Opinion ID: 474497
Heading Depth: 2
Heading Rank: 2

Heading: Extraregional Exchange Services

Text: 27 Because the RHCs are bound by the decree, it is necessary to reach the issues of consent decree interpretation presented in this appeal. In an earlier decision the district court ruled that two-way mobile telephone and one-way paging services are exchange telecommunications services within the meaning of the decree, United States v. Western Electric Co., 578 F.Supp. 643, 645 (D.D.C.1983), and appellants U.S. West, Bell Atlantic, and Pacific Telesis do not now contest this conclusion. They argue, however, that the district court erred in its January 13 decision in ruling that they are prohibited by the decree from providing exchange telecommunications services outside of their respective geographic regions. Their contentions in this regard are supported by amicus briefs filed on behalf of Ameritech, BellSouth, NYNEX, and Southwestern Bell. 28 This court has held that the construction of a consent decree is essentially a matter of contract law.... Citizens for a Better Environment v. Gorsuch, 718 F.2d 117, 1125 (D.C.Cir.1983), cert. denied, 467 U.S. 1219, 104 S.Ct. 2668, 81 L.Ed.2d 373 (1984). Accordingly, the district court's construction of the decree is subject to de novo review by this court. See Willie M. v. Hunt, 657 F.2d 55, 59 (4th Cir.1981). The principles of consent decree construction were elucidated by the Supreme Court in United States v. Armour & Co., 402 U.S. 673, 682, 91 S.Ct. 1752, 1757, 29 L.Ed.2d 256 (1971), where it observed that the scope of a consent decree must be discerned within its four corners, and not by reference to what might satisfy the purposes of one of the parties to it. It has further held that in the enforcement of a consent decree, reliance upon certain aids to construction is proper, as with any other contract. United States v. ITT Continental Baking Co., 420 U.S. 223, 238, 95 S.Ct. 926, 935, 43 L.Ed.2d 148 (1975). These include the circumstances surrounding the formation of the consent order.... Id. We need not decide whether this is a case where it is appropriate to consider evidence extrinsic to the consent decree, because in this case such evidence does not change our result. We conclude that neither the express language of the consent decree nor the circumstances of its formation will support the territorial restrictions imposed on exchange services by the district court. 29 None of the parties to the instant case contends that an explicit prohibition on the provision of extraregional exchange services is contained within the four corners of the consent decree. The district court found, however, that it is clear for a number of reasons that the Operating Companies were intended to be limited to their own local areas in furnishing exchange telecommunications services. United States v. Western Electric Co., 627 F.Supp. at 1106. The district court listed eight such reasons, including both provisions of the decree that allegedly contain implicit geographic restrictions on RHC operations, and evidence extrinsic to the decree that purportedly reveals an intent to impose such restrictions. Id. at 1106-08. We have considered the reasons identified by the district court, as well as other aids to construction cited by the parties, but we are unable to conclude that the parties to the decree reached any agreement on the issue of extraregional exchange services. 30 We do not agree with the district court that various provisions of the decree implicitly impose geographic restrictions on RHC and BOC operations. The fact that the criteria set forth in section IV(G) for establishing exchange areas are all local in nature has no bearing on the question of whether a geographic restriction was intended to be imposed on all subsequent RHC and BOC exchange activities. The local nature of these criteria was merely a function of the need, at the time of divestiture, to divide the Bell System's local operations into coherent units in which BOCs could function without entering the interexchange, or long distance, business. 31 Similarly, the fact that section IV(G) assigned the responsibility for establishing exchange areas within their respective regions to the BOCs reflects nothing more than simple necessity. Prior to January 1, 1984, when the system of exchange areas came into effect, the BOCs were the only providers of local telecommunications service within their respective regions; there was no other logical entity to draw exchange areas. It does not follow from this that each BOC was precluded from providing exchange services in exchange areas drawn by other BOCs. 32 Identical logic explains why, pursuant to section I of the decree, AT & T assets necessary to provide local telephone service were distributed to the BOCs on a geographic basis. This plan of distribution merely shows that the initial division of markets was geographic; it does not mean that after divestiture the initial geographic boundaries were to be inviolable. 33 We are unable to understand the district court's suggestion that sections VIII(A) and VIII(B) of the decree, which authorized the BOCs to sell customer premises equipment and publish telephone directories, reveal an intent to geographically restrict other BOC operations. These sections, which were adopted as amendments to the decree at the court's insistence, merely authorize the BOCs to enter lines of business that would otherwise be prohibited to them under section II(D). Sections VIII(A) and VIII(B) plainly do not purport to lift any geographic restrictions on these activities to which the BOCs would be subject in the absence of the sections. Thus, far from supporting the district court's conclusion, the fact that all parties to the decree have assumed that the RHCs and BOCs may sell customer premises equipment and publish telephone directories on a nationwide basis supports appellants' claims. If the RHCs and BOCs may engage in these activities outside of their regions without a waiver of geographic restrictions, it is not unreasonable to assume that other activities permitted under the decree may be conducted nationwide as well. 34 In view of the foregoing, we conclude that there is no explicit or implicit geographic restriction of RHC and BOC operations contained within the four corners of the consent decree. When we look beyond the language of the decree, we remain unpersuaded that the parties to the decree intended to prohibit provision of extraregional exchange services. 