Federal Communications Commis-

sion (App. B) is reported at 60 FCC 2d 25.

The court of appeals entered judgment on July 28, 1977. That

court stayed its mandate by order dated August 22, 1977 ( App.

C), and this petition for certiorari is filed within the time al-

lowed by the stay of mandate order. Rule 41(b) of the Federal

Rules of Appellate Procedure. This Court has jurisdiction by

virtue of 28 U.S.C. § 1254(1).

* The appendices are under separate cover.

(1)

2

QUESTION PRESENTED

The court of appeals held in this case that the Commission

had erred in ordering MCI Telecommunications Corp., a spe-

cialized communications common carrier, to cease and desist

from offering a service called “Execunet” which the Commis-

sion had found to be essentially identical to ordinary long dis-

tance telephone service.* The Commission had based its order

on its finding that Execunet was not a private line service

within the scope of MCI’s limited aut!¥ization, but that in

all essential respects it was the same as ordinary long distance

telephone service which MCI had no authority to provide.

The court of appeals reversed on its own finding that the Com-

mission had never made the requisite public interest findings

that would justify service limitations on MCI’s authorizations.

Accordingly, the court of appeals held that MCI was free to

provide Execunet and any other services for which its facilities

are adequate, and that its authorizations were not limited in

any way, despite the fact that the Commission had not con-

sidered whether unlimited authorization would serve the public

convenience and necessity within the meaning of 47 U.S.C.

§ 214.

The question for the court is:

Whether the court of appeals erred in holding that special-

ized common carriers such as MCI have authority to provide

ordinary long distance telephone service, despite the fact that

the FCC, with express approval of the Ninth and Third Cir-

cuits, had consistently regarded its specialized common carrier

policy as limited to private line services and had not made the

requisite statutory finding that competition in ordinary long

distance service would serve the public convenience and

necessity.

? A subscriber to Execunet can call from any telephone in the city of

origin to any telephone in any other city in the MCI network, using MCI’s

intercity circuits in connection with local exchanges belonging to the tele-

phone companies. Subscribers are billed for each call on the basis of time

and distance, subject to a monthly minimum. (App. A, p. 4a & n.3: App. B,

p. 33a n.1.)

3

STATUTES INVOLVED

Sections 1, 4, 204, 205, 208, 214, 303, 308 and 309 of the

Communications Act of 1934, 48 Stat. 1064, as amended, 47

U.S.C. §§ 151-609, are set forth in relevant part in App. D.

STATEMENT

Section 214 of the Communications Act empowers the FCC

to authorize construction and operation of interstate communi-

cations facilities and thus to control entry into communica-

tions markets.’ The statute presupposes that unlimited entry

will not always and necessarily serve the public interest. The

FCC must consider in discrete instances or in general policy-

making whether new competitive entry will further the statu-

tory public interest goal of efficient service with adequate fa-

cilities at reasonable charges. 47 U.S.C. §§ 151, 214(a).* When

faced with an application, the FCC may issue the certificate “as

applied for,” or deny it, or issue it in part or subject to “such

terms and conditions as in its judgment the public convenience

and necessity may require.” 47 U.S.C. § 214(c). The Com-

mission may not grant the authorization at all, however, unless

it can certify that the “public convenience and necessity”

require construction and operation of the proposed facility. 47

U.S.C. § 214(a).

3 Section 214 was patterned after Section 1(18-22) of the Act to Regulate

Commeree as amended by the Transportation Act of 1920, 41 Stat. 456 (re-

codified as 49 U.S.C. § 1(18)). See S. Report No. 781, 73d Cong., 2d Sess. 5

(1934); H.R. Report No. 1850, 73d Cong., 2d Sess. 6 (1934). The purpose of

those provisions is “to prevent interstate carriers from weakening them-

selves by constructing or operating superfluous lines, and to protect them

from being weakened by another carrier’s operating in interstate commerce

a competing line not required in the public interest.” Tezas & N.O.R. Co. v.

Northside Belt Ry. Co., 276 US. 475, 479 (1928). Similar certification stat-

utes apy-ear in other regulatory acts. E.g., 49 U.S.C. § 307 (motor carriers) ;

49 US.C. 1371 (air carriers)

* See Federal Communications Commission v. RCA Communications, Inc.,

346 US. 86 (1953) ; Washington Utilities & Transp. Comm. v. FCC, 513 F. 2d

1142 (9th Cir.), cert. denied, 423 U.S. 836 (1975); Hawaiian Telephone Co.

v. FCC, 498 F. 2d 771 (D.C. Cir. 1974).

4

Once a carrier has obtained certification, it may offer service

consistent with its certificate by filing tariff schedules, which

describe the regulations, practices and charges governing the

service. 47 U.S.C. § 203. A tariff filing may not broaden the

scope of certification, however, and the FCC may reject. any

tariff which purports to offer services that are beyond the

authority of a limited service carrier.’

The court of appeals in this case held that the FCC had in-

correctly construed Section 214 as empowering it to limit cer-

tificates to the services proposed by the carrier in its applica-

tion. According to the court of appeals, the FCC may grant a

limited authorization only if it has looked beyond the appli-

cant’s proposed services and made an “affirmative determina-

tion of public interest need for restrictions.” (App. A, pp. 24a-

29a.) Because the FCC, in adopting its specialized common car-

rier policy*® and in granting specific applications pursuant to

that policy, had not made such an “affirmative determination,”

the court of appeals found that the FCC had not limited the

specialized carriers’ certificates. With unlimited authorizations,

the court said that MCI was free to offer any service its facili-

ties could provide merely by filing tariffs. Accordingly, the

court reversed the FCC’s decision to require MCI, a specialized

carrier, to stop offering Execunet and to remain within what

the agency had regarded as the carrier’s sphere of authorized

services.

