Appendix — American Telephone & Telegraph Co. v. MCI (Nos. 78-217, 78-216, 78-270)

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| FILED

78-217 ! AUG 7% 1978 |

No.

IN THE

Supreme Court of the Bnited States

Octorner Term, 1978

American TELEPHONE anpd TELEGRAPH COMPANY.

Petitioner.

”,

MCT TerecomMunications Corporation, et Al...

Ry sponde nt.

APPENDIX TO PETITION

FOR A WRIT OF CERTIORARI

Of Counsel: Micuartt. Bovorn

. ' Pau. J. Berman

EF. Mark Gartinaitors: 2 a — : a

— S88 Sixteenth Street, N.W.

Arrrep C. Parrormw

5 Washington, D.C. 20006

19) Broadway Va hington i )

New York N.Y. 10007 9 Burrow K. Karxis

ALFRED WINCHELL WHITTAKER

195 Broadway

New York, New York 10007

Attorne Ys for Ame ru ay

T « le phone and

Telearaph Company

August 1978

Press of Brrow S. Adams PRINTING, INC, WASHINGTON, D.C

TABLE OF CONTENTS

Page

Appendix A

Opinion of Court of Appeals filed April 14, 1978, in

MCI Telecommunications Corp. v. FCC, D.C. Cir.,

Pe PE dite ea Ga then tek Gel eee bi vadsweukankes

Appendix B

Order of the Court of Appeals filed May 11, 1978,

granting petitioner’s request for interim stay of

the Order of April 14, 1978, MCI Telecommunica-

tions Corp. v. FCC, supra, and denying the motion

of United States Independent Telephone Associa-

tion for a stay pending certiorari; accompanying

per curiam memorandum. .............0.+0ee0es

Appendix C

Federal Communications Commission Memorandum,

Opinion and Order on AT&T petition for a declara-

— ruling, released February 28, 1978, FCC 78-

Ee Sha beekeneewsnaes Kuba shies babeetbakepeannec’

Appendix D

Order of Court of Appeals filed April 14, 1978, in MCI

Telecommunications Corp. v. FCC, supra. .......

Appendix E

Orders of Court of Appeals filed May 8, 1978, denying

petitions for rehearing and suggestions for rehear-

ing en banc of the Opinion and Order of April 14,

eS Pere ree rer yr errr

Appendix F

Pertinent provisions of the Communications Act of

1934 and of the Hobbs Act ...................0.

Appendix G

Decision of September 11, 1974, in Bell Telephone

are of Pennsylvania v. FCC, 503 F.2d 1250

ee CE re cate owe cau G webake b Keo onnebasns

Page

Appendix H

Charts Illustrating Execunet and MTS .............. lh

Appendix I

Decision of July 28, 1977, in MCI Telecommunications

Corp. v. FCC, 561 F.2d 365 (D.C. Cir. 1977) .... li

APPENDIX A

a ee ed de -

UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

No. 75-1635

MCI TevLecommunicaTions CorPoRATION, MicrowAvE

Communications, Inc., anp N-Trrpie-C Ino.,

PETITIONERS

Vv.

FreperaL ComMMUNICATIONS CoMMISSION AND

Unrtep States oF AMERICA, RESPONDENTS

AMERICAN TELEPHONE AND TELEGRAPH CoMPANY,

Unitep States INDEPENDENT TELEPHONE ASSOCIATION,

Data Transmission Company (DATRAN), anp

SoutHern Paciric Communications CoMPANY

INTERVENORS

Motion for an Order Directing

Compliance With Mandate

Filed April 14, 1978

Michael H. Bader, William J. Byrnes, Kenneth A. Coz,

and Raymond C. Fay were on the pleadings for petitioners.

Robert R. Bruce, General Counsel, Daniel M. Armstrong,

Associate General Counsel, and John E. Ingle, Counsel,

Federal Communications Commission, were on the plead-

ings for respondents.

Paul J. Berman, Michael Boudin, and F. Mark Garling-

house were on the pleadings for intervenor American

Telephone and Telegraph Company.

Before Wricut, Chief Judge, and Tamm and WILKey,

Circuit Judges.

Opinion for the court filed by Chief Judge Wricut.

Wricut, Chief Judge: Petitioners here, MCI Telecom-

munications Corporation, Microwave Communications, Inc.,

and N-Triple-C Inc. (hereinafter, collectively, MCI), re-

quest this court to issue an order directing the Federal

Communications Commission (FCC) and the American

Telephone & Telegraph Company (AT&T) to comply with

our mandate in MCI Telecommunications Corp. v. FCC,

561 F.2d 365 (D.C. Cir. 1977), cert. denied, —— U.S. —~—,

46 U.S. L. Weex 3446 (January 16, 1978) (hereinafter

Execunet). This motion by MCI was prompted by a declar-

atory ruling issued by the Commission, at the request of

AT&T, on Fabruary 23, 1978, holding that AT&T is under

‘‘no obligation’’ to provide the local physical interconnec-

tions necessary for MCI’s Execunet service.t MCI argues

that this ruling is inconsistent with and violative of our

Execunet decision, and that under our mandate AT&T is

required to provide interconnections for Execunet. For the

reasons set forth below, we agree, and we order the parties

to comply with our mandate.

I. Backerounp

The motion to direct compliance before us now is the

most recent stage in the long series of proceedings and

litigation in which MCT has attempted to secure and pre-

serve its authority to offer Execunet service.? Since the

1In the Matter of Petition of American Telephone and Telegraph

Company for a Declaratory Ruling and Expedited Relief, FCC

78-142, Memorandum, Opinion and Order, Adopted February 23,

1978, Released February 28, 1978 (hereinafter FCC Declaratory

Ruling).

? With Execunet a subscriber with a push-button telephone is

able to reach any telephone in a distant city served by MCI by

dialing a local MCI number followed by an access code and the

number in the distant city. Execunet subscribers are billed on a

time and distance basis for each call, subject to a monthly mini-

mum. See MCI Telecommunications Corp. v. FCC, 561 F.2d 365,

367 & n.3 (D.C, Cir. 1977), cert. denied, —— U.S. ——, 46 USS. L.

Week 3446 (Jan. 16, 1978) (hereinafter Execunet); MCI Tele-

communications Corp., 60 FCC2d 25, 26 n.1 (July 13, 1976).

seminal FCC Specialized Common Carrier decision, Spe-

cialized Common Carrier Services, 29 FCC2d 870 (1971),

aff’d sub nom. Washington Utilities & Transportation

Com’n v. FCC, 513 F.2d 1142 (9th Cir.), cert. denied, 423

U.S. 836 (1975) (hereinafter Specialized Carrier), MCI

has met with almost continuous resistance from AT&T in

its efforts to provide communications services. We had

thought that this process finally culminated in our Execunet

decision upholding MCI’s authority to offer Execunet pend-

ding further rulemaking by the Commission. Now, how-

ever, we are faced with a new effort by AT&T, with the

approval of the Commission, to arrest the development of

Execunet services, and the question for immediate dispo-

sition is whether protection of the integrity of our Execunet

mandate requires that this new effort be terminated

through an order directing compliance with our mandate.

We believe it does.

Since the course of all of these earlier proceedings is set

out in some detail in our Ezecunet decision,® our purpose

here is only to outline briefly the background necessary to

consideration of this motion. In Specialized Carrier, supra,

the Commission sought to determine by rulemaking

‘‘w)hether as a general policy the public interest would be

served by permitting the entry of new carriers in the spe-

cialized communications field * * *.’? 29 FCC2d at 878. The

Commission answered that question affirmatively,‘ but did

® See Execunet, supra note 2, 561 F.2d at 367-373. See also Bell

Telephone Co. of Pennsylvania v. FCC, 503 F.2d 1250, 1254-1263

(3d Cir. 1974), cert. denied, 422 U.S. 1026 (1975).

* As to this question the Commission concluded :

[T]here is a public need and demand for the proposed facili-

ties and services and for new and diverse sources of supply,

competition in the specialized communications field is reason-

ably feasible, there are grounds for a reasonable expectation

that new entry will have some beneficial effects, and there is

no reason to anticipate that new entry would have any adverse

impact on service to the public by existing carriers such as to

not seek to define precisely the boundaries of ‘‘the special-

ized communications field.’’®

outweigh the corsiderations supporting new entry. We further

find and conclude 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.

Spectalized Common Carrier Services, 29 FCC2d 870, 920 (1971,

aff'd sub nom. Washington Utilities & Transportation Com’n v.

FCC, 513 F.2d 1142 (9th Cir.), cert. denied, 423 U.S. 836 (1975)

(hereinafter Specialized Carrier). The Commission went on to

address the question of ‘‘the appropriate means for local distribu-

tion of the proposed services,’’ Notice of Proposed Rulemaking,

24 FCC2d 318 (1970), concluding:

157, We reaffirm the view expressed in the Notice (para-

graph 67) that established carriers with exchange facilities

should, upon request, permit interconnection or leased channe!

arrangements on reasonable terms and conditions to be nego-

tiated with the new carriers, and also afford their customers

the option of obtaining local distribution service under reason-

able terms set forth in the tariff schedules of the local carrier.

Moreover, as there stated, ‘‘where a carrier has monopoly con-

trol over essential facilities we will not condone any policy or

practice whereby such carrier would discriminate in favor of

an affiliated carrier or show favoritism among competitors.’’

In view of the representations of AT&T and GT&E in this

proceeding, upon which we rely, and the self-interest of other

independent telephone companies in not losing potential new

business, there appears to be no need to say more on this ques-

tion at this time. Should any future problem arise, we will act

expeditiously to take such measures as are necessary and ap-

propriate in the public interest to implement and enforce the

policies and objectives of this Decision.

Specialized Carrier, supra, 29 FCC2d at 940 (emphasis added;

footnote omitted).

* See Execunet, supra note 2, 561 F.2d at 371, 379 n.68 (‘‘to

the extent that any definition of a specialized common carrier

emerges from the Commission’s discussion, that definition appears

to be simply that a specialized carrier is any carrier that does not

attempt to optimize its service offerings to the voice communica-

tions needs of the general public’’).

Specialized Carrier served as the basis for the Commis-

sion’s later grants, under 47 U.S.C. § 214 (1970), of facili-

ties authorizations to carriers, including MCI, to provide

microwave communications services. AT&T, however, re-

fused to provide interconnections necessary for the spe-

cialized carriers to furnish these services. This refusal led

MCI to seek and secure from the Commission both a cease

and desist order against AT&T and an affirmative order

that AT&T was required to provide any physical connec-

tions ‘‘essential’’ to the rendition of ‘‘all’’ the services

which any of the specialized common carriers ‘‘ presently

or hereafter’’ are authorized to offer. Bell System Tariff

Offerings, 46 FCC2d 413 (1974), aff’d sub nom. Bell Tele-

phone Co. of Pennsylvania v. FCC, 503 F.2d 1250 (3d Cir.

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

MCI filed a tariff revision including rates for Execunet

service in September 1974. That tariff was rejected by the

Commission at the request of AT&T. MCI immediately

sought a stay of the Commission’s order pending judicial

review. A stay was initially granted, then later modified in

light of the opposition of the FCC and AT&T. As modified

the stay permitted MCI to continue to serve its present cus-

tomers but prohibited any solicitation of new customers or

any expansion of service.’ In seeking and securing this

modification of the stay—as well as in its opposition to the

grant of the original stay—AT&T forcefully argued that a

broad stay would permit MCI to compete with AT&T’s long

distance service in high density, high profit areas, and that

this would have a substantial adverse impact on AT&T and

on the public interest. According to the pleadings filed in

this court by AT&T, such competition would undermine

AT&T’s practice of determining long distance rates through

cost averaging and would result in substantial increase in

costs in low density areas.’

* See Execunet, supra note 2, 561 F.2d at 369 & n.18.

™ See Memorandum of AT&T in Opposition to Petitioners’ Motion

for Stay Pending Review, July 14, 1975, at 44-47; Motion of AT&T

After an initial remand at the Commission’s request for

further proceedings on the merits, we reversed the FCC’s

rejection of the Execunet tariff. We held that under the

Communications Act the tariff system provides the usual

mechanism for initiation of new services to be provided on

previously authorized facilities." Under this mechanism a

carrier files a tariff for the new service and, subject to a

possible stated suspension period, is permitted to imple-

ment that service until and unless the Commission deter-

mines that the service is not in the public interest.’ The

only limitation on the carrier’s ability to make use of tariff

filings to initiate new services relevant to this case is found

in Section 214(c) of the Act, 47 U.S.C. §214(c) (1970),

which permits the Commission, in granting facilities au-

thorizations, to limit the services which may be provided

on facilities which it authorizes.”

The Commission argued in Execunet that its Specialized

Carrier decision implicifly restricted the facilities authori-

zations of specialized carriers to ‘‘private line’’ services,

that Execunet is not such a ‘‘private line’’ service, and that

MCI therefore could not implement this service through a

tariff filing. In support of its position the Commission em-

phasized that its analysis of competitive effects in Special-

to Dissolve or Modify the Stay and for Expedited Review, August

18, 1976, at 24-29.

®* Execunet, supra note 2, 561 F.2d at 374, citing AT&T v. FCC,

487 F.2d 965, 870-881 (2d Cir. 1973).

®*The relevant tariff provisions are found in §§ 203-205 of the

Communication Act, 47 U.S.C. §§ 203-205 (1970). See Erecunet,

supra note 2, 561 F.2d at 374 n.44.

1° Section 214(¢) permits the Commission to ‘‘attach to the issu-

ance of the certificate such terms and conditions as in its judgment

the public convenience and necessity may require.’’ 47 U.S.C.

§ 214(c) (1970). See Execunet, supra note 2, 561 F.2d at 376-377

& n.56.

AMM ries a

ized Carrier assumed that the specialized carriers would

be limited to offering ‘‘private line’’ services.”

We rejected the Commission’s arguments, holding that

Section 214 requires an affirmative determination to restrict

a carrier’s facilities authorization, and that no such deter-

mination was made in Specialized Carrier. In reaching our

conclusion we placed emphasis on the Commission’s staff

report which formed the basis for the Specialized Carrier

decision. As to the competition argument, we found that the

staff report ‘‘ruminated more broadly [than the Commis-

sion suggested] on the issues posed by revenue diversion

and it appeared highly skeptical of the validity of AT&T’s

overall argument.’’ 561 F.2d at 378. Further, we noted that

the staff report ‘‘dealt explicitly with the question of how

the Commission ought to deal with possible adverse im-

pacts of service offerings other than those which were be-

fore the Commission in the Specialized Common Carrier de-

cision.’’ Id. at 378-379. We found that ‘‘[t]he undeniable

import of the staff’s analysis is that questions related to

the future impact of specialized carrier service offerings

other than those immediately at hand in the Specialized

Common Carrier case should be resolved in other proceed-

ings—in tariff proceedings, upon license renewal, or by

future rulemaking.’’ Id. at 379.

AT&T, as well as the Commission, petitioned for cer-

tiorari, arguing, inter alia, as they had before this court,

that our decision would result in vigorous competition over

. high density routes, with potentially adverse effects on the

11 Ezecunet, supra note 2, 561 F.2d at 37 & n.58.

public interest as well as on AT&T." Certiorari was denied

on January 16, 1978."

Hours after the Supreme Court’s denial of certiorari

AT&T announced its intention to cease providing any addi-

tional interconnections for Execunet or similar services,

and filed with the Commission a petition for declaratory

ruling that it was under ‘‘no obligation’’ to furnish MCI

or any other specialized carriers with any ‘‘additional’’

physical connections for Execunet-type services. The Com-

mission considered AT&T’s petition on an expedited basis,

and on February 23, 1978 it adopted a declaratory ruling in

substantial accord with AT&T’s request.

II. Tue Commisstion’s Decuaratory Rutine

1s INconsIsTENT WitH THE Execunet ManpaTE

The local physical interconnections which AT&T now re-

fuses to provide for Execunet service are admittedly essen-

tial to MCI’s ability to offer that service. As a result,

AT&T’s refusal to provide “additional” connections, up-

held in the Commission’s declaratory ruling, means that

MCT is in effect no better off than it was during the entire

course of the litigation in this court: notwithstanding our .

favorable decision, it is unable to expand Execunet. More-

over, nothing in the Commission’s ruling, or in AT&T’s

request, establishes any legal basis for a greater intercon-

* AT&T Petition for Certiorari, MCI Telecommunications Corp.

v. FCC (Sept. 1977), at 29-30 (‘‘If the lower court’s decision

stands, the telephone companies will be threatened with a massive

diversion of MTS traffic from the switched network. This diversion

ean occur at an extraordinary rate—literally in a matter of months

—because the specialized carriers have thousands of intercity cir-

cuits in operation and they utilize existing local distribution facili-

ties already in place. Past experience confirms the severity and

speed of this threat.’’), quoted in MCI Petition for Compliance

before the FCC, at 7.

