Petition — Western Union Telegraph Co. v. Federal Communications Commission

Supreme Court, U. T

| FILED

IN THE NOV 15 1976

Supreme Court of the United A RODAK, N, GAE

OCTOBER TERM, 1976 —

no. 76-683

THE WESTERN UNION TELEGRAPH COMPANY,

Petitioner,

V. 1

FEDERAL COMMUNICATIONS COMMISSION, UNITED STATES

OF AMERICA, AMERICAN TELEPHONE AND TELEGRAPH

ComraNy, and the BELL SYSTEM OPERATING COM-

PANIES,

Respondents.

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

WM. WARFIELD Ross

PHILIP ELMAN

WILLIAM R. WEISSMAN

NANCY H. HENDRY

Of Counsel: WALD, HARKRADER & Ross

RICHARD C. HOSTETLER 1320 Nineteenth St., N.W.

Vice President and Washington, D.C. 20036

General Counsel JOEL YOHALEM

The Western Union J ne

ACK WERNER

Telegraph Company 1828 L St., N.W.

One Lake Street .

Upper Saddle River, Washington, D.C. 20036

New Jersey 07485 Attorneys for Petitioner

November 15, 1976

WILSON ers PRINTING Co.. INC. - Re 7-6002 - WASHINGTON. O. C. 20001

TABLE OF CONTENTS

STATUTES INVOLVED .................. .. ̃ͤ 94

e iccenenncnsinencetvenianen

r RST Re SR TENE OIE

B. Proceedings Before. the Federal Communica-

I è ... euiaseeananiba

LL

REASONS FOR GRANTING THE WR rr

T ——— .

APPENDICES

APPENDIX A—Opinion of the United States

Court of Appeals for the Third

Circuit, filed July 28, 19768

APPENDIX B- Judgment of the United States

Court of Appeals for the Third

Circuit, entered July 28, 1976.

APPENDIX C—Order Denying Petition of The

Western Union Telegraph Com-

pany for Rehearing and Sug-

gestion of Rehearing En Banc,

entered August 18, 19766

ADDENDIX D—Memorandum Opinion and Or-

der of the Federal Communica-

tions Commission, released June

ER oR a

13

la

42a

II

TABLE OF CONTENTS (Continued)

Page

APPENDIX E- Memorandum Opinion and Or-

der of the Federal Communica-

tions Commission, released Oc-

rr. 64a

APPENDIX F— Sample Contract No. 1111 70a

APPENDIX G— Sample Contract No. 85a

APPENDIX H- Relevant Statutory Provisions... 97a

TABLE OF AUTHORITIES

CASES:

Bell System Tariff Offerings, 46 F.C. C. 2d 413,

aff'd, 503 F.2d 1250 (3d Cir. 1974), cert. de-

aed, GER UE. BEB CITI cececcccccccccncscncecsncsscccecess 4,11

Bell Telephone Co. v. FCC, 503 F.2d 1250 (3d Cir.

1974), cert. denied, 422 U.S. 1026 (1975) 5,7

FPC v. Sierra Pacific Power Co., 350 U.S. 348

r 5, 13

Pittston Stevedoring Corp. v. Dellaventura,

F.2d —— [389 Ap. L. 2d (P&F) 67] (2d Cir.

July 1, 1976), petition for cert. filed sub nom.

Northeast Marine Terminal Co. v. Caputo, 45

U.S.L.W. 3256 (U.S. Sept. 27, 1976) (No. 76-

— SR oan ec bs ai etna eee 11

Pure Oil Co. v. FPC, 299 F. 2d 370 (7th Cir. 1962) 10

SEC v. Chenery Corp., 318 U.S. 80 (1943) 2, 3, 7, 9,

10, 12, 13

SEC v. Cogan, 201 F.2d 78 (9th Cir. 1952) 10

Skelly Oil Co. v. FPC, 532 F.2d 177 (10th Cir.

EERIE RES Saar POSS SORES AANA ae nn 10

Texas Gas Transmission Corp. v. Shell Oil Co., 363

r = SES 2, 3, 7, 9, 10, 11, 13

United Gas Pipe Line Co. v. Mobile Gas Service

Ne ee 5, 10

United States v. Morgan, 313 U.S. 409 (1941) 13

III

TABLE OF AUTHORITIES (Continued)

Page

United States v. Seatrain Lines, Inc., 329 U.S. 424

| ROR A Sea RE En Se tv ae 13

Warren Petroleum Corp. v. FPC, 282 F.2d 312

2 10

| STATUTES:

| Communications Act of 1934:

Section 211 (a), 47 U.S.C. § 211 (a) 4

Section 402 (a), 47 U.S.C. § 402(a) 6

Administrative Procedure Act:

EET REE ee 6

S U.S.C. § 706(a) (2) (A) ................2................. 7,11

, e 2

s csudiiceiinicesbictabin 6

MISCELLANEOUS:

4 DAVIS, ADMINISTRATIVE LAW TREATISE § 30.07

Zen ... 12

4 DAVIS, ADMINISTRATIVE LAW TREATISE § 30.09

REE SS EEE . 12

Hearings on . to Title II of the Com-

munications Act of 1934 Before the House Com-

mittee on Interstate and Foreign Commerce,

88th Cong., 2d Sess. (1964) 4

— ee ta

IN THE

Supreme Court of the United States

OCTOBER TERM, 1976

No.

THE WESTERN UNION TELEGRAPH COMPANY,

Petitioner,

V.

FEDERAL COMMUNICATIONS COMMISSION, UNITED STATES

OF AMERICA, AMERICAN TELEPHONE AND TELEGRAPH

COMPANY, and the BELL SYSTEM OPERATING COM-

PANIES,

Respondents.

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

Petitioner, The Western Union Telegraph Company

(“Western Union“), requests that this Court issue a

writ of certiorari to review the judgment and opinion of

the United States Court of Appeals for the Third Cir-

cuit entered in this case on July 28, 1976.

OPINIONS BELOW

The majority and dissenting opinions of the Court of

Appeals are reported at 541 F.2d 346 and appear at

Appendix A.“ The court, with Judge Garth dissenting,

affirmed the Memorandum Opinions and Orders of the

Federal Communications Commission (“FCC”), reported

at 55 F.C.C.2d 1045 and 49 F.C.C.2d 321, appearing at

Appendices D and E, respectively.

The appendices to this petition are cited as Pet. App.”

* as

2

JURISDICTION

The judgment of the Court of Appeals was entered on

July 28, 1976, and appears at Appendix B. A timely

filed petition for rehearing and suggestion of rehearing

en banc was denied on August 18, 1976, by order repro-

duced in Appendix C. The order denying rehearing noted

that all Third Circuit judges in regular active service

other than the three members of the original panel recused

themselves. The jurisdiction of this Court is invoked

under 28 U.S.C. § 1254(1).

QUESTION PRESENTED

The Bell System and Western Union have long ex-

changed facilities under a series of contracts filed with

the Federal Communications Commission but not other-

wise regulated under the Communications Act of 1934.

In 1974, Bell challenged the applicability of the contracts

to facilities employed by Western Union in supplying

certain common carrier services, having previously filed

tariffs seeking very substantial increases in the charges

for such facilities. The Commission concluded, solely from

the language of the contracts, that they did not apply

to such facilities. The Court of Appeals (with Judge

Garth dissenting) held that, even though the Commis-

sion relied only on “general legal precepts” in interpret-

ing the contracts, the matter was “within the ambit of

the FCC’s expertise” and hence its interpretation was

“entitled to greater deference from this court than would

be due a district court in a breach of contract action.”

The question presented is:

Whether, under the standard of judicial review es-

tablished by this Court in Chenery I and Texas Gas,’

2 The “Bell System” refers to American Telephone and Tele-

graph Company (“AT&T’’) and its telephone operating subsidiaries.

SEC v. Chenery Corp., 318 U.S. 80 (1943); Texas Gas Trans-

mission Corp. v. Shell Oil Co., 363 U.S. 263 (1960).

— ete nese ee

3

the Court of Appeals erred in totally deferring to the

FCC’s construction of the contracts where

(a) the contracts were filed with the Commission but

are not otherwise subject to regulation under the Com-

munications Act;

(b) the Commission relied solely on general common

law canons of construction of contracts, and not on any

claimed special agency competence or expertise; and

(e) only a question of law was presented as to the

meaning of the contracts’ language since the facts were

not in dispute.*

STATUTES INVOLVED

Pertinent provisions of the Administrative Procedure

Act and the Communications Act appear at Appendix

F, infra.

STATEMENT OF THE CASE

This litigation arose from a dispute between Western

Union and the Bell System over the scope of long-stand-

ing written contracts by which Western Union and the

Bell System have agreed to lease to each other at fixed

rates local and inter-city communications circuitry.

A. Background

The Bell System-Western Union exchange of facilities

contracts (commonly identified as the Bell-Western Union

contracts)* have a long history in the communications

industry, dating back in one form or another to the 19th

century—long before the enactment of the regulatory

scheme established by the Communications Act of 1934.

*The question presented as to the proper standard of judicial

review is also applicable to the Commission’s holding that Western

Union waived its contract rights by accepting a domestic satellite

grant. And see note 18 infra, at 13.

Relevant portions of sample contracts are reproduced in Ap-

pendices F & G, infra.

1

These contracts are not subject to the Act’s ratemaking

procedures; indeed, the Commission has disclaimed any

regulatory jurisdiction over them.

By the terms of these agreements, Western Union and

the Bell System companies may lease from the other at

fixed rates certain communications facilities for use in

providing that party’s authorized common carrier serv-

ices to the public. The contracts have no fixed term, are

revised by mutual agreement from time to time, and are

terminable by either party on five years’ written notice.

The present form of the exchange of facilities contracts

was adopted in 1928, and has been revised by mutual

agreement on several occasions, the most recent of which

was on January 1, 1970.

In September 1973, the Bell System invoked the five-

year termination clause. However, instead of honoring

these contracts for their remaining five-year term, the

Bell System companies attempted to abrogate them by

unilaterally filing tariffs charging substantially higher

rates.

Following Western Union’s protest, the Commission

summarily rejected the tariffs to the extent they applied

to Western Union as an unlawful attempt to abrogate ex-

isting contract rights by means of a unilateral tariff

filing. The Commission construed the Communications

Act as sanctioning private contractual arrangements be-

tween carriers and as conferring no authority on the FCC

to sanction modification by unilateral tariff filings. Bell

System Tariff Offerings, 46 F.C.C.2d 413 (1974). In so

ruling, the Commission relied upon this Court’s construc-

tion of similar provisions of the Natural Gas Act and

Se Hearings on Amendments to Title II of the Communications

Act of 1934 Before the House Committee on Interstate and Foreign

Commerce, 88th Cong., 2d Sess. 12-47 (1964). The contracts are

filed for information purposes with the FCC pursuant to Section

211(a) of the Communications Act, 47 U.S.C. §211(a).

Federal Power Act in United Gas Pipe Line Co. v. Mobile

Gas Service Corp., 350 U.S. 332 (1956), and FPC v.

Sierra Pacific Power Co., 350 U.S. 348 (1956). On re-

view, the Third Circuit affirmed the Commission’s appli-

cation of the Mobile-Sierra doctrine to the Communica-

tions Act, and this Court denied certiorari. Bell Tele-

phone Co. v. FCC, 503 F.2d 1250 (3d Cir. 1974), cert.

denied, 422 U.S. 1026 (1975).

The extent to which the Bell System tariffs remained

applicable to Western Union thus was controlled by the

scope of the contracts. If communications circuitry in-

tended for a particular common carrier service were

covered by the contracts, the lower contract rates gov-

erned; if not covered by the contracts, Western Union

would be obliged to pay the higher tariff rates which

would exceed the contract rates by several million dollars

over the remaining contract life.

B. Proceedings Before the Federal Communications

Commission

The instant litigation arose out of a contractual dis-

pute between Western Union and the Bell System over

two classes of common carrier private line communica-

tions services: (1) terrestrial private line services in-

volving connection to telephone company switching equip-

ment,’ and (2) domestic satellite communications serv-

ices. The issue before the Commission was whether the

Bell-Western Union contracts permit the lease of cir-

cuitry for use in providing these two classes of common

carrier service.

In its first Memorandum Opinion and Order (Pet.

App. 64a-69a), the Commission held that Western Union

Two particular private line switched services were at issue:

foreign exchange (“FX”) and common control switching arrange-

ment (“CCSA”) services. A description of these services appears

in the court’s opinion below. Pet. App. 4a n.1.

org

6

had “waived” its contracts rights when it accepted an

FCC domestic satellite grant subject to a condition that

Western Union operate its satellite system in accordance

with all present and future Commission policies appli-

cable to domestic satellite communications (Pet. App.

68a). Such a future policy, the Commission claimed, was

adopted when it subsequently directed AT&T to tariff

its interconnection arrangements with other domestic

satellite carriers (Pet. App. 68a).*

In a subsequent Memorandum Opinion and Order

(Pet. App. 45a-63a), the FCC refused to reconsider its

earlier ruling that Western Union had “waived” its con-

tract rights with respect to circuitry used for satellite

service, and further held that the contracts’ language

did not require the Bell System to lease local circuits to

Western Union for use in providing the switching serv-

ices described above. Its conclusions were based entirely

on general legal principles and ordinary canons of con-

tract construction, involved no resolution of disputed

facts, and in no way claimed to rely on any special agency

expertise.

C. The Proceedings Below

Upon review, the Court of Appeals for the Third Cir-

cuit, in a 2-to-1 decision, affirmed the FCC in all re-

spects.“ Pet. App. la-4la. Over a dissent by Judge

Garth, the majority construed Section 10(e) of the Ad-

ministrative Procedure Act, 5 U.S.C. § 706, as compelling

judicial deference to the agency’s interpretation of the

contracts, notwithstanding that the FCC relied only on

* That order did not authorize the Bell System to disregard its

outstanding contractuai obligations, but the Bell System tariffs

filed in response disregarded the contract rates and established a

sharply higher rate structure.

»The jurisdiction of the lower court was based upon Section

402(a) of the Communications Act, as amended, 47 U.S.C. § 402(a),

and 28 U.S.C. §§ 2341-50.

* ° :e::c%c% .=

<a

7

“general legal precepts,” concluding that the controversy

“falls within the ambit of the FCC’s expertise” (Pet.

App. lla). The majority exercised such deference even

though the FCC did not itself claim or invoke any spe-

cial expertise or judgment in construing the contracts.

On so deferential a standard of appellate review the

majority concluded that the FCC’s rulings were not

“arbitrary” or “capricious” (Pet. App. 17a, 20a).

The dissenting judge—who had acquired a familiarity

with the underlying dispute as a result of his authorship

of the earlier Bell Telephone decision - disagreed both

with the majority’s resolution of the merits and its re-

strictive standard of review. Distinguishing cases in

which agencies rely on “factors within their special

knowledge or experience” (Pet. App. 24a), Judge Garth

asserted that “plenary, de novo review” was required

here because the agency relied solely on general princi-

ples of law (Pet. App. 24a, 27a, 28a, 29a), not on policy

or technical grounds within the agency’s special compe-

tence (Pet. App. 32a). He relied on Texas Gas Trans-

mission Corp. v. Shell Oil Co., 363 U.S. 263 (1960), and

SEC v. Chenery Corp., 318 U.S. 80 (1943), neither of

which was cited or discussed in the majority opinion.

Judge Garth noted that Section 10(e) of the Adminis-

trative Procedure Act, 5 U.S.C. § 706 (a) (2) (A), com-

mands the reviewing court to “decide all relevant ques-

tions of law” and “set aside agency action” which is

“found to be... not in accordance with law... .” Pet.

App. 23a. Judge Garth concluded that the Commission

had misconstrued the scope of the contractual obligations

contemplated by the Bell-Western Union contracts and

that Western Union had not waived any contract rights

Bell Tel. Co. v. FCC, 503 F.2d 1250 (3d Cir. 1974), cert. de-

nied, 422 U.S. 1026 (1975).

8

by accepting the FCC’s grant of domestic satellite au-

thority."

Western Union’s petition for rehearing was denied

over Judge Garth’s dissent, and rehearing en banc was

automatically denied when all active Third Circuit judges

other than the three members of the panel recused them-

seives. Pet. App. 44a.”

REASONS FOR GRANTING THE WRIT

Review is warranted because the Court of Appeals

failed to apply to the Federal Communications Commis-

sion a basic standard of judicial review that this Court

in similar circumstances held applicable to the Federal

Power Commission and the Securities and Exchange

Commission. The Court of Appeals ignored these prece-

dents as well as numerous lower court decisions follow-

ing this Court’s standard. We believe it is important in

the enforcement of the Communications Act that it be

made clear that the same standard of judicial review

applies to FCC orders as to FPC and SEC orders.

A. Unlike most cases decided by the FCC involving

esoteric and technical issues of broadcast regulation, fre-

quency allocation and ratemaking, the instant litigation,

like cases decided every day by courts, involves a simple

question of the interpretation of written instruments.

The Commission was called upon to construe the cover-

age of the Bell-Western Union contracts and the scope

Although he joined the majority opinion, Chief Judge Seitz

indicated, without stating any reasons, that “even assuming that

the dissenting opinion has stated the applicable scope of review, he

would still deny the petition for review.” Judge Aldisert, the

author of the majority opinion, did not join in that statement.

Pet. App. 21a.

The Fourth Circuit was similarly disabled from entertaining a

suggestion of en banc consideration in another recent case involving

the Bell System. See Petition for Certiorari at 14 n.21, American

Tel. & Tel. Co. v. FCC, No. 76-332.