The court’s decision in effect removes service limitations on

the specialized carriers—even though the FCC never has

weighed the public interest benefits and detriments of com-

petition outside the area of private line services and has not

5 See, e.g., Press Wireless, Inc., 25 FCC 1466 (1958), aff'd sub nom. Press

Wireless, Inc. v. FCC, 264 F. 2d 372 (D.C. Cir. 1959), Cf. ITT World Comm.,

Inc. v. FCC, 555 F. 2d 1125 (2d Cir. 1977) (recognizing the need for further

authorization under Section 214 to remove restrictions on AT&T’s use of

international cable and satellite facilities) ; Flying Tiger Line v. CA.B., 204

F. 2d 494 (D.C. Cir. 1953); W. J. Dillner Transfer Co. v. United States, 214

F. Supp. 941 (W. D. Penn. 1963).

° Specialized Common Carrier Services (Docket No. 18920), 29 FCC 2a

870, 31 FCC 2d 1106 (1971), aff'd sub nom. Washington Util. & Transp.

Comm. v. FCC, 513 F. 2d 1142.

-

al

5

warranted that unlimited competition will serve the public

interest. The decision leaves in doubt the scope of authority

under certificates and licenses granted to domestic satellite

carriers,’ “value added” carriers,* and a number of categories

of miscellaneous carriers with similarly limited grants.’ The

decision also imposes on the Commission a new interpretation

of the certification process under Section 214 which will require

scrutiny of applications beyond the proposed services and

which may bring into question the validity of numerous grants

made under the agency’s own interpretation of that statute.

A. THE INDUSTRY STRUCTURE AND SPECIALIZED COMMON

CARRIERS

Communications carriers render telephone service that may

be divided, for purposes of this case, into two broad categories:

(1) message telecommunications service (MTS), which in-

cludes ordinary long distance toll service and wide area telecom-

munications service (WATS); and (2) private line service,

also known as leased line service.’® Long distance public toll

service traditionally has been a de facto monopoly offering, just

as local exchange telephone service normally is provided by a

single local carrier. The interstate public MTS network, com-

prising the interconnected local exchanges of American Tele-

phone & Telegraph Company operating companies and some

1,600 independent telephone companies, historically has been

7 Domestic Communication-Satellite Facilities, 35 FCC 2d 844, 38 FCC 2d

665 (1972).

8 E.g., Packet Communications, Inc., 43 FCC 2d 922 (1973); Graphnet

Systems, Inc., 44 FCC 2d 800 (1974); Telenet Communications, Inc., 45

FCC 24 680 (1974). See also Regulatory Policies Concerning Resale and

Shared Use of Common Carrier Services and Facilities, 60 FCC 2d 261 (1976),

62 FCC 2d 588 (1977), review pending sub nom. American Tel. & Tel. Co.

v. FCC, No. 77-4057, Second Circuit.

® E.g., 47 C.F.R. 21.500-523 (domestic public land mobile radio service) ;

47 C.F.R. 21.800-809 (local television transmission service); 47 C.F.R.

21.900-908 (multipoint distribution service).

10 See, e.g., M. Irwin, The Telecommunications Industry 24-25 (1971).

6

the sole source of long distance public voice telephone

service.”

Private line service, by contrast, has been subject to some

degree of competition for many years.’* Private line service is

just what the name implies: a service in which the customer

buys the privilege of using facilities that are dedicated in some

meaningful respect to his personal use, always available to him,

directly connecting the customer’s premises with another point

(or a number of other points) selected in advance, capable of

instant connection without the need for dialing, and tariffed at

a flat periodic rate rather than according to use.” Private line

service attracts customers, primarily business or governmental

organizations, which have a substantial need for communica-

tions between or among limited numbers of fixed locations.

In recent years, the Commission has found that the demand

for more and different private line services exceeds the ca-

pacity and innovative efforts of the existing carriers to satisfy

it. The gap between demand and supply does not necessarily

reflect indifference or incompetence on the part of the carriers.

Rather, the telephone companies have spent their energies and

resources keeping up with the burgeoning demand for ordinary

public services, and simply have not remained abreast of the

more specialized demand for data and other nonvoice services

11 AT&T furnishes virtually all the intercity lines and circuits connecting

the local exchanges into a single interstate MTS network.

12 See Wilson & Co. v. FCC, 335 F. 2d 788 (7th Cir. 1964), remanded for

consent settlement, 382 US. 454 (1966), which recognized the long standing

competition between AT&T and the Western Union Telegraph Company in

some private line services. More recently, the District of Columbia and Sec-

ond Circuits have noticed the distinction between AT&T’s “competitive” pri-

vate line services and its “monopoly” MTS services. Nader v. FCC, 520 F. 2d

182, 187 (D.C. Cir. 1975) ; American Tel. & Tel. Co. v. FCC, 487 F. 2d 864,

868 (2d Cir. 1973).

*8 App. B, pp. 6la-64a. See also Private Line Cases, 34 FCC 244,

249-50 (1961) (Initial Decision), aff'd, 34 FCC 217 (1963), aff'd sub

nom. Wilson & Co. v. FCC, 335 F. 2d 788, 792. Private line services

need not have all these characteristics, and some of them do not. See

Bell Telephone Co. of Penn. v. FCC, 503 F. 2d 1250 (3d Cir. 1974), cert.

denied, 422 US. 1026 (1975).

7

and for customized private voice services.’* Competition has

been authorized in private voice as well as data communica-

tions, in the expectation that new entrants would satisfy the

unmet demand and provide innovation in technology and

marketing.

