Bell Atl Tele Cos v. FCC

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued November 19, 1997 Decided December 23, 1997

No. 97-1432

Bell Atlantic Telephone Companies, et al.,

Petitioners

v.

Federal Communications Commission and

United States of America,

Respondents

AT&T Corporation, et al.,

Intervenors

On Petition for Review of an Order of the

Federal Communications Commission

Mark L. Evans argued the cause for petitioners, with
whom Michael K. Kellogg, Sean A. Lev, James R. Young,
Michael E. Glover, and Edward Shakin were on the briefs.

John E. Ingle, Deputy Associate General Counsel, Federal
Communications Commission, argued the cause for respon-
dents, with whom Joel I. Klein, Acting Assistant Attorney
General, U.S. Department of Justice, William E. Kennard,
General Counsel at the time the brief was filed, Federal
Communications Commission, Christopher J. Wright, Deputy
General Counsel at the time the brief was filed, Laurel R.
Bergold, Counsel, Catherine G. O'Sullivan and Nancy C.
Garrison, Attorneys, U.S. Department of Justice, were on the
brief.

Anthony C. Epstein argued the cause for intervenors MCI
Telecommunications Corporation, et al., with whom Mark C.
Rosenblum, David W. Carpenter, Peter D. Keisler, Leon M.
Kestenbaum, Charles C. Hunter, Catherine M. Hannan, and
Richard S. Whitt were on the brief. Jay C. Keithley entered
an appearance.

James D. Ellis, Robert M. Lynch, Patricia Diaz Dennis,
David F. Brown, Randall E. Cape, Patricia L.C. Mahoney,
Martin E. Grambow, Durward D. Dupre and Mary W.
Marks were on the statement in lieu of brief, filed on behalf
of intervenors SBC Communications Inc., et al.

Before: Edwards, Chief Judge, Tatel, Circuit Judge and
Buckley, Senior Circuit Judge.

Opinion for the Court filed by Chief Judge Edwards.

Edwards, Chief Judge: This case arises from a challenge to
an Order of the Federal Communications Commission ("Com-
mission") construing a poorly drafted section of the Telecom-
munications Act of 1996, enacted as 42 U.S.C. s 272. Under
the statute, there are two potentially contradictory edicts:
first, s 272(a) states that, normally, a Bell Operating Compa-
ny ("BOC") may not provide origination of most communica-
tions services between Local Access and Transport Areas
("interLATA services") except through a separate affiliate;
second, s 272(e)(4) states that a BOC "may provide any
interLATA ... facilities or services to its interLATA affiliate
if such services or facilities are made available to all carriers
at the same rates." At first blush, the second provision

appears to give back what the first section takes away, i.e., a
BOC's ability to provide interLATA origination services in a
physically integrated network with its local exchange services.
To avoid such an anomalous result, the Commission interpret-
ed s 272(e)(4) to mean that a BOC may provide any inter-
LATA services "it is otherwise authorized to provide," so
long as it provides them on a non-discriminatory basis. Sec-
ond Order on Reconsideration, Implementation of the Non-
Accounting Safeguards of Sections 271 and 272 of the Com-
munications Act of 1934, as Amended, 12 FCC Rcd. 8653,
8675 (1997).

Petitioners, the BOCs, argue that the plain meaning of
s 272(e)(4) precludes the Commission's interpretation, be-
cause the literal meaning of the words "may provide any"
operates as an unrestricted affirmative grant of authority for
them to deliver integrated interLATA services. This argu-
ment confuses "plain meaning" with literalism. The meaning
of a statutory provision is its use in the context of the statute
as a whole. Here, the language of s 272(e)(4) cannot yield
the purported plain meaning advanced by Petitioners, be-
cause that meaning would produce marked inconsistencies
with s 272(a) and so would violate the context of the statute.
Because we find the statute ambiguous and the Commission's
interpretation reasonable, we deny the petition for review.

