Court Opinion

ID: 185124
Source: CourtListenerOpinion
Date Created: 2011-02-05 02:28:06+00
Date Added: 2024-06-11T17:26:13.419433
License: Public Domain

209 F.3d 760 (D.C. Cir. 2000)
MCI WorldCom, Inc., et al., Petitionersv.Federal Communications Commission and United States of America, RespondentsCompetitive Telecommunications Association, et al., Intervenors
No. 96-1459 Consolidated with96-1477, 97-1009, 97-1676, 98-1003,98-1007, 99-1240, 99-1242
United States Court of AppealsFOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued March 14, 2000
Decided April 28, 2000

On Petitions for Review of Orders of the Federal Communications Commission.
Donald B. Verrilli, Jr. argued the cause for petitioners and  supporting intervenors.  With him on the briefs were Thomas F. O'Neil III, Matthew B. Pachman, Jodie L. Kelley, Mark  C. Rosenblum, Roy E. Hoffinger, David W. Carpenter, Peter  D. Keisler, Paul J. Zidlicky, Robert M. McDowell, Leon M.  Kestenbaum, Michael B. Fingerhut, James M. Smith, Michael J. Shortley, III, Gail L. Polivy, Charles C. Hunter, and  Catherine M. Hannan.  Jay C. Keithley, David J. Gudino,  Dana Frix, Genevieve Morelli, and Richard S. Whitt entered  appearances.
John E. Ingle, Deputy Associate General Counsel, Federal  Communications Commission, argued the cause for respondents. With him on the brief were Joel I. Klein, Assistant  Attorney General, U.S. Department of Justice, Catherine G.  O'Sullivan and Robert J. Wiggers, Attorneys, Christopher J.  Wright, General Counsel, Federal Communications Commission, Susan L. Launer, Deputy Associate General Counsel,  and Laurence N. Bourne, Counsel.  Richard K. Welch, Counsel, entered an appearance.
Henry D. Levine, Ellen G. Block, and James S. Blaszak  appeared on the brief for intervenors in support of respondents.
Before:  Silberman, Randolph, and Rogers, Circuit Judges.
Opinion for the Court filed by Circuit Judge Silberman.
Silberman, Circuit Judge:

1
Petitioners, the large longdistance telecommunications carriers, seek review of an FCC  order prohibiting them from filing tariffs with the Commission.  We reject their petition.

I.

2
Commission efforts to move to a nontariff environment for  interexchange carriers--insofar as those carriers do not exercise market power--have not had an easy time with this court and the SupremeCourt.  For over six decades a tariff regime  was mandated by the Communications Act of 1934, which  requires the FCC to review telecommunications carriers'  tariffs to ensure their reasonableness.  See 47 U.S.C. §§ 201-202.  The Act requires carriers to file their tariffs with the  FCC, see 47 U.S.C. § 203(a), and they are prohibited from  charging consumers except as provided in the tariffs. See 47  U.S.C. § 203(c) (establishing what is popularly known as the  "filed-rate doctrine").  Starting in the early 1980s, the Commission tried to prohibit tariff-filing by nondominant carriers--in essence, those other than AT&T--but that effort was  successfully challenged in this court in MCI Telecommunications Corp. v. FCC, 765 F.2d 1186 (D.C. Cir. 1985), where we  struck down "mandatory detariffing" as inconsistent with the  1934 Act.

3
There remained some confusion as to whether the FCC's  surviving "permissive detariffing" policy for nondominant carriers--allowing those carriers to choose whether to file tariffs--was premised on an agency nonenforcement position,  subject to only very limited judicial review, or whether it  constituted a substantive regulatory framework.  AT&T, by  filing a complaint against MCI with the Commission over  MCI's non-filing (as it had a right to do under section 208 of  the Communications Act, 47 U.S.C. § 208(a)), put the cat  among the canaries and forced the Commission, by defending  MCI, to embrace the substantive position which we had  rejected.  The result was more Commission reversals, see  American Tel. & Tel. Co. v. FCC, 978 F.2d 727 (D.C. Cir.  1992); American Tel. & Tel. Co. v. FCC, 1993 WL 260778  (D.C. Cir. 1993), this time affirmed by the Supreme Court.See MCI Telecommunications Corp. v. American Tel. & Tel.  Co., 512 U.S. 218 (1994).  The upshot of all of this was that  the Commission simply could not suspend (permissively or  mandatorily) the tariff-filing obligations for interexchange  carriers, whether they had market power or not.

