American Broadcasting Companies, Inc. v. F. C. C., 350

• Decision Date: 27 May 1982
• Docket Number: No. 350,D,350
• Citation: 682 F.2d 25
• Parties: AMERICAN BROADCASTING COMPANIES, INC., CBS Inc., National Broadcasting Company, Inc., Petitioners, v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents, American Telephone & Telegraph Company, Intervenor. ocket 81-4106.
• Court: U.S. Court of Appeals — Second Circuit

Page 25

682 F.2d 25

AMERICAN BROADCASTING COMPANIES, INC., CBS Inc., National Broadcasting Company, Inc., Petitioners, v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents American Telephone & Telegraph Company, Intervenor.

No. 350, Docket 81-4106.

United States Court of Appeals Second Circuit.

Argued March 18, 1982.

Decided May 27, 1982.

Edward P. Taptich, Washington, D.C. (Joseph M. Kittner, Randolph J. May, McKenna, Wilkinson & Kittner, Washington, D.C., of counsel), for petitioners ABC, CBS and NBC.

(Robert J. Kaufman, New York City, of counsel), for petitioner ABC.

(Joseph DeFranco, Washington, D.C., of counsel), for petitioner CBS.

(Howard Monderer, Washington, D.C., of counsel), for petitioner NBC.

C. Grey Pash, F. C. C., Washington, D.C. (Stephen A. Sharp, Gen. Counsel, Daniel M. Armstrong, Associate Gen. Counsel, L. Andrew Tollin, Counsel, F. C. C., Washington, D.C., of counsel), for respondent F. C. C.

James H. Laskey, Dept. of Justice, Washington, D.C. (William F. Baxter, Asst. Atty. Gen., Robert B. Nicholson, Dept. of Justice, Washington, D.C., of counsel), for respondent U. S. A.

Jules M. Perlberg, Chicago, Ill. (David J. Lewis, Sidley & Austin, Washington, D.C., Alfred A. Green, Francine J. Berry, New York City, Raymond F. Burke, Bedminster, N. J., of counsel), for intervenor A. T. & T.

Before MESKILL and KEARSE, Circuit Judges, and METZNER, District Judge. ^*

MESKILL, Circuit Judge:

Petitioners American Broadcasting Companies, Inc., CBS Inc. and National Broadcasting Company, Inc. ("Networks") seek review of an order of the Federal Communications Commission ("FCC"), American Telephone and Telegraph Co., 86 F.C.C.2d 956 (1981) (hereinafter "Special Permission Order "), granting American Telephone & Telegraph Company's ("AT&T") special permission request to allow tariff revisions to take effect early and declining to reject or to suspend and investigate AT&T's tariff filing. The Networks contend that the FCC violated the Administrative Procedure Act ("APA") in granting AT&T's special permission request and violated sections 201(b) and 204(a) of the Communications Act, ¹ 47 U.S.C. §§ 201(b), 204(a), in refusing to undertake pre-effectiveness review of the proposed tariffs. We lack jurisdiction to review the FCC's decision to forego pre-effectiveness review. ABC, Inc. v. FCC, 662 F.2d 155 (2d Cir. 1981) (hereinafter "ABC I "). Further, we find no violation of the APA in the FCC's grant of AT&T's special permission request. Accordingly, we dismiss the petition in part and deny it in part.

BACKGROUND

AT&T, a telecommunications common carrier that offers private line services, Message Telecommunications Services (MTS) and Wide Area Telecommunications Services (WATS), is subject to FCC regulation under the Communications Act, 47 U.S.C. §§ 201 et seq. The actual setting of carrier rates has often involved a two-step process: first, the FCC approves the carrier's overall rate of return; and second, the carrier files a tariff revision designed to produce the approved rate of return. See generally ABC I, 662 F.2d at 156.

On April 6, 1981, after almost two years of hearings, the FCC approved an increase in AT&T's overall rate of return to 12.75 percent. American Telephone and Telegraph Co., 86 F.C.C.2d 221 (1981) (hereinafter "Rate of Return Decision "), appeal filed, United States v. FCC, No. 81-1751 (D.C.Cir. filed July 6, 1981). ² The FCC announced the new rate of return in a news release on April 6, 1981 and issued the text of the Rate of Return Decision to the public on May 7. The Rate of Return Decision appeared in the Federal Register on June 11. 46 Fed.Reg. 30,818 (1981). In discussing the rate of return increase the FCC noted:

The recent record in this Docket has demonstrated the volatile economic and financial conditions which have occurred during the course of this proceeding .... After considering the substantial increases which have occurred in A. T. & T.'s costs of common stock equity and embedded debt, and the volatility of current economic and financial conditions, we believe that it is imperative that A. T. & T. be permitted to realize the new rate of return as soon as possible. Accordingly, as in our prior decision in Docket No. 20376, 57 F.C.C.2d at 973, we shall permit A. T. & T. to effect tariff revisions which are designed to produce revenues necessary to earn the new rate of return on not less than thirty days notice from the filing of its tariffs.

