MCI Telecommunications Corp. v. Federal Communications Commission

627 F.2d 322, 200 U.S. App. D.C. 269
CourtCourt of Appeals for the D.C. Circuit
DecidedApril 2, 1980
DocketNo. 79-1119
StatusPublished
Cited by50 cases

This text of 627 F.2d 322 (MCI Telecommunications Corp. 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
MCI Telecommunications Corp. v. Federal Communications Commission, 627 F.2d 322, 200 U.S. App. D.C. 269 (D.C. Cir. 1980).

Opinion

Opinion for the Court filed by Circuit Judge WALD.

WALD, Circuit Judge:

At issue here are two decisions of the Federal Communications Commission (FCC), the first1 dated August 12,1977 and the second2 (the FCC’s reconsideration of the first) November 30, 1978. Both relate to a June 2, 1976 FCC decision3 which found American Telephone and Telegraph Company’s (AT&T’s) 1973, 1974, 1975 and 1976 Wide Area Telecommunication Service (WATS) tariff revisions to be unsupported by the data AT&T produced. The FCC’s 1976 decision nevertheless continued the effectiveness of those revisions pending final FCC action and, through its 1977 and 1978 decisions, the FCC has allowed those revisions to remain in effect.

The petitioners (referred to collectively as MCI4) challenge what they refer to as the FCC’s “acquiescence” to AT&T in allowing its WATS tariffs revisions to continue in effect for such a long period without any determination by the FCC pursuant to the Communications Act of 1934 that those revisions are “just and reasonable.”5 In fact, MCI asserts that the FCC in its 1976 decision found AT&T’s WATS tariffs un just and un reasonable, and argues that those tariffs are therefore unlawful and may not be continued in effect pursuant to the FCC’s 1977 and 1978 decisions, even temporarily. In contrast, AT&T asserts that in 1976 the FCC merely concluded that AT&T [272]*272had not met its statutory burden of showing its tariff revisions were “just and reasonable,” and argues therefore that the 1977 and 1978 decisions maintaining those revisions in effect pending a final determination as to what rates are “just and reasonable” were not abuses of the FCC’s discretion.

We recognize that the FCC is now, and has been for several years, in a period of transition in determining proper methods for evaluating the “reasonableness” and hence lawfulness of carrier-initiated communication tariffs such as these, and that the present limited controversy over WATS tariffs may itself be superseded if the FCC establishes comprehensive procedures for approving or setting AT&T’s tariffs for all of the communication services it provides.6 Nevertheless, there must be some limit to the time tariffs unjustified under the law can remain in effect (even if the FCC is in no position to decide whether they are actually unlawful). Otherwise, the regulatory scheme Congress has crafted becomes anarchic and whatever tariff rates the “regulated” entity files become, for all practical purposes, the accepted rates. Therefore, although we decline to act now on MCI’s petition for review of the FCC’s 1977 and 1978 decisions, we remand the case to the FCC for the preparation of, and report to the court on, a schedule for the expeditious resolution of this controversy within a reasonable time. This division of the court will retain jurisdiction over the case to insure compliance with the court’s decision.

I. BACKGROUND

AT&T first filed- FCC tariffs for, and offered, “outward” WATS7 in 1961 and “inward” WATS8 in 1967, justifying the lower rates charged for WATS than for regular long distance service (MTS9) on the ground that WATS used more automatic equipment and offered fewer special services — e. g., no itemized billing. The FCC first began to supervise WATS in 1961.10 In 1964 the FCC’s Common Carrier Bureau concluded there was a public need for WATS but recommended AT&T study various aspects of WATS which the Bureau questioned.11 [273]*273In 1965, the FCC adopted that recommendation.12

Two other proceedings begun around the same time are pertinent here. First, in 1965 the FCC began an inquiry to consider AT&T’s overall tariff structure and the part the tariffs for each individual service should play in a comprehensive rate regulation scheme applicable to all AT&T communication services. In 1969 the FCC and AT&T agreed to a Statement of Ratemaking Principles and Factors in that proceeding, and in 1970 AT&T filed a revised WATS tariff complying with that Statement. Second, in 1968 the FCC began to evaluate AT&T’s rates for TELPAK, its “private line” service. Because both involved interstate services of AT&T, the questions concerning comprehensive procedures to evaluate AT&T’s tariffs were consolidated into the TELPAK proceeding in 1970.13

In 1972 the FCC set 8.5 percent as AT&T’s allowable combined rate of return on WATS and its private line services.14 Consequently, in 1973 the FCC allowed AT&T to further revise its WATS tariffs to achieve that rate of return pending a final decision in the comprehensive examination of AT&T’s overall tariff structure, but the FCC expressly made those revisions subject to an accounting and possible refund.15 The FCC noted that the method AT&T used in its 1973 filing to support its costs was “a serious attempt by AT&T to employ modern quantitative techniques” for estimating revenues.16 In 1974 AT&T substantially revised its WATS tariffs; although it had some reservations, the FCC found those revisions were a step in the “right direction” and allowed them to become effective, again with an explicit accounting refund provision.17

AT&T’s next WATS tariff revisions filed in 1975 were rejected by the FCC because AT&T asked for a higher overall rate of return — 10.5 to 11 percent — from WATS and private line services than the FCC earlier set as a ceiling.18 Subsequently, in 1976 the FCC raised AT&T’s allowable return on those services to 9.5 percent and allowed another AT&T revision conforming to that percentage to become effective, pending completion of an FCC investigation.19

Shortly thereafter the FCC released its 1976 decision which underlies the two orders now under review. The FCC’s principal concern was with AT&T’s use of an “alignment” method of accounting which maintained the existing relationship be[274]*274tween WATS and MTS without reference to the costs of providing WATS:20

A novel “alignment” rate-making theory was relied upon by Bell in designing the aforementioned charges. The basis of Bell’s “alignment” approach was that initial and additional period monthly charges for Outward and Inward MT and FBD WATS services could be justified solely by maintaining “consistent” rate relationships with MTS DDD charges over distance, and that therefore independent cost of service studies were not required to explain or support Outward and Inward MT and FBD WATS monthly charges. We have found that Bell’s use of the “alignment” theory as the sole basis for justifying WATS charges is unacceptable and violative of clearly established Commission policy.

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Bluebook (online)
627 F.2d 322, 200 U.S. App. D.C. 269, Counsel Stack Legal Research, https://law.counselstack.com/opinion/mci-telecommunications-corp-v-federal-communications-commission-cadc-1980.