Amicus Curiae Brief — United States v. American Telephone & Telegraph Co.

© @ FILED ©

Nos. 93-52.

InN THE

Supreme Court of the United States

OCTOBER TERM, 1993

JAN 13° 1994

Fee OF Tal MRK

MCI TELECOMMUNICATIONS, INC.,

. Petitioner,

AMERICAN TELEPHONE & TELEGRAPH COMPANY, ef al.,

Respondents.

UNITED STATES OF AMERICA and

FEDERAL COMMUNICATIONS COMMISSION,

. Petitioners,

AMERICAN TELEPHONE & TELEGRAPH COMPANY, et all.,

Respondents.

On Writs of Certiorari to the

United States Court of Appeals

for the District of Columbia Circuit

BRIEF OF AMICI CURIAE WILTEL, INC.,

ET AL., IN SUPPORT OF PETITIONERS

PETER A. ROHRBACH

DAVID G. LEITCH *

Karis A. HASTINGS

HOGAN & HARTSON

555 Thirteenth Street, N.W.

Washington, D.C. 20004

(202) 637-5822

* Counsel of Record Counsel for Amici Curiae

WILSON - Eras Printine Co.. Inc. - 789-0096 - WASHINGTON. D.C. 20001

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TABLE OF CONTENTS

TABLE OF AUTHORITIES ....................--c-ccsessesesseesseseess

STATEMENT OF INTEREST OF AMICI CURIAE..

STATEMENT OF THE CASE... cee eeeeeeeeeeeeeeee

SUMMARY OF ARGUMENT ...0000o.2 cece

SE feteretierinrntenvertninenpetninnasnentnenirngraniuennemansion

I. THE FCC’S PERMISSIVE DETARIFFING

POLICY IS WELL WITHIN THE AUTHOR-

ITY DELEGATED TO THE COMMISSION

ee I i acitsictececticthinncsintinsinhtinnatanlosiesieieon

A. Congress Has Directly Spoken to the Ques-

tion at Issue by Providing the Commission

with Authority to Modify Any Requirement

of Section 203, Including the Tariffing Re-

RS 5 a

B. At a Minimum, the FCC’s Construction of

the Statute it Administers is Reasonable and

Entitled to Deference from the Courts ......... i

Il. THE FCC’S DECISION DID NOT IMPLI-

CATE THE FILED RATE DOCTRINE,

WHICH DOES NOT SPEAK TO THE QUES-

TION OF WHEN RATES MUST BE FILED....

STI scnicheresicdinssicpnssdceeiianitiamnninsctinisenmnetiinmenenies

10

18

28

30

ii

TABLE OF AUTHORITIES

Cases: Page

American Telephone & Telegraph Co. v. FCC, 978

F.2d 727 (D.C. Cir. 1992), cert. denied, 113

S. Ct. 3020 (1993) ........ seaside naan sealant 7, 15, 28

Ardestani v. INS, 112 S. Ct. 515 (1991) ................. 12

Chemical Manufacturers Ass’n v. Natural Re-

sources Defense Council, Inc., 470 U.S. 116

(| SR 12,18

Chevron U.S.A. Inc. v. Natural Resources Defense

Council, Inc., 467 U.S. 837 (1984) -..... 5, 7, 8, 10, 18-19

Crandon v. United States, 494 U.S. 152 (1990) .... 19

Estate of Cowart v. Nicklos Drilling Co., 112 8S. Ct.

| SER SE 10, 12, 18

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

) RR 9

Good Samaritan Hosp. v. Shalala, 113 8. Ct. 2151

(| SRR 19

INS v. Cardoza-Fonseca, 480 U.S. 421 (1987)........ 10

K Mart Corp. v. Cartier, Inc., 486 U.S. 281

) Te 10

Leatherman v. Tarrant County Narcotics Intelli-

gence and Coordination Unit, 113 S. Ct. 1160

| se 13

Lechmere, Inc. v. NLRB, 112 S. Ct. 841 (1992)... 15

Maislin Industries, U.S., Inc. v. Primary Steel,

we o£! @) 8) er 28-29

MCI Telecommunications Corp. v. FCC, 765 F.2d

to Ry ee: | | 7, 15-17

National Railroad Passenger Corp. v. Boston &

Maine Corp., 112 S. Ct. 1894 (1992) 0000000... 12, 14-15

National Railroad Passenger Corp. v. National

Ass’n of Railroad Passengers, 414 U.S. 453

0, | nn FE 13

Negonsott v. Samuels, 118 S. Ct. 1119 (1998)........ 10

NLRB v. United Food & Commercial Workers

Catan, 406 Ue. BEB CORED ccccccnnsuneneen 18

Pauley v. Bethenergy Mines, Inc., 111 S. Ct. 2524

CRIED cecceccevscscesncisstsineennstetimminsenaamn 8,18

Permian Basin Area Rate Cases, 390 U.S. 747

CRIBGIBD cccesnsvseccnsseressenisecssinmntitasaaieans 28

| ™

iii

TABLE OF AUTHORITIES—Continued

Page

Russello v. United States, 464 U.S. 16 (1983) _....... 12

Sullivan v. Everhart, 494 U.S. 88 (1990) 00 10

United States v. James, 478 U.S. 597 (1986)... 12

United States v. Shimer, 367 U.S. 374 (1961)... 18

United States v. United States Gypsum Co., 438

EE Se 21

Young v. Community Nutrition Institute, 476 U.S.

EE 11

Administrative Rulings:

Competition in the Interstate Interexchange Mar-

ketplace, Report and Order, 6 FCC Red 5880

EE SETI 25

Expanded Interconnection with Local Telephone

Company Facilities:

Notice of Proposed Rulemaking and Notice

of Inquiry, 6 FCC Red 3259 (1991)... 25

Report and Order and Notice of Proposed

Rulemaking, 7 FCC Red 7369 (1992)... 26

Second Notice of Proposed Rulemaking, 7

ee 26

Second Report and Order and Third Notice

of Proposed Rulemaking, 8 FCC Red 7374

EE 26

Policy & Rules Concerning Competitive Common

Carrier Services and Facilities Authorizations

Therefor (“Competitive Carrier Rulemaking’):

Fifth Report and Order, 98 F.C.C.2d 1191

EE SS 8 0 3, 20

First Report and Order, 85 F.C.C.2d 1

es 3

Fourth Report and Order, 95 F.C.C.2d 554

I suseuemeaunoouns 8, 4, 20, 21

Further Notice of Proposed Rulemaking, 84

ST 21, 24

Notice of Inquiry and Proposed Rulemaking,

77 F.C.C.2d 308 (1979) 2.0000. 8, 19, 20, 21

Second Report and Order, 91 F.C.C.2d 59

(1982) ......... . — 3, 20, 21

iv

TABLE OF AUTHORITIES—Continued

Page

Sixth Report and Order, 99 F.C.C.2d 1020,

vacated, MCI Telecommunications Corp. v.

FCC, 765 F.2d 1186 (D.C. Cir. 1985) __....... 15,17

Tariff Filing Requirements for Interstate Common

Carriers, Notice of Proposed Rulemaking, 7

i, fl Sle ee 23

Tariff Filing Requirements for Nondominant

Common Carriers:

Memorandum Opinion and Order, 8 FCC Red

ERTIES REED eae: 21, 24, 27

Notice of Proposed Rulemaking, 8 FCC Red

RES RR PEE Tec SW EO 23, 26

Statutes:

EERE Err sete sasrrweeommenncr ron rr: 5, 6, 19-22

I a cscieliapsaeaenialeceniiamntamnlaiiniabdaiatli 3, 24

ID inns inte sinsketisitentieeeiisenbisdnienenies 3, 24

ea passim

ictrnciincitibiniinetinnmennnnannnies 11, 13, 14, 16

I nines incrrcniatistnininitesinatiinmtiilomeel passim

gE TIE meee er oc 13-14

EE 14-15

Legislative Materials:

FCC and NTIA Authorizations: Hearings Before

the Subcom. on Telecommunications and Fi-

nance of the House Comm. on Energy and Com-

merce, 101st Cong., Ist Sess. (1989) ....... 14

H.R. Rep. No. 213, 101st Cong., Ist Sess. (1989) __. 14

S. Rep. No. 439, 101st Cong., 2d Sess. (1990) ....... 14

Other Authorities:

Black’s Law Dictionary (5th ed. 1979) -................ 11

FCC Industry Analysis Division, Long Distance

Market Shares, Third Quarter, 1993 (December

RR ae ee ee ee 22

Thomas W. Merrill, Judicial Deference to Execu-

tive Precedent, 101 Yale L.J. 969 (1992) ........... 9,10

Antonin Scalia, Judicial Deference to Administra-

tive Interpretations of Law, 1989 Duke L. J.

