Petition — National Ass'n of Radiotelephone Systems v. Federal Communications Commission

eo

Supreme Court, U. %

FILED

FEB 25 1976

| MICHAEL RODAK, JR., OLERK

IN THE |

Supreme Court of the United States

OcroBER TERM, 1975

No, 25-1216

NATIONAL ASSOCIATION OF RADIOTELEPHONE SYSTEMS,

Petitioner,

v.

FEDERAL COMMUNICATIONS COMMISSION, ET AL.,

. Respondents.

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE

DISTRICT OF COLUMBIA CIRCUIT

ABE ForTas

KENNETH E. HarpMAN

Fortas AND KovEeN 7

1200 Twenty-ninth “treet, N.W.

Washington, D. C. 20007

Telephone: (202) 337-5700

Attorneys for Petitioner

National Association of

Radiotelephone Systems

February 25, 1976

Prass oy Brrzon 8S. ADAMs PRINTING, INC., WASHINGTON, D. C.

poi ee

TABLE OF CONTENTS

Page

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PE? Loo. oe ices dendesduekeeeesenbenseaten 2

SI TD bn dc. ccscacoscsesccccsaceasens 2

Statutory Provisions INVOLVED ..............eee00: 5

I bb cc cecccbeatescadescees 5

REASONS FOR GRANTING THE WRIT .............-0000- 20

SED ccdbidues eebhounenecceesecueeusesseness 34

TABLE OF AUTHORITIES

Court CasEs:

Ashbacker Radio Corp. v. FCC, 326 U.S. 327 (1945) .. 26

Bell Telephone Company of Pennsylvania v. FCC, 503

F.2d 1250 (3d Cir. 1974), cert. den. 95 S.Ct. 2620

RR So Me rete ae es Sas ae 18

California Public Utilities Commission v. FCC, No.

ee Ge RRR eee renee 32

Florida Lime and Avocado Growers v. Paul, 373 U.S.

i Cn tb cedee eben ie dies ane aad 20, 26, 27

FPC v. Texaco, Inc., 417 U.S. 380 (1974) ....20, 24, 25, 26

Gulf States Utilities Co. v. FPC, 411 US. 747 (1973)

20, 22, 23, 24

Head v. New Mexico Board of Examiners, 374 U.S. 424

ETERS AL AEE ALPEN LORS eae pepe ede: 20, 26, 27

National Association of Regulatory Utility Commis-

stoners v. FCC, No. 75-1075, — U.S. App. D.C. —,

—F.2d — ( February BRR Rei nee Bare: 30, 32

North Carolina Utilities Commission v. FCC, No. 74-

en ee a ace h eae ones 32

North Carolina Utilities Commission v. FCC, No. 76-

i al 32

Philadelphia Television Broadcasting Co. v. FCC, 123

U.S. App. D.C. 288, 359 F.2d 282 (1966) ........ 30

ii Table of Authorities Continued

Page

SEC v. Chenery Corp., 318 U.S. 80 (1943) ....5, 20, 28, 29

SEC vy. Chenery Corp., 332 U.S. 194 (1947) ......... 29

United States v. American Telephone and Telegraph

Company, et al., D.C.D.C. Civ. Action No. 74-1698

(Nov. 20, 1974) ......ccccccccccccesccccvccecs 11, 23

United States v. Drum, 368 U.S. 370 (1962) ......... 31

United States v. Paramount Pictures, 334 U.S. 131

CREED cc ccnvccccesesccctecsrssccesenfesveseses 24

FeperaL CommvunicaTions ComMMIssion CasEs:

ATAT, 56 F.C.C. 24 14 (1975) ......cecccccccecess 32

Carterfone, 13 F.C.C. 2d 420 (1968), recon. den. 14

PETES, Te Tk GHD co vc cedcncsenseveceecesses 18

Computer Inquiry, 28 F.C.C. 2d 267 (1971) .......... 30

Frontier Broadcasting Co. v. Collier, 24 F.C.C. 251

FOUND bc ccnp deeseducencsesicecesessstsennsex« 30

General Mobile Radio Service, 13 F.C.C. 1190 (1949) .. 10

General Telephone Company of California, 21 Pike &

Fischer Radio Reg. 19 (1960) .................. 10

In the Matter of Application of Illinois Bell Telephone

Company, File No. 20115-CD-P-(—)-76 (July 31,

NE dh ons on hnendeesns0s00600s tneeksseiarenes 17

Industrial Radiolocation Service, 5 F.C.C. 2d 197

(IBGE) nccncccccvcesccvcvoscccccasesccesessere 30

Interstate and Foreign Message Toil Telephone Serv-

ice, 56 F'.C.C. 2d 593 (1975) .......ccccncccccces 32

ITT Mobile Telephone Company, 1 Pike & Fischer

Radio Reg. 2d 957 (1963) .........ccccccsccees 10

Telerent Leasing Corp., 45 F.C.C. 2d 204 (1974) .... 32

FEDERAL STATUTES:

Administrative Procedure Act, 5 U.S.C.

OB OBL, OF OOM. cc ccccccceccccccsonvesveceseseuses 4)

DUE n-6.04040sabCasaneeradenscnseuseessoseee 32

Communications Act of 1934, 47 U.S.C.

BO DBL, GF OOM cccccccccccccccccsssccsceescsecens 4)

DUD @ccacuccccedoussancevdvaseseuseedes 4, 9, 26

BRIBE ccccccccccccscccecesesseeecccesseeseces 9

RED <6. cu dkddsgnetsWisndesserwesvenees 4, 13, 30

DEERE ndyonvé0ebeboecehasscanedeseencesesses 6

Table of Authorities Continued iii

Page

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REARS ARN re aon

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| ini ees ierluiniaranieoeienrtapacate be mentaeta a 17

Judicial Review Act, 28 U.S.C.

i edie eee tees ee en cue i 17

Judiciary and Judicial Procedure Act, 28 U.S.C.

DD Dveietieeeueeteshguceuee luce ets. 2

Natural Gas Act, 15 U.S.C.

Pe SE ne a ae ee 25

I gtr eR i 25

Rvues oF THE FeperaL Communications CoMmIssIon:

fF eee 6, 7

§ 21.10 et seq. (1974) .............00 cee 10

SY SEED. 5a vd Uv cde eb ncedGevdceeedcun 10

RE OM ED on. cc cuccudesscececeecee 8,11

Parts 89, 91 and 93 (1973) ..................... 8, 29

MISCELLANEOUS:

Lohr, ‘‘Scenario Change Needed for 900 Megahertz

Frequencies,’’ Communicator, Vol. 17, No. 11 (De-

EE SEED Nh edie Uawicddecccdusuedeuaeseus 10

At er —

IN THE

Supreme Court of the United States

OcroBER TERM, 1975

No.

NATIONAL ASSOCIATION OF RADIOTELEPHONE SYSTEMS,

Petitioner,

v.

FEDERAL COMMUNICATIONS COMMISSION, ET AL.,

Respondents.

PETITION FOR WRIT OF CERTIORAR? TO THE

UNITED STATES COURT OF APPEALS FOR THE

DISTRICT OF COLUMBIA CIRCUIT

Petitioner, the National Association of Radiotele-

phone Systems (‘‘NARS’’), respectfully prays that a

writ of certiorari issue to review the judgment and

opinion of the United States Court of Appeals for the

District of Columbia Circuit (the ‘‘Court of Appeals’’)

entered in this proceeding on January 5, 1976.

