Opinion ID: 184717
Heading Depth: 2
Heading Rank: 1

Heading: The Telecommunications Market and the 1996 Act

Text: 7 In 1982, the American Telephone & Telegraph Company (AT&T) executed a consent decree, settling an antitrust suit brought by the Government in 1974. That decree, as modified by the District Court, is known as the Modification of Final Judgment (MFJ). United States v. American Tel. and Tel. Co., 552 F.Supp. 131 (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). The principal element of the MFJ was the requirement that AT&T divest itself of its local exchange monopolies. BellSouth's two local operating companies, Southern Bell Telephone and Telegraph Company and South Central Bell Telephone Company, were among the twenty-two BOCs spun off as a result of the decree. Each of the twenty-two BOCs were grouped into seven unaffiliated regional Bell operating companies (RBOCs). Due to mergers, there are now only five RBOCs, one of which is BellSouth. 8 The MFJ prohibited the BOCs from certain lines of business, including the provision of long distance services across different Local Access and Transit Areas (interLATA services), because of the BOCs' bottleneck power over the local exchange facilities. See 552 F.Supp. at 223-24. (For the remainder of this opinion, we will refer to interLATA services as long distance services.) The MFJ also provided that the BOCs could petition for relief from these prohibitions, including the prohibition against providing long distance services, if the petitioning BOC could show that there is no substantial possibility that it could use its monopoly power to impede competition in the market it seeks to enter. Id. at 231. 9 Over the life of the MFJ, the District Court granted nearly 300 waivers easing the restrictions of the decree. A few of these waivers were related to the long distance service restriction, but they were limited to the provision of services such as paging, time-of-day information, toll-free services, 911 services, international services, and cellular services. However, no BOC ever successfully petitioned under the MFJ to provide long distance telephone services. 10 In 1996, Congress passed the Act, by which it sought to open all telecommunications markets, including local telephone markets. To this end, many provisions of the Act were made generally applicable to incumbent local exchange carriers. For example, §§ 251 and 252 require all incumbents to permit new carriers to compete for local customers and set forth procedures that incumbents must follow in order to open their local markets to competition. See 47 U.S.C. §§ 251-252 (Supp. II 1996). 11 A critical feature of the Act is found in § 601(a)(1). This provision eliminated the prospective effects of the MFJ by providing that [a]ny conduct or activity that was, before the date of enactment of this Act, subject to any restriction or obligation imposed by the [MFJ] shall, on and after such date, be subject to the restrictions and obligations imposed by the Communications Act of 1934 as amended by this Act and shall not be subject to the restrictions and the obligations imposed by [the MFJ]. Telecommunications Act of 1996 § 601(a)(1), 110 Stat. at 143. 12 In addition to the Act's generally applicable provisions and the elimination of the future effects of the MFJ, Congress enacted §§ 271 through 276, special provisions applicable only to the BOCs listed in § 153(4) of the Act. BellSouth is governed by these provisions. As noted in BellSouth I, [i]n general these provisions simply maintained, and in most cases loosened, various restrictions to which the BOCs were already subject under the MFJ. 144 F.3d at 61. In other words, generally speaking, the BOCs were better off in terms of business market opportunities under the Act than they had been under the MFJ. 13 Section 271, the section at issue in this case, provides that the BOCs may immediately begin providing some categories of long distance services that were previously restricted under the MFJ. These services include out-of-region long distance services, i.e., long distance services originating outside the state(s) in which a BOC is authorized to provide local telephone service, and incidental long distance services, such as audio and video programming and commercial mobile services. See 47 U.S.C. § 271(b)(2), (g). Section 271 prevents a BOC from immediately providing in-region long distance services. But this restriction may be overcome by fulfilling the requirements of § 271(c) and (d). 14 In order to provide in-region long distance services, a BOC must first demonstrate that either § 271(c)(1)(A), known as Track A, or § 271(c)(1)(B), known as Track B, has been satisfied. Track A requires a BOC to show that it has entered into an agreement to provide access and interconnection to one or more unaffiliated competing providers of telephone exchange service ... to residential and business subscribers. Id. § 271(c)(1)(A). Track B, on the other hand, requires a BOC to show that no such provider has requested the access and interconnection described in subparagraph (A) three months prior to the BOC's application. Id. § 271(c)(1)(B). Such a request is called a qualifying request. See Order p 59. In addition, even if a BOC has received a qualifying request, it may still proceed under Track B if the party that made the request either failed to negotiate in good faith or failed to comply with an implementation schedule in an interconnection agreement. See 47 U.S.C. § 271(c)(1)(B); SBC Communications Inc. v. FCC, 138 F.3d 410, 413-14 (D.C.Cir.1998) (SBC Communications) (providing further explanation of Track A and Track B requirements). 15 If a BOC satisfies either Track A or B, it must then show that it offers the items listed in § 271(c)(2)(B), the competitive checklist. See 47 U.S.C. § 271(d)(3)(A). Included on the competitive checklist are things such as nondiscriminatory access to 911 and E911 services, adequate operational support systems, nondiscriminatory access to unbundled network elements, and contract service arrangements at a wholesale discount. See id. § 271(c)(2)(B). A BOC must also be willing to provide its in-region long distance service through a separate subsidiary as required by § 272, and must persuade the FCC that its provision of long distance service is consistent with public interest, convenience, and necessity. See id. § 271(d)(3)(B), (C).