AT&T Corp v. FCC ( 2001 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued November 30, 2000 Decided January 23, 2001
No. 99-1535
AT&T Corporation,
Petitioner
v.
Federal Communications Commission and
United States of America,
Respondents
Telecommunications Resellers Association, et al.,
Intervenors
Consolidated with
00-1090
On Petitions for Review of an Order of the
Federal Communications Commission
Gene C. Schaerr argued the cause for petitioner AT&T
Corporation and supporting intervenor WorldCom, Inc. With
him on the briefs were James P. Young, Mark C. Rosenblum,
Peter H. Jacoby, Judy Sello, Thomas F. O'Neil, III, William
Single, IV, and Jeffrey A. Rackow.
William T. Lake argued the cause for petitioner US WEST
Communications, Inc. On the briefs were Dan L. Poole,
Robert B. McKenna, John H. Harwood, II, and William R.
Richardson, Jr.
John E. Ingle, Deputy Associate General Counsel, Federal
Communications Commission, argued the cause for respon-
dents. With him on the brief were Christopher J. Wright,
General Counsel, and Laurel R. Bergold, Counsel. Robert B.
Nicholson and Robert J. Wiggers, Attorneys, United States
Department of Justice, entered appearances.
Mark C. Rosenblum, Peter H. Jacoby, Judy Sello, Gene C.
Schaerr, James P. Young, Thomas F. O'Neil, III, William
Single, IV, and Jeffrey A. Rackow were on the brief for
intervenors AT&T Corporation and WorldCom, Inc.
Before: Edwards, Chief Judge, Sentelle and Randolph,
Circuit Judges.
Opinion for the Court filed by Chief Judge Edwards.
Edwards, Chief Judge: US WEST* petitioned the Federal
Communications Commission ("FCC" or "Commission"), pur-
suant to s 10 of the Telecommunications Act of 1996, Pub. L.
No. 104-104, 110 Stat. 56 (1996), for forbearance from "domi-
nant carrier" regulation in the provision of high capacity
special access and dedicated transport for switched access
services ("high capacity services") in the Phoenix and Seattle
Metropolitan Statistical Areas ("MSAs"). See Petition of US
WEST Communications, Inc. for Forbearance from Regula-
tion as a Dominant Carrier in the Phoenix, Arizona MSA, et
al., 14 F.C.C.R. 19,947 (1999) (hereinafter "Forbearance Or-
der"). In seeking forbearance, US WEST relied heavily on
evidence regarding its market share. The Commission found,
however, that US WEST failed to provide the underlying raw
data on which its conclusions were based, and, as a result, US
____________
*At the request of petitioner in 00-1090, the caption was amended to read:
"Qwest Corporation v. Federal Communications Commission and United States of
America". Although US West merged into Qwest Corporation, this court's opinion
refers to petitioner as "US West".
WEST's findings were not verifiable. The Commission thus
reasonably rejected US WEST's market share evidence.
US WEST argues that the Forbearance Order should
nevertheless be overturned, because the Commission failed to
consider evidence of supply elasticity and demand elasticity.
In response to US WEST's claim, the Commission held that
market share data is critical to a "prima facie showing of
competition." Id. p 33, at 19,967. In other words, because
US WEST offered no reliable data on market share, the
Commission determined that the petition for forbearance
failed to make a prima facie showing that sufficient competi-
tion existed to satisfy the requirements of s 10. The problem
with this position, however, is that the FCC's conclusion is
inconsistent with its earlier decisions on this issue. In the
past, the FCC has considered market share along with other
factors such as supply elasticity, demand elasticity and com-
parative advantages in cost structure, size and resources.
The FCC has even made a non-dominance determination in
the absence of any market share data, never suggesting that
market share data is essential for a prima facie showing of
competition. This case must therefore be remanded for
further consideration by the agency.