The Commission granted its first specialized carrier authori-

zation to MCI in 1969 after six years of proceedings, authoriz-

ing MCI to provide private line services between Chicago and

St. Louis.* Hundreds of similar applications from MCI and

other prospective specialized carriers followed the MCI grant.

Rather than refer each application to a separate hearing, at

14 The Commission first perceived the need for new companies capabie

of providing flexible, tailored private line services during its Computer

Inquiry, which began in 1966. Customer Interconnection, 61 FCC 2d 766,

781-82 (1976). The Computer Inquiry resulted in rules governing the

participation of common carriers in data processing activities. Computer

Inquiry, 28 FCC 2d 291 (1970), aff’d in part sub nom. GTE Service Corp.

v. FCC, 474 F. 2d 724 (2d Cir. 1973). It had recognized the need for more

private communications service several years earlier, however, when it

made radio frequencies available for private microwave systems for com-

panies and other organizations with sufficient need for point-to-point service

to justify building their own communications systems. Allocation of

Frequencies in the Bands above 890 Mc., 27 FCC 359 (1959), 29 FCC 825

(1960). These frequencies may not be used for common carriage, but they

provide indirect competition to established private line services.

* Microwave Communications, Inc., 18 FCC 2d 953 (1969), 21 FCC 2d

190 (1970). The FCC’s hearing designation order on the MCI applications

focused on the services MCI proposed, directing the inquiry to such issues

as the nature and extent of the facilities and services, the communities and

entities which would be expected to receive the services, the public need for

the services, and the benefits and detriments expected from authorizing the

facilities and services. Microwave Communications, Inc., 31 Fed. Reg. 2666,

2668 (1966). After considering these issues, the Commission made what it

regarded as a limited grant of authority to MCI for the Chicago-St. Louis

route, authorizing only the services MCI had proposed. The hearing ex-

aminer focused on the limited service in his initial decision:

“MCI does not propose a message toll or exchange telephone service, but

it will offer its channels to subscribers for interoffice communications. Sub-

scribers would not be supposed to communicate with each other over MCI’s

facilities.”

18 FCC 2d at 982.

8

significant cost in time and resources, the Commission initiated

a rulemaking proceeding to resolve the general policy question

that was common to all the applications: whether the public

interest would be served by a general policy of open entry into

the specialized communications field. Specialized Common Car-

rier Services (Docket No. 18920), 24 FCC 2d 318 (1970).

In its notice of inquiry and proposed rulemaking, the Com-

mission noted that the applicants proposed only “specialized

private line services,” 24 FCC 2d at 324, and limited its public

interest inquiry to that segment of the communications mar-

ket, id. at 335-38. The FCC disclaimed any intention, in its no-

tice, of authorizing direct competition to MTS and WATS,

pointing out that “none of the applicants proposes to provide

this type of service, and we see no reason to expect any undesir-

able effects upon these services.” Jd. at 335.

After extensive proceedings, the Commission concluded that

there was a need for the proposed services, that new entry into

this limited market would produce specific public benefits and

would have little adverse impact on the established carriers,

and that a general policy of open entry into the interstate pri-

vate line market would serve the public interest, convenience

and necessity. The FCC specifically rejected claims by the es-

tablished carriers that new entry would have an adverse impact

on their revenues and therefore on their service to the public.

The agency found that the impact would be minimal because

of the limited scope of the proposed services. The FCC relied

upon the fact that the great bulk of the established carriers’

revenues came from long distance service and WATS, which

the applicants did not propose to offer. Specialized Common

Carrier Services, 29 FCC 2d 870, 31 FCC 2d 1106 (1971).

The Ninth Circuit unanimously affirmed. Washington Util.

& Transp. Comm, v. FCC, 513 F. 2d 1142. That court inter-

preted the Commission’s policy broadly as approving entry

into the entire field of private line services, but not public tele-

phone services:

The business involved is that of providing specialized

private or leased line communications services through

9

microwave transmission facilities, as distinguished from

public exchange and long distance toll telephone service.

513 F. 2d at 1155. The Ninth Circuit also found rulemaking to

be a lawful and appropriate means of setting policies to govern

individual applications. 513 F. 2d at 1160-65. In particular,

that court said:

Though the Commission said it would pass separately

upon the merits of each pending application, presum-

ably the rule would govern individual cases. That is its

function.

Id. at 1164.

The Commission has consistently regarded the policy as au-

thorizing competition in the full range of private line services,

but not in public services such as long distance toll calling. It

has rejected repeated efforts by the established carriers to

constrict the policy. See, e.g. United States Transmission Sys-

tems, Inc., 48 FCC 2d 859 (1974), aff'd sub nom. American Tel.

& Tel. Co. v. FCC, 539 F. 2d 767 (D.C. Cir. 1976); * Bell Sys-

tem Tariff Offerings, 46 FCC 2d 413 (1974), aff'd sub nom.

Bell Tel. Co. of Penn. v. FCC, 503 F. 2d 1250; * Specialized

Common Carriers, 44 FCC 2d 467 (1973), 50 FCC 2d 416

(1974) (reaffirming the policy in the face of an AT&T petition

for a moratorium on further grants pending a review by the

FCC of the effects of competition). But it has never expanded

the policy to authorize competition in public long distance

telephone service, nor has it been asked to do so.

"The D.C. Circuit stated in the AT&T case:

“The Commission decided broadly that the publie interest, convenience,

and necessity would be served by permitting specialized commen carriers

to provide a full range of private line communications services in direct

competition with the established carriers * * *.”