- U.S. ——, 46 U.S. L. Werx 3446 (Jan. 16, 1978).

** The petition for a declaratory ruling was granted, and AT&T

declared without obligation to interconnect, with respect to prior

Commission orders, the provisions of the Communications Act, and

nection obligation on AT&T with respect to maintenance of

physical connections already in place than with respect to

‘‘additional’’ connections, with the result that MCI might

well find itself in the near future unable even to provide

Execunet to its existing customers.”

Having successfully litigated the question of its right to

provide Execunet service, MCI certainly has good cause to

feel that this subsequent turn of events engineered by the

Commission and AT&T is strikingly unfair. Of course, as

AT&T and the Commission so vigorously argue, litigation

in the court does not always provide the victor with all that

he might wish, or with all that he expected or thought he

had won. But the fact of the matter is that our Execunet

decision did clearly contemplate—by virtue of AT#T’s

representations and actions—that AT&T was required to

provide interconnections for Execunet service.

Until the Supreme Court denied certiorari in Execunet,

AT&T provided MCI with the interconnections necessary

for Execunet service without any form of protest or objec-

tion. Never in the proceedings before this court did AT&T

even suggest that it was not required to provide these con-

nections, or that the question of MCI’s authority to provide

or expand its Execunet service was, as a practical matter,

of no consequence since AT&T could and would refuse to

provide the essential interconnections should we decide in

MCI’s favor. Quite to the contrary, in securing the modifi-

the mandate of this court in Execunet. The petition was denied

only ‘‘insofar as it requests a determination with respect to the

scope of petitioner’s interconnection obligations to specialized com-

mon carriers, if any, under the Sherman Act, the common law, or

any federal or state statute other than the Communications Act.”’

FCC Declaratory Ruling, supra note 1, § 83.

18 Indeed, the Commission’s order does not even restrict its hold-

ing to ‘‘additional’’ connections: it concludes ‘‘that our prior Sec-

tion 201(a) orders do not direct the petitioners to provide inter-

connection of facilities or services to any specialized common carrier

to enable such a specialized common carrier to provide any service

which is substantially equivalent to MTS or WATS.’’ Id. § 79.

10a

cation of our original stay, in its briefs and arguments to

this court, and in its petition for certiorari, AT&T consist-

ently emphasized that a decision in favor of MCI would

lead to vigorous and adverse competition.’"*°—a result which

would occur only if AT&T was required to provide the nec-

essary interconnections for Execunet. AT&T expected and

encouraged this court to take account of these representa-

tions in reaching our decisions in the Execunet matter ; cer-

tainly, it did not assume that in so doing we would at the

same time ignore the underlying assumptions supporting

the claims of competition. Indeed, even now AT&T does not

deny that it is required to provide interconnections for

existing Execunet service; it contends only that it is not

required to provide any ‘‘additional’’ connections,” not-

withstanding its earlier representations necessarily assum-

ing the contrary, upon which our Execunet decisions were

premised, as well as the absence of any apparent legal basis

for distinguishing existing connections from additional

ones.

In view of this background, AT&T's current refusal, with

the approval of the Commission, to provide interconnec-

tions to MCI does not simply raise questions for fairness

vis-a-vis MCT; it also raises questions as to the propriety of

allowing respondents here to renounce a position and obli-

gation which they assumed throughout the course of the

Execunet proceedings. But we need not rest our grant of

MCI’s compliance motion on the practical consequences

involved here or on considerations of fairness and estoppel.

For while it is true, as AT&T strongly emphasizes, that our

Execunet decision is not addressed explicitly to the inter-

connection issue or to AT&T's obligation to provide inter-

*® See notes 7 & 12 supra.

“* See Opposition of AT&T to MCI Motion for an Order Direct-

ing Compliance With Mandate, MCI Telecommunications Corp. v.

FCC (March 2, 1978), at 10.

Dhak. + eal nent d atin

lla

connection *“—a fact which is hardly surprising, given the

background of this case and the apparent assumption by

all the parties, as well as this court, that such an obligation

was in force—it is also true that our analysis and decision

of the Execunet case is plainly inconsistent with the analy-

sis and ruling of the Commission on February 23, 1978

holding AT&T under ‘‘no obligation’’ to provide inter-

connections for Execunet.

In reaching this conclusion the Commission addressed its

analysis to two questions: whether the Commission had

previously directed AT&T to provide these services pur-

suant to an order under Section 201(a) of the Communi-

cations Act; and, if not, whether AT&T is under an obliga-

tion to provide interconnection apart from a Section 201 (a)

order. While serious questions have been raised by the

Department of Justice as to the correctness of the Com-

mission’s disposition of the second question,”® we need not

address these doubts here, since it is the Commission’s

analysis and resolution of the first question which gives

rise to the inconsistency with our Execunet mandate. For

in concluding that its prior orders do not require AT&T

to provide interconnections for Execunet, the Commission

construes narrowly and restrictively the very same issues

and decisions which were broadly construed by this court

in Execunet.

For purposes of the Commission’s first question, the

critical interconnection order is the Bell System Tariff

18 See id. at 12-14. See also Response of Federal Communications

Commission to MCI Motion for an Order Directing Compliance

With Mandate, MCI Telecommunications Corp. v. FCC (March 6,

1978), at 7 (‘‘There was no mention of interconnection rights or

obligations, because none of the parties had raised these questions

either before the Commission or in the Court.’’).

19 See Comments of the United States Department of Justice, Jn

the Matter of Petition of American Telephone and Telegraph Com-

pany for Declaratory Ruling and Expedited Relief, submitted as

Appendix A to MCI Reply to Oppositions, MC/ T elecommunica-

tions Corp. v. FCC (March 9, 1978), at 7, 9 (arguing, inter alia,

12a

Offerings order, supra, requiring AT&T to provide inter-

connection for ‘‘all’’ of the services which any of the spe-

cialized carriers ‘‘presently or hereafter’’ are authorized

to offer. In its declaratory ruling the Commission sought

to construe this order as limited to ‘‘presently or hereafter

authorized private line service,’’ In the Matter of Petition

of AT&T for Declaratory Ruling and Expedited Relief,

FCC 78-142, Memorandum, Opinion and Order, Adopted

February 23, 1978, Released February 28, 1978, 58 (here-

inafter FCC Declaratory Ruling), allegedly relying on a

decision of the Third Circuit to that effect. See infra. In

the very next paragraph of its decision, however, the Com-

mission recognized ‘‘that the Specialized Carrier decision

encompassed specialized communication services other than

those which theretofore had been described as ‘private line

services’’’ and acknowledged that ‘‘private line’’ had

emerged as shorthand for the broader term ‘‘specialized

communication service’? because of the particular context

in which the interconnections issues were most frequently

raised. Jd. § 259. Thus the Commission continued:

We believe it is clear that the Specialized Common

Carrier decision as well as our order in Bell System

Tariff Offerings and the Court’s decision in Bell Tel.

Co. of Pennsylvania require interconnection for all

specialized interstate communication services, includ-

ing switched digital services such as those developed

by Datran. What is germane to the present proceed-

ing, however, is a determination as to what services

were explicitly excluded from consideration in Special-

ized Common Carrier, Bell System Tariff Offerings,

and Bell Tel. Co. of Pennsylvania. We believe it is

that ‘‘AT&T totally failed to make any factual showing of harm

in its petition seeking to invoke Commission protection against

competition in the intercity services market,’’ as well as that

se [r]ecent court decisions make it clear that local telephone com-

panies, including AT&T subsidiaries, are affirmatively obliged to

offer local interconnection or loop services to other carriers, in-

eluding MCI, to facilitate lawful services’’).

BDI: ened 9 bho bE mAs at

13a

clear that MTS and WATS services, and therefore

services by other names which are the functional equiv-

alent of MTS and WATS, were excluded from both

the considerations and holdings of these proceed-

ings. *.° *

Id. (emphasis in original). Paorased in these terms the Com-

mission’s reasoning is whoily at odds with that of this court

in Execunet. For in Execunet we held that MCI’s facilities

authorizations encompassed Execunet service precisely be-

cause Specialized Carrier did not explicitly and affirm-

atively exclude this type of service from consideration. In

relying on exactly the opposite conclusion to support its

declaratory ruling, the Commission acts in direct and ex-

plicit contradition to our Execunet decision.

The inconsistency between Execunet and the Commis-

sion’s declaratory ruling persists at the more general level

as well. The thrust of our entire option and decision in

Execunet, derived in part from our reading of the Com-

mission staff report, was that Specialized Carrier repre-

sented a broad decision by the Commission to allow carriers

such as MCI to enter the market and compete with AT&T,

subject only to later limitations based on public interest

determinations in tariff or rulemaking proceedings.” In its

February 23rd ruling, however, the Commission narrowly

construed Bell System Tariff Offerings, which was based

on Specialized Carrier, to exclude Execunet interconnec-

tions from those which AT&T was required to provide; and

it relied on interconnection obligations—as opposed to tar-

iffs or rulemaking—effectively to limit the services which

MCI and other carriers were authorized to provide by the

Specialized Carrier decision.

Both of these positions are clearly inconsistent with the

basic themes of our Execunet decision. For the expansive

interpretation of Specialized Carrier we advanced in Ez-

ecunet clearly mandates an equally expansive view of the

scope of the interconnection obligations of AT&T which

20 Execunet, supra note 2, 561 F.2d at 378-379. See pp. 7-8 supra.

l4a

were defined by that decision. And in fact the intercon-

nection order which the Commission issued on the basis

of Specialized Carrier, as well as its discussion of inter-

connection in Specialized Carrier itself,’ reflected the

broad reading of that decision to which we have adhered:

as noted earlier, it required AT&T to furnish interconnec-

tion for all “presently or hereafter authorized” services

provided by the specialized carriers.” Similarly, our em-

phasis on tariffs and ratemaking as the exclusive means

for future limitations on the specialized carriers’ develop-

ment * clearly contemplated that the carriers would be

free to expand their service offerings—and would be af-

forded the necessary interconnections—until and unless

it was found that the public interest demanded otherwise.

The Commission’s narrow construction of AT&T's exist-

ing interconnection obligation is not only theoretically

inconsistent with this position, but also means in practice

that a specialized carrier cannot implement new offerings

until and unless it is able to establish that the public in-

terest mandates the services** and that a new order

** See note 4 supra, quoting Specialized Carrier, 29 FCC2d at

940 (‘‘established carriers with exchange facilities should, upon

request, permit interconnection or leased channel arrangements on

reasonable terms and conditions to be negotiated with the new

carriers, and also afford their customers the option of obtaining

local distribution service under reasonable terms set forth in the

tariff schedules of the local carrier’).

** Bell System Tariff Offerings, 46 FCC2d 413 (1974), aff’d sub

nom. Bell Telephone Co. of Pennsylvania v. FCC, supra note 3.

** Execunet, supra note 2, 561 F.2d at 378-379. See pp. 6-8 supra,

** Compare Execunet, supra note 2, 561 F.2d at 374 (‘‘it is well

recognized that the tariff provisions of the Communications Act

(Sections 203-205, 47 U.S.C. §§ 263-205), like the cognate sections

of the Interstate Commerce Act * * * embody a considered legis-

lative judgment that carriers should in general be free to initiate

and implement new rates or services over existing communications

lines unless and until the Commission, after hearing, determines

that such rates or practices are unlawful, subject only to a limited

period of suspension set out in the statute’) (footnotes omitted;

emphasis in original).

15a

should therefore be issued directing AT&T to provide in-

tereonnections. This twists the issues we contemplated in

this case beyond recognition; it deliberately frustrates the

purpose of the litigation, the basis on which it was pre-

sented by the parties, and the intended effect of our de-

cree.

In our view, then, the only conclusion to the issues pre-

sented here which is consistent with our reasoning and

holding in Execunet is that the Commission decisions in

Specialized Carrier and Bell System Tariff Offerings im-

pose upon AT&T an obligation to provide interconnections

for Execunet. In holding otherwise in its February 23rd

declaratory ruling, therefore, the Commission acted incon-

sistently with our Execunet mandate. And in refusing to

provide these interconnections to MCI, AT&T is acting

inconsistently with the view of its legal obligations re-

flected in our Execunet decision.

III. Tue Bell Telephone Decision

One final argument remains to be addressed. The Com-

mission has asserted that the position it has taken in this

action is mandated by the decision of the Third Circuit in

Bell Telephone Co. of Pennsylvania v. FCC, supra, and

that this position represents the only means by which the

Commission can simultaneously comply with the decisions

of the two circuits.?® As we have already made clear, how-

ever, the Commission’s February 23rd decision does not

effectuate compliance with our Execunet decision. Nor can

the Commission claim that it was required to decide as it

did in order to comply with Bell Telephone. For in our

view there is absolutely no conflict between the Execunet

and Bell Telephone decisions; the latter in no way com-

pels or even provides support for the Commission ruling

that AT&T is under no obligation to provide intercon-

nections for Execunet.

28 See FCC Declaratory Ruling, supra note 1, {ff 56, 61; Response

of Federal Communications Commission, supra note 18, at 20.

l6a

The interconnection orders under review in Bell Tele-

phone were issued by the Commission after AT&T refused

to provide to MCI the interconnections necessary for FX

and CCSA service.** FX, a service similar to though

somewhat more limited than Execunet, allows an indi-

vidual in one state in effect to maintain a Jocal phone in

another state and thereby avoid making or receiving tra-

ditional long distance calls from that state. For example,

an individual in Washington with FX can be reached by

telephone subscribers in New York City and can himself

reach New York City subscribers through a local loop in

Washington, a Washington-New York interexchange line,

and a business line in the New York City exchange area.

CCSA, a Common Control Switching Arrangement, serves

to link the various offices of a large company through

switches on a local telephone company’s premises.” In

the orders being challenged in Bell Telephone the Commis-

sion had first concluded that its prior actions—notably, its

Specialized Carrier decision—had imposed upon AT&T

the obligation to provide FX and CCSA interconnections

to MCI and other specialized carriers.** Lest its prior

orders were not clear, however, the Commission again

reviewed the interconnection question, concluding that

“achievement of our objective that competition in the pro-

vision of interstate private line communications services

be on a full, fair and nondiscriminatory basis requires the

** See Bell Telephone Co. of Pennsylvania v. FCC, supra note 3,

503 F.2d at 1254-1259,

“Id. at 1254 n.4, quoting Bell System Tariff Offerings, supra

note 22, 46 FCC2d at 418 & n.5.

** Bell System Tariff Offerings, supra note 22, 46 FCC2d at 426-

427, See also Letter from Bernard Straussburg, Chief of the Com-

mon Carrier Bureau, FCC, to AT&T, August 31, 1973 (‘‘it is our

view that, as requested by MCI, the associated Bell companies are

required to permit interconnection or provide local channel ar-

rangements to MCI’’), quoted in Bell Telephone Co. of Pennsyl-

vania v. FCC, supra note 3, 503 F.2d at 1256.

———————

er ees

his oe hh Se Ma ts A HD IMs

Sethi eo

17a

‘ysuance of broad interconnection orders. Our orders

herein therefore make clear that Bell is to provide inter-

connections for all of the authorized services of the spe-

cialized carriers, including FX and CCSA.” 503 F.2d at

1259, quoting 46 FCC2d at 426-427 (emphasis added).

An essential question posed by AT&T’s petition for re-

view in Bell Telephone was whether the Commission’s

order was the first time that AT&T had been directed to

provide FX and CCSA interconnections, or whether, as

the Commission argued, AT&T’s obligations to provide

these connections were fixed by Specialized Carrier and

the Bell Telephone orders merely represented the Com-

mission’s method of enforcing a previously announced

mandate.” The Third Circuit adopted the Commission’s

view. The court noted that Specialized Carrier contained

no specific reference to FX or CCSA, but it construed that

decision broadly to include the services in question.” In

so doing the Third Circuit decision provides strong sup-

port—not conflicting authority—for the similarly broad

construction we accorded in Execunet to Specialized Car-

rier and to the Commission’s Bell Telephone order. For

just as the Third Circuit found Specialized Carrier suffi-

ciently broad to include FX and CCSA service, notwith-

standing the absence of specific references to these serv-

ices, so too we have found that decision broad enough

to encompass Execunet, notwithstanding the similar ab-

sence of specific references.”

2 Bell Telephone Co. of Pennsylvania v. FCC, supra note 3, 503

F.2d at 1259,

8° Jd. at 1258-1260. In so doing the court emphasized the broad

language the Commisgion itself employed in the Specialized Carrier

proceeding. Jd. at 1262-1263. See note 4 supra, quoting Specialized

niga 29 FCC2d at 940; Execunet, supra note 2, 561 F.2d at

-879,

*t Indeed, one of AT&T’s stronger arguments against the Bell

Telephone result is directly supportive of the result we reach here.