242

259

. K —

„ a tad beatin BS:

j

of a boilerplate license condition requiring Western Union

to comply with present and future FCC policies.“ In

reviewing the Commission’s actions, the Court of Appeals

deferred to a non-existent agency expertise. The FCC

interpreted the contracts as would any court of law of

competent general jurisdiction. No special expertise was

required to adjudicate these issues, and none was claimed

by the FCC. The Commission, as its opinion unequivo-

cally shows, resolved the issues of the interpretation of

the contract solely, as a court would, upon the meaning

of its terms in ordinary usage. Similarly, the determi-

nation of whether Western Union had waived its con-

tract rights was based on the wording of written instru-

ments. No factors derived from FCC “expertise” played

any part whatsoever in the agency decision.

Except for the fact that a Federal Power Commission

order was involved, this Court’s decision in Texas Gas

Transmission Corp. v. Shell Oil Co., 363 U.S. 263 (1960),

is on all fours. In that case, Mr. Justice Brennan, writ-

ing for a unanimous Court, held that no deference was

to be accorded by a reviewing court to a Federal Power

Commission construction of a contract for the sale of

natural gas, since the agency’s interpretation was based

not on “the application of its expert knowledge and judg-

ment to a highly technical field,” but rather on “the

application of ordinary rules of contract construction.”

Id. at 268-69. The language of the Texas Gas opinion

fits this case like a glove. Relying on SEC v. Chenery

Corp., 318 U.S. 80 (1943), Mr. Justice Brennan stated:

“The grounds upon which an administrative order

must be judged are those upon which the record dis-

closes that its action was based” .... Therefore,

since the Commission professed to dispose of the case

The Court of Appeals applied the ¢eference standard to the

FCC’s construction of both avcuments. The court’s error is the

same in both instances.

10

solely upon its review of the result called for by the

application of canons of contract construction em-

ployed by the courts, and did not in any wise rely

on matters within its special competence, the Court

of Appeals was fully justified in making its own

independent determination of the correct application

of the governing principles. [Id. at 270; citation

omitted. ]

In Chenery I, this Court reviewed the SEC’s applica-

tion of general principles of equity in approving a hold-

ing company reorganization plan, and concluded that

since the agency disavowed reliance on any special agency

competence or ex~2rtise and professed instead to be act-

ing as would a court of equity, no deference should be

accorded the agency’s judgment.“ There is no reason for

according the FCC greater deference when it purports

to be making a legal judgment based on general legal

principles.

The ruling below also conflicts with numerous lower

court decisions. The Federal Power Commission’s con-

struction of natural gas contracts was given no special

deference in a series of cases reviewed by the Seventh

and Tenth Circuits. See Pure Oil Co. v. FPC, 299 F.2d

370, 373 (7th Cir. 1962); Warren Petroleum Corp. v.

FPC, 282 F.2d 312, 315-16 (10th Cir. 1960). Recently,

the Tenth Circuit, in Skelly Oil Co. v. FPC, 532 F.2d

177 (10th Cir. 1976), held that no deference was to be

accorded the FPC’s construction of a natural gas sales

contract’s termination clause, since the question “is a

matter of ordinary contract law, a Williston-Corbin prob-

lem, and. .. nothing more than that.” Id. at 179. Cru-

cial to the decision was its conclusion, based on United

Gas Pipe Line Co. v. Mobile Gas Service Corp., 350 U.S.

332 (1956), that the “Natural Gas Act does not alter

the ordinary contractual relationships.” 532 F.2d at 179.

See also SEC v. Cogan, 201 F.2d 78, 85-87 (9th Cir. 1952).

~ *

11

The FCC, as affirmed by the court below, had previously

concluded that the Communications Act does not alter

ordinary inter-carrier contractual relationships. Bell

System Tariff Offerings, 46 F. C. C. 2d 413, aff'd, 503 F.2d

1250 (3d Cir. 1974), cert. denied, 422 U.S. 1026 (1975).

Similarly, writing for the Second Circuit in Pittston

Stevedoring Corp. v. Dellaventura, F.2d —— [39

Ap.L.2d (P&F) 67, 80-82] (2d Cir. July 1, 1976), peti-

tion for cert. filed sub nom. Northeast Marine Terminal

Co. v. Caputo, 45 U.S.L.W. 2356 (U.S. Sept. 27, 1976)

(No. 76-444), Judge Friendly rejected the “ ‘deference’

approach” in reviewing an agency’s construction of a

statutory term in performing an umpiring, rather than

policy making function. Id. at 81. In the present case,

also, the FCC’s role in contract interpretation was

merely that of an umpire, since it relied exclusively on

the language of the agreements in determining their

scope. Pet. App. 54a.

B. Despite this array of authoritative contrary prece-

dent, the majority below justified its limited review by

asserting without analysis that “this controversy talls

within the ambit of the FCC’s expertise.” Pet. App. IIa.

The Court of Appeals thus erroneously confused “exper-

tise” with “subject matter jurisdiction.”

In Texas Gas, the Federal Power Commission was

vested with jurisdiction to construe contracts for the sale

of natural gas. But that fact did not establish FPC

“expertise” to which a reviewing court must defer, where

the court is no less competent to construe the contracts

and is required by the APA to review “all questions of

law.” See Texas Gas Transmission Corp. v. Shell Oil Co.,

supra, 363 U.S. at 270; Administrative Procedure Act

§10(e), 5 U.S.C. § 706 (a) (2) (A). Similarly, approval

of a holding company’s reorganization plan fell within

the Securities and Exchange Commission’s jurisdiction.

But that fact did not establish SEC “expertise” in apply-

12

ing general principles fashioned by courts of equity. See

Chenery I, supra, 318 U.S. at 92-94.

The FCC is in a parallel position. It has jurisdiction

to construe these contracts between communications car-

riers, but its jurisdiction does not qualify the Commis-

sion as more expert than the FPC or SEC—or, indeed,

a reviewing court—in applying general canons of con-

tract construction. See 4 Davis, ADMINISTRATIVE LAW

TREATISE § 30.07, at 232 (1958).

C. As Judge Garth recognized (Pet. App. 21a), the

importance of this case transcends the interests directly

involved. The “deference” accorded by the majority to

the FCC’s legal conclusions is, on analysis, not defer-

ence but a decision to refrain from undertaking what

the majority saw as the arduous task of unravelling

contract meaning —a task which, though burdensome,

is normally performed by courts of law. If so limited a

view of judicial responsibility is permitted, administrative

agencies would have broader unreviewable authority than

United States district courts in deciding ordinary legal

issues. The exponential growth of government programs

affecting every aspect of private activity emphasizes the

continued need for proper allocation of authority be-

tween agencies and reviewing courts.

15 As Professor Davis points out:

The courts, not the agencies, are comparatively the experts in

many areas, including constitutional law, common law, ethics,

overall philosophy of law and government, judge-made law

developed through statutory interpretation, most analysis of

legislative history, and problems transcending the particular

field of the agency. [4 Davis, ADMINISTRATIVE LAW TREATISE,

§ 30.09, at 241 (1958).]

16 As the majority candidly stated:

But we need not decide what result we would reach if faced

with the necessity of construing de novo these Delphic con-

tractual provisions. What is clear only is that it is not clear

what these provisions, especially section 3(d), mean [Pet. App.

14a].

1

*

— nh ep . rr

13

CONCLUSION

We believe the error below is so patent, particularly

in view of the court’s failure even to cite or discuss the

Chenery and Texas Gas decisions, that the case may be

appropriate for summary reversal. In any event, we re-

spectfully urge review of the Court of Appeals’ “abdica-

tion” u of a meaningful role in the “partnership” be-

tween administrative agencies and reviewing courts as

“collaborative instrumentalities of justice.” United

States v. Morgan, 313 U.S. 409, 422 (1941). The peti-

tion for certiorari should be granted.“

Respectfully submitted,

WM. WARFIELD Ross

PHILIP ELMAN

WILLIAM R. WEISSMAN

NANCY H. HENDRY

WALD, HARKRADER & Ross

1320 Nineteenth St., N.W.

Washington, D.C. 20036

JOEL YOHALEM

JACK WERNER

1828 L St., N.W.

Washington, D.C. 20036

Attorneys for Petitioner

Of Counsel:

RICHARD C. HOSTETLER

Vice President and

General Counsel

The Western Union

Telegraph Company

One Lake Street

Upper Saddle River,

New Jersey 07485

November 15, 1976

Pet. App. 21a (Garth, J., dissenting) .

wf If the Court grants certiorari and sets this case down for full

briefing and oral argument, Western Union wishes to reserve the

right to brief and argue the following subsidiary issues which the

Court may deem appropriate for further review: (1) whether the

Bell-Western Union contracts cover facilities for common carrier

services involving connection to telephone company switching equip-

ment and domestic satellite transmissions; and (2) whether, in

light of United States v. Seatrain Lines, Inc., 329 U.S. 424 (1947),

and FPC v. Sierra Pacific Power Co., 350 U.S. 348 (1956), the

Commission could lawfully abrogate Western Union’s vested con-

tract rights by relying on an open-ended license condition requiring

licensee adherence to all existing and future agency policies.

APPENDICES

la

APPENDIX A

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 75-1796

THE WESTERN UNION TELEGRAPH COMPANY

One Lake Street, Upper Saddle River, New Jersey 07458,

Petitioner

V.

FEDERAL COMMUNICATIONS COMMISSION and

UNITED STATES OF AMERICA,

Respondents

AMERICAN TELEPHONE AND TELEGRAPH COMPANY

(“AT&T”) and THE BELL TELEPHONE COMPANY OF

PENNSYLVANIA; THE CHESAPEAKE AND POTOMAC TELE-

PHONE COMPANY, THE CHESAPEAKE AND POTOMAC

TELEPHONE COMPANY OF MARYLAND, THE CHESA-

PEAKE AND POTOMAC TELEPHONE COMPANY OF VIR-

GINIA, THE CHESAPEAKE AND POTOMAC TELEPHONE

COMPANY OF WEST VIRGINIA, CINCINNATI BELL, INC.,

DIAMOND STATE TELEPHONE COMPANY, ILLINOIS BELL

TELEPHONE COMPANY, INDIANA BELL TELEPHONE

COMPANY, MICHIGAN BELL TELEPHONE COMPANY, THE

MOUNTAIN STATES TELEPHONE AND TELEGRAPH COM-

PANY, NEW ENGLAND TELEPHONE AND TELEGRAPH

COMPANY, NEW JERSEY BELL TELEPHONE COMPANY,

NEW YORK TELEPHONE COMPANY, NORTHWESTERN

BELL TELEPHONE COMPANY, THE OHIO BELL TELE-

PHONE COMPANY, PACIFIC NORTHWEST BELL TELE-

PHONE COMPANY, THE PACIFIC TELEPHONE AND TELE-

2a

GRAPH COMPANY, SOUTH CENTRAL BELL TELEPHONE

COMPANY, SOUTHERN BELL TELEPHONE AND TELE-

GRAPH COMPANY, THE SOUTHERN NEW ENGLAND

TELEPHONE COMPANY, SOUTHWESTERN BELL TELE-

PHONE COMPANY, AND WISCONSIN TELEPHONE COM-

PANY,

Intervenors

ON PETITION FOR REVIEW FROM THE

FEDERAL COMMUNICATIONS COMMISSION

Argued May 6, 1976

Before: SErrz, Chief Judge, and ALDISERT and GARTH,

Of Counsel:

Circuit Judges.

Wm. Warfield Ross, Esq.

William R. Weissman, Esq.

J. Michel Marcoux, Esq.

Wald, Harkrader & Ross

1320 Nineteenth Street, N.W.

Washington, D.C. 20036

Jack Werner, Esq.

Joel Yohalem, Esq.

Laurence Singer, Esq.

1828 L Street, N.W.

Washington, D.C. 20036

Richard C. Hostetler

Vice President and General Counsel

The Western Union Telegraph Company

One Lake Street

Upper Saddle River, New Jersey 07458

Counsel for Petitioner

Of Counsel:

3a

Ashton R. Hardy, General Counsel

Daniel M. Armstrong, Associate

General Counsel

John E. Ingle, Counsel

Federal Communications Commission

Washington, D.C. 20554

Thomas E. Kauper, Assistant Attorney

General

Carl D. Lawson, Esquire

John Powers, Esquire

Department of Justice

Washington, D.C. 20530

Counsel for Respondents

Charles A. Horsky, Esq.

E. Edward Bruce, Esq.

Stephen G. Ryan, Esq.

Gary L. Reback, Esq.

Covington & Burling

888 Sixteenth Street, N.W.

Washington, D.C. 20006

Alfred C. Partoll, Esq.

Lee S. Cuteliff, Esq.

M. Jean Dabney, Esq.

195 Broadway

New York, New York 10007

F. Mark Garlinghouse, Esa.

195 Broadway

New York, New York 10007

Counsel for Intervenors

4a

OPINION OF THE COURT

(Filed July 28, 1976)

ALDISERT, Circuit Judge.

This petition for review of an order of the Federal

Communications Commission presents issues concerning

the scope and applicability of exchange of facilities con-

tracts in force between Western Union (WU) and Ameri-

can Telephone and Telegraph (AT&T). The Commission

concluded that the contracts did not cover AT&T facilities

to be used by WU to provide foreign exchange (FX) and

common control switching arrangement (CCSA) services,’

and that in accepting its satellite authorization WU had

waived any contract rights it might have had in con-

nection with facilities for its domestic satellite service.

WU, therefore, would be obliged to lease facilities for

these services at the higher rates set forth in AT&T tar-

1 Foreign exchange (FX) is a private line service that is

partially “switched”. It allows a businessman located in one

state, to, in effect, maintain a local phone in another state.

Under FX, for example, a businessman in Washington can be

reached by telephone subscribers in New York City and can

himself reach New York City telephone subscribers (through

a local leop in Washington, a Washington-New York inter-

exchange line, and a business line in the New York City ex-

change area). However, New York City telephone subscribers

could not reach Washington subscribers other than the Wash-

ington businessman over FX private line service and the latter

would have to maintain a separate telephone in order to tie into

the Washington exchange area. A Common Control Switching

Arrangement (CCSA) is a private line system for linking the

various offices of a large company through large switches on a

local telephone company’s premises instead of through PBX

switches on the customer’s premises.

46 F.C.C.2d 413, 418 n.5, aff'd sub nom. Bell Telephone Co. v. FCC,

503 F.2d 1250 (3d Cir. 1974), cert. denied, 422 U.S. 1026 (1975).

Reference may be had to previous decisions in this matter for

definitions of other technical or peculiar terms. In the interest of

simplicity, definitional material here will be minimal.

5a

iffs filed with the Commission, not at the lower

rates. We hold that the Commission acted — 5 —

tutory authority and that its conclusions were not arbi-

trary, capricious, an abuse of discretion, or otherwise not

in accordance with law.“ Accordingly, we deny WU’s pe-

tition for review.

I

A detailed history of the disputes underlying this liti-

gation is set forth in Bell Telephone Co. v. FCC, 503 F.2d

1250 (3d Cir. 1974), cert. denied, 422 U.S. 1026 (1975)

and will not be repeated here. That decision constitutes

the legal predicate for the litigation at bar. There we

affirmed a decision and order of the FCC which in

pertinent part (a) required AT&T to furnish to all

specialized common carriers—among them WU intercon-

nection facilities to provide authorized communications

services including FX and CCSA services, and (b) re-

jected AT&T tariffs insofar as they covered interconnec-

tion facilities and services already covered by Bell-West-

ern Union exchange of facilities contracts. Bell Telephone

Co. v. FCC established that the Communications Act does

not authorize the modification or abrogation of contracts

by subsequently filed tariffs. But the order of the Com-

25 U.S.C. $706. Scope of review

To the extent necessary to decision and when

0 tl t presented, the

reviewing court shall decide all relevant questions of law

—— ——— and statutory provisions, and determine

meaning or applicability of the term i

The reviewing court shall— oa

(2) hold unlawful and set asid ,

conclusions found to be— ide agency action, findings, and

(A) arbitrary, capricious, an abuse f . .

otherwise not in accordance with law; 3

(C) in excess of statutory jurisdiction, authori

. 2 2 ° orit „

limitations, or short of statutory right... . ine

6a

mission there affirmed also said that, with respect to

facilities not covered by exchange of facilities contracts,

AT&T was to charge pursuant to tariffs. 503 F.2d at

1282-84.

Following the decision in Bell Telephone Co. v. FCC,

AT&T refused WU’s requests to lease facilities for FX,

CCSA, and domestic satellite services at contract rates

although AT&T leased identical facilities at those rates

when the facilities were used for other services. WU

sought relief in administrative proceedings before the

Commission. On October 16, 1974, the Commission de-

cided that WU had waived any contract rights it might

have had in connection with facilities for its domestic

satellite service when it accepted its satellite authoriza-

tion, but emphasized that AT&T was required to inter-

connect with WU to permit WU to provide FX and CCSA

services. The Commission did not, at that time decide

whether the required FX and CCSA interconnections were

to be pursuant to tariff or contract, but asked the parties

to brief the question. 49 F.C.C.2d 321 (1974). On June

24, 1975 the Commission released its Memorandum Opin-

ion and Order rejecting WU’s contention that the ex-

change of facilities contracts covered FX and CCSA serv-

ices and denying reconsideration of its prior decision

that domestic satellite contract rights, if any, had been

waived. 53 F.C.C.2d 1045 (1975).

