Opinion With Judge Cain Specifically Concurring In Part Vi Thereof. P ( 2001 )

IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
May 3, 1999 Session
BELLSOUTH ADVERTISING & PUBLISHING CORPORATION v.
TENNESSEE REGULATORY AUTHORITY, ET AL.
Appeal from the Tennessee Regulatory Authority
at Nashville, Tennessee
Nos. 96-01692 & 98-00654
No. M1998-00987-COA-R12-CV & M1998-01012-COA-R12-CV
Filed February 16, 2001
In these cases consolidated on appeal, Bellsouth Advertising & Publishing Corporation (BAPCO)
appeals from the action of the Tennessee Regulatory Authority requiring it to brand the covers of its
“White Pages Directory” with the names and commercial logos of local telecommunication
companies in competition with its parent corporation Bellsouth Telecommunications, Inc. (BST). We
reverse the judgment of the Tennessee Regulatory Authority. Judge Cottrell dissents.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Tennessee Regulatory Authority
Reversed
WILLIAM B. CAIN , J., delivered the opinion of the court. WILLIAM C. KOCH , JR., J., filed a concurring
opinion with Judge Cain specifically concurring in Part VI thereof. PATRICIA J. COTTRELL , J., filed
a dissenting opinion.
Paul S. Davidson and Guilford F. Thornton, Jr., Nashville, Tennessee, and James F. Bogan, III and
Daniel J. Thompson, Jr., Atlanta, Georgia, for the appellant, Bellsouth Advertising & Publishing
Corporation.
Henry Walker and K. David Waddell, Nashville, Tennessee, for the appellees, Nextlink Tennessee,
L.L.C. and Tennessee Regulatory Authority.
OPINION
This case represents the consolidation of two different, but intricately linked, administrative
appeals concerning BellSouth Advertising & Publishing Corporation (BAPCO). The first, BellSouth
Advertising and Pubublishing Corp. v. Tennessee Regulatory Authority, et al (the AT&T case
hereinafter) concerned a claim originally brought by American Telephone & Telegraph, Inc. (AT&T)
seeking to have its name and logo placed on the covers of the “White Pages” directories published
by BAPCO. By order entered March 19, 1998, the Tennessee Regulatory Authority (TRA) Required
BAPCO to place AT&T’s name and logo on the cover of its “White Pages”.
The aforementioned AT&T declaratory order was interpreted and applied in a proceeding
wherein NEXTLINK L.L.C., and similarly situated telecommunications companies sought to “brand”
BAPCO’s “White Pages” cover along with AT&T. Because of the substantial similarity of the issues,
these two cases were consolidated for consideration in this court. While certain issues raised in the
Nextlink case are of no consequence in the AT&T case, and thus must be considered separately, the
crucial issues are common to both cases.
This crucial, sub-constitutional issue presents the question of whether or not the TRA, under
Tennessee law and Tennessee Regulatory Authority Rule 1220-4-2-.15, can compel BellSouth
Advertising and Publishing Corporation to display, on the cover of its “White Pages” telephone
directory, the name and commercial logo of local telecommunication companies that are competitors
of BellSouth Telecommunications, Inc., giving such competing names and commercial logos equal
prominence with the “BellSouth” name and logo.
I. HISTORICAL BACKGROUND
In the decade of the 1990's, many states, including Tennessee, were running legislatively
parallel to the Congress of the United States in converting, from a monopoly environment to a
competitive environment, the providing of local telephone services.
On January 25, 1999, the United States Supreme Court issued its decision in AT&T Corp. v.
Iowa Utilities Bd., 525 U.S. 366 (1999). This decision was a detailed construction of the
Telecommunications Act of 1996, 47 U.S.C. § 251 et seq. Justice Thomas, concurring in part and
dissenting in part, traced the history of telecommunications in the United States and the effect of the
Telecommunications Act of 1996.
From the time that the commercial offering of telephone service began in 1877
until the expiration of key patents in 1893 and 1894, Alexander Graham Bell's
telephone company--which came to be known as the American Telephone and
Telegraph Company--enjoyed a monopoly. In the decades that followed, thousands
of independent phone companies emerged to fill in the gaps left by the telephone giant
and, in most larger markets, to build rival networks in direct competition with it. As
competition developed, many municipalities began to adopt ordinances regulating
telephone service.
During the 1900's, state legislatures came under increasing pressure to centralize
the regulation of telephone service. Although the quasicompetitive system had
significant drawbacks from the consumers' standpoint--principally the refusal of
competing systems to interconnect--perhaps the strongest advocate of state regulation
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was AT&T itself. The company's arguments that telephone service was naturally
monopolistic and that competition was resulting in wasteful duplication of facilities
appealed to Progressive-era legislatures. By 1915, most States had established public
utility commissions and charged them with regulating telephone service. Over time,
the Bell Companies' policy of buying out independent providers coupled with the state
commissions' practice of prohibiting competitive entry led back to the monopoly
provision of local telephone service.
....
In the Communications Act of 1934, 48 Stat. 1064, as amended, 47 U.S.C. § 151
et seq., Congress transferred authority over interstate communications from the ICC
to the newly created Federal Communications Commission (FCC or Commission).
As in the Mann-Elkins Act, Congress chose not to displace the States' authority over
intrastate communications. . . .
Congress enacted the Telecommunications Act of 1996 (Act), Pub. L. 104-104,
110 Stat. 56, against this backdrop. To be sure, the 1996 Act marked a significant
change in federal tele-communications policy. Most important, Congress ended the
States' longstanding practice of granting and maintaining local exchange monopolies.
It also required incumbent local exchange carriers to allow their competitors to access
their facilities in three different ways. . . . [I]ncumbents must: interconnect their
networks with requesting carriers' facilities and equipment, provide nondiscriminatory
access to network elements on an unbundled basis at any technically feasible point,
and offer to resell at wholesale rates any telecommunications service that they provide
to subscribers who are not telecommunications carriers. The Act sets forth additional
obligations applicable to all telecommunications carriers and all local exchange
carriers. To facilitate rapid transition from monopoly to competitive provision of
local telephone service, Congress set forth a process to ensure that the incumbent and
competing carriers fulfill these obligations.
