sm586.021 fcc processes - based upon fcc rules, that are based upon federal law the communications...

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FCC PROCESSES - Based upon FCC Rules, that are based upon Federal law

• The Communications Act of 1934, as amended: 47 U.S.C.§ 151 et seq., provides the legal basis for the Commission’s subject matter jurisdiction and rulemaking authority.

• The Administrative Procedure Act, 5 U.S.C. § 551 et seq., provides the procedural authority for the Commission to exercise its subject matter and rulemaking powers.

• State Constitutions and Public Utility Laws provide State Public Utility Commissions with the same powers as the FCC, to be exercised within their State borders, respectively.

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FCC PROCESSES- “Notice and Comment” Rulemaking

• Petitions for Rulemaking

• FCC-initiated Rulemaking– Notice of Inquiry (NOI)

– Notice of Proposed Rulemaking (NPRM)

– Order/ Report and Order

– Memorandum, Opinion and Order (MO&O)

– Further Notice of Proposed Rulemaking (FNPRM)

– Second Order/ Second Report and Order

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FCC PROCESSES- Advisory Opinions and Declaratory Rulings

• Party Petitions the Commission to Determine the Commission’s Reaction to its Proposal, and Receives an Advisory Opinion

• Party Petitions the Commission for an Interpretation of a Federal Statute or a Commission Regulation, and Receives a Declaratory Ruling.

• In either case, the Commission may first place the issue or the interpretation request in a Public Notice, and request comment on the Petition.

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FCC PROCESSES - ADMINSTRATIVEREVIEW

• Petition for Reconsideration– Public Notice Requesting Comment/ Reply Comment

– Order on Reconsideration

• Application for Review– Commission En Banc Hearing (Agenda Item)

– Commission Vote (Circulation Item)

– Order on Review

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FCC PROCESSES

• “Notice and Comment” Rulemaking Process Requires:

– Adequate Notice of Commission Rulemaking Intentions

– Opportunity for Interested Parties to Participate

– Comment Cycle

– Reply Comment Cycle

– Commission Staff reviews Comments/Replies, and establishes an Administrative Record

– Commission makes a decision based upon the statute, its own regulations, and the administrative record

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JUDICIAL REVIEW OF FCC DECISIONS - Federal Trial Court Level

• Petitioner must first exhaust Administrative Remedies:– Petition for Reconsideration

– Application for Review

• The Federal Court that receives the suit is determined by statute (Communications Act of 1934, as amended).

• New or controversial legislation usually requires a Federal Appellate Court to receive the suit.

• The Court may:– Sustain the Commission’s Actions

– Vacate the Commission’s Actions

– Remand issues back to the Commission for further proceedings

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JUDICIAL REVIEW OF FCC DECISIONS - Federal Appellate Court Level

• Federal District Court for the District of Columbia is the Trial Court Designated by the 1934 Act

• Federal Appellate Court - D.C. Circuit is the Appellate Court that Reviews all Decisions by the Federal District Court for the District of Columbia

• The Federal Appellate Court can:– Affirm the lower Court’s ruling, in whole or in part

– Reverse the lower Court’s ruling, in whole or in part

– Remand the case back to the lower Court or to the FCC, for further proceedings.

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JUDICIAL REVIEW OF FCC DECISIONS - Supreme Court Level

• Unlike the Trial Court and Appellate Court, The U.S. Supreme Court is not compelled to hear every case brought to it by petitioners.

• When it accepts a case, the Supreme Court grants Certiorari. When it rejects a case, it doesn’t grant Certiorari.

• By not granting Certiorari, the Supreme Court upholds the lower court’s ruling.

• The Supreme Court can affirm, reverse, or reverse and remand the lower court’s ruling, in total or in part.

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JUDICIAL REVIEW OF FCC DECISIONS - Questions

• Can Petitioner seek review of a Supreme Court Decision?– What Court reviews Supreme Court decisions?