I. Background

The Telecommunications Act of 1996 ("Act") superseded
the consent decree, or "Modification of Final Judgment," that
governed the telecommunications industry after the break-up
of the AT&T monopoly and the emergence of the regional
BOCs. The Act aimed to foster competition at all levels of
the industry, including local exchange and interLATA ser-
vices. In the jargon of the Act, a LATA is bigger than a local
exchange and smaller than a region. This case concerns
interLATA services, that is, long distance service between
any two LATAs, originating within the BOC's service region.
InterLATA services represent a significant and sought-after
segment of the telecommunications market.

Section 271 of the Act gives the basic framework for BOC
provision of interLATA services; a BOC may not deliver
interLATA services not authorized therein. 42 U.S.C.
s 271(a). The section permits a BOC or its affiliate to
provide interLATA services originating inside the states in
which the consent decree authorized the BOC to provide
wireline services ("in-region states") only with express Com-
mission approval. s 272(b)(1). The approval depends upon
several factors, including the requirements of s 272. Com-
mission approval is not required for services originating
outside the states in which the consent decree authorized the
BOC to provide wireline service, s 272(b)(2), or for so-called
incidental interLATA services, s 272(b)(3).

The section in question in this case, 42 U.S.C. s 272,
creates a separate affiliate requirement for specified BOC
activities. It begins with the heading "In General," under
which it specifies that a BOC may not provide certain services
"unless it provides [the services] through one or more [sepa-
rate] affiliates." s 272(a)(1). One of those services requiring
provision through a separate affiliate is "[o]rigination of inter-
LATA communications services," with three minor excep-
tions. s 272(a)(2)(B). The exceptions include incidental
interLATA services and interLATA services that originate
outside the area in which the BOC was authorized to provide
wireline services under the consent decree. s 272(a)(2)(B)(ii).
The result is that s 272(a) permits a BOC to provide in-
region interLATA origination services only so long as it
provides them "through" a separate affiliate. The require-
ments of separateness, which include independent operations
and management, as well as arm's length dealings, are set out
in s 272(b). The separate affiliate requirement ceases to
apply four years after the Act goes into force. s 272(f)(2).

The interpretive difficulty seen in this case arises because
of a subsection headed "Fulfillment of Certain Requests,"
s 272(e). This subsection first lays out several non-
discrimination requirements for a BOC: a BOC must respond
to non-affiliate service requests in the same time it does to
affiliates, s 272(e)(1); must provide the same facilities to all,
s 272(e)(2); and must charge an affiliate at least as much as a

non-affiliate, s 272(e)(3). The last portion of the subsection
states that a BOC

may provide any interLATA or intraLATA facilities or
services to its interLATA affiliate if such services or
facilities are made available to all carriers at the same
rates and on the same terms and conditions, and so long
as the costs are appropriately allocated.

s 272(e)(4).

The language of s 272(e)(3) indicating that a BOC may
provide "any" interLATA services to its affiliate so long as it
meets the non-discrimination requirement arguably differs
from the requirement of s 272(a) that a BOC may only
originate in-region interLATA service through a separate
affiliate. In other words, the literal language of s 272(e)(4),
read alone, seems to grant a BOC the right to engage in
direct provision of "any" interLATA services. So construed,
s 272(e)(4) would permit a physically integrated interLATA-
local exchange system.

In its First Report and Order, the Commission concluded
that s 272(e)(4) was not intended to undercut s 272(a)(2), but
merely required non-discrimination for any interLATA ser-
vices that a BOC was otherwise authorized to provide. First
Report and Order, Implementation of the Non-Accounting
Safeguards of Sections 271 and 272 of the Communications
Act of 1934, as Amended, 11 FCC Rcd. 21905, 22032 (1996).
Petitioners challenged the Commission's interpretation before
this court, arguing that the plain meaning of s 272(e)(4)
expressly permitted physically integrated interLATA ser-
vices. At the Commission's request, the court remanded for
the Commission to consider the plain meaning argument
advanced by the BOCs. Bell Atlantic Telephone Cos. v. FCC,
No. 97-1067, 1997 WL 307161 (D.C. Cir. Mar. 31, 1997). On
remand, the Commission acknowledged the tension between
s 272(e)(4) and s 272(a)(2), but rejected the BOCs' plain
meaning argument, and reconfirmed its ruling in a detailed
exposition. See 12 FCC Rcd. at 8665. The BOCs now

challenge the Commission's interpretation of the statute as
unlawful.

