August 11, 1999
In the Matter of Petition of Ameritech Corporation for Forbearance from Enforcement of Section 275(a) if the Communications Act, as Amended, CC Docket No. 98-65, Memorandum Opinion and Order.
There are quite a few problems with this Order, both in terms of what it says and what it does not say. For starters, the Order misinterprets and misapplies section 10's public interest prong by shifting an unsubstantiated burden to the petitioner and applying the wrong standard. Specifically, the item says that in order to meet this forbearance criterion (section 10(a)(3)), a petitioner must explain how the benefits of a statutory provision can be attained in the event of forbearance.(1) As I have asserted in prior statements, the language of section 10 places on the FCC a greater burden to demonstrate that all three prongs of the forbearance test are or are not satisfied, whether it be a rule or a statutory provision.(2) The majority apparently now believes that it can summarily dismiss forbearance petitions, with mere passing reference to only one of the congressionally mandated prongs of analysis. It makes no effort to explain the benefits of section 275(a). Instead, the majority ignores the public interest benefits of forbearance asserted by Ameritech, fails to balance them against the purpose of section 275(a) and invents a new public interest principle.(3)
This new principle, suggested by the alarm industry, would recognize that we are dealing with an act of Congress passed a relatively short time ago (1996) which sunsets a little more than a year from now. It would require that Ameritech show that there are "new or unanticipated circumstance[s] that might have persuaded Congress to adopt an earlier sunset."(4) Yet, nothing in the text or legislative history of section 10 requires or suggests "changed circumstances" as a prerequisite to forbearance of a statutory provision. Nor has the Commission ever employed this standard for denying forbearance and the item cites none. So, where does this new standard come from?
Apparent Constitutional Concerns Are Not A Basis For Failing To Follow Congressional Direction.
AICC argues that failure to read in a requirement that circumstances must be shown to have changed before forbearing from a statutory provision would constitute an unconstitutional delegation of authority to the FCC. Perhaps out of this concern - and I can only surmise since it is not addressed - the Order summarily dismisses the petition to forbear from a statutory provision, stating flatly that nothing has changed since its adoption. I, too, find something disquieting about Congress delegating broad authority to an independent agency to sweep away a legislative act, particularly where little has changed since the time the legislative act was consummated. But, my discomfort is no greater than that I feel with respect to the extraordinarily broad authority we regularly invoke to promulgate rules or expand regulatory coverage beyond the express terms of statutes. Moreover, regardless of our constitutional concerns with the statute, we are duty bound to comply with clear congressional directives. (5)
Based on my brief review of precedent in this area, I believe that it is quite questionable that a court would find section 10 to be an unconstitutional delegation of authority, or otherwise contravene the separation of powers, under the long line of applicable judicial precedent. In order to avoid a delegation infirmity, Congress need only set out an "intelligible principle to which the person or body authorized [to act] is directed to conform. . ."(6) With respect to section 10, Congress has provided a three-prong analysis to guide our forbearance decisions. And with respect to the final "public interest" finding, Congress has offered specific guidance as to the things that "shall" be taken into consideration. Specifically, Congress commands the Commission to consider whether forbearance from enforcing the provision or regulation will promote competitive market conditions, including the extent to which such forbearance will enhance competition among providers of telecommunications services. 47 U.S.C. § 160(b). If the Commission determines that forbearance will promote competition among providers of telecommunications services, that determination may be the basis for a Commission finding that forbearance is in the public interest.
In my attempt here to defend section 10 from this constitutional attack by AICC, which the majority does not do, I cannot resist making the observation that if section 10 is constitutionally suspect on this basis, many of the other standards presently applied to justify our regulatory actions are as well. For example, the "public interest, convenience and necessity" standard is unbounded yet has been upheld against constitutional attack. See, e.g., FCC v. Pottsville Broadcasting Co., 309 U.S. 134, 138 (1940); National Broadcasting Co. v. United States, 319 U.S. 190 (1943). The Commission has also reached for "ancillary jurisdiction" or other broad "necessary and proper" delegations as a basis for regulating the cable industry and, more recently, asserted such plenary power in an unconstrained manner to extend coverage of section 255 to non-telecommunications services and the 1996 Act to private building owners and managers. I personally have never fully agreed with the courts' apparent sanctioning of such broad grants, but such decisions are the law. See, e.g., Texas Office of Public Utility Counsel v. FCC, 1999 WL 556461 (5th Cir. 1999) (holding that section 4(i) of the Act permits support of non- telecommunications carriers providing internet access and internal connections to schools and libraries as "necessary to fulfill [the Act's] primary directives.")
