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In the Matter of AMERICAN TELEPHONE & TELEGRAPH CO., LONG LINES DEPARTMENT Revisions of Tariff F.C.C. No. 260 Private Line Services, Series 5000 (TELPAK); AMERICAN TELEPHONE & TELEGRAPH CO. Revision of American Telephone & Telegraph Co., Tariff F.C.C. No. 260 Series 6000 and 7000 Channels (Program Transmission Services)

 

Docket No. 18128; Docket No. 18684

 

FEDERAL COMMUNICATIONS COMMISSION

 

40 F.C.C.2d 901

 

RELEASE-NUMBER: FCC 73-502

 

May 15, 1973 Released

 

 Adopted May 9, 1973

 


JUDGES:

BY THE COMMISSION: CHAIRMAN BURCH ABSENT; COMMISSIONER JOHNSON CONCURRING IN PART AND ISSUING A STATEMENT; COMMISSIONER REID CONCURRING IN THE RESULT.


OPINION:

 [*901]  1. We have under consideration Application No. 903 filed by the American Telephone and Telegraph Company (AT&T) on October 16, 1972, applicable to television program transmission private line services and the written material submitted by AT&T in support of its application.  Attachment 1. hereof sets forth the specific changes proposed by AT&T.  We also have under consideration the written comments and pleadings of interested parties in opposition to and in support of such application.

2.  We have given careful consideration to the contentions and views of all parties in this matter and it is our opinion that a grant of the application in its entirety as proposed by AT&T would result in undue delay and disruption in the resolution of the issues in Docket 18684 of the consolidated proceeding herein.  The filing of all of the tariff revisions as requested by AT&T would raise questions of lawfulness that are essentially the same as the issues herein in Docket 18684.  AT&T's basic justification for the proposed rate changes is grounded upon facts and conclusions which it has recently asked us to make herein in its March 12, 1973 "Proposed Findings of Fact and Conclusions of Bell System Respondents" (Pages 292-354).  However, these proposed findings of fact and conclusions of AT&T are vigorously disputed as being contrary to the evidence of record by other parties.  (See, e.g. Proposed Findings and Conclusions of Hughes Sports Network, Inc.) Under these circumstances we conclude that we should not permit the filing of the rates and rate structure as proposed by AT&T.

3.  Although we are unable to grant AT&T's application in the form submitted by it, we are of the view that we should not defer action  [*902]  on the merits of such proposal for the indefinite period required to reach final resolution of the complex rate level issues involved in the consolidated proceeding herein in Docket 18128.  We believe that there may be justification for some internal rate structure adjustments in AT&T's TV program transmission services pending such rate level decisions.  We believe that the principal issues raised by AT&T application relate to whether and to what extent there is, or should be, separate, dedicated facilities for occasional and monthly contract users and what the relationships should be between the charges for the two sub-classes of service.  As to these issues, we believe that such internal rate structure questions in Docket 18684 can and should be treated on a priority basis and decided by the Commission in the relatively near future.

4.  Accordingly, we shall modify the procedures herein insofar as these issues are concerned and, in lieu of a recommended decision by the Chief, Common Carrier Bureau, we shall schedule oral argument en banc on these questions and render our decision thereon.  In our later decision in Docket 18128, we will determine the appropriate overall revenue requirements and rate levels necessary to meet such requirements for the principal classes of service, including the TV Program Transmission service.

5.  For purposes of the modified procedures herein we shall, of course, consider all probative, reliable and substantial evidence of record herein relevant to the rate structure issues and the Proposed Findings and Conclusions thereon and Replies thereto.  In addition, we shall also take official notice of AT&T's application No. 903 and all of the written data and information submitted by AT&T in support thereof, together with all of the written comments thereon heretofore submitted by all persons opposing or supporting AT&T's application.  It is our intention and expectation to issue our final decision on these issues within four months from the release date of this Memorandum Opinion and Order.

