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

SEP 26 1978

jf euprem T VOUrT, U. we

[ FILED

Nos. 78-216, 78-217, and 78-270

MIGHARL RODAK, JR., CLERI

IN THE eeteindalictiieh Bei Bn

Supreme Court of the United States

OCTOBER TERM, 1978

UNITED STATES INDEPENDENT TELEPHONE ASSOCIATION,

Petitioner,

v.

MCI TELECOMMUNICATIONS CORPORATION, et al.,

Respondents.

AMERICAN TELEPHONE AND TELEGRAPH COMPANY,

Petitioner,

V.

MCI TELECOMMUNICATIONS CORPORATION, et al.,

Respondents.

FEDERAL COMMUNICATIONS COMMISSION,

‘ Petitioner,

MCI TELECOMMUNICATIONS CORPORATION, et al.,

Respondents.

On Petitions for a Writ of Certiorari to the United States

Court of Appeals for the District of Columbia Circuit

BRIEF FOR THE RESPONDENT SOUTHERN PACIFIC

COMMUNICATIONS COMPANY IN OPPOSITION

THORMUND A. MILLER

RICHARD S. Kopr

JAMES M. ToBIN

One Market Plaza

San Francisco, Cal. 94105

JOHN V. KENNY

ROBERT W. Ross

Suite 221

1801 K Street, N.W.

Washington, D.C. 20036

STEPTOE & JOHNSON STEPHEN AILES

1250 Connecticut Ave., N.W. HERBERT E. FORREST

Washington, D.C. 20036 1250 Connecticut Ave., N.W.

Of Counsel Washington, D.C. 20036

Attorneys for Southern Pacific

September 26, 1978 Communications Company

WILSON - EPES PRINTING Co., INC. - 789-0096 . WASHINGTON, D.C. 20001

BST IP oa LOL Oe aCe Rn RD fae

I tit ee

‘i

CITATIONS

CASES AND ADMINISTRATIVE PROCEEDINGS: Page

AT&T Vv. FCC, 487 F.2d 864 (2d Cir. 1973) —_...... 16

AT&T Vv. FCC, 539 F.2d 767 (D.C. Cir. 1976) -...... 16, 17

AT&T Offer of Facilities for Use by Other Common

Carriers, Docket No. 20099, 52 F.C.C.2d 727

CRIT aicnicnsesntceteeennccneesevcanienvicenemvenensneescnconece 6

Bell System Tariff Offerings, Docket No. 19896,

order to show cause, 44 F.C.C.2d 245 (1973),

decision, 36 F.C.C.2d 413 (1974) -...........--- ye 6, 7

affirmed, Bell Telephone Co. of Pennsylvania V.

FCC, 503 F.2d 1250 (83rd Cir. 1974) (AT&T

App. G), cert. denied, AT&T v. FCC, 422 US.

1026 (1975), rehearing denied, 423 U.S. 886

COD oimavnnietphiniacictlacimasinneionil 6, 7, 10, 14, 16, 17, 18, 19

City of Cleveland, Ohio v. FPC, 561 F.2d 344 (D.C.

I TI icinccsidaicsincisssnichsencin esreenieencionnnitannasonmtiaenens 14

City of Tacoma V. Taxpayers of Tacoma, 357 U.S.

SD CID aac inctcc ess ccteentcrcnsnensetanesemnesinenenones 13, 15

Colorado River Corp. Vv. FCC, 118 F.2d 24 (D.C.

| ao en 13

FCC v. Pottsville Broadcasting Co., 309 U.S. 134

CR nnn cnn ne sng ees eestwenntnnsnesngecieresneenoenee 15

Ford Motor Co. v. NLRB, 305 U.S. 364 (1939) -...... 15

FRC v. Nelson Bros. Bond & Mortgage Co., 289

U.S. 266 (1933) _.......... NY PRO See ISITE IS TER 15

Microwave Communications, Inc., Docket No.

16509, 18 F.C.C.2d 953 (1963), recon. denied,

21 F.C.C.2d 190 (1970), modifications granted,

beet ok F Ta.» | Ieee 4,6

MCI Telecommunications Corp. (Execunet), Dock-

et No. 20640, 60 F.C.C.2d 25 (1976) ....... eee 2,7,8

reversed, MCI Telecommunications Corp. Vv. FCC

(Execunet I), 561 F.2d 365 (D.C. Cir. 1977)

(AT&T App. I, FCC App. B), cert. denied,

United States Independent Telephone Assn. V.

FCC, 484 U.S. 1040 (1978) .............2, 3, 8, 9, 10, 12,

18, 14, 15, 16, 18

iii

CITATIONS—Continued

order directing compliance with mandate (Ex-

ecunet II), —— F.2d —— (D.C. Cir. Apr. 14,

1977) (AT&T App. A, FCC App. A), petitions

for rehearing and suggestions for rehearing en

bane denied (D.C. Cir. May 8, 1978) (AT&T

App. E, FCC App. D), pet. for cert. pending,

United States Independent Telephone Assn. V.

FCC (U.S. No. 78-216) .....2, 3, 10, 11, 13, 14, 16,

motion for stay pending pet. for cert. denied,

motion for temporary stay pending application

to Chief Justice granted (Execunet III), ——

F.2d —— (D.C. Cir. May 11, 1978), applications

for stay denied, Nos. A-954 and A-966 (U.S.

2. . ee 2, 11, 13, 14, 15, 17,

MTS and WATS Market Structure, FCC 78-144

RE SE Tn Ores PNM NOS eR ee am

North Carolina Utilities Commission v. FCC, 537

F.2d 797 (4th Cir. 1976), cert. denied, 429 U.S.

I a

North Carolina Utilities Commission v. FCC, 552

F.2d 1036 (4th Cir. 1977), cert. denied, 434 U.S.

I le Cee Bee

People of State of California v. FCC, 567 F.2d 84

(D.C. Cir. 1977), cert. denied, 484 U.S. 1010

RDN Eas RRNA AT

Petition of AT&T for a Declaratory Ruling and

Page

17,18

18, 19

16

Expedited Relief, FCC 78-142 (1978)... 9, 18, 19

SEC v. Chenery Corp., 332 U.S. 194 (1947)...

Southern Pacific Communications Co., Revisions

to Tariff F.C.C. No. 6, FCC 78-143 (1978)

Specialized Common Carrier Services, Docket No.

18920, notice of inquiry, 24 F.C.C.2d 318 (1970),

first report and order, 29 F.C.C.2d 870 (1971),

15

denial 9, 13,19

recon. denied, 31 F.C.C.2d 1106 (1971) ...5, 6, 7, 18, 20

iv

CITATIONS—Continued

Page

affirmed, Washington Utilities & Transportation

Commission v. FCC, 513 F.2d 1142 (9th Cir.