OPINIONS BELOW

The opinion of the Court of Appeals, which has not

yet been officially reported,’ appears at Appendix A

to this petition.” The Second Report and Order of re-

‘The opinion is reported at 35 Pike & Fischer Radio Reg. 2d

1484 (1976).

* The appendices are separately bound in a companion volume,

hereinafter cited as ‘‘Pet. App.’’ The opinion appears at Pet. App.

1a-33a.

2

spondent Federal Communications Commission (the

‘*FCC’’), which is reported at 46 F.C.C. 2d 752 (1974),

appears at Appendix B (Pet. App. 34a-134a); its

Memorandum Opinion and Order on reconsideration,

reported at 51 F.C.C. 2d 945 (1975), appears at Ap-

pendix C (Pet. App. 135a-266a) ; and its Memorandum

Opinion and Order denying further reconsideration,

reported at 55 F.C.C. 2d 771 (1975), appears at Ap-

pendix D. (Pet. App. 267a-273a).

JURISDICTION

The judgment of the Court of Appeals (Opinion by

Wilkey, Cir. J.) was entered on January 5, 1976, and

this petition for writ of certiorari is filed within 90

days of that date. The Court of Appeals, upon motion

of this petitioner and after considering the FCC’s

brief in opposition, granted a stay of its mandate

pending the filing of this petition for certiorari. The

jurisdiction of this Court is invoked under 28 U.S.C.

§ 1254(1) (1970).

QUESTIONS PRESENTED

The Monopoly Issues

(a) AT&T and the Cellulcr System

1. Whether the Court of Appeals erred in affirm-

ing a rulemaking order of the FCC disposing of a vast

band of the radio spectrum on a basis such that, as the

Court of Appeals found, American Telephone and

Telegraph Company (“‘AT&T’’) “appears likely to

dominate substantially the field of radio telephone

service, which has heretofore been occupied in sig-

nificant part by radio common carriers operating in a

highly competitive environment,’’ or whether the rul-

ings violate the antitrust component of the “‘public

- os enema

IOP tees.

3

convenience, interest, or necessity’’ standard of the

Communications Act (the ‘‘Act’’) (47 U.S.C. § 303) ?

2. Whether the Court of Appeals erred in affirm-

ing a rulemaking order of the FCC which, as the Court

of Appeals found, enhances AT&T’s monopoly power

by ‘‘elimination of a requirement that wireline oper-

ators [AT&T and associated telephone companies] of-

fer to interconnect radio common carriers into their

systems,’’ or whether the rulings violate the ‘‘public

interest”’ standard of the Act, supra?

3. Whether the Court of Appeals erred in affirm-

ing a rulemaking order of the FCC which will enhance

AT&T’s monopoly position, as the Court of Appeals

found, by authorizing it to “‘become a significant force

in the now highly competitive market for private dis-

patch services’’?

(b) Motorola and the Non-Cellular Operators (SMRS)

4. Whether the Court of Appeals erred in affirm-

ing a rulemaking order of the FCC which, for the first

time in the more than 30-year history of the industry,

authorizes radio equipment manufacturers (especially

Motorola, Inc., which, as the Court of Appeals finds,

“enjoys substantial domination of the sales market

for mobile radio systems’’) to obtain licenses and

operate on a vertically-integrated basis in competition

with small radio common carriers which must rely

upon them for equipment—an FCC action which the

Court of Appeals finds ‘‘could discourage competi-

tion’’?

(c) The RCCs

5. Whether the Court of Appeals erred in affirm-

ing a rulemaking order of the FCC allocating nearly

«

’

4

three times the total radio spectrum now available for

land mobile radio service on a basis which effectively

excludes the independent, regulated radio common car-

riers from access thereto and which will virtually eli-

minate them as competitive factors in the service?

The Common Carrier Issue: Deregulation

(a) Deregulation

6. Whether the Court of Appeals erred in affirm-

ing a rulemaking order of the FCC decreeing that the

common carrier provisions of the Act will not apply to

non-cellular land mobile radio service to be provided

to the public in the newly authorized spectrum on

an ‘‘entrepreneurial,’’ for-hire, for-profit basis, or

whether this deregulation is contrary to the explicit

provisions of the Act (47 U.S.C. §153(h))?

(b) Definition of Common Carrier

7. Whether the Court of Appeals erred in holding

that entrepreneurs authorized to provide service to

the public on a for-hire, for-profit basis are not com-

mon earriers as defined by the Act and are not subject

to the regulatory provisions of the Act and of state

laws, on the grounds that these entrepreneurs may

elect not to serve the public?

The Preemption Issue

8. Whether the Court of Appeals erred in affirm-

ing the Commission’s order decreeing the “‘preemp-

tion’’ of state regulatory jurisdiction, despite the fact

that the Act expressly vests regulatory authority in

the states (47 U.S.C. §§ 152(b) and 221(b))?

i)

The Judicial-Review Issues

9. Whether the Court of Appeals erroneously de-

parted from the fundamental Chenery rule (SEC v.

Chenery Corp., 318 U.S. 80, 95 (1943)) by affirming

the Commission’s deregulation order on the grounds

hat the licensees are free to refuse to serve the public:

grounds which were neither stated nor considered by

the Commission and which contradict the Commis-

sion’s design for providing service to the public.

10. Whether the Court of Appeals erred in refusing

to set aside the Commision’s order on the grounds that

the monopoly and common carrier issues could be the

subject of “‘future challenge’ and private litigation ?

STATUTORY PROVISIONS INVOLVED

Federal Communications Act of 1934, as amended,

47 U.S.C. § 151 et seq. (1970) ; Federal Administrative

Procedure Act, 5 U.S.C. §551 et seg. (1970). Relevant

sections of the statutes are set out in Appendices E

and F, respectively. (Pet. App. 274a-293a).

STATEMENT OF THE CASE

In this case, petitioner seeks review of a decision of

the Court of Appeals which affirms, in toto, an order

of the FCC allocating for the mobile radio services a

vast amount of the limited radio spectrum and estab-

lishing rules for licensing the use of such spectrum.

A. Background

1. Identity of Petitioner. Petitioner is the national

trade association representing the approximately 550

independent radio common carriers (“‘RCCs’’), de-

scribed hereinafter.

ee

6

2. The Service Involved. This case involves the land

mobile radio communications service: i.e., the use of

radio signals for communications between fixed trans-

mitting (base) radio stations and moving vehicles, or

between moving vehicles themselves. There are pres-

ently about four million users of the land mobile radio

service. It is of great and growing importance to

business and industry and to public services and

agencies such as police and fire departments. The

spectrum heretofore assigned to the service is ap-

proaching exhaustion due to the phenomenal growth

of its use.

The service was in existence prior to the Communi-

cations Act of 1934. It was expressly defined and in-

eluded in the Act, along with telephone, cable and

other wireless and radio service; and it is subject to

the comprehensive regulatory scheme of the Act de-

signed to control the use of radio frequencies and to

provide for regulation of the service.

The service takes three forms:

a. ‘‘General’’ (or radiotelephone) service, which in-

volves two-way radiotelephone communications be-

tween ordinary telephones and mobile transmitter/

receivers (usually located in a car or truck). 47 C.F.R.

§ 21.1 (1974). This service requires interconnection of

the radio facilities with the nationwide telephone net-

work of AT&T and associated telephone companies.

b. ‘‘Dispatch’’ service, which involves two-way

radio communications (such as used by taxicab com-

panies, utilities, delivery and service companies) be-

tween mobile transmitter/receivers and either (1) a

$47 U.S.C. §§153(1), (m) and (n) (definitions of ‘mobile

atation,’’ ‘‘land station’’ and ‘‘mobile service’’).

