In the Matter of AMERICAN TELEPHONE
& TELEGRAPH CO. (A.T. & T.), "FOREIGN ATTACHMENT" TARIFF
REVISIONS IN A.T. & T. TARIFF F.C.C. NOS. 263, 260, AND 259
FEDERAL COMMUNICATIONS COMMISSION
18 F.C.C.2d 871 (1969)
RELEASE-NUMBER: FCC 69-897
August 13, 1969 Adopted
ACTION:
MEMORANDUM
OPINION AND ORDER
BY THE
COMMISSION: COMMISSIONERS HYDE, CHAIRMAN; AND COX CONCURRING AND ISSUING
STATEMENTS; COMMISSIONER JOHNSON DISSENTING AND
ISSUING A STATEMENT; COMMISSIONER H. REX LEE CONCURRING IN THE RESULT.
[*871] 1.
The Commission has before it petitions for reconsideration of its
memorandum opinion and order herein adopted December 24, 1968 (15 F.C.C. 2d
605), filed by the U.S. Department of Justice (Justice), Bethlehem Steel Corp.
et al. n1 (
n1 E. I. du Pont de Nemours &
Co., Inc., Ford Motor Co., Monsanto Co., Northrop Corp., Olin Mathieson
Chemical Corp., Republic Steel Corp., Union Carbide Corp., United States Steel
Corp., and Westinghouse Electric Co.
2. In its decision of December 24, 1968, the
Commission permitted certain new and revised tariffs of A.T. & T. to go
into effect on January 1, 1969, without formal investigation or hearing. These tariffs purported to permit any kind
of customer-provided terminal device or communications system to be attached to
or connected to the telephone company's message toll and exchange network
subject to certain specifications and conditions. One of the conditions was that any "network control
signaling" device (such as the ordinary dial telephone instrument) had to
be furnished, maintained, and installed by the telephone company (except for
certain military installations and remote or hazardous locations).
[*872]
3. Prior to its decision the
Commission had received a number of formal and informal pleadings and comments
addressed to the aforementioned revised tariff provisions which requested us to
reject, suspend, or investigate the new tariffs in whole or in part. The contention was made, among others, that
the revised tariffs did not comply with our decision in the Carterfone case, In
the Matter of the Use of the Carterfone Device in Message Toll Telephone
Service, 13 F.C.C. 2d 420; 14 F.C.C. 2d 571, because the new filings prohibited
the use of any customer-provided network control signaling unit irrespective of
whether such use would be harmful to the telephone system. It was argued that such a prohibition was an
a priori assumption of harm that the Commission had found in Carterfone to be
unreasonable.
4. The Commission dismissed without prejudice
the various pleadings to the extent that they requested suspension, rejection,
or formal investigation of the January 1, 1969, tariffs. The Commission held that the decision in
Carterfone did not have the effect of permitting a customer to substitute his
own network control equipment for that furnished by the telephone company in
providing message toll telephone service.
Accordingly, the tariff bar against any customer providing his own
network control signaling unit in connection with telephone company facilities
was held not to be in conflict with our Carterfone ruling. However, the Commission pointed out that the
question remained as to whether the telephone companies should make provision
in their tariffs by which subscribers might have access to the nationwide
switched telephone network through the use of their own network control
signaling equipment. The Commission
instructed the Chief of the Common Carrier Bureau to initiate a series of
informal engineering and technical conferences which were to be broad in scope
and which would provide the Commission with valuable technical and operational
information needed by the Commission to evaluate the public interest factors
involved in the new tariffs. The
Commission stated that these conferences would "provide a principal forum
for the identification, examination, and, subject to Commission review,
resolution of any questions presented by the tariff revisions," and would
enable the Commission "to ascertain what further changes are necessary,
desirable, and technically feasible in the various tariff offerings of the
telephone companies." The Bureau was instructed to submit "periodic
reports to the Commission with appropriate recommendations" and the
Commission further stated that it would "be prepared to take such further
action as it deems necessary or desirable to resolve outstanding issues."