1975), cert. denied, National Assn. of Regula-

tory Utility Commissioners v. FCC, 423 US.

| , | EEE SENSE 5, 16

Thornton V. Carter, 109 F.2d 316 (8th Cir. 1940) . Ls

United States v. Allegheny-Ludlum Steel Corp.,

A EEE 18

United States v. Florida East Coast Ry. Co., 410

EE 18, 19

Vermont Yankee Nuclear Power Corp. Vv. National

Resources Defense Council, Inc., 98 S.Ct. 1197

(| 15

Yablonski v. UMW, 454 F.2d 1036 (D.C. Cir.

1971), cert. denied, 406 U.S. 906 (1972)... 14

STATUTES:

Communications Act of 1934, as amended, 47

U.S. 151 et seq.:

Section 201(a), 47 U.S.C. 201(a) —.............. : 9,12

Section 214(a), (c), 47 U.S.C. 214(a), (c)-.3, 4,8,

'9, 12

RY | a Ae 3

MISCELLANEOUS:

The Dilemma of Telecommunications Policy, An

Inquiry into the State of Domestic Telecom-

munications by a Telecommunications Industry

ys) Ug 20

H.R. 13015, 95th Cong., 2d Sess. (1978) . _.. 20, 21

Statement of Charles D. Ferris, Chairman, ‘Fed-

eral Communications Commission, on the Inter-

national and Domestic Common Carrier Provi-

sions of H.R. 13015, before the Subcommittee

on Communications of the House Committee on

Interstate and Foreign Commerce (Aug. 9,

1978) . am cctabisnipinnanstdaanianamnaniia 21

IN THE

Supreme Cowt of the United States

OCTOBER TERM, 1978

No. 78-216

UNITED STATES INDEPENDENT TELEPHONE ASSOCIATION,

- Petitioner,

MCI TELECOMMUNICATIONS CORPORATION, et al.,

Respondents.

.

No. 78-217

AMERICAN TELEPHONE AND TELEGRAPH COMPANY,

* Petitioner,

MCI TELECOMMUNICATIONS CORPORATION, et al.,

Respondents.

No. 78-270

FEDERAL COMMUNICATIONS COMMISSION,

fae Petitioner,

MCI TELECOMMUNICATIONS CORPORATION, et al.,

Respondents.

On Petitions for a Writ of Certiorari to the United States

Court of Appeals for the District of Columbia Circuit

BRIEF FOR THE RESPONDENT SOUTHERN PACIFIC

COMMUNICATIONS COMPANY IN OPPOSITION

2

OPINIONS BELOW

The petitions of the United States Independent Tele-

sociation (USITA), the American Telephone and

sri Company (AT&T), and the Federal ae

cations Commission (the FCC) involve three sgh “oe

opinions of the United States Court of Appea ee

District of Columbia Circuit in MCI Telecommumos

Corp. v. FCC, familiarly called Execunet:

1. Execunet I, reported at 561 F.2d 365 (D.C. Bg

July 28, 1977), cert. denied, 434 US. 1040 an a

(AT&T App. I, FCC App. B),’ reversing a oars

the FCC in MCI Telecommunications Corp., Docke ‘

20640, reported at 60 F.C.C.2d 25 (1976) ;

i rted (D.C.Cir.

2. Execunet II, not yet officially repo ).C.€

April 14, 1978) (AT&T App. A, FCC App. A), es

compliance with the Execunet I mandate of the Court o

Appeals; and

i ted (D.C.Cir.

3. Execunet III, not yet officially repor ,

May 11, 1978) (AT&T App. B, FCC App. E), granting

in part and denying in part motions for stay pending

certiorari, applications for stay denied by this Court in

Nos. A-954 and A-966, not reported (May 22, 1978).

20640

ications Corp. (Execunet), Docket No. 0640,

“0 y eciSs oe (1998), reversed, MCI Telecommunications Corp. iy

FCC (Execunet 1), 561 F.2d 365 (D.C. Cir. July 28, 1977), cert

denied, United States Independent Telephone Assn. v.M > —

munications Corp., 434 U.S. 1040 (1978), order oe ae “

i date (Execunet II), F.2d -— (DC. Cir. . 14,

rau celia for rehearing and suggestions for rehearing en _—

d ied (D.C. Cir. May 8, 1978), motion for stay gr gl ir

ya motion for temporary stay a en oe y Ao

ice nted (Execunet 8), — 2d —— (D.C. ’ ;

7m), cotieaitins for stay denied, Nos. A-954 and A-966 (U.S.

May 22, 1978). i |

2“AT&T App.” refers to the appendix of petitioner AT&T in

iti in Case No. 78-216.

-217, adopted by petitioner USITA in

ae ae? we Bngregs od appendix of the FCC in Case No. 78-270.

3

JURISDICTION

Petitioners seek review of the opinion and order of the

Court of Appeals in Execunet II entered April 14, 1978

(AT&T App. A, FCC App. A). Timely petitions for

rehearing and suggestions for rehearing en banc were

denied by the Court of Appeals on May 8, 1978 (AT&T

App. E, FCC App. D). The jurisdiction of this Court is

invoked under 28 U.S.C. 1254(1).

QUESTION PRESENTED

The Court of Appeals earlier ruled in Execunet J that

MCI was authorized without further FCC proceedings

to provide to the public a communications:service called

“Execunet”, which required interconnection with AT&T’s

monopoly local exchange facilities for users to have access

to the Execunet circuits. After judicial review had been

exhausted, the FCC approved a change of position by

AT&T whereby it refused to furnish any further inter-

connection of its essential monopoly facilities. Under

these circumstances, did the Court of Appeals properly

rule in Execunet II that this action constituted a viola-

tion of its mandate, because it frustrated and nullified its

Execunet I decision by precluding MCI as a practical

matter from providing the authorized service to the

public?

STATUTE INVOLVED

Sections 201(a) and 214(a) and (c) of the Communi-

cations Act of 1934, as amended, 47 U.S.C. 201(a), 214

(a) and (c), provide in pertinent part:

Sec. 201(a). It shall be the duty of every common

carrier engaged in interstate or foreign communica-

tion by wire or radio to furnish such communication

service upon reasonable request therefor; and, in

accordance with the orders of the Commission, in

cases where the Commission, after opportunity for

4

hearing, finds such action necessary or desirable in

the public interest, to establish physical connections

with other carriers, to establish through routes and

charges applicable thereto and the divisions of such

charges, and to establish and provide facilities and

regulations for operating such through routes.

Sec. 214(a). No carrier shall undertake the con-

struction of a new line or any extension of any line,

or shall acquire or operate any line, or extension

thereof, or shall engage in transmission over or by

means of such additional or extended line, unless and

until there shall first have been obtained from the

Commission a certificate that the present or future

public convenience and necessity require or will

require the construction, or operation, or construc-

tion and operation, of such additional or extended

tee °°

(ce) The Commission shall have pewer to issue such

certificate as applied for, or refuse to issue it, or to

issue it for a portion or portions of a line, or exten-

sion thereof, or discontinuance, reduction, or impair-

ment of service, described in the application, or for

partial exercise only of such right or privilege, and

may attach to the issuance of the certificate such

terms and conditions as in its judgment the public

convenience and necessity may require * * *.

