In the
Matter of AMERICAN TELEPHONE & TELEGRAPH CO. AND THE ASSOCIATED BELL SYSTEM
COMPANIES Charges for Interstate Telephone Service Transmittals Nos. 10989 and
11027
Docket No. 19129
FEDERAL COMMUNICATIONS COMMISSION
37 F.C.C.2d 754
RELEASE-NUMBER: FCC 72-942
October 26, 1972 Released
Adopted October 18, 1972
JUDGES:
BY THE COMMISSION: COMMISSIONER JOHNSON DISSENTING AND ISSUING A STATEMENT;
COMMISSIONER H. REX LEE CONCURRING IN PART AND DISSENTING IN PART AND ISSUING A
STATEMENT; COMMISSIONER HOOKS CONCURRING IN THE RESULT.
OPINION:
[*754] 1. We are
considering Tariff Application No. 898 of the American Telephone &
Telegraph Company (AT&T), filed September 1, 1972, in which AT&T
requests special permission to make certain amendments in tariff schedules that
are in issue in this proceeding. In view of the unique circumstances
pertaining to this application and its technical nature, some background will
be helpful.
2. On November 20, 1970,
AT&T filed revised tariff pages to its interstate message toll service tariff
(Transmittal No. 10989) which provided for substantial rate increases effective
January 19, 1971. These rate increases, according to AT&T, would have
increased earnings n1 by about $545 million a year and
would have increased the Bell System's overall rate of return to 9.5%. If
no action had been taken by us, the tariffs would have gone into effect
automatically on the date shown thereon, i.e. January 19, 1971, 47 U.S.C.
203-204. However, we did take action. In a letter to AT&T dated
January 12, 1971, we identified some of the questions of lawfulness raised by
the tariff submission (e.g. the projected return was substantially in excess of
the 7-7 1/2% return previously allowed) and we specifically requested
"that the effective date of the tariffs as filed be postponed by your
company pending the outcome of an expedited hearing." (See Att. A)
n1 Net earnings before income taxes.
3. AT&T responded by
letter of January 13, 1971 (Att. B), and stated that it would postpone the
effective date of the tariff pages pending hearing. Accordingly, on
January 14, 1971, AT&T filed further revised tariff pages which, in
pertinent part, expressly stated that the January 19, 1971 effective date of
the pages in question was "postponed in accordance with AT&T's letter
to FCC dated January 13, 1971 with respect to Transmittal No. 10989." (See
our two Memorandum Opinion and Orders of January 20, 1971 and January 21,
1971 [*755] for a more detailed exposition of the background and
scope of the entire proceedings herein; 27 F.C.C. 2d 149 et seq.)
4. Although not directly
relevant to the question before us, it should be noted that, in addition to the
1970 rate increases that are in issue herein, a schedule of lower rates which
was filed pursuant to special permission by us which is now in effect subject
to an accounting and refund order, is also in issue in this case.
Accordingly, as we stated in our Memorandum Opinion and Order of January 21,
1971, the proceedings herein are: to inquire into the justness and reasonableness
of the rates both as originally filed and as modified by the carrier.
(Italic ours.) (27 F.C.C. 2d 154.)
5. Thus, we have before us in
this proceeding two sets of rate schedules, one of which has been deferred
indefinitely at our request pending the outcome of the hearing and the other of
which is in effect on an interim basis. AT&T's application requests
that we waive certain of our requirements (Sec. 61.38, 61.58 of our Rules and
Paragraph 11 of our February 3, 1972 order in Docket 18128), and allow AT&T
to file further revised tariff pages that would do two things: one, cancel the
tariff language that states that the effective date of the 1970 tariff pages
has been postponed pending hearing thereon; and two, substitute an effective
date of September 15, 1972 for the January 19, 1971 date originally shown on
such pages. The application further makes clear that, upon granting this
request, AT&T assumes that we would then take the following additional
step: upon the filing of such further tariff pages bearing the substitute
effective date of September 15, 1972, we would act immediately to suspend the
substitute effective date for three months. At the end of such 3-month
suspension period, i.e. December 15, 1972, the substitute effective date presumably
would become operative, if, by that time, we had not rendered our decision
herein. However, it is AT&T's stated assumption that we will render
our decision and state what revised rates, if any, will be permitted to go into
effect, before the end of such 3-month suspension period.
