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In the Matter of USE OF CARTERFONE DEVICE IN MESSAGE TOLL TELEPHONE SERVICE; In the Matter of THOMAS F. CARTER AND CARTER ELECTRONICS CORP., DALLAS,TEX. (COMPLAINANTS) v. AMERICAN TELEPHONE & TELEGRAPH CO., ASSOCIATED BELL SYSTEM COS., SOUTHWESTERN BELL TELEPHONE CO., AND GENERAL TELEPHONE CO. OF THE SOUTHWEST (DEFENDANTS)

Docket No. 16942; Docket No. 17073

FEDERAL COMMUNICATIONS COMMISSION

14 F.C.C.2d 149

RELEASE-NUMBER: FCC 68-774

July 26, 1968 Adopted

ACTION: 

   MEMORANDUM OPINION AND ORDER

JUDGES:

   BY THE COMMISSION: COMMISSIONERS COX AND JOHNSON DISSENTING AND ISSUING A STATEMENT.

OPINION:

    [*149]The Commission has under consideration request for stay filed on July 16, 1968, by the Bell System Parties (Bell), on July 17, 1968, by General Telephone Co. of the Southwest and G.T. & E. Service Corp. (General), and on July 18, 1968, by the U.S. Independent Telephone Association (USITA).n1 Each of the requests asks that the effectiveness of the Commission's Decision and Order, released on June 27, 1968, canceling certain provisions of tariff FCC No. 263 (FCC 68-661), be stayed until a decision is rendered on petitions for reconsideration to be filed by Bell, General, and USITA on or before July 29, 1968, the date the order is to be effective. Bell and General further request that any stay order provide that in the event petitions for reconsideration should be denied the stay will remain in effect for a period of 60 days following the date of the release of such denial.

   n1 The Chief, Common Carrier Bureau, filed a statement which did not oppose the grant of stay.Oppositions to the requests for stay were filed by the Carter complainants (Carter), the National Retail Merchants Association (NRMA), and the central committee on communications facilities of the American Petroleum Institute (API).

   The three telephone companies make several allegations in support of their requests for stay.They contend that intrastate tariffs containing provisions substantially similar to those to be stricken remain binding upon them, and that the effect of the Commission's Decision and Order will be to encourage indiscriminate violation of the intrastate tariffs since it will be impracticable for the telephone companies to police prohibited intrastate uses when the intrastate tariffs are at odds with interstate requirements.They allege that the commission's Decision and Order will possibly result in the installation of customer [*150]provided devices which will have a broad and incalculable adverse effect on the quality and cost of telephone service, and that there is also the possibility of irreparable damage to those customers who purchase equipment only to find at a later date that it is illegal, if the requested stay is not granted.

   Another contention of the telephone companies is that the Commission's Decision and Order raised complex legal and practical problems in view of the breadth of the Order, striking tariff provisions which relate not only to the "devices" and "attachments" spoken of in the Decision, but also to circuits, equipment, and apparatus.This complexity, they say, together with the intrastate problem, warrants the maintenance of the status quo, pending a decision on petitions for reconsideration. Bell alleges that complete elimination of the tariff regulations will make impossible the achievement of modifications in this area which are currently being reviewed with the objective of meeting "the requirements of changing technology and innovation in the development of devices for use with the telephone network * * * to make the network increasingly flexible and useful to its customers in a manner that will produce the most effective communications service to the Nation."

   The Common Carrier Bureau in its statement does not object to the grant of a stay.The Bureau points out, however, that the concern of the telephone companies that the cancellation of paragraphs 2.6.1 and 2.6.9. of tariff FCC No. 263 would result in the indiscriminate connection of harmful customer provided facilities is ill-founded, since "there are existing provisions in the tariffs which were not ordered canceled by the Commission that adequately protect the telephone companies against the alleged irreparable harm that they claim may occur during the period of reconsideration." n2

   n2 These provisions appear in secs. 2.3.3 and 2.4.3 of American Telephone & Telegraph Co.'s tariff FCC No. 263 as follows:

   "2.3.3 Where long-distance-message-telephone service is available under this tariff for use in connection with customer-provided facilities or equipment, the operating characteristics of such facilities or equipment shall be such as not to interfere with any of the services offered by the telephone company.Upon notice from the telephone company that the facilities or equipment of the customer are causing or are likely to cause hazard or interference, the customer shall make such changes as may be necessary to remove or prevent such hazard or interference.

   * * *

   "2.4.3 Termination of Service for Cause. -- * * * upon a violation of any of the conditions governing the furnishing of service * * *, the telephone company may by notice in writing to the customer, without incurring any liability, forthwith discontinue the furnishing of said service."

