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

Supreme @ourt, U. &

~EILED

z. MAY 6 1976 |

No. 75-1216 | MICHAEL RODAK, JR. ture |

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Gn the Supreme Court of the United States

OcroBerR Term, 1975

NATIONAL ASSOCIATION OF RaDIOTELEPHONE SYSTEMS,

PETITIONER

v.

FEDERAL COMMUNICATIONS COMMISSION, ET AL.

ON PETITION FOR A WRIT OF OBPRTIORARI TO THE UNITED

i Ni aa OF APPEALS FOR THE DISTRICT OF COLUMBIA

OIRC

BRIEF FOR THE FEDERAL RESPONDENTS IN OPPOSITION

ROBERT H. BORK,

Solicitor General,

THOMAS E. KAUPER,

Assistant Attorney General,

CARL D. LAWSON,

Attorney,

Department of Justice,

f Washington, D.C. 20530.

ASHTON R. HARDY;

General Counsel,

DANIEL M. ARMSTRONG,

Associate General Counsel,

JOHN E. INGLE,

Counsel,

Federai Communications Comméiasion,

Washington, D.C. 20554.

Questions presented__..........--_------ —

a

A. Public and private land mobile radio services___-

B. Proceedings before the Federal Communications

0 ee uctenteainieen

CITATIONS

Cases :

Bowman Transportation Inc, v. Arkansas-Best Freight

Gestem, GD GC iiy Gib connnsscseuseuvensecesscascs

Federal Communications Commission v. RCA Commu-

nications Inc., 346 U.S. 96_...---.---222-------- =e

Federal Power Commission v. Texaco, Inc., 417 U.S.

0 eqeanecsqeitnesesssentiimemnggneesenseen

Federal Radio Commission v. Nelson Brothers Bond

and Mortgage Co. 289 U.S. 266...-..-------------.

Fisher's Blend Station, Inc. v. State Tax Commission,

Frost Trucking Co. v. Railroad Commission, 271 U.S.

BED casenecsnnsccccessesensssusqmasasesssuaunce

Gulf States Utilities Co. v. Federal Power Commission,

GED Wea We ccateenincnincntanannssinnapatiimins

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

Land-Mobile Use of TV Channels, 23 FCC 2d 325___-

Land-Mobile Use of TV Channels, 31 FCC 2d 48______

Multiple Licensing-Safety and Special Radio Services,

Poh fee ee

National Labor Relations Board v. Wyman-Gordow

” Gai, GER Ve Ceeececngegesacceygessscsesacenmsse

()

en mo ee

Cases—Continued

Pens

Penn-Central Merger Cases, 389 U.S. 486_----------- 18

Securities and Exchange Commission v. Chenery Corp.,

B00 WG, Giincccnnccnccenecenscscnssssnssnsitaee 17

Stimson Lumber Co. v. Kuykendall, 275 U.S. 207---- 15

Terminal Taxicab Co. v. District of Columbia, 241 U.S.

— 15

United States v. Brooklyn Terminal, 249 U.S, 296---- 15

United States v. California, 297 U.S, 175------------ 15

United States vy. Midwest Video Corp., 406 U.S. 649-_- 14

United States v. Southwestern Cable Co., 392 U.S. 157- 14

Statutes:

Administrative Pyrocedure Act, 60 Stat. 237, as

amended, Section 10(e), 5 U.S.C, 706_------------ 3

Communications Act of 1934, 48 Stat. 1064, as

amended, 47 U.S.C. 151-609_..-.----------------- 3

Title II (Sections 201-223, 47 U.S.C. 201-223)-. 5,

9, 12, 14, 15, 17

Title III (Sections 301-399, 47 U.S.C. 301-399). 15

Section 1, 47 U.S.C. 151_...-------------------- 3,14

Section 2(b), 47 U.S.C. 152(b) ----------------- 16

Section 3(h), 47 U.S.C. 153(h)---------------- 15

Section 4(i), 47 U.S.C. 154(i) ------------------ 3

Section 201, 47 U.S.C. 201...-........--..----- 15

Section 221(b), 47 U.S.C. 221(b) --------------- 16

Section 303(a)-(g), (r), 47 U.S.C. 303(a)-(g),

(ee 3, 2A-3A

Interstate Commerce Act, Section 1,49 U.S.C.1------ 15

Miscellaneous :

