Petition — FEDERAL COMMUNICATIONS COMMUNICATIONS COMMISSION v. MCI COMMUNICATIONS CORP. (Nos. 78-216, 78-217)

§u the Supreme Court of the United States

OCTOBER TERM, 1978

FEDERAL COMMUNICATIONS COMMISSION, PETITIONER

MCI TELECOMMUNICATIONS CORPORATION, et al.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR

THE DISTRICT OF COLUMBIA CIRCUIT

ROBERT R. BRUCE,

General Counsel,

DAVID J. SAYLOR,

Deputy General Counsel,

DANIEL M. ARMSTRONG,

Associate General Counsel,

JOHN E. INGLE,

Counsel.

Federal Communications Commission

Washington, D.C. 20554

(202) 632-7112

Page

I IT ai psrpiesectersincesipneninsinecloctemeci paceasdiiaeonien 1

PO Sin 5 a eee 2

I i ee 2

I FI isisticsencieccsscenitieticnisinsterntiaatnabaiaiianssenae ties 4

IIR sscusintstsitirnssnstisinsntapidiciehstersigistannmntbeiadiiateedmaiaineta 5

OF FN TT EET ODED 8 8

B. The Declaratory Ruling __..... iahesdabigsineshiattietiaaien 14

1. Relevant Interconnection Orders —.............. 15

2. The Clarification Order -..............................--- 18

Ge cenit thee EA 20

Reasons for Granting the Writ —...... eee 21

1. Conflict with the Third Cireuit .. 0. 22

2. Expansion of the Execunet I Mandate _............. 27

3. Judicial Intrusion into Administrative Process.. 29

4. Error in Statutory Construction .......0......0..... 32

ONT eisieccctseicissinenlesibieitiaeisisci tentacle 37

CITATIONS

Court decisions:

American Tel. & Tel. Co. v. FCC, 539 F.2d 767

es aN IIE acletchicseenichepneccctnnndsleicddichinibcindcmamacminane 10

American Tel. & Tel. Co. v. FCC, 487 F.2d 865

RR BRN Tne EOP NS ot Se 8

Atchison, T. & S.F. R.R. v. Denver & N.O.R.R.,

See ne I se 15

Atchison, T. & S.F. R. Co. v. Wichita Bd. of Trade,

SE Ts Te ID nies te eas 31

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

(3rd Cir. 1974), cert. denied, 422 U.S. 1026, reh.

denied, 423 U.S. 886 (1975) _7, 10, 15, 17, 18, 22, 30, 33

ALLE LO

Court decisions—Continued

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

I a os sesakideusharenstasniaesais

Federal Communications Commission v. Pottsville

Broadcasting Co., 309 U.S. 134 (1940) —.............

Federal Power Commission v. Idaho Power Co.,

Se I I I gcse nctecisescieestinsinnciis odepansiamisiap latinas

Federal Power Commission Vv. Transcontinental

Gas Pipe Line Corp., 423 U.S. 326 (1976) _........

Federal Trade Commission Vv. Colgate-Palmolive

ig ee rs Ie I ccerritn eeiececeteetetcreree

Microwave Communications Inc. v. AT&T, 369 F.

Supp. 1004 (E.D. Penn. 1973), vacated, 496 F.2d

214 (3rd Cir. 1974) -...... REE ENE es 10,

MCI Telecommunications Corp. Vv. FCC, No. 78-

1150, D.C. Circuit (filed February 23, 1978)

Nader v. FCC, 520 F.2d 182 (D.C. Cir. 1975) —_....

National Labor Relations Board v. Donnelly Co.,

Seas I i alenaninepeiabiavess

Perkins v. Standard Oil Co., 399 U.S. 222 (1970) ..

Red Lion Broadcasting Co. v. FCC, 395 U.S. 367

I sal ica ct aa asns on dhnlbwistenachcaeiaieiniebines

Securities & Exchange Commission Vv. Chenery

eS OG | Ee . : gence :

Udall v. Tallman, 380 U.S. 1 (1965) .........-...--....

Vermont Yankee Nuclear Power Corp. v. Natural

Resources Def. Coun., Inc., No. 76-419, decided

pk a eT Ne ee eee eee

Washington Util. & Trans. Comm, v. FCC, 513

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

IID saclsinsscok ceptible nal cnadeaniaeltcaesadalamtnideiciora dina

Agency decisions:

Bell System Tariff Offerings, 46 FCC 2d 413

(1974) <ciindidadatticicds decatbiaccanisaatenieadinacuniaaiets

Customer Interconnection, 61 FCC 2d 766 (1976).

In The Matter of MTS and WATS Market Struc-

ture, FCC 78-144 (released Feb. 28, 1978)...

MCI Telecommunications Corp. (Execunet), 60

FCC 2d 25 (1976)

Page

17, 24

Ill

Agency decisions—Continued Page

Specialized Common Carrier Services, 29 FCC 2d

870, 31 FCC 2d 1106 (1971), aff'd sub nom.

Washington Util. & Transp. Comm. v. FCC, 513

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

ESSER terre seca bsatedbalcnsn sacnchacad 8, 16, 17, 30

Private Line Cases, 34 FCC 244 (1961), 34 FCC

217 (1963), aff’d sub nom., Wilson & Co.w. FCC,

335 F.2d 788 (7th Cir. 1964), remanded for con-

sent settlement, 382 U.S. 454 (1966) —_.............. 9

Western Union Telegraph Co., 17 FCC 152 (1952),

Bg REL nt ONS TR NERO 15

Other citations:

Statutes and regulations:

gS Te | |: 5 EE een 2

go Ag) eee cane ne eEeon 33

ee TR I sien serttctnenioncecinniaclecspieieiesitiee 2

Communications Act of 1934, 48 Stat. 1064, as

amended, 47 U.S.C. §§ 151-609:

RBA RES ERE Eve ae eR 2,3, 4, 15

a ertsnemceinnpnioniell 2,3,11

fe RTO cee Oo LC TIONED 4,5

FRR EA RD ee RO 4, 5, 33

M. Irwin, The Telecommunications Industry

NN el El a calvetnnstanuntnasnsenned 8

President’s Task Force on Communications Policy,

pe I I 8

Beslan oa

a ihe cn

=

Iu the Supreme Court of the United States

OCTOBER TERM, 1978

No.

FEDERAL COMMUNICATIONS COMMISSION, PETITIONER

Vv.

MCI TELECOMMUNICATIONS CORPORATION, et al.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR

THE DISTRICT OF COLUMBIA CIRCUIT

The Federal Communications Commission respect-

fully asks this Court to issue a writ of certiorari to

review the April 14, 1978, order of the Court of

Appeals for the District of Columbia (Ewecunet I/)

which granted a motion for an order directing com-

pliance with that court’s previous mandate in MCI

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

Cir. 1977), cert. denied, 434 U.S. 1040 (1978) (Evxe-

cunet I).

OPINIONS BELOW

The order and opinion of the court of appeals (Pet.

App. A) and the decision of the FCC (Pet. App.

C) are not yet reported.

