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UNITED STATES v. WESTERN ELEC. CO.

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA


December 7, 1983

UNITED STATES OF AMERICA, Plaintiff,
v.
WESTERN ELECTRIC COMPANY, INC., AND AMERICAN TELEPHONE AND TELEGRAPH COMPANY, Defendants; UNITED STATES OF AMERICA, Plaintiff, v. AMERICAN TELEPHONE AND TELEGRAPH COMPANY, et al., Defendants

The opinion of the court was delivered by: GREENE

Ameritech *fn1" has moved the Court for clarification of that aspect of the decree which concerns the treatment of so-called undesignated traffic. The motion raises the question of the obligations of the Operating Companies under the decree with regard to inter-LATA calls made by subscribers who do not designate an interexchange carrier either by presubscription or by use of an access code. See infra. This is by no means an insignificant issue: the estimates of traffic that will not be designated, at least at the outset, range up to 90 percent of all subscribers, and according to some, it will represent billions of dollars in revenue annually. *fn2"

 Ameritech requests permission to route all undesignated traffic to AT&T, and it is supported in that stance by the Department of Justice and, naturally, by AT&T. With equal predictability, several of AT&T's competitors are opposed to that option, and they suggest two alternatives: (1) that the Operating Companies be required to "block," that is, not to complete, the call of any customer who has not designated an interexchange carrier so as to force him to make a designation, or (2) that the Operating Companies be required to distribute such calls among all the interexchange carriers on the basis of some appropriate formula. *fn3" In its Opinion of July 8, 1983, the Court deferred a decision on this issue pending a review by the various interested parties of the legal and practical implications of the several alternatives. 569 F. Supp. at 1109 n.227. These issues have now been developed in several briefs responding to the Ameritech motion.

 I

 To understand the issues raised by the motion, one must first understand the current procedures for routing traffic to interexchange carriers and the procedures which will be implemented in the future under the decree.

 At the present time, because of limitations on the Operating Companies' switching facilities, only one carrier -- AT&T -- may be reached without the use of a multiple-digit access code. A customer can place an interexchange call through AT&T by dialing 1 or 0 plus a normal ten-digit number, *fn4" for a total of eleven digits. If a customer wishes to place a call through any other interexchange carrier, however, he must dial a twelve-or thirteen-digit access code plus the ten-digit number, for a total of twenty-two or twenty-three digits. Since this "substantial disparity in dialing convenience has had a significant adverse impact on competition," *fn5" the decree mandates equality of access by all carriers by the following process.

 The decree provides *fn6" that the Operating Companies shall, on a gradual basis, furnish AT&T's competitors access that is "equal in type and quality" to that offered to AT&T, beginning not later than September 1, 1984, *fn7" and ending by September 1, 1986. Equal access will be phased in as various Operating Company end offices acquire the necessary switching capability. As a particular end office reaches the equal access stage, *fn8" any subscriber may choose one of two options for the routing of his interexchange calls: (1) he may dial a four-digit carrier access code ("10XX") instead of the twelve-to-thirteen digits now required, *fn9" or (2) he may predesignate a primary interexchange carrier, that is, he may opt for a switching arrangement by which his interexchange calls will be routed automatically to the selected carrier.

 Two points should be noted, however. First, a subscriber will not be limited to the carrier to which he has presubscribed: he may still reach any other interexchange carrier by dialing that carrier's four-digit access code. *fn10" Second, except for AT&T, which will remain available as a carrier of last resort (see infra), a customer will generally not be able to access an interexchange carrier, either by predesignation or by use of a code, unless he first establishes an account with that carrier. *fn11"

 The issue before the Court relates primarily to the period between September 1, 1984 and September 1, 1986 when equal access will be phased in on an end office-by-end office basis. It is assumed that by that time many, if not most, telephone subscribers will have elected to do nothing: they will not have made arrangements with an interexchange carrier, either by presubscribing to it or by establishing an account which would enable them to reach it through a four-digit access code. The question before the Court is -- should all such traffic remain with AT&T or should the Operating Companies require their customers to make a choice among the interexchange carriers?

 II

 The various interexchange competitors of AT&T *fn12" argue that the decree contemplates an end to the favorable treatment accorded AT&T by the Operating Companies; that the automatic routing of all undesignated traffic to AT&T would perpetuate that company's dominant role in the interexchange market; and that Ameritech's proposal therefore conflicts with the bedrock principles underlying the decree.

