In
the Matter of AMERICAN TELEPHONE & TELEGRAPH CO. Charges for Domestic
Telephone Service
A.T. & T.
Transmittal Nos. 10989, 11027
Docket No. 19129
FEDERAL COMMUNICATIONS COMMISSION
27 F.C.C.2d 151
RELEASE-NUMBER: FCC 71-74
January 21, 1971 Released
Adopted January 21, 1971
JUDGES:
BY THE COMMISSION: COMMISSIONER JOHNSON CONCURRING AND ISSUING A STATEMENT;
COMMISSIONER HOUSER NOT PARTICIPATING.
OPINION:
[*151] 1. The
Commission has before it for consideration the following items: (a) proposed
tariff changes filed by the American Telephone and Telegraph Company on
November 20, 1970, to be effective January 19, 1971, calling for increased
rates and changes in the rate structure in the provision of long distance
message toll telephone service under Tariff FCC No. 263; (b) numerous petitions
and letters opposing such rate changes and seeking to participate in any
hearings held thereon; n1 (c) replies of AT&T to certain
of these public filings; (d) our letter of January 12, 1971 to AT&T; (e)
its reply thereto of January 13, 1971; and (f) further tariff changes filed by
AT&T on January 14, 1971, to be effective January 21, 1971.
n1 Formal pleadings were filed by
the following parties: Equal Employment Opportunities Commission; Secretary of
Defense on behalf of all Executive Agencies; Silver Beehive Telephone Company;
City of Chicago; Anthony Martin-Trigona; Utility Users League; Microwave
Communications, Inc.; National Association for the Advancement of Colored
People; National Organization for Woman; Telephone Users Association of the
District of Columbia. In addition, numerous letters and telegrams have
been received expressing interest in the proposed rate increases and any
hearings to be held with respect thereto, or commenting on the merits of the
proposed increases. AT&T filed replies to the petitions of EEOC,
Secretary of Defense, Utility Users League, and City of Chicago.
Following a Public Notice issued January 12, 1971, a further telegram was
received from the EEOC on January 14, 1971 seeking certain information relating
to the Commission's deliberations and consideration of the proposed rate
increases and the EEOC petition. Further Petitions for Suspension,
Intervention and Declaration of Unlawfulness were filed on January 18, 1971, by
California Rural Legal Assistance, Inc., Mexican American Legal Defense Fund,
NAACP, American Civil Liberties Union, and the NOW Legal Defense and Education
Fund. On January 19, 1971, a Petition for Suspension was filed by Mr.
Ralph Nader. Further pleadings and responsive pleadings have been recently
filed.
2. The major increases
included in the tariffs as filed on November 20, 1970, are in the rates for
Person to Person calls, Operator Handled calls and customer dialed calls made
during the "Day" period (8 a.m. to 5 p.m.) on the week days, i.e.,
during the business period of the work week. The revised tariffs provide
for increased charges for operator assisted calls (both Person and Station
calls) by 30! for the initial three minute period and five cents per minute for
the additional time over three minutes in most mileage steps.
Increases [*152] for day time customer dialed calls would average
about nine cents for the initial period and three cents per minute
thereafter. Increases would be proportionately greater for the shorter
distances allegedly to reflect costs more accurately and to lessen the
interstate/intrastate rate disparity. In its filing, AT&T is also
proposing some relatively minor decreases in evening, night and weekend rates
for customer dialed calls (generally reductions of five cents or less).
These decreases are designed, in conjunction with the increases described
above, to create a pattern whereby evening rates are at least 20 percent below
daytime rates and night and weekend rates are at least 40 percent below daytime
rates. The tariffs also provide for rates for paid Station calls
originated at coin-box telephones which are lower than other Operator Handled
calls in the first seven mileage steps (0 to 70 miles). The increases
range from 67% from some short haul Operator Handled Station calls (three
minute rate increased from 15 cents to 25 cents in step one -- 1 to 10 miles --
and from 45 cents to 75 cents in step seven -- 56 to 70 miles) down to 7% for
cross country Customer Dialed Day calls ($1.35 rate increased to $1.45).
3. A straight repricing of
interstate calls at the revised rates (i.e., assuming no change in volume or
composition of messages projected for 1971) would result in increased revenues
of about $760 million annually. The Company estimates that only $385 million
additional annual revenues will be realized because of the following: (1)
Shrinkage -- the reduction in the volume of interstate calls because of the
higher rates; (2) Shifts -- the lower revenue derived because of customers
shifting their calls to a time period where lower rates prevail, e.g., calling
at night rather than daytime; and (3) Reclassifications -- the lower revenues
derived due to customers using a class of service where lower rates prevail,
e.g., making Customer Dialed calls rather than Person or Operator Handled
calls. The rate schedules were specifically designed to encourage shifts
and reclassification of calls in a continuation of the changes in the message
toll rate structure designed to encourage the use of the network in off-peak periods
and to place calls without operator assistance when feasible. In addition
to reducing the additional amount of revenues expected to be derived from the
rate revisions, these factors also reduce costs. The Company estimates
the cost reduction to be about $160 million for the year 1971. Therefore,
the improvement in operating results before income taxes is estimated to be
about $545 million ($385 million increased revenues plus the $160 million
reduction in costs).
4. In its transmittal letter,
AT&T states that the rate increase:
"... is required in order (1)
to offset the effect of the new separations methods shifting $130 million of
annual revenue requirements from intrastate to interstate operations by order
of the Commission effective January 1, 1971; (2) to recoup the reduction in
revenues of over $150 million annually made earlier this year on the basis of
estimates of economic and financial conditions which have been proved
inaccurate by experience; and, (3) to improve earnings to a level which will sustain
the financial integrity of the Bell System and permit the attraction of
additional capital needed to satisfy consumer requirements for
telecommunications service."
[*153]
The Company has also filed 17 statements by Company officials and outside consultants
and 22 volumes of related data and workpapers in support of various aspects of
the rate increase.
5. In support of the need for
a 9 1/2% rate of return, AT&T places primary stress on the change in
economic conditions and substantial increases in costs of debt and equity
capital since the 1966 test period on which the Commission's July 5, 1967
decision was based in phase 1A of the AT&T rate case in which the
Commission found that a rate of return in the range of 7% to 7 1/2% was
appropriate for Bell's interstate operations. See 9 FCC 2d 30. With
respect to the cost of debt capital to the Bell System the Company notes the
increase in the current cost of debt capital of about three percentage points,
from a range of 5 1/2% to 6% in 1966 to the range of 8.6% to 9.4% in 1970 and
the increase in embedded debt cost from 4.0% in 1966 to 6.0% which Bell
estimates it will reach shortly. AT&T contends that because of the
vast amounts of capital it will require in the near future (about $4 billion
annually) and its current debt ratio of about 45% it will be necessary to
acquire a substantial amount of equity capital; that a return on equity of 12%
to 12 1/2% will be required to attract the necessary new equity capital, that
the increase in return on equity to a level of 12% to 12 1/2% over that allowed
in the Commission's July 1967 decision is well justified by the changed
economic and financial conditions and the increase in bond interest rates since
1966.
