In the Matter of AMERICAN TELEPHONE
& TELEGRAPH CO., AND THE ASSOCIATED BELL SYSTEM COMPANIES Charges for Interstate
and Foreign Communication Service; In the Matter of AMERICAN TELEPHONE &
TELEGRAPH CO. Charges, Practices, Classifications, and Regulations for and in
Connection With Teletypewriter Exchange Service
Docket No. 16258; Docket No. 15011
FEDERAL COMMUNICATIONS COMMISSION
11 F.C.C.2d 493
RELEASE-NUMBER: FCC 68-73
January 24, 1968 Adopted
ACTION:
MEMORANDUM
OPINION AND ORDER
JUDGES:
BY
THE COMMISSION: COMMISSIONER COX CONCURRING IN PART AND DISSENTING IN PART AND
ISSUING A STATEMENT: COMMISSIONER LOEVINGER ISSUING A SEPARATE OPINION IN WHICH
COMMISSIONER LEE JOINS; COMMISSIONER JOHNSON
DISSENTING AND ISSUING A STATEMENT.
OPINION:
[*493] 1. The Commission has under Consideration its interim decision and
order, issued July 5, 1967, its memorandum opinion and order on
reconsideration, issued September 14, 1967, the report of the Technical Experts
Group on jurisdictional separations, a petition for extension of stay and
reopening of record, filed by the Bell System respondents on November 15, 1967,
and various oppositions thereto.
2. The memorandum opinion on reconsideration
stayed the effect of our interim decision as regards the prescription of jurisdictional
separations procedures until December 1, 1967, which date was subsequently
extended to February 1, 1968. At the
time of the initial stay, we had before us petitions for reconsideration from
respondents and others urging modification of our determinations with respect
to separations.
Regarding
these petitions, we concluded that they advanced nothing of substance to
discredit those determinations; and
that they provided no justification to reopen the record of these proceedings
or for holding further evidentiary hearings on separations at this time. We recognized, however, the complexities
inherent in jurisdictional separations and the intricacies involved in the
application of any set of principles.
We therefore stayed the effectiveness of our prescription of separations
for a brief period required to enable the technical experts group n1 to examine the proposed procedures "with the
view to [*494] ascertaining any
improvements or refinements therein which they may deem to be warranted."
n1 The technical experts group was formed
by direction of the Telephone committee at a pre-hearing conference on July 11,
1966, for the purpose of endeavoring to narrow the issues and devising other
means of expediting consideration of separations, pursuant to the Commission's
memorandum opinion and order issued Apr. 11, 1966. It consisted of representatives of all parties who submitted
separations proposals pursuant to the Telephone committee's order issued Apr.
22, 1966, and members of the Commission's staff.
3. On November 15, 1967, the technical experts
group submitted its report on the results of its examination. Nothing contained in the report causes us to
set aside the conclusions reached in our interim decision as to the soundness
and reasonableness of the jurisdictional separations procedures adopted
therein. Although the report makes
certain recommendations for revisions in the procedures, these recommendations,
in essence, involve major modifications or changes, and, to some degree,
introduce concepts different from those underlying the Commission's proposed
plan of separations. Certainly the
recommendations cannot be regarded simply as "improvements or
refinements" as contemplated by our memorandum opinion and order on
reconsideration. Moreover, it is clear
from the group's report itself, as well as from other representations made to
the Commission in the course of these proceedings, that there is no one plan of
separations which has unanimous support either within industry or among the
State regulatory agencies.
4. It must be kept in mind that the primary
purpose of this phase of the proceeding in docket No. 16258 has been to
determine the overall revenue requirements of respondents for their interstate
operations, and to adjust interstate rates accordingly. This purpose has been
accomplished. In view of all of the
foregoing circumstances, we are obliged, in the interest of administrative
finality, and in the entire context of the record of these proceedings to
reaffirm and adopt the findings and conclusions of our interim decision or
jurisdictional separations as providing a sound and reasonable basis for
determining respondents' interstate revenue requirements. We, therefore, adopt the amount of $85 million
n2 as the amount of additional revenue
requirements applicable to interstate operations on the basis of the
application of the changes in separations procedures adopted by our interim
decision to the 1966 test year data.
n2 As indicated in the report of the
technical experts group, more refined data produces an amount of $82,550,000 as
the precise effect of the Commission's plan.