(1)

2

JURISDICTION

The court of appeals issued its order on April 14,

1978. That court denied timely filed petitions for

rehearing and suggestions of rehearing en banc by

orders dated May 8, 1978 (Pet. App. D). This pe-

tition is filed within the time allowed by statute, as

enlarged by this Court’s order to August 17, 1978.

28 U.S.C. § 2850(a). This Court has jurisdiction

by virtue of 28 U.S.C. § 1254(1).

QUESTIONS PRESENTED

Common carriers have no duty under the Com-

munications Act to connect their facilities with those

of other carriers unless and until the FCC, “after

opportunity for hearing,” finds that connection is

“necessary or desirable in the public interest. .. .”

47 U.S.C. § 201(a). In response to a request by

the American Telephone and Telegraph Company

(AT&T) for clarification of its interconnection ob-

ligations, the FCC issued a declaratory ruling that

its own orders pursuant to Section 201(a) had not

required the established telephone carriers to pro-

vide interconnections for use by the specialized car-

riers in offering ordinary long distance service. (Pet.

App. C.) The court of appeals, purporting to enforce

its mandate in Execunet J (Pet. App. B), which dealt

with the scope of specialized carriers’ facilities au-

thorizations under Section 214, 47 U.S.C. § 214, re-

quired immediate interconnection between the car-

riers without limitation as to services (Pet. App.

A).

3

The Execunet II decision presents these anomalies.

First, in ordering interconnection, the court of ap-

peals relied primarily on its earlier interpretation (in

Execunet I) of a provision (Section 214) which does

not have anything to do with interconnection, rather

than on an independent evaluation of Section 201(a),

which does govern interconnection. Second, although

Section 201(a) plainly contemplates that the FCC

knowingly hold a “hearing” and thereafter make an

affirmative “public interest” finding before mandat-

ing interconnection, the Hxecunet II court disbe-

lieved or ignored the FCC’s protestations that it had

never held such a hearing, never made the requisite

finding, and never mandated interconnection. Third,

on the strength of Execwnet I, which barely men-

tioned and certainly never focused upon the subject

of interconnection, the Execunet II decision overrode

another decision (the Third Circuit’s) which had di-

rectly considered and defined the scope of the FCC’s

only relevant interconnection orders, in reliance upon

and consistent with the FCC’s views. Fourth, even

though AT&T had been specifically denied an FCC

hearing on MTS/WATS interconnection because that

issue was beyond the scope of the inquiry, Execunet

IT told AT&T years later that the issue had been

decided after all and that the carrier reasonably

should have known that all along.

The questions for this Court are:

1. Did the court of appeals impermissibly expand

its mandate to govern matters which were neither

4

considered nor decided in its earlier decision but

which had been resolved definitively in another circuit

in a manner that conflicts directly with the order in

Execunet II?

2. Did the court of appeals act beyond its au-

thority as a court reviewing agency action when it

ordered immediate carrier interconnection?

3. Did the court of appeals erroneously apply the

relevant statute in finding that the FCC had required

carriers to connect their facilities even though (a)

the agency concededly had not provided an oppor-

tunity for hearing and had not made the requisite

publie interest finding and (b) another court of ap-

peals, on direct review of the FCC’s interconnection

order, had held that those orders did not require this

kind of connection?

STATUTES INVOLVED

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

munications Act of 1934, 48 Stat. 1064, as amended,

AT U.S.C. §§ 201(a), 214(a) and (c), state, in perti-

nent part:

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

common carrier engaged in interstate and for-

eign communication by wire or radio * * *, in

accordance with the orders of the Commission,

in cases where the Commission, after opportunity

for hearing, finds such action necessary or desir-

able in the public interest, to establish physical

connections with other carriers * * *.

5

Section 214(a). No carrier shall undertake the

construction of a new line or of an extension of

any line, or shall acquire or operate any line, or

extension thereof, or shall engage in transmission

over or by means of such additional or extended

line, unless and until there shall first have been

obtained from the Commission a certificate that

the present or future public convenience and

necessity require or will require the construc-

tion, or operation, or construction and operation,

of such additional or extended line * * *.

Section 214(c). The Commission shall have

power to issue such certificate as applied for,

or to refuse to issue it, or to issue it for a por-

tion or portions of a line, or extension thereof

* * *, or for the partial exercise only of such

right or privilege, and may attach to the is-

suance of the certificate such terms and condi-

tions as in its judgment the public convenience

and necessity may require * * *,

STATEMENT

The court of appeals continues in this case to

make and implement important communications

policy. In Ewecunet I, the court held that the FCC

had inadvertently granted unlimited authorizations

to the “specialized’”” common carriers, with the re-

sult that those carriers are free to offer any services

they may choose over their own intercity facilities.

That decision drastically expanded the FCC’s com-

petition policy to include services the FCC had not

intended to embrace in its policy. (Pet. App. B.)

6

In this case, the court of appeals implemented its

earlier expansion of the FCC’s competition policy by

directing the established telephone companies to in-

terconnect their local exchange facilities with the

specialized carriers’ interstate facilities. (Pet. App.

B.) The court of appeals’ latest order rested not on

error in the FCC’s own interconnection decisions,

but upon the court’s own perception of what is neces-

sary to realize “the intended effect of [its] decree”

in Execunet I.

The court of appeals in Execunet II granted a

motion for an order requiring immediate intercon-

nection between local exchange telephone facilities

and the intercity facilities of specialized communica-

tions common carriers, to enable those carriers to

provide ordinary long distance service. (Pet. App.

4A-5A.) Although that court purported merely to

direct compliance with its earlier mandate in Execu-

net I,‘ its order in effect (1) performed an important

substantive administrative function (requiring car-

riers to connect their facilities) that Congress has

expressly delegated to the FCC; (2) expanded the

Execunet I mandate to govern matters that the court

did not consider or decide in that case; (3) summarily

reversed a decision of the FCC that rested entirely

upon the agency’s construction of its own prior or-

ders, as another court of appeals had construed those

1MCI Telecommunications Corp. Vv. FCC, supra, 561 F.2d

865 (Pet. App. B).

7

orders on direct review;* and (4) left the FCC with

the dilemma of irreconcilable judicial mandates with

respect to the scope of its outstanding interconnec-

tion orders.

Execunet II apparently rests upon the court of

appeals’ assumption that its earlier mandate had

resolved all questions regarding long distance tele-

phone competition in favor of the successful litigants

in Execunet I. (Pet. App. 18A, 5E, 10D.) Thus, the

court required interconnection because, as a practical

matter, the specialized carriers needed local ex-

change facilities to provide long distance service—

even though the court had not considered the “very

different issue” of interconnection in Execunet I (Pet.

App. 27B n. 59) and even though the holding in that

case had been limited expressly to a finding of pro-

cedural error in the FCC’s certification process (Pet.

App. 30B-31B, 32B). In this statement, we describe

briefly the Execunet I case, the relevant interconnec-

tion orders as construed on direct review in another

circuit, the FCC’s declaratory ruling in this case,

and the Execunet II decision.