47 C.F.R.:

Past Gh .ncncccscececcccccnnccscasansnsasesens 4

Past $0... caccccceccccccccesawscccecqsesosnense q

| 4

| 4

Part 06 ..n.cccccccnnenecceccocccccesccscescese 3

Bectien GRMIBIE) .nccccnsuneccensecccesensscse 4

Section 80.825(c) ..-..-.----------------------- 4

Final Report of the President’s Task Force on Communica-

tions Policy (1968) ...------.....-------~---~------- 5

Friendly, Chenery Revisited: Reflections on Reversal and

Remand of Administrative Orders, 1969 Duke L.J.199-. 18

S. Rep. No. 781, 73rd Cong., 2d Sess, (1934) .------------ 15

Ee

L-

4

a

Gu the Supreme Gourt of the United $

Ocroser TrerM, 1975

No. 75-1216

NATIONAL ASSOCIATION OF RADIOTELEPHONE SYSTEMS,

PETITIONER

v.

FEDERAL COMMUNICATIONS COMMISSION, ET AL.

ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED

— OF APPEALS FOR THE DISTRICT OF COLUMBIA

BRIEF FOR THE FEDERAL RESPONDENTS IN OPPOSITION

OPINIONS BELOW

The opinion of the court of appeals (Pet. App.

la-33a) is reported at 525 F.2d 630.1 The Federal

Communications Commission’s Memorandum Opinion

and Order of March 20, 1975 (Pet. App. 135a-266a),

is reported at 51 FCC 2d 945; the Commission’s

Second Report and Order dated May 2, 1974 (Pet.

App. 34a-134a), is reported at 46 FCC 2d 752; the

Commission’s Memorandum Opinion and Order of

The opinion reproduced in the appendix to the petition con-

tains modifications ordered by the court of appeals on January 22,

1976.

(1)

2

July 18, 1975, acting on further petitions for recon-

sideration and for clarification (Pet. App. 267a-273a),

is reported at 55 FCC 2d 771.

JURISDICTION

The opinion and judgment of the court of appeals

(Pet. App. la-33a) were entered on January 5, 1976.

The petition for a writ of certiorari was filed on Feb-

ruary 25, 1976. It invokes this Court’s jurisdiction

under 28 U.S.C. 1254(1).

QUESTIONS PRESENTED

1. Whether the Federal Communications Commis-

sion gave sufficient consideration to competitive fac-

tors in deciding: (a) to allocate radio frequencies for

the development of a new “cellular” system for mobile

common carrier communications service, and (b) to

permit radio equipment manufacturers to apply for

licenses to provide private radio dispatch service.

2. Whether the Commission has authority under the

Communications Act to establish a new class of

licensed entrepreneurs to provide private radio dis-

patch service to licensed users on a non-common car-

rier basis; and whether, having created this class and

established a policy of open entry into the class, the

Commission has authority to preempt inconsistent

state regulation which might frustrate the open entry

policy.

3. Whether the court of appeals’ affirmance of the

Cornmission’s decision establishing a new class of

licensees to provide private radio dispatch service was

based on grounds discernible from the agency’s orders.

3

STATUTES INVOLVED

Most of the relevant sections of the Communications

Act of 1954, 48 Stat. 1064, as amended, 47 U.S.C. 151-

609, are set forth at Pet. App. 274a—292a. In addition

47 U.S.C. 151, 154(1), and 303(a)—(g), (1) are repro-

duced in the Appendix to this brief. Section 10(e) of

the Administrative Procedure Act, 60 Stat. 237, as

amended, 5 U.S.C. 706, is set forth at Pet. App. 293a.

STATEMENT

A. PUBLIC AND PRIVATE LAND MOBILE RADIO SERVICES

Land mobile radio services, which enable people to

communicate while on the move, include two distinct

classes of service operated under different regulatory

schemes (Pet. App. 5a).’

One class is public or radiotelephone service, which

is similar to the service the telephone company provides

its subscribers in their homes or places of business.

