In the Matter of THE WESTERN UNION TELEGRAPH CO. (WESTERN UNION) Transmittal No. 6834; and Revisions of Telex Tariff F.C.C. No. 240 and Teleprinter Exchange (TWX) Tariff F.C.C. No. 258
Docket No. 19696
FEDERAL COMMUNICATIONS COMMISSION
39 F.C.C.2d 977
RELEASE-NUMBER: FCC 73-212
March 6, 1973 Released
Adopted February 21, 1973
BY THE COMMISSION: CHAIRMAN BURCH ISSUING A SEPARATE STATEMENT IN WHICH COMMISSIONERS ROBERT E. LEE, H. REX LEE, REID, WILEY AND HOOKS JOIN; COMMISSIONER JOHNSON CONCURRING IN PART AND DISSENTING IN PART AND ISSUING A STATEMENT.
[*977] 1. On December 29, 1972, revised tariff schedules were filed by Western Union under Transmittal No. 6834 to become effective February 28, 1973. n1 These revised schedules apply to the interstate Telex and TWX services provided by Western Union throughout the United States. In the case of both Telex and TWX the basic rate elements will include an access charge, an installation charge for such access, and message or usage charges that vary with time and distance of transmission of messages. Additionally, charges will be applicable where a customer desires Western Union terminal equipment.
n1 A Petition For Suspension and Investigation was filed by the Secretary of Defense on February 14, 1973 as was a Petition for Rejection and Suspension by Western Union International, Inc. A Reply was filed by Western Union on February 20, 1973. These petitions have been considered in our disposition of this matter.
2. The specific changes made in the revised tariff are described briefly as follows:
a. Customers will be permitted to provide their own teleprinter terminal equipment from sources other than Western Union subject to certain technical limitations to prevent electrical interference in the Telex and TWX services;
b. Two new rate elements are added to the tariff; an "access charge" which will be applicable to all customers, and a "terminal charge" which will be applicable only to customers who choose to lease terminal equipment from Western Union.
c. The installation, move, and monthly rental charges for both Telex and TWX terminal equipment are increased;
d. The Telex usage charge is increased by eliminating a quantity discount now allowed under the present tariff; and
e. A new regulation is added to the effect that customers may terminate Telex and TWX services on 30 days written notice to Western Union.
[*978] 3. Western Union estimates that (a) the overall effect of the entire package tariff revisions will be to produce additional revenues of about $12 million in 1973, $14.5 million in 1974 and $16.3 million in 1975; (b) the increased revenues will increase the overall level of earnings of Western Union from a current level of 5.4% to 6.7% in 1973; (c) the Telex rate proposals would increase the Telex pre-tax earnings from 14.8% to 18.0% in 1973; and (d) the TWX rate proposals would increase the TWX pre-tax earnings from 8.6% to 12.3% in 1973.
4. To support its tariff revisions herein, Western Union has submitted the cost data and other information required by Sec. 61.38 of our rules. There are two principal reasons advanced by the carrier for the revisions. With respect to the liberalization of the interconnection provisions in the Telex and TWX tariffs, the carrier states that this is being done to implement its commitment to do so at the time of the Commission's approval of Western Union's acquisition of TWX from the Bell System (24 FCC 2d 664 676). As to the rate increases and related changes the carrier contends that its current overall earnings are inadequate; and that, unless rate relief is granted in these two services where shrinkage and shifts from rate increases would be at a minimum, Western Union is faced with a decline in its over-all return. The decline is caused by revisions in settlement agreements with the international Telex carriers which will reduce Western Union's Telex revenues by about $2.2 million in 1973, and the need to finance already committed new plant and equipment totaling about $3.9 million in 1973 and $12.4 million in 1974 in the Telex and TWX services.
5. The increase in the Telex rates amounts to an increase of about 10%. This is the fourth increase in the rates for that service over the past six years (4% in 1967; 10.6% in 1969; 8.8% in 1971). Western Union estimates a pre-tax earnings for Telex of 19.2% in 1972 and 18.0% in 1973 with the proposed increase. The TWX rate increase is the first by Western Union following the acquisition of that service from the Bell System. The estimated pre-tax returns from TWX is 7.8% for 1972 and 12.3% for 1973 with the proposed increases. On the basis of Western Union's current earnings level of 5.4% applicable to its total operations, it would appear that there may well be justification for appropriate revenue relief. However, we are of the opinion that the magnitude and nature of these increases present questions of lawfulness that should be resolved by investigation and hearing.
