UNITED STATES of America
v.
WESTERN ELECTRIC COMPANY, INC., et al. Bell Atlantic
Corporation, Appellant.
UNITED STATES of America
v.
WESTERN ELECTRIC COMPANY, INC., et al. US West, Inc., Appellant.
UNITED STATES of America
v.
WESTERN ELECTRIC COMPANY, INC., et al. Ameritech, Appellant.
UNITED STATES of America
v.
WESTERN ELECTRIC COMPANY, INC., et al. Pacific Telesis
Group, Appellant.
UNITED STATES of America
v.
WESTERN ELECTRIC COMPANY, INC., et al. BellSouth
Corporation, Appellant.
UNITED STATES of America
v.
WESTERN ELECTRIC COMPANY, INC., et al. Southwestern Bell
Corporation, Appellant.
UNITED STATES of America
v.
WESTERN ELECTRIC COMPANY, INC., and American Telephone and
Telegraph Company NYNEX Corporation, Appellant.
Nos. 90-5333, 90-5335, 90-5337, 90-5351, 90-5365, 90-5367
and 90-5373.
United States Court of Appeals,
District of Columbia Circuit.
Argued Jan. 21, 1992.
Decided July 24, 1992.
Stephen M. Shapiro, with whom Mark I. Levy and Michael K. Kellogg, for Bell Companies, John Thorne, Michael D. Lowe, and Michael E. Glover, for Bell Atlantic Corp., Jeffrey S. Bork, for US WEST, Inc., Richard W. Odgers, Margaret DeB. Brown, and Stanley J. Moore, for Pacific Telesis Group, Walter H. Alford and Mark D. Hallenbeck, for BellSouth Corp., Liam S. Coonan, Ann Meuleman, and Martin E. Grambow, for Southwestern Bell Corp., and Raymond F. Burke, for NYNEX Corp., were on the joint brief, for Bell Co. appellants in all cases.
Nancy C. Garrison, Atty., Dept. of Justice, with whom James F. Rill, Asst. Atty. Gen., and Catherine G. O'Sullivan, Atty., were on the brief, for Federal appellee in all cases.
David W. Carpenter, with whom Mark C. Rosenblum and Howard J. Trienens, were on the brief, for appellee American Tel. & Tel. Co. in all cases.
Michael H. Salsbury, with whom Chester T. Kamin and Carl S. Nadler, were on the brief, for appellee MCI Communications Corp. in all cases. Anthony C. Epstein also entered an appearance, for appellee.
Martin T. McCue entered an appearance, for appellee U.S. Tel. Ass'n in all cases.
Gail L. Polivy entered an appearance, for appellee GTE Corp. in all cases.
John E. Ingle, Deputy Associate Gen. Counsel, and Robert L. Pettit, Gen. Counsel, filed a statement, for amicus curiae F.C.C. in 90-5333, explaining an FCC order.
Before: SILBERMAN, WILLIAMS, and SENTELLE, Circuit Judges.
Opinion for the Court filed by Circuit Judge SILBERMAN.
Dissenting Opinion filed by Circuit Judge STEPHEN F. WILLIAMS.
SILBERMAN, Circuit Judge:
The seven regional Bell Operating Companies (BOCs or Companies) and the United States appeal from the district court's denial of a waiver of the AT & T consent decree to permit centralized provision of the "signaling" component of long distance telephone calls. The appellants1 maintain that their motion for a waiver should not be evaluated under the standard set forth in section VIII(C) of the decree--whether the proposal presents no substantial possibility of impeding competition--but rather under section VII and the more permissive [
We think that the section VIII(C) standard applies and that the BOCs failed to demonstrate that their proposal satisfied that standard. We therefore affirm the judgment of the district court.
I.
