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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Appendix
- **Published:** January 1, 1978

## Text

No. 78-270
Gu the Supreme Court of the United States

OcToBER TERM, 1978

FEDERAL COMMUNICATIONS COMMISSION, PETITIONER
v.
MCI TELECOMMUNICATIONS CorP., ET AL.

PETITIONER’S APPENDIX

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.

TABLE OF CONTENTS

Appendix A, Order and Opinion of the United
States Court of Appeals for the District of
Columbia Circuit, granting the motion of
MCI Telecommunications Corp. for an order

directing compliance with mandate, April 14,
1978

Appendix B, Opinion of the court of appeals
in MCI Telecommunications Corp. v. FCC,
July 28, 1977

Appendix C, Memorandum Opinion and Order
of the Federal Communications Commission,
Petition of American Telephone and Tele-
graph Company for a Declaratory Ruling
and Expedited Relief, February 28, 1978

Appendix D, Orders of the court of appeals
denying petitions for rehearing and sugges-
tions of rehearing en banc, May 8, 1978

Appendix HE, Order of the court of appeals
and per curiam memorandum granting and
denying motions for stay of April 14, 1978,
Order, May 11, 1978

A ———

- oe

ee

APPENDIX A

United States Court of Appeals for the District of
Columbia Circuit
SEPTEMBER TERM, 1977

No. 75-1635
MCI TELECOMMUNICATIONS CORPORATION, MICROWAVE
ComMuNIcaTIONS, INc., aND N-TrripPLE-C INc.,
PETITIONERS
v.

FEDERAL COMMUNICATIONS COMMISSION AND UNITED
STATES OF AMERICA, RESPONDENTS.
AMERICAN TELEPHONE AND TELEGRAPH CO., ET AL.,
INTERVENORS.

Filed April 14, 1978

Before: WricHT, Chief Judge; TAMM and WILKEY,
Circuit Judges.
ORDER
Upon consideration of petitioners’ motion request-
ing this Court to enter an order directing compliance
with this Court’s mandate previously issued in this
proceeding, of petitioners’ motion for expedited con-
sideration, of the oppositions of intervenors United
States Independent Telephone Association and Ameri-
can Telephone and Telegraph Company, of the re-
sponse of intervenor Southern Pacific Communica-
tions Company, of petitioners’ supplements to their
motion, of the response of respondent Commission, of
the reply of intervenor United States Independent
; (1a)

a

2a

Telephone Association to the response of Southern
Pacific Communications Company, of petitioners’ re-
ply to the opposition of American Telephone and Tel-
egraph Company, of the supplemental opposition of
American Telephone and Telegraph Company to the
response of intervenor Southern Pacific Communica-
tions Company to the petitioners’ motion, of the reply
of intervenor Southern Pacific Communications Com-
pany to the various oppositions, and of the letter of
counsel for respondent Commission advising of addi-
tional authorities, it is

ORDERED by the Court that petitioners’ mo-
tion for an order directing compliance with the man-
date of this Court, previously issued, is granted for
the reasons set forth in the opinion for the Court filed
herein this date.

Per Curiam.

For the Court:
GrEORGE A, FISHER,
Clerk.

ee

|

3A
Ruited States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

No. 75-1635

MCI TELECOMMUNICATIONS CORPORATION, MICROWAVE
COMMUNICATIONS, INC., AND N-TRIPLE-C INC.,
PETITIONERS

Vv.

FEDERAL COMMUNICATIONS COMMISSION AND
UNITED STATES OF AMERICA, RESPONDENTS

AMERICAN TELEPHONE AND TELEGRAPH COMPANY,
UNITED STATES INDEPENDENT TELEPHONE ASSOCIATION,
DATA TRANSMISSION COMPANY (DATRAN), and
SOUTHERN PACIFIC COMMUNICATIONS COMPANY,
INTERVENORS

Motion for an Order Directing
Compliance With Mandate

Filed April 14, 1978

Bills of costs must be filed within 14 days after entry of judgment. The
court looks with disfavor upon motions to file bills of costs out of time.

ee

4A

Michael H. Bader, William J. Byrnes, Kenneth A. Coz,
and Raymond C. Fay were on the pleadings for peti-
tioners.

Robert R. Bruce, General Counsel, Daniel M. Arm-
strong, Associate General Counsel, and John E. Ingle,
Counsel, Federal Communications Commission, were on
the pleadings for respondents.

Paul J. Berman, Michael Boudin, and F. Mark Garling-
house were on the pleadings for intervenor American
Telephone and Telegraph Company.

Before WRIGHT, Chief Judge, and TAMM and WILKEY,
Circuit Judges.

Opinion for the court filed by Chief Judge WRIGHT.

WRIGHT, Chief Judge: Petitioners here, MCI Tele-
communications Corporation, Microwave Communications,
Inc., and N-Triple-C Inc. (hereinafter, collectively, MCI),
request 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, US.
——, 46 U.S. L. WEEK 3446 (January 16, 1978) (here-
inafter Execunet). This motion by MCI was prompted by
a declaratory ruling issued by the Commission, at the
request of AT&T, on February 23, 1978, holding that
AT&T is under “no obligation” to provide the local physi-
cal interconnections necessary for MCI’s Execunet serv-
ice." MCI argues that this ruling is inconsistent with
and violative of our Execunet decision, and that under

‘In 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).

a

ba

our mandate AT&T is required to provide interconnec-
tions for Execunet. For the reasons set forth below, we
agree, and we order the parties to comply with our man-
date.

I. BACKGROUND

The motion to direct compliance before us now is the
most recent stage in the long series of proceedings and
litigation in which MCI has attempted to secure and
preserve its authority to offer Execunet service.? Since
the seminal FCC Specialized Common Carrier decision,
Specialized Common Carrier Services, 29 FCC2d 870
(1971), aff'd sub nom. Washington Utilities & Trans-

portation Com’n v. FCC, 518 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 culmi-
nated in our Execunet decision upholding MCI’s authori-
ty to offer Execunet pending further rulemaking by the
Commission. Now, however, we are faced with a new
effort by AT&T, with the approval of the Commission, to
arrest the development of Execunet service, and the ques-
tion for immediate disposition is whether protection of
the integrity of our Execunet mandate requires that this
new effort be terminated through an order directing com-
pliance with our mandate. We believe it does.

2 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 minimum. See MCI Telecommunications Corp.

: v. FCC, 561 F.2d 365, 367 & n.3 (D.C. Cir. 1977), cert. denied,

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

inafter Execunet); MCI Telecommunications Corp., 60 FCC2d
25, 26 n.1 (July 18, 1976).

elk 8 eke. heme hale Wht tt Us ete 6 — see

6A

Since the course of all of these earlier proceedings is
set out in some detail in our Execunet decision,® our pur-
pose here is only to outline briefly the background neces-
sary to consideration of this motion. In Specialized Car-
rier, supra, the Commission sought to determine by rule-
making “[{wjhether as a general policy the public inter-
est would be served by permitting the entry of new car-
riers in the specialized communications field * * *.” 29
FCC2d at 878. The Commission answered that question
affirmatively,‘ but did not seek to define precisely the

3 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]jhere is a public need and demand for the proposed
facilities and services and for new and diverse sources
of supply, competition in the specialized communications
field is reasonably feasible, there are grounds for a rea-
sonable expectation that new entry will have some bene-
ficial 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 outweigh
the considerations 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.

Specialized 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 Com-
mission went on to address the question of “the appropriate
means for local distribution of the proposed services,” Notice
of Proposed Rulemaking, 24 FCC2d 318 (1970), concluding:

157. We reaffirm the view expressed in the Notice
(paragraph 67) that 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

7A

boundaries of “the specialized communications field.” °

Specialized Carrier served as the basis for the Com-
mission’s later grants, under 47 U.S.C. § 214 (1970), of
facilities authorizations to carriers, including MCI, to
provide microwave communications services. AT&T, how-
ever, refused to provide interconnections necessary for
the specialized carriers to furnish these services. This re-
fusal led MCI to seek and secure from the Commission
both a cease and desist order against AT&T and an affir-
mative order that AT&T was required to provide any
physical connections “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 418 (1974), aff'd

also afford their customers the option of obtaining local
distribution service under reasonable terms set forth
in the tariff schedules of the local carrier. Moreover, as
there stated, “where a carrier has monopoly control over
essential facilities we will not condone any policy or prac-
tice whereby such carrier would discriminate in favor of
an affiliated carrier or show favoritism among competi-
tors.” 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 question at this time. Should any
future problem arise, we will. act expeditiously to take
such measures as are necessary and appropriate 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 ap-
pears to be simply that a specialized carrier is any carrier
that does not attempt to optimize its service offerings to the
voice communications needs of the general public’).

Sa

sub nom. Bell Telephone 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 immedi-
ately 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 customers 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.’

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 un-
der the Communications Act the tariff system provides
the usual mechanism for initiation of new services to be
provided on previously authorized facilities.* Under this

* 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; Mo-
tion of AT&T to Dissolve or Modify the Stay and for Ex-
pedited 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).

Qa

mechanism a carrier files a tariff for the new service and,
subject to a possible stated suspension period, is per-
mitted to implement that service until and unless the
Commission determines that the service is not in the
public interest.* The only limitation on the carrier’s abili-
ty 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 Com-
mission, in granting facilities authorizations, to limit
the services which may be provided on facilities which it
authorizes.”

The Commission argued in Execunet that its Spe-
cialized Carrier decision implicitly restricted the facilities
authorizations of specialized carriers to “private line”
services, that Execunet is mot 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 emphasized that its analysis of
competitive effects in Specialized Carrier assumed that
the specialized carriers would be limited to offering “pri-
vate line” services."

We rejected the Commission’s arguments, holding that
Section 214 requires an affirmative determination to re
strict a carrier’s facilities authorization, and that no such
determination was made in Specialized Carrier. In reach-
ing our conclusion we placed emphasis on the Commis-

* The relevant tariff provisions are found in $§ 203-205 of
the Communication Act, 47 U.S.C. $§ 203-205 (1970). See
Ezecunet, supra note 2, 561 F.2d at 374 n.44.

*° Section 214(c) permits the Commission to “attach to the
issuance of the certificate such terms and conditions as in
its judgment the public convenience and necessity may re-
quire.” 47 U.S.C. $214(c) (1970). See Ezecunet, supra note
2, 561 F.2d at 376-377 & n.56.

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

10a

sion’s staff report which formed the basis for the Spe-
cialized Carrier decision. As to the competition argu-
ment, we found that the staff report “ryminated more
broadly [than the Commission suggested] on the issues
posed by revenue diversion and it appeared highly skep-
tical 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 impacts of service
offerings other than those which were before the Com-
mission in the Specialized Common Carrier decision.”
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 ef-
fects on the public interest as weli as on AT&T. Cer-
tiorari was denied on January 16, 1978."