Section 252 sets up a preference for negotiated interconnection agreements. To
the extent that the incumbent and competing carriers cannot agree, the Act gives the
state commissions primary responsibility for mediating and arbitrating agreements.
Specifically, Congress directed the state commissions to mediate disputes between
carriers during the voluntary negotiation period and--after the negotiations have run
their course--to arbitrate any “open issues.” In conducting these arbitrations, state
commissions are directed to ensure that open issues are resolved in accordance with
the requirements of §251, “establish . . . rates for interconnection, services, or network
elements” according to the standards that Congress set forth in §252(d), and to provide
a schedule for implementing the agreement reached during arbitration.1
1
As this extensive quotation is for historical background, many citations of supporting authority in the opinion
have been omitted.
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AT&T Corp., 525 U.S. at 402-06. (Thomas, J., concurring in part and dissenting in part).
While both cases at bar are based on Tennessee law, it is well to note that this dispute first
came before the TRA in 1996 when American Telephone and Telegraph Company filed a petition for
arbitration against BellSouth Telecommunications, Inc. (BST), the incumbent local exchange carrier,
under section 252 of the Federal Telecommunications Act of 1996. In this action, AT&T asserted
that the T R A should resolve, under the federal act, the question of whether AT&T had the right to
have its commercial logo displayed on the cover of directories published by BAPCO for BST.
Following the lead of Georgia (Georgia PSC Docket No. 6801-U Sept. 26, 1996), Massachusetts
(Order of Massachusetts DPU in NYTEX/AT&T/MCI/Sprint Arbitration Dec. 4, 1996), and North
Carolina (Order of North Carolina Utilities Commission in AT&T/BST Arbitration Dec. 23, 1996),
the TRA held that the directory cover issue was not arbitrable under the federal act and stated that
“private negotiations are the preferred method of resolving this issue, and the parties are encouraged
to resolve this matter through negotiation.” Private negotiations, however, reached an impasse
because AT&T would not agree to cease the display of its commercial logo on the covers of
directories published by competitors of BAPCO.
II. CHRONOLOGY OF THE TENNESSEE LITIGATION
BAPCO is a wholly owned subsidiary of BellSouth Enterprises, Incorporated, which is itself
a wholly owned subsidiary of BellSouth Corporation. BST is the “incumbent local exchange
telephone company” as defined in our state act, Tennessee Code Annotated section 65-4-101(d)
(1999) and is also a wholly owned subsidiary of BellSouth Corporation.
AT&T and interveners Nextlink Tennessee, L.L.C. (Nextlink), M.C.I. Telecommunications
Corporation (MCI), and American Communications Services, Inc. (ACSI) are “competing
telecommunications service providers” within the meaning of Tennessee Code Annotated section 65-
4-101(e).
Both federal law [47 U.S.C. §271(c)(2)(B)(viii)] and Tennessee law [Tenn .Code Ann. § 65-4-
124(c)] require BST to publish a directory of “White Pages”, containing not only the names of its own
subscribers but also the names of subscribers of competing carriers. It is undisputed that the “White
Pages” of BellSouth are published in full compliance with both federal and state law. The “White
Pages” directories required of BellSouth Telecommunications Company are, in fact, published by
BAPCO under contract with BST. The issues in this case involve only the covers of BellSouth
“White Pages” directories.
The Tennessee legislative parallel to the Telecommunications Act of 1996 actually predates
the federal act. Chapter 408 of the Public Acts of 1995 became effective on June 6, 1995. This
Tennessee act amended several sections of Title 65 of the Tennessee Code and established certain
new sections relative to the regulation of telecommunications carriers in Tennessee. See Tenn. Code
Ann. §§ 65-5-208 to -213 (1999).
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Following the refusal of the TRA to arbitrate the “cover” issue under the federal act and the
failure of negotiations between the parties, AT&T filed its petition for a declaratory ruling on
December 16, 1996. This proceeding sought a decision from the TRA as to whether Tennessee Code
Annotated sections 65-4-104, 65-4-114(1), 65-4-117(3) and 65-4-122(c), along with TRA Rule 1220-
4-2-.15 apply to the covers of “White Pages” telephone directories, published and distributed on
behalf of BST by BAPCO and containing the names and telephone numbers of customers of AT&T.
In its petition, AT&T requested the TRA to convene a contested case under Tennessee law with
BAPCO and BST as parties respondent. AT&T sought a decision from TRA regarding whether this
statutory and rule authority required BAPCO to place AT&T's name and logo on the covers of such
directories. Thereafter, TRA convened a contested case pursuant to Tennessee Code Annotated
section 4-5-223 and Tennessee Code Annotated section 65-2-104.
In its petition, AT&T asserted:
[T]he TRA [should] issue a declaratory order declaring that telephone directories are
an essential aspect of the telephone or telecommunications services of telephone
utilities such as BST; and that the covers of directories, published and distributed by
BAPCO on behalf of BST which include the names and numbers of customers of
AT&T, must be nondiscriminatory and competitively neutral, and either must include
the name and logo of AT&T in like manner to the name and logo of BST, or include
no company's name and logo, including the name “BellSouth.”
In Re: Petition of AT&T for Declaratory Order, Petition of AT&T to the Tenn. Regulatory Auth., No.
96-01692 (filed Dec. 16, 1996).
By order dated February 20, 1997, TRA granted the request of AT&T to convene a contested
case proceeding with BST and BAPCO as party respondents. In the process, the TRA also granted
intervention to MCI, ACSI and Nextlink so that each party would have an opportunity to participate
in the proceeding. On July 17, 1997, the hearing was held before the TRA. On September 23, 1997,
the TRA publicly deliberated and announced its decision. On March 19, 1998, the TRA issued its
order holding that TPSC Rule 1220-4-2-.15 required the appearance of the name and logo of AT&T
on the cover of the “White Pages” directory published by BAPCO under the same terms and
conditions as were provided to BST by contract. On May 15, 1998, BAPCO filed its Petition for
Review in this court.
