Opinion ID: 344471
Heading Depth: 1
Heading Rank: 3

Heading: allocation of power between the states and the fcc

Text: 20 A. Reconsideration Considered. Petitioners mount their first assault over old terrain: they contend that sections 2(b)(1) and 221(b) of the Act expressly deny the FCC jurisdiction over equipment used predominantly in local communication. 7 Seizing on the word nothing in sections 2(b)(1) and 221(b), petitioners contend that these reservation clauses override any potentially contrary language elsewhere in the statute. Respondents counter by invoking the doctrine of stare decisis and this Court's policy of interpanel accord. 8 21 It is true that North Carolina I rejected the jurisdictional challenge that petitioners press here; stare decisis would normally bar a reprise. But stare decisis is a principle of policy and not a mechanical formula of adherence to the latest decision, however recent and questionable. Helvering v. Hallock, 309 U.S. 106, 119, 60 S.Ct. 444, 451, 84 L.Ed. 604 (1940) (Frankfurter, J.) In the special and novel circumstances of this case, which implicates significant state and federal interests and which involves questions of statutory interpretation that have been considered by no other Court of Appeals, we conclude that stare decisis does not preclude reconsideration of our holding in North Carolina I. The mere fact that a prior opinion exists is not sufficient in itself to call the doctrine of stare decisis into play: otherwise one rogue opinion could deprive the law of the accumulated expertise that stare decisis strives to safeguard. 22 If the rule of interpanel accord serves a purpose different from that of stare decisis, its purpose must be to allocate decisionmaking power between coequal panels subject to reversal by the Court of Appeals en banc. Because en banc review in this case is prevented by disqualification of all but one of the active Judges of this Court, strict application of the rule of interpanel accord seems unwarranted. We therefore reach the merits of petitioners' jurisdictional challenge. 23 B. The Scope of Section 221(b). Section 221(b) of the Act, 47 U.S.C.A. § 221(b) (1962) provides: 24 (N)othing in this chapter shall be construed . . . to give the Commission jurisdiction, with respect to . . . practices, services, facilities or regulations for or in connection with . . . telephone exchange service . . . even though a portion of such exchange service constitutes interstate or foreign communication, in any case where such matters are subject to regulation by a State commission or local governmental authority. 25 (Emphasis added.) 26 The term telephone exchange service is a statutory term of art, and means service within a discrete local exchange system, see 47 U.S.C.A. § 153(r); compare 47 U.S.C.A. § 153(s) (definition of toll, or long distance, service). As we pointed out in North Carolina I, the legislative history of section 221(b) leaves no doubt that the purpose of section 221(b) is to enable state commissions to regulate local exchange service in metropolitan areas, such as New York, Washington or Kansas City, which extend across state boundaries. 537 F.2d at 795 & n.11. On this appeal, petitioners do not object to that determination, apparently agreeing with our view that by force of section 221(b) a local carrier that serves a single multi-state exchange area is assured whatever degree of freedom from federal regulation section 2(b) provides for uni-state carriers and intrastate telephone business generally, 537 F.2d at 795. Section 221(b) simply does not apply to the facilities with which this appeal is concerned. 27 C. The Scope of Section 2(b)(1). Section 2(b)(1) of the Act, 47 U.S.C.A. § 152(b)(1) (1962), provides: 28 (N)othing in this chapter shall be construed to . . . give the Commission jurisdiction with respect to . . . practices, . . . facilities, or regulations for or in connection with intrastate communication service . . .. 29 (Emphasis added.) 30 North Carolina I correctly reasoned that if section 2(b)(1) were construed to give the states primary authority over joint terminal equipment, i.e., equipment used interchangeably for interstate and intrastate service, then whenever state regulations conflicted with federal rules applicable to interstate calls the FCC would necessarily be prevented from discharging its statutory duty under sections 1 and 2(a) to regulate interstate communication. Petitioners' emphasis on the word nothing in section 2(b)(1) is an attempt to employ a definitional stop to prevent the Court from reaching North Carolina I's otherwise dispositive argument. Essentially, petitioners contend that the statute itself mandates state control over jointly used terminal equipment, and that therefore no possible duty of the FCC with respect to interstate communication can be compromised. 