The telephone companies and radio common carriers

(‘*RCCs”) provide this class of service on a common

carrier basis.* They are subject to common carrier

reguiation and, as users of radio frequencies, to the

Commission’s radio licensing authority. See generally

47 C.F.R. Part 21. Public land mobile radio systems

often are interconnected with the landline telephone

* Land mobile radio services are distinct from Citizens Radio

Service (Citizens Band). See 47 C.F.R. Part 95. This case does

not involve Citizens Band frequency allocations or regulations.

* Licensees in this service also may provide paging or “beeper”

service, and business “dispatch” service on a common carrier basis,

in addition to ordinary two-way radiotelephone service.

4

system, which permits a customer with an automobile

telephone, for example, to call or be called from an

ordinary home or business phone.

The second class is private radio service, such as the

dispatch service that is available to police and fire

departments, or to such businesses as taxicab com-

panies and firms with fleets of trucks. The typical

system includes a central dispatcher which may com-

municate with personnel or vehicles in the field. Calls

must be business related and brief, in contrast to the

conversational cails that often occur in the public

service. See 47 C.F.R. Parts 89, 91 and 93.*

Persons eligible to use private service frequencies

presently have several options: (1) they may

obtain their own facilities and operate their

own stations individually; (2) groups of licensees

may share jointly owned facilities; (3) groups

of licensees may create non-profit corporations

to provide facilities and service on a cost-shared

basis; and (4) licensees may lease equipment and

transmitter sites from non-licensed parties (usually

equipment manufacture and sales organizations). See

Multiple Licensing—Safety and Special Radio Services,

24 FCC 2d 510, 511-513. The shared, cooperative,

and multiple licensing arrangements permit small

businessmen, for example, who could not afford in-

dividual systems, to use mobile radio. They also make

efficient use of radio frequencies. Licensees in the

* Private service may also consist of one-way or two-way paging,

as is often the case with dectors in the Special Emergency Radio

Service. £.g., 47 C.F.R. 89.523 (d) , 89.525 (c).

private services are subject to the Commission’s radio

licensing authority, but they do not act as carriers

and are not subject to regulation under Title II of the

Communications Act, which contains the common car-

rier regulatory statutes.

The two classes are technologically similar. They

also share a common problem of long duration: inade-

quate spectrum allocation to meet a rapidly growing

demand for service.’ Delays in licensing and certifica-

tion procedures at both the state and federal levels

have also hampered utilization of available fre-

quencies (Pet. App. 57a-58a and n. 5, 167a-173a).

B. PROCEEDINGS BEFORE THE FEDERAL COMMUNICATIONS

COMMISSION

The Commission in 1968 instituted Docket No.

18262 to examine the possibility of making substantial

additional frequency allocations for land mobile radio,

to elicit proposals for more efficient use of the spec-

trum, and to develop a regulatory scheme that would

minimize delays in authorizing service. Almost 100

parties filed comments and 35 parties participated in

oral argument at two different stages of the seven-

year proceeding. The Commission ultimately decided

* Pet., p. 6. For a concise discussion of the congestion problems

in the land mobile radio services, see Final Report of the Presi-

dent’s Task Force of Communications Policy, chapter 8 (1968).

See also Land-Mobile Use of TV Channels, 23 FCC 2d 325, 329-

339. The radio spectrum is allocated by reserving for particular

uses the right to broadcast radio waves in a specified range of fre-

quencies per second. One MHz (megahertz) measures one million

wave cycles per second.

(1) to allocate 40 MHz for developm at of a new

“cellular’’ system concept of public radiotelephone

service, (2) to allocate 30 MHz for private services,

and (3) to set aside 45 MHz as a land mobile “reserve

ailocation’’ without specifying its use. Although the

Commission did not allocate additional frequencies for

radio common carriers who do not utilize a cellular

system in Docket No. 18262, it did make some fre-

quencies available for that purpose in a companion

proceeding.°

1. Cellular Systems.—The Commission found that

development of a new high capacity “cellular” system

will permit “multiple re-use of channels throughout a

given geographical area and more traffic intensity per

unit of spectrum * * * than other land mobile com-

munications system[s] proposed to date” (Pet. App.

