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
32 F.C.C.2d 691
RELEASE-NUMBER: FCC 71-1284
December 23, 1971 Released
Adopted December 21, 1971
JUDGES:
BY THE COMMISSION: COMMISSIONER
BARTLEY CONCURRING AND ISSUING A STATEMENT; COMMISSIONERS
JOHNSON AND H. REX LEE DISSENTING AND ISSUING STATEMENTS.
OPINION:
[*691] 1. By our
Order herein of January 21, 1971, 25 F.C.C. 2d 151, we directed that the issues
involved in these proceedings be heard and determined in two phases. In
Phase I, we were to address the issue of the fair rate of return that should be
allowed the Bell System companies on their interstate and foreign
communications services. The issues involved in Phase II call for an
examination of those matters that could affect the revenue requirements of the
Bell System, including the reasonableness of Western Electric's prices and
profits, and the amounts claimed by the carriers for investment and operating
expenses. The Phase II issues also contemplated examination of the
internal rate structure of the interstate and foreign message toll telephone
service. In addition, the Commission announced that it would retain
jurisdiction of the proceedings herein until it has reached a determination in
Docket No. 19143, In the Matter of the Petitions Filed by the Equal Employment
Opportunity Commission, concerning the effect, if any, of alleged
discriminatory practices of the Bell System companies on their revenue
requirements.
2. Related to the rate of
return issue in Phase I herein are the proceedings in Docket No. 18128, in
which consideration is being given to the principles that should govern the
assignment of the Bell System's revenue requirements among its principal
classes of interstate and foreign services. Thus our Order of January 21,
1971, provided that the implementation of our findings in Phase I with respect
to rate of return will be subject to the determinations to be made in Docket
No. 18128 insofar as they relate to the assignment of any revenue requirements
to interstate and foreign message toll telephone service. The accounting
and refund requirements of our Order of January 20, 1971, herein, will of
course continue to operate until such implementing actions have been taken.
3. Pursuant to our Order of January
21, 1971, the Hearing Examiner has submitted his Initial Decision on the
over-all rate of return issue (Phase I). Our Order stated that:
[*692] "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."
(paragraph 13a)
4. With the submission of the
Initial Decision, the immediate question is presented with respect to the
further proceedings required to treat the issues involved in Phase II.
The question arises because we do not have sufficient resources to permit
adequate staffing of the hearings that would be involved or to complete the
preparatory staff work required for developing a meaningful evidentiary record
on these issues. This is the result of the continuing growth in the
volume and complexity of regulatory problems within the common carrier
field. We need only mention as examples in this connection such matters
as the many pending applications which have been filed with us for
authorization for the establishment of competitive services and facilities in
the field of intercity specialized common carrier communications; our pending
proceeding looking toward the formulation of policy to guide our development of
domestic satellite systems; further implementation of the Carterfone policy by
expanding the interconnection options to communications users in the beneficial
use of the existing common carrier networks; the initial determination of
policies to govern ratemaking applicable to international services of the
Communications Satellite Corporation; and the determination of rate making
principles applicable to the rate levels and structures for the various
classifications of domestic communications (Docket No. 18128). This
increased workload is, of course, aggravated by budgetary and staffing
limitations and turnover over which we have no control.
5. Under these circumstances,
we find it necessary to revise our program priorities and to defer action on
the Phase II issues until we are in a position to go forward with the
proceedings in a meaningful manner. Without minimizing the importance to
the consumers of communications services of the issues involved in Phase II and
the recognized need to seek their resolution as soon as we are able to do so,
we believe it will make for a more orderly procedure to dismiss the proceedings
with respect to Phase II issues, rather than simply deferring. We will
reinstitute further proceedings on the issues involved as and when we are in a
position to treat them with the required effectiveness.
6. IT IS ORDERED, That the proceedings
are dismissed herein insofar as the issues in Phase II are concerned and
jurisdiction is retained with respect to the aforementioned matters involved in
and related to the issues involved in Phase I as discussed above.
FEDERAL COMMUNICATIONS
COMMISSION, BEN F. WAPLE, Secretary.
CONCURBY:
BARTLEY
CONCUR:
CONCURRING STATEMENT OF COMMISSIONER
ROBERT T. BARTLEY
I have joined in the action taken by
the majority in this case although I deeply regret the underlying reasons that
make this action necessary.
The Commission's action is a frank
admission that we do not have the minimum capabilities to carry out our most
fundamental statutory [*693] responsibilities to protect the
interests of the public in fair and reasonable interstate rates. It is
also a forceful dramatization of the unrealistic and penurious budget and
fiscal policies that have shackled the Commission's regulatory efforts in the
past decade in the common carrier field.