511 (1989) - 8-9

v

TABLE OF AUTHORITIES—Continued

Page

Jahan Sharifi, Precedents Construing Statutes

Administered by Federal Agencies After the

Chevron Decision: What Gives?, 60 U. Chi. L.

I 15

Laurence H. Silberman, Chevron—The Intersec-

tion of Law and Policy, 58 Geo. Wash. L. Rev.

I Ne 8,18

Cass R. Sunstein, Law and Administration After

Chevron, 90 Colum. L. Rev. 2071 (1990) _....._.. 9,12

Telecommunications Reports (Sept. 13, 1993)... 24 4

Webster's Ninth New Collegiate Dictionary

IID Sicherheit cee aS 11,12

IN THE

Supreme Court of the United States

OcTOBER TERM, 1993

No. 93-356

MCI TELECOMMUNICATIONS, INC..,

. Petitioner,

AMERICAN TELEPHONE & TELEGRAPH COMPANY, ef al.,

Respondents.

No. 93-521

UNITED STATES OF AMERICA and

FEDERAL COMMUNICATIONS COMMISSION,

. Petitioners,

AMERICAN TELEPHONE & TELEGRAPH COMPANY, et al.,

Respondents.

On Writs of Certiorari to the

United States Court of Appeals

for the District of Columbia Circuit

BRIEF OF AMICI CURIAE WILTEL, INC.,

ET AL., IN SUPPORT OF PETITIONERS

STATEMENT OF INTEREST OF AMICI CURIAE

Amici WilTel, Inc., LDDS Communications, Inc. d/b/a

LDDS Metromedia Communications, Cable & Wireless,

Inc., Chadwick Telecommunications Corp., American

Network Exchange, Inc., KLP, Inc. d/b/a Call America,

U.S. Long Distance, Inc., Consolidated Network, Inc.,

Capital Network System, Inc., Impact Telecommunica-

tions Corp., LCI International, Inc., One-2-One Commu-

nications, Inc., and Telephone Electronics Corp. are long

2

distance telephone companies of varying size. All of these

companies are considered non-dominant interexchange

carriers by the Federal Communications Commission, and

accordingly were not required to file and maintain tariffs

with the Commission prior to the decision below. Amicus

America’s Carriers Telecommunications Association is a

trade association representing non-dominant long distance

carriers. Amicus MFS Communications Company is a

competitive local exchange carrier in the emerging market

for alternatives to the local telephone company monopo-

lies, and also was not required to file tariffs prior to the

decision below.

Under the court of appeals decision, amici would be

required to file tariffs with the Federal Communications

Commission. This requirement would not only result in

added financial burdens on amici, but would also be detri-

mental to the viability and further development of tele-

communications competition. Amici therefore have a

direct stake in the outcome of this case, which is of far-

reaching significance to the entire telecommunications in-

dustry. This brief is filed with the consent of the parties.

Copies of the consent letters have been filed with the

Clerk.

STATEMENT OF THE CASE

This case arises from a decision of the Court of Ap-

peals for the District of Columbia Circuit invalidating the

longstanding permissive detariffing policy of the Federal

Communications Commission (“FCC” or “Commission” ).

The court of appeals found that this policy, which the

FCC has characterized as “one of the cornerstones” of its

regulation of developing telecommunications competition

(Pet. App. 65a),’ violated Section 203 of the Communi-

1 Citations to “Pet. App.” are to the Appendix to the Petition for

Writ of Certiorari in No. 93-356. Unless otherwise indicated,

citations to FCC orders and notices are citations to such items in

CC Docket No. 79-252, Policy & Rules Concerning Rates for Com-

petitive Common Carrier Services and Facilities Authorizations

Therefor (“Competitive Carrier Rulemaking”’).

Deneeenenentmes

3

cations Act of 1934, as amended (“the Communications

Act” or “the Act”), 47 U.S.C. § 203.

More specifically, this case has developed out of the

FCC’s Competitive Carrier Rulemaking, a multi-staged

proceeding between 1979 and 1985 that established regu-

latory policies to govern new competitors entering here-

tofore monopoly telecommunications markets. Over 13

years ago the FCC concluded that the rates of such “non-

dominant” carriers are presumptively lawful because they

“simply cannot rationally price their services in ways

which, or impose terms and conditions which, would con-

travene” applicable sections of the Communications Act.

See First Report and Order, 85 F.C.C.2d 1, 31 (1980).°

No party sought review of that decision, or the reduced

tariff regulation that the FCC adopted to implement it.

Two years later the FCC reaffirmed its conclusion regard-

ing the presumptive lawfulness of non-dominant carrier

rates based on its expert review of subsequent events in

the market. The Commission then found that tariff regu-

lation of such carriers was unnecessary and granted per-

missive detariffing to resale carriers. See Second Report

and Order, 91 F.C.C.2d at 64-71. The next year the FCC

extended permissive detariffing to other non-dominant car-

oo

2In its 1979 Notice of Inquiry and Proposed Rulemaking, the

Commission announced its “tentative belief that competitive car-

rier rates are highly unlikely to contravene the Act.” . 77 F.C.C.2d

308, 310. The Commission reasoned that under widely accepted

economic theory “the rates of non-dominant carriers are unlikely

to be either predatory or supra-competitive and thus are unlikely

to contravene” the proscription of 47 U.S.C. §201(b) on unjust

and unreasonable rates. /d. at 334. Likewise, “these same factors

preclude these [non-dominant] carriers from unjustly discriminat-

ing in favor of some customers at the expense of their other cus-

tomers,” id. at 337, in violation of the Act’s prohibition on “unjust

or unreasonable discrimination in rates.” 47 U.S.C. § 202(a).

The Commission has repeatedly endorsed these conclusions. See,

e.g., First Report and Order, 85 F.C.C.2d at 5, 20; Second Report

and Order, 91 F.C.C.2d 59, 69 (1982); Fourth Report and Order,

95 F.C.C.2d 554, 577-578 (1983); Fifth Report and Order, 98

F.C.C.2d 1191, 1199-1202, 1207-08 (1984).

4

riers. See Fourth Report and Order, 95 F.C.C.2d at

578.*° No party sought review of any of these Commis-

sion decisions.

Thus, for well over a decade it has been a black letter

principle that non-dominant carrier rates, terms and other

service conditions are presumptively lawful. This princi-

ple is not before the Court today; indeed, it has never

been challenged.

The only issue here is whether the FCC’s authority to

modify any requirement of Section 203 of the Act is suffi-

cient to allow the Commission to excuse hundreds of non-

dominant carriers from filing tariffs that the Commission

has already held are presumptively lawful. The D.C. Cir-

cuit answered that question in the negative, and the ques-

tion is now before this Court on review.

SUMMARY OF ARGUMENT

This case goes directly to the heart of the FCC’s ability

to regulate developing telecommunications competition at

a time of great ferment in the industry. The court of

appeals has stripped the FCC of a crucial tool—clearly

entrusted to the Commission by the Communications Act

—by which it fosters competition.