5. In our interim decision and order, we
proposed to prescribe, pursuant to sections 221 (c) and (d) of the Communications
Act of 1934, as amended, the method found to be reasonable therein as the
method to be applied for the future with respect to the separation and
allocation of all property, together with related reserves, expenses, and
taxes, used in whole or in part to provide the services subject to our
jurisdiction. The interim decision and
order also contemplated that, in order to provide an appropriate framework
within which any proposed revision may be considered on an orderly and public
basis, the procedures would be incorporated in rules and regulations, and that
thereafter any changes in such rules and regulations would be considered on a
public record in accordance with the rulemaking provisions of the
Administrative Procedure Act.
6. As we have previously stated, we consider
that the plan we have adopted herein is sound and reasonable. However, we must take note from the report
of the Technical Experts Group of the advocacy by [*495] respondents of
another plan and the endorsement of such other plan by the executive committee
of the NARUC -- although such endorsement does not represent the unanimous view
of all State commissions. Having in
mind the vital interest of State regulators in any plan of jurisdictional
separations that is prescribed for the future we feel constrained to give full
consideration to all of the views held by those affected by such
prescription. We feel that this should
be done in a manner which will enable us to evaluate the alternative plans now
being advocated in juxtaposition with the plan of separations we have adopted
for the immediate ratemaking purposes of this phase of docket No. 16258. We are further of the opinion that such
comparative evaluation can best be accomplished by proceeding immediately by
way of issuing a notice of proposed rulemaking in a separate docket. However, in view of the fact that the matter
has been so recently considered both by us and the interested parties, we do
not believe that an extended time period will be necessary, and that rather the
matter can be brought to a conclusion much quicker than would otherwise be the
case. The time period which we have
prescribed for filing comments and reply comments has been specified with this
consideration in mind.
7. Pending completion of the rulemaking
proceedings we are commencing herewith, respondents will be free to administer
their division of interstate revenue procedures on the basis of the interim
plan of divisions they are now using, and to which we offered no objection in
our letter of December 13, 1967. However, we will expect respondents to report to
us monthly the results of the division of revenue procedures applied on the
basis of the procedures adopted by our interim decision. We will also expect respondents to report to
each State regulatory commission the results of its division of revenues in the
particular State based on the interim plan and the plan adopted by our interim
decision. This will leave each State agency
free to take such action with respect to intrastate revenue requirements in its
State on the basis of whichever of these plans of jurisdictional separations it
deems appropriate pending conclusion of the forthcoming rulemaking proceedings.
8. Accordingly, It is ordered, That the petitions
for reconsideration and for modification listed in the appendix to our
memorandum opinion and order on reconsideration herein issued September 14,
1967, insofar as such petitions relate to jurisdictional separations, Are
granted to the extent indicated herein and in all other respects Are denied,
and It is further ordered, That Bell System respondents' petition for extension
of stay and reopening of record filed November 15, 1967, Is granted to the
extent indicated herein and in all other respects is denied.
FEDERAL
COMMUNICATIONS COMMISSION, BEN F. WAPLE, Secretary.
CONCURBY:
LOEVINGER; COX (IN PART)
CONCUR:
SEPARATE
OPINION OF COMMISSIONER LEE LOEVINGER REGARDING A SEPARATION'S PLAN FOR TELEPHONE
RATEMAKING IN WHICH COMMISSIONER ROBERT E. LEE JOINS
The
Commission has before it now an extremely complex and important aspect of
telephone ratemaking. The technical,
turgid, and prolix jargon in which discussion of the subject is presented
defies comprehension by the ordinary person, regardless of literacy or
intelligence. However the significance
of the matter warrants an effort to present the issues and decisions in plain,
comprehensible language, even at the risk of oversimplification and minor
inaccuracies.