STATEMENT

The FCC granted the first applications of Microwave

Communications, Inc. (MCI) to construct microwave fa-

cilities to provide specialized communications services in

1969... The FCC recognized at that time that MCI’s

ability to market its service would be dependent on the

3’ Microwave Communications, Inc., Docket No. 16509, 18 F.C.C.2d

granted, 27 F.C.C.2d 380 (1971).

5

ability of its subscribers to secure local loop service from

the telephone companies serving the area, and agreed with

the hearing examiner that the “intransigence’’ of the es-

tablished carriers was a likely obstacle to essential inter-

connection.‘ “We have already concluded,” the FCC de-

clared, “that a grant of MCI’s proposal is in the public

interest. We likewise conclude that, absent a significant

showing that interconnection is not technically feasible,

the issuance of an order requiring the existing carriers

to provide loop service is in the public interest.” °

Following MCI’s grant, numerous applications were

filed by MCI and its affiliated companies, by Southern

Pacific Communications Company (SPCC), and by others,

to construct microwave facilities to provide specialized

communications services in various parts of the country.

After an extensive rule making proceeding in Specialized

Common Carrier Services,’ the FCC concluded that a

general policy in favor of the entry of new carriers

in the specialized communications field would serve the

public interest, convenience, and necessity.’ The FCC

also reaffirmed the view expressed in its notice of inquiry

that established carriers with exchange facilities should,

upon request, permit interconnection or leased channel

arrangements on reasonable terms and conditions, and

that “where a carrier has monopoly control over essential

facilities we will not condone any policy or practice

*Id., 18 F.C.C.2d at 965, 1007.

°Id., 18 F.C.C.2d at 965, 21 F.C.C.2d at 193.

® Specialized Common Carrier Services, Docket No. 18920, notice

of inquiry, 24 F.C.C.2d 318 (1970), first report and order, 29

F.C.C.2d 870 (1971), recon. denied, 31 F.C.C.2d 1106 (1971),

affirmed, Washington Utilities & Tzansportation Commission v.

FCC, 513 F.2d 1142 (9th Cir. 1975), cert. denied, National Assn. of

Regulatory Utility Commissioners v. FCC, 423 U.S. 836 (1975).

TId., 29 F.C.C.2d at 920.

6

whereby such carrier would discriminate in favor of an

affiliated carrier or show favoritism among competitors.” *

Thereafter, complaints were filed by specialized carriers

that they were unable to secure prompt, adequate, and

efficient interconnection of local facilities from AT&T and

the Associated Bell System Companies (collectively Bell).’

A controversy also arose whether Bell was required to

furnish interconnection of its monopoly local distribu-

tion facilities for all of the specialized carriers’ authorized

services, including foreign exchange (FX) service and

common control switching arrangements (CCSA), which

used local exchange facilities providing access to the

switched public telephone network. Following proceed-

ings on an order to Bell to show cause, the FCC held

in Bell System Tariff Offerings: (1) that Bell had been

afforded “ample ‘opportunity for hearing’ to meet the

requirements of Section 201(a)” of the Communications

Act to support the FCC’s interconnection orders;* (2)

that the FCC’s prior orders in MCI and Specialized Car-

rier Services covered interconnection of the broad range

of services which the specialized carriers were authorized

to provide, including FX and CCSA type services; * and

(3) that Bell had engaged in conduct and practices re-

sulting in denying or unreasonably delaying interconnec-

tion with authorized specialized carrier services in viola-

8Id., 24 F.C.C.2d at 347, 29 F.C.C.2d at 940.

®See AT&T Offer of Facilities for Use by Other Common Car-

riers, Docket No. 20099, 52 F.C.C.2d 727 (1975).

© Bell System Tariff Offerings, Docket No. 19896, order to show

cause, 44 F.C.C.2d 245 (1973), decision, 36 F.C.C.2d 413 (1974),

affirmed, Bell Telephone Co. of Pennsylvania v. FCC, 503 F.2d 1250

(8rd Cir. 1974), (AT&T App. G), cert. denied, AT&T v. FCC, 422

U.S. 1026 (1975), rehearing denied, 423 U.S. 886 (1975).

11 Td., 46 F.C.C.2d at 417-30.

12 Td., 46 F.C.C.2d at 419-28.

7

tion of the Communications Act and the FCC’s declared

policy.’

Bell was ordered to furnish to the specialized carriers

“the interconnection facilities essential to the rendition

of all of their presently or hereafter authorized interstate

and foreign communications services,” including FX and

CCSA."* On review, the Third Circuit affirmed in all

particulars,’ holding that the order was not overbroad

in its context in precluding AT&T from discriminating

in treating its Long Lines Department and its affiliates

differently from specialized carriers.”

Under tariff revisions which became effective in Oc-

tober, 1974, MCI began to offer a new metered use service

over its authorized facilities which it called “Execunet”’.

AT&T complained to the FCC that MCI was offering

ordinary long distance telephone service (called Message

Telecommunications Service, or MTS), but was only au-

thorized to provide private line service. The FCC agreed,“

rejecting the Execunet tariff as unlawful because it had

intended in Specialized Common Carrier Serviccs to open

only private line services to competition by specialized

carriers,‘ and because Execunet had characteristics simi-

lar to MTS and not to any actual private line service

such as FX being offered by any carrier. The essential

difference perceived between FX (which was classified as

a private line service) and Execunet was that in FX

service, one end of MCI’s facilities was interconnected

13 Td., 46 F.C.C.2d at 435-36.

1 Td., 46 F.C.C.2d at 438.

8 Td., 503 F.2d 1250 (3rd Cir. 1974), AT&T App. G.

16 Id., 503 F.2d at 1273, AT&T App. G at 42g.

17 Note 1 supra, 60 F.C.C.2d 25 (1976).

18 Td., 60 F.C.C.2d at 36.

19 Td., 60 F.C.C.2d at 42.

8

with AT&T’s monopoly local exchange facilities in the

cities served by MCI’s circuits, whereas in Execunet both

ends of MCI’s facilities were so interconnected.”

In a unanimous decision in Execunet I, the District of

Columbia Circuit reversed.** The Court of Appeals re-

jected the FCC’s position that implicit restrictions had

been imposed on the facilities authorized to’ specialized

carriers which limited them to providing only “private

line” services. The Court ef Appeals held that since

the FCC had never made an affirmative determination

‘under Section 214(c) of the Communications Act that

the public convenience and necessity required that limita-

tions be attached to MCI’s authorized facilities, there

were no restrictions on the services which might be pro-

vided and the FCC could not properly reject the Execunet

tariff as offering an unauthorized service.* In addition,

the Court of Appeals held that unless and until there

had been a public interest determination in an appropri-

ate proceeding, there was no present justification for con-

tinuing or propagating a de facto or de jure monopoly

by AT&T over interstate communications.”*

This Court denied petitions for certiorari of Execunet

I on January 16, 1978.*° On the same day, AT&T an-

nounced that it would provide no further interconnection

of its monopoly local exchange facilities essential for

specialized carriers to furnish authorized Execunet-type

20 Tbid.

21 Id., 561 F.2d 365 (D.C. Cir. 1977), AT&T App. I, FCC App. B.

22 Id., 561 F.2d at 373-77, AT&T App. I at 15i-23i, FCC App. B

at 16B-26B.