539 F. 2d at 773-74.

17 The Third Circuit held in Bell Tel. Co. of Penn. that “the Commission

intended to authorize the new carriers to provide all elements of private

line services * * *,”

10

B. THE EXECUNET MATTER

After several years of offering private line services in ac-

cordance with its authorizations, MCI on September 11, 1974,

filed tariff revisions to broaden its service offerings by provid-

ing “metered use service” as an additional option to its full-

time and part-time private line services. The tariff did not

mention Execunet by name and did not describe the service.

Members of the FCC staff met several times with MCI person-

nel to discuss the meaning of the revisions and to seek clarifi-

cation of what was being offered. The tariff became effective by

operation of law on October 10, 1974,* even though FCC staff

members still were seeking clarification of the tariff and the

services it purported to describe. (App. B, pp. 38a-39a.)

MCI began to sell Execunet in January 1975. (App. B, p.

39a. )’® Several months later, AT&T became aware of the nature

of the service and brought the matter to the Commission’s at-

tention, first orally *° and then in a written complaint. After

two rounds of investigation * and after oral argument that was

open to all interested parties including other specialized car-

“47 USC. §§ 203(b), 204.

” Although it described Execunet as a new private line network, MCI

stated in promotional material that users could save substantially on “long

distance telephone service” and “intercity telephone calls.” Supplemental

Appendix 189-93, filed in court of appeals. In one brochure, MCI stated:

“MCL is the first company offering intercity telephone service in competi-

tion with the telephone company.”

Supp. App. 365, See also id. at 216-20.

” MCI made an issue of the oral complaint at the Commission and in the

court of appeals. That issue is not in the case at this point, however, for it

was not a factor in the court of appeals decision.

21 The FCC first decided the matter adversely to MCI in a letter order

released July 2, 1975, after receiving three letters setting forth MCI’s views.

(App. B, pp. 99a-104a.) In that order, the FCC rejected MCT’s tariff insofar

as it offered Execunet, on grounds that Execunet was an unauthorized serv-

ice. MCI sought review of the letter order, and, in an application for judicial

stay, made arguments that the FCC had not had an opportunity to address

in its le ter order. On motion of the FCC, the court of appeals held the re-

view proceeding in abeyance to allow the FCC to conduct further proceed-

ings in which it would consider MCI’s arguments. (App. A, p. 8a.)

11

riers, the FCC issued its final decision on July 13, 1976, finding

that Execunet was outside MCI’s limited authority and re-

quiring the carrier to cease and desist from offering it. (App.

B, pp. 89a--90a. )

Analyzing its own specialized common carrier policy, the

Commission restated its consistent position that it had author-

ized competition “only in the limited portion of AT&T’s and

Western Union’s business represented by private line services.”

(App. B, p. 51a.) Execunet, the Commission found on the basis

of undisputed descriptions of the service, “has all the essential

characteristics of MTS or WATS” and “does not have the es-

sential characteristics of private line service * * *.” (App. B,

p. 64a.)** Accordingly, since Execunet was a service that MCI

had no authority to provide, the FCC directed it to cease offer-

ing the service.

C. THE DECISION BELOW

The court of appeals reversed. While it agreed that the FCC

has authority ‘to limit or condition certificates and licenses

(App. A, pp. 23a—24a), it found that the FCC had not done so

cither in its Specialized Common Carrier Services proceeding

or in subsequent grants of specific certificates to MCI. * The

court conceded that the FCC “perhaps did not intend to open

*? For a brief description of Execunet, see note 2, supra, and appendix ma-

terial cited there. For a schematic diagram of Execunet as compared with

ordinary long distance service, see Supplemental Appendix 1027-28, filed in

court of appeals.

*8 While many of MCI’s certificates and licenses contain express state-

ments to the effect that they are limited to authorized private line services

and include by specific reference the limitations of the Specialized Common

Carrier Services decision, not all of them do. (App. B, p. 49a.) All of the

grants, however, depend upon the Specialized Common Carrier Services pro-

ceeding for validity, because the FCC has not made independent findings

with respect to such grants that the public convenience and necessity re-

quired certification. 47 U.S.C. § 214(a). The FCC relies upon the Specialized

Common Carrier Services decision as the source of the rule limiting MCI

and other specialized carriers to private line services. The policy adopted in

that proceeding governs individual grants. “That is its function.” Washing-

ton Util. & Transp. Comm. v. FCC, 513 F. 2d at 1164.

12

the field of common carrier communications generally” (App.

A, p. 28a)** and thus might have regarded the specialized car-

riers as limited to private line services. But it held that the

Commission “cannot impose any such restriction unless it has

affirmatively determined that ‘the public convenience and

necessity [so] require.’ ” (App. A, p. 24a.)

The court rejected the FCC’s interpretation of Section 214

(a), which assumes that the agency may consider applications

on the basis of the services proposed, limit its analysis to the

public interest in receiving those services from the applicant,

and grant authority in appropriate situations that goes no

further than the services proposed and considered. Instead,

the court of appeals would require the agency to make an addi-

tional public interest finding—after it has found justification

for granting the certificate—that the applicant may not offer

other unknown and unknowable services. The court thus would

not allow the agency merely to consider the application before

it, but would require analysis of matters of conjecture, lest the

agency inadvertently introduce competition in areas it “did

not perhaps intended to open * * *.” (App. A, p. 28a)*°

On motion by the FCC and by intervenors AT&T and the

United States Independent Telephone Ass’n, the court of ap-

peals stayed its mandate until September 19, 1977. (App. C.)

MCI continues to provide Execunet to its existing customers

pursuant to a stay entered by the court of appeals. (App. A,

p. 8an. 18.)