In
regulatory jargon the subject involved is called "separations." This
refers to separation of the costs of local (or intrastate) telephone operation
from long-distance (or interstate) telephone operation for purposes of setting
rates. The same telephones are used for
making both local and long-distance calls, so that some of the expense of
maintaining the telephone must be assigned to each class of service. The same thing is true of other parts of the
telephone plant.
The
most obvious method of dividing the cost of telephone plant between different
services is on the basis of use. Some
plant is used exclusively in either local or long-distance service, and the
cost of this plant can be assigned to the service in which it is used. Such things as telephone instruments are
used for both local and long-distance calls,
[*501] and their cost can be divided
between local and long-distance service on the basis of the amount of time
during which they are used for such purposes.
This was once the basis of the accounting procedures officially adopted.
This
principle has been modified or abandoned because of the fact that local
telephone service is relatively more expensive than long-distance telephone
service, using such a method of allocating costs, and modern technology is
reducing the cost of long-distance transmission much more rapidly than the cost
of local transmission. Consequently if
costs were allocated strictly on the basis of time in use, long-distance rates
would be much cheaper than they are now and local rates would be more
expensive. For a number of reasons –
chiefly political -- various plans have been developed to shift a greater part
of the cost of telephone plant to the long-distance rates than actual time in
use would warrant. This is rationalized
by a variety of complicated plans and theories which I will not attempt to
describe.
The
ratemaking plan which has been in use for a number of years averages the
high-cost local transmission plant and equipment with the low-cost,
long-distance transmission plant and equipment in order to set the cost of
telephone plant for ratemaking purposes.
This has the effect of shifting costs from local to long-distance
service and of providing lower rates for local service and higher rates for
long-distance service than would otherwise be the case. This also has the effect of establishing
long-distance transmission plant and equipment costs at unrealistically high
levels.
When
conventional telephone transmission lines of copper wire strung on poles were
the only significant method of long-distance transmission, the arbitrary
increase in their apparent cost was of no importance except for ratemaking
purposes. However, modern technology is
now providing alternative modes of long-distance transmission. Communications satellites are available now
and numerous sophisticated and exotic techniques are under development and
likely to be available in the near future.
Present methods of separating or allocating telephone costs between
local and long-distance service prevent effective competition or rational
economic comparison between different technical modes of long-distance
transmission. The conventional long-distance
telephone landlines bear the burden of about half a billion dollars of cost for
services for which they are not used at all.
This makes it virtually impossible to judge whether landline or
satellite transmission may be more economical or efficient for a particular
use. This appears to me -- and I would
hope to others -- as an improper impediment to technological and economic
progress and to intelligent administration and regulation.
The
separations plan for allocating local and long-distance costs which was adopted
by the Commission in its July 5, 1967, interim decision and order was based on
the plan described above. Before the
order went into effect the Commission became sufficiently uncertain about its
own separations plan to suspend its operation and call for a committee of
technical experts to review the plan and suggest improvements.
[*502] The committee of technical experts
did not agree upon a plan, but A.T. & T. and the national association of
State utility commissioners did agree upon a substitute plan which would shift
costs from local to long-distance service on an apparently more rational
basis. The A.T. & T. plan was
proposed to the Commission, and in order to have time to study it the
Commission extended the suspension of the FCC plan until February 1, 1968, with
the understanding that A.T. & T. would make reductions in rates and
increase allocations of costs from local to long-distance service which
approximated in amount the effects of the Commission plan.
The
accompanying Commission memorandum opinion and order finds that the FCC plan is
sound and reasonable, but further suspends its effectiveness indefinitely and
the Commission institutes a new rule-making proceeding to consider the A.T.
& T. proposal. The action taken by
the Commission seems to me to be proper and required by a rational approach to
the problem. However, I do not believe
it is proper to try to maintain the pretense that the method of separating
local and long-distance costs proposed by the Commission in its July 5, 1967,
order is sound and reasonable. The
demonstration that has been made of the effects of the separations plan
previously approved by the Commission compels the conclusion that the
Commission plan is neither sound nor reasonable and that we must adopt some
other plan that allocates costs more nearly in accordance with actual usage and
that does not preclude competition and economic comparison between different
technological modes of transmission. Candor and clarity in stating these
obvious conclusions will contribute to our consideration of these problems and
to the confidence that the public may justly have in our operation.