36a-37a, 152a and n. 17, 5a—6a). Technology and costs

make it unfeasible for more than one system to

operate in each community (Pet. App. 48a). Although

the Commission decided ultimately to permit any

qualified entity, including non-wireline firms, to apply,

it established demanding eligibility standards to en-

sure that an applicant for a license to establish a cel-

° Land-Mobile Use of TV Channels (Docket No. 18261), 23 FCC

2d 325. The Commission has stayed grants of licenses for those new

frequencies pending resolution of demands that no new carriers

be licensed. Land-Mobile Use of TV Channels, 31 FCC 2d 48. In

addition, the Commission expressly contemplated in Docket No.

18262 that owners of present RCC systems will have a “major role”

in development of the new private systems it was authorizing

(Pet. App. 185a).

7

lular system will have the resources and expertise to

complete the project’ (Pet. App. 152a-154a). The

Commission also decided to permit cellular systems to

offer limited dispatch service on a common carrier

basis, as well as radiotelephone service. It coneluded

that a cellular system licensee should be permitted to

offer dispatch service because excluding such service

might delay or even foreclose the development of

cellular systems, and might deprive the public of the

benefits of “natural economies’’ resulting from a com-

bination of dispatch and radiotelephone services (Pet.

App. 49a-50a).

The Commission noted that permitting wire line

carriers to operate cellular systems creates a potential

for anticompetitive abuse; it therefore imposed

restrictions upon such carriers to minimize the possi-

bility of cross-subsidization with profits from wireline

or other operations. To operate cellular systems, such

carriers must establish separate corporations with

separate officers, operating personnel, and accounting,

and they are prohibited from manufacturing system

equipment (Pet. App. 48a-49a, 145a-148a).

2: Private Services and Specialized Mobile Radio

Systems.—The Commission decided that the newly

allocated private service frequencies should be avail-

able not only to eligible users of those services, but

also to a new class of licensees who may use the fre-

quencies on a commercial basis to serve eligible users.

* The Commission at first restricted eligibility to wireline car-

riers (Pet. App. 47a—48a). That restriction was removed on recon.

sideration (Pet. App. 150a).

206-571—76-—-2

8

Those licensees, who will operate stations known as

specialized mobile radio systems (‘*‘SMRs”), will be

limited to dispatch service and to the brief, business-

related messages previously authorized for private

service. They may not serve the general public, nor

may they provide ordinary radio-telephone service.

(Pet. App. 137a-138a, 16la-163a.) The SMRs will

not be required to serve users on a common carrier

basis and will make arrangements privately and con-

tractually for service and facilities (Pet. App. 161la

and n. 22. 166a, 54a-58a, 23a-26a).

The Commission concluded that it would be inap-

propriate to apply common carrier regulation to

SMRs or to process license applications under pro-

cedures customarily used in licensing new common

varriers. It found (Pet. App. 185a) that RCCs gen-

erally have confined their service offerings to radio

telephone and one-way signalling, and have not made

a significant effort to meet the need for dispatch

service. It established an ‘open entry” policy for

SMRs to obviate the ‘interminable delays” that

have attended the establishment of new service in

other frequency bands (Pet. App. 166a, 182a, 57a and

n. 5). Applications for SMRs will be processed and

granted in the order of filing, along with applications

for individual or shared systems in the same fre-

quency band. The Commission will not entertain peti-

tions to deny which are based on concepts such as the

adequacy of existing facilities to provide service.

Finally, the Commission declared that its regulations

constitute “federal preemption of possible assertion

i)

of state entry certification” of SMRs because it recog-

nized that some states might attempt to regulate

SMRs in a manner inconsistent with the Commission’s

open entry policy (Pet. App. 186a—-189a).

C. PROCEEDINGS IN THE COURT OF APPEALS

The petitioner, National Association of Radiotele-

phone Systems (NARS), and others, filed petitions

for review in the United States Court of Appeals for

the District of Columbia Circuit attacking various

aspects of the Commission’s order. NARS is a trade

association representing radio common carriers. Its

members are generally subject to both federal and

state regulation as radio licensees and as communica-

tions common carriers.

