Memorandum — California v. Federal Communications Commission

ee

wre Court, U. rs |

SEP 19 1977

“FUOMNPHROTK, JR, CLERK

IN THE

Supreme Court of the United States

OcTOBER TERM, 1977

77-406

No.

THE PEOPLE OF THE STATE OF CALIFORNIA, THE PUBLIC

Utiities COMMISSION OF THE STATE OF CALIFORNIA AND THE

NATIONAL ASSOCIATION OF REGULATORY UTILITY COMMISSION-

ERS,

Petitioners,

we

FEDERAL COMMUNICATIONS COMMISSION and the UNITED

STATES OF AMERICA, ET AL.,

Respondents.

BRIEF IN SUPPORT OF

PETITIONS FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR TE DISTRICT OF COLUMBIA CIRCUIT

DONALD K. KING

1010 Wilshire Boulevard,

Suite 1501

Los Angeles, California 90017

(213) 621-3117

Rospert V. R. DALENBERG

140 New Montgomery Street,

Room 1625

San Francisco, California 94105

(415) 542-1507

Counsel for The

Pacific Telephone and

Telegraph Company

_—_—_—_—_—_—————— i

No.

IN THE

Supreme Court of the United States

OctToser TERM, 1977

THE PEOPLE OF THE STATE OF CALIFORNIA, THE PUBLIC

Uturtres COMMISSION OF THE STATE OF CALIFORNIA AND THE

NATIONAL ASSOCIATION OF REGULATORY UTILITY COMMISSION-

ERS, ~

Petitioners,

Vr

FEDERAL COMMUNICATIONS COMMISSION and the UNITED

STATES OF AMERICA, ET AL.,

Respondents.

BRIEF IN SUPPORT OF

PETITIONS FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

DONALD K. KING

1010 Wilshire Boulevard,

Suite 1501

Los Angeles, California 90017

(213) 621-3117

RoBERT V. R. DALENBERG

140 New Montgomery Street,

Room 1625

San Francisco, California 94105

(415) 542-1507

Counsel for The

Pacific Telephone and

Telegraph Company

TOPICAL INDEX

Page

Table of Authorities ..... - i

QUESTIONS PRESENTED............ 2

cairn al 2

REASONS FOR GRANTING THE WRIT &

1. Certiorari Should Be Granted Because of the

Nature and Importance of the Jurisdictional ‘i

2. The Decision Below Misconstrues the Commu-

nications Act’s Reservation of State Jurisdic-

tion and Disregards Long-Standing Rules of

Statutory Construction Establi By This

Cea ninnsiessnsidishillcsentisaciacnasinitninctpmaioeinenitninbatides 12

3. Federal Preemption Was Not Warranted Under

the Circumstances of This Case ........................ 16

STII ccssntcrsecinnnieticiatinsnanipateanidiaidaintainibaapecaidinimmeanaauian 18

TABLE OF AUTHORITIES

CASES

California v. FPC, 369 U.S. 482 (1962) .........2........2+- 9

Caminetti v. United States, 242 U.S. 470, 485 (1917) 12

Chemehuevi Tribe of Indians v. FPC, 420 U.S. 395

Oy Se enatichasiiainaiaiosaniti cities dinate aii it ie 9,10

FCC v. RCA Communications, Inc., 346 U.S. 86, 94

ee cesienitriatiacrtieatteaiterttiinsnataianttaineamninaion 4

First Report and Order, 29 FCC 2d 870 ( 1971)........... 4

Florida v. United States, 282 U.S. 194 ( 1931)............. y

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

i cree ol a ae 10, 16

Fourco Glass Co. v. Transmirra Products Corp., 353

as Ses Ne 0 DITO eitchiehinitinccheattnnsenteitiitidinithinkeditis 13

FPC v. Conway Corp., 426 U.S. 271 (1976) ................ 9,10

FPC vy. Transcontinental Pipe Line Corp., 365 U.S. |

fj Se pciiicuaiaiblaapsani iain

FTC v. Bunte Bros. Inc., 312 U.S. 349 (1941)...