III. THE DECISION OF TRA
TRA Rule 1220-4-2-.15 provides in its entirety as follows:
(1) Telephone directories shall be regularly published, listing the name[,]
address, and telephone number of all customers, except public
telephones and number unlisted at customer's request.
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(2) Upon issuance, a copy of each directory shall be distributed to all
customers served by that directory and a copy of each directory shall be
furnished to the Commission upon request.
(3) The name of the telephone utility, the area included in the directory and
the month and year of issue shall appear on the front cover.
Information pertaining to emergency calls such as for the police and
fire departments shall appear conspicuously in the front part of the
directory pages.
(4) The directory shall contain such instructions concerning placing local
and long distance calls, calls to repair and information services, and
location of telephone company business offices as may be appropriate
to the area served by the directory.
(5) Information operators shall have access to records which include all
listed telephone numbers (except telephone numbers not listed or
published at customer request)in the area for which they are responsible
for furnishing information service.
(6) In the event of an error in the listed number of any customer, the
telephone utility shall intercept all calls to the listed number for a
reasonable period of time provided existing central office equipment
will permit and the number is not in service. In the event of an error or
omission in the name listing of a customer, such customer's correct
name and telephone number shall be in the files of the information or
intercept operators and the correct number furnished the calling party
either upon request or interception.
(7) Whenever any customer's telephone number is changed after a directory
is published, the utility shall intercept all calls to the former number for
a reasonable period of time, and give the calling party the new number
provided existing central office equipment will permit, and the
customer so desires. Provided, however, the telephone utility may
refuse to take such action for good and sufficient reason.
(8) When additions or changes in plant, records or operations which will
necessitate a large group of number changes are scheduled, reasonable
notice shall be given to all customers so affected even though the
additions or changes may be coincident with a directory issue.
(9) The inside cover of the directory all contain the Commission's
telephone number: 1-800-342-8359 (toll free).
This rule, adopted in 1968, long before federal and state statutory policy changes mandating
the conversion from a monopolistic environment to a competitive environment in the provision of
local telephone services, provides only that the cover of the “White Pages” directory should disclose
the name of the telephone utility, the area included in the directory, and the month and year of issue
of the directory. In the monopoly environment of 1968, there was only one telephone utility; that
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utility was the only local service provider, and thus, it was the only telephone utility locally serving
the customers listed in the directory.
The policy of the Tennessee Telecommunications Act of 1995 is stated as follows:
The general assembly declares that the policy of this state is to foster the development
of an efficient, technologically advanced, statewide system of telecommunications
services by permitting competition in all telecommunications services markets, and
by permitting alternative forms of regulation for telecommunications services and
telecommunications services providers. To that end, the regulation of telecom-
munications services and telecommunications services providers shall protect the
interests of consumers without unreasonable prejudice or disadvantage to any
telecommunications services provider; universal service shall be maintained; and rates
charged to residential customers for essential telecommunications services shall
remain affordable.
Tenn. Code Ann. § 65-4-123 (Supp. 1999).
The majority of the TRA held that the policy declarations in Tennessee Code Annotated
section 65-4-123, together with proper construction of Rule 1220-4-2-.15, provide sufficient authority
to compel BST through BAPCO to display, on the cover of its “White Pages” directory, the name and
commercial logo of AT&T in equal prominence with the BellSouth name and commercial logo and
on the same terms and conditions as are given by BAPCO to BST. The dissenting member of the
TRA agreed that the end result was correct but felt that it should not be attained in a contested case
construing the Rule but rather that a rule-making proceeding was needed to revise the Rule so as to
apply in a competitive environment. This issue is so clearly drawn and articulated in the majority and
dissenting opinions of the TRA that extensive quotation from the declaratory order is desirable in
order to focus appellate consideration.
Chairman Greer, speaking for himself and Director Kyle, stated the majority position of the
TRA in the declaratory order of March 19, 1998 as follows:
Following the disposition of the pending motions, each Director openly deliberated
in great detail on the merits of the case and stated his or her position as to the proper
disposition of the issues. After the deliberations were concluded, the motion as stated
by Chairman Greer prevailed. The motion and supporting comments are as follows:
As a regulator in Tennessee, I am bound by the parameters of federal law, state
law and existing rules of this Agency. However, I am also charged with the
duty of promoting telecommunications competition in this state according to
the [state and federal] Telecommunications Act[s] of 1995 and 1996, and with
the duties of protecting the interest of both the consumers of Tennessee and the
utility providers. Sometimes the fulfillment of all of these duties conflicts, not
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only with each other but with the applicable laws involved. I feel that the
production of one complete phone book containing the names and numbers of
all customers, promotes competition, reduces consumer confusion and best
serves the needs of Tennessee. I feel this solution of one complete directory
fulfills my policy goals and I would encourage this action to be taken by the
parties involved.
All of that said, however, I must now determine what I am allowed to do under
the law. The original petition brought four (4) statutes and one (1) Tennessee
Public Service Commission/TRA rule in question. And I will explore each of
these.
First, [Tenn. Code Ann. §] 65-4-104 deals with the TRA's jurisdiction over
public utilities. The TRA obviously has jurisdiction over BellSouth
Telecommunications and the fulfillment of their obligations as a utility. By
virtue of contract, then, BAPCO, as BellSouth's agent, becomes responsible for
the fulfillment of BellSouth's utility obligations under the law. . . .
[Tenn. Code Ann. §] 65-4-114(1) empowers the Authority to require every
public utility to provide safe, adequate and proper service, but it does not
require that utility to provide such service to customers other than its own.
This statute, then, in my opinion, is not really applicable to this case.
[Tenn. Code Ann. §] 65-4-117(3) enables the Authority, after hearing, by order
in writing, to fix just and reasonable standards to be applied to any utility. This
statute seems to be envisioning rules, which truly requires a rule-making
proceeding. Thus, this statute is not applicable, in my opinion, to this case.