The 1982 consent decree settled the government's antitrust suit against the "Bell System" by first separating the BOCs2 and their monopolies over local telephone ("exchange") service from AT & T and its more competitive long distance ("interexchange") and equipment manufacturing businesses and then--with section II(D)'s "line-of-business" restrictions--prohibiting the BOCs from reentering those and other competitive markets. See generally United States v. American Tel. & Tel. Co.,
Section II(D)(1) of the decree, which prohibits the BOCs from providing any "interexchange telecommunications services," was implemented, and the scope of the seven BOCs' local monopolies defined, by dividing the country geographically into 164 "exchange areas" (better known as "LATAs").3 See generally United States v. Western Elec. Co.,
The telephone "call" that a Company passes to an interexchange carrier consists of two components. One is the actual communication (e.g., the voices) of the calling and called parties. The other is "network control signaling," which directs the operation of the telecommunications network, telling the switches and circuits how and when to set up and disconnect a call. The signaling indicates that a receiver has been picked up, what digits were dialed, whether the called line is ringing or busy, when the phone is hung up, and so forth. When the decree was approved in 1982, almost all signaling was "in-band," meaning that the communication and its associated network control signals were transmitted over the same circuit and therefore delivered to the interexchange carrier at the same location--the carrier's point of presence in each LATA. In-band signaling, however, has significant limitations. Because the signals travel over the same circuit as the callers' communication, they must precede or follow the communication. In-band signaling is also relatively slow and can carry relatively little information.
In recent years a new signaling technology has emerged. In "out-of-band" or Common Channel Signaling (CCS), the signals are transmitted over a system of switches and circuits separate from that of the communications they control. The CCS and communications networks are not parallel but rather linked only at special CCS switches known as Signal Transfer Points (STPs). Out-of-band signaling is much more efficient than in-band. The CCS network contains only signals, which can be packeted into bursts of information and loaded into a circuit with no gaps; in contrast, a single voice communication takes up an entire circuit, even when the parties are not saying anything. As a result, a single CCS circuit can carry the signaling for over 10,000 calls. Each STP pair, moreover, can be connected to multiple communications switches, allowing a few STP pairs to serve a very large area.
The advantages of CCS are undisputed. Its speed markedly reduces call set-up time--the time between dialing on one end and ringing on the other--a benefit of particular value to long distance service. It also frees circuits for communications by not clogging them while callers listen to busy signals or service announcements. And it provides the technological foundation for a variety of new telecommunications services, including some for which the signaling functions as part or all of the communicated information. For example, CCS enables the telephone number of the calling party to be transmitted to the called party, allowing such caller identification features as distinctive ringing and selective call screening, call waiting, and call forwarding.
The BOCs have begun to deploy CCS networks for use in providing local (intra-LATA) exchange services. The CCS efficiencies and network structure have allowed the Companies to deploy centralized STP pairs, each pair having the capacity to serve several of a Company's LATAs.5 US WEST's STP pair in Minneapolis, for example, serves U S WEST switches in six of its LATAs. In 1989, in fact, the BOCs predicted that all 164 LATAs could be served by only 27 STP pairs, although many more pairs have been installed in the last three years. The interexchange carriers have also been deploying CCS networks for use in their interexchange systems. AT & T inherited the Bell System's nascent CCS network at divestiture, and MCI has also extended signaling facilities to almost every LATA. The smaller carriers have lagged somewhat behind.
This case is brought because the BOCs have not yet installed an STP pair in every LATA and wish to avoid having to do so just to allow the interexchange carriers to connect in every LATA. Instead, they would like authority to provide the carriers access to CCS service only at certain centralized [
In February 1989 US WEST filed a motion in the district court requesting a waiver "of the Decree" to allow centralized signaling interfaces. (Under its proposal, the communications component of interexchange calls would still be provided at the point of presence in each LATA, as would in-band signaling if the carrier so requested.) US WEST purported to act "pursuant to section VII of the Decree," a provision that authorizes the district court to modify the decree upon application of any party.6 Section VII does not include any criterion for judging proposed changes, so motions under it are presumed to be governed by the appropriate common law standard. See Triennial Review Opinion,
The positions of the decree parties in this case were divided. The other six BOCs supported US WEST's motion and filed similar motions of their own.8 The Department of Justice (DOJ) told the Companies to file directly in the district court, claiming that the motions did not involve a modification of the line-of-business provisions and so the DOJ pre-screening procedure, see United States v. Western Elec. Co.,
However, the remaining party to the decree, AT & T, opposed the Companies' motions, arguing that section IV(F) of the decree expressly obliges the Companies to provide access to network control signaling in every LATA and that the centralization of signaling would allow the BOCs to transmit telecommunications information--the signals--across LATA boundaries in violation of the section II(D)(1) interexchange services ban. AT & T argued that the proposal should therefore be evaluated not under section VII but under the decree's other provision for modification, section VIII(C).9 That section was added to [
The district court, shortly after our Triennial Review Opinion issued, held that the waiver proposal did not satisfy the section VIII(C) test. See United States v. Western Elec. Co.,
II.