4
The landscape changed, however, when Congress passed  the Telecommunications Act of 1996, which requires the FCC to

5
forbear from applying any regulation or any provision of this chapter to a telecommunications carrier or telecommunications service, or class of telecommunications carriers or telecommunications services, in any or some of its or their geographic markets, if the Commission deter-mines that

6
(1) enforcement of such regulation or provision is not necessary to ensure that the charges, practices, classifications, or regulations by, for, or in connection with that telecommunications carrier or telecommunications ser-vice are just and reasonable and are not unjustly or unreasonably discriminatory;(2) enforcement of such regulation or provision is not necessary for the protection of consumers;  and

7
(3) forbearance from applying such provision or regulation is consistent with the public interest.

47 U.S.C. S 160(a).1

8
Armed with this new statutory authority, the FCC moved  once more to detariff the interstate, domestic, interexchange  services of nondominant carriers--now all of the interexchange companies.  In a Notice of Proposed Rulemaking, 11  F.C.C. R. 7141 (1996), the Commission tentatively concluded  that the 1996 Act required it to "forbear from applying" the  tariffing requirement to nondominant carriers, and that permitting carriers to file tariffs at all would not be in the public  interest.  It thus announced its intention to implement mandatory detariffing by "forbearing from applying" S 203(a) of  the 1934 Act.  Followinga comment period the FCC confirmed that enforcement of the tariffing provision is neither  necessary to ensure just and reasonable, nondiscriminatory  rates, nor necessary for the protection of consumers, and  ordered mandatory detariffing.  See Second Report and Order, 11 F.C.C.R. 20730, 20742-47, 20750-53 (1996).

9
In their comments, petitioners did not dispute the Commission's tentative conclusion that tariffing was no longer necessary, but argued that the Commission's intention to order  mandatory detariffing--rather than permissive detariffing-both exceeded the Commission's statutory authority and was  unreasonable.  They claimed that under the 1996 Act the  FCC may forbear from enforcing S 203, but cannot actually  forbid the filing of tariffs.  Petitioners also complained that  detariffing would lead to their customer relationships being  governed by state contract laws, which, in some cases, might  require the execution of a new contract whenever the carrier  would want to change its rates.  According to petitioners, the  necessity of mailing new contracts to customers would increase their transaction costs resulting in higher prices for  consumers, make casual-calling options more difficult, and  hinder their ability to respond quickly to competitors' price  changes.  See id. at 20755-56.2  If tariffs were permitted,  petitioners claimed, they could still negotiate individual contracts with large customers, but also file tariffs for millions of  mass-market consumers, the optimal result for both groups. In response to objections by consumer groups that carriers  might negotiate contracts with individual customers and then  rely on the filed-rate doctrine to collect higher tariff rates,  petitioners argued that courts would not apply the doctrine  because permissive detariffing would gut its rationale:  the  filed rate would no longer be the only lawful rate.  See id. at  20757.

10
The Commission rejected petitioners' statutory and practical arguments.  The FCC concluded that outside the filing  requirement of S 203(a) there was no provision granting  carriers a right to file tariffs, so its forbearance authority  under the 1999 Act inherently contemplated mandatory detariffing.  It found petitioners' proposed distinction between  large and small customers immaterial, because the competitive benefits of detariffing would be felt by both.  The  Commission was also concerned that courts might not interpret the interplay of permissive detariffing and the filed-rate  doctrine quite as petitioners suggested, and that carriers would use the continued existence of the filed-rate doctrine to  refuse to negotiate individualized contracts with customers. The risk that tariffs might serve to facilitate price fixing was  also a factor cited by the Commission in its order, but in  response to two petitions for reconsideration the Commission  abandoned this rationale.  See id. at 20760, 20765-67, 20772;Order on Reconsideration, In re Policy and Rules Concerning the Interstate, Interexchange Marketplace, 12 F.C.C.R.  15014 (1997);  Second Order on Reconsideration and Erratum, In re Policy and Rules Concerning the Interstate,  Interexchange Marketplace, 14 F.C.C.R. 6004 (1999).

11
Petitioners challenge both the order and the reconsideration orders, and raise before us the same concerns presented  to the Commission.  They argue that the mandatory detariffing order is ultra vires because the FCC lacks statutory  authority to forbid the filing of tariffs.  Petitioners claim  alternatively that the order is arbitrary and capricious because the Commission's preference for mandatory detariffing  over permissive detariffing is not supported by facts or logic,  the Commission failed to respond to a third alternative advanced by AT&T, and the Commission based its decision in  part on a misunderstanding of the filed-rate doctrine.

II.