In concluding that FX and CCSA services were not

covered by the exchange of facilities contracts, the Com-

mission relied upon the language of the contraciz. Con-

ceding that facilities available under the contract are

technically capable of furnishing FX and CCSA services,

the Commission asked instead “whether the contracts

allow the use of these facilities for FX and CCSA serv-

ices.” 58 F.C.C.2d at 1050. This question it resolved by

7a

reference to contract sections 3 (b) and 3 (d),“ finding

(bb) Connection of Leased Circuits.

Circuits leased to the Telegraph Company hereunder, or

interexchange circuits of the Telegraph Company when con-

nected to such leased circuits, may be directly connected with

circuits owned by:

(1) Other telephone companies offering a general tele-

phone service to the public within the continental United

States.

(2) The United States Government on military bases,

and on reservations of the National Aeronautics and Space

Administration.

(3) Electric power, or oil, oil products, or natural gas

pipeline companies, or railroad companies where the cir-

cuits of such companies are provided primarily to com-

municate with points located along a right-of-way owned or

controlled by such company.

(4) Telegraph Companies offering international tele-

graph service under filed tariffs, where such circuits are

used exclusively in international service and connection is

made at terminals within the United States of such

circuits.

(5) Telegraph or telephone companies, or government-

operated telegraph or telephone systems, operating in com-

panies [sic] bordering the continental United States,

where such circuits are used exclusively in furnishing

service between such countries and the continental United

States, and connection is made at terminals within the

United States of such circuits.

Any other direct connection of such circvits with circuits

of others or of the Telephone Company shall be made only with

the written approval of the Telephone Company.

53 F.C.C.2d at 1048.

(d) Connection of Western Union Private Line Services

With Telephone Company Services.

Connection of Western Union private line services with Tele-

phone Company services shall be allowed only under the tariffs

of the Telephone Company and consistent with the terms and

conditions of such tariffs applicable to the connection of Western

Union provided services with services of the Telephone Com-

pany. No such connection shall at any time be made in any

8a

the controlling language in section 3(d) : “Connection of

Western Union private line services with Telephone Com-

pany services shall be allowed only under the tariffs of

the Telephone Company. .. .” The contracts distinguish

between services and facilities.“ Section 3(d) applies

expressly to services. In the Commission’s view, how-

ever, section 3(d) served a definitional purpose, referenc-

ing the contracts themselves to services allowed at the

date of contracting and thereby, limiting contract fa-

cilities to use for such services:

The purpose of this provision is to define those situ-

ations in which Western Union services utilizing

facilities obtained under the contracts, may be con-

nected to Bell services. Since this provision ref-

erences the applicable telephone company tariffs, the

question before us is whether the cross reference to

the applicable tariffs is to be made as of the time of

contracting (e.g., January 1, 1970) or as of the date

jurisdiction except as duly authorized by tariffs in force and

effect.

.C.C.2d at 1047. The Commission was aware that section 3(d)

anaes in Contract No. 1,. applicable to leasing within ex-

change areas, and not in Contract No. 2, applicable to leasing be-

tween exchange areas. WU mentions this variance by way of dis-

paraging reliance on section 3(d), but makes no argument that the

contracts ought to be separately construed as regards FX, CCSA,

or domestic satellite services. (Petitioner’s Brief at 20.)

5 ing to WU the “facilities” available under the contracts

3 — and microwave circuits, certain items of telephone

equipment, and duct and pole line attachment space.” (Petitioner's

Brief at 16.) Again according to WU, “Telephone Company serv-

ices” referred to in the contracts are “exchange switching (in

the case of FX) and CCSA switching (in the case of CCSA).’

(Petitioner’s Brief at 21.) In addition, a “private line service”,

like FX, “provides the large-scale telephone customer with full-time

private circuits for the transmission of communications between

locations specified by the customer. The service operates to give the

customer continuous communication without requiring the carrier

to establish a new connection for each call or message.” Bell Tele-

phone Co. v. FCC, supra, 503 F.2d at 1254 n.3.

9a

the interconnection of services is to be made. The

law is well settled that all parts or sections of a con-

tract must be given effect, force and meaning, if pos-

sible, and if it can fairly and reasonably be done;

and that a construetion rendering a provision or

term meaningless or superfluous should be avoided.

If there were no Section 3(d) in the contract, then

the terms and conditions governing the connection of

Bell Services with the services of other common car-

riers would be found in the then effective applicable

Bell System customer tariffs. If the cross reference

to the applicable telephone company tariffs is meant

to be to the then effective tariff provisions, then

Section 3(d) would be superfluous. Therefore, in

order to give meaning to Section 3(d), we conclude

that the cross reference to applicable telephone com-

pany tariffs is to be made as of the time of contract-

ing (e. g., January 1, 1970). Since the telephone

company tariffs, at that time, did not allow Western

Union to interconnect its private line services with

Bell’s service for the purpose of providing its own

FX and CCSA services, we conclude that Western

Union may not obtain under the contracts, facili-

ties which would be used in the provision of FX and

CCSA services. Western Union may, of course, ob-

tain such facilities pursuant to Bell tariffs on file

with this Commission, in the same manner and at

the same rates as other common carriers offering

FX and CCSA type services,

53 F.C.C.2d at 1051 (footnotes omitted).

The FCC authorized WU’s domestic satellite application

on January 18, 1973, subject to the condition that WU’s

“facilities shall be operated in accordance with all Com-

mission policies adopted in Docket No. 16495 [which

established basic domestic satellite policy objectives] and

all rules and policies subsequently made applicable to

domestic satellite communications. .” 38 F.C.C.2d

1197, 1199 (1973). Some eight months later, in the con-

10a -

text of AT&T’s domestic satellite application, the Com-

mission decided that tariffs, not private contracts, were

the means most conducive to achieving its basic policy ob-

jectives of reasonable and non-discriminatory satellite

licensee access to AT&T facilities.“ The effect of the

quoted conditional language, the Commission here con-

cluded, was to waive any contract rights WU might

have had in connection with its satellite operations, and

to subject those operations to the subsequently articulated

tariff policy. “We conclude that Western Union willingly

and knowingly accepted a condition in its domestic satel-

lite authorization, as implemented by the unchallenged

AT&T decision, which constituted a voluntary waiver of

its contract rights, if any existed.” 53 F.C.C.2d at 1054.

WU petitions for review under § 402(a) of the Com-

munications Act, as amended, 47 U.S.C. § 402(a), and 28

U.S. C. § 2342 (1).

We turn now to review of the Commission's conelu-

sions: first, concerning FX and CCSA services, and,

second, concerning domestic satellite service.

6 We see no reason why tariffs should not be filed by the Bell

System to cover facilities supplied to satellite licensees. The

statutory requirement under our Act for filing of tariffs is

based upon the national public interest in securing uniformity

of treatment to all, to suppress unjust discrimination and undue

preferences, and to prevent special and secret agreements, in

respect to interstate wire and radio communications, and to that

end to require that rates applicable thereto be established

in a manner calculated to give them publicity, to make them

inflexible while in force, and to cause them to be unalterable

except in a manner prescribed by statute.

21. Accordingly, we shall impose as a condition to the grant

herein of the AT&T applications that all charges, classifications,

regulations and practices applicable to the provision by the

Bell System companies of interconnection facilities shall be

set forth in tariff schedules to be filed pursuant to Section 203

of the Act and Part 61 of our Rules.

42 F.C.C.2d 654, 659-60 (1973).

lla

II.

Preliminarily, we must address a question raised con-

cerning the proper scope of our review of the FCC’s

conclusions concerning FX and CCSA services. Both

parties, correctly, agree that the pertinent statute is

§ 706 of the Administrative Procedure Act, note 2 supra,

which provides that a reviewing court shall set aside

agency conclusions found to be arbitrary, capricious, an

abuse of discretion, or otherwise not in accordance with

law. WU argues, however, that the Commission here was

net applying the Communications Act which is the

agency’s expert province, but was applying general com-

mon law precepts of contract construction in which the

agency has no particular expertise. Accordingly, the ar-

gument continues, the Commission here is entitled to no

greater deference from this court than would be due a

district court in a breach of contract action. We cannot

agree.

WU makes no attempt to harmonize its argument for

a more stringent standard of review with the apparently

clear language of the Administrative Procedure Act. We

find no ambiguity in the statutory standard. Nor do we

perceive any intimation that an agency’s resort to gen-

eral legal precepts in determining a matter within the

ambit of its expertise sufficies [sic] to divest that deter-

mination of judic al deference otherwise due. Certainly,

this controversy falls within the ambit of the FCC’s ex-

pertise. These agreements involve complex, sophisticated,

and rapidly-evolving communications technology. Quite

properly, WU took the matter to the FCC for resolution,

not to a district court.’ Moreover, the agreements impli-

An attempt to initiate this proceeding in the district court would

probably have resulted in a reference to the FCC under the doctrine

of primary jurisdiction. “Under the doctrine, a court should refer

a matter to an administrative agency for resolution, even if the

matter is otherwise properly before the court, if it appears that

the matter involves technical or policy considerations which are

12a

cate questions of national regulatory policy. They con-

cern the applicability of Commission-approved tariffs

intended to provide access to all common carriers on rea-

sonable and non-discriminatory terms. Under these cir-

cumstances, the fact that these are private agreements

cannot alter the statutory deference due the Commission.

See North Atlantic Westbound Freight Ass’n v. FMC,

397 F.2d 683, 685 (D.C. Cir. 1968); Manufacturers

Light & Heat Co. v. FPC, 374 F.2d 88, 89 (3d Cir.

1967). We will upset the Commission’s conclusion con-

cerning FX and CCSA only if it is arbitrary, capricious,

an abuse of discretion, or otherwise not in accordance

with law. Meadville Master Antenna, Inc. v. FCC, ——

F.2d ——, No. 75-1889 (3d Cir., April 12, 1976).

WU objects to the FCC’s conclusion concerning FX

and CCSA in three respects. First, WU focuses on the

Commission’s determination that the contracts cover the

technical facilities that would provide FX and CCSA

services. This determination, WU contends, should have

been dispositive of the litigation. WU here contends, in

effect, for a plenary obligation on the part of AT&T to

provide contract facilities for any services that WU

might be authorized to, and choose to, provide during the

term of the contracts. But the Commission aptly an-

swered this contention: “the question to be resolved is

not whether the facilities available under the contracts

are capable of furnishing FX and CCSA services, but

rather whether the contracts allow the use of these fa-

cilities for FX and CCSA services.” 53 F.C.C.2d at 1050.

Second, WU takes issue with the Commission’s reli-

ance on section 3(d) as defining the services for which

contract facilities are available by reference to services

being provided by WU at the time of contracting in 1970.

beyond the court’s ordinary competence and within the agency’s

particular field of expertise.” MCI Communications Corp. v. AT&T,

496 F.2d 214, 220 (3d Cir. 1974).

13a

WU argues that the purpose of section 3(d) is not to

define services for which contract facilities are available,

but is “to acknowledge that such service connection con-

figurations are consistent with these facilities contracts.”

(Petitioner’s Brief at 22.) According to WU, section

3(d) contemplates an arrangement where WU would

lease facilities at contract rates and services at tariff

rates.“ AT&T’s response is multi-faceted. Distilled to its

essence, however, it is that WU’s interpretation results

in an “open-ended” obligation to provide facilities at con-

tract rates, and that other contract provisions evidence

no intention on the part of AT&T to assume such an obli-

gation. Most particularly, AT&T points to section 3(b),

note 3 supra, with its enumeration of five specific in-

stances in which circuits leased to WU under contract

may be connected with other circuits, and its require-

ment of AT&T approval for other connections. AT&T

also points to section 2(d)* of Contract No. 2, and sec-

tion 20g)“ of Contract No. 1 (identically reproduced in

; WU also argues that the FCC’s reference to 1970 tariffs in

interpreting the contracts will have the ‘preposterous consequences”

that all provisions of such tariffs “would be frozen as of that date

for the life of the contract.” (Petitioner’s Brief at 25.) We fail to

see the logic of this argument. There is no apparent logical connec-

tion between the Commission's reference to 1970 tariffs as part of

the process of construing these private exchange of facilities con-

tracts, and the statement that all provisions of the tariffs will be

frozen. If there is a logical connection, it escapes our powers of

discernment.

(d) Access and connection to a circuit section furnished here-

under may be had at points of termination of such circuit sec-

tion only by means of local terminal circuits procured from the

lessor or from its connesting telephone company by separate

agreement, or by connec.ions made by the lessee upon special

approval by the lessor.

(App. at 0111.)

(e) This Agreement does not apply to the furnishing by

either party to the other of anv telephone or telegraph services

or facilities under published tariffs.

(App. at 0087.)

14a

section 2 (f) of Contract No. 2), as evidence that the

parties did not contemplate the obligation that WU seeks

to impose. AT&T, of course, vigorously supports the

FCC’s reference to 1970 as the time for judging the

scope of the parties’ obligations, asserting that “it is

clear that section 3, read as a whole, plainly mandates”

such a reference. (Intervenors’ Brief at 31.)

Unfortunately, what is clear and plain to the advo-

cates is not always clear and plain to the court. This

aspect of the argument is slippery. But we need not

decide what result we would reach if faced with the

necessity of construing de novo these Delphic contractual

provisions. What is clear only is that it is not clear

what these provisions, especially section 3(d), mean. Cer-

tainly, it was not arbitrary or capricious to conclude, as

the Commission did, that the contracts embodied some

limitation on AT&T’s obligation to provide facilities tech-

nically covered by the specifications of the contracts.

Neither, we believe, was it arbitrary or capricious for

the Commission to interpret section 3(d) as imposing

that limitation by referencing the contracts to the time

of contracting. Accordingly, we reject WU’s argument

concerning the interpretation of section 3(d).

Finally, WU contends that the Commission’s decision

was tainted by the application of erroneous standards of

law, to-wit, by consideration of parol evidence as to the

contracting parties’ intentions, and by adoption of a

policy of strict construction of the exchange of facilities

contracts. WU’s parol evidence contention is based on

the Commission’s consideration of an affidavit concern-

ing AT&T’s intentions during the negotiations and in

the execution of the contracts." For this contention to

Our interpretation of the contracts is further buttressed by

the affidavits submitted by both parties in an attempt to explain

each party’s intentions at the time of contracting. AT&T

affirmatively states that [dluring the negotiations, and in

15a

have logical validity, WU would have to establish at a

minimum: (a) as a matter of administrative law, that

the Commission was bound to apply the parol evidence

rule, and (b) as a matter of contract law, that the rule

was applicable. WU has not established either of these

propositions. We have strong doubts on both scores, but

we have no occasion to go further than the basic precept

of administrative law set forth in 5 556 (d) of the Ad-

ministrative Procedure Act: Any oral or documentary

evidence may be received, but the agency as a matter

of policy shall provide for the exclusion of irrelevant,

immaterial, or unduly repetitious evidence.” 5 U.S.C.

556 (d).“ The paramount issue being the real intention

the execution of the contracts, it was not contemplated by those

representing the Bell System that the contracts covered con-

nection of Bell System services or facilities with Western

Union services or facilities for FX or CCSA services, or that

facilities would be furnished to Western Union under the con-

tracts for such purposes.” On the other hand, Western Union

did not state that, at the time of negotiations, it was intended

that facilities obtained under the contracts could be used for

FX or CCSA services or any other Western Union services

which required connection to Bell System services and which

were not already allowed by tariffs in effect at the time of the

signing. Rather Western Union merely states that at no time

prior to the execution of the contracts did AT&T inform

Western Union that the contracts did not cover leasing of Bell

System facilities to Western Union for FX or CCSA services.

Thus the intentions of the parties at the time of contracting,

as shown by the affidavits of the parties, was that contract

facilities could not be used for FX and CCSA services.

53 F.C.C.2d at 1051 n.12.

1 Referring to the parol evidence rule, Professor Thayer said:

“Few things are darker than this, or fuller of subtle difficulties.”

THAYER, A PRELIMINARY TREATISE ON EVIDENCE AT COMMON LAW

390 (1898). See, .., United States v. Clementon Sewerage Au-

thority, 365 F.2d 609, 613-14 (3d Cir. 1966).

7 “If these words mean what they say, an agency whose action

is subject to this provision cannot commit error by admitting par-

ticular evidence, no matter how incompetent or irrelevant the evi-

dence may be.” K. Davis, ADMINISTRATIVE LAW TREATISE § 14.08,

at 282 (1958).

16a

of the parties, Ludwig Honold Manufacturing Co. V.

Fletcher, 405 F.2d 1123, 1131 (3d Cir. 1969), and the

Commission having obviously concluded that an affidavit

speaking to that issue was not “irrelevant, immaterial,

or unduly repetitious”, we are not in a position to gain-

say that conclusion.“ The Commission considered a simi-

lar affidavit supplied by WU, note 11 supra, so clearly

the practice here was even-handed. And, in any event,

the agency’s opinion makes clear that the affidavits were

not dispositive in effect; they merely “buttressed” its

conclusions concerning FX and CCSA. Ibid. We reject

the parol evidence argument.

WU gets no further with its attack on the FCC’s an-

nounced policy of strict construction of the exchange of

facilities contracts." WU interprets this as a policy to

construe the contracts “not in accord with their literal

meaning, but as narrowly as possible” and asserts that

such a policy “necessarily would stem from authority

granted the agency in the Communications Act to abro-

gate, set aside or modify the contracts, and it is settled

that no such authority exists, except possibly under for-

14 We recognize that the parol evidence rule is frequently said to

be a rule of substantive law and not a rule of evidence. F. g., United

States v. Clementon Sewerage Authority, supra note 12, 365 F.2d

at 613: J. CALAMARI & J. PRULO, THE LAW OF CONTRACTS § 43, at

86 (1970). No reason is apparent why the FCC could not apply the

rule as a matter of substantive law or policy, if it chose to do so,

but we hardly imagine that it is required to do so in view of the

plain language of § 556(d) that “Ca]ny oral or documentary evidence

may be received.”