The court of appeals read the plain meaning of Section

203(b)(2) too narrowly when it found that the express

grant of authority to “modify any requirement” of Section

203 did not give the FCC the flexibility to adopt permis-

sive detariffing. This plain meaning is supported both by

the specific language of Section 203, the language and

structure of other parts of the Act, and subsequent con-

gressional action. Because the Commission’s understand-

ing of the statute it administers is demonstrably correct,

“that is the end of the matter; for the court, as well as

the agency, must give effect to the unambiguously ex-

% At that time the FCC noted that over the preceding three years

it had received only five petitions challenging tariff filings of “spe-

cialized” (i.e., new) common carriers such as MCI, and that none

of the petitions had merit. See 95 F.C.C.2d at 578 n.79.

penne

———eeeEEEE—ee———e——— ea a

5

pressed intent of Congress.” Chevron U.S.A. Inc. V.

Natural Resources Defense Council, Inc., 467 U.S. 837,

842-843 (1984).

Should the Court find Section 203 ambiguous or un-

clear on the question presented, it is plain at a minimum

that the Commission’s construction of this provision is a

permissible one. The D.C. Circuit below failed to defer to

the FCC’s reasonable interpretation of its governing stat-

ute as required by Chevron. Had it done so, it would

have found that the language of the Communications Act

amply supports the FCC’s decision to excuse non-

dominant carriers from filing tariffs.

Permissive detariffing is supported, not only by Section

203, but by the FCC’s expert and reasonable understand-

ing of the broader purposes of the Act—and the complex

industry conditions in which it applies. Section 1 of the

Act gives the FCC a broad mandate “to make available,

so far as possible, to all the people of the United States

a rapid, efficient, Nation-wide and world-wide wire and

radio communications service with adequate facilities at

reasonable charges.” 47 U.S.C. § 151.

The FCC determined nearly two decades ago that com-

petition can help meet these objectives. The amici here

owe their existence to that decision. But the challenge of

a transition from monopoly to competitive markets can-

not be overstated. Even today AT&T’s long distance mar-

ket share is over 60%, three times greater than that of

even its largest rival. Equally important, competition with

local telephone companies is only now beginning. The

FCC had just taken its first major steps to encourage such

competition when the D.C. Circuit invalidated the permis-

sive detariffing policy.

The court of appeals struck down one of the most im-

portant tools used by the FCC to manage competitive

market development. The flexibility provided by Section

203 of the Act allows the FCC to avoid harmful and

unnecessary tariff regulation of developing competitors—

6

regulation that the Commission has found could prevent

competition from taking root in the face of the market

power of preexisting monopolies. The Commission then

has used this same flexibility gradually to reduce regula-

tion of the dominant monopoly as market competition

grows.

Significantly, the Commission long ago found that the

rates charged by non-dominant competitors are presump-

tively lawful under the Act because those carriers lack

market power. Indeed, the Commission made tariff filing

permissive only after it reaffirmed, based on further ex-

perience, that non-dominant carrier rates should continue

to be considered presumptively lawful. No party has

ever challenged this substantive conclusion.

The only issue here, then, is whether Section 203 should

be given a constricted reading so as to require the filing

of rates that the Commission has already found presump-

tively lawful, even though such a requirement would have

harmful effects on users of telecommunications services

and on the overall policy goals expressed in Section 1 of

the Act. In these circumstances the Court should respect

the language of Section 203, and restore to the Commis-

sion its full statutory authority to regulate competitive

market development.

7

ARGUMENT

I. THE FCC’S PERMISSIVE DETARIFFING POLICY

IS WELL WITHIN THE AUTHORITY DELEGATED

TO THE COMMISSION IN SECTION 203

In holding that the Commission’s authority to “modify

any requirement” of Section 203 does not permit it to

modify the tariff filing requirement, the court below re-

jected the agency’s interpretation of the statute it admin-

isters. Remarkably, it did so without analyzing the

agency’s construction under the principles announced by

this Court in Chevron U.S.A. Inc. vy. Natural Resources

Defense Council, Inc., 467 U.S. 837 (1984), the seminal

decision establishing the guidelines for analysis “[w]hen a

court reviews an agency’s construction of the statute which

it administers * * *.” Jd. at 842.* Under that familiar

analysis, “[f]irst, always, is the question whether Congress

has directly spoken to the precise question at issue. If

the intent of Congress is clear, that is the end of the

matter; for the court, as well as the agency, must give

effect to the unambiguously expressed intent of Congress.”

Id. at 842-843. If, however, “the court determines Con-

gress has not directly addressed the precise question at

issue, the court does not simply impose its own construc-

tion on the statute * * *. Rather, if the statute is silent

or ambiguous with respect to the specific issue, the ques-

tion for the court is whether the agency’s answer is based

on a permissible construction of the statute.” Jd. at 843.

4The D.C. Circuit’s unpublished per curiam opinion below did

not cite Chevron and relied exclusively on its opinion in American

Telephone & Telegraph Co. Vv. FCC, 978 F.2d 727 (D.C. Cir. 1992),

cert. denied, 113 S. Ct. 3020 (1993). That opinion, in turn, men-

tions Chevron only to say that the court’s 1985 decision in MCI

Telecommunications Corp. V. FCC, 765 F.2d 1186 (D.C. Cir. 1985)—

which the D.C. Circuit found (incorrectly, we think) to be the

ultimate source for the decision below—did not cite Chevron. Thus,

although all of the tariffing decisions of the D.C. Circuit postdate

this Court’s decision in Chevron, that court has never analyzed

Section 203 under Chevron principles,

8

The D.C. Circuit’s failure to apply the teaching of

Chevron was fundamental error. One of the primary

effects of the approach mandated by this Court in Chev-

ron is to ensure the appropriate distribution of authority

in our federal system. As the Court observed in Chevron

itself:

While agencies are not directly accountable to the

people, the Chief Executive is, and it is entirely

appropriate for this political branch of the Govern-

ment to make such policy choices—resolving the

competing interests which Congress itself either in-

advertently did not resolve, or intentionally left to

be resolved by the agency charged with the admin-

istration of the statute in light of everyday realitics.

[467 U.S. at 865-866. ]

See also Pauley v. Bethenergy Mines, Inc. 111 S. Ct.

2524, 2534 (1991) (judicial deference mandated by

Chevron “reflects a sensitivity to the proper roles of the

judicial and political branches”).° Chevron’s allocation

of the appropriate roles between the judiciary and the

executive is not, however, merely a matter of political

theory, for it also reflects the relative competence and

expertise of the two branches. For this reason, the Court

has found particular significance in the complexity of the

Statute at issue, and the expertise of the agency in ad-

ministering it. See, e.g., id. (in the context of a “com-

plex and highly technical regulatory program” requiring

the application of “significant expertise” and “the exer-

cise of judgment grounded in policy concerns, * * *

courts appropriately defer to the agency entrusted by Con-

gress to make such policy determinations”).

5 See also Laurence H. Silberman, Chevron—The Intersection of

Law and Policy, 58 Geo. Wash. L. Rev. 821, 822 (1990) (Chevron

“is simply a sound recognition that a political branch, the execu-

tive, has a greater claim to make policy choices than the judiciary”).

® Justice Scalia has explained that “one of [Chevron’s] major

advantages from the standpoint of governmental theory * * * is

to permit needed flexibility, and appropriate political participation,

in the administrative process.” Antonin Scalia, Judicial Deference

9

Long before the decision in Chevron, this Court recog-

nized the need for particular deference to the Commis-

sion’s judgments under the Communications Act. The

Act, the Court observed, is a “supple instrument for the

exercise of discretion by an expert body which Congress

has charged to carry out its legislative policy.” FCC v.

Pottsville Broadcasting Co., 309 U.S. 134, 138 (1940).

By its decision below, therefore, the D.C. Circuit imposed

its understanding of the statute not only in the face of

the contrary requirements of Chevron, but also against

the longstanding recognition of the Commission’s author-

ity to exercise the discretion granted by the “supple instru-

ment” handed to it by Congress sixty years ago to develop

regulatory policies that promote the national interest in

efficient, reasonably priced telecommunications.

