In the Matter of ESTABLISHMENT OF
POLICIES AND PROCEDURES FOR CONSIDERATION OF APPLICATIONS TO PROVIDE
SPECIALIZED COMMON CARRIER SERVICES IN THE DOMESTIC PUBLIC POINT-TO-POINT
MICROWAVE RADIO SERVICE AND PROPOSED AMENDMENTS TO PARTS 21, 43 AND 61 OF THE
COMMISSION'S RULES
Docket
No. 18920
FEDERAL
COMMUNICATIONS COMMISSION
24 F.C.C.2d 318
RELEASE-NUMBER: FCC 70-768
July
17, 1970 Released
Adopted
July 15, 1970
JUDGES:
BY THE
COMMISSION: COMMISSIONERS ROBERT E. LEE AND JOHNSON
CONCURRING AND ISSUING STATEMENTS; COMMISSIONER COX ABSENT; COMMISSIONER
WELLS CONCURRING IN THE RESULT.
OPINION:
[*318]
1. Notice is hereby given of
this inquiry looking towards the formulation of appropriate policies in the
above entitled matter and of proposed rule making designed to implement such
policies.
2. The Commission has pending before it a large
number of applications, including those from companies associated with
Microwave Communications of America, Inc. (MCI Associated Companies), and Data
Transmission Corporation (Datran), for authorization to construct and operate
microwave and other facilities to provide specialized common carrier services,
particularly for the transmission of data, in various parts of the
country. The applications pending as of
June 25, 1970, are listed in the Appendix hereto. These applications have already occasioned, or are expected to
give rise to, petitions to deny and/or requests for comparative hearings. It is also anticipated that numerous
additional applications for facilities of a similar nature will be forthcoming, [**2]
and that these will likewise be subject to petitions to deny and/or
requests for comparative hearings.
3. A review of the pending applications and the
pleadings filed in response to them indicates that the Commission is confronted
with a series of broad policy issues which are common to all of them, as well
as specific issues which may be pertinent to particular applications or groups
of applications. For the reasons set
forth below the Commission is of the view that the basic policy issues should
be resolved in an overall proceeding directed toward these policies,
appropriate procedures and necessary modifications in existing rules. Such action would be conducive to prompt,
orderly and efficient disposition of these matters and, in the opinion of the
Commission, is by far preferable to
[*319] decisions on them arrived
at in the context of individual proceedings, and/or evidentiary hearings on
each set of applications, or even a single consolidated hearing. As noted above, even after the adoption of
appropriate procedures, general policies and/or additional rules, there may
remain specific, factual questions to be resolved. Once the procedures, basic policies and/or rule changes have
[**3] been adopted, the Commission will
further review this matter and determine both the nature and extent of these
remaining questions, as well as the appropriate proceedings necessary and
proper to resolve them.
4. The Commission has also, on the basis of the
applications pending before it, the pleadings filed with respect to them, and
our staff's analyses of certain of the basic legal and economic considerations
involved, reached certain tentative conclusions which are set forth below with
respect to the appropriate procedures which we should follow -- assuming that
we adopt the analyses and recommendation of our staff (see para. 22). Respondents herein should address themselves
to each of these tentative conclusions and staff analyses on their respective
merits and should give in detail and with specificity the reasons, supported
where appropriate by factual data, why in their opinion such tentative
conclusions and analyses should be adopted, modified or reversed. In each case the procedure and policy
advocated by the Respondent should be clearly identified and properly supported. Finally, there are set forth herein below
specific proposals for amendments to Parts 21, 43 and 61 [**4] of the Commission's Rules, all designed to
facilitate the processing and disposition of the applications before us, as
well as applications of a similar type, and to minimize the need for time
consuming evidentiary hearings.
Respondents should address themselves to each of the proposed amendments
and set forth in detail and with specificity the reasons, supported where
applicable by factual data, why the proposed amendment should be adopted,
modified or rejected, as well as the exact text of any proposed modifications,
additions or substitutions.
I. THE APPLICATIONS AND OPPOSITION PLEADINGS
5. Before discussing our proposed procedure and
rules, we will indicate the nature of a few representative applications and
opposition pleadings. We do not
undertake to describe each of the many systems that have been proposed, or to
summarize in detail each of the opposing arguments and counterarguments. The following major or typical proposals and
arguments will sufficiently exemplify the kinds of applications and oppositions
to serve as a basis for discussion.
A. Datran
6. Datran has proposed a switched, all digital,
nationwide communications network specifically designed and engineered [**5] for data transmission. The initial system would have 244 microwave
stations in a high channel density microwave backbone trunk which would follow
a route between San Francisco, Los Angeles, Dallas, Minneapolis-St. Paul,
Atlanta and Boston. Spur routes from
the backbone trunk would provide service to additional cities to accommodate
growth in demand [*320] for service. The system would utilize time division multiplexing (TDM), and be
modular in design to facilitate easy and economical extension of terminal
capacity. Datran intends to file
applications to construct the necessary local distribution facilities, which it
regards as essential to its concept of end-to-end service, in time for
completion with construction of the trunking and switching elements of the
system. It is proposing to use a
combination of 11 GHz frequencies and multipair cable for local loop
service. Datran also stands ready at
all stages of system development to "interconnect with other carriers or
authorized communications entities on a realistic basis in order to provide
service to all locations, as well as to offer flexibility to meet individual
customer requirements," and is pursuing possibilities for interconnection
[**6] arrangements. The system is designed to provide inter-connection
capability with either TDM or analog modes of transmission. Space diversity and hot standby transmitters
are proposed for increased system reliability.
7. According to Datran, major economic sectors,
individual consumers, and providers of information systems and services in the
aggregate have a rapidly expanding need for rapid, accurate, low-cost data
transmission services which is largely unmet by present common carrier
offerings. Specifically, Datran claims
that the costs of existing communications services have not declined in
proportion to data processing costs; that existing analog transmission systems
require costly modulator-demodulator equipment to convert digital signals to
analog and back again; that current switched services often take significant
time to establish connections, which detracts from the productivity of the data
terminal and operator; that transmission systems originally engineered for
voice and record transmission do not meet the more demanding reliability
standards of digital data transmission; that existing switched services
generally cannot handle full-duplex transmission, which leads [**7] to reduced throughput and wasteful line
reversal time; that the basic switched services, originally intended only for
voice and record, provide only two major speed selections whereas many new data
applications require faster and more varied choices; that attempts to establish
a switched connection for data transmission can be impeded by the high
incidence of busy signals currently being experienced in points and times of
heavy user concentration; that communication between terminal devices utilizing
different line speeds is not possible in most existing major networks; that
many data transmissions can be completed in far less than the minimum charge
periods now in force; and that while common carriers have recently begun to
drop barriers against sharing and interconnection, much confusion and
difficulty continues to exist in user attempts to apply this flexibility.
8. Datran attributes many of the asserted unmet
needs of data transmission users to the circumstance that the existing switched
facilities of common carriers were originally engineered only for voice and
record analog transmission services, a constraint which does not exist in its
proposed digital system. The three
[**8] basic integrated components of
Datran's proposed end-to-end system (trunking system, [*321] switching system,
and local distribution system) are engineered specifically for, and dedicated
to, digital data transmission. Thus, a
subscriber need not convert his digital signals to a different (analog)
transmission mode, since the system transmits the subscriber's signal in its
original form. Moreover, as the signal
is transmitted through the system, it is continuously regenerated into a new,
clean and conditioned signal without the amplified system noise present in
analog systems. Datran states that the
following features of its proposed systems will meet current and projected data
transmission needs which are largely unmet by the existing carrier offerings
(see paragraph 7 above):
Low cost -- as indicated by samples
of proposed charges in Exhibit No. 8 to Datran's application.
End-to-end compatibility -- no
analog/digital conversion required.
Rapid connection -- connection to be
made within 30 seconds after receipt of last destination address indicator.
High reliability -- no more than one
bit error in 10 million transmitted bits
Simultaneous two-way transmission
(full duplex) -- [**9] the proposed system would operate entirely
in full duplex mode.
Wide selection of switched speed
offerings -- the initial system would provide 150, 4800, 9600 and 14,400 bits
per second switched service.
Low incidence of network busy
conditions -- a service goal of P.01 providing on an average no more than one
busy signal in one hundred attempts
Flexibility to interconnect with and
share facilities -- Datran proposes to permit ample flexibility for potential
users to interconnect user-provided facilities and to share the proposed system
among more than one user
Asymmetry -- the system will provide
capability for communication between all terminals on the network, regardless
of their varying transmission needs.
9. Datran further asserts that there is "a
need for competition in communications to motivate technological innovations,
cost reductions, and efficient allocation of facilities as well as to encourage
efforts by common carriers beyond the simple expansion of current networks to
meet growing demand." It supports its position with the following
contentions: Full realization of the public interest in computer technology
requires achievement of appropriate specialized communications [**10] services.
The users of computer technology are not obtaining adequate service from
communications facilities constructed for, and dedicated to, meeting voice and
record transmission needs. Effective
utilization of existing data processing technology is constrained by present common
carrier communications services and facilities, and the design and development
of new computer applications requiring data transmission is constrained by high
cost as well as unreliable and inflexible service. The public will not realize the full benefits of existing and
potential data processing technology until this situation is remedied. The best remedy would be to authorize a
versatile, low-cost communications network uniquely structured for digital data
communications. Moreover, authorization
of its proposed system is likely to stimulate innovations and to encourage
economies by all carriers. A major
price paid for monopoly is reduced incentive for innovation. The introduction of competition into the provision
of data transmission services to all users will spark further technical developments
and spur all common carriers to measure and control costs more effectively in
the public interest. [**11] If innovation can lower the cost of a
service, or provide a better service at the same cost, that service will
attract a larger market or create new
[*322] markets. In addition, the benefits of the regulatory
process are most readily obtained when the regulated system's structure,
customers, services and costs are easily identified and quantified. Authorization of its proposed system would
allegedly encourage economies by all carriers through simplified application of
new standards and measures for costs of services.
B. MCI Associated Companies
10. There are also pending a number of
applications by MCI associated companies for portions of a proposed nationwide
network to provide specialized private line communications services, e.g. the
following:
|
MCI-New York West, Inc. |
Chicago
and New York City and intermediate points (65 microwave stations) |
|
MCI Pacific Coast, Inc |
San Diego,
California and Everett, Washington and intermediate points (56 microwave
stations) |
|
MCI North Central States, Inc |
Minneapolis
and Chicago and intermediate points (16 microwave stations) |
|
MCI New England, Inc |
Boston to
New York City and Boston to New Bedford, Mass. (17 microwave stations) |
|
MCI Michigan, Inc |
Grand
Rapids, Pontiac, Saginaw, and Detroit, Michigan; South Bend, Indiana; Toledo,
Ohio; and intermediate points (26 microwave stations) |
|
MCI St. Louis-Texas, Inc |
St. Louis-Dallas
and intermediate points (42 microwave stations) |
|
MCI Texas East Microwave, Inc |
Texas-Louisiana (34 stations) |
|
MCI Mid-Atlantic Communications,
Inc |
Washington,
D.C.-Atlanta, Georgia (37 stations) |
|
MCI Kentucky Central, Inc |
Kentucky,
Ohio, Indiana, Illinois, Tennessee, Georgia and Alabama (34 stations) |
|
MCI Texas-Pacific, Inc |
Dallas-Los Angeles (64 stations) |
[**12]
The various MCI
applications propose to provide "customized" communications channels,
tailored to the exact requirements of subscribers needing interoffice and
intracompany communications, to meet newly developing data and specialized
communications needs of the public at significantly low cost. The channels would accommodate transmission of
data, facsimile, control, remote metering, voice and other forms of
communication. MCI does not now propose
to provide end-to-end service. Local
loop interconnection may be accomplished by the subscriber's private facilities
or, for subscribers requiring only voice grade channels, by use of local
land-lines of existing telephone companies.
n1
n1 MCI states that it is working
with manufacturers to develop new low-cost short haul microwave systems in the 50
GHz band, and infrared transmission not requiring radio frequencies. When such equipment becomes available and is
operational, MCI proposes to offer this type of interconnection under tariff
filings with the FCC.
