# Opposition Brief — Bell Atlantic Corp. v. United States > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385020_3158%3A2 ## Record - **Collection:** Supreme Court brief - **Document type:** Opposition Brief - **Published:** January 1, 1991 - **Citation:** 498 U.S. 1109 ## Text Rea. Pipers es Sea - ‘ 4 4 AMS Par eG wens 7 ‘ 6 . Se oe SK . ture Oe ae ee. Sep ce > (: * p ’ . s ~~ OCTOBER TERM, 1990 BELL ATLANTIC CORPGRATION v. UNITED STATES OF AMERICA, ET AL. ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT BRIEF FOR THE UNITED STATES IN OPPOSITION JOHN G. ROBERTS, JR. Acting Solicitor General JAMES F, RILL Assistant Attorney General ALISON L. SMITH Deputy Assistant Attorney General CATHERINE G. O’SULLIVAN ANDREA LIMMER Altorneys Depariment of Justice Washington, D.C. 20530 (202) 514-2217 et ¥. me” F Pe a ¢~ a og ae ova’ A” ad, > c , i : wae 7 Al 2 Sapte aig” att ay se ee ee ee? ey OP ala gy aL Mees La oe QUESTION PRESENTED Whether the lower courts correctly interpreted the AT&T consent decree to preclude petitioner, a Bell Operating Company, from providing a “gateway” service linking a customer in one telephone exchange area to a computer in another exchange area without a waiver of the provision of the decree prohibiting the Bell Operating Companies from providing interexchange telecommunica- tions services. (I) TABLE OF CONTENTS Page I Le er ca oe aya gk cheba ane K ns 1 EEE SSR RRS CME re ann ae beet Come Parana | rh sci a oso WERWES RD bee bs dndeGh Gah dees | Ths Gitcula chy adeyb 6k eaGeu bh RUNS Sas d's ceca 7 ee his pawewe babs 3 13 TABLE OF AUTHORITIES Cases: Anderson v. Celebrezze, 460 U.S. 780 (1983) ..... 10 California v. United States, 464 U.S. 1013 (1983) .. 5 McCrea v. Harris County Houston Ship Channel Navigation District, 423 F.2d 605 (Sth Cir.), cert. GCI, Ge Ua. Fe CEI viv cc ccc cece 9 Red Ball Motor Freight v. Shannon, 377 U.S. 311 EES TG cea ee ekk hds Gant ack web ane es 9 Stimson Lumber Co. v. Kuykendall, 275 U.S. 207 Sis Seek Os REN BEC AG 6-506 Mx-4 0 9 United States v. AT&T, 552 F. Supp. 131 (D.D.C. 1982), aff'd mem. sub nom. Maryland v. United States, 460 U.S. 1001 (1983) ................. 2 United States v. Armour & Co., 402 U.S. 673 ee ea AR ys cb kw eb eee 7 United States v. Atlantic Refining Co., 360 U.S. i ee ee. bee wen aces 7 United States v. California, 297 U.S. 175 (1936) ... 9 United States v. ITT Continental Baking Co., 420 ee ee ea es os 5 7 United States v. Western Electric Co., 673 F. Supp. $525 (D.D.C. 1987), modified, 714 F. Supp. 1 (D.D.C. 1988), rev’d in part, 900 F.2d 283 (D.C. Cir. 1990), cert. denied, No. 90-9 (Oct. 9, 1990) . 2 United States v. Western Electric Co., 690 F. Supp. I ee ha 80s bas bn astndsccu bes 3 IV Cases — Continued: Page United States v. Western Electric Co., 569 F. Supp. 990 (D.D.C. 1983) ... 1... cece eee e eee nenes oa United States v. Western Electric Co., Civ. No. 82-0192 (D.D.C. Feb. 6, 1984) .............-. 6, 11 Statute: Interstate Commerce Act § 203(c), 49 U.S.C. SUBS) CIDTE) onc. ccc cc cccccccccccccenceces 10 Miscellaneous: 47 Fed. Reg. (1982): EU Ka B Gee 6s in osc asad eWsUeeect cdaeees 1] is FED vee kes ces docenceccvscedcctssenses 1} In the Supreme Court of the United States OCTOBER TERM, 1990 No. 90-830 BELL ATLANTIC CORPORATION Vv. UNITED STATES OF AMERICA, ET AL. ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT BRIEF FOR THE UNITED STATES IN OPPOSITION OPINIONS BELOW The opinion of the court of appeals (Pet. App. la-10a) is reported at 907 F.2d 160. The opinion of the district court (Pet. App. 1la-21a) is reported at 1989-1 Trade Cas. (CCH) ¢ 68,400. JURISDICTION The judgment of the court of appeals was entered on June 12, 1990. A timely petition for rehearing was denied on August 28, 1990. Pet. App. 23a-24a. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1). STATEMENT 1. The 1982 consent decree that terminated the United States’ antitrust suit against AT&T required AT&T to di- vest its 22 Bell Operating Companies (BOCs). Pet. App. (1) 2 25a-43a; United States v. AT&T, 552 F. Supp. 131 (D.D.C. 1982), aff'd mem. sub. nom. Maryland v. United States, 460 U.S. 1001 (1983). The object of the divestiture was to eliminate AT&T’s incentive and ability to use its control of the local exchange monopolies to impede competition in the interexchange (long distance) telecommunications market and the telecommunications equipment market. The decree also placed restrictions on the separated BOCs, which now operate the local exchange monopolies. Among other