In the Matter of THE WESTERN UNION TELEGRAPH CO. (WESTERN
UNION) Transmittal No. 6834; and Revisions of Telex Tariff F.C.C. No. 240 and
Teleprinter Exchange (TWX) Tariff F.C.C. No. 258
Docket No. 19696
FEDERAL COMMUNICATIONS COMMISSION
39 F.C.C.2d 977
RELEASE-NUMBER: FCC 73-212
March 6, 1973 Released
Adopted February 21, 1973
JUDGES:
BY THE COMMISSION: CHAIRMAN BURCH
ISSUING A SEPARATE STATEMENT IN WHICH COMMISSIONERS ROBERT E. LEE, H. REX LEE,
REID, WILEY AND HOOKS JOIN; COMMISSIONER JOHNSON CONCURRING
IN PART AND DISSENTING IN PART AND ISSUING A STATEMENT.
OPINION:
[*977] 1. On December
29, 1972, revised tariff schedules were filed by Western Union under
Transmittal No. 6834 to become effective February 28, 1973. n1 These revised schedules apply to
the interstate Telex and TWX services provided by Western Union throughout the
United States. In the case of both Telex and TWX the basic rate elements
will include an access charge, an installation charge for such access, and
message or usage charges that vary with time and distance of transmission of
messages. Additionally, charges will be applicable where a customer
desires Western Union terminal equipment.
n1 A Petition For Suspension and Investigation was
filed by the Secretary of Defense on February 14, 1973 as was a Petition for
Rejection and Suspension by Western Union International, Inc. A Reply was filed
by Western Union on February 20, 1973. These petitions have been
considered in our disposition of this matter.
2. The specific changes made
in the revised tariff are described briefly as follows:
a. Customers will be permitted
to provide their own teleprinter terminal equipment from sources other than
Western Union subject to certain technical limitations to prevent electrical
interference in the Telex and TWX services;
b. Two new rate elements are
added to the tariff; an "access charge" which will be applicable to
all customers, and a "terminal charge" which will be applicable only
to customers who choose to lease terminal equipment from Western Union.
c. The installation, move, and
monthly rental charges for both Telex and TWX terminal equipment are increased;
d. The Telex usage charge is
increased by eliminating a quantity discount now allowed under the present
tariff; and
e. A new regulation is added to
the effect that customers may terminate Telex and TWX services on 30 days
written notice to Western Union.
[*978] 3. Western
Union estimates that (a) the overall effect of the entire package tariff
revisions will be to produce additional revenues of about $12 million in 1973,
$14.5 million in 1974 and $16.3 million in 1975; (b) the increased revenues
will increase the overall level of earnings of Western Union from a current
level of 5.4% to 6.7% in 1973; (c) the Telex rate proposals would increase the
Telex pre-tax earnings from 14.8% to 18.0% in 1973; and (d) the TWX rate
proposals would increase the TWX pre-tax earnings from 8.6% to 12.3% in 1973.
4. To support its tariff
revisions herein, Western Union has submitted the cost data and other information
required by Sec. 61.38 of our rules. There are two principal reasons
advanced by the carrier for the revisions. With respect to the
liberalization of the interconnection provisions in the Telex and TWX tariffs,
the carrier states that this is being done to implement its commitment to do so
at the time of the Commission's approval of Western Union's acquisition of TWX
from the Bell System (24 FCC 2d 664 676). As to the rate increases and related
changes the carrier contends that its current overall earnings are inadequate;
and that, unless rate relief is granted in these two services where shrinkage
and shifts from rate increases would be at a minimum, Western Union is faced
with a decline in its over-all return. The decline is caused by revisions
in settlement agreements with the international Telex carriers which will
reduce Western Union's Telex revenues by about $2.2 million in 1973, and the
need to finance already committed new plant and equipment totaling about $3.9
million in 1973 and $12.4 million in 1974 in the Telex and TWX services.
5. The increase in the Telex
rates amounts to an increase of about 10%. This is the fourth increase in
the rates for that service over the past six years (4% in 1967; 10.6% in 1969;
8.8% in 1971). Western Union estimates a pre-tax earnings for Telex of
19.2% in 1972 and 18.0% in 1973 with the proposed increase. The TWX rate
increase is the first by Western Union following the acquisition of that
service from the Bell System. The estimated pre-tax returns from TWX is
7.8% for 1972 and 12.3% for 1973 with the proposed increases. On the
basis of Western Union's current earnings level of 5.4% applicable to its total
operations, it would appear that there may well be justification for
appropriate revenue relief. However, we are of the opinion that the
magnitude and nature of these increases present questions of lawfulness that
should be resolved by investigation and hearing.