11. MCI-New York West's applications will serve
as a typical example, since it is stated that this "is one of a series of
independent MCI-type carriers made up of local
[**13] ownership interests which
will [*323] interconnect and cooperate with one another in order to provide a
unified, nationwide, customized communications network through arrangements
with Microwave Communications of America, Inc." MCI- New York West claims
that its proposal offers the following features which are not now available to
communications users on existing common carrier facilities:
Communications channels designed especially for data
transmission;
Specified data error rate (1 error in 10 7);
Analog or digital input;
Data channels starting as low as.05 cents per mile
per month;
Data channels priced on data speed rather than
bandwidth;
One way transmission;
Two-way transmission of different bandwidths;
138 communications channels ranging in bandwidth from
200 hertz to 960,000 hertz;
Termination of channels in 93 different types, with
bandwidth ranging from 200 hertz to 960,000 hertz;
Channels can be terminated into the full single
bandwidth of the channel or into a number of subchannels;
Thousands of channel and termination combinations are
possible and feasible;
Communication channels start as low as.05 cents per
mile per month;
Half-time use;
Sharing of channels;
Use [**14] of
carrier's facilities for installation of subscriber's private equipment.
12. According to MCI, the "real distinction
which delineates MCI service from anything provided today by existing common
carriers is not the facility itself but the manner in which a customer may
utilize it in order to provide a customized intra-company point-to-point
communications system of his own design and capability." For example, the
customer may purchase the exact bandwidth required on a point- to-point basis
(including one-way channels), utilize it in whatever transmission mode he
chooses (voice or data, alternately or singly), mix different bandwidths on the
same channel, use his own terminal equipment and install his own equipment on
MCI to wers and shelters, provide either analog or digital input signals, and
avail himself of MCI's offering of channels designed especially for data use
with rates based on transmission speed rather than bandwidth.
13. MCI asserts that a grant of its applications
would serve the public interest primarily by affording a flexibility in service
needed by, but not now available to, an important communications submarket, and
also by causing existing carriers to revise [**15] their service offerings and tariff provisions to the benefit of
other communications users.
Specifically, it claims that a strong need exists now for the type of
services proposed by MCI-New York West.
It reasons along the following lines: The computer industry
"desperately" needs a communications network designed especially for
data transmission. MCI would provide
this network (accepting both analog and digital data signals) and meet many of
the communications needs of the computer industry forecast over the next five
years in a study by Arthur D. Little, Inc. Moreover, the economic feasibility
of, and market for, the proposed operation are demonstrated in a study
conducted by Spindletop Research.
Industry, business, government and educational entities also require
additional communications channels other than those adapted [*324]
to a communication network designed primarily for voice telephone
service. It is essential that these
entities have available flexible, low cost communications channels which they
can customize to their own particular needs and requirements. The existing carriers serving the proposed
routes allegedly do not and cannot readily provide the same type of offering. [**16]
MCI claims its proposal would provide the benefits of competition in the
specialized communications field, stimulate the development of new lines of
equipment, introduce new ownership interests in the communications industry,
and pioneer new types of communications.
It would do so without having an adverse economic impact on the existing
carriers or affecting their telephone or private line rate-making
principles. There is, MCI says, "a
distinct difference between a public telephone service which is a natural
monopoly and a customized communications service offered on a private point-to-
point basis."
C. Other
Applications
14. There are also a number of applicants
proposing to provide specialized common carrier services along or near some of
the same routes proposed by Datran and/or MCI associated companies, and other
routes. For example, New York-Penn
Microwave Corporation proposes a 67 station system between Chicago, New York
City and intermediate points, to interconnect with its proposed 22 station
system between Washington, D.C. and Boston, Massachusetts. In its New York-Chicago applications, New
York-Penn Microwave states that it "proposes to provide similar service to
[**17] that specified by MCI-New York
West, and in large part along the same paths." Asserting that the two sets
of applications are mutually exclusive, New York-Penn Microwave plans to use
sites for which MCI-New York West now holds or is negotiating options. Interdata Communications Inc. has applied
for 11 microwave stations to provide specialized, private line services between
New York City and Washington, D.C. n2 Five applicants have applied for Pacific Coast
systems, generally between San Diego, California and the Seattle-Everett,
Washington, and intermediate points.
Applications have been filed for such routes as: Dallas- Houston-Los Angeles;
Minneapolis-St. Paul-Omaha-Oklahoma
City-Dallas; Atlanta-Washington, D.C.; Atlanta-New Orleans; and
Minneapolis-Chicago-Dallas. Three
applicants have applied for systems serving cities solely within the State of
Texas. Other applications are pending
and more are anticipated.
n2 By letter dated April 8, 1970,
the Chief of the Common Carrier Bureau ruled that the New York-Penn Microwave
applications for the Washington-Boston route, filed on February 13, 1970, were
not entitled to comparative consideration with Interdata's applications filed
on December 4, 1968, since they were filed after the cut-off date. An application for review of that action has
been filed by New York-Penn Microwave. [**18]
15. While varying in detail, in general these
applicants all propose to provide specialized private line services tailored to
the requirements of the subscriber.
Some are already engaged in common carrier or private microwave
operations, and propose to make use of such facilities, personnel and
experience to the extent practicable.
Some propose to provide "end-to-end" service, either by
constructing their own loop [*325] facilities or by negotiating on behalf of
subscribers for interconnection with existing local carriers or by some
combination of both. n3 Interconnection with facilities of the subscribers
and other microwave systems would be permitted. All claim that they will provide low-cost, flexible services
which are needed and not now provided in the same manner by existing
carriers.
n3 For example, New York-Penn
Microwave proposes to install an entrance link (using frequencies at 18 GHz)
from the terminating microwave relay point near Chicago to a general
distribution center immediately adjacent to the premises of a number of customers
in Chicago. Local loops would then be
negotiated by the applicant on behalf of the customer with local carriers. At intermediate relay points the 18 GHz
entrance link would be omitted, and the applicant would arrange with local
carriers for interconnection between the microwave relay station and the
customer's premises. [**19]
D. Opposition
Pleadings
16. While the time for filing pleadings with
respect to these applications has not yet expired in some instances, oppositions
have been filed against the earlier applications and it appears likely that all
of the applications will be opposed on similar grounds.
17. AT&T states that applications of the
type filed by MCI associated companies and others cannot be regarded as an
isolated experiment, but rather necessitate a Commission determination of
"basic and important policy questions regarding future development of
common carrier communications services throughout the United States." In
connection with MCI-New York West's applications, AT&T summarizes its
position as follows:
MCI-NY West's
proposal and others like it confront the Commission with basic policy questions
regarding the future development of common carrier communications
services. They would offer to serve
only limited segments of business users in certain selected cities, without
concern for the deleterious impact this might have on the other business and
residential users who are subscribers of the existing common carriers. Such proposals, if granted, would seriously
undermine the policy [**20] of uniform
interstate rates and dilute or delay the benefits that economies of scale would
otherwise make available to the general telephone using public. Moreover, the authorization of such
proposals would result in harmful electrical interference to existing common
carrier routes, inefficient and under-utilization of scarce common carrier
facilities, to the detriment of the general public. As shown above, there is no demonstrated unfilled public need for
MCI-NY West's incomplete and inadequate proposal or for the network of which it
would be a part. Existing common
carrier facilities are more than adequate to meet the public need and the
existing carriers stand ready to serve any additional need which may be found
to exist in the future.
18. With respect to Datran's proposed nationwide
switched digital network for data transmission, AT&T raises a number of
questions which it asserts require hearing.
These concern alleged uneconomic duplication of common carrier
facilities, impact on nationwide uniform rates, social costs (such as a less
efficient total communications network, a requirement for additional Bell
System stand by capacity, intensified congestion of the radio spectrum), [**21]
the basis for regulating or controlling competition between Datran and
established carriers, the extent of public demand for services which is not, or
will not be, met by existing carriers, comparative costs and frequency usages,
and the technical and economic feasibility of Datran's proposal. AT&T also asserts that Datran's proposal
would cause harmful interference
[*326] to some stations of the
Bell System companies, as well as additional cases of potential interference to
full development of already established Bell System routes. AT&T takes the position that
construction of Datran's proposed system would be more costly than expansion of
existing Bell System routes by an equivalent number of circuits, that a grant
might lead to the adoption of route pricing by the established carriers and
cause an increase in rates to the general public, and that the need alleged by
Datran would be better met within its time frame by the Bell System's
"evolutionary approach." It is further asserted that Datran's
proposal will depend on intrastate, as well as interstate, service and require
appropriate local or state authorization.
In addition, AT&T claims that a proliferation of 11 GHz local
distribution [**22] systems in and
around major cities would cause serious frequency congestion problems. Finally, it states that Datran's
applications appear to be mutually exclusive with those filed by other
specialized common carriers for technical or economic reasons, or both.
19. Western Union urges that consideration of
MCI's new applications is premature before its Chicago-St. Louis system has been demonstrated. n4
It requests the Commission to postpone any kind of action of the applications
of Datran and other applicants pending a determination of the underlying policy
questions, since the proposals "threaten the common carrier communications
industry with significant change, if not upheaval." Western Union claims
that a grant of these proposals will divert revenues from its prime industrial
areas, jeopardize the cost averaging approach, and threaten its efforts to gain
a broader economic base and more financial stability. It also claims that the applicants have failed to demonstrate a
public need for their proposed services, or to establish their technical and
financial qualifications, and that their proposed systems will cause harmful
interference to some of its existing stations and [**23] prejudice its ability to expand to full band
usage on present routes.
n4 See Microwave Communications,
Inc., 18 FCC 2d 953 (1969); reconsideration denied, 21 FCC 2d 190; pending on
review in the United States Court of Appeals for the District of Columbia
Circuit in American Telephone & Telegraph Co. et al. v. Federal
Communications Commission (Case Nos. 23959 and 23962).
20. The applications are also opposed by the
General System Telephone companies (General), other independent telephone
companies, and various existing miscellaneous common carriers. In general, they claim that grants would
result in wasteful duplication of facilities within their operating territories
and/or electrical interference to existing systems. In addition, some of the applicants have filed petitions to deny
the applications of others on grounds of mutual exclusivity. The National Association of Regulatory
Utility Commissioners (NARUC) has petitioned for a public hearing on the Datran
applications. Moreover, the Washington
Utilities and Transportation Commission opposes the MCI Pacific Coast
applications on the ground that any diversion of interstate usage from
established carriers to other communications [**24] media would have the effect of placing a heavier relative burden
on intrastate users of jointly provided facilities.
21. As indicated, the foregoing is not a
complete listing of the applications and opposition pleadings on file, or a
comprehensive summary [*327] of the individual contentions. However, it sufficiently indicates the kind
of proposals and objections that have been made to serve as a basis for
discussion.
II. DISCUSSION
22. Based upon the applications and related
leadings before us, it appears that the questions requiring resolution in this
proceeding may be stated as follows:
A. Whether as a general policy the public
interest would be served by permitting the entry of new carriers in the
specialized communications field; and, if so,
B. Whether comparative hearings on the various
claims of economic mutual exclusivity among the applicants are necessary or
desirable in the circumstances;
C. What standards, procedures and/or rules
should be adopted with respect to such technical matters as the avoidance of
interference to domestic communications satellites in the 6 GHz band, the
avoidance or resolution of terrestrial frequency conflicts and route blockages
both vis-a-vis [**25] the facilities of
established carriers and among the applicants, and the use of frequency
diversity;
D. Whether some measure of protection to the
applicants' subscribers is called for in the area of quality and reliability of
service; and
E. What is the appropriate means for local
distribution of the proposed services?
The resolution
of Question A is obviously of threshold policy significance and, in large
measure, will constitute the predicate for decisional treatment of the
remaining questions. Hence, we are of
the view that effective and informed participation by the public in this
proceeding will be facilitated by a presentation herein of our staff's analysis
and recommended disposition of Question A.
A/t the same time, the Commission is deferring any determination of its
own on Question A until we have the benefit of the comments by interested
parties on the staff's position. In
this context, our indicated resolutions herein of Questions B-E are to be
regarded as tentative and subject to appropriate modification as may be required
by our ultimate determination of Question A.