REASONS FOR GRANTING THE WRIT

The Court should grant the petition for writ of certiorari

because (1) the decision below conflicts directly with decisions

of the Ninth and Third Circuits construing the scope of au-

thorized competition by specialized common carriers, and con-

flicts in principle with decisions of this and other courts con-

struing Section 214 and other certification statutes; (2) the

decision and the principle it establishes are important be-

24 See also App. A, p. 26a.

*° The court of appeals did not decide that Execunet was in fact a private

line service. (App. A, p. 26a.)

13

cause of the fundamental changes and disruption they may

cause in the communications industry and the significant im-

pact they will have on the FCC’s common carrier certification

process; and (3) the decision is wrong as a matter of statutory

construction, in that it ignores the plain language of Section

214(a) and the FCC’s consistent application of that statute

over the years.

A. CONFLICT WITH OTHER DECISIONS

The decision below is irreconcilable with decisions of the

Ninth and Third Circuits directly construing the FCC policy

of limited specialized common carrier competition. The Ninth

Circuit, in Washington Util. & Transp. Comm. v. FCC, 513 F.

2d 1142, affirmed the Specialized Common Carrier Services de-

cision on direct review. A necessary premise of that court’s

decision was its finding that the FCC had authorized competi-

tion only in private line services:

The business involved is that of providing specialized

private or leased line communication services through

microwave transmission facilities, as distinguished from

public exchange and long distance toll telephone service.

513 F. 2d at 1155. This was no mere “general description of the

services proposed,” as the court of appeals in this case suggests.

(App. A, p. 25a n. 59.) Rather, this finding was an essential

premise for the analysis the Ninth Circuit performed in affirm-

ing the policy.

That court found that the FCC had lawfully authorized com-

petition, under the standard articulated in Federal Communi-

cations Commission v. RCA Communications, Inc., 346 U.S. 86

(1953), because the FCC had found and warranted that specific

public interest benefits would result from “entry of new carriers

in the specialized communications field * * *.” 513 F. 2d at

1159 (emphasis added).** Since the FCC had not warranted

* See also 513 F. 2d at 1156, 1158-60, 1165. The Ninth Circuit summarized,

in affirming the adoption of policy in rulemaking:

245-896—77 2

14

benefits from competition outside the area of private line serv-

ices, the Ninth Circuit might have been unable to affirm a

broader policy on the record of that proceeding. See Federal

Comm. Comm. v. RCA Communications, Inc., 346 U.S. at 92-

97. Further, that court found that the FCC had adequately

appraised the adverse effects of competition on the established

carriers, citing to the agency’s analysis of the very small part

of the total market that would be vulnerable to private line

competition. 513 F. 2d at 1159, citing to 29 FCC 2d at 910-14. *

At the urging of the Department of Justice and other parties

supporting limited service competition, the FCC had rejected

claims by the established carriers that new entry would require

higher rates for public services such as MTS. The court found

that the FCC had properly considered only that part of the

established carriers’ revenues that would be jeopardized by the

services proposed in the specialized carriers’ applications. If the

effect of the FCC’s policy had been to authorize unlimited

competition, its analysis of impact on the established carriers’

revenues and thus on rates for MTS might not have been suffi-

cient to satisfy the Ninth Circuit under the RCA Communica-

tions test. 513 F. 2d at 1151. Plainly, the findings that specialized

carriers were limited to private line services was essential to the

Ninth Circuit’s holding, and the D.C. Circuit’s finding to the

contrary in the Execunet case is in direct conflict.

In Bell Tel. Co. of Penn. v. FCC, 503 F. 2d 1250, the Third

Circuit directly considered the scope of MCI’s authorizations

and, like the Ninth Circuit, concluded that the FCC had certi-

fied the specialized carriers to compete in the “full field of pri-

vate line services.” 503 F. 2d at 1270."* The ultimate question

for that court was whether MCI was entitled to interconnection

with AT&T for the provision of certain services which MCI

“fT ]he Commission * * * may determine that competition in the fur-

nishing of a class of regulated service will lead not to poorer but to better

service * * *. We have sustained the Commission's determination to this ef-

fect with respect to the specialized communications field as a whole.

513 F. 2d at 1166 (emphasis added).

™ See also 513 F. 2d at 1156 n. 21.

* See also, e.g., 503 F. 2d at 1259-62, 1269, 1273.

15

contended were private line services and AT&T claimed were

not. In the FCC’s view, MCI was entitled to interconnection

for purposes of providing all its authorized services (i.e., all

private line services). The task for the Third Circuit was to

determine (1) the scope of MC!’s authority, and (2) whether

these services were within that scope and entitled to intercon-

nection. The court concluded that MCI and the other special-

ized carriers had authority to offer the full range of private line

services ; that the services in question were private line services;

and that MCI was entitled to interconnection.

As in the Ninth Circuit decision, the finding of limitation

to private line services was essential to the Third Circuit de-

cision. If MCI’s grants were unlimited, as the D.C. Circuit

has held in this case, there would have been no need for the

Third Circuit to inquire whether those specific services were au-

thorized. The Third Circuit also considered whether the inter-

connection requirement was overbroad and concluded that it

was not, because it had to be read in the context of the Special-

ized Common Carrier Services decision and was limited thereby

to private line services. 503 F. 2d at 1273-74.*° The Third Cir-

cuit, like the Ninth Circuit, thus has construed the scope of spe-

cialized carrier authorization as an essential part of a decision;

and its construction conflicts with that of the court below.* ”

2° The Third Circuit also considered the validity of the underlying Spe-

cialized Common Carrier Services decision, which had not yet been affirmed

by the Ninth Circuit, and conducted essentially the same analysis under

this Court’s RCA Communications decision that the Ninth Circuit later

conducted. The Third Circuit similarly relied upon the FCC’s findings and

warrant of public benefits from the proposed private line services and upon

the impact analysis that was limited to private line competition. 503 F. 2d

at 1250-53, 1269-74.