The issues involved in Phase II,
which we are dismissing, are addressed to the reasonableness of the billions of
dollars of costs upon which the rates of the Bell System are based. They
also address the soundness of the rate structure for interstate telephone
services. In other words, these issues are dealing with the most basic
matters of regulatory concern.
The common carrier industry has been
growing at a faster pace than any other sector of our economy. Public
expenditures for common carrier services subject to Federal regulation exceed
$6.5 billion a year and have been growing by more than 10% annually in the past
decade. In 1961 the plant of the telephone system in the United States
represented an investment of some $32 billion. Today that plant
investment has more than doubled where it now exceeds some $76 billion and it,
too, is growing at about an annual rate of 10%.
Advances in communications and
related technologies, such as the electronic computer and communications
satellites, have not only revolutionized the methods by which conventional
communications services are supplied, but they have also generated consumer
demands for new, expanded and improved services of all kinds. This
dynamic growth and have been growing by more than 10% annually in the past
decade. faced by the country such as those examples cited in the Commission's
majority opinion.
I think it is clear that there must
be a change in the fundamental approach of Congress to the funding of the
Commission's regulatory responsibilities. n1 First, it is imperative that the Commission's resources be sufficiently
and systematically augmented to a level which permits an on-going regulatory
program to deal with issues, such as those involved in Phase 2, on a continuing
basis. Second, with respect to a matter as complex and far-reaching as
Western Electric's relationship to the Bell System and the effects of that
relationship on the cost of telephone service, it is my opinion that an
investigation of this matter should be undertaken by the Congress itself or by
a special task force functioning under the aegis of the Commission and financed
through a separate appropriation. Any such investigation should also
examine the effects of vertical integration of telephone operations and
manufacturing. This industry structure no longer applies solely to the
Bell System. In recent years, it has also become a basic characteristic
of the independent segment of the telephone industry as a result of mergers and
consolidations of independent telephone operations within corporate systems
which include manufacturing and marketing affiliates.
n1 From my address, "Let's
Abolish the FCC," (page 6), Illinois Broadcasters Association, May 23,
1968: "I believe there would be a more responsible administration of the
differing functions now administered by the FCC if they were the
responsibilities of separate agencies. I think they would each fare
better in their appeals for manpower and money; they would each be able to
concentrate more and become more expertise in their more specialized filed; the
members could give greater guidance to their staffs on policy planning and in
supervision."
[*694] DISSENTING
OPINION OF COMMISSIONER NICHOLAS JOHNSON
I dissent to these two actions by
the majority but I admire my colleagues' candor.
The FCC has concluded that
examination of the appropriateness of Bell's costs, the role of Western
Electric, vertical integration in the telephone industry, and the internal rate
structure of the long distance telephone schedule are matters of low priority
given the Commission's present resources and activities. The promises
made in 1965, and reaffirmed in 1971, that these were matters that should be
investigated are not to be fulfilled. Rather than continuing the
six-year-old charade of "deferring" proceedings the Commission does
not plan to activate anyway, however, the majority now simply dismisses them.
I dissent on both management and
substantive grounds.
On substantive grounds I believe
these matters are of a higher priority than do my colleagues. We have
spent significant resources on determining the appropriate rate of return for
the Bell System. We have spent very little time in examining the
appropriateness of the costs which the Bell System incurs and deducts from
revenues before the Commission ever gets to the question of rate of
return. (See my opinion concurring to the designation for hearing of the
present rate increase, Docket 19129, AT&T 27 F.C.C. 2d 151, 165 (1971).)
Questions concerning the level of maintenance expenses, levels of managerial
expenses, the appropriate treatment of accelerated depreciation and many others
-- issues raised in prior proceedings -- will now not be examined.
The American people paid the Bell
System companies over $17 billion last year. The prices they paid were
not determined by forces of free private enterprise operating in a competitive
market -- in part because Bell has fought the possibility of marketplace
competition at every turn. Telephone rates are initially set by a
monopolistic company at whatever level it wishes. The reason the Federal
Communications Commission and the state regulatory commissions are responsible
for reviewing and approving those prices is because the public is otherwise
left with no protection whatsoever. For the FCC to say it does not have
the "resources" to do this job -- a job which, of course, the Bell
System hopes it won't do -- is like your bank telling you it doesn't have the
resources to prevent other people withdrawing money from your checking account.
If an unemployed inner city resident
breaks into a coin phone box and takes $3.20 to feed his family he is
considered an outcast, his earning potential is cut off entirely, and he is
sent to the jailhouse. But if a wealthy telephone company executive
succeeds in "breaking into" 100 million private telephones, taking
$3.20 from each subscriber by manipulating the law, he is hailed as a pillar of
the business community, his stock goes up, and he's invited to the White
House. I think it's about time that "law and order" -- not to
mention wage-price control -- be applied to rich and poor alike.
