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In the Matter of AMERICAN TELEPHONE & TELEGRAPH CO. AND THE ASSOCIATED BELL SYSTEM COMPANIES Charges for Interstate and Foreign Communication Service; In the Matter of AMERICAN TELEPHONE & TELEGRAPH CO. Charges, Practices, Classifications, and Regulations

for and in Connection With Teletypewriter Exchange Service


Docket No. 16258; Docket No. 15011




10 F.C.C.2d 705 (1967)




November 30, 1967 Adopted




[*705]  1.  The Commission has under consideration its interim decision and order, its memorandum opinion and order on reconsideration, the report of the Technical Experts Group on Jurisdictional Separations, a petition for extension of stay and reopening of record, filed by the Bell System respondents on November 15, 1967, and various oppositions thereto.


2.  The memorandum opinion and order on reconsideration stayed the effect of our interim decision as regards jurisdictional separations until December 1, 1967, for the purpose of considering recommendations to be contained in the report of the Technical Experts Group.  It appears that, because of the procedural requirements of our rules, as well as the voluminous and technical nature of the material involved, the Commission will not be able to act upon the report and the pleadings prior to December 1, 1967.


3.  Accordingly, It is ordered, That the stay of the effect of our interim decision and order with respect to jurisdictional separations Is extended to February 1, 1968.







After 71 days of telephone rate hearings, producing 10,094 pages of hearing transcript and 3,485 pages of exhibits, the FCC issued a 342-paragraph opinion on July 5, 1967.  It dealt with many items, including  [*706]  "separations" -- the allocation of "rate base" (capital investment) between interstate and intrastate telephone service, for purposes of computing companies' rate of return and subscribers' telephone rates.


The details of separations are dealt with in that opinion, and we will not repeat them here.  We note, however, that the opinion indicated the Commission's open mind on these matters and willingness to consider new schemes in the future.


"Because telephone technology and operations of respondents (Bell) are not static, but undergo changes with time, telephone separations procedures must be reevaluated and, when necessary, revised in light of such changes. * * * We will require any party who may advocate a revision in these prescribed procedures to make a clear and convincing showing that the charge advocated is reasonably required by new or changed circumstances." (Par. 322.)


Moreover, this Commission opinion, as any other, was open to reconsideration or hearing. In fact, such a reconsideration was requested.  And on September 13, 1967, the Commission issued a 24-page, single-spaced order carefully considering the comments of the parties regarding the July 5 opinion.  Bell had questioned the Commission's proposed separations procedures at that time.  The Commission wrote:


"We are firmly convinced that the separations plan prescribed in our interim decision and order (of July 5, 1967) is reasonable on the basis of the record before us.  Indeed, the petitions for reconsideration advance nothing of substance in the way of criticism thereof." (Par. 55.)


Nevertheless, in spite of the Commission's firm conviction, and the absence of substantive criticism, the Commission reconstituted an industry-staffed Technical Experts Group "for the purpose of affording that group, in concert with our staff (in, of course, closed-door, off-the-record sessions), an opportunity to examine the prescribed separations plan with the view of ascertaining any improvements or refinements therein which they may deem to be warranted." (Par. 57.)


What "improvements or refinements" have been suggested by the "technical experts"? On November 15 the group submitted its report.  The group had considered a number of alternatives to the FCC's plan, but itself questioned "whether they fall within the framework of 'improvements and refinements' as contemplated by the FCC's September 13 order." It is not clear whether the group even considered any changes fairly characterized as "improvements and refinements." What is clear is that, to quote its report, "no one plan is acceptable to all members of the Technical Experts Group."


In short, the Commission is left -- or ought to be -- where it was September 13: "Firmly convinced" of the reasonableness of the separations decision arrived at in its July 5 opinion, and without any substantial criticism of the details of that plan.  The Technical Experts Group has failed to come forward with anything whatsoever to warrant a further postponement of the Commission's new separations formula (already stayed from July 5 to December 1).

And yet the time is now to be extended once again -- to February 1, 1968.  What is the result?  The old separations formula stays in effect,  [*707]  although all parties are agreed that the last adjustment made -- the so-called "Denver Plan" -- is unsound.  The potential immediate impact upon States and citizens alike of these multi-million-dollar decisions are further lost, for this extended period, never to be regained.  And we are confronted with a Bell proposal for a new system which is, already, opposed by the independent telephone companies and several States.


We are now well into phase IB of this rate proceeding.  The limited FCC staff is fully engaged in that hearing.  Today's decision will simply further postpone ultimate resolution and impose an additional drain upon staff resources to replow ground already harrowed over the past 2 years.

We contemplated such new proposals in our original July 5 order.  We provided, in addition to the language quoted at the outset of this statement,

"Any changes in such rules and regulations will * * * be considered on a public record, in accordance with the rulemaking provisions of the Administrative Procedure Act." (Par. 322.)


We believe that judgment is as sound today as it was nearly 5 months ago. Indeed, the majority has apparently overlooked the fact that even Bell acknowledged in its filing with the Technical Experts Group that such a procedure might be more appropriate, when it concluded:


Respondents respectfully suggest that the Commission consider adoption of respondents' proposal by either of two methods: (1) Reopening the pecord * * *; (2) incorporation of this report in a separate rulemaking proceeding.


One of the anticipated benefits of our whole rate proceeding was that it would replace the unsatisfactory system of negotiated separations with a prescribed system based on logically stated conclusions drawn from a hearing record.  We indicated, as noted above, that anyone proposing further change would have the burden of justifying his modification in terms of new or changed circumstances.  Yet at the first suggestion that some of the poarties would prefer another approach -- though they have not complied with the terms of our September 13 order -- we extend the present unsatisfactory arrangement for a further period.  Perhaps the following story, often told by one of our colleagues of the majority, is in point.


A Russian Orthodox priest was exiled to Siberia.  After 40 years of imprisonment, he was released because of his age and deteriorating health.  On his return to his old village he was welcomed by a younger man, the son of one of his friends.  The latter asked about his exile, and in particular how he had passed the time.  The priest replied that he had devoted a great deal of time to contemplation and the formulation of a personal philosophy.  His friend immediately expressed great interest in his conclusions after all this deep thought.  The priest said: Well, I would sit and look out the high window in my cell.  I would note the change from day to night, the changing weather, the changing seasons.  I thought about how the rain falls and runs into little streams, then great rivers, and finally into the ocean.  I thought of the cycle  [*708]  of birth and life and death.  And I concluded, my son, that life is like a fountain." His friend was entranced and exclaimed, "Father, why is life like a fountain?" The old priest thought a moment, shrugged, and said, "Well, may be it isn't."

In short, although we are on record as encouraging more original and imaginative approaches to telephone regulation, we believe that the judgment of this Commission -- shared by Bell -- was correct that we ought to put our July 5, 1967, order into effect, get on with phase IB, and consider any new suggestions as to separations in further rulemaking proceedings.


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