The dispute between the parties has two main facets. The Companies and the Justice Department contend that the waiver request does not substantially implicate the decree's line-of-business restrictions and therefore that the standard to determine whether it should be granted is not the potentially demanding section VIII(C) test but rather the more relaxed public interest test embodied in section VII. Alternatively, the appellants maintain that the applicability of section VIII(C) turns on the position of the DOJ--the plaintiff and "Prime Mover" in the antitrust case underlying the decree. Even if section VIII(C) would apply had the government contested the CCS waiver, the argument goes, section VII and the public interest test govern here because the DOJ does support the proposal. AT & T's opposition to a modification of a line-of-business restriction, the appellants claim, has no more significance than that of other, non-party interexchange carriers.
The first argument is based on the notion that the centralization of signaling interfaces involves primarily not an entry into the interexchange services market prohibited by section II(D)(1) but rather a redefinition of the Companies' obligation under section IV(F) to provide network control signaling in each LATA. The appellants assert that a small adjustment in the definition of the BOCs' exchange access monopoly is distinguishable from an "entry" into a new and competitive line of business, even though the CCS waiver might "affect" the interexchange market.11 We think that is a distinction without a difference. By that logic, the decree's most sensitive restriction placed on the Companies might be eroded merely by redefining the decree's terms. The Companies could, for example, just as well move to redefine "interexchange telecommunications"" [
The more serious argument, that the relaxed section VII public interest standard governs waivers supported by the DOJ whether or not opposed by AT & T--i.e., if the DOJ approves a waiver, it is not "contested"--is largely a product of a footnote in our Triennial Review Opinion. See
We also noted that the decree contemplated that only the Companies could petition under section VIII(C) for modification of the line-of-business restrictions. See id. at 294-95. Therefore, if the DOJ wanted an alteration of those restrictions it would necessarily proceed under section VII, the provision authorizing any party to seek decree modifications. See id. at 294. We then added a footnote raising a question as to what standard would apply to such a motion:
The Government opposed the modification sought in Swift, and therefore it is not at all clear to us that the stringent, so-called "unforeseen conditions" test of Swift would apply to motions brought by the DOJ under section VII. Since the DOJ is, as plaintiff, the "Prime Mover" of this case, it may well be that modifications it seeks should be evaluated under a standard somewhat more akin to the "public interest" test of the Tunney Act. Still, it is true that the line of business restrictions were part of what AT & T bargained for in the original decree, therefore suggesting that the modification requests that AT & T opposes should perhaps be viewed differently from those that all the parties agree to. We need not pass on this issue here since the DOJ brought no motion under section VII.
Id. at 294 n. 12 (emphasis in original deleted; new emphasis added).
Appellants, relying exclusively on the italicized portion of the footnote, assert that by asking the question of what standard applied, we answered it--that we have strongly implied that the government's support for a waiver causes the public interest test to govern. That is a strained interpretation at best, since we have clearly indicated that if AT & T opposes a line-of-business modification, then DOJ's support, in whatever form, does not relieve the Companies from meeting the section VIII(C) test. Thus, in the Triennial Review Opinion itself we treated the BOCs' motion to remove the manufacturing line-of-business restriction as contested and subject to the section VIII(C) standard notwithstanding DOJ's support for the proposal. See id. at 301. And in the subsequent NYNEX Procurement Opinion (United States v. Western Elec. Co.,
Appellants nevertheless, and for the first time in this series of cases, squarely challenge the proposition that AT & T's opposition to a proposed change should have such important consequences as to trigger the more stringent section VIII(C) standard. They argue that AT & T's "rights" under the decree are unaffected by changes in the line-of-business restrictions on the BOCs, and therefore that AT & T's "legal or equitable status" in relation to the CCS waiver should be thought no different than any other interexchange carrier's-- i.e., not significant enough to affect the standard by which we evaluate the proposal. See Triennial Review Opinion,
It is, however, those line-of-business restrictions that prevent the Companies from a full-bore entry into the interexchange market. It seems more than passing strange to suggest that the decree should be interpreted so as not to allow AT & T to contest, under section VIII(C), the BOCs' complete entry into the interexchange market. After all, the AT & T lawsuit was based on the premise that a corporation that enjoyed a monopoly on local calls would ineluctably leverage that bottleneck control in the interexchange (long distance) market. See id. at 142, 188-89. The Bell System was for that reason broken up; the local monopolies were taken away from AT & T. (Of course, "AT & T" is a different entity after the decree than it was before.) To claim that AT & T has no interest under the decree in challenging one or more of the Company's "return" to the interexchange market, there to compete against AT & T with the same sort of local monopoly leverage that caused the government to bring suit against AT & T in the first place, has an ironic, even Kafkaesque, quality. By the appellants' logic, if the BOCs' proposed entry into the interexchange market was likely to impede competition (which would violate the section VIII(C) test) but not certain to do so (thus surviving section VII's public interest test), and if the government did not object, the district judge would be obliged to permit the entry. Are we to believe that AT & T had in 1982, and has today, no interest in effectively objecting to such a proposal?