DISSENTBY:
COX (IN PART); JOHNSON
DISSENT:
STATEMENT
OF COMMISSIONER KENNETH A. COX, CONCURRING IN PART AND DISSENTING IN PART
I
concur in this action insofar as it: (1) Denies, in large part, the petitions
for reconsideration and for modification addressed to our interim decision and
order of July 5, 1967; (2) reaffirms and adopts [*496] our findings and conclusions therein on jurisdictional
separations as providing a sound and reasonable basis for determining
respondents' interstate revenue requirements; and (3) refuses to reopen the
record in this proceeding for further consideration of the separations
issue. However, I believe that, on the
basis of the record in this proceeding,
we should prescribe for future use the jurisdictional separations procedures
which we set forth in our Interim Decision and Order, and I dissent because of
the majority's failure to do so.
I
would point out the following: (1) After the first full consideration of
jurisdictional separations which we have ever made on a formal hearing record,
we concluded, in our July 5, 1967, order, that we should do the following:
(a)
As to inter-exchange plant, we decided to continue to use the so-called
"Modified Phoenix Plan," adopted in 1956 on the urging of the Bell
System, under which the costs of all inter-exchange plant within a State are
combined (regardless of whether a particular element is owned by the local Bell
Associated Company or by Bell's Long Lines Department and used only for
interstate service), these combined costs are then apportioned on the basis of
relative use for intrastate and interstate purposes, and the book costs so
assigned to intrastate service are then deducted from total book costs of the
Associated Company inter-exchange circuit plant, with the remainder being
assigned to interstate operations. This
kind of averaging of costs is widely used in the field of utility regulation,
and admittedly results in attributing to interstate service substantial plant
in excess of that actually used in such service -- for the reasons set forth in
our Interim Decision and Order. Despite
its original espousal of this procedure, the Bell System now seeks to eliminate
it.
(b)
As to exchange plant, we decided that actual use is the proper standard for
allocation, except as to subscriber plant (station equipment and subscriber
lines). To take care of the latter, we
adopted a procedure which starts with actual interstate subscriber line usage
(SLU) for each study area and then adds to this a factor of 200 percent of the
nationwide average interstate subscriber line usage.
(2)
In our Memorandum Opinion and Order on Reconsideration, released September 14,
1967, we said with respect to this matter:
55. We are firmly convinced that the separations
plan prescribed in our Interim Decision and Order is reasonable on the basis of
the record before us. Indeed, the petitions for reconsideration advance nothing
of substance by way of criticism thereof.
* * *
*
* *
57. On the basis of the pleadings before us, we
see no justification for a reopening of the record or for holding further
evidentiary hearings on this matter at this time. Nor do we see any justification for reopening the entire subject
of jurisdictional separations in the context of this proceeding. We do,
however, see some merit in reconstituting the Technical Experts Group for the
purpose of affording that group, in concert with our staff, an opportunity to
examine the prescribed separations plan with the view of ascertaining any
improvements or refinements therein which they may deem to be warranted. To that end, we will stay, until December 1,
1967, the effectiveness of that portion of our Order which prescribes the
separations procedures. * * * [Emphasis
supplied.]
(3)
In an Order adopted November 30, 1967 -- with Commissioners Bartley, Johnson,
and myself dissenting -- the stay with respect to jurisdictional separations
was extended to February 1, 1968.
[*497] (4) The majority opinion here
adopted says:
3.
On November 15, 1967, the Technical Experts Group submitted its report
on the results of its examination.
Nothing contained in the report causes us to set aside the conclusions
reached in our interim decision as to the soundness and reasonableness of the
jurisdictional separations procedures adopted therein. Although the report makes certain
recommendations for revisions in the procedures, these recommendations, in
essence, involve major modifications or changes, and, to some degree, introduce
concepts different from those underlying the Commission's proposed plan of
separations. Certainly the
recommendations cannot be regarded simply as "improvements or
refinements" as contemplated by our Memorandum Opinion and Order on
Reconsideration. * * *
It
goes on to reaffirm and adopt the findings and conclusions of our Interim Decision
on jurisdictional separations as providing a sound and reasonable basis for
determining respondents' interstate revenue requirements.