~ oe

7

fixed location transmitter/receiver or (2) other mobile

units. 47 C.F.R. § 21.1 (1974).

ec. “‘Signaling’’ (or paging) service (excluded from

this case by the FCC), which involves. a one-way radio

communication to a small portable receiver carried by

persons. 47 C.F.R. § 21.1 (1974). The ‘‘beepers”’ car-

ried by physicians or repairmen alerting them to call

their offices are examples of this service.

3. The Participants . 1 the Service. The design of the

Communications Act, heretofore implemented by the

FCC regulations, provides that licensed mobile radio

service may be provided in one of two ways: to the

publie by common carriers; to an individual user or a

cooperative group of users by licensing for their pri-

vate, not-for-hire, non-profit use. No provision is

made for service to the publie which does not own and

operate its own system, either individually or cooper-

atively, except by regulated common carriers.

a. The Common Carriers: The telephone industry

has historically provided land mobile radio service as

an adjunct to ordinary telephone service. Local tele-

phone companies are separately licensed by regulatory

authorities for this purpose.

The non-telephone company carriers engaged in this

service are the radio common carriers represented by

petitioner. There are about 550 RCCs located through-

out the United States. Despite their great importance

in providing service (see infra), the RCCs are small,

independent entrepreneurial enterprises not affiliated

with the telephone, telegraph, private line microwave

or domestic satellite industries, or with any other form

of communications common carriage. Many of them

are outgrowths of small ‘“‘mom and pop’’ telephone

8

answering services. A recent study showed that 67 per-

cent of the RCCs in 1973 had gross annual revenues of

$0-$50,000. There are a few RCCs of substantial size.*

The RCCs, as well as the telephone companies, are li-

censed and regulated as common carriers in the Domes-

tic Public Land Mobile Radio Service (“‘DPLMRS’’)®

by the FCC, and by state regulatory authorities.°

b. The Private Users. FCC rules provide that land

mobile radio service users, instead of obtaining service

from the common carriers, may obtain a license and

operate mobile radio systems for their own private use.

Many private users have availed themselves of this

option, either on a single or cooperative basis. Private

operations must be on a not-for-hire, ‘‘non-profit,”’

‘‘non-common carrier’’ basis as explicitly provided in

the detailed rules of the Commission. 47 C.F.R. Parts

89, 91 and 93 (1973). Obviously, private users are not

subject to common carrier regulation as to rates, serv-

ices, ete, and the rules, until the present orders, have

been carefully designed to forbid their offering service

to the public.

e. Basis of Participation. The Act gives the FCC

comprehensive control over the allocation and use of

the radio spectrum. Both common carriers and pri-

vate users must obtain licenses from the FCC for the

radio frequencies which they may use in a givei: area.

4 According to the study, 1.9 percent of the RCCs had gross

annual revenues in excess of $400,000. Perrin Affidavit, Exhibit 5F

to petitioner ’s Motion for Stay to the Court of Appeals, filed May 6,

1975.

547 C.F.R. § 21.500, et seg. (1974).

6 All but five states have applicable regulatory laws: Connecticut,

Iowa, New Jersey, Oregon and Rhode Island. Where no state law

is in effect, the Act permits regulation of rates, practices and serv-

ices by the FCC.

9

47 U.S.C. § 301. Due to the relatively limited range

of the radio equipment employed (about 25-30 miles),

land mobile radio operations are ‘‘intrastate’’. Under

the Act, these operations are classified as ‘‘intrastate’’

even if a portion of the service is interstate or foreign

communication and even if interconnected with the

telephone network. 47 U.S.C. §§ 152(b), 153(e),

221(b).

The Act requires that common carriers must charge

rates which are just and reasonable, must serve all

upon reasonable request, must avoid discriminations

and preferences, etc. 47 U.S.C. §§ 201, 202. None of

these requirements is applicable to non-common car-

riers.

Apart from the procedures and prohibitions of the

federal Act, the common carriers, under the specific

provisions of the Act, are subject to the exclusive

Jurisdiction of state commissions as to ‘‘charges, clas-

sifications, practices, services, facilities, or regula-

tions,’’ where jurisdiction is exercised under state law.

47 U.S.C. §§ 152(b) and 221(b).’

4. The RCCs. Pursuant to their licenses from the

FCC and state authorities, RCCs operate base radio

station facilities and mobile radio units which they

purchase or lease from manufacturers and supply to

their customers for such radiotelephone and dispatch

services, as well as paging, as the regulatory agencies

determine that the public interest, convenience and ne-

cessity require. The RCC industry was authorized by

:; 47 U.S.C. § 221(b) provides that the FCC shall have no juris-

diction with respect to charges, classifications, practices, services,

prem or regulations . . . in any case where such matters are

subject to regulation by a State commission cy by local g

0 .

mental authority.’’ P nee

ee

10

the FCC in 1949 for the express purpose of competing

with the telephone industry (primarily AT&T and its

affiliates) in the provision of common carrier land

mobile communications services. General Mobile Radvo

Service, 13 F.C.C. 1190 (1949).

In this competition, the ROCs have been remarkably

successful. Despite the handicap that they have been

allocated fewer frequencies by the FCC, they serve

substantially more mobile units than all telephone com-

panies combined.’ RCC-served mobile units have been

growing at nearly three times the rate of telephone

ecompany-served units.” In turn, the FCC, in past

years, itself has expressly and repeatedly found the

competition between RCCs and the telephone industry

to be desirable and in the public interest.”

In order to become licensed under the plan of the

Act, an RCO, as a common carrier, must obtain a cer-

tifieate of public convenience and necessity from the

state commission, where required by state law. 47

C.F.R. §21.15(c) (4) (1974). It then applies to the

FCC for a construction permit and assignment of a

frequency. 47 C.F.R. $21.10 et seq. (1974). Quasi-

judicial hearings and proceedings are provided for, in

the usual form. 47 U.S.C. § 309. If the RCC-applicant

obtains a frequency assignment, it then operates under

® See, e.g., Lohr, ‘‘Scenario Change Needed for 900 Megahertz

F'requencies,’’ Communicator, Vol. 17, No. 11 (December 1975),

p. 10.

® Ibid.

10B.g., General Mobile Radio Service, 13 F.C.C. 1190, 1218

(1949); General Telephone Company of California, 21 Pike &

Fischer Radio Reg. 19 (1960); /TT Mobile Telephone Company,

1 Pike & Fischer Radio Reg. 24 957 (1963).

ae

11

the technical supervision of the FCC as to the use of

the assiened frequencies and related matters. See 47

C.F.R. § 21.500 et seq. (1974). At the same time, it op-

erates under the rates, services and practices supervi-

sion of the state and the general requirements of the

Communications Act applicable to common carriers,

including the requirement as to just and reasonable

rates and the mandate to serve the general public

‘‘upon reasonable request’’ and to avoid discrimina-

tion—provisions which in practice are principally im-

plemented by state commissions.

5. AT&T and the Manufacturers (Motorola)

a. AT&T obviously occupies a key role in the indus-

try. Telephone companies are specially licensed to pro-

vide land mobile service, like the RCCs, and directly

compete with the RCCs. RCCs are absolutely depend-

ent upon AT&T and associated telephone companies

for their radiotelephone business, which requires inter-

connections between RCC radio facilities and the na-

tionwide telephone network. The attempts of the RCCs

to obtain such interconnections on reasonable terms

and conditions have been and are a source of continu-

ing controversy and litigation between the RCCs and

the AT&T-associated companies. In a pending mon-

opoly antitrust action, the United States Government

has expressly charged AT&T with monopolistic and

restrictive practices in this field: specifically, with con-

certed action to ‘“‘eliminate competition from other

telecommunications common carriers’? and with ‘‘ob-

struct[ing] the interconnection of Radio Common Car-

riers with the Bell System.’’ ”

™ Complaint, [J 28(b), 29(c), United States v. American Tele-

phone and Telegraph Company, et al., D.C.D.C. Civ. Action No.