23. We are hopeful that this proceeding will
facilitate resolution of the difficult policy [**26] and procedural questions presented by this multiplicity of
applications and oppositions in the shortest possible time. The situation calls for expedition in the
public interest, since it is claimed that the proposed services are needed by
the public now. In addition, the applications
are tying up frequencies which may in some instances block action on applications
by established carriers for expansion on existing microwave routes and affect
the location of earth station sites for domestic communications satellite
systems.
24. Accordingly, we propose to use this
proceeding as a vehicle for the prompt resolution of the broad policy questions
listed above and amplified below. Once
these issues have been determined, we will consider each proposal on its
individual merits and follow such procedures as may be necessary to resolve any
remaining questions pertinent to the particular set of applications. Each applicant will, of [*328]
course, be required to make a satisfactory showing that it is qualified
and that the service it seeks to offer is technically and economically sound
and would otherwise serve the public interest.
We have reached no final conclusions on any of the matters discussed
[**27] below. However, we will set forth tentative proposals and the position
of the staff to stimulate comments, counterproposals and suggestions as to what
course would best serve the public interest.
Material already submitted in the applications and pleadings on file may
be incorporated by reference and should not be resubmitted.
A. Whether As
a General Policy the Public Interest Would be Served by the Entry of New
Carriers in the Specialized Communications Field Staff analysis
25. In considering whether the public interest
would be served by permitting new carriers to provide specialized
communications services, the basic touchstone for decision is, of course, the
Commission's mandate to regulate "interstate and foreign commerce in
communication by wire and radio so as to make available, so far as possible, to
all people of the United States a rapid, efficient, Nation-wide, and world-wide
wire and radio communications service with adequate facilities at reasonable
charges * * *" (Section 1 of the Communications Act). Although this is the first time that the
Commission has been presented with a large number of applications for authority
to provide competitive common carrier
[**28] services via microwave in
the field of domestic communications, the issue of competition is not new. The Commission has had numerous occasions to
consider and establish policy with respect to the provision of communications
services in the common carrier field on a competitive basis.
26. As long ago as 1948 applications were filed
in Docket No. 8777 by Mackay Radio and Telegraph Company, a predecessor company
to ITT World Communications, Inc. (ITT) for authority to operate circuits to
Finland, the Netherlands, Portugal and Surinam in competition with pre-existing
circuits to those points operated by RCA Communications, the predecessor to RCA
Global Communications, Inc. (RCAC).
Upon review of the Commission's decision n5 to grant the applications for Portugal and the Netherlands and deny the
Surinam application (Finland was withdrawn), the Supreme Court held: n6
n5 FCC 51-197; see also FCC 55-698.
n6 FCC v. RCA Communications, Inc.,
346 U.S. 86 (1953).
(a) The
Commission may not grant applications to provide a competitive service merely
because it assumes "that competition is bound to be of advantage in an
industry so regulated and so largely closed as this one * * *"
(b) [**29]
The Commission may grant applications for competitive circuits after an
analysis of the trends and needs of the industry n7 and in the exercise of "the discretion given it by the
Congress." n8
n7 Id. page 97.
n8 Id. page 95.
[*329]
(c) "In reaching a conclusion that duplicating authorizations are in
the public interest wherever competition is reasonably feasible the Commission
is not required to make specific findings of tangible benefit."n9
n9 Id. page 96.
(d) In order to
grant a competing application, "the Commission must at least warrant, as
it were, that competition will serve some beneficial purpose such as
maintaining good service or improving it." An applicant is not required to
demonstrate tangible benefits. There
must, however, "be grounds or reasonable expectations that competition may
have some beneficial effect." n10
n10 Id. page 97.
26a. Since the Supreme Court's decision in the
RCA case, the Commission has granted authority for numerous competing direct
radio telegraph circuits, n11 in certain
instances without holding hearings. The
Commission has also followed a similar policy with respect to the grant of
competing applications to miscellaneous common [**30] carriers in the domestic communications field. In each instance the test was whether the
competition was reasonably feasible and could be expected to have some
beneficial effect. n12 In addition, the Commission has authorized the use
of private microwave systems, n13 by entities
to satisfy their own needs. This also
introduces an element of competition in the sense that a potential user now has
the alternative of leasing facilities from a common carrier or providing his
own facilities.
n11 See, e.g., 26th Annual Report of
the FCC, page 107. The Commission has
also authorized competing international carriers to lease, or obtain
indefeasible rights of use of, channels in international cables of
AT&T. See, e.g., 28th Annual Report
of the FCC, pages 124-125.
n12 The Commission in Mackay Radio
and Telegraph, Inc., 15 FCC 690, at page 737, defined "reasonably
feasible" as encompassing the concept that the applicant seeking to
compete must demonstrate: that a grant of its application would enhance or
induce competition; and that a grant of its application would not endanger the
ability of the existing carrier to continue to provide competitive service to
the points at issue or to other points of its services. Specifically, the Commission was concerned
as to whether there was a sufficient volume of traffic available to support
both services. The presence of such a
volume of traffic was taken as an indication that competition was reasonably
feasible.
n13 In the Matter of Allocation of
Frequencies in the Bands Above 890 Mc., 27 FCC 359 (1959), 29 FCC 825 (1960).
[**31]
27. We note that there are not numerous
precedents in the general domestic common carrier service field for the
authorization of competing circuits.
This is due primarily to the fact that until the filing of the
applications considered in Microwave Communications, Inc., 18 FCC 2d 953
(1969), n14 reconsideration denied 21 FCC 2d
190 (1970), the Commission had no occasion to consider applications for
competitive service in this area. In
its MCI decision, the Commission granted applications of MCI to provide
specialized interstate common carrier services between Chicago and St. Louis
upon a finding that competition was reasonably feasible and could be expected
to provide some public benefits. While
not determinative of issues posed by the instant applications, the MCI decision
indicated a disposition to foster in the specialized communications field a
competitive environment within which users may have a wider range of choices as
to the means of satisfying their special communications needs.
n14 See footnote 4.
28. The public interest would be best served by
allowing the entry of new communications common carriers to serve the markets
for special communications services,
[**32] to the extent that such
entry can be accommodated [*330] within the limitations of radio frequency
availability. For the reasons set forth
below, competition in this area meets the long-established test, i.e., that it
is reasonably feasible and can be expected to have some beneficial effect. Indeed, the advantages of such a policy
appear to be manifold and to outweigh any risk that the public interest would
be adversely affected.
29. The demand for all types of communications
service is growing very rapidly. The
use of standard voice communications services is expanding at very high rates
and it is expected that this rapid growth will continue, if not increase. n15
In addition, data communication, which has been in an embryonic stage of
development, will probably exhibit very substantial growth over the next
decade. n16 In proposing a policy favoring the entry of new specialized common carriers,
we look toward a degree of competition oriented toward the development of new
communications services and markets and the application of improvements in
technology to changing and diverse demands.
Thus, we are not faced with the question of whether we should increase
the number of carriers [**33] which are
to serve a fixed market with the same services, as is implied by many of the
arguments raised by the established carriers.
Rather we anticipate that the new carriers would be developing new services
and would thereby expand the size of the total communications market. There may well be realignments of customers
for specific services in accord with the types and degrees of specialization
provided by different carriers. But any
loss to the established carriers can be expected to occur only in terms of
their relative share of the total communications market which would be served
and not in terms of the volume of communications provided. Since the total communications market being
served is likely to be increased, the existing carriers' volumes of traffic may
increase at the same time that there is entry by the new carriers. n17
Moreover, the filings before us indicate that the special service markets are
quite different from the standard toll telephone service. The existing communications network was
established to meet the requirements of voice transmission in a market where
consumer demands were generally similar.
However, data users require not only a different application [**34] of communications technology, but also have
requirements for services that are heterogeneous in character. For example, Datran proposes to construct
digital technology transmission systems especially to meet data requirements. Other applicants, while proposing to use
analog transmission [*331] techniques, propose to offer services with
systems more closely designed to the requirements of transmitting digital and
other non-voice traffic. The applicants
would be able to use systems that have not been engineered around the
specialized requirements of voice traffic (such as sensitivity to steady line
noise but relative insensitivity to impulse noise and phase distortion). Some may even offer systems totally
optimized to the requirements of data transmission or other specialized
traffic. In summary, the diversity that
characterizes both the demand and the technology supports our conclusion that
new entry in this field is reasonably feasible.
n15 About 87 percent of the Bell
System's interstate revenue is from message toll telephone and wide area
telephone service, and these services have an annual growth rate of 15
percent. It has been estimated that the
existing plant of the Bell System will quadruple by 1980. See State of R.R. Hough, Vice-President,
AT&T, before the FCC during continuing surveillance meetings, week of
September 8, 1969.
n16 In its report to the Commission
in the computer inquiry (Docket No. 16979) Stanford Research Institute
estimated that by 1980 10-15 percent of the Bell System plant may well be
serving data users (as measured in terminal hours). However, AT&T estimated that by 1980 data use will amount to
only 5-10 percent of the peak network load.
n17 We note that despite the claims
of potential adverse effects upon the established carriers that were made in
the Carterfone case (13 FCC 2d 420), AT&T Chairman Romnes stated in the
1968 Annual Report (page 4):
Since customers now have more
options in using the network, this should further increase usage and enhance
the growth of our business. Competition
in providing communications equipment that may be connected to the network will
no doubt accelerate, but we are confident of our ability to meet the tests of
the market. In the expanding structure
of communications there is opportunity for all. [**35]
30. There appears to be an increasing public
need and demand for the availability of diverse and flexible means for meeting
heterogeneous communications requirements.
Furthermore, the means for satisfying such needs are becoming available
through rapid developments in communication, computer and related
technologies. The information before us
affords grounds for a reasonable belief that there is a substantial public need
for the proposed services which is not now being adequately met by the established
carriers. The computer inequity showed that there was dissatisfaction on the
part of the computer industry and by many data users who had been attempting to
adapt their requirements to existing services.
n18 Datran has persuasively stated the
public need for rapid, accurate and low-cost data transmission, the drawbacks
in using existing facilities engineered for voice and record transmission, and
the advantages of a switched, all digital network with end-to-end compatibility
(see paragraphs 7-9 above). Moreover,
the showings in the MCI applications (e.g., the Arthur D. Little and Spindletop
studies) support the view that there is widespread interest in the types of
specialized, [**36] private line services proposed by it and
other applicants. The circumstance that
so many applicants apparently believe that there are markets to be developed is
also of some significance. By
permitting the entry of specialized carriers, we would provide users with
flexibility and a wider range of choices as to how they may best satisfy their
expanding and changing requirements for specialized communication service.
n18 For a summary of the responses
of the computer industry and data users, see Report No. 2 of the Stanford
Research Institute study in the computer inquiry (Docket No. 16979).
31. We note in this connection that the
applicants are in a disadvantageous competitive position vis-a-vis AT&T
insofar as prompt inauguration of the proposed services is concerned. Action on their applications may be delayed
for some time by the necessity of resolving claims in petitions to deny, inter
alia, that the showing of need is inadequate.
Since AT&T has numerous long line facilities, both cable and radio,
and many diverse routes, it generally has enough flexibility and spare capacity
to institute new services (at least on a limited scale) without having the
immediate necessity [**37] of obtaining
authorization for new or modified facilities.
Therefore, AT&T need only file a tariff in order to commence
providing service on its authorized facilities. AT&T is thus in a position to offer at any time services with
many of the features proposed by the applicants, while challenging the [*332]
showings of need made by would-be new entrants and claiming that
hearings are required on their proposals.
32. There is also a question as to whether the
existing carriers can meet the requirements in the specialized markets
promptly, efficiently and effectively without prejudice to full and timely
satisfaction of the increasing requirements of the public monopoly
services. The responsibility for
meeting the nation's growing and changing communications requirements is now
largely concentrated in the Bell System.
This responsibility is becoming more and more difficult to discharge in
a manner which enables the Bell System to satisfy timely and effectively all
existing and anticipated communications requirements. This is partly because of the diversity of such requirements, the
obvious problems of designing and engineering facilities capable of meeting all
such requirements with [**38] equal efficiency, economy and expedition,
and the huge and increasing amounts of new capital that the Bell System must
raise for construction purposes. The
entry of new carriers would have the effect of dispersing somewhat the burdens,
risks and initiatives involved in supplying the rapidly growing markets for new
and specialized services among a multiplicity of entrepreneurs who appear
ready, willing and able to assume these undertakings. It would also expand the capability of the communications
industry to respond to the challenge of meeting the rapidly growing and varied
demands of communications users.