Goldberg v. Kelly, 397 U.S. 254, 269 (1970) 0.0.0.2...

Hawaiian Telephone Co. v. FCC, 498 F. 2d 771

Seis MUNN: SUT ccastinesesiusssaissinicicasniianiilimeiiiibiieajeianies

Mauer v. Hamilton, 309 U.S. 598, 614 (1940) wu...

Minnesota Rate Cases, The, 230 U.S. 352, 398-402.....

National Association of Reg. Util. Comrs. v. FCC, 533

A , £1 fe § | eee

National Petroleum Refiners Ass’n v. FTC, 482 F. 2d

672, 690 (D.C. Cir. 1973), cert. denied 415 US.

Fe © Pil tnstncessucitctinnienetcnccendiniccnapia namiasensinenameietadine

North Carolina Util. Com’n v. FCC, 537 F. 2d 787,

793, cert. denied ....... | Se | ee

North Carolina v. United States, 325 U.S. 507 (1945)

Panhandle Eastern Pipe Line Co. v. Michigan Public

Service Com’n, 341 U.S. 329 (1950) 0.0...

Phillips Petroleum Co. v. Wisconsin, 347 U.S. 672

i Tra tailncccsearciensininereniineaesnatacapadaniiiilonitiemnninenaiibititeins

Regents of Georgia v. Carroll, 338 U.S. 586 (1950)...

Rice v. Board of Trade, 33\ U.S. 247 (1947) .........00...

Rice v. Sioux City Memorial Parks Cemetery Inc., 349

a A Ce Pisdéieesccnscnsedndincserencccpendieeanitnipiitilbieiengels

Specialized Common Carrier Inquiry, Docket No.

18920. Notice of Inquiry, 24 FCC 2d 318 (1970)...

Telerent Leasing Corp., 45 F.C.C. 2d 204, cert.

denied ....... S| ae 59 L. Ed. 2d 63 (1976)...

Texas & CRR Co. v. Northside Ry. Co., 276 U.S. 475,

SE TIT daiiidiinsbniieatttistncenpinniiidbaniainiidantabeataaiablatetitdaeianani

United States v. Southwestern Cable Co., 392 U.S.

i £ EPERERSER. 7Daeeeeseomeennnen es een remeny eons

Washington Utilitie: 1nd Transportation Commission

v. FCC, 513 F. 2d 1142 (9th Cir. 1975), cert.

IE Tre IGG ID vccdcesccctncenecenpnteenangnanengentsennens

9,10

Page

STATUTES AND REGULATIONS

Communications Act of 1934:

Section 1, 47 U.S.C. §151 12, 13,

16, 17

Section 2(b), 47 U.S.C. §152 ‘ . 2,3, 10,

12,

l

Section 3(e), 47 U.S.C. §153(e) ... ven m .

Section 221(b), 47 U.S.C. §221(b).... eee 3, 13

Supreme Court Rule 19( 1 )(b ).........2......-c.cesccceeseceeee 9

Se SID cctcntsnecencasenstenicusanenntbamnnineitntemsnneiuesennetie l

MISCELLANEOUS

Hearings on S. 2910 before ‘he Senate Committee on

‘mae Commerce, 73d Cong. 2d Sess. 179

i snnemntndinnanstasiiidiniiemnpeneiliieabuesibinndiidieiibiapintedibeaiinunes 3

Hearings on S. 6 before the Senate Committee on

Interstate Commerce, 7\st Cong., Ist Sess. 2167-68

| TIRUIEE iieencencnssinnstneiiiapaneiprniennteieiiaanibiiiiiniaiaimnbimienion 14

Hearings on H.R. 8301 before the House Committee

on Interstate and Foreign Commerce, 73d Cong. 2d

Fs eae ; . 4,14, 15

EE 14

FO es Sere Ce iethinnccinnciceinstnsnccivntunhinntisnbiiniaes 14

TN 3

S. 2041, 70th Cong. Ist Sess. (1928). ae ae

th, | & . %) | eo 14

S. Rep. No. 781, 73d Cong. 2d Sess. 3 ( 1934)............. 3,14

IN THE

Supreme Court of the United States

OcTOBER TERM, 1977

No.