   In their oppositions, Carter, NRMA and API contend that good cause has not been shown for the requested stay.In particular, they argue that petitioners have failed to demonstrate that irreparable injury will result if a stay is denied, and cite the tariff provisions that will, in any even remain in effect (see footnote 2, supra) as well as the statements in the Commission's Decision that the telephone companies can "prevent the use of devices which actually cause harm, or * * * they may * * * set up reasonable standards to be met by interconnection devices (p. 7), and a similar statement at page 9 of the Decision.

   We, therefore, believe special care is warranted to insure that full consideration is given to the arguments which may be presented by the petitions for reconsideration before permitting our Decision and Order[*151]to go into effect.On balance, therefore, we believe the public interest will best be served by maintaining the status quo by exercising our discretion to stay the effect of our Decision and Order pending disposition of petitions for reconsideration.In view of all the circumstances, including the pendency of Carter's civil suit in the Federal district court, we shall give expedited consideration to petitions for reconsideration.

   Accordingly, it is ordered, that the requests for stay, insofar as they seek to stay the effectiveness of the Commission's Decision until a decision is rendered on petitions for reconsideration, are granted, and are otherwise Denied, and the effectiveness of the Commission's Decision in this proceeding Is stayed until a determination is rendered on petitions for reconsideration.

FEDERAL COMMUNICATIONS COMMISSION, BEN F. WAPLE, Secretary.

DISSENTBY: COX; JOHNSON

DISSENT:

   DISSENTING OPINION OF COMMISSIONER KENNETH A. COX AND NICHOLAS JOHNSON 

Carterfone Stay (In the Matter of Thomas F. Carter * * *, Dockets Nos. 16942 and 17073)

   On June 26 of this year a unanimous FCC found that the "foreign attachment" tariffs of the Bell System "are, and have since their inception been, unreasonable, unlawful and unreasonably discriminatory under * * * the Communications Act." Carter v. A.T. & T., 13 P. & F. Radio Reg. 2d 597 (1968) (FCC 68-661, June 26, 1968, p. 9).The finding came in a case involving the Carterfone which was described as follows:

   The Carterfone is designed to be connected to a 2-way radio at the base station serving a mobile radio system.When callers on the radio and on the telephone are both in contact with the base station operator, the handset of the operator's telephone is placed on a cradle in the Carterfone device. This brought to an end -- so we thought at the time -- an 11-year struggle between Thomas Carter and the American Telephone & Telegraph Co.

   The foreign attachment tariffs provide, in pertinent part, that "no equipment, apparatus, circuit, or device not furnished by the telephone company shall be attached to or connected with the facilities furnished by the telephone company * * *." (Tariff FCC No. 263, pars. 2.6.1. and 2.6.9. (1968).) We have found this provision unlawful.

   FCC Hearing Examiner Naumowicz was impressed, as well he might have been, with the problems faced by the little Carter company from the beginning of its encounter with the gargantuan A.T. & T.He said: * * * the Examiner is struck, as was the Court in Hush-A-Phone (238 F. 2d 266) with the inherent unfairness of a system which permits the telephone company to bar the use of equipment or services which compete with their own until the producers thereof have undertaken the long and costly task of adjudication by regulatory authority (FCC 67D-47, Aug. 30, 1967, par. 357.9). From 1957 until the FCC's decision in this case the telephone company has argued that their tariffs prohibit the use of the Carterfone.It was[*152]backed up in this interpretation by the FCC, first in informal rulings and then in a letter of April 23, 1965 advising that the tariffs "prohibit the interconnection * * *." Finally, in desperation, Carter brought a private antitrust action against A.T. & T. and the General Telephone Co.The Federal district court held that, under the doctrine of "primary jurisdiction," the FCC must first pass upon the validity of the tariffs.Carter v. A.T. & T., 250 F. Supp. 188 (N.D. Tex. 1966). The court of appeals affirmed.Carter v. A.T. & T., 315 F.2d 486 (5th Cir. 1966). With a determination and commitment of resources that has been extraordinary, Thomas Carter came back to the FCC in 1966.He has, since that time, pursued this matter as it has passed its way through several stages of proceeding, culminating in our decent decision of June 26. 

   Given the telephone company's unbending position in this case from its inception, we suppose we should not be surprised that A.T. & T. has now asked for a "stay" of our decision.It seemingly seeks to withhold from Mr. Carter for the longest possible period the fruits of his expensive victory – perhaps as a lesson to others who may be considering the costs of challenging A.T. & T. 's interpretation of this or some other tariff provision.