* Bell Telephone Co. of Penn. v. FCC, 503 F.2d 1250 (3rd

Cir. 1974), cert. denied, 422 U.S. 1026, reh. denied, 423 U.S.

886 (1975).

8

A. Execunet I. *

Interstate common carriers provide services that

may be divided into two broad categories: public

telecommunications services, including ordinary long

distance message toll telephone service (MTS) and

wide area telephone service (WATS); and private

line services, also known as leased line services.‘

While MTS and WATS historically have been mo-

nopoly offerings, private line services have been com-

petitive to some degree.’ The Commission in recent

years has encouraged and authorized new entry into

specialized private line services.° It has not con-

sciously introduced competition into MTS and WATS.

* We describe the Execunet I case in some detail because an

understanding of that case is essential to informed action on

our petition for certiorari. Although the FCC continues to be-

lieve that Execunet I was incorrectly decided, this Court de

nied our petition for certiorari in that case. 434 U.S. 1040.

Our present petition assumes that Execunet I is now binding

on the Commission.

*President’s Task Force on Communications Policy, Final

Report, Ch. 6, pp. 9-10 (1968); M. Irwin, The Telecommunica-

tions Industry, pp. 24-25 (1971).

*See Nader v. FCC, 520 F.2d 182, 197 (D.C. Cir. 1975);

American Tel. & Tel. Co. Vv. FCC, 487 F.2d 865, 868 (2d Cir.

1973).

* E.g., Specialized Common Carrier Services, 29 FCC 2d

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

& Transp. Comm. Vv. FCC, 513 F.2d 1142 (9th Cir.), cert.

denied, 423 U.S. 836 (1975). See generally, Custemer Inter-

connection, 61 FCC 2d 766 (1976) (an appraisal of the eco-

nomic impact of the FCC’s competition policies on the tele-

communications industry, including an overview of those

policies).

9

MCI Telecommunications Corp., the petitioner in

the court of appeals, is a “specialized common car-

rier” operating under FCC authorizations. MCI filed

a tariff in 1974 to broaden its service offerings by

providing a “metered use service’ as an additional

option to its full-time and part-time private line

services.’ Although the tariff did not mention Execu-

net by name or describe the service. MCI began to

offer Execunet pursuant to the tariff early in 1975.

Several months later, AT&T complained to the

FCC that Execunet was outside the scope of MCI’s

authorizations. AT&T alleged that Execunet was

not a private line service at all, but was functionally

the same as MTS or WATS.* (Pet. App. 4B.) The

* A private line service is what the name implies: a service

in which the customer buys the privilege of using facilities

that are dedicated in some meaningful respect to his or her

personal use, always available to the customer, directly con-

necting the customer’s premises with another point (or a num-

ber of other points) selected in advance, capable of instant

connection without the need for dialing, and tariffed at a

periodic rate rather than according to use. See MCI Tele-

communications Corp. (Ezecunet), 60 FCC 2d 25, 40-44

(1976). A private line service need not have all these charac-

teristics. Private Line Cases, 34 FCC 244, 249-51 (1961), 34

FCC 217 (1963), aff’d sub nom. Wilson & Co. Vv. FCC, 335 F.2d

788, 792 (7th Cir. 1964), remanded for consent settlement, 382

U.S. 454 (1966).

* An Execunet customer may place calls from any telephone

in the Execunet network to any telephone in a distant city

in the network by dialing a local MCI number, a customer

access code, and the telephone number in the distant city. The

customer pays a toll for each call that is based on time and

distance, subject to a minimum monthly charge. (Pet. App.

5A n.2, 3B & n.3.)

10

Commission had consistently asserted that it had au-

thorized competition by specialized carriers such as

MCI only in private line services, and that those

carriers had no authority to provide MTS or WATS.’

After obtaining comments from interested parties

and hearing oral argument, the FCC concluded that

Execunet was not a private line service, but that it

had all the essential characteristics of MTS or

WATS. Concluding that MCI had no authority to

offer such a service under its existing certificates, the

Commission directed MCI to cease and desist from

offering Execunet.”

On judicial review, the court of appeals reversed,

in Execunet I. (Pet. App. B.) After outlining its

view of the statutory scheme for regulating common

* See American Tel. & Tel. Co. v. FCC, 5389 F.2d 767 (D.C.

Cir. 1976); Washington Util. & Transp. Comm., supra, 513

F.2d 1142; Bell Tel. Co. of Penn., supra, 503 F.2d 1250. Cf.

Microwave Communications, Inc. v. AT&T, 369 F. Supp. 1004

(E.D. Penn. 1973), vacated (on primary jurisdiction grounds),

496 F.2d 214 (3d Cir. 1974). The FCC had confined its spe-

cialized carrier proceeding to private line services as a matter

of administrative efficiency, both because the applicants had

proposed only that kind of service and because the public

policy questions involved in MTS/WATS competition would

be much more complex and apparently did not need to be

resolved in that proceeding.

2° MCI Telecommunications Corp., 60 FCC 2d 25. The ques-

tion for the FCC in that proceeding was whether MCI’s exist-

ing certificates were broad enough to permit the offering of

Execunet—not whether the FCC shou!d open further markets

(including the MTS and WATS markets) to competition. Jd.

at 35.

11

carriers under Title II of the Communications Act,

that court stated:

Applying these principles to the instant case,

the issues to be resolved are two: whether and

to what extent Section 214 of the Communica-

tions Act expressly authorizes the Commission

to impose prior approval requirements through

the facilities authorization mechanism, and

whether the Commission has properly exercised

whatever authority it may have under Section

214.

(Pet. App. 21B.) The court of appeals decided, on

the basis of statutory analysis, that the FCC did

have authority to restrict the services a carrier may

offer; but it found that the FCC may do so only

if it has “affirmatively determined” that the public

convenience and necessity require such restrictions.

(Pet. App. 24B-26B. )

Turning to the second question—whether the FCC

had properly exercised its authority to restrict MCI’s

authorizations to particular services—the court of

appeals analyzed the Specialized Common Carrier

Services rulemaking proceeding, and concluded that

the Commission had not made the requisite statutory

findings to restrict specialized carriers to private line

services. (Pet. App. 26B-31B.) Accordingly, it held

that MCI’s facility authorizations were not restricted

and that the Commission had erred in requiring MCI

to cease and desist from offering Execunet on grounds

that it was an unauthorized service. Id.

12

That court made no findings beyond its holding

that the FCC had not properly restricted MCI’s au-

thorizations and therefore could not require MCI to

terminate a particular service on grounds that it was

unauthorized. In fact, the court of a expressly

denied any broader holding:

We have today decided that the Commission

erred in rejecting MCI’s Execunet tariff as un-

authorized. The Commission has no general au-

thority to insist that carriers receive its ap-

proval before filing tariffs proposing new services

or rates. Only if the Commission has determined

that the public convenience and necessity may

require that new services receive advance ap-

proval can it then reject a tariff as unauthorized.

In so holding 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 proceed-

ings.