122 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 can occur at an extraordinary rate—
literally in a matter of months—because the specialized car-
riers have thousands of intercity circuits in operation and
they utilize existing local distribution facilities already in
place. Past experience confirms the severity and speed of this
threat.”), quoted in MCI Petition for Compliance before the
FCC, at 7.

13__§__ U.S, _—, 46 U.S. L. WEEK 3446 (Jan. 16, 1978).

——eEoOe

11a

Hours after the Supreme Court’s denial of certiorari
AT&T announced its intention to cease providing any
additional interconnections for Execunet or similar serv-
ices, and filed with the Commission a petition for declara-
tory ruling that it was under “no obligation” to furnish
MCI or any other specialized carriers with any “addi-
tional” physical connections for Execunet-type services.
The Commission considered AT&T’s petition on an expe-
dited basis, and on February 23, 1978 it adopted a de-
claratory ruling in substantial accord with AT&T’s re-
quest.**

II. THE COMMISSION’s DECLARATORY RULING
IS INCONSISTENT WITH THE Execunet MANDATE

The local physical interconnections which AT&T now
refuses to provide for Execunet service are admittedly
essential to MCI’s ability to offer that service. As a
result, AT&T’s refusal to provide “additional” connec-
tions, upheld in the Commission’s declaratory ruling,
means that MCI 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. Moreover, nothing in the Commission’s
ruling, or in AT&T’s request, establishes any legal basis
for a greater interconnection obligation on AT&T with
respect to maintenance of physical connections already
in place than with respect to “additional” connections,

* The petition for a declaratory ruling was granted, and
AT&T declared without obligation to interconnect, with re-
spect to prior Commission orders, the provisions of the Com-
munications Act, and the mandate of this court in Execunet.
The petition was denied only “insofar as it requests a deter-
mination with respect to the scope of petitioner’s intercon-
nection obligations to specialized common carriers, if any,
under the Sherman Act, the common law, or any federal or
state statute other than the Communications Act.” FCC De-
claratory Ruling, supra note 1, 7 83.

12a

with the result that MCI might well find itself in the
near future unable even to provide Execunet to its exist-
ing 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 en-
gineered by the Commission and AT&T is strikingly un-
fair. Of course, as AT&T and the Commission so vig-
orously argue, litigation in the courts 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&7’s representations
and actions—that AT&T was required to provide inter-
connections for Execunet service.

Until the Supreme Court denied certiorari in Execu-
net, AT&T provided MCI with the interconnections nec-
essary for Execunet service without any form of protest
or objection. Never in the proceedings before this court
did AT&T even suggest that it was not required to pro-
vide these connections, or that the question of MCI’s au-
thority 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 modification of our original stay, in its
briefs and arguments to this court, and in its petition
for certiorari, AT&T consistently emphasized that a

18 Indeed, the Commission’s order does not even restrict its
holding to “additional” connections: it concludes “that our
prior Section 201(a) orders do not direct the petitioners to
provide interconnection of facilities or services to any spe-
cialized common carrier to enable such a specialized common
carrier to provide any service which is substantially equivalent
to MTS or WATS.” Id. §j 79.

13a

decision in favor of MCI would lead to vigorous and ad-
verse competition.—a result which would occur only if
AT&T was required to provide the necessary intercon-
nections for Execunet. AT&T expected and encouraged
this court to take account of these representations in
reaching our decisions in the Execunet matter; certainly,
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 ncw 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 as-
suming 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 inter-
connections to MCI does not simply raise questions of
fairness vis-a-vis MCI; it also raises questions as to the
propriety of allowing respondents here to renounce a
position and obligation which they assumed throughout
the course of the Execunet proceedings. But we need not
rest our grant of MCI’s compliance motion on the prac-
tical 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 interconnection issue or to
AT&T’s obligation to provide interconnection *—a fact

6 See notes 7 & 12 supra.

** See Opposition of AT&T to MCI Motion for an Order
Directing Compliance With Mandate, MC/ Telecommunica-
tions Corp. v. FCC (March 2, 1978), at 10.

18 See id. at 12-14. See also Response of Federal Communi-
cations Commission to MCI Motion for an Order Directing

14a

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 analysis
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
pursuant to an order under Section 201(a) of the Com-
munications Act; and, if not, whether AT&T is under an
obligation 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
Commission’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

Compliance With Mandate, MCI Telecommunications Corp. v.
FCC (March 6, 1978), at 7 (“There was no mention of inter-
connection rights or obligations, because none of the parties
had raised these questions either before the Commission or
in the Court.’’).

1° See Comments of the United States Department of Justice,
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
Telecommunications Corp. v. FCC (March 9, 1978), at 7, 9
(arguing, inter alia, 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 “[r]Jecent court decisions
make it clear that local telephone companies, including AT&T
subsidiaries, are affirmatively obliged to offer local intercon-
nection or loop services to other carriers, including MCI, to
facilitate lawful services”).

te ete Gand ca

POERebeE Ao: Coe

15a

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 purpsoses of the Commission’s first question, the
critical interconnection order is the Bell System Tariff
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 here-
after 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 (hereinafter FCC Declaratory Ruling), allegedly re-
lying on a decision of the Third Circuit to that effect. See
infra. In the very next paragraph of its decision, how-
ever, the Commission recognized “that the Specialized
Carrier decision encompassed specialized communication
services other than those which theretofore had been de-
scribed 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. Id. (259. Thus the Commis-
sion 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 serv-
ices were explicitly excluded from consideration in
Specialized Common Carrier, Bell System Tariff

16a

Offerings, and Bell Tel. Co. of Pennsylvama. 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. * * *

Id. (emphasis in original). Phrased in these terms the
Commission’s reasoning is wholly at odds with that of
this court in Execunet. For in Execunet we held that
MCI’s facilities authorizations encompassed Execunet
service precisely because Specialized Carrier did not ex-
plicitly and affirmatively exclude this type of service from
consideration. In relying on exactly the opposite conclu-
sion to support its declaratory ruling, the Commission
acts in direct and explicit contradiction 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 opinion and deci-
sion in Execunet, derived in part from our reading of
the Commission staff report, was 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
proceedings.” In its February 23rd ruling, however, the
Commission narrowly construed Bell System Tariff Of-
ferings, which was based on Specialized Carrier, to ex-
clude Execunet interconnections from those which AT&T
was required to provide; and it relied on interconnection
obligations—as opposed to tariffs or rulemaking—effec-
tively to limit the services which MCI and other carriers
were authorized to provide by the Specialized Carrier
decision.

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

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17a

Both of these positions are clearly inconsistent with
the basic themes of our Execunet decision. For the ex-
pansive interpretation of Specialized Carrier we advanced
in Execunet clearly mandates an equally expansive view
of the scope of the interconnection obligations of AT&T
which were defined by that decision. And in fact the
interconnection order which the Commission issued on the
basis of Specialized Carrier, as well as its discussion of
interconnection in Specialized Carrier itself," reflected
the broad reading of that decision to which we have ad-
hered: as noted earlier, it required AT&T to furnish
interconnection for all “presently or hereafter authorized”
services provided by the specialized carriers.” Similarly,
our emphasis on tariffs and ratemaking as the exclusive
means for future limitations on the specialized carriers’
development * clearly contemplated that the carriers
would be free to expand their service offerings—and
would be afforded the necessary interconnections—until
and unless it was found that the public interest demanded
otherwise. The Commission’s narrow construction of
AT&T’s existing interconnection obligation is not only
theoretically inconsistent with this position, but also
means in practice that a specialized carrier cannot im-
plement new offerings until and unless it is able to es

1 See note 4 supra, quoting Specialized Carrier, 29 FCC2d

at 940 (“established carriers with exchange facilities should,
upon request, permit interconnection or leased channel ar-
rangements 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 rea-
sonable terms set forth in the tariff schedules of the local
carrier”).

2 Bell System Tariff Offerings, 46 FCC2d 413 (1974), aff’d
sub nom. Bell Telephone Co. of Pennsylvania v. FCC, supra
note 3.

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

18a

tablish that the public interest mandates the services *
and that a new order should therefore be issued directing
AT&T to provide interconnections. This twists the is-
sues we contemplated in this case beyond recognition ; it
deliberately frustrates the purpose of the litigation, the
basis on which it was presented by the parties, and the
intended effect of our decree.

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 in-
consistently 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. THE 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

** Compare Execunet, supra note 2, 561 F.2d at 374 (“it is
well recognized that the tariff provisions of the Communica-
tions Act (Sections 203-205, 47 U.S.C. §§ 203-205), like the
cognate sections of the Interstate Commerce Act * * *, embody
a considered legislative judgment that carriers should in gen-
eral be free to initiate and implement new rates or services
over existing communications lines unless and until the Com-
mission, after hearing, determines that such rates or prac-
tices are unlawful, subject only to a limited period of suspen-
sion set out in the statute”) (footnotes omitted; emphasis
in original).

mal

+ ale

ee ke eee :

19a

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 compels
or even provides support for the Commission ruling that
AT&T is under no obligation to provide interconnections
for Execunet.

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 local 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

*° See FCC Declaratory Ruling, supra note 1, 19 56, 61;
Response of Federal Communications Commission, supra note
18, at 20.

** 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.

20a

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 issuance of broad interconnection orders. Our orders
herein therefore make clear that Bell is to provide inter-
connection for all of the authorized services of the special-
ized 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
review 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

28 Bell System Tariff Offerings, supra note 22, 46 FCC2d
at 426-427. See also Letter from Bernard Straussburg, Chief
of the Common Carrier Bureau, FCC, to AT&T, August 31,
1973 (“it is our view that, as requested by MCI, the associ-
ated Bell companies are required to permit interconnection or
provide local channel arrangements to MCI”), quoted in Bell
Telephone Co. of Pennsylvania v. FCC, supra note 3, 503
F.2d at 1256.

2 Bell Telephone Co. of Pennsylvania v. FCC, supra note
3, 508 F.2d at 1259.

3° Id. at 1258-1260. In so doing the court emphasized the
broad language the Commission itself employed in the Spe-
cialized Carrier proceeding. I¢. at 1262-1263. See note 4 supra,

Se on

ee a eee ee

21a

so doing the Third Circuit decision provides strong sup-
port—not conflicting authority—for the similarly broad
construction we accordeu 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 absence
of specific references.”

Nonetheless, AT&T and the Commission, pointing to
the Third Circuit’s discussion of an overbreadth challenge,
argue that that discussion fgyecloses the FCC from find-
ing that AT&T is required to interconnect for Execunet
under the Specialized Carrier and Bell Telephone orders.”

quoting Specialized Carrier, 29 FCC2d at 940; Ezecunet,
supra note 2, 561 F.2d at 378-379.