8° See also American Tel. & Tel. Co. v. FCC, supra, 539 F. 2d 767; MCI

Communications Corp. v. AT&T, 369 F. Supp. 1004 (E.D. Penn. 1973), va-

cated other grounds, 496 F. 2d 214 (3d Cir. 1974).

** The decision below also conflicts (1) with consistent FCC interpreta-

tions of its own policy, e.g., Customer Interconnection, 61 FCC 2d 766, 781-

83; (2) with representations made by the FCC and the United States in

oppositions to certiorari filed in this Court, e.g., American Tel. & Tel. Co. v.

FCC, No. 74-1229, Brief for Respondents in Opposition; National Ass’n of

16

The decision below also conflicts in principle with decisions

of this and other courts recognizing that certifying agencies

ean properly limit their consideration of applications to the

services proposed, and that they may commit legal error if

they try to grant authority that has not been requested. This

Court has held that if an agency permits a certificate holder

to operate beyond the terms of its grant, “He who was in sub-

stance a highly specialized carrier * * * would be treated as

a carrier of general commodities * * *”* Noble v. United

States, 319 U.S. 88, 92 (1943).* More recently, this Court re-

manded a case to a three-judge district court to determine the

lawfulness of a certificate to the extent that it exceeded the

scope of the application. Bowman Transportation, Inc. v.

Arkansas-Best Freight System, Inc., 419 U.S. 281, 299-300

(1974).** The court of appeals, in reversing agency action that

Reg. Util. Comm'rs v. FCC, No. 74-1550, Brief for the Federal Respondents

in Opposition; (3) with views of the congressional oversight committees,

e.g.. Agenda for Oversight (Committee Print), 94th Cong., 2d Sess., prepared

by the staff for use of the Subcommittee on Communications of the House

Committee on Interstate and Foreign Commerce, April 26, 1976; and (4)

with legal commentary, e.g., Note, Competition in the Telephone Equipment

Industry, 86 Yale L.J. 538 n.1 (1977); Note, Resale and Sharing of Private

Line Communications Services, 61 Va. L. Rev. 679, 681-95 (1975).

32 See also, Crescent Express Lines v. US. 320 US. 401 (1943); Capitol

Airways, Inc. v. C.A.B., 292 F. 2d 755 (D.C. Cir. 1961); Civil Aeronautics

Board v. Anerican Air Transport, 201 F. 2d 189, 193-94 (D.C. Cir.), certifi-

cate dismissed, 344 US. 4 (1952); Brady Transfer & Storage Co. v. US.,

80 F. Supp. 110 (S.D. Iowa), aff'd, 335 U.S. 875 (1948). Compare United

States v. Seatrain Lines, 329 US. 424 (1947).

33 On remand, the district court set aside the grant of “excess authority

that was and is not supported by any evidence of public need and in regard

to which there was no finding of any public need.” Arkansas-Best Freight

System, Inc. v. US., 399 F. Supp. 157, 168 (W.D. Ark, 1975), aff'd, 425

US. 901 (1976). To the extent that MCI offers services outside the rubric

of private lines, its authority also lacks supporting evidence and findings of

public need, The district court in Arkansas-Best also found that authoriza-

tions beyond the scope of the application raised serious questions of notice

to competing carriers and others who might oppose the application. See

also Civil Aeronautics Board v. State Airlines, Inc., 338 US. 572, 576,

578-81 (1950). Notice questions would arise also in a grant of unlimited

authorization to specialized carriers after a proceeding expressly limited to

private line service applications. Compare 47 C.F.R. §§ 63.01(e) ; 63.52.

17

is consistent with the principle espoused in these cases, has

brought itself into conflict with that principle.

Finally, the decision below conflicts in principle with the rule

of RCA Communications, supra, 346 U.S. 86, and Hawaztian

Tel. Co. v. FCC, supra, 498 F. 2d 771. Those cases stand for the

proposition that the FCC, in considering whether to grant Sec-

tion 214 authorization for entry into a communications market,

“must start from the situation as it then exists,” analyze the

need for additional service, and determine whether and to

whom it should grant a certificate for the proposed service. 498

F. 2d at 776. Under that rule, the FCC may not assume that

competition will serve the public interest, but must “warrant”

that benefits will flow from a particular authorization. If it

cannot so warrant, it may not depart from “the situation as it

then exists.”

The D.C. Circuit in the Execunet decision would require

entry by MCI and other specialized carriers into services the

FCC never has analyzed and as to which it has no basis for

warranting that competition will “serve some beneficial pur-

pose such as maintaining good service and improving it.” 346

US. at 97. Such entry would conflict with the venerable prin-

ciple of RCA Communications—a principle established in con-

struction of the very statute that the D.C. Circuit has errone-

ously construed in this case.

B. IMPORTANCE OF THE CASE

This case has significance far beyond the question whether

MCI can offer a particular communications service called Ex-

ecunet. The decision leaves in doubt the scope of authorized

competition in interstate common carrier communications. If

it stands, the decision will expand that scope to services which

the FCC had not intended to reach in its decisions up to now

and as to which the Commission has not made the statutorily

required findings of public convenience and necessity. 47 U.S.C.

§ 214(a).

18

The-Commission has not declared certain areas, such as

MTS and WATS, to be free for all time from competition.”

