Aeronautical Radio, Inc. v. F. C. C.
| Decision Date | 04 May 1981 |
| Docket Number | 77-1544 and 78-1368,77-1521,Nos. 77-1333,s. 77-1333 |
| Citation | 642 F.2d 1221 |
| Parties | AERONAUTICAL RADIO, INC., et al., Petitioners, v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents, American Broadcasting Cos., Inc., et al., American Telephone and Telegraph Co., Microwave Communications, Inc., Western Union Telegraph Company, Intervenors. AERONAUTICAL RADIO, INC., and Air Transport Association of America, Petitioners, v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents, American Telephone and Telegraph Company, Consolidated Rail Corporation, Microwave Communications, Inc. and MCI Telecommunications Corp., American Newspaper Publishers, et al., Intervenors. GENERAL ELECTRIC COMPANY, Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents, American Telephone and Telegraph Company, Microwave Communications, Inc., et al., Intervenors. AMERICAN TELEPHONE AND TELEGRAPH COMPANY, Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents, American Broadcasting Company, Inc. & CBS, Inc. & National Broadcasting Company, Inc., Dow Jones & Co., Inc., Intervenors. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Ron M. Landsman, Atty., Dept. of Justice,Washington, D.C., with whom Robert B. Nicholson, Atty., Dept. of Justice, Washington, D.C., was on the brief for respondent, United States.
John L. Bartlett, Washington, D.C., with whom Charles R. Cutler, Michael Yourshaw, James E. Landry and William E. Miller, Washington, D.C., were on the brief for petitioners in nos. 77-1333 and 77-1521.
Joseph M. Kittner, Edward P. Taptich and Lawrence J. Movshin, Washington, D.C., were on the brief for petitioner, General Elec. Co. in no. 77-1544.
John E. Ingle, Counsel, F.C.C., Washington, D.C., with whom Robert R. Bruce, Gen. Counsel, and David J. Saylor, Deputy Gen. Counsel and Daniel M. Armstrong, Associate Gen. Counsel, F.C.C., Washington, D.C. were on the brief for respondent, F.C.C.
Richard J. Flynn, Joseph B. Tompkins, Jr., William G. Schaefer, David J. Lewis, Jules M. Perlberg, Washington, D.C., and Alfred A. Green, New York City, were on the brief for intervenor, American Tel. & Tel. in nos. 77-1333, 77-1521 and 77-1544.
Norman P. Leventhal, Joseph De Franco and Howard Monderer, Washington, D.C., were on the brief for intervenor, American Broadcasting Co., Inc., et al. in no. 77-1333.
Werner K. Hartenberger, Daniel M. Armstrong, Counsel, F.C.C., Washington, D.C., entered appearances for respondent F.C.C.
Barry Grossman and James F. Ponsoldt, Attys., Dept. of Justice, Washington, D.C., entered appearances for respondent United States.
Michael H. Bader, Kenneth A. Cox, William J. Byrnes, Washington, D.C., and Raymond C. Fay, Chicago, Ill., entered appearances for intervenor Microwave Communications, Inc. in nos. 77-1333, 77-1521 and 77-1544.
Joel Yohalem, Washington, D.C., entered an appearance for intervenor, Western Union Tel. Co in no. 77-1333.
Richard M. Rindler and Russell L. Smith, Washington, D.C., entered appearances for intervenor, Consolidated Rail Corp. in no. 77-1521.
Aloysius B. McCabe, Michael Yourshaw, Washington, D.C., John R. Baskin, Cleveland, Ohio, and Herbert M. Schulkind, Washington, D.C., entered appearances for intervenor, American Newspaper Publishers, et al. in no. 77-1521.
Before BAZELON, Senior Circuit Judge, and ROBB and WILKEY, Circuit Judges.
Opinion for the Court filed by Circuit Judge ROBB.
This case comes to us on petitions for review of eight rulings of the Federal Communications Commission 1 dealing with (1) general ratemaking principles and (2) American Telephone and Telegraph Company's (AT&T's) TELPAK offering. In response to the arguments of the parties, we (1) uphold the Commission's selection of fully distributed costs as its primary costing methodology; (2) vacate certain findings of the Commission with regard to specific rates and past rate levels; (3) uphold the Commission's procedures; and (4) dismiss the petitions to review the Commission's acceptance of a tariff filing.
