FEDERAL COMMUNICATIONS COMMISSION
12 F.C.C.2d 980
RELEASE-NUMBER: FCC 68-493
May 1, 1968
[*980] Mr. RUSSELL W. McFALL,
President, the Western Union Telegraph Co.,
MR. McFALL: This refers to our letter of June 16, 1967, to
its letter of June 16, 1967, the Commission requested that
Commission is aware that
It is noted that Mr. Chamberlin's letter of February 9, 1968, states in part that: As you know, our efforts are consistently directed toward attaining a 90-percent of better service performance objective at each office. Recognizing, however, that there may be exceptional circumstances which preclude obtaining this objective in a particular method at a particular office during a particular month, we have endeavored to keep each office from falling below the 90-percent level in any method more than twice in any 6-month period. * * *
You are reminded that the directive of June 16, 1967, states quite clearly that the Commission "will expect that performance within your own standards be fully achieved and maintained * * * at all of your office." [Emphasis supplied.] Failure to meet the service objectives for as much as one-third of the time should not be construed as meeting the requirement for full achievement.
[*981] The frequency with which explanations such as "insufficient fore assigned," "excessive absenteeism," "heavy file," and "heavy peak periods" are given by you to account for performance below objectives on the monthly speed of service reports raises a serious question as to whether your staffing policies at certain offices are adequate to cope with normal traffic surges or to cover for more than a minimal amount of absenteeism. We recognize your difficulties in recruiting and holding sufficient operating force to fully meet your needs in certain tight labor market areas. However, substandard performance also occurs with frequency at cities in which you have not claimed a labor shortage. This suggests that your company may be using staffing policies which are in the interest of cost control but which are not realistically compatible with the requirements of the public message volume. We, therefore, expect that immediate attention will be given by you to increased staffing and other appropriate measures as are necessary to assure that performance within your own standards is fully achieved and maintained at all of your offices.
regard to the aforementioned selective rate increases the Commission has
decided not to suspend or investigate them at this time. This action is not to be construed as
approval by the Commission or a finding that the increases are justified or
that they will be effective in producing increased revenues or earnings to the
company. They remain subject to
complaint by users as to the validity thereof.
Deficiencies in quality and speed of public-message service now being
furnished by your company are relevant to a determination as to the propriety
of proposed increases in rates for such service. However, in view of the progress which
We wish to emphasize that any further proposed increases in rates for such services will be critically reviewed in light of your service performance. In this connection we note that, in your supporting material, your company is assuming that the present 6-percent surcharge on public message telegrams will continue in effect after October 31, 1968, when it is now scheduled to expire. However, it should be understood that any request to extend the effectiveness of such surcharge will also be examined carefully in the context of the quality and speed of service considerations referred to above.
This letter was adopted by the Commission on May 1, 1968.
BY DIRECTION OF THE COMMISSION, ROSEL H. HYDE, Chairman.
DISSENTING STATEMENT OF COMMISSIONER NICHOLAS JOHNSON
telegram service received by the American public, and the rates charged, are a
The usefulness of a publicly available telegraph service is as much a function of quality of service as of rates.
The telegram is a written record, slower and cheaper (usually) than a phone call and faster (usually) and more expensive than a letter.
There are many aspects of service: Conveniently located offices; 24-hour availability; a nationwide telephone number that can be called from anywhere without charge ("inward WATS"); friendly employees; the number of lost, garbled, or mis-delivered messages; and the speed of telephone answering.
The principal measure of quality of service selected by the company, however, is "speed of service." This is measured by the length of time from receipt to delivery of a message (usually 1 to 2 hours for most classes of service). Note that the FCC does not establish standards which it thinks are necessary to serve the public interest; indeed, it does not even challenge the company's standards.
The FCC receives statistics from the company on how it is coming in meeting the company-established standards in the 75 largest telegraph cities.