Vindication of these longstanding principles is par-

ticularly important now, when the FCC is in the midst of

supervising the complex transition from monopoly to com-

petitive telecommunications markets. The FCC’s exercise

of its flexibility thus far has been a success, as demon-

strated by the existence of the amici here and the im-

portant role they play in bringing innovative services to

the public.

The court below disregarded the authority given the

FCC by the plain meaning of the statute to excuse non-

dominant carriers from filing tariffs. Moreover, the court

did not acknowledge, let alone apply, its obligation to

to Administrative Interpretations of Law, 1989 Duke L. J. 511,

517 (1989). See also Thomas W. Merrill, Judicial Deference to

Executive Precedent, 101 Yale L. J. 969, 1002 (1992) (“the practice

of deferring to executive interpretations of statutes performs many

valuable functions: it allows policy to be made by actors who are

politically accountable; it draws upon the specialized knowledge of

the administrators; it injects an element of flexibility into statu-

tory interpretation; and it helps assure nationally uniform con-

structions”); Cass R. Sunstein, Law and Administration After

Chevron, 90 Colum. L. Rev. 2071, 2084 (1990) (“when agency

competence is relevant, deference is particularly appropriate’’).

10

defer to the FCC’s reasonable interpretation of the Act.

As a result, the court’s decision must be reversed.

A. Congress Has Directly Spoken to the Question at

Issue by Providing the Commission with Authority

to Modify Any Requirement of Section 203, Includ-

ing the Tariffing Requirement

Amici fully concur in the submission of the Solicitor

General that “the FCC’s policy is not merely a reasonable

interpretation of the statute, it is the correct one.” 93-521

Pet. at 14. As this Court’s post-Chevron decisions have

explained, the inquiry under step one of the analysis is

an effort to “ascertain[] the plain meaning of the stat-

ute, * * * Jook[ing] to the particular statutory language

at issue, as well as the language and design of the statute

as a whole.” K Mart Corp. v. Cartier, Inc., 486 U.S.

281, 291 (1988).' These traditional tools of statutory

construction establish that the FCC correctly determined

that its permissive detariffing decisions were authorized

by the Communications Act.

a. As the Court has repeatedly noted, all statutory

construction must begin with the text of the statute itself.

See, e.g., Negonsott v. Samuels, 113 S. Ct. 1119, 1122-23

(1993); Estate of Cowart v. Nicklos Drilling Co., 112

S. Ct. 2589, 2594 (1992). The “particular statutory

language at issue” in this case, K Mart Corp., 486 U.S.

at 291, is quite broad. Section 203(b)(2) gives the

Commission power “in its discretion and for good cause

shown,” to “modify any requirement made by or under

the authority of this section either in particular instances

or by general order applicable to special circumstances or

7 See Sullivan v. Everhart, 494 U.S. 83, 89 (1990); INS v.

Cardoza-F onseca, 480 U.S. 421, 449 (1987) (using “ordinary canons

of statutory construction” to ascertain meaning of the statute) ;

Chevron, 467 U.S. at 843 n.9 (inquiry into meaning of statute is

to be conducted “employing traditional tools of statutory construc-

tion”). See also Merrill, 101 Yale L. J. at 990-992 (describing

evolution of Chevron step one analysis).

—o "

11

conditions except that the Commission may not require

the notice period specified in paragraph (1) to be more

than one hundred and twenty days.” 47 U.S.C. § 203(b)

(2) (emphasis added). The “requirements” of Section

203, of course, include the tariff filing requirement of Sec-

tion 203(a).*° The D.C. Circuit, however, found that the

Commission, in excusing some carriers from the tariffing

requirement while continuing to apply it to dominant

carriers, did not “modify” that requirement. This decision

was plainly in error.

The D.C. Circuit's decision rested on the definition of

“modify” found in Black’s Law Dictionary (Sth ed. 1979).

Pet. App. 53a. That dictionary defines “modify” as “[t]o

alter; to change in incidental or subordinate features; en-

large; extend; amend; limit; reduce.” Black’s at 905. In

determining that the authority to “modify” permitted only

“circumscribed alterations,” Pet. App. 53a (emphasis

added), the court below apparently emphasized the por-

tion of the definition concerning changes in “incidental

or subordinate features.” Even this source, however, does

not so limit the meaning of the word. Thus, for example,

Black’s also defines “modify” as “amend,” “limit,” or

“reduce.” None of these definitions is qualified with any

*The D.C, Circuit apparently believed that its decisions were

supported by the observation that Congress, in using the word

“shall” in section 203(a), employed the language of command.

See Pet. App. 52a. We have no quarrel with this observation. But

see Young V. Community Nutrition Institute, 476 U.S. 974 (1986)

(“shall” may in some circumstances be permissive). But use of

the term “shall” merely establishes that Congress in fact imposed

a “requirement”—which it then expressly gave the Commission the

authority to “modify.” See Webster's Ninth New Collegiate Dic-

tionary 1002 (1989) (definition of “require” includes “to impose

a compulsion or command on”’).

Indeed, the only “requirement” of Section 203 that is not ex-

pressly conditioned on the Commission's discretion to adopt regu-

lations (¢.g., “as the Commission may by regulation require’)

is the basic tariffing requirement of Section 203(a). Thus, unless

it applies to that requirement, the Commission’s modification

authority under Section 203(b)(2) would be wholly superfluous.

12

reference to “incidental or subordinate features.” Nor

does the ordinary, plain meaning of the term “modify”

include any such limitation.” Webster's Ninth New Col-

legiate Dictionary, for example, defines “modify” as

either “to make minor changes in” or “to make basic

or fundamental changes in order to give a new orientation

to or to serve a new end.” 7/d. at 763. And this Court

has observed elsewhere that “the word ‘modify’ * * * in

its broadest sense * * * encompass[es] any change or al-

teration * * *.” Chemical Manufacturers Ass'n Vv. Nat-

ural Resources Defense Council, Inc., 470 U.S. 116, 125

(1985) (emphasis added ).”°

It is also evident from the “precise language at issue”

that Congress, rather than limiting the Commission’s

authority to modifications a court might find “incidental”

or “subordinate,” intended the broader definition of “mod-

ify” to apply here. Congress directly and expressly gave

the Commission the authority to modify “any” require-

ment of Section 203. There is no basis in this language,

or in the accepted meaning of the word “modify,” to hold

that only “circumscribed alterations” are permissible.

Under the precise language of the statute, then, it is

plain that the permissive detariffing policy does not exceed

statutory authority. By permitting non-dominant carriers

® Congress is presumed to intend the ordinary meaning of the

words it uses. Russello v. United States, 464 U.S. 16, 21 (1983) ;

Perrin Vv. United States, 444 U.S. 37, 42 (1979).

1 This Court has suggested that “[t|)he existence of alternative

dictionary definitions * * *, each making some sense under the

statute, itself indicates that the statute is open to interpretation.”

National Railroad Passenger Corp. Vv. Boston & Maine Corp., 112 S.

Ct. 1394, 1402 (1992). The mere existence of alternative dictionary

definitions does not compel analysis under Chevron’s second step

in this context. As we explain, other features of the Communica-

tions Act demonstrate that only one of the alternative dictionary

definitions—the broad one—makes “some sense under the statute.”

This Court has found a statute to be unambiguous even where

alternative dictionary definitions exist. See, e.g., Estate of Cowart

v. Nicklos Drilling Co., 112 8. Ct. 2589 (1992); Ardestani v. INS,

112 S. Ct. 515 (1991); United States v. James, 478 U.S. 597

(1986). See also Sunstein, 90 Colum. L. Rev. at 2091 & n.97.

13

to forego filing tariffs, the Commission simply relied on

its authority to “modify”—to change, alter, or amend—

“any” requirement of Section 203, including the tariff

filing requirement of Section 203(a).

2. In addition to the precise language at issue, the

language and structure of the Act as a whole confirm the

Commission’s understanding of the statute. We believe—

as the Commission did—that the statute contains three

specific indications of congressional intent, each confirm-

ing the authority of the Commission to adopt permissive

detariffing.