6. The revised tariff changes,
as filed on January 14, 1971, provide for an increase in revenue of $175
million and associated costs savings of $75 million, for a total increase in
net earnings before income taxes of $250 million annually. The following
summarizes the major reductions from the November 20, 1970 filing for increased
rates provided for in the revised tariffs filed on January 14, 1971:
1. The increases in the
initial period rate for customer dialed daytime calls were reduced generally
from ten cents to five cents. The increases in the additional minute rate
for such calls were also generally reduced.
2. The increases in the
initial period rates for Daytime Operator Station-to-Station calls were reduced
from 30 cents to 15 cents.
3. The increases in the
initial period rates for Person-to-Person calls were, with some exceptions,
reduced from 30 cents to 25 cents.
The Company
estimates that earnings for the year 1971 would be 7.9% absent any rate change
and without the implementation of the recent separations change (Ozark Plan)
adopted by the Commission. With the Ozark Plan, which became effective
January 1, 1971, in effect the estimate for 1971 is 7.4% n2 again absent any rate change. The Company
indicates that each deviation from their forecasts [*154] of message
volumes and expenses of one percent and their forecast of average revenues per
message by one cent, would alter the results by 1/2 of 1 percent above or below
the projected figure.
n2 In a letter of January 4, 1971,
AT&T indicated that further data on operating results for December, 1970
suggest that the estimate for 1971 should be adjusted downward to 7.2%.
7. Upon consideration of the
proposed tariff changes and the material submitted therewith, the Commission
adopted its letter of January 12, 1971 wherein it requested that AT&T
voluntarily postpone the effective date of the tariffs as filed pending the
outcome of an expedited hearing, and simultaneously granted special permission
to the company to refile revised tariffs providing for increases in MTT rates
that will produce additional annual net earnings, before income taxes, of not
more than $250 million. It stated that such new rates would be suspended
and would also be subject to accounting and refund by the carriers, pending a
final determination by the Commission on the justness and reasonableness of the
rates sought by AT&T. In so acting, the Commission indicated that it
had taken into account its decision in 1967 in Docket No. 16258 that an
allowable rate of return for AT&T's interstate operations was within a
range of 7.0% to 7.5%, whereas the present rate of return objective was
substantially higher. The Commission's letter also referred to the
pendency of proceedings in Docket No. 18128 in which the determination of
appropriate relationships among the earnings level of each of AT&T's
several classes of interstate service is to be made. At the same time,
the Commission recognized that interstate annual revenue requirements, as of
January 1, 1971, would be increased by about $130 million as a consequence of
recent revisions in jurisdictional separations procedures prescribed by the
Commission; it also noted that changes occurring in the capital structure and
the costs thereof of AT&T subsequent to the 1967 decision, particularly the
net increase in embedded cost of debt, were of particular importance.
8. The Commission stated in
its letter to AT&T that if the carrier would agree to postpone the
effective date of the pending tariff changes and would file new tariff schedules
designed to generate the lower net earnings level specified in the letter, the
Commission would, nevertheless, proceed immediately to institute an expedited
hearing under Section 204 of the Act to inquire into the justness and
reasonableness of the rates, both as originally filed and as modified by the
carrier. The Commission felt that under these circumstances it should
expedite the proceeding with a view to completing it within a time frame of six
to nine months (barring extraordinary developments). It also stated that
the concurrent proceedings in Docket No. 18128 would also be expedited with the
objective that determinations in this docket should be available in a timely
fashion to implement the conclusions reached in the rate proceeding to be
initiated with respect to the revised tariff schedules. The Commission
made it clear that the procedures set out in its letter should not be construed
as in any way indicating approval or acceptance of the rates filed pursuant to
the special permission being granted. Instead, it specifically stated
that its findings and conclusions in this matter would be reached only after it
had before it the entire record resulting from the hearing and investigation it
would institute. It noted that the new rates were subject to protest and
to any action that the Commission [*155] might deem warranted prior
to the effective date. The Commission further noted that the carrier
would be free to make a showing that the rates originally filed and the resulting
rate of return change, which the carrier felt to be justified, were warranted
and would be in the public interest. Conversely, any party participating
in the projected hearing would, of course, be given equal opportunity to show
that other rates or another rate of return should be found to be just and
reasonable. Implicit in the Commission's request to the company to refile
the lower rates was the strong feeling that an increase of the magnitude first
proposed, even with a 90 day suspension, was not warranted until it had been
explored on the basis of a complete record in the projected hearing. On
the other hand, the Commission recognized that by its own action in Docket No.
18688, the company's interstate revenue requirements had been increased by some
$130 million annually, effective January 1, 1971, and that changes had taken
place in the various elements which make up the cost of capital since the
Commission's 1967 decision in Docket No. 16258. Accordingly, any long
term suspension of the revised proposed rate increases would inevitably prevent
the company from recovering any of these sums during the period of such
suspension. On the other hand an accounting order with provision for
refund would protect the using public if any or all of the increases collected
by the company during this period were not justified by the company.
Under such circumstances, the public which had paid the sums found to be
excessive would secure prompt refunds with interest for the time the company
held the sums found to be excessive. As already noted, AT&T has, in
fact, refiled at the lower rates pursuant to the special permission
granted. In view of all of the foregoing considerations including the
company's refiling of rates substantially below those originally filed, the
Commission adopted an order herein on January 20, 1971 suspending the refiled
rate increases until 12:01 a.m., January 26, 1971, and requiring appropriate
accounting with provision for possible refund. This order was premised on
the Commission's inability to find the rates either as initially filed or
refiled to be just, reasonable and non-discriminatory and, therefore, requiring
investigation and hearing pursuant to Section 204 of the Act. In its
present posture, therefore, there is before the Commission a filing by AT&T
which that company must justify on a record with leave, of course, to justify
the higher rates and the associated rate of return originally filed by the
company.