15 The Commission is cognizant that if the contract rates do

apply a disparity in treatment among carriers will exist. Such a

disparity, if unjustified, would be manifestly contradictory to

the Commission’s often enunciated policy of fair and full com-

petition and its policy that tariffs, rather than contracts,

should generally govern these matters. Because of this the

Commission intends to strictly construe the Bell-Western Union

contracts.

49 F.C.C.2d at 322.

17a

mal hearing procedures, not followed here.” (Petition-

er’s Brief at 31-32.) This argument misconceives the

agency’s action: the Commission here did not abrogate

set aside or modify the contracts, it construed them. Of

course, Opinions may differ as to the proper limits and

results of construction. But where, as here, the meaning

of contractual provisions is contested and unclear, we

have no hesitancy in characterizing the process as con-

struction. Moreover, while we would see no impropriety

in alertness to policy implications of contract construc-

tion, we find no evidence in the decision under review

of the application of any particular philosophy of con-

struction, strict or otherwise. We find simply an effort

to determine the intentions of the parties embodied in a

group of difficult contractual provisions. Again, we can

discern no basis to disturb the FCC’s conclusions.

We have considered WU’s arguments, and

reviewed the FCC’s conclusion that FX and CCSA —

ices are not covered by the exchange of facilities con-

tracts. We do not find that conclusion to be arbitrary

capricious, an abuse of discretion, or otherwise not in

accordance with law.

III.

Turning to the domestic satellite aspect of the petition

for review, we again address the threshold question of

the proper scope of our review. In this phase of the case

WU makes two substantive arguments: first, that the

WU satellite authorization was not, in fact, conditioned

on a waiver of contract rights; and second, that any

such condition imposed constituted an unlawful expan-

sion of the Commission’s regulatory powers. With re-

gard to WU’s first argument, our review must be based

on determining whether the FCC’s action was arbitrary

capricious, an abuse of discretion, or otherwise not in

accordance with law. The reasons set forth previously

for applying that standard apply here a fortiori. Pri-

18a

marily, this argument turns on an interpretation of the

FCC’s own prior action in imposing the contested waiver,

and upon a factual determination whether WU know-

ingly and voluntarily accepted its authorization subject

to the condition. We will accord the full deference of

the statutory standard to the Commission’s conclusions

on these points. With regard to WU’s second argument,

our review is of a different character. A claim that

agency action is “in excess of statutory jurisdiction, au-

thority, or limitations, or short of statutory right”, 5

U.S.C. § 706(2) (C), necessarily entails a first-hand judi-

cial comparison of the claimed excessive action with the

pertinent statutory authority. See, e.g., FPC v. Moss, 44

U.S.L.W. 4278 (U.S. Mar. 3, 1976).

In marked contrast to the parties’ contractual lan-

guage previously discussed, the Commission’s language in

its January, 1973, satellite authorization to WU was quite

explicit: “these [satellite] facilities shall be operated in

accordance with all Commission policies adopted in Docket

No. 16495 and all rules and policies subsequently made

applicable to domestic satellite communications.” 38

F.C.C.2d at 1199. Having argued that the FX and CCSA

contract terms were clear and unambiguous, WU here

contends that the Commission’s language was not suffi-

ciently clear to give fair notice of a waiver. WU asserts

that in January, 1973, it had no reason to suspect that

it was waiving contract rights. “No policy was then in

effect or subsequently adopted in the orders cited by the

FCC compelling Western Union to waive its contract

rights in order to receive the requested domestic satellite

authority.” (Petitioner’s Brief at 37.) But the FCC had

said in June, 1972, that its objective was “that all car-

riers providing retail interstate satellite services

have access at non-discriminatory terms and conditions to

local loop and interchange facilities.” 35 F.C.C.2d at

856 (1972). WU is not unsophisticated; at the least

19a

this language adumbrated the possbility that tariffs might

be applied. And surely a policy was “subsequently adopt-

ed”—in connection with AT&T’s satellite application, 42

F.C.C.2d at 656-60—which required that tariffs, not pri-

vate contracts, govern domestic satellite facilities. The

Commission said:

. . In summary, as a participant in Docket No.

16495, Western Union was on — notice of: (a)

the Commission's general poliey objective on access

and interconnection; (b) the regulatory approach

adopted by the Commission to develop appropriate

means to realize such policy objective and; (e that

as a potential domestic satellite licensee it would be

subject to any interconnection and access policies

— by the Commission pursuant to the Second

eport.

.. [Wie find it difficult to believe that as an

established common carrier Western Union would not

anticipate, either at the time of our Second Report

and Reconsideration Orders or at the time its au-

thorization was granted, that we might reach the de-

termination after appropriate consideration of AT

&T’s applications and interconnection proposal that

tariffs, rather than private contracts, would be the

most appropriate means to assure the realization of

our access and interconnection policy objectives which

stressed the goal of “reasonable and non-discrimina-

tory” interconnection. In light of the foregoing and

Section 203 of the Communications Act, we deem

Western Union’s claim of lack of notice to be un-

tenable. In any event, Western Union failed to chal-

lenge the AT&T grant, and is therefore now bound

by that final decision. We conclude that Western

Union willingly and knowingly accepted a condition

in its domestic satellite authorization, as imple-

mented by the unchallenged AT&T decision, which

20a

constituted a voluntary waiver of its contract rights,

if any existed.

53 F.C.C.2d at 1053-54 (1975).

We do not believe that this conclusion was arbitrary,

capricious, an abuse of discretion, or otherwise not in

accordance with law.

WU’s final argument—that the imposition of a waiver

exceeded the Commission’s statutory authority—is not

persuasive. The Commission is expressly authorized by

statute “to attach to the issuance of [a] certificate such

terms and conditions as in its judgment the public con-

venience and necessity may require.” 47 U.S.C. § 214

(e). Recognizing the existence of § 214(c), WU is forced

to argue that it cannot be considered as authorizing the

Commission to impose a waiver of contract rights as a

condition. The gravamen of the argument is that such

an interpretation would allow the Commission to do “in-

directly” by condition what it is forbidden to do “di-

rectly” by tariff, viz., modify or abrogate contracts. Bell

Telephone Co. v. FCC, supra. The argument fails because

of the brute fact that there is a significant difference

between a voluntary waiver of rights in order to secure

a benefit not otherwise obtainable,” and the extinguish-

ment of rights by tariffs which provide no quid pro quo.

Keeping in mind also that § 214 applies only to new

lines or extensions, we see no inconsistency between the

condition imposed in this case and the rule of Bell Tele-

phone Co. v. FCC that the Act does not authorize the

abrogation or modification of contracts by subsequently

filed tariffs. The Commission specifically stated that

At jhe condition we imposed on Western Union’s authori-

When an applicant accepts a Government permit which is sub-

ject to certain conditions, he cannot later assert alleged rights

which the permit required him to surrender in order to receive it.”

Capital Telephone Co. v. FCC, 498 F.2d 734, 740 (D.C. Cir. 1974).

21a

zation is reasonable and in our judgment serves the publie

convenience and necessity in assuring flexibile regulation

of domestic satellite communications and the provision

of services and facilities on a reasonable and non-dis-

criminatory basis.” 53 F.C.C.2d at 1055 (1975). Far

from overstepping its statutory bounds, the Commission

appears to have acted carefully and consciously within the

express language of § 214(c). We decline to hold the

Commission’s action unlawful.

We have considered all the contentions raised by the

petition for review. The petition will be denied.

Chief Judge Seitz joins in Judge Aldisert’s opinion.

However, even assuming that the dissenting opinion has

stated the applicable scope of review, he would still deny

the petition for review.

GARTH, Circuit Judge, dissenting:

The majority’s resolution of this petition for review

has, in my view, dangerously limited the scope of judicial

scrutiny of administrative decisions. The administrative

agency’s interpretation of the contracts at issue here was

based solely upon principles of contract construction and

not agency expertise. In according deference to the Fed-

eral Communications Commission’s interpretation of these

contracts, I believe the majority has given the agency vir-

tually unreviewable power in matters of law, a power

denied to federal district courts, although courts are pre-

sumably expert in such matters. Reason compels no such

abdication of our appellate function, nor does it require

substitution of our normal de novo standard of review

for the standard employed by the majority.

22a

I.

As stated by the majority (Majority Op. at 5-9), the

matters in issue here follow directly from the Federal

Communications Commission’s (FCC) order dated April

23, 1974 which this Court affirmed in Bell Telephone Co.

of Pennsylvania v. F.C.C., 503 F.2d 1250 (3d Cir. 1974),

cert. denied, 423 U.S. 886 (1975). That order required

the American Telephone and Telegraph Company (AT

&T) and the Bell System Operating Companies (Bell) to

furnish specialized common carriers,’ including Western

Union, with interconnection facilities pursuant to tariffs

for foreign exchange (FX) and common control switching

arrangement (CCSA)?* services. However, the April 23,

1974 order provided that the Bell Companies could not

abrogate Western Union’s existing contractual rights

through the adoption of tariffs. Therefore, interconnec-

tion facilities would be available to Western Union for

FX and CCSA services at contract rate if these facili-

ties were covered by the Bell-Western Union exchange of

facilities contracts, and would otherwise be available at

tariff rate.

Thereafter, Western Union requested that the Bell

Companies furnish interconnection facilities for FX,

1 See Bell Telephone Co. of Pennsylvania v. F.C.C., 503 F.2d at

1254, n.3, where this Court stated:

A “specialized” common carrier is a carrier that does not

provide the full range of communications services contemplated

by the Communications Act, 47 U.S.C. § 151 et seq. For the pur-

poses of this opinion, the phrase “specialized common carrier”

shall refer to carriers who specialize in “private line services.”

“Private line service” provides the large-scale telephone

customer with full-time private circuits for the transmission

of communications between locations specified by the customer.

The service operates to give the customer continuous communi-

cation without requiring the carrier to establish a new connec-

tion for each call or message.

2 See Majority Op. at n.1.

23a

CCSA, and domestic satellite communication services at

the lower contract rates. The Bell Companies refused,

claiming that these facilities were only available under

tariffs. As a result Western Union filed complaints with

the FCC against AT&T and the Bell Companies. It is

these complaints that give rise to this petition for review.

I am in complete accord with the majority’s statement

that our review of the FCC orders at issue here is gov-

erned by section 10(e) of the Administrative Procedure

Act (APA), 5 U.S.C. § 706 (a) (2) (A). That section

states in pertinent part:

To the extent necessary to decision and when pre-

sented, the reviewing court shall decide all relevant

questions of law, interpret constitutional and statu-

tory provisions, and determine the meaning and ap-

plicability of the terms of an agency action. The

reviewing court shall—

(2) hold unlawful and set aside agency action,

findings, and conclusions found to be—

(A) arbitrary, capricious, and abuse of dis-

cretion, or otherwise not in accordance with

„.

However, I believe § 706 (a) (2) (A) does not create a

single standard of review applicable to all situations. The

phrase arbitrary, capricious, and abuse of discretion, or

otherwise not in accordance with law“ is worded in the

disjunetive, thereby providing alternative tests for seru-

tinizing agency action. While the standard of arbitrary,

capricious, and abuse of discretion is appropriate in some

instances, Congress has required the reviewing court to

“decide all revelant questions of law” and thereafter to

set aside agency determinations “not in accordance with

law.” The APA thus recognizes a basic postulate of our

system of appellate jurisprudence—that while deference ~

24a

must be accorded to judgments of lower tribunals based

upon factors within their special knowledge or experi-

ence, an appellate court is entrusted with plenary, de

novo review of all questions of law. Consequently, I be-

lieve a determination of the appropriate APA standard

of review can only be made after examining the type of

agency action presented in this petition.

The FCC characterized the FX-CCSA issue as purely

a question of contract construction—whether “the Bell-

Western Union exchange of facilities contracts cover the

leasing of interconnection facilities to be used in furnish-

ing FX-CCSA services.” 53 F.C.C.2d 1045 (1975).

Moreover, in resolving this legal problem the FCC relied

solely upon principles of contract law. Paragraph 16 of

the Memorandum Opinion and Order of June 24, 1975

states:

16. Foreign exchange (FX) service involves the

connection of a pure private line service to a local

exchange service, and CCSA service is a switched

private line service involving the connection of vari-

ous private line services through AT&T’s Common

Control Switching Arrangements (CCSA). For

Western Union to provide FX and CCSA service it

is necessary in either case to connect Western Un-

ion’s private line services with Bell services. Thus

the controlling provision in the contracts is Section

3(d) which states, in pertinent part, that “Connec-

tion of Western Union private line services with

Telephone Company services shall be allowed only

under the tariffs of the Telephone Company... .”

The purpose of this provision is to define those situa-

tions in which Western Union services utilizing fa-

cilities obtained under the contracts, may be con-

nected to Bell services. Since this provision refer-

ences the applicable telephone company tariffs, the

question before us is whether the cross reference to

the applicable tariffs is to be made as of the time of

contracting (e.g., January 1, 1970) or as of the date

25a

the interconnection of services is to be made. The

law is well settled that all parts or sections of a

contract must be given effect, force and meaning, if

possible, and if it can fairly and reasonably be done;

and that a construction rendering a provision or

term meaningless or superfluous should be avoided."

If there were no Section 3(d) in the contract, then

the terms and conditions governing the connection of

Bell services with the services of other common car-

riers would be found in the then effective applicable

Bell System customer tariffs. If the cross reference

to the applicable telephone company tariffs is meant

to be to the then effective tariff provisions, then Sec-

tion 3(d) would be superfluous. Therefore, in order

to give meaning to Section 3(d), we conclude that

the cross reference to applicable telephone company

tariffs is to be made as of the time of contracting

(e.g., January 1, 1970). Since the telephone com-

pany tariffs, at that time, did not allow Western

Union to interconnect its private line services with

Bell’s services for the purpose of providing its own

FX and CCSA services, we conclude that Western

Union may not obtain under the contracts, facili-

ties which would be used in the provision of FX and

CCSA services. Western Union may, of course, ob-

tain such facilities pursuant to Bell tariffs on file

with this Commission, in the same manner and at

the same rates as other common carriers offering

FX and CCSA type services.“ (Footnote 12 omitted)

(Emphasis added.)

1 F. g., Meighan v. Finn, 146 F.2d 594 (2nd Cir. 1944),

affirmed 325 U.S. 300, 65 S. Ct. 1147 (1945); United Artists

Corporation v. Strand Productions, 216 F.2d 305 (9th Cir.

1954); Ludwig Honold Manufacturing Company v. Fletcher,

405 F.2d 1123 (3rd Cir. 1969); Gillentine v. McKeand, 426

F.2d 717 (1st Cir. 1970); see also 17A C.J.S. Contracts § 297;

Williston, Ch. 22, §619; Restatement of Contracts § 236.

53 F.C.C.2d at 1051.

26a

The second issue concerning the availability of inter-

connection facilities under the contracts for domestic

satellite services also presented a purely legal question—

whether Western Union in accepting domestic satellite

authorization waived any rights under the contracts.

Paragraphs 9 and 10 of the Memorandum Opinion and

Order of October 16, 1974 capsulize the FCC’s analysis:

9. Western Union also sought authorization from

the Commission to provide its own domestic satellite

communications. These applications were also grant-

ed subject to the condition that the facilities would

be operated in accordance with Commission policies

adopted in the Second Report and Order, 35 FCC2d

844 (1972), and “all rules and policies subsequently

made applicable to domestic satellite communica-

tions. Western Union Telegraph Co., 38 FCC

2d 1197, 1199 (1973). Western Union willingly ac-

cepted such a conditional grant.

10. Both Bell and Western Union willingly and

knowingly accepted their domestic satellite authori-

zations subject to the explicit condition that tariffs,

not private contracts, would be filed setting forth the

charges, classifications, regulations and practices ap-

plicable to such facilities. AT&T 42 FCC2d 654,

659 (1973). Bell System Tariff Offerings, 46 FCC2d

413, 437. We held that such tariffs were “the most

appropriate means by which to achieve our objective

that these facilities [should] be provided to other

satellite carriers on ‘reasonable and non-discrimina-

tory conditions.” AT&T, 42 FCC2d 654, 659

(1973).* Bell and Western Union thus agreed to

waive any rights, in any existed, to obtain such fa-

cilities by any means other than a tariff. Neither

can now allege a right to such facilities under any con-

tracts. “When an applicant accepts a government

permit which is subject to certain conditions, he

cannot later assert alleged rights which the permit

required him to surrender in order to receive it.”

27a

Capital Telephone Company v. Federal Communica-

tions Commission, slip op. 11, No. 72-1715, D.C. Cir.,

May 24, 1974. [498 F.2d 734, 740]. (Emphasis

added. )

49 F.C.C.2d 321, 323 (1974). On reconsideration of this

opinion and order the FCC further expanded upon its

waiver theory still relying upon the precise terms of the

satellite grant (see p. 32, infra). 53 F.C.C.2d at 1052-55.