[Tenn. Code Ann. §] 65-4-122(c) mandates that a public utility shall not make
or give any undue preference to anyone. However, this statute applies more to
the ratepayers than to the utilities, as evidenced in New River Lumber
Company versus Tennessee Railway, 1921, thus, this statute is not relevant to
this case either.
Now, Tennessee Public Service Commission Rule [TRA Rule] 1220-4-2-.15
mandates that a telephone directory be published regularly containing the
names and numbers of all customers and distributed to all customers served by
that directory. The directory must have the name of the utility, the area served,
and the month and year of issue on the cover. . . .
I have been charged with the interpretation of this rule in resolving this issue.
I feel that it is important to note that this rule was created in 1968, long before
the 1996 Telecommunications Act and the push for competition. Keeping this
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in mind, and realizing that no more than one utility existed at the time of this
statute to address, I believe that the plain language of the rule envisions the
name and utility whose customers are inside the directory. Following the same
logic, then, I believe that if more than one utility's customers are inside the
same directory, then more than one utility's name would be on the cover. I do
not believe I have the authority to allow a telephone book with no name on the
cover.
The charges of law in this docket bring another important statute into focus,
and that is [Tenn. Code Ann. §] 65-4-123. This statute discusses not only the
policy of this state to permit competition in all telecom services markets, but
also that this regulation shall protect the interest of the consumers. This
Agency has ruled that directory assistance is not a basic service for
Tennessee consumers, therefore, in my opinion, the white pages listing is
a basic service and an essential tool the customer needs to efficiently and
fairly use the network. This telephone directory, then, needs to be complete
and as easy to understand as possible. In my opinion, the names of local
providers on the cover would be helpful to consumers. This would not only
serve as information, but would also promote competition by showing
consumers they have a choice in service providers. This method also allows
small companies to continue to provide service without the financial burden of
having to produce their own directory. They may contract with another carrier
or publisher to satisfy their TRA Rule requirements and still have their name
on the cover of the directory.
Therefore, after reading all of the testimony and briefs filed in this docket, and
after a hearing on the merits, and after contemplation of both my duties as a
regulator and my interpretation of the applicable rules and the statutes, I feel
that the name or names of the utility or utilities, whose customers are inside the
directory, by contract, should be allowed to be included in the cover in the
same format. So, if a carrier contracts with another carrier or publisher to have
their customers included in combined directory, then the included carrier
should have its name on the directory cover in a like format. Thus, I move
that AT&T be allowed to contract with BAPCO to have its name on the
cover of the directory under the same terms and conditions as that of
BellSouth's name. And further, BAPCO and/or BellSouth must offer the
same terms and conditions to AT&T in a just and reasonable manner.
In Re: Petition of AT&T Communications, Declaratory Order, Tenn. Regulatory Auth.,, No. 96-01692
(March 19, 1998) (citations and footnotes omitted)(emphasis in original).
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Thus, does the majority of the TRA hold in clear and unambiguous language that the policy
of Tennessee Code Annotated section 65-4-123 and Rule 1220-4-2-.15, in its present form, authorize
the action sought by AT&T in a “contested case” proceeding for a declaratory order.
With equal clarity, Director Melvin Malone asserts that the result reached by the majority is
correct but should be accomplished in a “rule-making” procedure rather than a “contested case”
proceeding for a declaratory order.
Says Director Malone:
In this declaratory order action, AT&T has requested that the Authority issue a
declaratory ruling on whether T.C.A. §§ 65-4-104, 65-4-114(1), 65-4-117(3), 65-4-
122(c), or TRA Rule 1220-4-2-.15 require BellSouth to place AT&T's name and logo
on the front cover of the local directory that is published by BellSouth Advertising and
Publishing Company (“BAPCO”) on behalf of BellSouth.
Consistent with the majority, in my opinion, this case turns upon the application
of the Rule, as opposed to other state statutes relied upon by AT&T in this cause. The
plain language of TRA Rule 1220-4-2-.15 mandates that “the name of the telephone
utility” must appear on the front cover of the local phone directory. The controlling
question here is whether the Rule requires BellSouth to place AT&T's name and logo
on the cover of BellSouth's local phone directory, or the local phone directory
published on its behalf, when AT&T's customers are listed in said directory.
Unlike the majority, however, I have concluded that applying the plain language
of the Rule, irrespective of its original intent and purpose, in the current environment
would result in each local telecommunications services provider distributing or
providing, directly or indirectly, its own phone book with its name on the front cover
to its customers. No law was submitted nor phalanx of language offered in this case
that resulted in a metamorphic effect on the plain meaning or intent of the Rule into
anything other than what it is. Nonetheless, I am persuaded that the imposition of
such a daunting requirement as would be mandated by the plain language of the Rule
and its original intent at this stage in Tennessee's transition to a competitive
environment may result in crippling consequences to the development of competition.
For the foregoing and other reasons, I have concluded that the most appropriate
path in this case is to declare that neither the Rule nor §§ 65-4-114(1), 65-4-117(3),
or 65-4-122(c) require BellSouth to place AT&T's name and logo on the front cover
of the local directory published by BAPCO on behalf of BellSouth when AT&T's
customers are listed therein. Being ever mindful of the clear and unambiguous policy
of the State of Tennessee to foster the development of an efficient, technologically
advanced, statewide system of telecommunications services by permitting competition
in all telecommunications services markets and this agency's general supervisory and
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regulatory power, jurisdiction, and control under § 65-4-104, I am persuaded that the
most judicious manner in which to proceed is with a rulemaking to revise TRA Rule
1220-4-2-.15 and/or to develop a rule to apply in a competitive environment.
In Re: Petition of AT&T Communications, Separate Opinion of Director Melvin Malone, Tenn.
Regulatory Auth., No. 69-01692 (March 19, 1998) (footnotes omitted).
While Director Malone asserted that a rule-making procedure was the preferable way to
dispose of the case, he chose in the end to join with the majority in result, observing “Hence, while
I conclude that the path that I would choose to resolve this matter is more appropriate than that chosen
by the majority, the result is the same - all competitors names on the front cover of Bell South’s local
phone Directory.” Id.