Rate of Return Decision, 86 F.C.C.2d at 250 (emphasis in original).

On April 10, 1981, AT&T filed tariff revisions designed to produce the 12.75 percent rate of return. AT&T Transmittal Nos. 13703-13708. AT&T proposed, inter alia, a sixteen percent increase for its private line services, ³ submitted twenty-six volumes of supporting data pursuant to 47 C.F.R. § 61.38 and, in compliance with 47 C.F.R. § 61.58, notified customers of the proposed rate changes. AT&T concurrently requested special permission to make the rates effective five days after the effective date of the Rate of Return Decision instead of on ninety days notice as provided by 47 U.S.C. § 203(b)(1). ⁴

On April 23, the Acting Chief of the FCC's Common Carrier Bureau granted AT& T's special permission request for private line and WATS services, allowing the rate increases to take effect on thirty days notice, or five days after release of the text of the Rate of Return Decision, whichever occurred later. The rationale for granting the request was the inadequacy of AT&T's earnings level and its urgent need for rate relief. J.App. at 113-14.

In response, the Networks filed an "Emergency Application for Review." On May 5, the FCC upheld the Bureau Chief's decision. American Telephone and Telegraph Co., FCC 81-214 (adopted May 5, 1981). J.App. at 234-40. The FCC noted that members of the public who objected to the tariffs could seek post-effectiveness review under 47 U.S.C. §§ 206-209. Id. at 4; J.App. at 237. The FCC also observed that while "(t)he statutory scheme affords those who object to a tariff as unlawful ample remedies to seek refunds or damages, ... the carrier can never recoup revenues lost because of delays attributable to the agency or protesting parties." Id. at 1; J.App. at 234.

On May 13, a day before the tariffs were due to take effect, the Bureau Chief, noting the need to clarify some aspects of the AT&T's filing, deferred the effective date of the tariffs until July 9, pending receipt of the appropriate cost information from AT&T. He indicated, however, that upon receipt of the data and completion of the staff's analysis, the Bureau would "consider allowing advancement of the effective date (of the tariff filings)." Id. at 273. Following its filing of tariff revisions and submission of data, AT&T renewed its request for special permission to advance the effective date of the tariffs.

On June 25, the FCC adopted and released the order under review. American Telephone and Telegraph Co., 86 F.C.C.2d 956 (1981). Reiterating its opinion that " '(i)t is imperative that AT&T be permitted to realize the new rate of return as soon as possible,' " id. at 961, the FCC decided that the most appropriate procedure was to suspend the tariff revisions for one day, institute an investigation into the "discrete problems" it perceived in the filing and impose "an accounting order on all rate increases to facilitate possible refunds," id. at 965. The FCC maintained that this procedure would protect ratepayers if the rate increases were later determined to be excessive and would, at the same time, enable AT&T to realize revenues at the level which the FCC had determined to be necessary and appropriate in the Rate of Return Decision. Finally, the FCC granted AT&T special permission to make the tariff revisions effective by June 28.

In the Special Permission Order, the FCC addressed a number of claims presented by the Networks. The Commission first rejected a procedural argument raised by the Networks that section 553(d) of the APA ⁵ barred the general rate increase from taking effect until thirty days after publication of the Rate of Return Decision in the Federal Register. The FCC found the thirty-day requirement inapplicable holding that publication in the Federal Register was not mandatory. The FCC noted that "whatever impact the requirements of the APA may have on the effectiveness of Commission orders, they do not govern carrier-initiated tariff filings, which become effective of their own accord absent rejection or suspension by the Commission." 86 F.C.C.2d at 960-61. Moreover, the FCC pointed out that, in any event, because "(i)t is clear beyond doubt that the Networks have had actual notice of the Rate of Return decision," section 552(a)(1) of the APA precluded them from "rais(ing) the nonpublication of the Rate of Return decision as a bar to the effectiveness of rates filed in response to it." Id. at 961 n.14. ⁶

Further, as in American Telephone and Telegraph Co., 86 F.C.C.2d 689 (1981), petition dismissed sub nom. ABC, Inc. v. FCC, 662 F.2d 155 (2d Cir. 1981), the FCC declined to undertake pre-effectiveness review of the tariffs on a service-by-service basis, deciding to "rely( ) instead on ongoing proceedings, to ultimately determine the lawfulness of service-by-service rates ... as well as (on) investigations of individual tariff filings ... and finally, (on) the complaint provisions of the Act. See, 47 U.S.C. §§ 206-209." 86 F.C.C.2d at 962. ⁷ The FCC also summarily rejected a claim raised by the Networks that because AT&T failed to submit cost data in support of the tariff filings on a service-by-service basis the tariff filings were defective and in violation of section 201(b) of the Communications Act. ⁸ Id. at 960.

AT&T refiled its tariff revisions on June 26, 1981. The Networks then filed a motion seeking an emergency stay of the Special Permission Order. American Telephone and Telegraph Co., FCC 81-288 (ad...