   When the Commission first considered this matter at its regularly scheduled meeting on Wednesday, July 24, 1968, the staff was instructed (by the three-man majority of the five Commissioners present) to prepare an order denying the requested stay.That proposed order was prepared and circulated.It concluded:

   Having examined carefully and in detail the requests for stay, we conclude that the requests should be denied.Before the Commission would be justified in granting a stay, the probability of irreparable harm must be shown with reasonable certainty, and petitioners have failed to meet this burden.In this connection we note that there seems to be adequate means for the telephone companies to protect themselves against the connection of harmful devices to the telephone system. The last sentence is a reference to the position of the Commission's own Common Carrier Bureau, a party in this case, which filed a position in the proceeding stating:

   We submit that if the Commission should decide not to stay the effectiveness of its decision, the above-quoted provisions of the tariff, properly enforced, would, in our opinion, protect the telephone companies and the public from any significant harm that could occur during the period that the Commission may require for consideration of the forthcoming petitions for reconsideration.

   The final vote is now 4 to 2 against the original order, and in favor of a new one which was circulated at the same time.The concluding paragraph of the Commission's adopted order reads:

   We therefore believe special care is warranted to insure that full consideration is given to the arguments which may be presented by the petitions for reconsideration before permitting our Decision and Order to go into effect. On balance, therefore, we believe the public interest will best be served by maintaining the status quo by exercising our discretion to stay the effect of our Decision and Order pending disposition of petitions for reconsideration. Where now is the finding of "irreparable harm"?

    [*153]It has also been brought to the Commission's attention that it would be possible to grant the stay only with regard to the Carterfone opinion's application to other devices (which A.T. & T. claims to fear most), leaving it in effect for Carter Electronics.This would at least permit the long-harassed Thomas Carter to proceed immediately with his antitrust suit in the district court.This alternative has been rejected by the majority, too -- for reasons undisclosed.

   When this case was decided it was hailed as a great policy breakthrough which would open up our national telephone network for the attachment of new devices and freer interconnection of private communications systems.In addition, it held out the possibility of relief for the developer of the Carterfone, who had pressed the matter to decision.Now, however, this result is to be delayed at the request of the telephone industry -- as is true of the reform in separations procedures which was decided upon last July but is still awaiting finalization. See A.T. & T., FCC 2d 30 (1967).

   A petition for stay is normally granted only when a petitioner has shown thathe will otherwise suffer irreparable injury and, usually, that he has a reasonable chance to prevail in the further proceedings for which time is requested.Petitioners have not met either test here -- and the majority doesn’t 't even claim that they have.

   Indeed, the majority simply jumps to its conclusion in paragraph of 10 lines in which they speak of "special care" to insure full consideration for the arguments petitioners haven't yet made with respect to a carefully reasoned decision which the Commission adopted a month ago without dissent.They express the belief that "on balance * * * the public interest will best be served by maintaining the status quo" pending receipt and disposition of the petitions for reconsideration.However, we are not told what contentions were balanced to reach this conclusion -- unless the very brief summary of the pleadings is intended as a catalog of the matters on which the majority rely to reach their result.If so, it seems to us that the contentions of the Common Carrier Bureau, Carter, the National Retail Merchants Association, and the American Petroleum Institute clearly meet and outweigh the arguments of petitioners.At least the Tennessee Public Service Commission (an intervening party to the case), which also urges the stay, had the candor to say that the decision "disturbs longstanding ratemaking patterns, which have been found to be in the public interest and would result in a loss of revenue to the telephone company."

   And the majority completely overlook Carter's contention that, at the very least, if a stay is granted it should not extend to the issues relating to the Carterfone device itself or the issues referred to the Commission by the U.S. district court.Since the only arguments of the petitioners recited by the majority are very general in character and do not go to the specific relief granted Carter, we believe it is unfair to delay further the remedy the latter has been seeking so long.

   We believe this case was carefully and properly decided and that the long-continued practices which the Commission found contrary to the public interest should be terminated as quickly as possible.Petitioners can then pursue their requests for reconsideration -- and possible judicial review -- without prolonging practices the Commission has found [*154]to be inimical to public and private interests.But the majority -- on pleadings which do not meet sound procedural standards -- permit their continuance.We note the reference to expedited consideration and hope this goal can be achieved, but we know that the odds favor considerable slippage in any schedule that may be set -- and see no reason to defer what we regard as the very beneficial results of the decision regarding this 11-year-old tariff while petitioners run out all the procedures available to them.

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