restrictions, the decree provided that no BOC shall “provide interexchange telecommunications services or information services.” Section II(D)(1), Pet. App. 28a. In orders issued in 1987 and 1988, the district court modified some of the decree’s line of business restrictions. In particular, the court modified the restriction on the pro- vision of information services to permit the BOCs to pro- vide “gateways” to an information service provider. See Section VIII(K)(1) (Pet. App. 38a); United States v. West- ern Electric Co., 673 F. Supp. 525, 591-592 & nn. 297, 300 (1987), modified, 714 F. Supp. 1, 5-7 (D.D.C. 1988), rev’d in part on other grounds, 900 F.2d 283 (D.C. Cir. 1990), cert. denied, No. 90-9 (Oct. 9, 1990). “Gateway services” include “a variety of functions designed to foster intercon- nection between consumers and information providers.” Pet. App. 4a. The gateway service at issue, for example, would allow customers with computers to contact a central processor that would list information services that are available over the telecommunications network and would interact with customers to provide information about the services. Although the BOs had also requested removal of the prohibition on their provision of interexchange ser- vices, the court denied that motion (673 F. Supp. at 552, 562, 567, 602), and the court of appeals affirmed that refusal (900 F.2d at 300-301). MCI moved the district court to “clarify” its order modi- fying the information services restriction to make clear that it did not undermine the decree’s restriction on BOCs’ providing interexchange services. Petitioner Bell Atlantic, a Bell Operating Company, opposed the motion for clari- fication, stating that “[t]he Court has been quite clear that it has not modified the interexchange prohibition, and no further clarification is required.” C.A. App. 266. In deny- ing the motion for clarification, the district court stated that it “did not modify the interexchange prohibition of the decree when it allowed [BOC] participation in the transmission of information services,” and noted that “there does not appear to be any confusion on this point.” United States v. Western Electric Co., 690 F. Supp. 22, 28 (D.D.C. 1988). Petitioner nevertheless subsequently moved for a declar- atory ruling that a gateway system it planned to implement on a trial basis in Pennsylvania would not violate the de- cree.' Petitioner proposed to connect gateway equipment in each of five Pennsylvania local exchange areas (known as LATAs?) to one central gateway processor located in Philadelphia. A customer in any of the five LATAs would dial a local telephone number to reach a “protocol agile packet assembler-disassembler” (PAP) located in his ' Petitioner did not request, in the alternative, a waiver of the decree prohibition. Section VIII(C) of the decree specifically provides for waivers of the decree’s line of business prohibitions upon a show- ing that there is no substantial possibility that a BOC could use its monopoly power to impede competition in the market it seeks to enter. Pet. App. 36a. ? Because the term “exchange area” had long been used by state regulators to mean something different from what the term means in the AT&T consent decree, the parties agreed after the decree was entered to use “LATA” (local access and transport area) as a synonym for “exchange area.” United States v. Western Electric Co., 569 F. Supp. 990, 993-995 & n.9 (D.D.C. 1983). 4 LATA. The PAP would connect the customer to the cen- tral processor in Philadelphia over a private circuit owned or leased by petitioner. The central processor would then send the customer’s computer an introductory “welcom- ing” screen and a list of information service providers (ISPs). The customer would be able to search the central processor’s files to obtain additional information, in- cluding listings of providers of particular services, descrip- tions of those services, and information about the cost of the services. Pet. App. 5a, 12a-13a & n.8. If the customer elected to use the services of an ISP, the central processor would provide the PAP with the necessary information and the PAP would connect the customer to the ISP. In the case of an ISP not located in the customer’s LATA, the call would be routed to an interexchange carrier selected by the ISP. C.A. App. 272, 290. A customer subscribing to petitioner’s gateway informa- tion service would receive a bill for the total charge at- tributable to the gateway service. There would