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Docket No. 18128




20 F.C.C.2d 383 (1969)




October 29, 1969 Adopted






[*383]  1.  The Commission has before it for consideration proposed revisions to FCC tariff No. 260, filed by the American Telephone & Telegraph Co. (A.T & T.) (1) on March 28 and August 29, 1969, for a new offering, titled series 11,000, to become effective November 1, 1969, n1 and (2) on October 1, 1969, in the Telpak tariff to be effective November 1, 1969.  Petitions to suspend the series 11,000 offering were filed June 16 and 17, 1969, by Microwave Communications Inc. (MCI) and the Western Union Telegraph Co. (Western Union).  n2 A petition to reject this offering was also filed by MCI.  After the August 29, 1969, filing by A.T. & T., MCI filed a supplement to complaint and petition for rejection and/or suspension.  Replies to the aforementioned pleadings were filed by A.T. & T.  n3 Western Union has submitted no comments as to the revised schedules filed August 29, 1969.  Petitions to reject, or require or secure withdrawal of further Telpak increases or other relief were filed by Air Transport Association of America (ATA), Aeronautical Radio, Inc. (ARINC), United Air Lines, Inc. (United), Eastern Air Lines, Inc. (Eastern), Emery Air Freight Corp. (Emery), Aerospace Industries Association of America, Inc. (AIA), the Secretary of Defense on behalf of all executive agencies of the United States (Secretary of Defense), Associated Press (AP), Bethlehem Steel Corp. (Bethlehem), E. I. du Pont de Nemours & Co. (Du Pont), Ford Motor Co. (Ford), Monsanto Co. (Monsanto), Olin Corp. (Olin), Republic Steel Corp. (Republic), Union Carbide Corp. (Union Carbide), United States Steel Corp. (U.S. Steel), Westinghouse Electric Corp. (Westinghouse), and Chicago, Rock Island and Pacific Railroad Co.  n4


n1 A.T. & T. extended the effective date of the revised schedules from July 1, to Oct. 1, 1969, then to Nov. 1, 1969.


n2 Western Union, pursuant to sec. 1.773, sent a telegraphic request for suspension on June 16, 1969.


n3 Comments were also filed concerning the filing by Air Transport Association of America and Aeronautical Radio Inc.


n4 A.T. & T. filed an opposition to the petitions and AIA filed a reply to the opposition.


 [*384]  2.  The proposed filing titled series 11,000 is intended to provide high capacity wideband channels on a discrete spectrum basis which can be arranged by A.T. & T. for a variety of wideband uses or for individual voice grade channels.  Major features alleged are that (1) the proposed service will be furnished only over A.T. & T.'s coaxial and high capacity microwave routes, and that pricing is related to the low unit costs of such facilities; (2) provisions in the tariff will permit joint users to share in the base capacity of the wideband channels; and (3) provision of a continuous wideband spectrum will accommodate a combination of wideband data and voice grade arrangements as requested by the customer.  The proposed offering is experimental in nature, limited to a term of 3 years to expire November 1, 1972, and to specific routes to ascertain market potential, effect on other services, joint use provisions, pricing structure, and rearrangement implications of a discrete spectrum offering.


3.  MCI, in its petition to suspend, alleges generally that the proposed offering is: (a) a revival of the illegal Telpak A, (b) that the revised tariff schedules are duplicative, at cut rates, of existing private line services for a few of the users and that (c) in general, it is an anticompetitive move without the slightest public benefit or need.  Western Union in its petition requests that the Commission request A.T. & T. to voluntarily suspend the proposed revision or in the alternative order its suspension.  Basically, Western Union alleges (1) that the rates for the series 11,000 are unreasonable, (2) that the titling of the service as experimental is a ploy since its design and structure precludes the assembly of meaningful data, and (3) that the proposed revisions are unduly complicated and ambiguous further confusing the present conglomeration of private line services.