I am disturbed to note, however, that broad grants of authority to impose new regulations often proceed with little hesitation, but in the application of a broad grant to deregulate like section 10, we suddenly (apparently) give in to a concern about unconstitutional delegations of authority. Moreover, I disagree that the Commission can ignore a congressional directive because a party has argued that such directive might be unconstitutional. Nor do I believe it is free to import additional criterion, which are not necessary to cure any potential constitutional infirmity. But, ironically, this Order short shrifts the congressionally crafted "intelligible principles" in section 10. That is, arguably the allegiant application of the three-prong test set out in section 10 is essential in order not to usurp unconstrained legislative power which might give rise to separation of power concerns.
Yet, here (as we have done before over my objections), the item summarily dismisses a properly presented and well-supported forbearance petition, resting exclusively on only one of the three guiding principles set out by Congress - as applied the apparently broad, catch-all public interest prong. More disturbingly, as noted above, the application of that prong in this case fails to take into account the specific direction to consider the promotion of competition when evaluating this basis of decision. Rather, the item perpetuates an open-ended notion of "public interest," to import (at the eleventh hour) new and novel additional requirements.
There is no attempt to even find "changed circumstances" or apply this new test in this Order. Even if "changed circumstances" were relevant, can we not point to the circumstances facing Ameritech and SBC in their merger (in which the alarm industry is requesting that we require divestiture of all of Ameritech's alarm monitoring assets because SBC is not grandfathered)? Can we not rely on the implementation on our non-structural safeguards or the other safeguards that apply to other LECs in section 275? Can not we point to the fact that the Commission's own interpretation of section 275, after a loss in the D.C. Circuit, has changed, essentially putting a halt to any expansion by Ameritech's alarm monitoring affiliate? No, the burden is shifted to Ameritech.
Sections 10 and 275(a) Can Coexist.
By its terms, section 10 unequivocally can be applied to section 275. Forbearance must be applied to both Commission regulations and to provisions of the Communications Act, including those added by the 1996 Act. Indeed, the statute itself in section 10(d) lists the provisions for which forbearance is not available (excluding section 275): "the Commission may not forbear from applying the requirements of section 251(c) or 271 . . . until it determines that those requirements have been fully implemented." 47 U.S.C. § 160(d). The Commission has already forborne from section 272 of the 1996 Act in connection with RBOC provision of
E-911(7) and reverse directory services.(8) Even where the Commission refused to forbear from section 254(g), it never mentioned that forbearance would be impossible in view of the simultaneous enactment of that provision and section 10.
I would agree that many of the points that argue for forbearance (some of which I set forth below) were probably the case at the time section 275 was adopted. True enough, but one answer is simply because at the same time 275 was adopted, so was section 10 and we are duty-bound to apply it, without regard to alleged constitutional concerns. A second answer, however, is that Congress set out a comprehensive scheme in the 1996 Act which required many complex judgments that it did not believe it could responsibly make without thorough analysis. Also, there are a lot of deals and compromises that get into large pieces of legislation like this. Consequently, Congress concurrently established certain bars or limitations as starting points and delegated to the Commission the job of carefully evaluating such provisions to see if less regulatory devices existed to render unnecessary blanket bans against certain activity. Indeed, the advantage of forbearance is that it requires case-by-case evaluation, where a flat rule has dangers of being over-inclusive. Congress may have wished to establish a default presumption that barred entry, which could be rebutted through forbearance in a certain case.
It is also important to observe that Congress understood that it could not possibly sort through the panoply of FCC regulations and antitrust doctrine that might assuage some of its concerns with respect to competition. Instead, it may have chosen to direct the FCC to make such an assessment and if convinced, following its "intelligible principle," that if the provision was unnecessary, it could forbear. Therefore, in concluding that there must be a peaceful coexistence of sections 10 and 275(a), the original intent of section 275 must be fairly assessed.
Understanding Section 275(A) And Applying Section 10 To It.