6. AT&T makes clear that
its purpose is to accomplish technical compliance with certain provisions in
the regulations of the Price Commission. The carrier wants to make sure
that, by the time we make our decision on rate of return, we will not only have
"suspended" the effective date of the 1970 rates for the 3-month
period specified in Sec. 204 of the Act but that such period will have actually
run. The reason that this is important to AT&T is that AT&T
construes the present Price Commission regulations as requiring such a
suspension and the running of the 3-month period before any interim rate
increases that we may allow in our rate of return decision could be placed into
effect without a delay of at least three months after our decision.
Obviously, AT&T wants to avoid any such delay.
7. The pertinent Price
Commission regulations are as follows:
Any interim rate which is authorized
by a regulatory agency * * * may not be placed into effect * * * until the
regulatory agency has suspended the interim rate for the maximum period allowed
by law, and such suspension period has run unless * * * [the interim rate]
represents a price increase of the same or a lesser amount than a previously
filed rate for the same or equivalent service which has been suspended for the
maximum period, and that suspension has run; 6 C.F.R. Sec. 300.307(c)(1).
(Italic ours.) [*756] AT&T assumes that to the extent any
interim rate increases that we may allow will represent price increases
"of the same or lesser amount than" the 1970 tariff increases and
that if the latter have been suspended for at least a 3-month period, any such
interim rate increases may be put into effect without a 3-month suspension.
8. Objections to AT&T's
application have been submitted by the Trial Staff, Commonwealth of
Pennsylvania, Secretary of Defense, State of New Jersey, and American Telephone
Consumer's Council. Comments by Microwave Communications, Inc. appear to
support a grant of the application provided that any rate increase we might
allow is distributed "equitably over all services." The United States
Independent Telephone Association supports AT&T's application.
9. It is our opinion that the
pleadings herein raise three questions that we should resolve: (1) Were the
1970 rate increases "suspended" for the maximum period authorized by
law within the meaning of the Price Commission regulations? (2) If not,
should these increases be suspended now so that the maximum period could run in
whole or in part before our rate of return decision herein?; and (3) If these
rates have already been suspended for such maximum period, should they be
re-suspended in order to remove any doubt with respect thereto?
10. With respect to the first
question, AT&T contends that we have already suspended the 1970 increases
within the intendment of the Price Commission regulations. Nevertheless,
AT&T suggests that we should allow it to re-file them and then issue an
order under Section 204 of the Act, "formalizing the suspension begun in January,
1971" in order to "remove any technical question that might otherwise
arise as to whether the action taken with respect to MTS rates in January 1971
constituted a suspension within the meaning of the Price Commission
regulations." The Trial Staff contends that we have not suspended the 1970
rate increases; that the Price Commission regulations require that any interim
rate increases we may allow must be suspended for three months; and that a
grant of the application would be to "impede", "circumvent"
or "steal a march on" the Price Commission. USITA states that
our action in January, 1971 "more than meets the Price Commission
suspension requirements;" and the State of New Jersey suggests that we
proceed to issue an order under Section 204 suspending the 1970 tariffs for
three months without deciding at this time whether our earlier action in
January, 1971 was a suspension within the meaning of the Price Commission
regulations. None of the other parties appear to address this particular
question.
11. We agree with AT&T's
contention that our action of January 12, 1971 requesting AT&T to postpone
the effective date of the 1970 tariffs pending the outcome of an expedited
hearing, and AT&T's compliance therewith, constituted a "suspension"
within the meaning of Section 300.307(c)(1) of the Price Commission
regulations. Thus, any interim rate increases that we may allow herein
that are the same or less than those in the suspended 1970 tariffs could be put
into effect by AT&T after our decision upon such date as we should
determine to be appropriate. The letter we sent to AT&T on January
12, 1971 was "by direction of the Commission" and constituted an
action by us which, under the circumstances of this case, was clearly
authorized by the specific powers given to us under Secs. 4(i), 4(j) and 203(b)
of [*757] the Communications Act. We note that no party
herein raises any question about our authority to act as we did. The
Trial Staff's contention that we did not "suspend" appears to be
based primarily upon the fact that we did not expressly proceed under Section
204 of the Act. However, Section 204 of the Act does not constitute our
sole and exclusive statutory authority to take action deferring or postponing
the effectiveness of tariffs pending hearing. (See, e.g. In the Matter of
AT&T, et al, Dockets 18128 and 10684, FCC 72-619, released July 19,
1972). In our opinion, the word "suspension" as it appears in
the Price Commission's regulations is used in its ordinary meaning (i.e.
