Wilson & Co. v. United States, 14269.
| Decision Date | 14 August 1964 |
| Docket Number | No. 14269.,14269. |
| Citation | 335 F.2d 788 |
| Parties | WILSON & CO., Inc., Swift & Company, and Armour and Company, Petitioners, v. UNITED STATES of America and Federal Communications Commission, Respondents, Aeronautical Radio, Inc., The Western Union Telegraph Company, and American Telephone and Telegraph Company, et al., Intervenors. |
| Court | U.S. Court of Appeals — Seventh Circuit |
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Charles A. Bane, Arthur C. Gehr, Sharon L. King, Robert Wood Tullis, Kenneth K. Howell, Edward E. Gibson, James E. Knox, Jr., Chicago, Ill., Isham, Lincoln & Beale, Chicago, Ill., of counsel, for petitioners.
Lionel Kestenbaum, Dept. of Justice, Washington, D. C., Daniel R. Ohlbaum, Federal Communications Commission, Washington, D. C., William H. Orrick, Jr., Asst. Atty. Gen., George R. Kucik, Attys., Dept. of Justice, Washington, D. C., Max D. Paglin, Gen. Counsel, Michael Finkelstein, Counsel, Federal Communications Commission, Washington, D. C., for respondents.
Howard J. Trienens, Chicago, Ill., Horace P. Moulton, John F. Preston, Jr., Ernest D. North, George E. Ashley, New York City, Kenneth F. Burgess, Howard P. Robinson, Gary L. Cowan, Chicago, Ill., Sidley, Austin, Burgess & Smith, Chicago, Ill., of counsel, for American Telephone and Telegraph Company and Bell System Associated Companies.
John R. Baskin, Cleveland, Ohio, Joseph Du Coeur, Kirkland, Ellis, Hodson, Chaffetz & Masters, Chicago, Ill., Baker, Hostetler & Patterson, Cleveland, Ohio, of counsel, for intervenor American Newspaper Publishers Association, Inc.
Joseph Du Coeur, Chicago, Ill., Kelley E. Griffith, Washington, D. C., for intervenor United Press International, Inc.
William A. McSwain, Chicago, Ill., Herbert G. Telsey, New York City, Roy W. Sears, Eckhart, McSwain, Hassell & Husum, Chicago, Ill., John H. Waters, New York City, of counsel, for The Western Union Telegraph Company, Intervenor.
Donald C. Beelar, Charles R. Cutler, Washington, D. C., for Aeronautical Radio, Inc.
Before KNOCH, KILEY and SWYGERT, Circuit Judges.
This petition for review, filed pursuant to section 402(a) of the Communications Act of 1934, 47 U.S.C. § 402(a) and section 4 of the Judicial Review Act of 1950, 5 U.S.C. § 1034, seeks to invalidate the orders of the Federal Communications Commission prescribing rates for private line telephone and telegraph services furnished by American Telephone & Telegraph Company and associated companies1 and Western Union Telegraph Company.
Private line services furnish channels for the transmission of communications, at monthly rates between locations specified by the customer. These services provide the customer continuous communication without the necessity of the carriers establishing a connection for each call or message. The basic components of private line services include: intercity channels which connect a central office of the carrier in one city with a central office in another city, local channels which connect the central office with the customer's premises, and equipment for communicating over the channels.
The Commission's order resulted in an aggregate decrease in AT&T's rates for private line telephone service and an aggregate increase in rates for private line telegraph service furnished by AT&T and Western Union.
Petitioners Wilson & Co., Inc., Swift & Company, and Armour and Company are three meat packing concerns which use both private line telegraph and telephone services. They intervened in the rate proceeding after the Commission had issued its initial decision. They challenge the Commission's final order insofar as it increases the rates for telegraph service.
AT&T, Western Union, United Press International, Inc., American Newspaper Publishers Association, Inc., and Aeronautical Radio, Inc., have been allowed to intervene in the review in this court. Western Union, in whole, and United Press International and American Newspaper Publishers Association, in part, support the Commission's final order; the others ask that it be set aside.