The majority regards this issue of waiver as a factual

determination (Majority Op. at 16) which is again sub-

ject to the “arbitrary, capricious, and abuse of discre-

tion” standard. I cannot agree. The Commission itself

has predicated Western Union’s “waiver” solely upon the

precise terms of its grant of domestic satellite authoriza-

tion. Thus, in holding that Western Union “waived” its

contract rights, the FCC relied upon no factual determin-

ation and did not go outside the exact terms of the grant.

Nor did the question of Western Union’s knowing and

willing relinquishment of any rights under its contracts

involve the FCC’s interpretation of its own prior actions.

For “waiver” looks to the knowledge and conduct of

Western Union at the time of accepting the grant and not

to the FCC’s subsequent interpretation of its own intent

in authorizing the grant. Thus, while I acknowledge that

deference is accorded to an agency’s interpretation of its

own actions or agreements where the issue may involve

the meaning of that particular action or agreement, I see

no basis for “deference” when the issue for determina-

tion necessarily arises from the knowledge, conduct, and

intent of third parties such as Western Union here.

Since the waiver here involves neither factual conclu-

sions, nor interpretation requiring agency expertise, I find

no basis for applying an “arbitrary or capricious” stand-

ard which is traditionally applied in such circumstances.

Rather, here. . . where the only evidence as to waiver

is a writing, its construction and interpretation and

28a

whether or not it constitutes a waiver is a question of

law for the court.” Hanover Construction Co. v. Fehr,

392 Pa. 199, 139 A.2d 656, 658 (1958) ; Griffin v. United

States of America, 500 F.2d 1059, 1072 (3d Cir. 1974);

Crabb v. Commissioner of Internal Revenue, 121 F.2d

1015 (5th Cir. 1941). Hence the appropriate APA

standard to be applied here is the standard of “not in

accordance with law,” a standard which requires a plen-

ary, de novo review of the documents in question.

Applying strictly legal principles, the FCC concluded

that the Bell-Western Union contracts did not extend to

facilities for FX and CCSA services and that Western

Union waived any contract rights with respect to do-

mestic satellite services. In reviewing decisions that are

grounded upon principles of contract law, their “validity

must likewise be judged on that basis. The grounds upon

which an administrative order must be judged are those

upon which the record discloses that its action was

based.” S.E.C. v. Chenery Corp., 318 U.S. 80, 87 (1943);

Texas Gas Corp. v. Shell Oil Co., 363 U.S. 263, 270

(1960). Hence, I conceive of our function as being one

of reviewing the FCC’s application of strictly legal pre-

cepts to the Bell-Western Union controversy.

However, the majority evidently does not share in

this view. Instead the majority has characterized the

matter before us as

an agency’s resort to general legal precepts in

determining a matter within the ambit of its exper-

tise . . . Certainly this controversy falls with the

ambit of the FCC’s expertise. These agreements in-

volve complex, sophisticated, and rapidly-evolving

communications technology . . . . Moreover, the

agreements implicate questions of national regula-

tory policy ....

29a

Majority Op. at 10. Although the FCC does exercise

special competence with respect to the many decisions en-

trusted to it under the Federal Communications Act, 47

U.S.C. § 151 et seg., I know of no reason to conclude that

this competence extends to the subject of contract con-

struction—an area that has traditionally been considered

within the special province of a court’s expertise. More-

over, even if the FCC had special ability in such matters,

its decisions here were predicated solely on the basis of

contract law and not upon any expertise or policy con-

siderations. Thus, the possibility that this controversy

falls within the special competence of the FCC is irrele-

vant to our consideration since “[t]he grounds upon

which an administrative order must be judged are those

upon which the record discloses that its action was

based.” S.E.C. v. Chenery Corp., supra at 87. Hence, I

believe our review is strictly limited to the FCC’s ap-

plication of contract principles to the issues presented.

Our initial inquiry as to the appropriate APA stand-

ard for review of the FCC orders presented here may be

further refined as follows: Which of the § 706(a) (2) (A)

standards“ arbitrary, capricious, an abuse of discre-

tion” or “not in accordance with law“ must we apply

in reviewing agency decisions that are based exclusively

upon principles of contract law? This is by no means a

question of first impression. In a similar context, this

Court, without even discussing its scope of review, con-

sidered de novo the Federal Power Commission’s inter-

pretation of a clause in a contract for the sale of natural

gas. Shell Oil Co. v. F.P.C., 263 F.2d 223 (3d Cir.

1959). Our plenary review of the contract in Shell Oil

Co. resulted in a petition for certiorari which the Su-

preme Court granted, having been “particularly moved

to do so by the contention .. . that the Court of Ap-

peals exceeded the appropriate scope of judicial review

of the Commission’s determination.” Texas Gas Corp. V.

Shell Oil Co., 363 U.S. 263, 268 (1960).

30a

The Supreme Court analyzed the challenge to this

Court’s review of the F.P.C. contract interpretation as

follows:

We may assume with the petitioners that the

Court of Appeals did not treat the Commission’s

order as one which it was required to accept if

reasonably supported in the record, and instead con-

sidered that it could examine de novo the question

of the proper interpretation to be given the Shell

“favored nation” clause. The petitioners’ argument

that the Court of Appeals exceeded the allowable

limits of judicial review is based upon the premise

that the Commission’s interpretation of the “favored

nation” clause reflects the application of its expert

knowledge and judgment to a highly technical field,

so that the Court of Appeals was required to accept

the Commission’s interpretation if it had “ ‘warrant

in the record’ and a ‘reasonable basis in law,“

citing Unemployment Compensation Comm’n v. Ara-

gon, 329 U.S. 148, 153-154. But the record no-

where discloses that the Commission arrived at its

interpretation of the “favored nation” clause on the

basis of specialized knowledge gained from experi-

ence in the regulation of the natural gas business,

or upon the basis of any trade practice concerning

“favored nation” clauses. On the contrary the opin-

ions of the examiner and the Commission show that

both treated the question as one to be determined

simply by the application of ordinary rules of con-

tract construction.

363 U.S. at 268-69. I can find no difference between the

standard of review actually applied by the majority here

and the position urged by the petitioners upon the Su-

preme Court in Texas Gas Corp., supra. Therefore, the

Supreme Court’s total rejection of the petitioner’s argu-

ment in Texas Gas Corp. and its affirmance of this

31a

Court’s standards of de novo review,’ makes, in my view,

the majority’s position here untenable.

Confronted with precisely the same question as we are

here as to the appropriate standard for review for an

agency’s contract interpretation, the Supreme Court

stated:

“The grounds upon which an administrative order

must be judged are those upon which the record dis-

closes that its action was based.” Securities & Ex-

change Comm'n v. Chenery Corp., 318 U.S. 80, 87.

Therefore, since the Commission professed to dispose

of the case solely upon its view of the result called

for by the application of canons of contract con-

struction employed by the courts, and did not in any

wise rely on matters within its special competence,

the Court of Appeals was fully justified in making

its own independent determination of the correct ap-

plication of the governing principles. See Federal

Communications Comm’n v. RCA Communications,

Inc., 346 U.S. 86, 91. There applies here what the

Court said in Chenery: “Since the decision of the

Commission was explicitly based upon the appli-

cability of principles {of contract interpretation]

announced by courts, its validity must likewise be

judged on that basis.” 318 U.S., at 87.

363 U.S. at 270. Thus, where an administrative agency’s

construction of a contract was based solely upon legal

principles, the Supreme Court held that this Court “was

fully justified in making its own independent determina-

tion of the correct application of the governing prin-

ciples.” Id. at 270. Furthermore, I suggest that de novo

consideration of an agency’s resolution of legal issues is

not only “justified” but mandated by the APA. For

Although the Supreme Court affirmed this Court’s standard of

review, it reached a different interpretation of the contract clause

at issue. Hence the Supreme Court reversed this Court’s decision

on the merits.

32a

§706(a) requires that “the reviewing court . . de-

cide all relevant questions of law.. . Thus, this Court’s

position with respect to the proper standard of review in

Shell Oil Company v. F.P.C. as approved by the Supreme

Court in Texas Gas Corp. and the very terms of the

APA are, in my view, dispositive of the issue presented

here.

Reason, in addition to controlling authority, argues

against any other conclusion here. The scope of appellate

review of agency actions reflects to varying degrees the

limited competence of an appellate tribunal to pass upon

matters that involve specialized knowledge and impor-

tant policy considerations. In such matters deference

must be shown to the administrative agency specially cre-

ated by Congress to make decisions based upon expertise.

However, when, as here, an agency relies upon strictly

legal principles to resolve a controversy, an appellate

court is at least equally capable, and probably more

capable, of applying the legal precepts involved. More-

over, when a district court in an identical situation re-

solves questions of contract law, this Court engages in

de novo consideration of the issues. Thus, I perceive no

basis which requires this Court to give special considera-

tion to the application of legal principles by an adminis-

trative agency. Indeed, I believe the very opposite is

called for.

Nor am I in the least persuaded by the two cases

cited by majority in support of its view that deference

should be accorded to the FCC’s interpretation of the con-

tract questions at issue here. In Manufacturers Light

and Heat Co. v. F. P. C., 374 F.2d 88 (3d Cir. 1967) (per

curiam), this Court granted “substantial weight to the

expert judgment of the Commission” in the interpreta-

tion of a settlement agreement which had been confirmed

by the F.P.C. in a rate proceeding as to which the

F.P.C. was itself a party. The issue of how refunds

33a

under the agreement should be properly allocated im-

plicated the special knowledge of the F.P.C., and there-

fore this Court properly concluded that the F.P.C.’s judg-

ment should “not be lightly regarded.” Id. at 89.

Furthermore, the majority’s reliance upon North At-

lantic Westbound Freight Assoc. v. Federal Maritime

Comm'n, 397 F.2d 683 (D.C. Cir. 1968) (per curiam), is

also inapposite. There, with respect to judicial review

of conference agreements in the maritime freight indus-

try, the Court of Appeals stated:

Certainly where underlying issues of fact or policy

are involved an agency’s interpretation of agree-

ments is due judicial respect and deference... .

Specifically in regard to conference agreements, the

Commission is to be given “reasonable leeway in de-

lineating the scope” of these agreements. .. .

397 F.2d at 685. However, here, there is no suggestion

that the FCC’s interpretation of the Bell-Western Union

contracts was based upon underlying issues of fact or

policy. Nor are these Bell-Western Union contracts anal-

ogous to the industry-wide conference agreements at

issue in North Atlantic Westbound Freight Assoc. Thus,

I can only conclude that the majority’s reliance upon

these cases is completely misplaced.

Summarizing my view, since the FCC orders before

us were decided strictly upon legal principles, I believe

our task under the APA is to determine whether these

agency actions are “in accordance with law.” 5 U.S.C.

§ 706(a) (2) (A). In resolving such legal questions, our

scope of review is both plenary and de novo. Since the

APA does not suggest but requires that we “decide all

relevant questions of law,” I can find no authority for

the majority’s assertion that agency determinations of

legal questions must be accorded special consideration or

deference. Therefore, I believe this Court is required to

34a

engage in an independent review of the FCC’s decisions

concerning the availability of interconnection facilities for

Western Union’s FX, CCSA, and domestic satellite serv-

ices.

II.

Based upon a de novo review of the legal issues pre-

sented, see Part I, supra, I believe the FCC’s interpreta-

tion of the Bell-Western Union contracts is unwarranted

and tortured. As explained by the majority, see Major-

ity Op. at 6-8, the thrust of the FCC’s decision is found

in Paragraph 16 of the Memorandum Opinion and Order

of June 24, 1975, 53 F.C.C.2d 1045 (1975). See p. 22

supra. There the FCC concluded that Section 3(d) de-

fine d] those situations in which Western Union services

utilizing facilities obtained under the contracts, may be

connected to Bell services.” In “order to give meaning to

Section 3(d),” the FCC construed this provision as allow-

ing for the connection of Western Union services utiliz-

ing contract facilities to only those Bell services for

which tariffs existed as of the time of contracting, Janu-

ary 1, 1970. Therefore, under the Commission’s analysis,

the facilities necessary for Western Union’s FX and

CCSA services were not available under the contracts

since Bell tariffs in existence on January 1, 1970 did not

allow for the connection of Western Union services with

Bell FX and CCSA services.

I begin my analysis of these contracts with section 2,

which describes the general undertaking of the parties.

Under section 2 each party agreed to “lease to the other

. . circuits and certain related facilities, to be operated

by the lessee as part of or in connection with its plant

... in furnishing communication service to the public.”

(Emphasis added.) App. 86-87; 110-111. FX and CCSA,

two particular types of private line services, clearly con-

stitute a type of “communication service to the public.”

85a

The only explicit limitation placed upon the uses for

which facilities subject to the contracts could be put is

found in section 3. Under section 3(a),

... circuits leased to the Telegraph Company [West-

ern Union] hereunder may be used only in providing

its common carrier communications services for

which such circuits are suitable. (Emphasis added.)

App. 87, 112. Here, Western Union sought to lease con-

tract facilities to furnish FX and CCSA services, both of

which are “common carrier communications services.”

Furthermore, the FCC implicitly recognized the “suita-

bility” of these facilities for Western Union’s private

line services when it concluded:

. .. from a purely technical or operational viewpoint,

it appears that the circuits and related facilities

specified in the contracts provide the capability for

Western Union to access Bell’s exchange and CCSA

switching equipment, thus making it physically pos-

sible for Western Union to use contract facilities

for its own FX and CCSA services.

53 F.C.C.2d at 1050.

Sections 2 and 3 of the contracts thus indicate the

parties’ intentions to permit the leasing of all facilities

so long as they were used for common carrier communi-

cations services and the facilities were suitable for this

purpose. The parties, sophisticated corporations in the

communications industry, placed no limitation on the par-

ticular type of communications services for which the

facilities could be used. Nor do I believe that section

3(d), which the Commission relied on, imposes any such

limitations.

Section 3(d) simply provides for the connection of

Western Union services with Bell services:

Connection of Western Union private line services

with Telephone Company services shall be allowed

36a

only under the tariffs of the Telephone Company

and consistent with the terms and conditions of such

tariffs applicable to the connection of Western Un-

ion provided services with services of the Telephone

Company. No such connection shall at any time be

made in any jurisdiction except as duly authorized

by tariffs in force and effect.

App. 89. Whereas the other portions of the contracts

provide that facilities will be available at contract rate,

this section provides that tariff, rather than contract

rate, shall govern the interconnection of services. There

is no indication that this section was intended to freeze

the types of service for which facilities under the con-

tracts could be used. Moreover, the last sentence of the

section, ignored by both the FCC and the majority here,

further supports my interpretation. That sentence states:

“No such connection shall at any time be made in any

jurisdiction except as duly authorized by tariffs in force

and effect.” This specification that connection was only

to be made at “tariffs in force and effect” constitutes an

implicit recognition that the services subject to tariff as

well as the amount of the tariff were subject to change.

Thus, it would seem that only the tariffs “in force and

effect” at any particular time are relevant to the ques-

tion of whether Western Union and Bell services may be

connected under section 3(d).

Nor does such a construction render section 3(d) su-

perfluous as the FCC suggests. The provision represents

agreement by the parties that the services offered by each

may be connected, and it establishes the rate which gov-

erns such connection. Such a provision is both meaning-

ful and significant. Whether, in the absence of such a

provision, the services could be connected at the prevail-

ing tariffs is irrelevant to parties’ desire to reduce this

matter to writing and thereby avoid a possible area of

dispute.

37a

In concluding that the FCC erred in its interpretation

of the Bell-Western Union contracts, I see no need to

reach or decide Western Union’s arguments concerning

the parol evidence rule or the Commission’s strict con-

struction of the contracts. Hence, I would conclude based

upon a de novo review that the facilities necessary for

Western Union’s FX and CCSA services are available

under the Bell-Western Union contracts.

III.

Exereising an independent judgment as to the second

issue presented whether acceptance of domestic satellite

authorization constituted a waiver of any rights under

the contracts—I cannot agree with the FCC’s decision.

As previously stated, pp. 22-23, supra, the FCC concluded

that Western Union had waived its rights, if any existed,

under the Bell-Western Union contracts in accepting its

satellite authorization. In reaching this determination the

Commission relied upon the condition in the Western

Union satellite authorization that the facilities be oper-

ated in accordance with the Second Report and Order, 35

F.C.C.2d 844 (1972) and “all rules and policies subse-

quently made applicable to domestic satellite communica-

tions.” Thereafter the FCC decided that tariffs were the

“most appropriate means” to achieve the availability of

facilities on non-discriminatory terms. Based upon West-

ern Union’s conditional grant, the Commission concluded

that it had “willingly and knowingly accepted [its] .. .

domestic satellite authorizations subject to the explicit

condition that tariffs, not private contracts” would apply

to interconnection facilities. 49 F.C.C.2d at 323.

In denying reconsideration of the October 16, 1974

domestic satellite communication decision, the Commis-

sion altered its analysis. Although still relying upon the

conditional satellite authorization, the Commission stated:

38a

As to whether such condition placed Western

Union on actual notice of the nature of the intercon-

nection requirement we find it difficult to believe that

as an established common carrier Western Union

would not anticipate, either at the time of our Sec-

ond Report and Reconsideration Orders or at the

time its authorization was granted, that we might

reach the determination after appropriate considera-

tion of AT&T’s applications and interconnection pro-

posal that tariffs, rather than private contracts,

would be the most appropriate means to assure the

realization of our access and interconnection policy

objectives which stressed the goal of “reasonable

and non-discriminatory” interconnection. In light of

the foregoing and Section 203 of the Communica-

tions Act, we deem Western Union’s claim of lack

of notice to be untenable.