** 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 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 “C[wlhile there
is language in [Specialized Carrier] indicating a concern with
new, customized services, we interpret this language as re-
ferring not only to types of services provided, but also to the
delivery of private line services to ultimate customers who
theretofore 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 recog-
nized in Specialized Carrier a concern with and an interest
in encouraging “new, customized 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, { 58; Response
of Federal Communications Commission, supra note 18, at
10-11, 20; AT&T Opposition, supra note 17, at 19.

22a

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 “‘wnbownded intercon-
nection order.” Id. 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 peti-
tioner that the order is somewhat vague anc, to a
certain extent, overbroad. On its face, the order
gives little guidance as to the types of services that
A T & T will be required to provide “hereafter.”

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 context
in which they appear. * * * Viewed in its entirety,
the FCC’s opinion in Docket 19896 operates to pre-
clude AT&T from treating its Long Lines Depart-
ment and its affiliates differently than it treats the
specialized common carriers. * * * As we read the
order, the FCC has required A T & T to provide to
the specialized carriers those (interconnection) ele-
ments 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

*° FCC Declaratory Ruling, supra note 1, 1 53, quoting MCI
Telecommunications Corp., 60 FCC2d 25, 63 (1976).

Ro ime he ohne ES sd Srgnctail

—

fs Dental ee

Sees |

-

234

was concerned were directed not to any uncertainty as
to what 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.’” Jd. ‘emphasis added). Such concerns are not

limits AT&T’s interconnection obligations to “private
line” services, as that term is currently defined by the
Commission. Rather, the Commission, notwithstanding
its emphasis on the Third Circuit’s use of the term “pri-
vate line” as a limiting factor in its decision, itself recog-

rier decision as well as our order in Bell System Tariff
Offerings and the Court’s decision in Bell Tel. Co. of Penn-
sylvania require interconnection for all specialized inter-
state communication 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 abbreyvi-

ices were explicitly excluded from consideration in Spe-
ctalized Common Carrier. Bell System Tarif Offerings,
and Bell Tel. Co. of Pennsylvania.” Id. ( emphasis in

original). And that is precisely the question we addressed

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

24a

and answered in Execunet, finding that Execunet services
were not explicitly 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

No. 75-1635

MCI TELECOMMUNICATIONS CORPORATION, MICROWAVE
COMMUNICATIONS, INC., AND N-TRIPLE-C INC.,
PETITIONERS

Vv.

FEDERAL COMMUNICATIONS COMMISSION AND
UNITED STATES OF AMERICA, RESPONDENTS

AMERICAN TELEPHONE AND TELEGRAPH COMPANY, UNITED
STATES INDEPENDENT TELEPHONE ASSOCIATION, DATA
TRANSMISSION COMPANY (DATRAN), AND SOUTHERN
PACIFIC COMMUNICATIONS COMPANY, INTERVENORS

Petition for Review of Orders of the
Federal Communications Commission

Argued April 28, 1977
Decided July 28, 1977

Bills of costs must be filed within 14 days after entry of judgment. The
court looks with disfavor upon motions to file bills of costs out of time.

i
t
;
/

(1B)

2B

Kenneth A. Cox, with whom Michael H. Bader, William
J. Byrnes, and Raymond C. Fay were on the brief, for
petitioners.

John E. Ingle, Counsel, Federal Communications Com-
mission, with whom Werner K. Hartenberger, General
Counsel, and Daniel M. Armstrong, Associate General
Counsel, Federal Communications Commission, and Carl
D. Lawson, Attorney, Department of Justice, were on the
brief, for respondents. Ashton R. Hardy, General Counsel
for the Federal Communications Commission at the time
the record was filed, entered an appearance for respond-
ent Federal Communications Commission. James F.
Ponsoldt, Attorney, Department of Justice, entered an
appearance for respondent United States of America.

Michael Boudin, with whom Craig D. Miller, Alfred
C. Partoll, and F. Mark Garlinghouse were on the brief,
for intervenor American Telephone and Telegraph Com-
pany.

Thomas J. O’Reilly was on the brief for intervenor
United States Independent Telephone Association.

John M. Scorce and Kevin H. Cassidy were on the
brief for intervenor Data Transmission Company.

Herbert E. Forrest entered an appearance for inter-
venor Southern Pacific Communications Company.

Before WRIGHT, TAMM, and WILKEY, Circuit Judges.
Opinion for the court filed by Circuit Judge WRIGHT.

WricHT, Circuit Judge: This is a petition to review
two orders of the Federal Communications Commission,
each of which requires petitioner MCI Telecommunica-
tions Corporation to cease and desist from offering and
operating its “Execunet” telephone service.’ Finding that

1 The orders are a letter order of July 2, 1975 (FCC 75-799)
and the Decision in MCI Telecommunications Corp., 60 FCC2d

. ~ all

3
.
2
4
é
-
¥
2
§
ey

3B

the Commission has not taken the steps required by the
Communications Act of 1934, 47 U.S.C. § 151 et seq.
(1970), to restrict the services MCI may offer over its
existing facilities, we reverse.

I. BACKGROUND

MCI Telecommunications Corporation, Microwave Com-
munications, Inc., and N-Triple-C Inc. (hereinafter, col-
lectively, MCI) are affiliated communications common
carriers which operate a transcontinental point-to-point
microwave system catering to business and data com-
munications markets. In the vernacular of the trade
MCI is a “specialized common carrier.”

The present dispute has its roots in MCI’s September
1974 filing of revisions to its tariffs F.C.C. No. 1—the
tariff under which MCI furnishes all its interstate serv-
ices. Those revisions, which became effective October
10, 1974, established rates for a class of “metered use”
services, among which was Execunet.? With Execunet a
subscriber using any push-button telephone (or rotary
dial phone and tone generator) can reach any telephone
in a distant city served by MCI simply by dialing a local
MCI number followed by an access code and the number
in the distant city. Execunet customers are billed for
each call on a time and distance basis, subject to a
monthly minimum.’

25 (July 18, 1976). The letter order is set out at Appendix B
of the second order, 60 FCC2d at 62-64.

* Apparently the tariffs do not themselves define Execunet
service, but define only certain “modular” services and rates
therefor. Putting these modular services together in a par-
ticular way results in the Execunet service package. The term
“metered use” refers to the fact that charges for some services
are set on a usage basis.

* Execunet’s characteristics are summarized as follows.

A customer in the calling city calls the local MCI office
via local exchange telephone service from any push..

4B

In the spring of 1975 intervenor AT&T, after sub-
scribing to Execunet and procuring Execunet marketing
brochures, complained orally to the Commission that MCI
was offering interstate long distance message telephone
service (MTS) under the guise of Execunet and that
no such service could properly be tariffed by MCI. Ap-
parently AT&T representatives approached individual
commissioners and various Commission staff personnel
with this complaint and even held a demonstration of
Execunet in the Commission’s offices. Subsequent to the
ex parte complaints, AT&T filed with the Commission a
letter which repeated the allegations previously made.

The Commission forwarded AT&T’s letter to MCI and
indicated that MCI’s “comments on this matter would be
appreciated.” * MCI wrote a series of letters in return.

button telephone in the local exchange area. A rotary-
dial telephone can also be used if the caller has a touch-
tone pad (tone generator). This device can be purchased
in the open market from numerous sources. He then
pulses his customer code and the area code and calling
number of any telephone in one of a number of distant
cities. Connection at the distant end may again be ac-
complished via the local exchange telephone service in
that area. Upon connection, the customer is charged a
per-minute toll, based upon the mileage to the city called,
subject to a connection charge and a monthly minimum
charge. Any MCI Execunet customer in the calling city
can access the system at any time to place a call, and
presumably many such customers may utilize the inter-
city facilities simultaneously. In other words, none of
the MCI plant, or indeed any of the plant used in com-
pleting the call, is dedicated to the use of a particular
customer during any specified time; rather it is available
upon demand.

MCI Telecommunications Corp., supra note 1, 60 FCC2d at
26 n.1.

« Letter from FCC to MCI, May 1, 1975, MCI Telecommuni-
cations Corp., supra note 1, Appendix B, 60 FCC2d at 64,
JA 8.

ote eT ree

!
&
4
3

5B

In the first it took the position that AT&T’s complaint
was untimely and should be rejected, but that in any case
Execunet was a “private line” service which MCI was
authorized to offer.’ By a further letter MCI complained
of AT&T’s ex parte “lobbying” and asked for an op-
portunity to present its side of the dispute to the Com-
mission. In a third letter MCI pointed out that its
licenses were not limited by anything in Section 21.705 of
the Commission’s rules’ pursuant to which point-to-point
microwave radio licenses are issued to communications
common carriers.’ It also called the Commission’s at-
tention to AT&T’s comments in Rulemaking Docket
19117,° in which AT&T had taken the position that the
Commission had no statutory authority to require prior
approval of new services that were to be offered over

* Letter from MCI to FCC, June 5, 1975, MCI Telecommuni-

cations Corp., supra note 1, Appendix B, 60 FCC2d at 65-68,
JA 9-15.

* Letter from MCI to FCC, June 9, 1975, MCI Telecommuni-

cations Corp., supra note 1, Appendix B, 60 FCC2d at 69-70,
JA 16-18.

* § 21.705 Permissible communications.

Stations in this service are authorized to render any
kind of communication service provided for in the legally
applicable tariffs of the carrier, unless otherwise directed
in the applicable instrument of authorization or limited by
§ 21.701 or § 21.708 [the latter rules relating to frequency
use]. * * *

47 C.F.R. § 21.705 (1976).

* Letter from MCI to FCC, J uly 1, 1975, MCI Telecommuni-

cations Corp., supra note 1, Appendix B, 60 FCC2d at 80-84,
JA 39-48.

* In the Matter of Establishment of Rules Pertaining to the
Authorization of New or Revised Classifications of Communi-
cations on Interstate or Foreign Common Carrier Facilities,
and Amendment of Part 63.60—63.90 of the Rules, Notice of
Proposed Rule Making, 27 FCC2d 36 (1971); Report and
Order, 39 FCC2d 131 (1978).

6B

existing facilities of a domestic carrier, but instead could
regulate such services, if at all, only under the tariff
provisions of the Communications Act. In MCI’s view,
AT&T’s position in Docket 19117” denies the authority
asserted by the Commission in the instant proceeding on
AT&T’s behalf. MCI also pointed out that the report in
Docket 19117 states that new service offerings could be
proposed by merely filing a tariff.”