Some petitions for review contended that various

frequency allocations were excessive or insufficient.

Some contended that the Commission decision creates

an undue risk that some or all land mobile radio

services will be monopolized by AT&T and/or

Motorola, Ine., a major equipment manufacturer.

NARS and others also asserted that the Commission

has violated the Communications Act by exempting

SMRs from common carrier regulation under Title II

of that Act and by preempting state regulation of

SMR activities.

The court of appeals affirmed unanimously (Pet.

App. la-38a).° It concluded that possible anti-com-

* That court subsequently stayed its mandate pending applica-

tion for a writ of certiorari. The stay has the effect of preventing

implementation of those portions of the Commission order relating

to SMRs.

10

petitive effects are at present “too speculative and dis-

tant in time” to constitute an abuse of agency

discretion, although such effeets are subject to future

challenge if they become manifest (Pet. App. 33a).

The court first rejected challenges to the allocation

of frequencies. It noted that given this ‘‘highly tech-

nical anad somewhat speculative undertaking” (Pet.

App. 9a) *** * * such determinations are precisely

the sort that Congress intended to leave to the broad

discretion of the Commission * * *” (Pet. App. 10a).

The court found “significant plausibility” to the

allegations that AT&T might dominate radiotelephone

and/or dispatch services, and that the restrictions

which the Commission imposed to prevent anticom-

petitive conduct by AT&T may not be sufficient to pre-

vent AT&T domination. Nevertheless, it concluded

that the Commission did not exceed its broad discre-

tion in allocating frequencies for the development of

a eellular system. (Pet. App. 10a-16a.)° The court

said that any anticompetitive effects of development

of the cellular system were “speculative” and “con-

tingent upon a variety of factors’’ that remain un-

determined, and noted that the Commission would

* The court of appeals misunderstood one aspect of the Commis-

sion’s decision. It said the Commission’s decision to eliminate a

requirement that telephone companies interconnect with RCCs is

“puzzling” (Pet. App. 12a and n.29). The Commission did not in

fact take any action affecting the interconnection rights of RCCs.

The Commission merely deleted a requirement that telephone com-

panies interconnect with SMRs when it decided not to authorize

SMRs to provide radiotelephone service. Compare Pet. App. 62a-

63a with 137a-138a.

~ om = Dee -

ll

have a continuing duty to be “on the lookout fer possi-

ble anticompetitive effects’? as the cellular system

develops (Pet. App. 14a-l5a).”

Allegations that the Commission’s failure to exclude

equipment manufacturers as SMRs would lead to

Motorola’s domination of the dispatch market ap-

peared to be less plausible to the court of appeals. It

said that the present record did not show that

Motorola’s entry into that market would produce

“such anticompetitive effects * * *

a colorable violation of the antitrust component of the

public convenience, interest or necessity standard”

(Pet. App. 31a).

The court also held that the Commission had not

exceeded its powers by exempting SMRs from com-

mon carrier regulation under the Communications

Act or by preempting state regulation of SMRs, be-

cause SMRs “are not common carriers” (Pet. App.

18a-—28a, 3la-32a). The court concluded that the term

“eommon earrier”’ is used in the Communications Act to

deseribe one who holds himself out to serve the publie

indiscriminately or indifferently and, therefore, one

is not a common carrier who makes ‘individualized

decisions, in particular cases, whether and on what

terms to deal’’ (Pet. App. 20a—21a). The court found

nothing in the Commission’s orders or regulations

as would constitute

” The court of appeals also was “strongly influenced” by the

Department of Justice’s support for the Commission’s order, The

court observed that the Department's position, like the court’s, was

based in part on the “ample opportunity” to challenge anticom-

petitive effects when they become assessable (Pet. App. lja-l6a).