THE PEOPLE OF THE STATE OF CALIFORNIA, THE PUBLIC

Utitittes COMMISSION OF THE STATE OF CALIFORNIA AND THE

NATIONAL ASSOCIATION OF REGULATORY UTILITY COMMISSiON-

ERS,

Petitioners,

we

FEDERAL COMMUNICATIONS COMMISSION and the UNITED

STATES OF AMERICA, ET AL.,

Respondents.

BRIEF IN SUPPORT OF

PETITIONS FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

The Pacific Telephone and Telegraph Company, a party in

the proceedings below, pursuant to Supreme Court R. 21(4),

submits this brief as Respondent in support of Petitioners’

request that a writ of certiorari issue in this proceeding.

2

QUESTIONS PRESENTED

The case at bar results from a declaratory ruling by the

FCC, which, contrary to an order of the California Public

Utilities Commission, authorizes Southern Pacific Commu-

nications Company (SPCC), to provide foreign exchange ser-

vice between two points in California based on the fact the

same facilities are also used for interstate calls (App. B).1 The

questions presented are:

1. Does the FCC’s preemptive assertion of jurisdiction

over intrastate foreign exchange service violate the explicit

mandate of Section 2(b) of the Communications Act that

“nothing in this Act” shall “apply to or give the Commission

jurisdiction with respect to charges (or) facilities . . . for or in

connection with intrastate communication service by wire or

radio of any carrier.” (47 U.S.C. §152(b), (App. D).

2. Assuming the first question is answered in the negative,

then does the record demonstrate the unavoidable necessity for

the exercise of that power in this case?

STATEMENT OF THE CASE

From almost the beginning of telephony the individual

states have pervasively regulated the provision of public tele-

phone service in this country. However, prior to the passage of

the Communications Act in 1934, interstate rates for long

distance service were not extensively regulated. Through the

vehicle of the Communications Act, Congress sought to fill this

void by provision of adequate federal regulation over interstate

service but, at the same time, to preserve existing state regu-

'The appendices (App.) are separately bound and are being

jointly submitted by The People of the State of California, The Public

Uulites Commission of the State of California (CPUC) and the

National Association of Regulatory Utility Commissioners (NA-

RUC).

3

lation over intrastate services and protect it against federal

invasion.

Since enactment of the Communications Act, state and

federal regulatory spheres, with respect to the regulation of

intrastate and interstate telephone service, have been tradition-

ally determined by the beginning and ending points of the

telephone call. Normally, the FCC has regulated commu-

nications crossing state lines and the states have regulated all

communications taking place within a single state, even though

the same equipment and facilities may be used for both.? This

division of jurisdiction conforms to the legislative mandate.

Sections 2(b) and 221(b) of the Act evidence a deliberate

Congressional intent to preserve existing state regulation. By

enactment of these sections Congress reserved to the States

“exclusive” jurisdiction over intrastate service (S. Rep. No. 781,

73d Cong. 2d Sess. 3 (1934)) to assure that the legislation

would not affect the 97 or 98 percent of telephone commu-

nications that were and are intrastate. 78 Cong. Rec. 10316

(1934).3 As the Senate Manager explained during Congres-

sional hearings on the Act

“[ A]t the request of the State Commission representa-

tives, we wrote in certain provisions that are not in the

Interstate Commerce Act, to protect the State commissions

against being overridden by this Commission [the FCC],

2A telephone message originating within a state and terminating

within that same state is considered an intrastate transmission, even if

it transverses another state in the process. The Communications Act

provides that “ ‘Interstate communication’. . . shall not . . . include

wire or radio communication between points in the same State,

Territory or possession of the United States, or the District of

Columbia, through any place outside thereof, if such communication

is regulated by a State commission.” 47 U.S.C. §153(e); see also 47

U.S.C. §221(b).

3Hearings on S. 2910 before the Senate Committee on Interstate

Commerce, 73d Cong. 2d Sess. 179 (1934) (Senator Dill).

