Capital Network System, Inc. v. Federal Communications Commission

3 F.3d 1526, 303 U.S. App. D.C. 242, 73 Rad. Reg. 2d (P & F) 1188, 1993 U.S. App. LEXIS 23977
CourtCourt of Appeals for the D.C. Circuit
DecidedSeptember 17, 1993
DocketNos. 91-1280, 91-1291
StatusPublished
Cited by1 cases

This text of 3 F.3d 1526 (Capital Network System, Inc. v. Federal Communications Commission) is published on Counsel Stack Legal Research, covering Court of Appeals for the D.C. Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Capital Network System, Inc. v. Federal Communications Commission, 3 F.3d 1526, 303 U.S. App. D.C. 242, 73 Rad. Reg. 2d (P & F) 1188, 1993 U.S. App. LEXIS 23977 (D.C. Cir. 1993).

Opinion

Opinion for the court filed by Circuit Judge BUCKLEY.

BUCKLEY, Circuit Judge:

Capital Network System, Inc. and NY-COM Information Services, Inc. are providers of interexchange telephone service. They petition for review of a ruling of the Federal Communications Commission denying a request for the initiation of a rulemak-ing or other measures that would reinstate the regulation of billing and collection services provided by local exchange telephone companies to interexchange companies for tolls arising from operator-assisted long distance calls. Because petitioners have failed to adduce sufficient evidence of the need for regulation, we deny their petitions.

I. Background

A. Applicable Law

The Communications Act, 47 U.S.C. §§ 151-613 (1988), authorizes the Federal Communications Commission (“FCC” or “Commission”) to regulate interstate and foreign telephone and radio communication. 47 U.S.C. §§ 151, 152(a). Under Title II of the Act, 47 U.S.C. §§ 201-224, the Commission is given explicit authority to regulate rates charged for “communication service” by interstate and international communications common carriers. See 47 U.S.C. § 201(a). In addition, Title I of the Act, 47 U.S.C. §§ 151-58, grants the Commission “ancillary” authority to regulate activities of communications carriers that are not subject to regulation under Title II. See 47 U.S.C. § 152(a) (“this chapter shall apply to all interstate and foreign communication by wire or radio....”); 47 U.S.C. § 153(a) (defining “communication by wire” as “the transmission of writing, signs, signals, pictures, and sounds of all kinds ..., including all instru-mentalities, facilities, apparatus, and services ... incidental to such transmission ”) (emphasis added); 47 U.S.C. § 154(i) (empowering the Commission to “perform any and all acts, make such rules and regulations, and issue such orders, not inconsistent -with this chapter, as may be necessary in the execution of its functions”); see also United States v. Southwestern Cable Co., 392 U.S. 157, 178, 88 S.Ct. 1994, 2005, 20 L.Ed.2d 1001 (1968) (in regulating broadcasting, section 152(a) authorizes the Commission to take actions that are “reasonably ancillary to the effective performance of [its] various responsibilities”).

B. Factual and Procedural History

This case is one of many arising from the breakup of the American Telephone and Telegraph Company. Before the breakup, the Bell Companies (the local telephone exchange companies then affiliated with AT & T) performed the billing and collection task in connection with AT & T’s long distance services. As part of the “Modification of Final Judgment” (“MFJ”), the antitrust consent decree that required AT & T to divest itself of the Bell companies, these newly divested companies were permitted to continue [1528]*1528these services but were required to offer them on the same terms to all long distance service providers. See United States v. American Tel. & Tel. Co., 552 F.Supp. 131, 234 (D.D.C.1982), aff'd sub nom. Maryland v. United States, 460 U.S. 1001, 103 S.Ct. 1240, 75 L.Ed.2d 472 (1983). Shortly after the MFJ took effect, similar terms were imposed by another settlement decree on the local telephone exchange companies controlled by GTE Corporation. See United States v. GTE Corp., 603 F.Supp. 730, 743 & n. 55 (D.D.C.1984). Together, the Bell and GTE companies provide about 90 percent of all local telephone exchange service in the United States. See id. at 733-34.

In the immediate aftermath of the AT & T breakup, the FCC brought billing and collection services under regulation, requiring compliance with approved rate schedules and prohibiting discrimination in the provision of such services. See MTS and WATS Market Structure, 97 F.C.C.2d 682, 741-42 (1983), aff'd in part and remanded in part on other grounds, National Ass’n of Regulator Util. Comm’rs v. FCC, 737 F.2d 1095 (D.C.Cir.1984). The FCC asserted authority to impose these requirements under Title II of the Communications Act. See id. at 741.

In January 1986, the Commission ordered the deregulation of billing and collection services. Detariffing of Billing and Collection Services, 102 F.C.C.2d 1150 (1986) (“Detariffing Order”). That order held that billing and collection in connection with telephone service was not a “communication service,” and that even if it were deemed a communication service, it was “doubtful” that it could qualify as a “common carrier service,” id. at 1168-69; hence, such services were not, as the Commission had previously thought, subject to regulation under Title II of the Act. Although the Commission found that it could perpetuate its regulatory regime on the authority of its “ancillary jurisdiction” under Title I, it declined to do so. See id. at 1169-71. Having established that “there is sufficient competition to allow market forces to respond to excessive rates or unreasonable billing,” the FCC concluded that “no statutory purpose would be served by continuing to regulate billing and collection service.” Id. at 1170.

In promulgating the Detariffing Order, the Commission’s focus was almost exclusively on the market for “subscriber,” or “1 + ,” long-distance service, for which tolls are charged to the account of the telephone that originates the call. When the Detariffing Order was issued, competition in the other segment of the long-distance market, that for “operator-assisted,” or “0 +,” service was still in its infancy. Operator-assisted calling, as the term is used here, includes all calls for which tolls are not automatically charged to the owner of the line originating the call, whether or not an actual operator assists in the call’s completion. Credit card, collect, and bill-to-third party calls are all examples of operator-assisted services.

A surge of competition in the operator-assisted segment of the market followed in the wake of the AT & T breakup, and, amidst this surge, several interexchange carriers (“IXCs”) became convinced that certain local exchange carriers (“LECs”) were subjecting them to exorbitant rates and discrimination in billing and collecting for operator-assisted calls.

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3 F.3d 1526, 303 U.S. App. D.C. 242, 73 Rad. Reg. 2d (P & F) 1188, 1993 U.S. App. LEXIS 23977, Counsel Stack Legal Research, https://law.counselstack.com/opinion/capital-network-system-inc-v-federal-communications-commission-cadc-1993.