6. The liberalization of the
tariffs for interconnection of customer-provided terminal equipment appears in
general to be in keeping with the principles of our decision in Carterfone and
we regard it as a forward step toward more effective use by the public of
Western Union's services. There are, however, certain questions raised
with respect thereto. For example, the new "access charge" will
apply to all customers whether they use carrier or non-carrier terminal
equipment, even though the "access charge" covers, in part, costs
that are generated only by customers using non-carrier terminals; the Telex
subscribers in some cases may provide their own network signaling unit whereas
no TWX subscriber may do so; Western Union appears to disclaim all liability
for transmission of signals sent or received by non-carrier terminal
[*979] equipment; and Western Union proposes to maintain
customer-provided terminal equipment on an undefined lease or maintenance basis
at charges not shown in the tariffs. Accordingly, we are of the opinion
that these questions should be resolved on the basis of a hearing record.
7. In view of the foregoing,
we are unable to conclude at this time that all features of the tariff
revisions are just and reasonable and free of undue discrimination within the
meaning of Section 201(b) and 202(a) of the Act or that the proposal of the
carrier to impose charges not in the tariffs is in conformity with Sec. 203 of
the Act. We shall therefore designate the revised tariff schedules for
investigation and shall suspend the effectiveness thereof and enter an
accounting order providing for possible refund. However, in view of the
carrier's current earnings situation; the desirability of allowing customers
the benefit of the proposed liberalized interconnection policy at an early
date, and the protection afforded customers by the accounting and refund order
we are providing herein, we will suspend the said tariff schedules for a period
of one day.
8. In the present case, we
believe it desirable that the Administrative Law Judge render an Initial
Decision and that the trial staff of the Common Carrier Bureau be separated
from both the Commission and the Administrative Law Judge. As we have
previously explained, 32 FCC 2d at pg. 90, the separation of the trial staff
simply means that such staff: (1) will not make any oral presentations to the
Administrative Law Judge or the Commission without the other parties being
present, and (2) will not make any written presentations to the Administrative
Law Judge or the Commission which are not served on the other parties.
9. Accordingly, IT IS ORDERED,
That, pursuant to the provisions of Sections 201, 202, 203, 204, 205 and 403 of
the Communications Act of 1934, as amended, an investigation is instituted into
the lawfulness of the tariff schedules filed by The Western Union Telegraph
Company submitted with Transmittal No. 6834 including any cancellations,
amendments or reissues thereof; and no changes shall be made in such tariff
schedules during the pendency of this proceeding without prior approval by the
Commission;
10. IT IS FURTHER ORDERED, That,
pursuant to the provisions of Section 204, the tariff schedules filed by The
Western Union Telegraph Company submitted with Transmittal No. 6834 ARE HEREBY
SUSPENDED until March 1, 1973, and that Western Union, as to the operation of
such tariff schedules, shall, in the case of all increased charges and until
further order of the Commission, keep accurate account of all amounts received
by reason of such increase, specifying by whom and in whose behalf such amounts
were paid, and upon completion of the hearing and decision therein, the
Commission may be further order require the refund thereof, will interest,
pursuant to Section 204 of the Act, and the carrier shall file such reports on
the amounts accounted for as aforesaid as the Chief, Common Carrier Bureau
shall require;
[*980] 11. IT IS
FURTHER ORDERED, That, without in any way limiting the scope of the
investigation, it shall include consideration of the following:
(1) Whether the charges,
classifications, practices, and regulations published in the aforesaid tariffs
are or will be unjust and unreasonable within the meaning of Section 201(b) of
the Act;
(2) Whether such charges,
classifications, practices, and regulations will, or could be applied to,
subject any person or class of persons to unjust or unreasonable discrimination
or give any undue or unreasonable preference or prejudice to any person, class
of persons, or locality, within the meaning of Section 202(a) of the Act;
(3) Whether the aforesaid tariffs
conform to the requirements of Section 203 of the Act and Part 61 (47 CFR Part
61) of our Rules implementing that Section;
(4) If any of such charges,
classifications, practices, or regulations are found to be unlawful, whether
the Commission, pursuant to Section 205 of the Act, should prescribe charges,
classifications, practices, and regulations for the service governed by the
tariffs, and if so, what should be prescribed.
12. IT IS FURTHER ORDERED,
That, the hearing in this proceeding shall commence at the Commission offices
in Washington, D.C. at a time to be specified by the presiding Administrative
Law Judge; and that such Administrative Law Judge shall, upon the closing of
the record, prepare an initial decision which shall be subject to the submittal
of exceptions and requests for oral argument as provided in 47 C.F.R. 1.276 and
1.277, after which the Commission shall issue its decision as provided in 47
C.F.R. 1.282 and that the trial staff of the Common Carrier Bureau be separated
both from the Commission and from the Administrative Law Judge;
13. IT IS FURTHER ORDERED,
That, the Petitions For Suspension and Investigation and For Rejection or
Suspension ARE GRANTED to the extent noted herein and otherwise DENIED.