There is considerable question
whether a handful of professionals in an agency like the FCC can ever
"regulate" the rates of a company with $40 billion in assets and a
$17 billion gross. But putting [*695] aside for a moment that
well-founded skepticism, let's take a look at how those rates are set.
"Rate of return" -- the
part of the proceeding to which the FCC is willing to turn its attention --
involves perhaps the least significant aspect of the public's monthly telephone
bill.
There are at least four factors that
go into fixing a phone bill.
(1) Expenses. All the bills
together will have to generate at least enough income to pay for the phone
company's expenses of operation.
(2) Capital investment. The company
is entitled to some return on its "investment" -- the value of the
lines, and poles, and telephones, and other equipment that goes into running a
telephone company. That investment, known as "rate base," has
to be computed.
(3) Rate of return. Once the
amount of the rate base has been ascertained, the regulatory agency in question
then has to address the question of "rate of return" -- what
percentage return is the company entitled to have on that investment.
This is the aspect of utility rate hearings that often attracts the most public
and media attention.
(4) Pricing. Decisions must be
made about rates for individual services within the guidelines determined for
expenses, rate base, and rate of return. How is the revenue to be
generated? Will the homeowner pay more for his service while the
businessman pays the same -- in the way that postal increases tend to be lowest
for junk mail and highest for first class? It's little consolation to
know the phone company's rate of return went from 8% to 9% (a 12 1/2%
increase), if your own bill went up 20%.
Obviously, however high the phone
company's profits may be, they do not represent a very large percentage of the
average subscriber's telephone bill. Most of that bill goes to pay
expenses. Are the expenses reasonable and fair? The FCC doesn't
know. And, as of today, it makes clear it has no intention of finding
out. It's as if an employee would say to his boss, "I'll negotiate
with you about my salary -- but of course I won't let you look at my unlimited
expense account."
As for the portion of the bill that
is profit, it is obviously as much affected by the size of the "rate
base" as it is by the "rate of return." Let's look at an
example.
Suppose the company's capital
investment is considered to be $50 billion. A 10% rate of return means $5
billion profit a year. An 8% rate of return means a $4 billion profit a
year -- a $1 billion difference.
But consider for a moment that the
capital investment may be inflated -- or represent arbitrary decisions.
Suppose what would cost $50 billion to replace today only cost $30 billion when
it was built and could only be sold for $20 billion if it had to be sold in its
present condition. What's the rate base? Keeping the rate of return
the same -- at the higher 10% figure -- the profit fluctuates from $5 billion
to $2 billion, a $3 billion difference.
One example. During the rate
of return hearing it came out that Bell regularly puts in its rate base a cost
-- which, of course, it computes internally within the company -- for turning
on the telephone in an apartment when a new occupant moves in. The value
of the telephone (which Bell has bought from itself at whatever price it
chooses) is, of course, also placed in the rate base. There is no telling
how many new telephones are turned on each year. It is, obviously,
[*696] far more than there are new telephone instruments manufactured and
installed. Whatever may be the most appropriate way of determining the
cost to the company of turning on those telephones, it seems to me there is
considerable question as to the propriety of treating that cost as a
"capital" item on which the company will be permitted to earn a
"rate of return" for years and years until entirely
depreciated. I could go on with the examples, but I trust this makes the
point: to regulate telephone rates responsibly one simply must know the
contents, and formulae used, in the rate base. To "regulate" a
rate of return without examining what's in the rate base is like agreeing to
pay a merchant an 18% carrying charge on your unpaid balance, while leaving to
him the discretion of "defining" unpaid balance to be the maximum
amount you are ever permitted to charge, or any other level he chooses.
These issues need not be made
sophisticated and obtuse. They are simple and fundamental.
The FCC has not been regulating the
Bell System as the law and common sense requires it to do. It has been
granting Bell's requested rate increases while procrastinating on the job of
examining its costs and rate base. I am as tired of the hypocrisy as my
colleagues. I commend them for their candor in abandoning publicly a task
that has not, in fact, been tended to anyway. Our difference lies in the
fact that I would establish a management system to permit us to evaluate
priorities, and then -- probably -- accord this crucial, first responsibility
of the FCC more resources than they have.
Vertical integration also presents
several important questions. If the Bell System is correct, and Western
Electric is the cheapest supplier of communications equipment, why shouldn't
non-Bell companies buy from the lowest cost source? The 1956 Consent
Decree prohibiting such sales by Western Electric should be examined in light
of developments in the past 15 years. Alternatively, how does vertical
integration affect the pace of technological innovation, and also the emergence
of non-telephone common carriers who want to sell communications
equipment? Our Trial Staff urged in the rate of return proceeding that
the rate of return for Western Electric is relevant to any determination of a
rate of return for the Bell System overall. The counterargument is that
this is a question for a subsequent phase -- which is now dismissed.