74-1698 (Nov. 20, 1974) (‘‘continuing agreement and concert of

12

Nevertheless, as the Court of Appeals found, the

FCC order in this case provides for ‘“‘significant in-

creases in [AT&T’s] market power’’; will enable

AT&T to “dominate substantially the field of radio

telephone service, which has heretofore been occupied

in significant part by small radio common carriers op-

erating in a highly competitive environment”; and

will enable AT&T to ‘‘become a significant force in the

now highly competitive market for private dispatch

services.”’? (Pet. App. 1la-12a). (Despite these find-

ings, the Court of Appeals affirmed).

b. The RCCs are also totally dependent upon manu-

facturers of radio communications systems and facili-

ties to supply the base station facilities which they di-

rectly operate and also the mobile radio units which

RCCs lease or sell to their customers. As the Court of

Appeals found, Motorola, Ine., ‘‘enjoys substantial

domination of the sales market for mobile radio sys-

tems’? (Pet. App. 30a). Motorola accounts for about

64 percent of the land mobile radio equipment market.

The next largest is General Electric Company with

about 15 percent. Motorola also directly controls the

prime base station antenna sites in many, if not most,

of the metropolitan areas across the country.” Access

to such sites is vital to any RCC.

Manufacturers have never before been vertically in-

tegrated, i.e., licensed to operate carrier communica-

action . .. to prevent, restrict and eliminate competition from other

telecomunications common carriers’, including, inter alia, ‘‘at-

tempt{ing] to obstruct and obstruct{ing] the interconnection of

Radio Common Carriers with the Bell System’’).

12 Wolf Affidavit, Exhibit 5C to petitioner’s Motion for Stay to

the Court of Appeals, filed May 6, 1975.

13

tions systems in competition with their customers; but

are now expressly permitted to do so under the subject

FCC order. The Court of Appeals found that Motor-

ola’s “‘size and financial power . . . could discourage

competition’’ and that cause may arise ‘‘for independ-

ent antitrust actions.’’ (Pet. App. 30a-3la). (The

court nevertheless affirmed).

B. The Regulatory Plan of the Communications Act

This petition presents issues arising particularly

under Title II of the Communications Act (Common

Carriers) and Title III of that Act (Special Provi-

sions Relating to Radio). The Commission’s general

authority to make allocations and to authorize and is-

sue licenses to use the radio spectrum appears in Title

Ill. 47 U.S.C. §§ 301, 303, 307-309. All participants in

the mobile radio communications field are subject to

these provisions. Title III prescribes the standard to

govern Commission action: ‘‘publie convenience, inter-

est or necessity”’, 47 U.S.C. §§ 307 and 309. It requires

that applications shall specify the ‘‘financial,”’ ‘‘char-

acter,’’ and other qualifications of the applicant (47

U.S.C. §§308(b) and 319); and, among other proce-

dural rights, it guarantees to ‘‘any party in interest”’

the right to file a petition to deny an application and

the right to a hearing if ‘‘a substantial and material

question of fact is presented’”’. 47 U.S.C. §309. And

it includes provisions to prevent or penalize defined

activities which are in restraint of trade or which are

monopolistic. 47 U.S.C. §§ 313 and 314.

Title II of the Act applies to all communications

common carriers, whether by wire or radio. ‘‘Common

carrier’’ is defined as ‘‘a person engaged as a common

carrier for hire’, 47 U.S.C. §153(h). In addition to

ee ee ee

14

the requirement that common carriers must serve all

‘‘upon reasonable request therefor” (47 U.S.C. § 201),

Title II requires that the charges, practices, etc., of

common carriers shall be ‘‘just and reasonable,’’ and

it outlaws ‘unjust or unreasonable discrimination in

charges, practices,’’ unreasonable preferences by com-

mon carriers, ete. 47 U.S.C. §§ 201, 202(a). It provides

injured persons with a private remedy for damages

resulting from common carrier fault. 47 U.S.C. § 207.

It prohibits interlocking directorates among common

carriers. 47 U.S.C. § 212.

Jurisdiction with respect to ‘‘charges, classifica-

tions, practices, services, facilities, or regulations”’

over common carriers in intrastate commerce is exclu-

sively vested in state commissions when such matters

are regulated by state law, and Commission authority

is explicitly precluded when the states provide for such

regulation. 47 U.S.C. § 221(b). The FCC has the right

and duty to regulate such matters in the absence of

state regulation. Ibid.

The Act contains no authority for the Commission to

exempt a common carrier from its provisions or from

the prescribed regulatory provisions. There is no pro-

vision for ‘‘contract”’ carriers: i.e., for carriers to pro-

vide for-hire, for-profit service to others on a ‘‘non-

common’”’ carrier basis. There are only two categories

under the Act and the regulations prior to the present

order: service to the public, by common carriers; and

service for one’s own use, either on an individual or

cooperative (not-for-hire, non-profit) basis.

C. Proceedings Before the FCC

In the present rulemaking order affirmed by the

Court of Appeals, the FCC allocated 115 MHz of the

15

public domain (i.e., the radio spectrum) in the 806-

960 MHz band to accommodate present and antici-

pated future land mobile service needs to approxi-

mately the end of the century.’ This is nearly three

times the amount of spectrum heretofore allocated to

all land mobile services combined.

1. AT&T; The Ceilular System; Interconnection. Of

the 115 MHz, the FCC allocated 40 MHz for develop-

ment and licensing of a new and untried common ear-

rier ‘‘cellular’’ mobile radio system, to furnish radio-

telephone and dispatch services. It is not scheduled to

become operative on a general basis until at least some-

time in the 1980s. This is a complex system which has

largely been devised by AT&T to provide mobile radio

service. As the Court of Appeals found, ‘‘ AT&T is the

likely recipient of a virtual monopoly in the operation

of cellular systems’’. (Pet. App. 11a). The magnitude

of this monopoly can be illustrated by the fact that

AT&T claims to have spent $20 million on its develop-

ment to date, and anticipates that additional millions

will have to be spent through 1978.

The Commission also relieved AT&T of its obliga-

tion to provide interconnections with the telephone

system to other radio carriers. (The Court of Appeals

characterized this as ‘‘somewhat puzzling’, saying that

‘‘the Commission has given no justification” for it, and

that ‘‘[a] substantial anticompetitive impact seems

almost inevitable”’. (Pet. App. 12a, fn. 29). (The court

nevertheless affirmed).

** This part of the spectrum had previously been reserved for

UHF-TV channels, federal government radiolocation operations,

broadcast auxiliary services and industrial, scientific and medical

equipment.

-

Z

.

>

16

2. SMRS; Motorola; Preemption. The FCC also al-

located 30 MHz for non-cellular service to private and

all other users, to be operated on a non-common car-

rier basis; 2nd it kept 45 MHz in reserve. It made no

other provision for public use; it refused to make an

allocation for common carrier operation (which would

have been available for licensing to the RCCs) except

for the cellular system. Service to the public, in the

newly allocated 30 MHz band, apart from ‘private

users’’ (which is not at issue in this appeal), is to be

provided solely by unregulated ‘‘entrepreneurs”’ op-

erating on a for-hire, for-profit basis, but freed from

the substantive and procedural regulatory provisions

applicable to common carriers. This newly-invented

category is referred to in the Commission’s order as

‘Specialized Mobile Radio Systems’? (SMRS).