(Pet. App. 32B.) There was no mention of intercon-

nection rights or obligations, because none of the

parties had raised these questions either before the

Commission or in the court of appeals.”

™ The court of appeals also did not disturb the FCC’s find-

ing that Execunet was the functional equivalent of MTS or

WATS, although MCI had challenged that finding on review.

(Pet. App. 36C.)

cueitieeenee ern.

13

When the FCC and others petitioned this Court for

certiorari,” MCI and another specialized carrier,

Southern Pacific Communications Co., argued that the

Court should deny the petitions because, inter alia,

(1) the court of appeals had merely remanded the

matter to the FCC for its further consideration, (2)

the Execunet decision was narrowly limited to a find-

ing of procedural inadequacy in the certification

process and did not require the FCC to take any par-

ticular action with regard to its competition policies,

and (3) in this posture, the case was not ripe for

review by this Court.” The Court denied the pe-

titions for certiorari, although, of course, we have

no way of knowing whether these arguments by MCI

and Southern Pacific influenced its decision.

Shortly after denial of certiorari, the FCC under-

took to set its competition policies in order, in light

of both its statutory mandate and the Execunet I

mandate. First, it initiated an inquiry into the MTS

and WATS market structure, with a view to de-

termining whether competition in those areas would

serve the public interest.** Second, the Commission

12 The United States Independent Telephone Ass’n (USITA)

and AT&T filed petitions in addition to the FCC’s petition.

Nos. 77-420, 77-421 and 77-436.

18 MCI’s Brief for the Respondents in Opposition, pp. 35-40;

Brief for the Respondent Southern Pacific Communications

Co. in Opposition, pp. 10-14.

4 434 U.S. 1040 (Justices Stewart and Powell stating that

they would have granted the writ).

15 In the Matter of MTS and WATS Market Structure, FCC

78-144, released February 28, 1978. The Execunet I opinion

14

acted on a petition by AT&T for clarification of that

company’s interconnection obligations to MCI and

other specialized carriers. The FCC’s declaratory rul-

ing in response to AT&T’s petition, interpreting the

agency’s own previous orders as not requiring inter-

connection for MTS and WATS services, was the

genesis of Execunet IJ. (Pet. App. C.)

B. The Declaratory Ruling.

AT&T’s petition asked the FCC to issue a de-

claratory ruling with regard to its outstanding in-

terconnection orders so as to make clear that the

telephone company had no obligation to provide ad-

ditional interconnections to MCI for Execunet and

other non-private line services." The Commission

considered the petition in light of comments and ar-

guments of interested parties and in full awareness

had stated that the court of appeals had not considered

“whether competition like that posed by Execunet is in the

public interest,” and had said that was “the question for the

Commission to decide should it elect to continue these pro-

ceedings.” (Pet. App. 32B.) In fact, the Commission had no

“election” in the matter. It had a statutory responsibility to

resolve this important policy question, as well as a duty to act

on specific applications and requests for rulings, such as

AT&T’s request for clarification of its interconnection obliga-

tions. (Pet. App. 43C.)

1» AT&T asked the FCC broadly to declare that there was

no interconnection obligation under the antitrust laws, the

common law, or any other federal or state statute in addition

to the Communications Act. The Commission expressly de-

nied the petition insofar as it requested a determination of

AT&T’s obligations arising apart from the Communications

Act. (Pet. App. 52C, 11A n.14.)

15

of the Execunet [ mandate. But its decision neces-

sarily rested upon an interpretation of its own pre-

vious interconnection orders, as those orders had

been construed on direct review.

1. Relevant interconnection orders. Although com-

mon carriers have no duty under the Communications

Act to connect their facilities with those of other

carriers,” the Commission may require interconnec-

tion, after opportunity for hearing, on the basis of a

public interest finding. 47 U.S.C. § 201(a). Rights

and obligations to interconnection do not arise from

certification of facilities; rather, interconnection and

certification are discrete regulatory functions gov-

erned by independent statutes and different policy

objectives and concerns.”

In its Specialized Common Carrier Services pro-

ceeding, the Commission established an open entry

policy under Section 214(a) for new carriers who

had proposed to offer specialized communications

services. At the same time, the Commission addressed

the Section 201(a) problem of providing local distri-

7 Bell Tel. Co. of Penn., supra, 503 F.2d at 1270. See

Atchison, T. & S.F. R.R. v. Denver & N.O. R.R., 110 U.S. 667,

680 (1884); Western Union Telegraph Co., 17 FCC 152, 171

(1952), 17 FCC 5038 (1953).

The Commission may grant a certificate of convenience

and necessity authorizing new facilities, pursuant to Section

214(a), without requiring interconnection, pursuant to Section

2U1 (a). See Western Union Telegraph Co.,. supra, 17 FCC 503

(FCC denied request of Western Union for connection with

AT&T for purposes of providing video transmission service

over facilities the Commission had authorized).

16

bution facilities for the new carriers, and declared

that “established carriers with exchange facilities

should, upon request, permit interconnection or leased

channel arrangements on reasonable terms and con-

ditions to be negotiated with the new carriers... .”

Specialized Common Carrier Services, 29 FCC 2d at

940. The interconnection question, like the question

of Section 214 authorizations, was considered on the

assumption that the only authorizations and inter-

connection rights at stake were those essential to the

provision of specialized services.

Two years later, MCI complained to the Commis-

sion that AT&T had refused to interconnect with

MCI for the provision of two services (“FX” and

“CCSA”)” which AT&T offered to the public as pri-

vate line services. After a show cause proceeding in

which all interested parties filed comments and ar-

gued before the Commission en banc, the Commission

concluded that its Specialized Common Carrier Serv-

ices decision had required interconnection for all pri-

vate line services, including FX and CCSA.” The

1° For a description of these two private line services, see

Bell System Tariff Offerings, 46 FCC 2d 413, 418 n.5 (1974),

quoted at Bell Tel. Co. of Penn., supra, 503 F.2d at 1254 n.4.

20 In oral argument before the FCC, Mr. Laurence E. Harris,

MCI’s vice president, stated that one reason for assuming

that the Commission had ordered FX and CCSA interconnec-

tion was that “the staff specifically singled out and excluded

from consideration MTS and WATS services. Had it contem-

plated that FX and CCSA or any other services were not in-

cluded [in the interconnection obligation], it would clearly

have made specific reference to them at this point.” FCC

17

Commission ordered AT&T to provide the intercon-

nection MCI had asked for those two services. Bell

System Tariff Offerings, 46 FCC 2d 413.

On judicial review, the Third Circuit affirmed. Bell

Tel. Co. of Penn., supra, 503 F.2d 1250. In the proc-

ess, that court had to resolve an argument that the

interconnection requirement was overbroad. The

Third Circuit agreed that the requirement, if it were

read in a vacuum, “is somewhat vague and, to a cer-

tain extent, overbroad.” But it found no necessity to

remand on this ground, because it read the inter-

connection requirement in the context of the Special-

ized Common Carrier Services proceeding. Given this

context, the court found that the FCC’s order took

on a definite meaning:

As we read the order, the FCC has required

AT&T to provide to the specialized carriers those

(interconnection) elements of private line serv-

ices which AT&T supplies to its affiliates and

furnishes to customers through its Long Lines

Department. -

503 F.2d at 1273-74. It affirmed the interconnection

order, thus construed.”

