Appeals Court Rejects AT&T's Challenge to FCC's Long Distance Decision

(August 2, 2000) The U.S. Court of Appeals affirmed the FCC's decision to allow Bell Atlantic to provide long distance service in New York.

The Federal Communications Commission (FCC) decided last December to approve Bell Atlantic's (now called Verizon) § 271 application. The FCC had rejected all five previous applications. AT&T and Covad Communications, a provider of high-speed, data-oriented telecommunications services, immediately challenged the decision.

The unanimous opinion of the three judge panel of the U.S. Court of Appeals for the District of Columbia was written by Judge David Tatel. Judge Raymond Randolph and Judge Merrick Garland joined in the opinion.

On December 21, 1999, the FCC, by a vote of 5 to 0, approved Bell Atlantic's application, under Section 271 of the Telecom Act of 1996, to provide long distance service in New York state.

The Modified Final Judgment which broke up the old Bell monopoly nearly twenty years ago prevented the Regional Bell Operating Companies (RBOCs) from providing long distance service. The Telecom Act of 1996 authorized the FCC to permit the RBOCs to provide in region InterLATA service, if they first meet the checklist of requirements in Section 271 of the Act. This section required the RBOCs to first open their local service monopolies to competition.

On December 28, 1999, the appellants, AT&T and Covad Communications, filed their appeal with the Court of Appeals. 47 U.S.C. § 402(b)(6) and (9) give the U.S.C.A. for the D.C. Circuit exclusive jurisdiction to review FCC orders relating to applications to provide long distance service under section 271.

AT&T and Covad argued that the FCC failed to properly implement all of the elements of the 14 point checklist contained in Section 271.

The Court of Appeals summarized their challenge as follows: "AT&T mounts four challenges to the FCC's approval of Bell Atlantic's application, the first two of which Covad joins: (1) Bell Atlantic's prices for certain network elements do not conform to the TELRIC pricing methodology; (2) contrary to the Commission's conclusion, Bell Atlantic fails to provide competitors nondiscriminatory access to two types of unbundled loops, DSL-capable loops and hot cut loops; (3) the company imposes use restrictions on combinations of network elements that violate the 1996 Act; and (4) the company's proposed script for handling calls requesting new service or changes to existing service conflicts with section 272's nondiscrimination safeguards."

In a long and technical opinion, the Court rejected each and every argument of the appellants.

The Court also concluded:

"Approving a section 271 application requires a delicate judgment about the current state of competition in local markets, as well as how best to foster future competition. The FCC must ensure--as it has in five previous cases--that BOCs failing to comply with the 1996 Act's local competition provisions are not allowed to provide long distance service. The Commission must be equally careful to ensure--as it has in this case--that BOCs that satisfy the statute's requirements are not barred from long distance markets."

The Court elaborated that setting the bar too high would both dampen the RBOCs' incentive to open their local markets to competition, and deprive consumers of the benefits of price reducing competition in long distance service.

The Court also wrote that "We believe that the Commission set the bar at a reasonable height. It demanded real evidence that Bell Atlantic had complied with all checklist requirements, but at the same time, it did not allow " 'the infeasible perfect to oust the feasible good.' " [citations omitted] Given the evidence of growing competition in the New York local telephone market, see supra at 9-10, the NYPSC's careful work on a host of technical and complex issues, and the thorough analysis conducted by the FCC in the limited time permitted by section 271(c), we find no basis for faulting the Commission's conclusion that Bell Atlantic satisfied the statute's requirements for entry into the long distance telephone market."

William Kennard

FCC Chairman William Kennard immediately released a statement praising the Court's opinion. "This decision is a great victory. The court clearly affirmed the FCC's framework for deciding long distance applications from the Bell companies - the heart and soul of the Telecommunications Act of 1996. This marks an important milestone in our efforts to move competition out of the courtroom and into the marketplace, where it belongs."

Michael Glover, the Verizon SVP and Deputy General Counsel who argued the case for Verizon, also released a statement. He said that "Today's federal court decision once again rejects AT&T's ceaseless efforts to seek government protection for its long distance market and keep customers from receiving the benefits of competition. Hundreds of thousands of New York consumers and businesses are already benefiting from the lower prices and easier-to understand long distance services that came with our entry into long distance."

Glover also stated that "This decision reaffirms that local competition is strong in New York, and it lays the foundation to obtain long distance relief in other states. It is long past time for consumers and businesses in states like Massachusetts, New Jersey and Pennsylvania to also have the opportunity to start saving money and understanding their long distance calling plans with Verizon long distance."