53 F.C.C.2d at 1054. This shift, from concluding that

Western Union “willingly and knowingly” accepted its

authorization subject to tariffs to concluding that West-

ern Union must have “anticipate[d]” the tariff policy, in

and of itself suggests the slippery quality of the FCC’s

reasoning. Moreover, when the FCC decisions concerning

domestic satellite communications are read in light of

Western Union’s satellite authorization, I believe the

Commission’s finding of a knowing and voluntary waiver

cannot be sustained.

The Commission’s Second Report and Order, 35 F.C.C.

2d 844 (1972), provides the starting point for analyzing

the issue presented here. There the Commission stated

with respect to domestic satellite communications:

. . . we will require existing terrestial carriers seek-

ing domestic satellite authorizations to submit for

commission approval, prior to action on their ap-

plications, a description of the kinds of interconnec-

tion arrangements they will make available to other

satellite systems and/or earth station licensees .. .

89a

35 F.C.C.2d at 856. This policy was designed to accom-

plish the Commission’s “objective of assuring that all

carriers providing retail interstate services.. . have ac-

cess at non-discriminatory terms and conditions to local

loop and interchange facilities as necessary for the pur-

pose of originating and terminating such interstate serv-

ices to their customers.” Id.

Thereafter, Western Union applied for satellite com-

munication authorization. The FCC granted Western

Union the right to construct three satellites subject to

certain terms and conditions. As specified in that order

the Commission required that “these facilities should be

operated in accordance with all Commission policies

adopted in Docket No. 16495 [Second Report and Order]

and all rules and policies subsequently made applicable

to domestic satellite communications.” Western Union

Telegraph Co., 38 F.C.C.2d 1197, 1199 (1973).

The Commission’s major policy pronouncement with

respect to satellite communications came one year after

the Second Report and Order in the grant of satellite

authorization to AT&T. In this proceeding the FCC re-

jected AT&T’s proposal that it furnish interconnection

facilities to other satellite service carriers on a negoti-

ated contract basis.“ American Telephone & Telegraph

Co., 42 F.C.C.2d 654 (1973). Instead the Commission

determined that “the filing of tariff schedules rather than

the negotiation of private contracts is the most appropri-

ate means by which to achieve our objective that these

facilities shall be provided to other satellite carriers on

‘reasonable and non-discriminatory conditions.’” Id. at

659.

The question presented here is whether Western Union,

in accepting its satellite authorization, waived any rights

that might exist under the Bell-Western Union contracts

and consequently became bound by the tariff rate. In ac-

40a

cepting the satellite authorization, Western Union became

subject to the Commission’s general policies with respect

to satellite communication set forth in the Second Report

and Order, 35 F.C.C.2d 844 (1972). In this report the

Commission sought to ensure satellite communication car-

riers “access at non-discriminatory terms and conditions

to local loop and interchange facilities. Id. at 856.

However, the Commission did not express any opinion

as to whether contract or tariff rates should govern the

lease of such facilities.

Nor should Western Union have assumed that only

tariff rates would be consistent with non-discriminatory

terms. For the leasing of interconnection facilities under

contracts as well as tariffs had long been an accepted

practice in the communications industry, a practice which

this Court subsequently upheld in Bell Telephone Co. of

Pennsylvania v. F.C. C., supra.

Thus, nothing in the Second Report announced in 1972

apprised Western Union that its acceptance of satellite

authorization was in any way conditioned upon abandon-

ment of its rights under the Bell-Western Union con-

tracts.

Moreover, Western Union’s satellite authorization was

granted on the further condition that the facilities “be

operated in accordance with. . . all rules and policies

subsequently made applicable to domestic satellite com-

munications. ...” (Emphasis added.) The question then

presented is whether acceptance of authorization under

such terms constituted a “. . . voluntary or intentional

relinquishment of a known right.” Royal Air Properties,

Inc. v. Smith, 333 F.2d 568, 571 (9th Cir. 1964). The

grant by its terms refers only to the operations of fa-

cilities used in satellite communications; it makes no

reference to existing interconnection rights of Western

Union, a significant matter which the majority has seen

41a

fit to ignore. Thus, there is no basis in the language to

conelude that Western Union's acceptance of this grant

constituted a voluntary or intentional” abandonment of

any rights that might exist under the Bell-Western Union

contracts.

Consequently, I would hold that the Commission erred

in concluding that Western Union waived any existing

rights to interconnection facilities under the Bell con-

tracts. Such a holding necessarily obviates any considera-

tion on my part of Western Union’s second argument that

the conditional grant of satellite authorization constituted

an unlawful expansion of the Commission’s regulatory

powers.

IV.

Based upon a de novo review of the two legal issues

presented, I believe the FCC erred in its interpretation of

the Bell-Western Union contracts and the Western Union

domestic satellite authorization. Accordingly, I dissent

and would grant the petition for review which the ma-

jority has denied.

A True Copy:

Teste:

Clerk of the United States Court of Appeals

for the Third Circuit.

4

42a 3a

PHONE COMPANY, THE PACIFIC TELEPHONE AND TELE-

GRAPH COMPANY, SOUTH CENTRAL BELL TELEPHONE

CoMPANY, SOUTHERN BELL TELEPHONE AND TELE-

GRAPH COMPANY, THE SOUTHERN NEW ENGLAND

APPENDIX B

UNITED STATES COURT OF APPEALS

20 TELEPHONE COMPANY, SOUTHWESTERN BELL TELE-

PHONE COMPANY, AND WISCONSIN TELEPHONE COM-

PANY,

Intervenors

No. 75-1796

ON PETITION FOR REVIEW OF AN ORDER OF THE

FEDERAL COMMUNICATIONS COMMISSION

THE WESTERN UNION TELEGRAPH COMPANY

One Lake Street, Upper Saddle River, New Jersey 07458, Present: SEITZ, Chief. Judge and ALDISERT and

Petitioner GARTH, Circuit Judges

v.

JUDGMENT

FEDERAL COMMUNICATIONS COMMISSION and

UNITED STATES OF AMERICA, This cause came on to be heard on the certified list

Respondents in lieu of the record from the Federal Communications

Commission and was argued by counsel.

AMERICAN TELEPHONE AND TELEGRAPH COMPANY

(“AT&T”) and THE BELL TELEPHONE COMPANY OF On consideration whereof, it is now here ordered and

PENNSYLVANIA; THE CHESAPEAKE AND POTOMAC TELE- adjudged by this Court that the petition to — the

PHONE COMPANY, THE CHESAPEAKE AND POTOMAC order of the Federal Communications Commission adopt-

TELEPHONE COMPANY OF MARYLAND, THE CHESA- ed June 18, 1975 and released June 24, 1975 is denied.

PEAKE AND POTOMAC TELEPHONE COMPANY OF VIR- Costs are taxed against the petitioner.

GINIA, THE CHESAPEAKE AND POTOMAC TELEPHONE ATTEST:

COMPANY OF WEST VIRGINIA, CINCINNATI BELL, INC., y

DIAMOND STATE TELEPHONE COMPANY, ILLINOIS BELL

TELEPHONE COMPANY, INDIANA BELL TELEPHONE

Illegible

COMPANY, MICHIGAN BELL TELEPHONE COMPANY, THE /8/ 4 J

MOUNTAIN STATES TELEPHONE AND TELEGRAPH Com- July 28. 1976

PANY, NEW ENGLAND TELEPHONE AND TELEGRAPH — os

COMPANY, NEW JERSEY BELL TELEPHONE COMPANY,

NEW YORK TELEPHONE COMPANY, NORTHWESTERN

BELL TELEPHONE COMPANY, THE OHIO BELL TELE-

PHONE COMPANY, PACIFIC NORTHWEST BELL TELE-

44a

APPENDIX C

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 75-1796

THE WESTERN UNION TELEGRAPH COMPANY,

. Petitioner,

FEDERAL COMMUNICATIONS COMMISSION AND

UNITED STATES OF AMERICA,

Respondents,

AMERICAN TELEPHONE AND TELEGRAPH COMPANY

(“AT&T”), ET AL.,

Intervenors.

SUR PETITION FOR REHEARING

Present: SEITZ, Chief Judge, and ALDISERT and

GARTH, Circuit Judges.*

The petition for rehearing filed by Petitioner in the

above entitled case having been submitted to the judges

who participated in the decision of this court and to

all the other available circuit judges of the circuit in

regular active service, and no judge who concurred in

the decision having asked for rehearing, and a majority

of the circuit judges of the circuit in regular active serv-

ice not having voted for rehearing by the court in banc,

the petition for rehearing is denied.

By the Court,

/s/ Aldisert

Judge

Dated: Aug. 18, 1976

* Judges Van Dusen, Adams, Gibbons, Rosenn, Hunter and Weis

have recused in this case.

Judge Garth would grant the petition for rehearing.

45a

APPENDIX D

FCC 75-726

BEFORE THE

FEDERAL COMMUNICATIONS COMMISSION

Washington, D.C. 20554

In the Matter of

INTERCONNECTION FACILITIES FOR THE

WESTERN UNION TELEGRAPH Co.

MEMORANDUM OPINION AND ORDER

(Adopted June 18, 1975; Released June 24, 1975)

BY THE COMMISSION: COMMISSIONER HOOKS CONCURRING

IN THE RESULT.

1. On October 16, 1974, we released a Memorandum

Opinion and Order herein in which we held (1) that

AT&T and the Bell System Operating Companies (Bell)

are required to provide to The Western Union Telegraph

Company (Western Union) interconnecting facilities for

its FX and CCSA services, and (2) that the leasing

49 F. C. C. 2d 321 (1974).

2 FX and CCSA, were defined in Bell System Tariff Offerings of

Local Distribution Facilities, 46 F.C. C. 2d 413, 418 n.5 (1974),

aff'd sub nom., Bell Telephone Company of Pennsylvania v. F. C. C.,

503 F.2d 1250 (3rd Cir. 1974), cert. denied, ——- U.S. ——— (1975),

as follows: “Foreign exchange (FX) is a private line service that is

partially “switched”. It allows a businessman located in one state,

to, in effect, maintain a local phone in another state. Under FX,

for example, a businessman in Washington can be reached by tele-

phone subscribers in New York City and can himself reach New

York City telephone subscribers (through a local loop in Washing-

ton, a Washington-New York interexchange line, and a business line

in the New York City exchange area). However, New York City

telephone subscribers could not reach Washington subscribers other

46a

from Bell of interconnection facilities by Western Union

to provide domestic satellite communications services shall

be only pursuant to tariffs filed with this Commission.

We further requested the parties to submit briefs and

reply briefs addressed to the question of whether the

Bell-Western Union exchange of facilities contracts cover

the leasing of interconnection facilities to be used in

furnishing FX and CCSA services.

2. We now have before us the briefs and reply briefs

of AT&T and Western Union with respect to FX and

CCSA interconnection facilities. We also have before us

Western Union’s Petition for Reconsideration of that

part of our October 16 Memorandum Opinion and Order

which held that satellite interconnection facilities shall

be provided pursuant to tariff rather than the Bell-West-

ern Union contracts.

FX AND CCSA INTERCONNECTION FACILITIES

3. For nearly 50 years Western Union has leased

a substantial portion of its facilities from the the Bell

System pursuant to privately negotiated exchange of fa-

cilities contracts. The most recent contracts are dated

January 1, 1970 and will expire on September 28, 1978

in accordance with notices of termination transmitted to

Western Union by the Bell System in September, 1973.

Two contracts have been entered into by Western Union,

on the one hand, and AT&T and each of the Bell

System operating companies on the other hand. Contract

No. 1 is applicable to the leasing of facilities within

than the Washington businessman over FX private line service and

the latter would have to maintain a separate telephone in order to

tie into the Washington exchange area. A Common Control Switch-

ing Arrangement (CCSA) is a private line system for linking the

various offices of a large company through large switches on a local

telephone company’s premises instead of through PBX switches

on the customer’s premises.”

47a

exchange areas, and Contract No. 2 covers the leasing

of circuits between exchange areas.

Western Union’s Position

4. Western Union claims that Bell System facilities

are available under the Bell-Western Union contracts for

connection of Western Union’s private line services to Bell

switching equipment so that Western Union may provide

its own FX and CCSA services. In support of its posi-

tion Western Union claims that for use in providing

FX service, it would need to lease circuits between a

Western Union office and a central office of the telephone

company, terminal loop circuits between a telephone com-

pany central office and a customer’s premises, and, de-

pending on the location of Western Union’s customer,

circuits between two or more telephone company central

offices. Western Union claims that the on'y Contract No.

1 facility it would need to connect a CCSA trunk is a

circuit between a central office of the telephone com-

pany and a Western Union office. Since each of these

types of facilities is expressly mentioned in Contract

No. 1, Western Union contends that all the facilities

necessary for use in providing its own FX and CCSA

services are available under Contract No. 1. Moreover,

in the event that it needs to obtain interexchange facili-

ties for use in providing its own FX and CCSA services,

it claims that the facilities it would require are available

under Contract No. 2.

5. In addition, Western Union notes that Section 3(a)

of each contract provides that facilities leased to it under

the contracts “may be used only in providing its com-

mon carrier communications services.. Western Union

claims that such provision means it may use contract

facilities as a link in a service offering to the public but

it may not use such facilities for any communications

system Western Union may establish for its own in-

48a

ternal use. Western Union claims that this construction

is reinforced by Section 2(a) of each contract which

specifies that the “circuits and certain related facilities”

leased under the contracts are to be used. . . in fur-

nishing communications services to the public.” Further,

Western Union claims that it is settled as a result of the

Commission decision in Bell System Tariff Offerings * that

FX and CCSA services are private line common carrier

services, and, therefore, as soon as Western Union tariffs

setting forth the rates, terms and conditions for those

services become effective, they will be common carrier

services offered by Western Union and thus embraced by

Section 3(a) of both contracts. Western Union notes

that section 3(a) of each contract further provides that

the Bell System facilities may be used only for Western

Union services “for which circuits are suitable.” West-

ern Union claims that the wire pair facilities described

above which are needed for FX and CCSA services, are

the same facilities currently available to other specialized

common carriers for their FX and CCSA services, pur-

suant to Bell System facility tariffs. In any event, West-

ern Union’s technical officials are satisfied that contract

facilities are suitable for it to provide its own FX and

CCSA services.

6. Western Union contends that the aforementioned

facilities may be used to connect Western Union services

with tariffed Bell System services, i. e., FX and CCSA

switching services, citing in support of its contention,

Section 3(d) of Contract No. 1 which provides as follows:

(d) Connection of Western Union Private Line

Services With Telephone Company Services.

Connection of Western Union private line services

with Telephone Company services shall be allowed

only under the tariffs of the Telephone Company

5 Ibid.

49a

and consi.ient with the terms and conditions of such

tariffs applicable to the connection of Western Un-

ion provided services with services of the Telephone

Company. No such connection shall at any time be

made in any jurisdiction except as duly authorized

by tariffs in force and effect.

Western Union contends that this Section makes a clear

distinction between „facilities“ which are available by

lease under the contract, and “services”, which Bell fur-

nishes pursuant to tariff and that such section applies

directly to the present controversy since FX and CCSA

are Western Union private line services and the Bell

System has filed tariffs permitting interconnection with

telephone company FX and CCSA exchange switching

equipment. In other words, Western Union claims that

interconnection by other common carriers with telephone

company FX and CCSA switching equipment is now

allowed. In summary, Western Union’s position is that

on the face of the contracts it is entitled to use contract

facilities, i.e., wire pairs, to connect with FX and CCSA

services offered by the Bell System pursuant to Bell

tariffs.

7. Finally, Western Union argues that the scope of the

contracts was not frozen at the time the contracts were

executed. It states that the only tariffed service specifi-

cally referred to in the contracts is Western Union’s pub-

lie message telegraph service, and that the contracts pro-

hibit Bell from offering public message telegraph service

through facilities leased from Western Union (Contract

No. 1, §5(a); Contract No. 2, 8 4).“ Western Union

claims that the specific reference to this service, together

with the omission of references to other purportedly fore-

*For example, Section 4 of Contract No. 2 provides: Circuits

leased to the Telephone Company may be used in the public com-

munications business of the Telephone Company but not for public

message telegraph service.

50a

closed services such as FX and CCSA, support a con-

struction that the contracts do not, except by their terms,

restrict any other utilization of leased facilities. Thus,

Western Union claims that the contracts plainly con-

template that it is free to utilize. leased Bell facilities

to provide any authorized common carrier service. West-

ern Union also claims that the past history of perform-

ance under the contracts confirms its interpretation. For

example, it notes that the Bell System, without objection

has provided contract facilities for Western Union’s .

DATACOM service even though such service was initiated

after the contracts were executed in 1970.

AT&T’s Position

8. AT&T contends that the contracts do not cover the

furnishing to Western Union of the facilities necessary

for the provision of FX and CCSA services. AT&T em-

phasizes that the question of coverage of the contracts

has been raised in the context of the issue whether tariff

or contract rates apply to interconnection facilities pro-

vided by Bell to Western Union to enable Western Union

to provide FX and CCSA services.

9. AT&T claims that the general purpose of the con-

tracts was not to establish interconnection contracts, i.e.,

as contracts to provide for interconnection between West-

ern Union and Bell facilities for through service to the

public. Moreover, AT&T claims that the Bell tariffs at

the time of the execution of the contracts specifically pre-

cluded connection of Bell services with Western Union

facilities for FX service, and the specified connections

permitted for Western Union under the Bell tariffs did

not include connection to Bell CCSA service. AT&T also

claims that Western Union did not construe the contracts

as including connections or facilities for FX service as

evidenced by Western Union’s 1971 request to use Bell-

provided FX service for the rendition of message tele-

51a

gram service. AT&T contends that Western Union’s pres-

ent intentions are primarily based on the Commission’s

Bell System Tariff Offerings decision rather than upon

any claim it may have properly based upon the contracts.