The text of section 275(a) does not help explain why the RBOCs are banned from the alarm monitoring business for five years. The conference report and most floor statements, while attempting to explain the scope of the grandfathering provision that applies to Ameritech, does not discuss why the growth of Ameritech's alarm business is restricted in certain ways. See S. Conf. Rep. 230, 104th Cong., 2nd Sess. 348-50 (1996); see also Alarm Industry Communications Comm. v. FCC, 131 F.3d 1066, 1071 (D.C. Cir. 1997). However, when you go back a little further to try to figure out how Congress was going to handle things that grew out of the line of business restrictions originally imposed by the MFJ, you discover two principal concerns: (1) concern that the incumbent could leverage its control over the "local bottleneck" telephone infrastructure to gain a competitive advantage in providing alarm monitoring services; and (2) concern by the "small business dominated alarm industry" that big companies like the RBOCs will harm competition and upset the "level playing field." See H.R. Rep. No. 204(i), 104th Cong., 1st Sess. 237-38 (1995); see also 141 Cong. Rec. S8355-56 (June 14, 1995) (statement by Senator Harkin).
Then, when one faithfully applies the prongs of section 10, it is difficult to conclude that section 275(a)(1) is necessary to ensure just and reasonable, nondiscriminatory rates, or (2) is necessary to protect consumers from harm, or (3) that it is inconsistent with the public interest to forebear, unless we want to, with full disclosure, continue the "public interest," as Senator Harkin saw it, in protecting this competitive "small business" industry. We must also ask ourselves whether there are other alternatives that could shape the implementation of section 275(a) in a way that best matches competitive and regulatory realities of the day. For example, we should have explored relief for Ameritech that is prospective only so that any alleged section 275 violations could be adjudicated and proper sanctions could be imposed for such violations (if found). Also, we should have explored out-of-region relief, which would address the Congress' and the alarm industry's concerns about bottleneck facilities. This approach would also show that section 10 does in fact contain limiting principles and can be applied in a way to avoid alleged unconstitutional delegation problems.
If we had conducted a proper section 10 analysis, I think it might have proved sufficiently persuasive to grant, at least in part, the petition. Perhaps the majority would not have so found. But they must, I believe, reach that conclusion only after a full and faithful application of the standards set forth by Congress, which they have failed to do here. Moreover, I am disheartened by the degree to which we express reluctance to employ broad grants for deregulatory purposes, but express little concern when such grants are invoked for adoption or extension of new rules. For these reasons, I respectfully dissent.
1 SeePolicy and Rules Concerning the Interstate Interexchange Marketplace, CC Docket No. 96-61, Memorandum Opinion and Order, 14 FCC Rcd 391 (1998). The item fails to note that, even if this is the burden placed on proponents of forbearance, this principle was established in a Commission Order released more than seven months after Ameritech filed its petition. Ameritech would not have had a clue that this is what its petition needed to show. The item also fails to note that the Order is subject to judicial appeal and petitions for reconsideration.
2 See Memorandum Opinion and Order and Notice of Proposed Rulemaking, Personal Communications Industry Association's Broadband Personal Communications Services Alliance's Petition For Forbearance For Broadband Personal Communications Services, 13 FCC Rcd 16857 (1998 Statement of Commissioner Powell, dissenting in part).
3 Nor does the item really address what the intended benefits of the alarm monitoring prohibition were. I will address this below. I note further that the item makes no attempt whatsoever to carry out the mandate of section10(b) considering whether forbearance will promote competitive market conditions, including the extent to which forbearance will enhance competition among providers of telecommunications services.
4 See Order at ¶ 9; see also Comments of the Alarm Industry Communications Committee (AICC) at 5-8. A concern about the short time left in the life of this statutory provision also would have led me to question why we would grant such relief if it was coming relatively soon through operation of the sunset. However, I must point out that when Ameritech filed its petition, May 13, 1998, it was less than half-way through the life of section 275(a). A year plus 90 days later we are telling Ameritech to wait it out until February 2001. This remaining time period in a highly competitive industry like alarm monitoring is an eternity to companies seeking to grow their business and provide their public shareholders sustained value in a volatile market.
5 See cf. Department of Justice Appropriation Authorization Act, Fiscal Year 1980, Pub. L. No. 96-132, §21(a) 93 Stat. 1049 (requiring Attorney General to report to each House of Congress a determination that the Department of Justice "will refrain from defending any provision of law enacted by Congress . . . because of the position of the Department that such provision is not constitutional"). Congress appears to have been clear that it generally expects the constitutionality of its laws to be defended, such that it may require notification from agencies if they do not intend to meet this expectation.