In arguing that FX and CCSA should not be considered within

18a

Nonetheless, AT&T and the Commission, pointing to the

Third Circuit’s discussion of an overbreadth challenge,

argue that that discussion forecloses the FCC from find-

ing that AT&T is required to interconnect for Execunet

under the Specialized Carrier and Bell Telephone orders.”

We disagree. In Bell Telephone AT&T argued, inter alia,

that the order under review, by requiring it to provide

“the interconnection facilities essential to the rendition of

all of [the specialized carriers’] presently or hereafter

authorized interstate and foreign communications serv-

ices,” 503 F.2d at 1283, imposed an “unbounded intercon-

nection order.” Jd, at 1273 (emphasis in original). The

court rejected this challenge and upheld the order, noting:

Were we to read the Commission’s order in a

vacuum, we would be inclined to agree with petitioner

that the order is somewhat vague and, to a certain

extent, overbroad. On its face, the order gives little

guidance as to the types of services that AT&T

will be required to provide “hereafter.”

the scope of Specialized Carrier, AT&T emphasized that FX and

CCSA services were already being provided at the time by AT&T

and independent carriers, and that the FCC in Specialized Carrier

was ‘‘contemplating other, more unique services.’’ 561 F.2d at 1262.

The Third Circuit did not find this dispositive, concluding that

‘‘({w]hile there is language in [Specialized Carrier] indicating a

concern with new, customized services, we interpret this language

as referring not only to types of services provided, but also to the

delivery of private line services to ultimate customers who there-

tofore had been unable to obtain private line services fashioned to

their particular needs,’’ Jd. We need only point out that to the

extent both AT&T and the Third Circuit recognized in Specialized

Carrier a concern with and an interest in encouraging ‘‘new, cus-

tomized service,’’ that is a recognition which we share in finding

that decision dispositive of MCI’s right—in theory and in practice

—to provide Execunet.

*? See FCC Declaratory Ruling, supra note 1, 158; Response of

Federal Communications Commission, supra note 18, at 10-11, 20;

AT&T Opposition, supra note 17, at 19.

at ee Cee es nate Oe Re NS ar Deka’ wale eultees | as are

ee ee ek ee ee) ee

Pca a tw A arte Lin ONT AN ee Pe Ce

19a

Nevertheless, we find it unnecessary to remand on

this ground. Orders are not to be read in a vacuum,

but rather must be read and interpreted in the con-

text in which they appear. * * * Viewed in its entirely,

the FCC’s opinion in Docket 19896 operates to pre-

clude AT&T from treating its Long Lines Department

and its affiliates differently than it treats the special-

ized common carriers. * * * As we read the order, the

FCC has required A T & T to provide to the spe-

cialized carriers those (interconnection) elements of

private line services which A T & T supplies to its

affiliates and furnishes to customers through its Long

Lines Department. * * °

Id. at 1273-1274.

The question presented by the arguments of the FCC

and AT&T here is whether the above paragraphs clearly

limit the Bell Telephone interconnection order so as to

exclude Execunet, which the Commission has determined

is not a “private line” service.** In concluding that it does

not, we think two factors are of importance. First, the

overbreadth and vagueness with which the Third Circuit

was concerned were directed not to any uncertainty as

to wha‘ services the specialized common carriers them-

selves would provide, but rather to the fact that “[o]n

its face, the order gives little guidance as to the types of

services that AT&T will be required to provide ‘here-

after.’” Id. (emphasis added). Such concerns are not

involved in this case, however, since Execunet apparently

does not call for any novel forms of service from AT&T,

but rather requires virtually the same forms of intercon-

nection as are provided for FX.** Second, and more im-

portant, the Commission itself has not found or suggested

%3 FCC Declaratory Ruling, supra note 1, J 53, quoting MCI Tele-

communications Corp., 60 FCC2d 25, 63 (1976).

*¢ See MCI Reply to Oppositions, supra note 19, at 14.

20a

that the court’s Bell Telephone decision in fact limits

AT&T’s interconnection obligations to “private line” serv-

ices, as that term is currently defined by the Commission.

Rather, the Commission, notwithstanding its emphasis on

the Third Circuit's use of the term “private line” as a

limiting factor in its decision, itself recognizes that Bell

Telephone imposes upon AT&T an obiigation to provide

interconnection for services not traditionally considered

“private line’—and that it did so at the time it was en-

tered. To quote the Commission once again: “We believe

it is clear that the Specialized Common Carrier decision

as well as our order in Bell System Tariff Offerings and

the Covrt’s decision in Bell Tel. Co. of Pennsylvania re-

quire interconnection for. all specialized interstate com-

munication services * * *.” FCC Declaratory Ruling,

supra, at {59 (emphasis in original). Having made this

determination, and having explained the Third Circuit’s

use of “private line” as a shorthand or abbreviated term,

the Commission then formulates the final and dispositive

question for resolution as that of “what services were ex-

plicitly excluded from consideration in Specialized Com-

mon Carrier, Bell System Tariff Offerings, and Bell Tel.

Co. of Pennsylvania.” Id. (emphasis in original). And

that is precisely the question we addressed and answered

in Execunet, finding that Execunet services were not ex-

plicitly excluded.

The Commission’s analysis of Bell Telephone, then, far

from providing authority which conflicts with our con-

struction of the Execunet decision, culminates finally in

the very question which was not addressed in Bell Tele-

phone but which was answered in Execunet. Neither the

Commission nor AT&T is now free to choose to ignore

the answer given by this court, in lieu of one more favor-

able to their position we rejected in Execunet.

Motion granted.

APPENDIX B

UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

September Term, 1977

No. 75-1635

MCI Telecommunications Corporation,

Microwave Communications, Inc.

N-Triple-C Inc., Petitioners

Vv.

Federal Communications Commission and

United States of America, Respondents

American Telephone and Telegraph Co., et ail.,

Intervenors

Before: Wricut, Chief Judge, and Tamm and WILEEy,

Cireuit Judges.

(Freep May 11, 1978)

Order

Intervenor United States Independent Telephone Asso-

ciation has filed a motion for a further stay of this court’s

order of April 14, 1978. For the reasons stated in the

attached per curiam, it is Orprerep that that motion is

hereby denied.

Intervenor American Telephone and Telegraph Com-

pany has filed a motion for a temporary stay of this

court’s order of April 14, 1978 until May 12, 1978, to per-

mit application to the Chief Justice of the United States.

It is Ornperep that the motion of intervenor American

Telephone and Telegraph Company is hereby granted.

It is FurtHer Orperep that if the application is made

at or before noon on May 12, 1978 the stay is extended

until the Chief Justice Acts.

Per Curiam

For the Court

/s/ Grorce A. FisHER

George A. Fisher

Clerk

Per Curiam: The United States Independent Telephone

Association (USITA), an intervenor in this action, has

filed with this court a petition for a stay of the panel’s

unanimous decision of April 14, 1978 granting MCI Tele-

communications Corporation’s motion for an order direct-

ing compliance with our mandate in MCI Telecommunica-

tions Corp. v. FCC, 561 F.2d 365 (D.C. Cir. 1977), cert.

denied, —— U.S. ——, 46 U.S. L. Week 3446 (Jan. 16,

1978) (Execunet I). See MCI Telecommunications Corp.

v. FCC, —— F.2d —— (D.C. Cir. No. 76-1635), decided

April 14, 1978) (Execunet II). In seeking a stay USITA

raises again the very same arguments unanimously re-

jected by this panel in Execunet I, which the Supreme

Court declined to review, in Execunet II, and in the peti-

tions for rehearing. These same arguments were raised as

well in the suggestions for rehearing en bane filed by the

Commission, AT&T, and USITA, which led not one judge

on this court to request a vote on en banc consideration. See

Rule 35(b), Fev. R. App. P. It is our view that this case

has been amply litigated, and that the time has come for

enforcement of our original mandate in Execunet I. USITA

has not ‘‘made a substantial case on the merits,’’ Washing-

ton Metropolitan Area Transit Com’n v. Holiday Tours,

Inc., 599 F.2d 841 (D.C. Cir. 1977), nor has it demonstrated

that there will be irreparable injury without a stay, or

that a stay is necessary to serve the public interest and

will not substantially harm the opposing parties in this

proceeding,’ id.; Virginia Petroleum Jobbers Ass’n v. FPC,

259 F.2d 921, 925 (D.C. Cir. 1958). We therefore deny the

petition for a further stay. In order to allow AT&T to seek

a stay from the Circuit Justice, however, we hereby grant

its motion for a temporary stay. But lest there be any con-

fusion as to our views, we hereby set forth briefly, hope-

fully for the last time, the issues at stake in this case and

the reasons why we believe the arguments raised once again

here to be wholly without merit.

The background of these proceedings is detailed at length

in both the original opinion, Execunet I, supra, 561 F.2d at

367-373, and our recent opinion granting MCI’s motion,

Ezecunet II, supra, slip op. at 4-9. What is involved is

MCI’s provision of Execunet service, whereby a subscriber

making use of local AT&T-furnished interconnections at

both ends of an MCI-furnished interstate line can reach any

telephone in a distant city served by the MCI line. In the

proceedings under review in Ezecunet I the Commission

rejected MCI’s tariff for Execunet service on the ground

that its earlier decisions establishing the scope of MCI’s

facilities authorizations—notably the Specialized Carrier

decision, Specialized Common Carrier Services, 29 FCC2d

870 (1971), aff’d sub nom. Washington Utilities € Trans-

portation Com’n v. FCC, 513 F.2d 1142 (9th Cir.), cert.

* Indeed, the Department of Justice, in opposing the FCC’s

grant of AT&T’s petition for a declaratory ruling which led to our

Execunet II decision, emphasized that ‘‘AT&T totally failed to

make any factual showing of harm in its petition to invoke Com-

mission protection against competition in the intercity services

market.’’ See Comments of the United States Department of Jus-

tice, In the Matter of Petition of American Telephone and Tele-

graph Company for Declaratory Ruling and Expedited Relief,

submitted as Appendix A to MCI Reply to Oppositions, MCI Tele-

communications Corp. v. FCC (March 9, 1978), at 7. AT&T and

the FCC have yet to make such a showing, or to demonstrate in

any way that the public interest would be adversely affected by

expansion of Execunet service.

denied, 423 U.S. 836 (1975)—did not encompass Execunet-

type services. This court reversed unanimously, holding

that MCI did have authority to provide Execunet service.

We found that an affirmative determination to exclude

certain services is necessary to restrict a carrier’s facilities

authorization, and that no such determination had been

made in Specialized Carrier. In reaching this determination

this court broadly construed the scope of the Specialized

Carrier decision and emphasized that that decision con-

templated rulemaking and tariff review according to public

interest standards as the exclusive mechanisms for impos-

ing future controls on the development of specialized car-

riers such as MCI.

Certiorari was denied in Execunet I on January 16, 1978.

On the same day AT&T filed with the Commission a peti-

tion for a declaratory ruling that it was under no obliga-

tion to furnish the local connections necessary for MCI’s

provision of Execunet service. The Commission responded

by issuing a declaratory ruling to that effect on February

23, leading MCI to request that this court grant a motion

directing the FCC and AT&T to comply with the Execunet

I mandate. Since the Commission’s declaratory ruling un-

dermined our Execunet I mandate, on April 14, 1978 we

granted the motion directing compliance.

Our grant of MCI’s motion for compliance was based on

the clear and intentional inconsistency of the Commission’s

February 23 declaratory ruling with our opinion and deci-

sion in Execunet I. In its declaratory ruling the Commis-

sion framed the critical question as ‘‘a determination as to

what services were explicitly excluded from consideration’’

in its earlier decisions, and concluded that Execunet ser-

vice was so excluded. FCC Declaratory Ruling 59 (em-

phasis in original). That is precisely the question, however,

which was presented and determined—in directly contra-

dictory fashion—by this Court in Execunet J. In relying

on the opposite conclusion to support its declaratory ruling

the Commission, we found, had acted in ‘‘direct and explicit

contradiction” to our Execunet I mandate. Execunet II,

supra, slip op. at 14. In addition, we found the Commis-

sion’s interpretation of Specialized Carrier and its reliance

on interconnection obligations effectively to limit the ser-

vice offerings of MCI to be directly at odds with the basic

themes of our Execunet I decision: “that Specialized Car-

rier represented a broad decision by the Commission to

allow carriers such as MCI to enter the market and com-

pete with AT&T, subject only to later limitations based on

public interest determinations in tariff or rulemaking pro-

ceedings.’’ Jd. Finally, we addressed and rejected the argu-

ment that the Commission’s position in its declaratory

ruling was mandated by the Third Circuit’s decision in Bell

Telephone Co. of Pennsylvania v. FCC, 503 F.2d 1250 (3rd

Cir. 1974), cert. denied, 422 U.S. 1026 (1975), finding our

decision to be wholly consistent with—and indeed deriving

support from—that reached by the Third Circuit in Bell

Telephone.

Subsequently, we granted a stay of our order pending

disposition of the petitions for rehearing and suggestions

for rehearing en banc to afford the Commission and AT&T

the fullest opportunity to press their claim. Extensive pe-

titions for rehearing and suggestions for rehearing en banc

were then filed by the FCC and AT&T, as well as by

USITA. We unanimously denied the petitions for rehear-

ing on May 8, 1978. Rehearing en banc was denied on the

same day, with no judge on this court having requested a

vote on the suggestions. See Rule 35(b), Fev. R. App. P.

In seeking a stay of our order, USITA continues to stress

the two points which have been emphasized throughout

these proceedings: that the interconnection obligation of

AT&T was neither mentioned nor addressed in Execunet I,

and that Ezecunet II is inconsistent with the Third Cir-

cuit’s decision in Bell Telephone Co. of Pennsylvania v.

FCC, supra.

As to the first point, the fact is that until the Supreme

Court denied certiorari in Execunet I AT&T provided the

interconnections necessary for Execunet service without

any form of protest or objection. The obligation of AT&T

as a common carrier to provide the necessary interconnec-

tions was conceded all through the Execunet I proceedings,

and they were indeed so provided. In securing the modifica-

tion of our original stay of the Commission’s ruling in E2-

ecunet I, in its briefs and arguments to this court, and in its

petition for certiorari, AT&T repeatedly and consistently

stressed that a decision in favor of MCI would lead to

further expansion and vigorous and adverse competition—

a result which could occur only if AT&T was required to

provide the necessary interconnections. It was only after

the Supreme Court’s denial of certiorari—and only a few

hours afterwards, at that—that AT&T claimed for the first

time that it was not required to provide interconnection for

Execunet service. It was thus that we concluded in Ezecu-

met JI that our decision in Execunet I, consistent with

AT&'T’s representations during those proceedings, clearly

contemplated that AT&T was and is required to provide

interconnection for Execunet service. Slip op. at 10. None-

theless, our grant of MCI’s motion was not based on any

abstract contemplation of the court, let alone on the private

intentions of the members of the panel. See AT&T Petition

for Rehearing at 11. Rather, it was grounded on the very

clear and concrete contradictions between the court’s rea-

soning, interpretations, and conclusions in Execunet I and

those of the Commission in its declaratory ruling. The fact

that interconnection obligations were not specifically ad-

dressed in Execunet I because they were assumed by the

parties hardly eliminates these contraditions; if anything,

it provides further support for the grant of MCI’s motion

to direct compliance with this court’s mandate.

The argument for a further stay of our mandate based

on the alleged inconsistency with Bell Telephone is, we

think, no more persuasive. Indeed, in Bell Telephone the

court held that AT&T was required to provide interconnec-

tion for services similar to though somewhat more limited

than Execunet. The court reached this conclusion by

broadly construing the Commission’s Specialized Carrier

decision to include the services in question, notwithstand-

ing the absence of any explicit mention of them in the

Commission decision—just as we have construed Special-

ized Carrier to encompass Execunet service notwithstand-

ing the similar absence of specific references. Certainly, no

one could argue that a decision by one court that AT&T

is required to provide interconnection for one service fore-

closes a subsequent decision that AT&T is also required

to provide interconnection for a similar service which

makes use of identical forms of interconnection.

There is, then, absolutely no inconsistency between the

holdings of Bell Telephone and Execunet I and II. The only

inconsistency even asserted derives instead from the Third

Circuit’s reasoning in rejecting AT&T’s argument that the

interconnection order under review in Bell Telephone,

which required AT&T to provide interconnections ‘‘essen-

tial to the rendition of all of [the specialized carriers’]

presently or hereafter authorized interstate and foreign

communications services,’’ imposed an ‘‘unbounded” and

illegal interconnection obligation. Bell Telephone, supra,

503 F.2d at 1273, 1283. In response the court noted that

while the order on its face gave little guidance as to the

types of services that AT&T will be required to provide

‘thereafter,’’ when read in context ‘‘the FCC has required

AT&T to provide to the specialized carriers those intercon-

nection elements of private line services which AT&T sup-

plies its affiliates and furnishes to customers through its

Long Lines Department.” Jd. at 1273-1274. Relying on this

statement, AT&T argues that its interconnection obliga-

tions are limited by the Third Circuit decision to ‘‘ private

line’’ services and that Execunet is not such a service.