10. AT&T contends that certain specific terms of the

contracts show that facilities for FX and CCSA are not

covered. AT&T cites the language of Section 3(d) of

Contract No. 1 (see para. 6 above), namely, that “[c]on-

nections of Western Union’s private line services with

Telephone Company services, shall be allowed only under

the tariffs of the Telephone Company.. as proof that

in order to provide FX and CCSA services, Western

Union private line services may be connected with Tele-

phone Company services only under Telephone Company

tariffs, and not under the contracts. Furthermore, AT&T

notes that its obligation to provide FX and CCSA inter-

connection facilities is based on Commission decisions and

not on the contracts. AT&T also cites Section 3(b) of

both contracts which reads as follows:

(b) Connection of Leased Circuits.

Circuits leased to the Telegraph Company here-

under, or interexchange circuits of the Telegraph

Company when connected to such leased circuits,

may be directly connected with circuits owned by:

(1) Other telephone companies offering a gen-

eral telephone service to the public within the

continental United States.

(2) The United States Government on mili-

tary bases, and on reservations of the National

Aeronautics and Space Administration.

(3) Electric power, or oil, oil products, or

natural gas pipeline companies, or railroad com-

panies where the circuits of such companies

are provided primarily to communicate with

points located along a right-of-way owned or

controlled by such company. -

52a

(4) Telegraph Companies offering interna-

tional telegraph service under filed tariffs, where

such circuits are used exclusively in interna-

tional service and connection is made at ter-

minals within the United States of such cir-

cuits.

(5) Telegraph or telephone companies, or

government-operated telegraph or telephone sys-

tems, operating in countries bordering the con-

tinental United States, where such circuits are

used exclusively in furnishing service between

such countries and the continental United

States, and connection is made at terminals

within the United States of such circuits.

Any other direct connection of such circuits with

circuits of others or of the Telephone Company

shall be made only with the written approval of the

Telephone Company.

Pointing to the last sentence of this section, AT&T claims

that Western Union’s provision of FX and CCSA serv-

ices necessarily requires connection of Western Union

circuits with circuits of Bell and that it has not given

written approval to connection of Western Union circuits

with telephone company circuits for the purposes of FX

and CCSA services.

11. AT&T also relies upon Section 2(d) of Contract

No. 2 which relates to the connection of circuit sections

leased under Contract No. 2 to circuits leased under Con-

tract No. 1.“ AT&T contends that there is no provision

in either contract for the direct connection of a circuit

leased under the contracts and terminating in a Tele-

Section 2(d) of Contract No. 2 provides: Access and connection

to a circuit section furnished hereunder may be had at points of

termination of such circuit section only by means of local terminal

circuits procured from the lessor or from its connecting telephone

company by separate agreement, or by connections made by the

lessee upon special approval by the lessor.

53a

phone Company central office, with a Telephone Company

circuit or facility provided as a service—the type of con-

nection required for Western Union’s FX and CCSA

services. Another provision relied upon by AT&T is

found in Section 2(g) of Contract No. 1 and Section 2

(f) of Contract No. 2.° AT&T claims such provision pre-

cludes Western Union from using contract circuits for

administrative purposes because service and facilities for

such use are obtainable from Bell under tariff. AT&T

claims that since Bell facilities for use by other carriers

in rendering their common carrier services, including fa-

cilities for FX and CCSA services, are now available

under tariff, the above provision by its terms excludes

from coverage of the contracts any such facilities which

may be provided to Western Union for the furnishing of

FX and CCSA services.

12. In summary, AT&T claims that the Bell-Western

Union exchange of facilities contracts should be strictly

construed to avoid any disparity in treatment as between

Western Union and competing common carriers, both ter-

restrial and satellite carriers, and that the Bell-Western

Union contracts should also be construed in the light of

their basic purpose of providing the companies with fa-

cilities to furnish their own communications services to

the public. AT&T claims that the agreements are not

“interconnection” contracts and did not at the time of

execution contemplate Western Union FX and CCSA serv-

ices. Further, AT&T claims the contracts, by their terms,

not only do not cover the furnishing of facilities or serv-

ices necessary to the furnishing by Western Union of FX

and CCSA services but contain restrictive provisions

which preclude the furnishing of such facilities or serv-

ices under the contracts.

Section 2(g) of Contract No. 1 and Section 2(f) of Contract No.

2 provide: This Agreement does not apply to the furnishing by

either party to the other of any telephone or telegraph services or

facilities under published tariffs.

54a

Discussion

13. We have carefully considered the arguments of

Western Union and AT&T and most, importantly, the

language of the contracts. We believe the language of the

contracts sufficiently states the agreement of the parties

as to the scope of the contracts with respect to Western

Union’s FX and CCSA services.’ As will be shown, the

contracts distinguish between circuits (or facilities) ar

services. Thus a variety of circuits capable of various

uses are offered under the contracts: however the con-

tracts place certain limitations on their use.

14. We do not dispute that under the general terms

of the contracts, Western Union may utilize contract cir-

cuits and related facilities in furnishing its common car-

rier communications services to the public but may not

use such facilities for its own administrative internal

use. Moreover, from a purely technical or operational

viewpoint, it appears that the circuits and related facili-

ties specified in the contracts provide the capability for

Western Union to access Bell’s exchange and CCSA

switching equipment, thus making it physically possible

for Western Union to use contract facilities for its own

FX and CCSA services. However, the aforementioned

provisions must be construed in conjunction with other

contract provisions which further delineate, and in some

cases restrict, how leased circuits or facilities may be

used. Such provisions must be construed in light of the

fact that in order for Western Union to furnish FX and

CCSA services, it must connect with Bell’s exchange

switching equipment to provide FX service and with

Bell’s CCSA switching equipment to provide its own

7 We have also considered the affidavits submitted by both parties

in an attempt to explain their intentions at the time of contracting

with respect to FX and CCSA. See footnote 12 infra.

See Sections 2(a) and 3(a) of both contracts cited above.

55a

CCSA service. Thus, the question to be resolved is not

whether the facilities available under the contracts are

capable of furnishing FX and CCS A services, but rather

whether the contracts allow the use of these facilities for

FX and CCSA services. This question can be answered

by examining Sections 3(b) and 3(d) of the contracts.

15. A reading of Sections 3(b) and 3(d)* shows that

the contracts distinguish between circuits (or facilities)

and services. Section 3(b) deals with the connection of

a circuit leased under the contract to any other circuit

or circuits (whether obtained pursuant to another Bell-

Western Union contract or otherwise) to enable Western

Union to offer a complete private line circuit. Subsec-

tion (1) of Section 3(b), for example, allows circuits

obtained under contract to be connected with circuits

obtained from other telephone companies. Thus, if West-

ern Union wishes to offer a private line circuit, over its

own intercity microwave facilities, between customer

locations in New York and Washington, D.C., it may

need to obtain intraexchange circuits from the local tele-

phone company, at both ends of the line. It may obtain

the necessary facilities in New York under its Contract

No. 1 with the New York Telephone Company, and Sec-

tion 3(b) (1) of that contract allows Western Union to

connect the circuit obtained from New York Telephone

with similar circuitry obtained in Washington. Likewise,

Western Union may obtain the necessary facilities in

Washington under its Contract No. 1 with the Chesa-

peake and Potomac Telephone Company, and Section 3

(b) (1) of that contract allows Western Union to connect

the circuit obtained from C&P Telephone with similar

circuitry in New York. Thus Section 3(b) allows the

various circuit sections to be pieced together to enable

® See paragraphs 6 and 10 above.

1° If Western Union does not have its own intercity facilities, it

may lease these facilities under Contract No. 2.

56a

Western Union to offer its own end-to-end private line

service. However, Section 3(b) does not address the situ-

ation in which Western Union wishes to connect its pri-

vate line service with a telephone company service.

16. Foreign exchange (FX) service involves the con-

nection of a pure private line service to a local exchange

service, and CCSA service is a switched private line serv-

ice involving the connection of various private line serv-

ices through AT&T’s Common Control Switching Arrange-

ments (CCSA). For Western Union to provide FX and

CCSA service it is necessary in either case to connect

Western Union’s private line services with Bell services.

Thus the controlling provision in the contracts is Section.

3(d) which states, in pertinent part, that “Connection of

Western Union private line services with Telephone Com-

pany services shall be allowed only under the tariffs of the

Telephone Company ... The purpose of this provision is

to define those situations in which Western Union services

utilizing facilities obtained under the contracts, may be

connected to Bell services. Since this provision references

the applicable telephone company tariffs, the question

before us is whether the cross reference to the applicable

tariffs is to be made as of the time of contracting (e.g.,

January 1, 1970) or as of the date the interconnection

of services is to be made. The law is well settled that

all parts or sections of a contract must be given effect,

force and meaning, if possible, and if it can fairly and

reasonably be done; and that a construction rendering a

provision or term meaningless or superfluous should be

avoided.“ If there were no Section 3(d) in the contract,

then the terms and conditions governing the connection

FE. g., Meighan v. Finn, 146 F.2d 594 (2nd Cir. 1944), affirmed

325 U.S. 300, 65 S. Ct. 1147 (1945); United Artists Corporation v.

Strand Productions, 216 F.2d 305 (9th Cir. 1954) ; Ludwig Honold

Manufacturing Company v. Fletcher, 405 F.2d 1123 (3rd Cir. 1969) ;

Gillentine v. McKeand, 426 F.2d 717 (Ist Cir. 1970); see also 17A

C.J.S. Contracts § 297; Williston, Ch. 22, § 619; Restatement of Con-

tracts § 236.

57a

of Bell services with the services of other common car-

riers would be found in the then effective applicable Bell

System customer tariffs. If the cross reference to the

applicable telephone company tariffs is meant to be to

the then effective tariff provisions, then Section 3(d)

would be superfluous. Therefore, in order to give mean-

ing to Section 3(d), we conclude that the cross reference

to applicable telephone company tariffs is to be made as

of the time of contracting (e.g., January 1, 1970). Since

the telephone company tariffs, at that time, did not allow

Western Union to interconnect its private line services

with Bell’s services for the purpose of providing its own

FX and CCSA services, we conclude that Western Union

may not obtain under the contracts, facilities which would

be used in the provision of FX and CCSA services. West-

ern Union may, of course, obtain such facilities pursuant

to Bell tariffs on file with this Commission, in the same

manner and at the same rates as other common carriers

offering FX and CCSA type services.”

12 Our interpretation of the contracts is further buttressed by the

affidavits submitted by both parties in an attempt to explain each

party’s intentions at the time of contracting. AT&T affirmatively

states that “[d]uring the negotiations, and in the execution of the

contracts, it was not contemplated by those representing the Bell

System that the contracts covered connection of Bell System

services or facilities with Western Union services or facilities for

FX or CCSA services, or that facilities would be furnished to

Western Union under the contracts for such purposes.“ On the other

hand, Western Union did not state that, at the time of negotiations,

it was intended that facilities obtained under the contracts could

be used for FX or CCSA services or any other Western Union

services which required connection to Bell System services and

which were not already allowed by tariffs in effect at the time of the

signing. Rather Western Union merely states that at no time prior

to the execution of the contracts did AT&T inform Western Union

that the contracts did not cover leasing of Bell System facilities

to Western Union for FX or CCSA services. Thus the intentions of

the parties at the time of contracting, as shown by the affidavits of

the parties, was that contract facilities could not be used for FX

and CCSA services.

58a

DOMESTIC SATELLITE INTERCONNECTION FACILITIES

17. We also have before us Western Union’s Petition

for Reconsideration of that portion of our Memorandum

Opinion and Order of October 16, 1974, paragraphs 7-12,

relating to use of contract facilities by Western Union

to provide its domestic satellite services,“ AT&T’s Oppo-

sition thereto and Western Union’s Reply to AT&T’s Op-

position. Western Union challenges our finding at para-

graph 10 that it waived its right, if any existed, to use

contract facilities to provide its domestic satellite serv-

ices when we granted Western Union’s domestic satellite

authorization, Western Union Authorization.* Western

Union claims generally that (a) the contracts permit it

to use contract facilities in providing its domestic satel-

lite services; (b) AT&T’s duty to file tariffs did not au-

thorize it to abrogate or ignore its contract obligation

and; (c) the Western Union satellite license was not

conditioned on a waiver by Western Union of its contract

rights. In its responsive pleading AT&T argues, among

other things, that provision of terrestrial access and in-

terconnection facilities to Western Union under the Bell-

Western Union exchange of facilities contracts is incon-

sistent with the terms of the contracts and would violate

(a) the Commission’s Second Report and Order (Second

Order) in Docket No. 16495, 35 FCC 2d 844 (1972); (b)

the Commission’s December 22, 1972 Memorandum Opin-

ton and Order (Reconsideration Order) in Docket No.

16495, 38 FCC 2d 665 and; (c) the Commission’s Memo-

randum Opinion, Order and Authorization (AT&T Au-

thorization) with respect to AT&T’s domestic satellite

application, released September 12, 1973, 42 FCC 2d 654.

Moreover, AT&T claims that the provision of such facili-

ties pursuant to tariff is fully consistent with the au-

thority granted by the Commission to Western Union to

construct and operate its domestic satellite system.

18 Supra, n. 1.

See Western Union Authorization, 38 FCC 2d 1197 (1973).

15 Jd.

*

5D

18. The essence of Western Union's position is that

its domestic satellite authorization was not conditioned

on a waiver of its contract rights because such condition

was not drawn with sufficient clarity to apprise Western

Union of any threat to the continuing validity of its fa-

cilities contracts with the Bell System if it accepted the

authorization. Western Union’s position is without merit

when considered in the context of, among other things, the

regulatory approach we have appropriately adopted and

followed in domestic satellite communications in general,

and in interconnection and access in particular. In our

Second Report and Reconsideration Orders in Docket No.

16495, in which Western Union actively participated, we

established our basic domestic satellite policy objectives,

including our policy objective of having existing terres-

trial carrier domestic satellite applicants (whether or not

affiliated with the Bell System) provide interconnection

and access arrangements at reasonable and non-discrimi-

natory conditions to other domestic satellite carriers de-

siring to offer “retail” end-to-end services to their cus-

tomers (Second Report, para. 34 and Reconsideration

Order, paras. 83-84). Significantly, we recognized that

the “initial implementation of domestic satellites does not

confront [the Commission] with a normal or routine

situation” and that “i[t] is also necessary to retain flexi-

bility to alter our initial determinations in the light of

changing circumstances” (Second Report, para. 15).

With respect to interconnection and access in particular

we stated that “it [was] advisable to retain greater

flexibility” and that “we [did] not expect to anticipate

all conceivable situations” (Second Report, para. 34).

Thus, we properly left open for future determination,

namely, at such time as we considered specific intercon-

16 Flexible regulation of domestic satellite communications is

essential because of the unique nature of the technology and the

extraordinary uncertainties and risks involved in developing viable

domestic satellite systems. Second Report, para. 15.

60a

nection and access proposals from applicants such as

AT&T, the question of what means would be appropriate

to assure realization of our interconnection and access

policy objectives (Second Report, para. 33-34 and Re-

consideration Order, paras. 83-84). We specifically stated

that AT&T’s proposals for interconnection with other

carriers must be submitted for Commission approval

prior to action on AT&T’s domestic satellite applications

and must meet our objective of assuring that “all car-

riers providing retail interstate satellite services (wheth-

er or not affiliated with Bell System Companies) have

access at non-discriminatory terms and conditions to local

loop and interexchange facilities as necessary for the pur-

pose of originating and terminating such interstate serv-

ices to their customers” (Second Report, para. 34). In

summary, as a participant in Docket No. 16495, Western

Union was on actual notice of: (a) the Commission’s

general policy objective on access and interconnection;

(b) the regulatory approach adopted by the Commission

to develop appropriate means to realize such policy ob-

jective and; (c) that as a potential domestic satellite

licensee it would be subject to any interconnection and

access policies adopted by the Commission pursuant to

the Second Report.

19. It was in the context of the above-described regula-

tory scheme that we considered Western Union’s and AT

&T’S requesis for domestic satellite authorization. As cir-

cumstances developed we considered Western Union’s ap-

plication some eight months before we considered AT&T’s

application, wherein we concluded as a matter of basic do-

mestic satellite policy that tariffs, not private contracts,

were the appropriate means to assure realization of our in-

terconnection and access policy objectives (AT&T Authori-

zation, 42 FCC 2d at 656-60). Contrary to the claim of

Western Union, the mere circumstance that its uthori-

zation was considered and granted prior to AT&T’s does

not exempt Western Union from the applicability of our

6la

access and interconnection determinations reached in con-

junction with our consideration and granting of AT&T’s

authorization, to implement the general policies adopted

in the Second Report. Nor does such circumstance have

any bearing on whether Western Union voluntarily

waived its contract rights, if any existed, when it ac-

cepted its authorization issued pursuant to the policies

adopted in Docket No. 16495.