6. The liberalization of the tariffs for interconnection of customer-provided terminal equipment appears in general to be in keeping with the principles of our decision in Carterfone and we regard it as a forward step toward more effective use by the public of Western Union's services. There are, however, certain questions raised with respect thereto. For example, the new "access charge" will apply to all customers whether they use carrier or non-carrier terminal equipment, even though the "access charge" covers, in part, costs that are generated only by customers using non-carrier terminals; the Telex subscribers in some cases may provide their own network signaling unit whereas no TWX subscriber may do so; Western Union appears to disclaim all liability for transmission of signals sent or received by non-carrier terminal [*979] equipment; and Western Union proposes to maintain customer-provided terminal equipment on an undefined lease or maintenance basis at charges not shown in the tariffs. Accordingly, we are of the opinion that these questions should be resolved on the basis of a hearing record.
7. In view of the foregoing, we are unable to conclude at this time that all features of the tariff revisions are just and reasonable and free of undue discrimination within the meaning of Section 201(b) and 202(a) of the Act or that the proposal of the carrier to impose charges not in the tariffs is in conformity with Sec. 203 of the Act. We shall therefore designate the revised tariff schedules for investigation and shall suspend the effectiveness thereof and enter an accounting order providing for possible refund. However, in view of the carrier's current earnings situation; the desirability of allowing customers the benefit of the proposed liberalized interconnection policy at an early date, and the protection afforded customers by the accounting and refund order we are providing herein, we will suspend the said tariff schedules for a period of one day.
8. In the present case, we believe it desirable that the Administrative Law Judge render an Initial Decision and that the trial staff of the Common Carrier Bureau be separated from both the Commission and the Administrative Law Judge. As we have previously explained, 32 FCC 2d at pg. 90, the separation of the trial staff simply means that such staff: (1) will not make any oral presentations to the Administrative Law Judge or the Commission without the other parties being present, and (2) will not make any written presentations to the Administrative Law Judge or the Commission which are not served on the other parties.
9. Accordingly, IT IS ORDERED, That, pursuant to the provisions of Sections 201, 202, 203, 204, 205 and 403 of the Communications Act of 1934, as amended, an investigation is instituted into the lawfulness of the tariff schedules filed by The Western Union Telegraph Company submitted with Transmittal No. 6834 including any cancellations, amendments or reissues thereof; and no changes shall be made in such tariff schedules during the pendency of this proceeding without prior approval by the Commission;
10. IT IS FURTHER ORDERED, That, pursuant to the provisions of Section 204, the tariff schedules filed by The Western Union Telegraph Company submitted with Transmittal No. 6834 ARE HEREBY SUSPENDED until March 1, 1973, and that Western Union, as to the operation of such tariff schedules, shall, in the case of all increased charges and until further order of the Commission, keep accurate account of all amounts received by reason of such increase, specifying by whom and in whose behalf such amounts were paid, and upon completion of the hearing and decision therein, the Commission may be further order require the refund thereof, will interest, pursuant to Section 204 of the Act, and the carrier shall file such reports on the amounts accounted for as aforesaid as the Chief, Common Carrier Bureau shall require;
[*980] 11. IT IS FURTHER ORDERED, That, without in any way limiting the scope of the investigation, it shall include consideration of the following:
(1) Whether the charges, classifications, practices, and regulations published in the aforesaid tariffs are or will be unjust and unreasonable within the meaning of Section 201(b) of the Act;
(2) Whether such charges, classifications, practices, and regulations will, or could be applied to, 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, within the meaning of Section 202(a) of the Act;
(3) Whether the aforesaid tariffs conform to the requirements of Section 203 of the Act and Part 61 (47 CFR Part 61) of our Rules implementing that Section;
(4) If any of such charges, classifications, practices, or regulations are found to be unlawful, whether the Commission, pursuant to Section 205 of the Act, should prescribe charges, classifications, practices, and regulations for the service governed by the tariffs, and if so, what should be prescribed.
12. IT IS FURTHER ORDERED, That, the hearing in this proceeding shall commence at the Commission offices in Washington, D.C. at a time to be specified by the presiding Administrative Law Judge; and that such Administrative Law Judge shall, upon the closing of the record, prepare an initial decision which shall be subject to the submittal of exceptions and requests for oral argument as provided in 47 C.F.R. 1.276 and 1.277, after which the Commission shall issue its decision as provided in 47 C.F.R. 1.282 and that the trial staff of the Common Carrier Bureau be separated both from the Commission and from the Administrative Law Judge;
13. IT IS FURTHER ORDERED, That, the Petitions For Suspension and Investigation and For Rejection or Suspension ARE GRANTED to the extent noted herein and otherwise DENIED.