23 1d., 561 F.2d at 377-80, AT&T App. I at 23i-30i, FCC App. B

at 26B-33B.

24Td., 561 F.2d at 379-80, AT&T App. I at 29i-30i, FCC App. B

at 31B-33B.

25 Td., 484 U.S. 1040 (1978).

9

services to the public, and petitioned the FCC for a

declaratory ruling that it was under no obligation to do

so. The Department of Justice immediately recognized

that the petition was prompted by AT&T’s “hope that the

Commission would provide the protection from competi-

tion which the courts consistently refused to grant to

AT&T,” and urged that AT&T “cannot be allowed to

frustrate MCI’s efforts to provide enhanced intercity

need by denying access to such local distribution

oops.” **

The FCC granted the ruling requested by AT&T on

an expedited basis, holding that Execunet I applied only

to defining the services authorized under Section 214 of

the Act, not to any obligation of AT&T under Section

201(a) of the Act to provide interconnection to enable

the carriers to provide their authorized services to the

public, and that its own earlier rulings were limited to

requiring AT&T to interconnect private line services and

did not extend to Execunet-type services.** At the same

time, the FCC rejected summarily without hearing an

Execunet-type offering of SPCC called SPRINT Option V

as “a substantive nullity,” on the ground that as a prac-

tical matter SPCC could not provide this admittedly

authorized service to the public because SPCC did not

have available the necessary interconnection with AT&T’s

monopoly local exchange facilities.» In both summary

rulings, the FCC acknowledged that the issues in de-

termining whether interconnection should be ordered un-

der Section 201(a) of the Act were “essentially identical”

to the issues in determining whether limitations should

2° Comments of the United States Department of Justice, Be

System Tariff Offerings, Jan. 30, 1978, at 2-3. are ee

2? Petition of AT&T for a Declaratory Ruling and Expedited

per FCC 78-142 (released Feb. 28, 1978), AT&T App. C. FCC

pp. C.

28 Southern Pacific Communications Co., Revisions to Tariff F.C.C

No. 6, FCC 78-143 (released Feb. 28, 1978), ili ai

10

be imposed on the authorized services of specialized car-

riers under Section 214(c) of the Act.®

On motion by MCI, the Court of Appeals issued an

order and opinion in Ewecunet IJ * here under review

holding that the Commission’s declaratory ruling violated

its mandate in Execunet I. The Court of Appeals held

that its prior decision did clearly contemplate that AT&T

was required to provide interconnection for Execunet

service, since interconnection was admittedly essential to

MCI’s ability to offer the service; AT&T had previously

interconnected its facilities without objection or ques-

tion; and AT&T had represented that if Execunet I be-

came effective, the decision in and of itself would neces-

sarily lead to vigorous and adverse competition.*' The

Court declared that the FCC’s construction was “plainly

inconsistent”, in “indirect and explicit contradiction”, and

“wholly at odds” with its decision, and that it “twists

the issues * * * beyond recognition” and “deliberately

frustrates” the purpose, basis, and intended effect of

Execunet I, contrary to the expansive interpretation re-

quired by earlier decisions.“ The Court further held

that the Third Circuit’s decision in Bell Telephone Co. of

Pennsylvania ™ provided strong support, not conflicting

authority, for a broad construction requiring Execunet-

type interconnection, since Execunet required virtually

the same form of interconnection as provided for FX

service, and admittedly AT&T was under an obligation to

2° Note 27 supra, FCC 78-142 at $61, AT&T App. C at 36c-37c,

FCC App. C at 41c-42c; note 28 supra, FCC 78-143 at { 28.

3© Note 1 supra, Execunet 1], AT&T App. A, FCC App. A.

31Jd., AT&T App. A at 9a-10a, FCC App. A at 12A-13A.

82 Td., AT&T App. A at lla, 18a, 15a, FCC App. A at 14A, 16a, 18a.

33 Note 9 supra, 503 F.2d 1250 (3rd Cir. 1974), AT&T App. G.

11

interconnect with services beyond those traditionally con-

sidered “private line.” **

Petitions for rehearing of Execunet II and suggestions

for rehearing en banc were denied by the Court of Ap-

peals without any judge requesting that a vote be taken

on en banc consideration.** The Court of Appeals also

denied a motion for stay pending petitions for certiorari,

but granted a temporary stay to permit applications to

the Circuit Justice for a stay, while issuing another opin-

ion (Execunet III) on the issues and the reasons why

it believed the arguments raised once again to be wholly

without merit.*° Applications for a stay pending certi-

orari were denied by this Court.*’

Petitions for certiorari have been filed by USITA,

AT&T, and the FCC, with Commissioner Fogarty issuing

a statement (Appendix A attached to this brief) dissent-

ing to the FCC’s decision to seek certiorari.

** Note 1 supra, Execunet 1], AT&T App. A at 19a-22a, FCC App.

A at 22a-24a,

** Note 1 supra (D.C. Cir. May 8, 1978), AT&T App. E, FCC

App. D.

** Note 1 supra (D.C. Cir. May 11, 1978), AT&T App. B, FCC

App. E.

** Note 1 supra, Application Nos. A-954, A-966 (U.S. May 22,

1978).

12

ARGUMENT

1. The Court of Appeals properly held that the refusal

to provide further interconnection violated its mandate

in Execunet I. In Execunet I, the Court of Appeals held

that specialized carriers are authorized to provide Execu-

net-type services without limitation over their authorized

lines in competition with AT&T’s interstate services, and

that there is no present justification for preserving to

AT&T a de facto or de jure monopoly in communications.

As a necessary part of its mandate, the decision clearly

contemplated that AT&T would continue to interconnect

its monopoly local exchange facilities essential to the

carriers’ ability to furnish the authoried services to the

public.

In describing Execunet, the Court of Appeals adverted

to “local exchange telephone service” at both terminals

as a necessary part of the service.” “Strikingly absent”

from the list of procedures to challenge the availability

of specialized carrier service offerings was not only any

mention of further Section 214 proceedings,*”’ but also of

Section 201(a) proceedings.’ The Court below explicitly

recognized that under the statutory scheme, a carrier

“should in general be free to initiate and implement new

rates or services over existing communications lines”,

absent a prior adverse determination (emphasis in

original ).*’

Likewise, throughout tne Execunet I proceedings AT&T

freely provided interconnection to MCI without protest,

objection, or suggestion that it was not required to do so.