This
brings us to the point at which I began my dissent. I agree with everything in the majority's opinion up to and
including the first sentence of paragraph 6, but then it takes a change in
direction which seems to me completely unsound. We have ruled on the separations matter. We have refused to reconsider that decision,
finding no merit in the petitions to that end.
We afforded an opportunity for the Technical Experts Group to suggest
improvements or refinements to the procedure we had unanimously adopted and
reaffirmed, and the majority even now concedes that they did not produce any.
All parties agree that the separations procedures in effect prior to our
interim decision -- as last modified in the Denver Plan -- produced undesirable
results. Why not, then, complete the job we set out to do by prescribing for
the future -- that is, putting into our rules -- the revised procedures which
we adopted last July -- and which the majority, except apparently Commissioner
Loevinger, still regard as sound and reasonable?
The
majority says we must "take note" of another plan advanced by
respondents and set forth in the report of the Technical Experts Group --
though it is clearly beyond the scope of the task which we assigned to
them. They say that they "feel
constrained to give full consideration to all the views held by those affected
by such prescription." It seems to me we have given such consideration for
over 2 years, and through thousands of pages of the record. And I am morally certain that no matter what
procedures are adopted, some of those affected by such prescription will demur
and tender further views. The majority
opinion, in paragraph 3, notes from the Technical Expert Group's report that
"there is no one plan of separations which has unanimous support either
within industry or among the State regulatory agencies." I think that much
of the difficulty with separations in the past has arisen from the effort to
get unanimous -- or near unanimous -- support for a plan by offering benefits
to all concerned -- except the user of interstate communications who always
ends up carrying more of the burden. I
thought the purpose of considering the matter in this proceeding was to get
away from the "political considerations" which Commissioner Loevinger
refers to in his separate [*498] opinion.
I thought we intended to treat the matter on a formal record, where
proponents of plans could be cross-examined and rebutted, and then adopt some
rational result which would continue in effect until it could be demonstrated
on another record – though perhaps one in a rulemaking proceeding -- that conditions
had changed to such a degree that reason would dictate a modification. I am tired of negotiated settlements based
on expedience rather than substantial facts.
I want to find a logical separations formula and stick with it until
changed conditions make it inappropriate, at which time we should adopt
procedures which logically fit the conditions then existing -- regardless of
the fact that some elements of the industry and some State regulatory
commissions may not like the results.
I
think our staff and the members of the majority -- and certainly Commissioner
Loevinger -- have become concerned about the possible impact of continued use
of the Modified Phoenix Plan on
Certainly
use is, in most cases, both legally and practically the best basis for
separations. I expressed some concern
during oral argument with respect to phase I-A of this case as to the Modified
Phoenix Plan's departure from the concept of direct allocation according to
use, but I was not persuaded by respondents' showing and felt last July -- as I
do today -- that they have not demonstrated that this plan has no rational part
in a reasonable separations formula.
Apparently Commissioner Loevinger agreed, both last July and last
September, because he did not demur to our use of Modified Phoenix either at
the time of our interim decision or our order on reconsideration. I do not know on what he now bases his
concern, because while it is briefly touched on in appendix B, attachment 4, to
the report of the Technical Experts Group which contains respondents' proposed
change in treatment of inter-exchange plant, his statement certainly does not
involve much of the argument there set forth. Instead, he confines himself to
the problem of comparing landline and satellite costs. Here it seems to me that he confuses the
issue by talking of averaging high cost "local transmission plant"
with low cost "long-distance transmission plant." I think local
transmission plant suggests the local circuits used to furnish exchange
service, while long-distance [*499]
transmission plant would seem to include both intrastate and interstate toll
service. Actually, the Modified Phoenix
computations do not involve local exchange plant at all, but simply average two
kinds of long distance plant. Nor is it
accurate to say that this has the effect of providing lower rates for local
service, since our assent to the shifting of costs from intrastate to
interstate toll service simply permits lower intrastate rates if the respective
State Commissions act to require lower rates.