6.  We believe that, pending our decision after oral argument we should exercise our discretion and permit AT&T to file and make effective (upon appropriate notice to its customers) the proposed monthly contract rates set forth in Attachment 1.  These charges will effectuate an estimated reduction in charges of about $18 million a year to the users and will reduce AT&T's monthly contract rates to a level that AT&T claims is cost justified while at the same time enabling AT&T to compete with other carriers offering similar service at rates generally lower than the contract rates proposed by AT&T.  We stress that, in allowing these contract rates to be filed and to become effective pending our decision, we are not approving or disapproving such rates and they will be subject to accounting requirement and possible refunds to the extent that they may cause any increases in charges to customers vis-a-vis either the presently effective rates or the pre-October, 1969 rates.  n1 With respect, however, to the proposed revisions in occasional rates, we conclude that we should not allow the proposed revisions to be filed in these rates pending our decision on the rate structure issues in Docket 18684.  Unlike the monthly contract rates, the occasional rate proposals involve increases that are substantial, both in the  [*903]  aggregate and as to individual customers; if filed, questions would be raised as to the lawfulness thereof, particularly with respect to our decision in Hughes Sports Network, Inc.; n2 and, in view of the magnitude of the increases as to individual customers, it is questionable whether an accounting order with provision for possible refunds, would be an adequate safeguard of the rights of occasional users if we should later find the occasional rates to be unlawfully high.  However, in view of the inequities that may arise from any undue delay in the resolution of this matter, we are of the opinion that, if we have not issued our decision on the rate structure issues within 120 days from the release date of this Memorandum Opinion and Order, we should allow AT&T to file revised tariffs publishing the occasional rates set forth in Attachment 1., on the usual 60 days' notice required by our rules. 

n1 See Memorandum Opinion and Order in Docket 18684, FCC 69-1038, released October 6, 1969.

n2 25 FCC 550 (1970); 34 FCC 2d 691 (1972).

7.  We find that due and timely execution of our functions imperatively and unavoidably requires the modified procedures we are adopting herein.

8.  Accordingly, in view of the foregoing, IT IS ORDERED, pursuant to Sections 4(i), 4(j), 201-208 and 403 of the Act.  That ORAL ARGUMENT SHALL BE HELD before the Commission en banc at Washington, D.C. commencing at 9:00 a.m. on June 26, 1973 on the questions of whether and to what extent the program transmission facilities offered under AT&T's Tariffs are or should be dedicated to "contract" and "occasional" users; whether and to what extent such facilities are or should be used interchangeably by "contract" and "occasional" uses; and, in the light of the findings of facts on these issues, whether there should be any revisions in the relationships between the "occasional" and "contract" rates and, if so, what revisions should be required or permitted by the Commission.

9.  IT IS FURTHER ORDERED, That each person desiring to participate in such argument shall file with the Commission on or before June 5, 1973, its brief on the issues and a separate written summary of the oral argument and the amount of time requested for argument.

10.  IT IS FURTHER ORDERED, That official notice will be taken of AT&T's Application 903 and the written material submitted by it in support thereof and of all of the written comments and pleadings of all persons heretofore submitting written comments in opposition to or in support of such application.

11.  IT IS FURTHER ORDERED, That AT&T is hereby granted permission to file forthwith the monthly contract charges set forth in Attachment 1. effective on 30 days' notice to the Commission and the public (including actual notice to all customers where increases are involved) and such monthly contract charges shall be subject (a) to accounting and possible refunds insofar as they effectuate increases to any customer over either the present or the pre-October, 1969 charges and (b) to such modifications and revisions as we may permit or require in our decision on the issues herein.

12.  IT IS FURTHER ORDERED, That, if we have not released our decision following oral argument within 120 days from the release date of this Memorandum Opinion and Order, AT&T, upon the expiration  [*904]  of such 120-day period, may file, on 60 days' notice, tariffs publishing the occasional rates set forth in Attachment 1. hereof.

 

FEDERAL COMMUNICATIONS COMMISSION, BEN F. WAPLE, Secretary.