12

which would require SMRs to hold themselves out

indiscriminately to serve all eligible users, and de-

clared that there is no reason to suppose they will do

so voluntarily; they were much more likely to deal on

an individual contract basis. Since SMRs are not

common carriers the Commission was not required to

subject them to rate regulation under Title IT of the

Communications Act or to process applications under

procedures customarily used for communications com-

mon carriers, and was not precluded from preempting

state regulation by the Communications Act’s pro-

Visions reserving jurisdiction to the states to regulate

intrastate activities of communications common ear-

riers. The court specifically held, however, that the

decision *‘is subject to future challenge should SMRs

in practice behave as common carriers” (Pet. App.

ua). .

ARGUMENT

The court of appeals correctly recognized the con-

tingent and developmeiital nature of the Commission’s

response here to new service needs in the dynamic

field of radio communications. in light of that court’s

comprehensive exploration of the record, there is no

reason for further review by this Court.

1. The Commission adequately considered competi-

tive factors in authorizing development of a cellular

system, in permitting cellular systems to perform dis-

patch service, and in permitting equipment manu-

facturers to apply for SMR licenses. Its decision fully

accords with this Court’s decision in Gulf States Utili-

tices Co. v. Federal Power Commission, 411 U.S. 747.

—-—

13

In Gulf Sletes Utilities this Court held that the FPC

erred in refusing to consider the possible anticompeti-

tive effects of authorizing a particular transaction.

liere, the Commission carefully analyzed the possible

anticompetitive effects of each decision and ultimately

concluded that the probable benefits to the pubhe out-

weighed any risk that its decision might lead to a

lessening of competition. The Commission also im-

posed restrictions aimed at AT&T and Motorola to

minimize the risk that either of those companies will

dominate either service (Pet. App. 47a—5la, 139a,

145a-148a, 177a).

Gulf States Utilities does not preclude » regulatory

agency from authorizing under a “public interest”

standard a transaction or activity which might have

adverse competitive effects, if the agency concludes on

an adequate factual foundation that the risk is out-

weighed by the need to promote other public interest

factors entitled to equal or greater weight under the

statute. Indeed, failure to consider such other factors

might violate an agency’s statutory obligations. See

Federal Communications Commission v. RCA Com-

munications, Inc., 346 U.S. 86; ef. Bowman Transpor-

tation, Inc. v. Arkansas-Best Freight System, 419 U.S.

281, 298-299; Gulf States Utilities, supra, 411 U.S. at

758-759, 762-763.

Although the court of appeals believed that the

Commission had underestimated the risk of AT&T’s

domination of radiotelephone and dispatch service,

that court quite properly refrained from substituting

14

its assessment of that risk for the carefully considered

judgment of the Commission. For primary responsi-

bility to determine when the public interest requires

new departures in regulated service is vested in the

Commission. See, e.g., United States vy. Midwest Video

Corp., 406 U.S. 649; United States v. Southwestern

Cable Co., 392 U.S. 157.

Contrary to petitioner’s assertions, the court of ap-

peals’ reliance upon continuing scrutiny by the Com-

mission (and the Department of Justice) accords

with the regulatory scheme Congress has established.

The question before the court was whether the Com-

mission had acted rationally in balancing the risk that

the development of cellular systems would lead to

AT&T domination, against public benefits from the

development of such systems. In answering that ques-

tion, the court correctly concluded that the Commis-

sion’s duty of continuing oversight strongly supported

its assessment of the competitive risks.

2. The court of appeals correctly concluded that

SMRs are not common earriers. Therefore, the Com-

mission was well within its powers and responsibilities

in adopting a policy which treats them as private con-

tractors rather than as common e¢arriers, and which

protects that policy by preempting state control of

entry by SMRs into private commercial service.

The petitioner errs in contending (Pet. 29-31) that

the term “common carrier” in the Communications

Act encompasses all persons who provide “for hire”

communications services. To regulate communication

common carriers Congress adopted Title II of the

Act (47 U.S.C. 201-223), which incorporated the tra-

ditional definition of common carrier (47 U.S.C.

153(h)). That definition had been applied earlier in

the Interstate Commerce Act (49 U.S.C. 1), on which

Title II of the Communications Act (47 U.S.C. 201-

223) is modeled. S. Rep. No. 781, 73rd Cong., 2d Sess.