Without holding a hearing or even disclosing the de-
tails of AT&T’s arguments concerning the unlawfulness
of Execunet, the Commission on July 2, 1975 wrote a
letter to MCI which stated: “[YJour tariff F.C.C. No.
1 is hereby rejected insofar as it purports to offer
Execunet service, but without prejudice to MCI’s offer-
ing any other service which you are authorized to pro-
vide.” * The rationale for this order was explained in
the body of the letter.

First, the Commission concluded that MCI could offer
only “private line” communications services over its ex-
isting facilities:

In the various Commission orders granting the Sec-
tion 214 applications of the MCI carriers to construct
and operate facilities (e.g., 32 F.C.C.2d 36 (1971),
FCC 72-456 (May 26, 1972), FCC 72-832 (Septem-
ber 22, 1972), FCC 72-852 (September 29, 1972)),
appears language similar to the following:

1° See Letter, supra note 8, 60 FCC2d at 82-83, JA 44-46.

“TT }he termination of the rule making proposed herein
will make it possible for domestic carriers, as a general rule,
to offer new classes or subclasses of communications service
over duly authorized facilities merely by the filing of appro-
priate tariff revisions * * *.’”” Report and Order, supra note 9,
39 FCC2d at 135.

12 MCI Telecommunications Corp., supra note 1, Appendix
B, 60 FCC2d at 64.

Die ae

a ea a Na Rh ac I wg tay

7B

The service proposed is essentially private line
for the transmission of data, facsimile, control,
remote metering, voice and other communica-
tions.

Each grant refers to the paragraph which incorpo
rates the above language as conditioning the grant
of construction and operating authority. As a result,
MCI is only permitted to operate its facilities for
private line services.

Further, in our Second Report on domestic satel-
lites, which followed the Specialized Common Carrier
decision, we pointed out (35 F.C.C.2d 844, 853
(1972) ):

In encouraging multiple entry and the develop-
ment of competition in the supply of domestic
communications, we have maintained a distinc-
tion between the so-called monopoly switched
telephone services now being furnished by AT&T
and all other classes of existing and potential
specialized services.

It is thus clear that MCI sought authorization to
offer only private line services, and that it was
granted authority to offer only such services.)

The Commission then rejected MCI’s arguments that
Execunet was a private line service like AT&T’s “foreign
exchange” (FX) service, deciding instead that “the com-
bination of * * * similarities” between Execunet and
AT&T’s MTS made Execunet “essentially a switched
public message telephone service * * *.”

MCI immediately filed a petition for review in this
court and sought a stay of the Commission’s order,
arguing that the Commission had failed to comply with

18 Td. at 63.
14 Td.

8B

Section 4 of the Administrative Procedure Act,” its own
rules governing informal complaints,” its own rules gov-
erning ex parte contacts,’ Sections 204 and 205 of the
Communications Act, 47 U.S.C. §§ 204-205 (1970), and
the Due Process clause. The request for a stay was
granted.** Subsequently the Commission, which had pre-
viously refused to allow MCI any kind of hearing, moved
to have the proceedings remanded so that it could con-
sider matters more fully than it had previously. This
motion was granted, although jurisdiction was retained.

In December 1975 the Commission issued an order
commencing the proceedings on remand. MCI Telecom-
munications Corp., 57 FCC2d 271 (1975), SA 49.” It
announced that comments and reply comments would be
accepted and that oral argument or an evidentiary hear-
ing might be held if warranted by the written submis-
sions. The issue to be resolved was said to be “whether
or not Execunet is a service which MCI is authorized
to offer pursuant to its facility authorizations and policies
set forth by this Commission.” * On March 26, 1976 the
Commission announced that it would hold oral argument
and designated the issues to be addressed at that time.
The issues the Commission identified as having been

65 U.S.C. § 553 (1970).
1° 47 C.F.R. §§ 1.711-1.735 (1976).

17 47 C.F.R. §§ 1.1201-1.1251 (1976). See also Rules Govern-
ing Ex Parte Communications, 1 FCC2d 49 (1965).

18 This court initially stayed the Commission’s order in its
entirety. After the proceedings on remand our order was
modified to allow MCI to continue to serve its present cus-
tomers, but solicitation of new customers was not permitted.

19“SA” refers to a two-volume Supplemental Appendix
covering the proceedings on remand.

20 MCI Telecommunications Corp., 57 FCC2d 271, 271-272
(1975), SA 49-50.

ee) Puamees- adie

i. Ai PALI AS RNG bit SD ee

9B

raised by the comments and reply comments were the
following:

a. What class or classes of service is MCI permitted
to offer pursuant to its facility authorizations and
Commission policies?

b. What changes, if any, were made to the permitted
classes of service by our Report and Order in
Docket 19117, 89 FCC2d 131 (1978)?

c. Is Execunet service, as presently offered, a private
line service?

d. Were any communications between parties to this
proceeding and the Commission, as developed by
filings herein, in violation of any applicable stat-
ute or regulation?

e. If any prohibited contacts occurred, what effect
have they had on the substance of this proceed-
ing?

f. Whether any further proceedings are required to

comport with the requirements of due process of
law.

MCI Telecommunications Corp., 58 FCC2d 962, 963
(1976), SA 812.

Prior to oral argument the Commission issued yet a
third order responding to procedural motions made by
MCI at various points during the comment period. MCI
Telecommunications Corp., FCC2d (FCC 76-
441, May 17, 1976), SA 892. In this order the Com-
mission rephrased the primary issue before it as
“whether MCI’s facility authorizations and Commission
policies restrict in any way the broad categories of serv-
ice which MCI may offer.” *" It also stated that the pro-
ceedings would not be expanded to include consideration

*t MCI Telecommunications Corp., -—~ FCC2q —— (FCC
76-442, May 17, 1976), SA 894.

108

of “whether it is in the public interest for MCI to offer
Execunet regardless of whether it is within the class of
services it may offer.” ** Finally, the Commission for the
first time mentioned the statutory authority for its ac-
tions: “th[is] proceeding is an investigation into the
lawfulness of MCI’s Execunet service offering, conducted
pursuant to Sections 4(i), 4(j), 201, 204, 205, 208 and
403 of the Communications Act of 1934, as amended,
47 USC 154(i), 154(j), 201, 204, 205, 208 and 403.”

After oral argument the Commission issued an exten-
sive opinion, again finding that MCI was not authorized
to offer Execunet. MCI Telecommunications Corp., 60
FCC2d 25 (1976). The approach taken in that opinion
is materially different from that taken in the July 1975
letter order, however. Whereas the letter order had re-
lied on express restrictions written into MCI’s facilities
authorizations (the certificates of public convenience and
necessity issued pursuant to Section 214(a) of the Com-
munications Act, 47 U.S.C. § 214(a) (1970) ),** the opin-
ion on remand stated:

22 Id., SA 895.
*3 Td.

2 (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 construction, or operation, or con-
struction and operation, of such additional or extended
line * * *. * * * No carrier shall discontinue, reduce, or
impair service to a community, or part of a community,
unless and until there shall first have been obtained from
the Commission a certificate that neither the present nor
future public convenience and necessity will be adversely
affected thereby * * *. As used in this section the term

lls

As MCI points out, however, not all of its authoriza-
tions contain similar language [i.e., restrictions],
some contain no such restrictions, and thus it is nec-
essary to look further, to our expressed policies and
to judicial statements, to ascertain the limits on
[specialized common carrier] services. ?*!

The Commission’s “further look” began with a review
of the seminal Specialized Common Carrier decision,**
pursuant to which most specialized carrier facilities au-
thorizations have been issued. The purpose of that de-
cision was to facilitate the Commission’s handling of
Section 214 applications by determining by rulemaking
“(w]hether as a general policy the public interest would
be served by permitting the entry of new carriers in the
specialized communications field * * *.’?? While the

Commission apparently concedes that it did not define

“line” means of channel of communication established
by the use of appropriate equipment, other than a channel
of communication established by the interconnection of
two or more existing channels: Provided, however, That
nothing in this section shall be construed to require a
certificate or other authorization from the Commission
for any installation, replacement, or other changes in
plant, operation, or equipment, other than new construc-
tion, which will not impair the adequacy or quality of
service provided.

*° MCI Telecommunications Corp., supra note 1, 60 FCC2d
at 35.

** Specialized Common Carrier Services, 29 FCC2d 870
(1971), aff'd, sub nom. Washington Utilities & Transporta-
tion Comm’n v. FCC, 518 F.2d 1142 (9th Cir.), cert. denied,
423 U.S. 836 (1975). See also Bell Telephone Co. v. FCC, 503
F.2d 1250 (3d Cir. 1974), cert. denied, 422 U.S. 1026 (1975) ;
AT&T v. FCC [United States Transmissions Systems, Inc.]},
539 F.2d 767 (D.C. Cir. 1976).

** Specialized Common Carrier Services, supra note 26, 29
FCC2d at 878.

12B

the boundaries of the “specialized communications field,” *
it asserts that the services to be offered over the fa-
cilities covered in some 1,700 Section 214 applications
before it provided a touchstone for its analysis and that
all such services were “private line.” Accordingly, it is
the Commission’s position that it did not consider services
other than private line services in determining the public
interest ramifications of competition.** As an example

*8 See note 68 infra.

29

35. At the time of the Specialized Common Carrier
decision, we had before us 1712 microwave applications
from 33 applicants, 17 of which were affiliated with MCI.
Accordingly, the statements of MCI as to the types of
services it proposed to offer were of importance in the
policy determination made therein and are helpful in
ascertaining the limits,-if any, imposed upon Specialized
Common Carrier (SCC) service offerings. The MCI
applications considered were for “portions of a proposed
nationwide network to provide specialized private line
communications services” (emphasis added) 29 FCC2d at
874. We further quoted MCI’s pleadings that “the real
distinction which delineates MCI service from anything
provided today by existing common carriers is not the
facility itself but the manner in which a customer may
utilize it in order to provide a customized intra-~company
point-to-point communications system of his own design
and capability” 29 FCC2d at 875. Finally MCI asserted
that there was a distinct difference between a public tele-
phone service which is a natural monopoly and a cus-
tomized communications service offered on a private line
basis, Jd. [sic] Thus, MCI sought therein to offer only
private line, point-to-point services. * * *

MCI Telecommunications Corp., supra note 1, 60 FCC2d at
36. See also FCC Letter Order, id., Appendix B, 60 FCC2d
at 62:

Specialized Common Carrier Services, 29 F.C.C. 2d 870
(1971), which established the Commission’s policies re
garding entry of the specialized common carriers in com-
petition with AT&T, contemplated such entry only in the
private line field, not in the area of switched public
message telecommunications service. * * *

138

of this the Commission points to its analysis of “cream-
skimming,” the argument that specialized carriers will
upset the established rates of general carriers (such as
AT&T) by siphoning off high-profit business.” The Com-
mission’s interpretation here of its discussion of cream-
skimming in Specialized Carriers is that it found allega-
tions of cream-skimming to be unfounded only because
the specialized carriers were not proposing to compete
“to any substantial degree” with AT&T’s monopoly serv-
ice offerings, MTS and WATS.”