14. IT IS FURTHER ORDERED, That, The Western Union Telegraph Company is named Party Respondent.
FEDERAL COMMUNICATIONS COMMISSION, BEN F. WAPLE, Secretary.
CONCURBY: BURCH; JOHNSON (In Part)
SEPARATE STATEMENT OF CHAIRMAN DEAN BURCH IN WHICH COMMISSIONERS ROBERT E. LEE, H. REX LEE, REID, WILEY AND HOOKS JOIN
The staff understandably resists the separation procedures imposed herein essentially on grounds of economics and ease of administration. These arguments are valid to a certain extent and the Commission, fully cognizant of its budgetary constraints, will attempt to deal with the budgetary problems, forthwith.
On the other hand, when due process and ease of administration are in conflict, the latter will simply have to take a back seat.
[*981] OPINION OF COMMISSIONER NICHOLAS JOHNSON, CONCURRING IN PART AND DISSENTING IN PART
Today the Commission sets for hearing significant increases in the prices of Western Union's TWX and Telex teleprinter exchange services. I concur in the majority's action insofar as it sets up a separate Trial Staff to participate in this case and advocate the public interest.
The Commission in recent actions has come to the view that there should be a separated Trial Staff in common carrier proceedings. It is a view I have held for some time. Most of the discussion that has led to this change has evinced concern that it is not fair to a common carrier like Bell or Western Union for the Commission's Common Carrier Bureau staff to participate in a hearing, supposedly not as advocates, and then try to objectively advise the Commissioners in camera on the final decision in the case. I do not believe common carriers lack for opportunity to present their views to the Commissioners, nor do I believe our staff is unfair in the way it advises the Commission, nonetheless I support this increased measure of insuring fairness. As a matter of law it seems well settled that the Commission is not required to separate its Common Carrier Bureau staff in these ratemaking rulemaking proceedings. And I agree with the Chairman's statement in this case which points out the serious budget implications of using separated staffs. We simply must have more resources for common carrier regulation. We are not doing our job now.
But my support for separation of a Trial Staff rests on a premise in addition to that of fairness. I believe it is important for the Commission to have a Trial Staff which feels no inhibition in advocating the consumer or public interest in these cases. I believe we get better advocacy when our staff is separated, we make better decisions, and the public is better protected. But apparently some carriers are having second thoughts about the benefits of Trial Staff separation. Bell apparently likes the fairness aspects, but doesn't like the vigor of Trial Staff public interest advocacy, and would like the Commission to rein in its Trial Staff. I hope the majority has no intention of giving the carriers all the benefits of this new fairness, while at the same time taking away from the public the benefits of improved consumer advocacy. It is a situation that will bear watching, and I hope our staff reports any efforts to crimp the performance of their important duties in these proceedings.
I cannot join the majority in the rest of its order on these Western Union price increases. This is the fourth increase in Telex rates in six years. The rate of increase is about 10% this time.
Competition between TWX and Telex was eliminated when the Commission permitted Western Union to buy TWX from Bell. Western Union estimates a pre-tax earnings of 19.2% on Telex in 1972 and 18% in 1973 with these increases. The earnings for TWX will be 7.8% in 1972 and 12.3% in 1973. Yet the majority does not use its full suspension power, which it believes to be a 90-day suspension, and instead suspends for only one day. In addition there are serious questions [*982] of the pricing and cost allocation procedures to be used in evaluating whether these prices are lawful. These issues depend to some extent on decisions the Commission must make in other proceedings. As I have said before, I would suspend for as long as it takes to litigate the public interest issues any significant tariff changes by common carriers, particularly where those issues depend upon decisions in proceedings that have been going for so many years here. I believe the Commission has the power to enter such a suspension order. Until the Commission makes decisions in these long-delayed proceedings, and has some guidelines by which to test major tariff changes, I believe we have no other course.
There is another reason why the majority should have entered a longer suspension order in these price increases. If anyone is interested in what the differences are between Phase II and Phase III of President Nixon's inflation control policies, here is a good example. Under the rules of Phase II, this Commission would have been compelled to suspend the price increases for at least 90 days, and perhaps for the full period of time needed to litigate the issues in this investigation. Under Phase III the 10% price increases go into effect with a one day suspension, and I detect no great interest in whatever review structure is left in Phrase III to review what the Commission has done here.
Things are back to normal.