35 We recognize that certain of the aids to construction in this case suggest that the parties and the district court assumed that the RHCs and BOCs would confine themselves to providing exchange services within their respective regions. For instance, in approving the proposed consent decree, the district court stated that [e]ach of the divested Operating Companies will have a monopoly in only one geographic portion of one [telecommunications] market[]--local telecommunications. United States v. American Telephone and Telegraph Co., 552 F.Supp. at 187. Later, in a portion of its opinion approving the plan of reorganization submitted by AT & T pursuant to section I of the decree, the district court observed that [w]ith respect to exchange telecommunications ... the Operating Companies and the Regional Companies will, by definition, be limited to clearly defined geographic areas.... United States v. Western Electric Co., 569 F.Supp. 1057, 1081 (D.D.C.1983). Certain RHC filings with the Federal Communications Commission suggest that the RHCs may have shared the district court's understanding. See Comments of Associated Bell System Companies at 13, FCC CC Docket No. 83-115 (Apr. 25, 1983); Reply Comments of Associated Bell System Companies at 13, FCC CC Docket No. 83-115 (May 25, 1983); Joint Petition for Reconsideration of Indiana Bell, Michigan Bell, and Ohio Bell at 13, 15, 16, FCC CC Docket No. 83-115 (Feb. 10, 1984). 36 There are also indications in the record, however, that the drafters of the consent decree did not intend to prohibit the RHCs from furnishing exchange services outside of their respective regions. For example, both Assistant Attorney General for Antitrust Enforcement William F. Baxter and AT & T Vice President and General Counsel Howard J. Trienens testified before committees of Congress that it would have been possible under the consent decree for AT & T to combine all of the BOCs into a single nationwide operating company. See AT & T Proposed Settlement: Hearings Before the Senate Comm. on Commerce, Science and Transportation, 97th Cong., 2d Sess. 73 (1982) (testimony of William F. Baxter); Department of Justice Oversight of the United States v. American Telephone and Telegraph Lawsuit: Hearings Before the Senate Comm. on the Judiciary, 97th Cong., 2d Sess. 112, 141-42 (1982) (prepared statement of William F. Baxter; testimony of Howard J. Trienens). This conclusion was compelled by section I(A)(4) of the decree, which states that nothing in this decree shall require or prohibit the consolidation of the ownership of the BOCs into any particular number of entities. The possibility of a single nationwide operating company is obviously inconsistent with the existence of geographic limitations on exchange telecommunications, for if there were only one operating company it would necessarily provide local telephone service throughout the country. 37 The absence of geographic restrictions is also suggested by events surrounding Bell Atlantic's efforts to solicit the views of the Department of Justice concerning its plans to acquire A Beeper Company. As explained in affidavits filed with the district court, the Justice Department initially advised Bell Atlantic that the fact that A Beeper provided exchange services outside of the Bell Atlantic region would not place Bell Atlantic in violation of the consent decree. See Affidavit of James H. Dickerson paragraphs 4-6. In fact, there was internal disagreement within the Justice Department as to whether the consent decree prohibited the provision of extraregional services, but the existence of this disagreement was not initially communicated to Bell Atlantic. See id. p 12; Affidavit of James P. Denvir p 6; Supplemental Affidavit of James P. Denvir p p 2, 3; Affidavit of Richard O. Levine p 12. We consider the existence of internal disagreement to be significant, for if the Justice Department found the decree ambiguous in this regard, it is most unlikely that the parties to the decree ever reached an agreement on the issue of extra-regional exchange services. 38 We suspect that the uncertainty surrounding this issue has a simple explanation: the parties and the district court never considered the possibility that the BOCs might want to provide exchange services outside of their geographic regions. It must be remembered that exchange service consists principally of local landline telephone service, and it is hardly conceivable that one BOC would want to enter another BOC's area in order to provide such traditional service in competition with the established BOC. This case, on the other hand, involves special types of exchange service that can be provided in competition with an established BOC, and we think it likely that the drafters of the consent decree simply did not consider such a possibility. Had they considered it, they might have proscribed it (though in view of its pro-competitive effect, that is far from certain). The question before the court, however, is whether we may now read such a proscription into the decree. Under Armour and ITT Continental Baking, it is clear that we may not. We therefore reverse the district court's January 13 decision insofar as it held that the RHCs may not provide exchange telecommunications services outside of their respective regions. 39