descrybe logo
You are viewing a free summary from Descrybe.ai. For citation checking, legal issue analysis, and other advanced tools, explore our Legal Research Toolkit — not free, but close.

At & T Information Systems, Inc. v. Federal Communications Commission and United States of America, North American Telecommunications Ass'n, Mountain States Telephone and Telegraph Co., B. South Corp., at & T Information Systems, Inc., Southwestern Bell Telephone Co., Ameritech Operating Companies, Rolm Corp., New York Telephone Co., Pacific Bell and Nevada Bell, Bell Atlantic Telephone Companies, Nynex, South Central Bell Telephone Co., Intervenors

Citation: 854 F.2d 1442Docket: 85-1198

Court: Court of Appeals for the D.C. Circuit; August 30, 1988; Federal Appellate Court

Narrative Opinion Summary

This case involves a judicial review sought by AT&T Information Systems of a Federal Communications Commission (FCC) order regarding the reimbursement of refurbishment costs for equipment transferred following the breakup of the Bell System. The primary legal issue concerns the FCC's determination of economic value and the balancing of interests between ratepayers and investors under principles established in prior cases such as Federal Power Commission v. Hope Natural Gas and Democratic Central Committee v. Washington Metropolitan Area Transit Commission. Initially, the FCC required AT&T Information Systems to reimburse fifty percent of refurbishment costs for inventory CPE, which was later revised to cover sixty percent after AT&T demonstrated discrepancies. The court found the FCC's rationale insufficiently justified and inconsistent, particularly regarding the imposition of refurbishment charges and the application of net book value as a measure of economic value. The FCC's approach failed to adequately consider investor losses and the principle of risk allocation, leading to the court granting AT&T's petition and remanding the case for further examination. Circuit Judge Bork did not participate in the decision.

Legal Issues Addressed

Allocation of Capital Gains from Utility Assets

Application: The court applied the principle from Democratic Central Committee v. Washington Metropolitan Area Transit Commission, determining that ratepayers were entitled to profits from the sale of utility assets, as they bore the risk of loss.

Reasoning: Generally, ratepayers bear the risk of loss for depreciable assets, thus having a superior claim to any capital gains realized during their operation.

FCC's Detariffing of Customer Premises Equipment

Application: The FCC allowed ratepayers to acquire in-place CPE at net book value, while investors could recuperate investments through pricing flexibility, balancing interests post-Bell System breakup.

Reasoning: Ratepayers were given the opportunity to acquire in-place CPE at net book value, allowing them to benefit from asset value gains, while investors could recuperate their investments through pricing flexibility for ATT-IS.

Investor Protections and Risk of Loss

Application: The court noted the FCC's failure to properly apply the risk-of-loss principle, potentially subjecting investors to speculative costs without adequate protection.

Reasoning: The FCC's directive on refurbished inventory CPE appears to inadequately address potential investor losses, failing to apply the distinct principles from the Democratic Central case properly.

Just and Reasonable Rates under Federal Power Commission v. Hope Natural Gas

Application: The court emphasized the necessity for utility rates to balance investor and consumer interests, ensuring utilities can cover expenses and provide reasonable returns to equity owners.

Reasoning: The court referenced Federal Power Commission v. Hope Natural Gas, which outlines the necessity of balancing investor and consumer interests when determining just and reasonable rates for federally regulated utilities.

Reimbursement Obligations for Refurbished Inventory CPE

Application: The court found the FCC's reimbursement mandate for refurbishment costs lacked adequate justification and potentially imposed unfair financial burdens on investors.

Reasoning: The FCC's approach in imposing the refurbishment charge lacks adequate justification and deviates from its previous use of net book value as a fair measure of economic value.