2 (1934). The traditional definition recognizes a clear

distinction between common and private carriers. A

common carrier holds itself out to serve all members

of the publie without discrimination. Stimson Lumber

Co. v. Kuykendall, 275 U.S. 207, 210-212. Its status

turns not on its corporate character or declared pur-

pose, or on the views of its state of incorporation,

“but upon what it does.” United States v. California,

297 U.S. 175, 181; United States v. Brooklyn Ter-

minal, 249 U.S. 296, 304. Indeed, a firm may offer

related services to the public some of which are com-

mon carrier, and some of which are private individ-

ual offerings. Terminal Taxicab Co. v. District of

Columbia, 241 U.S. 252, 255-256. The court of ap-

peals found that SMRs were neither required nor

likely to hold themselves out to serve the public at

large, but would deal with their customers on a

highly individual basis (Pet. App. 23a-28a). Since

Title II of the Communications Act is limited to

“common carriers” (47 U.S.C. 201), its regulatory

provisions are inapplicable to private users of radio

for communications services, who are licensed under

Title III (47 U.S.C. 301-399). Thus, since SMRs are

not common carriers. there is no basis for petitioner’s

contention (Pet. 24-26) that the Commission has un-

16

lawfully deregulated them.” If future experience

shows, liowever, that SMRs in fact are operated as

common carriers, then, as the court of appeals noted

(Pet. App. 26a), the Commission’s classification may

be revised or challenged. Cf. Frost Trucking Co. v.

Railroad Commission, 271 U.S. 583, 599-600.

It follows that petitioner also errs in contending

that Sections 2(b) and 221(b) of the Act (47 U.S.C.

152(b), 221(b)) bar the Commission from preempting

state control over entry. These sections in substance

provide that nothing in the Act shall be construed

to give the Commission jurisdiction over communica-

tions “common carriers’’ operating wholly intra-state.

Since these sections are expressly limited to “common

earriers,’’ they are inapplicable to non-common car-

rier radio licenses. Because radio is inherently inter-

state (Fisher’s Blend Station, Inc. v. State Tax

Commission, 297 U.S. 650, 655), only the Commission

may grant licenses and regulate their use. Federal

Radio Commission v. Nelson Brothers Bond and Mort-

gage Co., 289 U.S. 266, 279. Moreover, since unre-

stricted entry is the very heart of the Commission’s

regulatory policy for SMRs, restrictive entry policies

under some state regulatory schemes pose a direct

conflict with the authority the Commission has asserted

(Pet. App. 186a-189a). Cf. Head v. New Mexico

Board of Examiners, 374 U.S. 424.

” For this reason petitioner’s reliance upon Federal Power Com-

mission Vv. Texaco, Inc., 417 U.S. 380, is incorrect. Here, the Com-

mission will continue to regulate SMRs as radio licensees rather

than as common carriers.

17 .

3. The decision below does not violate the rule an-

nounced: in Securities and Exchange Commission v.

Chenery Corp., 318 U.S. 80, 95, that “an administra-

tive order cannot be upheld unless the grounds upon

which the agency acted in exercising its powers were

those upon which its action can be sustained.” The

Commission’s decision with respect to SMRs is based

in part upon the premise that SMRs will act as pri-

vate carriers.” It is evident from the Commission’s

opinion that it believed SMRs would conduct their

businesses by contract and that customers would “ne-

gotiate” with SMRs for service and facilities. It

stated that SMR facilities would be made available

by means of the same “marketing practices” under

which licensees obtain radio gear, and it contemplated

that SMRs would participate in a “free competitive

market” (Pet App. 57a-58a, 16la and n. 22, 166a).

Its decision also includes an appendix to the Com-

mission’s reconsideration order, which discusses the

concepts of “indifferent” or “indiscriminate” service

and cites the cases on which the court of appeals

relied (Pet. App. 247a). Thus, the court did not en-

croach upon the agency’s responsibility by originat-

ing some novel concept of the public interest never

considered by the agency. Rather, it was able to

22 The Commission did offer some alternative reasons for con-

cluding that it has power to exempt SMRs from Title II and state

regulation which the court of appeals rejected. However, the

Chenery rule does not preclude a court from affirming an agency’s

adequately supported assertion of power merely because it dis-

agrees with some of the agency’s theories with respect to the scope

of its jurisdiction.