But it has represented to the courts, to Congress, to the public,

and to all the carriers concerned that its decisions so far have

not opened ordinary long distance service to competitive car-

riers such as MCI. The decision below would work fundamental

changes in the Commission’s policy by, in effect, eliminating

the limitations on the area in which the Commission has found

that competition will serve the public interest.

The decision also casts doubt upon the validity of the com-

petitive policies on which MCI and other specialized carriers

depend for their existence, and upon their grants of authority

pursuant to the po icy. The Ninth and Third Circuits affirmed

that policy on the essential finding—correct, in our view—

that the FCC had lawfully limited it to private line services.

This Court two times has denied certiorari presumably on the

same premise. The FCC has made numerous grants in appli-

eation of the policy as affirmed. If this decision stands, there

may be relitigation before the FCC and in the courts of issues

bearing on competition that the Commission believes were

properly resolved in some 14 years of agency and judicial pro-

ceedings.” This relitigation and the uncertainty it would

engender would disrupt and might change fundamentally the

structure of the industry—perhaps, ironically, to the detriment

34 The suggestion in the opinion below that the FCC has “granted AT&T

a de jure monopoly over MTS and WATS” (App. A, pp. 15a & n. 39, 29-

30a) has no foundation :n the Execunet decision or any other FCC action.

The FCC relied in this case not upon anything that had or had not been

granted to AT&T, but upon the nature and extent of authorization to MCI.

The established telephone companies have a de facto monopoly in MTS and

WATS, as the courts often have recognized. E.g., Nader v. FCC, supra, 520

F. 2d at 187; Amer. Tel. & Tel. Co. v. FCC, supra, 487 F. 2d at 868.

35 Amer. Tel. & Tel. Co. v. FCC, 422 US. 1026 (1975); National Ass'n of

Reg. Util, Comm'rs. V. FCC, 423 US. 836 (1975).

36 B.g., Washington Util. & Transp. Comm. v. FCC, supra, 513 F. 2d 1142;

Bell Tel. Co. of Penn. v. FCC, supra, 503 F. 2d 1250; Microwave Communi-

cations, Inc., supra, 18 FCC 2d 953, 21 FCC 2d 190.

19

of the very sound competitive policies the FCC has carefully

fostered with the approval of the courts.

The disruption and change almost necessarily would extend

beyond the specialized carriers to domestic satellite carriers,*’

“value added” carriers with existing certificates, and possibly

the new “resale” carriers the FCC anticipates as a result of its

recent policy decision on communications brokerage.*® The FCC

has limited or anticipates limiting these carriers in much the

same manner as the specialized carriers—to the services they

proposed, and, generally to private line services.

Finally, apart from the general policy of competition and the

validity of existing grants, the decision would require signifi-

cant changes in the FCC’s certification procedures.* If it is not

sufficient any more to consider applications on the basis of the

proposed services without risking inadvertently broad certifica-

tion, the FCC will have to adopt procedures that will produce

a basis for deciding either to take a chance on open-ended

grants or to limit the grants because the public interest affirma-

tively requires limits. This would slow the certification process

immeasurably, might obviate broad policy proceedings such as

the specialized common carrier inquiry, and almost certainly

would not result in a better or more rational regulatory

product.

The fact that the court of appeals remanded the case to the

agency for further proceedings does not diminish the impor-

tance of obtaining review now. First, any proceeding of the

kind the court envisions, to determine whether MTS competi-

tion would disserve the public interest, necessarily would take

a great deal longer than the specialized common carrier pro-

ceeding which considered the narrower and less complex issue

37 See note 7, supra.

38 See note 8, supra.

8% Regulatory Policies Concerning Resale and Shared Use, note 8, supra.

¢° Under FCC regulations, an application for a Section 214 certificate must

include, inter alia, a statement of “the nature and classification of the com-

munication services to be provided (e.g. telephone, telegraph, facsimile, data,

private line, voice, television relay etc.).” 47 C.F.R. § 63.01(e).

20

of private line competition. Second, it is not at all clear what

the status of MCI and other specialized carriers would be in

the meantime. If their authorizations, which had been thought

limited to private line services, were challenged on grounds that

the FCC had not considered the public interest in unlimited

competition, the Ninth and Third Circuit decisions might not

be dispositive. If their certificates were not valid, MCI and the

other specialized carriers might have to stop operating until

the FCC had completed its further task as described by the

court of appeals.’ Plainly, final review of this important regu-

latory matter is appropriate now to avoid the disruption and

uncertainty that almost certainly would result if the Court

stays its hand.

C. ERROR OF FEDERAL STATUTORY CONSTRUCTION

The court of appeals misconstrued and misapplied Section

214. The statute on its face authorizes the FCC to “issue such

certificates as applied for”—which is just what the agency did

in the ease of MCI. The specialized carriers generally, and MCI

in particular, never sought authorization beyond private line

services. The FCC never considered whether competition was

feasible or would serve the public interest in areas outside those

proposed in the applications. It would have been wasteful of

time and resources to consider questions that had not been

asked—particularly such difficult questions as whether compe-

tition was desirable in the provision of long distance telephone

service.”

41 Similarly, the FCC would have difficulty granting new applications for

specialized common carrier certificates until this matter is settled. Under-

standably, the Commis. ‘on may not want to issue more certificates until it

ean be certain what those certificates will authorize.

42 The questions as to competition in public services are more difficult

than those as to private line services. While the FCC on the record in Spe-

cialized Common Carrier Services could warrant benefits from private line

competition and could be assured that the economic impact on established

carriers was not sufficient to hurt their service to the public, a far different

(Continued)

21

Section 214(c) plainly authorizes the FCC to limit or con-

dition certificates in the public interest as well as to grant them

“as applied for.” But nowhere does the statute demand an

“affirmative determination” that the public convenience and

necessity require limits when the Commission is granting all

that has been asked. Stated differently, ncthing in Section 214

requires the FCC to grant more than the carrier has applied

for. The court of appeals recognized that “it is analytically

impossible to determine the need for a new facility without

considering the services to be provided over it.” (App. A, p.

