Nader v. F. C. C., Nos. 73-1045

CourtUnited States Courts of Appeals. United States Court of Appeals (District of Columbia)
Writing for the CourtBefore FAHY, Senior Circuit Judge, and TAMM and ROBINSON; TAMM; FAHY
Citation520 F.2d 182,172 U.S.App.D.C. 1
Decision Date29 September 1975
Docket NumberNos. 73-1045,73-2051
PartiesRalph NADER and Reuben B. Robertson, III, Petitioners, v. FEDERAL COMMUNICATIONS COMMISSION, and the United States of America, Respondents, American Telephone and Telegraph Company, United States Independent Telephone Association, Air Transport Association of America, Telephone Users Association, Inc., and Commonwealth of Pennsylvania, Intervenors. MICROWAVE COMMUNICATIONS, INC. and MCI Telecommunications Corporation, Petitioners, v. FEDERAL COMMUNICATIONS COMMISSION, and the United States of America, Respondents, American Telephone and Telegraph Company, Air Transport Association of America, et al., Commonwealth of Pennsylvania, and the American Broadcasting Companies, Inc., et al., Intervenors.

Page 182

520 F.2d 182
172 U.S.App.D.C. 1
Ralph NADER and Reuben B. Robertson, III, Petitioners,
v.
FEDERAL COMMUNICATIONS COMMISSION, and the United States of
America, Respondents,
American Telephone and Telegraph Company, United States
Independent Telephone Association, Air Transport Association
of America, Telephone Users Association, Inc., and
Commonwealth of Pennsylvania, Intervenors.
MICROWAVE COMMUNICATIONS, INC. and MCI Telecommunications
Corporation, Petitioners,
v.
FEDERAL COMMUNICATIONS COMMISSION, and the United States of
America, Respondents,
American Telephone and Telegraph Company, Air Transport
Association of America, et al., Commonwealth of
Pennsylvania, and the American
Broadcasting Companies, Inc.,
et al., Intervenors.
Nos. 73-1045, 73-2051.
United States Court of Appeals,
District of Columbia Circuit.
Argued Dec. 10, 1974.
Decided Sept. 29, 1975.

William J. Byrnes, Washington, D. C., with whom Michael H. Bader, Washington, D. C., was on the brief for petitioners in No. 73-1043.

Alan B. Morrison, Washington, D. C., with whom Paul G. Evans and Reuben B. Robertson, III, were on the brief for petitioners in No. 73-2051.

Philip V. Permut, Counsel, Federal Communications Commission with whom Daniel R. Ohlbaum, Acting Gen. Counsel and Joseph A. Marino, Associate Gen. Counsel, Federal Communications Commission, were on the brief for respondent. John W. Pettit, Gen. Counsel, Federal Communications Commission, at the time the record was filed and Ashton R. Hardy, Gen. Counsel, Federal Communications Commission, also entered appearances for respondent Federal Communications Commission.

Howard J. Trienens, Chicago, Ill., of the bar of the Supreme Court of Illinois pro hac vice by special leave of court, with whom Richard J. Flynn, Chicago, Ill., John E. Haley, Washington, D. C., Jules M. Perlberg, Chicago, Ill., and John F. Preston, Jr., New York City, were on the brief for intervenor American Telephone and Telegraph Co. Jules M. Perlberg, Chicago, Ill., entered an appearance for intervenor American Telephone and Telegraph Co.

Carl D. Lawson, Atty., Dept. of Justice, was on the brief for respondent, United States of America.

Thomas J. O'Reilly, Washington, D. C., was on the brief for intervenor, United States Independent Telephone Assn.

James E. Landry, William E. Miller, Herbert E. Forrest, Charles R. Cutler, Washington, D. C., were on the brief for intervenors Air Transport Association of America and Aeronautical Radio, Inc.

Arthur S. Curtis, Washington, D. C., was on the brief for intervenor Telephone Users Ass'n, Inc.

Gordon P. MacDougall, Sp. Asst. Atty. Gen., was on the brief for intervenor Commonwealth of Pennsylvania.

Joseph M. Kittner, Norman P. Leventhal, Washington, D. C., Joseph DeFranco, New York City, and Howard Monderer, Washington, D. C., were on the brief for intervenors, American Broadcasting Companies, Inc., CBS, Inc. and National Broadcasting Co., Inc.

Howard E. Shapiro, Atty., Dept. of Justice, entered an appearance for respondent, United States of America.

Before FAHY, Senior Circuit Judge, and TAMM and ROBINSON, Circuit Judges.

Opinion for the Court filed by Circuit Judge TAMM.

Dissenting opinion filed by Senior Circuit Judge FAHY.

