Opinion ID: 344471
Heading Depth: 1
Heading Rank: 2

Heading: the conditions of contest

Text: 6 A. The Statutory Scheme. The Communications Act of 1934, 47 U.S.C.A. §§ 151-609 (1962 & Supp. 1976), created the Federal Communications Commission for the purpose of regulating interstate and foreign commerce in communications by wire and radio so as to make available . . . 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. Section 2(a) of the Act, 47 U.S.C.A. § 152(a), provides that the Act and the FCC's jurisdiction shall apply to all interstate and foreign communication by wire. This general grant of authority to the FCC is amplified by section 3(a), 47 U.S.C.A. § 153(a), to encompass the transmission of writing, signs, signals, pictures, and sounds of all kinds by aid of wire . . . including all instrumentalities, facilities, apparatus, and services incidental to such transmission.. (Emphasis added.) 7 The Commission's major substantive powers over common carriers are described by sections 201-205 of the Act, 47 U.S.C.A. §§ 201-205. Section 201(b) requires that all charges, practices, classifications, and regulations for and in connection with (interstate) communication service, shall be just and reasonable. Section 202(a) declares it to be unlawful for any common carrier to make any unjust or unreasonable discrimination in charges, practices, classifications, regulations, facilities, or services of interstate communication. Section 203 and 204 mandate procedures for tariff filings by carriers and for FCC review of proposed tariffs. Although the FCC may simply disapprove a proposed tariff provision and require refiling by a carrier, section 205 also gives the FCC power to prescribe what will be the just and reasonable charge . . . and what classification, regulation, or practice is or will be just, fair, and reasonable, to be thereafter followed by the carrier. 8 The Communications Act also reserves some regulatory jurisdiction to the states. Section 2(b)(1) of the Act, 47 U.S.C.A. § 152(b)(1), provides that nothing in the Act shall be construed to give the Commission jurisdiction with respect to . . . charges, classifications, practices, services, facilities or regulations for or in connection with intrastate communication service. (Emphasis added.) Section 221(b) of the Act, 47 U.S.C.A. § 221(b), carves out a second area of state regulatory hegemony by denying the Commission jurisdiction with respect to charges, classifications, practices, services, facilities or regulations for or in connection with . . . telephone exchange service where such matters are subject to regulation by a State commission or by local governmental authority even though a portion of such exchange service constitutes interstate or foreign communication. 9 The tension between the powers granted to the FCC by sections 2(a) and 3(a), and the powers reserved to the states by sections 2(b)(1) and 221(b), generates this particular appeal. The validity of the Commission's registration program, however, cannot be properly determined without reference to the development of the Commission's interconnection policy. 10 B. The Interconnection Policy and North Carolina I. Prior to 1969, AT&T tariffs filed with the Commission prohibited attachment of any non-carrier-supplied terminal equipment to the telephone line network. 1 Earlier in 1966, manufacturers of the Carterphone device, which enabled a radio transmitter to interconnect with the telephone network, had attacked the tariff as an antitrust violation, but the courts held that the FCC had primary jurisdiction to determine the lawfulness of the inclusion of the blanket prohibition in an FCC-approved tariff. Carter v. AT&T Co., 250 F.Supp. 188, 190 (N.D.Tex.), aff'd 365 F.2d 486 (5th Cir. 1966), cert. denied 385 U.S. 1008, 87 S.Ct. 714, 17 L.Ed.2d 546 (1967). The FCC then found that the absolute prohibition of customer interconnection was unreasonable and unjustly discriminatory in violation of sections 201 and 202 of the Act. Carterphone v. AT&T, 13 F.C.C.2d 420 (1968),reconsideration denied, 14 F.C.C.2d 571. 2 The Commission did not, however, affirmatively prescribe any specific interconnection policy for the carriers, as it might have done pursuant to section 205. Rather, it declared the AT&T tariff to be invalid, and permitted the carriers to refile. 13 F.C.C.2d at 425. 3 The carriers responded by filing tariffs that contained the current CA and NCSU requirements. The Commission did not object to the refiled tariffs, and permitted them to become effective without scheduling a formal investigation, see AT&T Foreign Attachment Tariff Revisions, 15 F.C.C.2d 605 (1968), 18 F.C.C.2d 871 (1969), although the FCC still retained authority to investigate the lawfulness of the tariffs in the future, see 47 U.S.C.A. § 403. 4 11 Despite this federal tariff permitting interconnection of terminal equipment (as long as CAs and NCSUs were used), several state regulatory commissions in the early 1970's planned to forbid interconnection of non-carrier-supplied terminal equipment with local exchanges, except where such equipment was used exclusively for interstate communication. Because separation of terminal equipment used exclusively for local communication is a practical and economic impossibility, the proposed state rules would have scuttled the federal interconnection policy. Acting on the petition of independent equipment manufacturers, the FCC ruled that state commissions were precluded from regulating or restricting interconnection in any fashion that conflicted with FCC regulations governing the same equipment. In the Matter of Telerent Leasing Corp., 45 F.C.C.2d 204 (1974). 