IV. JURISDICTION OF TENNESSEE REGULATORY AUTHORITY
The question in this case is not the method used by TRA in hearing and deciding this case,
but rather whether or not TRA had jurisdiction to compel BAPCO against its wishes to display the
name and commercial logo of AT&T on the cover of its “White Pages” directory. We conclude that
neither federal nor state law provides the authority with such jurisdiction.
As stated supra, before this contested case was ever filed, AT&T had filed a petition for
arbitration against Bellsouth Telecommunications, Inc. under section 252 of the Federal
Telecommunications Act of 1996. The TRA held that the issue of whether or not AT&T was entitled
to have its commercial logo displayed on the cover of directories published by BAPCO for Bellsouth
Telecommunications Company was not a subject for arbitration under section 252 of the Federal Act.
Administrative agencies in Alabama, Florida, Georgia, Kentucky, Illinois, Louisiana, Massachusetts,
Mississippi, New Hampshire, New York, North Carolina, Oregon, Rhode Island, South Carolina,
Texas and Vermont have reached the same conclusion. Administrative agencies in Arizona, Iowa,
Kentucky, Montana, and Washington have concluded otherwise.
Inherent in the findings of the majority of state regulatory agencies considering the issue
(including Tennessee in this case), is a finding that the cover of the incumbent’s “White Pages”
directory is not a “network element” within the meaning of 47 U.S.C. § 153 (29) which provides:
The term “network element” means a facility or equipment used in the provision
of a telecommunications service. Such term also includes features, functions, and
capabilities that are provided by means of such facility or equipment, including
subscriber numbers, databases, signaling systems, and information sufficient for
billing and collection or used in the transmission, routing, or other provision of a
telecommunications service.
47 U.S.C. § 153(29)( ).
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Bellsouth’s obligation under the federal act is to provide “White Pages directory listings for
customers of the other carrier’s telephone exchange service.” 47 U.S.C. § 271(c)(2)(B)(viii)( ).
The TRA rightly acknowledges that the goal in all of the legislative law in these cases is to
“unbundle” the network elements of an incumbent local exchange carrier in order to foster
nondiscriminatory entry into the competive market of telecommunications services. With very little
by the way of explanation, the TRA held that the branding of “White Pages” directory covers was in
the nature of a network or utility function. This holding, if correct, brings the issue of directory cover
branding within the ambit of the Telecomunications Act of 1996, the FCC rules regarding
enforcement of the act’s provisions, and Tennessee’s Telecommunications Act of 1995.
The term “network element” is broadly defined to include more than simply the physical
facilities and equipment of an ILEC. AT&T Corp. v. Iowa Utilities Bd., 525 U.S. 366 (1999).
Providing directory listings necessary to local customer service is in the nature of a “network
element” to be provided at cost-based rate. See AT&T of Va. v. Bell-Atlantic Va., Inc., 197 F.3d 663,
674 (4th Cir. 1999). Yet inherent in the TRA’s ruling was the finding that the branding of the cover
of a local white pages directory is an element of BST’s network as well, and thus, must be provided
to competing LEC’s on an unbundled basis.
In this discussion the following is persuasive:
There is a point, though, at which a particular service is too remote to justify
inclusion as a network element. . . . Some things the CLEC’s must do for themselves.
The unbundling requirement is aimed at making available to CLEC’s, those network
features, which a CLEC needs to provide competitive local telephone service, . . . or
which competitors could not otherwise duplicate in a timely manner or at a reasonable
cost. The unbundling requirement ordinarily should not extend to general business
services that can be replicated by competitors.
MCI Telecomm. Corp. v. GTE Northwest, Inc., 41 F. Supp. 2d 1157, 1180-81 (D.Or. 1999).
The incumbent’s “White Pages” directory cover is among “items that do not (as they must)
meet the statutory definition of ‘network element’ ” AT&T Corp., 525 U.S. at 386.
So ends the federal inquiry in this case. We now turn to Tennessee law, primarily the
Telecommunications Act of 1995 codified as part of Tennessee Code Annotated Title 65, chapters
4 and 5. First, it is well to observe that the Federal Telecommunications Act of 1996 is not
preemptive of state legislation, but rather compatible therewith, and state law is preempted only to
the extent that it conflicts with the federal act. See Bellsouth Telecomm. v. Greer, 972 S.W.2d 663,
671 (Tenn. Ct. App. 1997).
This Court has held:
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The Commission, like any other administrative agency, must conform its actions to
its enabling legislation. Tennessee Pub. Serv. Comm’n v. Southern Ry., 554 S.W.2d
612, 613 (Tenn.1977); Pharr v. Nashville, C. & St. L. Ry., 186 Tenn. 154, 161, 208
S.W.2d 1013, 1016 (1948). It has no authority or power except that found in the
statutes. Tennessee-Carolina Transp., Inc. v. Pentecost, 206 Tenn. 551, 556, 334
S.W.2d 950, 953 (1960). While its statutes are remedial and should be interpreted
liberally, see Tenn. Code Ann. § 65-4-106 (Supp.1996), they should not be construed
so broadly as to permit the Commission to exercise authority not specifically granted
by law. Pharr v. Nashville, C. & St. L. Ry.,, 186 Tenn. at 161, 208 S.W.2d at 1016.
Bellsouth Telecomm., 972 S.W.2d at 680 (Tenn. Ct. App. 1997.)
The Supreme Court of Tennessee has held:
Any authority exercised by the Public Service Commission must be as the result
of an express grant of authority by statute or arise by necessary implication from the
expressed statutory grant of power. Pharr v. Nashville, Chattanooga and St. Louis
Railway, 186 Tenn. 154, 208 S.W.2d 1013 (1948); Nashville, Chattanooga and St.
Louis Railway v. Railroad and Public Utilities Commission et al, 159 Tenn. 43, 15
S.W.2d 751 (1929). In either circumstance, the grant of power to the Commission is
strictly construed.