TAMM, Circuit Judge:

Petitioners seek review of four orders of the Federal Communications Commission arising from its investigation of American Telephone & Telegraph Co.'s (AT&T or Bell) 1971 rate increases. In the first order issued November 22, 1972,

Page 187

the Commission rejected AT&T's 1970 tariff filing intended to raise its rate of return to 9.5% and determined that a fair rate of return on AT& T's interstate investment would be 8.5%. 38 F.C.C.2d 213 (1972). 1 The second order supplemented the first by disposing of individual exceptions filed by the parties. 38 F.C.C.2d 492 (1972). The third implemented the November 22, 1972 order by accepting AT&T's rate increases designed to achieve the 8.5% return. 38 F.C.C.2d 984 (1973). The final order denied applications for rehearing of the first three. 42 F.C.C.2d 293 (1973).

Petitioners in 73-1045, Ralph Nader and Reuben Robertson, as telephone users and rate payers, challenge the validity of the Commission's November 22, 1972 order, arguing that the Commission erred by granting AT&T a rate of return as high as 8.5% and by refusing to adjust that figure to account for the earnings of AT&T's manufacturing subsidiary, Western Electric. Petitioners in 73-2051, Microwave Communications, Inc. and its affiliate, MCI Telecommunications Corp., (hereinafter petitioner or MCI) provide specialized communication service in competition with AT&T. MCI claims that the Commission abused its discretion and violated several sections of the Communications Act of 1934 by the manner in which it allowed AT&T to implement the November 22, 1972 decision. AT&T, who has a vital interest in the outcome of this case, has intervened in support of the Commission. Other intervenors have also presented a number of arguments.

After careful consideration of the arguments, we affirm the Commission. However, in the course of our deliberations, we became concerned that the parties' true complaint is the Commission's inability to resolve within a reasonable time the issues arising from its regulation of AT&T. At least two crucial issues are now entering their tenth year of consideration without a decision from the Commission. Pursuant to our obligation to scrutinize such delays, see 5 U.S.C. § 706(1) (1970), we find that the Commission has unreasonable delayed decision of issues vital to the parties, and provide herein directions to accomplish the orderly and expeditious resolution of these issues.

I. Background

American Telephone & Telegraph Company, the world's largest utility, derives its interstate revenue from several classes of communication service; 80% is from message toll telephone service (MTS), in which the user dials his call or is assisted by an operator and pays for the service on a per-call basis. A variant of MTS, Wide Area Telephone Service (WATS), which allows the customer to make direct dialed telephone calls anywhere within a specified service area at monthly rates, accounts for approximately 7% of AT&T's interstate revenue. MTS and WATS are essentially monopoly services in which AT&T does not face competition.

The other 13% of AT&T's interstate revenue accrues from private line service, which can consist of 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, including MCI, compete against AT&T in this part of the market.

In November 1970, AT&T filed tariffs designed to produce an additional $545 million in earnings before taxes and to increase AT&T's interstate rate of return to 9.5%. 2 The filing increased rates on its monopoly MTS and WATS services, but not on its competitive private line services. On January 12, 1971, the Commission requested AT&T to postpone

Page 188

the effective date of its proposed $545 million increase, and granted permission to file tariffs increasing net earnings before taxes to $250 million. AT&T agreed and substituted a tariff which increased MTS rates by $175 million and reduced costs by $75 million. Tariffs for private line services again remained unaffected.

On January 21, 1971, the day before AT&T's revised tariff was to become effective, the Commission suspended its effectiveness for five days, made it subject to an accounting and refund order, 3 and instituted Docket 19129 to investigate the lawfulness of AT&T's original and revised rate increases. 27 F.C.C.2d 149 (1971). The first phase of Docket 19129 would consist of an investigation into the appropriate overall rate of return for interstate and foreign investment. Id. at 156-57. The investigation would then continue in a second phase to consider, inter alia, the relationship between AT&T's interstate earnings on communication services and earnings from its manufacturing subsidiary, Western Electric. The Commission also noted that AT& T's new tariffs:

rest on an implicit conclusion that the additional revenue requirements claimed by AT&T . . . should be met by imposing higher charges on (MTS) users, to the exclusion of increases or adjustments in the rates of other classes of service provided by (it). The basis for this assumption is not shown and we expect AT&T to carry the burden of proof on this issue in Docket No. 18128, in which we also expect AT&T to demonstrate that the instant rate increases do not involve any cross-subsidization of other services provided by the carriers involved.

Id. at 155-56.

The significance of this statement requires some explanation. The private line carriers who compete with AT&T claim that they are victims of its practice of cross-subsidization. Specifically, they assert that AT&T is able to charge unrealistically low rates where competition is present and yet still earn an adequate rate of return by increasing the charges for monopoly services, thus driving its competitors out of business.