First, Section 203(b)(2) contains one—and only one

—express limitation of the authority to “modify any re-

quirement”: “the Commission may not require the notice

period specified in paragraph (1) to be more than

one hundred and twenty days.” The existence of an ex-

press limitation on the authority to modify strongly con-

firms that the Congress meant what it said when it

otherwise gave the Commission authority to “modify

any requirement” of Section 203. See Leatherman v.

Tarrant County Narcotics Intelligence and Coordination

Unit, 113 S. Ct. 1160, 1163 (1993); National Railroad

Passenger Corp. v. National Ass'n of Railroad Passengers,

414 U.S. 453, 458 (1974). In its Brief in Opposition,

AT&T offered no contrary explantion for this express

qualification on the FCC’s modification authority.

Second, the section of the Act immediately following

the express grant of authority to modify clearly contem-

plates that some carriers will be excused from the tariff

filing requirement. Section 203(c), which was ignored by

the court below, provides that “[n]Jo carrier, unless other-

wise provided by or under the authority of this chapter,

shall engage or participate in [interstate and foreign wire

or radio] communication unless schedules have been filed

and published in accordance with the provisions of this

subchapter and with the regulations made thereunder”

(emphasis added). The plain meaning of this provision

14

is that it may be “provided”—here, by the Commission—

“under the authority of this chapter” that some carriers

may engage in such communications without filing and

publishing schedules of charges.”

Third, Congress recently adopted another provision of

the Act, 47 U.S.C. § 226(h)(1)(A), confirming that it

shares the FCC’s interpretation of Section 203. That

provision, adopted as part of the Telephone Operator

Consumer Services Improvement Act of 1990, imposed on

non-dominant carriers offering operator services the duty

to file informational tariffs. Because the information re-

quired by such tariffs would be largely contained in any

tariffs filed under Section 203(a), this additional require-

ment of the 1990 statute would have been redundant if

these non-dominant carriers were required to file tariffs

under the Act. But Congress plainly did not intend to

adopt a redundant regulatory requirement. Rather, fully

aware of the Commission's permissive detariffing policy,”

Congress determined that a limited form of tariffing should

be reimposed on providers of certain services. Whether

considered as congressional acquiescence,"* or simply as

11 AT&T has complained that this argument ignores the second

clause of Section 203(c), which, it says (without bothering to

quote the clause), “prohibits charging rates other than those filed

in tariffs.” Opp. at 16. But the second clause of Section 203(c)

prohibits a carrier from charging a different rate for communica-

tions “between the points named in any such schedule than the

charges specified in the schedule then in effect” (emphasis added ) .

This restatement of the filed rate doctrine, discussed infra at 28 to

29, applies by its own terms only to those circumstances where a

schedule has been filed and is in effect. Rather than “prohibiting

rates other than those filed in tariffs,” the statute clearly prohibits

only rates other than those specified in any tariff that is actually

filed (either by Commission mandate or voluntarily).

12 See FCC and NTIA Authorizations: Hearings Before the

Subcommittee on Telecommunications and Finance of the House

Committee on Energy and Commerce, 101st Cong., Ist Sess. 30

(1989) ; S. Rep. No. 439, 101st Cong., 2d Sess. 3-4 & n.10 (1990) ;

H.R. Rep. No. 213, 101st Cong., Ist Sess. 3, 5-6 (1989).

13 See National Railroad Passenger Corp. Vv. Boston & Maine

Corp., 112 S. Ct, at 1402 (finding agency's interpretation permissi-

15

additional statutory evidence of the scope of Section

203(b)(2), the requirement of Section 226(h)(1)(A)

confirms the Commission’s interpretation of the statute it

administers.

3. In reaching its contrary conclusion, the D.C. Cir-

cuit below relied for its statutory construction exclusively

on its earlier decision in AT&T v. FCC, supra, which in

turn relied on its 1985 decision in MCI v. FCC, supra.

See Pet. App. 2a, 52a-53a. Although the AT&T court

found that the argument from the express authority of

Section 203(b)(2) was “not insubstantial when made

initially,” id. at 52a, it rejected the Commission’s view

on the basis of its earlier decision in MCI. The AT&T

court, however, did not recognize that the MCI deci-

sion was reached without the benefit of the subsequent

congressional action discussed above, which demonstrated

Congress’s agreement with the FCC’s interpretation of

Section 203 as allowing “permissive detariffing.” More

importantly, the AT&T court overstated the relevance of

the MCI decision here; the reasoning of that decision

plainly does not compel affirmance of the D.C. Circuit's

erroneous decisions on permissive detariffing."*

The MCI case arose out of the Commission’s Sixth

Report and Order, 99 F.C.C.2d 1020 (1985), in which

ble where “statutory addition enacted by the Congress,” which did

not modify the specific language at issue, “confirms the [agency’s |]

view” and contrary interpretation “would make the amendment

superfluous”).

'* AT&T has suggested that the decision below was based on the

doctrine that “judicial construction of a statute binds subsequent

courts and eliminates ‘any issue of deference to the [agency].’”

Opp. at 19 (quoting Lechmere, Inc. v. NLRB, 112 S. Ct. 841, 847

(1992)). But even if the D.C. Circuit’s decision was mandated by

its earlier AT&T decision, that decision certainly was not man-

dated by the MCI decision, which expressly reserved the question

at issue here. None of these decisions, of course, binds this Court.

See generally Jahan Sharifi, Precedents Construing Statutes Ad-

ministered by Federal Agencies After the Chevron Decision:

What Gives?, 60 U. Chi. L. Rev. 223 (1993).

16

it prohibited carriers from filing tariffs. The issue, there-

fore, was “whether the Commission has statutory authority

to prohibit common carriers from filing tariffs * * *.”

Opp. App. 3a (reproducing MCI decision) (emphasis in

original). The court held that the Commission, by pro-

hibiting the filing of the tariffs, had not adopted the “cir-

cumscribed alterations” permitted by Section 203(b)(2)

but rather had adopted a “wholesale abandonment or

elimination of a requirement.’ /d. at lla (emphasis

added). The court viewed the mandatory detariffing pol-

icy before it as “fundamentally” different from the per-

missive detariffing policy at issue here. Jd. at 8a

(emphasis added). It specifically noted that “we do not

reach the question whether the FCC’s earlier permissive

orders are invalid.” Jd. at 20a.

The D.C. Circuit’s subsequent AT&T decision relied

on the MCI opinion—which, as noted, expressly reserved

the issue presented in AT&T and here—with little analy-

sis. Rather, the court simply repeated the language of

MCI and concluded: “Whether detariffing is made man-

datory, as in the Sixth Report, or simply permissive, as in

the Fourth Report, carriers are, in either event, relieved

of the obligations to file tariffs under section 203(a).

That step exceeds the limited authority granted the Com-

mission in section 203(b) to ‘modify’ requirements of the

Act.” Pet. App. 53a. This ipse dixit, however, provides

no support for the Court’s extension of the MCI holding

on mandatory detariffing to the “fundamentally” different

permissive detariffing policy at issue here.

The MCI decision stands only for the proposition that

the authority provided in Section 203(b)(2) does not

permit the “wholesale abandonment or elimination” of

Section 203(a) such that carriers are prohibited from

filing tariffs. The court thereby protected the opportunity

to file tariffs that also is present in Section 203. Some

carriers had noted affirmative reasons why they might

wish to retain tariffs, including simplification of contract-

ing with customers and coordination with corresponding

17

tariffs for intrastate services. See Sixth Report and Order,

99 F.C.C.2d at 1024-25 & n.13. They argued that Sec-

tion 203 allowed them to maintain interstate tariffs on

file with the FCC, even if the FCC itself had no material

interest in the tariffs for its own purposes, and was willing

to make such filings voluntary.