9. In addition to the
determination to be made herein regarding the just and reasonable rate of
return to be allowed AT&T on its interstate operations, a number of other
important issues are presented for determination, as indicated in our letter of
January 12, 1971. The subject tariff filings rest on an implicit
conclusion that the additional revenue requirements claimed by AT&T and the
Bell System companies should be met by imposing higher charges on MTT users, to
the exclusion of increases or adjustments in the rates of other classes of
service provided by them. The basis for this assumption is not shown and
we expect AT&T to carry the burden of proof on this [*156]
issue in Docket No. 18128, in which we also expect AT&T to demonstrate that
the instant rate increases do not involve any cross-subsidization of other
services provided by the carriers involved.
10. An additional matter
warranting specific inquiry is that of the expense level used by the company in
making its revenue requirement calculations. In our continuing review of
Bell's operating results, we have noted an unusually sharp upswing in
interstate operating expenses excluding Federal income taxes. For the
first nine months of 1970 such expenses were 15.7% greater than the same period
in 1969 and for the year 1969 the growth was 15.8%, whereas since 1960 the annual
growth rates ranged from 7.4% in 1962 to 13.9% in 1965 and averaged 10.6% for
the 1961-1968 period. The growth rates for maintenance expenses assigned
to interstate were 20.3% for the first nine months of 1970 and 20.0% for 1969
compared to 10.7% in 1968 and 9.6% in 1967. There may be valid reasons
for these unusual growth rates. However, the question arises whether
these growth rates are to continue in the foreseeable future or whether
adjustments should be made in the Company's operating results to reflect the
nonrecurring nature of these expenses if they are not expected to continue at
such high level. A specific issue is included herein to deal with this
matter.
11. Included by the company in
its material filed in support of the original tariff changes is considerable
testimony and data related to the regulatory problems posed by the integration
of Western Electric into the AT&T's corporate structure. That matter
is already in issue in Phase II of Docket No. 16258, and we believe it would be
appropriate to inquire specifically into the question whether the costs and
expenses for Western Electric equipment and plant should result in earnings in
excess of those necessary to give AT&T a fair rate of return; we expect
AT&T to demonstrate what justification there is for a return to Western
Electric which is different from that allowed AT&T generally, and why
charges higher than those sufficient to maintain the same rate of return as
that allowed to AT&T overall for its interstate operations should not be disallowed
for rate making purposes.
12. We also wish to explore in
this proceeding issues going to the appropriateness of the rate structure for
MTT service as proposed by AT&T herein and a specific issue on this matter
will be included. Both the November 20, 1970 and the January 14, 1971
filings effect substantial changes in the MTT rate structure. We wish to
investigate the MTT rate structure to determine whether each sub-class of MTT
users bears an appropriate share of the burden and whether there is any
discrimination in favor of or against any MTT users or class thereof.
13. While we are concerned
with a prompt resolution of the issues herein, we stress that we do not intend
to preclude the parties from making the presentations necessary to permit a full
and fair exploration of the issues specified. However, in view of the
fact that we have recently held a full hearing on the rate of return issues for
AT&T and since AT&T has already filed its case in chief, we
believe [*157] that at least the rate of return issue can be
resolved within a six to nine month period. We propose, therefore, to
consider the question of the fair and allowable rate of return first. To
the extent that actual experience, as the hearing proceeds, makes it possible
and feasible to explore the other issues in the first phase, we believe it
would be desirable to do so.
13a. Turning now to other
procedural questions we are of the opinion that in light of all of the
circumstances involved in this matter and discussed herein, it would be
desirable to provide for the submission of an Initial Decision by a hearing
examiner and we have done so below. Moreover, we believe it would be
desirable for the trial staff of the Common Carrier Bureau to be separated both
from the Commission and from the Examiner. We will therefore follow the
procedures recommended by the Administrative Conference. See Selected
Reports of the Administrative Conference of the U.S., 88th Cong., 1st Sess. S.
Doc. 24 at pp. 109-110. After the record has been completed on the rate
of return issue the parties may file proposed findings of fact and conclusions
of law, but in establishing procedural dates for the conduct of the hearings
the examiner should bear in mind the need for expedition as outlined above and
consistent with a full and fair hearing should strive to issue an Initial
Decision within approximately six months of the publication hereof in the
Federal Register. Such a schedule would permit the parties sufficient
time to brief and argue the issues on appeal from the examiner's decision, and
to permit us sufficient time to prepare a Final Decision within the time frame
specified above. n4 After the parties have concluded
their participation in the rate of return phase, they may address themselves to
the remaining issues and every effort should be made to expedite that phase of
this proceeding, although we do not, at this time, impose any time limitations
on the conduct of that aspect of the matter.
n4 We will at this time order all
intervenors filing a direct case to do so within 30 days of the prehearing
conference.
14. As indicated above, we are
prepared to handle the issues in phases since this will "best conduce to
the ends of justice and the proper dispatch of business" 47 USC
154(j). This may result in rate adjustments at the end of the first
phase, but before the resolution of other important issues. This, in
turn, again calls for full protection of the public while these further issues
are being explored. Thus, any such rate changes as may be authorized in
the Final Decision or any appropriate further orders may be of an interim
nature and may be accompanied by appropriate accounting and refund orders
pending the outcome of the further hearing on questions related to expenses,
rate level and structure, and other associated matters.
15. In view of our inability
to find that the rate increases or rate structure changes proposed by AT&T
comply with all statutory requirements and are in the public interest, it is
necessary, in order to adequately protect the rate payers, to require AT&T
to undertake such accounting procedures as will permit it to make appropriate
refunds to subscribers if the rates refiled on January 14, 1971
subsequently [*158] prove to be too high or otherwise contrary to
the public interest. In response to an inquiry from the Chief of the
Common Carrier Bureau, AT&T indicated, in a letter of December 1, 1970,
that it could institute a procedure for maintenance of collection records, at
minimal cost and complexity, which would assure equitable treatment to all but
coin-box patrons or hotel guests paying for toll calls. We have been
assured that other carriers will also be able to establish such
procedures. n5 According to AT&T the cost of
maintaining individual records for sent paid coin-box calls and for hotel guest
calls would be approximately five times the additional revenue from such users
sought by AT&T in its November 20, 1970 filing. Accordingly, with
respect to those classes of service we provided that accounting procedures be
established sufficient to provide revenue data for the classes as a whole
rather than on an individual user basis. Should the rates ultimately be
reduced or modified as a consequence of this proceeding in such a way as to
require further consideration of the total revenue collected from these user
classes, the carrier shall dispose of such funds as directed by the
Commission.
n5 United Utilities, Inc. has
suggested an accounting procedure less costly than AT&T's but also less
precise. In view of the magnitude of the sums in issue here we believe
AT&T's approach is the more appropriate.