33. AT&T claims that the entry of
specialized carriers will result in the sacrifice of economies of scale and the
incurrence of social costs. However,
the achievement of any economies of large scale supply in particular facilities
may be at the expense of potential economies in other directions. In order to realize large scale economies, a
single supplier must conglomerate diverse functions and provide general
standardized services, thereby foregoing potential economies of specialization
that could be derived from serving a specialized portion of the market. During an era [**39] of relative stability in technology,
characterized by markets with homogeneous demands, the efficiency of large
scale, single supply is necessarily considerably greater than it is during an
era of rapidly changing applications of improved technology and growing
potential markets made up of diverse consumer demands. Any attempt to adapt facilities designed
primarily to meet voice requirements to the quite different requirements of
data communications may entail such compromises in service as to leave both
types of users dissatisfied, n19 and may
vitiate the economies of scale the carriers postulate.
n19 AT&T, in effect, recognizes
some shortcomings in the use of voice oriented facilities for data transmission
in that it is gradually working toward digital transmission with the
"evolutionary approach" necessitated by its existing plant. As Datranpoints out, it apparently
recognized this need some time ago. An
article entitled "Transmission Aspects of Data Transmission Service by
Using Private Line Voice Telephone Channels" in the Bell System Technical
Journal, November 1957, states that:
The telephone network was developed
for speech transmission, and its characteristics were designed to fit that
objective. Hence, it is recognized that
the use of it for a distinctly different purpose, such as data transmission,
may impose compromises both in the medium and in the special service
contemplated.
See also, "Transmission Across
Town or Across the Country," Bell Laboratories Record (May/June 1969),
pages 162, 167, to the effect that the use of digital transmission for voice
may be more costly than analog transmission. [**40]
[*333]
34. Further, while economies of
scale may result when large general purpose transmission facilities can be used
to meet relatively homogeneous communications requirements, there may be other
drawbacks. The sheer size of the
AT&T organizational structure, its enormous financing requirements, its
vertical integration, and near monopoly position in the provision of communications
services may make it slower to perceive and respond to individual, specialized
requirements and to initiate market and technical innovations. n20
Competition in the specialized communications field would enlarge the equipment
market for manufacturers other than Western Electric, and may stimulate
technical innovation and the introduction of new techniques. Moreover, new carriers with smaller scale
operations could devote their undivided attention to the particular needs to be
served and, lacking a captive market, would be under pressure to innovate to
produce those types of services which would attract and retain customers.
n20 In its Report and Order relating
to the establishment of domestic communication satellite facilities by
non-governmental entities, Docket No. 16495, March 24, 1970 (22 FCC 2d 86), the
Commission took note that "AT&T has stated that it views satellite
transmission as another form of transmission similar in function to terrestrial
microwave systems and coaxial cables, and that there are no communications
services which could be offered by satellites which cannot now be offered by
terrestrial facilities." (Paragraph 26, footnote 7) However, the
Commission observed that:
The most important value of domestic
satellites at the present time appears to lie in their potential for opening
new communications markets, for expanding the beneficial role of competition in
the existing markets for specialized communication services, and for developing
new and differentiated services that reflect the special characteristics of the
satellite technology. (Paragraph 25)
[**41]
35. In an industry of the size and growing
complexity of the communications common carrier industry, the entry of new
carriers could provide a useful regulatory tool which would assist in achieving
the statutory objective of adequate and efficient services at reasonable
charges. Competition could afford some
standard for comparing the performance of one carrier with another. Moreover, competitive pressure may encourage
beneficial changes in AT&T's services and charges in the specialized field,
and stimulate counter innovation or the more rapid introduction of new
technology. The Commission noted in its
MCI decision the apparent response of AT&T to MCI's proposal in modifying
certain of its sharing provisions of its private line tariff offerings (18 FCC
2d 953, 961-2).
36. We are not persuaded that the allegation of
"creamskimming" is well-founded or would justify a bar against new
entry of the type proposed here. The
concept of creamskimming assumes that the total potential market that could be
served is actually being served by the established carriers and that they are
responding to all changes in demand and technology at an optimum rate. It postulates that there is no [**42] room for a potential entrant without giving
him part of the existing market and the only attraction to the potential
entrant is the existence of the cream on the low cost routes. But it appears that the principal attraction
for the new applicants here is not the cream of the existing markets, but
rather special service markets that have not been developed. As earlier mentioned, the entrants seek to
expand the size of the total communications market in a manner that may benefit
all communications users.
37. Further, the development of new markets must
always take place gradually and begin in those particular sub-market areas
where [*334] maximum demand can be stimulated at minimum cost. This is the manner in which all new products
and services are introduced, and it is practiced by the established
carriers. When AT&T developed its
audio and video services during the 1948-58 period, it chose to serve only the
larger population centers and not outlying areas. As a result the Commission authorized intercity relay facilities
to broadcasters and to miscellaneous common carriers. More recently, AT&T claims that the costs of high capacity
microwave and cable facilities used between major [**43] cities justify its experimental Series
11,000 tariff which is applicable only between large cities. Further, AT&T originally proposed plans
to introduce interstate Picturephone service initially only between
Pittsburgh's Golden Triangle area and lower Manhattan. n21
n21 AT&T has since requested dismissal
of its applications for authority to provide such service. However, it is offering Picturephone service
in Pittsburgh.
38. Though claiming that the geographical scope
of the applicants' proposals is too small, n22
the established carriers have not elected to specify any additional locations
needing the proposed services at this time.
The proposals now before us cover large sectors of the country, much
larger than one might expect in initial proposals. Datran's proposed initial network is limited to 35 markets where
the level of maturity of digital technology has created the greatest initial
requirement for data transmission.
However, it states that it plans ultimately to expand the system to
serve all significant interstate as well as intrastate data transmission
markets, "including residential subscribers as digital technology is
extended to the home." As Datran points [**44] out, business and other institutions, rather than individuals,
presently constitute the overwhelming majority of potential data transmission
users and they are heavily concentrated in major metropolitan areas. We would not expect a system such as that
proposed by Datran to be constructed on a total nation-wide basis at one time,
though we would anticipate orderly expansion and development of communications
plant to meet evolving market demands. n23 Moreover, the combined routes of the applicants
proposing specialized, private line services appear to cover the bulk of the
major cities where customers for such services are apt to be concentrated, and
they are proposing interconnection. We
can reasonably expect applicants to propose extensions of their systems as
their markets develop, and there is no indication of a cessation in the filing
of new applications for special services in additional areas. Competition in the response to these new
demands may result in much faster geographical extension of the services than
would be the case if all markets were preserved for the established carriers. Finally, other customers could be reached by
spur routes from these networks as demand [**45] develops, pursuant to Commission action under Sections 201(a) and
214(d) if necessary in the public interest.
n22 We note that the carriers cannot
consistently claim both that there is no need for these specialized services
and that the geographical scope of applicants' proposals is too small.
n23 Indeed, the Bell System and
Western Union began on a modest basis and gradually evolved to their existing
positions. Moreover, while the Bell
System serves the bulk of the nation's population, it does not serve most small
towns and rural areas.
[*335]
39. Assuming that the questions
of interference and frequency blockage are satisfactorily resolved (see
paragraphs 54-58 below), we see no real basis for the asserted fears that the
authorization of specialized systems would affect rates for existing common
carrier services or delay the planned construction of high-capacity systems in
this decade. Preliminarily, we note
that there appears to be a basic inconsistency between the claim of adverse
impact and the contention that there is no public need for the proposed
services. Clearly, if the applicants
are unable to attract subscribers because their needs are being fully and
satisfactorily [**46] met by
established carriers, there can be no adverse impact. On the more reasonable premise that unmet public need exists,
some diversion of existing and potential traffic may occur. On the other hand, the stimulative effect of
the specialized services may actually increase the amount of traffic being
carried by the established carriers (see para. 29). Moreover, to the extent that they provide local distribution
service as proposed by some of the applicants, established carriers would also
realize an increase in business.
Established carriers would, of course, be free to compete on equal terms
with the new entrants and might obtain a very substantial portion of the
specialized communications market. n24 Indeed, their established position and the fact that
they already provide various communications services to potential customers for
the specialized services could very well afford them a competitive advantage
over newcomers to the field (see also paragraph 31 above).
n24 A representative of Datran has
stated that it expects to obtain only about 10 percent of the data market by
1980 (see Telecommunications Reports, Vol. 36, No. 20 (May 18, 1970), page 5).
40. It is important [**47] to recognize that we are concerned with only
a relatively small percentage of established common carrier service to the
public. n25 For example, AT&T's present interstate business constitutes only
about 30 percent of the Bell System's total business; about 87 percent of the
interstate revenue is from message toll telephone and wide area telephone
service (WATS), and these latter services have an annual growth rate of about
15 percent. n26 None of the applicants proposes to provide this type
of service and we see no reason to expect any undesirable effects upon these
services. An examination of AT&T's
private line, program transmission and other more specialized services
indicates that an estimate of the proportion of AT&T services that is
vulnerable to competitive in-roads would be on the order of 2-4 percent of its
existing total business. Moreover, it
has been estimated that the existing plant of the Bell System will quadruple by
1980. n27 Thus, it is difficult to see how a diversion (if, indeed, there is any
diversion) of some portion of that comparatively small percentage of total
business represented by interstate specialized
[*336] services would have any
substantial effect on [**48] telephone
rates and service or delay or preclude whatever expansion of facilities is
needed to accommodate the rapid growth in telephone traffic. In light of this and the estimate of
AT&T that by 1980 data will amount to only 5-10 percent of its peak network
load, we cannot find merit in the argument that the high-capacity facilities
which AT&T plans for the next decade are in any substantial or relative
measure dependent upon a very substantial growth in data and specialized
private line services of AT&T, far exceeding existing percentages, and
would be made possible only by a denial of the applications before us. n28
Similarly, nothing before us warrants a conclusion that the uniform tariff
policies of the established carriers would be endangered. It has not been shown that the rates of the
new entrants would in fact be lower than Bell could justify with its uniform
charging approach or that there is any real threat to the rates of the
established carriers. In the event that
adverse consequences to the public should develop, the Commission can take such
action on the relevant tariff filings, as may be necessary to protect the
public. We think that in the context of
the matters [**49] now before the
Commission involving proposed new and different services, a question of this
nature is more appropriately considered in connection with the tariffs rather
than upon authorization of the facilities.
n25 All of the applicants propose
interstate facilities and services except three applicants in Texas, which, we
understand, does not require state certification for intrastate service. Applicants proposing to operate where state
or local authorization is required for intrastate service must, of course,
obtain the necessary authorization prior to engaging in such service, and where
proposed facilities are justified on the basis of intrastate service, local or
state authorization must be obtained prior to the filing of microwave
applications (see Section 21.15(c)(4) of the rules).
n26 However, the telephone
facilities may be used for the transmission of data (e.g., Dataphone). It has been estimated that about 200,000 of
the present approximately 96 million telephones are Dataphones. The use of Dataphones is expected to
increase.
n27 See Statement of R. R. Hough,
Vice-president, AT&T, before the FCC during continuing surveillance
meetings, week of September 8, 1969.
n28 As earlier indicated (footnote
16 above), AT&T has estimated that by 1980 data will amount to only 5-10
percent of its peak network load. [**50]
41. In addressing the question of pricing
practices we must not overlook the possibility that the converse situation may
arise. We refer to the possibility that
the established carriers may file unduly low or discriminatory tariff schedules
and thereby subject the new entrants who increase the competitive character of
the market to unfair competition. In
this connection we note that AT&T could file tariffs which price its
potentially competitive services below cost to prevent or limit entry and seek
to recover the losses through cross-subsidy from its monopoly message toll
telephone and WATS market. The
Commission has already addressed itself to this problem by undertaking an
examination of ratemaking principles in Dockets Nos. 16258 and 18128. See also the Commission's Report and Order
in the domestic satellite proceeding (Docket No. 16495), 22 FCC 2d 86, 96. The
Notice of Proposed Rule Making in Docket No. 18703 (FCC 69-1140) looks toward
an expansion of the scope of information available to the Commission at the
time of proposed rate changes or new services by any major carrier. In addition, the Commission is expected to
address itself further in the near future to this [**51] problem and to explore
the feasibility of establishing ratemaking standards which would identify
cross-subsidization as well as policies directed to their prevention or
elimination.
