Document ID: ./input/supremecourt_opinions/opinions/boundvolumes/524bv.pdf
Page Number: 262.0

524US1

Unit: $U84

[09-06-00 20:39:07] PAGES PGT: OPIN

Cite as: 524 U. S. 214 (1998)

217

Opinion of the Court

observe certain substantive requirements imposed by that
law. Section 203 of the Act requires that common carriers
ﬁle “schedules” (also known as “tariffs”) containing all their
“charges” for interstate services and all “classiﬁcations, prac-
tices, and regulations affecting such charges.” § 203(a).
The Federal Communications Commission (FCC), which is
the agency responsible for enforcing the Act, requires carri-
ers to sell long-distance services to resellers such as respond-
ent under the same rates, terms, and conditions as apply to
other customers.

Prior to 1989, petitioner had developed a type of long-
distance service known as Software Deﬁned Network (SDN),
designed to meet the needs of large companies with ofﬁces
in multiple locations. SDN established a “virtual private
network” that allowed employees in different locations to
communicate easily. For example, an employee in Washing-
ton could call a co-worker in Denver simply by dialing a
four-digit extension. SDN customers,
in exchange for a
commitment to purchase large volumes of long-distance com-
munication time, received this service at a rate much below
what it would otherwise cost.

Several changes to SDN in 1989 made the service ex-
tremely attractive to resellers, such as respondent, who ag-
gregate smaller customers. Petitioner developed the capa-
bility to allow customers to use ordinary (“switched access”)
telephone lines to connect locations to their SDN networks.
Previously, locations had to be connected over special “dedi-
cated access” lines, which are direct lines from a location’s
telephone system to petitioner’s long-distance network, by-
passing the switches of the local exchange carrier. Dedi-
cated access involves large ﬁxed costs, so it is cost effective
only when a location originates a large volume of calls.
Switched access, in contrast, does not entail additional high
ﬁxed costs, so it is better suited to small users and hence to
resellers. Petitioner also instituted two pricing promotions
for SDN in 1989: additional discounts from the basic SDN