II. Analysis

A. Chevron Step One

Chevron U.S.A., Inc. v. Natural Resources Defense Coun-
cil, 467 U.S. 837 (1984), governs review of agency interpreta-
tion of a statute which the agency administers. Under the
first step of Chevron, the reviewing court "must first exhaust
the 'traditional tools of statutory construction' to determine
whether Congress has spoken to the precise question at
issue." National Resources Defense Council, Inc. v. Brown-
er, 57 F.3d 1122, 1125 (D.C. Cir. 1995) (quoting Chevron, 467
U.S. at 843 n.9). The traditional tools include examination of
the statute's text, legislative history, and structure, see South-
ern California Edison Co. v. FERC, 116 F.3d 507, 515 (D.C.
Cir. 1997); as well as its purpose, see First Nat'l Bank &
Trust v. National Credit Union, 90 F.3d 525, 529-30 (D.C.
Cir. 1996). This inquiry using the traditional tools of con-
struction may be characterized as a search for the plain
meaning of the statute. If this search yields a clear result,
then Congress has expressed its intention as to the question,
and deference is not appropriate. See Hammontree v.
NLRB, 894 F.2d 438, 441 (D.C. Cir. 1990). If, however, "the
statute is silent or ambiguous with respect to the specific
issue," Chevron, 467 U.S. at 843, Congress has not spoken
clearly, and a permissible agency interpretation of the statute
merits judicial deference. Id.

The first traditional tool of statutory construction focuses
on the language of the statute. See Bailey v. U.S., 116 S. Ct.
501, 506 (1995). Petitioners argue that the language of
s 272(e)(4), according to which a BOC "may provide any
interLATA or intraLATA facilities or services to its inter-
LATA affiliate" if the BOC does so non-discriminatorily,
amounts to an express textual grant of authority sufficient to
illustrate congressional intent. They therefore would have us
decide that the plain meaning of the statute precludes Chev-
ron deference. However, textual analysis is a language game
played on a field known as "context." The literal language of
a provision taken out of context cannot provide conclusive
proof of congressional intent, any more than a word can have

meaning without context to illuminate its use. In short, "the
meaning of statutory language, plain or not, depends on
context." Bailey, 116 S. Ct. at 506 (citations omitted). Al-
though Petitioners rely on the expansive character of the
word "any," the Supreme Court has specifically held that in
context the word "any" may be construed in a non-expansive
fashion. See O'Connor v. U.S., 479 U.S. 27, 31 (1986) (Scalia,
J.) (statutory context showed that unmodified phrase "any
taxes" included only taxes of Republic of Panama).

Context serves an especially important role in textual anal-
ysis of a statute when Congress has not expressed itself as
univocally as might be wished. Where, as here, we are
charged with understanding the relationship between two
different provisions within the same statute, we must analyze
the language of each to make sense of the whole. A compari-
son between the words of s 272(e)(4) and those of (a)(2)
reveals several ambiguities. Those ambiguities lead us to the
conclusion that the words of s 272(e)(4) do not, on their own,
provide a plain meaning that captures Congress' intent.

The gravest problem with Petitioners' plain meaning argu-
ment is that if the words of s 272(e)(4) are read as an
independent, affirmative grant of authority, they vitiate
s 272(a)(2). Section 272(a)(2) permits a BOC to provide in-
region interLATA origination services only through a sepa-
rate affiliate. Yet, s 272(e)(4) acknowledges no limitation on
provision of interLATA services except non-discrimination.
Thus, at the level of literal language there exists a potential
contradiction between the two provisions sufficient to pre-
clude the possibility that the plain meaning is the one urged
by Petitioners.