6 J.W.Hampton, Jr., & Co.v. United States, 276 U.S. 394, 409 (1928). But for a recent case in the D.C. Circuit released after AICC filed its comments (see American Trucking Ass'n, Inc. v. EPA, 175 F.3d 1027 (D.C. Cir. 1999)), the courts have generally avoided striking down acts of Congress or their implementation by administrative agencies under the non-delegation doctrine. See Mistretta v. United States, 488 U.S. 361, 372 (1989) (there is "a practical understanding that in our increasingly complex society, replete with ever changing and more technical problems, Congress simply cannot do its job absent an ability to delegate power under broad general directives."); see also id. at 416 (Scalia, J. dissenting and noting that the Supreme Court has "almost never felt qualified to second-guess Congress regarding the permissible degree of policy judgment that can be left to those executing or applying the law.") In fact, the Court has held in only two cases that a statue amounted to an unconstitutional delegation of legislative authority, and this was over fifty years ago. See Panama Refining Co. v. Ryan, 293 U.S. 388 (1935) (holding that a provision of the National Industrial Recovery Act was an unconstitutional delegation because it allowed the President to exercise unfettered discretion to determine policy as to the transportation of excess oil; the statute failed to articulate a proper standard to govern the President's actions).
In the other case from 1935, which AICC cites, A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495 (1935), the Court held that another provision of the National Industrial Recovery Act was unconstitutional because it once again provided the President with the ability to legislate without proper congressional guidance or an "intelligible principle." In Schechter, the President approved codes of fair competition that were developed by the industry. Congress had no part in the development of these codes, which had the force of law. The Court faulted this code-making process for creating a private delegation where an industry was, in essence, making law. I read Schechter as generally standing for the proposition that Congress may not delegate unfettered lawmaking authority to private parties, which section 10 of the Communications Act surely does not do.
AICC also cites Loving v. United States, 517 U.S. 748 (1996), which repeats the general rule that Congress must also "lay down by legislative act an intelligible principle to which the person or body authorized to [act] is directed to conform." Id. at 771 (quoting J.W. Hampton, 276 U.S. at 409). The Court in Loving said that "the intelligible-principle rule seeks to enforce the understanding that Congress may not delegate the power to make laws and so may delegate no more than the authority to make policies and rules that implement its statutes. Id. (citation omitted); see also AICC comments at n.4. However, in that case cited by AICC, the Court upheld the alleged delegation under the intelligible-principle rule, noting further that, since 1935, it has upheld, without exception, delegations under standards phrased in "sweeping terms." Id. (citing National Broadcasting Co. v. United States, 319 U.S. 190 (1943) (upholding delegation to the Federal Communications Commission to regulate radio broadcasting according to "public interest, convenience, or necessity")).
7 See Bell Operating Companies Petitions for Forbearance from the Application of Section 272 of the Communications Act of 1934, As Amended, to Certain Activities, CC Docket No. 96-149, Memorandum Opinion and Order, 13 FCC Rcd 2627 (1998). In the Order, the Common Carrier Bureau granted the petitions of BellSouth and other Bell Operating Companies, pursuant to section 10 of the Communications Act, for forbearance from the application of the separate affiliate requirements of section 272 to their E911 services and to BellSouth's reverse search directory assistance services.
8 See Nevada Bell, Pacific Bell and Southwestern Bell Telephone Company Petition for Forbearance from the Application of Section 272 of the Communications Act of 1934, As Amended, to Reverse Search Services, CC Docket No. 98-193, Memorandum Opinion and Order, 1999 WL 198878 (Apr. 9, 1999). In the Order, the Common Carrier Bureau granted the petitions
of Nevada Bell, Pacific Bell, and Southwestern Bell Telephone Companies for forbearance from the application of section 272 of the Communications Act of 1934, as amended, to their electronic reverse directory services.
8 See Nevada Bell, Pacific Bell and Southwestern Bell Telephone Company Petition for Forbearance from the Application of Section 272 of the Communications Act of 1934, As Amended, to Reverse Search Services, CC Docket No. 98-193, Memorandum Opinion and Order, 1999 WL 198878 (Apr. 9, 1999). In the Order, the Common Carrier Bureau granted the petitions of Nevada Bell, Pacific Bell, and Southwestern Bell Telephone Companies for forbearance from the application of section 272 of the Communications Act of 1934, as amended, to their electronic reverse directory services.