4.  MCI's petition for rejection of tariff alleges that the proposed filing for the series 11,000 is in contravention of section 61.55 of the rules requiring clarity of tariffs and that additional section 214 authority is required to effectuate the proposal.  The revised schedules filed August 29, 1969, remove substantially the complexities and ambiguities previously noted in this filing.  To the extent that ambiguities may continue to exist they appear to be of a minor nature.  We need not decide at this time whether additional section 214 authority or radio licenses will be necessary for this service and will defer action on the question pending development of facts on the hearing record herein.


5.  The trial service, series 11,000, differs from Telpak and the other private line services in that, (1) the service is experimental, offered only in a specified area for a limited time, (2) the new service is a twopoint service only and not multipoint, (3) the new service is offered only over certain designated high capacity physical routes of the telephone company, (4) the individual data or voice channel derived in the new service from the wideband facility will be furnished only from such physical facility and will not be furnished over diverse routes and (5) the unlimited sharing provisions in series 11,000 relate to the sharing of a discrete physical facility rather than a theoretical pricing concept.


 [*385]  6.  By Order adopted July 11, 1968, and released July 16, 1968 (F.C.C. 68-711), the Commission instituted an investigation and hearing into the lawfulness of charges by A.T. & T. for private line services in general (other than program transmission).  The investigation of A.T. & T.'s Telpak rates ordered in the April 12, 1968 order (F.C.C.  68-388) was included in the private line investigation.  By Order adopted July 24, 1968, and released July 29, 1968, the Commission included in the hearing and investigation in docket No. 18128, the schedules of Western Union in its tariff F.C.C. No. 237 and specified that the issues heretofore specified in that docket shall apply with equal force to the tariff schedules of Western Union.


7.  Although there appear to be differences between the new experimental wideband, shared service offering, on the one hand, and existing Telpak and other private line services, on the other hand, we are unable to determine at this time whether any such differences warrant the differences in charges proposed in the new offering.  Moreover, we cannot conclude at this time that the charges proposed for the new service designed to recover calculated full additional costs plus 20 percent thereof, will be just and reasonable and otherwise lawful.  Accordingly, we believe that these questions should be examined in the context of our private line investigation.  No useful purpose will be served, however, by suspending inauguration of the experiment for a period of 3 months, and therfore we will permit the series 11,000 offering to become effective as filed.


8.  We wish to emphasize that all customers of this experimental service are on notice that this service is a trial for a limited period of time and that the lawfulness thereof if yet to be determined.  Therefore, any subscriber to this service is forewarned that use of the service will not constitute any equitable or other basis for continuance of the service in the future.


9.  The revisions to the Telpak (series 5000) tariff propose an increase in rates for the Telpak C and D base capacities, a change from six (three in the case of 150 baud service) to two in the number of telegraph channels and an increase in rates for certain service terminals.  A.T. & T. alleges that the increase in rate levels will improve the revenue cost relationship of Telpak and increase the contribution of that service to overall earnings.  For its justification of such substantial increases, A.T. & T. relies upon studies recently completed in recognition of the statement on ratemaking principles and factors in docket No. 16258, phase 1-B (app. A of the Commission's "Memorandum Opinion and Order," adopted July 29, 1969, 18 F.C.C. 2d 761, 765).  The petitioners filing against the Telpak increases allege generally: (1) that the instant rate increases violate the statement of ratemaking principles and factors in docket No. 16258, phase 1-B, (2) that the tariff increases are patently improper and involved, and that (3) suspension and investigation of these tariffs, together with an accounting order, are inadequate remedies and that extraordinary relief is necessary.  We cannot agree with the petitioners' construction of the statement of ratemaking principles and factors in docket No. 16258, phase 1- B (agreement), F.C.C. 69-842, 18 F.C.C. 2d 761 (1969). We made it abundantly clear in our memorandum opinion and order that  [*386]  we were not necessarily approving the stipulation, merely noting it.  Of equal concern, is the petitioners' reliance upon their alleged contractual rights pursuant to the agreement.  A careful reading of the agreement denotes an accord as to certain ratemaking principles and factors embodied in this agreement.  We fail to find any contractual rights and obligations flowing to, from, or between the parties involved, nor indeed, do we discover the use of any terminology which would imply the establishment of such rights and obligations.  This is not to suggest that we would not be concerned if any of the parties departed substantially from the import of this accord.  We are merely stating that the agreement per se does not establish substantive rights and obligations which, if not observed, can be viewed as a breach of contract.  The parties who allege certain departures from the accord may raise questions in docket No. 18128 with respect thereto.  The revised tariff schedules for Telpak, while raising questions that may be explored in hearing, cannot be construed as being so defective as to require rejection.  The interested parties will have ample opportunity during the proceeding in docket No. 18128 to explore those areas in which they express concern and to develop their position on the record.