AT&T and WorldCom, in separate petitions for review,
argue that the Forbearance Order should be vacated to the
extent that it grants US WEST forbearance under the Pric-
ing Flexibility Order. See In re Access Charge Reform, 14
F.C.C.R. 14,221 (1999) (hereinafter "Pricing Flexibility Or-
der"). In p 2 of the Forbearance Order, the Commission
stated that "we grant the relief requested in the forbearance
petitions to the extent that the Pricing Flexibility Order
establishes a framework pursuant to which the BOC petition-
ers may obtain relief by demonstrating satisfaction of the
competitive triggers adopted in that order." Forbearance
Order, 14 F.C.C.R. p 2, at 19,949. At the conclusion of the
Order, however, the Commission explained that "the Pricing
Flexibility Order establishes a mechanism by which the peti-
tioners may receive much of the relief they seek without
having to demonstrate loss of market power." Id. p 36, at
19,968. The FCC therefore "encourage[d] the BOC petition-
ers to submit [their] petitions for any market, including the
markets identified in ... their forbearance petitions, as soon
as they have sufficient information to satisfy the required
competitive triggers." Id. AT&T and WorldCom claim that,
in referring US WEST to the Pricing Flexibility Order, the
FCC effectively granted relief on a petition that was found
meritless under s 10. This is a specious claim. It is clear
that, the Forbearance Order does nothing more than indicate
that US WEST is eligible to apply for relief under the Pricing
Flexibility Order; no concrete relief was granted to US
WEST in the Forbearance Order.
During argument before this court, counsel for the FCC
suggested that the mere availability of relief under the Pric-
ing Flexibility Order was itself sufficient to forestall a claim
under s 10. We reject this position. US WEST and other
such petitioners are entitled to pursue forbearance under
s 10 without regard to the Pricing Flexibility Order. In
other words, s 10 remains a viable and independent avenue of
appeal for pricing flexibility. Therefore, the FCC's rejection
of the US WEST petition for forbearance does not survive
review because of the availability of the Pricing Flexibility
Order.
I. Background
US WEST petitioned the Commission to forbear from
regulating it as a dominant carrier in high capacity services in
the Phoenix and Seattle MSAs. Petition of US WEST Com-
munications, Inc. for Forbearance from Regulation as a Dom-
inant Carrier in the Phoenix, Arizona MSA, CC Docket No.
98-157 (filed August 24, 1998) (hereinafter "Phoenix Pet."), at
1; Petition of U S WEST Communications, Inc. for Forbear-
ance from Regulation as a Dominant Carrier for High Capaci-
ty Services in the Seattle, Washington MSA, CC Docket No.
99-1 (filed Dec. 30, 1998) (hereinafter "Seattle Pet."), at iii.
SBC Companies, Bell Atlantic Telephone Companies, and
Ameritech Operating Companies ("BOC petitioners") also
filed forbearance petitions seeking pricing flexibility in other
markets throughout the United States. Forbearance Order,
14 F.C.C.R. p 1, at 19,947-48. In seeking forbearance, US
WEST requested permissive de-tariffing, which would permit
the filing of tariffs on one day's notice with a presumption of
lawfulness and without cost support, exemption from price
cap and rate of return regulation, and permission to charge
de-averaged rates. Phoenix Pet. at 8-9; Seattle Pet. at 8-9.
US WEST's petition for forbearance rested on s 10 of the
Telecommunications Act of 1996. Under s 10, the Commis-
sion will forbear from applying any regulation or any provi-
sion of the Act to a telecommunications carrier or telecommu-
nications service, or class of telecommunications carrier or
telecommunications services, in any or some of its 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 tele-
communications service are just and reasonable, and are not
unjustly or unreasonably discriminatory; (2) enforcement of
such regulation or provision is not necessary for the protec-
tion of consumers; and (3) forbearance from applying such
provision or regulation is consistent with the public interest.
47 U.S.C. s 160(a) (1998).
In its petitions, US WEST argued that the high capacity
markets in the Phoenix and Seattle MSAs were robustly
competitive, and, as a result, US WEST did not have market
power in those areas. US WEST based its claims primarily
on reports prepared by Quality Strategies, POWER Engi-
neers ("PEI"), and economists Alfred E. Kahn and Timothy
J. Tardiff. Kahn and Tardiff based their economic evaluation
on the reports prepared by Quality Strategies and PEI, in
addition to their own research. In describing its diminished
market power, US WEST addressed several factors, includ-
ing (1) market participants, (2) market share, (3) demand
elasticity of customers, (4) supply elasticity of customers, and
(5) the carrier's cost, structure, size, and resources. Phoenix
Pet. at 14; Seattle Pet. at 14. What follows is a brief review
the evidence offered by US WEST.
