by Michael K. Kellogg, John Thorne, and Peter W. Huber
PREFACE
1. AN INDUSTRY IN TRANSITION
1.1 Introduction
1.2 The Rise of the Bell System: Technology
1.2.1 Telephones and Wires
1.2.2 The Telephone Exchange
1.2.3 Interexchange Connections
1.2.4 The Development of Radio
1.3 The Rise of the Bell System: Regulation
1.3.1 Common Carriage
1.3.2 Regulation
1.3.3 Antitrust
1.3.4 The Separation of Radio and Telephony
1.3.5 Regulation After 1934
1.4 The Fall of the Bell System: Technology
1.4.1 Broadband Communications
1.4.2 The New Switch
1.5 The Fall of the Bell System: Regulation
1.5.1 Customer Premises Equipment (CPE)
1.5.2 Enhanced Services
1.5.3 Long Distance
1.5.4 Mobile Services
1.6 The Fall of the Bell System: Antitrust
1.6.1 Customer Premises Equipment
1.6.2 Enhanced Services
1.6.3 Long Distance
1.7 The Fall of the Bell System: Divestiture
1.7.1 Customer Premises Equipment
1.7.2 Enhanced Services
1.7.3 Long Distance
1.7.4 Mobile Services
1.7.5 The Divestiture That Wasn't
1.8 The Network of the Future: Technology
1.9 The Network of the Future: Regulation
1.9.1 The Exclusive Franchise
1.9.2 The Quarantine
1.9.3 Pricing Regulation
1.10 The End of State Regulation
1.11 Conclusion
2. THE POWERS OF THE FCC
2.1 Introduction
A. Regulation Prior to 1934
2.2 1877-1910
2.3 1910-1934
2.4 The Shreveport Rate Case
2.5 Smith v. Illinois Bell Telephone Co.
2.6 Genesis of the 1934 Act
B. The Authority of the Federal Communications
Commission
2.7 The Jurisdiction of the FCC
2.7.1 FCC Authority
2.7.2 State Authority
2.7.3 Dividing the Indivisible
2.8 Preemption in the Era of Uncontested
Monopoly
2.9 Preemption Prior to Louisiana Public Service
Commission
2.10 Louisiana Public Service Commission
2.11 Preemption After Louisiana PSC
C. The Federal Communications Act of 1934
2.12 The Obligations of Common Carriers
2.12.1 Service on Demand
2.12.2 At Tariffed Rates
2.12.3 Just and Reasonable Rates
2.12.4 Without Unreasonable Discrimination
2.12.5 Private Contracts
2.13 The Powers of the FCC
2.13.1 FCC Control Over Competition
2.13.2 FCC Procedures for Reviewing Rates
2.13.3 FCC Prescription of Rates
2.14 Industry Oversight Provisions
2.14.1 Transactions
2.14.2 Internal Management
2.14.3 Depreciation
2.14.4 Mergers and Consolidations
2.15 Procedural and Administrative Provisions
2.15.1 Review of FCC Decisions
2.15.2 Enforcement
2.15.3 Private Rights of Action
3. ANTITRUST
3.1 Introduction
3.2 Principles
3.2.1 Essential Facilities
3.2.2 Tying
3.2.3 "Leveraging" and Refusals to Deal