10.  We now address ourselves to petitioners' requests for extraordinary relief and oral argument.  We fail to perceive in petitioners' pleadings sufficient circumstances that would require the extraordinary remedies they seek, or any benefit that would accrue at this point, by granting the petitioners' request for oral argument.  We have previously responded to petitioners' contention that we possess plenary power pursuant to sections 4(i), and 303(r) of the Communications Act of 1934, as amended, to accord the requested relief, in our order adopted August 28, 1968, 14 F.C.C. 2d 564, and find no reason to disturb our conclusion reached therein.  As to petitioners' conclusion that section 203(b) of the Communications Act of 1934, as amended, conveys sufficient authority to defer the effective date of the proposed tariff revisions in Telpak, it suffices to say that we find no necessity for the imposition of such extraordinary relief.  However, we are not deciding at this time the extent of our authority to grant the kind of relief petitioners request.


11.  On the basis of the information now before us, we are unable to determine that the charges, classifications, regulations, and practices contained in the Telpak revised schedules are or will be just and reasonable or otherwise lawful.  As noted in paragraph 6 above, we have instituted an investigation and hearing into the lawfulness of charges by A.T. & T. for private line services in general, including Telpak, other than program transmission services.  This covers any amendments, cancellations or successive issues thereof effected during the pendency of the investigation in docket No. 18128, including the revisions to Telpak presently before us.


12.  We now come to the question of whether we should suspend the Telpak revised schedules for a portion or all of the statutory period.  At this point it is well to dwell briefly upon the history of the Telpak offering.  These rates were filed in 1961, principally to meet the threat of competition from private microwave systems which had arisen as the result of the Commission's decision in the above 890-Mc. case.   [*387]  Telpak rates were originally offered in four classifications, A, B, C, and D, based on the number of channels required between a given pair of points.  After extensive hearings, the Commission found the A and B classifications, which encompassed the lesser number of channels, to be unlawfully discriminatory since they applied to a service similar to private line service but afforded different rates for such service.  The justification of competitive necessity was found not to be applicable to the A and B classifications, since it would not be practical for a customer to construct his own microwave system if his need was limited to the number of channels encompassed by these classifications.  The Commission found, however, that there was apparent competitive necessity for the C and D classifications which encompassed larger capacities, but required a further showing on the question of whether the existing rates for such classifications were compensatory.  In accordance with our decision in the original Telpak case, Telpak A and B were canceled.  Upon such cancellation, the proceeding was terminated and the question as to whether Telpak C and D were compensatory was placed at issue in docket No. 16258, and subsequently incorporated into docket No. 18128.  It must be kept in mind that Telpak classifications C and D were found to be discriminatory and that we were unable to find the rates for such services compensatory.  This question is still posed and the lawfulness of the revised tariff schedules presently before us will be resolved upon the record made in docket No. 18128.  We are cognizant of the fact that the intervenors in docket No. 16258 have not yet had the opportunity to present their cases which presumably would seek to establish that the original rates were compensatory and that competitive necessity requires their maintenance at the present level.  The revised tariff schedules for Telpak presently before us propose substantial increases as did the presently existing tariff schedules which became effective approximately a year ago.  In view of the substantial increases the company now proposes, we feel compelled to exercise the extent of our statutory authority and suspend for 3 months the proposed tariff schedules for Telpak. 