Similarly,
the half billion figure used by Commissioner Loevinger in the sixth paragraph
of his statement does not represent added cost for service, but rather is
claimed to be plant improperly assigned to a service for which it is not
used. And I do not think it is accurate
to say that the Commission became sufficiently uncertain about its own separations
plan to suspend its operation and call for a committee of technical experts to
review the plan and suggest improvements.
Actually, in our September 14 order on reconsideration we reacted to the
claim that the parties had not, during the earlier proceedings, had a chance to
address themselves to the exchange plant element of the separations procedures
we had adopted in July and authorized a limited study to see if they could
suggest minor improvements or refinements in that part of the formula. No one at the Commission expressed any
uncertainty even about that facet of our ruling, much less the inter-exchange
element, involving the Modified
Finally,
the order here does not suspend the effectiveness of our separations plan
indefinitely -- instead, it affirms it as the proper basis for determining
respondents' interstate revenue requirements in this case, and permits
adjustments which approach the $85 million shift in revenue requirements to the
interstate service, but defers any prescription for the future pending a new
rulemaking proceeding. Commissioner
Loevinger seems already to have concluded that there has been some
demonstration that the plan we approved in our July 5, 1967, order would have
effects such as to "[compels] the conclusion that the Commission plan is
neither sound nor reasonable." I don't know what demonstration he is
referring to, and he does not explain it.
He goes on to say that "we must adopt some other plan that
allocates costs more nearly in accordance with actual usage and that does not
preclude economic comparison between competitive technological modes of
transmission." As indicated above, I think actual usage is generally the
best test, but of course the other half of our separations formula -- to which
Commissioner Loevinger addresses no criticism -- departs markedly from this
principle by charging interstate service with approximately three times as much
use of subscriber plant as it actually accounts for. n1
n1 I am disturbed by Commissioner Loevinger's statement that
"A.T. & T. and the National Association of State Utility Commissioners
did agree upon a substitute plan which would shift costs from local to long
distance service on an apparently more rationally basis." [Emphasis
supplied.] We have, in this proceeding, already shifted $85 million of revenue
requirements from intrastate to interstate operations -- and this is on top of
the effects of the ineffable Denver Plan, which all parties now agree was
unsound, which I bitterly opposed at the time, and which the Commission has
never approved. The main thrust of
Commissioner Loevinger's separate statement is addressed to adjustments which
would apparently shift half a billion dollars of inter-exchange plant in the
other direction -- to the intrastate service.
I hope that Commissioner Loevinger has not already concluded that this shift
should be made, but should be offset by an even greater shift of other plant to
the interstate service.
[*500] I think there are valid reasons
for this much of a departure from the test of actual use as to this one class
of telephone plant -- just as I think there are as yet un-rebutted reasons for
averaging inter-exchange plant costs.
Therefore, I would forthwith prescribe the plan we adopted in our
interim decision of July 5, 1967, as the basis for future separations. I would, of course, be willing to consider
later proposals -- whether by the industry, a State commission, or our own
staff -- for rulemaking to consider a modified approach necessitated by
demonstrated changes in circumstances.
However, I think it is unseemly to rush into an immediate foreshortened
proceeding to consider possible revision of a plan which we have just arrived
at after the most painstaking efforts in this area ever undertaken in this
agency's history. I do not think any need for this has been shown, and
certainly I think Commissioner Loevinger's concerns about the competition of
domestic satellites are premature. At
most, we have been asked to authorize a special television distribution
satellite or a pilot general usage satellite.
If at some later point domestic satellites come into wide usage, it is
quite likely that the Bell System and the independent telephone companies will
be the entities using these new facilities, with rates for interstate service
set so as to produce a fair return on the average cost of all plant used,
including the satellites. Certainly the
danger of injury to the telephone industry is not so imminent that we could not
apply our new separations plan for a reasonable period of time, gain some
experience with it, and then consider revisions if they seem necessary. I therefore dissent to that part of this
action which defers prescription of separations procedures in accordance with
our interim decision of July 5, 1967.