16. As indicated in footnote
1, numerous petitions and informal filings have been submitted in response to
the proposed rates increase. One group of petitions in particular
warrants particular mention at this time. The Equal Employment
Opportunities Commission (hereafter EEOC) filed a Petition for Intervention,
asking the Commission to suspend the proposed rate increases, conduct a
hearing, and declare the proposed increases illegal until the operating
companies of the Bell System "have ceased their unlawful discrimination
against women, blacks, Spanish-surnamed Americans, and other minorities."
The EEOC also seeks numerous other forms of relief, arguing that for many
years, and continuing to the present time, the operating companies of the Bell
System have engaged in massive, deliberate, illegal discrimination against
blacks, women, Spanish-surnamed Americans and other minorities in hiring,
promotion, job classification, and wage scales.
17. The EEOC contends that
because AT&T has operated in widespread and flagrant disregard of the equal
employment laws, the proposed rate increase is unjust and unreasonable as
contrary to the public interest, and therefore unlawful. It notes that
the Bell System, as a regulated utility, is a public trustee and as a company
of enormous economic power and influence, is particularly bound to serve the
national goal of eradicating employment discrimination; it contends that, in
considering the "public interest," the Commission is bound to
consider issues other than the narrow and traditional ones which are related to
the economic factors generally considered in public utility regulation.
Finally, the EEOC contends that to approve the rate increases in issue here
would be to authorize the discrimination to continue and would contravene the
Fifth and Fourteenth Amendments to the Constitution.
[*159] 18.
AT&T responded with an Opposition to the Petition on December 21, 1970,
denying, with varying degrees of specificity, the charges lodged by the EEOC,
and urging the Commission not to consider the issues raised by the EEOC
petition in its disposition of the pending request for rate increases.
AT&T argues that it would be "incongruous to hear and investigate
charges of discrimination simply because an employer files new rates while
ignoring the employment practices of those who enjoy adequate earnings"
(Oppos., p. 3). Moreover, AT&T argues that to delay the rate increases
in issue would seriously injure the public interest inasmuch as the additional
funds are required to permit attraction of capital for construction programs
which must be maintained to provide telecommunications service.
Subsequently, numerous petitions for "Rate Suspension, Hearing
Intervention, and Declaration of Unlawfulness" were filed by California
Rural Legal Assistance, Inc., Mexican American Legal Defense Fund, the NOW
Legal Defense and Education Fund and the American Civil Liberties Union.
Each of these pleadings adopts and incorporates the petition filed by EEOC.
19. We agree with the EEOC
that the matters raised by it are indeed crucial considerations in effectuating
our statutory responsibilities. As the Commission recently said in
adopting its non-discrimination rules applicable to common carrier operations:
"It is clear to us that discriminatory employment practices by a common
carrier licensee or permittee are not compatible with the public
interest." Employment Practices by Common Carriers, 24 FCC 2d 725 at 729
(1970). We also observed that "The Commission has an independent
responsibility to effectuate the strong national policy against discrimination
in employment...." Id. at 727. See also Potomac Electric Power Co., (D.C.)
83 PUR 3d 113 at 147-149 (1970); 84 PUR 3d 236. Moreover, on the basis of the
pleadings now before us on this issue, we believe there are outstanding
substantial and material questions of law and fact which can be resolved only
after full evidentiary hearing and briefing of the issues by the parties.
20. It is therefore our
intention to vigorously pursue the questions raised by the EEOC and related
filings and to reach appropriate determinations on a full record. No
showing has been made, however, or even attempted, as to any logical or
functional relationship between rate levels and the company's policies and
practices in the matter of equal employment opportunity.
21. In these circumstances, we
believe the most appropriate way to proceed is as follows: We will treat the
EEOC and related petitions as formal complaints filed under our
anti-discrimination rules, and will establish a separate docketed proceeding in
which the questions raised by EEOC may be fully considered. We will
include an issue in that proceeding inquiring into the effect, if any, of the
employment practices or policies of AT&T and the Associated Bell System
companies on the company's revenue requirements, so as to permit the
complainants an opportunity to demonstrate some logical or causal relationship
between the matters raised by them and the determination of just and reasonable
rates under Section 201 of the Act. Pending a final resolution of this
separate proceeding, we will retain jurisdiction [*160] of the
instant case until such time as the employment discrimination issue and its
relationship, if any, to revenue requirements has been resolved. n6 Any of the civil rights groups is of course free to
intervene, upon appropriate notice, in this proceeding, in its capacity as a
telephone subscriber or representative of telephone subscribers, and for the
purpose of assisting in the determinations of the issues set forth herein; the
petitions to intervene filed by the City of Chicago, Telephone Users
Association, MCI Inc., Martin-Trigona, and Silver Beehive Telephone Company
will be granted.
n6 The petitions filed by the civil
rights groups specifically state that they are not complaints filed under
Section 1.721 of our rules. However, the alternative to so construing
them is to dismiss them outright, a result we believe would not be in the
public interest.
22. In its telegram of January
14, 1971 (See n. 1, supra), EEOC asks that the Commission provide, in addition
to certain documents which are readily available, and certain relief which is
mooted by this order, a transcript of the Commission proceeding at which the
Commission's letter of January 12, 1971 was authorized, a copy of each
correspondence item received or sent by the Commission in relation thereto, and
a report of all telephone calls, meetings and other communications between
commissioners and officers of the carrier in relation to the letter of January
12, 1971. EEOC also seeks a transcript of the Commission proceeding which
dealt with the petition. The Commission responded to that telegram by letter
dated January 19, 1971. We adopt that letter (Att. A hereto) as our
response.
23. The Petitions filed by the
Civil Rights groups on January 18, 1971, uniformly make two additional
arguments: (1) that the lower rate increase proposed by AT&T is a Commission-prescribed
rate and as such is violative of numerous statutory provisions; and (2) that no
"good cause" has been shown to permit the rate increase to become
effective prior to the 60 day period specified in 47 U.S.C. Section
203(b). They also request that if the Commission denies the relief
requested in the petition, it stay its actions pending judicial review.
We find no merit in any of these points. We believe the language of this
order makes clear beyond quibble that we have not established any rates
pursuant to Section 205 of the Communications Act; instead we have suspended
these rates with an accounting order and placed the burden of justifying them
upon AT&T. The determination that good cause does exist for waiving
the usual statutory waiting period of 60 days is one which is committed to our
discretion and we believe, on the basis of all the circumstances presented,
that our decision in this respect, for the reasons set forth above, is well
within the bounds of a reasonable exercise of such discretion. As to the
imposition of a stay, we note that the parties have neither alleged nor proven
that a denial of such extraordinary relief would result in irreparable injury
either to themselves or to the public, particularly in view of our accounting
order, nor have they demonstrated that they have a substantial likelihood of
prevailing on the merits. In such circumstances we see no reason to grant
a stay. See Virginia Petroleum Jobbers Ass. v. FPC, 259 F. 2d 921 (D.C.