Moreover, we are issuing an accounting order as to the contemplated increases to protect the interests of the parties involved.  We note that some parties have expressed concern about the effectiveness of the accounting orders, but see no merit in these contentions.  The carriers and interested parties are again put on notice that the Telpak increases effective September 1, 1968, and which will continue to February 1, 1970, are subject to an accounting order and that if after completion of this hearing, the Commission issues an order refunding charges paid during this period, the accounting procedures should be sufficiently accurate to insure all customers are recompensed.  Similar action should also be accorded the accounting to be required for the proposed tariffs presently before us.


13.  The Commission in its "Memorandum Opinion and Order" of July 16, 1968, 13 F.C.C. 2d 853, deferred proceedings in docket No. 18128 pending a determination with respect to the proceeding in phase 1-B of docket No. 16258 and the Telpak Sharing case, docket No. 17457.  Since that time, the Chief, Common Carrier Bureau, has issued a recommended decision in docket No. 17457, which is now pending  [*388]  before us.  Furthermore, the parties in phase 1-B of docket No. 16258 have entered into an agreement as to ratemaking principles and factors looking toward determination that phase (see 18 F.C.C. 2d 761, 765). We also note that the cost studies submitted by A.T. & T. in support of the proposed Telpak revisions assume a continuation of the sharing provisions as now in effect.  Under such circumstances, we will no longer defer the proceedings in docket No. 18128, and the examiner presiding in that case is authorized to schedule hearings therein at such time as he may deem appropriate. 


14.  Accordingly, It is ordered, That pursuant to sections 201, 202, 204, 205 and 403 of the Communications Act of 1934, as amended, the hearing and investigation in docket No. 18128 concerning the lawfulness of the private line tariff schedules of American Telephone & Telegraph Co. shall include the like revisions to A.T. & T. tariff F.C.C. No. 260 forwarded with transmittal Nos. 10396 and 10562 filed on March 28 and August 29, 1969, and transmittal No. 10609 filed on October 1, 1969, as enumerated in the appendixes hereto, and that the issues heretofore specified in that docket shall apply with equal force to the above-described revised tariff schedules of A.T. & T.


15.  It is further ordered, That pursuant to section 204 of the Communications Act of 1934, as amended, the operation of the tariff schedules listed in appendix B as becoming effective November 1, 1969, Is hereby suspended, unless otherwise ordered by the Commission, until February 1, 1970, and that during said period of suspension, no changes shall be made in said tariff schedules or in the charges sought to be altered thereby unless authorized by special permission of the Commission and that respondents, 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 by further order require the refund thereof, with interest, pursuant to section 205 of the act, and the carrier shall file with the Commission a report on or before the 10th day of each month, commencing March 10, 1970, showing the amounts accounted for as aforesaid during the previous calendar month.


16.  It is further ordered, That the petitions for rejection, suspension, withdrawal, or other relief Are granted to the extent noted and otherwise Denied;


17.  It is further ordered, That all parties named in paragraph 1, supra, as having filed petitions for relief Are granted leave to intervene upon filing a notice of intention to appear and participate within 20 days of the release date of this order.







I concur generally in this action, but dissent to the suspension of the tariff for 90 days.  In view of the long delay in correcting the discriminatory Telpak rates, I would suspend the new tariff for only 1 day, or until the company files tariffs covering the offsetting reductions in message toll telephone rates which are to be made.





The Commission here makes two decisions affecting private line communications service offered by Bell Telephone.  Neither decision will serve the public interest.