The administrative proceeding
In 1955 AT&T filed proposed tariff schedules with the Commission offering reduced rates for multiple channel private line service. Western Union filed a protest against the reduction. It claimed that the reduction would have an adverse effect on its private line business. The Commission ordered the suspension of the reduced rates and instituted an investigation of them. It notified AT&T that the carrier had to demonstrate that the new channel rates were justified by the costs of furnishing the various private line services.
While the proceeding was in recess pending AT&T's completion of the cost study, the Commission in March 1958 broadened its investigation to include all private line services offered by AT&T and Western Union except those furnished radio broadcast stations, television stations, and broadcast networks.
During this investigation, the General Services Administration, an intervenor representing the United States, petitioned the Commission to reduce AT&T's charges for private line telephone service, alleging that the carrier's cost study revealed that AT&T was deriving an excessively high rate of return. The Commission in June 1958, in granting GSA's petition in part, directed AT&T to reduce its private line telephone rates by not less than $5,700,000 per year, finding that "the charges of AT&T * * * for private line services using telephone grade channels are unjustly and unreasonably high and should be reduced." At the same time the Commission found that AT&T's return for private line telegraph services was only 2.6 per cent as of 1955 and 1.7 per cent as of 1957. The Commission observed that the telegraph rates of both AT&T and Western Union "may be inadequate to provide the respondents with a fair return."
Thereafter, AT&T and Western Union in August 1958 requested interim relief by filing revised tariffs increasing their private line telegraph rates. GSA and twenty private line telegraph users who intervened at this time (not including petitioners) objected to the proposed rates. These tariffs were subsequently withdrawn because the Commission found that the record did not support the proposed modifications even though some increase in rates was warranted.
AT&T and Western Union filed substitute tariffs in October 1958 for private line telegraph rates. The Commission conditionally authorized the rates to go into effect on December 2, 1958, subject to section 204 of the Communications Act of 1934, 47 U.S.C. § 204, requiring the carriers to keep an account of the amounts collected so that the Commission, in its final decision, might order refunds. Under the revised interim tariffs, the level of private line earnings of both AT&T and Western Union increased to about 5.9 per cent.
The administrative record was closed in September 1959. The hearing officer in January 1960 certified without decision the record to the Commission in accordance with the Commission's direction. The Commission's initial decision was filed July 6, 1961. The decision prescribed a complete revision of the rate structure for all private line telephone and telegraph services furnished by AT &T and Western Union. A number of users requested the Commission to reconsider, including petitioners who intervened in the administrative proceeding after the Commission had issued its initial decision.
All petitions for reconsideration were denied except those filed by American Newspaper Publishers Association and United Press International. The Commission said that the petitions of the press raised "substantial questions regarding the impact which changed private line telegraph and * * * telephotograph rates * * * would have upon the dissemination of news information." The Commission excepted the press from its final order and inaugurated further investigation to determine if the new rates would "impair * * * the dissemination of news." As to all other users of private line telephone and telegraph services, the Commission ordered the rates prescribed in its initial decision to be effective as of August 1, 1963.
The Commission's decision and order.
Except for the exemption granted the press, the final decision, dated May 29, 1963, affirmed without significant modification the initial decision. The order increased the carriers' rates for private line telegraph service and decreased AT &T's private line telephone rates.
The Commission discussed extensively AT&T's and Western Union's cost studies, as adjusted by the Commission. It was the opinion of the Commission that the cost of providing services constituted the most reliable criterion available to determine reasonable and nondiscriminatory rates. The Commission said that it would regard costs either as directly controlling or as reference points from which to measure the extent of any departure therefrom based on other rate making considerations.
The Commission concluded that the proper level of private line earnings was 9 per cent for Western Union and 7.25 per cent for AT&T. It held, however, that it could not prescribe rates for Western Union which would give it a 9 per cent overall level of earnings because the evidence indicated that AT&T had lower costs for the service and to permit Western Union to obtain a 9 per cent return would require either raising Western Union's rates so high as to be noncompetitive or raising AT&T's rates above the level necessary to obtain a 7.5 per cent overall return. The Commission found both solutions undesirable because the "ratepayers are entitled to benefits from competitive service offerings by the carriers," and it was determined to avoid "burdening the ratepayer with higher rates for complete telegraph service than would otherwise obtain if AT&T were the sole carrier." Accordingly, the Commission authorized Western Union to charge rates which if charged by AT&T would permit it to earn at a 7.25...
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