42. We turn now to a consideration of the other
established carriers. First, there are
the independent telephone companies.
These are not engaged to any substantial degree in providing either
interstate data or specialized private line services. Instead, for the most part, they are engaged in the provision of
local exchange and other local services.
They participate in interstate service primarily for the provision [*337]
of the local distribution facilities.
Under these circumstances it is difficult to visualize how they would be
affected adversely by a grant of the pending applications. In fact, to the extent that these applicants
rely upon or use existing local distribution facilities, their entry would
increase the business of the independents.
43. The situation in the case of Western Union
is different. Its revenues from leased
systems and Telex account for about 30 and 15 percent, respectively of its
total revenues, with the remaining 55 percent coming from message telegraph
service and other [**52] services. The potential impact upon Western Union is
therefore greater than upon either the Bell System or the independents. Such potential impact must, however, be
evaluated in the context of the overall public interest. First of all, as already set forth in
detail, we are here concerned with the sharing of a new, relatively untouched
market in a field where even the present demand is growing at a very rapid
rate. Secondly, the proposed services
are designed to meet demands not being satisfied by the current services of the
established carriers. Moreover, we
believe that this market will best be served by a competitive service of
supply. Thirdly, we are primarily
concerned with the provision of interstate facilities. In this connection, we note that Western
Union for the most part does not use its own facilities, but instead acquires
them largely by lease or rental from AT&T.
In fact, there is no established pattern for the installation of new
facilities by Western Union other than its recently filed applications for facilities
over a route from Cincinnati to Atlanta.
Finally, the Commission has just announced that it has instructed its
staff to prepare a decision approving [**53]
Western Union's application to purchase the Bell System TWX system with
estimated annual revenues of $86,000,000 for 1971. This in itself should, if the transaction is given final
Commission approval, increase Western Union's annual revenues materially. In view of all of these factors, it is our
conclusion that additional competition is reasonably feasible and that the
foreseeable public benefits from the new services set forth above (see
paragraphs 30-35) far outweigh the potential dangers to Western Union. In any event, there is no substantial
showing that a grant of the applications would deprive the public of any
services provided by Western Union which it is now enjoying and there are very
substantial grounds for finding that numerous benefits in the way of new,
different and less expensive services would result from a grant of the pending
applications.
44. The most important safeguard, however, is
the fact that the Commission has ample power under the Communications Act to
take such regulatory action as may be necessary in the public interest to avoid
adverse impact on the achievement of statutory goals and, particularly, the
basic purpose stated in Section 1 of the Act.
[**54] The Commission would, of
course, not permit any degradation in overall services to the public or any
impediment to the realization of their development. The results of any authorizations would be the object of close
and continuous scrutiny by the Commission.
Should adverse consequences develop or appear imminent, the Commission
can take such remedial action or precautionary measures as may be necessary to
protect [*338] the public.
As indicated, appropriate action can be taken in connection with the
tariffs. In addition, any renewal of
license for the proposed facilities would require a public interest finding,
and could be subject to any needed conditions.
Moreover, the Commission's broad rule making powers are always
available. Finally, we do not
contemplate any protective umbrella to shield the competitors, except from
predatory pricing and other unfair anti-competitive practices, or any
artificial bolstering of operations that cannot succeed on their own merits.
45. In short, we have an opportunity now to see
if the benefits that may reasonably be anticipated from entry of new carriers
in this narrow field will in fact materialize.
We can do so at what appears to be minimal [**55] risk. If we fail to explore this opportunity, the
present situation in which one carrier dominates the entire domestic
communications scene will continue indefinitely, and we are unlikely to know
what the public may be missing. On
balance, we think that the better course in the public interest is to apply
long standing precedent to the area of domestic microwave services and to open
the door to realization of the possible advantages while keeping a watchful eye
to avoid any adverse effect.
45a. Accordingly, inasmuch as it appears that
additional competition is reasonably feasible in this burgeoning market and
that the entry of new carriers may be expected to benefit the public by
providing new and differentiated services, there is no need to designate the
pending and anticipated applications for hearing on the broad issue of whether
the public interest would be served by competition to the established carriers
in the provision of specialized services or on the related contentions with
respect to alleged duplication of facilities, the general question of the need
for the new services and impact on uniform tariff policies and existing
services. Interested persons may make
as full [**56] a showing as they desire
on this aspect in their comments in this proceeding, and the Commission will,
of course, carefully consider all material submitted in arriving at policy
determinations. However, we do
recommend that the policy decisions made in the proceeding should be
dispositive of such questions for purposes of these applications, in the
absence of unusual and distinguishing circumstances.
45b. The foregoing paragraphs (25-45a) constitute
the staff analysis of Question A, on which we request comment. The following proposals of the Commission on
the remaining issues are premised on that analysis of Question A, and are
accordingly subject to modification depending upon the resolution of that
Question by the Commission.
B. Claims of Mutual Exclusivity on Economic
Grounds
46. In the event that the staff position on
Question A is adopted by the Commission, another major question concerns the
best procedures for dealing with the claims of mutual exclusivity among the
applicants on economic grounds. The
problem may be exemplified by the
[*339] Pacific Coast
applications. Both Datran and MCI have
proposed Pacific Coast routes as part of their respective nationwide
networks. [**57] In addition, at least five other applicants
have proposed Pacific Coast routes to provide specialized private line services
similar to those proposed by MCI.
Leaving aside for the moment the alleged conflicts in frequency usage
and assuming that most, if not all, of these problems can be resolved by other
means, we question whether comparative hearings on issues of economic
exclusivity are necessary or desirable in the public interest.
47. We think that Datran's proposed system
should be considered separately. It
alone has proposed a switched, occasional use, all digital, end-to-end network
dedicated exclusively to data transmission.
The other applicants have proposed to provide a variety of private line,
point-to-point, specialized services, which may include data transmission but
are primarily aimed at offering subscribers flexible, low cost communications
channels adaptable to their own particular needs and requirements. While there may be mutual impact insofar as
data transmission is concerned, we see enough difference between the two types
of proposals to warrant a conclusion that the public would benefit by having
both kinds of services available.
Moreover, it does not [**58]
presently appear that a grant of Datran's applications would preclude an
opportunity for entry by MCI and others proposing private line services.
48. We are not confronted here with applications
which seek to duplicate all or even a major portion of the services provided by
the existing carriers or to enter a static market. Instead, the applicants seek to develop a relatively new and
potentially very large market. The
forecasts of the potential data transmission market indicate that competition
among several competing carriers would be reasonably feasible. For example, Datran, which is proposing to
invest some $349,000,000 in its initial system, estimates that it will serve
only about 10 percent of the data market by 1980. If this percentage of the potential data transmission market will
support successful operations by Datran, there should be ample opportunity for
other new entrants even assuming that the established carriers succeed in
obtaining a substantial share of the remaining 90 percent of the data
transmission market.
49. Moreover, as indicated, MCI and other
applicants are proposing to provide other private line services besides data
transmission. Their proposals
[**59] are basically similar in that
each is proposing to provide "customized" services tailored to the
requirements of individual subscribers, i.e., to provide whatever the
particular subscriber desires. The
proposed services represent a significant departure from any service offered by
the established carriers in that virtually all of the restrictions placed on
use of the facilities are eliminated. n29 Various systems may develop along different lines,
each offering something of value to the public which would attract sufficient
customers for viable operations. The
number of successful operations may well depend on the ingenuity, enterprise
and initiative of applicants and equipment
[*340] manufacturers over a
period of years in taking advantage of changing circumstances and in coming up
with the types of services and equipment that will attract sufficient business
to support the particular system.
n29 Computers and
Telecommunications: Issues in Public Policy, Mathison and Walker
(Prentice-Hall, Inc., 1970), pp. 184, 186-187.
50. Under these circumstances where competition
is reasonably feasible and affords great promise of substantial public
benefits, we cannot conclude that the public [**60] interest would be served by selecting only one of the several
applicants as a "chosen instrument" for new entry in a particular
geographic area. We think that users
should be provided with flexibility and a wide range of choices as to how they
may best satisfy their expanding and changing specialized requirements. Since some of the applications may have been
filed in anticipation that the applicant would obtain a monopoly position in
any given geographic area (except from the established carriers), some of the
applicants may combine or decide not to proceed as a matter of business
judgment in view of our proposal to authorize multiple entry. As there is a potential demand sufficient to
support several entrants, the failure of any one authorized applicant would not
result from lack of potential customers but rather from its inability to
anticipate and meet public requirements.
Accordingly, it does not appear that there would be a substantial loss
or deterioration of service from the failure of such entrants. Instead, the demand for this type of
communications service will undoubtedly be met by another entrant or an
established carrier. In fact, if none
of the new entrants is [**61] sufficiently effective and efficient to
out-do his competitors and achieve successful operations, it will probably be
because uses can obtain either better service or lower charges from the
established carriers.
50a. In the circumstances, it does not appear to
us that comparative hearings would be either appropriate or effective at this
stage. This is not to say, however,
that it may not become necessary to take some future action (e.g., rule making
or comparative hearings at license renewal time), if it should develop that the
market is spread so thin among the new entrants as to jeopardize the availability
and continuity of specialized service to the public, or otherwise adversely
affect service to the public. By that
point, we will have some basis in experience to assist in appraising the market
potential, the number of systems that might be expected to be viable, the
comparative abilities and performances of the new entrants, and the extent to
which user requirements are being satisfied by the particular
"customized" services that develop.
Predictions now as to these dynamic factors would not, in our opinion,
be substantially assisted by the evidentiary hearing process. [**62]
In addition, the avoidance of lengthy comparative hearings at this stage
will make available to the public at a much earlier date services which all the
applicants claim, and we believe, are needed now.
50b. While we have used the Pacific Coast
applications as an example, the same considerations are pertinent to other
instances where more than one applicant has applied for routes in the same or
nearby areas. n30 We are therefore proposing generally to consider
each set of [*341] applications on its individual merits in
determining whether a grant would serve the public interest. We do not propose to hold comparative
hearings on claims of economic exclusively unless there is a much stronger
showing of exclusivity than those presently before us and we are persuaded that
the public interest requires such action in the particular situation.
n30 We note, however, that there may
be even less basis for a claim of economic exclusivity where the applicants
have proposed different intermediate service points.
C.
Frequency and Route Coordination; Spectrum Conservation
1.
Terrestrial versus satellite systems
51. The Commission is considering on its own
motion one question which has not [**63]
been raised in the applications or pleadings. Except for some stations, the applicants are generally proposing
to use frequencies in the 6 GHz common carrier band (5,25-6,422 MHz), which is
shared with the communications satellite service. In its Report and Order (22 FCC 2d 86) issued on March 24, 1970
in the domestic satellite proceeding (Docket No. 16495), the Commission stated
that "there may be considerable difficulty in coordinating satellite earth
stations with terrestrial systems in the 4 and 6 GHz bands without some
readjustments by certain stations in the terrestrial networks." The
technical criteria in Appendix D to that Report require satellite system
applicants to make interference calculations for each terrestrial station within
the coordination distance contours including those proposed stations for which
an application has been accepted for filing by the Commission. Moreover, for purposes of such coordination
it is to be assumed that both the satellite and the terrestrial system will
occupy continuously all frequencies allocated to the particular service band to
which they are assigned. There is also
the possibility of interference to terrestrial systems in the [**64]
6 GHz band resulting from scatter propagation.
52. We have considerable concern as to whether
the 6 GHz band can fully accommodate all the existing, proposed and anticipated
to be proposed uses by terrestrial and domestic satellite systems. However, we do not presently intend to
decline to consider the instant applications for terrestrial use of the 6 GHz
band on this ground. While these
applications will complicate the earth station situation, the magnitude of the
existing terrestrial use in some areas may pose a problem for satellite
applicants in any event. We will not
know how serious this problem may be until the applications for satellite
systems have been filed and the earth station coordination studies have been
considered. It is anticipated that some
additional spectrum allocations for communications satellite service will
result from the 1971 international space conference. As indicated in the Report in Docket No. 16495 (footnote 3), if
it appears from the domestic satellite applications that the use of the 4 and 6
GHz bands would be uneconomic because of the length of the terrestrial
interconnection links for earth stations, consideration may have to be given
to [**65] the use of such other bands as may be allocated for this
service. Unless impossible or precluded
by other compelling considerations, we think that established and new carriers
competing in the provision of the proposed terrestrial [*342]
services should not be placed in unequal positions insofar as access to
frequency bands is concerned.
