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

Heading: facts

Text: 5 As we noted in BellSouth I, the Telecommunications Act of 1996, Pub.L. No. 104-104, 110 Stat. 56 (1996), changed the entire telecommunications landscape. 144 F.3d at 61. Therefore, in order to put the instant case in proper focus, we begin with an overview of the industry landscape prior to the passage of the Act, as well as the Act itself. 6
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).
16 BellSouth filed an application on September 30, 1997 to provide in-region long distance services in South Carolina. See Order p 1. It claimed that it had met the requirements of Track B as interpreted by the FCC in Application of SBC Communications Inc., Pursuant to Section 271 of the Communications Act of 1934, as amended, To Provide In-Region, InterLATA Services In Oklahoma, 12 F.C.C.R. 8685 (1997) (Oklahoma Order), aff'd, SBC Communications v. FCC, 138 F.3d 410 (D.C.Cir.1998). See Order p 52. It also contended that it had generally offered all fourteen checklist items. See Brief in Support of Application by BellSouth for Provision of In-Region, InterLATA Services in South Carolina at 17-57, reprinted in Joint Appendix 317-57. 17 The FCC denied BellSouth's application, because it found that qualifying requests had been made for the services in South Carolina. See Order p 67. Accordingly, BellSouth was not eligible to proceed under Track B. See id. It also found that BellSouth did not generally offer all fourteen checklist items. See id. p 240. BellSouth timely petitioned for review of the FCC's decision in this court on January 13, 1998.
18 Since BellSouth filed its appeal, three cases relevant to this appeal have been decided. On March 20, 1998, this court decided SBC Communications, denying SBC's petition to review the so-called Oklahoma Order. In that case, SBC sought review of the FCC's denial of its request to provide in-region long distance services in Oklahoma. SBC argued that it had satisfied Track A, because another entity was providing service to 20 customers in the region. SBC argued in the alternative that it had satisfied Track B. The FCC denied SBC's request, because it found that SBC had not satisfied either Track A or Track B. 19 This court denied SBC's petition to review the FCC's decision, because it found that the other entity providing service in-region was doing so free of charge, and it was reasonable for the FCC to interpret competing provider in Track A to require an actual commercial alternative to the BOC. SBC Communications, 138 F.3d at 416 (internal quotation marks omitted). This court also found that SBC had not satisfied Track B. Particularly relevant to this case, this court approved the FCC's interpretation that Track B was foreclosed the moment a provider requested interconnection so long as [the FCC] could predict that the carrier would, after implementing the agreement, provide competitive service to both residential and business customers, at least predominantly over its own facilities. Id. at 417. Because SBC had received qualifying requests that satisfied the FCC's interpretation of Track B, it could not seek to provide long distance services under that track. 20 On May 15, 1998, this court decided BellSouth I, holding that § 274, which limited the ability of the BOCs to provide electronic publishing, was not a bill of attainder, nor did it violate the BOCs' right to free speech under the First Amendment. Although BellSouth I addressed many of the bill of attainder issues raised in this case, there are differences between § 274 and § 271 that make this case somewhat different from that one. 21 On September 4, 1998, the Fifth Circuit decided SBC Communications, Inc. v. FCC, 154 F.3d 226 (5th Cir.1998) (SBC Communications (5th)), in which SBC had argued that all of the Special Provisions of the Act, 47 U.S.C. §§ 271-276, were unconstitutional. Reversing the district court, the Fifth Circuit found that the provisions did not constitute a bill of attainder, did not violate the separation of powers requirement, and did not violate the equal protection clause. It also found that the electronic publishing restrictions did not violate the BOCs' right to free speech under the First Amendment. 22 In the light of these developments, we now review the FCC's denial of BellSouth's application to provide long distance services in South Carolina.