"deferment" or "postponement") without reference to any
particular statutory provisions by which such suspension is effectuated and
without regard to the particular kind of agency action, formal or informal,
that brings about such suspension. The only specific procedural requirement
is that the suspension be for the "maximum period authorized by law."
Moreover, it would appear to be of little, if any consequence from the
standpoint of the spirit if not the letter, of the Price Commission regulations
whether the "suspension" resulted from an edict of the Commission or
from a voluntary response by the carrier to a formal request by the
Commission. In either event, the effect is the same, particularly in view
of the fact that the rate schedule has remained on file and its lawfulness has
been the subject of these proceedings.
12. Further, the Trial Staff's
contention that we did not suspend also appears to be based upon the claim
that, since the 1970 tariffs never became effective, they "have no legal
status whatsoever." We believe that this contention is in error. The
facts are that the 1970 tariffs are now officially and lawfully on file with
us; they were filed pursuant to Section 203 of the Act; they were filed in
compliance with Part 61 of our rules applicable thereto, including the
submission of supporting cost and other data, the filing of AT&T's
case-in-chief, and the giving of actual notice to the public; they have been
accepted by us for filing; they bear a published effective date of January 19,
1971, which date has been postponed pendente lite by further tariff revisions
which were also officially and lawfully filed pursuant to special permission
given by us to AT&T on January 12, 1971; and they have been specifically
designated for hearing in the proceedings herein.
13. We turn now to the request
of AT&T that, even if we have already suspended the 1970 rates, we should
re-suspend them under Section 204 of the Act. We appreciate that there
may be some substance to AT&T's claim, which we do not now decide, that
they would be an "undue hardship" or "gross inequity" if
there was to be a delay for a period of three months in the effective date of
any interim rate increases we might allow after a lengthy formal proceeding
concerning the merits thereof. However, we do not believe that we should
grant this application. We agree with the Trial Staff that it would be
confusing and perhaps misleading to the public for us to grant AT&T an
application to re-file substantial rate increases that are already on file but
suspended pending a hearing only to have such re-filed rates immediately
suspended and set for hearing in which the hearing record is already
closed. Moreover, the present suspension is for a period
[*758] that runs until we render our decision herein on the merits whereas
AT&T's application would attempt to substitute a suspension period under
Section 204 that would definitely expire December 15, 1972 after which users
would pay higher charges if we had not rendered a decision by then. In
addition, if we were to grant the application with the intent of suspending the
resubmitted rates for three months under Section 204, substantial question
would be raised as to whether we would not be required to re-open the record
and initiate further hearings. Insofar as Section 204 is concerned, it
appears that any suspension there under must be an action that is ancillary to
the principal action by the Commission to "enter upon a hearing concerning
the lawfulness thereof." 47 U.S.C. 204 AT&T's application does not
contemplate that this be done.
14. We believe that AT&T's
major objective in filing its application will have been accomplished by our
action herein ruling definitely that, as we interpret the Price Commission
regulations, the 1970 rates have been suspended for the maximum period and any
interim rate increases we allow that are within the parameters of such
suspended rates need not be suspended further. This will remove any
doubts on this score insofar as this agency is concerned. We believe
that, in the meantime, the public interest will be served by maintaining the
status quo until we render our decision on the allowable rate of return.
15. Accordingly, in view of
the foregoing, AT&T's Tariff Application No. 898 IS DENIED.
FEDERAL
COMMUNICATIONS COMMISSION, BEN F. WAPLE, Secretary.