But unlike the mandatory detariffing at issue in MCI,

permissive detariffing does not constitute “wholesale aban-

donment or elimination” of the requirements of Section

203. Rather, the Commission, “in its discretion and for

good cause shown,” Section 203(b)(2), modified the

requirement by making the mandatory element of that

section applicable only for tariffs that are not presump-

tively lawful—i.e., tariffs of carriers with market power.

The FCC also retained regulation of other carriers

through its complaint process and investigative powers.

It is one thing to hold that the Commission may not

modify a statutory command by turning it into a prohibi-

tion—the action the D.C. Circuit condemned in MC/—

thereby affecting carriers’ opportunity to file tariffs if they

wish. But it is quite something else to say that the Com-

mission may not modify the command by excusing some

carriers from compliance where the Commission itself has

no further need for the relevant tariff filings to meet its

Statutory duties. In the language of the D.C. Circuit, the

former is more plainly a “wholesale elimination or aban-

donment,” while the latter bears the characteristics of an

alteration that is “circumscribed,” i.e., limited in its appli-

cation. Thus, even if the MCI case accurately describes

the boundaries of the statutory authority (an issue this

Court need not reach), that case does not compel the

decision reached by the D.C. Circuit in the “fundamen-

tally” different context presented here.

18

B. At a Minimum, the FCC’s Construction of the Stat-

ute it Administers is Reasonable and Entitled to

Deference from the Courts

Although this case may be resolved on the basis of the

plain evidence of the statute’s meaning, the foregoing

demonstrates, at a minimum, that the agency’s construc-

tion of the statute is a permissible one entitled to defer-

ence under Chevron. As the Chevron Court explained, an

agency’s interpretation of an ambiguous statute is entitled

to deference so long as it “ ‘represents a reasonable ac-

commodation of conflicting policies that were committed

to the agency’s care by the statute.” 467 U.S. at 845

(quoting United States v. Shimer, 367 U.S. 374, 383

(1961)). Once a court determines that the issue is not

definitively resolved by the statute, “it is incumbent upon

[the party challenging the agency's interpretation] to

establish that the agency’s construction is inconsistent

with the structure and purpose of the statute and therefore

impermissible.” Silberman, 58 Geo. Wash. L. Rev. at

827. AT&T cannot carry that burden here.

When analyzing an agency construction of a statute

under step two of the Chevron test, this Court has de-

ferred to any reasonable or rational agency construction.””

As the Court observed just last Term:

[W]here the agency’s interpretation of a statute is

at least as plausible as competing ones, there is little,

if any, reason not to defer to its construction. We

should be especially reluctant to reject the agency's

15 See, e.g., Estate of Cowart, 112 S. Ct. at 2594 (deference is

owed to a “reasonable” statutory interpretation from an adminis-

tering agency); Pauley Vv. Bethenergy Mines, Inc., 111 S. Ct. at

2535 (agency position “entitled to deference” so long as it is reason-

able): NLRB v. United Food & Commercial Workers Union, 484

U.S. 112, 123 (1987) (question is whether agency’s construction is

“rational and consistent with the statute”) ; Chemical Manufacturers

Ass’n V. Natural Resources Defense Council, Inc., 470 U.S. at 125

(agency’s construction sustained if it is a “sufficiently rational

one”).

19

current view, which, as we see it, so closely fits “the

design of the statute as a whole and * * * its object

and policy.” [Good Samaritan Hosp. v. Shalala, 113

S. Ct. 2151, 2161 (1993) (quoting Crandon v.

United States, 494 U.S. 152, 158 (1990)).]

We have already demonstrated that the agency’s construc-

tion fits closely with the language and design of the stat-

ute. We explain below that this construction—which even

the D.C. Circuit called “not insubstantial,” Pet. App. 52a

—also is a reasonable implementation of the object and

policy that guide the statute.

1. Section 1 of the Communications Act, 47 U.S.C.

§ 151, imposes on the FCC the mandate “to make avail-

able, so far as possible, to all the people of the United

States a rapid, efficient, Nation-wide, and world-wide wire

and radio communication service with adequate facilities

at reasonabie charges.” This directive was given “at a

time when there was little or no competition in tele-

communications.” Notice of Inquiry and Proposed Rule-

making, 77 F.C.C.2d at 359. However, as new technologi-

cal and legal developments permitted the introduction of

competition into certain market segments, the FCC recog-

nized its obligation under Section 1 to foster such com-

petition to improve telecommunications efficiency and

choice for consumers, as well as to reduce prices. As

discussed above, in the Competitive Carrier Rulemaking

the FCC adopted regulatory policies applicable to new

entrants, including a finding that the rates and service

terms of competitors are presumptively lawful. Again,

this conclusion has never been challenged, and will remain

a governing principle however the Court decides this case.

See supra at 3-4.

It follows that when the FCC construed Section 203, it

reasonably concluded that the modification authority pro-

vided there was broad enough to permit it to excuse non-

dominant carriers from filing tariffs that the Commission

did not require in order to meet its statutory obligations.

Permissive detariffing was a small and logical step.

20

The Court should recognize that even though the FCC

has created a presumption that non-dominant carrier rates

are lawful (and excused tariff filing on that basis as un-

necessary), the Commission at all times has retained full

authority to examine such rates upon customer complaint

or its own motion. See, e.g., Second Report and Order,

91 F.C.C.2d at 70; Fourth Report and Order, 95

F.C.C.2d at 556. Non-dominant carriers must stand ready

to file relevant rate information upon request, and have

that information evaluated under the statutory standards.

Thus, in no respect did the Commission abandon its

fundamental responsibility to protect consumers from un-

lawful rates when it exercised its modification discretion

under Section 203(b) (2).

The FCC’s construction of Section 203 is even more

clearly reasonable given the affirmative harm the Commis-

sion found that mandatory tariff filing would do to its

general obligations under Section 1. As early as 1979,

in the first notice in the Competitive Carrier Rulemak-

ing, the FCC expressed concern that “some of the poten-

tial public benefits which we had hoped would flow

from freer entry have been frustrated, in part, by con-

tinued adherence to rules and procedures governing tar-

iff filings * * * designed primarily for carriers with

dominant market positions and monopoly services.” No-

tice of Inquiry and Proposed Rulemaking, 77 F.C.C.2d

at 330. See also id. at 309. For example, the FCC

found that tariff requirements imposed significant im-

pediments to market entry, for the direct costs of pre-

paring, filing, and maintaining a current tariff are substan-

tial. Id. at 359.

These costs take on heightened significance in the con-

text of firms with little or no market power trying to

break in against a longstanding industry giant. From the

time of its initial notice in 1979, the Commission has re-

peatedly found that tariff filings in the context of an

otherwise competitive market would likely have anticom-

petitive effects. As the FCC explained, carriers attempt-

ing to compete “must either offer services unavailable

ii

21

from the established carriers or, more likely, offer services

with rates, conditions and practices more favorable than

those offered by the established carriers.” Jd. at 324.

The FCC saw that dominant monopoly carriers could

use the tariff process to squelch such competitive market

developments. Jd. The Commission further found that

continued regulation of non-dominant firms would “dis-

courage the introduction of new, competitive services,”

| act as a barrier to market entry by new firms, and

inhibit innovative pricing mechanisms. /d.

The FCC has endorsed these conclusions repeatedly in

its decade of experience with the deregulation of non-

dominant interexchange carriers."* For example, the FCC

emphasized in the rulemaking directly at issue here its

finding that “mandatory tariff regulation of non-dominant

carriers was in fact at odds with the fundamental statutory

purpose set forth in Section 1 of the Act because it in-

hibits price competition, service innovation, entry into

the market, and the ability of firms to respond quickly to

market trends.” Pet. App. 27a.”

6 See, e.g., Fourth Report and Order, 95 F.C.C.2d at 555 n.1

(tariff filing requirements “impede entry, impair competitive pric-

ing, and facilitate collusive conduct’) (citing United States v.