The dissent responds to our question in the negative. Judge Williams argues that AT & T has no institutional interest in competition in the interexchange market, and thus to read the decree to allow AT & T to object to any sort of BOC entry into that market--including a complete and full-scale entry--is to sanction a broad "allocation" of telecommunications markets in contradiction to the purpose of the antitrust laws. Dissent at 1243-44. That argument, which has the virtue of boldly confronting the core problem with appellants' case (even if it is an argument that neither appellants nor the government dare make), is nothing less than an attack on the very premise of the consent decree. AT & T today, after all, has the same economic interest vis-a-vis the BOCs' effort to gain access to the interexchange market that MCI (the company that first sought to compete against the Bell System in the interexchange market) had at the time the government's lawsuit was brought against the Bell System. MCI then, and both AT & T and MCI now, seek to confine the BOCs to that portion of the telecommunications market in which they enjoy a historical natural monopoly.
Certainly there is nothing in the language of the decree that suggests that AT & T should be thought unconcerned with the line-of-business restrictions, so that it should be regarded as not a "real" party with respect to those matters. It is not, as [
Appellants have, nevertheless, combed the multitude of documents filed and hearing transcripts generated during the decree approval proceedings and have found numerous examples of Bell System representatives (who now work for AT & T) professing opposition to the line-of-business restrictions or acceptance of them simply as a step towards an overall settlement. Appellees in turn point to some statements demonstrating more affirmative interest in the prohibitions. But what are we to make of these offerings? After all, the Bell System (pre-divestiture AT & T) had been defending itself for decades--and presumably would have continued defending itself if the settlement negotiations failed--on the ground that vertical integration of telecommunications businesses is efficient and pro-competitive. The Bell System representatives also faced a significant inherent conflict of interest: post-divestiture AT & T, as an interexchange carrier and equipment manufacturer, would obviously favor a complete prohibition on competition from the powerful local monopolies, while the post-divestiture BOCs would undoubtedly desire no such restrictions. The Bell System's duty at the time was, of course, to maximize the combined future value of AT & T and the BOCs for its (and soon to be their) shareholders. See United States v. Western Elec. Co.,
The Justice Department, although it does not go so far as our dissenting colleague in challenging the consent decree as an anti-competitive division of the telecommunications industry, does caution that we should not "interpret" the decree to give AT & T a "strong incentive to oppose pro-competitive decree modifications in order to protect itself from the very competition such modifications could promote." This contention is, as the dissent elaborates, sort of a variation on the antitrust injury doctrine. See, e.g., Cargill, Inc. v. Monfort of Colorado, Inc.,
Insofar as the government believes that there are pro-competitive aspects of a BOC's proposed "reentry" into part or all of the interexchange market, it can aid the BOC in seeking to meet the section VIII(C) test by showing that the proposal will enhance rather than impede competition. The government expresses particular concern that AT & T might somehow use its rights under section VIII(C) to handicap its existing interexchange competitors by making it more difficult for the BOCs to provide services to those competitors in the interexchange market. We note, however, that AT & T's fiercest competitor, MCI, supports AT & T's construction of the decree, and that although the BOCs claim that AT & T's smaller competitors would benefit from both the CCS proposal and their construction of the decree, none of those companies appeared before us. It should be remembered that section VIII(C) does not give AT & T the power to veto truly pro-competitive line-of-business modifications, only to block those changes that are quite possibly, though not certainly, anti-competitive.