These allegations of cross-subsidization are not wholly unfounded. In 1965, the Commission initiated an investigation into AT&T's rate structure after AT&T furnished a report, known as the seven-way cost study, which showed wide variations in the earnings among the various classes of AT&T's services. The study indicated that: "At one extreme, message toll telephone and WATS were earning at the rates of 10 and 10.2 percent respectively, while Telpak, (a private line service) at the other extreme, was earning at the rate of 0.3 percent. . . ." 2 F.C.C.2d 871 (1965). This investigation, Docket 16258, was initially divided into two phases. Phase I, was to investigate AT&T's total revenue requirements on interstate service and...

To continue reading

Request your trial
112 practice notes
  • Cobell v. Norton, Civil Action Number 96-1285 (RCL) (D. D.C. 9/25/2003), Civil Action Number 96-1285 (RCL).
    • United States
    • United States District Courts. United States District Court (Columbia)
    • September 25, 2003
    ...remedy — not the only appropriate remedy. MCI Telecommunications Corp. v. FCC, 627 F.2d 322, 345 (D.C. Cir. 1980); Nader v. FCC, 520 F.2d 182, 207 (D.C. Cir. 1975); Natural Resources Defense Counsel v. Train, 510 F.2d 692 (D.C. Cir. 1975). Indeed, in Train, the Court stated: "The authority ......
  • Aeronautical Radio, Inc. v. F. C. C., Nos. 77-1333
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • May 4, 1981
    ...study which showed wide variations among the returns earned by AT&T's investment in monopoly and competitive service. Nader v. FCC, 172 U.S.App.D.C. 1, 25, 520 F.2d 182, 206 (1975). See also, id. at 29-30, 520 F.2d at 210-11 (Fahy, J., dissenting). 14 The theoretical benefits of LRIC pricin......
  • Cutler v. Hayes, No. 82-2365
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • May 5, 1987
    ...U.S.App.D.C. 289, 702 F.2d 1026 (1983); MCI Telecommunications Corp. v. FCC, 200 U.S.App.D.C. 269, 627 F.2d 322 (1980); Nader v. FCC, 172 U.S.App.D.C. 1, 520 F.2d 182 (1975). Other circuits have similarly exercised their authority under the APA. See, e.g., British Airways Bd. v. Port Auth.,......
  • Telecommunications Research and Action Center v. F.C.C., Nos. 84-1035
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • October 24, 1984
    ...PEPCO, 702 F.2d 1026 (D.C.Cir.1983); MCI Telecommunications Corp. v. FCC ("MCI"), 627 F.2d 322 (D.C.Cir.1980); Nader v. FCC, 520 F.2d 182 (D.C.Cir.1975), we have not articulated a single test for when the writ should issue. On reading these cases together, however, one can discern the hexag......
  • Request a trial to view additional results
112 cases
  • Cobell v. Norton, Civil Action Number 96-1285 (RCL) (D. D.C. 9/25/2003), Civil Action Number 96-1285 (RCL).
    • United States
    • United States District Courts. United States District Court (Columbia)
    • September 25, 2003
    ...remedy — not the only appropriate remedy. MCI Telecommunications Corp. v. FCC, 627 F.2d 322, 345 (D.C. Cir. 1980); Nader v. FCC, 520 F.2d 182, 207 (D.C. Cir. 1975); Natural Resources Defense Counsel v. Train, 510 F.2d 692 (D.C. Cir. 1975). Indeed, in Train, the Court stated: "The authority ......
  • Aeronautical Radio, Inc. v. F. C. C., Nos. 77-1333
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • May 4, 1981
    ...study which showed wide variations among the returns earned by AT&T's investment in monopoly and competitive service. Nader v. FCC, 172 U.S.App.D.C. 1, 25, 520 F.2d 182, 206 (1975). See also, id. at 29-30, 520 F.2d at 210-11 (Fahy, J., dissenting). 14 The theoretical benefits of LRIC pricin......
  • Cutler v. Hayes, No. 82-2365
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • May 5, 1987
    ...U.S.App.D.C. 289, 702 F.2d 1026 (1983); MCI Telecommunications Corp. v. FCC, 200 U.S.App.D.C. 269, 627 F.2d 322 (1980); Nader v. FCC, 172 U.S.App.D.C. 1, 520 F.2d 182 (1975). Other circuits have similarly exercised their authority under the APA. See, e.g., British Airways Bd. v. Port Auth.,......
  • Telecommunications Research and Action Center v. F.C.C., Nos. 84-1035
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • October 24, 1984
    ...PEPCO, 702 F.2d 1026 (D.C.Cir.1983); MCI Telecommunications Corp. v. FCC ("MCI"), 627 F.2d 322 (D.C.Cir.1980); Nader v. FCC, 520 F.2d 182 (D.C.Cir.1975), we have not articulated a single test for when the writ should issue. On reading these cases together, however, one can discern the hexag......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT