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UNITED STATES TRANSMISSION SYS. v. AT&T

March 11, 1983

UNITED STATES TRANSMISSION SYSTEMS, INC., Plaintiff,
v.
AMERICAN TELEPHONE AND TELEGRAPH COMPANY; NEW ENGLAND TELEPHONE & TELEGRAPH COMPANY; NEW YORK TELEPHONE COMPANY; NEW JERSEY BELL TELEPHONE COMPANY; THE BELL TELEPHONE COMPANY OF PENNSYLVANIA; THE DIAMOND STATE TELEPHONE COMPANY; THE CHESAPEAKE AND POTOMAC TELEPHONE COMPANY; THE CHESAPEAKE AND POTOMAC TELEPHONE COMPANY OF MARYLAND; THE CHESAPEAKE AND POTOMAC TELEPHONE COMPANY OF VIRGINIA; SOUTHERN BELL TELEPHONE AND TELEGRAPH COMPANY; SOUTH CENTRAL BELL TELEPHONE COMPANY; THE OHIO BELL TELEPHONE COMPANY; CINCINNATI BELL INC.; MICHIGAN BELL TELEPHONE COMPANY; INDIANA BELL TELEPHONE COMPANY, INCORPORATED; WISCONSIN TELEPHONE COMPANY; ILLINOIS BELL TELEPHONE COMPANY; NORTHWESTERN BELL TELEPHONE COMPANY; SOUTHWESTERN BELL TELEPHONE COMPANY; THE MOUNTAIN STATES TELEPHONE AND TELEGRAPH COMPANY; THE PACIFIC TELEPHONE AND TELEGRAPH COMPANY; SOUTHERN NEW ENGLAND TELEPHONE COMPANY; BELL TELEPHONE CO. OF NEVADA, Defendants.


SWEET


The opinion of the court was delivered by: SWEET

SWEET, D.J.

Defendants American Telephone and Telegraph Company ("AT&T") and twenty-two of its twenty-four operating companies have moved pursuant to Fed.R.Civ.P. 12(b)(1) and 12(b)(6) to dismiss the complaint of plaintiff United States Transmissions Systems, Inc. ("USTS") alleging violations of sections 1 and 2 of the Sherman Act 15 U.S.C. §§ 1 & 2 and sections 201(b) and 202 of the Communications Act of 1934, 47 U.S.C. §§ 201(b) and 202 and pursuant to Fed.R.Civ.P. 56(b) for partial summary judgment. For the reasons set forth below, the motion to dismiss will be denied and the motion for partial summary judgment will be granted. *fn1"

 Background

 This motion involves an initial skirmish between AT&T and one of its many attackers in the intricate battle for new rights, ratios and practices in the telecommunications industry. Here USTS seeks to recover monetary damages for past practices alleged to constitute a Sherman Act violation and injunctive relief against present practices relating principally to AT&T's ENFIA rates and services. ENFIA is an acronym for Exchange Network Facilities Interstate Access, which are the facilities that local telephone companies provide to USTS and other companies that offer interstate long distance services. *fn2" USTS claims that the ENFIA rates and services constitute an unreasonable restraint of trade in violation of section 1, and that AT&T along with its local operating companies have attempted to monopolize monopolized, and conspired to monopolize the market for long distance telephone service in violation of section 2.

 The motion to dismiss is not directed to the merits of USTS's claim but is based on AT&T's claim of implied immunity, namely, that the conduct in issue here is immune from the antitrust laws because it has been approved by the Federal Communications Commission ("FCC") and remains the subject of FCC regulation. AT&T also seeks a dismissal of certain claims as a consequence of a release executed by the parent of USTS.

 The Parties

 USTS is a Delaware corporation with its principal place of business in New Jersey. Its common stock is wholly owned, through two intervening subsidiaries, by International Telephone and Telegraph Corporation ("ITT"). USTS is a common carrier of telecommunication services and offers a long distance telephone service known as "City Call" which is competitive with AT&T's long distance services.

 In the words of our Court of Appeals, AT&T is "a mammoth and legendary enterprise." Northeastern Telephone Co. v. AT&T, 651 F.2d 76, 79 (2d Cir. 1981), cert. denied, 102 S. Ct. 1438 (1982). It is a New York corporation with its principal place of business here. Through its Long Lines Department AT&T is the principal carrier of long distance service within the United States. AT&T owns, in whole in part, twenty-four local telephone companies known as the Bell System Operating Companies ("BSOC"). Twenty-two of the BSOCs are defendants here. The other two are named as coconspirators. Each has a monopoly over local telephone services within its geographic area and controls the access to over eighty percent of the telephones in the United States. Nearly all the BSOCs will soon be divested by AT&T pursuant to the consent decree in United States v. AT&T, No. 74-1698 (D.D.C.).