But as the FCC has recognized in its declaratory ruling,

the Third Circuit’s use of the term ‘‘private line” cannot

be interpreted to limit the interconnection obligations aris-

ing from Specialized Carrier to ‘‘private line services’’ as

that term is currently defined. Rather, the Commission has

explained the court’s use of the term as a shorthand or

abbreviated expression encompassing a broader range of

services than that which the Commission currently defines

as private line services. See FCC Declaratory Ruling,

supra, at 159; Execunet II, supra, slip op. at 21. The rele-

vant question, then, according to the Commission itself, is

what services were explicitly excluded from consideration

in Specialized Carrier and the decisions which followed it.

The Bell Telephone case answered this question with re-

spect to the services at issue in that case, but it did not

address it, let alone answer it, with respect to Execunet

services. That was the issue we addressed and decided in

Execunet I. And it is the Commission’s rejection of the

answer we provided in Execunet I which necessitated our

grant of MCI’s motion to direct compliance.

III

Only one point remains to be addressed. USITA empha-

sizes, as did the Commission and AT&T in their suggestions

for rehearing en banc, that it is the responsibility of the

Commission to determine whether competition by services

such as Execunet is in the public interest. With that point

we are in complete agreement. Recognition of the Com-

mission’s public interest responsibilities, however, provides

no basis for upholding its February 23 declaratory ruling

in view of the clear inconsistencies with the Execunet case.

For the Commission’s declaratory ruling was not based on

considerations of the public interest, and it in no way re-

flected a Commission decision that expansion of Execunet

service would adversely affect the public interest. Rather,

it reflected only the Commission’s interpretation of the

statutory provisions of the Communications Act and of

earlier decisions rendered by the Commission, the Third

Circuit, and, most importantly, this court in Execunet I. In-

deed, it was the Commission’s prohibition of Execunet ser-

vice without any consideration of the public interest in the

first instance which led to this long series of litigation.

The Commission has now commenced inquiry into the

broad questions of competition and the public interest posed

by the development of services such as Execunet. That in-

quiry is one which we welcome. How long it takes is another

question. But its existence does not justify allowing AT&T

to maintain its de facto monopoly pending any final rules

where this court has held, in a full proceeding between

these parties, that consideration of the provisions of tho

Communications Act and of the relevant agency and judi-

cial precedents establishes MCI’s right to enter the market

now.”

The decisions reached by this court have been informed

by full briefing and argument in Execunet I and by volumi-

nous submissivns by the parties in Execunet IJ. The parties

have been afforded ample opportunities to present their

positions to this court, and to the Supreme Court in their

petitions for review of Execunet I. Our decision in Execu-

net II simply enforces the mandate of Execunet I, which

the Supreme Court chose not to review.

? Indeed, FCC Commissioner Joseph R. Fogarty, who dissented

from both the Commission’s declaratory ruling in favor of AT&T

and its decision to seck a stay and rehearing by this court, stated:

‘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 resourees of this Commission

to expedite determination of a reasonable competitive market struc-

ture for domestic telecommunications services.’’ Statement of Com-

missioner Joseph R. Fogarty, In re Motion for a Stay of the United

States Court of Appeals Order Directing Compliance with Execu-

net Mandate, submitted as Attachment A to MCI Oppositions to

Stay, at 1.

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APPENDIX C

BEFORE THE

FEDERAL COMMUNICATIONS COMMISSION

Wasuinoton, D.C, 20554

FCC 78-142

97470

In THE MATTER oF

Petition or AMERICAN TELEPHONE AND TELEGRAPH CoMPANY

FOR A DecLARATORY RuLING AND Expepirep RELIEF

Memorandum, Opinion and Order

Adopted: February 23, 1978; Released: February 28, 1978

By the Cemmission: Chairman Ferris issuing a separate

statement; Commissioner Fogarty dissenting and is-

suing a statement.

1. We have before us a ‘‘Petition for a Declaratory

Ruling and Expedited Relief’’ filed on January 16, 1978 by

the American Telephone and Telegraph Company (AT&T).*

That petition stated that AT&T will not provide any addi-

tional connections to local exchange services to “Other Com-

mon Carriers’’ for their use in the provision of service of-

ferings which are not private line services and that AT&T

believes such a course of conduct does not violate the cease

and desist order in Bell System Tariff Offerings, 46 FCC 2d

*That petition has been styled as ‘‘In the Matters of BELL

System Tarirr Orrertnos of Local Distribution Facilities for Use

by Other Common Carriers; and Letter of Chief, Common Carrier

Bureau, dated October 19. 1973, to Laurence E. Harris, Vice Presi-

dent MCI Telecommunications Corporation, FCC Docket No.

19896.’’ Inasmuch as Docket No. 19896 has been terminated for

more than two years, the petition should have been styled as a

new proceeding. The petition and all comments or other pleadings

relating to this petition will be filed in the instant proceeding,

which shall be considered as separate and distinct from the termi-

nated Docket 19896 proceeding.

413 (1974), affirmed sub nom. Bell Tel. Co. of Pennsylvania

v. FCC, 503 F.2d 1250 (3rd Cir. 1974), cert. denied, 422 U.S.

1026 (1975). The petition requested that we issue a declara-

tory ruling affirmirg that AT&T has ‘‘no present obligation

to provide additional connections to local exchange service

to Other Common Carriers (‘‘OCCs’’) for their use in the

provision of service offerings which are not private line

services.’’ ?

2. Oppositions to AT&T’s request for such a declara-

tory ruling have been filed by MCI Telecommunications

Corporation (MCI), Southern Pacific Communications

Company (SPC), Satellite Business Systems (SBS), Amer-

ican Satellite Corporation (ASC), Telenet Communications

Corporation (Telenet), Aeronautical Radio, Inc. (ARINC)

and the United States Department of Justice. Comments in

support of AT&T’s position have been filed by Continental

Telephone Corporation (Continental), GTE Service Cor-

? The petition does not define ‘‘Other Common Carriers.’’ How-

ever, inasmuch as the Bell System Tariff Offerings cease and desist

order was issued for the purpose of clarifying and enforeing

AT&T’s obligation to interconncet with specialized common car-

riers pursuant to our decision in Specialized Common Carrier

Services, 29 FCC 2d 870 (1971), affirmed sub nom. Washington

Utilities & Transportation Commission vy. FCC, 513 F.2d 1142

(9th Cir.), cert. denied, 423 U.S, 836 (1975), the term ‘‘Other

Common Carriers’ ‘n the AT&T petition appears to be synony-

mous with the term ‘‘specialized common ecarriers’’ in the Bell

System Tariff Offerings order which directed AT&T to furnish

certain interconnection facilities to ‘‘specialized common carriers.’’

AT&T's Reply Comments confirm that the petition does not relate

to international record carriers or value-added carriers who are

authorized to provide only non-voice services. Neither the petition

nor the reply comments indicate that AT&T contemplates any

change in intereonnection arrangements with Western Union or

the independent telephone companies. Accordingly, the discussion

and decision herein relates only to interconnection arrangements

between telephone companies and specialized common carriers and

not to such arrangements between and among telephone companies,

or between telephone companies and Western Union, international

record carriers, or value-added carriers.

poration (GTI), and the United States Independent Tele-

phone Association (USITA). In addition, the following

parties have filed comments regarding AT&T’s petition as

it relates to their individual circumstances, but have taken

no formal position before the Commission; Association of

Data Processing Service Organizations, Inc. (ADAPSO),

Graphnet Systems Inc. (Graphnet), Computer and Busi-

ness Equipment Manufacturers Association (CBEMA),

Western Union International, Inc. (WUI), ITT World

Communications, Inc. (ITT Worldcom), and RCA Global .

Communications, Inc. (RCA Globeom). Additional reply

comments have been filed by AT&T, MCI, USITA, GTE

and Continental.

I. Contentions oF THE Parties

A. Contentions of AT&T

3. AT&T begins by stating that its interpretation of

the recent Court of Appeals decision in MCI Telecommuni-

cations Corp. v. FCC (‘‘Ezecunet’’), 561 F.2d 365 (D.C.

Cir. 1977), cert. denied, No. 77-420, 46 U.S.L.W. 3448

(January 16, 1978), is that the Court ruled that our Special-

ized Common Carrier decision, supra, did not limit Other

Common Carriers to providing only private line services

over their existing facilities. AT&T states that it does not

dispute that holding for purposes of this proceeding. How-

ever, AT&T contends that the Execunet decision did not

alter the Commission’s finding that MCI’s Execunet serv-

ice and other similar services are not private line services,

nor did the Court address AT&T’s interconnection obliga-

tions, if any, to the OCCs for the provision of non private

line services. Under existing law, argues AT&T, it is re-

quired to interconnect its facilities with the OCCs for the

provision of only private line services. Because the Com-

mission has determined that Execunet type services are

not private line services, AT&T maintains that it is not now

legally required to interconnect with the OCCs to enable

them to provide other than private line services. Before

the Commission can order AT&T to interconnect, argues

AT&T, a hearing pursuant to Section 201(a) of the Com-

munications Act is required so as to enable the Commis-

sion to ascertain whether the interconnection of AT&T’s

local exchange services for the provision of non private

line services by the OCCs would be in the public interest.

Because a hearing on that issue has not been held, AT&T

concludes that it is under no present obligation to offer its

local exchange facilities to the OCCs for the provision of

Fixecunet/MTS type services.

4. AT&T advances four legal arguments in support of

this position. First, AT&T contends that the Commission

specifically determined in its Docket No. 19896 proceeding,

Bell System Tariff Offerings, supra, that the extent of

AT&T’s Section 201(a) interconnection obligation with re-

spect to the specialized carriers was limited to private line

services, and did not encompass public message services.

AT&T directs our attention to a portion of the Commis-

sion’s decision which focuses on whether FX and CCSA

are private line services and asserts that such an analysis

would have been pointless if AT&T’s interconnection obli-

gation went beyond connections for private line services.

See also Bell Tel. Co. of Pennsylvania, supra, 503 F.2d at

1273.

5. Second, AT&T avers that in the Specialized Com-

mon Carrier proceeding, the Commission had before it only

applications by OCCs to provide private line services. Con-

sequently, when the Commission ruled in Docket No. 19896

that AT&T already had a Section 201(a) hearing with re-

spect to interconnection of the OCCs in the Specialized

Common Carrier proceeding, it is obvious, reasons AT&T,

that the Commission was considering only whether the

public interest would be served by requiring AT&T to inter-

connect its local exchange facilities for private line services,

and not for public message services. Thus, AT&T concludes

that the Specialized Common Carrier proceeding does not

constitute a hearing or contain the public interest findings

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necessary to impose a present obligation upon AT&T for it

to provide public exchange service connections for use by

the OCCs for other than private line services.

6. Third, AT&T states that recent Commission deci-

sions have explicitly restated that the Specialized Common

Carrier proceeding did not require carrier-to-carrier inter-

connection for other than private line services, and that

before the Commission can order such interconnection on

the part of local telephone companies, a Section 201(a)

hearing must be conducted. See Southern Pacific Comuni-

cations Company (‘‘SPRINT II’’), 63 FCC 2d 309, 320

(1977), MCI Telecommunications Corporation (‘‘SPLS

II’’), 63 FCC 2d 237, 247 (1977).* Furthermore, AT&T

states that these decisions also have made it clear that it

has no interconnection obligation for non private line serv-

ices because without an interconnection hearing and deci-

sion, such interstate services could currently be terminated

by the specialized carriers only through resale of local ex-

change service obtained under an intrastate tariff. This, in

turn, would violate the general requirement that all por-

tions of an interstate service be offered pursuant to an

interstate tariff on file with this Commission. Until we con-

duct a hearing pursuant to Section 201(a) of the Act to

determine whether it is in the public interest to terminate

specialized interstate services via facilities used in common

with public message services, then AT&T contends that

such services could not be lawfully terminated because no

interstate tariffs are on file which offer such termination

service or facilities.

7. Fourth, AT&T contends that the reason the Execu-

net court concluded that the specialized carriers were not

restricted to the provision of private line services over

their existing authorized facilities was because the Com-

*The SPRINT II and SPLS II decisions were vacated and re-

manded for reconsideration after AT&T filed its petition. MCI

Telecommunications Corp. v. FCC, No. 76-2071 (D.C. Cir., Feb-

ruary 3, 1978).

mission had made no inquiry into whether competition for

public message services was in the public interest, and

therefore, the Commission had no basis upon which to re-

strict the specialized carriers from providing non private

line, Execunet-type services. The Court did not address the

scope of AT&T’s interconnection obligation for such serv-

ices. But implicit in the Court’s holdings, states AT&T, is

that the Commission also made no public interest findings

which could require AT&T to provide connections and serv-

ices to be used by the OCCs for the equivalent of public

message services. Until a Section 201(a) hearing is con-

ducted into these issues, argues AT&T, the Commission

cannot conclude that the public interest requires intercon-

nection for non private line services.

8. AT&T’s next major argument is that before the in-

terconnection question is ever reached, the Commission

must first determine whether it is in the public interest for

OCCs to provide MTS/Execunet-type services, i.e., services

that would directly compete with the switched public mes-

sage telephone network. In Execunet, the Court stated:

we have not had to consider, and have not considered,

whether competition like that posed by Execunet is in

the public interest. That will be the question for the

Commission to decide should it elect to continue these

proceedings. 561 F.2d at 380.

Accordingly, AT&T claims that in the absence of a thresh-

old determination by the Commission that Execunet-type

services are in the public interest, it cannot be said that

AT&T is under an existing obligation under Section 201(a)

of the Act, or otherwise, to provide local exchange connec-

tions to the OCCs to enable them to provide non private

line services. AT&T contends that the Commission must

first be in a position to determine whether and how the pub-

lic interest would be served by authorizing the OCCs to

provide MTS services before it can require AT&T to inter-

connect with the OCCs for the provision of those services.

9. Next, AT&T asserts that the public interest would be

disserved if AT&T were now to provide additional facilities

and connections for use by OCCs in furnishing non private

line services. To provide these additional facilities and con-

nections to the OCCs prior to a determination that it would

be in the public interest to do so, states AT&T, could em-

bark the industry on an irreversible course of intercity

MTS competition without the Commission ever having con-

sidered the implications of such competition to the public,

the carriers, and the industry.

10. Finally, AT&T requests the Commission to act expe-

ditiously on its petition because it anticipates, in the wake

of the Execunet decision, receiving requests from OCCs for

facilities and connections to local exchange services for their

use in the provision of MTS/Execunet-type services. More-

over, because AT&T believes no interconnection obligation

for such services currently exists, and because AT&T be-

lieves the Commission has addressed this precise question

in its Docket 19896 proceeding and determined that such

connections would not be in the public interest, it states that

it will await the Commission’s ruling on the instant Petition

before it processes any interconnection requests by the

OCCs for non private line exchange services.

B. Contentions of Parties

in Opposition

11. MCI and SPC present the principal arguments

against AT&T’s petition for declaratory relief. Accord-

ingly, our presentation of the arguments in opposition will

concentrate primarily upon the MCI and SPC pleadings.

To the extent that other parties have submitted arguments

different than those advanced by MCI and SPC, however,

they also will be given specific attention.

12. SPC begins by contesting AT&T’s argument that

the Specialized Common Carrier proceeding limited

AT&T’s obligation to provide facilities and connections to

OCCs for only private line services. SPC argues that

Specialized Common Carrier did not restrict the new spe-

cialized carrier applicants to private line services, but au-

thorized competition in the broader specialized communica-

tions field to include a full range of new and innovative

service offerings. SPC points to Datran’s authorization to

provide a switched all digital end-to-end network, as op-

posed to other applicants then before the Commission

which proposed only point-to-point, rather than switched,

services. SPC states that Datran’s service would not have

met the essential criteria of a private line service set forth

in the Commission decision in Execunet. Therefore, SP

concludes that AT&T cannot now contend that its intercon-

nection obligation is limited to private line services when

AT&T had an obligation to provide interconnection to Da-

tran for its fully switched, non private line service.