AT&T provides two major categories of interstate service: public switched message service and private line service. Public switched message service is of two types, long distance message telecommunications service (MTS) and wide area telecommunications service (WATS). Under MTS (the ordinary "long distance" call), the user dials his call or is assisted by an operator and pays for the service on a per-call basis. Under WATS (a variant of MTS) the customer makes direct dialed calls anywhere within a specified service area at a monthly rate. MTS and WATS are essentially monopoly services in which AT&T does not face competition.
Private line service is of several types, primarily telephone, telegraph, audio and video program transmission and data transmission services. These services provide the customer with continuous communication between fixed points without the necessity of establishing a new circuit for each message. Unlike MTS and WATS, several specialized carriers compete against AT&T in the private line service market.
By the end of 1960, it appeared to AT&T's larger private line customers that it might be cheaper to construct their own private microwave systems than to pay AT&T's private line rates. To head off this potential diversion of traffic, AT&T, in January 1961, filed tariffs for TELPAK service. Under TELPAK, a customer with substantial requirements for private line service between two points may order that service on a bulk basis, at relatively less expense than if he were to order an equivalent number of channels on an individual basis. 2 As originally filed, TELPAK was of four types A, B, C, and D. These types
provided, respectively, twelve, twenty-four, sixty, and two hundred forty voice-grade channels. 3 TELPAK A and B were subsequently eliminated for reasons which do not presently concern us. With regard to TELPAK C and D, the Commission found that they were justified by competition, but ordered further proceedings to determine whether they were compensatory, i. e., would bear their own costs or would be a burden on other customers of the company. 4 Unfortunately, as of 1967 the FCC had not established any ratemaking standards for determining whether a service was compensatory and consequently the FCC closed out Docket 14251 and transferred this issue, as it applied to TELPAK C and D, together with the entire record in Docket 14251, to a new proceeding Docket 16258.
In October 1965 the FCC began an investigation of the rates and services of AT&T in its General Telephone Rate Investigation (Docket 16258). Phase 1-B of that investigation was designed to establish general ratemaking principles. 5 Of particular interest was whether fully distributed costs (FDC) and/or long-run incremental costs (LRIC) should be the appropriate measure of costs for ratemaking purposes. 6
After lengthy hearings on the general issues of ratemaking and costing principles, the Commission initiated a conference among the parties, hoping they could reach a mutual agreement on the issues. These parties agreed to a "Statement of Ratemaking Principles and Factors" but the Commission did not approve this Statement; rather in July 1969, the Commission "noted" it. 7 At the same time, the Commission folded the entire records of Docket 14251 and Phase 1-B of Docket 16258 into a third proceeding begun the prior year to investigate the lawfulness of substantial rate increases for TELPAK C and D Docket 18128. 8
Docket 18128 was opened in April 1968 to consider, as noted above, the lawfulness of rate increases for TELPAK C and D, which had been filed in March 1968. 12 F.C.C.2d 1028 (1968). Eventually the Commission was to consider in Docket 18128 a number of other matters in addition to Phase 1-B of Docket 16258 (and the attendant record from Docket 14251). These matters consisted of (1) almost all AT&T's other private line tariffs, 13 F.C.C.2d 853, 857 (1968); (2) new private line tariff revisions filed in October 1969, 20 F.C.C.2d 383, 388 (1969); (3) other tariff revisions for private line services filed in December 1971, 33 F.C.C.2d 522, 525 (1972).
Hearings in Docket 18128 were concluded in August 1972 and the record closed that December. More than three years later, the Chief, Common Carrier Bureau, on January 19, 1976 issued the Recommended Decision, 41 Fed.Reg. 4320. Following the filing of exceptions to the Recommended Decision, the Commission on October 1, 1976 issued its Final Decision, 61 F.C.C.2d 587, supplemented by its Rulings on Exceptions, issued February 1, 1977, 42 Fed.Reg. 8178.
In this Final Decision the Commission held as follows:
(1) Fully distributed costs, rather than long-run incremental costs, should be the primary standard by which to judge rate levels for interstate service. 61 F.C.C.2d at 589-90, 633-49. From the seven different FDC methodologies of record, the Commission selected FDC "Method 7" as that primarily to be used. Id. at 668. 9
(2) The Commission prescribed certain guidelines under 47 U.S.C. § 205 (1976) consistent with its adoption of FDC over LRIC. 61 F.C.C.2d at 659-67.
(3) The Commission found that the present return levels for the television, audio/radio, private line, telephone, and private line telegraph service categories were unlawful and that "(p)ast return levels for these services are generally . . . found to have been unlawfully low, although in some years the return level of certain services could have been considered to have approached the zone of reasonableness." 61 F.C.C.2d at 590. See id. at...
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