In any event, as MCI observes, the question before us is not how we would fashion the decree if we were writing on a clean slate. The decree is not ambiguous; it gives AT & T the right, as a party to the decree, to assert its objection to the BOCs' proposal and thus to invoke section VIII(C). Until this case, the government never even suggested that the decree could be read otherwise.
[
The proposition that AT & T's position on a proposed line-of-business modification can be determinative of whether the section VIII(C) test applies has thus been a linchpin of two of our opinions. Although it is true that we cannot be said to have held that AT & T's opposition makes a requested modification contested--because the point was not directly controverted--we do not think that the Companies can opportunistically, after so much litigation involving the same parties, switch their position and challenge that proposition at this late date. Cf. Northwestern Ind. Tele. Co. v. FCC,
III.
The appellants' submissions to the district court were not clearly focused on the section VIII(c) test--that is, on demonstrating that the CCS waiver posed no substantial possibility of impeding competition in the interexchange services market. Nor are their appellate briefs primarily directed to this point. We are rather disappointed, particularly in light of our remarks in the Triennial Review Opinion as to the importance of the DOJ's predictive economic analysis, see
In the Triennial Review Opinion, we determined that the BOCs cannot "impede competition," as that phrase is used in section VIII(C), unless they will possess market power--the ability to restrict output and/or raise prices--in the market they seek to enter via the proposed decree modification. See
The BOCs contend, however, that they merely want to offer an existing exchange access service--the provision of network control signaling--in a very similar (same content and ultimate destination, different interconnection point) but much more efficient manner. This would not "impede competition" in any meaningful way, they claim, because they would still lack market power in the interexchange services market as a whole. There would be no control over output, it is asserted, because the decree requires the Companies to provide signaling with every interexchange call, however many there are. As for price, appellants suggest that the cost of interexchange calls would in fact decline because the Companies would not be required to install and operate expensive and unnecessary STP pairs in every LATA (and will pass on the savings as lower access charges), nor would interexchange carriers have to invest in CCS links to every LATA. Appellees and the district court simply failed to confront, appellants argue, this absence of market power. Section VIII(C), however, places the burden of proof on the BOCs, see NYNEX Procurement Opinion,
In our previous cases, the BOCs sought to enter all or part of a section II(D) market in order to compete with the companies already in that market. See, e.g., NYNEX Procurement Opinion,
Appellants claim that any reduction in interexchange services competition will be insignificant because many small interexchange carriers cannot afford to install CCS links to every LATA, leaving only AT & T and perhaps a couple of other carriers offering CCS services to those areas[
We are quite skeptical, moreover, about the principal benefit claimed by the appellants--the costs that the BOCs could avoid if the CCS waiver were granted--because even if the savings were large,20 they might be entirely irrelevant to the section VIII(C) analysis. Savings passed on to the Companies' local ratepayers (or shareholders) would not provide any competitive benefit to the market the Companies seek to enter. See Triennial Review Opinion,
* * * * * *
Perhaps a stronger case can be made than that which the appellants mounted, but on this record the judgment of the district court is affirmed.
It is so ordered.
STEPHEN F. WILLIAMS, Circuit Judge, dissenting:
The 1982 consent decree resolving the Department of Justice's protracted antitrust suit against the Bell System included so-called "line of business" restrictions. See Section II(D) of the decree. United States v. American Tel. & Tel. Co.,
Narrowly conceived, the issue is which of three possible standards established by our decision in United States v. Western Elec. Co.,
The majority here rules that AT & T's opposition is enough of a "contest" to make a line-of-business change "contested" even when the Department of Justice approves. Thus the rump of the original defendant, a firm that has no institutional interest in favoring competition in interexchange markets, simply by crying nyet can displace the standard normally governing changes that are not contested by the original plaintiff. While it is of course true that the "line of business" restrictions originated in the Justice Department's belief that they were necessary to facilitate competition, the Department believes that the modifications here proposed "would promote interexchange competition". Brief of United States at 38. The upshot is that restraints originally devised in the name of enhancing competition have now become a private anti-competition agreement between potential competitors (AT & T and the BOCs), to be cheerfully enforced by the courts at the behest of a private party that (naturally) resists intrusion on its turf.