31 Petitioners' argument begs the question. Even if the word nothing overrides any contrary language, the argument fails to identify those intrastate facilities over which state jurisdiction is to be primary. The question is whether jointly used facilities are to be classified for jurisdictional purposes as the interstate facilities of sections 1, 2(a) and 3(a), or as the intrastate facilities of section 2(b)(1). Sections 1, 2(a) and 3(a) commit jurisdiction over facilities utilized in interstate communication to the FCC. Section 2(b)(1) does not deny the FCC jurisdiction with respect to interstate facilities: it excludes only intrastate facilities from FCC jurisdiction. The terminal equipment dealt with in the order appealed from is used for both interstate and intrastate communication. The withdrawal of jurisdiction over one cannot be read to mean the withdrawal as to the other. Based on the statutory policy of centralizing control over interstate communications in the FCC, the otherwise plenary jurisdiction conferred by sections 201-205, and the recognition by section 410(c) of federal supremacy in rate base allocation, we concluded in North Carolina I that the intrastate facilities of section 2(b)(1) were those facilities separable from and . . . not substantially affect(ing) the conduct or development of interstate communications, 537 F.2d at 793. Congress' use of the word nothing in no way detracts from this analysis, nor does it suggest as do petitioners that the intrastate facilities of section 2(b)(1) are those items of terminal equipment used predominantly for local communication. 32 Petitioners confuse the fact that almost all terminal equipment is and has been used predominantly for local communication, with the statutory division of decisionmaking power. We find it difficult to credit an argument which amounts to an assertion that Congress created a regulatory scheme that depends on the calling habits of telephone subscribers to determine the jurisdictional competence of the FCC versus state utility commissions. There can be no doubt that, when the Communications Act was passed, Congress envisioned circumstances in which the same equipment would be employed for both interstate and local communication: section 221(b)'s special provisions governing multistate local exchanges are testimony enough. Particularly revealing, therefore, is the fact that although Congress secured to the states control over multistate exchanges even though a portion of such exchange service constitutes interstate or foreign communication, 47 U.S.C.A. § 221(b), it included no similar language in the reservation clause of section 2(b)(1). Section 2(b)(1) does not deny the Commission jurisdiction with respect to interstate facilities even though a portion of the use of such facilities is for interstate communication. Indeed, the language of section 221(b) is a reproach to petitioners' construction of section 2(b)(1). The explicit language of section 221(b) shows that when Congress meant to give primary authority over inter- and intra-state facilities to the states, it was capable of unambiguously expressing that purpose. 33 A brief consideration of the potential consequences of state control over jointly used terminal equipment confirms our interpretation of section 2(b) (1). Surely petitioners would not contend that if a state commission authorized interconnection of a terminal equipment device which actually interfered with the transmission of interstate communications, the FCC would be powerless to order the removal of the device. And once it is recognized that FCC regulations must preempt any contrary state regulations where the efficiency or safety of the national communications network is at stake, there can be little argument that FCC regulation of jointly used terminal equipment for the purpose of improving or expanding interstate communication services may not also displace conflicting state regulations. The aim of the Communications Act, after all, is not limited to achievement of a minimally efficient, nondangerous national network. Instead, Congress has declared its purpose to be the creation of a rapid, efficient, Nationwide, and world-wide wire and radio communication service with adequate facilities at reasonable charges. Communications Act § 1, 47 U.S.C.A. § 151. If it is admitted as we think it must be that the FCC has full statutory authority to regulate joint terminal equipment to ensure the safety of the national network, then we can discover no statutory basis for the argument that FCC regulations serving other important interests of national communications policy are subject to approval by state utility commissions. 34 D. The Implications of Federal Control Over Interconnection. Petitioners characterize the registration program as an assumption of power similar to that given the Interstate Commerce Commission by the Shreveport Doctrine of Houston, East & West Texas Railway v. United States, 234 U.S. 342, 34 S.Ct. 833, 58 L.Ed. 1341 (1914), a result that Congress sought to avoid in drafting the Communications Act. In the Shreveport case, Louisiana shippers were shut out of Texas markets by a system of intrastate rates under which rates for shipments by interstate carriers eastward from Dallas and Houston to points in Texas were set to undercut ICC rates for shipment by the same carriers over the same distances westward from Shreveport into Texas. The Supreme Court held that the ICC was not limited to lowering the interstate rates as a remedy for the discrimination against interstate commerce worked by the Texas rate system. To so limit the ICC, the Court reasoned, would force the ICC to stultify its own judgment as to reasonable interstate rates. The ICC was therefore given the alternative of suspending the Texas intrastate rates, thus enabling the carriers to raise local rates to federal levels for similar distances. Despite a proviso in the ICC legislation similar to the jurisdictional reservation of section 2(b)(1) of the Communications Act, the Supreme Court held that the state power over exclusively local rates was inviolable only where local rates, in comparison with interstate rates, did not create unreasonable discriminations against interstate commerce. 