The company originally proposed to meet its standards on 95 percent of all messages. This was subsequently lowered to 90 percent -- with FCC acquiescence. (Now it would like to lower the standard still further, so that an individual office would only have to meet this 90 percent standard 4 out of every 6 months!)
It now reports, by months, the number of offices which do not meet this 90 percent goal, on its own standards of service, in three categories of delivery service ("telephone," "tie line," and "messenger").
The reports are not encouraging. Taking the past 8 months for which records are available (August 1967 through March 1968), the average number of cities meeting the company goal is less during the 4-month period of December 1967 to March 1968 than it was in August through November of 1967. (By contrast, the last 6 months of 1967 had shown an improvement over the first half of the year.) It is still not uncommon for 20 to 30 percent of the reporting cities to fail to meet their goals for speed of service (goals which, it should be repeated, only require that the elapsed time maximums be met for 90 percent of the messages).
June 1967, the FCC ordered
sanctions are to be imposed for this rather extraordinary failure? None. The Commission merely grants Western
[*983] Rate Increase
the past 3 years
1. Ignores the vast amount of research and analysis that went into the telegraph investigation -- and rejects the April 29, 1966, recommendations it own Telephone and Telegraph Committee embodied in its telegraph report ("Report of the Telephone and Telegraph Committee of the FCC," Apr. 29, 1966);
2. Continues to allow Western Union to impose a
perhaps disproportionate share of costs of the modernization of Western Union
facilities on the customers of the public message service -- despite the fact
that the modernization schedule of
3. Takes a static, overall rate-of-return approach to the regulation of a company which is an important contributor to the Nation's communications system (so long as "rate of return" is not excessive there is no regulation);
4. Accepts Western
5. Declines to examine Western Union's investment practices, long-range growth plans, and future price expectations -- although since 1960: (a) Western Union's capital investment has been growing at twice the percentage rate of the Bell system; (b) large amounts of investment have been directed to services which by Western Union's calculation show low profit return; and (c) Western Union has declared its intention to become the "computer utility" of the United States;
6. Neglects the possibility that
7. Accepts the gross underutilization of
Western Union's telegraph system, with the resulting high unit costs --
underutilization mainly brought about through unimaginative pricing by
is obvious that a wide variety of investment and pricing alternatives exist,
within the constraint of an overall rate of return, and it is not necessarily
the case that any one of those alternatives best serves the public interest. The Commission has here decided to not
substitute [*984] its judgment for that of
The telegraph report, issued by the Commission's Telephone and Telegraph Committee, offers some indication as to what the Commission should be examining before it decides to interpose no objection to this price rise.
The report notes: "Thus, it appears that the continually increased price of the public message service was the single most important cause of the decline (in usage) that occurred in the major part of the postwar period." (92.)
the report recommends: "Should
The report warns: "If the telegraph company and the Commission are content to embrace conventional ratemaking, and fix rate levels merely by equating total revenue requirements with total expenses plus an allowable return, on the implicit assumption that the demand for the individual record services is 'price-inelastic,' then the stage is set for repetition of the past message telegraph experience (decline in usage, revenues, and earnings) on a much broader scale. By taking existing earnings levels for the message telegraph service as a justification for a further increase in rates, traffic will continue to divert, revenues will decline, earnings will worsen, and a round of price increases will be triggered." (313-314.)
seems to me incumbent upon the Commission to follow the results of its own
policy judgments until it believes new information and analysis warrant
change. In this case, the Commission
caves in to
would think we had by now satisfactorily proved the hypothesis that increased
prices and deteriorating service will produce decreased volume and revenues; and
that if this is taken as evidence of need for further rate increases and
expense cutting the spiral can be made self-perpetuating. It seems clear that this policy, today
do not discount the possibility that the telegram, like the passenger ship and
the carrier pigeon, has outlived its economic usefulness. But, if that be the case, a firing squad
might be more humane than long, lingering starvation. If this Commission believes
that it is appropriate for
are a number of alternatives. Public
telegraph service might be acquired from
I have not yet reached this stage. I