Having concluded that the Specialized Common Carrier
decision makes no reference to competition in other than
private line areas, the Commission turned next to MCI’s
allegations concerning the meaning of the Commission’s
Rule 21.705, 47 C.F.R. § 21.705 (1976), and its orders
in Docket 19117.

Rule 21.705 governs the scope of licenses granted car-
riers in the point-to-point microwave service. Its opera-
tive language is that a carrier may offer any service
“provided for in the legally applicable tariff: of the car-
rier, unless otherwise directed in the applicable instru-
ment of authorization * * *” (emphasis added). MCI,
focusing on the second phase, had argued that the ab-
sence of any directions in its instruments of authorization
indicated that it was free to offer by tariff any com-
munications service that could physically be provided
on its existing system. The Commission, on the other
hand, took the position that the italicized language is the
key and tha‘ tariffs exceeding the bounds of the Special-
ized Carrier decision can never become “legally appli-»

*° See Specialized Common Carrier Services, supra noce 26,
29 FCC2d at 910 (% 78).

* MCI Telecommunications Corp., supra note 1, 60 FCC2d
at 36, quoting Specialized Common Carrier Services, supra
note 26, 29 FCC2d at 915.

148

cable.” Thus in the Commission’s view Rule 21.705
merely “expresses the truism that a carrier need not
generally file an application [under Section 214] for each
new service it wishes to offer, [and therefore] it cannot
be used to reverse a clearly defined Commission policy.” *

The Commission takes a similarly narrow view of the
effect of its Report and Order in Docket 19117. That
docket was started to consider whether domestic carriers
should be required to get Commission approval before
filing tariffs proposing services not previously provided
or set out in a Section 214 application.** The purpose
of the proposed rules was threefold: to decide the public
interest ramifications of a service before it was com-
menced, thereby protecting the public from service dis-
ruptions that might be caused if the service were al-
lowed to go into effect and later enjoined; to put general
domestic carriers (such as AT&T and Western Union),
which could theretofore start a new service simply by
filing a tariff, on an equal footing with international and
domestic miscellaneous carriers whose facilities authori-
zations were always restricted so that new services re-
quired further Section 214(a) proceedings; and to pro-
tect entrants to the specialized carrier field who also
needed prior approval of entry under Section 214(a) from
unfair competition from the generalized carriers.** The
proposed rules were never adopted, and restrictions in
facilities authorizations which had worked a result simi-
lar to the proposed rules were expressly declared “null
and void” in the order terminating the docket.*

32 Jd. at 38.

33 See Notice of Proposed Rule Making, supra note 9, 27
FCC2d at 38-39.

% Id. at 39.
35 See Report and Order, supra note 9, 39 FCC2d at 137.

15B

MCI argued before the Commission that the result of
Docket 19117 was that any express restrictions in its
facilities authorizations were lifted and that it should be
free as a result of the order terminating the docket to
propose new services simply by filing a tariff, even if it
was not free before. The Commission’s response was
that Docket 19117 was not concerned with competition
except in the specialized carrier field—the only field in
which competition was allowed at the time of the Report
and Order in that docket.** Thus the Commission’s view
apparently is that existing specialized carriers are al-
lowed to offer private line services free of any prior
approval requirement as a result of Docket 19117, but
are required to proceed by Section 214 application with
respect to all other services.

In the remainder of the opinion below the Commis-
sion again concluded that Execunet was not a private
line service.’ It also concluded that no facts were in
dispute which required an evidentiary hearing and de-
nied MCIs motion for one.** The Commission for a second
time refused to consider whether Execunet should be
permitted regardless of the scope of the Specialized Com-
mon Carrier decision, and further indicated that it had
intended to confer on AT&T a monoply over MTS and
WATS by its ruling in Specialized Carriers, a decision
that could not be changed absent a demonstration of
changed circumstances.” Finally, the Commission re-

8° MCI Telecommunications Corp., supra note 1, 60 FCC2d
at 39.

3? See id. at 40-44.
88 Td. at 44-48.

8° [W]e disagree with MCI that we have never defined the
areas of telecommunications service which should be open
to competition and those which are a monopoly. Rather,

16B

fused to inquire further into the ex parte contact prob-
lem on the ground that all such contacts had occurred
before commencement of formal proceedings and were,
therefore, proper under both court and Commission rul-

ings.“

On this petition for review MCI has challenged vir-
tually every ruling of the Commission in the proceeding
on remand and has renewed its attack on the July 1975
letter order.

II. ANALYSIS

A.

The implicit restrictions argument advanced by the
Commission in its opinion on remand represents a sub-
stantial departure from prior administrative practice. As
the Commission’s letter order suggests, the usual way
in which a carrier becomes restricted in the services it
may offer is for the Commission to write restrictions
into the facilities authorizations that must be obtained
pursuant to Section 214 of the Communications Act be-
fore any communications line may be built, operated,
or extended.** Accordingly, a carrier can usually tell if
it is subject to service restrictions simply by examining

that was the principal purpose of our investigation in
[Specialized Carrier Services, supra note 26]. * * *
+. * > 7

109. In essence MCI is * * * asking us to reopen the
Specialized Common Carrier decision to determine again
what services should be open to competition. We decline
to do so. * * * There is no allegation that the public inter-
est considerations upon which the Specialized Common
Carrier [was] based have changed at all * * *.

MCI Transcommunications Corp., supra note 1, 60 FCC2d at
56-57.

Id. at 48-54.
*! See text at note 13 supra; note 24 supra.

17B

the instruments of authorization issued to it by the
Commission. Section 21.705 of the Commission’s rules,
47 C.F.R. § 21.705 (1976), which governs the manner in
which point-to-point microwave radio licenses cai be used
by specialized carriers such as MCI, similarly recognizes
that the usual place to find restrictions on services is in
the “applicable instrument of authorization.” See also
47 U.S.C. §309(h)(1) (1970) (which indicates that
restrictions will usually be found in the license instru-
ment); 47 C.F.R. § 21.903(b) (1976) (instrument of
authorization controls in part services that may be offered
on a multi-point distribution system).

The Commission’s discussion of its administrative prac-
tice in Docket 19117 is also instructive. There the Com-
mission explained that in the absence of restrictions im-
posed under Section 214 in the facilities authorizations,
carriers could offer any service which could physically be
provided over their existing systems simply by filing a
tariff. This discussion clearly indicates that the Commis-
sion’s understanding of Section 214 of the Act has until
now been that explicit action is necessary to restrict a car-
rier to the service offerings it proposed when it sought
authority to build, operate, or extend its communications
lines.

Finally, as evidenced by the decision in Press Wire-
less, Inc., 25 FCC 1466 (1958), aff'd, sub nom. Press
Wireless, Inc. v. FCC, 264 F.2d 872 (D.C. Cir. 1959)
(per curiam), the Commission has from time to time
exercised its express authority under Section 303(b) of
the Act, 47 U.S.C. § 303(b) (1970), to “[p]rescribe the
nature of the service to be rendered by each class of
licensed stations and each station within any class” by
promulgating rules setting out limitations on services to

*2 See Notice of Proposed Rule Making, supra note 9, 27
FCC2d at 38; Report and Order, supra note 9, 839 FCC2d at
133.

18B

be offered over radio facilities. See, e.g., 47 C.F.R.
§§ 21.509, 21.606, 21.903 (1976). In this regard it is
instructive to note that the Commission has not enacted
any comparable service restrictions for point-to-point
microwave licensees and in particular it has not made
the definition of “private line service’ set out in 47
C.F.R. § 21.2 (1976) applicable to such licenses, although
this would certainly seem to be the natural thing to have
done had the Commission sought to restrict specialized
carriers to private line service offerings. .

The fact that an administrative practice is novel does
not, of course, mean that it is wrong. However, novelty
is a warning signal that all may not be well, especially
in the instant case in which the Commission has itself
failed to discuss the statutory warrant for the new course
it has adopted. When the Communications Act is con-
sidered in detail, it becomes apparent that novelty has
led to error in this case.

B.

To frame our analysis, we sketch at the outset some
principles which are either uncontested or uncontestable.
First, it is settled that “a tariff [may] be rejected if it
is unlawful without prior agency approval and approval
has not been obtained.” Associated Press v. FCC, 448
F.2d 1095, 1103 (D.C. Cir. 1971); accord, Press Wire-
less, Inc. v. FCC, supra. Yet the power to require

«8 See also North Central Truck Lines, Inc. v. ICC, ——
F.2d ——, —— (D.C. Cir. No. 76-1597, decided June 6, 1977)
(slip op. at 4) ; Delta Airlines, Inc. v. CAB, 543 F.2d 247, 254
(D.C. Cir. 1976) ; Municipal Light Boards of Reading & Wake-
field, Mass. v. FPC, 450 F.2d 1341, 1845-1346 (D.C. Cir. 1971),
cert. denied, 405 U.S. 989 (1972).

MCI has vigorously argued that rejection of a tariff is not
possible once a tariff has become effective. We need not de-
cide whether this is so since, as this case comes to us after
remand, no facts material to the issues thus far decided by
the Commission are in dispute and, accordingly, the Commis-

19B

prior agency approval is itself circumscribed, for it is
well recognized that the tar: provisions of the Com-
munications Act (Sections 203-205, 47 U.S.C. §§ 203-
205),** like the cognate sections of the Interstate Com-
merce Act (49 U.S.C. §§ 15(1), 15(7) (1970) ),*° embody

sion could, as it apparently did, issue a cease and desist order
pursuant to 47 U.S.C. § 205 (1970) without more of a hearing
than has already been afforded MCI. Thus, even if the Com-
mission was without power to reject a tariff as that phrase
is used as a term of art, it was empowered to reject the
Execunet tariff in a practical sense.

“* Under the Communications Act the practices of existing
carriers using existing facilities are regulated primarily
through the tariff mechanism established in §§ 203-205 of the
Act, 47 U.S.C. §§ 203-205 (1970). Section 208 obliges carriers
to file tariff schedules with the Commission and to make such
schedules available to the public. Section 203(b) expressly
recognizes that changes in the services a carrier may offer will
be commenced with a tariff filing. Operation except in strict
compliance with applicable tariffs is prohibited, 47 U.S.C.
§ 203(c), as are discriminations and preferences, id. § 202.
Prior to the effective date of a tariff—a date certain that must
be set out in the tariff, id. § 203(d)—the Commission may
suspend the tariff and hold a hearing concerning the lawful-
ness thereof. Jd. § 204. If the hearing has not been completed
within three months (five months as of 1976, see 47 U.S.C.A.
§ 204 (1977 pocket part)) after the effective date of the
suspended tariff, that tariff by law goes into effect. Jd. After
the effective date, and without regard to whether a tariff has
previously been suspended, the Commission may hold a hear-
ing on the lawfulness of the tariff, although the tariff must be
allowed to remain in effect pending the outcome of such a
hearing. Id. § 205; see AT&T v. FCC, 487 F.2d 865, 874-875
(2d Cir. 1973). Subsequent to a hearing under either § 204 or
§ 205 the Commission may prescribe such rates, classifications,
regulations, or practices as shall be determined to be just, fair,
and reasonable, and it may enjoin the carrier from continuing
services except as prescribed. 47 U.S.C. §§ 204, 205.