First, regarding market participants, US WEST claimed
that, in the Phoenix MSA, it faced competition from resellers
and five facilities-based competitors. US WEST emphasized
that the merger of Teleport Communications Group, one of its
competitors, with AT&T ("AT&T/TCG"), and the pending
merger of MCI with another of its competitors, MFS World-
Com ("MCI/MFS WorldCom"), further contributed to robust
competition. Phoenix Pet. at 2-3. In the Seattle MSA, US
WEST claimed to face competition from resellers and three
facilities-based competitors, AT&T/TCG, Electric Lightwave
Inc., and MCI/MFS WorldCom. Seattle Pet. at 14-15.
Second, in reference to market share, US WEST empha-
sized that, based on the market analysis conducted by Quality
Strategies, competitors have captured more than 70% of the
retail market for high capacity services in the Phoenix MSA.
Phoenix Pet. at 19. In addition, competitors in the Phoenix
MSA have captured significant portions of the growth in
demand in the provider segment, i.e., high capacity services
ultimately purchased by end users, and in the transport
segment, i.e., high capacity services purchased by carriers for
transport. Id. at 21. In the Seattle MSA, US WEST
presented market analysis by Quality Strategies showing that
competitors have almost 80% of the retail market for high
capacity services. Seattle Pet. at 19. Moreover, competitors
have captured about two-thirds of the growth in demand for
high capacity services. Id. at iv.
Third, in demonstrating high demand elasticity, US WEST
pointed out that, in the Phoenix MSA, customers for high
capacity services are sophisticated businesses, some of which
could migrate high capacity traffic to their own affiliated fiber
networks. Phoenix Pet. at 23-25. US WEST emphasized
that evidence showing that competitors hold significant por-
tions of market share in the retail segment, and increasing
portions of market share in the provider and transport seg-
ments of the market, further indicates demand elasticity. Id.
at 25. Similarly, in the Seattle MSA, customers tend to be
sophisticated businesses and governmental entities that are
highly sensitive to price. Seattle Pet. at 24. In addition, as
in the Phoenix MSA, US WEST's largest carrier customers in
the Seattle MSA are able to migrate high capacity traffic to
their own affiliated fiber networks. Id. at 25. Furthermore,
Kahn and Tardiff explain that competitors' high market share
in the retail segment of the Seattle market, and the rapid
growth of competitors' market share in the provider and
transport segments of the market, reinforces demand elastici-
ty. Id. at 25.
Fourth, in relation to supply elasticity in the Phoenix MSA,
US WEST explained that, based on Quality Strategies' mar-
ket reports, competitors have more than adequate excess
capacity to constrain US WEST's pricing determinations.
Phoenix Pet. at 26. US WEST's five main facilities-based
competitors in the Phoenix MSA have put in place over 800
route miles of optical fiber. In the Phoenix MSA, competi-
tors' fiber backbone networks would be able to assume US
WEST's end-use and transport traffic utilizing less than 8%
capacity. Id. at 26. Based on the PEI study of the Phoenix
MSA, US WEST explained that if competitors invest $45
million, they could serve almost 50% of US WEST's high
capacity customer locations within 1,000 feet of their current
fiber networks. Id. at 27. Kahn and Tardiff pointed out that
economies of scale and opportunities to bundle services make
the investment to revenue comparison more favorable to
competitors in the Phoenix, MSA. Id. at 28-29. US WEST
emphasized that the growth of competitors' market share in
the Phoenix MSA demonstrates that the cost of entry is not
prohibitive. Id. at 30.
Similarly, in the Seattle MSA, competitors have in place
more than 700 route miles of optical fiber, with the capacity
to service all of US WEST's end user and transport traffic.