– Does the Supreme Court need a reason to deny Certiorari?

• Can Petitioner introduce new evidence on appeal?

• What standard of review does the trial court use, to measure the legality of the Commission’s actions?

• What are the two basic questions that are always in the Judges’ minds, when reviewing an administrative agency’s action?

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Selected Common Carrier Statutes

• 47 U.S.C. § 201(a): “It shall be the duty of every common carrier engaged in interstate or foreign communication by wire or radio to furnish such communication service upon reasonable request therefor; and, in accordance with the orders of the Commission, after opportunity for hearing, finds such action necessary or desirable in the public interest, to establish physical connections with other carriers, to establish through routes and charges applicable thereto and the divisions of such charges, and to establish and provide facilities and regulations for operating such through routes.”

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• 47 U.S.C. § 201(b): “All charges, practices, classifications and regulations for and to connection with such communication service, shall be just and reasonable, and any such charge, practice, classification, or regulation that is unjust or unreasonable is hereby declared to be unlawful;. . .”

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• 47 U.S.C. § 202: Tariffed rates and conditions must not be unjust, unreasonable, or discriminatory. Regarding tariffs, the Commission can:– allow the tariff to go into effect

– reject the tariff outright

– suspend the tariff pending Commission investigation

– impose an accounting order, to track tariff performance

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• 47 USC § 203: “Every common carrier. . .shall. . .file with the Commission. . . Schedules showing all charges. . .for interstate and foreign telecommunications. . .” Also, carriers cannot charge rates other than the tariffed rates.

• 47 USC § 203(c): “No carrier shall engage or participate in such communication unless schedules have been filed and published in accordance with the provisions of this Act and the regulations made thereunder. . .”

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• 47 U.S.C. § 204: Hearing as to the lawfulness of new charges; suspension: “Whenever there is filed with the Commission any new charges, classifications, regulation, or practice, the Commission may either upon complaint or upon its own initiative without complaint, upon reasonable notice, enter upon a hearing concerning the lawfulness thereof; . . .the Commission may suspend such charge, classification and regulation, in whole or in part. . .”

• 47 U.S.C. § 205: Commission authorized to prescribe just and reasonable charges.

• 47 U.S.C. § 206: Liability of carriers for damages.

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• 47 U.S.C. § 207:Recovery of damages.• 47 U.S.C. § 208: Complaints to the Commission. Any

person, body politic or municipal organization, or State commission complaining. . .may apply to said Commission by petition. . .”

• 47 U.S.C. § 209: Orders for payment of money. “If, after hearing on a complaint, the Commission shall determine that any party complainant is entitled to an award of damages under the provisions of this Act, the Commission shall make an order directing the carrier to pay to the complainant the sum to which he is entitled. . . “

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• 47 U.S.C. § 213: Valuation of carrier property. “The Commission may. . .make a valuation of all or of any part of the property owned or used by any carrier subject to this act. . .the Commission may . . . Require any such carrier to file an inventory showing . . . such property. . .”

• 47 U.S.C. § 214: Extension of lines. “No carrier shall undertake the construction of a new line or of an extension of any line, or shall acquire or operate any line, or extension thereof, or shall engage in transmission over or by means of such additional or extended line, unless. .there shall first have been obtained . . .a permit. . .”

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• 47 USC § 160: Regulatory Flexibility- (a) “Notwithstanding section 332( c)(1)(a) of this Act, the Commission shall forbear from applying any regulation or any provision of this Act to a telecommunications carrier or a telecommunications service, or class of telecommunications carriers or telecommunications services, in any or some of its or their geographic markets, if the Commission determines that:

– (1) enforcement of such regulation or provision is not necessary to ensure that the charges, practices, classifications, or regulations by, for, or in connection with that telecommunications carrier or telecommunications service are just and reasonable and are not unjustly or unreasonably discriminatory,

– (2) enforcement of such regulation or provision is not necessary for the protection of consumers, and

– (3) forbearance from applying such provision or regulation is consistent with the public interest.”