53. However, it appears desirable to incorporate
in the rules at this time standards for protecting the satellites against
interference from new terrestrial microwave facilities in the 6 GHz band. We are proposing to impose restrictions on
the antenna orientation of microwave point-to-point stations operating in the 6
GHz band under Part 21 of the rules, which would be similar to recommendations
of the CCIR to prevent interference to synchronous satellites. Such limitations would not permit
transmitting antennas to be pointed within two degrees of the synchronous
satellite orbit except under unusual circumstances and then with restrictions
on the amount of power that could be radiated.
2.
Terrestrial frequency conflicts and route blockages
54. Aside from the question of terrestrial
versus satellite system coordination, the applications and opposition
[**66] pleadings raise issues as to
conflicts in terrestrial frequency usage and spectrum conservation. The established carriers assert that the
proposals of the applicants will cause interference to their existing systems
and block or impede future expansion on existing microwave routes. There are also instances of frequency
conflicts and potential interference among the applicants themselves.
55. We are not persuaded that the claimed
frequency conflicts are irreconcilable.
It has been our experience in processing microwave applications in the 6
GHz band, that frequency conflicts and route blockages can be avoided in most,
if not all, instances through co-ordination.
It does not appear that most of the applicants have followed such a
coordination procedure prior to filing their applications. While conflicts in the 6 GHz band may be
unavoidable in some heavily congested areas even with careful frequency coordination
and route planning, the 10.7-11.7 GHz band is also available now and
frequencies above 17.7 GHz will probably be available for short hops once the
allocations for the communications satellite service have been determined. If no frequencies can be found for some
segments, [**67] there is always the alternative of wire or
cable. In other words, while the
present conflicts must be eliminated, we see no absolute technical bar to the
effectuation of the applicants' proposed systems, though the economics may vary
with the technique utilized.
56. While Section 21.100 of the rules presently
states that licensees and applicants shall cooperate in the selection and use
of frequencies to minimize interference, there is no requirement for
coordination to avoid interference or blockage of expansion on existing
routes. We are proposing to amend our
rules to require that prior to the filing of an application, the applicant
shall coordinate with all existing (operating or authorized) common carrier
microwave stations, and with the proposed microwave stations in all previously
filed applications, in the proposed service area. Of course, applications which involve harmful interference to
existing or authorized stations will not be considered until the frequency conflicts
are removed. Applications which involve
interference to proposed stations in previously filed applications [*343]
would not be designated for comparative hearings unless: (1) the
application is filed within [**68] the
cut-off period for consideration with the earlier filed application, and (2)
the Commission is satisfied that the frequency conflict cannot be resolved by
reasonable measures by the later filing applicant. Comparative hearings on applications filed on the same date would
be subject to requirement (2) above, except that the burden of resolving
conflicts would lie equally on all the applicants. In the even that this rule making proposal is adopted, we would
accord applicants with pending applications an opportunity to modify their
applications to achieve compliance. n31 The original filing and cut-off dates would still be
determinative of priority under the rules.
n31 Applicants are encouraged to
make efforts to remove conflicts and route blockages without awaiting the
outcome of the rule making.
57. In this connection, we note with disapproval
the practice of applying for the same sites and frequencies specified by a
prior applicant without the consent of such applicant. Voluntary arrangements for sharing sites and
equipment may offer advantages and are to be encouraged. However, it is manifestly unfair to the
applicant who has undertaken the burden of engineering [**69]
a system and obtaining options for sites, for another applicant simply
to copy his proposal, in whole or in large part, and then claim mutual
exclusivity. Applications of this
nature will not be processed unless and until they are modified to reflect the
applicant's own independent proposal which, insofar as possible, does not
conflict with that of a prior applicant.
58. We are also of the view that an applicant
should coordinate with established carriers so as to avoid blocking planned
future expansion of existing microwave routes, to the extent practicable. Comments are requested as to whether
standards for such protection should be prescribed and, if so, parties are
invited to suggest appropriate standards.
It would appear that the measure of protection might vary from carrier
to carrier and depending on whether a particular route has high or low growth
potential. There is also a question as
to whether it is necessary or desirable to protect the potential for full
development in the pertinent frequency band on all existing Bell System
routes. We note that AT&T makes the
following statements in its petition to deny Datran's applications:
* * * as the capacity of the
existing [**70] Bell System routes is
exhausted planned construction of high-capacity systems will furnish Bell
companies with large numbers of additional circuits at a cost per channel well
below those proposed to be incurred by Datran.
* * * With normal growth, by the mid-1970's it will be economically
justifiable to install L5 coaxial cable carrier systems (providing 150 master
groups, equivalent to 90,000 voice channels) which will augment microwave and
cable routes currently used at far less cost per voice channel mile. Systems of still greater capacity are
expected to be available by 1980, which systems could again dramatically reduce
the cost per voice channel mile.
If non-spectrum using systems will
shortly be required on high density routes in any event, does this reduce the
importance of preserving the opportunity for full development of such microwave
routes in the interim?
[*344] 3. Frequency diversity and miscellaneous
technical requirements
59. The contention that the proposed use of
frequency diversity by most of the applicants is an inefficient and wasteful
use of scarce spectrum, raises a further question as to whether or to what
extent, if any, frequency diversity n32
should be [**71] permitted. Section 21.100 presently provides that
"[frequency] diversity transmission will not be authorized in these
services in the absence of a factual showing, in each case, that the required
communications cannot practicably be achieved by other means." It has been
our practice to authorize frequency diversity upon a showing that it is
necessary to achieve the required reliability standards. We have accepted such showings on a system
basis rather than requiring case-by-case justification. Such authorizations typically have been
conditioned to permit withdrawal of frequency diversity without a hearing if
the frequencies are later needed.
However, it is obvious that once a route is designed and built utilizing
frequency diversity, conversion to other methods of achieving reliability would
be quite expensive. In view of the
growing demand on the frequency spectrum along routes between major cities, it
does not appear that we should continue the present policy with respect to
frequency diversity, especially when there are other recognized methods, e.g.
space diversity, for achieving high reliability where it is needed.
n32 Frequency diversity may be
defined as two separate transmitters working on different radio frequencies by
carrying the same modulation and using a single antenna system. For purposes here, we also include the use
of a spare channel which may be switched into the path in lieu of the faded
channel. [**72]
60. Datran and Interdata propose space
diversity, n33 but most of the other applicants
propose a one for one frequency diversity operation. The Bell System generally utilizes frequency diversity on a spare
channel protection basis; in the 4 GHz band it uses a channel ratio of one
(protection) for five (working), and in the 6 GHz band one for three. Bell contends that a one for one frequency
diversity as proposed by MCI and others would make wasteful and inefficient use
of spectrum. We are inclined to agree. But further than that, we question the need
for the continued wholesale use by all carriers of frequency diversity in the
heavily used 4 and 6 GHz common carrier bands.
As a method for reducing the impact of frequency diversity on these
bands we are considering several approaches.
The most effective remedy would be to eliminate frequency diversity
altogether on new microwave routes. n34 Other approaches, admittedly less effective, involve
the reduced use of diversity channels.
On an across the board basis the ratio of protection channels to
operating channels could be limited (e.g. one for eleven in the 4 GHz band, one
for six in the 6 GHz band, and one for three in the [**73] 11 GHz band). Or we could restrict the use of frequency diversity only to those
new routes where it has been demonstrated to our satisfaction that there are no
reasonable [*345] alternate methods of obtaining the necessary
reliability (primarily in terms of cost) and that the spectrum in the areas
considered is not particularly crowded.
n35 A further possibility would be to
restrict frequency diversity to those new facilities that are shown likely to
become part of a high density route (e.g. become a four channel route within
five years). Carriers are requested to
comment on these various approaches (or combination thereof) in a positive
manner, recognizing that frequency congestion is likely to become severe in
many areas and that we do not have the luxury of continuing to use frequency
diversity without substantial limitations.
n33 Space diversity involves the use
of separate receiving antennas which are spaced sufficiently far apart so that
the signals from both have a low or negative correlation. In effect separate transmission paths are
established, but no extra frequencies are used. Standby transmitters are often used to protect against equipment
failures.
n34 As noted previously, the
conversion of existing facilities employing frequency diversity to other
diversity techniques (particularly space diversity) is not likely to be easily
accomplished. Therefore, we are not at
this time proposing the elimination of frequency diversity on existing systems.
n35 This case-by-case approach is
somewhat similar to our earlier proposal in the micro-wave reliability
proceeding in Docket No. 15130 (FCC 67-1072, September 27, 1967). [**74]
61. There are other, less important technical
aspects of microwave transmission that may require regulatory action in order
to promote more efficient use of spectrum and to improve the quality of
service. We are proposing two changes
which we believe will tighten transmission paths and reduce the chances for
interference in areas where frequency assignments are congested. First, we propose to ban new passive
reflectors where used in connection with "periscope" antennas. Systems utilizing periscope antennas are
more susceptible to interference because of poor rejection of unwanted sidelobe
radiation from other facilities located nearby. This makes it more difficult for additional facilities to be
engineered on an interference free basis in an area where periscope antennas
are being used. For similar reasons we
are also proposing that the nominal diameter of parabolic antennas should not
be less than six feet because it is more difficult to secure suppression of
side lobes with smaller antennas.
D. Quality and Reliability of Service
62. In the event that we adopt the staff
position on new common carrier entry in the specialized communications field,
we believe that some [**75] measure of protection to the subscribers
would be called for. Primarily, we are
concerned that the prospective subscriber be accurately informed about the
nature of the proposed service. The
major components of the service the carrier is attempting to sell are: (1)
rates, (2) regulations and terms of service, and (3) quality and
reliability. The first two items are
usually clearly specified in the tariffs and are generally well understood by
the prospective customer. However,
quality and reliability of service may be poorly defined in the tariff and
subject to misinterpretation, especially by the prospective subscriber.
63. We have considered, and tentatively decided
against, proposing specific minimum standards of technical performance. We recognize that there may be a ide
diversity of public needs, ranging from low cost-low reliability service to a
higher cost-higher reliability service, and that a minimum performance floor
might fail to satisfy the needs of many communications users. Therefore, we have tentatively concluded
that the carriers should be free to design facilities and offer services to
meet the varying market needs, but that the services should be fairly
advertised [**76] as to quality and
reliability. In an attempt to [*346]
insure that the customer receives such service as is promised, we
propose to require:
(a) that the applicant
specify in standard terminology in his microwave application the proposed
reliability of service to the customer, to the extent that the nature of the
proposed service is known;
(b) that the
carrier be required to specify in his tariff, and notify the customer of, the
precise reliability factors applicable to the particular service;
(c) that the
carrier make refunds on a reasonable proportionate basis where the service
rendered fails to meet the specified reliability standards; and
(d) that the
carrier make periodic reports to the Commission concerning the reliability
actually achieved, service complaints and refunds.
It is contemplated that these requirements would
apply at this time to the provision of private line or other specialized
services by all carriers.
64. We recognize that reliability may have
different characteristics for various services, such as dedicated versus
switched service or voice as compared to data.
However, to the user reliability is generally stated in terms of the
channel's availability for [**77] use
when required and its ability to meet the requirements applicable to his
specific use of the communications system.
Service interruption or failure of reliability may reflect any of the
following conditions:
(a) The complete
loss of a channel occasioned by a failure in the microwave facilities.
(b) A
degradation of signal level to a point below the level established for
satisfactory operation of the customer's equipment.
(c) Circuit
noise which would interfere with voice communication.
(d) Any
condition that would adversely affect the error rate in data transmission.