Tennessee Pub. Serv. Comm’n v. Southern Ry. Co., 554 S.W.2d 612, 613 (Tenn. 1977).
As with the question of arbitration under the federal statute we are dealing in this case with
a very limited issue. We are concerned not with the “White Pages” listings of competing local
telecommunications service providers, which BST, as the incumbent local exchange telephone
company, is required by both federal and state law to provide, but rather with the branding of the
cover of such “White Pages” directory.
Tennessee Code Annotated section 65-4-124 provides in pertinent part as follows:
(a) All telecommunications services providers shall provide non-discriminatory
interconnection to their public networks under reasonable terms and conditions; and
all telecommunications services providers shall, to the extent that it is technically and
financially feasible, be provided desired features, functions and services promptly, and
on an unbundled and non-discriminatory basis from all other telecommunications
services providers.
(b) Prior to January 1, 1996, the commission shall, at a minimum, promulgate
rules and issue such orders as necessary to implement the requirements of subsection
(a) and to provide for unbundling of service elements and functions, terms for resale,
interLATA presubscription, number portability, and packaging of a basic local
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exchange telephone service or unbundled features or functions with services of other
providers.
(c) These rules shall also ensure that all tele-communications services providers
who provide basic local exchange telephone service or its equivalent provide each
customer a basic White Pages directory listing, provide access to 911 emergency
services, provide free blocking service for 900/976 type services, provide access to
telecommunications relay services, provide Lifeline and Link-Up Tennessee services
to qualifying citizens of the state and provide educational discounts existing on June
6, 1995.
Tenn. Code Ann. § 65-4-125(a-c) (Supp. 1999).
The same reasons that impelled the TRA, and a majority of other state regulatory
commissions, to reject arbitration of the branding of “White Pages” directory covers under the federal
act impel the conclusion that branding of “White Pages” directory covers is not an essential public
service, subject to regulation by the TRA. National Merchandising Corp. v. Public Serv. Comm’n,
5 N.Y.2d 485, 490, 158 N.E.2d 714, 716, 186 N.Y.2d 47, 50 (1959). The TRA is mandated by Code
section 65-4-124(c) to, by rule, insure that each “customer” of all telecommunications service
providers who provide basic local exchange telephone service get a “White Pages” directory listing,
and it is undisputed in this record that Bellsouth and BAPCO have complied - rule or no rule - with
this statutory mandate, which is the same mandate required by federal law.
The TRA held that under section 65-4-104of the Code, it had jurisdiction over BST and the
fulfillment of its obligation as a utility. It further held: “By virtue of contract, then, BAPCO, as
Bellsouth’s agent becomes responsible for the fulfillment of Bellsouth’s utility obligations under the
law.” While it is correct to say that BST may not avoid the fulfillment of its statutorily mandated
utility functions by either agency or contract, See Smith v. Southern Bell Tele. and Tel. Co., 51 Tenn.
App. 146, 151, 364 S.W.2d 952, 955 (1962); Loring v. Bellsouth Adver. & Publ’g. Corp., 339 S.E.2d
372, 374 (Ga. Ct. App. 1985), it does not follow that TRA has jurisdiction to regulate the activities
of BAPCO in non-utility endeavors.
At this point, the separate identity of BST and BAPCO becomes critical. Both are wholly
owned subsidiaries of Bellsouth Corporation. BST is a “telecommunications services provider” under
Title 65, Chapters 4-5 of Tennessee Code Annotated and thus subject to regulation by the TRA. BST
is also an “incumbent local exchange” company under the Federal Telecommunications Act of 1996.
On the other hand, BAPCO is not a public utility company, subject to regulation by Tennessee
Regulatory Authority, but rather a corporation engaged in the competitive business of publishing
telephone directories. Having fulfilled the utility obligations of BST by providing “each customer
a basic White Page directory listing” [Tenn. Code Ann. § 65-4-124(c)], BAPCO has fulfilled all
utility functions mandated by Tennessee statute and TRA has no further power under either state law
or federal law to regulate the non-utility activities of BAPCO. See U. S. West Communications, Inc.
v. Minnesota Pub. Utils., 55 F. Supp. 2d 968, 983-985 (D. Minn. 1999).
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Tennessee Regulatory Authority correctly held that sections 65-4-114(a), 65-4-117(3) and 65-
4-122(c) of the Code, statutes relied on by AT&T in its petition for a declaratory ruling, were
inapplicable to this case. The authority based its decision on the general policy statement of
Tennessee Code Annotated section 65-4-123, the jurisdictional provisions of the Code section 65-4-
104 and the provisions of TRA Rule 1220-4-2-.15. The rule is brought unchanged into a statutorily
mandated competitive environment. As observed by Director Malone:
[A]pplying the plain language of the Rule, irrespective of its original intent and
purpose, in the current environment would result in each local telecommunications
services provider distributing or providing, directly or indirectly, its own phone book
with its name on the front cover to its customers. No law was submitted nor phalanx
of language offered in this case that resulted in a metamorphic effect on the plain
meaning or intent of the Rule into anything other than what it is.
Opinion Director Malone, Tenn. Regulatory Auth., In Re: Petition of AT&T.
It is well to add that this observation comports precisely with Tennessee Code Annotated §
65-4-124, which applies by its terms not to just an “incumbent local exchange telephone company”
but rather to “all telecommunications services providers” who provide basic local exchange telephone
service.
However laudable the desire of the Tennessee Regulatory Authority to have produced “one
complete phone book containing the names and numbers of all customers,” the language of the
controlling statutes and of TRA Rule 1220-4-2-.15 simply cannot be stretched to provide TRA with
authority to compel a non-utility publishing company to brand the cover of its White Pages directory,
not just with the name, but also the commercial logo of a telephone utility in competition with BST.
We hold that TRA is without authority under present statutes and rules to compel BAPCO to
brand its “White Pages” directory cover with the name and commercial logo of AT&T or any other
telecommunications service provider who provides basic, local exchange telephone service.
