by Michael K. Kellogg, John Thorne, and Peter W. Huber
Historically, there have been two core principles of public utility regulation: prices and terms must be both "reasonable" and "nondiscriminatory." Pricing, discussed in Chapter 9, is a fairly self-contained subject. Nondiscrimination, however, cuts across various areas of regulation and public policy. As discussed in Chapter 1,(1) the debate over equal access principles is as old as the law of common carriage; the *common* carrier label itself implies uniform treatment for all comers. Chapter 2 outlines the common carriage principles of the 1934 Communications Act. Chapters 10 through 14 discuss interconnection rules developed by the FCC for customer premises equipment,(2) enhanced services,(3) long distance companies,(4) mobile services,(5) and cable companies (at least insofar as access to telephone poles is concerned).(6)
The lawsuit that culminated in the Bell System divestiture in 1984 likewise revolved around the question of nondiscrimination. Indeed, the core of the government's case was "that the [Bell] Operating Companies provided interconnections to AT&T's intercity competitors which were inferior in many respects to those granted to AT&T's own Long Lines Department."(7) The divestiture decree accordingly contains equal access and nondiscrimination provisions specifically addressing competition in the long distance market. These provisions, unlike the line of business restrictions,(8) were the subject of painstaking negotiation between the parties.(9) Equal access was designed with the specific purpose of preventing favoritism between AT&T and competing providers of long distance and information services.(10)
The decree thus requires RBOCs to provide "exchange access" and "exchange services for such access" to all interexchange carriers on equal terms.(11) An interexchange carrier must establish one or more points of presence in any LATA it wishes to serve. The RBOC then acts as the local collector and distributor of calls to and from those "points of presence."(12) Each RBOC is required to provide "exchange access" "on an unbundled, tariffed basis, that is equal in type, quality, and price to that provided to AT&T."(13) Section II(B) similarly directs: "No BOC shall discriminate between AT&T and . . . other persons . . . in the . . . interconnection and use of the BOC's telecommunications service and facilities or in the charges for each element of service . . . ."(14) Section IV(F) states that "exchange access" is to be provided via connections "with signal quality and characteristics equal to that provided similar traffic of AT&T."(15) Appendix B provides a timetable for implementing "non-discriminatory access" and defines the term in more detail.
The decree likewise requires RBOCs to provide "information access" to "information service providers" "that is equal in type, quality, and price to that provided to AT&T."(16) Information access is defined in much the same terms as "exchange access."(17) The similarities end there. Appendix B of the decree contains a detailed prescription of what various parties to the decree believed to be technically feasible and desirable in the long distance voice business in light of the years of conflict between AT&T and MCI that preceded divestiture. The information access clauses, by contrast, were drafted in a vacuum with no comparable record of complaint on which to build.(18)
By their terms, all of these requirements apply to "BOCs";(19) in contrast to the line of business restrictions, they do not apply to affiliated enterprises.(20) AT&T is not subject to the requirements at all unless it acts in concert with the RBOCs.(21)
The actual timetable for deploying equal access capabilities for long distance carriers was moderately controversial while the deployment was under way but is now of historical interest only. The Decree set out a three-year schedule following divestiture for making the conversion, which involved (for the most part) developing and installing new software in the RBOC end-office switches. In early 1988 the Department issued a final report concluding that all regions but NYNEX had satisfactorily completed the deployment of equal access; NYNEX's program was completed soon thereafter.(22) A small number of end offices equipped with older electromechanical switches have not yet been converted; RBOCs remain obliged to make the necessary conversions within 18 months of any bona fide carrier request.(23)
Scheduling matters aside, Judge Greene has repeatedly allowed the RBOCs to exercise their independent judgment regarding the technical details of attaining equal access.(24) Equality is tested *functionally*.(25) Section IV(F) does indeed include an airy definition of the "exchange access" that RBOCs both may and must provide -- the term is said to encompass "network control signalling, answer supervision, automatic calling number identification, carrier access codes, directory services, testing and maintenance of facilities and the provision of information necessary to bill customers."(26) But in the negotiations that led up to the decree, Bell expressly refused to agree to a decree that specified the physical facilities by which equal access would be provided.(27) It would not be for Justice Department lawyers, still less for a single judge, to take over supervision of the engineering departments at Bell Labs.