3.2.4 Predatory Pricing and Cross-Subsidy
3.2.5 Transfer Pricing and Self Dealing
3.3 The Implications of Regulation
3.3.1 Antitrust Abuse of the Regulatory Process
3.3.2 General Immunity
3.3.3 Primary Jurisdiction
3.3.4 Regulation as a "Fact of Market Life"
3.3.5 The Filed Tariff Doctrine
3.3.6 State Action
3.3.7 Tenth Amendment
3.4 Network Services: Access, Interconnection,
and Essential Facilities
3.4.1 MCI Communications Corp. v. AT&T
3.4.2 Southern Pacific Communications
Co. v. AT&T
3.4.3 Mid-Texas Communications Systems,
Inc. v. AT&T
3.4.4 Intercity Aspects of the 1974 Federal
Case
3.4.5 Coin Telephone Cases
3.4.6 Discussion
3.5 Network Services: Cross-Subsidy and
Predatory Pricing
3.5.1 MCI Communications Corp. v. AT&T
3.5.2 Southern Pacific Communications Co. v.
AT&T
3.5.3 Pricing Aspects of the 1974 Federal Case
3.5.4 Discussion
3.6 Customer Premises Equipment
3.6.1 Essential Communications Systems, Inc. v.
AT&T
3.6.2 Northeastern Telephone Co. v. AT&T
3.6.3 Litton Systems, Inc. v. AT&T
3.6.4 Subsequent Cases
3.6.5 CPE Aspects of the 1974 Federal Case
3.6.6 Discussion
3.7 Central-Office Equipment
3.7.1 ITT v. GTE
3.7.2 Central-Office Equipment Aspects of the
1974 Federal Case
3.7.3 Discussion
3.8 Information Services
3.8.1 Broadcast
3.8.2 Wire Services
3.8.3 Movies
3.8.4 Cable Television
3.8.5 Airline Reservation Services
3.8.6 Directories
3.8.7 Electronic Publishing
3.8.8 Software
3.9 Radio Services
4. RESTRUCTURING THE BELL SYSTEM
4.1 Introduction
4.2 The 1914 Decree
4.3 The 1956 Decree
4.4 The 1982 Decree: Litigation
4.5 The 1982 Decree: Entry of the Decree
4.6 The 1982 Decree: Overview
4.7 Bellcore
4.8 The Creation of LATAs
4.9 The Transfer of Assets
4.9.1 "Sufficient Facilities"
4.9.2 Official Service Circuits
4.9.3 Equal Access Conversion Costs
4.9.4 Customer Premises Equipment, Inside
Wiring, and Directories
4.9.5 Mobile Assets
4.9.6 Contingent Liabilities
4.9.7 Patents and Technical Information
4.9.8 Labor Relations
4.9.9 Bell Name and Logo
4.10 AT&T Unbound
4.10.1 Electronic Publishing
4.10.2 Patent Licensing
4.10.3 Bypass
5. EQUAL ACCESS UNDER THE DIVESTITURE DECREE
5.1 Introduction
5.2 Equality
5.3 Equality Redefined
5.3.1 Pay Phones
5.3.2 Customer Premises Equipment (CPE)
5.3.3 IntraLATA Access
5.3.4 Other Carriers
5.4 Pricing
5.5 Equal Access to Information
5.5.1 Presubscription
5.5.2 700, 800, and 900 Services
5.5.3 Operator Services
5.5.4 Billing Services
5.5.5 Signaling
6. THE LINE OF BUSINESS RESTRICTIONS
6.1 Introduction
6.2 "BOCs" and "Affiliated Enterprises"