CONCURBY:
LEE (IN PART)
DISSENTBY:
LEE (IN PART); JOHNSON
DISSENT:
STATEMENT OF COMMISSIONERS H. REX
LEE, CONCURRING IN PART AND DISSENTING IN PART
The American Telephone and Telegraph
Company has requested special permission to resubmit the $545 million
interstate rate increase, which it originally filed on November 20, 1970, and
which precipitated the proceedings in Docket No. 19129, and to substitute a new
effective date (September 15, 1972) for the rate schedules. It has also
asked the Commission to suspend immediately such resubmitted rate increases for
three months. AT&T candidly concedes that its purpose is to
accomplish technical compliance with certain Price Commission regulations,
which require that a regulatory agency suspend any interim rate increases for
the full statutory period. In other words, if this Commission decides in
Phase I (rate of return) of Docket No. 19129 that the Bell System is entitled
to rate increases above those now being collected pursuant to an accounting and
refund order, AT&T wants to be able to effectuate such increases without
the additional delay imposed by Price Commission directives.
While I am somewhat sympathetic with
AT&T's present request in light of the Commission's failure to proceed to an
early resolution of the rate of return phase of Docket No. 19129, n1 I cannot agree that special
permission should be granted, and it is for that reason that I have concurred
in the majority's denial of AT&T's application to resubmit its original
tariff filing. For one thing, the application for special permission does
not include any of the supporting data required by Section 61.38 of the
Rules. Furthermore, AT&T has not given proper notice to the public
and the Commission of its intention to increase interstate rates, pursuant to
the provisions of Section 61.58. The Bell System seeks waiver of our
requirements apparently on the theory that the proposed tariff revisions
contain material originally filed on November 20, 1970, under Transmittal No.
10989. However, as the Trial Staff points out in its petition to deny the
AT&T request, the situation has changed dramatically since 1970 in regard
to inflationary pressures, interest rates, traffic trends, cost projections and
government intervention, and the data supplied in 1970 is hardly relevant to
the increases now proposed, which would result in $300 million more in
[*764] annual interstate earnings for the Bell System. In addition,
the proposed rate increases would all fall on message toll telephone users, but
AT&T has made no attempt to show how it intends to implement its earlier
proposal to readjust rates for non-MTS services.
n1 While I did concur in the decision to schedule a
limited reargument of the Phase I issues, I did so only to accommodate the
wishes of two of the present Commissioners who were not members of this agency
at the time of the initial oral argument in October, 1971.
It should also be noted that if
special permission is granted for the resubmission of rate increases and the Commission's
decision in Phase I is delayed beyond the requested three-month suspension
period, AT&T's subsequent effectuation of new interstate tariffs could
cause great confusion for rate payers and investors who might assume that the
increased rates were the result of a Phase I decision. Moreover, if our
decision on the rate of return issue is adverse to the Bell System's position
and readjustments in interstate rates are required as a result, there could be
serious impact on the market value of AT&T common stock, which has
witnessed some improvement in recent weeks.
As already indicated, the
extraordinary relief requested by AT&T is clearly an attempt to circumvent
the impact of recent Price Commission regulations. AT&T undoubtedly
feels that a Phase I decision will permit rate levels higher than those now in
effect, and it does not want any further delay in the implementation of rate
increases after the Commission's decision. But the Bell System's desires
run counter to the clear thrust of Price Commission regulations, adopted as
part of the President's program to control inflationary pressures in the
economy. While AT&T may believe that Price Commission regulations are
unfairly applied to the Bell System in light of the voluntary postponement of
the effective date of its 1970 tariff filings, the matter is one for Price
Commission review. In the meantime, the Commission should make every
effort to enforce the spirit and intent of Price Commission directives. n2
n2 Price Commission
regulations do permit an immediate implementation of rate increases if
"required for emergency reasons or to prevent an undue hardship or gross
inequity." However, AT&T's application and the material attached
thereto fail to demonstrate that an emergency situation exists or that the
elimination of a full suspension is needed to prevent undue hardship or gross
inequity. In fact, recent reports of AT&T earnings indicate that the
contrary is the case.
In addition, as the majority points
out, if we were to suspend the resubmitted rate increases for three months
pursuant to Section 204 of the Communications Act, a substantial question would
arise as to whether the record in Docket No. 19129 should be reopened for
further hearings. For, it appears that any suspension ordered under Section
204 must be an action that is ancillary to the Commission's designation of a
hearing concerning the lawfulness of proposed rate schedules. AT&T's
application for special permission does not even contemplate further hearings
in Phase I.