Separations
Determination and Rulemaking
[In
the matter of American Telephone and Telegraph -- Charges for Interstate and
Foreign Communication Service * * *]
DISSENTING STATEMENT OF COMMISSIONER NICHOLAS JOHNSON
The
FCC has today made yet another effort to straighten out its position regarding
"separations procedures" in setting A.T. & T.'s telephone
rates. I dissent.
Jurisdictional
separations procedures are a part of the regulation of the telephone
industry. The Bell System provides
telephone service within communities (exchange service); intrastate long-distance calling; and
interstate long-distance calling. The
Federal Communications Commission regulates only interstate long-distance
calling; State or local agencies regulate exchange and intrastate service. However, much of the plant and equipment of
the Bell System is used to provide all types of service. Thus, the plant costs (and revenues) of the
Bell System must be divided among these jurisdictions in order to compute a
rate of return on A.T. & T.'s investment in each service. Jurisdictional separations procedures are
prescribed as guidelines. The issues
involved in separations include which service shall bear what proportion of the
cost of commonly used plant.
[*503] I have previously discussed
separations problems in my opinion concurring in the Commission's interim
decision [A.T. & T., 9 F.C.C.2d 30, 126 (1967)]. There I discussed what I
thought separations was all about and what the Commission should be considering
in the process of deciding separations questions -- much of which is consistent
with Commissioner Loevinger's separate opinion regarding today's action -- and
I will not repeat it here. Commissioner
Cox and I dissented to the subsequent suspension of the effect of the interim
order, and the procedures that were being followed after the ratemaking
hearing. [A.T. & T. Rate Hearing,
FCC 67-1310 (1967).]
The
Commission even tried an industry-staffed "Technical Experts Group"
to tell it what refinements and improvements would best suit the companies
involved. That didn't work either. For on November 15, 1967, the group
reported, "no one plan is acceptable to all members."
Today
the Commission provides but a limited affirmation of its earlier interim
decision on separations. And it simultaneously
institutes a new written rulemaking proceeding to again deal with separations.
As
a result of today's action there is to be a separations plan for the FCC to use
in determining what A.T. & T.'s interstate revenue requirements are; a separations
plan for A.T. & T. to use in determining how to divide revenues and costs
with the States (this plan is itself an interim compromise proposed as a stop
gap by A.T. & T.); and the States are left to choose whichever of the two
plans they want in dealing with A.T. & T.
On top of this mess, we are again opening the whole question of
separations procedures -- but this time in a written rulemaking we hope to
conclude quickly. No doubt we secretly
hope that the whole thing will suddenly disappear. What we have done is to get ourselves into an administrative
morass which, I believe, we are making worse by our action today.
There
are better ways to proceed.
We
ought to affirm our interim decision as the best result that could be reached
on that record, but with the understanding that we will continue to explore
separations problems.
A
new rulemaking now will provide little more than a written rehash of the
parties' positions as they have evolved in the rate hearing and the Technical
Experts Group meeting. We will get more
"from-the-hip" comments on all competing proposals.
Instead
of a new rulemaking we should direct the FCC staff to come forward with a
well-thought-out, economically rational separations analysis, not taking into
account the political pressures and reactions of those whom changes would
affect. Presumably there are several
policy alternatives available to us -- depending on the assumptions and
objectives to be achieved by such a plan. Then, after the Commission had
arrived at its best judgment from adequate examination of the policy matters
involved, rulemaking could be proposed.
The
policy questions surrounding jurisdictional separations are far more important
than just allocating telephone plant into Federal and State jurisdictions. Jurisdictional separations is most
fundamentally cost allocation -- precisely one of the matters at issue in phase
I-B of this proceeding. And decisions
on cost allocations have a profound
[*504] effect on what prices are
paid by whom for what service. These
problems deserve more than the muddled set of proceedings the majority is now
proposing.
Richard
Gabel, author of "Development of Separations Principles in the Telephone
Industry" (1967), concludes his thoughtful study: "Our criticism is
that our public policymakers, fragmented and competitive, have been unable to
arrive at a clear public direction" (p. 126). I would like to see us attempt to do more to meet that charge
than to provide the evidence to support it.
Perhaps another day.