Cir., 1958). As indicated above, we have also received a letter from Mr.
Ralph Nader protesting the Commission's actions and policies and requesting
suspension of the [*161] proposed rate increases. Many of the
points raised in that letter are dealt with either in our response to the EEOC
of January 19, 1971, cited above, or in this Memorandum Opinion and
Order. We reemphasize, however, that the accounting and refund provisions
included in this proceeding will adequately protect the public; that by our
action here we have not approved any rate increases or higher rate of return
and that we are holding a full evidentiary hearing on the public interest
issues raised by the proposed rates increases. Mr. Nader or any other
interested party is free to seek intervention in this proceeding, pursuant to
Section 1.223(b) of our Rules, and to make any relevant showing with respect to
the issues set forth herein.
24. We wish to make clear that
as to all the issues specified below, AT&T, as the proponent of higher
rates, shall bear not only the burden of proof, but also the burden of going
forward with the evidence. We will provide by order that the proceedings
in Docket No. 18128 be expedited and it is our expectation that a resolution of
that proceeding insofar as it relates to the rate adjustments proposed by
AT&T in its filing of November 20, 1970, as well as in the tariff schedule
suspended herein, will occur in less than one year. We shall retain
jurisdiction herein to implement our conclusions in Docket No. 18128 insofar as
they relate to the assignment of any revenue requirements of AT&T to MTT.
In view of all the foregoing
matters, IT IS ORDERED, That, pursuant to the provisions of Sections 201(b),
202(a), 204, 205 and 403 of the Communications Act of 1934, as amended, an
investigation is hereby instituted into the lawfulness of the charges of the
American Telephone and Telegraph Company and the Associated Bell System
Companies for interstate and foreign communication service; n7
n7 See 2 FCC 2d 876 (1966) for a
full listing of the corporate parties included.
IT IS FURTHER ORDERED, That, without
in any way limiting the scope of the proceeding, it shall include consideration
of the following:
1. What are the revenue
requirements of the Bell System Companies applicable to their interstate and
foreign communication services and the basis upon which such revenue
requirements are to be determined, including:
A.
The amounts properly includible as the net investment of the above-mentioned
companies in property and plant use and useful for providing interstate and
foreign communication service;
B.
The fair rate of return required by the Bell System on the amounts of net
investment determined pursuant to the foregoing;
C.
The amounts properly includible as expenses and taxes incurred by the
above-mentioned companies in the provision of interstate and foreign
communication service.
2. The amount of operating
revenues that are or may reasonably be expected to accrue in the foreseeable
future from interstate and foreign communication services rendered by use of
the plant and facilities, the costs of which are included in the net investment
to be determined herein as a consequence of the particular MTT rate levels
proposed [*162] by respondent in its filing of November 20, 1970,
as well as those suspended herein, with particular reference to the projected
gross revenues to be derived therefrom, the changes in traffic level and usage
patterns anticipated as a result of the rate change, and the associated changes
in expense level;
3. The cost justification,
demand factors and other pertinent considerations in respect to the structure
and differing rate levels proposed for various classes of MTT service proposed
by AT&T in its filing of November 20, 1970, as well as that included in the
tariff schedules suspended herein;
4. In light of our
determinations as to the foregoing, whether the instant rate increases sought
by the Bell System Companies are just and reasonable within the meaning of
Section 201(b) of the Communications Act of 1934, as amended;
5. Whether the specific
charges for the above-mentioned service proposed by AT&T in its filing of
November 20, 1970, as well as those suspended herein, will subject any person
or class of persons to unjust or unreasonable discrimination, or give any undue
preference or advantage to any person, class of persons, or locality, or
subject any person, class of persons or locality to any undue or unreasonable
prejudice or disadvantage within the meaning of Section 202(a) of the
Communications Act of 1934, as amended;
6. Whether the Commission
should prescribe just and reasonable charges or maximum or minimum or maximum
and minimum charges to be hereafter followed with respect to message toll
telephone service, and, if so, what charges should be prescribed;
IT IS FURTHER ORDERED, That the
hearings in this investigation shall be held at the offices of the Commission
in Washington, D.C., at a time to be later specified and that the Examiner
appointed to preside at the hearings shall conduct a hearing with the objective
of issuing, if practicable and fully consistent with the requirements for a
full and fair hearing, an Initial Decision no later than six months following
the publication hereof in the FEDERAL REGISTER on the rate of return issue, and
on such other issues as the foregoing schedule will permit.
IT IS FURTHER ORDERED, That upon
issuance of its Final Decision herein, consideration will be given to what
action, if any, should be taken by the Commission to effect such interim rate
adjustments as may be warranted on the basis of the record as it is then
constituted, and such further order or orders will issue as may be appropriate
to this end;
IT IS FURTHER ORDERED, That the
Petition for Intervention filed by the EEOC and the relief sought in its
telegraph of January 14, 1971, is DENIED to the extent indicated herein;
IT IS FURTHER ORDERED, That the
American Telephone and Telegraph Company and the Associated Bell System
Companies are hereby made parties respondent in this proceeding, and subject to
the procedures set forth in paragraph 13 above the Common Carrier Bureau is
named a party hereto;
[*163] IT IS FURTHER
ORDERED, That the petitions for Hearings and Suspension of the increased rates
are GRANTED to the extent indicated herein and are in all other respects
DENIED, and that the petitions for denial, declarations of unlawfulness or for
similar forms of relief are DENIED;
IT IS FURTHER ORDERED, That the
Commission will retain jurisdiction of this proceeding until such time as a
final determination in the proceedings in Docket No. 19143. In the Matter
of Petitions Filed by the Equal Employment Opportunity Commission (EEOC) and
Others is reached as to the effect, if any, of the alleged discriminatory
hiring and employment practices of AT&T and the Associated Bell System
Companies on the revenue requirements of the parties respondent herein.
Jurisdiction will also be retained until we are able to implement our
conclusions in Docket No. 18128 insofar as they relate to the assignment of any
revenue requirements of AT&T to MTT.
FEDERAL
COMMUNICATIONS COMMISSION, BEN F. WAPLE, Secretary.