V. CONSTITUTIONAL QUESTIONS
BAPCO on appeal asserts that the action of TRA in compelling BAPCO to brand the cover
of its White Pages directory with the name and commercial logo of AT&T constitutes “forced speech”
in violation of the First Amendment of the Constitution of United States. Miami Herald Publ’g. Co.
v. Tornillo, 418 U.S. 241, 257 (1974). BAPCO further asserts that the TRA order effects a
confiscatory taking of property in violation of the Fifth and Fourteenth Amendments to the
Constitution of the United States and in violation of Article 1 section 8 of the Constitution of
Tennessee.
Since the majority of this Court is in agreement that the TRA order underlying this appeal is
invalid on grounds other than those constitutional issues presented, I would prefer to pretermit the
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constitutional issues under Teague v. Campbell County, 920 S.W.2d 219 (Tenn. Ct. App. 1995) and
Watts v. Memphis Transit Management Co., 224 Tenn. 721, 462 S.W.2d 495 (Tenn. 1971). Judge
Koch, however, prefers to address the First Amendment “forced speech” question, and since on the
merits of this constitutional question I agree with him, I concur in section VI of his separate
concurring opinion entitled “Constitutional Limits on the TRA’s Authority to Compel Speech.”
VI. TRADEMARK ISSUES
BAPCO asserts that the TRA order violates state and federal trademark law and promotes
marketplace confusion.
We have held that TRA has no jurisdiction over BAPCO in its non-utility functions. The only
utility function performed by BAPCO in this case was under its contract with BST whereby it
undertook to perform for BST the utility duties mandated by federal and state law. It is undisputed
that BAPCO has performed these utility duties for BST. We have further held that the branding of
the “White Pages” directory cover produced by BAPCO is a non-utility function. These rulings have
disposed of all issues necessary to the determination of this case. We therefore pretermit the
trademark issues. See General Outdoor Adver. Co. v. Coley, 23 Tenn. App. 292, 131 S.W.2d 305(1938); Deaton v. Evans, 192 Tenn. 348, 241 S.W.2d 423 (1951); Tennessee Cable Television Ass’n
v. Public Serv. Comm’n, 844 S.W.2d 151 (Tenn. Ct. App. 1992).
VII. THE NEXTLINK CASE
In the disposition of these consolidated cases, our holding in the AT&T case is necessarily
dispositive of the Nextlink case.
Nextlink Tennessee LLC, MCI Telecommunications Corporation and American
Communications Services, Inc. are all “competing telecommunications service providers” within the
meaning of Tennessee Code Annotated § 65-4-101(e) in competition with BST. All of these parties
were allowed to intervene in the AT&T case and participate therein. Their application to intervene
sought no specific relief for themselves but rather strongly supported the position of AT&T. When
the TRA released its 1998 order sustaining the position of AT&T, it granted the relief sought by
AT&T without specific adjudication of the Nextlink, MCI, and ACSI interventions.
When BAPCO appealed the March 19, 1998 order in the AT&T case, no stay order issued,
and the March 19, 1998 order remained effective. Tenn. Code Ann. § 4-5-322(c); Underwood v.
Liberty Mut. Ins. Co., 782 S.W.2d 175, 177 (Tenn. 1989). Nextlink then approached BAPCO about
putting the name and commercial logo of Nextlink on the front cover of the BAPCO “White Pages”
directory, only to be rebuffed by BAPCO on an assertion that the March 19, 1998 order only
adjudicated the claim of AT&T and did not apply to Nextlink. On September 23, 1998, Nextlink filed
its petition in this case seeking to compel BAPCO to comply with the declaratory order of March 19,
1998 as it related to Nextlink and to implement sanctions against BAPCO.
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The Nextlink case was heard on oral argument on October 15, 1998, and on November 2,
1998, TRA entered an order enforcing Rule 1220-4-2-.15 against BAPCO holding in pertinent part:
The fundamental issue raised by NEXTLINK’s petition and BAPCO’s response
is whether the Authority may enforce TRA Rule 1220-4-2-.15, as interpreted in the
Declaratory Order, pending appeal of the Declaratory Order. On October 15, 1998,
following the submission of briefs and oral arguments, the Authority deliberated and
concluded that, in the absence of a stay of the Declaratory Order, BAPCO must
comply with TRA Rule 1220-4-2-.15 as interpreted in the Authority’s Declaratory
Order of March 19, 1998, and as applied to all similarly situated carriers. In support
of that decision, the Authority makes the following findings of fact and conclusions
of law.
1. NEXTLINK is a certified, competitive local exchange telephone company. See
Docket No. 95-02502 (September 29, 1995) and Docket No. 96-00728 (April 12,
1996). NEXTLINK offers local telephone service to subscribers in Memphis and
Nashville in competition with BellSouth. See Docket No. 97-00309, Tr. Vol. VIII B,
pages 112-113. NEXTLINK’s customer listings are contained within the White Pages
directories published by BAPCO on behalf of BellSouth. See Docket No. 97-00309,
Tr. Vol. XIA, pages 10-11. As required by federal law, the White Page Directories
published by BAPCO on behalf of BellSouth must include the names and telephone
numbers of NEXTLINK’s local customers. The facts from the foregoing dockets were
officially noticed by the Authority in a letter dated October 16, 1998, without
objection from the parties.
2. In its Declaratory Order, the Authority declared that the rule on White Pages
directories applies to competitive local exchange carriers and that such carriers should
be allowed the opportunity to appear on the cover of the White Pages under the same
terms and conditions as BellSouth itself. Although the ordering clause of the decision
grants relief only to AT&T, the Order was based squarely on the Authority’s
interpretation and application of the agency’s rule on White Pages directories and
therefore, the agency’s holding concerning the interpretation of the rule must not be
applied only to AT&T but it must equally be applied to all similarly situated carriers
that seek the same relief.
By definition, an agency rule is a “statement of general applicability.” See Tenn.
