Puerto Rico Tel. Co. v. F.C.C., 76-1134

• Decision Date: 31 March 1977
• Docket Number: No. 76-1134,76-1134
• Citation: 553 F.2d 694
• Parties: PUERTO RICO TELEPHONE COMPANY, Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION, and United States of America, Respondents, Comtronics, Inc., Intervenor.
• Court: U.S. Court of Appeals — First Circuit

Page 694

553 F.2d 694

PUERTO RICO TELEPHONE COMPANY, Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION, and United States of America, Respondents Comtronics, Inc., Intervenor.

No. 76-1134.

United States Court of Appeals First Circuit.

March 31, 1977.

Alberto Pico Santiago and Alberto Pico Gonzalez, San Juan, P. R., with whom Brown Newsom & Cordova, San Juan, P. R., was on brief, for petitioner.

John E. Ingle, Counsel, Washington, D. C., with whom Werner K. Hartenberger, Acting Gen. Counsel, Daniel M. Armstrong, Associate Gen. Counsel, Donald I. Baker, Acting Asst. Atty. Gen., and Barry M. Grossman, Atty., Dept. of Justice, Washington, D. C., were on brief, for respondents.

Sigfredo Irizarry, San Juan, P. R., for Intervenor, Comtronics, Inc.

Before COFFIN, Chief Judge, McENTEE and CAMPBELL, Circuit Judges.

McENTEE, Circuit Judge.

Until recently the Puerto Rico Telephone Company (PRTC) was a Delaware corporation operated as a subsidiary of the International Telephone & Telegraph Company. In 1974 the Commonwealth's legislature established the Puerto Rico Telephone Authority and directed it to "acquire and operate, through the means that it finds most convenient to the public interest, all the telephone and telegraph communication systems in Puerto Rico, in order that said system can meet the actual and future communication needs of our People." Law of May 6, 1974, Act No. 25. The Authority purchased the stock of PRTC shortly thereafter and commenced operation of the telephone system.

At the time the Telephone Authority took over PRTC, Comtronics, Inc. was a supplier of telephone terminal equipment, viz. private branch exchange (PBX) equipment. PBX equipment, we are given to understand, includes intra-office and intra-hotel telephone systems including a privately owned switchboard which furnishes the link between the subscriber's private system and the island-wide PRTC telephone system. After the Telephone Authority purchased PRTC it announced a policy of refusing to connect privately supplied PBX equipment with the PRTC telephone system. Comtronics sued PRTC in federal district court but suffered dismissal for want of jurisdiction. ¹ Several weeks later, Comtronics filed a complaint with the Federal Communications Commission (FCC) alleging that PRTC's actions violated tariffs which bound PRTC to permit interconnection of PBX equipment such as that supplied by Comtronics. The FCC ruled that the tariffs were binding on PRTC, and construing PRTC's defense as a request for a waiver, refused to relieve PRTC of the tariff requirements. However, the FCC denied the waiver without prejudice and requested PRTC to supply more detailed information in support of a renewed waiver request. ²

PRTC petitions for review of the FCC's declaratory order that it is bound by the tariff requiring PRTC to permit interconnection. At the threshold, however, the FCC suggests that its denial of a waiver is not a final reviewable order since PRTC may file a new waiver request and therefore has not exhausted its administrative remedies. The agency freely concedes, however, that the "part of the order declaring that PRTC is bound by the interconnection tariffs" is final and reviewable.

We do not share the FCC's perspective on how the issues are framed. PRTC does not contest the FCC's finding that the telephone company's concurrence in the interconnection tariff survived the sale of PRTC to the Puerto Rico Telephone Authority. ³ However, PRTC does challenge the FCC's order on grounds that the agency erred in failing to give controlling weight to the Puerto Rican legislature's alleged direction that all telephone equipment be state-owned. In addition, PRTC argues that the FCC acted beyond its authority since PRTC's actions related to intrastate facilities and therefore were exempted by the Communications Act from regulation. See 47 U.S.C. §§ 152(b), 221(b). Finally, PRTC claims that since the FCC's policy of fostering maximum interconnection of PBX equipment and like facilities springs from a desire to enhance competition, a policy which PRTC considers to be alien to the regulatory scheme of the Communications Act, the FCC's refusal to release PRTC from the tariff is arbitrary and capricious.