** “Section 204 * * * is adapted from section 15(7) of the
Interstate Commerce Act so as to apply to communications.
* * * Section 205 follows sections 15(1) and 16(8) of the

208

a considered legislative 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. AT&T v.
FCC, 487 F.2d 865, 870-881 (2d Cir. 1973) ; see United
States v. SCRAP, 412 U.S. 669, 697 (1973) (interpret-
ing Interstate Commerce Act) ; Arrow Transportation Co.
v. Southern R. Co., 372 U.S. 658, 662-669 (1963)
(same). As the Second Circuit explained in the AT&T
case in overturning a Commission requirement that
AT&T obtain approval prior to filing tariff revisions:

Interstate Commerce Act * * *.” S. Rep. No. 781, 73d Cong.,
2d Sess. 4 (1934). See also H.R. Rep. No. 1850, 73d Cong.,
2d Sess. 5-6 (1934).

‘© Since the most likely objection to MCI’s provision of Exec-
unet service is its potential effect on AT&T’s MTS, it is useful
to note that the Supreme Court, in Arrow Transportation Co.
v. Southern R. Co., 372 U.S. 658, 669 (1963), rejected the
claim that a court should have the power to extend the statu-
tory suspension period to protect competitors of a carrier and
their customers:

It must be admitted that Congress dealt with the prob-
lem as it affected the relations between shippers and
carriers, making no express reference to the interests of
competing carriers and their customers such as are in-
volved in this case. We see no warrant in that omission,
however, for a difference in result. * * *

In noting that neither claims of a carrier’s customers nor
those of its competitors or competitors’ customers in any way
abridge the right of a carrier to implement a new rate or
service, we do not intend to suggest that a showing of harm
to competitors or competitors’ customers would be insufficient
to sustain a service restriction promulgated in accord with 47
U.S.C. §214(c) (1970) or 47 U.S.C. §303(b) (1970). Our
only point is that allegations of harm to competitors or com-
petitors’ customers do not in any way expand the Commis-
sion’s suspension or rejection powers.

2lB

In enacting Sections 203-05 of the Communications
Act, Congress intended a specific scheme for carrier
initiated rate revisions. A balance was achieved after
a careful compromise. The Commission is not free
to circumvent or ignore that balance. Nor may the
Commission in effect rewrite this statutory scheme on
the basis of its own conception of the equities of a
particular situation, '*!

The Second Circuit, moreover, rejected the Commission’s
argument that the general grants of procedural authority
in Sections 4(i), 4(j), and 403 of the Act, 47 U.S.C.
$$ 154(i), 154(j), 403 (1970), empowered the Com-
mission to erect prior approval requirements like that
imposed on AT&T, although it recognized that the Com-
mission would have the power to reject a tariff whenever
a section of the Act expressly establishes or authorizes **
a prior approval requirement.‘

Applying these principles to the instant case, the issues
to be resolved are two: whether and to what extent Sec-
tion 214 of the Communications Act expressly authorizes
the Commission to impose prior approval requirements
through the facilities authorization mechanism, and
whether the Commission has properly exercised what-
ever authority it may have under Section 214.

“AT&T v. FCC, supra note 44, 487 F.2d at 880 (footnote
omitted).

“Of course, if the statute merely authorizes the Commis-
sion to impose a prior approval requirement, as is the case
with §303(b), 47 U.S.C. § 303(b) (1970), that authority
would have to be exercised before rejection is proper.

“ AT&T v. FCC, supra note 44, 487 F.2d at 876-881 & 880
n.13, citing Associated Press v. FCC, 448 F.2d 1095, 1103
(D.C. Cir. 1971).

22B

Section 214 establishes the Commission’s regulatory
charter over entry into the common carrier communica-
tions field and states that no carrier shall construct,
extend, or acquire a line unless the Commission has first
affirmatively determined that such entry would be in the
public interest.° The primary purpose of Section 214
(a) is prevention of unnecessary duplication of facilities,
not regulation of services.*’ Because of this, Section 214
would appear to have a limited office with respect to
regulation of service offerings on existing lines. We
have held as much,” and this view is confirmed by the
final proviso to Section 214(a) which states expressly
that

°° See note 24 supra.

= See 78 CONG. REc. 10314 (1934) (“The section [§ 214] is
designed to prevent useless duplication of facilities, with con-
sequent higher charges upon the users of services.”). It is
also clear that § 214 was intended to apply only to construc-
tion or acquisition of new lines. See id.; H.R. Rep. No. 1850,
supra note 45, at 6; S. Rep. No. 781, supra note 45, at 5; ac-
cord, Western Union Telegraph Co. v. FCC, 541 F.2d 346, 355
(3d Cir. 1976) ; United Telegraph Workers v. FCC, 436 F.2d
920 (D.C. Cir. 1970).

Of course, § 214 also applies to abandonment of service, see
note 24 supra, but no one has so far contended that Execunet
will have any impact, adverse or otherwise, on provision of
pre-existing MCI services.

52 In the first Western Union Mailgram case, United Tele-
graph Workers v. FCC, supra note 51, the Telegraph Workers
sought to force the FCC to enjoin Mailgram service pending
a hearing at which § 214 issues could be ventilated. The Com-
mission, on the other hand, maintained that the Mailgram
tariff should be processed in the same manner as any other
tariff filing. This court sided with the Commission on the
ground that (with exceptions not relevant here) § 214 did
not apply to even this novel use of existing facilities. See 436
F.2d at 924-925.

238

nothing in this section [214] shall be construed to
require a certificate or other authorization from the
Commission for any * * * changes in plant, opera-
tion, or equipment, other than new construction,
which will not impair the adequacy or quality of
service provided. !**!

Moreover, we do not agree with the suggestion of Com-
mission counsel in brief that Judge Wilkey’s opinion
in Hawatian Telephone Co. v. FCC, 498 F.2d 771 (D.C.
Cir. 1974), somehow transmogrifies Section 214(a) so
that carriers must now obtain Commission approval be-
fore they implement new services. In Hawaiian Tele-
phone this court reversed a grant of Section 214 au-
thority to RCA Global Communications, Inc. on the
ground that the Commission was allowing competition
merely for competition’s sake in direct violation of the
teaching of the Supreme Court in FCC v. RCA Com-
munications, Inc., 346 U.S. 86 (1953). In stating the
proper standard to be applied under Section 214(a) Judge
Wilkey wrote: “When the FCC considers an application

°° 47 U.S.C. §214(a) (1970) (emphasis added); see note
24 supra.

** FCC brief at 24 & n.14, 32 n.23.

55 If this were the case, then there would obviously have
been no need for the rulemaking in Docket 19117 which pro-
posed rules that would have required “common carriers [to]
request prior Commission approval before offering or discon-
tinuing any new or revised classification of communications,
irrespective of whether offered over proposed new facilities
or over facilities previously authorized by the Vommission
[sic].” Notice of Proposed Rule Making, supra note 9, 27
FCC2d at 38-39. Similarly, if the Commission is now correct,
then both the Commission and this court were in error in
United Telegraph Workers v. FCC, supra note 51. See note
52 supra. See also MCI Telecommunications Corp., supra
note 1, 60 FCC2d at 38 (“a carrier need not generally file an
application [under § 214] for each new service it wishes to
implement”).

24B

for certification of a new line, it must start from the
situation as it then exists, and must * * * determine
whether indeed the public convenience and necessity re-
quires more or better service.” 498 F.2d at 776 (em-
phasis added). We do not read this statement to suggest
that every time a carrier seeks to start a new service
over existing facilities it must petition the Commission
under Section 214(a), but rather it is merely a matter
of fact observation that it is analytically impossible to
determine the need for a new facility without considering
the services to be provided over it. In addition, the read-
ing suggested by the Commission would nullify the final
proviso of Section 214(a) by requiring a “certificate
(and] other authorization from the Commission” prior
to changes in carriers’ operations even if such changes
did not affect the “adequacy or quality” of the carriers’
preexisting services. There is no indication that the
Hawaiian Telephone court contemplated such a remark-
able result. Nor, indeed, can such a result be justified by
reference to the primary purpose of Section 214 because,
so long as the “adequacy or quality” of the service pro-
posed in a Section 214(a) application is not impaired
by provision of other services, the public need that jus-
tified construction of facilities will still be met and
there is no sense in which those facilities would have be-
come needlessly duplicative.

Notwithstanding the proviso to Section 214(a), Sec-
tion 214(c) gives the Commission authority to”

56 Section 214(c) provides:

The Commission shall have power to issue such certifi-
cate as applied for, or to refuse to issue it, or to issue it
for a portion or portions of a line, or extension thereof,
or discontinuance, reduction, or impairment of service,
described in the application, or for the partial exercise
only of such right or privilege, and may attach to the
issuance of the certificate such terms and conditions as

25B

issue such certificate [facility authorization] as ap-
plied for * * * or for the partial exercise only of
such right or privilege, and may attach to the issu-
ance of the certificate such terms and conditions as
in its judgment the public convenience and necessity
may require. * * *

(Emphasis added.) Used to condition the services an in-
dividual carrier may offer, Section 214(c) would pro-
vide a power over individual carriers in all respects
identical to its power over classes of carriers under Sec-
tion 803(b), which was held in Press Wireless, Inc. v.
FCC, supra, to give the Commission authority to create
a prior approval requirement. For this reason Section
214(c) does, in our judgment, authorize the Commission
to restrict the services that may be offered over a com-
munication line once it is built, acquired, or extended.
Cf. Western Union Telegraph Co. v. FCC, 541 F.2d 346,
355 (3d Cir. 1976). However, since any prior approval
requirement is in derogation of the legislative com-
promise embodied in Sections 203-205, the Commission
must strictly follow the terms of Section 214(c) and it

in its judgment the public convenience and necessity may
require. After issuance of such certificate, and not before,
the carrier may, without securing approval other than
such certificate, comply with the terms and conditions con-
tained in or attached to the issuance of such certificate
and proceed with the construction, extension, acquisition,
operation, or discontinuance, reduction, or impairment of
service covered thereby. Any construction, extension, ac-
quisition, operation, discontinuance, reduction, or impair-
ment of service contrary to the provisions of this section
may be enjoined by any court of competent jurisdiction at
the suit of the United States, the Commission, the State
commission, any State affected, or any party in interest

47 U.S.C. § 214(c) (1970).

268
cannot impose any such restriction unless it has affirma-
tively determined that “the public convenience and neces-
sity [so] require.”

C.

With the framework of our inquiry in mind, we turn
next to the question whether the Commission was correct
in concluding that the Specialized Common Carrier de-
cision was a lawful exercise of Section 214(c) authority.
As we understand the Commission’s opinion on remand,
there are two considerations supporting its view that the
Specialized Common Carrier decision restricted the serv-
ices specialized carriers can offer—first, the fact that only
private line services were before the Commission in
Section 214 applications * and, second, that the Commis-
sion’s analysis of cream-skimming assumed that special-
ized carriers would be restricted to private line services.”
We consider these in turn.”

5* See note 29 supra.

*s [O]ur analysis of possible revenue diversion (29 FCC2d
at 911-914) dealt only with the private line revenues of
these two carriers. Further, we recognized that SCCs
would not compete directly with the established carriers’
message services.

“There is no reason to believe that [nationwide aver-
age] pricing of the interstate message service offer-
ings of the Bell System and Western Union (such as
MTT, WATS, and public telegraph) need be altered
by new entry into the developing specialized com-
munications market. Clearly, none of the uniform
rate structures of the existing carriers for such serv-
ices would appear in jeopardy since those services
are not being challenged competitively to any sub-
stantial degree by the services proposed to be offered
by the aspiring new entrants.” 29 FCC2d at 915
(emphasis added) [.]

MCI Telecommunications Corp., supra note 1, 60 FCC2d at

36.

°° The Commission offered two other considerations in sup-
port of its interpretation of Specialized Common Carrier Serv-

27B

We can assume, without deciding, that a service like
Execunet was not within the contemplation of the Com-
mission when it made the Specialized Carrier decision.
Nonetheless, it is readily apparent that failure to consider
the public interest ramifications of a service—either pro
or con—during resolution of a Section 214(a) applica-
tion is simply not the same thing as an affirmative de-

ices, supra note 26. First, it concluded that specialized carriers
would not duplicate services already being offered, whereas
in the Commission’s view Execunet would duplicate MTS.
We fail to see the relevance of this assertion in light of AT&T
v. FCC, supra note 26.

The Commission also pointed to statements made by the
Ninth and Third Circuits in, respectively, Washington Utilities
& Transportation Conrm’n v. FCC, supra note 26, and Bell
Telephone Co. v. FCC, supra note 26. In Washington Utilities,
however, the scope of the services authorized in Specialized
Carriers was not at issue; the reference is simply a general
description of the services proposed in the applications before
the Commission. The Bell Telephone case involved a very
different issue, namely, whether the Commission had affirma-
tively determined that it would be in the public interest to
require AT&T to interconnect with MCI for the purpose of
allowing MCI to offer FX and CCSA service. See 47 U.S.C.
§ 201(a) (1970). The Commission’s view was that Specialized
Carriers had settled the point, whereas AT&T argued that,
since MCI had never mentioned FX and CCSA services in
its §214(a) applications, MCI’s provision of those services
had not been approved even if some other carriers’ might have
been. The Third Circuit held that the Commission in Spe-
cialized Carriers had made an affirmative determination that
interconnection for provision of private line services was a
general matter in the public interest and that MCI was cov-
ered by this general determination. Bell Telephone therefore
stands for the proposition that the Commission in Specialized
Carriers decided at least that specialized carriers could pro-
vide all private line services. However, one cannot reason
from this proposition to its converse—that specialized carriers
may offer only private line services—yet the converse is the
issue relevant under § 214(c) as we explain in text.

288

termination that the “public convenience and necessity
may require” a restriction on a facility authorization
limiting a carrier to provision solely of those services pro-
posed in its Section 214 (a) application.

The Commission’s analysis of cream-skimming in the
Specialized Common Carrier decision similarly gives no
evidence that the Commission made an affirmative find-
ing that revenue diversion would be a problem if special-
ized carriers were allowed to compete on the fringes of
the message telephone service market as MCI allegedly
proposes to do. No such issue was before the Commis-
sion in that proceeding. As it has repeatedly asserted
here, all it had to consider was whether the competition
proposed in the Section 214 applications before it raised
serious revenue diversion problems threatening the public
interest. This is all it apparently did decide:

[W]e do not see how there could be any diversion of
revenues of a magnitude to have the impact claimed
by AT&T, in view of the very small percentage of
AT&T’s existing total market that is vulnerable to
competition of the kind proposed here, the growth
rate of Bell’s basic services, and the likelihood that
AT&T would obtain a very substantial share of the

potential market for specialized services.'*) |

Moreover, the Commission’s staff report, which formed
the basis for the Specialized Carrier decision, ruminated
more broadly on the issues posed by revenue diversion and
it appeared highly skeptical of the validity of AT&T’s
overall argument.” Thus there is simply nothing in

«0 47 U.S.C. § 214(c) (1970).

6 Specialized Common Carrier Services, supra note 26, 29
FCC2d at 910.

62 See id. at 883-884.

298

Specialized Carriers that would support a conclusion
that revenue diversion required restrictions on MCI’s
facility authorizations.”

Finally, it should also be noted that the Commission
staff, in its report adopted by the Commission,” dealt
explicitly with the question of how the Commission ought
to deal with possible adverse impacts of service offerings
other than those which were before the Commission in
the Specialized Common Carrier decision:

In the event that adverse consequences to the public
should develop, the Commission can take such action
on the relevant tariff filings as may be necessary to
protect the public. We think-that in the context of
the matters now before the Commission involving
proposed new and different services, a question of
this nature is more appropriately considered in con-
nection with the tariffs rather than upon authoriza-
tion of the facilities,(**)

And, again, the staff wrote:

The results of any authorizations would be the object
of close and continuous scrutiny by the Commission.
Should adverse consequences develop or appear immi-

** It should also be noted that subsequent to Specialized Car-
riers the Commission has indicated a willingness to consider
competition in the message telephone field on its merits. See
Domestic Communications-Satellite Facilities, 35 FCC2d 844,
853-854 (1972). To a large extent this undercuts the Com-
mission’s argument here, see note 39 supra, that it conferred
a statutory monopoly on AT&T in this field.

* See Specialized Common Carrier Services, supra note 26,
29 FCC2d at 920 (7 103) (“In light of all of the foregoing
and the record as a whole, we adopt our staff’s analysis * * *
as amplified and modified herein.”). There is no indication
that the Commission “modified” the staff’s analysis of the
points relevant to this appeal.

** Specialized Common Carrier Services, supra note 26, 29
FCC2d at 886 (emphasis added).

30B

nent, the Commission can take such remedial action
or precautionary measures as may be necessary to
protect the public. As indicated, appropriate action
can be taken in connection with the tariffs. In addi-
tion, any renewal of license for the proposed facilities
would require a public interest finding and could be
subject to any needed conditions. Moreover, the Com-
mission’s broad rule making powers are always avail-
ecole

The 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 proceedings—in tariff proceedings,
upon license renewal, or by further rulemaking. Strik-
ingly absent from this list is a mention of further Section
214 proceedings.

For the reasons stated above the Commission’s Special-
ized Common Carrier decision cannot reasonably be read
to have made an affirmative determination that the pub-
lie convenience and necessity required “private line’ re-
strictions on the facilities authorizations of specialized
common carriers.” Instead, it appears that the Commis-
sion saw benefits accruing to the public from the services
which were before it. In granting the facilities au-
thorizations on the basis of that public interest finding,
the Commission did not perhaps intend to open the field
of common carrier communications generally, but its con-
stant stress on the fact that specialized carriers would
provide new, innovative, and hitherto unheard-of com-
munications services clearly indicates that it had no very

86 Jd. at 887 (emphasis added).

®t For this reason the deference normally owed to our
agency’s interpretation of its own decisions, see, e.g., Udall v.
Tallman, 380 U.S. 1, 16 (1965), is not appropriate here.
See id. at 18.

3lB

clear idea of precisely how far or to what services the
field should be opened. As indicated in the staff re
port, a decision was apparently made to consider the
consequences of future developments in appropriate future
proceedings. There being no affirmative determination
of public interest need for restrictions, MCI’s facility
authorizations are not restricted and therefore its tariff
applications could not properly be rejected.

D.

As a final and somewhat collateral point, we are con-
cerned with a thread running through the Commission’s
analysis—that the Specialized Carrier decision granted
AT&T a de jure monopoly over MTS and WATS service
which would be undermined were MCI allowed to provide
Execunet—because any such assertion is plainly incorrect
and may have influenced the Commission’s disposition
of the instant case.

As the Commission staff explained in Specialized Car-
riers, absence of competition in the “general domestic
common carrier service field * * * is due primarily to
the fact that until the filing of [MCI’s first Section 214
applications] the Commission had no occasion to con-
sider applications for competitive service in this area.” ”
The question whether AT&T should be granted a de jure
monopoly was not among those proposed to be decided
in Specialized Carriers, and nowhere in that decision can

** See Specialized Common Carrier Services, supra note 26,
29 FCC2d at 905-914 ({{ 65-86). Indeed, 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 communi-
cations needs of the general public. See id. at 882 ({ 29) ;
id. at 906-907 ({{ 69-70).

° Id. at 881.

32B

justification be found for continuing or propagating a
monopoly that, according to the staff, had theretofore
just grown like Topsy. Of course, there may be very
good reasons for according AT&T de jure freedom from
competition in certain fields; however, one such reason
is not simply that AT&T got there first. Indeed, the
Commission’s attempt here to imbue AT&T’s existence
with public interest significance represents a retrench-
ment from the position it took in passing on a proposal to
enter the MTS field via domestic communications satellites :
“(We should not reject any proposal that might prove
feasible and beneficial to the public simply because it
represents some departure from the established scheme.”
Domestic Communications-Satellite Facilities, 35 FCC2d
844, 854 (1972).

Because the Commission has not so far determined
that the public interest would be served by creating an
AT&T monopoly in the interstate MTS field, it may not
properly draw any inferences about the public interest
from the bare fact that another carrier’s proposed serv-
ices would compete in that field.