For the first time in history, the Commission autho-

rized radio equipment manufacturers, including Mo-

torola, Inc., the dominant manufacturer and supplier,

to qualify for this service and to enter the field as ver-

tically-integrated entrepreneurs (see infra).

As part of its deregulation of this service, the Com-

mission ‘‘preempted”’ state jurisdiction to issue certi-

ficates of convenience and necessity as a precondition

to entry, on the ground of federal “‘primacy’’.* It ex-

‘The FCC originally preempted all state regulation of SMRS

(then known as ‘‘common user systems’’), but on reconsideration

it professed to preempt state jurisdiction over SMRS entry into the

field—the indispensable basis of state enforcement powers and

authority—aud te ‘‘defer judgment as to any action by the states

relating to the regulation of other aspects of SMR operations.”’

(Pet. App. 189a.) It warned, however, that ‘*rate-struetured, com-

mon-carrier-type regulation is inconsistent with the free-market

competitive environment we feel is necessary’’. (/bid.).

17

plained its surgical operation on the Act and on state

jurisdiction as necessary ‘‘to shed this heavy cloak

[common carrier provisions of the Act] and exchange

it for one with far greater flexibility’? (Pet. App. 59a).

The Commission confessed that this sweeping de-

regulation was ‘‘not free from doubt’’. (Pet. App.

157a). The Court of Appeals nevertheless affirmed

(see infra).

D. The Decision Below

Petitioners sought review of the FCC order by the

Court of Appeals pursuant to 47 U.S.C. §402(a) and

28 U.S.C. § 2342. Petitioner sought a stay pendente

lite, and by order entered June 10, 1975, the Court of

Appeals (Wright and MacKinnon, JJ.) stayed the

FCC order pending appeal ‘‘to the extent that it au-

thorizes the assignment or operation of radio spectrum

space to Specialized Mobilfe] Radio Systems’’. It did

not stay the portion of the order relating to private

users (which is not at issue in this appeal), or to cellular

systems which are not scheduled for operation in any

form until at least 1978."

On the merits, the Court of Appeals (Tamm, Mae-

Kinnon and Wilkey, JJ.), per Wilkey, Circuit Judge,

affirmed the FCC order in toto. In substance, in a de-

cision which we respectfully characterize as at least

unusual, the court found as follows:

* On July 31, 1975, the Illinois Bell Telephone Company (an

AT&T subsidiary) filed for authority from the FCC, pursuant to

the instant decision, to construct and operate a commercial ‘‘cellu-

lar’? mobile radio system in the Chicago metropolitan area, esti-

mated to require an additional investment of at least $23.5 million

through 1978. In the Matter of Application of Illinois Bell Tecle-

phone Company, File No. 20115-CD-P-(—)-76. This application

is pending.

18

1. On the Monopoly-Axtitrust Issues:

a. AT&T. The court below found that under the FCC

order AT&T ‘‘is the likely recipient of a virtual mo-

nopoly in the operation of cellular systems’’; that

‘‘this will result in significant increases in its market

power’’; that AT&T ‘appears likely to dominate sub-

stantially the field of radio telephone service, which

has heretofore been occupied in significant part by

small radio common carriers [the RCCs represented

by petitioner] operating in a highly competitive en-

vironment’’; that ‘‘[t]his threat [of AT&T dominance

of radiotelephone service] is made more severe by the

1975 Order’s elimination of a requirement that wire-

line operators offer to connect radio common carriers

into their systems”’ (it found the FCC’s decision to

this effect unexplained and ‘‘somewhat puzzling’’) ;“

that AT&T ‘‘will become a significant force in the now

highly competitive market for private dispatch serv-

ices’’;*’ and that the FCC provisions in the orders

under review to minimize such anticompetitive be-

havior (principally relating to accounting) ‘‘likely

. will prove largely cosmetic.’’ (Pet. App. 11a-13a).

The court nevertheless affirmed, stating that ‘‘we are

1% AT&T's continuing resistance to the interconnection of its

facilities with other communications systems has been ventilated

in various forums. See, e.g., Bell Telephone Company of Pennsyl-

vania Vv. FCC, 503 F.2d 1250 (3d Cir. 1974), cert. den. 95 S.Ct.

2620 (1975) (interconnection with specialized common carriers for

FX and CCSA private line service) ; Carterfone, 13 F.C.C. 2d 420

(1968), recon. den. 14 F.C.C. 2d 751 (1969) (interconnection of

private radio systems).

17 The Court of Appeals further states that it ‘‘is unclear whether

the authorization to engage in dispatch service is in violation of

the 1956 Western Electric consent decree.’’ But it affirms without

deciding this issue.

19

not unaware of substantial anticompetitive effects

which may become more apparent as the date for gen-

eral implementation of the [cellular] systems draws

nearer. ... We make no comment upon the possible

success of any antitrust actions which may in the fu-

ture be brought’’. (Pet. App. 33a).

b. Motorola. The court found that the unprecedented

authorization to Motorola to operate as a radio carrier

on a vertically integrated basis is a ‘‘ potential threat”’

to competition and to small radio carriers. (Pet. App.

30a). The court held that the FCC’s authorization to

Motorola ‘‘eould discourage competition’’ and ‘‘may

provide cause for independent antitrust actions’’. (Pet.

App. 30a-3la). It nevertheless affirmed.

2. On the Common Carrier Issue: The court also

affirmed the FCC order relieving entrepreneurial, for-

hire, for-profit operators providing service to the pub-

lie in the 30 MHz segment of the allocated spectrum

(the SMRS) from the common carrier regulatory pro-

visions of the Act. The FCC’s basis for its action was

its theory that it has the discretion to ‘‘confer or not

confer common carrier status on a given entity, de-

pending upon the regulatory goals it seeks to achieve”’

(Pet. App. 26a), a theory which the FCC itself con-

fessed is ‘‘not free from doubt”? (Pet. App. 157a). The

court below sustained the FCC’s action on different

grounds, neither considered nor discussed by the FCC:

i.e., that these SMRS operators, although authorized

to serve the public, might choose to serve only selected

members of the public, and not to serve the public

‘“‘indifferently’’. The court held that if the operators

discriminate in this fashion among those seeking serv-

ice from the public domain, they would not be ‘‘com-

20

mon carriers’. The court conceded that the Commis-

sion’s order authorizes the SMRS to serve the public

generally, but it affirmed, stating that if the SMRS

do so the order ‘‘will be open to renewed attack’’. (Pet.

App. 33a).

3. On the Preemption Issue: The FCC preempted

state jurisdiction on the grounds that it has discre-

tionary power to do so in the interest of facilitating its

overall plan, whether or not SMRS are considered to

be common carriers. The court sustained preemption,

but on a different ground: i.e., on the basis of its holding

that the SMRS are not common carriers.

REASONS FOR GRANTING THE WRIT

Petitioner respectfully submits that an extraordi-

nary number of reasons demonstrates that the writ of

certiorari should issue:

A. In Summary

1. The importance of the case merits review by this

Court.

