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In the Matter of AMERICAN TELEPHONE & TELEGRAPH CO. AND THE ASSOCIATED BELL SYSTEM COS.  Charges for Interstate Telephone Service Transmittals Nos. 10989 and 11027


Docket No. 19129




27 F.C.C.2d 914




March 3, 1971 Released


 Adopted February 24, 1971





 [*914]  1.  On November 20, 1970, American Telephone and Telegraph Company (AT&T) filed proposed tariff changes, under Transmittal Letter No. 10989, published to become effective January 19, 1971, that would have increased the interstate long distance toll telephone (MTT) earnings of the Bell System companies by an estimated $545 million a year before income taxes and would have produced an estimated 9 1/2% overall interstate rate of return for such companies.

2.  In a letter of January 12, 1971, we requested AT&T to postpone the effective date of these tariff proposals pending the outcome of an expedited hearing on the lawfulness thereof and simultaneously granted special permission to the company to file revised tariffs on not less than 7 days notice, providing for increases in MTT rates that would produce estimated net earnings for the Bell System, before income taxes, of not more than $250 million a year.  We stated in our letter, among other things, that such new rates would be suspended and that we would "invoke the accounting and refund provisions of Section 204 of the Act, so that in all events the public interest will be protected during and through the hearing process." (Page 2)

3.  AT&T responded to our letter of January 12, 1971 by letter of January 13, 1971 and agreed to postpone the effective date of the abovementioned $585 million rate proposal.  At the same time AT&T filed revised tariffs, under T.L. No. 11027 of January 13, 1971, that proposed new MTT rates designed to produce additional Bell System annual net earnings before income taxes of $250 million.  These new rates were published to become effective on January 21, 1971 under the aforementioned special permission granted in our letter of January 12, 1971.

4.  On January 20, 1971 we released our order herein suspending the aforementioned $250 million rate schedules until 12:01 a.m., January 26, 1971.  (FCC 71-64) In this order we included the following clause:

 [*915]  6.  IT IS FURTHER ORDERED, That pending the determination of this proceeding, or until further order of the Commission, the carriers collecting amounts under the above-mentioned tariff schedules shall keep accurate account of such amounts, specifying by whom and on whose behalf such amounts were paid except in the case of sent-paid coin box and hotel guest-initiated toll telephone calls, and that for the latter classes of users such accounting procedures shall be established and records maintained as will permit respondents to account for the revenues collected pursuant to the rates filed on January 14, 1971, for each class as a whole.  Such latter sums will be held for further disposition as further order of the Commission may direct:

5.  On January 25, 1971 there was filed with us a pleading entitled "Application for Stay of, or Extension of Time for Effective Date of FCC Order 71-641 (dated January 20, 1971) pending Petition for Reconsideration." This pleading was filed by the American Telephone Consumers' Council and the United Community Corporation, Newark, New Jersey (hereinafter ATCC/UCC).  It requested the Commission to postpone indefinitely the effective date of the aforementioned $250 million tariff revisions in their entirety from January 26, 1971 to such time as the Commission could rule on a petition for reconsideration to be filed by ATCC/UCC within ten days.  The Trial Staff of the Common Carrier Bureau filed a "Partial Support of Application for Stay" on January 29, 1971 in which it opposed the ATCC/UCC request that we postpone the effective date of the substitute tariffs in their entirety but in which it urged us to postpone indefinitely that part of such tariff schedules that apply to "sent-paid coin box and hotel guest-initiated toll telephone calls" pending action on ATCC/UCC's petition for reconsideration.  To date no such petition for reconsideration has been filed.

6.  ATCC/UCC's petition was filed one day before the original 5-day suspension period was to terminate and the tariffs were to go into effect.  Thus, the petition was not submitted in sufficient time for consideration prior to the effectiveness of the tariffs in question.  Moreover, the petition is defective in that it was not served on the party respondents as required by Section 1.211 of our rules, 47 C.F.R. 1.211.  We shall therefore dismiss the ATCC/UCC application for stay.  However, the Trial Staff filed a follow-up "Petition for Reconsideration" on July 29, 1971 and we shall consider its merits.

7.  The Petition for Reconsideration filed by the Trial Staff of the Common Carrier Bureau requests the Commission to suspend for three months the revised rates only with respect to sent-paid coin box and hotel guest-initiated calls and to request American Telephone & Telegraph Company, the filing carrier, to voluntarily agree to a further suspension of such rates until a final order with regard thereto is issued in this proceeding.  In support of the request, the petition alleges that our order requires that the carriers collecting amounts under the revised tariff schedules keep accurate account of such amounts, specifying by whom and on whose behalf such amounts were paid, except in the case of sent-paid coin box and hotel guest-initiated calls, and that, accordingly, these are the only classes of telephone users who cannot receive possible refunds at the termination of this case.  The petition further alleges that these two classes of users will provide only a small portion of the increase subject to refund, probably about 2 percent; and that it is only the least affluent class of users, those who cannot afford  [*916]  a telephone, who will find it necessary to depend exclusively on sent-paid coin box calls.  The petition argues that since the effects on the company will be minimal and since these classes of users cannot be otherwise protected by possible later individual refunds, the requested relief is "an equitable solution to what would otherwise be an unfair situation which would provide the least protection to a class of users (persons without home telephones), upon whom the potential impact would be relatively most severe." The petition further suggests that the protective measures requested "would be consistent with the policy of Section 202(a) of the Act * * * in that these two unprotected classes of users would be discriminated against and could suffer 'unreasonable prejudice and disadvantage' because of the failure of the accounting order to provide them with the protection afforded other classes of telephone users."