CONCUR:
CONCURRING OPINION OF COMMISSIONER
NICHOLAS JOHNSON
I am concurring in the Commission's
order setting for hearing the proposed Bell rate increases of $545
million. In light of the fact that rate increases of any magnitude are
relatively unprecedented, and because of the unusual method the Commission has
used to arrive at today's order, an explanation of my position may be useful.
The arithmetic of the Bell increases
bears some explaining. Earlier this year the Commission agreed to allow
some costs to be "shifted" from "intrastate" to
"interstate." Although the telephone network is a national integrated
system, its regulation is divided between Federal and state jurisdiction.
As a result, plant and costs of the system are divided by mathematical formulae
among the various jurisdictions. These shifts amounted to $130 million in
increased revenue requirements for Bell interstate, and it was fully expected
that Bell would file rate increases to offset those increased costs.
Bell chose to use the opportunity,
when filing for these offsetting increases, to try to make a case for a
dramatic increase in its interstate rate of return, last formally fixed by the
Commission in 1967 at 7.0 to 7.5%.
Bell has asked for a 9.5% overall
rate of return. (It should be noted that all the following figures are
Bell's and there may be substantial question about their validity.) When Bell
filed, it said that its present rate of return, projected for 1971, was
7.4%. Based on projected traffic for 1971, a 9.5% rate of return would
have yielded Bell $750 million in new revenue. However, Bell estimates
that a total of $270 million will not materialize because fewer calls are made
when prices rise. And Bell also estimates that $95 million will not
materialize as consumers shift to lower cost (off-peak and direct dial) calling
patterns. Thus, Bell estimates the true increase in revenues from repricing
as $385 million. But Bell also expects to save $160 million in projected
costs because of the lower number of calls and the less costly calling
patterns. Adding $160 million to $385 million results in a net increase
in Bell's revenue of $545 million.
Based on Bell's then-estimated 1971
rate of return of 7.4%, and figuring that each $25 million in revenue is
roughly equivalent to 0.1% rate of return, a grant of Bell's full increase
would bring their earnings to roughly 9.5%, which is the level Bell feels they
are justified in obtaining. While the rate increase was pending, Bell
submitted revised estimates which in their view showed that the rate of return
for 1971 would be 7.2%, based on revised estimates of traffic growth.
Thus, a full grant of their rate increases -- under these new projections --
would bring Bell to a 9.3% overall rate of return.
At this point it would be useful to
refer to the Commission's 1967 rate decision. In its 1967 decision
setting 7.0 to 7.5% as the reasonable range, the Commission considered the
components of that rate of return -- return to debt and return to equity.
Assuming a 40% debt ratio * at an imbedded (average) debt cost of 4%, the 7.0
to 7.5% range would yield 9.3 to 9.8% return on equity, as follows:
* Bell has raised capital by selling
stock (equity) and borrowing, by selling bonds (debt). "Debt
ratio" (in fact a misnomer) refers to the percentage of total capital that
is debt.
|
|
Percent |
Percent |
|
40
percent debt at 4 percent |
1.6 |
1.6 |
|
60
percent equity at 9.3 percent |
5.4 |
|
|
60
percent equity at 9.8 percent |
|
5.9 |
|
Total |
7.0 |
7.5 |
Now, with Bell's increasing debt ratio, obtained at
relatively high debt costs, Bell finds itself with a 45% debt ratio at 6% inbedded
debt cost. In order to maintain the same return on equity, Bell must earn
an overall rate of return in the range of 7.8%-8.u%.
|
|
Percent |
Percent |
|
45
percent dept at 6.0 percent cost |
2.7 |
2.7 |
|
55
percent equity at 9.3 percent |
5.1 |
|
|
55
percent equity at 9.8 percent |
|
5.4 |
|
Total |
7.8 |
8.1 |
Thus, if Bell's actual present going
rate of return is 7.4%, Bell would need $100 to $175 million just to maintain
the level of equity earnings allowed in 1967. If Bell's rate of return
now is 7.2%, then Bell would need $150 million to $225 million to maintain the
equity earnings, depending on what level the Commission wished to establish the
range. Bell applied for $545 million in rate increases. How then
did the Commission reach the present posture of permitting a $250 million
increase and holding hearings on a new rate schedule while Bell deferred the
effective date of the $545 million increase?
The Commission's traditional concept
of its power to deal with rate increases is to suspend them for 90 days (at the
maximum), with an "accounting order" providing for possible refunds
to consumers if the higher rates are determined to be unreasonable.
However, the facts of this case suggest that the Commission had other remedies
available to it. In view of recent cases which have taken an expansive
view toward the powers of regulatory agencies to fashion procedures to deal
with industry-wide problems, particularly in the federal power regulation
field, and given that the courts have tended to sustain FCC actions which have
also been premised on broad Commission powers, arguably the Commission could
have rejected the Bell filing with instructions that some lower level be filed
while determinations on the reasonableness of the $545 million was
litigated. This view is premised on the following hypotheses:
The Commission has broad statutory
powers;
The Courts have given liberal
interpretations to such powers in acts similar to the Communications Act;
In this matter there are
unprecedented increases in dollar amounts as well as on the returns being
requested;
The impact of the requested rate
increase is placed solely on users accounting for only 80 percent of the total
revenues;
The FCC now has in process a
proceeding designed to determine the proper relationship between the levels of
charges for the various services provided by ATT including message toll
service.
There is no
purpose to developing fully the legal arguments on this question since the Commission
decided not to follow such a course.
At the other end of possible
Commission actions would have been a one-day suspension of the $545 million
increase. It would then have gone into effect immediately, pending the
outcome of the Commission hearing, and subject to potential refunds to
customers under an accounting order. Or, the Commission could have
ordered a 90-day suspension of the full amount.
The Commission unanimously chose to
ask that Bell postpone the $545 million increase. It permitted the company
to file for $250 million, to go into effect promptly, but with consumer
protection in an accounting order and the possibility of refund. It
should be noted that under Bell's most recent figures, $250 million will allow
a rate of return of about 8.2% -- close to the level that would permit the same
return on equity as in 1967 -- again using Bell's figures. Thus, the
course ultimately chosen by a unanimous Commission seemed far preferable to me
to the likely alternatives of a Commission majority with a split vote.