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Verizon’s Application to Offer Long Distance Service in New Jersey

• What kind of document is it, and how do we know?– “Memorandum, Opinion, and Order”

– An Order is a “final regulatory action” under the APA

• What statutory authority does the Commission invoke to justify the issuance of this document?– 47 USC §§ 271 and 272

• Who participated?– NJDRA, DOJ; why not the NJBPUC?

– Worldcom and AT&T

• What was the outcome?

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ANTITRUST PRIMER: Merger and Acquisition Primary Approval Authorities

• Primary Players (Domestic):– DOJ

– FTC

– State Attorneys General

– FCC, for Telecommunications

• Primary Players (International):– All of the Above

– Commerce Dept (NTIA for Telecommunications)

– State Department (Input from the White House and the Senate Foreign Relations Committee)

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ANTITRUST PRIMER: Merger and Acquisition Approval Statutory Authorization

• Sherman Act (15 USC et seq.)

• Clayton Act

• Robinson-Patman Act

• Hart-Scott-Rodino Act

• Tunney Act

• FTC Act

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ANTITRUST PRIMER: Merger and Acquisition Approval Statutory Authorization

of the FCC• Telecommunications Act of 1934, as amended:

– Title I (47 USC § 154), FCC approval authority from plenary jurisdiction, “the FCC shall act to further the public interest, convenience and necessity.”

– Title II (47 USC § 214(a)), FCC approves the transfer of construction permits.

– Title III (47 USC § 303®), FCC approves the transfer of spectrum licenses.

• Clayton Act:– 15 USC § 21(a), empowers the FCC specifically to review mergers

and acquisitions “where applicable to common carriers engaged in wire or radio communications or radio transmissions of energy.”

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ANTITRUST PRIMER: Basic Antitrust Concepts

• Horizontal and Vertical Markets

• Market Power

• Criminal Antitrust Actions

• Civil Antitrust Actions

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ANTITRUST PRIMER: Market Concentration Analysis in the Merger and

Acquisition Approval Process• Market concentration means few competitors in a given

marketplace; this is bad because the less competition, the higher the price of the goods/services to consumers.

• Market Power of an individual company is measured by the amount of sales and net worth the company has in relation to the total market.

• Market Concentration is measured by the Hirfindahl-Hirshman Index, which sums the squared os the individual market shares, represented in percents, of all competitors in that market.

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ANTITRUST PRIMER: Market Concentration Analysis in the Merger and

Acquisition Approval Process• HHI Example:

– If there are four participants in a given marketplace, and two of the participants have 30% of the market and the other two have 20% of the market, then:

– (30+30+20+20)(squared) equals an HHI of 2,600.

– Since this figure is above 1,800, the market will be considered by the government to be too concentrated, and any mergers and acquisitions requested by any of the four remaining within the marketplace will be denied.

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ANTITRUST PRIMER: Antitrust Violations

• Price Fixing

• Predatory Pricing

• Illegal Tying

• Monopolization

• Bid Rigging (criminal antitrust violation)

• Territory Allocations

• Discrimination

• Refusals to Deal (Boycotts)

• Oligopoly Pricing

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ANTITRUST PRIMER: Antitrust Remedies

• Antitrust Convictions– Treble Damages

– Stigma of “bad corporate citizen.”

– Jefferson City, Mo., v. TCI, and why TCI lost the opportunity to obtain two $800 million DBS orbital slots at 110 degrees, West.

• Consent Decrees– Restrict Corporate behavior, and make it difficult for Companies

bound by consent decrees to respond competitively

– Very hard to change

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ANTITRUST PRIMER: Antitrust Problems In the Telecommunications Industry

• Discrimination– Public utility is duty-bound to provide competitors with

underlying basic services, and thus an incentive to offer competitors less-quality at higher prices

– Discrimination comes in many forms: installation and maintenance intervals and transmission quality, and responsiveness to retail subscriber.