Docket No. 19896, Tr. pp. 77, 78 (March 4, 1974). See also

MCI Communications Corp. v. AT&T, supra n.9, 369 F.

Supp. at 1027 (“The Commission did mention wide area tele-

phone service (WATS) and long-distance toll service, but only

to exclude them from the scope of the decision. If FX, CCSA,

and interexchange were to have been excluded also, they

would have been singled out as were WATS and private long-

distance toll calls.’’)

21 The Third Circuit also found that AT&T had not been

deprived of its hearing rights under Section 201(a) because

18

The Commission has issued no other interconnec-

tion orders either constricting or expanding the rights

of the specialized carriers and the obligations of the

established carriers.

2. The Clarification Order. At an open meeting

on February 23, 1978, in which interconnection, serv-

ice competition and the Execunet I decision were dis-

cussed at length, the FCC adopted its declaratory

ruling. The ruling rested on the Commission’s con-

struction of its own interconnection orders, as af-

firmed and construed by the Third Circuit, in the

light of Execunet I. (Pet. App. C.) The Commission

concluded that it had provided no opportunity for

hearing on MTS and WATS interconnection and had

not made the statutory public interest finding that

was required for a Section 201(a) order to inter-

connect. Thus, the Commission declared that AT&T

had no obligation under outstanding FCC orders to

provide additional interconnection for Execunet or

other services that are substantially equivalent to

MTS or WATS. Id.

The FCC stated that its interconnection ruling was

“entirely consistent” with Ewxecunet I. (Pet. App.

it had “notice of the Commission’s intentions” as to intercon-

nection and could claim “neither surprise nor denial of the

opportunity to speak meaningfully to the issues before the

Commission.” 503 F.2d at 1268.

22 In its brief in Bell Tel. Co. of Penn., supra, the FCC had

told the Third Circuit that if any serious questions arose as

to the extent of AT&T’s interconnection obligations to the spe-

cialized carriers, “AT&T can seek guidance from the Com-

mission.” (Pet. App. 43C.)

19

41C.) The error the court had found in that case

was the FCC’s failure to make an affirmative public

interest finding which the court regarded as a pre-

requisite to imposing service restrictions on certifi-

cates. The court had reasoned that “failure to con-

sider” the matter was not the same thing as making

“an affirmative determination” that the public in-

terest required restrictions, the Commission stated.

(Pet. App. 41C, referring to the court’s reasoning at

Pet. App. 27B-28B.)

The FCC said that Section 201(a) also required an

affirmative finding as a prerequisite to an intercon-

nection order. Since the Commission had expressly

excluded MTS and WATS from consideration in the

Specialized Common Carrier Services proceeding, it

had made no affirmative determination that intercon-

nection for such services would serve the public in-

terest. (Pet. App. 41C-42C.) Thus, the Commission

concluded, its prior orders as construed in Execunet

I could not have required such interconnection. Jd.

MCI immediately petitioned the D.C. Circuit for

review of the declaratory order. At the same time,

it filed a motion with the court, in the Execunet I

docket, asking for an order directing the FCC to

comply with the court’s mandate by requiring AT&T

to furnish additional interconnection facilities for

Execunet.

28 MCI Telecommunications Corp. v. FCC, No. 78-1150, D.C.

Circuit. This case remains on the docket in the D.C. Circuit.

20

C, Execunet IT.

The Commission had no opportunity to defend its

‘declaratory ruling on the merits, as it would on di-

rect review. Instead, the Commission addressed itself

to the motion to direct compliance with mandate.” It

argued that Execunet I did not and could not require

interconnection because neither the parties nor the

court had addressed that matter in the earlier case.

In any event, the Commission argued, the Third Cir-

cuit had resolved the interconnection question on di-

rect review in precisely the same way as the declara-

tory ruling, and the mandate of the Third Circuit

controls the question—not the mandate of the D.C.

Cireuit in Execunet I. The Commission urged the

court of appeals to deny the motion and to consider

interconnection in the separate review proceeding that

MCI had initiated, in which the FCC would have a

full opportunity for briefing and oral argument.

The court of appeals issued its Execunet II order

on April 14, 1978. Conceding that Execunet I was

“not addressed explicitly to the interconnection issue

or to AT&T’s obligation to provide interconnection”

(Pet. App. 13A), the court concluded that the

“thrust” of its opinion and “the expansive interpreta-

tion of Specialized Carrier’ it had advanced “clearly

mandate[d] an equally expansive view of the scope

of the interconnection obligations” (Pet. App. 16A,

24 The FCC released its order on February 28. FCC litiga-

tion counsel responded to the motion to direct compliance on

April 6. There was no opportunity for oral argument.

21

17A). Denial of further Execunet interconnections,

that court said, “deliberately frustrates the purpose

of the litigation” (Pet. App. 18A), and gives MCI

“good cause to feel that [the FCC order] is strikingly

unfair” (Pet. App. 12A).

The court of appeals rejected the argument that

the Third Circuit’s decision controlled the intercon-

nection matter:

[J]Just as the Third Circuit found Specialized

Carrier sufficiently broad to include FX and

CCSA service, notwithstanding the absence of

specific references to those services, so too we

have found that decision broad enough to encom-

pass Execunet, notwithstanding the similar ab-

sence of specific references.

(Pet. App. 21A.) The D.C. Circuit did not address

the Commission’s observation in the ruling that Sec-

tion 201(a) requires an affirmative public interest

finding as a prerequisite to an order for MTS and

WATS interconnection and that the FCC had made

no such finding.

The court of appeals denied rehearing and rehear-

ing en banc on May 8, 1978, with Judges Leventhal

and McGowan not participating. (Pet. App. D.)*

REASONS FOR GRANTING THE WRIT

The Court should grant the writ because (1) the

order in Execunet II conflicts directly with a decision

** This Court, on May 22, denied the applications of AT&T

and USITA for stay pending, certiorari.

22

of the Third Circuit and thus confronts the Commis-

sion with irreconcilable judicial interpretations of its

interconnection orders; (2) the court of appeals has

expanded its Execunet I mandate to govern matters

the court did not consider or decide in the earlier

case; (3) the court of appeals has performed an ad-

ministrative function in establishing important com-

munications policy and ordering interconnection to

implement its policy, in derogation of the Commis-

sion’s statutory function and in violation of the proper

role of courts reviewing agency action; and (4) the

court’s decision is wrong as a matter of statutory

interpretation and construction of the relevant agency

decisions.