Code Ann. § 4-5-102(10). Consequently, an interpretation of a rule necessarily
applies to all similarly situated companies. NEXTLINK is similarly situated to AT&T
in that it too is a certificated competing local exchange provider. Moreover,
NEXTLINK, is in fact, providing service. Therefore, since there are no relevant
differences between NEXTLINK and AT&T regarding the application of the rule on
White Pages directories, no contested case hearing was required on this issue.
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3. In the absence of a stay, the Authority’s decision in its Declaratory Order
remains in effect pending appeal. Under Tennessee law, the filing of a petition for
review “does not itself stay enforcement of the agency decision.” See Tenn. Code
Ann. § 4-5-322(c). BAPCO itself concedes that the Declaratory Order is now in
effect, at least as it applies to BAPCO and AT&T. See also Transcript of October 15,
1998, at 32. Therefore, the Authority’s interpretation of Rule 1220-4-2-.15 is
effective and enforceable. See Underwood v. Liberty Mutual, 782 S.W.2d 175, 177
(Tenn. 1989) holding that “judgment may continue to be enforced pending an appeal
unless a stay is ordered.”
4. BAPCO’s argument that NEXTLINK’s claim is barred by res judicata is not
persuasive. Similarly, BAPCO’s argument that the Authority cannot now modify the
terms of the Declaratory Order has no merit, because NEXTLINK has not asked the
Authority to amend its Declaratory Order nor is any such modification necessary to
grant NEXTLINK’s petition. The Declaratory Order interprets and applies the
Authority’s rule as to White Pages directories and that interpretation necessarily
applies to any other, similarly situated carrier covered by that rule.
5. In its Declaratory Order, the Authority directed BAPCO to negotiate with
AT&T for “the same terms and conditions” which BAPCO offers to BellSouth.
BAPCO acknowledges that no such terms and conditions exist at this time. See
Transcript of October 15, 1998, at p. 6. BAPCO is therefore obliged to negotiate with
NEXTLINK for the opportunity to appear on the cover of the White Pages directories
in a size and style comparable to the name and logo of BellSouth.
In Re: Petition of Nextlink to Sanction Bellsouth, Order enforcing T.R.A. Rule 120-4-2-.15 and
denying sanctions, Tenn. Regulatory Auth. No. 98-00654 (Nov. 2, 1998)(footnotes omitted).
TRA declined to impose sanctions upon BAPCO and BAPCO timely appealed the November
2, 1998 order.
BAPCO on appeal asserts three issues.
1. That BAPCO’s procedural due process rights were violated when the TRA refused to allow
BAPCO to submit evidence on whether or not Nextlink was a “similarly situated competitive local
exchange carrier.”
2. The March 19, 1998 order, which is the subject of the AT&T appeal, is res judicata of the
claims of Nextlink.
3. That BAPCO’s appeal of the AT&T order divested the TRA of any jurisdiction of the
Nextlink case.
The TRA’s November 2, 1998 order is so completely and correctly dispositive of these three
issues on appeal as to require little discussion. Nextlink is a certified, competitive local exchange
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telephone company providing local service in competition with BST, and its White Pages customers
are published in the BAPCO “White Pages” directories. It is, thus, in the only context at issue,
“similarly situated” as a matter of law, and further proof is neither necessary nor proper.
If the agency and the individual disagree only with respect to the way in which the
law applies to an uncontroverted set of facts, additional procedures cannot possibly
enhance the accuracy of the factfinding process, simply because the agency does not
need to resolve any factual controversies. This is a familiar principle that
administrative law borrows from the concept of summary judgment in civil procedure.
Kenneth C. Davis & Richard S. Pierce, Sr., Administrative Law Treaties, § 9.5 (3d ed.1994).
Likewise, res judicata is not applicable to this case. Intervention in this case is governed by
Tennessee Code Annotated § 4-5-310 and not by Rule 24 of the Tennessee Rules of Civil Procedure.
Rule 24.03 Tennessee Rules of Civil Procedure provides that one seeking to intervene must
accompany his intervention motion with a “ ... pleading setting forth the claim or defense for which
intervention is sought.” Tenn. R. App. P. R. 24.03. Tennessee Code Annotated § 4-5-310 does not
require a petitioner for intervention to seek affirmative relief. In the AT&T case Nextlink did not
seek or receive specific affirmative relief.
In the AT&T action for a declaratory order TRA Rule 1220-4-2-.15 was already long in
existence having been adopted in1968. The AT&T adjudication sought an interpretation of this rule.
Administrative agencies typically perform both legislative and adjudicative
functions. These functions are closely related, and the line between them is not
always clear.
Rule making is essentially a legislative function because it is primarily concerned
with considerations of policy. It is the process by which an agency lays down new
prescriptions to govern the future conduct of those subject to its authority.
Tennessee Cable, 844 S.W.2d at 160-61 (citations omitted).
In the AT&T case the TRA interpreted its rule. The Nextlink case sought to enforce the
previous interpretation of this same rule. Application of this rule is an executive or administrative
function. In re: Cumberland Power Co., 147 Tenn. 504, 509-513, 249 S.W. 818, 819-20 (1923). The
TRA correctly held that Nextlink is not barred by res judicata.
Finally, no stay order having been issued in the AT&T appeal, the TRA was free to enforce
its decision in the Nextlink proceeding. See Tenn. Code Ann. § 4-5-322(c).
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IX. CONCLUSION
Because we find that neither state nor federal law allows the TRA to compel BAPCO to brand
its White Pages cover with the name and commercial logo of “competing telecommunications service
providers” in competition with BST, and because we further find, as articulated by Judge Koch in his
separate concurring opinion, that such order imposes “forced speech” upon BAPCO in violation of
the First Amendment of the Constitution of the United States, both the AT&T case and the Nextlink
case are reversed. The issues of alleged violation of the Fifth and Fourteenth Amendments to the
Constitution of the United States, together with the trademark issues asserted in the AT&T case, are
pretermitted. The other issues raised by BAPCO in the Nextlink case are without merit. Costs of the
AT&T case are assessed against AT&T. Costs of the Nextlink case are assessed one-half against
Nextlink and one-half against BAPCO.
_______________________________________________
WILLIAM B. CAIN, JUDGE
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