be no sepa- rate charge listed on the bill for the connection between the customer and the central processor. The single charge for the gateway service would vary according to the dura- tion of that connection, however. Pet. App. Sa, 18a. 2. The district court denied petitioner’s motion, hold- ing that the proposal would violate the interexchange pro- hibition of the decree in the absence of a waiver. Pet. App. lla-2la. The court noted that “[iJn every significant re- spect, it would be the central, multi-LATA processor, not the local PAP, that would be the information services gateway” and “that the information and the services at the heart of the gateway service would be provided by that processor [which] may be located in an entirely different LATA than the customer * * * and would perform its > Petitioner does not claim the authority to connect a customer di- rectly to an ISP in another LATA. 5 functions on an interLATA or interexchange basis.” /d. at 14a-15a. The court found the conclusion “inescapable that the gateway architecture [petitioner] is proposing would operate On an interexchange basis, and that it would therefore constitute an interexchange service prohibited by section II(D)(1) of the decree.” Jd. at 15a. The district court rejected petitioner’s contention that the gateway service at issue was analogous to “directory assistance” for local telephone service, which the BOCs are permitted to provide across exchange boundaries through an “official services” network. Pet. App. 15a-19a; see United States v. Western Electric Co., 569 F. Supp. 1057 (D.D.C. 1983), aff'd sub nom. California v. United States, 464 U.S. 1013 (1983) (Official Services) (partially repro- duced at Pet. App. 44a-52a). The court explained that its 1983 decision sanctioning centralized official services was part of the process of reorganizing the AT&T system to separate the local telephone exchanges from the long dis- tance network. It held that the preexisting official services network was “an inherent part of the provision of ex- change communications” by a BOC and that it need not be redesigned after divestiture. /d. at 16a-17a. Bell Atlantic’s gateway proposal, on the other hand, involved the establishment of a new competitive service on an interex- change basis. /d. at 18a. Moreover, the court explained, although the gateway service would permit a customer to obtain access to an in- formation service provider, it was not analogous in nature to simple directory assistance. Gateway subscribers would interact extensively with the central processor and would be charged according to the time they were connected to it. Pet. App. 18a-19a. Thus, the court concluded, petitioner’s new service was more closely analogous to interLATA time and weather services and interLATA directory as- sistance to independent telephone companies, which the BOCs are prohibited from providing under Section 6 II(D)(1) of the decree in the absence of a waiver. /d. at 19a; see United States v. Western Electric Co., Civ. No. 82-0192 (D.D.C. Feb. 6, 1984), slip op. 6 n.9 (C.A. App. 39). 3. The court of appeals affirmed. Pet. App. la-10a. Petitioner argued on appeal that the interexchange portion of the proposed gateway service would not be offered “for hire”—and would not, therefore, constitute an “interex- change telecommunications service” within the meaning of the decree*—because the interexchange portion of the service would not be separately identified or separately charged to the customer. The court of appeals refused to accept that “strained interpretation” of the phrase “for hire,” noting that this view would allow the BOCs to pro- vide any interexchange services so long as they were pack- aged with some permitted service. Jd. at 7a. The court also rejected petitioner’s claim that the district court’s 1983 Official Services decision permitting the BOCs to provide interLATA directory assistance com- pelled a finding that interLATA transmission of gateway communications are not services “for hire.” Pet. App. 8a-10a. The court of appeals first stated that it was not bound by the earlier decision of the district court. /d. at 9a. It then noted that “[iJn 1983 the district court was faced with a one-time daunting task, the allocating of ex- isting facilities to either AT&T or the BOCs—and the court and the parties may well have preferred a measure of pragmatism to logic.” Jd. at 10a. The court of appeals did not reach the question whether the district court had in fact, as petitioner contended, intended in its 1983 Official Services decision to hold that directory assistance is not “for hire.” Jd. at 9a-10a & n.5. 