Bell seeks to raise its Telpak rates believing them to be too low.  Numerous powerful user groups have protested.  Telpak is the service which the Commission has believed could be noncompensatory; that is, its rates do not compensate Bell for its costs and are designed to meet competition from private carriers.  Even Bell's studies show a need to raise these rates.  The new Telpak tariffs are filed in part as a result of negotiations held in the overall rate investigation (docket No. 16258).


Unfortunately neither the Commission nor Bell is now prepared to institute lower rates for the MTT service (the common man's "message toll telephone" long-distance service) to offset the Telpak increases, despite longstanding promises by the company that the two events would occur simultaneously.  Thus, the majority's action today simply acquiesces in Bell's brazen refusal to provide the small user with the much-needed and long-overdue rate reductions to which he is entitled.


The Commission is going to suspend the new Telpak rates for the maximum period allowed by law -- 90 days.  For the purposes of a hearing and accounting order a 1-day suspension would serve as well.  Large users of communications services will thus have the effect of the rate increases postponed -- despite the fact the fact that Telpak users have been on notice for 8 years that the Telpak rates may be noncompensatory and for months that rate increases were coming.  Allowing suspension for the full 90-day period serves no equitable purpose; it is simply another example of what Fred Friendly has called "the leaning tower of jello" bending in response to the political and business winds.


It is useful to note the majority's discussion at paragraph 9 of its order.  I have outlined in another opinion the defects with the Commission decision in phase 1B of docket No. 16258.  ( A.T. & T. Co., 18 F.C.C. 2d 761, 769 (1969).) The majority's discussion here confirms not only the hopeless ambiguity of the so-called stipulation but also demonstrates that resolution of questions regarding pricing policy and price discrimination are no farther along now than they were in 1965 when the overall rate investigation -- docket No. 16258 -- was begun to deal with them.


The majority's almost unseen reaction to the Bell shell-and-peagame represented in the new series 11,000 tariffs is even more serious than the failure to provide some price decreases to the general consumer.  Since the inception of the Telpak service in 1961 the Commission has been concerned that Bell was offering discriminatory services designed to drive out of prevent competition in the private line field.  The majority recites the history of Telpak at paragraph 12 of its order.  Much of the Commission's regulatory activity toward Bell has grown out of this concern.  And as the majority points out in paragraph 12, the lawfulness of the original Telpak offerings is still in question.


 [*391]  Incredibly, the majority today allows Bell to institute a new private line tariff classification (called series 11,000) designed as a replacement for Telpak -- a special tariff presumably designed to head off threatened competition.


ATT has advised the Commission that series 11,000 is designed principally to serve as a potential substitute for the discriminatory Telpak rate classification in the event that the Commission should require ATT to permit unlimited sharing of private line service under the Telpak rate classification.  Thus, series 11,000 could negate the effect of possible Commission decisions relating to the Telpak sharing provisions (Bell has indicated Telpak would probably be terminated if sharing is required) and the compensatory level of Telpak rates, by substituting a new discriminatory service for an old one.  The majority dumps the question of lawfulness of series 11,000 into a proceeding already overcrowded with Telpak matters (all the unresolved Telpak and private line lawfulness questions plus the two Telpak rate increases -- docket No. 18128).  The result is that any unlawful competitive effect of series 11,000 will take place long before the Commission can decide the question of its lawfulness.


One need only examine the majority's description of the series 11,000 service to find evidence that it is intended to forestall competition.  Series 11,000 is planned for only the Northeast and Central United States, including Illinois, an area where the Commission has several applications for competitive non-Bell private line services.  Series 11,000 is for high-capacity routes only, the type of routes which Bell's competitors seek to serve.  Series 11,000 is to be provided only over Bell's lowest cost interexchange facilities.  Series 11,000 is designed for data -- and the competing proposals are designed for data.  Series 11,000 is a two-point rather than multipoint service -- and the competing proposals are for two-point service.  Series 11,000 would allow unlimited sharing, as would the competing proposals.  Finally, series 11,000 would be priced in accordance with the principles Bell urged in the overall rate hearing -- principles still to be evaluated by the Commission.  Needless to say, use of these princing principles allows Bell to charge a low price for series 11,000.  In sum, to use Bell terminology, Bell is "creamskimming" its own market in terms of its selection of locations and facilities for providing service.  Here is yet another example of Mason Williams' famous adage that "Government makes better deals with business than it does with people." Presumably the general public is again to be relegated to the leftovers of Bell's service.