234 U.S. at 357-58, 34 S.Ct. 833. 35 Petitioners correctly point out that in enacting the Communications Act, Congress sought to deny the FCC the kind of jurisdiction over local rates approved by the Shreveport Rate Case. We do not agree, however, that the registration program is some sort of regulatory atavism. Congress' dissatisfaction with the Shreveport doctrine was that it permitted the ICC to control the rates for exclusively local service because of the relationship between those rates and the interstate rates. But the FCC's registration program in no way purports to prescribe charges for local services; state commissions remain unfettered in their discretion to set rates for all local services and facilities provided by the telephone companies. Shreveport dealt specifically with rates for services which were admittedly local in nature; this appeal concerns the definition of what services and facilities are intrastate and hence subject to state rather than federal control. 36 The Supreme Court's recent decision in FPC v. Conway Corp., 426 U.S. 271, 96 S.Ct. 1999, 48 L.Ed.2d 626 (1976), is particularly instructive. Section 201(b) of the Federal Power Act, 16 U.S.C.A. § 824(b), gives the Federal Power Commission jurisdiction with respect to the sale of electric energy at wholesale in interstate commerce, but denies the FPC jurisdiction over retail sales. This limitation, the Supreme Court noted, was designed to ensure that the Shreveport doctrine would not be employed to expand FPC jurisdiction: 37 (T)he legislative history . . . indicat(es) that the section was expressly limited to jurisdictional sales to foreclose the possibility that the Commission would seek to correct an alleged discriminatory relationship between wholesale and retail rates by raising or otherwise regulating the nonjurisdictional, retail price. 38 426 U.S. at 277, 96 S.Ct. at 2003 n.5. 39 In Conway, the FPC contended that its lack of jurisdiction over retail sales not only prevented it from regulating retail rates to correct unreasonable discriminations against customers, but also precluded FPC action to change wholesale rates because of an alleged discriminatory or anticompetitive relationship between wholesale and retail sales. A unanimous Supreme Court held to the contrary, and affirmed the judgment of the Court of Appeals that the FPC was not precluded from adjusting wholesale rates as a means of responding to the problem of a discriminatory relationship between wholesale and retail rates. The jurisdictional limitation inspired by Congressional reaction to the Shreveport doctrine, said the Court, meant only that the FPC could not set retail rates as a means of dealing with the problem. 40 The lesson of FPC v. Conway Corp., in the circumstances of the instant case, is that the FCC has jurisdiction to prescribe the conditions under which terminal equipment may be interconnected with the interstate telephone line network. The FCC has not attempted to control the use of terminal equipment in local communication because of the effect that such use through the medium of the market has on interstate communication. Instead, the FCC has established a registration program governing the interconnection of terminal equipment when that equipment is used directly to effectuate interstate communication. 41 Petitioners counter by claiming that the effect of federal control of interconnection with respect to the national network will be to deprive the states of meaningful ratemaking power. The state commissions contend that they currently subsidize residence and one-phone consumer service by charging more for business equipment (PBX's and key phones) and for extension phones than the unit costs of such equipment. Apparently, the state commissions fear that increased substitution of independently provided terminal equipment for carrier-supplied equipment will reduce revenues and the corresponding amount of money available to subsidize other services and facilities. 42 We hold that the registration program as a jurisdictional matter does not jeopardize state ratemaking prerogatives to subsidize favored types of service. The states remain free to approve the pricing of carrier-supplied terminal equipment above or below unit cost. The effect of the federal program will depend upon the extent to which independents invade the terminal equipment market and undersell the regulated price. But cross-subsidization can still be accomplished by differential charges for services where there is no competition. For example, state commissions can permit carriers to classify and bill business line exchange service at rates higher than private line service if they desire to subsidize the latter. 