Indeed in pleadings to the Court below and to this Court, -

88 Note 1 supra, 561 F.2d at 367 fn. 3, AT&T App. I at 2 fn. 3.

8° Id., 561 F.2d at 379, AT&T App. I at 27i-28i.

* See ibid.

“1 Id., 561 F.2d at 374, AT&T App. I at 18i.

13

AT&T represented that Execunet I would lead to vigorous

and adverse competition without any indication that it

would seek to thwart this result by interposing a refusal

to interconnect.** A party may not reserve for another

round of litigation a point which could and should have

been raised during pendency of an action to reverse a

Commission order, by remaining silent on the issue until

certiorari has been denied.“

The Court of Appeals recognized that the FCC ruling

that AT&T is under no obligation to furnish further in-

terconnection “deliberately frustrates the purpose of the

litigation, the basis on which it was presented by the

parties, and the intended effect of our decree.” *' The

FCC itself acknowledged in the contemporaneous rejec-

tion of SPRINT Option V, an SPCC Execunet-type serv-

ice, that the effect of its ruling was to make Execunet I

a “substantive nullity” by making it impossible for the

carrier as a practical matter to furnish its authorized

service.** AT&T and the FCC thus sought to leave the

specialized carriers with Court-affirmed authorizations to

provide Execunet-type services over their authorized

facilities, but without the means to offer these services

to the public.

In the exercise of its jurisdiction to interpret and en-

force its own orders, the Court of Appeals issued its

order under review directing compliance with its man-

date because the FCC’s analysis and decision were “plain-

“Id., Execunet I], AT&T App. A at 9a-10a, FCC App. A at

12a-13A; Execunet 11], AT&T App. B at 6b, FCC App. E at 6E-7E.

*8 City of Tacoma v. Taxpayers of Tacoma, 357 U.S. 320, 339

(1958) ; Colorado River Corp. v. FCC, 118 F.2d 24, 26 (D.C. Cir.

1941).

** Note 1 supra, Execunet I], AT&T App. A at 15a, FCC App. A

at 18A.

*° Note 28 supra.

14

ly inconsistent with” “* and “in direct and explicit contra-

diction to” “ the Court’s analysis and ruling in Execunet

I: (1) the FCC’s position that the Specialized Carrier

decision excluded Execunet-type services from considera-

tion was in explicit contradiction to the holding in Execu-

net I; * (2) the FCC’s narrow interpretation was directly

at odds with the broad interpretation in Execunet I that

specialized carriers were authorized to enter the market

and compete with AT&T, subject only to any possible later

limitations based on public interest determinations;* and

(3) Ewzecunet I was wholly consistent with and sup-

ported by the Third Circuit decision in Bell Telephone

Co. of Pennsylvania.” An administrative agency, like a

trial court, is “without power to do anything which is

contrary to either the letter or the spirit of the mandate”

of an appellate court of higher authority, and “the higher

tribunal is amply armed to rectify any deviation” from

its binding decision.”

It is clear from the tenor of the petitions for certiorari

that the quarrel of petitioners is essentially with the de-

cision of the Court of Appeals in Execunet I holding

46 Note 1 supra, Execunet I], AT&T App. A at lla, FCC App. A

at 14a.

47 Id., Erecunet I], AT&T App. A at 13a, FCC App. A at 16a;

Ezxecunet II], AT&T App. B at 5b, FCC App. E at 5g.

*sId., Execunet I], AT&T App. A at 13a, FCC App. A at 16a;

Execunet III], AT&T App. B at 4b-5b, FCC App. E at 5e.

Id., Execunet I], AT&T App. A at 13a-15a, FCC App. A at

16A-18A; Execunet III], AT&T App. B at 5b, FCC App. E at 5eE.

%Id., Execunet II], AT&T App. A at 15a-20a, FCC App. A at

18a-24A; Execunet II], AT&T App. B at 5b-8b, FCC App. E at

5E-9E.

‘City of Cleveland, Ohio v. FPC, 561 F.2d 344, 346 (D.C. Cir.

1977); Yablonski v. UMW, 454 F.2d 1036, 1038 (D.C. Cir. 1971),

cert. denied, 406 U.S. 906 (1972); Thornton v. Carter, 109 F.2d 316,

320 (8th Cir. 1940).

15

Execunet was an authorized service. Certiorari having

been denied, however, the final judgment of the Court of

Appeals was effective and binding,“ and the FCC was

bound to act upon the Court’s corrections of its errors of

law,” giving full effect to its duties in harmony with the

views expressed by the Court.** What the FCC sought

to do upon remand was not to enforce the legislative

policy committed to its charge™ consistent with the

Court’s mandate. Instead, as the Court below pointed

out, the FCC’s declaratory ruling was not based on con-

siderations of the public interest, but rather reflected

only the FCC’s interpretation of statutory provisions of

the Communications Act and earlier decisions of the FCC,

the Third Circuit, and Execunet I directly inconsistent

with the Court’s judicial interpretation.’ Thus the Court

did not seek as in Vermont Yankee to impose its own

notions of proper procedures beyond rules governing

the agency because it was “unhappy with the result

reached,” * but to the contrary interdicted an action by

% E.g., “The court of appeals continues in this case to make and

implement important communications policy. * * * Execunet J * * *

drastically expanded the FCC’s competition policy to include services

the FCC had not intended to embrace in its policy.” (FCC Pet. 5.)

“(Ijn its trio of Execunet decisions the court below has seriously

misread the statutes involved, has usurped the Commission’s author-

ity * * *, and has precluded responsible exercise of that authority

by the agency * * *” (USITA Pet. 9.)

°° City of Tacoma Vv. Taxpayers of Tacoma, 357 U.S. 320, 340-41

(1958).

% FCC v. Pottsville Broadcasting Co., 309 U.S. 134, 145 (1940).

58 SEC v. Chenery Corp., 332 U.S. 194, 200 (1947); Ford Motor

Co. v. NLRB, 305 U.S. 364, 374 (1939); FRC v. Nelson Bros. Bond

& Mortgage Co., 289 U.S. 266, 278 (1933).

°* Note 54 supra, 309 U.S. at 145.

** Note 1 supra, Execunet I]], AT&T App. B at 8b-9b, FCC App.

E at 9E-108E.

5° Vermont Yankee Nuclear Power Corp., v. National Resources

Defense Council, Inc., 98 S.Ct. 1197, 1219 (1978).

—~ oe ok —

16

the FCC which it found “deliberately frustrates * * * the

intended effect” of the Court’s decree * by attempting to

circumvent the Court’s statutory construction because it

was dissatisfied with the Court’s conclusions.”

2. The decision below is not in conflict with the de-

cision of the Third Circuit. The decision of the Court

below under review is only one of a series of recent cases,

including Bell Telephone Co. of Pennsylvania,” upholding

the extension of competition by new entrants in services

and facilities heretofore offered only by the telephone

companies, and affirming the obligation of telephone com-

panies to furnish interconnection of their monopoly local

exchange facilities essential for the provision of the serv-

ices and facilities by the new competitors.”