Thus the RBOCs were not required to rip out AT&T's existing connections after divestiture; functionally similar connections were provided to the new long distance carriers via "access tandems." Judge Greene agreed that "technically different" access(28) was acceptable so long as the functions ultimately provided were comparable. He expressly accepted the RBOCs' position that "equal access" be defined as access whose "overall quality in a particular area is equal within a reasonable range which is applicable to all carriers," and expressly declined to require absolutely identical technical quality, which would have meant identical values for loss, noise, echo, and probability of blocking. Unduly rigid demands for technical equality, Judge Greene concluded, "would necessitate substantial dismantling and reconstruction of local telephone networks without any real benefits either to the consuming public or to AT&T's intercity competitors."(29)
Similar issues arose with respect to the shared use of space and facilities. At divestiture, the RBOCs and AT&T still shared many facilities; their respective switches were sometimes located on adjacent floors of the same building, or even adjacent parts of the same room. The RBOCs were not, however, required to offer similar sharing arrangements to other carriers.(30) Indeed, Appendix B of the decree expressly states that no RBOC is required to allow "joint ownership or use of its switches," or "co-location in its building of the equipment of other carriers."(31)
It is equally clear that the decree was not written with an eye on competition *within* LATAs. To the contrary, the entire conception of the decree was that such competition was infeasible, that local telephone operations were a natural monopoly. Equal access obligations within the monopoly would have been useless or worse. "The local monopoly is a lawful one," Judge Greene thus declared in 1981.(32) This clean, bifurcated, economic model, of competition natural and desirable above the local exchange, monopoly natural and desirable within it, was undoubtedly elegant. It suffered from only a single defect: the model was wrong. All sorts of competition was possible within the local exchange. And with the smell of "equal access" in the air, local competitors would surely demand their part of it too.
Most obviously, as the decree itself fully recognized, competition was possible in the most local of all local telephone operations, on a customer's own premises. *That* part of the business had been handed over to AT&T. Or at least most of it had -- pay phones had been left with the RBOCs, but everything else had gone to AT&T. Or at least almost everything else -- Judge Greene had decided that RBOCs would be allowed to market (though not manufacture) CPE.(33) In due course, he would allow RBOCs into "information gateways"; the D.C. Circuit would then allow them into information services generally.(34) All of these businesses were at least partially competitive; and all could be served by RBOCs operating within the confines of individual LATAs. So, in a process more reminiscent of common law than consent decrees, Judge Greene gradually set about reinventing the equal access requirement from scratch.(35)....
1. See Section 1.3.1.
2. See Section 10.4.
3. See Section 11.7.
4. See Section 12.7.
5. See Sections 13.3.3-13.3.5.
6. See Section 14.5.
7. United States v. AT&T, 552 F. Supp. 131, 195 (D.D.C. 1982); see also United States v. AT&T, 524 F. Supp. 1336, 1353 (D.D.C. 1981).
8. See Chapter 6.
9. Peter Temin, The Fall of the Bell System: A Study in Pricing and Politics 257-261, 270-273 (1987). Drafts of the various decrees from the extended "quagmire" negotiations show repeated changes, counterproposals, and discussion regarding the equal access requirements. One of the key issues was whether the decree would specify the precise physical facilities at which the interexchange carriers would interconnect with the RBOC networks. Ultimately, the Department agreed with AT&T that equal access could be defined in terms of service rather than facilities.
10. United States v. AT&T, 552 F. Supp. at 142, 195-197, 209 n.327; see also Competitive Impact Statement at 26-27, United States v. Western Elec. Co., No. 82-0192 (D.D.C. Feb. 10, 1982).
11. Modification of Final Judgment section 11(A), cited in United States v. AT&T, 552 F. Supp. at 225, 227 (hereinafter Decree). Exchange access may include "any activity or function performed by a BOC in connection with the origination or termination of interexchange telecommunications." Id. Section IV(F), 552 F. Supp. at 228.
12. Decree Section IV(F), 552 F. Supp. at 228. See also Competitive Impact Statement at 32 (Feb. 10, 1982) ("The BOCs . . . must deliver interexchange traffic originating or terminating within an exchange area to a point or points within an exchange area designated by an interexchange carrier for the connection of its facilities with those of the BOC. This obligation includes the provision of all transmission facilities and any necessary routing facilities, including any necessary switching above end offices, to ensure the delivery to interexchange carriers of all the traffic destined to and from an exchange area.")
Although the definition of exchange access states that the interexchange carriers may establish a "point or points" of presence, it was understood that the RBOCs were required to provide access only from one point per LATA. See United States v. Western Elec. Co., 569 F. Supp. 990, 1027 n.192 (D.D.C. 1983) ("If the entire state were one LATA, the Operating Company would be under no obligation to provide equal access from more than one point in the state."); id. at 1004 n.62 ("the Operating Company may attempt to provide access to the local network for AT&T's competitors only from one point per LATA (i.e., one access tandem switch).") For example, in allowing Southern Bell to consolidate multiple SMSAs in the Southeast Florida LATA, the district court specifically conditioned its approval of the LATA on the basis that Southern Bell "would provide access within the LATA to as many points of presence as an intra-LATA carrier such as Microtel requests." United States v. Western Elec. Co., 569 F. Supp. at 1032 n.220, 1033 n.22l. This condition would not have been necessary if section IV(F) already required the RBOCs to provide access at multiple points per LATA.