5. Justice, in its petition (supported by ITT,
Marcom, NCUR, API, and CSS), contends that the Commission erred in not ordering
a formal investigation into the lawfulness of paragraph 2.6.3 of A.T. &
T.'s tariff 263, which prohibits customer-provided network control signaling
devices. n2 No claim is made by Justice that
the Commission erred as a matter of law in its choice of procedures or that the
informal [*873] procedures adopted by the Commission violate
any provision of the Communications Act or any other statutory provision. Indeed, Justice expressly recognizes that,
under the law, the Commission has broad discretion in its choice of
procedures. The thrust of Justice's
argument seems to be that, since our December 24, 1968, decision did not
resolve the basic issues relating to the tariff prohibition on network control
signaling, the only available procedure that can bring about a prompt
resolution of those issues is for us to order a formal proceeding and relegate
the aforementioned informal technical and engineering conferences to the minor role
of prehearing conferences to frame the issues to be considered in such formal
proceeding.
n2 Par. 2.6.3 states that
"satisfactory performance of the telecommunication network requires
continuing functional compatibility of the Network control signals and the
switching equipment involved. To assure
such continuing compatibility, network control signaling in the furnishing of
long distance message telecommunications service shall be performed by
equipment furnished, installed and maintained by the Telephone Company."
6. We disagree with Justice's contentions. In making our December 24, 1968, decision we
gave careful consideration to the alternative procedures available to us. We considered whether a formal investigation
in lieu of informal technical and engineering conferences should be ordered on
the "network control" question, among others, and we decided against
the former in favor of the latter. (See
e.g., dissenting opinion of Commissioner Johnson, 15 F.C.C. 2d 614.) We said
that, on the basis of the pleadings and comments before us, we were in no
position to determine the extent to which any provision for customer-provided
network control devices would be consistent with efficient and economic
telephone service or otherwise in the public interest. We further stated that we would be in a
better position to determine whether and what further action if any (including
formal proceedings), may be required by the Commission after it had had a
reasonable opportunity to observe the effects of changes in the interconnection
tariffs as they relate particularly to the needs of customers for flexible
access to the telephone system and after the Commission had obtained the
benefits of the aforementioned informal technical and engineering conferences. Justice points to no changes in
circumstances that would warrant any change in these views. No persuasive showing has been made that we
should be deprived of the benefits of the informal procedures before we take
further action nor has Justice adequately supported its contention that the
institution of a formal hearing proceeding now prior to the conclusion of the
informal technical and engineering conferences would bring about a more
expeditious resolution of the issues before us. The converse might be a more reasonable conclusion.
7. Four reasons are advanced by Justice to
support its position and these may be summarized as follows: (1) Since the
burden is on the carriers under the Communications Act to establish the need
for a general tariff prohibition of the type involved, a public investigation
offers the most appropriate immediate vehicle by which carriers can offer
evidence meeting this burden; (2) the Commission must act on the record in a
formal proceeding to determine the legality of a tariff; (3) the relevant
questions are already presented by the record of filings in this proceeding and
"the Commission takes no steps which would enable it to resolve
promptly" those questions; and (4) any significant delay in resolving
these questions will have an adverse effect on the public interest in securing
the advantages of efficient and flexible communications.
[*874]
8. It seems to us that the
aforementioned reasons are subject to the defect of either begging the question
of what is the most expeditious procedure or of being non sequiturs, or
both. Thus, as to the first reason,
even assuming arguendo that the burden of justifying the network control
provision is on the carriers, that same burden would exist irrespective of
whether we utilize formal or informal procedures and it does not necessarily
follow from that that a formal hearing in lieu of informal procedures is the
most appropriate procedure. Also
assuming arguendo that Justice is correct in its second reason in stating that
the Commission must act on a record in a formal proceeding to determine the
legality of tariff, it does not necessarily follow that we should abandon
informal procedures that could serve the salutary function of either resolving
such questions without the necessity of formal hearing or of making it possible
for the Commission to conduct any necessary formal proceedings on a more
informed, efficient, and expeditious basis than would otherwise obtain without
such informal procedures. As to
Justice's third reason, it assumes that, since the earlier pleadings and
counter pleadings discuss the network control issue, the only procedure that
can resolve this issue promptly is a formal proceeding. We do not agree that this follows for the
reasons heretofore stated. In its fourth
reason Justice emphasizes the need for avoiding any significant delay in
resolving the questions before us. We
agree that this is desirable. However,
Justice does not make any showing that its proposed procedure would result in
less of a significant delay than will ours.