On three occasions the Court below has considered and

rejected the arguments of petitioners that its Execunet

decisions are somehow in conflict with the decision of the

Third Cireuit in Bell Telephone Co. of Pennsylvania, and

to the contrary concluded that the Third Circuit decision

affirmatively supports the rulings of the District of Co-

lumbia Circuit.“ Drawing upon the consistent earlier

rulings of the FCC that established carriers with ex-

5° Note 1 supra, Execunet I], AT&T App. A at 15a, FCC App. A

at 18A.

6° Cf. AT&T v. FCC, 487 F.2d 864, 880, 881 (2d Cir. 1973).

®t Note 9 supra.

6 Washington Utilities & Transportation Commission vy. FCC,

note 6 supra; North Carolina Utilities Commission v. FCC, 537

F.2d 797 (4th Cir. 1976), cert. denied, 429 U.S. 1027 (1976);

North Carolina Utilities Commission v. FCC, 552 F.2d 1036 (4th

Cir. 1977), cert. denied, 434 U.S. 874 (1977) ; Bell Telephone Co. of

Pennsylvania Vv. FCC, note 9 supra; AT&T v. FCC, 539 F.2d 767

(D.C. Cir. 1976); People of State of California v. FCC, 567 F.2d 84

(D.C. Cir. 1977), cert. denied, 434 U.S. 1010 (1978).

®3 Note 1 supra, Execunet I, 561 F.2d at 377-78 fn. 59, AT&T

App. I at 24i-25i fn. 59, FCC App. B at 26B-27B fn. 59; Execunet

II, AT&T App. A at 15a-20a, FCC App. A at 18A-24A; Execunet III,

AT&T App. B at 7b-8b, FCC App. E at 7E-9E.

17

change facilities should upon request permit intercon-

nection on reasonable terms and conditions, and that

“where a carrier has monopoly control over essential

facilities we will not condone any policy or practice

whereby such carriers would discriminate in favor of an

affiliated carrier or show favoritism among competi-

tors,” ** the Third Circuit affirmed the FCC’s ruling that

its “prior orders covered interconnection for the broad

range of services which the specialized carriers are auth-

orized to provide.” * Execunet II and Execunet III point

out that the Third Circuit’s decision buttresses the Dis-

trict of Columbia Circuit’s own views, because the inter-

connection required in Bell Telephone Co. of Pennsylvania

for FX and CCSA was for facilities virtually identical

to that required for Execunet;” there was no explicit

mention of FX or CCSA, just as there was no reference

to Execunet services, in the earlier decisions; and the

authorizations encompassed by the FCC’s prior decisions

extended not only to new and innovative services but also

to services in direct competition with those offered by

AT&T.

The argument of petitioners that Execunet II is in con-

flict with the Third Circuit opinion hinges on language in

Bell Telephone Co. of Pennsylvania that AT&T’s obli-

gation to interconnect was not unbounded because it read

the FCC order to require AT&T to provide to the special-

** Note 9 supra, 503 F.2d at 1254-59, AT&T App. G at 3g-12g.

*5Td., 503 F.2d at 1259, AT&T App. G at 12g, affirming 46

F.C.C.2d at 426-27.

®° Note 1 supra, Execunet IJ], AT&T App. A at 19a, FCC App. A

at 23a; Execunet III, AT&T App. B at 7b, FCC App. E at 8Fr.

®* Id., Execunet II, AT&T App. A at 17a, FCC App. A at 21A;

Execunet III, AT&T App. B at 7b, FCC App. E at 8.

°° Id., Execunet II, AT&T App. A at 17a-18a fn. 31, FCC App.

A at 21A fn. 31; Execunet II], AT&T App. B at 8b, FCC App. E

at 9£. Cf. AT&T v. FCC, 539 F.2d 767 (D.C. Cir. 1976).

18

ized carriers “those (interconnection) elements of private

line services which AT&T supplies to its affiliates and

furnishes to customers through its Long Lines Depart-

ment.” * However, as the Court below carefully pointed

out, the Third Circuit was concerned not with uncertainty

as to the services the specialized carriers themselves

would provide, but with the types of services AT&T

might be required to provide “hereafter”—an irrelevant

consideration in this case, since the forms of intercon-

nection for FX and Execunet. are virtually identical.”

Furthermore, the FCC itself recognized that the term

“private line services” was only a shorthand or abbrevi-

ated expression encompassing a broader range of services

beyond those traditionally considered private line. The

obligation of AT&T to interconnect ran to all of the

specialized carriers’ authorized services, and under the

Specialized Carrier decision as interpreted in Execunet 1

this included Execunet-type services.”

The Third Circuit decision in Bell Telephone Co. of

Pennsylvania also settled the issue sought to be revived

by petitioners (AT&T Pet. 12; FCC Pet. 3) that an

evidentiary hearing was required before interconnection

could be mandated. Following the principle established

by this Court in Allegheny-Ludlum™ and Florida East

6° Note 9 supra, 503 F.2d at 1273-74, AT&T App. G at 42g.

7 Note 1 supra, Execunet II, AT&T App. A at 19a, FCC App. A

at 22a-23a.

11d., Execunet I], AT&T App. A at 19a-20a, FCC App. A at

23a; Execunet II], AT&T App. B at 8b, FCC App. E at 98, citing

Petition of AT&T for a Declaratory Ruling and Expedited Relief,

FCC 78-142 959, AT&T App. C at 34c-35¢, FCC App. C at 39c-40c.

72 Note 1 supra, Execunet I, 561 F.2d at 379, 380, AT&T App. I

at 28i, 30i, FCC App. B at 31B, 32s.

78 United States v. Allegheny-Ludlum Steel Corp., 406 U.S. 742,

757 (1972).

19

Coast Ry.," the Third Circuit held that the statutory re-

quirement of “an opportunity for hearing”, absent ref-

erence to “a hearing on the record”, was satisfied by less

formal and adversarial procedures appropriate to estab-

lishing a general policy requiring AT&T to interconnect

its monopoly local exchange facilities to all the authorized

services of the specialized carriers.”

3. Review by this Court would be premature. As the

Court below has pointed out, no justification has been

established for allowing AT&T to maintain its de facto

monopoly over interstate communications, or for prevent-

ing the specialized carriers from exercising their right

established by relevant agency and judicial precedents

to enter the specialized communications market now.”

The FCC has conceded that the public interest issues to

be resolved in determining whether AT&T must inter-

connect Execunet-type services are “essentially identical”

to the public interest issues in determining whether spe-

cialized carriers should be authorized to provide Exec-

unet-type services.” The FCC has embarked upon a

comprehensive rule making proceeding to examine pre-

cisely those broad issues of competition and the public

interest raised by the introduction of services such as

Execunet.** Until the FCC has had an opportunity to

make an informed decision whether competition should

be circumscribed under public interest standards, based

upon a specific factual record and not upon unsupported

assumptions and vague suppositions, there is no adequate

™ United States v. Florida East Coast Ry. Co., 410 U.S. 224

(1978).