1. Conflict with the Third Circuit.

The Third Circuit’s decision in Bell Tel. Co. of

Penn., supra, 503 F.2d 1250, affirmed the FCC’s only

relevant interconnection orders and construed them

as requiring AT&T to interconnect with the special-

ized carriers only for the full range of private line

services. The Third Circuit directly addressed the

scope of interconnection under those orders, because

that was what its case was about. It found, after

analysis of the FCC’s Specialized Common Carrier

Services policy decision and the interconnection en-

forcement order in Bell System Tariff Offerings,”

that the FCC had required only “those (interconnec-

tion) elements of private line service which AT&T

2°46 FCC 2d 413 (1974). The Third Circuit reviewed the

interconnection enforcement order in Bell Tel. Co. of Penn.

ED bie et ed OR we eh Ed le

23

supplies to its affiliates... .” 503 F.2d at 1273-74.

The court also found that AT&T had the required

“opportunity for hearing” because it was given “no

tice of the Commission’s intentions” and thus could

claim “neither surprise nor denial of the opportunity

to speak meaningfully to the issues before the Com-

mission... .” Id. at 1268.

To resolve AT&T’s inadequate notice and over-

breadth arguments, the Third Circuit had to deter-

mine whether and where the Commission had drawn

a line between services for which interconnection had

been ordered and services for which interconnection

had not been ordered. By contrast, the D.C. Circuit

held that the Commission had not drawn such a line

and, indeed, that further proceedings were necessary

before the Commission could lawfully forbid inter-

connection for any category of services. A close anal-

ysis of the process of reasoning by which the Third

Circuit reached its holdings on notice and breadth

reveals the irreconcilable conflict with the rationale

and decision in Execunet II.

In determining that AT&T had adequate notice in

the Specialized Common Carrier Services proceeding,

the Third Circuit relied heavily on the notice’s dis-

tinction between “message toll telephone and wide

area telephone service” on the one hand and “private

line program transmission and other more specialized

services” on the other hand. 503 F.2d at 1269. Quot-

ing the rulemaking notice, the court concluded that

the Commission had contemplated that, at most, only

“2.4 percent” of AT&T’s total business would be

24

“vulnerable to competition” if interconnection were

ordered. Jd. In reasoning that the Commission’s

reference to “percentages” and its “analysis” of com-

petitive vulnerability gave adequate notice that FX

and CCSA were candidates for forced interconnec-

tion, the Third Circuit explicitly decided, first, that

the “2-4 percent” excluded MTS/WATS and, second,

that FX and CCSA were “perforce include[d]” on

the basis of “[s]imple mathematics.” Jd. Thus, the

exclusion of MTS/WATS was a logical prerequisite

to the court’s inclusion of FX and CCSA, and was

not mere dictum or a negative inference unnecessary

to the result.”

The exclusion of MTS/WATS was also an essential

ingredient of the Third Circuit’s affirmance of the

breadth of the interconnection order. AT&T had

charged that the order was “unbounded.” Agreeing

that the order on its face provided insufficient guid-

ance, the court limited the order to “private line”

services in accordance with what it viewed as the

intended “context” of the Commission’s decision. 503

F.2d at 1273. The court indicated that, absent this

limitation, remand would have been necessary.* Id.

27 See also MCI Communications, Inc. Vv. AT&T, supra, 369

F. Supp. at 1015, 1027.

*° If thereafter the Commission had ruled that its previous

order did compel interconnection with MCI for Execunet and

other MTS- and WATS-like services, AT&T could have gone

promptly to the Third Circuit and obtained summary reversal.

AT&T’s argument would have been bolstered by the fact that

in obtaining the Third Circuit’s initial ruling, the Commission,

MCI, and others had represented that the interconnection

ae ee aS ee ae Ee Oe OD Te BR ODS PUNO Y Me Oe fe A MLA ALN art A Saeed ntl Goh a LY PS, AT lM a MRT ge a Sky LRTI Ue ewe

25

The D.C. Circuit ruling stands in stark contrast

to the foregoing. Whereas the Third Circuit effec-

tively decided that the adequacy of notice and the

breadth of the interconnection obligation hinged on

the exclusion of MTS/WATS, the D.C. Circuit held

that interconnection for MTS/WATS-type services

was obligatory. The D.C. Circuit stated that its ex-

pansive interpretation of MCI’s authorizations ‘“man-

dates an equally expansive view of the interconnec-

tion obligation. .. .” (Pet. App. 17A.) Since that

court had earlier held that MCI’s authorizations were

not restricted in any way (Pet. App. 31B), it follows

from the Execunet II order that the interconnection

obligation is similarly unbounded. This is precisely

the construction that the Third Circuit rejected in

affirming the Commission’s order as having a “defi-

nite meaning.” 503 F.2d at 12738.

Thus, we have two appellate courts interpreting the

same agency orders in flatly inconsistent and irrecon-

cilable ways—the one court agreeing with the agency

which issued the order and the other (the D.C. Cir-

cuit) deriving a contrary meaning not from the face

or context of the order but from the court’s earlier

opinion {Execunet I) on a “very different issue” (Sec-

tion 214 facilities authorization). (Pet. App. 27B

n.59.) Moreover, each court was governed by a dif-

obligation extended to private line services and no farther.

(Pet. App. 32C-33C, 37C.) The Third Circuit’s repeated refer-

ences to “private line” or “specialized” services (503 F.2d at

1254, 1256, 1259, 1260, 1261, 1273) amply testify to the court’s

reliance on the parties’ representations.

26

ferent understanding of Section 201(a). The Third

Circuit viewed an FCC hearing and “public interest”

finding as “condition[s] precedent” to imposition of

any interconnection order. 503 F.2d at 1270. Con-

ceding that the FCC had not yet made that “public

interest” finding (Pet. App. 8B), the D.C. Circuit

necessarily viewed Section 201(a) differently.

The conflict between the circuits will have con-

tinuing adverse consequences. Not only will the Com-

mission face the continued dilemma of whether to

obey the one circuit or the other, but affected parties

appealing future Commission decisions may expand

the controversy to other circuits.” To ensure a ra-

tional and consistent nationwide communications

policy in this vital area, the Court should grant cer-

tiorari and resolve the conflict between the circuits.”

2° For instance, if MCI or another specialized carrier files

tariffs which presuppose interconnection with non-Bell oper-

ating companies for MTS/WATS-like services, the Commis-

sion will have to determine whether such interconnection was

required by the 1971 Specialized Common Carrier Services

decision. If the Commission, relying upon Ezecunet II, rules

that interconnection was so required, the affected telephone

companies may well seek reversal in the Third or another

circuit.

*° The conflict with Bell Tel. Co. of Penn. is clearer and

more direct in this case than in Execunet I. In Execunet I, the

D.C. Circuit had not purported to construe the interconnection

orders at stake in Bell Tel. Co. of Penn. By contrast, in Eze-

cunet II, the D.C. Circuit construed the very same orders pre-

viously and differently construed by the Third Circuit. More-

over, the conflict between the circuit’s views of Section 201 (a)

became manifest only when the D.C. Circuit explictly dealt

with interconnection.

Yh a —

27

2. Expansion of the Execunet I Mandate.

The court of appeals summarily required inter-

connection in an order purporting merely to enforce

its previous mandate. But the earlier decision had

resolved only two issues:

whether and to what extent Section 214 of the

Communications Act expressly authorizes the

Commission to impose prior approval require-

ments through the facilities authorization mecha-

nism, and whether the Commission has properly

exercised whatever authority it may have under

Section 214.