* * *
The starting place for any possible AT & T entitlement to shift the applicable standard is obviously the agreement itself. The only material language--apart from the substantive provisions themselves--is in Section VII:
Retention of Jurisdiction
Jurisdiction is retained by this Court for the purpose of enabling any of the parties to this Modification of Final Judgment, or, after the reorganization specified in section I, a BOC to apply to this Court at any time for such further orders or directions as may be necessary or appropriate for the construction or carrying out of this Modification of Final Judgment, for the modification of any of the provisions hereof, for the enforcement of compliance herewith, and for the punishment of any violation hereof.
It is evident from the heading of this provision and its first six words that it was inserted to ensure that the district court would have jurisdiction over all disputes arising under the decree. It thus rejected the usual rule that the court of the original decree has no special position as to such disputes, Washington Hospital v. White,
Nor is Section III of any help: "The Provisions of this [decree] applicable to each defendant, shall be binding upon said defendants and BOCs, their affiliates, successors and assigns...." The section is carefully phrased to make sure that the burdens imposed on then-present entities--and only those burdens--should reach any later components or offspring of the burdened firms. It says nothing about who is allowed to enforce any specific element of the decree. Compare Maj.Op. at 1238-39 & n. 12.
Some parts of the decree directly burden AT & T, such as Section I(D), barring post-divestiture AT & T acquisition of stock or assets of any of the BOCs. Some parts provide AT & T with clear entitlements, such as Section VIII(G)'s rule on how to resolve conflicts over the allocation of assetsused [
The logic of the line-of-business restrictions is quite different. They originated, as the majority correctly notes, Maj.Op. at 1238, in the Justice Department's belief that the Bell System had used its local service monopoly to achieve market power in adjacent fields and its concern that the BOCs would do likewise. As such, the restrictions seek, perhaps ironically, to enhance competition by restricting competitive entry. Obviously such a device is rather delicate, even in the hands of the Justice Department or courts, as competitive values are on both sides of the issue. But as an agreement between private firms, the line-of-business restrictions of Section II(D) are simply an agreement of potential competitors to divide the market--i.e., a per se violation of the Sherman Act, see United States v. Topco Associates, Inc.,
Of course the Department of Justice might conceivably have put its imprimatur on an agreement by which Bell divided itself and provided that all of the new firms would have contractual rights against competitive threats from each other. As the text of the decree suggests no such purpose, one might find it in the structure of the relations of the parties, and I gather that is the majority's purpose in its discussion of the Bell System's pre-break-up goals. Maj.Op. at 1239. As the majority correctly observes, before divestiture the Bell management's duty and, presumably, intention were to maximize the System's value; with divestiture in prospect, this meant maximizing the combined value of the future AT & T and of the BOCs. See id. at 1239. The majority apparently assumes that that must have entailed supporting enforcement power for AT & T, for it concludes that as it "presume[s] that the negotiators fulfilled their duty", there is no need to look at what was actually said about future AT & T's rights in the restrictions. Id.
In fact, however, there is no special reason to believe that the Bell System management would have been likely to think that the future AT & T's gain from any increment in restrictions would be enough to offset the BOCs' loss. Equally so for post-decree modifications; if the Bell management expected that relaxations would on a net basis decrease the value of the aggregate, it would have tried to give the future AT & T the special hold over VIII(C) changes that the court here finds; otherwise not. Either result is theoretically possible, depending on the relative abilities of the different Bell components to exploit the competitive advantages they enjoy in their own markets. But without detailed information about those advantages, there is nothing inherent in the pre-divorce structure of the Bell System that gives us a reason to impute to it a desire to secure such a special position for AT & T.