United States Gypsum Co., 438 U.S. 422, 457 (1978) (“the exchange

of price information among competitors carries with it the added

potential for the development of concerted price-fixing arrange-

ments”) ); Second Report and Order, 91 F.C.C.2d at 71 (tariff

“requirements stifle price competition and service and marketing

innovation”) ; Further Notice of Proposed Rulemaking, 84 F.C.C.2d

at 454 (“Tariff posting * * * provides an excellent mechanism for

inducing noncompetitive pricing’’).

'T The FCC has endorsed the fundamental conclusions supporting

its regulatory decisions even after the D.C. Circuit issued the

decision below. In response to the AT&T decision, the Commission

“reaffirm(ed]” its “policy findings, adopted nearly a decade ago in

Competitive Carrier, and conclude[d] that * * * traditional tariff

regulation of nondominant carriers is not only unnecessary to

insure just and reasonable rates, but is actually counterproductive

** *” Tariff Filing Requirements for Nondominant Carriers,

Memorandum Opinion and Order, 8 FCC Red. 6752, 6752 (1993)

(footnote omitted) (“Rate Range Order’), appeal pending sub nom.

en et Tee —

22

2. The Commision’s judgment that the permissive

detariffing modification serves the goals of the Communi-

cations Act has been confirmed by its actual effect on the

marketplace for long distance services. As the Commis-

sion noted below, “permissive detariffing has proven to

be a success over the years, as evidenced by the robust

competition in the interexchange [long distance] market

and the increased choices for consumers with respect to

carriers and prices.” Jd. at 29a. Such choices advance

Section 1’s mandate of “adequate facilities at reasonable

charges.”

Amici are a product of the Commission’s actions. Con-

sumer options have increased dramatically under permis-

sive detariffing: “In 1982, approximately a dozen long

distance carriers operated within the United States. By

March 1992, there were an estimated 482 such carriers

purchasing switched access from local exchange carriers.”

Id. at 30a. AT&T’s share of the market, while still large

enough to secure its place as the dominant carrier, “de-

clined from over 80% to just more than 60%, while its

rates for directly dialed interstate [service] have also

fallen substantially.” Jd.”*

Given the costs and negative effects resulting from

tariff filings by non-dominant carriers, the FCC’s decision

to free those carriers from the obligation to make such

filings plainly was a substantial factor in this market

maturation. Indeed, the Competitive Telecommunications

Association told the FCC that many of the companies

Southwestern Bell Corporation v. FCC, Nos. 93-1562 et al. (D.C.

Cir. filed Aug. 30, 1993). Nevertheless, the FCC was constrained

to impose some type of tariff regulation on nondominant carriers

because the court below had held that filed tariffs are required by

the Act.

18 The FCC has reported that “[b]y mid 1993, about 72% of the

nation’s [telephone] lines were presubscribed to AT&T, 15% to

MCI and 6% to Sprint,” with “[o]ver four hundred smaller car-

riers” accounting for the remainder of the interstate long distance

industry. FCC Industry Analysis Division, Long Distance Market

Shares, Third Quarter, 1993 at 3 (December 1993).

Oe ll th el a

23

operating in the market “would not be in existence today

were it not for the Commission’s policy of encouraging

competition in the telecommunications marketplace

through the lifting of unnecessary and burdensome regu-

lations.” Reply Comments of the Competitive Telecom-

munications Association at 11,”

Perhaps the most compelling confirmation that permis-

sive detariffing fosters the Act's general purpose is the

unanimity of the users of long distance telecommunica-

tions services in support of the policy. For example, the

Ad Hoc Telecommunications Users Committee (the on-

going representative of major corporate telecommunica-

tions departments on regulatory issues), called the Com-

mission’s policy “a major regulatory success story” as a

result of which “{c]ompetition has burgeoned in the long-

distance marketplace.” Comments at 3. Likewise, the

International Communications Association, which de-

scribes itself as “the largest association of telecommunica-

tions users in the world,” observed that the permissive

detarifling policy permits non-dominant common carriers

“to make rapid, efficient responses to changes in demand

and cost * * * and price competitively,” all without any

detriment to users. Comments at 5.

In short, the FCC’s detariffing policy has served the

goals of the Communications Act well, just as the Com-

mission hoped when it announced that policy over a

decade ago. Adopted at a time of almost no competition

'® Citations to comments are to those comments received by the

FCC in response to Tariff Filing Requirements for Interstate

Common Carriers, Notice of Proposed Rulemaking, 7 FCC Red 804

(1992), the proceeding that led to the decision at issue here.

See also Comments of OCOM Corporation at 8 (“Many of the

smaller carriers today would not be here now or be able to continue

offering competitive services under a more burdensome regulatory

structure.” Permissive detariffing is “critical to the survival of a

substantial number of nondominant interexchange carriers’’) :

Reply Comments of the United States Commerce Department’s

National Telecommunications and Information Administration at 5.

24

in the market for long distance services, the policy has

enabled hundreds of new firms to enter and begin to com-

pete effectively by offering innovative service and rate

plans. Prices for long distance service have decreased

dramatically. There is no evidence of widespread viola-

tions of the substantive pricing prohibitions in Sections

201(b) and 202(a) of the Act. Nothing has led any

party to ask the FCC to reconsider its finding that non-

dominant carrier rates are presumptively lawful.

These substantial marketplace benefits, however, could

easily be lost, and further development of competition

stunted, if the decision below stands. A mandatory tariff

requirement on non-dominant carriers necessarily curbs

those carriers’ ability to offer innovative price and service

plans to meet customer needs as they arise. See F urther

Notice of Proposed Rulemaking, 84 F.C.C.2d at 454.

This is true even though the FCC has attempted to min-

imize the tariff burden on non-dominant carriers as it

responds to the court of appeals decision here. The Com-

mission has permitted non-dominant carriers to file so-

called rate range tariffs setting forth minimum and max-

imum rates and offering prices within the bands. See

Rate Range Order, supra. Even these tariffs impose un-

necessary burdens on carriers, and in any event AT&T

and certain local telephone companies have challenged the

Commission’s Rate Range Order based on the same court

of appeals decision at issue here. See Telecommunications

Reports, Sept. 13, 1993, at 22. In a long distance market

where one firm still controls more than 60 percent of the

business, any reduction in the pressure of competi-

tion is likely to be damaging to that market's further

development.”

20 [t should be emphasized that as the long distance marketplace

has become more competitive, the FCC also has substantially re-

laxed its regulation of AT&T to permit AT&T to respond to that

competition. Today virtually all AT&T tariffs also are considered

presumptively lawful. AT&T has broad freedom to negotiate prices

25

3. The statutory purposes served by the permissive

detariffing modification are not limited to the long dis-

tance arena. The FCC has concluded that this policy is

equally required for the development of other markets

where telecommunications competition is far less advanced.

Local telephone service is a prime example. This multi-

billion dollar market is now the domain of the Bell Oper-

ating Companies and other local exchange telephone com-

panies (“LECs”). But like the long distance market in

the early 1980s, the local telephone market is the focus

of increasing competition.”'

The Association for Local Telecommunications Services

(“ALTS”) explained in comments before the FCC that

its member non-dominant competitive access provides

(“CAPs”) “attempt to compete directly with dominant

local exchange carriers” by “deploy[ing] innovative tech-

nologies—including fiber optic and microwave networks”

—in-metropolitan areas across the country. ALTS Com-

with customers on a competitive basis, and then file simple tariffs

reflecting the rates and other major elements of the resulting con-

tracts. See Competition in the Interstate Interexchange Market-

place, Report and Order, 6 FCC Red 5880, 5882, 5894, 5897 (1991).

Given AT&T’s continued domination of the long distance market, the

FCC has not been willing to excuse AT&T altogether from filing

tariffs—the FCC still sees the need to oversee AT&T's conduct to

that extent. However, AT&T has recently filed a request for the

FCC to extend permissive detariffing to it as well; that request is

now under consideration by the Commission. Motion for Reclassi-

fication of AT&T as a Nondominant Carrier, filed by AT&T in the

Competitive Carrier Rulemaking (Sept. 22, 1993).