 The History of this Controversy

 Prior to 1969, long distance service in this country was provided by AT&T's Long Lines Department. In 1969, the FCC approved a proposal by Microwave Communications, Inc. ("MCI") to provide an intercity point-to-point private line service that did not utilize the switching networks operated by the local companies. *fn3" Microwave Communications, Inc., 18 F.C.C.2d 953 (1969); 21 F.C.C.2d 190 (1970). In 1971, the FCC issued its well-known Specialized Common Carriers decision, which authorized MCI and other common carriers ("OCCs") to provide private line service. 29 F.C.C.2d 870 (1971), aff'd sub nom. Washington Utilities & Transp. Comm'n v. FCC, 513 F.2d 1142 (9th Cir.), cert. denied, 423 U.S. 836 (1975.).

 Thereafter, the OCCs sought access to AT&T's local networks in order to provide a private line service known as "foreign exchange" ("FX"), which permits a customer in one city to obtain local business line service in a distant city or exchange area without incurring a toll charge. See New York Telephone Co. v. FCC, 631 F.2d 1059, 1061 n.1 (2d Cir. 1980). AT&T initially took the position that the Specialized Common Carrier decision did not require the BSOCs to provide the OCCs with such access to their local networks. The FCC disagreed and ordered AT&T to provide the interconnections for the FX services. Bell System Tariff Offerings, 46 F.C.C.2d 413, aff'd sub nom. Bell Telephone Co. v. FCC, 503 F.2d 1250 (3d (Cir. 1974), cert. denied, 422 U.S. 1026 (1975).

 In 1974, MCI revised its tariffs seeking to offer a service it termed "Execunet," which would involve ordinary switched long distance service in competition with AT&T's long distance service. The FCC declared the tariff illegal, interpreting its Specialized Common Carrier decision to limit MCI's offerings to private line services. On review, the Court of Appeals for the District of Columbia Circuit remanded the case for consideration of whether the Execunet service was in the public interest, MCI Telecommunications Corp. v. FCC, 182 U.S. App. D.C. 367, 561 F.2d 365. (D.C.Cir. 1977) ("Execunet I"), cert. denied, 434 U.S. 1040, 54 L. Ed. 2d 790, 98 S. Ct. 780 (1978). In response, the FCC initiated an administrative proceeding to make this determination. FCC Docket No. 78-72, MTS and WATS Market Structure, 67 F.C.C.2d 757 (1978). At the same time the FCC issued a declaratory ruling that the BSOCs were not required to provide interconnections until conclusion of the administrative proceeding. This ruling was overturned on review by the D.C. Circuit, which held that the OCCs were to be afforded interconnections until and unless the public interest demanded otherwise. MCI Telecommunications Corp. v. FCC, 188 U.S. App. D.C. 327, 580 F.2d 590 (D.C.Cir.) ("Execunet II"), cert. denied, 439 U.S. 980, 58 L. Ed. 2d 651, 99 S. Ct. 566 (1978).

 After the Execunet II decision, it was obvious that the OCCs would to permitted to offer long distance service in competition with AT&T and the independent telephone companies. Accordingly, in May, 1978, AT&T filed its first ENFIA tariff, which drew heated criticism from the OCCs, and resulted in negotiations among the FCC, AT&T and the OCCs, culminating in an "Interim Settlement Agreement" (the "Agreement"). The Agreement, executed in December, 1978, sets forth the basic terms and conditions for OCC access to the BSOC plants and provided a formula for access rates. The Agreement was designed to be in effect for an interim period until the FCC concluded its MTS and WATS Market Structure proceeding. Exchange Network Facilities, 71 F.C.C.2d 440 (1979). *fn4"

 The Agreement is still in effect. In accordance with its terms it was extended in April, 1982 for a two-year period. Exchange Network Facilities, 90 F.C.C.2d 6 (1982).

 The MTS and WATS Market Structure proceeding still continues. On December 23, 1982, the a press release announcing that it has adopted rules pursuant to which the relevant access rates access rates will be determined. The release states that the FCC's action establishes a long-range plan with the rules to become effective on January 1, 1984. Accompanying statements by some of the commissioners describe the FCC's decision as "difficult," "momentous," and "historic." The release also noted that the FCC's plan seeks to balance the proceeding's four basic goals, namely: "(1) the continued assurance of universal service; (2) the elimination of unjust discrimination or unlawful preferential rates; (3) the encouragement of network efficiency; and (4) the prevention of uneconomic bypass." On February 28, 1983, the FCC issued its order implementing this decision.

 Thus, the Interim Settlement Agreement remains in effect, and it is primarily, although not exclusively, the FCC's action with respect to the Agreement that AT&T urges exempts its challenged conduct from antitrust scrutiny. For example, AT&T contends that the ENFIA rates charged in accordance with the Agreement have been expressly approved by the FCC and that they therefore cannot be made the subject of an antitrust claim for damages. USTS asserts, on the other ...


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