In one respect, the majority's view is in obvious contradiction with the structure of the Bell System as divestiture approached. Under the majority's view that the language of Section VII unambiguously gives AT & T rights to enforce and preserve the line-of-business rules, its reading must sweep in the BOCs as well. Thus each BOC is entitled to insist on the Section VIII(C) standard as to a line-of-business change sought by any other BOC, such as [
The majority assumes that just because the Department of Justice and AT & T are parties to the same contract, and both have interests in the line-of-business restrictions (one acting for the public, the other for its shareholders), it follows that they must have identical rights in relation to those restrictions. It is clear, however, that in multiple-party contracts not every party will necessarily have a right to enforce every duty of every other party; lines of entitlement may be single, not multiple. The general point about separate right-duty relations typically arises in a slightly different context, with a single obligee claiming that multiple obligors' duties are joint, so that it may enforce all its rights against either. In that context, courts do not create the kind of duty sprawl that the majority indulges here; the rights and obligations of each party may be several as well as joint, to whatever extent the parties intend. See Restatement (Second) of Contracts §§ 10, 288 & comment d (1981) ("if one party promises one performance, and another promises a different performance, each may be bound independently of the other and the promisee may be entitled to both performances"); 4 Corbin, Contracts §§ 926, 940 (1951). Compare Over the Road Drivers, Inc. v. Transport Ins. Co.,
To the extent that the text and structure leave doubt, we should turn to "contemporaneous statements of [the decree's] objectives". Triennial Review,
The contract language, and the structure and history of the negotiation, do not support an inference that every one of the parties was given the right to obtain, through opposition to a change, application of the VIII(C) standard. That being so, we may search for default rules. The common law has addressed a cognate problem--whether those who acquire portions of a burdened estate may sue each other to enforce an equitable servitude benefiting a third party. The answer is no, unless the estate was subdivided pursuant to a common plan or scheme. See Korn v. Campbell,
More acutely relevant is the antitrust standing doctrine, which requires an antitrust plaintiff to allege an "antitrust injury", i.e., one "of the type the antitrust laws were designed to prevent and that flows from that which makes defendant's acts unlawful." Cargill, Inc. v. Monfort of Colorado, Inc.,
Of course the fact that the parties occupy adjacent fields does not mean in itself that one cannot have antitrust claims against conduct of the other, such as MCI's original "essential facilities" and predatory pricing claims against the Bell System. See MCI Communications Corp. v. American Tel. & Tel. Co.,
The majority insists that here the modification would cause AT & T a genuine antitrust injury: the BOCs "are expanding the boundaries of their monopolies to render a portion of the interexchange market completely non-competitive." Id. at 1240 n. 16. But in fact the BOCs propose only to change the means of implementing the monopolies granted to them by state law, shifting to more efficient ways for handing off signals generated in their region to the interexchange carriers.
The majority also argues that its holding is required by precedent. Id. at 1240-41. In Triennial Review and in United States v. Western Electric Co.,
* * *
As the majority explains, the public interest standard--the common law standard for unopposed modifications of consent decrees--is quite relaxed. The proposed modification need only be "within the zone of settlements consonant with the public interest today." See Triennial Review,
Notes
Because the Companies and the United States each seek reversal of the judgment below, we refer to them together as "appellants," although the government is technically an appellee
The seven BOCs--Ameritech, Bell Atlantic Corp., BellSouth Corp., NYNEX Corp., Pacific Telesis Group, Southwestern Bell Corp., and U S WEST, Inc.--are independent Regional Holding Companies, each controlling several of the Bell System's 22 local operating companies. The Companies are also known as the "RBOCs," "RHCs," or "Baby Bells."
The full text of the consent decree, formally entitled the Modification of Final Judgment, appears in the Decree Opinion. See
Section IV(F) states, in relevant part:
"Exchange access" means the provision of exchange services for the purpose of originating or terminating interexchange telecommunications. Exchange access services include any activity or function performed by a BOC in connection with the origination or termination of interexchange telecommunications, including but not limited to, the provision of network control signalling.... Such services shall be provided by facilities in an exchange area for the transmission, switching, or routing, within the exchange area, of interexchange traffic originating or terminating within the exchange area, and shall include switching traffic within the exchange area above the end office and delivery and receipt of such traffic at a point or points within an exchange area designated by an interexchange carrier for the connection of its facilities with those of the BOC.