CONCURBY: JOHNSON (In Part)

 

DISSENTBY: JOHNSON (In Part)

 

DISSENT:

OPINION OF COMMISSIONER NICHOLAS JOHNSON, CONCURRING IN PART AND DISSENTING IN PART; MOTHER [BELL]'S DAY

This Commission majority seems to have an incredible knack for giving Ma Bell her presents at all the appropriate moments.  Its initial decision to stop regulating the reasonableness of the Bell system's own determination of its cost of doing business came just in time for Christmas in 1971.  See "Why Ma Bell Still Believes in Santa Claus." Saturday Review, March 11, 1972, p. 57.  Its decision to increase AT&T's allowable rate of return to a whopping 9.0% graced her Thanksgiving table just last November -- and knocked $1.3 billion of stuffing per year right out of the pocketbook of the consumer.  Now, just a few short hours before Mother's Day, the Commission does it again, and in the process partially emasculates one of its most important decisions regarding anticompetitive behavior in the telecommunications industries.

 [*905]  In the Hughes Sports Network, Inc. decision, 25 F.C.C. 2d 560 (1968); 34 F.C.C. 2d 691 (1972), this Commission held that the rate structure then in existence for users of intercity private lines was heavily discriminatory against the small (or "occasional") user.  AT&T's rates were found to be "both unjust and unreasonable under   201(b) of the ACT and unduly discriminatory under   202(a) of the Act." In particular, the monthly contract rates, which required users to pay for at least eight hours per day each month before they could get a break from the high "occasional user" rate, and the "occasional user" rate itself, were singled out as totally unreasonable.  Bell then came up with the rate structure currently in use, which reduced the occasional service rate from $1.15 per mile per hour to $.55 per mile per hour (or $.28 between 1:00 and 7:00 AM) and set up a sliding scale for the monthly contract user, which allowed the user to purchase anything from one hour per day to twenty four hours per day at a base rate of $12.10 per mile per hour per month for the first hour and just $4.40 per mile per hour for each consecutive hour (or $6.60 per mile per hour for each subsequent non-consecutive hour).  Thus, the contract user was allowed considerably greater flexibility, and the occasional service, while still somewhat higher, was at least in reasonable proportion to the contract rates.  We decided the new rates looked as though they might at least partially ameliorate the problem, and we allowed them to go into effect while we proceeded to develop a record on which we could make some final determination.  See F.C.C. 69-1038, Docket No. 18684, October 9, 1969.

Last Fall, pursuant to our decision requiring AT&T to receive special permission before filing any new tariff in this service, Memorandum Opinion and Order in Docket Nos. 18128/18684, 33 F.C.C. 2d 552 (1972), Ma Bell requested permission to revise the 1969 rates, on which the final decision is still pending.  Claiming that increased price competition from specialized microwave carriers was soon going to be siphoning off her largest contract users -- primarily the networks -- she insisted that she should be allowed to "revise" her monthly contract rate to a more competitive single, 24 hour per day rate of $55.00 mile per month, and at the same time increase the occasional service rate to $1.00 per mile per hour (ostensibly to "make the occasional service more self-supporting").

The latter request was simply a flagrant violation of the letter and spirit of the Hughes case, since it would have driven occasional rates virtually all the way back up to their unreasonable pre-1969 rate (of $1.15 per mile per hour).  I concur in the majority's refusal to agree to this aspect of the AT&T request.

The "revision" of the monthly contract rate, on the other hand, which my colleagues continually but fallaciously referred to in their oral discussion as a "reduction," has been allowed for filing, and to that action I must vigorously dissent.

It is true that the $55.00 rate represents a "reduction" (from a potential 24 hour per day high of $113.30 per mile) for the major network users -- a reduction with which I have no problems.  (When was the last time Ma Bell asked permission to reduce the price of anything?) What does disturb me, however, is the fact that these rates will once again require the monthly contract user to take a minimum  [*906]  number of hours per day in order to get the benefits of contract service -- in flagrant disregard of an important part of the holding in Hughes.  Indeed, the major difference between these new rates and the pre-1969 rate structure outlawed in Hughes is that under the previous structure the monthly user was required to pay for at least 8 hours per day (at $39.50 per mile) whether he needed them or not, whereas now he must contract for no less than 24 hours per day (at a rate of $55.00 per mile) whether he needs them or not.  This seems to me a curious interpretation of the public interest standard indeed, and one that would have the effect (especially if coupled with the proposed increase in occasional service charges) of forcing the small user -- the local network or specialized network or the local station regularly covering distant events -- to seriously curtail his service to the public.