(Pet. App. 21B.) It answered the first in the affirma-

tive; but it reversed the Commission on the sole

ground that the agency had not “properly exercised’”’

its authority under Section 214(c) to restrict MCI’s

certificates because it had not made the requisite

public interest finding. (Pet. App. 22B-31B.)

The court did not decide anything about intercon-

nection in Execunet I." The issue was not raised

either at the agency or in the review proceeding.”

31 The Execunet I opinion mentioned interconnection only

in a footnote attempting to distinguish the Bell Tel. Co. of

Penn. decision as involving “a very different issue” from the

Execunet I case—namely, the scope of AT&T’s interconnection

obligation. (Pet. App. 27B n.59.)

82 The court of appeals appears in Execunet II to suggest

some kind of estoppel because the FCC did not rely upon the

interconnection issue in its 1976 cease and desist order. (Pet.

App. 12A-13A.) But there was no reason for the FCC to

address that issue. As the court of appeals apparently con-

cedes, the FCC firmly believed that MCI had limited authori-

zations, and that the pertinent inquiry was whether Execunet

28

Indeed, the court went out of its way to deny that its

holding was broad. It disclaimed any finding that the

public interest required Execunet, it left such ques-

tions to further proceedings at the FCC, and it stated

its holding narrowly as limited to a procedural fail-

ure on the part of the FCC. (Pet. App. 31B, 32B.)*

Now the court of appeals appears to say that Eve-

cunet I mandates interconnection that is coextensive

with MCI’s unrestricted certificates. The court ap-

parently assumes that its decision required the re-

moval of any and all obstacles to MCI’s implementa-

tion of Execunet service, without regard to what the

Commission might have ordered and, if necessary to

achieve that end, without regard to the statutory

prerequisites to an interconnection order. 47 U.S.C.

§ 201(a).™

But the reviewing court does not dictate a result;

nor does it sit to vindicate expectations or the ulti-

was beyond the limit. When the FCC found in the original

decision that Execunet was not an authorized service, in its

view of the specialized carrier policy, its inquiry was at an

end.

83 The court’s characterization of its own opinion supported

the oppositions to the petitions for certiorari, which argued

that the decision was so narrow and unassuming as not to

warrant Supreme Court review.

** In a per curiam memorandum attached to an order staying

its Execunet II decision, the court reveals the sweeping view

it now takes of Execunet I. The court states, in effect, that

the Commission may not take any action, pending “final rules”

after agency rulemaking, that would be inconsistent with what

the court has established as “MCI’s right to enter the market

now.” (Pet. App. 10E.)

29

mate purposes of litigants. Its function ends when

“an error of law is laid bare.” At that point, “the

matter once more goes to the agency for reconsidera-

tion.” Federal Power Commission v. Idaho Power

Co., 344 U.S. 17, 20-21 (1952). Execunet I properly

controls only those matters the court considered and

decided directly. See Perkins v. Standard Oil Co.,

399 U.S. 222 (1970); Federal Trade Commission v.

Colgate-Palmolive Co., 380 U.S. 874 (1965). The

words of the opinion, and not the private thoughts

of the judges, constitute the mandate.* The words

and the reasoning of Execunet I do not require or

justify the court of appeals’ interconnection order.

This Court should grant the writ, in exercise of

its supervisory power over inferior courts, to con-

strue the Execunet I mandate in the accepted and

usual course of judicial proceedings, on the basis of

matters actually considered and decided. Federal

Trade Commission vy. Colgate-Palmolive Co., supra,

380 U.S. at 379; National Labor Rel. Bd. v. Donnelly

Co., 330 U.S. 219, 227; Federal Communications

Comm'n v. Pottsville Broadcasting Co., 309 U.S. 134,

141 (1940).

3. Judicial Intrusion into Administrative Process.

In addition to ignoring the controlling decision of

the Third Circuit and improperly expanding its own

mandate, the court of appeals intruded into the

85 Litigants may not be left to speculate as to the require-

ments of the mandate. See National Labor Relations Board

v. Donnelly Co., 380 U.S. 219, 229 (1947).

30

FCC‘s decision-making process by directly ordering

carrier interconnection to implement judge-made com-

munications policy. As the Third Circuit said in Bell

Tel. Co. of Penn.:

Section 201(a) of the Communications Act re-

quires (as a conditien precedent to the issuance

of interconnection orders) that the FCC make

a finding that the proposed interconnection will

be “necessary or desirable in the public interest.”

503 F.2d at 1270. Although the FCC plainly has had

no hearing on MTS/WATS interconnection and has

made no finding that such interconnection is ‘‘neces-

sary or desirable in the public interest,” Execunet I/

required immediate interconnection. The court of

appeals has no authority either to disregard the statu-

tory requirements or to assume the Commission’s

function.

Congress gave the FCC the responsibility to make

and implement communications policy. That includes

the big decisions, such as Specialized Common Carrier

Services, supra, 29 FCC 2d 870, and the smaller ones

that carry out policy in a consistent and rational

manner. All its decisions are subject to judicial re-

view; and if error is found, the FCC must take

corrective action. But the decisions must be the

FCC’s. When the court of appeals ordered intercon-

nection, it “overstepped the bounds of its reviewing

authority,” Federal Power Commission v. Transcon-

tinental Gas Pipe Line Corp., 423 U.S. 326, 331

(1976), and “usurped an administrative function,”

ae ik

Ns

31

Federal Power Commission v. Idaho Power Co., supra,

344 U.S. at 20.

The order to interconnect underscores a more fun-

damental problem in this case: the court of appeals

has made important communications policy and will

not countenance any action by the FCC—even lawful

and reasonable action—that might frustrate the “in-

tended effect of [the court’s] decree.” (Pet. App.

18A.)*” But as we pointed out above, the function

of the reviewing court ends when agency error is

“laid bare.” At that point, the Commission once

again must enforce “the legislative policy committed

to its charge.” Federal Communications Comm’n v.

Pottsville Broadcasting Co., supra, 309 U.S. at 145.

The court of appeals, in rejecting the FCC’s inter-

connection ruling, appears to claim, in effect, that

“the Commission lacks power to enforce the standards

of the Act in this proceeding.” See Securities & Evx-

change Comm’n v. Chenery Corp., 332 U.S. 194, 203-

04 (1947). Such a claim “deserves rejection.” Jd.”

36 It seems fair to characterize the court’s current view of

Execunet I as a judicial rulemaking proceeding in which the

FCC was permitted to participate and which established, as

a matter of policy, “MCI’s right to enter the market now.”