5 Note 9 supra, 503 F.2d at 1263-68, AT&T App. G at 22g-32¢.

7 Note 1 supra, Execunet II], AT&T App. B at 8b-9b, FCC App.

E at 9E-10E.

7? Note 29 supra.

*8 MTS and WATS Market Structure, FCC 78-144 (1978).

20

foundation for restricting specialized carriers from fur-

nishing presently authorized services or for review by

this Court of a priori limitations which petitioners seek

to impose.

While the petitions for certiorari turn on the asserted

differences betwen “private line” services and ordinary

switched public telephone services, it has been recognized

by representatives of the telephone industry itself that

the distinction has become increasingly ephemeral: *

Although the FCC has subsequently [after the Spe-

cialized Carrier decision] attempted to more closely

define the services open to competition, it has become

apparent that no clear distinction can be made be-

tween the competitive “private line service” and

monopoly Message Telecommunications Service mar-

ket. In economic terms, the two types of services are

strong substitutes for one another, especially for

large volume business users who constitute a signifi-

cant portion of the Message Telecommunications

Service market. In technological terms, too, the dis-

tinction between “private line service” and “Message

Telecommunications Service” is rapidly dissipating.

Current hearings on a bill to rewrite completely the

provisions under which telecommunications is regulated

by Federal statute * disclose a strong tide in favor of

competition in all aspects of interstate communications.

The bill itself is designed, in the provision of domestic

common carrier service, to place maximum feasible reli-

ance on market place forces; to promote nationwide basic

voice telephone service at affordable rates; to rely on com-

petition to provide efficiency, innovation, and low rates,

7? The Dilemma of Telecommunications Policy, An Inquiry into

the State of Domestic Telecommunications by a Telecommunications

Industry Task Force, at III 6-7 (1967). Cf. Statement of Commis-

sioner Washburn in MTS and WATS Market Structure, note 77

supra.

80 H.R. 13015, 95th Cong., 2d Sess. (1978).

21

and to determine the variety, quality, and cost of tele-

communications services; to establish full and fair com-

petitive conditions; and to prevent practices by any

carrier to limit or exclude competition.*' The Chairman

of the FCC has emphasized the importance and his sup-

port for this ‘clear Congressional mandate that com-

petition in telecommunications should be the rule and

monopoly the exception.” *

There are no special or important reasons for review

by this Court on a writ of certiorari of the question pre-

sented whether the Court of Appeals correctly interpreted

its own opinion in directing compliance with its man-

date. Conversely, the specialized carriers should not be

deprived of their present opportunity afforded them

under existing authorizations to offer services to the pub-

lie which the Court of Appeals has ruled to be permis-

sible, after its judgment became final and effective upon

the denial of certiorari.

81 Id., Sec. 331.

2 Statement of Charles D. Ferris, Chairman, Federal Communi-

cations Commission, on the International and Domestic Common

Carrier Provisions of H.R. 13015, before the Subcommittee on Com-

munications of the House Committee on Interstate & Foreign Com-

merce (Aug. 9, 1978) at 2-3.

22

CONCLUSION

For the foregoing reasons, the petitions for a writ of

certiorari should be denied.

Respectfully submitted,

THORMUND A. MILLER

RICHARD S. KOPF

JAMES M. TOBIN

One Market Plaza

San Francisco, Cal. 94105

JOHN V. KENNY

ROBERT W. Ross

Suite 221

1801 K Street, N.W.

Washington, D.C. 20036

STEPHEN AILES A P P E N D I xX

HERBERT E. FORREST

1250 Connecticut Ave., N.W.

Washington, D.C. 20036

Attorneys for Southern Pacific

Communications Company

STEPTOE & JOHNSON

1250 Connecticut Ave., N.W.

Washington, D.C. 20036

Of Counsel

la

APPENDIX

FEDERAL COMMUNICATIONS COMMISSION

6065

August 10, 1978—CC

COMMISSIONER FOGARTY DISSENTS TO SEEKING

SUPREME COURT REVIEW OF

MCI TELECOMMUNICATIONS CORP. V. FCC

Commissioner Joseph R. Fogarty today issued the fol-

lowing statement regarding the Commission’s decision

to seek Supreme Court review of MCI Telecommunica-

tions Corporation v. FCC, FCC 76-1635 (D.C. Circuit

1978) :

The Commission has decided to seek certiorari of the

Court of Appeals decision granting MCI’s Motion to En-

force Mandate. The court in that decision reversed the

Commission’s determination that the telephone companies

are not obligated to provide MCI with local exchange

facilities to use in connection with Execunet service, a

decision to which I dissented. I dissented also to the

determination to seek rehearing before the Court of

Appeals en banc, and I disagreed with the decision to ask

the Supreme Court for a stay. Subsequently, both the

Court of Appeals and the Supreme Court rejected the

Commission’s requests.

Nevertheless, the Commission refuses to accept this

decision and seeks, without sound basis, in my opinion,

to obtain Supreme Court review. For that reason, I

dissent to the decision to seek certiorari. Since my rea-

sons for dissent are the same as those I set forth in op-

posing rehearing, I am attaching the statement which I

issued at that time. ;

—FCC—

Attachment

2a

STATEMENT OF COMMISSIONER

JOSEPH R. FOGARTY

In Re: Motion for Stay of the United States Court of

Appeals Order Directing Compliance With

Execunet Mandate.

The Commission has filed a motion for stay and said

it will seek rehearing before the United States Court of

Appeals for the District of Columbia en banc, of the

Court’s April 14, 1978,’ grant of MCI Telecommunica-

tions Corporation’s Motion for an Order Directing Com-

pliance with Mandate in the Court’s Ewecunet decision.’

I believe it is improper and counterproductive to continue

this litigation any further, following two reversals by

the Court of Appeals and denial of review by the

Supreme Court. Enough is enough. I would devote all

available resources of this Commission now to expedite

determination of a reasonable competitive market struc-

ture for domestic telecommunications services. Rehear-

ing is being sought of an Order which, in essence, re-

quires the FCC to direct and the telephone companies

to furnish those interconnections and local facilities re-

quired for the provision of MCI’s Evxecunet service

offering. In doing so, the Court also found that its

*MCI Telecommunications Corp. v. FCC, —— F.2d ——, No.

75-1635.

? MCI Telecommunications Corp. v. FCC, 561 F.2d 365, (D.C. Cir.,

1977), cert. denied, —— U.S. , 46 U.S.L.W. 3446 (Jan. 16,

1978).