*1 As the Commission has explained: “For many years, local

exchange carriers (LECs) faced little or no competition in pro-

viding the local access facilities and services used in the provision

of interstate communications. Recent changes, however, have facili-

tated the development of competition in the provision of these

facilities and services.” Expanded Interconnection with Local Tele-

phone Company Facilities (“Expanded Interconnection”), Notice

of Proposed Rulemaking and Notice of Inquiry, 6 FCC Red 3259,

8259 (1991).

26

ments at 1-2. Thus, for example, amicus Metropolitan

Fiber Systems “operates state-of-the-art digital fiber optic

telecommunications networks in the business districts” of

cities throughout the United States. Comments of Metro-

politan Fiber Systems at 2. See also Comments of Local

Area Telecommunications, Inc. at 1 (company provides

“a broad range of * * * competitive access services, pri-

marily via microwave facilities”). Nevertheless, the CAP

share of the total market for local telephone exchange

services remains less than one percent. ALTS Comments

at 5-6.

The Commission has recently adopted new local ex-

change policies to begin what it calls “the process of

opening the remaining preserves of monopoly telecom-

munications service to competition.” See, e.g., Expanded

Interconnection, Report and Order and Notice of Pro-

posed Rulemaking, 7 FCC Red 7369, 7372 (1992). In

that context, the Commission noted the success of its de-

regulatory approach toward long distance services. /d. at

7378. The FCC similarly believed that greater competi-

tion in the local telephone market should increase

“incentives for efficiency and encourage deployment of

advanced technologies facilitating new and innovative

services.” Expanded Interconnection, Second Report and

Order and Third Notice of Proposed Rulemaking, 8 FCC

Red 7374, 7383-84 (1993). The Commission has taken

several actions to foster competition in the local telephone

market, and further proposals are pending.”

The FCC’s steps to promote new local service competi-

tion have taken place against a background of permissive

detariffing for non-dominant CAPs,” supported by the

22 See, e.g., Expanded Interconnection, Second Notice of Proposed

Rulemaking, 7 FCC Red 7740, 7747-49 (1992).

23 See, e.g., Tariff Filing Requirements for Nondominant Common

Carriers, Notice of Proposed Rulemaking, 8 FCC Red 1395, 1397

(1993) (“Since their inception, CAPs have not been burdened by

interstate tariff filing requirements”).

)

:

:

:

anata

27

same FCC statutory construction and policy conclusions

arrived at in the Competitive Carrier Rulemaking de-

scribed earlier. Under the decisions below, however, the

Commission has been required to reimpose tariff regula-

tion on the CAPs along with all other non-dominant

carriers.** Such regulation substantially and unnecessarily

interferes with the still-emerging competition in the local

market, no less than it would have interfered with new

long distance competition a decade ago. CAPs face sub-

stantial hurdles to market entry, including the need for

massive capital investment and vigorous price competi-

tion from the reigning monopolists. As ALTS explained

below, “[iJmposition of a mandatory tariffing obligation

would impose a substantial economic burden on such

carriers. The costs associated with the preparation and

maintenance of federal tariffs—legal and consulting fees,

the diversion of personnel, the filing fees—constitute an

expense the CAPs can ill afford.” ALTS Comments at

6-7. More important, mandatory tariffing can provide an

opportunity for the dominant LECs to bring price and

service rigidity to the marketplace, thereby discouraging

innovations CAPs might offer in service or price and

stifling the newborn competitors.

Local telephone competition holds the promise to rev-

olutionize the nation’s telecommunications infrastructure.

The FCC envisions a future in which multiple carriers—

local and long distance, mobile and wireline—intercon-

nect with one another and compete to offer business and

residential users advanced quality services at lower prices.

To reach that goal—the goal mandated by Section | of

the Communications Act—the FCC will need all the

flexibility provided by the Act. In these circumstances,

the FCC’s construction of Section 203 is entirely reason-

able and demands deference from the judicial branch.

See Tariff Filing Requirements for Nondominant Common

Carriers, Memorandum Opinion and Order, 8 FCC Red 6752, 6754

(1993).

28

Il. THE FCC’S DECISION DID NOT IMPLICATE THE

FILED RATE DOCTRINE, WHICH DOES NOT

SPEAK TO THE QUESTION OF WHEN RATES

MUST BE FILED

This is not a filed rate doctrine case. Indeed, under

the FCC’s decision hundreds of non-dominant carriers

filed no tariffs, and hence had no “filed rate”. Amici make

this observation only because AT&T has placed tremen-

dous weight on the filed rate doctrine here, and particu-

larly on the Court’s application of that doctrine in the

context of a different regulatory statute in Maislin Indus-

tries, U.S., Inc. v. Primary Steel, Inc., 497 US. 116

(1990). In its opposition to the petitions for certiorari,

for example, AT&T repeatedly asserted that the D.C.

Circuit’s decision below was ‘required * * * by a long

line of this Court’s decisions culminating in Maislin.”

Opp. at 1. See also id. at 5 (the decision in Maislin “elim-

nated any possibility that the FCC, might have the author-

ity that MCI claimed”); 7, 9-14, 19-20.* But the decision

25 The D.C. Circuit in AT&T, by contrast, observed in a footnote

only that its decision was “somewhat buttressed” by Maislin and

cited the “shared lineage” of the Communications Act and the

Interstate Commerce Act. Pet. App. 53a-54a n.12. This genealogical

approach to statutory interpretation, however, cannot substitute

for a precise examination of the language at issue, which both the

D.C. Cireuit below and AT&T in this Court have declined to offer.

As the petitioners demonstrated in their replies to the opposition

to the petitions, the language of the Communications Act is dif-

ferent in vital respects from that of its ancestor the Interstate

Commerce Act. Amici agree with petitioners that Maislin, which

discusses the filed rate doctrine in the context of the Interstate

Commerce Act, does not control how the doctrine would be applied

under the Communications Act, and in any event that decision is

irrelevant here. To the extent that reasoning by analogy to other

regulatory contexts is appropriate, a more apt analogy is to this

Court’s decision in Permain Basin Area Rate Cases, 390 U.S. 747

(1968), in which the Court endorsed the Federal Power Commis-

sion’s regulatory decisions that “began a new era in the regulation

of natural gas producers.” Jd. at 755.

omen: eee

29

below was in no way compelled (as AT&T contends) by

the filed rate doctrine.

Properly understood, AT&T’s extreme reliance on

Maislin is a red herring. The filed rate doctrine involves

the relative enforceability of inconsistent contract and

tariff terms; it provides that in such a case a bona fide

tariff provision governs. The specific question in Maislin

was “the validity of [an ICC] policy * * * that relieves

a shipper of the obligation of paying the filed rate when

the shipper and carrier have privately negotiated a lower

rate.” 497 U.S. at 119 (emphasis added). The resolu-

tion of that question, the Court found, rested on a straight-

forward application of the filed rate doctrine: the filed

tariff rate applied.

This case, by contrast, involves the entirely different

question of whether a tariff rate is required in the first

place. The filed rate doctrine has nothing to say about

this question. None of the filed rate doctrine cases AT&T

cites involves an interpretation of the scope of the tariff

filing requirement. The question at issue in this case is

) not answered by citation of the doctrine; it is instead

answered by the specific language of the Communications

Act. See Maislin, 497 U.S. at 136 (Scalia, J., concurring )

(“prior ‘filed-rate’ decisions * * * were based not on the

‘regulatory scheme as a whole,’ * * * but rather on the

text of the statute”). Based on its reasonable interpreta-

tion of Section 203, the FCC properly relieved non-

dominant carriers of the obligation to file tariffs at all.

30

CONCLUSION

For the foregoing reasons, and those in the briefs of

petitioners, this Court should reverse the decision below.

Respectfully submitted,

PETER A. ROHRBACH

DAVID G. LEITCH *

KARIS A, HASTINGS

HOGAN & HARTSON

555 Thirteenth Street, N.W.

Washington, D.C. 20004

(202) 637-5822

* Counsel of Record Counsel for Amici Curiae