In light of these "coincidences," the Commission would be fully warranted in establishing a special, expedited proceeding to test the lawfulness of series 11,000.  Outright rejection of the 11,000 tariff may not now be advisable, although Bell has not answered many of the questions the staff asked when the tariff was first filed.  But to allow the delay that will result from consolidating series 11,000 in a proceeding where a decision will not come for years is simply to grant Bell carte blanche to price as it wishes.


 [*392]  Bell is entitled to a speedy answer as to the lawfulness of this experimental offering.  So are Bell's customers.  And potential competitors of Bell who well might be victims of destructive competition are also entitled to know whether the Commission will establish and protect a fair competitive environment in these situations where a monopoly seeks to serve markets for which there are active competitors.  There will be no timely answers for series 11,000.  An expedited, separate proceeding could focus immediately on the question of series 11,000's possible discriminatory effect.  The Commission could also compel ATT to furnish copies of internal company documents that deal with the company's intentions and expectations about the competitive effect of this service.


Perhaps the Commission is incapable of regulating Bell's pricing practices effectively.  Its present consolidated proceeding now includes the past lawfulness of Telpak, one rate increase piled on top of another already suspended, and series 11,000.  The delay which has characterized Commission proceedings on competition and pricing policy serve only the purposes of ATT and their large users who may receive discriminatorily low rates.  But at least the Commission could be candid about it.  No one should be mislead by today's actions.  The Commission is not about to resolve the really difficult regulatory problems it now faces in the common carrier field.







Series, 11,000 Tariff Pages

5th revised page 11       1st revised page 139.16

6th revised page 17       2d revised page 139.16

7th revised page 18.1    1st revised page 139.17

6th revised page 19       2d revised page 139.17

7th revised page 19       1st revised page 139.18

3d revised page 21        2d revised page 139.19

4th revised page 21       1st revised page 139.19

Original page 21.1         2d revised page 139.19

8th revised page 22       1st revised page 139.20

2d revised page 23.1     2d revised page 139.20

3d revised page 23.1     1st revised page 139.21

4th revised page 25       2d revised page 139.21

3d revised page 26.1     1st revised page 139.22

4th revised page 26.1    2d revised page 139.22

5th revised page 29       1st revised page 139.23

10th revised page 30     2d revised page 139.23

7th revised page 30.1    1st revised page 139.24

2d revised page 34        2d revised page 139.24

7th revised page 35       1st revised page 139.25

5th revised page 36       2d revised page 139.25

2d revised page 36.2     Original page 139.26

2d revised page 36.3     Originalpage 139.27

3d revised page 36.3     Original page 139.28

1st revised page 36.4    Original page 139.29

4th revised page 37       Original page 139.30

8th revised page 44.1    Original page 139.31

9th revised page 44.1    Original page 139.32

4th revised page 45       Original page 139.33

5th revised page 45       Original page 139.34

3d revised page 46.1     Original page 139.35

4th revised page 46.1    Original page 139.36

5th revised page 46.1    Original page 139.37

6th revised page 46.1    Original page 139.38

Original page 46.2         Original page 139.39

1st revised page 139.13          Original page 139.40

2d revised page 139.13 Original page 139.41

1st revised page 139.14          2d revised page 143.1

2d revised page 139.14 3d revised page 143.1

1st revised page 139.15          4th revised page 143.2

2d revised page 139.15




Telpak Tariff Pages

7th revised page 81       9th revised page 85

14th revised page 84     13th revised page 86


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