4 The decree prohibits the BOCs from providing “interexchange telecommunications services,” and defines a “telecommunications ser- vice” as “the offering for hire of telecommunications facilities, or of telecommunications by means of such facilities.” Section IV(P); Pet. App. 32a. 7 Finally, the court of appeals acknowledged petitioner’s argument that it would be prohibitively expensive to place a central processor in each LATA. That argument, it ob- served, may be a “powerful argument for a waiver from the terms of the decree, * * * a route appellants chose to bypass.” Pet. App. 10a. ARGUMENT Petitioner seeks to have this Court interpret the terms of a particular consent decree. The lower courts’ construction of those terms is consistent with the language of the decree and creates no conflict with the decisions of this Court or any other court of appeals. Accordingly, further review is not warranted. 1. A consent decree is to be construed as a contract. United States v. ITT Continental Baking Co., 420 U.S. 223, 236-237 (1975). Thus, the initial guide to decree con- struction is the language of the decree itself, as used “in its natural sense” and in relation to its normal meaning. United States v. Armour & Co., 402 U.S. 673, 678 (1971); ITT Continental Baking, 420 U.S. at 236; United States v. Atlantic Refining Co., 360 U.S. 19, 22-23 (1959).5 Con- trary to petitioner’s claim (Pet. 12-14, 18-20), the courts below applied those principles of construction and proper- ly concluded that petitioner’s proposed gateway service is prohibited by the terms of the decree. The decree prohibits the BOCs from providing “interex- change telecommunications services.” Section II(D)(1); Pet. App. 28a. “Interexchange telecommunications” is de- fined as “telecommunications between a point or points > Aids to construction of the sort properly taken into account in construing a contract, including the circumstances surrounding the formation of the decree and any technical meaning that the words used may have had to the parties, are also appropriately considered. ITT Continental Baking, 420 U.S. at 238; Atlantic Refining, 360 U.S. at 22. 8 located in one exchange telecommunications area and a point or points located in one or more other exhange areas.” Section IV(K); Pet. App. 32a. A “telecommunica- tions service” is defined as “the offering for hire of telecommunications facilities, or of telecommunications by means of such facilities.” Section IV(P); Pet. App. 32a. Petitioner concedes (Pet. 14) that its proposed service in- volves “interexchange telecommunications” since it pro- poses to connect callers in one LATA with a central proc- essor in a different LATA, relying exclusively on facilities that it owns or leases. Petitioner also concedes (ibid.) that its gateway service is “for hire.” It contends, however, that the interexchange telecommunications involved in the gateway service are not “for hire” and, therefore, that no interexchange telecommunications service is involved. The court of appeals properly rejected this “strained inter- pretation” of the decree. Pet. App. 7a. The decree does not define which telecommunications services are offered “for hire.” But a common-sense inter- pretation would include any telecommunications service that constitutes a major and essential component of a tele- communications service that is concededly “for hire,” par- ticularly where the charge for the total service varies with the duration of the component telecommunications ser- vice. The court of appeals rightly concluded that bundling the cost of the interLATA connection with the other com- ponent costs of gateway service does not render the con- nection to the centrai processor any less a service “for hire.” Pet. App. 8a.° Petitioner urged the courts to look beyond the “four corners” of the AT&T consent decree to the concept of common carrier status under various statutes in interpret- * Petitioner proposed to lease, rather than construct and own, the interLATA facilities in this case. The court of appeals correctly con- cluded that the ownership of the facilities is not determinative. Pet. App. 8a. 9 ing the term “for hire.” Unlike those statutes, however, the decree does not use the term “for hire” as a definition of, or in conjunction with, the term “common carrier.”’ In any event, the cases on which petitioner relies do not ad- vance its cause. Rather, they establish that the carriage of a customer’s property or communication constitutes ser- vice “for hire,” regardless of the manner in which payment is received.§ 2. Petitioner also claims that the lower courts’ ruling in this case is inconsistent with the district court’s 1983 Of- ficial Services decision, which allowed each BOC to offer local telephone directory assistance on a centralized basis, across LATA boundaries. Pet. 14, 16-18. As the court of appeals pointed out, however, even if petitioner were cor- rect in its assertion that its service is indistinguishable from ”? Petitioner’s argument that some businesses make use of interex- change telecommunications and recover the costs in charges for other products without being deemed to provide interexchange telecommu- nications for hire (Pet. 15-16) is without force. The decree in this case restricts the conduct of AT&T and the BOCs. Its restrictions do not apply to, and were not drafted to take account of, the activities of other firms. 8 E.g., United States v. California, 297 U.S. 175, 182-183 (1936) (“[a]s the service involves transportation of the cars and their con- tents, the method of fixing the charge is unimportant”); Stimson Lumber Co. v. Kuykendall, 275 U.S. 207, 210-211 (1927) (“one who undertakes for hire to transport from place to place the property of others who may choose to employ him is a common carrier”); McCrea v. Harris County Houston Ship Channel Navigation District, 423 F.2d 605, 608 (Sth Cir.), cert. denied, 400 U.S. 927 (1970) (“common car- rier” status depends on whether an entity is performing a part of the total rail service contracted for by a member of the public and is receiving remuneration for it in some manner). This Court’s decision in Red Ball Motor Freight v. Shannon, 377 U.S. 311 (1964), on which petitioner relies (Pet. 15-16), is inapposite. The issue in Red Ball was whether respondent’s back-hauling of sugar constituted legitimate “private carriage” that furthered “a noncarrier business” or was “for-hire carriage” requiring certification from the 10 directory assistance, the appellate courts have not previ- ously been presented with the issue decided by the district court in 1983 and are not bound by the district court’s rul- ing. Pet. App. 9a, citing Anderson v. Celebrezze, 460 U.S. 780 (1983).° In any event, as the district court concluded, the 1983 decision did not establish a sweeping rule that no directory- type service offered across LATA boundaries is a service for hire. The issue in Official Services was the proper divi- sion of the Bell System’s assets between the soon-to-be- divested BOCs, which were to operate the local telephone exchanges, and AT&T, which was to retain the long dis- tance network. Because the Bell System’s network had not been designed with this divestiture in mind, the assets did not fall neatly into the two categories. In particular, net- works carrying “official services” (services that “represent communications between personnel or equipment of an ICC. Id. at 314 (emphasis added). The Court found in the legislative history of Section 203(c) of the Interstate Commerce Act, 49 U.S.C. 303(c) (1976), a congressional intent to ground this determination on the “primary business” of the carrier. 377 U.S. at 314-317. The Court ultimately concluded that Shannon’s sugar hauling was not “for-hire transportation” because it was “within the scope, and in furtherance, of [its] noncarrier business enterprise” as a dealer in commodities. /d. at 319 (emphasis added). The Court also relied on the fact that Shannon’s assets were not in large part composed of transportation facilities, nor was transportation a major item of expense. Jd. at 320. The interLATA telecommunications connection that petitioner pro- poses to operate, on the other hand, is an integral part of a telecom- munications service concededly offered “for hire” by a firm in the business of providing telecommunications services. ° This Court summarily affirmed the Official Services decision, but whether directory assistance was offered “for hire” was not raised by any of the parties on appeal and thus was not the basis of the Court’s summary affirmance. As this Court stated in Celebrezze, “the precedent.al effect of a summary affirmance extends no further than ‘the precise issues presented and necessarily decided by those actions.” ” 460 U.S. at 784-785 n.5. 