Seattle Pet. at 26. An estimated 61% of US WEST's high
capacity demand is located within 100 feet of competitors'
networks. Id. at iv. As a result, competitors could absorb
US WEST's services relatively quickly. Based on PEI's
report, the cost to competitors of extending their fiber net-
works to take over most of US WEST's high capacity demand
would not be prohibitive. If competitors invest $46 million,
they will be able to serve the almost 60% of US WEST's high
capacity customer locations within 1,000 feet of their existing
fiber networks. Id. at 27. The significant growth of competi-
tors' market share demonstrates that the cost of entry is not
prohibitive. As in the Phoenix MSA, Kahn and Tardiff
emphasized that economies of scale and opportunities to
bundle services make the investment to revenue ratio more
favorable for potential competitors in the Seattle MSA. Id.
at 28-29.
Fifth, US WEST asserted that it did not have an advantage
over its competitors in terms of relative size. In the Phoenix
MSA, US WEST faces five facilities-based competitors, and
the merged competitors AT&T/TCG and MCI/MFS World-
Com have significant advantages in terms of economies of
scale and access to capital. Phoenix Pet. at 31. Kahn and
Tardiff explain that the fact that competition in the market in
the Phoenix MSA has increased, while prices for services
have decreased, strongly indicates that investors believe in-
cumbents do not have absolute cost advantages in the market.
Id. at 32.
Similarly, in the Seattle MSA, US WEST does not benefit
from comparative advantage in terms of costs, structure, size,
and resources. As in the Phoenix MSA, AT&T/TCG and
MCI/MFS have advantages based on size; furthermore, in-
crease in competitive entry into the market, despite the fact
that US WEST's charges for high capacity services have
declined, strongly indicates that US WEST does not have an
insurmountable cost advantage. Seattle Pet. at 31-32.
The Commission received numerous comments arguing
that US WEST remained dominant in the markets for high
capacity services in the Phoenix and Seattle MSAs, including
comments criticizing Quality Strategies' market reports.
Forbearance Order, 14 F.C.C.R. p 25, at 19,961 n.88. The
Commission denied US WEST's request for forbearance,
finding US WEST's basis for evidence regarding market
share, the market analysis conducted by Quality Strategies,
could not be verified and, therefore, was not reliable. Id.
p p 25-26, at 19,961-62. Furthermore, the market share data
was based on DS1 equivalents, which distorted the level of
competition. Finally, the Commission rejected the market
share analysis, because US WEST focused on retail market
share and, therefore, failed to account for the fact that even
when US WEST did not provide retail services, US WEST
still provided and received compensation for the underlying
facilities. Without Quality Strategies' underlying evidence of
market share, the Commission found that US WEST had
failed to make a prima facie showing of competition and,
therefore, did not satisfy the initial requirement for s 10
forbearance. Id. p 33, at 19,967.
The Commission, however, completely failed to address the
evidence other than the market share data offered by US
WEST to show its diminished market power--i.e., evidence
relating to market participants, demand elasticity of custom-
ers, supply elasticity of customers, and the carrier's cost,
structure, size, and resources. It is this failing that is the
focus of US WEST's petition for review.
III. Discussion
A. Standard of review
We review the Commission's order pursuant to familiar
Administrative Procedure Act standards, to determine wheth-
er it is arbitrary, capricious, an abuse of discretion, or not in
accordance with law. 5 U.S.C. s 706(2)(A) (1994). As the
Supreme Court explained in Motor Vehicle Manufacturers
Ass'n v. State Farm Mutual Automobile Insurance Co., 463
U.S. 29 (1983):
The scope of review under the "arbitrary and capricious"
standard is narrow and a court is not to substitute its
judgment for that of the agency. Nevertheless, the
agency must examine the relevant data and articulate a
satisfactory explanation for its action including a "ration-
al connection between the facts found and the choice
made." Burlington Truck Lines, Inc. v. United States,
371 U.S. 156, 168 (1962). In reviewing that explanation,
we must "consider whether the decision was based on a
consideration of the relevant factors and whether there
has been a clear error of judgment." Bowman Trans-
portation, Inc. v. Arkansas-Best Freight System, Inc.,
supra, at 285; Citizens to Preserve Overton Park v.
Volpe, supra, at 416. Normally, an agency rule would be
arbitrary and capricious if the agency has relied on
factors which Congress has not intended it to consider,
entirely failed to consider an important aspect of the
problem, offered an explanation for its decision that runs
counter to the evidence before the agency, or is so
implausible that it could not be ascribed to a difference in
view or the product of agency expertise. The reviewing
court should not attempt itself to make up for such
deficiencies; we may not supply a reasoned basis for the
agency's action that the agency itself has not given.