 That argument has substantial weight, and were there no compelling countervailing considerations, the Court would be strongly inclined to accept it. But countervailing considerations do exist, of several types: language in the decree itself; expressions of the court and of the parties with respect thereto; and various practical considerations as they affect the public.

 Section A(2)(i) of Appendix B of the decree, while permitting an interim dialing disparity between AT&T and the other interexchange carriers, requires exchange access for these carriers through minimum access codes, and section A(2)(ii) requires the Operating Companies to

 

offer . . . access that permits each subscriber automatically to route, without the use of access codes, all the subscriber's interexchange communications to the interexchange carrier of the customer's designation.

 Ameritech contends that these provisions imply that when a customer neither presubscribes nor dials a 10XX access code, the call is to be completed through AT&T. *fn13" Ameritech also relies on a statement in the Court's August 11, 1982 Opinion that allowed continued dialing inequality because of provisions in the decree which require the Operating Companies to "permit" subscribers to route their calls to interexchange carriers other than AT&T, and on another which described presubscription as an "option." See 552 F. Supp. at 198 and at n.279.

 The Department of Justice, for its part, explained its understanding of the meaning of the decree when it stated early on -- in May 1982 -- that under section A(2)(ii), the presubscription option "would not apply to AT&T [but would] allow exchange customers the right to substitute another carrier for AT&T . . . if no other designation is made . . . ." Response to Comments at 105. In other words, in the Department's view, expressed shortly after the decree was published, customers were to be given merely the option of selecting a carrier other than AT&T; however, if they did not exercise the option, AT&T would retain the traffic. AT&T also espouses this understanding of the decree. Response at 2.

 The Court did not contradict that interpretation in its August 11, 1982 Opinion, but, if anything, tended to support it. Accordingly, the interpretation of the agreement by the parties who negotiated it represents a substantial indication of their intent, and for that reason is entitled to weight. See, e.g., United States v. Armour & Co., 402 U.S. 673, 681-82, 29 L. Ed. 2d 256, 91 S. Ct. 1752 (1971); Eastmount Const. Co. v. Transport Mfg. & Equipment Co., 301 F.2d 34, 39 (8th Cir. 1962).

 Normally, the Court would not regard these factors as conclusive because they conflict with the basic purpose of the decree -- to place all interexchange carriers on an equal footing. However, the conclusion to which they point is further supported by the fact that the alternatives to the continued assignment of undesignated traffic to AT&T immediately upon the achievement of equal access suffer from substantial practical difficulties.

 III

 One of the two suggested alternatives to routing all undesignated traffic to AT&T, *fn14" is the allocation of that traffic among all the interexchange carriers. This alternative suffers from defects which, in the opinion of this Court, render it entirely unsuitable.

 First. There is some question whether allocation is as compatible with the purposes of the antitrust laws as its proponents suggest. These laws are intended to protect the competitive process, not to assure positive results for competitors. See, e.g., Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 488, 50 L. Ed. 2d 701, 97 S. Ct. 690 (1977); Calnetics Corp. v. Volkswagen of America, Inc., 532 F.2d 674 (9th Cir. 1976); Mullis v. Arco Petroleum Corp., 502 F.2d 290, 299 (7th Cir. 1974); see also, United States v. AT&T, 552 F. Supp. 131, 174 n.183 (D.D.C. 1982). There is force, therefore, to Ameritech's point that the decree should be interpreted as a means of fostering a fair competitive process rather than as a device for manipulating the results of that process, and that the allocation option would accomplish the latter rather than the former. *fn15"

 Second. A more serious flaw in the allocation proposal is that many of the interexchange carriers are not prepared, technologically or otherwise, to receive all the customers *fn16" that may be allocated to them by the Operating Companies. Specifically, it appears that in many LATAs in which, under this scheme, calls would be randomly assigned, several carriers would be unwilling or unable to accept all customers assigned to them, because of the frequency of those customers' calls, their economic circumstances, their location, or their inability to pay a presubscription fee or a particular monthly service charge. *fn17" Other carriers would lack the ability to terminate service to every telephone in the network, to provide billing through the Operating Companies, or to accommodate the interexchange traffic of all assigned customers.

