American Tel. & Tel. Co. v. F. C. C.
| Decision Date | 21 May 1979 |
| Docket Number | No. 77-1742,77-1742 |
| Parties | AMERICAN TELEPHONE & TELEGRAPH COMPANY, Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents. Southern Pacific Communications Company, The Independent Data Communications Manufacturers Association, Inc., Stanley J. Samorajczyk, Trustee for Data Transmission Company, Bankrupt, and Telenet Communications Corporation, Intervenors. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
George L. Saunders, Jr., Chicago, Ill., with whom David J. Lewis, Washington, D. C., F. Mark Garlinghouse, New York City, Edgar Mayfield, Bedminster, N. J., Alfred A. Green, New York City, and Harold S. Levy, New York City, were on brief, for petitioner.
John E. Ingle, Counsel, F. C. C., Washington, D. C., with whom Robert R. Bruce, Gen. Counsel, and Daniel M. Armstrong, Associate Gen. Counsel, F. C. C., and Barry M. Grossman and James F. Ponsoldt, Attys., Dept. of Justice, Washington, D. C., were on the brief, for respondents. Robert B. Nicholson, Atty., Dept. of Justice, Washington, D. C., entered an appearance for respondent United States of America. Jack David Smith, Counsel, F. C. C., Washington, D. C., entered an appearance for respondent F. C. C.
James van R. Springer, Washington, D. C., with whom David I. Shapiro, Joel B. Kleinman, Walter J. Walvick, David A. Donohoe, and Courtenay Ellis, Washington, D. C., were on brief, for intervenor Stanley J Samorajczyk, Trustee for Data Transmission Co., Bankrupt.
Thormund A. Miller, San Francisco, Cal., and James M. Tobin, Herbert E. Marks, and James E. Magee, Washington, D. C., were on brief for intervenor The Independent Data Communications Manufacturers Ass'n, Inc.
Stephen Ailes and Herbert E. Forrest, Washington, D. C., were on brief for intervenor Southern Pac. Communications Co.
Philip M. Walker and Donald E. Ward, Washington, D. C., were on brief for intervenor Telenet Communications Corp.
Before WRIGHT, Chief Judge, and ROBINSON and ROBB, Circuit Judges.
Opinion for the court filed by J. SKELLY WRIGHT, Chief Judge.
On January 17, 1977, after a prolonged investigation, the Federal Communications Commission issued its Final Decision and Order cancelling an American Telephone & Telegraph Company tariff that set forth the rates, terms, and conditions under which a new data communications service was to be furnished. 1 AT&T now petitions this court to set aside some of the findings made by the Commission in the course of that decision and order. The company has already filed and placed into effect an amended tariff for the services in question and thus does not seek reinstatement of the one that the Commission cancelled. Nor does it urge us to set aside the agency's determination that the tariff was not shown to be just and reasonable as required by Section 201(b) of the Communications Act of 1934, 47 U.S.C. § 201(b) (1976), and was therefore unlawful. Rather, AT&T challenges only the Commission's finding that the rates set forth in the tariff and certain associated practices were "anticompetitive in effect and in violation of our policies of 'full and fair competition.' " 2 The Government argues that we lack jurisdiction to review subsidiary findings of this sort and, alternatively, that if we do reach the merits the administrative determination should be affirmed because it is supported by substantial record evidence. 3 We conclude that we have no jurisdiction to review the challenged findings. Accordingly, this petition must be dismissed.
In June 1971 the FCC came to the conclusion that "a general policy in favor of the entry of new carriers in the specialized communications field would serve the public interest, convenience, and necessity." Specialized Common Carrier Services, 29 FCC2d 870, 920 (1971), Aff'd sub nom. Washington Utilities & Transportation Com'n v. FCC, 513 F.2d 1142 (9th Cir.), Cert. denied, 423 U.S. 836, 96 S.Ct. 62, 46 L.Ed.2d 54 (1975). Such a policy, the Commission contemplated, would stimulate innovation and help meet demand in the market for various sorts of "private line" communications services. 4
One of the original Specialized Common Carrier applicants, Data Transmission Company (Datran), 5 had proposed a communications network capable of transmitting data signals in the digital language used by computers. At that time computer signals were transmitted by AT&T via its voice-type analog facilities a system which required that digital signals be converted into a form suitable for analog transmission on one end and then reconverted to computer language on the other. 6 Direct digital transmission and reception offered the possibility of greater accuracy and, once certain technological hurdles were surmounted, substantial savings. Datran began constructing facilities in 1972.