8.  On February 5, 1971, the Bell System respondents filed an opposition to both petitions.  In their opposition, respondents contend that the Commission's orders adequately protect coin box and hotel guest users as classes.  They dispute on a factual basis the assertion that these users represent the least affluent class.  Moreover, they assert that the relief requested would operate as a discrimination against those users not using coin or hotel phones.  Finally, they contend that the Commission has no authority to suspend a rate after it has become effective.

9.  We do not believe that the actions requested by ATCC/UCC and the Trial Staff are warranted.  Our reasons for permitting the refiled rates to become effective January 26, 1971, after a 5-day suspension period, are set forth in our Memorandum Opinion and Order FCC 71-74, released January 21, 1971.  The ATCC/UCC petition provides no basis for a revision of our earlier determination in this regard.  Further, we do not believe that the partial suspension requested by the Trial Staff would be appropriate.  If we were to suspend indefinitely the increased rates only as to prepaid coin box and hotel guest-initiated calls, this would result in such calls being handled for an indefinite period at substantially lower rates than apply to similar calls made from residential or business phones.  As pointed out in the opposition to the petitions, as an example.

... the initial period charge at the rates that are now in effect for a station call in the daytime period from Washington, D.C. to Pittsburgh, Pa. for sentpaid coin box telephone (and hotel-guest initiated) calls is $0.85.  If the rates for such calls were rolled back to the level prior to January 26, 1971, the charge would be $0.70, while the charge for the same call dialed directly would be $0.75.  This would create a distortion in the rate structure whereby the telephone user could save money by placing an operator-handled coin box call rather than by dialing directly.  * * * Similarly, the initial period charge for a person-to-person call from Washington to Pittsburgh is $1.35, whether made from a coin telephone or from a home telephone.  If, as the Trial Staff requests, the sent-paid coin box rates were rolled back to the former level, the charge for such a person-to-person call would be $1.10 if made from a coin telephone but would still be $1.35 from a home telephone.  Again, a telephone user could get a more advantageous rate by using a coin box rather than his home telephone.


Moreover, if we should later find, after hearing, that the prepaid charges to the coin-box users and hotel guests were too low, the telephone companies would have no recourse to recover such underpayments.

 [*917]  10.  In our Memorandum Opinion and Order released January 21, 1971 (FCC 71-74) we dealt more fully with the matters contained in our prior January 20, 1971 order (FCC 71-64).  We stated, in paragraph 15 thereof, as follows:

... In response to an inquiry from the Chief of the Common Carrier Bureau, AT&T indicated, in a letter of December 1, 1970, that it could institute a procedure for maintenance of collection record, at minimal cost and complexity, which would assure equitable treatment to all but coin-box patrons or hotel guests paying for toll calls.  We have been assured that other carriers will also be able to establish such procedures.  According to AT&T the cost of maintaining individual records for sent paid coin-box calls and for hotel guest calls would be approximately five times the additional revenue from such users sought by AT&T in its November 20, 1970 filing.  Accordingly, with respect to those classes of service we provided that accounting procedures be established sufficient to provide revenue data for the classes as a whole rather than on an individual user basis.  Should the rates ultimately be reduced or modified as a consequence of this proceeding in such a way as to require further consideration of the total revenue collected from these user classes, the carrier shall dispose of such funds as directed by the Commission.


According to AT&T the estimated cost of maintaining the individual records referred to is approximately $57,000,000, whereas the associated revenue under the modified rate schedules now in effect is approximately $7,000,000, or a ratio of approximately 8 to 1.  Under such circumstances, the infeasibility of providing for the potential refunds to individual users of sent paid coin-box calls and hotel guest-initiated calls in a manner which would require accounting for each individual call is apparent.  The situation in this respect is analogous to that noted by the U.S. Court of Appeals for the D.C. Circuit in the Bebchick case when faced with the prospect of refunds to D.C. Transit riders where it stated:

It is not feasible to require refunds to be made to individuals who paid the increase.  Nevertheless, the amount realized by Transit from the increase must be utilized for the benefit of the class who paid it, that is, those who use Transit...  Bebchick v. P.U.C., 318 F. 2d 187, 203 (1963)

Thus, we have provided for an accounting by the company for the amounts paid by these classes of users by virtue of the increased charges looking toward a possible refund to them as a class in a manner best calculated to benefit them as a class.

11.  Accordingly, IT IS ORDERED, That the aforementioned "Application for Stay of, or Extension of Time for Effective Date of FCC Order 71-64 (dated January 20, 1971) pending Petition for Reconsideration" IS DISMISSED, and the "Petition for Reconsideration" by the Trial Staff IS DENIED.









I concur in the denial of further suspension of the entire $250 million ATT rate increase.  For the reasons stated in my concurring opinion at the time the Commission designated this case for hearing, -- F.C.C. 2d -- (1971), I believe that in the totality of circumstances of this case,  [*918]  consumers are adequately protected by the Commission's accounting order and hearing.

However, I disagree with the Commission's treatment of our trial staff's proposal that rate increases for coin-box (pay telephone) calls and hotel guest-initiated telephone calls be suspended altogether.  Our trial staff's concern is that there is no economic way to protect these consumers if in fact the Commission determines that the proposed rate increases are unreasonable.  It is simply not practical to keep account of who has made those calls.

Our staff also points out that there are two considerations which support a complete suspension pending the outcome of the case.  One, the sum is nominal, something around 2% of the total rate increase.  The impact on Bell's revenues if a suspension were made would be infinitesimal.  In addition the equities are strongly on the side of suspension.  Those consumers most likely to have to pay increased rates -- particularly for coin-box telephones -- are those who often cannot afford telephones and resort to coin telephones only when calls are absolutely necessary.  As a practical matter there is no way the Commission can provide relief to the particular consumers if we find the new rates unreasonable.

In these circumstances I would have supported the initial efforts of our trial staff as they act to improve the public interest advocacy in Commission common carrier cases.

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