20. As set forth above, Western Union was on express

notice from the Second Report that the basis on which

AT&T would interconnect with other satellite carriers

would be determined by the Commission in acting on

AT&T’s domestic satellite applications“ and be binding

on all other satellite applicants. The interconnection pro-

posals submitted by AT&T in conjunction with its do-

mestic satellite applications were subject to comment by

interested persons, and although other various domestic

satellite applicants took advantage of this opportunity

Western Union did not file any comments (AT&T Au-

thorization, 42 FCC 2d at 656). Nor did Western Union

seek reconsideration or judicial review of the Commis-

sion’s decision that the “filing of tariff schedules rather

than the negotiation of private contracts is the most ap-

propriate means by which to achieve our objective that

these facilities shall be provided to other satellite car-

riers on ‘reasonable and non-discriminatory conditions“

(AT&T Authorization, 42 FCC 2d at 659). Certainly,

Western Union cannot claim that at that point it lacked

knowledge of the express nature of the AT&T intercon-

nection requirement.

17 Indeed, in granting Western Union's earth stations the Com-

mission noted that basic interconnection policy would be determined

in the context of AT&T’s applications since most domestic satellite

applicants will be relying primarily on the local loop and inter-

exchange facilities of the telephone companies for the purpose of

originating and terminating services to their customers” (Western

Union Telegraph Co., 40 FCC 2d 1123, 1124).

62a

21. Further, Western Union knowingly and willingly

accepted its authorization subject to the condition that its

“facilities shall be operated in accordance with all Com-

mission policies adopted in Docket No. 16495 and all

rules and policies subsequently made applicable to do-

mestie satellite communications (Western Union

Authorization, 38 FCC 2d at 1199). This condition is

entirely consistent with the regulatory scheme set forth

in our Second Report and Reconsideration Order as de-

scribed above, which preceded the Western Union authori-

zation and was embodied in that authorization, and is

entirely consistent with the statutory scheme of the Com-

munications Act. As to whether such condition placed

Western Union on actual notice of the nature of the in-

terconnection requirement we find it difficult to believe

that as an established common carrier Western Union

would not anticipate, either at the time of our Second

Report and Reconsideration Orders or at the time its

authorization was granted, that we might reach the de-

termination after appropriate consideration of AT&T’s

applications and interconnection proposal that tariffs,

rather than private contracts, would be the most appro-

priate means to assure the realization of our access and

interconnection policy objectives which stressed the goal

of “reasonable and non-discriminatory” interconnection.

In light of the foregoing and Section 203 of the Com-

munications Act, we deem Western Union’s claim of lack

of notice to be untenable. In any event, Western Union

failed to chailenge the AT&T grant, and is therefore

now bound by that final decision. We conclude that

Western Union willingly and knowingly accepted a con-

dition in its domestic satellite authorization, as imple-

mented by the unchallenged AT&T decision, which con-

stituted a voluntary waiver of its contract rights, if

any existed.

22. In view of our finding that Western Union know-

ingly and willingly waived its contract rights when it

accepted its authorization, its further arguments that

we unlawfully abrogated or modified its domestic satel-

lite authorization or its contract rights are, if not ren-

dered moot, clearly without merit. Our actions with

respect to this matter, and the basis for such actions,

have at all times been consistent with the statutory

scheme set forth in the Communications Act, e.g.,

Sections 4(i), 4(j), 201, 203, 214, 307-309 (see also au-

thority cited in the Second Report, 35 FCC 2d at 860).

The condition we imposed on Western Union’s authoriza-

tion is reasonable and in our judgment serves the public

convenience and necessity in assuring flexible regula-

tion of domestic satellite unications and the provi-

sion of services and facilities on a reasonable and non-

discriminatory basis. Finally, even if Western Union

had not waived its contract rights, as it did, for the

reasons stated at paras. 13-16 above it still would not be

able to use leased contract circuits or facilities to pro-

vide FX and CCSA services via its domestic satellite

communications facilities.

23. Accordingly, IT IS ORDERED, That the leasing

from Bell of interconnection facilities by Western Union

to provide its FX and CCSA communications services and

satellite communications services shall be only pursuant

to tariffs filed with this Commission.”

24. IT IS FURTHER ORDERED, That Western Un-

ion’s Petition for Reconsideration IS DENIED.

FEDERAL COMMUNICATIONS

COMMISSION,

VINCENT J. MULLINS,

Secretary.

This action is not to be interpreted as a ruling on the validity

or merits of the presently filed Bell facility tariffs for other common

carriers.

64a

APPENDIX E

FCC 74-1092

BEFORE THE

FEDERAL COMMUNICATIONS COMMISSION

Washington, D.C. 20554

In the Matter of

INTERCONNECTION FACILITIES FOR THE

WESTERN UNION TELEGRAPH CO.

MEMORANDUM OPINION AND ORDER

(Adopted October 9, 1974; Released October 16, 1974)

BY THE COMMISSION: COMMISSIONER LEE NOT PARTICI-

PATING; COMMISSIONER REID CONCURRING IN THE RE-

SULT.

1. The Commission has before it complaints from

Western Union Telegraph Company (hereinafter West-

ern Union) against American Telephone and Telegraph

Company and the Bell System Operating Companies

(hereinafter Bell). A controversy exists between the

parties as to (a) whether the Commission has required

Bell to provide Western Union with interconnection fa-

cilities for its terrestrial or landline FX and CCSA serv-

ices and, if so, whether contract or tariff rates apply

thereto and (b) whether contract or tariff rates are ap-

plicable to interconnection facilities Western Union ob-

tains for its domestic satellite service.

I. INTERCONNECTION FOR FX AND CCSA

2. On September 11, 1974 the Bell System Tariff Of-

ferings Decision was affirmed. The Bell Telephone Com-

pany of Pennsylvania v. FCC, No. 74-1386, 3rd Cir.

65a

Subsequently Bell in an apparent recognition of its ob-

ligations, has indicated its willingness to permit Western

Union to interconnect with Bell facilities to provide

Western Union’s terrestrial FX and CCSA services.

We reaffirm that such an obligation exists.

3. The Commission in the Specialized Common Carrier

Services proceeding, 29 FCC 2d 870, reconsideration de-

nied, 31 FCC 2d 1106 (1971) conducted a thorough in-

vestigation into the provision of private line services.

As a result of that proceeding the Commission formu-

lated a general policy of permitting the entry of new

carriers in the specialized communications field. That

policy required that all authorized carriers would have

fair and equal access to the facilities necessary to ter-

minate their authorized services. The Commission spe-

cifically stated that where a carrier had monopoly con-

trol over essential facilities it would not condone any

policy or practice whereby such carrier would discrimin-

ate in favor of an affiliated carrier or among competi-

tors.“ 29 FCC 2d 870, 940.

4. To the extent that Western Union seeks to utilize

facilities over which another carrier has a monopoly con-

trol, the policy is applicable to Western Union. Consistent

with that view the Commission termed Western Union

a specialized carrier in its Bell System Tariff Offerings

proceeding, where Western Union and others were seek-

ing to utilize facilities over which Bell had monopoly con-

trol. 46 FCC2d 413, 414 (1971). Thus Bell is obligated,

pursuant to the Commission’s Decision in Specialized

Common Carrier Services, to make available, on a non-

discriminatory basis, its monopoly facilities to all car-

riers, including Western Union, for the provision of FX

and CCSA services.

*Compare Final Report and Order in Docket No. 18509, 21 FCC

2d 307, 324-325 (1970).

66a

5. Bell and Western Union have entered into contracts

which permit either party to lease certain facilities from

the other. The Commission, without a hearing, is not

empowered to modify or abrogate these contracts. See

United Gas Pipe Line Co. v. Mobile Gas Corp. 350 U.S.

332 (1956) and Federal Power Commission v. Sierra

Pacific Power Co. 350 U.S. 348 (1956). Docket 20099

will deal with inter alia the questions surrounding these

contracts. Thus contract rates must be adhered to pen-

dente lite if applicable to the facilities necessary for the.

provision of Western Union’s FX and CCSA services.

46 FCC 2d 413. The remaining question is whether sueh

contracts cover the necessary facilities. We deem it best

to have the parties file briefs addressed specifically to

that question before deciding whether the tariff rates or

contract rates should apply to FX and CCSA. Accord-

ingly, we request full briefings by all interested parties

on this question.’

6. The Commission is cognizant that if the contract

rates do apply a disparity in treatment among carriers

will exist. Such a disparity, if unjustified, would be

manifestly contradictory to the Commission’s often enun-

ciated policy of fair and full competition and its policy

that tariffs, rather than contracts, should generally govern

these matters. Because of this the Commission intends

to strictly construe the Bell-Western Union contracts.

Regardless of the outcome of this immediate proceeeding,

the very important question of the disparity between the

contract and tariff rates will be expeditiously considered

in Docket 20099, wherein we previously stated the Com-

mission would consider whether the rates in the contracts

or the tariffs are unreasonably high, unreasonably low,

2 All such briefs should be filed 10 working days from the release

of this order. Reply briefs may be filed 5 working days after that.

American Telephone and Telegraph Co., FCC 74-690, released

July 5, 1974. 47 FCC 2d 660. ;

67a

or otherwise discriminatory and therefore unlawful in

violation of Sections 201 (b) and 202 of the Act. 46 FCC

2d 413, 434.

II. DOMESTIC SATELLITE FACILITIES

7. The issue raised in the area of domestic satellite fa-

cilities is whether the facilities necessary for such services

be provided pursuant to the Bell-Western Union contracts

or tariffs. Bell argues that the contracts do not apply to

such facilities. Further Bell alleges that the provision

of such facilities pursuant to contracts would be con-

trary to the Commission’s policy of requiring that all

carriers providing retail interstate satellite services have

access to local loop and interexchange facilities at non-

discriminatory terms and conditions pursuant to tariffs,

Western Union, on the other hand, alleges the applica-

bility of the Bell-Western Union contracts to the leas-

ing of such facilities.

8. In its Second Report and Order, 35 FCC 2d 844

(1972), the Commission adopted a policy favoring multi-

ple entry and competition both as to satellite and ter-

restrial systems. We were concerned however that Bell’s

“economic strength and dominance stemming from its

multi-billion dollar terrestrial investments and its per-

meating presence in all domestic communications mar-

kets” might have an impact on the chances of such policy

succeeding. 35 FCC 2d 844, 847. Accordingly, the Com-

mission in a further Domsat proceeding held that the

domestic satellite authorizations would be withheld in

the absence of a satisfactory showing that the necessary

interconnection facilities would be offered in a reason-

able and non-discriminatory manner. Domestic Com-

munications Satellite Facilities, 38 FCC 2d 665, 698-99

(1972). Thus Bell’s applications were specifically con-

ditioned on it following the Commission’s policies. AT&T,

68a

42 FCC 2d 654 (1973). Bell willingly accepted the grant

subject to the expressed conditions.

9. Western Union also sought authorization from the

Commission to provide its own domestic satellite com-

munications. These applications were also granted sub-

ject to the condition that the facilities would be operated

in accordance with Commission policies adopted in the

Second Report and Order, 35 FCC 2d 844 (1972), and

“all rules and policies subsequently made applicable to

domestic satellite communications. Western Union

Telegraph Co., 38 FCC 2d 1197, 1199 (1973). Western

Union willingly accepted such a conditional grant.

10. Both Bell and Western Union willingly and know-

ingly accepted their domestic satellite authorizations sub-

ject to the explicit condition that tariffs, not private con-

tracts, would be filed setting forth the charges, classifica-

tions, regulations and practices applicable to such fa-

cilities. AT&T 42 FCC 2d 654, 659 (1973), Bell System

Tariff Offerings, 46 FCC 2d 413, 437. We held that such

tariffs were “the most appropriate means by which to

achieve our objective that these facilities [should] be pro-

vided to other satellite carriers on ‘reasonable and non-

discriminatory conditions.?“ AT&T, 42 FCC 2d 654, 659

(1973).* Bell and Western Union thus agreed to waive

any rights, if any existed, to obtain such facilities by

any means other than a tariff. Neither can now allege

a right to such facilities under any contracts. “When

an applicant accepts a government permit which is sub-

ject to certain conditions, he cannot later assert alleged

rights which the permit required him to surrender in

order to receive it.” Capital Telephone Company v. Fed-

This requirement was restated by the Commission in Bell Sys-

tems Tariff Offerings, 46 FCC 2d 413, 430 (1974). See also Bell

System Tariff Offerings, FCC 74-955 released September 12, 1974.

Neither party objected to such a requirement by petition for recon-

sideration.

69a

eral Communications Commission, slip op. 11, No. 72-1715,

D.C. Cir., May 24, 1974.

11. Accordingly, IT IS ORDERED, That the Bell Sys-

tem shall provide to Western Union interconnection fa-

cilities for its terrestrial FX and CCSA services.

12. IT IS FURTHER ORDERED, That the leasing

from Bell of interconnection facilities by Western Union

to provide domestic satellite communications service shall

be only pursuant to tariffs filed with this Commission.’

FEDERAL COMMUNICATIONS COMMISSION,

VINCENT J. MULLINS, Secretary.

»The Commission’s action should not be interpreted as a ruling

on the validity or merits of the presently filed tariffs for domestic

satellite communications.

70a

APPENDIX F

AGREEMENT

between

THE CHESAPEAKE AND POTOMAC TELEPHONE

COMPANY OF WEST VIRGINIA

and

THE WESTERN UNION TELEGRAPH COMPANY

CONTRACT NO. 1

Covering the leasing of:

Circuits within exchange areas

Certain items of telephone equipment

Duct and pole line attachment space

Dated as of January 1, 1970

71a

CONTRACT NO. 1

CONTENTS

Section

No.

11.

Schedule A—Rentals for Circuit Facilities

Subject

Definitions

General Undertaking of the Parties

Circuits Leased to Telegraph Company

Circuits and Equipment Leased to Telegraph Com-

pany for Forwarding Telegrams by Telephone

Circuits Leased to Telephone Company

Interruptions of Circuits

Operation and Maintenance

Duct and Pole Line Attachment Space

Claims for Damages

Patents

General Provisions

Schedule B—Rentals for Telephone Equipment for

Forwarding Telegrams by Telephone

Schedule C—Rentals for Duct and Pole Line Attach-

ments

72a

THis AGREEMENT, dated and effective as of the first

day of January, 1970, made by and between THE CHESA-

PEAKE AND POTOMAC TELEPHONE COMPANY OF WEST

VIRGINIA, a corporation of the State of West Virginia

(“the Telephone Company”), and THE WESTERN UNION

TELEGRAPH COMPANY, a corporation of the State of New

York (“the Telegraph Company“),

WITNESSETH :

That in consideration of the mutual covenants and

undertakings herein contained, the parties hereto cove-

nant and agree as follows:

1. Definitions

(a) The word “circuit” means a path of electrical

communication of one of the types described in Schedule

A hereto attached, which is made a part hereof. Unless

otherwise specifically provided herein, a circuit shall not

extend beyond a single exchange area.

b) The words “exchange area” and interexchange“,

when used with respect to the Telephone Company or

the Telegraph Company, shall have the meanings ap-

plied to them in the practices of the Telephone Company.

(c) The words “Bell System companies” mean the

American Telephone and Telegraph Company and its

principal operating telephone subsidiaries in the United

States, and The Cincinnati and Suburban Bell Telephone

Company and The Southern New England Telephone

Company.

(d) The words “lessor” and “lessee” mean, respec-

tively, with respect to any particular circuit or facility

furnished hereunder (1) the party which furnishes, pro-

poses to furnish, or is requested to furnish such circuit

or facility, and (2) the party to which such circuit or

73a

facility is furnished, proposed to be furnished, or re-

quested to be furnished.

(e) The term “telephone order-receiving equipment”

means an arrangement of equipment designed so that

telephone circuits may be terminated but not intercon-

nected. This equipment is furnished by the Telephone

Company and is used by the Telegraph Company in con-

nection with the forwarding of telegrams by telephone.

2. General Undertaking of the Parties

(a) Each party will lease to the other, upon reason-

able notice in each case from the other party, and sub-

ject to all the provisions hereof, circuits and certain

related facilities, to be operated by the lessee as part of

or in connection with its plant or plant leased from lessor

under other agreements in furnishing communication

service to the public.

(b) Circuits and facilities furnished hereunder shall

be subject to the conditions and for the charges specified

in Schedules A, B, and C attached, which are made a

part of this Agreement.

(e) The Telephone Company will furnish, install and

maintain circuits for the use of the Telegraph Company,

in any exchange area served by the Telephone Company,

provided that in the judgment of the Telephone Company

such circuits are available over and above the operating

needs of the Telephone Company; where circuits are not

so available, the Telephone Company will undertake as

expeditiously as practicable, subject to construction

charges as provided in item 6 of Schedule A, to construct

such circuits for the use of the Telegraph Company, pro-

vided, however, that where construction by the Telephone

Company would be required on non-Telephone Company

facility routes to meet the needs of the Telegraph Com-

pany, additional circuits need not be provided other than

74a

by special agreement. The Telephone Company may eleet,

but is not required, to furnish eireuits hereunder to ex-

tend beyond the limits of an exchange area where the

normal method of providing service would be from an-

other exchange, or to connect different buildings on con-

tinuous property of the same customer. Nothing in this

subsection (c) shall require the lessee to relinquish any

circuit after it has once been established.

(d) The Telephone Company will furnish, install and

maintain for the Telegraph Company’s use the telephone

equipment specified in Schedule B, for the purposes speci-

fied in this Agreement.

(e) The Telegraph Company will, to the extent that,

in its judgment, it has facilities available, furnish, in-

stall and maintain circuits for the use of the Telephone

Company.

(f) Each party will lease to the other duct in conduit

systems and space for pole line attachments in such cases

as the parties hereafter agree upon.

(g) This Agreement does not apply to the furnishing

by either party to the other of any telephone or telegraph

services or facilities under published tar

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