13. Next, both MCI and SPC disagree with AT&T that

Specialized Common Carrier, Docket 19896, and Bel! Te. Co.

of Pennsylvania require AT&T to provide interconnection

to OCCs for only their private line services. It is the >si-

tion of MCI and SPC that AT&T must provide ini_ son-

nection facilities to OCCs for all their authorized services,

and that AT&T can treat the OCCs no differently than it

does its own Long Lines Department. First, SPC and MCT

argue that the Specialized Common Carrier decision made

no mention of limiting AT&T’s interconnection obligation

to private line services, but included all specialized carrier

communications services. Second, these same parties vig-

orously argue that the Commission decision in Docket

19896 prohibited AT&T from engaging in conduct which

would result in denial or unreasonable delay ‘‘in establish-

ing physical connections with MCI and other specialized

common carriers for their presently or hereafter author-

ized interstate and foreign communications services.’’ 46

FCC 2d at 439. Consequently, SPC maintains that when

these decisions are read together, the test of AT&T’s inter-

connection obligation is not whether an OCC service is a

private line service, but whether the service has been au-

thorized. If the service is authorized, then, states SPC,

AT&T is bound to provide interconnection facilities. MCI

points out that the question of whether Execunet and sim-

ilar services are authorized was specifically addressed in

the Execunet case, where the Court held that MCI was

authorized to provide Execunet service over its existing

facilities. Therefore, argues MCI, AT&T is legally obli-

gated to furnish interconnection so that its service can be

provided. MCI contends that AT&T’s present refusal to

interconnect its monopoly local distribution facilities to al-

low MCT to provide a service that the Court determined

MCI was authorized to provide would constitute a total

abnegation of the Court’s mandate.

14. With respect to AT&T’s argument that the Com-

mission and Court discussions concerning AT&T’s inter-

connection obligations for FX and CCSA imply that such

obligation extends only to private line services, MCI states

that the reason these two private line services were the

focus of the Docket 19896 proceeding was because AT&T

had refused to provide interconnection for them. But in

addressing these two services, MCI contends that the Com-

mission did not abandon or limit the broad basis of its

holding regarding the interconnection of ‘‘all authorized

services.’? MCI supports this argument by quoting a pas-

sage from Docket 19896 which states, ‘‘that Bell is to pro-

vide interconnection facilities for all authorized carriers,

including FX and CCSA.” 46 FCC 2d at 427.‘

15. SPC counters AT&T’s contention that a hearing

pursuant to Section 201(a) of the Act must be held before

the Comission can order AT&T to interconnect with the

OCCs for the provisions of other than private line services

by submitting two reasons why such a hearing is not re-

quired. First, SPC argues that the initial clause of Section

201(a) establishes the duty of every common carrier to

furnish service upon ‘‘reasonable request.’’ It is unneces-

sary to proceed to the second clause to establish the obli-

*SBS strongly supports this argument.

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gation of AT&T to provide the requested service or facility,

states SPC, if the request is reasonable. Second, SPC be-

lieves that if a hearing is required by Section 201(a), such

opportunity has already been afforded to AT&T on pre-

vious occasions, and AT&T did not present arguments

against. such interconnection when given the opportunity

to do so.

16. SPC argues that the only possible reason that

AT&T could consider its interconnection request to be

unreasonable is because Execunet-type services would

involve the resale or sharing of local exchange facilities

and some intrastate tariffs may prohibit this. However,

SPC claims that when facilities are used solely for in-

terstate purposes, restrictions in an intrastate tariff

are preempted by federal policies where the two conflict.

Therefore, if the federal authority authorizes an inter-

state service, and conflict with a local tariff is preempted,

then the request is not unreasonable. ARINC carries

this argument a step further by contending that once

an interstate service has been authorized by the Commis-

sion, then only technical incompatibility would make such

a request unreasonable, and absent that factor, Section

201(a) would require AT&T to furnish local exchange

facilities so that the authorized interstate service could

be provided.

17. If the Commission believes the first clause of Sec-

tion 201(a) does not apply here, then SPC contends that

the “opportunity for hearing” required by the second

clause has already been afforded to AT&T, and there-

fore, the Commission must rule that AT&T’s intercon-

nection obligations include providing facilities for Ex-

ecunet-type services. SPC states that AT&T was given

numerous concrete opportunities to establish how such

interconnection could disserve the public interest when

it was presented with actual tariff filings proposing such

interconnection. See Execunet, 60 FCC 2d. 25 (1976);

Southern Pacific Communications Company (SPRINT

lle

1), 61 FCC 2d 144 (1976); MCI (SPLS I), 61 FCC 2d 131

(1976); Southern Pacific Communications Company,

(SPRINT II), supra and MCI (SPLS II), supra (1977).

SPC argues that AT&T failed to demonstrate in these

proceedings that some public interest reason exists why

the Commission should not require interconnection for

non private line services. Moreover, SPC states that

Bell Tel. Co. of Pennsylvania makes it clear that a dis-

tinct full evidentiary hearing is not required by Section

201(a). Consequently, AT&T has been afforded the “op-

portunity for hearing” mandated by Section 201(a), and

having failed to make its case, the Commission may now

lawfully order the interconnection necessary for author-

ized carriers to provide Execunet-type services without

further hearing and as a part of this proceeding.

18. AT&T’s argument that a public interest finding is a

condition precedent to any ruling by the Commission on

AT&T’s obligation to provide local interconnection to

OCCs for MTS/Execunet-type services, states SPC, is

misplaced. In fact, SPC contends that with respect to

MCI’s Execunet service, and similar authorized service

offerings of SPC, AT&T’s argument is the reverse of the

process contemplated by the Ezecunet Court. In the Ez-

ecumet case, SPC maintains that the Court ruled that

MCT has always been authorized to provide its Execunet

service, and that until the Commission initiates and com-

pletes a proceeding which would restrict these authoriza-

tions, Execunet and comparable services of other car-

riers possess the same legal validity as any other au-

thorized service, and therefore, must be interconnected.

The threshold issue described by AT&T may be relevant

in a proceeding initiated by the Commission to restrict

the scope of future authorizations, argues SPC, but not

to restrict the authorizations for existing service cate-

gories that the Execumet Court determined to be without

limitation for existing facilities.

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19, If the Commission were to grant AT&T’s petition,

MCI, SPC, and the Department of Justice contend that

such action would raise serious antitrust implications.

All three of these parties rely heavily on an established

principle of antitrust law known as the “bottleneck” or

“essential facilities” doctrine. This principle.establishes a

general obligation upon those who control access to es-

sential facilities to make such available to actual or po-

tential competitors without unreasonable restriction. All

three parties cite Otter Tail Power Co. v. United States,

410 U.S. 366, 377 (1973) in support of this principle. To

be an essential facility, it is sufficient if duplication of

the facility would be economically infeasible and if denial

of its use inflicts a severe handicap on potential market

entrants. See Hecht v. Pro-Football, Inc., —— F.2d ——

(D.C. Cir., No. 75-1819, December 20, 1977, pp. 17-19)

which MCI and SPC both cite. The parties then state

that AT&T has a de facto monopoly control of local dis-

tribution facilities, that these facilities are essential to

the provision of their authorized Execunet-type services,

and that it is impractical, if not impossible, for the spec-

ialized carriers to duplicate these facilities. Accordingly,

AT&T’s denial of an obligation to interconnect with the

OCCs for provision of its authorized services is a clas-

sic example of the “essential facilities” doctrine and, the

parties argue, cannot be countenanced by the Commis-

sion because it would be a violation of the antitrust laws

and contrary to the public interest.

Telenet argues that AT&T’s obligation to provide non-

discriminatory access to its monopoly local exchange

facilities for authorized services is broader than, and

exists independently of the Commission’s holdings in

Docket 19896, or even Section 201(a) of the Act. Where

a carrier has essential control over monopoly facilities,

Telenet argues the interconnection obligation arises out

of the Sherman Act, and interpretations thereof, pro-

scribing a monopolists “refusal to deal.” Both Telenet

ee ee —

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and SBS contend that if AT&T is relieved of its obli-

gation to provide connections for MCI’s Execunet Serv-

ice, then the authorization found by the Court to have

been made for that service would be virtually nullified.

MCI states further that a denial of AT&T’s petition

would be in keeping with our policy of full and fair com-

petition established in Specialized Common Carrier. The

Department of Justice also argues that the Execunet de-

cision held that AT&T possesses no de jure monopoly,

and therefore, AT&T cannot be granted its request for

expedited relief so as to deny competing carriers access

to essential local loop facilities in order to preserve its

monopoly position of intercity service.

20. With regard to another antitrust matter, the De-

partment of Justice states that those who advocate re-

strictions on competition have the burden of proving,

with facts, that such restrictions are in the public inter-

est. The Department believes that AT&T’s petition fails

to meet this threshold burden, and therefore must be

denied. AT&T’s mere assertion that its revenues and

pricing policies would be adversely affected if intercon-

nection for Execunet-type services was provided to the

OCCs, contends the Department, is obviously insufficient

to act as a basis for the protection AT&T seeks. Under

Carroll Broadcasting Co. v. FCC, 208 F. 2d 440 (D.C.

Cir. 1958), a case relied on by the Execunet Court, the

Department urges that we cannot equate injury to regu-

lated firms with injury to the public interest. The Car-

roll case, contends the Department, stands for the propo-

sition that competitors may severely injure each other

to the great benefit of the public. Absent a factual show-

ing of harm to the public by AT&T, the Department

states that the Commission cannot assume that preserv-

ing AT&T’s de facto monopoly over MTS/Execunet-type

services is desirable in the public interest. Finally, the

Department concludes that for the past twenty years

AT&T has predicted cataclysmic effects from the pro-

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competitive rulings of the Commission and courts, and,

as yet, no evidence has surfaced to indicate that compe-

tition has caused a deterioration in service or an increase

in rates to any class of customers. Therefore, the De-

partment urges that we deny AT&T’s petition and re-

frain from instituting a hearing into whether AT&T

should be required to interconnect for non private line

services, unless AT&T can make some initial showing as

to why such a restriction would serve the public as dis-

tinguished from its own corporate interests.

21. Telenet and ASC believe that AT&T’s attempt to

limit its present interconnection obligation to OCCs for

the provision of services which are private line services is

too ambiguous and creates the potential for abuse. ASC

strenuously objects to allowing AT&T to become the final

arbiter of what constitutes a permissible private line ser-

vice for purposes of interconnection. ASC believes that

this would put the OCCs in the untenable position of prov-

ing to AT&T that every new service offering was not an

Execunet-type or other non private line service. ASC

argues that the authority to evaluate the public interest

justifications for any new service should not be delegated

to AT&T. Therefore, ASC requests that the Commission

limit its review to whether Execunet service must be pres-

ently interconnected, and not to the more general issue of

interconnection of OCC services.

22. Telenet states that the OCC concept is one of

AT&T’s design, and therefore, AT&T could change its

view of what constitutes an OCC at any time. While this

could lead to abuse, Telenet contends that regardless of

how AT&T chooses to classify a common carrier, AT&T

nevertheless has an obligation to provide access to mo-

nopoly facilities which are essential to the provision of

any service authorized and certificated by the Commis-

sion.

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C. Comments of Other Parties

23. The international record carriers (IRCs), ITT

Worldcom, RCA Globeom and WUI have all expressed

concern that the language used in AT&T's petition to

describe the extent of its interconnection obligations is

overly broad, and if sustained by the Commission could

be construed to allow AT&T to refuse interconnection

with the IRCs for their non private line services. The

specific language at issue is AT&T’s statement that:

this pleading concerns only whether Petitioners have

a duty to provide to MCI and other OCCs additional

facilities and connections to Petitioner’s exchange

services for use by OCCs in their provision of Ex-

ecunet-type services or any other offering which is

not a private line service. (Emphasis added)

Because AT&T categorizes the IRCs as OCCs, and be-

cause the international telex and dataphone-type services

offered by the IRCs are not private line services, these

parties contend that a literal application of the language

in the AT&T petition could permit AT&T to refuse the

IRCs interconnection facilities for these services. The

IRCs state that interconnection for these international

services raises entirely different issues than those in-

volved in the AT&T dispute with the domestic special-

ized carriers. Accordingly, the IRCs request that we dis-

tinguish the AT&T/IRC interconnection matters and

expressly limit the AT&T petition to those matters in-

volving the interconnection of domestic specialized car-

riers to the public switched telephone network.

24. CBEMA, ADAPSO and Graphnet have also

noted their concern that the above-cited sweeping lan-

guage used by AT&T in its petition, if granted by the

Commission, could be used by AT&T to deny intercon-

nection to local exchange services which are essential to

16¢

the provision of services authorized for value-added car-

riers and for OCCs offering specialized data and alter-

nate voice/data services. Moreover, these parties contend

that AT&T’s “unspoken definition of private line serv-

ices” could create substantial confusion if AT&T’s dec-

laration is granted. ADAPSO contends that the decisions

relied on by AT&T to define its interconnection obliga-

tions to OCCs apply only to voice use private line serv-

ices. Accordingly, CBEMA, ADAPSO,* and Graphnet

request that whatever action is taken, the Commission

should not alter AT&T’s present interconnection obliga-

tions to these earriers, and in addition, should expressly

incorporate the Commission’s prior definitions and dis-

cussions of what constitutes a private line service.

D. Comments in Support

25. GTE agrees with AT&T that its present legal

obligation to interconnect with the specialized carriers

is limited to private line services. In support of this

argument, GTE stresses the representations made by

counsel for MCI in the Specialized Common Carrier pro-

ceeding. At that time, GTE observes that it was MCI’s

intention to provide only private line services which

were the equivalent of private microwave. When the

Commission subsequently ordered AT&T to interconnect

with the specialized carriers for their authorized services

pursuant to Specialized Common Carrier, GTE argues

that the interconnection order obviously extended to only

private line services because those services were the only

’ ADAPSO has also filed a ‘‘Motion to Respond to American

Telephone and Telegraph Company.’’ ADAPSO made this request

based on its concern that the scope of AT&T’s requested relief

might not be adequately clarified by AT&T in its Reply. In order

to expedite our ruling in this matter, we hereby deny ADAPSO’s

request. However, we believe ADAPSO’s concerns have been di-

rectly addressed in n.2, supra.

17¢

kind the specialized carriers were authorized to provide.

Since that decision in Execunet did not upset the Com-

mission’s determination that Execunet service is not pri-

vate line service, GTE contends that before AT&T can

be required to interconnect, a hearing pursuant to Sec-

tion 201(a) must be held to ascertain whether intercon-

nection to local exchange services should be provided to

the specialized carriers for the provision of Execunet/

MTS type services.

26. USITA reminds the Commission that the inde-

pendent telephone companies are also subject to the

policies announced in Specialized Common Carrier, and

that these companies agree with AT&T that a hearing

is required before the Commission can order the inde-

pendent carriers to offer interconnection to the OCCs

for the provision of non private line services. Moreover,

the Commission must make a fundamental public inter-

est determination “whether competition like that posed

by Execunet is in the public interest,” Execunet, 561 F.

2d at 380, states USITA, before it can require the tele-

phone companies to interconnect for these services.

27. Continental asserts that a Section 201(a) deter-

mination has nev er been made with respect to the inter-

connection of non private line services. Continental ar-

gues that the Evzecunet decision actually supports

AT&T’s position because it left to the Commission the

question of whether the provision of Execunet-type serv-

ices by specialized carriers is in the public interest. By

recognizing that the Commission has never made such

a public interest finding, Continental contends that the

Court implicitly acknowledged that there could not have

been a previous Section 201(a) finding that the public

interest mandates interconnection of these services with

local exchange facilities. Accordingly, Continental believes

that the Execunet decision confirms AT&T’s obligation

18¢

to interconnect with the specialized carriers for only pri-

vate line services.

28. In a separate petition, Continental states that in

the wake of the Evecunet decision, MCI, SPC, and ITT’s

United States Transmission Systems, as well as other

specialized carriers, will be seeking to offer Execunet/

MTS type services because no affirmative public interest

determination pursuant to Section 214(c) of the Act, 47

U.S.C. § 214(c), has yet been made to restrict the facili-

ties authorizations of the specialized carriers to private

line services, as required by Execunet. Therefore, Con-

tinental argues that these carriers are now free to offer

services that are essentially the same as, and compete

directly with, message toll service. Continental claims

that if the growth of Execunet-type service by means of

the existing facilities authorizations is not temporarily

halted pending a hearing as to whether it is in the pub-

lic interest for specialized carriers to provide such serv-

ices, the competitive responses of the established carriers

will lead to an abandonment of nationwide rate averag-

ing and a reduction or elimination of contributions from

message toll services to local exchange carrier revenue

requirements. The toll settlement contribution from mes-

sage toll service amounts to over 60 percent of Conti-

nental’s revenue requirement, and if some of these con-

tributions were diverted by reason of competition for

MTS services, then Continental maintains that this could

irreparably disrupt its current pricing policies, with a

significant impact upon its telephone subscribers. Fur-

thermore, Continental argues. that if the growth of Ex-

ecunet-type services is left unchecked, additional inter-

connects would disrupt the marketplace, confuse the pub-

lic concerning continued availability of these services

and promote expansion of specialized carrier facilities

that could prove wastefully duplicative. Should the Com-

mission subsequently decide that these services are not

19¢

in the public interest, a decision to eliminate or condition

the services would then become exceedingly difficult to

implement, states Continental. Accordingly, Continental

requests the Commission to utilize the broad statutory

authority conferred upon it by Section 4(i) of the Act,

47 U.S.C. §154(i), to prevent further growth of Execu-

net-type services pending resolution of the vital question

of whether competition in the MTS marketplace is in the

public interest. Continental states that in U.S. v. South-

western Cable, 392 U.S. 157 (1968), the Supreme Court

specifically affirmed the Commission’s authority under

Section 4(i) to issue interim orders preserving the status

quo until the Commission can make a determination as to

whether the expansion of a regulated service is in the

public interest.