In short, it borders on the
irresponsible for the regulatory agency concerned with interstate telephone
communications to ignore these questions. The 1965 AT&T Investigation
was thought important because no such investigation had been held in 30 years
on the Bell System. I do not see that six years have made the issues any
less urgent.
I must admit that it is difficult to
be confident about what the priorities of the FCC should be. I am a
little surprised that my colleagues can be so sure. This agency has never
attempted to determine what the totality of agency programs and projects are,
what resources -- personnel, contractual studies, and consultant help -- are
required to meet the program needs, what the outputs and goals of the various
programs and projects are, what alternatives there are to doing the present
programs and projects, and finally, what difference it makes [*697]
to assign alternative priorities, in terms of the goals of the agency. We
do not now have this information for the agency as a whole, nor for the common
carrier activity in particular. No one questions that this agency cannot
do all it would like with every project it might undertake. My objection
is that the decisions on what to do are not made rationally and systematically.
It has not been done in the budgetary process, it has not been done in
managerial control of agency activity, and it is not being done here.
Continuation of Phase II -- whether
in Docket No. 16258 or Docket No. 19129 -- has always been a step-child
here. Whenever the question of initiation of proceedings has been raised,
it has met with significant resistance. The Commissioners have not made a
sophisticated presentation to the Office of Management and Budget or the
Congress on this issue, describing with any particularity the resources
required to do the job adequately, and the possible multi-billion-dollar
benefits that could flow in terms of this Commission's responsibilities to the
consuming public, the American business community in general, and the communications
industry in particular. We have not attempted to push vigorously a
supplemental appropriation request that would focus on these matters. It
is wrong to blame, by implication, the Office of Management and Budget or the
Congress by saying we don't have the resources, and they should have been
provided to us. Neither Congress nor OMB has ever been given the choice
of giving us the resources we think we need, or watching these crucial
proceedings be terminated. We have no one to blame but ourselves.
I dissent.
DISSENTBY:
LEE
DISSENT:
[*699]
DISSENTING STATEMENT OF COMMISSIONER
H. REX LEE
I must dissent to the majority's
action in dismissing further proceedings in Docket No. 16258 and in Phase II of
Docket No. 19129. While I am most sympathetic with the majority's
position, especially in light of the current budgetary and staffing limitations
(including restrictions imposed by the Office of Management and Budget), I
cannot agree with the timing of the action taken.
The Commission intended these proceedings
to serve as the vehicle for a thorough examination of the revenue requirements
of the Bell System, including the reasonableness of Western Electric's prices
and profits, and of the basis upon which such revenue requirements are
[*700] to be determined. The Phase II inquiry also contemplated an
examination of the internal rate structure of the interstate and foreign
message toll telephone service. The majority's action in dismissing these
highly important inquiries is based on the painful fact that the Commission
does not now possess sufficient resources to ensure the development of
meaningful records in these proceedings or even to staff the hearings that must
be held.
The inquiries previously ordered by
the Commission into the rate structure of the Bell System, including the
amounts claimed by the carriers for investment and operating expenses and the
relationship between the associated telephone companies and their equipment
supplier, are much too important to the consumers of interstate and foreign
communications services to permit a termination of these proceedings.
Moreover, our decision in the Phase I inquiry as to the appropriate rate of
return for AT&T is closely interwoven with an existing rate structure that
must be examined if we are to fulfill our regulatory responsibilities.
With the given restraints imposed
upon this agency in the form of budgetary and average grade reductions and the
current staff turnover in the Common Carrier Bureau, it seems unlikely that
these proceedings will be reactivated in the near future. Rather than be
faced with such a prospect, I would have preferred to keep the proceedings
alive by seeking from the OMB a specific exemption from the existing budgetary
and average grade restrictions to the extent necessary to accomplish this
task. I believe it pertinent to point out that the Congress in the last
session appropriated all the monies requested by the FCC that were cleared by
the OMB. This appropriation included funds for additional staff for the
Common Carrier Bureau. While this additional personnel may not have been
adequate for the total tasks contemplated in this proceeding, it would have
been enough to keep this proceeding alive until the next fiscal year. I
would then have presented to the OMB an adequate program for the 1973 fiscal
year budget.
Quite simply, before taking such a
drastic step as the majority is doing today, I believe that the Commission
should have notified the Congress that without additional resources the Bell System,
as well as other important utilities, will be entering into a period of
effective deregulation in significant areas. If after presentation to the
OMB and the Congress, it is decided to follow this line of deregulation, I
would certainly consider the majority's action to be appropriate. But not
until that time.
APPENDIX:
APPENDIX
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 make a determination on this massive
rate increase 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
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 subscriber's 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 be repeated in the
filed 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.