2. The decision of the Court of Appeals is in con-

flict with decisions of this Court: Gulf States Utilities

Co. v. FPC, 411 U.S. 747 (1973) (the monopoly issue) ;

FPC vy. Texaco, Inc., 417 U.S. 380 (1974) (deregula-

tion); SEC v. Chenery Corp., 318 U.S. 80 (1943)

(principles of appellate review) ; Head v. New Mexico

Board of Examiners, 374 U.S. 424 (1963) and Florida

Lime and Avocado Growers v. Paul, 373 U.S. 132

(1963) (preemption).

3. The decision of the Court of Appeals determines

fundamental questions as to the interpretation and

21

application of the Communications Act of 1934 in con-

flict with that Act and applicable law.

4. The decision of the Court of Appeals determines

questions of fundamental importance in ‘-e interpre-

tation and application of the Communications Act of

1934, which have not heretofore been ruled upon by

this Court, but should be decided by it.

5. The decision of the Court of Appeals affirms the

preemption of state jurisdiction by agency decree in

direct violation of the specifie direction of the Com-

munications Act of 1934 and in conflict with the rul-

ings of this Court.

6. The decision of the Court of Appeals violates the

fundamental Chenery rule: that a reviewing court may

not affirm agency action on grounds radically different

from those which impelled the action of the agency

itself. This case demonstrates the reason for the rule

(see infra).

_

7. The decision of the Court of Appeals is predi-

eated upon an erroneous ‘ndgment as to the role of

an appellate court reviewing an administrative rule-

making order of a regulatory agency: that is, instead

of reversing agency actions which the Court of Ap-

peals found to violate and to require and authorize

violations of law, the court ordered that the agency’s

order should stand, subject to future challenge.

B. Argument

1. Importance of the Case. The FCC order is of

fundamental importance to the mobile radio industry ;

to the 550 independent, small RCCs; to four million

present users; to many public agencies; to American

business enterprises which require access to the essen-

————

22

tial instruments of mobile radio communication and

require it on non-discriminatory terms in order to

compete; to basic antitrust and antimonopoly objec-

tives of our law and national policy; to the definition

and application of the ‘‘common carrier’’ concept

which is fundamental to the Communications Act and

other laws; to federal-state relations; to the interpre-

tation and application of the Communications Act;

and to the principles of judicial review of agency

action.

2. Conflict with Decisions of this Court.

a. Gulf States Utilities Co. v. FPC and the monop-

oly issue. The statutory standard controlling FCC ac-

tion is ‘‘publie convenience, interest, or necessity’’. 47

U.S.C. 6303. In Gulf States this Court held that the

‘‘nublic interest’? standard requires application of

antitrust standards by administrative agencies as a

‘‘first line of defense against those competitive prac-

tices that might later be the subject of antitrust pro-

ceedings’. 411 U.S. at 760. The decision below is in

direct conflict with Gulf States which the court neither

cites nor seeks to reconcile with its decision.

(1) AT&T. The Court of Appeals found that the

FCC’s order conferred a ‘‘virtual monopoly”’ of the

cellular system on AT&T; that it bestowed upon AT&T

substantial dominance in radiotelephone service to the

prejudice of ‘‘small radio common carriers operating

in a highly competitive environment’’; that it enabled

AT&T to “become a significant force in the now highly

competitive market for private dispatch services’’; and

that it, without explanation, eliminated AT&T’s obli-

gation to provide interconnections. Nevertheless, the

court held that this is not, ‘‘at this time, a breach of

23

the broad discretion allocated to the Commission’’. It

asserted that ‘‘there will be ample opportunity to chal-

lenge anticompetitive effects as the time approaches

when they will be felt’’., (Pet. App. 14a-16a).”

We submit, first, that, on the merits, this decision is

in conflict with Gulf States and other decisions of this

Court on the monopoly issue and with the specific anti-

monopoly provisions and policies of the Communica-

tions Act (47 U.S.C. §§ 313, 314) ; and second, that the

Court of Appeals’ ‘‘deferral’’ of the monopoly issue

until after millions of dollars are spent on new facili-

ties, many RCCs are driven out of business, vested

interests are created, and much public injury has re-

sulted—is in obvious disregard of the facts and in con-

flict with appropriate principles of appellate review

(see infra).

(2) Motorola, Inc. The Court of Appeals found that

the FCC’s unprecedented authorization to radio equip-

ment manufacturers and suppliers, especially to the

dominant supplier, Motorola, also to engage in the

business of providing carrier service on a vertically-

integrated basis is a ‘‘potential threat’’ to competi-

tion and to small radio carriers, and ‘‘may provide

cause for independent antitrust actions’. (Pet. App.

50a-3la). But it inexplicably held that the authoriza-

tion is justifiable because the threat ‘‘arises from eco-

nomie power alone and not from any of Motorola’s

'’ The court did not refer to, or comment upon the implications

of, the Government’s antitrust monopoly action against AT&T

secking to break up the Bell System for AT&T’s monopolistic

practices in this precise field. The Government’s complaint explicit-

ly covers AT&T's restrictive and monopolistie practices against

the RCCs. See supra; Complaint (fff 28(b), 29(c)) in United

States v. American Telephone and Telegraph Company, et al

D.C.D.C. Civ. Action No. 74-1698 (Nov. 20, 1974). a

24

mobile radio-related activities.’ (Pet. App. 30a). The

court notes that ‘‘independent antitrust actions’’ may

be brought to challenge the anticompetitive effects re-

sulting from the Commission’s order.

We must respectfully suggest that this reasoning

is insupportable and bewildering. The court does not

question—it affirms—that the FCC order will vest

Motorola with power to injure or destroy competition

in mobile radio communications because of the vertical

integration that it authorizes. Cf., United States v.

Paramount Pictures, 334 U.S. 131, 174 (1948). This

power is the direct consequence of the Commission’s

order. The court’s conclusion is in conflict with estab-

lished antitrust law and with Gulf States Utilities Co.,

supra; it is in violation of the ‘‘public interest”’ stand-

ard as construed by this Court; it is directly contrary

to the provision of the Communications Act specifically

providing that the antitrust laws are applicable to

‘‘manufacture and sale of’’ radio apparatus. 47 U.S.C.

§ 313. Further, the court’s affirmance of the order with

respect to Motorola on the basis that future ‘‘inde-

pendent antitrust actions’? may be brought is an er-

roneo:s view of the responsibility of an appellate court

reviewing agency action.

We respectfully submit that the reviewing court is

not justified in affirming agency action in the face of

antitrust findings such as those in this case, and re-

mitting the parties and the public interest to possible

remedies after the damage is done.

b. FPC v. Texaco, Inc., and deregulation. In affirm-

ing the Commission’s extraordinary departure from

the mandate of the Communications Act in the inter-

ests of deregulation, the Court of Appeals does not

+ lil

Midtewttinsca 2

25

cite or discuss this Court’s holding in FPC v. Texaco,

Inc., 417 U.S. 380 (1974). In that case, on the basis

of a rulemaking proceeding and a public interest ra-

tionale of much greater force than in the present case,

the F PC had substituted for the rate regulation pro-

cedures and standards of the Act (15 U.S.C. §§ 717e

and 717d), a ‘‘regulatory plan’’ by which adjustments

and refunds would be made in the rates charged by

small producers of natural gas if the market prices

realized were unreasonably high. This Court set aside

the F PC’s order. It ruled that the FPC does not have

the power ‘‘to set at naught an explicit provision of

the Act”’ (417 U.S. at 394), or to substitute for regula-

tory jurisdiction which the Act mandated, a scheme by

which the market place would be the regulator ( pre-

cisely what the FCC purports to do in the present ease).