22a.) But its ruling in this case wou!d, indirectly, perform the

“analytically impossible” act of authorizing MCI to use facili-

ties without FCC consideration of the services to be provided.

By focusing on Section 214(c), moreover, and requiring an

“affirmative determination” that the public interest requires

limitations, the court below ignored the command of Section

214(a) that the FCC grant only those certificates that the

public convénience and necessity require.** In making the Sec-

tion 214(a) determination, the FCC must consider the services

(Continued)

record would have been required to make similar conclusions as to lonz

distance toll service and WATS. The FCC simply did not reach those ques-

tions in light of the applications that. prompted the rulemaking proceeding.

See 47 C.F.R. § 63.01(e). As Mr. Justice Brandeis wrote, “The duty im-

posed on the Commission does not extend-beyond the need for ite action.”

New England Division Case, 261 US. 184, 201-02 (1923). An agency need

decide only the “real controversy” before it; as to other matters, “theie

is no occasion for the Commission to act.” Jd.

*8 Indeed, Section 214(c), on which the court of appeals rested ‘ts decision,

expressly gives the FCC several options as to the action it migot properly

take on applications. It may grant them “as applied for.” It may grant them

in part. It may attach such conditions as “in its judgment” the public con-

venience and necessity may require. And, of course, it may deny them.

** The court of appeals also discounted the FCC’s authority under Section

303 (a) and (b) to “classify” microwave radio stations and to “prescribe the

nature of the service” to be rendered by each class of stations. 47 USC.

§ 303 (a) and (b). The FCO relied expressly on these provisions of the act

in adopting its specialized carrier policy. 24 FCC 2¢ at 249 ; 29 FCC 2d at

941. °°

22

that are proposed. (App. A, p. 22a.)** It cannot be said that the

FCC ever has determined whether the public convenience and

necessity “require” unlimited operation of MCI’s facilities—

or even that the public convenience and necessity permit such

operation. The court below, we submit, has inferred a require-

ment from subsection (c) that abrogates the express command

of subsection (a); it has reversed the premise that underlies

the certification procedure under Section 214.

The Third Circuit, deferring to the FCC’s primary jurisdic-

tion in a case involving just the kind of question that MCI

raised in this case, held that the FCC was the appropriate

agency, by statute as well as by experience, to make such deci-

sions as whether competition should be authorized and to what

extent. That court stated:

Deferral to the FCC under the doctrine of primary juris-

diction is particularly appropriate in this case not simply

because of the fact of uncertainty concerning the issue

of what private line services have been authorized, but

also because of the nature of the issue. For a court to

resolve this issue results in a judicial determination of

the scope of permissible competition between the spe-

cialized carriers, such as MCI, and the existing carriers,

such as AT&T. Such a determination, involving, as it

must, the comparative evaluation of complex technical,

economic, and policy factors, as well as consideration of

the public interest, should be made, in the first instance,

by the administrative agency which has been entrusted

with the primary responsibility for making such a deter-

mination and which has the expertise necessary for the

development of sound regulatory policy.

MCI Communications Corp. v. AT&T, 496 F. 2d at 222. In-

stead of deferring to the FCC’s construction of its own statute

and policy, the court of appeals in this case has cut the founda-

45 See also Network Project v. FCC, 511 F. 2d 786, 793-94 (D.C. Cir. 1975)

(approving the FCC’s policy of open entry into the domestic satellite com- |

munications field for purposes of providing private line services).

tions from under considered agency policy on the basis of its

own novel reading of a statute that has been in regulatory acts

at least sinve 1920,** +

The court’s rule would supplant forty years of consistent

FCC interpretation and application of Section 214. The agency

always has considered its function under that statute to in-

clude evaluating certificates “as applied for” and attaching

conditions or limitations as “in its judgment” the public con-

venience and necessity may require, In the process, the FCC

has created numerous classes of limited service carriers.** The

agency’s consistent practice under Section 214 provides an

independent reason for this Court to review the decision below.

CONCLUSION

The Court should grant the writ of certiorari.

Respectfully submitted,

Dantet M. Armstrone,

Associate General Counsel.

Joun E. Inate,

Counsel.

Federal Communications Commission,

Washington, D.C. 20554.

“ Transportation Act of 1920, 41 Stat. 456, 49 U.S.C. 1 (18). The novelty

of the court of appeals’ reading is evident from the total absence of support-

ing authority from that part of its opinion. (App. A, pp. 20a-24a.)

“ The court of appeals in this case appears to have denied the deference

normally owed to agency interpretations of their own decisions because it

disagreed with the agency as to how Section 214 should be read. (App.

A, p. 28a & n. 67.) This ignores the fact that deference also is due to agency

construction of its own organic statutes, particularly when the construction

is consistent with past decisions and is rational. See Red Lion Broadcasting

Co. v. FCC, 395 US. 367, 381 (1969).

“ See, ¢.g., notes 8 & 9, supra. Compare ATT, 27 FCC 113 (1959) (sepa-

ration between voice and record communications functions in the interna-

tional market). See also Capital Telephone Co., Inc. v. FCC, 498 F. 2d 734,

740 (D.C. Cir. 1974) (“When an applicant accepts a government permit

which is subject to certain conditions, he cannot later assert alleged rights

which the permit required him to surrender in order to receive it.’’).

U.S. GOVERNMENT PRINTING OFFICE, 1977