SEC v. Chenery Corp., 332 U.S. 194, 196 (1947).
Id. at 43. In addition, the Court has made it clear that when
an agency determines to change an existing regulatory re-
gime it must do so on the basis of "reasoned analysis." Id. at
42.
B. Commission's Denial of Forbearance
The Commission determined that it was not required to
forbear from treating US WEST as a dominant carrier solely
because of three major areas of weakness in US WEST's
evidence regarding market share. The Commission's princi-
pal concern appeared to be that the studies conducted by
Quality Strategies analyzing US WEST's market share were
not reliable. US WEST did not provide the underlying raw
data on which the studies were based. As a result, the
analysis could not be evaluated or verified. The Commission
noted, for example, that Quality Strategies failed to provide a
copy of the questions and answers that were the basis of its
surveys, and failed to describe how it weighted and evaluated
responses to the surveys. Forbearance Order, 14 F.C.C.R.
p 25, at 19,961. Without adequate information about Quality
Strategies' methods, the Commission found that it was unable
to resolve discrepancies between their market share evidence
and evidence presented by other commentators. Id. p 26, at
19,962.
The Commission also faulted the material prepared by
Quality Strategies insofar as it purported to measure market
share by analyzing the percentage of capacity provided by
various providers of high capacity services. A "DS1" is a
measure of capacity, and Quality Strategies used DS1 equiva-
lents to measure market share. The problem, however, as
the FCC pointed out, is that reliance on DS1 equivalents fails
to provide an accurate measure of competition for high capac-
ity services, because resort to this data overstates competitive
inroads in a market. One DS3 channel is equivalent to 28
DS1 channels. Therefore, if entity "x" provides one DS3
channel to one customer, and entity "y" provides 28 DS1
channels to 28 different customers, entity "y" can claim that it
has only 50% of the market share based on "capacity." Id.
p 27, at 19,963. Because of this type of distortion, the Com-
mission rejected the claim that the DS1 equivalents methodol-
ogy provides an accurate measure of market share. The
Commission also found that DS1 equivalents methodology
puts disproportionate weight on entrance facilities, which are
usually DS3 circuits. Id. p 28, at 19,964.
Finally, the Commission found that US WEST's evidence
regarding market share further distorts levels of competition
by relying on retail market share. By defining competitive
losses based on retail, US WEST can claim competitive losses
even when US WEST provides the underlying facilities and,
therefore, continues to benefit from a substantial revenue
stream from the services. Id. p 29, at 19,965. For example,
the Commission noted that US WEST claimed to have lost
70% of the Phoenix retail market for special access and high
capacity dedicated transport services. But, according to its
own calculations, US WEST maintained control over 77% of
the overall Phoenix market for special access and high capaci-
ty dedicated transport. Id. US WEST argues that the FCC
considered only market share and failed to analyze other
bases of market power, including evidence regarding supply
elasticity, demand elasticity, and the comparative resources of
US WEST and its competitors. They are right on this point.
The FCC's order rests solely on a view that, because US
WEST offered no reliable data on market share, the petition
for forbearance failed to make a prima facie showing that
sufficient competition existed to satisfy the requirements of
s 10. Insofar as there may be other reasons to reject US
West's petition, such as the purported deficiencies in US
West's elasticity arguments outlined in the FCC's brief, they
were not articulated in the FCC's order and, therefore,
cannot provide the basis for upholding the FCC's decision.
See Burlington Truck Lines v. United States, 371 U.S. 156,
168-69 (1962) ("the courts may not accept appellate counsel's
post hoc rationalizations for agency action; Chenery requires
that an agency's discretionary order be upheld, if at all, on
the same basis articulated in the order by the agency itself"
(citing SEC v. Chenery, 332 U.S. 194, 196 (1947)).