Petitioners attempt to resolve the apparent inconsistency in
the statute by claiming that s 272(a)(2) permits provision of
interLATA services by a BOC through a separate affiliate,
while s 272(e)(4) permits provision of all interLATA services
to an affiliate, and then requires that if a BOC does provide
interLATA services to an affiliate, it must make the services
available to all other carriers on the same terms as a condi-
tion of its provision of services. This interpretation fails to

convince on its own terms, and certainly does not suffice to
constitute the plain meaning of the statute. On Petitioners'
interpretation, s 272(e)(4) grants nothing that s 272(a)(2)
does not already grant, but merely adds a non-discrimination
provision. The non-discrimination provision, for its part,
would appear to have no application, because under
s 272(a)(2) a BOC may only provide in-region interLATA
origination services through an affiliate, not to anyone else.
If Congress had intended what Petitioners now claim,
s 272(e)(4) would have been unnecessary.

Furthermore, the inconsistency between s 272(a)(1), which
permits provision of interLATA services "through" an affili-
ate, and s 272(e)(4), which speaks of services delivered "to"
an affiliate, constitutes an independent source of ambiguity in
the statute. It is simply unclear why Congress would have
used a different preposition in each of the two provisions to
describe what would presumably be an identical business
relationship. A further source of ambiguity lies in the stat-
ute's use of the words "any ... services" in s 272(e)(4). The
statute provides no guidance as to whether this term compre-
hends simply the list of services set down at s 272(a)(2) as
requiring a BOC affiliate, or some larger list. These two
ambiguities each stand in the way of Petitioners' claim that
the statute's plain textual meaning permits provision of inter-
LATA services on an unrestricted basis. They contribute to
our conclusion that this opaquely drafted statute cannot be
said to possess the plain meaning urged upon us.

The Petitioners claim that the history, structure, and un-
derlying policy purpose of the statute similarly yield the
purported plain meaning they support, but this is not so.
The formal legislative history is silent on the meaning of
s 272(e)(4), which was introduced as part of the Managers'
Amendment to the Act. 141 Cong. Rec. S8574 (daily ed. June
16, 1995). Petitioners advance two letters written by their
lobbyists before the reporting of an unpassed predecessor bill
in a previous Congress, J.A. 391, 394, but these unofficial,
self-serving tokens carry little or no weight and are in any
case inconclusive. The structure of s 272 is also inconclusive.
Although placement of a provision may indicate congressional

intent, see Bailey, 116 S. Ct. at 506, the fact that s 272(e)(2),
(3), and (4) all loosely relate to non-discrimination does not
offer any support to Petitioners' reading.

Finally, the policy basis of s 272 cannot be said to support
Petitioners for the simple reason that Petitioners and the
Commission advance opposing plausible theories of the in-
tended policy of the statute, each of which corresponds to its
proponent's respective preferred reading. Petitioners argue
that the relevant portions of the statute seek to deregulate
interLATA services expeditiously in order to take advantage
of economies that will derive from physically integrated inter-
LATA services. The Commission maintains to the contrary
that the purpose of s 272(a)(2) is to prevent the BOCs from
gaining an unfair competitive advantage in the interLATA
market by exploiting those very same economies to the
detriment of potential competitors. Because Petitioners do
not provide any independent evidence to show that Congress
favored the policy they advance as the basis for the statute,
they cannot rely on that supposed policy to establish the plain
meaning of the statute. Petitioners' plain meaning argu-
ments accordingly fail.