III. CONCLUSION

We have today decided that the Commission erred in
rejecting MCI’s Execunet tariff as unauthorized. The
Commission has no general authority to insist that car-
riers receive its approval before filing tariffs proposing
new services or rates. Only if the Commission has de
termined that the public convenience and necessity may
require that new services receive advance approval 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 proceedings. In
that eventuality the Commission must be ever mindful

33B

that, just as it is not free to create competition for com-
petition’s sake,” it is not free to propagate monopoly for
monopoly’s sake. The ultimate test of industry struc-
ture in the communications common carrier field must
be the public interest, not the private financial interests
of those who have until now enjoyed the fruits of de

facto monopoly.”
Reversed and remanded.

7 See FCC v. RCA Communications, Inc., 346 U.S. 86, 96-97
(1953) ; Hawaiian Telephone Co. v. FCC, 498 F.2d 771, 776-

777 (D.C. Cir. 1974).
1 Cf., e.g., Carroll Broadcasting Co. v. FCC, 258 F.2d 440,
448 (D.C. Cir. 1958).

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APPENDIX C

Before the Federal Communications Commission,
Washington, D.C. 20554

(FCC 78-142—97470)

In THe MaTrrerR OF PETITION OF AMERICAN TELEPHONE
AND TELEGRAPH COMPANY FOR A DECLARATORY RUL-
ING AND ExpEpITED RELIEF

MEMORANDUM, OPINION AND ORDER

Adopted: February 23, 1978.

Released: February 28, 1978,

By the Commission: Chairman Ferris issuing a
separate statement; Commissioner Fogarty dissent-
ing and issuing a statement.

1. We have before us a ‘‘ Petition for a Declara-
tory 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 additional connections to local
exchange services to ‘‘Other Common Carriers” for

1 That petition has been styled as “In the Matters of BELL
SYSTEM TARIFF OFFERINGS of Local Distribution Fa-
cilities for Use by Other Common Carriers; and Letter of Chief,
Common Carrier Bureau, dated October 19, 1973, to Laurence E.
Harris, Vice President MCI Telecommunications Corporation,
FCC Docket No, 19896.” Inasmuch as Docket 19896 has been ter-
minated 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
proceedings, which shall be considered as separate and distinct
from the terminated Docket 19896 proceeding.

(1c)

2c

their use in the provision of service offerings 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 413 (1974), affirmed sub nom. Bell Tel. Co.
of Pennsylvania vy. FCC, 503 F. 2d 1250 (3rd Cir.
1974), cert. denied, 422 U.S. 1026 (1975). The peti-
tion requested that we issue a declaratory ruling
affirming 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 Telecommunica-
tions Corporation (MCI), Southern Pacifie Communi-

2 The petition does not define “Other Common Carriers.” How-
ever, inasmuch as the Bell System Tariff Offerings cease and de-
sist order was issued for the purpose of clarifying and enforcing
AT&T’s obligation to interconnect with specialized common car-
riers pursuant to our decision in Specialized Common Carrier
Services, 29 FCC 2d 870 (1971), affirmed sub nem. Washington
Utilities & Transportation Commission v. FCC, 513 F. 2d 1142
(9th Cir.), cert. denied, 423 U.S. 836 (1975), the term “Other
Common Carriers” in the AT&T petition appears to be synony-
nous with the term “specialized common carriers” in the Bel/
System Tariff Offerings order wnich directed AT&T to furnish
ceriain 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 peti-
tion nor the reply comments indicate that AT&T contemplates
any change in interconnection arrangements with Western Union
or the independent telephone companies. Accordingly, the dis-
cussion and decision herein relates only to interconnection ar-
rangements between telephone companies and specialized common
carriers and not to such arrangements between and among tele-
phone companies, or between telephone companies and Western
Union, international record carriers, or value-added carriers.

3c

cations Company (SPC), Satellite Business Systems
(SBS), American Satellite Corporation (ASC), Tele-
net Communications Corporation (Telenet), Aeronau-
tical Radio, Inc. (ARINC) and the United States De-
partment of Justice. Comments in support of AT&T's
position have been filed by Continental Telephone
Corporation (Continental), GTE Service Corpora-
tion (GTE), and the United States Independent Tele-
phone Association (USITA). In addition, the follow-
ing parties have filed comments regarding AT&T’s
petition as it relates to their individual circumstances,
but have taken no formal position before the Commis-
sion; Association of Data Processing Service Orga-
nizations, Inc. (ADAPSG), Graphnet Systems Ine.
(Graphnet), Computer and Business Equipment Man-
ufacturers Association (CBEMA), Western Union
International, Inc. (WUI), ITT World Communica-
tions, Inc. (ITT Worldcom), and RCA Global Com-
munications, Inc. (RCA Globecom). 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 Tele-
communications Corp. v. FCC (“Execunet’’), 561 F. 2d
365 (D.C. Cir. 1977), cert. denied, No. 77-420, 46
U.S.L.W. 5448 (January 16, 1978), is that the Court
ruled that our Specialized Common Carrier decision,
supra, did not limit Other Common Carriers to provid-
ing only private line services over their existing facili-
ties. AT&T states that it does not dispute that holding
for purposes of this proceeding. However, AT&T con-

4c

tends that the Execunet decision did not alter the Com-
mission’s finding that MCI’s Execunet service 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 pri-
vate line services. Under cxisting law, argues AT&T, it
is required to interconnect its facilities with the OCCs
for the provision of only private line services. Because
the Cominission 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
services. Before the Commission can order AT&T to
interconnect, argues AT&T, a hearing pursuant to
Section 201(a) of the Communications Act is required
so as to enable the Commission 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 hear-
ing 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
Execunet/MTS type services.

4, AT&T advances four legal arguments in support
of this position. First, AT&T contends that the Com-
mission 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 respect 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 Commission’s decision which fo-
cuses on whether FX and CCSA are private line
services and asserts that such an analysis would have
been pointless if AT&T’s interconnection obligation

5c

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
Common Carrier proceeding, the Commission had be-
fore it only applications by OCCs to provide private
line services. Consequently, when the Commission
ruled in Docket No. 19896 that AT&T already had a
Section 201(a) hearing with respect to interconnec-
tion 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 necessary to impose a
present obligation upon AT&T for it to provide pub-
lic exchange service connections for use by the OCCs
for other than private line services.

6. Third, AT&T states that recent Commission de-
cisions have explicitly restated that the Specialized
Common Carrier proceeding did not require car-
rier-to-carrier interconnection for other than private
line services, and that before the Commission can
order such interconnection on the part of local tele-
phone companies, a Section 201(a) hearing must be
conducted. See Southern Pacific Communications
Company (“SPRINT II”), 63 FCC 2d 309, 320
(1977), MCI Telecommuncations Corporation
(“SPLS IT’), 63 FCC 2d 237, 247 (1977).’ Further-

* The SPRINT II and SPLS II decisions were vacated and re-
manded for reconsideration after AT&T filed its petition. MCJ
Telecommunications Corp. v. FCC, No. 76-2071 (D.C. Cir., Feb-
ruary 3, 1978).

6c

more, AT&T states that these decisions also have
made it clear that it has no interconnection obliga-
tion for non private line services because without an
interconnection hearing and decision, such interstate
services could currently be terminated by the spe-
cialized carriers only through resale of local ex-
change service obtained under an intrastate tariff.
This, in turn, would violate the general requirement
that all portions of an interstate service be offered
pursuant to an interstate tariff on file with this Com-
mrssion. Until we conduct a hearing pursuant to Sec-
tion 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 serv-
ices could not be lawfully terminated because no in-
terstate tariffs are on file which offer such termination
service or facilities.

7. Fourth, AT&T contends that the reason the
Execunet court concluded that the specialized carriers
were not restricted to the provision of private line
services over their existing authorized facilities was
because the Commission 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 restrict 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 finding which could require AT&T to pro-
vide connections and services to be used by the OCCs
for the equivalent of public message services. Until

ic

a Section 20i(a) hearing is conducted into these
issues, argues AT&T, the Commission cannot con-
clude that the public interest requires interconnec-
tion for non private line services.

8. AT&T’s next major argument is that before the
interconnection question is ever reached, the Commis-
sion must first determine whether it is in the public
interest for OCCs to provide MTS/Execunet-type
services, 1.e., services that would directly compete with
the switched public message telephone network. In
Ezxecunet, the Court stated:

we have not had to consider, and have not con-
sidered, 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
threshold determination by the Commission that Exe-
eunet-type services are in the public interest, it can-
not be said that AT&T is under an existing obliga-
tion under Section 201(a) of the Act, or otherwise,
interest would be served by authorizing 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 public
interest would be served by authorizing the OCCs to
provide MTS services before it can require AT&T to
interconnect 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 addi-
tional facilities and connections for use by OCCs in
furnishing non private line services. To provide these

8c

additional facilities and connections to the OCCs prior
to a determination that it would be in the public in-
terest to do so, states AT&T, could embark the in-
dustry 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
expeditiously on its petition because it anticipates,
in the wake of the Haxecunet decision, receiving re-
quests from OCCs for facilities and connections to
local exchange services for their use in the provision
of MTS/Execunet-type services. Moreover, because
AT&T believes no interconnection obligation for such
services currently exists, and because AT&T believes
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 intercon-
nection 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. Ac-
cordingly, our presentation of the arguments in op-
position 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

9c

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 specialized carrier applicants to pri-
vate line services, but authorized competition in the
broader specialized communications 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 opposed 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 serv-
ice set forth in the Commission decision in Execunet.
Therefore, SPC concludes that AT&T cannot now
contend that its interconnection obligation is limited
to private line services when AT&T had an obligation
to provide interconnection to Datran 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
Bell Tel. Co. of Pennsylvania require AT&T to pro-
vide interconnection to OCC’s for only their private
line services. It is the position of MCI and SPC that
AT&T must provide interconnection facilities to OCC’s
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 MCI argue
that the Specialized Common Carrier decision made
no mention of limiting AT&T’s interconnection obli-
gation to private line services, but included all spe-
cialized carrier communications services. Second, these
same parties vigorously argue that the Commission
decision in Docket 19896 prohibited AT&T from en-

10c

gaging in conduct which would result in denial or un-
reasonable delay “in establishing physical connections
with MCI and other specialized common carriers for
their presently or hereafter authorized interstate and
foreign communications services.” 46 FCC 2d at 439.
Consequently, SPC maintains that when these deci-
sions are read together, the test of AT&T’s intercon-
nection obligation is not whether an OCC service is a
private line service, but whether the service has been
authorized. If the service is authorized, then, states
SPC, AT&T is bound to provide interconnection fa-
cilities. MCI points out that the question of whether
Execunet and similar services are authorized was spe-
cifically addressed in the Execunet case, where the
Court held that MCI was authorized to provide Exec-
unet service over its existing facilities. Therefore,
argues MCI, AT&T is legally obligated to furnish in-
terconnection so that its service can be provided. MCI
contends that AT&T’s present refusal to interconnect
its monopoly local distribution facilitie

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385005_1545%3A2. Public record. Not legal advice.