43 Recognition of federal primacy in the regulation of jointly used terminal equipment no more curtails state ratemaking power as a matter of statutory jurisdiction than would the denial of state authority to set rates for interstate calls in order to subsidize local exchange and intrastate services. In the end, the problem of subsidy reduces to the tactical problem of obtaining sufficient revenues to cover the difference between the cost of providing subsidized service and the regulated price of subsidized service. Whether that amount is obtained by overcharging on PBX's, by overcharging on business phone exchange service, or even by direct legislative appropriation, is largely academic as far as statutory jurisdiction is concerned. Political expediency may encourage state commissions to defend their current option to bury subsidy costs in as many holes as possible, but this concern cannot be allowed to determine the allocation of jurisdictional competency between state and federal agencies. 44 To support their retention of meaningful ratemaking power, petitioners resort to the science of statutory interpretation. No part of a statute, they argue, should be read in a fashion that makes it meaningless 9 ; and to establish FCC authority over jointly used terminal facilities as primary would, according to petitioners, render the term facilities in section 2(b)(1) meaningless. 45 Reliance on the maxim of meaningfulness is misplaced in the circumstances of this case. First, the maxim is only a guide for interpretation when analysis of statutory purpose fails to resolve a dispute about statutory meaning, 10 and carries little weight against the major policy arguments favoring FCC jurisdiction and the Commission's consistent assertion of FCC authority over jointly used equipment. Moreover, the maxim seems inappropriate to the construction of boilerplate language in an extremely general delegation statute. Finally, the Commission's construction makes the term facilities meaningless not because exclusively intrastate facilities cannot be built or imagined (indeed, some are already in existence), but because state commissions prefer to avoid the economic and political costs of forcing the general consumer to buy two sets of terminal equipment. 46 E. Agency Estoppel. It is true that most practices regarding terminal equipment have historically been regulated by the states, and that the FCC has always formulated its decisions in terms of equipment used for interstate communication. Petitioners contend that these facts establish an FCC interpretation of the statute which should now be held to bar FCC jurisdiction over jointly used terminal equipment. 47 While we agree that an agency's construction of its enabling statute is entitled to deference from the courts, we have a good deal of difficulty with the more sweeping proposition that an agency is forever bound by its own prior view of its jurisdiction. Such a rule would not only be antithetical to the policy rationale for administrative agencies (ability to tailor broad legislative directives to fit specific problems), but would also contradict the central assumption of the rule respecting an agency's construction of its enabling statute. That assumption is that the agency's accumulated expertise makes it particularly well qualified to determine how the legislature might have dealt with a particular fact situation had that situation been among the conceptual paradigms to which the general language of a statute speaks. Petitioners' proffered rule of agency estoppel would confound that assumption by preventing an agency from revising its approach to problems on the basis of experience in dealing with the range of disputes generated by particular configurations of statutory powers and duties. 48 Moreover, agency estoppel could hardly be enforced on the facts of this case. FCC decisions not unexpectedly refer only to the use of equipment for interstate communication, but the relevant cases firmly establish the Commission's view that when facilities are used for both interstate and local communication, state regulations must give way to federal regulations even though the latter unavoidably affect local communication in the process of regulating interstate communication. Thus in AT&T (Railroad Interconnection), 32 F.C.C. 337, 339 (1962), the FCC ruled that there is no doubt that this Commission has jurisdiction over (local) exchange facilities to the extent that such facilities are used in accomplishing interstate toll communication. In cases involving the attachment of special mouthpieces to telephones, 11 the interconnection of radio base stations and telephone lines, 12 the attachment of recording devices to telephones, 13 the use of automatic answering devices, 14 the connection of teletypewriter equipment to the telephone network, 15 the regulation of the interconnection of right-of-way telephone lines and the national telephone network, 16 the control of the use of the telephone network for illegal purposes, 17 and the interconnection of military communications lines with the national network, 18 the FCC has never considered its jurisdiction inadequate because effectuation of the federal policy of interconnection might as a practical matter make enforcement of less liberal state rules difficult if not impossible. Additional reference to history would be otiose. The vast majority of terminal equipment has been and is regulated by the states, but the FCC has never conceded that joint equipment is beyond federal jurisdiction should the need for federal action arise.