29. For the same reasons described above, USITA

joins Continental in its request to preserve the special-

ized carrier situation as it exists at the moment.

E. AT&T’s Reply

30. AT&T begins its reply by framing what it be-

lieves is the critical issue now before the Commission—

“whether the Commission has ever ordered the Bell Sys-

tem to interconnect its facilities with those of MCI and

other specialized carriers for their use in providing the

functional equivalents of message telephone service.”

AT&T states that its petition does not request the Com-

mission to adopt new interconnection policies or to re-

treat from existing ones, but requests only that the Com-

mission affirm its past interconnection policies by ruling

that AT&T has no present obligation to provide addi-

tional connections to local exchange facilities to OCs

for their use in providing Execunet-type services. In this

respect, AT&T responds to the contentions of the IRCs

and value-added carriers that the petition could be con-

strued to alter their present interconnection arrange-

20c

ments. AT&T assures these carriers that the services

they now provide “are not functionally equivalent to

MTS; thus, if granted, the Petition would not affect the

provision of connections to IRCs or value-added car-

riers for such services.”

31. Next, AT&T disagrees with the comments of the

Department of Justice that it has not satisfied all pre-

conditions to the grant of declaratory relief. In stating

that AT&T has failed to make a “factual showing of

harm” in support of its petition, the Department of Jus-

tice, states AT&T, clearly misunderstands the issue.

AT&T argues that it is seeking only a determination of

its legal obligations under existing Commission orders,

and is not seeking relief from outstanding obligations.

Only in the latter case, argues AT&T, might a factual

showing of harm be relevant. AT&T also disagrees that

its petition seeks creation of a de jure monopoly for in-

tercity services, as the Department of Justice believes.

Rather, states AT&T, the only determination sought is

whether it has an obligation under prior Section 201(a)

orders to interconnect with the OCCs for their provision

of non-private line services.

32. AT&T next asserts that the orders in Docket

19896 clearly establish the Bell System’s interconnection

obligation with respect to private line services, but do

not, as the Oppositions argue, require interconnection

for all authorized OCC services. In Docket 19896, no

OCC sought to establish or justify interconnections for

Execunet-type services, states AT&T, and therefore that

proceeding cannot be deemed to have provided the notice,

opportunity for hearing, and public interest findings re-

quired by Section 201(a) to establish such an intercon-

nection obligation. Furthermore, since a policy of com-

petition for public switched message services has never

been adopted by the Commission, AT&T contends that it

2lc

cannot now be said that the existing Commission inter-

connection orders require it to provide connections to

OCCs so that they can offer such services. Finally,

AT&T states that repeated statements throughout the

Docket 19896 proceeding clearly indicate that its scope

was limited to private line services. In fact, argues

AT&T, when the Third Circuit affirmed Docket 19896 in

Bell Tel. Company of Pennsylvania, supra, it rejected

AT&T’s argument that the Commission’s interconnection

orders were unduly vague and overbroad on the express

representations made by MCI, SPC, and the Commission

that the interconnection obligation extended to only pri-

vate line services. See 503 F. 2d at 1273-74.

33. With respect to the argument made by SPC and

ARINC that the first clause of Section 201(a) itself es-

tablishes an interconnection obligation, AT&T maintains

that such an interpretation of the statute is contrary to

its plain language. That clause, states AT&T, does not

deal with carrier interconnection, but with the provision

of communications services to customers. The second

clause deals with physical connections to other carriers

and requires a hearing to determine if such a connection

is in the public interest.

34. Turning to the Execunet decision, AT&T asserts

that the Court’s mandate directs only what the Court has

said in its opinion and judgment. Because neither the

opinion nor the judgment discusses or decides whether

the Bell System has a legal obligation under Section 201

(a) to provide connections to MCI for Execunet-type

services, then AT&T disputes MCI’s contention that the

mandate compels the provision of additional connections

for Execunet service. AT&T argues that in resolving the

authorization question, the Court did not have to decide

the interconnection question, nor did it do so. Moreover,

AT&T disagrees with MCI’s assessment that the entire

22¢

Execumet proceeding will be rendered futile if intercon-

nection is denied. Because the Execunet decision found

that MCI was authorized to provide Execunet service,

then AT&T argues that this places MCI in a position

to request the Commission to expand the Bell System’s

interconnection obligations under Section 201(a) of the

Act. Because the Court did not decide the issue, states

AT&T, does not render the decision a futility. AT&T

also maintains that since the Commission in Execunet

did not decide the scope of AT&T’s interconnection obli-

gation in relation to public switched message services,

such as Execunet, that the Court would have violated the

separation of function between an administrative agency

and a court by deciding an issue, such as interconnection,

which was never presented to the court.

35. In reference to the antitrust ‘‘essential facilities”

doctrine which SPC, MCI and the Department of Justice

use in support of their theory that AT&T’s monopoly con-

trol over local distribution facilities creates an obligation

upon AT&T to make these facilities available to competi-

tors, AT&T answers that these antitrust arguments rest

on false assumptions. First, AT&T argues that this is not a

de novo proceeding under Section 201(a) where such an

argument might be made to establish a new interconnection

obligation. The absence of such a hearing, argues AT&T, is

exactly why the relief it seeks is warranted. Second, AT&T

contends that even in a new Section 201(a) proceeding to

establish interconnection obligations, under the Communi-

cations Act it is the public interest standard which governs

and not antitrust law. AT&T cites FCC v. RCA Communi-

cations, 346 U.S. 86, 93 (1953) ; Hawatian Telephone Co. v.

FCC, 498 F.2d 771 (D.C. Cir. 1974) and Satellite Business

Systems, 62 FCC 2d 997 (1977), among other cases, to sup-

port its argument that competitive considerations are only

one part of the public interest standard, and that the Com-

mission cannot presume, as does antitrust law, that compe-

23¢

tition is in the public interest. AT&T argues that the Otter

Tail case relied upon by the Oppositions clearly distin-

guished antitrust principles from the public interest regula-

tory standard involved therein, and concluded that while

antitrust consideration might be relevant, they are not de-

terminative. Finally, AT&T states that even in an unregu-

lated industry, the anti: ust cases do not support such a

broad reading of the ‘‘essential facilities’’ doctrine as ad-

vanced by the Oppositions.

36. AT&T next states that it has never acknowledged

any obligation to provide interconnection for Execunet and

is not estopped from raising the issue. The reason the Bell

System originally provided interconnection facilities for

Execunet, states AT&T, was because it was not aware of

the true nature of the service. The Execunet proceeding

dealt with the lawfulness of this service offering, and not

to interconnection. Hence, AT&T contends that because this

issue was never raised, estoppel principles do not apply.

37. Finally, AT&T maintains that the relief requested

will preserve the Commission’s ability to determine the

public interest. If the Bell System were required to provide

additional connections for Execunet-type services, without

a Section 201(a) hearing, then AT&T argues that the OCCs

have enough intercity facilities already in place to alter

substantially the present structure of the nation’s telecom-

munications industry. By granting AT&T’s petition, AT&T

believes the Commission can avoid such deleterious conse-

quences and thereby retain its ability to determine what

should be the appropriate structure of the industry, and

whether competition in public switched message services

would serve the public interest.

F, Other Reply Comments

88. MCI contends that the language of the Bell System

Tariff Offering order stating that AT&T is obligated to in-

24¢

terconnect for all presently or hereafter authorized services

settles the question presented by AT&T’s petition. MCI

also says that telephone company assertions that the tele-

phone companies will suffer financial injury if MCI con-

tinues to provide Execunet service are unfounded.

39. USITA contends that the basis for this current dis-

pute involves differing interpretations of the Execunet de-

cision. The Execunet case simply held, argues USITA, that

the Commission committed reversible error in rejecting the

Execunet tariff on the grounds that MCI’s facility authori-

zations were restricted to private line services. However,

USITA contends MCI and SPC interpret the decision as

authorizing Execunet-type services by the specialized car-

riers and that AT&T must therefore furnish local exchange

facilities for all authorized services under the holding in

Bell Tel. Company of Pennsylvania v. FCC. USITA asserts

that Execunet did not authorize anything, and specifically

left to the Commission the question of ‘‘whether competi-

tion like that posed by Execunet is in the public interest.’’

561 F 2d at 380. USITA argues that if the Commission

cannot now correct the judicially found error by condition-

ing the specialized carrier’s authorizations, as MCI would

have it, then the Commission will have lost control of its

licensing processes.

40. GTE observes that neither MCI nor SPC has

shown that Execunet-type services fit within the scope of

private line services, and therefore, argues GTH, they fail

to support their conclusion that terminating facilities

must be provided. In this regard, USITA states that tele-

phone company’s local exchange facilities are not the only

way by which MCI or SPC may reach their customers.

Other available options recognized by the Commission in

Specialized Common Carrier, states USITA, are customer

provided facilities or specialized carrier facilities. In argu-

ing the ‘‘essential facilities’’ doctrine, USITA contends that

the Department of Justice overlooked these alternatives.

25¢

41. SPC’s reliance on Datran’s authorization for a

switched data service as proof that the specialized carriers

were given authority to provide other than private line

service, argues GTE, is incorrect. Datran proposed to offer

data transmission links, and in 1970 and 1971, GTE asserts

these were ‘‘generally understood to be private line.’

Finally, GTE states that the Department of Justice posi-

tion urging immediate expansion of Execunet-type services

ignores the requirements of Sections 1 and 214 of the

Communications Act, 47 USC §§ 151,214. Because Execu-

net-type service has been found by the Commission to be

equivalent to MTS, GTE asserts that Exzecunet did not

prohibit the Commission from limiting the expansion of

this service until further analysis and hearings can be held.

Discussion

II. Bacxcrounp

42. In 1970 we instituted a rulemaking proceeding to

examine common policy questions presented by a large

number of applications from entities other than AT&T and

Western Union for authority to construct facilities to pro-

vide specialized interstate common carcrier communications

services. Specialized Common Carrier Services, 24 FCC 2d

318. Some of those applicants such as Data Transmission

Corporation (Datran) proposed to provide specialized

services which were substantially different from any ser-

vice then being offered by the established carriers. Other

applicants proposed to provide specialized services which

appeared to be competitive with existing specialized serv-

ices of established carriers which the established carriers

had traditionally described as ‘‘ private line’’ services. Af-

ter extensive proceedings, we concluded that ‘‘a general

policy in favor of entry of new carriers in the specialized

communications field will serve the public interest ...”’

Id. at 920.

26¢

43, Existing carriers filed comments in that proceeding

opposing new entry. AT&T alleged that the entry of new

carriers in the interstate communications market would ad-

versely affect the public interest, claiming in particular that

‘‘cream-skimming’’ by new entrants providing service on

major intercity routes would undermine the nationally-

averaged uniform rate structure which then prevailed for

all intercity services and would deprive the public of the

benefits of economies of scale by delaying the installation

of large capacity facilities. Jd. at 910. USITA expressed

concern that new entry would result in reduced revenue set-

tlements to local independent telephone companies from

existing intercity carriers which would have an adverse

impact upon the independent telephone companies’ ability

to provide local exchange service. Id. at 914, n. 37. The

nature of USITA’s concern is more fully described in our

First Report in Docket No. 20003 (Economic Inquiry), 61

FCC 2d 766 (1976). Under existing separation and settle-

ment procedures, a portion of the revenues from interstate

message telephone toll service (MTS) and wide area tele-

phone toll service (WATS) are returned to the local tele-

phone operating companies in payment for the use of local

exchange facilities in rendering interstate services. A re-

duction in the amount of interstate revenues returned to

the local telephone companies through this process, which

could result from either diversion of interstate traffic and

revenues to a specialized carrier not subject to the separa-

tions and settlement proceedings or from a repricing of

MTS and WATS to meet specialized carrier competition,

would allegedly force local telephone companies to raise

rates for local exchange service to cover their relatively

fixed operating costs.

44. Our Specialized Common Carrier decision con-

cluded that entry of the new carriers could not produce the

kind of impact claimed by AT&T ‘‘in view of the very small

27¢

percentage of AT&T’s existing market that is vulnerable to

competition of the kind proposed here’’ (id. at 910) and

that the independent telephone companies would not be

adversely affected (id. at 914). We noted that ‘‘the portion

of AT&T’s total business which might be jeopardized, i.e.,

the interstate private line business, represented only a very

small fraction of Bell’s total revenues’’ (id. at 911) and de-

clared that ‘‘it is difficult to visualize how independent tele-

phone companies would be adversely affected.’’ (id. at 914).

45. The Specialized Common Carrier decision also ad-

dressed the problem of providing local distribution for in-

terstate services of the new carriers and declared ‘‘that es-

tablished carriers with exchange facilities should, upon re-

quest, permit interconnection or leased channel arrange-

ments on reasonable terms and conditions to be negotiated

with the new carriers, and also afford their customers the

option of obtaining local distribution service under reason-

able terms set forth in the tariff schedules of the local

earrier.’’ Id. at 940.

46. In the summer of 1973, MCI advised the Commis-

sion that AT&T was refusing to interconnect with MCI for

the provision of services which the AT&T Long Lines De-

partment provides to its private line customers. After

letters from the Chairman of the Commission and the Chief

of the Common Carrier Bureau failed to resolve the dis-

pute, the Commission instituted a proceeding to clarify

AT&T’s interconnection obligations with the specialized

common carriers. 44 FCC 2d 245 (1973). We rejected

AT&T’s contention that specialized common carrier serv-

ices do not encompass private line services such as FX or

CCSA which require interconnection with the public

switched telephone system. Bell System Tariff Offerings,

supra. We concluded that the Specialized Common Carrier

decision contemplated that the new carriers would be au-

thorized to offer services which compete with interstate

private line services offered by AT&T, including private

28c

line services which must interconnect with or utilize a part

of the switched public telephone network.

47. Paragraph 53(a) of the Bell System Tariff Offer-

ings Order (46 FCC 2d at 438) directed AT&T to:

(a) Furnish to MCI Telecommunications Corporation,

MCI New York West, Inc. and other specialized com-

mon carriers the interconnection facilities essential to

the rendition of all of their presently or hereafter au-

thorized interstate and foreign communications ser-

vices and to enable the said specialized common car-

riers to terminate their authorized interstate and for-

eign communications services, including interconnec-

tion by the specialized carriers into a telephone com-

pany’s local exchange facilities for the purpose of fur-

nishing Foreign Exchange (FX) service or for inser-

tion into telephone company Common Control Switch-

ing Arrangements (CCSA) ;”’

48. AT&T filed a petition for review in the United

States Court of Appeals for the Third Circuit. AT&T chal-

lenged the decision on various grounds including the al-

leged ‘‘overbreadth’”’ of the interconnection order. The brief

filed in that Court on behalf of the Federal Communications

Commission and the United States observed (Brief, p. 49,

n. 14):

AT&T also argues that the Commission’s cease and

desist order is overly broad in stating that intercon-

nection is required for services ‘‘hereafter’’ authorized.

Read in context, however, it is clear that the Commis-

sion was saying that MCI and the other specialized

carriers were to be afforded the same service as Long

Lines and the independent telephone companies. See

FTC v. Cement Institute, 333 U.S. 683 (1948). ‘‘ Here-

after’’ simply embraces those private line services

which Long Lines and the independents provide or

may provide, and which the specialized ‘carriers do not

29¢

now provide but may become authorized to provide

in future procesdings. The Commission included this

language in recognition of the developing nature of the

industry and in the interest of averting further litiga-

tion in an area of well defined policy. See FCC v.

Pottsville Broadcasting Co., 309 U.S. 134, 138 (1940);

NLRB v. Local 282, International Brotherhood of

Teamsters, 428 F.2d 994 (2d Cir. 1970). The breadth

of the order is modified still further: Every time the

word ‘‘hereafter’’ appears, it is followed by the word

‘*authorized.’’ Thus, only after authorization is ob-

tained from the Commission is interconnection re-

quired, and the telephone companies have every right

to oppose authorizations in the ‘‘hereafter.’’ Finally,

if any serious questions arise, AT&T can seek guidance

from the Commission. Lafayette Radio Electronics

Corp. v. U.S. and FCC, 345 F.2d 278, 281-82 (2d Cir.

1964).