Now that the Commission has decided
to designate this case for hearing, I want to indicate the issues I believe
must be explored before the Commission can made a determination on this massive
rate increases for the Bell System. It is clear what the Bell System
wants the Commission to do. It would prefer a quick rate of return
hearing where rate of return is the only issue. It wants questions of
costs, rate base questions, and questions of pricing allocation to be deferred
to the hopefully distant future. I believe we simply must not fall into
this trap again. In 1965 the Commission promised to explore costs,
pricing policies, and rate base-Western Electric relationships in a full rate
investigation. On those particular issues the passage of six years has
shown no real results. When questions of quick rate decreases are at
stake for the consumer, an argument can be made that ignoring time-consuming
issues may delay deserved rate decreases, and the Commission should move ahead
quickly. But now that there are price increases to be paid by consumers,
at a time when the highest national priority should be directed to reducing
inflationary price increases, the Commission can no longer ignore important
rate issues. I yield to no one in my encouragement of expedition in
Commission proceedings, but I will not worship expedition at the expense of
thoroughness when hundreds of millions of dollars of the public's money are at
stake.
The Commission has expressed a
hoped-for time schedule. I would expect that our staff would immediately
tell us if its resources are inadequate to do a thorough job, and that it would
then be up to the Commission to secure those resources if our staff lacks
them. The Commission has indicated in its January 12 letter to Bell the
issues it particularly wishes to explore in the upcoming hearing -- issues on
allocations of revenue requirements among Bell's services, and a speedy
resolution of the issues in Dkt. No. 18128 where those questions are already
being litigated. Other issues the Commission pointed to in its letter
include Bell's estimate of the elasticity of the MTT service (message toll
telephone, the "long distance" per-call pricing system), and its
predictions on the increases in costs, particularly in maintenance
expenses. Naturally these are all issues the Commission must explore in
the forthcoming hearing.
But there are other Bell costs which
the Commission should evaluate before deciding that Bell can tax its subscribers
an additional half billion dollars every year. These should include
Bell's advertising expenses, particularly expenses for institutional
advertising and for service stimulation at times when Bell was already having
problems meeting service demands. Another category which should be
examined is that of managerial expenses, and the possibility that the cost-plus
contract of regulation has induced padding in this area. And fundamental
to any determinations about cost of capital, rate of return, and financing
policies are evaluations of growth policies -- particularly in areas which
might be considered peripheral to the provision of a basic telephone
service. The specter of other utilities, such as railroads like the
Penn-Central, concentrating on expansion in exotic areas to the detriment of
basic consumer services, should be explored in any expansion program as massive
as that of the Bell System.
In my judgment, public utility
regulation generally tends to be perceived by public, companies and commissions
alike in a way that over-emphasizes profit ("rate of return") and
under-emphasizes costs (and capital investment, or "rate
base"). Bell earns a rate of return on its "rate base"
(depreciated capital investment). Subscribers' monthly bills are computed
at levels sufficient to guarantee the company the recovery of all of its costs
of operation plus a profit ("rate of return"). Of the total
amount paid by the subscribers, something on the order of 80% represents costs
rather than profits.
Assume the following ballpark
figures for purposes of ease of illustration:
Rate base: $40 billion.
Rate of return: 7%.
Annual costs of operation: $10
billion.
Subscribers would then have to pay
telephone bills sufficient to raise $10 billion costs plus $2.8 billion profit
(7% of a $40 million rate base as a rate of return) or $12.8 billion.
Now assume the rate of return is
increased 10%, from $2.8 billion to about $3 billion, and costs remain
constant. The total subscriber burden increases from $12.8 billion to $13
billion.
If, on the other hand, costs
increase by 10%, from $10 billion to $11 billion (while the rate of return
remains constant), the subscribers' burden goes from $12.8 billion to $13.8
billion.
Moreover, even the amount of profit
is affected as much by the amount of the rate base as by the "rate"
of return. A 7% rate of return on $40 billion is $2.8 billion of annual
profit. A 6% rate of return on $40 billion is $2.4 billion. But a
7% rate of return on $30 billion is only $2.1 billion.
The only point of this discussion is
that it is dangerously shortsighted for this Commission to be willing to accept
the company's suggestion that it pass upon a half-billion-dollar annual
increase by examining only the issue of rate of return while ignoring (or continuing
to postpone for subsequent consideration -- which is the same thing) the 80% of
the subscribers' burden represented by the company's unexamined
multi-billion-dollar levels of costs, and the tens-of-billions-of-dollars of
rate base to which the simple rate-of-return percentage would be applied.
The Equal Employment Opportunity
Commission petition charging that Bell discriminates in its hiring practices is
an issue the Commission cannot duck, no matter how strongly Bell cries
"foul." EEOC's position is that no rate increases may be found by the
Commission to be in the public interest while Bell discriminates in
employment. There is some concern by the Commission on the relevance of
this issue to what is construed as the narrow issue of rate levels. I do
not now reach that question because I do not need to. I would establish a
separate proceeding, to be resolved concurrently with this one, to examine
EEOC's charges. EEOC should be permitted to file a brief subsequently,
after the evidentiary proceeding, showing how its complaint is relevant to the
Commission determination on the proposed rate increase.
It should also be noted that half of
Bell's direct case in this proceeding, Bell statements 10 through 16, are
directed toward justifying the present vertically integrated relationship with
Western Electric. This is another terribly important issue that the
Commission promised it would explore in its 1965 rate investigation, but which
it has never considered. I do not believe the Commission can any longer
shirk its duty in this area. Vertical integration has increased in the
domestic common carrier industry since 1965. I believe the Commission
must now open a new proceeding and undertake a full market study of vertical
integration, particularly in this era of changing rates of technological
innovation. The Department of Justice has commented in another proceeding
before the FCC:
The Bell System has traditionally
relied on a captive equipment supplier, Western Electric, and has continued to
rely extremely heavily on that supplier, thereby insuring that virtual
nationwide monopoly in public message telephone service to be repeated in the
field of telephonic equipment, whether or not there was any economic
justification for such concentration at the manufacturing level.
DOJ Reply Comments in Dkt. No.
18920, p. 3 (emphasis supplied). Under these circumstances, the question
of vertical integration in the domestic common carrier industry is one the
Commission simply must examine fully, particularly when the issues are related
to the Bell half-billion-dollar rate increase. Even Bell acknowledges the
crucial importance of this relationship by devoting so much of its direct case
to it. A full market study of vertical integration should again proceed
concurrently with the other proceedings related to the rate increases -- Dkt.
No. 18128 on pricing; the EEOC proceeding; and the rate of return/cost
justification proceeding.