 Among the inevitable by-products of an allocation plan would be the difficulties associated with the issuance of bills to customers on behalf of carriers which the customers had expressed no desire to use. *fn18" Any relationship between the wishes of a particular customer with regard to such matters as service, quality, and price options, and the options actually made available by the assigned carrier would be purely coincidental.

  At best, therefore, the allocation scheme would be disruptive and cause a great many customer-carrier disputes; at worst, it would be totally unworkable in a substantial proportion of the transactions.

 Third. Assuming that these difficulties could, somehow, be overcome, there remains a final obstacle to the allocation scheme: the adoption of a fair formula. The various proponents of the allocation plan have suggested different methods of implementation. Each of these methods, however, suffers either from the defect that it is tailored to the particular proponent's strengths and would substantially disadvantage other interexchange carriers, or from the flaw that it represents merely a vague concept, with the vital and difficult details left unaddressed.

 For example, MCI proposes that the allocation reflect the percentage of subscribers who had previously designated a particular carrier. Opposition at 5 n.*. This would, of course, disadvantage those carriers which are just starting out and are still in the process of building a subscriber base. *fn19" Moreover, MCI does not address the problem of whether the number or the availability of carriers will change over a period of time, *fn20" or the question of whether the formula should be based on nationwide designations, designations from the territory of a particular Operating Company, or designations on a LATA-by-LATA basis. *fn21"

 Satellite Business Systems and Western Union avoid the problems inherent in the production of a formula by simply demanding that the Operating Companies be required to establish "reasonable eligibility criteria" for carrier participation; *fn22" ITT suggests that an approach similar to that used in international communications might work, predicting that the Court "may be able to smooth out the operation of an allocation arrangement through . . . an [undefined] economic benefit approach" (Response at 9); and U.S. Telephone recommends the adoption of an equally undefined "reasonable, non-discriminatory scheme." Response at 5. *fn23"

 Unless the Court were to establish its own allocation scheme -- a task that would seem to be as foreign to its Tunney Act responsibilities as it would be fraught with the same practical obstacles which have thwarted the efforts of AT&T's various competitors -- it would have to require each Operating Company to devise and implement its own plan. While as indicated in note 39 infra, the Court sees no basis for prohibiting the Operating Companies from undertaking this task if they are willing to do so despite the ensuing problems, *fn24" it will not impose such a requirement upon them. *fn25"

 Accordingly, the Court rejects the allocation alternative.

 IV

 When a call is blocked, it is not completed. Several of AT&T's competitors propose that when a caller who has neither presubscribed nor dialed a carrier access code attempts to make an interexchange call, he be referred to a recorded announcement from his Operating Company advising him to dial the company's business office or an "800" number to obtain additional information. If the customer complied, he would be given the access codes of several interexchange carriers, and this would enable him to select a carrier *fn26" and thereafter to complete his call. Call completion would not be certain even at that juncture, however, for if the caller did not have an account with the particular carrier, he might not be accepted on such short notice, if at all. *fn27"

 These difficulties would, of course, be aggravated if the interexchange call were attempted during a holiday period (when a peak calling load traditionally occurs) or in an emergency (when the caller cannot wait for intricate subscription arrangements). Moreover, problems would be particularly likely for those who, on account of inexperience, age, indigency, language difficulty, and the like would not have made a selection in advance, but would have to do so on a moment's notice. *fn28"

 Since, as indicated above, a very substantial proportion of the subscribers would probably not select an interexchange carrier at the time equal access becomes a reality for their particular areas, it may be expected that this scheme would at that time cause a great deal of difficulty *fn29" and confusion. *fn30" Indeed, many individuals, faced with the complications described above, would simply hang up, never to complete their calls. *fn31"

 While some of the adverse impacts on the public from divestiture have been exaggerated, it is a fact that the reorganization, affecting as it does every single household in the United States, will present some complications to consumers in the short run. *fn32" It is important, however, and clearly in the public interest, that such practical problems be held to a minimum. Certainly, if a choice must be made between accommodating the interests of the public and those of the various competitors in the interexchange market, the interests of the public must take precedence. For while the protection and fostering of competition is the goal of the antitrust laws, it is that goal merely as a means to a broader objective -- the promotion of the interest of the consuming public. See, e.g., Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 488, 50 L. Ed. 2d 701, 97 S. Ct. 690 (1977) ("the antitrust laws were enacted for 'the protection of competition not competitors '"). *fn33"