11 Operating Company located in various areas and com- munications between Operating Companies and their cus- tomers” (Pet. App. 44a)) posed a problem because they crossed LATA boundaries. The district court decided to assign those facilities to the BOCs because it did not be- lieve that the BOCs should be forced to rely on AT&T for services integral to local telephone service.'® The district court also decided to allow the BOCs to continue operat- ing the networks on a centralized basis because the alter- native was to require them to reconstruct the system to set up a separate network in each LATA. Id. at 44a-S0a.'! This reasoning does not suggest that the district court thought it was establishing a broad rule for the future al- lowing the BOCs to design new networks offering new ser- vices in competitive markets on an interLATA basis with- out obtaining a waiver. Subsequent events confirmed that the Official Services result was not intended to apply to all directory-type ser- vices. Thus, the district court ruled soon after the Official Services decision that even interLATA directory assistance to other independent telephone companies was not per- mitted under the decree in the absence of a waiver. United States v. Western Electric Co., Civ. No. 82-0192 (D.D.C. Feb. 6, 1985), slip op. 6, n.9; C.A. App. 39. Moreover, as the district court pointed out, the direc- tory service at issue here is not comparable to the “white pages” directory service at issue in the Official Services decision. Although the proposed gateway’s central proces- 10 See Competitive Impact Statement, 47 Fed. Reg. 7170, 7176 n.24 (1982) (“the provision of a listing of the phone numbers and addresses of subscribers and the related directory assistance function are in- herent parts of exchange telecommunications”). '! Petitioner asserts (Pet. 16) that “all the parties to the decree” shared the view that directory assistance did not amount to an offering of long-distance service “for hire.” However, none of the parties even addressed the “for hire” point. See Pet. Ann 44a-4Sa 12 sor contains what can be termed a “directory” of informa- tion service providers, it provides much more than the phone number of the ISPs. The customer interacts with the gateway, seeking information about subjects of in- terest, relaying further requests back to the central proc- essor, and deciding which, if any, ISP may provide the in- formation being sought. The gateway itself is the service the customer is hiring from the BOC; the BOC does not itself provide the services about which it provides informa- tion to the customer. White page users, on the other hand, are “hiring” local telephone service, and the directory is an incidental service provided to facilitate its use. Accordingly, there is no inconsistency in the lower courts’ refusal to extend the treatment afforded the pre- existing official services network in 1983 to petitioner’s proposed interLATA gateway service. The lower courts’ interpretation of the decree to prohibit such service in the absence of a waiver is consistent with the language of the decree.'? In these circumstances, there is no need for review by this Court. '2 Petitioner asserts that the decision below impairs its ability to provide consumers with low-cost gateway services. Pet. 18. But the prohibition of Section II(D)(1) is unconditional; it makes no exception for “lost efficiencies.” And when the district court modified the decree to permit the BOCs to offer gateway services, it explained that the BOCs would have flexibility to design and create an information serv- ice network only “[i}nsofar as this goal is attainable without interfer- ing with the core decree restrictions” (714 F. Supp. at 12 n.42) and only to the extent that specific restrictions and conditions are observed (id. at 12). Moreover, if petitioner can show that its proposed gateway | architecture would not afford it the opportunity to use its local | telephone monopoly to impede competition in the interexchange : market, it can obtain a waiver under Section VIII(C) of the decree. See : note 1, supra. a 13 CONCLUSION The petition for a writ of certiorari should be denied. Respectfully submitted. JOHN G. ROBERTS, JR. Acting Solicitor General* JAMES F. RILL Assistant Attorney General ALISON L. SMITH Deputy Assistant Attorney General CATHERINE G. O’SULLIVAN ANDREA LIMMER Attorneys JANUARY 1990 * The Solicitor General is disqualified in this case. 1s U.S. GOVERNMENT PRINTING OFFICE: 1991—282-061/20329 --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385020_3158%3A2. Public record. Not legal advice.