6.3 Interexchange Telecommunications Services
6.3.1 Interexchange
6.3.2 Telecommunications
6.3.3 Services
6.4 Information Services
6.5 Manufacturing Telecommunications Equipment
6.5.1 Customer Premises Equipment (CPE)
6.5.2 What Is CPE?
6.5.3 "Providing" CPE
6.5.4 Dedicated Facilities
6.5.5 "Manufacturing"
6.6 Other Businesses
6.7 Implied Restrictions
6.8 Summary
7. INTERPRETING, ENFORCING, AND MODIFYING THE DIVESTITURE DECREE
7.1 Introduction
7.2 Interpretation
7.3 Enforcement
7.4 Standards and Procedures for Modification
7.4.1 Common Law Standards
7.4.2 Standards in the Decree
7.4.3 The Linchpin: Changed Circumstances
7.4.4 Procedures
7.5 Modification Under Section VIII(C)
7.5.1 Promoting Competition
7.5.2 Regulatory Safeguards
7.5.3 Cross-Subsidy
7.5.4 Universal Service
7.6 Section VIII(C) Litigation After April 3, 1990
7.7 Modification Under Section VII
7.7.1 Meaning of the Standard
7.7.2 Applying the Standard
7.8 Market Power in Perspective
7.9 Conclusion
8. THE GTE DECREE
8.1 Introduction
8.2 GTE Corporation: A Brief Overview
8.3 The Government's Antitrust Suit
8.4 The GTE Decree
8.4.1 Structural Separation
8.4.2 The Local Exchange Quarantine
8.4.3 The Information Services Quarantine
8.4.4 Equal Access
8.4.5 Enforcement Provisions
8.4.6 Hawaii
8.5 Subsequent Modifications
8.6 The GTE Experience
9. PRICING
9.1 "Natural Monopoly" and Price Regulation
9.2 Rate-of-Return Regulation. . . and the
Alternative
9.3 Separations and Cost Accounting
9.3.1 Federal-State Separations
9.3.2 Dual Authority Under the Communications
Act of 1934
9.3.3 Separations by Cost Category
9.3.4 Allocating Costs to Services
9.3.5 The Joint Cost Order
9.3.6 Common Costs
9.3.7 Affiliate Transactions
9.3.8 The Uniform System of Accounts
9.3.9 Enforcement Mechanisms
9.3.10 Foxes and Chickens
9.4 The Rise of a Subsidy
9.5 Muddling into Competition
9.6 Access Charges
9.6.1 Detariffing Customer Premises Equipment
9.6.2 Freezing Interstate Contributions to
Nontraffic Sensitive Costs
9.6.3 The Genesis of Access Charges
9.6.4 The Subscriber Line Charge
9.6.5 The Centrex Line Charge
9.6.6 The Private Line Charge
9.6.7 The Carrier Common Line Charge
9.6.8 The AT&T Premium
9.6.9 Detariffing Long-Distance Services
9.7 More Subsidies
9.8 Depreciation in a Competitive Environment
9.9 Price Caps for Local Exchange Carriers
9.10 Conclusion
10. TELECOMMUNICATIONS EQUIPMENT
10.1 Introduction
10.2 The Evolution of the Network
10.3 Development of the Equipment Monopoly
10.3.1 Exclusive Dealing
10.3.2 The 1956 Suit
10.3.3 FCC Efforts at Containment
10.4 The Transition to a Competitive Market:
Customer Premises Equipment
10.4.1 The First Stirrings of Competition
10.4.2 Carterphone
10.4.3 "Protective Connecting Arrangements"
10.4.4 Part 68
10.5 CPE Unbundled
10.6 Structural Separation
10.6.1 Extending Structural Separation to
the BOCs
10.6.2 The Resale and Sales Agency Orders
10.7 CPE Unbound
10.7.1 Structural Relief for AT&T
10.7.2 Structural Relief for the BOCs
10.7.3 Nonstructural Safeguards
(i) Disclosure of Network Information
(ii) CPNI
(iii) Nondiscriminatory Access to the
Network
(iv) Sales Agency Agreements
10.7.4 The Independents
10.7.5 Preemption
10.8 The Competitive Equipment Market
10.9 Equipment and Service
11. ENHANCED SERVICES
11.1 Introduction
11.2 Computer I
11.3 Computer II
11.4 The Collapse of Computer II
11.4.1 Custom Calling
11.4.2 Protocol Conversion
11.5 Structural Integration
11.6 The Open Network
11.6.1 The Commission's Model
11.6.2 The BOCs' ONA Plans
11.6.3 Initial Offerings
11.7 Comparably Efficient Interconnection
11.7.1 Interconnection
11.7.2 Collocation
11.7.3 Basic Interconnection Charge
11.7.4 Access Charges for Enhanced
Service Providers
11.8 Nonstructural Safeguards