Of course, the majority sidesteps
the entire issue of the resubmission of 1970 tariff filings by holding that the
Commission's action of January 12, 1971, in requesting AT&T to postpone the
effective date of its 1970 rate schedules pending the outcome of an expedited
hearing constituted a "suspension" within the meaning of Price
Commission regulations. Relying on this theory, the majority concludes
that any rate increases to be allowed in a Phase I decision that are the same
or less than those contained in the 1970 tariff filings can be effectuated
immediately by AT&T. I simply cannot agree with such a construction
of our 1971 action. Whatever status AT&T's original
[*765] tariff schedules now have, it is clear that our informal request
of AT&T to postpone the effective date of the rate increases did not amount
to a statutory suspension within the meaning of the Communications Act or Price
Commission regulations.
For one thing, AT&T, in exchange
for a voluntary postponement of the effective date, was granted special
permission to file revised tariffs, which would produce additional annual net
earnings of $250 million, subject to accounting and refund. Moreover, in
responding to the Commission request, AT&T expressly reserved the right to
establish a new effective date for its original tariff filing and thereby to
terminate any "deferral" or "postponement." If the
Commission's action effectively constituted a statutory suspension, AT&T's
reservation represented a meaningless gesture. In any event, above and
beyond all of the legal niceties mentioned by the majority is the fact that not
even the Bell System seriously considered the Commission's 1971 action as a
statutory suspension -- its application for special permission clearly
indicates its interpretation of the Commission action. If AT&T really
believed in the majority's position, it could have easily asked for a
declaratory ruling to that effect. The point is that the original tariff
schedules submitted by AT&T were not suspended by the Commission n3 -- their effective date was
voluntarily postponed by the Bell System in return for the effectuation of
modified rates, which have permitted increased interstate revenues since early
1971.
n3 If our January 12, 1971, action did constitute a
"suspension" within the meaning of the Communications Act and the
effect thereof was to confirm this agency's power to stop the effectiveness of
tariff filings during an investigation into their lawfulness, it could be
argued that Price Commission regulations require continuation of such a
suspension until all phases of the many inquiries concerning the Bell System
have been concluded.
Since the majority's interpretation
is clearly erroneous and only serves to undercut the role of the Price
Commission in the implementation of the New Economic Policy, I dissent to that
portion of the majority's decision that holds our 1971 action effectively
amounted to a statutory suspension. In my own opinion, our common carrier
regulation should be fashioned in a way that would assist the current program
to control inflationary pressures rather than in an attempt to avoid the
applicability of NEP guidelines. [*760]
DISSENTING OPINION OF COMMISSIONER
NICHOLAS JOHNSON
We return to the continuing story of
whether Bell, with the help of the FCC, will be successful in getting more
profit from the American consumer. I don't like this chapter, or the way
the story seems to be coming out, and so I dissent. Whether I can explain
what is happening is another question, but I am willing to give it a try in
what follows.
In November 1970 Bell filed the
largest interstate rate increase they have ever sought from the FCC. The
FCC had two basic choices. It could suspend the entire rate increase for
three months and hold a hearing on the lawfulness of the increase. During
the time of the hearing, which might take years, Bell would be collecting the
higher rates after the three months suspension had run, subject to a possible
order from the Commission to give the money back if the FCC subsequently found
the rates were in fact too high. But Bell would get [*761]
nothing for three months from the higher rates. n1 Another choice was for the
Commission to strike a bargain with Bell. And that is what
happened.
n1 There is a strong view, discussed at the time in
January 1971, which I need not consider now, that the FCC has sufficient
general powers under the Communications Act to stop a tariff filing from going
into effect without regard to the statutory suspension period while the agency
reasonably proceeds to litigate the issues raised by the tariff. It is
argued this is true when the effects of the tariff are extraordinary -- for
example, as in this case, when the rate increase affects every consumer in the
nation, and perhaps also because the amount requested is so large as compared
with the profit permitted under the agency's last determination of reasonable
rate of return. This view underpins the agency's decision in July 1972 to
stop tariff filings unless accompanied by special permission -- a view Bell did
not appeal after losing on reconsideration. It is also possible to argue
that the "maximum period authorized by law" under the Price
Commission rules means the full power of the FCC to hold up rate
increases. This would mean that no increase could go into effect until
the FCC has expended its full power to suspend them. That power under
this theory would include the power to stop rate increases until Dkt. No.