14. IT IS FURTHER ORDERED,
That, The Western Union Telegraph Company is named Party Respondent.
FEDERAL
COMMUNICATIONS COMMISSION, BEN F. WAPLE, Secretary.
CONCURBY:
BURCH; JOHNSON (In Part)
CONCUR:
SEPARATE STATEMENT OF CHAIRMAN DEAN
BURCH IN WHICH COMMISSIONERS ROBERT E. LEE, H. REX LEE, REID, WILEY AND HOOKS
JOIN
The staff understandably resists the
separation procedures imposed herein essentially on grounds of economics and
ease of administration. These arguments are valid to a certain extent and
the Commission, fully cognizant of its budgetary constraints, will attempt to
deal with the budgetary problems, forthwith.
On the other hand, when due process
and ease of administration are in conflict, the latter will simply have to take
a back seat.
DISSENT:
[*981] OPINION OF
COMMISSIONER NICHOLAS JOHNSON, CONCURRING IN PART AND DISSENTING IN PART
Today the Commission sets for
hearing significant increases in the prices of Western Union's TWX and Telex
teleprinter exchange services. I concur in the majority's action insofar
as it sets up a separate Trial Staff to participate in this case and advocate
the public interest.
The Commission in recent actions has
come to the view that there should be a separated Trial Staff in common carrier
proceedings. It is a view I have held for some time. Most of the
discussion that has led to this change has evinced concern that it is not fair
to a common carrier like Bell or Western Union for the Commission's Common
Carrier Bureau staff to participate in a hearing, supposedly not as advocates,
and then try to objectively advise the Commissioners in camera on the final
decision in the case. I do not believe common carriers lack for
opportunity to present their views to the Commissioners, nor do I believe our
staff is unfair in the way it advises the Commission, nonetheless I support
this increased measure of insuring fairness. As a matter of law it seems
well settled that the Commission is not required to separate its Common Carrier
Bureau staff in these ratemaking rulemaking proceedings. And I agree with
the Chairman's statement in this case which points out the serious budget
implications of using separated staffs. We simply must have more
resources for common carrier regulation. We are not doing our job now.
But my support for separation of a
Trial Staff rests on a premise in addition to that of fairness. I believe
it is important for the Commission to have a Trial Staff which feels no
inhibition in advocating the consumer or public interest in these cases.
I believe we get better advocacy when our staff is separated, we make better
decisions, and the public is better protected. But apparently some
carriers are having second thoughts about the benefits of Trial Staff
separation. Bell apparently likes the fairness aspects, but doesn't like
the vigor of Trial Staff public interest advocacy, and would like the
Commission to rein in its Trial Staff. I hope the majority has no
intention of giving the carriers all the benefits of this new fairness, while
at the same time taking away from the public the benefits of improved consumer
advocacy. It is a situation that will bear watching, and I hope our staff
reports any efforts to crimp the performance of their important duties in these
proceedings.
I cannot join the majority in the
rest of its order on these Western Union price increases. This is the
fourth increase in Telex rates in six years. The rate of increase is
about 10% this time.
Competition between TWX and Telex
was eliminated when the Commission permitted Western Union to buy TWX from
Bell. Western Union estimates a pre-tax earnings of 19.2% on Telex in
1972 and 18% in 1973 with these increases. The earnings for TWX will be
7.8% in 1972 and 12.3% in 1973. Yet the majority does not use its full
suspension power, which it believes to be a 90-day suspension, and instead
suspends for only one day. In addition there are serious questions
[*982] of the pricing and cost allocation procedures to be used in
evaluating whether these prices are lawful. These issues depend to some
extent on decisions the Commission must make in other proceedings. As I
have said before, I would suspend for as long as it takes to litigate the
public interest issues any significant tariff changes by common carriers,
particularly where those issues depend upon decisions in proceedings that have
been going for so many years here. I believe the Commission has the power
to enter such a suspension order. Until the Commission makes decisions in
these long-delayed proceedings, and has some guidelines by which to test major
tariff changes, I believe we have no other course.
There is another reason why the
majority should have entered a longer suspension order in these price
increases. If anyone is interested in what the differences are between
Phase II and Phase III of President Nixon's inflation control policies, here is
a good example. Under the rules of Phase II, this Commission would have
been compelled to suspend the price increases for at least 90 days, and perhaps
for the full period of time needed to litigate the issues in this
investigation. Under Phase III the 10% price increases go into effect
with a one day suspension, and I detect no great interest in whatever review
structure is left in Phrase III to review what the Commission has done here.
Things are back to normal.