49. Some of the intervenors’ briefs which were filed in

that proceeding contained similar observations with respect

to the breadth of the interconnection order. The brief for

SPC said that the order does not impose an ‘‘unbounded”’

interconnection obligation and that ‘‘the Commission ob-

viously was seeking to require the telephone companies to

provide the specialized carriers with all private line ser-

vices (itself a substantial limitation) of the same or simi-

lar character.’’ (Brief, p. 61). The brief for MCI said

(Brief, pp. 52-53) : ‘*{WJhile it is correct that the Commis-

sion’s language requires Bell to permit physical connec-

tiens ‘essential’ for ‘all’ of the private line services which

any of the specialized carriers are now or may ‘hereafter’

be authorized to offer, the obligation is qualified and limited

by the duty set forth in the Decision that such interconnec-

tion facilities must be ‘similar to, these presently provided

to Bell’s Long Lines Department on a non-discriminatory

basis.’ ’’

30¢

50. In its opinion affirming the Bell System Tariff

Offerings order the Court of Appeals said: ‘‘Were we to

read the Commission’s order in a vacuum, we would be in-

clined to agree with petitioner that the order is somewhat

vague and, to a certain extent, overbroad.’’ 503 F.2d at

1273. The Court added that orders are not to be read in a

vacuum, observed that the Commission opinion ‘‘[v]iewed

in its entirety .. . operates to preclude AT&T from treating

its Long Lines Department and its affiliates differently

than it treats the specialized common carriers’’ (Jbid.)

and concluded (Jd. at 1273-1274): ‘‘As we read the order,

the FCC has required AT&T to provide to the specialized

carriers those (interconnection) elements of private line

services which AT&T supplies to its affiliates and furnishes

to customers through its Long Lines Department.’’ (em-

phasis added).

51. Shortly before the Court of Appeals issued its de-

cision affirming the Bell System Tariff Offering order

AT&T filed revised tariffs covering facilities and services

which AT&T furnishes to other carriers including special-

ized common carriers. We instituted an investigation of

those tariffs. AT&T then proposed that we convene and

chair negotiations among AT&T and other carriers for the

purpose of resolving a variety of technical, operational,

and other issues concerning the specific arrangements which

would be provided for interconnecting AT&T and other

common carrier facilities and services. Several months of

negotiation led to a Settlement Agreement which we ac-

cepted as a basis for terminating the tariff investigation.

AT4T, 52 FCC 2d 727 (1975). AT&T filed tariffs imple-

menting that agreement which remain in effect to this date.

52. Meanwhile, MCI had filed revised tariffs on Sep-

tember 10, 1974, which identified a number of ‘‘modular’’

service elements which could be combined to create a variety

of service offerings. Although members of our staff ex-

pressed concern regarding certain ambiguities in the re-

3lce

vised tariff, that tariff was permitted to enter into effect

by operation of law on October 10, 1974.

53. In the spring of 1975 AT&T advised us that it be-

lieved a metered use service called ‘‘ Execunet’’ which MCI

was offering pursuant to its modular tariffs was not a pri-

vate line service and was equivalent to MTS. After review-

ing comments filed by both AT&T and MCI, with respect

to the nature of Execunet service, we issued an order on

July 2, 1975, rejecting the revised MCI tariff as unlawful

insofar as it purported to offer Execunet service. That

order said that the Specialized Common Carrier decision

contemplated entry of specialized common carriers in com-

petition with AT&T ‘‘only in the private line field, not in

the area of switched public message telecommunications

service’’ (60 FCC 2d at 62) and concluded that ‘‘ Execunet

service is essentially a switched public message telephone

service, rather than private line.’’ Id. at 63. After further

proceedings to reconsider that order based on new informa-

tion developed by MCI, we issued an order affirming our de-

cision to reject MCI’s tariff. MCI Telecommunications

Corp., 60 FCC 2d 25 (1976) (‘‘Execunet”).

54. On review the United States Court of Appeals for

the District of Columbia Circuit reversed the Execunet re-

jection order. MCI Telecommunications Corp. v. FCC,

supra. That Court concluded that a facility authorization

issued pursuant to Section 214 of the Communications Act,

47 U.S.C. § 214, authorizes a carrier to offer any service

which the facility is capable of providing in the absence

of a condition adopted pursuant to Section 214(c) which

expressly restricts the services which may be offered. The

Court noted that the Section 214 authorizations which were

issued to MCI prior to our Execunet decision do not con-

tain any effective conditions restricting the services which

may be provided. The Court also held that neither the

Specialized Common Carrier decision nor the subsequent

facility authorization proceedings contained an adequate

finding that MCI’s provision of particular services would

32¢

be contrary to the public interest and concluded that such

a finding is essential to support a restriction on MCI’s use

of its facilities. The Court of Appeals held that we erred

in rejecting the tariff on the grounds that MCI did not have

the requisite authority to use its existing facilities to pro-

vide Execunet service. The Court’s opinion did not address

MCI’s contention that we also erred in rejecting MCI’s

claim that Execunet is a private line service.

III. Prior Section 201 Orpers

55. AT&T’s request for a declaratory ruling that it has

‘‘no obligation’’ to provide interconnection to specialized

common carriers to enable them to provide services which

are not private line services raises two distinct questions.

Have we directed AT&T to provide such services in any

prior interconnection order issued pursuant to Section

201(a) of the Communications Act, 47 U.S.C. § 201(a)?

Does AT&T have any legal obligation to: provide such in-

terconnection apart from any Section 201(a) interconnec-

tion Order? We will address the first question in this sec-

tion of the opinion.

Section 201(a) provides in relevant part:

It shall be the duty of every common carrier engaged

in interstate or foreign communication by wire or

radio ...in accordance with the orders of the Com-

mission, in cases where the Commission, after oppor-

tunity for hearing, finds such action necessary or de-

sirable in the public interest, to establish physical con-

nections with other carriers, .. .

56. The Bell System Tariff Offerings order is a Sec-

tion 201(a) interconnection order and Paragraph 53(a) of

that order states that AT&T is directed to provide special-

ized common carriers with interconnection facilities essen-

tial to the rendition of all of their presently or hereafter

authorized interstate and foreign communications. MCI

33¢

and SPC would read that paragraph in isolation to mean

that the order requires AT&T to provide interconnection

services to enable MCI to provide Execunet service through

facilities which have been constructed pursuant to uncon-

ditional or improperly conditioned facility authorizations.

However, the Court of Appeals for the Third Circuit con-

cluded that Paragraph 53(a) must be read in context of the

entire Commission opinion as requiring interconnection for

private line services which are similar to private line ser-

vices offered by AT&T through interconnection between

AT&T Long Lines and Bell System affiliates. That is in-

deed the interpretation which both we and all parties have

given this Order in prior proceedings, and thus the one

which we shall continue to accord it in this proceeding. We

are bound by the Third Circuit’s interpretation of that

order. In concluding that the order was limited to private

line services that Court had before it representations in the

briefs filed by this Commission in conjunction with the

United States, as well as those filed by MCI and SPC, with

respect to the scope of the order. Therefore, we could not

utilize the Bell System Tariff Offerings order as a basis

for enforcement proceedings to compel AT&T to provide

interconnection facilities to any specialized common carrier

for any service which is not within the scope of specialized

and private line services addressed in the Specialized Com-

mon Carrier proceeding.

57. None of the comments which have been filed in re-

sponse to this AT&T petition except AT&T’s reply com-

ments discuss the representations contained in brief filed

in Bell Tel. Co. of Pennsylvania and most of the comments

do not discuss the Court of Appeals opinion in that case.

MCI and SPC do claim that that Court of Appeals did not

attach any significunce to the distinction between private

line services and other services. MCI says that AT&T’s

overbreadth claim focused upon services which might be

authorized in the future and accordingly contends that the

Court of Appeals opinion should not be read as limiting

34c

AT&T’s obligation to provide interconnection for all pre-

viously authorized services, SPC advances a different in-

terpretation of the opinion. It contends that the Court of

Appeals merely sought to limit the broad language of the

interconnection order to require Bell operating companies

to supply interconnection facilities to specialized carriers

which are similar to interconnection facilities furnished to

the AT&T Long Lines Department.

58. We cannot accept either of those interpretations of

the Court of Appeals opinion. Various parties did repre-

sent that the interconnection obligations under the Bell

System Tariff Offerings order are limited to private line

services and that Court did say that it understood the order

to be limited to private line services. That statement ap-

peared in the context of a discussion of the reasons which

caused that Court to refrain from remanding the matter to

the Commission with instructions to draft a narrower inter-

connection order. We cannot assume that such a remand

order would not have been issued in the absence of repre-

sentations that the interconnection obligations imposed by

that particular order are limited to private line services.

Accordingly, the words ‘‘all of their presently or hereafter

authorized interstate and foreign communication services”’

in Paragraph 53(a) of the Bell System Tariff Offerings

order can only be read to mean ‘‘all of their presently or

hereafter authorized interstate and foreign private line

communications services.’’ (emphasis added), as the Third

Circuit held. Bell Tel. Co. of Pennsylvania, supra, 503 F.2d

at 1273-1274.

59. This is an appropriate point at which to address

SPC’s contention herein that the Specialized Common

Carrier proceeding did not restrict the new specialized car-

rier applicants to private line services, in support of which

SPC points to Datran’s authorization therein to provide a

switched all digital data communications network (see par-

agraph 12 above). It is true that the Specialized Carrier

35¢

decision encompassed specialized communications services

other than those which theretofore had been described by

the established carriers as ‘‘private line’’ services. It is

also true that in the ensuing debate and litigation regard-

ing required interconnection arrangements, the term spe-

cialized communications service was frequently omitted in

favor of the more limited term ‘‘private line.’’ The use of

this abbreviated expression apparently arose as a result of

the context in which these issues were raised, i.e., whether

the specialized carriers should be accorded the same inter-

connection rights as were accorded AT&T’s internal opera-

tions in Bell’s offering of ‘‘private line’’ services. We be-

lieve it is clear that the Specialized Common Carrier deci-

sion as well as our order in Bell System Tariff Offerings

and the Court’s decision in Bell Tel. Co. of Pennsylvania

require interconnection for all specialized interstate com-

munication services, including switched digital services

such as those developed by Datran. What is germane to the

present proceeding, however, is a determination as to what

services were explicitly excluded from consideration in

Specialized Common Carrier, Bell System Tariff Offerings,

and Bell Tel. Co. of Pennsylvania. We believe it is clear

that MTS and WATS services, and therefore services by

other names which are the functional equivalent of MTS

and WATS, were excluded from both the considerations

and holdings of these proceedings. The interconnection dis-

cussion in those opinions can only be read to mean that all

telephone companies are required to provide facilities and

interconnections which the specialized common carriers

may need to provide both conventional private line services

and new specialized services which may differ from any

private line service which was being offered by the estab-

lished carriers in June 1971.°

* Although the Bell System Tariff Offerings order was directed

at AT&T, the interconnection provisions of the Specialized Com-

mon Carrier decision are applicable to all of the telephone com-

panies.

36¢

60. However, the Specialized Common Carrier decision

cannot be interpreted as ordering interconnection for the

purpose of enabling specialized common carriers to provide

services which are substantially equivalent to MVS and

WATS from the user’s perspective. In the Specialized

Common Carrier decision we declined to consider argu-

ments that the diversion of MTS or WATS revenues from

the existing carriers would produce effects which may be

adverse to the public interest because the applicants had

indicated that they did not proposed to provide any service

which would be capable of diverting any significant amount

of MTS or WATS business. 29 FCC 2d at 910-915. If the

Specialized Common Carrier decision ordered all telephone

companies to interconnect with the specialized common car-

riers for the purpose of enabling the specialized common

carriers to provide services which are the functional equiv-

alent of, and thus directly competition with, MTS or WATS,

then all of the telephone companies were deprived of a

meaningful opportunity for a hearing with the respect to

the public interest consequences not only of such competi-

tion but also of such interconnection. Such an action would

violate their rights under Section 201(a). We decline to

adopt a construction of that decision which is based on the

premise that we did deprive the telephone companies of

their statutory rights.

61. Our conclusion with respect to the scope of the in-

terconnection order in the Specialized Common Carrier

decision is entirely consistent with the Court of Appeals

opinion in the Execunet case. That Court concluded that a

Section 214(c) condition requires an affirmative finding that

the provision of particular services would be detrimental

to the public interest. The Court observed that the Spectal-

ized Common Carrier proceeding did not constitute a

proper hearing on the issue of MTS or WATS competition,

and thus could not serve as a proper basis for Section

214(c) restrictions. A Section 201(a) interconnection order

likewise requires an affirmative finding, after hearing, that

interconnection will be beneficial to the public interest. The

hearing issues required to determine the public interest in

—- vor

ai tt tine.

ow - 7

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each of these situations are essentially identical. To deter-

mine whether the public interest requires that specialized

carrier facility authorizations be limited to preclude their

use for MTS-type services, we must determine whether or

not the public interest will be served by the competitive of-

fering of such services. Similarly, to determine whether the

public interest requires that local telephone companies be

ordered to provide the interconnections required to com-

plete such service offerings, we must also determine

whether or not the public interest will be served by the

competitive offering of MTS-type services. Neither of these

issues has been resolved in prior Commission hearings or

proceedings; both will be addressed in the hearing we in-

tend to initiate forthwith in compliance with the remand

order in the Execunet case.

62. We have noted the Department of Justice’s conten-

tion that AT&T has the burden of proof because any action

which deprives the specialized common carriers of inter-

connection they need to provide any service will have an

anticompetitive effect. Inasmuch as we declined to consider

AT&T’s “proof” in the Specialized Common Carrier Serv-

ices proceedings, we need not determine whether AT&T

would have had the burden if we had attempted to deter-

mine whether the entry of specialized common carriers into

the MTS-WATS market would be in the public interest.

AT&T was clearly entitled to an opportunity for hearing

with respect to such questions and it did not receive such

an opportunity at that time.’

63. The Department of Justice may be suggesting that

we should decline to construe our prior interconnection

orders because clarification of those orders may lead AT&T

"We also declined to address the concerns expressed by USITA

in the Specialized Common Carrier proceeding because we assumed

that the specialized common carriers would not be providing serv-

ices which could have an impact upon the revenues of the inde-

pendent telephone companies. Thus, USITA did not receive an

opportunity to have its ‘‘proof’’ considered.

A BAER ie WON Oe eee RW ee

38e

to take actions which are undesirable or unlawful. We could

not decline to provide guidance with respect to the scope of

prior orders even if clarification produces such a result. We

have an obligation to respond to reasonable requests for

guidance with respect to the scope of parties’ obligations

under our orders, particularly where, as here, AT&T is

subject to a cease and desist order. As previously noted,

the brief filed on behalf of the Federal Comunications Com-

mission and United States in the Court of Appeals for the

Third Circuit said: ‘‘{I]f any serious questions arise,

AT&T can seek guidance from the Commission.’’ (Brief,

p. 49, n. 14).°

IV. Orxer INTERCONNECTION OBLIGATIONS

64. The Communications Act does not preclude car-

riers from entering into voluntary interconnection arrange-

ments in the absence of a Section 201(a) order. We have

not adopted any rule or issued any order which would pro-

hibit AT&T from entering into interconnection arrange-

ments with any specialized common carrier to enable that

specialized common carrier to provide any service. Accord-

ingly, while we have concluded that prior Section 201(a)

order relating to specialized common carriers do not direct

8 We have also noted SPC’s contention that AT&T had an ‘‘op-

portunity’’ for hearing with respect to the desirability of new

entry in the MTS-WATS market in subsequent proceedings and

failed to avail itself of that opportunity. We must disagree. Con-

sistent with our treatment of this issue in the Specialized Common

Carrier proceeding, we have explicitly excluded it from considera-

tion in all subsequent proceedings concerning competition in the

domestic common carrier industry. While we have examined cer-

tain broad economic issues, including the potential effects of com-

petition in the specialized services market on the economics of

MTS, WATS, and local exchange services, none of these investiga-

tions has explored the social and economic effects of competition in

the provision of MTS and WATS. To hold that such broad economic

inquiries have provided tiie telephone industry the ‘‘opportunity”’

for a hearing when the hearing issue was so explicitly excluded

would be a clear abuse of due process.

39e

AT&T to provide interconnection for services which are

substantially equivalent to MTS or WATS, it remains to

be determined whether AT&T has any other legal obliga-

tion to provide such services.

A. The Court of Appeals Mandate

65. MCI apparently contends that the Court of Ap-

peals mandate in the Execunet case either imposes an obli-

gation upon AT&T to provide interconnection for Execunet

or requires the Commission to take immediate action to im-

pose such an obligation upon AT&T. * MCI has filed a docu-

ment entitled ‘‘Petition for Compliance with Mandate of

the Court of Appeals for the District of Columbia Circuit

by Enforcing MCI’s Right to Local Interconnection for

Execunet Services’’ which has been incorporated by refer-

ence in MCI’s comments in the instant proceeding. That

petition asks this Commission to issue an order directing

AT&T to provide the interconnections MCI requires to

provide Execunet and all ‘‘other authorized services.’’