*“Execunet’s characteristics are summarized as follows. A cus-

tomer in the calling city calls the local MCI office via local exchange

telephone service from any push-button telephone in the local ex-

change area. A rotary-dial telephone can also be used if the caller

has a touch-tone pad (tone generator). This device can be purchased

in the open market from numerous sources. He then pulses his

customer code and the area code and calling number of any telephone

in one of a number of distant cities. Connection at the distant end

may again be accomplished via the local exchange telephone service

in that area. Upon connection, the customer is charged a per-minute

3a

prior Execunet decision‘ required such interconnections,

despite a declaratory ruling by the Commission, to which

I dissented, that such interconnections were not man-

dated by Section 201(a) of the Communications Act, 47

U.S.C. § 201 (a).

In Order to understand the import of the April 14

decision, it is necessary to examine briefly the legal basis

of our competitive service policy. Our 1971 Specialized

Common Carrier decision® declared that it is the Com-

mission’s policy to promote “full and fair competition”

among established and new “specialized” carriers for the

provision of “specialized common carrier services.” That

decision cleared the way for the grant of a number of

facilities applications to several newly emerging common

carriers, including MCI. Both in that case and in the

subsequent Bell System Tariff Offerings,’ we determined

that the specialized carriers were limited to the offering

of specialized, particularly private line, services."

AT&T subsequently refused to supply interconnections

for the offering of foreign exchange (FX) and common

toll, based upon the mileage to the city called, subject to a connec-

tion charge and a monthly minimum charge. Any MCI Execunet

customer in the calling city can access the system at any time to

place a call, and presumably many such customers may utilize the

intercity facilities simultaneously. In other words, none of the MCI

plant, or indeed any of the plant used in completing the call, is dedi-

cated to the use of a particular customer during any specified time;

rather it is available upon demand.” MCI Telecommunications Corp.

60 FCC 2d 25, 26n (1976).

* Supra, note 2.

5 F.2d ——, FCC 78-142, released February 28, 1978.

®20 FCC 2d 870 (1971), aff'd sub nom Washington Utilities and

Transportation Commission v. FCC, 513 F.2d 1142 (2d Cir. 1975),

cert. denied, 423 U.S. 836 (1975).

746 FCC 2d 413 (1974), aff’d sub nom Bell Telephone Company

of Pennsylvania v. FCC, 503 F.2d 1250 (3d Cir., 1974), cert. denied,

422 U.S. 1026 (1975).

®’ See MCI Telecommunications Corp., 60 FCC 2d 25, 36 (1976).

4a

control switching arrangement services (CCSA). Upon

complaint, we hold that FX and CCSA were authorized

private line services and that the Specialized Carrier

decision, supra, could reasonably be read to grant those

interconnections, pursuant to Section 201(a) of the Act,

“essential to the rendition of all of their presently or

hereafter authorized interstate and foreign communi-

cations services and to enable the said specialized com-

mon carriers to terminate their authorized interstate and

foreign communications services.” °

AT&T appealed the Commission’s interconnection order,

asserting among other arguments that our opinion was

“somewhat vague and, to a certain extent, overbroad.” ”

The Third Circuit affirmed the Commission, however,

holding that, when read in the context of the Specialized

Common Carrier decision, our intention had been for

interconnection to be required only in connection with

the offering of specialized common carrier services.

“Orders are not to be read in a vacuum, but rather must

be read and interpreted in the context in which they ap-

pear.”

When MCI began offering its Execunet tariff, AT&T

did not refuse to provide interconnections, but rather

filed a complaint seeking a ruling that the service was

outside of those which MCI’s authorizations allowed it

to offer. After hearing, we agreed and ruled the MCI

tariff to be null and void.“ We found Execunet to be

not private line but essentially long distance message

telecommunications service (MTS) and outside of the

® Bell System Tariff Offerings, supra note 7, 46 FCC 2d at 438.

10 Supra, note 7, 503 F.2d at 1273.

1 Jd.

12 MCI Telecommunications Corp., 60 FCC 2d 25 (1976), rev'd

sub nom MCI Telecommunications Corp. v. FCC, supra, note 2.

ee Ste ete seen

a

5a

scope of those services which the specialized carriers were

permitted to provide.

Our holding in this regard was overturned in the first

of the court reversals relating to this question. The Court

of Appeals told us that the Specialized Common Carrier

decision did not limit services which MCI could offer,

but rather such limitations could be imposed only after

public interest findings were made based upon a complete

record. In developing such a record, the Court cautioned,

“the Commission must be ever mindful that, just as it

is not free to create competition for competition’s sake,

it is not free to propagate monopoly for monopoly’s

sake.” *

Significantly, it was not until after denial of review by

the Supreme Court that AT&T refused to provide inter-

connections. The Commission agreed that 201(a) did not

require the furnishing of local facilities to MCI when it

granted AT&T’s declaratory ruling petition. In dissent-

ing from that ruling, I wrote, “Clearly, the D.C. Circuit’s

findings would be a nullity were we to deny intercon-

nection necessary for the provision of [Execunet]. Bell

System Tariff Offerings held that Specialized Common

Carriers mandated interconnections necessary for services

authorized therein, and the Execunet court found these

services unrestricted. Since Execunet-type services are

presently authorized, these cases read together mandate

interconnection.”

Now we are faced with what amounts to a Court of

Appeals reversal of the declaratory ruling, with a direc-

tion to the Commission to comply with the Court’s

Execunet mandate. Yet the Commission still insists on

retrying the Execunet case, this time by seeking a stay

and rehearing. It persists in this effort despite language

in the April 14 Court Order, which I find very disturb-

8 561 F.2d at 380.

6a

ing, that the Commission’s Declaratory Ruling “twists

the issues we contemplated in this case beyond recog-

nition; it deliberately frustrates the purpose of this

litigation, the basis on which it was presented by the

parties, and the intended effect of our decree.” ** The

Court also cites AT&T’s efforts to thwart the develop-

ment of MCI’s services, then says that now “we are faced

with a new effort by AT&T, with the approval of the

Commission, to arrest development of Execunet service.’

Whiie I am certain that my colleagues believe that a

rehearing request has a reasonable chance of success,

I cannot agree. Instead, the attempt to relitigate these

same issues on which we were reversed in Execunet will

further alienate a Court which already has expressed the

view that this Commission is acting “in direct and ex-

plicit contradiction to our Execunet decision.” *

The FCC has accepted losses before—without devas-

tating consequences. Certainly, it has had a multitude

of court reversals in the cable and broadcast areas. It is

time now for a mature Commission to accept the Ewxecu-

net decisions and to move ahead affirmatively to define

and resolve the issues in CC Docket No. 78-72, our

MTS/WATS market structure investigation, and thus to

remove as quickly as possible the uncertainties surround-

ing the scope of inter-city competition.

Meanwhile, we are under a Court direction to enforce

the Execunet mandate. In doing so, I would ensure that

AT&T complies by issuing a show cause order in the

event it does not provide MCI with local interconnections

and facilities necessary for the provision of Execunet

service within a reasonable time at just and reasonable

rates.

14 Slip opinion, pp. 15-16.

15 Slip opinion, p. 3.

16 Slip opinion, p. 14.