B. Chevron Step Two

Having concluded that the statute is ambiguous, we turn
next to the Commission's interpretation. Pursuant to the
second step of Chevron, we will defer to the Commission's
interpretation if it is reasonable and consistent with the
statutory purpose and legislative history. See Troy Corp. v.
Browner, 120 F.3d 277, 285 (D.C. Cir. 1997) (agency interpre-
tation must be "reasonable and consistent with the statutory
purpose"); Cleveland, Ohio v. U.S. Nuclear Regulatory
Comm'n, 68 F.3d 1361, 1367 (D.C. Cir. 1995) (agency inter-
pretation must be "reasonable and consistent with the statu-
tory scheme and legislative history"). We will not uphold an
interpretation "that diverges from any realistic meaning of
the statute." Massachusetts v. Dep't of Transp., 93 F.3d 890,
893 (D.C. Cir. 1996). We note that step two of Chevron
requires us to evaluate the same data that we also evaluate

under Chevron step one, but using different criteria. Under
step one we consider text, history, and purpose to determine
whether these convey a plain meaning that requires a certain
interpretation; under step two we consider text, history, and
purpose to determine whether these permit the interpretation
chosen by the agency. Cf. id. (step two inquiry "depends on
the nature and extent of the ambiguity" identified in step
one).

We also find in the statute an implicit delegation of inter-
pretive authority to the Commission. This result is critical to
our analysis, for it is only legislative intent to delegate such
authority that entitles an agency to advance its own statutory
construction for review under the deferential second prong of
Chevron. See Chevron, 467 U.S. at 843-44. "If Congress has
explicitly left a gap for the agency to fill, there is an express
delegation of authority.... Sometimes the legislative dele-
gation to an agency on a particular question is implicit rather
than explicit. In such a case, a court may not substitute its
own construction of a statutory provision for a reasonable
interpretation made by the administrator of an agency." Id.
The requisite legislative intent may be inferred when, as here,
resolution of an interpretive question turns on the reconcilia-
tion of competing statutory purposes. See id. at 865; City of
Kansas City, Mo. v. HUD, 923 F.2d 188, 191-92 (D.C. Cir.
1991). By declining itself to strike an exact balance between
the commands of s 272(a)(2) and s 272(e)(4), Congress im-
plicitly delegated to the Commission the authority to accom-
modate the interests at stake through its own interpretation
of the statute.

The Commission's interpretation here is reasonable and
consistent with the statute's legislative history and purpose.
According to the Commission, s 272(e)(4) attaches a non-
discrimination requirement to a BOC's provision of inter-
LATA services that it is otherwise authorized to provide.
The language stating that a BOC "may provide any ...
interLATA services" if it does so in a non-discriminatory
manner therefore means that a BOC may provide interLATA
service only if it provides the service non-discriminatorily.

This reading of s 272(e)(4) infers the existence of a qualify-
ing phrase not expressed within the language of the provision.
However, the inference is reasonable because it gives mean-
ing and vitality to the provision. As noted above, if
s 272(e)(4) were an independent grant of authority, it would
contradict s 272(a)(2). It is reasonable for the Commission
to read s 272(e)(4) as a non-discrimination requirement in
order to avoid this contradiction. As for vitality, s 272(e)(4)
applies both to interLATA and intraLATA services, so that
even if a BOC may provide the interLATA services autho-
rized by s 272(a) only to affiliates, the non-discrimination
provision would still apply to intraLATA services that the
BOC may provide to other customers. What is more, after
the sunset of s 272(a)(2), BOCs will be permitted to offer all
interLATA services to other customers, but a BOC may still
choose to maintain its affiliate even though not required by
law to do so. When such conditions obtain, s 272(e)(4) will
still apply to the BOCs and will require them to provide
services non-discriminatorily. Thus, even if s 272(e)(4) has
no vitality when applied to interLATA services at present, the
provision will possess vitality in the near future.

As observed above, the legislative history of the statute is
inconclusive. The Commission's interpretation is therefore
not inconsistent with it. Finally, the Commission's interpre-
tation of the statute is consistent with what may well be the
policy purpose of the statute: preventing the BOCs from
entering the interLATA origination market except through
affiliates until the sunset of s 272(a)(2).

Because the Commission's interpretation of the ambiguous
statute is reasonable and consistent with the statute's history
and purpose, we must defer to its judgment.

III. Conclusion

For all of the foregoing reasons, the petitions for review
are hereby denied.

So ordered.