417 U.S. at 395-399. As Mr. Justice White observed,

writing for the unanimous Court, the Act ‘‘does not say

a little unlawfulness is permitted”. 417 U.S. at 399, _

In the present orders, the FCC does not even pur-

port to comply with the Act by substituting a different

type of regulation. It boldly affirms that its purpose

is completely to deregulate : in the Commission’s words,

‘to shed this heavy cloak [common earrier provisions

of the Act] and exchange it for one with far greater

flexibility”’. (Pet. App. 59a). To achieve this goal, the

FCC created a category of entrepreneurs which, as

the Court of Appeals stated, ‘‘are not required to be-

have and thus be regulated, as common earriers’’.

(Pet. App. 29a). The Commission totally relieved the

for-hire for-profit purveyors of entrepreneurial com-

munications services to the public (the SMRS) from

the substantive and procedural regulations of the Act:

from the hearing requirements—frequencies are to be

assigned on a *‘ first-come, first-served” basis (Pet. App.

26

7a); from the requirement that their charges, prac-

tices, etc., be just and reasonable (47 U.S.C. § 201 (b));

from the prohibition against unjust or unreasonable

discrimination in charges, practices, ete., and unreason-

able preferences (47 U.S.C. § 202(a)) ; from state jur-

isdiction and oversight over intrastate operations (47

U.S.C. §§ 152(b) and 221(b) ) ; from the required show-

ing of character and financial qualifications (47 U.S.C.

§ 308(b)) ; from the prescribed public notice and wait-

ing period (47 U.S.C. §309(f)); and from the right

of parties in interest to contest license applications

(47 U.S.C. §309(d)). Cf. Ashbacker Radio Corp. V.

FCC, 326 U.S. 327 (1945).

It did so in the interests of a grand design to pro-

mote more effective use of the spectrum, as it con-

ceived of it, and to avoid procedural burdens. But

neither these nor any other objectives sanction Com-

mission defiance of the statute. It is supposed to ad-

minister the statute, not to violate or rewrite it. As

stated by this Court in Texaco: ‘‘The Commission may

have great discretion as to how to insure just and rea-

sonable rates, but it is plain enough to us that the Act

does not empower it to exempt small producer rates

from compliance with that standard.”’ 417 U.S. at 394.

ec. Head v. New Mexico Board of Examiners; Flor-

ida Lime and Avocado Growers vy. Paul; preemption.

This Court has repeatedly insisted that federal pre-

emption of state authority is a power that must be

exercised only in clear cases and upon a clear showing.

The test is that state statutes may not be preempted

unless there is found ‘‘ ‘such actual conflict between

the two schemes of regulation that both cannot stand

in the same area, [or] evidence of a congressional de-

sign to preempt the field.’ Florida Lime and Avocado

27

Growers v. Paul, 373 U.S. 132, 141, 83 S.Ct. 1210

1217.” The congressional design in the present case

is precisely the opposite. It affirmatively prescribes

state jurisdiction which is the basic regulatory ma-

chinery of the Act. And certainly, there is no evidence

of ‘‘actual conflict between the two schemes of regula-

tion.’”’ They have existed side-by-side for more than

30 years during which the industry has experienced

remarkable growth and development and public serv-

ice has expanded spectacularly.

Obviously, this is in precise contradiction of the

standards set by this Court (supra). The Commission

rested its decision to ‘‘preempt’’ on the grounds of

“federal primacy’’—a claim of power which violates

our concepts f£ federal-state relationships and the

clear directions of this Court.

The Court of Appeals affirmed the Commission’s

preemption order, but on a somewhat different ground.

The court held that since the Commission had ex-

cluded the SMRS, as a matter of federal law, from

regulation as common carriers, “‘it follows that any

state regulation inconsistent with the policy adopted

may be pre-empted”’. As we shall discuss, the court’s

basie premise—that the Commission may validly ex-

clude the SMRS from regulation under federal law—is

clearly incorrect. They are ‘‘common earriers”’ and

must be subjected to regulation under federal and state

law as such. In any event, we submit that agency pre-

emption of state authority in a rulemaking proceeding

prior to any experience, is at least suspect. In fact, if

the SMRS are not common carriers, preemption would

be idle and unnecessary since the state regulatory stat-

utes apply only to ‘common carriers.” If the SMRS are

dia Head v. New Mexico Board of Examiners, supra, 374 U.S. at

28

common carriers, as we submit, preemption is a sub-

version of the clear, explicit mandate of the Com-

munications Act and can, at best, be explained as based

upon anticipated convenience and not upon the ‘‘actual

conflict’’ required by this Court’s standard.

d. SEC v. Chenery Corp: rule governing appellate

review of agency action. As we have described, the

Court of Appeals sustained the Commission’s decision

to deregulate the SMRS, but it rejected the Commis-

sion’s basis for deregulation. The Commission held that

it had discretionary authority to classify operators

as common earriers or non-common carriers. The

Court of Appeals emphatically rejected this claim of

‘‘unfettered discretion in the Commission to confer

or not confer common carrier status’’ (Pet. App. 26a).

But it then proceeded to support the Commission’s

conclusion by holding that the SMRS are not coiamon

carriers. Its basis was that, although the order au-

thorized the SMRS to serve the public, they might

choose not to do so, but to serve only selected custo-

mers.

The Commission, however, proceeded on the prinei-

ple, an essential part of its design, that service to the

publie—to the vast category of potential users—would

be provided by the SMRS. It assumed that the SMRS

would offer its service **to whatever public its service

may legally and practically be of use’’ (Pet. App. 28a).

It made no other provision for general public acces. to

the vast public domain which it allocated, except for the

cellular systems which are not expected to be in opera-

tion until the 1980s.

The Court of Appeals, seeking a way to affirm the

deregulation order, undermined this basie part of the

Commission’s order. In effect, the court’s action would

penalize any SMRS that offered to serve the public

generally. It would then, according to the court, be

ee ee a eee ar Oe ee eee

ieee a Ll ta

29

operating as a common carrier, and since it would not

be in compliance with the regulatory provisions of the

Act and of state law, it would be operating illegally.

The court’s decision that the SMRS are not common

carriers is incorrect, as we shall show. But, apart from

this, its grounds for sustaining deregulation are in

clear conflict with the principle which this Court has

characterized as ‘‘a simple but fundamental rule of

administrative law,’’ SEC vy. Chenery Corp., 332 U.S.

194, 196 (1947), namely, that ‘‘an administrative or-

der cannot be upheld unless the grounds upon which

the ageney acted . . . were those upon which its action

can be sustained.”? SEC y. Chenery Corp., 318 U.S.

80, 95 (1943).

3. The Common Carrier Issue. The Court of Ap-

peals sustained the Commission’s deregulation of en-

trepreneurs authorized to serve the public on a for-

hire, for-profit basis (SMRS) on the grounds that

they are not ‘“‘common carriers” as defined in the Act

although, the court stated, (hey might become common

carriers if, as authorized by the Commission’s order,

they should in practice offer to serve the publie gen-

erally.” The Court conceded that “it is undisputed

that they [the SMRS] would be permitted [under the

Commission ’s order] so to hold themselves out if they

desired” (Pet. App. 26a); but it concluded that this

“is not a sufficient basis for imposing the burdens that

go with common carrier status.” (J bid.).

*° The Commission ’s second order purported to restrict the

SMRS to provide service only to ‘‘eligibles”’ under Parts 89, 91

and 93 who may qualify for ‘‘private user’? status. But these

eligibles’’ include virtually all conceivable members of the publie

who might seek mobile radio service. The Court of Appeals rejected

the obviously spurious and insupportable Suggestion that this

device converts the SMRS into some sort of “‘private’’ rather than

“‘public”’ carrier (Pet. App. 23a).