For this Commission to do otherwise
seems to me to leave it open to the charge that it acquiesces in Bell's setting
the rules for Commission action, rather than the Commission setting the rules
to protect the public. In short, I believe the least the Commission can
do on a rate increase of this magnitude is to conduct a proceeding no less
thorough than some of those conducted by the state commissions -- for example,
the California investigation in 1964 of Pacific Telephone. Pacific
Telephone & Telegraph Co., 55 P.U.R. 3d 513 (1964), aff'd in major respects
62 Cal. 2d 634, 58 P.U.R. 3d 229 (1965). I do not see how the Commission can
maintain that it has done an adequate job of protecting the public without such
an effort. This is particularly so when it is apparently this
Commission's destiny to preside over perhaps the largest proposed public utility
rate increase in history.
Perhaps the Commission does not have
the resources to undertake the job it should. If true, then an estimate
of the resources required should be made and a candid request for those
resources made. (And, of course, any "public interest"
intervenors ought to be specially welcomed, rather than discouraged as has so
often been the case in the past.) But I cannot believe that with a half-billion
dollars at stake, the representatives of the public -- who must pay these prices
-- will not give serious consideration to the Commission's needs. And if
statutory authority is thought to be lacking to protect the public and its own
regulatory processes, I would expect the Commission to seek that authority with
vigor.
It might be argued that pursuing
these issues would risk "delays." I have heard these arguments, and I
am not persuaded. If an adequate hearing takes a little longer, the
Commission has ample power to protect the interests of all parties, including
Bell. I would welcome a reasoned presentation as to why the Commission
should not move in the manner I have suggested. And I would especially
like to hear any reason why an intervening six years have decreased the urgency
of the issues the Commission should explore.
I fully support the efforts to
provide more vigorous representation of consumer interests in these proceedings
by our staff. Formerly the Common Carrier Bureau has had the unenviable
role of presenting a case to an examiner as an advocate, and then coming around
to counsel the Commissioners privately as their advisor. This may have
been illegal or even unconstitutional. At the very least, it was unwise
and unfair -- to everyone: the consumer, the company, the Bureau and the
Commissioners. Now a Bureau task force is to be "separated"
from the Bureau and the Commissioners for the purpose of this hearing.
The task force will be free to present as strong a case for the consumer as
possible. All issues can be fully explored. The company can know
that the same Commission employees who are functioning as advocates will not
subsequently be privately advising the Commissioners. I expect to see
tangible effects of these procedural changes in the intensity and quality of
advocacy by the Commission's staff in this case, and believe the Chairman is
entitled to some credit for bringing about unanimous Commission support for
this long-overdue procedural reform.
APPENDIX:
JANUARY 19, 1971.
Hon.
WILLIAM H. BROWN III, Chairman, Equal Employment Opportunity Commission, Washington,
D.C.
DEAR MR. BROWN: This is in response
to your telegram of January 14, 1971, with regard to the tariffs filed by
American Telephone and Telegraph Company for increases in rates for interstate
long distance message telecommunication services (MTT). I am enclosing a
copy of the Commission's letter of January 12, 1971, which sets out the actions
taken by the Commission.
In response to your first and third
numbered paragraphs, the Commission will act in the near future on your
petition of December 10, 1970, which requests, inter alia, that the Commission
suspend AT&T's proposed rate increase, conduct a hearing, allow EEOC to
intervene, and declare the rate increases illegal until AT&T's operating
companies have ceased their alleged unlawful discriminatory employment
practices. You will, of course, receive a copy of the Commission's order
on your petition as soon as it is released.
As to your request for documents and
other records in paragraph number 2, there was no transcript of Commission proceedings.
We are enclosing a copy of AT&T's response to our letter of January 12,
1971. Any other correspondence which may be received or sent relating to
our letter of January 12 will be available for inspection at the
Commission. Item 2 also requests a report of all ex parte telephone
calls, meetings and other communications that took place between members of the
Commission and the officers of the applicant. Informal discussions with a
carrier filing a tariff revision are normal and routine, and are customarily
held to inform the Commission fully on all aspects of the proposal before
it. Such informal discussions are in accord with our regulations which
were adopted on July 7, 1965 (FCC 65-598, 30 F.R. 9266) pursuant to the
recommendation of the Administrative Conference of the United States.
Thus, the Commission's rules governing ex parte presentations (Sections
1.1201-1.1251, 47 CFR 1.1201-1.1251) permit informal discussions between the
Commission and a common carrier filing for a rate increase until such time as
the matter is designated for hearing under Section 204 of the Communications
Act, 47 U.S.C. Section 204. See Section 1.1207 of the rules, which
provides that the prohibitions against ex parte presentations are applicable to
rule making proceedings which are required by statute to be decided on the
record after hearing only from the time such proceedings are designated for
hearing. A hearing on a rate increase under Section 204 comes within that
regulation since it constitutes rule making under the Administrative Procedure
Act. Therefore, so long as a filing for a rate increase has not been
designated for hearing, there is no impropriety in discussions between the
Commission and the carrier, nor any right in any persons to be a party to such discussions
or to be apprised of their content. A petition to deny invokes the
prohibitions against ex parte presentations only where there is involved an
application filed under Section 308 of the Communications Act. See
Section 1.1202(b) (1) of the rules. Finally, I would also note that our
regulations on ex parte matters are appreciably more comprehensive and
restrictive than the statutory provision governing such matters, which has no
application to tariff proceedings (47 U.S.C. 409(c) (1)).
As to your paragraph number 4, as
provided in the Commission's letter of January 12, AT&T has been granted
permission to file revised tariffs, to be effective on not less than seven
days' notice, providing for increases in MTT rates that will produce additional
annual net earnings before income taxes not to exceed $250 million, rather than
the $545 million provided by its tariff filing. (The revised tariffs were
filed January 14, 1971.) As set out in the enclosed copy of our letter, the
Commission intends to conduct an expedited hearing with respect to the
lawfulness of such rates, and to require that all collections under such rates
be subject to accounting and refund by the carriers. As to the effective
date of the revised tariffs, the Commission provided that in determining the
length of the period of suspension to be ordered under Section 204, due regard
will be given, among other factors, to the January 1, 1971, effective date of
the revised separation procedures prescribed in Docket No. 18866, and immediate
adverse effects thereof on the company's level of interstate earnings.
As to paragraph number 5, AT&T
filed its revised tariffs on January 14, 1971, specifying an effective date of
January 21, 1971, and your General Counsel's office was notified of this filing
on the same day. On January 15, the Commission released a public notice
of this filing.
As to paragraph number 6, all
proceedings of the Commission on the tariffs will be public. However, as
is the case with all meetings at which our Commissioners make their decisions,
such meetings are not open to the public, nor is the public entitled to
information regarding such deliberations which are quasi-judicial in nature.
Sincerely,
DEAN BURCH, Chairman.