13. Decree Section 11(A), app. B Para. A(l), 552 F. Supp. at 227, 232.
14. Id. Section 11(B), 552 F. Supp. at 227.
15. Those "characteristics" are defined to include "equal probability of blocking, based on reasonable traffic estimates supplied by each interexchange carrier." Id. Section 1V(F), 552 F. Supp. at 229.
16. Id. Section 11(A), 552 F. Supp. at 227. See also United States v. AT&T, 552 F. Supp. at 141 n.40 ("The Operating Companies must also provide access services to link their subscribers with companies providing information services.")
17. Information access is defined as:
the provision of specialized exchange telecommunications services by a RBOC in an exchange area in connection with the origination, termination, transmission, switching, forwarding or routing of telecommunications traffic to or from the facilities of a provider of information services. Such specialized exchange telecommunications services include, where necessary, the provision of network control signalling, answer supervision, automatic calling number identification, carrier access codes, testing and maintenance of facilities, and the provision of information necessary to bill customers.
Decree Section IV(1), 552 F. Supp. at 229. See United States v. AT&T, 552 F. Supp. at 196 n.268. For example, the Department indicated that "information access" could include "specialized local trunking" for information services reached by dialing a "976" number. Response of the United States to Public Comments on Proposed Modification of Final Judgment at 53, United States v. Western Elec. Co., No. 82- 0192 (D.D.C. May 20, 1982) (hereinafter Response to Comments on Proposed MFJ). In addition, "information access could include nondiscriminatory announcements to [BOC] customers of the recordings provided by the various programmers making use of the 976 service. Any information access must be arranged so that multiple vendors could be provided nondiscriminatory access to the local networking portion of the 976 offering." Id. at 54. Subsequently, the district court said it was authorizing the RBOCs to provide transmission and announcements for "976" services that fit the same description as the information access services already permitted. United States v. Western Elec. Co., 714 F. Supp. 1, 13 n.45 (D.D.C. 1988), rev'd in part, 900 F.2d 283 (D.C. Cir. 1990).
18. As discussed in section 11.7, the FCC has required the RBOCs to offer "comparably efficient interconnections" to their information service competitors. The district court has held that comparable, though not identical, access meets the decree's "equal" access requirements. United States v. Western Elec, Co., 569 F. Supp. 1057, 1063 (D.D.C. 1983) ("The Court . . . will not insist on absolute technical equality."); see also United States v. AT&T, 524 F. Supp. at 1360 ("absolute equality of access to essential facilities, without regard to the feasibility of such access or the burden it would impose upon the owner of the facilities, is not mandated by the antitrust laws"). Thus, by satisfying the FCC's requirements in this regard an RBOC will also satisfy the decree's.
19. Decree Sections 11(A), (B), 552 F. Supp. at 227. See also United States v. Western Elec. Co., 846 F.2d 1422, 1427 n.4 (D.C. Cir. 1988) ("This [nondiscrimination] prohibition extends with equal force to the seven Regional Holding Companies.")
20. Thus, entities in which the RBOCs hold noncontrolling minority positions are not subject to the equal access and nondiscrimination requirements. See, e.g., Joint Motion of the United States and US West, Inc., for Modification of the Enforcement Order at 3, United States v. Western Elec. Co., No. 82-0192 (D.D.C. 1991) ("The Department has interpreted the decree's definition of a 'BOC' to include those entities in which a BOC controls or possesses a direct or indirect ownership interest greater than 50 percent.")
21. Decree Section III, 552 F. Supp. at 228. AT&T is, however, enjoined from interfering with the RBOCs' compliance with the equal access provisions. Id. Section 1(C), 552 F. Supp. at 227; see also Competitive Impact Statement at 23 (Feb. 10, 1982). The district court rejected arguments that AT&T should be required to license to competing carriers and manufacturers the technical information necessary for interconnection with the RBOCs' local networks. United States v. AT&T, 552 F. Supp. at 176-177. The court held that it is sufficient that AT&T owe a duty to the RBOCs to provide them "with, inter alia, sufficient technical information to permit them to perform their exchange telecommunications and exchange access functions." Id. at 177 (citing Decree Section 1(A) (1), 552 F. Supp. at 226).