Were this the first time the FCC was asked to consider
whether a carrier was dominant in a given market, the
explanation provided by the Commission in the Forbearance
Order may well have been adequate; but it is not the first
time that the Commission has addressed this issue. Indeed,
the FCC has considered this question on several occasions,
each time applying a test different from that applied here to
determine whether the firm in question retained market
power. For instance, in the Motion of AT&T Corp. to be
Reclassified as a Non-Dominant Carrier, 11 F.C.C.R. 3,271
(1995) the FCC considered four factors: (1) "AT&T's market
share"; (2) "the supply elasticity of the market"; (3) "the
demand elasticity of AT&T's customers"; and (4) "AT&T's
cost structure, size and resources." Id. p 38, at 3,293-94.
This approach was also followed in subsequent proceedings
before the agency. See Motion of AT&T Corp. to be De-
clared Non-Dominant for International Service, 11 F.C.C.R.
p 36 at 17,977 (1996) ("AT&T International Nondominance
Order"); COMSAT Corp., Petition Pursuant to Section 10(c)
of the Communications Act of 1934, as amended, for Forbear-
ance from Dominant Carrier Regulation and for Reclassifi-
cation as a Non-Dominant Carrier, 13 F.C.C.R. p 67, at
14,118-19 (1998) ("COMSAT Nondominance Order"). Yet, in
evaluating US West's petition, the FCC ended its inquiry
once it deemed the market share data inadequate.
Logically, for the lack of market share data to establish the
lack of a prima facie case, market share must be an essential
factor, not merely one of several factors in the determination.
Our research indicates, however, that the FCC has never
viewed market share as an essential factor in the past, and
the Commission does not assert to the contrary. In fact, the
FCC acknowledges that "the factors the Commission tradi-
tionally considered in classifying carriers as dominant or non-
dominant include market share, supply substitutability, elas-
ticity of demand, and the cost structure, size and resources of
the carrier." FCC Br. at 4. Therefore, the FCC's conclusion
in the Forbearance Order that market share data is essential
for a prima facie showing of competition simply is not
consistent with the agency's earlier decisions.
It is also noteworthy that, in the past, the FCC has gone so
far as to view market share as irrelevant where there was
other evidence that a carrier lacked market power. In the
COMSAT Nondominance Order, for example, the FCC made
a nondominance finding without "specific data" on the market
shares of the carrier in question or its competitors.
COMSAT Nondominance Order, 13 F.C.C.R. p 111, at 14,139.
It may be that it is reasonable for the Commission to
demand a showing on market share in every dominance
inquiry. But, no matter how reasonable it may be for the
FCC to require market share data before evaluating an
incumbent local exchange carrier's market power, it is not
reasonable for the Commission to announce such a policy
without providing a satisfactory explanation for embarking on
this course when it has not followed such a policy in the past.
The FCC "cannot silently depart from previous policies or
ignore precedent" as it has done here. Committee for Com-
munity Access v. FCC, 737 F.2d 74, 77 (D.C. Cir. 1984) (citing
Greater Boston Television Corp. v. FCC, 444 F.2d 841, 852
(D.C. Cir. 1970) ("an agency changing its course must supply
a reasoned analysis indicating that prior policies and stan-
dards are being deliberately changed, not casually ignored")).
No matter how reasonable the FCC's position that market
share data is necessary for a prima facie showing of market
competition, the FCC's "conclusory statements cannot substi-
tute for the reasoned explanation that is wanting in this
decision." Arco Oil & Gas Co. v. FERC, 932 F.2d 1501, 1504
(D.C. Cir. 1991).
Accordingly, the FCC's Forbearance Order must be re-
manded so that the Commission may "examine the relevant
data and articulate a satisfactory explanation for its action."
Motor Vehicle Manufacturers Ass'n, 463 U.S. at 43. The
FCC departed from its traditional non-dominance analysis
without explanation. The FCC's new policy that market
share data is essential to evaluate a carrier's market power
may well be reasonable, but until the Commission has ade-
quately explained the basis for this conclusion, it has not
discharged its statutory obligation under the Administrative
Procedure Act. Where, as here, an agency "has failed ... to
explain the path that it has taken, we have no choice but to
remand for a reasoned explanation." Tex Tin Corp. v. EPA,
935 F.2d 1321, 1324 (D.C. Cir. 1991).
C. Alleged Grant of Forbearance Under the Pricing Flexi-
bility Order
In the Forbearance Order, the Commission stated that "we
grant the relief requested in the forbearance petitions to the
extent that the Pricing Flexibility Order establishes a frame-
work pursuant to which the BOC petitioners may obtain relief
by demonstrating satisfaction of the competitive triggers
adopted in that order." Forbearance Order, 14 F.C.C.R. p 2,
at 19,949. AT&T and WorldCom argue that the Forbearance
Order should be vacated to the extent that the Commission
"granted" "relief" to US WEST, because US WEST's petition
was found to be meritless under s 10. This argument bor-
ders on being disingenuous.