AT&T, meanwhile, had developed plans for its own digital transmission network which was to provide what it called DATAPHONE Digital Service (DDS). Those plans were premised upon a new technology known as Data Under Voice (DUV) which permits the use of an unallocated portion of the microwave radio spectrum for transmission of digital signals. In October 1972 AT&T applied under Section 214 of the Communications Act, 47 U.S.C. § 214 (1976), for a certificate of public convenience and necessity to construct and operate the first five-city segment of a proposed 96-city DDS network. The following July, finding the basic DUV technology to be sound, the Commission granted authority to construct the facilities described in the application. Operating authority, however, was withheld pending submission of certain cost and rate data as well as further consideration of objections lodged by competitors. 7
AT&T applied in September 1973 for authority to construct and operate the DDS network in 19 additional cities. On March 19, 1974 it applied again for authority to operate the original five-city segment. Simultaneously, it filed its DDS Tariff No. 267 setting forth the rates, terms, and conditions under which it intended to offer the new service.
On December 16, 1974 the Commission granted AT&T's requests to operate the five-city segment and to construct and operate facilities in the additional 19 cities. 8 It stated, however, that doubts remained about the validity of the rates set forth in Tariff No. 267 9 and designated a number of issues concerning the lawfulness and competitive effects of those rates for a full investigation and hearing. 10 In the interim it ordered that the Tariff No. 267 rates could only be employed in the original five cities. DDS service in the additional 19 would have to be offered at the generally higher rates that then governed AT&T's analog transmissions until either the expiration of one year or the termination of the designated hearing and investigation. 11
Six months later, after service had commenced in the original five cities and construction was under way in the other 19, AT&T filed for authority both to expand the transmission facilities in the 24 cities then authorized and to construct and operate DDS facilities in an additional 40 cities. On August 23, 1976 the Commission granted authority to augment the 24-city facilities and deferred a decision on the application to serve 40 new cities pending resolution of the proceedings concerning Tariff No. 267 which are the subject of the instant petition for review. 12
Those proceedings commenced shortly after the Commission's December 16, 1974 order designating the tariff for a hearing on various ratemaking issues. Among the designated issues were (1) whether the rates "are or will be unjust and unreasonable" within the meaning of the Communications Act; (2) whether the rates could "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"; (3) whether DDS, "as reflected in the tariff filing described herein, involves rates or practices which may be anti-competitive or otherwise unlawful"; and (4) whether the ratemaking and cost-allocation principles employed by AT&T "are appropriate to the types of competitive services proposed * * * and whether the costs derived therefrom justify the charges for the proposed service." 13 In an effort to expedite the case, the Commission ordered that the hearing proceed via submission of written interrogatories and responses and provided that oral evidentiary proceedings could be ordered only if the "paper hearing" approach failed to elicit needed information. 14
The Initial Decision of the two Administrative Law Judges who presided was released on July 2, 1976. 15 They concluded that the DDS Tariff No. 267 rates were unjust and unreasonable, discriminatory, and anticompetitive. More particularly, they found (1) that AT&T had materially overestimated the likely revenues from DDS service and underestimated the investment and expenses, 16 (2) that "AT&T has failed to demonstrate that (the DDS) rates are just and reasonable," 17 (3) that in fact "(t)he rates appear to be unjust and unreasonable," 18 (4) that the rates discriminated in favor of users of low speed transmission services, 19 (5) that the rates were predatory and anticompetitive, 20 and (6) that AT&T deliberately used various anticompetitive ratemaking techniques and thus was guilty of predatory and anticompetitive intent. 21
AT&T filed exceptions to the Initial Decision, as did the Commission's trial staff and various intervenors. On January 17, 1977 the Commission issued its Final Decision and Order affirming, with a few significant exceptions, the ALJ's conclusions. 22 The Commission first explored the general issue of the reasonableness of the DDS tariff. It found that AT&T's market projections were unjustified and tended to overstate demand and revenues and that its cost studies both those...
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