12
We begin with petitioners' argument that the 1996 Act does not give theFCC authority to implement mandatory detariffing--it cannot forbid the filing of tariffs.  The Act states that  the FCC "shall forbear from applying any regulation or any  provision of this chapter ... if the Commission determines  that (1) enforcement ... is not necessary [to ensure rates are  just, reasonable, and nondiscriminatory], (2) enforcement ...  is not necessary for the protection of consumers, and (3)  forbearance from applying such provision or regulation is  consistent with the public interest."  47 U.S.C. § 160(a) (emphasis added).  Petitioners urge that under the plain language of the statute the Commission is empowered merely to  exercise its discretion not to enforce a provision under such  circumstances.  In other words, to forbear is to "refrain from action," see Pet. Br. at 17 (citing, e.g., Black's Law Dictionary  329 (5th ed. 1983));  non enforcement is therefore forbearance,  but barring the doors of the FCC to lawyers bearing tariff  filings and throwing out extant tariffs, both affirmative acts,  are not.

13
Petitioners offer in support of their interpretation our  opinion in American Telephone & Telegraph, where we stated  that the FCC "went beyond mere forbearance ... by making  detariffing mandatory and by telling non-dominant carriers  that it would no longer even accept their rate filings...."978 F.2d at 729-30.  But we ourselves have used the word  forbear in two different ways.  In MCI Telecommunications, we said "forbearance was made mandatory" and the Commission "changed the permissive forbearance arrangement into a  mandatory one."  765 F.2d at 1191 n.4, 1189.  So it is hardly  open to us to deny the ambiguity which accompanies the  statutory use of that term--particularly when Congress acted  against a backdrop of our decisions.  Moreover, the crucial  phrase in the statute is not "forbear from enforcing" but  rather "forbear from applying," which suggests a broader  authority.  As the Commission correctly points out no provision of the Communications Act except S 203(a) requires  tariffing, and no provision gives a carrier a positive right to  file a tariff, so if it forbears from applying S 203(a) the  Commission's staff is not obliged to accept filings.  We therefore think that the Commission's interpretation of the Act is  entitled to Chevron deference.  See Chevron U.S.A. Inc. v.  Natural Resources Defense Council, Inc., 467 U.S. 837 (1984)3.

14
Petitioners alternatively claim that the Commission's order  is arbitrary and capricious, and, to use the Act's terminology,  against the "public interest" because its stated objectives  easily can be met by adopting a permissive-detariffing regime, and therefore the extra transaction costs imposed on  the carriers--and passed through to consumers--are unnecessary.  The major thrust of petitioners' arguments is that  the Commission inadequately responded to their comments,  and therefore the case should be remanded to the FCC so as  to require the agency to do so.  (It is worth noting that we  have stayed the Commission's order so the status quo favors  the petitioners for so long as they can maintain it.)

15
The Commission, as we have mentioned, wishes to disentangle the interexchange carriers' prices from the filed-rate  doctrine.  The Commission has long been concerned that the  necessity of filing tariffs hinders competitive responsiveness.  And, according to consumer representatives' comments presented to the FCC, the filed-rate doctrine has been used by  the carriers as a shield to avoid individual contract negotiations with large and small users, thereby reducing competition among carriers.  Petitioners argue that streamlined tariff procedures already adopted by the FCC, see Tariff Filings  Requirements for Nondominant Common Carriers, 8  F.C.C.R. 6752 (1993), and carriers' ability to file tariffs for  individual consumers have obviated those concerns.  But the Commissionreasonably disagreed, in part relying on the  consumers' reported experience under those procedures, and  in part because it was wary that the filed-rate doctrine might  be interpreted by state and federal courts to interfere with  free-market behavior.  See Second Report and Order, 11  F.C.C.R. at 20760-61;  20766-67.

16
Perhaps the most interesting argument in the case relates  to an AT&T ex parte letter (suitably filed) sent after the  comment period ended.  In a rather downplayed alternative  argument AT&T suggested in a single paragraph that if the  Commission's interpretation of forbearance was legitimate  (which of course AT&T denied) the Commission could eliminate certain problems with tariffs--and thereby move to only  permissive detariffing--if it would forbear from enforcing--or  even forbid the application of--the filed-rate doctrine, 47  U.S.C. S 203(c).  The Commission did not respond to this  rather subtle suggestion and petitioners contend that that  failure alone requires a remand.  The FCC argues that  AT&T's comment was only a throwaway, inconsistent with  petitioners' primary argument that mandatory forbearance is ultra vires, and not even part of its formal comment, so we  should not regard the issue as properly presented to the  Commission under 47 U.S.C. § 405(a).  If that were so, we  would not have jurisdiction to consider the point.  We do not  think that is quite correct, although it is a close question.