Since I am not in conflict with the basic intentions of the majority in attempting to allow AT&T to remain competitive in the intercity private lines service, I would have preferred to allow the "reduction" of the monthly contact rate to $55.00 to become a "reduction" in reality and not just in rhetoric, perhaps by one of two alternative expediencies:

(1) Allow AT&T to file the $55.00 per mile 24 hour per day tariff, but require a proportional reduction in rates for monthly users wishing to use fewer hours.  Since the present rate of $133.30 represents $12.10 for the first hour plus $4.40 per hour for each of the next 23, Bell might be allowed to retain the "base rate" of $12.10 but required to reduce the additional hourly rate proportionately to $1.87 per mile;

(2) Although the first alternative is logical and in keeping with the spirit of the Hughes decision, a considerably less drastic but still sensible solution would simply require that Bell retain the current contract rate structure of $12.10 for the first and $4.40 (or $6.60) for each additional hour up to a cutoff point of $55.00 per mile, beyond which the same rate applies for up to 24 hours of use.

Since the majority considered neither alternative in allowing Bell to file its $55.00 rate "revision" (which, to counteract the majority's reference to "reduction," I should more appropriately term an "increase") it has run afoul of our own significant decision in Hughes -- as well as of the recommendations of our common carrier bureau staff, who had initially suggested we deny permission to AT&T to file either new tariff, on the theory that to do otherwise would be "a classic example of the kind of tariff application that, if granted, would result in undue delay and disruption in the resolution of the issues in a pending rate case and would impair the integrity thereof." The bureau's language refers to the fact that allowing this new filing would allow Bell virtually to regulate itself, since it would initiate a new rate determination proceeding every bit as complex as the one we have not yet decided regarding the rates currently in effect.  The result is a disastrous precedent for allowing AT&T to keep FCC procedures in perpetual motion by merely filing a new rate structure (which automatically takes effect within 60 days and can only be effectively stayed for another 90 days) every time the Commission  [*907]  looks as though it is getting ready to approve or disapprove the previous one.  These two concerns -- about undermining the integrity of Commission procedures and partially emasculating the holding of a landmark decision -- cannot be ignored in light of the majority's decision regarding the $55.00 rate, and therefore to that aspect I must register a vigorous dissent.


APPENDIX:

TELEVISION SERVICE -- RATE COMPARISON

 

 

Present rates

Proposed rates

Monthly

 

Inter-exchange channel -- per mile:

 

24 hours

 

$55.00

1st hour

$12.10

 

Cons. hrs. -- per hour

4.40

 

Non-cons. hrs. -- per hour

6.60

 

Station connection -- per connection:

 

24 hours

 

1,500.00

1st hour

580.00

 

Cons. hrs. -- per hour

147.00

 

Non-cons. hrs. -- per hour

236.00

 

Local and studio-to-transmitter channels

 

-- per channel:

 

Month

 

1,000.00

1st month

1,225.00

 

Cons. months -- per month

725.00

 

Occasional

 

Interexchange channel -- per mile:

 

Per hour

 

$1.00

7AM-1AM

$.55

 

1AM-7AM

.28

 

Station connection -- per connection:

 

Per hour

 

80.00

7AM-1AM

26.25

 

1AM-7AM

13.15

 

Local channel -- per channel:

 

Per day

 

500.00

1st day

410.00

 

Cons. day -- per day

110.00

 

30 day max

1,225.00

1,000.00

Monitoring:

 

30 minutes or less

8.00

8.00

Exceeding 30 minutes -- per hour

15.00

15.00

Switches:

 

Per switch

9.00

9.00

One half switch

4.50

4.50


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