Whether we view PRTC's arguments as challenging the FCC's ruling that PRTC is bound to the interconnection tariff or the Commission's refusal to permit a waiver on the facts presently before it, we think that the issues outlined above are ripe for review. Hence, we do not agree with the FCC that its leaving the door open to reconsideration of the PRTC case on the basis of additional facts showing economic hardship should bar our review, for abuse of discretion, of its decision that on the basis of the facts available to it, a waiver was not warranted. The issues which PRTC raises here have been finally decided against it by the FCC, and, it appears, will not be open to reconsideration by that agency. Moreover, the FCC ruled that PRTC has been bound by the tariff since early 1974. A waiver granted on reconsideration will operate prospectively only, ⁴ leaving PRTC potentially liable for past violations. Quite understandably, therefore, PRTC has retreated from its refusal to permit interconnection pending review by this court. ⁵ Thus, it is clear to us that the FCC's order is causing sufficient hardship to PRTC and is sufficiently final to present clearcut issues appropriate at this time for judicial resolution. Port of Boston Marine Terminal Ass'n v. Rederiaktiebolaget Transatlantic, 400 U.S. 62, 71, 91 S.Ct. 203, 27 L.Ed.2d 203 (1970); Abbott Laboratories v. Gardner, 387 U.S. 136, 148-49, 87 S.Ct. 1507, 18 L.Ed.2d 681 (1967); Northeast Airlines, Inc. v. CAB, 345 F.2d 662, 664 (1st Cir. 1965).

The statutory scheme involved in this case is fairly complex and we set out our understanding of it at this point as a basis for the discussion which follows. The Communications Act of 1934, 47 U.S.C. §§ 151 et seq., vests the FCC with the power to regulate interstate telephone communications. While the FCC's authority under the statute is comprehensive with respect to most interstate carriers, such as AT&T, its jurisdiction over PRTC is considerably narrower. Section 2(b) of the Communications Act, 47 U.S.C. § 152(b), provides that "nothing in this Act shall be construed to apply or to give the Commission jurisdiction with respect to" a "connecting" carrier, such as PRTC "except that sections 201 through 205 of this Act, both inclusive, shall, except as otherwise provided therein, apply to" connecting carriers. ⁶ Section 201(b), 47 U.S.C. § 201(b), requires in turn, that "(a)ll charges, practices, classifications, and regulations for and in connection with (interstate wire) communication service, shall be just and reasonable, and any such charge, practice, classification, or regulation that is unjust or unreasonable is hereby declared to be unlawful; . . . The Commission may prescribe such rules and regulations as may be necessary in the public interest to carry out the provisions of this act."

Section 3(a), 47 U.S.C. § 153(a), in turn, defines interstate "wire communication" as the "transmission of writing, signs, signals, pictures, and sounds of all kinds by aid of wire . . . including all instrumentalities, facilities, apparatus and services . . . incidental to such transmission." Finally, under § 203, a connecting carrier such as PRTC is required to post and adhere to tariffs governing its interstate rates and facilities.

In this case the FCC's refusal to permit PRTC to deviate from the tariff was based on a finding that "a blanket prohibition of the interconnection of customer-provided terminal equipment which did not adversely affect the telephone system was unreasonable and unlawful" under § 201(b). Comtronics, Inc. v. Puerto Rico Telephone Co., No. 76-126 (F.C.C. Feb. 13, 1976). The prohibition was ruled unreasonable since "it was an 'unwarranted interference with the subscriber's right reasonably to use his telephone in ways which are privately beneficial without being publicly detrimental.' " ⁷ Id., quoting Carterfone, 13 F.C.C.2d 420, 424 (1968).

PRTC challenges the FCC's ruling first on the grounds that the prohibitions of § 201 and the FCC's authority under the Act to enforce § 201 do not reach PRTC's essentially local policy of refusing to permit interconnection of PBX equipment. PRTC argues that the literal reach of 47 U.S.C. §§ 153(a), 201(b), quoted above, is restricted by provisions of the Act exempting intrastate communication facilities from federal control. For example, section 2(b), 47 U.S.C. § 152(b), provides that

"nothing in this chapter shall be construed to apply or to give the Commission jurisdiction with respect to (1) . . . facilities . . . for or in connection with intrastate communication service by wire . . . of any carrier".

Furthermore, § 221(b), 47 U.S.C. § 221(b), provides that

"nothing in this chapter shall be construed to apply, or to give the Commission jurisdiction with respect to charges, classifications, practices, services, facilities, or regulations for or in connection with wire . . . telephone exchange service . . . even though a portion of such exchange service constitutes interstate or foreign communication, in any case where such matters are subject to regulation by a State commission or by local governmental authority."

Read literally, these provisions do appear to preclude the federal jurisdiction extended elsewhere in the Act. However, we think that these sections sweep far less broadly than their language would indicate.

The legislative history of § 221(b) is sparse but it is nonetheless unequivocal. Section 221(b) was intended to exempt from FCC regulation "exchange services in metropolitan areas overlapping State lines." S.Rep. No. 781, 73d Cong., 2d Sess. 5 (1934); accord H.R.Rep. No. 1850, 73d Cong., 2d Sess. 7 (1934); 78 Cong.Rec. 10314 (remarks of Representative Rayburn). See 78...