18128/Dkt. No. 18684 had been concluded, as well as Phase II in Dkt. No. 19129.
Bell agreed to reduce its rate
increase to about half. The FCC agreed to let the rate increase go into
effect immediately, to conduct an expedited proceeding that would evaluate the
entire rate increase Bell was seeking, and to issue an accounting order in case
refunds were indicated. The FCC requested ATT to file lower rates under
these conditions. Bell agreed, stating that it specifically reserved the
right to make the full rate increase effective if it determined it was
necessary. Discussion at the time clearly indicated that Bell would be
left in about the same position -- they would get about as much in increased
revenues from an immediate lower rate increase as it would get from the full
increase that did not take effect for three months, assuming that a final
decision was made in a six-to-nine month time frame. At the end of the
time period, Bell would have about as much money either way.
And so the FCC proceeding began and
continued roughly on schedule up to August 1971. Then came the Nixon
Administration New Economic Policy which threw the schedule into a cocked
hat. After a series of events too numerous to recount, the question of
what profit rate to allow the Bell System again seems near a decision at the
FCC. But two events have affected what happens now, and they are
considered in this action.
First, the Price Commission now
requires that any rate increase permitted Bell must have been suspended for the
full statutory period. That means, if the FCC is to permit higher rates
for Bell in a forthcoming decision, Bell will have to file those rates.
Those rates will then, under Price Commission rules, have to be suspended for
three months before they can go into effect. Bell does not want to have
to wait three months after an FCC decision, and the FCC is trying to be
accommodating.
Second, the FCC has also decided to
stop tariff filings in proceedings where the Commission is trying to make
decisions -- in effect trying to get the tariffs to hold still long enough to
make decisions. Thus, to file a new tariff, Bell needs special permission
from the Commission.
And so Bell is here seeking special
permission to file the rest of its rate increase now. It tells the FCC to
go ahead and suspend it for three months under the statute, thereby complying
with the Price Commission rules and permitting any rate increases to be
authorized [*762] subsequently to go into effect at the end of the
three months. The Bell request was put out for comment as an act of
cosmetology to improve the image of a possible Bell price hike to be granted
shortly after the election. This request for permission has been opposed
by the major consumer parties to this proceeding, on grounds I find cogent, as
apparently the majority does as well, since it here decides not to go the special
permission route.
The arguments against granting the
special permission are numerous. Suppose for some reason the Commission
does not make a final decision within the three month period. The rates
would then go into effect with catastrophic effects on consumers and the
economy which would be difficult to undo, particularly if the Commission were
to decide that none of the rate increase should have been permitted.
Secondly, FCC rules require Bell to notify the public and provide detailed
backup material justifying a new rate increase. Bell argues that the
special permission requested is just the old rate increase. But notice to
the public was given in late 1970 to early 1971. Bell's justification was
submitted then also. And although there has been a hearing held on the
full rate increase, that hearing was closed in August 1971, and the material
put in the record since then clearly does not comply with the Commission's
rules. So in order to grant the special permission, the Commission would
have to waive its major tariff filing rules with almost no rationale for doing
so. Thirdly, granting special permission would simply accommodate Bell's
interest in meeting the Price Commission requirements as quickly as possible --
hardly an appropriate posture for the FCC to take in helping the Price
Commission to fight inflation. And finally, the FCC power to suspend
rates is an ancillary power connected with the power to set a tariff for
hearing. If the Commission suspends the tariff, it must do so when it
sets a tariff for hearing. In this case, granting the special permission
and suspending the tariff would mean that the record in this case would have to
be reopened.