22. The Department urged the district court to approve a schedule for the conversion of offices for which the RBOCs received belated equal access requests. Memorandum of the United States Regarding BOC Schedules for Equal Access at 5, 33, United States v. Western Elec. Co., No. 82-0192 (D.D.C. Nov. 21, 1986). The court did not act on the Department's request until almost four years later, by which time the contested conversions had been completed. Opinion, United States v. Western Elec. Co., No. 82-0192 (D.D.C. May 8, 1990). It took the district court over two years to act on the Department's request for an enforcement order directing NYNEX to accelerate its completion of equal access. See Final Report of the United States Concerning BOC Schedules for Providing Equal Access in Response to MCI's Requests and Memorandum in Support of Motion for an Enforcement Order Requiring NYNEX to Accelerate Its Provision of Equal Access at 69, United States v. Western Elec. Co., No. 82-0192 (D.D.C. Jan. 29, 1988).
While the Department's enforcement motion was before the district court, the court denied an unrelated motion by NYNEX to build a transatlantic cable for carrying calls between the U.S. and Europe, while on the same day granting a motion to permit Pacific Telesis to invest in a company that owned the foreign half of a cable from Japan to the U.S. Compare Opinion, United States v. Western Elec. Co., No. 82-0192 (D.D.C. Feb. 13, 1989) (NYNEX PTAT decision); Opinion, United States v. Western Elec. Co., No. 82-0192 (D.D.C. Feb. 13, 1989) (Pacific Telesis IDC decision). The court did not state that NYNEX's failure to provide equal access was a factor in the decision. The court had previously stated, however, that it would take into account the RBOCs' equal access performance in deciding whether to grant waivers of the line of business restrictions, since "the diversion of capital and managerial resources in the pursuit of outside ventures may impede the implementation of equal access." United States v. Western Elec. Co., 592 F. Supp. 846, 860 (D.D.C. 1984).
23. Opinion at 6 n.5, 11 (May 8, 1990).
24. In approving the decree, the district court stated that the first "principle" of equal access is that "the Operating Companies should have latitude to provide access in the manner they deem most efficient." United States v. AT&T, 552 F. Supp. at 142 n.46. "[S]ince the Bell System network is both vast and complex, a variety of approaches will in all probability be necessary to achieve equal access. Imposition by the Court of a single procedure applicable to all areas and all interconnection requirements is likely to create inefficiencies and impose added costs on the Operating Companies without achieving superior results." Id. at 197. RBOCs have likewise been allowed discretion in entering contracts with others to assist in meeting equal access obligations. See, e.g., United States v. Western Elec. Co., 569 F. Supp. at 1010 n.95 (BOCs may use independent telephone companies to assist in providing equal access "provided that the relevant ITC makes a commitment to provide equal access to both the Bell and non-Bell exchanges that it then would serve").
25. The same principle has been adopted by the FCC respecting comparably efficient access afforded enhanced service providers. See Section 11.7.
26. Decree Section IV(F), 552 F. Supp. at 228.
27. See Temin, The Fall of the Bell System at 272-273.
28. United States v. Western Elec. Co., 569 F. Supp. at 1063.
29. Id. (footnote omitted). The court also noted that "[t]he Operating Companies are not responsible, of course, for correcting any quality deficiencies that may result from an interexchange carrier's own facilities." Id. at 1063 n.15.
30. See United States v. AT&T, 552 F. Supp. at 198 n.278.
31. Decree app. B para. C(1), 552 F. Supp. at 234.
32. United States v. AT&T, 524 F. Supp. at 1352 n.65.
33. See Chapter 7. Inside wiring presented a close question; it was not a natural monopoly (but see United States v. Western Elec. Co., 569 F. Supp. at 1129 ("In-place wiring . . . is as much a 'bottleneck' as are the subscriber access lines.")), yet even the Department believed the decree should permit the RBOCs to provide "at least the wiring which connects the RBOC's protection block with one or more pieces of customer premises equipment, e.g., a PBX." Response to Comments on Proposed MFJ at 48 (May 20, 1982). The Department noted that regulators would be free to prohibit the RBOCs from providing inside wiring or other "competitive services which fall within the ambit of exchange telecommunications." Id. at 47 n.*. The FCC has since detariffed inside wiring and made it a competitive market. See 10.5.
34. Decree Section 11(A), 552 F. Supp. at 227.
35. Judge Greene had warned the RBOCs in 1982 that the decree's "broad guarantee of equal treatment" would "acquire meaning only through implementation." United States v. AT&T, 552 F. Supp. at 196, 196 n.270.