30

The definition of ‘‘ecommon carrier” (47 U.S.C.

§153(h)) is an issue of recurring importance under

the Communications Act.” It is also of great impor-

tance with respect to the administration of other reg-

ulatory statutes, such as the Interstate Commerce Act,

the Federal Aviation Act and the Shipping Act, par-

ticularly in light of the current public debate concern-

ing deregulation. This Court has not ruled upon the

question for purposes of the Communications Act, but

should do so.

We respectfully submit that the decision of the court

below is clearly in error. The SMRS, under the FCC’s

order, are authorized and expected to serve the public.

Where an entrepreneur is granted a franchise to serve

the public under the Act, he is obliged to serve the

public. The Communications Act provides that a com-

mon carrier must serve the public ‘‘upon reasonable

request’’. 47 U.S.C. § 201(a). Classification as a com-

mon carrier does not depend upon whether he in fact

fulfills the obligation that is implicit in his license to

serve the public. It may be true that common carrier

status can be voluntarily incurred by performance, i.e.,

by offering service to the public; but it does not follow,

logically or legally, that voluntary non-performance

21 See, eg., National Association of Regulatory Utility Commis-

ioners v. FCC, No. 75-1075, — U.S. App. D.C. —, — F.2d —

(February 10, 1976) (use of cable television access channels for

two-way point-to-point non-video communications service is common

a: Goan Broadcasting Co. v. Collier, 24 F.C.C. 251

(1958) and Philadelphia Television Broadcasting Co. v. FCC, 123

U.S. App. D.C. 298, 359 F.2d 282 (1966) (conventional CATV

systems not common carriers); Computer Inquiry, 28 F.C.C. 2d

267 ( 1971) (establishing standards for distinguishing bet ween

data processing services and cornmon carriage involving data com-

munications) ; Industrial Radwolocation Service, 5 F.C.C, 2d 197

(1966) (radiolocation service not communications common car-

riage).

hy alta be ew

ss e

31

relieves a common carrier of his responsibilities to be

licensed and regulated under law.

The Communications Act contains no provision for

exempting common carriers from its regulatory pro-

visions. It contains no provision for ‘‘contract”’ ear-

riers who may pick and choose among the public to be

served. On the contrary, it permits only the licensing

of operators for their own private use, on a single or

cooperative basis, or as common carriers to serve the

public without discrimination and on ‘reasonable re-

quest’’.””

The FCC recognized that the ‘‘entrepreneur-oper-

ated’? SMRS ‘‘could be licensed as common carriers

and regulated under Title II of the Communications

Act”’ (Pet. App. 54a). It decreed that it would not

do so on the grounds that it had discretion to make

such a decision-——a conclusion which it admitted was

“not free from doubt”’. The Court of Appeals rejected

its claim of ‘‘unfettered discretion”’, but then errone-

ously proceeded to construct a definition which, if al-

lowed to stand, would undermine the fundamental pur-

pose of the common carrier requirement : to require in-

discriminate service to all of the publie in exchange

for the right to use the public domain “‘for-profit”’ and

‘for-hire’’, on an entrepreneurial basis.

We submit that the decision below is in error and

that it is of such great importance that this Court

should review the issue.

4. The Preemption Issue. As discussed above, the

FCC’s claim of power to preempt, and the Court of

Appeals’ refusal to reverse its preemption decision, are

** See, e.g., United States v. Drum, 368 U.S. 370, 375, 376 (1962)

(Motor Carrier Act of 1935) (application of the concept requires

“‘reference to the clear but broad remedial purpose of a regula-

tory statute committed to agency discretion’’).

32

clearly erroneous. This is a recurring issue of vital im-

portance which this Court should review.”

5. The Function of Appellate Review. This Court

should grant review of the question precipitated by the

decision of the court below: the function of an appellate

court reviewing an administrative order in a rulemak-

ing proceeding: viz., whether it is the reviewing court’s

duty to decide the issues presented, and not to rubber-

stamp agency action, despite substantial infirmities, on

the grounds that future private or administrative ac-

tion may be available.*

The Court of Appeals in this ease made findings of

palpable departures by the FCC from the mandate of

the Communications Act and the law with respect to

22The FCC’s power to preempt state regulation is also being

addressed by Courts of Appeals in various other current or pend-

ing eases where the FCC has recently asserted such power. See,

e.g., National Association of Regulatory Utility Commissioners Vv.

FCC, No. 75-1075, — U.S. App. D.C. —, — F.2d — (February

10, 1976) (FCC preemption of state jurisdiction over cable tele-

vision ieased access channels used for two-way point-to-point non-

video communications services set aside) ; Telerent Leasing Corp.,

45 F.C.C. 2d 204 (1974), appeal pending North Carolina Utilities

Commission v. FCC, No. 74-1220, et al., (4th Cir.) (FCC preemp-

tion of state jurisdiction over telephone station equipment) ; AT&T,

56 F.C.C. 2d 14 (1975), appeal pending California Public Utilities

Commission v. FCC, No. 75-2060, et al., (D.C. Cir.) (FCC pre-

emption of state jurisdiction over FX and CCSA private line

service interconnection) ; Interstate and Forcign Message Toll Tele-

phone Service, 56 F.C.C. 2d 593 (1975), appeal pending North

Carolina Utilities Commission v. FCC No. 76-1002, et al., (4th

Cir.) (FCC preemption of state jurisdiction over customer-pro-

vided telephone equipment).

2 The Administrative Procedure Act, 5 U.S.C. § 706(2), pro-

vides that a reviewing court shall ‘‘hold unlawful and set aside

agency action . . . found to be . . . not in accordance with law;

_. . im excess of statutory jurisdiction, authority or limitations,

or short of statutory right’’.

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33

the antitrust component of the “public convenience,

interest or necessity’’ standard of the Act and its com-

mon carrier requirements. But the Court of Appeals

refused to set aside the Commission’s order on the

apparent grounds that attack should await implemen-

‘ation of the order.

The Court of Appeals says that the cellular system

allocation ‘‘may be subject to successful challenge at

some future date’’ (Pet. App. 16a) ; it affirms the un-

precedented authorization to Motorola to obtain li-

censes to operate base stations and to deploy its verti-

cally integrated power, which, it acknowledges, ‘‘could

discourage competition” and ‘‘may provide cause for

independent antitrust actions” at a later date ; it holds

that the FCC order authorizes the SMRS to operate as

common carriers, and that if ““SMRS in practice be-

have as common carriers,’ the FCO’s order “will be

open to renewed attack”’. (Pet. App. 33a). Despite all

of these infirmities, the Court of Appeals affirmed.

Petitioner submits that the court’s affirmance of the

FCC ’s order, despite this extraordinary series of legal

infirmities in the order, and its insistence that effective

judicial review must wait until the damage is done

2 : = and important restriction of the function and

uty of a reviewing court in a rulemakin eedin

which should be reviewed by this Court. anes .

34

CONCLUSION

For the reasons stated, a writ of certiorari should

issue to review the judgment and opinion of the United

States Court of Appeals for the District of Columbia

Circuit.

Respectfully submitted,

ABE FortTASs

KENNETH E. HarRpMAN

Fortas AND KoveN

1200 Twenty-ninth Street, N.W.

Washington, D. C. 20007

Telephone (202) 337-5700

Attorneys for Petitioner

National Association of

Radiotelephone Systems

February 25, 1976