9. Bethlehem requests the Commission to amend
paragraph 28 of its December 24, 1968, memorandum opinion and order to state
specifically that there will be a further order of the Commission acting on the
recommendations of the Chief of the Common Carrier Bureau after completion of
the informal engineering and technical conferences and to revise the memorandum
opinion and order to eliminate any inference of final conclusions, in advance
of the Commission's further action, as to what portions of an interconnected
communications system may be provided by customers. We do not believe that any such amendments or revisions to the
memorandum opinion and order are necessary.
We have clearly indicated that we will take such further action as may
be necessary or desirable to resolve any outstanding issues. Paragraph 27 of our decision is clear in its
statement that "our action is not to be construed as approval thereof and
these tariffs are subject to such further action as the Commission may wish to
take with respect thereto." We find nothing in the memorandum opinion and
order from which it can reasonably be inferred that a final conclusion has been
reached with respect to what portions of an interconnected communications
system may be provided by customers.
10. BEMA suggests that the Chief of the Common
Carrier Bureau be directed to submit a written report in 90 days to the
Commission containing full information with respect to the progress of the
conferences and that action on the petitions for reconsideration be held in
abeyance. This suggested report would
contain the conclusion of the Bureau Chief as to whether the conferences hold
sufficient promise to warrant continuation thereof or whether they should be
discontinued. [*875] Also this suggested recommendation would be
subject to written comments by the other parties after which the Commission
could either grant or deny the petitions for reconsideration on the evaluation
before it. We do not believe that there
is a need for such a procedure. The
Chief of the Bureau has already been instructed to submit periodic reports to
the Commission. He is free, at any
time, as is any other interested person, to recommend to the Commission that
the informal conferences are not being productive. Similarly, the Commission is free to take further action on its
own motion if deemed necessary in this regard.
Any formal hearings that may be required are not affected by a denial of
the petitions for reconsiderations herein.
11. We wish to emphasize that it is the hope and
expectation of the Commission that all interested parties will cooperate fully
in the forthcoming technical and engineering conferences and join us in our
effort to make them as helpful and productive as possible. We have obtained the assistance of the
National Academy of Science in the conduct of these conferences. The Academy has agreed to render this
assistance in large part because it recognizes that the procedures we have
adopted are an innovative effort to utilize new and different procedural
techniques for identifying, evaluating, and resolving complex scientific and
technical issues that are involved in the rendition of common carrier
communications service to the public.
12. In view of the foregoing we believe that the
procedure adopted in our memorandum opinion and order of December 24, 1968, is
within proper Commission discretion and that the allegations made in the
several petitions for reconsideration do not warrant a contrary conclusion.
13. Accordingly, It is ordered, That the
petitions for reconsideration Are denied.
FEDERAL
COMMUNICATIONS COMMISSION, BEN F. WAPLE, Secretary
SEPARATE
STATEMENT OF CHAIRMAN HYDE
In view
of Commissioner Johnson's dissent and to keep matters in proper perspective, I believe
the following observations should be made with respect to the procedures the
Commission is following in this matter.
By its
decision of December 24, 1968, the Commission determined that informal
conferences, rather than formal evidentiary hearings, would provide a more
effective procedure for identifying, crystallizing, and resolving most of the
questions presented by A.T. & T.'s revised interconnection and foreign
attachment tariff regulations. This decision
was premised, essentially, on the highly technical nature of the matters
involved which we concluded could be more effectively treated in a conference
of technically qualified experts than in the rigidly formalized environment of
an adversary-type proceeding. The
Commission's views in this respect remain unchanged.