When the Forbearance Order is read in its entirely, it is
absolutely clear that US WEST was granted no relief whatso-
ever. US WEST sought forbearance and it was categorically
denied. At the conclusion of the Order, the Commission
reminded US WEST and other BOCs that they were eligible
to apply for pricing flexibility under the Pricing Flexibility
Order:
The BOC petitioners may file petitions with the Commis-
sion in accordance with the procedures outlined in the
Pricing Flexibility Order for any market, including the
markets identified in their forbearance petitions, identify-
ing the relief requested and demonstrating satisfaction of
the triggers adopted therein.
Id. p 2, at 19,949. Indeed, the FCC was quite candid in
suggesting that the Pricing Flexibility Order might be the
preferred mechanism for companies seeking relief from the
burdens of dominant carrier status, because "price cap LECs
are not required to demonstrate that they lack market power
in the provision of any access service to receive much, if not
all, of the pricing flexibility that the BOC petitioners seek in
their forbearance requests." Id. p 11, at 19,953. The For-
bearance Order does not, however, ensure US WEST any
kind of entitlement to the regulatory relief available under
either s 10 of the Act or the recently promulgated Pricing
Flexibility Order. Accordingly, the claims from AT&T and
WorldCom are specious.
D. Impact of Pricing Flexibility Order on s 10 Forbear-
ance
During oral argument, it became clear that there is some
confusion over the relationship between the mechanisms for
relief afforded by s 10 forbearance and the Pricing Flexibility
Order. FCC counsel went so far as to suggest that the latter
preempts the former. We reject this view.
There is no doubt that the Commission expressed great
enthusiasm over the availability of the Pricing Flexibility
Order as a mechanism for relief of the sort sought here by
US WEST and other BOCs. Indeed, the Commission sug-
gested that might be a better mechanism for affected compa-
nies, because
non-dominance showings [under s 10] are neither admin-
istratively simple nor easily verifiable. The Commission
[bases] non-dominance findings on complex criteria, in-
cluding market share and supply elasticity. Market
share analyses require considerable time and expense,
and they generate controversy that is difficult to resolve.
Id. p 11, at 19,953. The Commission may or may not be right
in what it surmises about the purported advantages of the
Pricing Flexibility Order; but, at least for now, these surmis-
es are beside the point. Congress has established s 10 as a
viable and independent means of seeking forbearance. The
Commission has no authority to sweep it away by mere
reference to another, very different, regulatory mechanism.
Section 10 broadly states that the Commission will forbear
from applying any regulation or any provision of the Act to a
telecommunications carrier or telecommunications service, or
class of telecommunications carrier or telecommunications
services if certain statutory determinations are made. 47
U.S.C. s 160. The Pricing Flexibility Order does not purport
to regulate pursuant to s 10--it is narrower in reach and
adopts different burdens of proof with respect to issues that
might be common to claims arising under s 10 or the Pricing
Flexibility Order. And, notably, in the Forbearance Order,
the Commission did not claim that the Pricing Flexibility
Order would afford all of the relief otherwise available to a
petitioner under s 10; rather, the Commission said only that
"the Pricing Flexibility Order establishes a mechanism by
which the petitioners may receive much [not all] of the relief
they seek" under s 10. 14 F.C.C.R. p 36, at 19,968.
In short, the availability of the Pricing Flexibility Order as
an alternative route for seeking pricing flexibility does not
diminish the Commission's responsibility to fully consider
petitions under s 10. Therefore, the Commission is without
authority to deny US WEST's petition for forbearance be-
cause of the availability of the Pricing Flexibility Order.
IV. Conclusion
For the foregoing reasons, US WEST's petition for review
is granted and the case is remanded for further consideration
by the agency. The petition for review filed by AT&T and
WorldCom is hereby denied.