Granting the special permission Bell
seeks is not a viable alternative. But this agency is nothing if it is
not ingenious. The majority concludes that no special permission was ever
needed. The Commission's January 1971 letter requesting Bell to postpone
its rates now is deemed to be a binding suspension, even though Bell specifically
reserved the right to terminate the postponement and put the full rate increase
into effect -- something it would have found it difficult to do after price
controls were placed on the economy, and something for which it would require
special permission after the Commission's July 1972 order requiring special
permission. The majority concludes the Price Commission uses
"suspension" to mean "postponement." But why does that
agency say "for the maximum period"? The maximum period for a
"postponement" is forever. I do not see how a request for a
postponement, which Bell agreed to, specifically reserving its right later to
refuse the request, can now be termed a legal suspension. Presumably Bell
could have filed a new effective date for the full increase within a month
after the Commission's January 1971 letter, and if the Commission had not
acted, the rates would have become effective. If so, how can the January
1971 letter be a suspension which bars rate effectiveness for the term of the
suspension? But now any "request" has to [*763] be
a "suspension", or else any new rate increase Bell files here has to
be suspended for the full statutory period under Price Commission rules.
And the majority can't have that. n2
n2 There is one other
possibility. Price Commission rules permit a rate increase to go into
effect without statutory suspension "for emergency reasons, or to prevent
an undue hardship or gross inequity." But it is inconceivable that such a
finding validly could be made here.
I would deny the special permission,
and hold that if the FCC decides Bell is entitled to higher rates than are now
in effect, those rates when filed must be suspended for the statutory
period. n3
n3 Under these
circumstances, the majority might then hold that the hearing requirement had
been complied with. My own view, however, is that the FCC must remand
this case for rehearing insofar as the hearing was completed prior to the New
Economic Policy.
See American Telephone and
Telegraph Co., FCC 72-662, F.C.C. 2d
, (1972).
APPENDIX:
Attachment A FEDERAL COMMUNICATIONS
COMMISSION, Washington, D.C. 20554, January 12, 1971.
Attention:
MR. DANIEL E. EMERSON, Vice President.
(In reply
refer to: 9100).
AMERICAN
TELEPHONE & TELEGRAPH CO., 195 Broadway, New York, N.Y. 10007.
GENTLEMEN: This is with reference to
the revised tariffs filed by your company providing for increases in rates for
your interstate long distance message telecommunications services (MTT) to be
effective January 19, 1971. According to the information submitted with
such filing, the proposed rate increases are designed by you to produce
additional annual revenues of $385 million. This amount, together with
your estimate of associated cost savings, will produce $545 million of
additional annual net earnings before taxes and a rate of return on your
interstate operations of 9 1/2%.
Upon consideration of this matter,
the Commission hereby requests that the effective date of the tariffs as filed
be postponed by your company pending the outcome of an expedited hearing and,
at the same time, grants AT&T special permission to file revised tariffs,
to be effective on not less than seven days' notice, providing for increases in
MTT rates that will produce additional annual net earnings before income taxes
not to exceed $250 million, rather than the $545 million provided by your
tariff filing. As more fully discussed below, the Commission intends to
conduct an expedited hearing with respect to the lawfulness of such rates, and
to require that all collections under such rates be subject to accounting and
refund by the carriers. In taking these actions, we have taken into
account, among other things, the relationship of your proposed increase to two
proceedings:
(1) Our decision of July 5 and
September 13, 1967, in Docket No. 16258 which determined on the basis of a
comprehensive evidentiary record that an allowable rate of return for your
interstate operations was within a range of 7.0 to 7.5%. The rate of
return objective (9 1/2%) of the subject revised rates substantially exceeds
the upper limits of such range.
(2) The proceedings now in progress
in Docket No. 18128, the issues of which call for a determination of
appropriate relationships among the level of earnings for each of your several
classes of interstate service.
In
determining upon the amount of $250 million specified above as acceptable for
the revised filing, we have taken into account two principal factors:
(1) That interstate annual revenue
requirements will, as of January 1, 1971, be increased by about $130 million as
a consequence of the revisions in jurisdictional separations procedures
prescribed by this Commission in Docket No. 18866 to be effective on that date.
(2) Known changes which have
occurred since the aforementioned 1967 decision in your capital structure and
the costs thereof, including specifically the net increase in embedded cost of
debt.
This action is not to be construed
as Commission approval of the specific rate schedules to be filed pursuant to
the above permission nor as an indication of the findings that may be made
after investigation and hearings to be instituted pursuant to Section 204 of
the Act, to determine the reasonable revenue requirements of the company and
the nature of any further rate adjustments, upwards or downwards, that may be
justified in the light of such determinations. Nor is it our intention by
this action to prejudge the merits of any showing by your company in support of
its claim that it requires a rate of return of 9 1/2%. The Commission, as
indicated above, will institute an investigation and hearing with respect to
the tariff on file and the refiled rates, and 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. In determining
the length of the period of suspension to be ordered under Section 204, we will
give due regard, among other factors, to the January 1, 1971, effective date of
the revised separations procedures prescribed in Docket 18866, and immediate
adverse effects thereof on the company's level of interstate earnings.
In short, the company will be
afforded a full opportunity in the hearing to press for the rate adjustments
which it believes called for. Other interested persons will be allowed to
present their showings, and the Commission will, of course, develop whatever
record it believes desirable in the public interest. In addition to the
matters of the allowable rate of return, the Commission intends to explore
particularly the following issues:
(1) The questions presented as to
the justification for recovering the total of any deficiency in interstate
revenue requirements from MTT service, to the exclusion of adjustment in rates
for other interstate services, as contemplated by the subject tariff filing.
(2) Questions presented as to the
representativeness, for rate making purposes, of your current level of
operating expenses, with particular reference to the extraordinary increases in
the rate of growth in certain classes of such expenses in 1969 and 1970.
(3) The computations which show that
the proposed rates would produce $760 million in additional revenues if there
were no shrinkage in traffic volumes and no shifts and reclassifications of
messages due to changes in users' calling patterns that would result from the
increased charges, and your calculation that such anticipated shrinkage,
shifts, and reclassifications will reduce the amount of the increased revenues
to $385 million, or about 50%. This is also a matter to be explored fully
in the hearing process.
It is our intention to proceed with
and conclude the aforementioned hearings as expeditiously as feasible (e.g.
barring extraordinary developments, within a time frame of six to nine months)
and to order the expedition of the current proceedings in Docket No. 18128 so
that the determinations made therein with respect to the appropriate
relationship among the level of earnings for the several classes of interstate
services, including MTT, may be effectively and timely applied to implement the
determinations made in the forthcoming rate of return proceeding.
We request the company to inform the
Commission within one week whether it will take the actions provided for herein
and submit revised tariffs providing for the above-noted increases. Upon
receipt of the company's response, the Commission will proceed promptly to take
such action as appropriate, in line with the considerations outlined in this
letter.
This letter was adopted by the
Commission on January 11, 1971.
BY
DIRECTION OF THE COMMISSION, DEAN BURCH, Chairman.
Attachment B
AMERICAN TELEPHONE & TELEGRAPH
CO., 195 Broadway, New York, N.Y. 10007, January 13, 1971, Area Code
212-393-1000.
D. E.
EMERSON, Vice President.
The Honorable
DEAN BURCH, Chairman, Federal Communications Commission, 1919 M Street NW.,
Washington, D.C. 20554
DEAR CHAIRMAN BURCH: In your letter
of January 12, 1971, you have requested that AT&T advise the Commission
whether AT&T will postpone the effective date of Tariff Filing No. 10989
pending the outcome of expedited proceedings to be completed within six to nine
months (barring extraordinary developments), and you have granted special
permission to file revised tariffs to produce not more than $250 million in net
earnings before income taxes.
The $250 million interim increase
proposed by the F.C.C. is far short of what is required under today's economic
conditions. However, under all the circumstances set forth by the
Commission and with the explicit understanding that the hearing will be
expedited, AT&T agrees to postpone the effective date of Tariff Filing No.
10989. In responding to the Commission's proposal, AT&T expressly
reserves the right to take such action as may be necessary to protect its position,
including the right to establish a new effective date for Tariff Filing No.
10989, if it should develop that the expedition on which the Commission's
letter is based cannot be fulfilled. AT&T commits itself to cooperate
in every way in expediting the hearings so they may be completed in the
shortest time frame possible, namely the six month period mentioned in the
Commission's letter, or indeed less. The Company's case in chief was
filed November 20, 1970, and the Company is prepared to proceed at once.
In complying with your request, we
are doing so on the premise that the expedited hearings will put rate of return
at issue first, and that upon determination of this issue by the Commission,
appropriate rates will be made effective.
Revised tariffs to provide the
additional $250 million will be filed on special permission as permitted by
your letter.
Very truly yours,