65. We request comments on the development of
standard statements of reliability quality factors for the various types of
service. The statements should contain
all pertinent data applicable to the particular use of the communication
channel provided by the carrier and provide a base for measurement of the
quality of service provided. We propose
that the prospective customer should be supplied, at the time his business is
solicited, a written statement or a copy of the applicable tariff terms which
specifies the proposed quality and reliability of service, including the
requirement for credits for below [**78]
par service. To the extent
possible, these factors should be expressed in terms which are easily
understood by a non-expert. We further
propose that the carrier file quarterly reports with the Commission, based on
records that log individual customer trouble conditions reported to the
carrier, the time and date of such reports and remedical action taken,
including the time when service was fully restored and the amount of credit to
the customer, if any. The report should
show the number of service complaints received during the three-month period,
the average clearing time and the total amount of customer refunds. It should also indicate the number [*347]
of customers served by the carrier as of the last day of the quarterly
reporting period.
E. Local Distribution Facilities
66. The final area of concern is the means for
local distribution of the proposed services.
Datran plans to construct its own facilities, using low-powered
microwave equipment in the 11 GHz band and multi-pair cable to reach other
subscriber locations in the vicinity of the microwave terminals. Other applicants proposing
"end-to-end" service plan to negotiate with local carriers for
complete loop service on [**79] behalf
of their subscribers. Some applicants
propose to offer subscribers the option of obtaining service from local
carriers, furnishing their own loop facilities, or using loop facilities
provided by the applicant. New
York-Penn Microwave proposes to use 18 GHz frequencies for an entrance link to
the center of Chicago and to negotiate with local carriers for the remaining
loop to the subscriber's premises.
While MCI plans initially to have its subscribers take care of loop
service, it states that it may ultimately offer local loop facilities using 50
GHz frequencies or infrared transmission.
67. In the MCI case, the Commission retain
jurisdiction over the interconnection issue, stating that an order requiring
the established carriers to provide loop service would be issued unless it is
shown that interconnection is not technically feasible (18 FCC 2d at 965; 21
FCC 2d at 193). The local exchange facilities of the Bell System and
independent telephone companies presently constitute almost the sole means for
local distribution of interstate common carrier services (apart from CATV and
broadcast facilities). Western Union is
almost entirely dependent on the Bell System for [**80] its local
distribution. If access to local
facilities is requested and needed by the applicants, we would expect the local
carrier -- Bell or other carrier -- to permit interconnection or leased channel
arrangements on reasonable terms and conditions to be negotiated with the new
carriers. In other words, where a
carrier has monopoly control over essential facilities we will not condone any
policy or practice whereby such carrier would discriminate in favor or an
affiliated carrier or show favoritism among competitors. n36
Customers of any new carrier should also be afforded the option by the local
carrier to obtain local distribution facilities under reasonable terms set
forth in the tariff schedules of the latter.
n36 See, e.g., Report and Order in
Docket No. 16778, 12 FCC 2d 841; Final Report and Order in Docket No. 18509, 21
FCC 2d 307, 324-325; The Western Union Telegraph Co. v. United States, 217 F.2d
579 (C.A. 2, 1954).
68. However, there appears to be some question
as to the desirability of using the existing local exchange facilities for
local distribution of some of the proposed services. The local exchange facilities of the telephone company are
presently overburdened [**81] in a
number of the largest cities. In
challenging MCI's assertion that its proposal would alleviate present telephone
service problems, AT&T points out:
Such problems as do exist are in
switching and some local facilities.
There is no scarcity of interest transmission facilities. Significantly, MCI-NY West proposes to
duplicate trunk facilities, where no problem exists, and to depend upon the
existing common carriers to provide the local facilities which its customers
would require for end-to-end service.
[*348] Moreover, Datran
claims that the use of local voice switching and circuit facilities for data
transmission service places a burden on such facilities and that voice subscribers
have, in effect, been paying a penalty for the sharing of these facilities with
data transmission. In support of its
contention that "the unusual hold times, peaking, and usage patterns
accompanying data transmission impose a crippling burden on voice switching and
circuit facilities," Datran cites a statement by a Bell System
representative that:
There lies are in use about eight
times as much as the average business line.
This increases the cost of central office switching equipment (Page 32,
Exhibit [**82] 32, Direct Testimony of
Mr. L. R. Stang, in Docket No. 55426, Application of Illinois Bell Telephone
Rates Applicable to all Exchanges of the Company, before the Illinois Commerce
Commission).
We note that a number of Bell System companies are
before various State commissions seeking substantial increases in charges for
information system access lines (to provide direct access to the customer
information system through local exchange facilities) on the ground that these
are high usage lines. Datran claims
further that the construction of new local distribution facilities is essential
to its proposal, both to maintain the continuity of digital transmission and
also since "existing data transmission service often provides
substantially reduced capability and reliability in total (or end-to-end) communications
services because of the reduced transmission quality in local distribution
circuits." n37
n37 The Commission has received a
complaint from a Boston company to the effect that the operation of its
computer is being adversely affected by line noise in the local exchange
lines. We note that AT&T states
that in all major metropolitan areas most of the local central offices and toll
switching offices have digital T-1 carrier facilities which are used for the
provision of both voice and data services. [**83]
69. In light of the foregoing and since some of
the applicants are proposing new construction of local facilities by themselves
and/or their customers, comments are requested on what would be the appropriate
means for achieving local distribution of the proposed services. If new construction is necessary, the use of
wire or cable is certainly one desirable avenue to be explored. We recognize that the use of radio may offer
economies over wire or cable and save time, particularly in cites where
underground construction would be required.
AT&T contends that Datran's proposed use of the 11 GHz band would be
inappropriate for this purpose. While
we are tentatively of the view that the 11 GHz band should be reserved for
intercity use, comments are requested on the compatibility of using 11 GHz
frequencies for intercity and intracity transmission and what, if any,
technical standards would be required to facilitate the accommodation of
both. Comments are also requested on
the feasibility of using 18 or 50 GHz frequencies for intracity distribution,
or some other portion of the spectrum above 11 GHz. n38 There is a further question as to
whether there should be more than one local [**84] system to distribute
[*349] interstate signal within
a particular metropolitan area. In the
event that new construction is necessary, would it be preferable for this to be
undertaken by the local telephone company or by another entity? To the extent that the telephone company may
not perform this function, is it technically and economically feasible for each
of the applicants and/or his customers to construct his own local loop
facilities or would the public interest be better served by encouraging a
sharing of facilities to the extent practicable? n39
n38 In 1968, the Commission denied
(12 FCC 2d 936) a petition by TelePrompTer Corporation for rule making to
allocate 18 GHz frequencies for a high capacity, local distribution service for
use in conjunction with CATV systems on the ground that piece-meal allocation
of the higher spectrum would run counter to the public interest prior to a
determination of communications satellite requirements and other potential
uses, and would be inadvisable prior to the outcome of the 1971 international
space conference on spectrum allocations.
As preparation for the space conference progresses, it may prove
possible to lift this freeze prior to that time.
n39 To some extent, similar
questions were raise by Part V of the Commission's Notice of Proposed Rule
Making and Notice of Inquiry in Docket No. 18397 (15 FCC 2d 417, 441-443).
Pertinent material in comments filed in that proceeding will be considered here
and need not be resubmitted. [**85]
70. In short, while it may be comparatively easy
to accommodate new intercity facilities, the matter of intracity distribution
may prove to be more troublesome. None
of the applications has actually applied for local distribution facilities or
submitted concrete proposals as to interconnection or the leasing of
facilities. Applicants and other
interested persons are requested to address this aspect fully in their
comments, with particular attention to the technical feasibility and
comparative costs of the various alternatives and the effect on charges to
subscribers for end-to-end service.
III. MISCELLANEOUS
71. The foregoing constitute the areas in which
we are proposing to prescribe procedures and regulations. The parties may suggest other areas where
the establishment of guidelines might assist in the case-by-case consideration
of these applications, and are requested to address in their reply comments any
suggestions submitted by others.
72. There is one further matter which warrants
action at this time. As previously
noted, the specialized common carrier applications have occasioned a tremendous
number of opposition and reply pleadings and many more pleadings are
[**86] expected to be filed in the
future. In view of this proceeding it
is obvious that the continuation of further pleadings in substantial numbers
will not be helpful at this time.
Moreover, a resolution of the issues in this proceeding would remove the
necessity for addressing some of these questions in pleadings filed with
respect to a particular set of applications.
Therefore, we will order a moratorium on the filing of further
pleadings. When we have resolved the
policy and rule making issues in this proceeding or when we are prepared to
consider any set of applications which is subject to further pleadings, an
order specifying a schedule for filing such pleadings will be issued. We will continue to place new specialized
common carrier applications and major amendments thereto on public notice for
purposes of frequency coordination. N40 All applicants and existing carriers should continue
to resolve frequency conflicts so that future pleadings can be eliminated or
simplified.
n40 Carriers should notify
applicants of claimed frequency conflicts and route blockages as soon as
possible.
73. Authority for the proposed procedures and
rule making instituted herein and for [**87]
the policies recommended by the staff is contained in Sections 4 (i) and
(j), 201, 202, 203(a), 214, 218, 219, 220, 301, 303, 307-309, and 403 of the
Communications Act.
[*350]
74. In Interested persons may
file comments on the foregoing matters on or before October 1, 1970, and reply
comments on or before November 2, 1970.
In reaching its decision in this matter, the Commission may also take
into account any other relevant information before it, in addition to the
comments invited by this Notice. In
accordance with the provisions of Section 1.419 of the Commission's Rules and
Regulations, an original and 14 copies of all comments, shall be furnished to
the Commission. Parties should address
themselves to the question of whether oral argument before the Commission en
banc would assist in a resolution of this matter.
IV. ORDER
75. IT IS ORDERED, That the time for filing
petitions to deny and other pleadings involving applications listed in the Appendix
hereto or new applications by specialized carriers to provide services of this
nature, which pleadings are not due as of the release date of this Order, IS
HEREBY EXTENDED to a date to be specified by further order.
FEDERAL COMMUNICATIONS [**88] COMMISSION, BEN, F. WAPLE, Secretary.
CONCURBY: LEE; JOHNSON
CONCUR:
CONCURRING
STATEMENT OF COMMISSIONER REPORT E. LEE
I regard this as
presenting one of the most important issues we have ever considered in the
common carrier field. I recognize that
each of the issues (A-E inclusive) listed on page 13 are critical to the entire
future of common carriers in the country and to the users of existing and new
forms of service. I have previously
expressed some doubts on duplicating common carrier facilities serving the same
points (See my dissent in Microwave Communications, Inc., 18 FCC 2d 953, 973).
I believe that
decision has resulted in the almost 2000 conflicting applications now on file
which give rise and urgency to the problems now before us. This document expresses certain tentative
conclusions [*353] reached by the staff. My concurrence here should not be
interpreted as any endorsement or leading toward the views expressed. Rather, I intend to review the comments of
all parties.
CONCURRING
STATEMENT OF COMMISSIONER NICHOLAS JOHNSON
I concur in the
majority's action here. On balance I
believe the action will speed the Commission's resolution of the important
policy questions which it confronts [**89]
in the area of proposed specialized common carrier services. I do not believe the Commission's action is
as effective as it might have been -- and I am fearful that this new proceeding
is simply a prelude to interminable delay which can only benefit the present
entrenched monopolists who oppose the new customized carrier entrants.
The Commission
here puts forward in the most tentative way possible a "staff
position" of the threshold question of appropriate general policy on
entry. This is a rather timid way to
approach the question. The Commission
arguably has before it sufficient facts, analysis, and positions of the parties
pleaded in response to the MCI case and later applications to reach a final
policy conclusion on the threshold question.
We have at least enough before the Commission for it to issue this
document as its own tentative policy proposal.
As a matter of fact, a motion to adopt a document substantially as this
one is written, but as the Commission's tentative policy, failed by a three to
three vote. I regret the Commission's
unwillingness more boldly to confront issues of such national importance, and
to support its staff when the staff must withstand such [**90] strong opposition by the established
carriers.
The Commission's
action here is designed to minimize the undue procedural delay which
established common carriers have been able to cause in their intense efforts to
frustrate new entry in the common carrier industry. This delay has a serious impact on the general community which is
denied the benefits of this competition.