• Cross-Subsidization– Artful shifting of costs from competitive services to regulated

services. Captured ratepayers provide economic engine for utility to price below cost, without affecting the utility’s bottom line.

• Price Leadership (the MCI game)

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• 1913 AT&T Consent decree “Kingsbury Commitment”

• 1956 Consent Decree and “Computer Inquiry I”

• The Bell System was “broken- up” on 1/1/84:– Consent decree (AKA “Modified Final Judgement,” or MFJ)

• In 1984, was AT&T Convicted of (trick question):

– Cross-subsidization, or

– Discrimination?

• MCI v. AT&T: private antitrust suit. Who won? What were the damages?

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• What was the remedy (AT&T’s Punishment)?– Structural reorganization (break-up)

– Competitive portion line-of-business restrictions

– Regulated portion (7 Regional Bell Operating Companies “RBOCs” line-of-business restrictions)

• Modified Final Judgment mechanics– Waivers (two possible standards of review- “public interest,” and

“no substantial possibility of competitive harm.” Which one presents the higher hurdle to the RBOC-petitioner?

– Triennial review (see references to The Huber Report)

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• The Telecommunications Act of 1996 replaced the MFJ by incorporating many of its provisions, and giving more power to the FCC to effectuate local exchange competition– 47 U.S.C. §§ 214(e) and 254, universal service obligations

extended to all common carriers, including competitors (anti-cream skimming provisions).

– 47 U.S.C. § 254: Access charge reform.

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• 1996 Act, continued:– 47 U.S.C. § 251, interconnection obligations extended to ILECs,

to include the offering of unbundled network elements (UNEs) at wholesale prices to CLECs, where the FCC determines the rate-making methodology that the states must follow. Also, dialing parity and number portability is required.

– 47 U.S.C. § 252: Procedures for negotiating interconnection agreements, between ILECs and CLECs.

– 47 U.S.C. § 271: RBOC entry to long distance 14-pt. checklist

– 47 U.S.C. § 272: Separate affiliate safeguards for RBOCs

– 47 U.S.C. § 273: Manufacturing safeguards for RBOCs.

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• Forward from the 1996 Act:– Competition and competitive entry has been slow– High cost of market entry– RBOC foot-dragging on OSS, unbundling, and unbundled

packages required by CLECs– RBOC-initiated political pressure on FCC to “rubber stamp” § 271

applications– RBOC litigation (“bate and switch” strategy)

• Interconnection• Access charge reform• Universal service reform• “Bill of Attainder” litigation

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The Microsoft Case

• Brief:– Who is the plaintiff, and who is the defendant?

– In what Court is the case being heard?

– What procedural statute is being applied to plaintiff’s case?

– What substantive statute is being applied by plaintiff to the facts?

– What remedy is plaintiff asserting?

– What does plaintiff want to achieve with this remedy?

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The Microsoft Case

• The Theory of Plaintiff’s case:– MS has used its power over Operating Equipment Manufacturers

(EOMs) to agree to use, distribute and promote MS’s software products and to limit their use, distribution, and promotion of competitive products.

– MS has withheld, threatened to withhold, and discrimintated in the disclosure of the application programming interfaces (APIs), interfaces, and technical information required to enable independent software vendors (ISVs), independent hardware vendors (ISVs) and OEMs to make their products interoperate with Windows so that competitive middleware cannot connect to Windows in a timely way, or at all, or so that use of such competitive middleware will be a “jolting experience” to the user.

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The Microsoft Case

• The Theory of Plaintiff’s Case, continued:– MS has used its power to discriminate in the disclosure of

information required for interoperability in order to force ISVs and IHVs not to support competitive middleware.

– MS has used its power over industry participants to force such participants to enter into exclusive dealing arrangements with MS, to limit their distribution of non-MS platform software, and to degrade the performance of non-MS platform software.