That the decree permits the Companies to use centralized STP pairs to support their own intra-LATA services is not in dispute. STPs are deployed in pairs to provide greater reliability. The paired STPs need not be in the same location
Section VII states that:
Jurisdiction is retained by this Court for the purpose of enabling any of the parties to this [decree], or, after the reorganization specified in section I, a BOC to apply to this Court at any time for such further orders or directions as may be necessary or appropriate for the construction or carrying out of this [decree], for the modification of any of the provisions hereof, for the enforcement of compliance herewith, and for the punishment of any violation hereof.
By contrast, changes opposed by a decree party--at least when that party is the United States, see Triennial Review Opinion,
The BOCs also sought a declaratory judgment that the decree allows them to use centralized CCS interfaces. The government opposed that portion of the motions, the district court flatly denied it, and the Companies have not pursued it on appeal
Section VIII(C) states in full:
The restrictions imposed upon the separated BOCs by virtue of section II(D) shall be removed upon a showing by the petitioning BOC that there is no substantial possibility that it could use its monopoly power to impede competition in the market it seeks to enter.
Section VIII(C) was added because of a concern that otherwise contested line-of-business modifications would be governed by the stringent Swift "unforeseen conditions" test, see supra note 7, preventing pro-competitive changes in response to new but foreseeable market conditions. See Triennial Review Opinion,
At oral argument, counsel for the BOCs did not press the claim that centralization of signaling interfaces would not violate the section II(D)(1) restriction at all because the Companies would not transmit "end user communications" across LATA boundaries. Indeed, the Companies propose to transmit signaling information between points in different LATAs for a price (the access charge), and that would appear to make the proposed service "interexchange telecommunications" and "telecommunications service" as defined in sections IV(K) and (P) of the decree. See United States v. Western Elec. Co.,
Section III provides in relevant part (with emphasis added):
The provisions of this [decree] applicable to each defendant and each BOC, shall be binding upon said defendants and BOCs, their affiliates, successors and assigns,....
The dissent makes the interesting point that under our reading of the decree, a BOC would be able to contest another BOCs' effort to relax a line-of-business restriction. See Dissent at 5. That may seem an unlikely occurrence today, but, in any event, we see no reason why that would necessarily be thought undesirable. We will await a concrete case, however, to say any more on that scenario.
Section VIII(G), which Judge Williams reads as establishing a "clear entitlement[ ]" for AT & T to move for judicial resolution, Dissent at 1244, speaks of actions by "a party or a BOC"--virtually mirroring the "any of the parties ... [or] a BOC" language of section VII
Missouri-Kansas Pipe Line Co. v. United States,
Even were we to determine that AT & T must assert a cognizable and unique interest (vis-a-vis other interexchange carriers) in the CCS waiver in order to be entitled to put the BOCs to their proof under section VIII(C), it appears that AT & T would qualify. Pursuant to the reorganization plan implementing the decree, the Bell System's widespread signaling facilities were allocated to AT & T; these assets would be devalued--and therefore AT & T's "rights," narrowly expressed, would be infringed--if the BOCs could provide signaling on a centralized basis so that other interexchange carriers were spared the costs of investing in such far-flung facilities. As we have indicated, however, we do not think such a particular examination of AT & T's rights and interests is called for under the decree in order to conclude that AT & T has every right to force a section VIII(C) examination of the CCS proposal
Of course, in this case, as we discuss further below, the BOCs are not just entering a competitive market, they are expanding the boundaries of their monopolies to render a portion of the interexchange market apparently non-competitive. See infra page 1242
It is therefore again unnecessary to decide what standard would govern a contested modification proposal, filed under section VII and either brought by or supported by the government, that does not implicate section II(D). See Triennial Review Opinion,
We do not foreclose reexamination of the market definition in future cases, however. It may be that there are relevant submarkets or a developing signaling market, although none has been identified thus far
Access charge regulation is also relevant to the concern that a BOC foothold in the interexchange market would create an incentive for exchange access discrimination against certain interexchange carriers. See Waiver Opinion,
The district court discounted the significance of the savings. See Waiver Opinion,
By contrast, the decree in Missouri-Kansas Pipe Line Co. v. United States,
The parties and this court seem to have assumed all along that AT & T has standing to challenge modifications in the line-of-business restrictions. Given its clear commercial interest, there seems little doubt that the Constitutional minimum is satisfied. See Warth v. Seldin,