The fact
that the conferences have not yet commenced is no reason to discredit the
procedure or to embark at this time upon formalized hearings which undoubtedly
would be protracted and costly to all concerned. [*876] Convening of the
conferences has been postponed to enable the Chief of our Common Carrier
Bureau, with the full knowledge, approval, and encouragement of the Commission,
to engage the aid and support of a technically qualified group of experts who
could bring their expertise to bear on the questions involved. Such a measure would be no less necessary
and desirable even if we were to proceed by formal hearings in view of the
limited in-house capabilities of the Commission to deal, with full
effectiveness, with technical matters of this importance and complexity. Our efforts to augment our in-house
capability have resulted in an arrangement under which the National Academy of
Sciences is constituting a panel of experts who will provide the kind of expert
and objective evaluation and advice required to deal with the matters involved
in the conferences.
I am
satisfied that the conferences, which are now expected to convene in the latter
part of September, with the valuable assistance that the NAS will render, hold
real promise for the resolution of many of the issues. I should stress again, however, that further
action, including formal proceedings, might well be required in light of the
results produced by the conferences and any substantial questions that remain
unresolved. In that event, the
conferences will have served the important purpose of refining with specificity
the questions that remain to be resolved, thus facilitating the efficient and
expeditious conduct of any formal proceedings that may become necessary.
CONCURRING
OPINION OF COMMISSIONER KENNETH A. COX
I
concur. However, I am concerned that
more than 7 months have elapsed since our last action in this matter. I think it is imperative that our staff and
the parties make every effort, including continuous sessions, to resolve the
questions involved in these informal proceedings.
DISSENTING OPINION OF COMMISSIONER NICHOLAS JOHNSON
The U.S.
Department of Justice here seeks reconsideration of a Commission decision not to
hold formal hearings on the lawfulness of the telephone carriers'
interconnection and foreign attachment tariff policies. In December 1968, I favored the institution
of formal proceedings to consider complaints about the new changes in the
We are
also instructing the Chief of the Common Carrier Bureau to initiate promptly a
series of informal engineering and technical conferences with the telephone
industry and interested manufacturers, user groups, and Government agencies to
ascertain what further changes are necessary, desirable and technically
feasible in the various tariff offerings of the telephone companies. * * * The staff will submit periodic reports
to the Commission, with appropriate recommendations, and the Commission will be
prepared to take such further action as it deems necessary or desirable to
resolve outstanding issues.
[*877]
Since December 1968 little has happened. The Commission had received a series of comments from interested
parties directed not only to the "network control signaling device"
question, but also to the language of other parts of the tariff and to the
reasonableness of the charges
I would
grant the Department of Justice petition.
My
position in December was that formal proceedings were then warranted. Circumstances have changed since then in
ways that now make formal proceedings even more attractive. We have tried expedition through informal
means for 8 months. It has not worked. Formal proceedings now, combined with the
solicitation of advice from the National Academy of Sciences, would seem to
offer the best alternative for speedy resolution of the questions only partly
decided by the Carterfone decision.
Carterfone, 13 F.C.C. 2d 420 (1968); 14 F.C.C. 2d 571 (1968).
It is axiomatic
that an initial reform which goes against what are thought to be the vested
economic interests of strong advocates will require continuing vigilance if its
effect is not to be dissipated by backsliding.
The Commission has not maintained that vigilance on the Carterfone
questions.
There is
also a second problem. The process of
competition is a dynamic one. An
innovator is rewarded because he can take advantage of his innovation while his
competitors hurry to adopt their offerings to the new market situation. If a regulatory agency lags in authorizing
competitive innovation it is not mrerly "doing nothing." It is
allowing itself to be used by its regulated companies to hold off competition
until they have had sufficient opportunity to adapt.
This is
inequitable. The innovator is denied
the fruits of his enterprise. It is bad
public policy. It discourages potential
innovators whose opportunity for advantage is much less certain, even if the
innovation is successful. Finally,
since actual and potential innovations are frustrated, the consumer has less
choice, and often must pay higher prices for the choices he does have.
A formal
proceeding would at least serve to move us off dead center. Participation as advocates by the Department
of Justice, the Commission's
[*878] staff, and user parties
would improve the potentialities for successful negotiation and
resolution. Nothing in a formal
proceeding would bar the possibility that negotiations and conferences would
take place. But all parties would be on
notice that the Commission expected to achieve a timely resolution of the
issues. If the parties were unable to
resolve differences, the Commission then would be prepared to act.
I
dissent.