(Pet. App. 10E.) As this Court has pointed out, it is all too

easy for a reviewing court to judge agency action “in the light

of policies the court, rather than the agency, seeks to imple-

ment... .” Atchison, T. & S.F.R. Co. v. Wichita Bd. of Trade,

412 U.S. 800, 809 (1973). But this approach to judicial review

improperly interferes with Congress’ assignment of particular

functions to agencies. /d.

st Bxecunet II also violates the Chenery principle that agen-

’ cies may act either by general rule or by individual order. 332

32

The court of appeals’ interconnection order was an

exercise of an administrative function, plainly in

violation of consistent rulings in this Court. The

Court should grant the writ to restore the appellate

review process to its proper bounds.

4, Error in Statutory Construction.

The FCC properly determined in the declaratory

ruling that it had not made a public interest finding

to justify an interconnection order for MTS/WATS-

type services. (Pet. App. 36C-48C.) The court of

appeals also eschewed any finding that MTS/WATS

competition is in the public interest. (Pet. App. 32B.)

Yet, Execunet II required interconnection in the face

of a statute that expressly forbids such an order in

the absence of an affirmative public interest finding.

47 U.S.C. § 201(a). Because no one has made that

finding, the court’s order rests upon an error in

statutory construction.

U.S. at 199-204. The court stated, apparently as an independ-

ent ground for its order, that “tariff and rulemaking proceed-

ings” were the “exclusive means” by which the FCC could

affect the services provided by specialized carriers. (Pet. App.

16A, 17A, 4E.) But the agency “must retain power to deal

with the problems on a case-by-case basis if the administrative

process is to be effective.” 332 U.S. at 203. The Commission

surely cannot be faulted for acting on AT&T’s petition for a

declaratory interpretation of its own outstanding orders,

simply because the court of appeals contemplated rulemaking

as the “exclusive means” for further agency action in this

area. Nor, for that matter, could the FCC ignore its statutory

duties under Section 201(a) even though Ezecunet I had over-

looked that provision.

ates tte.

33

The court apparently believed that the logic behind

its Hxecunet I interpretation of Section 214 also

controlled the interpretation of Section 201(a). A

comparison of the two provisions, however, leads to

a contrary conclusion. Section 214(c) says that the

FCC “may attach to issuance of the [214] certificate

such terms and conditions as in its judgment the

public convenience and necessity may require.” 47

U.S.C. §214(c) (emphasis added). In contrast to

this permissive language which helped form Execunet

I’s view that such conditions are the exception and

not the rule (Pet. App. 9A n.10), Section 201(a)

makes it clear that the FCC must provide an ‘“‘op-

portunity for hearing” and make a “public interest”

finding before ordering interconnection.

The essentional rationale of Execunet I was that,

under Section 214, once facilities are authorized, a

carrier may offer any services with those facilities un-

less the FCC imposes an express service-limiting con-

dition on the authorization. It does not follow, how-

ever, that interconnection orders under Section 201

(a) are similarly unbounded.* It is one thing to au-

38 Our argument here is independent of the argument that

the Third Circuit definitively construed the scope of the inter-

connection order in Bell Tel. Co. of Penn., supra, 503 F.2d

1250. We point out, however, that both statutory and decisional

law indicates that the Third Circuit jurisdiction became ex-

clusive when the petition for review of the interconnection

orders was filed there, and that the decision of that court

precluded any “collateral attack” on its judgment in new liti-

gation between the same parties. 28 U.S.C. § 2349; City of

Tacoma V. Taxpayers of Tacoma, 357 U.S. 320, 339-40 (1958).

34

thorize a carrier to construct and use its own facilities

in whatever way it may wish. But, as the “oppor-

tunity for hearing’’/“public interest” finding scheme

of Section 201(a) attests, it is quite a different thing

to require access to and use of another company’s

facilities for any possible service. In recognition of

the infringement on the business affairs of a separate

company, Section 201(a) permits the FCC to require

interconnection only to the extent “such action [is]

necessary or desirable in the public interest.” *°

In Execunet I, the court reversed the FCC because

the agency had failed, in the court’s view, to make

an “affirmative determination” of public interest need

for restrictions on MCI’s authorizations. (Pet. App.

24B-31B.) The court stated:

We can assume, without deciding, that a service

like Execunet was not within the contemplation

of the Commission when. it made the Specialized

Carrier decision. Nonetheless, it is readily ap-

parent that failure to consider the public interest

ramifications of a service—either pro or con—

during resolution of a Section 214(a) application

is simply not the same thing as an affirmative

determination that the “public convenience and

3° Hxecunet II makes much of the fact that AT&T did pro-

vide interconnections during the pendency of Ezecunet I. A

carrier’s previous voluntary interconnection arrangement

might be a proper consideration for the FCC to weigh in

determining whether compulsory interconnection thereafter

is “necessary or desirable in the public interest.” But such

prior practice is hardly justification for a court to usurp the

FCC’s function of balancing that consideration against other

competing public interest factors.

2 REE Ad cea OC aR ele SN lt Oe

35

necessity may require” a restriction on a facility

authorization limiting a carrier to provision

solely of those services proposed in its Section

214(a) application.

(Pet. App. 27B-28B. Emphasis added.)

But if a “failure to consider the public interest

ramifications” could not satisfy a statutory require-

ment of affirmative public interest findings in Section

214(c), it follows that the same “failure” would not

satisfy the requirement of public interest findings

that are a prerequisite to an order to interconnect

in Section 201(a). We submit that the court’s ap-

proaches to the requirements of public interest find-

ings in these two statutes are irreconcilable.”

The Commission’s declaratory ruling, moreover,

proceeded from a construction of the agency’s own

interconnection orders, as those orders had been in-

terpreted on direct judicial review and as the FCC

had consistently read and applied them. The agency’s

reading of its own Act and particularly of its own

decisions is entitled to deference in the courts, and

must be given controlling weight unless 1+ is plainly

erroneous. Red Lion Broadcasting Co. v. FCC, 395

4° The FCC argued in Execunet I, of course, that it could

impose service restrictions on certificates without an affirma-

tive public interest finding by virtue of the statute’s provision

for granting “such certificate as applied for.” That position

is entirely consistent with our argument that Section 201 (a),

which contains no such alternative route to ordering intercon-

nection, requires an affirmative public interest finding that the

FCC has not made as to interconnection for MTS/WATS-type

services.

36

U.S. 367, 381 (1969); Udall vy. Tallman, 380 U.S. 1,

16-18 (1965). In this case, the court of appeals

treated the agency’s construction almost with con-

tempt: ‘“‘[The Commission’s declaratory ruling] re-

flected 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.” (Pet. App. 10E. Emphasis added.)

Under the proper test, if the FCC’s interpretations

of the statutory provisions and its own earlier deci-

sions are reasonable—as they plainly are—this Court

“must reverse the decision of the Court of Appeals.”

Udall v. Tallman, supra, 380 U.S. at 18. The court

of appeals may not override agency action “simply

because the court is unhappy with the result reached.”

Vermont Yankee Nuclear Power Corp. v. Natural

Resources Def. Coun., Inc., No. 76-419 (decided April

3, 1978), slip opinion p. 36.

CONCLUSION

DAVID J. SAYLOR,

veral Counsel

Associate Gene

JOHN E. INGLE,

Counsel.

2 amr hi

SOVERMMENT PRINTING OFFICE