For example, the MCI proceeding began in February 1966. Now more than four years later the carriers
who oppose MCI continue to wage a delaying battle both before the Commission
and in the courts. Delaying tactics of
this sort can only have the most serious impact on communications users, and
additionally, I believe, in the long run best interests of the established
carriers. The present situation is
roughly analogous to the circumstances of the Carterfone case where Bell's
intransigent opposition to flexible attachment and interconnection for over 13
years is now recognized even within the Bell System as an unwise policy from
the company's point of view. Carterfone
will mean better service, more flexible and responsive service, and will mean
that the Bell System will find more customers who, with more useful [**91] equipment and communications systems, will
use the Bell network. Bell's policy in
Carterfone in short was terribly shortsighted.
Its present policy on competition is equally defective.
This is not to
say that the Commission's action today will solve all the problems of
delay. This is clear from the
Commission document. There will be
delay while this proceeding is underway.
The views expressed [*354] here are tentative and subject to
reversal. The established carriers will
no doubt work to that end.
More importantly
two policy issues remain apparently unamenable to resolution -- at least as the
Commission is now considering action.
First we have to yet develop pricing guidelines to prevent cross-subsidy
between competitive and monopoly services by a single carrier. I do not believe our action today will do
much to further determination of those guidelines. This is a job I believe we cannot ignore much longer. I think the majority action here recognizes
that fact. I am unsure that any
achievements will be forthcoming.
Perhaps the most
serious unresolved difficulty which will exist even after a satisfactory
conclusion of today's action will be the frequency management problem. [**92]
The established carriers and those proposing new services, whether they
be specialized common carriers, domestic satellite system operators, or others
must compete for the right to use a scarce natural resources -- the radio
spectrum. If one's potential competitor
can be denied access to spectrum -- which must be allocated by the FCC -- then
competitive entry can be hindered or barred entirely. The Commission's action here provides that frequencies will be allocated
usually on a first-come-first-serve basis with newcomers required to adjust
their applications to eliminate conflicts in so far as possible. Established carriers will be allowed to
retain frequencies they already have plus those frequencies needed to
effectuate planned routes or to expand present route plans. The opportunity for "bankrolling"
spectrum to hinder entry is clearly present.
Since the costs to a "bankroller" of spectrum are almost zero,
there will be every incentive to do so.
In addition, technical standards may be imposed on new applications
which are not now required of the established carriers. The elimination of frequency diversity is
one example. It is not clear from the
majority's discussion [**93] of these problems that any satisfactory
resolution can be developed in this proceeding absent a full recognition of the
competitive and other economic implications of the Commission's allocative
procedures for radio spectrum and a subsequent complete revamping of spectrum
allocation procedures.
I do not mean to
suggest that I am in basic disagreement with the Commission's action here. But at the same time it should be clear that
the battle to bring competitive influences to bear on common carrier utility
regulation is only beginning -- and the effort will require sustained activity
on the part of the Commission against vested interests anxious to protect their
entrenched positions.
APPENDIX:
APPENDIX
The following
point to point microwave proposals from entities proposing to establish
themselves as "specialized" common carriers are on file in the
Domestic Radio Division of the Common Carrier Bureau as of June 25, 1970.
Interdata Communications, Inc. File Nos.
3386/3396-C1-P-69. Filed December 4,
1968. Proposes 11 microwave stations
for specialized, private line service between New York City and Washington,
D.C. and intermediate points.
MCI-New York West, Inc. File Nos.
1366/1430-C1-P-70. [**94] Filed September 7, 1969. Proposes 65 microwave stations for
specialized, private line service between Chicago and New York City and
intermediate points.
MCI Pacific Coast, Inc. File Nos.
2445/2500-C1-P-70. Filed November 3,
1969. Proposes 56 microwave stations
for specialized private line service between San Diego, California and Everett,
Washington and intermediate points.
MCI north Central States, Inc. File Nos.
2868/2883-C1-P-70. Filed November 24,
1969. Proposes 16 microwave stations
for specialized private line service between Minneapolis and Chicago and
intermediate points.
Data Transmission Co. (Datran). File Nos. 2926/3169-C1-P-70. Filed November 25, 1969. Proposes 244 microwave stations in a major
switched network for data transmission between 35 major cities from Boston to
San Francisco.
New York-Penn Microwave Corp. File Nos.
3216/3282-C1-P-70. Filed November 28,
1969. Proposes 67 microwave stations
for specialized private line service between Chicago, Detroit and New York City
and intermediate points (competitive with MCI-New York West) to interconnect
with New York-Penn Microwave Corp. filing of February 13, 1970.
MCI New England, Inc. File Nos.
3392/3408-C1-P-70. [**95] Filed December 11, 1969. Proposes 17 microwave stations for
specialized private line service Boston to New York and Boston to New Bedford,
Massachusetts.
MCI Michigan, Inc. File Nos. 4320/4345-C1-P-70. Filed February 6, 1970. Proposes 26 microwave stations to provide
customized communications service between Grand Rapids, Pontiac, Saginaw, and
Detroit, Michigan; South Bend, Indiana; Toledo, Ohio; and intermediate points.
Western Tele-Communication Inc. File Nos.
4265/4290-C1-P-70. Filed February 6,
1970. Proposes 26 microwave stations
for specialized communications service between San Diego, California and
Seattle, Washington, and intermediate points, to interconnect with Microwave
Transmission Corp. for Los Angeles-San Francisco California portion of service.
Microwave Service Company, Inc. File Nos.
4437/4501-C1-P-70. Filed February 9,
1970. Proposes 65 microwave stations
for specialized communications service between San Diego, California and
Seattle-Everett, Washington and intermediate points.
Southern Pacific Communications Co. File Nos.
4502/4558-C1-P-70. Filed February 9,
1970. Proposes 57 microwave stations to
provide specialized communications service between [**96] San Diego, California and Seattle,
Washington and intermediate points.
Astron Corporation.
File Nos. 4347/4402-C1-P-70.
Filed February 9, 1970. Proposes
56 microwave stations for specialized communications service between San Diego,
California and Everett/Seattle, Washington.
Microwave Transmission Corp. File Nos.
4422/4436-C1-P-70. Filed February 9,
1970. Proposes 15 microwave stations
for specialized communications service on an interstate basis to interconnect
at Los Angeles, California and San Francisco, California and proposed
facilities of Western Tele-Communications, Inc.
New York-Penn Microwave Corp. File Nos.
4616/4637-C1-P-70. Filed February 13,
1970. Proposes 22 microwave stations
for specialized service between Washington, D.C. and Boston, Massachusetts and
interconnection with previously filed (11-28-69) New York-Penn Microwave
Corporation applications for service between Chicago, Detroit, and New York
City.
Mitran, Inc.
File Nos. 5703-5724-C1-P-70.
Filed March 31, 1970. Proposes
22 microwave stations for specialized service between Minneapolis-St. Paul and
Chicago, together with intermediate points.
United Video, Inc. File Nos. 5726/5819-C1-P-70. [**97]
Filed March 31, 1970. Proposes
94 microwave stations for data transmission service between Chicago/Minneapolis
and Dallas and intermediate points.
CPI Microwave, Inc. File Nos. 5881/5906-C1-P-70. Filed April 2, 1970. Proposes 26 microwave stations for data
communications between Ft. Worth-Dallas and Houston and intermediate points,
all in the State of Texas.
MCI St. Louis-Texas, Inc. File Nos.
5922/5963-C1-P-70. Filed April 3,
1970. Proposes 42 microwave stations
for customized communications between St. Louis and Dallas and intermediate
points.
MCI Texas East Microwave, Inc. File Nos.
6066/6099-C1-P-70. Filed April 10,
1970. Proposes 34 microwave stations
for specialized communications between the states of Texas and Louisiana.
West Texas Microwave Co. File Nos.
6133/6163-C1-P-70. Filed April 13,
1970. Proposes 31 microwave stations
for specialized communications between Fort Worth, Amarillo and El Paso, Texas.
KHC Microwave Corporation d/b/a United
Video/Louisiana. File Nos.
6496/6519-C1-P-70. Filed April 14,
1970. Proposes 24 microwave stations
for data transmission systems for data transmission system between
Looneyville/Houston and New Orleans.
East Texas [**98]
Transmission Co. d/b/a United Video/Texas. Files Nos.
6869/6873-C1-P-70. Filed April 14,
1970. Proposes 5 microwave stations for
data transmission system between Dallas and Jacksonville, Texas.
United Video, Inc. File Nos. 6583/6651-C1-P-70. Filed April 14, 1970. Proposes 69 microwave stations for data
transmission system between Chicago and New Orleans.
MCI Mid-Atlantic Communications, Inc. File Nos.
6652/6688-C1-P-70. Filed April 14,
1970. Proposes 37 microwave stations
for customized communications between Washington, D.C. and Atlanta, Georgia.
Nebraska Consolidated Communications Corporation.
File Nos. 6185/6314-C1-P-70. Filed
April 14, 1970. Proposes 130 microwave
stations for specialized communications between Minneapolis-St. Paul to Houston
and Atlanta, includes major interim points. (14 States)
Southern Pacific Communications Co. File Nos.
6401/6495-C1-P-70. Filed April 14,
1970. Proposes 95 microwave stations
for specialized communications between St. Louis and Los Angeles and
intermediate cities.
MCI Kentucky Central, Inc. File Nos.
6704/6737-C1-P-70. Filed April 14,
1970. Proposes 34 microwave stations for
specialized communications between the states [**99] of Kentucky, Ohio, Indiana, Illinois, Tennessee, Georgia and
Alabama.
MCI Texas-Pacific, Inc. File Nos.
6336/6399-C1-P-70. Filed April 14,
1970. Proposes 64 microwave stations
for customized communications between Dallas, Texas and Los Angeles,
California.
Western Tele-Communications, Inc. File Nos.
6776-6793-C1-P-70. Filed April 14,
1970. Proposes 18 microwave stations
for customized communications between Los Angeles, California and El Paso, Texas
and Hobbs, New Mexico.
MCI Mid-continent Communications, Inc. File Nos.
8235/8291-C1-P-70. Filed June 12,
1970. Proposes 57 microwave stations
for customized communications in the states of Minnesota, South Dakota, Iowa,
Nebraska, Colorado, Kansas, Misouri and intermediate points.
Western Tele-communications, Inc. File Nos.
8300/8326-C1-P-70. Filed June 12,
1970. Proposes 27 microwave stations
for "Los cost customized" interstate communications between Denver,
Colorado; Hastings, Lincoln and Omaha, Nebraska; Sioux City, Iowa; and Sioux
Falls, South Dakota.
Western Tele-communications, Inc. File Nos.
8327/8358-C1-P-70. Filed June 12,
1970. Proposes 32 microwave stations
for "Los cost customized" interstate communications [**100] between the cities of Denver, Dodge City,
Whicita, Topeka, Tulsa, Oklahoma City, and Kansas City.
Western Tele-communications, Inc. File Nos.
8292/8299-C1-P-70. Filed June 12,
1970. Proposes 8 microwave stations for
"Low cost customized" interstate communications between Sioux Falls,
South Dakota and Minneapolis, St. Paul, Minnesota.
Associated Independent Telephone Microwave, Inc. File
Nos. 8379/8395-C1-P-70. Filed June 12,
1970. Proposes 17 microwave stations
for data and private line communications between New Orleans and Houston and
Intermediate points, all within Louisiana and Texas.
Telephone Utilities Service Corp. File Nos.
8296/8431-C1-P-70. Filed June 12,
1970. Proposes 36 microwave stations
for private line data communications in the central Texas region.
Microwave Communications, Inc. File Nos.
8359/8378-C1-P-70. Filed June 12,
1970. Proposes 20 microwave stations to
expand their present route in customized communications to include Dubuque and
Davenport, Iowa.
MCI Mid-South, Inc. File Nos. 8691/8738-C1-P-70. Filed June 19, 1970. Proposes 48 microwave stations to provide
specialized service between Atlanta, Birmingham, Memphis, Little Rock, Jackson, [**101]
New Orleans, Mobile and intermediate points.
Total 1713
stations as of 6-25-70.