18

“discern in the Commission’s opinion a rational basis

for its [action]” (Bowman Transportation vy. Arkan-

sas-Best Freight System, supra, 419 U.S. at 290),

which the court highlighted in explaining its affirm-

ance of the agency’s decision. Reconsideration by the

agency would serve no purpose since the substance of

_ the Commission’s decision is not seriously contestable,

and there is “not the slightest uncertainty” as to the

outcome of remand proceedings. National Labor Rela-

tions Board v. Wyman-Gordon Co., 394 U.S. 759, 766,

n, 6. See also Penn-Central Merger Cases, 389 U.S.

486, 518 n. 10, 526 n. 14; Friendly, Chenery Revisited:

Reflections on Reversal and Remand of Administra-

tive Orders, 1969 Duke L.J. 199.

CONCLUSION

The petition for a writ of certiorari should be

denied.

Respectfully submitted.

Rosert H. Bork,

Solicitor General.

THomas E. Kavuper,

Assistant Attorney General.

Cart D. Lawson,

Attorney.

AsuTon R. Harpy,

General Counsel,

DANIEL M. ARMSTRONG,

Associate General Counsel,

JOHN E. INGLE,

Counsel,

Federal Communications Commission.

May 1976.

APPENDIX

Communications Act of 1934, 48 Stat. 1064, as

amended, 47 U.S.C. 151 et seq.:

§ 151. Purposes of chapter; Federal Communications

Commission created

For the purpose of regulating interstate and for-

eign commeree in communication by wire and radio

so as to make available, so far as possible, to all the

people of the United States a rapid, efficient, Nation-

wide, and world-wide wire and radio communication

service with adequate facilities at reasonable charges,

for the purpose of the national defense, for the pur-

pose of promoting safety of life and property through

the use of wire and radio communication, and for,

the purpose of securing a more effective execution

of this policy by centralizmg authority heretofore

granted by law to several agencies and by granting

additional authority with respect to interstate and

foreign commerce in wire and radio communication,

there is created a commission to be known as the

“Federal Communications Commission’’, which shall

be constituted as hereinafter provided, and which

shall execute and enforce the provisions of this

chapter.

§ 154. Federal Communications Commission

7 * * * 7

(i) Duties and powers,

The Commission may perform any and all acts,

make such rules and regulations, and issue such or-

ders, not inconsistent with this chapter, as may be

necessary in the execution of its functions.

(1a)

2A

§ 303. Powers and duties of Commission

Except as otherwise provided in this chapter, the

Commission from time to time, as public conven-

ience, interest, or necessity requires, shall—

(a) Classify radio stations ;

(b) Prescribe the nature of the service to be ren-

dered by each class of licensed stations and each

station within any class;

(ec) Assign bands of frequencies to the various

classes of stations, and assign frequencies for each

individual station and determine the power which

each station shall use and the time during which it

may operate;

(d) Determine the location of classes of stations

or individual stations;

(e) Regulate the kind of apparatus to be used with

respect to its external effects and the purity and

sharpness of the emissions from each station and

from the apparatus therein;

(f) Make such regulations not inconsistent with

' law as it may deem necessary to prevent interfer-

ence between stations and to carry out the provisions

of this chapter: Provided, however, That changes in

the frequencies, authorized power, or in the times

of operation of any station, shall not be made with-

out the consent of the station licensee unless, after

a public hearing, the Commission shall determine

that such changes will promote public convenience

or interest or will serve public necessity, or the pro-

visions of this chapter will be more fully complied

with;

(g) Study new uses for radio, provide for experi-

mental uses of frequencies, and generally encourage

the larger and more effective use of radio in the

public interest;

* * * «

3A

(r) Make such rules and regulations and prescribe

such restrictions and conditions, not inconsistent

with law, as may be necessary to carry out the pro-

visions of this chapter, or any international radio or

wire communications treaty or convention, or regu-

lations annexed thereto, including any treaty or con-

vention insofar as it relates to the use of radio, to

which the United States is or may hereafter become

a party.

0.8. GOVERNMENT PRINTING OFFICE: 1976