17
Petitioners note that the Commission's order refers to  several ex parte filings received after the filing in issue here. See Second Report and Order, 11 F.C.C.R. at 20781-82 nn.  253 & 254.  AT&T's filing was not long, and the relevant  paragraph concluded a discussion on one of the key issues of  the proceeding:  whether the filed-rate doctrine would be an  impediment to permissive detariffing.  The paragraph--even  though presented as an alternative argument--does suggest  that forbearance from S 203(c) would eliminate the possibility  of carriers' invoking the filed-rate doctrine.  Therefore, we  think the argument was presented--if barely--to the Commission.

18
Still, it is one thing to preserve a point for judicial review  and quite another to raise the issue with sufficient force to  require an agency to formally respond.  An agency is not  obliged to respond to every comment, only those that can be  thought to challenge a fundamental premise.  See Grand  Canyon Air Tour Coalition v. FAA, 154 F.3d 455, 468 (D.C.  Cir. 1998) ("An agency must ... demonstrate the rationality  of its decision making process by responding to those comments that are relevant and significant.") (emphasis added).In this case, AT&T's late ex parte alternative comment does  not seem to us to be forceful enough to have obliged the  Commission to squarely confront it.  Certainly the Commission made clear its concern that if tariffs were permitted it  could not foresee how the judiciary (in this case, probably  state courts) would treat the filed-rate doctrine.  It seems  obvious to us that the Commission would not have wished to  risk the doctrine's continued employment even had AT&T's  device been tried4.

19
Moreover, as we read the Commission's decision the essence of its reasoning was a desire to put the interexchange  carriers under the same market conditions as apply to any  other nonregulated provider of services in our economy.  The  Commission concluded that "a regime without nondominant  interexchange carrier tariffs for interstate, domestic, interexchange service is the most pro-competitive, deregulatory system."  Second Report and Order, 11 F.C.C.R. at 20760.  It  thought the public interest would best be served by "establishing market conditions that more closely resemble an  unregulated environment."  See id.  It noted that the "parties that oppose complete detariffing have notshown that the  business of providing interstate, domestic, interexchange services offered by nondominant interexchange carriers should  be subject to a regulatory regime that is not available to  firms that compete in any other market in this country."  Id.  at 20763.  And, importantly, the Commission found that  permitting carriers to file tariffs on a voluntary basis would  undermine the competition-enhancing effect of detariffing. See id. at 20760.5  Under such circumstances, remand is not  necessary for the agency to consider the proposed alternative. See Center for Science in the Public Interest v. Department  of the Treasury, 797 F.2d 995, 1004 (D.C. Cir. 1986).

20
Tariff filing, in other words, in the Commission's view is an  undesirable deviation from the market--at least where there  are no market imperfections.  Petitioners contend that the  Commission could not foreclose a permissive detariffing without more justification than simply a desire to embrace the  free market.  We think, however, the Commission was entitled to value the free market, the benefits of which are rather  well established.  Indeed, the 1996 Act provides that "[i]f the  Commission determines that ... forbearance will promote competition ... that determination may be the basis for a ...  finding that forbearance is in the public interest."  47 U.S.C.  § 160(b).  It was certainly reasonable to move regulation in  that direction even if it ostensibly raises transaction costs for  the carriers6.

21
*  *  *  *

22
The petition for review is denied.

23
So ordered.

Notes:

1
 The 1996 Act was passed in the expectation that telecommunications carriers would actively seek detariffing.  See 47 U.S.C.  S 160(c) ("Any telecommunications carrier, or class of telecommunications carrier, may submit a petition to the Commission requesting  that the Commission exercise the authority granted under this  section with respect to that carrier or those carriers....").

2
 Casual calling refers to collect calls, credit-card calls, or dialaround calling.

3
 Petitioners seem to argue that the delegation of the authority to  "forbear" implicitly precludes authority to forbid but that is even  more of a stretch.

4
 Since the filed-rate doctrine is applied by courts, even if it has  its genesis in the 1934 Act, the Commission's concern about the  filed-rate doctrine is not unreasonable and is certainly not, as  petitioners claim, legally erroneous.

5
 The agency rejected an alternative similar to AT&T's without  even referring to the danger of judicial mishandling of the filed-rate  doctrine;  the focus was squarely on competition.  See id. at 20766-67.

6
 The Commission did not, as petitioners contend, ignore the  probability of increased transaction costs.  It simply found them  insignificant compared to the competitive benefits of detariffing. See Second Report and Order, 11 F.C.C.R. at 20764.