12 On appeal to this Court, the FCC's action was affirmed. North Carolina Utilities Commission v. FCC, 537 F.2d 787 (4th Cir. 1976) (North Carolina I ), petition for cert. denied, --- U.S. ----, 97 S.Ct. 651, 50 L.Ed.2d 631 (1976). The Court first noted the impossibility of separating interstate terminal equipment from local terminal equipment: the same telephones are used for both interstate and local communications. Thus, if state commissions could lawfully prohibit interconnection unless terminal equipment is used exclusively for interstate communications, federal tariffs authorizing interconnection would be made nugatory. Conversely, if federal regulations permitting interconnection are primary, it becomes a practical impossibility for the states to prohibit interconnection with respect to purely intrastate communication. Something had to give. 13 This Court held that FCC authority to regulate interconnection of equipment used for both interstate and local communication was paramount. Considerations of congressional purpose, of statutory provision for parallel situations, and of established agency practice informed the Court's decision. First, the Court pointed out that the Communications Act's primary purpose of establishing an efficient interstate communications network with adequate facilities at reasonable charges, see 47 U.S.C.A. § 151, would be jeopardized if federal regulation of jointly used equipment could be countermanded by state rules. Second, the Court found that other provisions of the Communications Act establish federal primacy where the control of facilities used for both interstate and local communication is concerned. Sections 2(b)(2) through 2(b) (4), for example, make intrastate carriers subject to FCC regulation when they provide interstate service by hooking up with the lines of interstate carriers, see 47 U.S.C.A. § 152(b)(2)-(4); and section 410(c) establishes federal preeminence in the allocation of rate base between interstate and local services, see 47 U.S.C.A. § 410(c) (Supp.1976). Finally, invoking the principle that an agency's established construction of its enabling legislation is entitled to deference, 5 the Court noted that the FCC has consistently asserted its jurisdiction over facilities and equipment used in both interstate and local communication. 14 C. The Present Challenge. The genesis of this dispute was the Commission's determination, shortly after its 1969 Carterphone decision, to study the technical justifications for the carrier-promulgated connecting arrangement tariffs. This investigation was formalized in Docket 19528 for the announced purpose of ascertaining the best technical method of effecting the interconnection policy. In its Notice of Inquiry, the FCC attempted to insulate Docket 19528 from any further dispute about the wisdom of interconnection as a policy goal by stating that it is not our intention to consider . . . any question as to whether there should be any modification of our holding in Carterphone or any revisions in the tariff provisions applicable to customer interconnection, 35 F.C.C.2d 539, 542 (1972). The Commission did, however, begin a separate proceeding Docket 20003 to consider, inter alia, the long-term economic impact of liberalized interconnection, and expressed a willingness to consider evidence contrary to the public policy judgment adumbrated by Carterphone. Customer Interconnection, 46 F.C.C.2d 214, 216-218 (1974). A First Report in Docket 20003 was issued after oral argument but before decision in this case. 6 15 The Commission has rendered its final orders implementing the terminal equipment registration program. First Report and Order in Docket No. 19528, 56 F.C.C.2d 593 (1975); Second Report and Order in Docket No. 19528, 58 F.C.C.2d 736 (1976) (hereinafter denominated as First Report and Second Report ). Pursuant to section 402(a) of the Communications Act, 47 U.S.C.A. § 402(a) (1962), and section 2342(1) of Title 28, petitioners most of whom are telephone companies (carriers) or state utility commissions contest the validity of the FCC's registration program. The numerous claims made by petitioners can be systematically analyzed under three rubrics: 16 (1) allocation of power does the FCC, as opposed to state regulatory commissions, have statutory authority to control customer interconnection when the facilities (i.e., the terminal equipment) attached to the national network are themselves used over 97% of the time for local, as opposed to interstate, communication; 17 (2) delegation of power assuming FCC jurisdiction over joint terminal facilities, does the Communications Act give the Commission power to impose a registration program, to include the carriers in it, and to indirectly regulate non-carrier-affiliated manufacturers of terminal equipment; and 18 (3) exercise of power assuming the FCC possesses the authority to do what it proposes, has the Commission exercised that authority in accordance with procedures required by law. 19