66. Although AT&T did intervene as a party in the

review proceedings in the Execunet case, the Court of Ap-

peals mandate does not direct AT&T to do anything. The

judgment states “that the orders of the Federal Communi-

cations Commission on review herein are hereby reversed,

and this case is hereby remanded to the Federal Communi-

cations Commission for further proceeding in accordance

with the opinion of this Court filed herein this date.’’

67. The Commission orders in the Execunet case did

not relate to interconnection. No interconnection question

was presented in the Commission proceedings or the review

proceedings and neither the Commission decisions nor the

Court of Appeals opinion purports to discuss the nature of

AT&T’s interconnection obligations.

*The SPC and SBS comments present similar contentions.

40c

68. MCI’s contention appears to be based on the prem-

ise that the Court of Appeals has determined that Execunet

service is desirable and has decreed that no one should take

any action which will frustrate MCI’s efforts to provide

Execunet service. That premise is incorrect. The Court of

Appeals opinion says: ‘‘ [W]e have not had to consider, and

have not considered whether competition like that posed by

Execunet is in the public interest. That will be the question

for the Commission to decide... .’’ 561 F.2d at 380.

B. The Sherman Act

69. MCI, SPC and the Department of Justice have ex-

pressed the view that AT&T’s refusal to provide intercon-

nection to MCI and others may violate the antitrust laws.

AT&T’s petition at least implicitly requests that we deter-

mine that question inasmuch as it seeks a ruling that AT&T

has no obligation to provide interconnection for Execunet

and other similar services. While we must and do refuse to

sanction AT&T’s overlr-broad language, we must also de-

cline to rule on the antitrust issue. Although we do consider

the basic policies of the antitrust laws in the context of

‘*public interest’’ determinations *® and we do have some

enforcement responsibilities under Section 2, 3, 7 and 8 of

the Clayton Act, 15 U.S.C. 13, 14, 18 and 19, we do not have

authority to enforce the Sherman Act, 15 U.S.C. 1-7.

See United States v. Radio Corp. of America, 358 U.S. 334,

339-46 (1959) ; c.f., United States v. Pacific d A.R. & Wav.

Co., 228 U.S. 87, 105 (1913). The comments do not clearly

identify the statutory basis for any antitrust claim based

on AT&T’s refusal to interconnect, but MCI, SPC and Jus-

tice appear to be relying upon Sherman Act cases. For ex-

ample, SPC relies upon a statement in United States v.

Otter Tail Power Co., 331 F. Supp. 54, 61 (D.Minn. 1971),

affirmed, 410 U.S. 366 (1973) that ‘‘[t]he Sherman Act

requires that where facilities cannot practically be dupli-

1°Tn this instance we are not making such a public interest de-

termination, that will be made in the context of another proceeding.

De i a ee ee ee

4lc

cated by would-be competitors, those in possession of them

must allow them to be shared on fair terms.’’ We could not

make a definitive determination that AT&T’s present

course of conduct does or does not violate the Sherman

Act."

C. The Communications Act

70. SPS claims that the first clause of Section 201(a)

of the Communications Act imposes a duty to interconnect

apart from a Section 201(a) order. The first clause states:

‘*It shall be the duty of every common carrier engaged in

interstate or foreign communication by wire or radio to

furnish such communication service upon reasonable re-

quest therefor ;” ... The Section continues: “and in accord-

ance with the orders of the Commission, in cases where the

Commission, after opportunity for hearing, finds such ac-

tion necessary or desirable in the public interest, to estab-

lish physical connection with other carriers, to establish

through routes and charges applicable thereto and the di-

vision of such charges, and to establish and provide facili-

ties and regulations for operating such through routes.”’

AT&T claims that the first clause is limited to ultimate

users of communication services avd that its obligations to

other carriers are governed exclusively by the second

clause. Neither SPC nor AT&T cites any authority to sup-

port its interpretation.

71. If the first clause of Section 201(a) automatically

imposed a duty to interconnect for any service the request-

ing carrier may lawfully provide the second clause of that

subsection would be superfluous. A construction of a statu-

tory provision which renders one clause of the provision

superfluous ‘‘offends the well-settled rule of statutory con-

struction that all parts of a statute, if at all possible, are to

™ We believe that it would also be inappropriate for us to at-

tempt to determine the scope of AT&T’s interconnection obliga-

tions, if any, under any legal standards other than those embodied

in the Communications Act.

42c

be given effect.’’ Weinberger v. Hynson, Westcott &€ Dun-

ning, 412 U.S. 609, 633 (1973). Accordingly, the first clause

of Section 201(a) cannot be interpreted to require a carrier

to grant every interconnection request from another carrier

to provide an interstate communications service.

72. However, it does not follow that the first clause

never imposes a duty to provide services to another carrier

in the absence of a Commission order under the second

clause of Section 201(a). If a carrier files a tariff describ-

ing services which it will provide to other carriers it has a

duty to provide such services even if the tariff filing was

not compelled by a Section 201(a) order. A refusal to pro-

vide tariffed services upon request would violate the first

clause of Section 201(a) and Section 203.

73. AT&T has filed a tariff describing the services and

facilities which it furnishes to other carriers. That tariff

provides for a variety of dedicated local loops, intra and

inter-exchange lines, and other facilities and interconnec-

tions which may be required to complete a wide range of

specialized and private line service offerings. However, it

does not offer any facility or any interconnection with local

exchange facilities or services of a type which specialized

common carriers could utilize to provide Execunet or any

similar service. The local operating company facilities

which MCI presently utilizes to provide Execunet were

apparently obtained pursuant to local exchange service tar-

iffs which have not been filed with this Commission. There-

fore, a refusal to provide additional interconnections for

Execunet and similar services would not violate the first

clause of Section 201(a) or Section 203,

74. Some comments opposing the AT&T petition con-

tend that Bell operating companies which refuse to inter-

connect with specialized common carriers for the provision

of Execunet or similar services are discriminating in favor

of AT&T Long Lines. Such comments may be intended as a

contention that AT&T’s action violates Section 202(a) of

es el ee ee eas

43¢

the Communications Act, 47 U.S.C. § 202(a), which pro-

vides:

It shall be unlawful for any common carrier to make

any unjust or unreasonable discrimination in charges,

practices, classifications, regulations, facilities, or serv-

ices for or in connection with like communication serv-

ice, directly or indirectly, by any means or device, or

to make or give any undue or unreasonable preference

or advantage to any particular person, class of per-

sons, or locality, or to subject any particular person,

class of persons, or locality to any undue or unreason-

able prejudice or disadvantage.

75, The services which local operating companies have

been providing to MCI for Execunet service have not been

furnished on terms which could be compared to the alloca-

tion of interstate toll service revenue between AT&T Long

Line and local operating companies. It is our understand-

ing that neither MCI nor any other specialized common

carrier has ever requested that interconnection facilities be

proviced on some’ basis which could provide the local oper-

ating company with the same revenue it would receive if

the specialized common carriers’ customers utilized MTS

or WATS service. Under these circumstances, a refusal to

interconnect does not arguably subject the specialized com-

mon carriers to an ‘‘unreasonable prejudice or disadvan-

tage’’ vis-a-vis AT&T’s Long Lines Department.

76. We have not determined whether Section 202(a)

could impose an interconnection obligation apart from a

Section 201(a) order if a specialized common carrier did

request interconnection upon terms which are substentially

equivalent to WATS or MTS from the local operating com-

pany’s perspective. That question appears to be purely

hypothetical under the present circumstances.

V. Arrirnmative Action

77. USITA and Continental have suggested that we

should act to inhibit the expansion of Execunet and similar

services until we can complete necessary proceedings to

determine whether competition in the M{TS-WATS mar-

ket is or is not in the public interest. Such suggestions are

contained both in comments filed in this proceeding and in

a separate petition which Continental! filed on January 25,

1978. Some of the other comments have expressed the view

that any affirmative action by this Commission which is

designed to preserve the status quo would be undesirable

and/or unlawful.

78 Such affirmative action requests are beyond the

scope of this particular proceeding. Accordingly, we have

not considered contentions with respect to the desirability

or undesirability of preserving the status quo or the ex-

tent of our power, if any, to accomplish that result. Our

actions herein are directed solely to the clarification of the

telephone industries’ obligations under the Communica-

tions Act to mrovide interconnection of the type appar-

ently required to complete Execunet-type services.

CONCLUSIONS

79. The Petition for a Declaratory Ruling is granted

insofar as it requests a determination with respect to the

scope of the petitioners’ interconnection obligations to spe-

cialized common carriers under prior orders of this Com-

mission issued pursuant to Section 201(a) of the Communi-

cations Act. We conclude that our prior Section 201(a)

orders do not direct the petitioners to provide interconnec-

tion of facilities or services to any specialized common

carrier to enable such a specialized common carrier to

provide any service which is substantially equivalent to

MTS or WATS.

80. The Petition fer Declaratory Ruling is granted

insofar as it requests a determination with respect to the

—- ——

45¢

effect of the Court of Appeals mandate in MCI Telecom-

munications Corp. v. FCC, 561 F.2d 365 (D.C. Cir. 1977),

cert. denied, —— U.S. —— (No. 77-420, 46 U.S.L.W. 3448

(January 16, 1978)), upon the scope of petitioners’ inter-

connection obligations to specialized common carriers. We

conclude that the Court of Appeals mandate in that case

has no effect upon the scope of petitioners’ interconnection

obligations.

81. The Petition for a Declaratory Ruling is granted

insofar as it requests a determination of the scope of pe-

titioners’ interconnection obligations to specialized carriers

under the first clause of Section 201(a) and Section 203

of the Communications Act. We conclude that the first

clause of Section 201(a) and Section 203 do not impose any

obligation upon petitioners to furnish facilities or services

to specialized common carriers which are not described in

an effective tariff filed with this Commission.

82. The Petition for a Declaratory Ruling is granted

in part insofar as it requests a determination with respect

to the scope of petitioners’ interconnection obligations to

specialized common carriers under Section 202(a) of the

Communications Act. We conclude that Section 202(a) does

not impose any obligation upon local operating companies

which interconnect with an interstate carrier to provide a

through service to interconnect with a second interstate

carrier to provide a through service if the second carrier

fails to offer compensation to the local operating companies

which is comparable to the compensation the local operat-

ing companies receive from the first carrier.

83. The Petition for a Declaratory Ruling is denied

insofar as it requests a determination with respect to the

scope of petitioner’s interconnection obligations to spe-

cialized common carriers, if any, under the Sherman Act,

the common law, or any federal or state statute other than

the Communications Act.

46c

ORDER

84. Ir Is Orperep, That the Petition for a Declaratory

Ruling Is Grantep to the extent provided herein.

FEepERAL COMMUNICATIONS COMMISSION

William J. Tricarico

Secretary

Separate Statement of Chairman Charles D. Ferris

RE: Southern Pacific Communications Company Tariff

Revisions, Inquiry into MTS and WATS Market

Structure, and Petition of American Telephone and

Telegraph Company for Declaratory Ruling

I join in the three related opinions the Commission

adopts today with regard to telephone service competition

and interconnection because I believe they are responsible

approaches to difficult and vital policy questions and be-

cause I am convinced that they apply the law correctly.

Although I subscribe fully to the rationale stated in the

opinions, I add my separate remarks as a personal over-

view of where we are in telephone service competition and

where I believe we are going.

I. WHere We Are.

For about ten years now, the Commission has been

opening segments of the interstate and foreign communi-

cations market to competition. Starting with an industry

that traditionally had been monopolistic, the Commission

has looked to see where competition would serve the pub-

lic and has taken the appropriate regulatory steps to

make that competition possible. In 1969, my predecessors

here authorized MCI to get into the intercity private line

service business on the Chicago-St. Louis route. Two years

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

FCC 2d 190 (1970).

een ee

47¢

later, at the end of a broad policy-making proceeding, the

Commission adopted its specialized common carrier deci-

sion, opening a substantial segment of the specialized in-

tercity communications market to competition nationwide.*

In 1972, the Commission extended the same policy to the

domestic satellite communications industry, which ap-

peared to be on the verge of exploiting new space tech-

nology in a manner that could revolutionize voice and data

communications in this country.’ In 1976, the Commission

removed the monopoly carriers’ restrictions on “resale and

sharing” of private line services to open the way (1) for

brokerage of communications service in competition with

the established carriers and (2) for more flexible sharing

arrangements in which small users will be able to pool

their needs and buy large packages of services to be shared

according to individual needs at lower unit costs.‘

While I cannot share in the credit for these initiatives

because I came to the Commission only recently, I applaud

and enthusiastically endorse them.* I firmly believe that the

marketplace should have as big a voice as possible in

deciding such questions as the rates to be charged for

* Specialized Common Carrier Services, 29 FCC 2d 870, 31 FCC

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

v. FCC, 153 F.2d 1142 (9th Cir.), cert. denied, 423 U.S. 836

(1975).

8 Domestic Communications-Satellite Facilities, 35 FCC 2d 844,

38 FCC 2d 665 (1972).

* Resale and Shared Use of Common Carrier Services and Facili-

ties, 60 FCC 2d 261 (1976), 62 FCC 2d 588 (1977), aff’d sub

nom. AT&T v. FCC, No. 77-4057, 2d Cireuit (decided January 26,

1978).

*I also am proud of this agency’s initiatives in the area of

terminal equipment competition. See, e.g., Interstate and Foreign

Message Toll Telephone Service, 56 FCC 2d 593 (1975), 58 FCC

2d 736 (1976), aff’d sub nom. North Carolina Util. Comm. v. FCC,

552 F.2d 1036 (4th Cir. 1977), cert. denied, 46 U.S.L.Wk. 3219

(October 3, 1977).

48e

services, what kinds of services will be offered, and who

shall serve. Moreover, I am committed to extension of our

present policies favoring competition to any area of com-

munications in which we can conscientiously and respon-

sibly find that such competition would benefit the public.

Having said this much, I must go back and underscore

the words “conscientiously” and “responsibly.” Our man-

date under the Communications Act is to establish policy

and implement it in such a way as to ensure a rapid and

efficient communications system in this country at reason-

able charges to the public.* As I understand that mandate,

it requires us to evaluate the consequences of significant

regulatory actions so that we are in a position to make

knowledgeable decisions. That is why the so-called “ex-

pert” agency was created.

The Commission, I believe, has been faithful to that man-

date in developing the policies that have opened selected

common carrier markets to competition. It has conscien-

tiously and responsibly evaluated the possible public costs

and benefits of competition in discrete services and tech-

nologies, and has made significant and orderly progress to-

ward opening this historically monopoly market.

The matters that are before us today challenge our re-

solve to maintain control of the developing competition.

As a result of the District of Columbia Cireuit’s ruling in

the Execunet case,’ the specialized carriers now have au-

thority to provide classes of service (with their existing

facilities) that the Commission never has evaluated for

purposes of deciding whether competition will serve the

public interest. This resulted, in the Court’s view, from

the Commission’s failure in its seminal specialized com-

mon carrier proceeding to take the appropriate procedural

* 47 U.S.C, § 151.

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

Cir. 1977), cert. denied, 46 U.S.L. Wk. 3448 (January 16, 1978).

49e

steps and make the requisite findings that would justify

restrictions on the carriers’ service offerings. I do not

agree with the Court’s ruling, but that is beside the point.

The Supreme Court declined to grant our petition for

writ of certiorari, and we are thus bound to respect the

mandate of the Court of Appeals.

I do not understand the Court's mandate, however, as

requiring us to abdicate our continuing responsibility to

evaluate the role of competition in common carrier markets

before we take regulatory actions. Nor do I understand the

Execunet opinion to have vitiated the decision of the Third

Circuit in the Bell of Pennsylvania case,’ which construed

our orders requiring AT&T to interconnect with the spe-

cialized common carriers as limited to private line services.

I regard our decisions today as consistent with our obliga-

tions under the mandates of both Courts. Moreover, I view

these actions as consistent with our obligations under the

Communications Act and as a reassertion of our commit-

ment to orderly consideration of the vital public interest

questions surrounding the competitive offering of commu-

nications services.

First, we are rejecting the tariff of Southern Pacific

Communications Co., which would offer an MTS-like serv-

ice despite the absence of requisite interconnection privi-

leges, because we have not decided as a matter of policy

whether the public interest requires such interconnection.

Second, we are declaring that AT&T has no present obli-

gation under any of our outstanding orders to interconnect

with the specialized carriers for purposes of providing

MTS and WATS services, because, once again, we have

not decided as a matter of policy whether the public inter-

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

(3rd Cir. 1974), cert. denied, 422 U.S. 1026, reh. denied, 423 U.S.

886 (1975). The Third Circuit affirmed and construed the Com-

mission’s order in Bell System Tariff Offerings, 46 FCC 2d 412

(1974).

50¢e

est requires such interconnection. Third, we are initiating

a new rulemaking

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