  Finally, it is not irrelevant that AT&T is now and will continue to be the carrier of last resort. It offers service to all subscribers, regardless of their circumstances, the frequency of the calls, or the places they call. That fact appears to have been considered by the parties at the time of the entry of the decree, and it bears on the issue whether a blocking rule should be required immediately upon the availability of equal access. The continued availability of a carrier everyone will be able to use is in the public interest and should therefore be encouraged. *fn34" Moreover, there would be some question as to the fairness of a system which at the first available opportunity required universal blocking of all undesignated calls but left AT&T's competitors free to accept or reject the blocked subscribers while AT&T had to continue to accept them all. *fn35"

 For these reasons, the Court is not prepared to construe the decree so as to impose the substantial burdens of a blocking rule upon the public immediately upon the achievement of equal access unless such a construction were plainly required. As explained above, no such requirement is explicit or clearly implicit in the decree.

 V.

 The Court recognizes, of course, that this ruling may be of substantial assistance to AT&T. *fn36" For the reasons stated, that is a result that cannot initially be avoided without exorbitant costs to the public. It does not follow, however, that the Court, consistently with the promotion of competition, should not require the Operating Companies to make reasonable efforts to acquaint customers with their options with regard to interexchange service or that it should not take steps to preclude AT&T from receiving the calls of undesignated customers in perpetuity. Such measures are, indeed, entirely appropriate.

 There is a substantial difference between a forcible assignment of customers to specific interexchange carriers, on the one hand, and the development of public information regarding the availability of such carriers, on the other. Likewise, although it may be unreasonable to require all telephone subscribers immediately upon the availability of equal access in a particular area to designate interexchange carriers on account of an event -- divestiture -- with which they have no direct concern or relationship, it is not inappropriate to expect them to make such designations at a time when they will be involved with the telephone company, and the services it provides, for other, unrelated, reasons *fn37" in any event. *fn38"

  VI

 On the basis of these considerations, the Court hereby grants Ameritech's motion, and it construes the decree, pursuant to the authority vested in it by sections VII and VIII(I) of the decree, as permitting *fn39" each Operating Company to route to AT&T the calls of any customer who, by the time equal access is available, has failed to make a selection of an interexchange carrier either by predesignation or by dialing an access code. Such permission is limited, however, as follows.

 First. Each Operating Company shall, during the ninety days immediately preceding and the ninety days immediately following the availability of equal access at any end office, inform its customers who receive service from such office, of their options with respect to the various interexchange carriers. *fn40" This Operating Company information *fn41" shall include (a) reasonably detailed data concerning AT&T and its competitors serving the area, (b) advice to the customer to the effect that his present designation of an interexchange carrier will be free of charge, but that a subsequent designation may require payment of a fee, *fn42" and (c) advice to the customer that if he does not make a designation, he may subsequently be able to complete an interexchange call only by making a carrier selection at that time through the possibly cumbersome method described at pp. 13-15 supra. But see note 47 infra. Such information shall be provided to the customers at a minimum by way of inserts in the monthly bills. *fn43"

 Second. During the ninety-day period immediately following the achievement of equal access, each Operating Company shall allow each of its customers in the area being converted to equal access the opportunity to predesignate an interexchange carrier free of charge. *fn44"

 Third. Following the ninety-day period referred to above, each Operating Company shall again allow a predesignation free of charge *fn45" and provide information similar to that required above, at the time a customer receives new service if he still has not designated an interexchange carrier at that time. The receipt of new service by a customer means that (1) he receives service from the particular Operating Company for the first time, or (2) he moves to another location within the Operating Company area. *fn46"

 No Operating Company shall continue automatically to assign to AT&T the calls of a customer who receives new service but fails to designate an interexchange carrier although given an opportunity to do so pursuant to the procedures described above. The Operating Company may instead refer the caller to a recorded announcement advising him of the availability of interexchange carriers, or it may otherwise assist him in locating such a carrier, provided that no favoritism is shown to any particular carrier. Customers may, of course, at any time establish their own relationships with interexchange carriers they consider suitable and which are willing and able to accept their business. *fn47"

 These procedures strike an appropriate balance. *fn48" Taking into account the language of the decree and the intention of the parties, they fulfill the fundamental purpose of the decree to promote competition and protect the legitimate interests of the interexchange carriers, without imposing unreasonable and unnecessary burdens on the public at large.


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