11.8.1 Installation and Maintenance
11.8.2 CPNI
11.8.3 Network Disclosure
11.9 Scope of the Proceedings
11.9.1 Interim Relief
11.9.2 AT&T
11.9.3 Independents
11.9.4 Preemption
11.9.5 The Ninth Circuit's Decision
11.9.6 The FCC's Response on Remand
11.10 Outlook
12. LONG-DISTANCE SERVICE
12.1 Introduction
12.2 The Advent of Regulation
12.3 Licenses and Market Entry
12.3.1 Technological Advances
12.3.2 Microwave
12.3.3 Satellite
12.3.4 Cable and Wireless
12.4 License Conditions and the Right to Compete
12.5 The Right to Interconnect
12.5.1 Execunet I
12.5.2 Execunet II
12.6 The Right to Resell
12.7 Equal Access Regulation by the FCC
12.7.1 Equal Access for Carriers
12.7.2 Equal Access for Consumers
12.7.3 Equal Access for "800" and "900" Services
12.7.4 Equal Access for Calling Cards
12.8 Dominant and Nondominant Carriers
12.8.1 Regulation of Nondominant Carriers
12.8.2 Regulation of Dominant Carriers
12.9 Price-Cap Regulation
12.10 From Public Tariffs to Private Contracts
12.10.1 AT&T and the One-Customer Tariff
12.10.2 Tariff 15
12.10.3 Tariff 16
12.10.4 Contract Carriage for Business Services
12.11 Beyond Regulation
13. MOBILE TELEPHONY
13.1 Introduction
13.2 Regulatory Jurisdiction
13.3 Competitive Policies
13.3.1 Spectrum Allocation
13.3.2 Separate Subsidiaries
13.3.3 Interconnection with the Landline Network
13.3.4 Interconnection Tariffs
13.3.5 Interconnection with Mobile Switches
13.3.6 Line of Business Restrictions
13.3.7 Industry Oversight
13.3.8 Rate Regulation
13.4 Industry Structure
13.5 Service Areas
13.5.1 FCC Licensing
13.5.2 Considerations Under the Divestiture
Decree
13.6 Beyond the Divestiture Decree
14. TELEPHONY AND CABLE TELEVISION
14.1 Introduction
14.2 Converging Markets
14.3 FCC Jurisdiction
14.4 The FCC's 1970 Cross-Ownership Ban
14.5 Pole Attachments
14.6 The 1984 Cable Act
14.7 Impact of the Divestiture Decree on Telco
Operation of Cable Systems
14.8 Telcos Providing Cable Services
14.8.1 Telco Ownership of Cable Systems
14.8.2 Telcos as Facilities Providers
14.9 Cable Companies Providing Telephone Services
14.10 Reconsideration of the Cross-Ownership Ban
14.11 First Amendment Considerations
15. INTERNATIONAL ISSUES
15.1 Introduction
15.2 Voice and Record Carriage
15.2.1 AT&T and Western Union
15.2.2 Converging Technology
15.2.3 International Gateways
15.2.4 The Record Carrier Competition Act
of 1981
15.2.5 Eliminating the Voice/Record Distinction
15.3 Transmission Media
15.3.1 Cable Facilities
15.3.2 Satellite Facilities: Comsat
15.3.3 Independent Satellite Networks
15.4 Wholesale, Retail, and Resale
15.4.1 Resale and Shared Use
15.4.2 Comsat's Status as a Wholesaler
15.5 Price Regulation
15.5.1 Dominant Carriers and Price Caps
15.5.2 Accounting Rates
15.5.3 Enhanced Services in the International
Arena
15.6 Deregulation Initiatives in Foreign Countries
15.6.1 United Kingdom
15.6.2 Japan
15.6.3 Germany
15.6.4 The European Community
15.7 International Regulation and Standard-Setting
16. PRIVACY
16.1 Introduction
16.2 The Right to Privacy
16.3 The Privacy of Telecommunications
16.3.1 Pre-1968
16.3.2 The Wiretap Act of 1968
16.4 The Electronic Communications Privacy
Act of 1986
16.5 Telephone Harassment
16.5.1 Telephone Harassment
16.5.2 Federal Constitutional Challenges
16.6 Telephone Solicitation
16.7 Dial-A-Porn
16.7.1 Government Attempts to Regulate
16.7.2 Congress's Absolute Ban and the
Sable Decision
16.7.3 Post-Sable: Return to Regulating Access
16.7.4 Phone Company Restrictions
16.8 Caller ID
16.9 Privacy and the First Amendment: A
Synthesis Based on Consent
16.9.1 Identification and Screening
16.9.2 Time Shifting
16.9.3 The Uncrowded Theater
APPENDICES GLOSSARY TABLE OF CASES TABLE OF SECONDARY AUTHORITIES INDEX