– MS successfully obtained Intel’s agreement not to compete in offering middleware and sought agreements not to compete with numerous other competitors, including Netscape, Real Networks, Apple, and IBM.

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The Microsoft Case

• The Theory of Plaintiff’s Case, continued:– MS has contractually tied its middleware to its monopoly

operating system and thereby frustrated OEM and customer choice of, and competition among, browsers.

– MS has combined the software code of separate middleware products with the code of its operating product systems - again with the purpose and effect of foreclosing customer choice and excluding competition.

– MS has refused to license, or has increased the price of, existing operating systems when new operating systems were announced in order to prevent older operating systems from competing with newly announced operating systems.

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The Microsoft Case

• The Theory of Plaintiff’s case, continued:– MS has engaged in a pattern of predatory conduct by spending

large sums of money to limit the distribution of competitive middleware without any way to recover, or expectation of recovering, such sums except by increasing barriers to entry and thus maintaining MS’s monopoly power.

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The Microsoft Case

• Plaintiff’s Charges:– MS has monopoly power in the market for personal computer

operating systems. (What’s “market power??)

– MS has “maintained its monopoly by anticompetitive means.”

– MS has “attempted to monopolize the web browser market and there is a dangerous probability that MS will maintain monnopoly power in that market.

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The Microsoft Case

• Plaintiff’s Proposed Remedies:– Aim: (1) to prevent the continuation or recurrence of conduct

found to be unlawful and (2) repair the damage to competition in the affected markets.

– Permanent injunctive relief ordered in a Sherman Act case must be both forward-looking and remedial. The decree must end the violation, avoid a recurrence of the violation, and others like it, and restore competition in the market.

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The Microsoft Case

• Plaintiff’s Proposed Remedies, continued:– Reorganization:

• Split MS into two companies: Operating systems (OpsCo), which will own Windows 95, 98, 2000, NT and CE, and have a perpetual license to Internet Explorer

• Applications Company (AppsCo), which will own all of MS’s other business, including its dominant Office Suite desktop applicatiions (Word, Excel, PowerPoint, etc.), its critical tools business, and Internet Explorer.

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The Microsoft Case

• Plaintiff’s Proposed Remedies, continued:– Conduct restrictions:

• Ban on adverse actions for supporting competing products• Uniform terms for Windows Operating System products licensed to

covered OEMs.• OEM flexibility in product configuration• Disclosure of information that MS’s developers use that is necessary

to insure that ISVs will be able to compete on a level playing field.• Ban on “knowing interference” with software to protect consumers

from “jolting experiences” while using competing software products.• Ban on exclusive dealing.• Ban on contractual tying and restriction on binding middleware to the

operating system.

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The Microsoft Case

• Plaintiff’s Proposed Remedies, continued:– Conduct restrictions, continued:

• Ban on agreements limiting competition. This provision prohibits MS from entering into agreements with actual or potential competitors allocating markets or otherwise not to compete like those it attempted to enter into with Netscape and others.

• Continued licensing of earlier operating system versions, for three years after releasing a new version.

• Compliance requirements. MS must establish a compliance committee of its board of directors, to hire a compliance officer, to inform appropriate personnel of the requirements of the decree, to maintain certain records and upon appropriate request to provide information and documents to the plaintiffs.

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The Microsoft Case

• The future:– MS must agree to the terms, or face litigation in front of a jury

(very risky, and can go anywhere).

– If MS loses at trial, it must pay treble damages and also lose its ability to negotiate a consent decree.

– Even if MS works out an agreement with plaintiff, Judge Jackson must review and rule upon the consent decree. The Judge can refuse to sign if, in his judgment, the decree needs to be modified to accomplish its purported purposes.

– Once signed, it will bind MS until vacated.

– What is the longest consent decree, that is still in full force and effect?

sm586.021 fcc processes - based upon fcc rules, that are based upon federal law the communications...

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