4

as the Interstate Commerce Commission has overridden

some of the State railroad Commissions.” [ Hearings, H.R.

8301 at 136}.

In establishing federal regulation, Congress not only re-

stricted the FCC’s jurisdiction to prevent federal interference

with state regulation, but also enacted public interest standards

to be applied by the FCC within its area of competence. Under

the Congressional plan the FCC in regulating interstate carriers

may not “| mJerely . . . assume that competition is bound to be

of advantage, in an industry so regulated and so largely closed

as is this one... .”4 This case involves only the scope of the

FCC’s jurisdiction—not the validity of the policies it seeks to

implement. The present controversy, nevertheless, stems from

new FCC regulatory policies promulgated in the past decade.

It first permitted certain businesses to construct their own

interstate “private line” telephone facilities and later authorized

the entry of numerous new common carriers (called specialized

carriers) to provide interstate “private line” service in com-

petition with the telephone companies.5 SPCC is such a

carmier.

In a radical departure from the regulatory pattern which

has existed for over 50 years, the FCC, in the case at bar, has

overriden a state commission’s contrary order and has asserted

plenary regulatory authority over the terms and conditions of

4FCC v. RCA Communications, Inc., 346 U.S. 86, 94-97 (1953).

Accord, Hawaiian Telephone Co. v. FCC. 498 F. 2d 771, 776 (D.C.

Cir. 1974).

5 Specialized Common Carrier Inquiry, Docket No. 18920. Notice

of Inquiry, 24 FCC 2d 318 (1970); First Report and Order, 29 FCC 2d

870 (1971); reconsideration denied, 31 FCC 2d 1106 (1971); af-

firmed, Washington Utilities and Transportation Commission v. FCC,

513 F. 2d 1142 (9th Cir. 1975); cert. denied, 423 U.S. 836.

5

intrastate foreign exchange service.® To accomplish this objec-

tive it has jettisoned the regulatory road map laid out in the

ing regulatory views held by state commissions. In short, it has

determined that it and it alone can adjudicate what is in the

best interest of the general body of telephone users in the

United States.

The history of this case begins in 1973, when SPCC, a

specialized communications carrier, obtained approval from the

FCC to operate an interstate microwave private line network

between San Francisco, Los Angeles, Phoenix and Tucson.

Following installation of its interstate network, SPCC filed an

application with the California Public Utilities Commission

(CPUC) to provide intrastate private line services. After

hearings, the California Commission on March 4, 1975, issued

an interim order granting SPCC authority to provide private

San Diego. (Decision No. 84167, which appears at Appendix

C). The CPUC also ordered rates for the service be set at a

point that would minimize rate differentials between SPCC’s

service and the duplicate services of the telephone companies.

It did this to protect the general body of telephone customers

*Forsign exchange (FX) service is a distinct class of service that

is separate and apart from other types of telephone service. It is a

service whereby a telephone subscriber located in one exchange area

may obtain exchange telephone service in another area as if his

telephone were actually located in that other exchange. Thus, for

example, a subscriber in the Los Angeles exchange may utilize FX

service to reach telephone subscribers located in the San Diego

exchange. This capability is afforded through provision of a local loop

in Los Angeles (referred to as the “closed-end” of the FX), a Los

Angeles-San Diego interexchange private line (dedicated to the

customer's exclusive use), and business exchange service (one or

more business lines) in the San Diego exchange area. The enterprise

that engages in bringing access to the San Diego exchange from Los

Angeles provides an intrastate service, even though interstate calls

may also be switched through the same for completion.

6

from the economic burden of making up the revenues which the

telephone companies would lose if wide rate disparities were

permitted. For the same reason the CPUC prohibited SPCC

from providing:

“7. Any direct connection of private line circuits to the

exchange network is prohibited. This includes any con-

nection similar to foreign exchange service.” (Emphasis

added) (App. C p. 114).

Several weeks after the CPUC’s order was issued, SPCC

made a service request of Pacific to provide the facilities and

connections needed by it to provide intrastate FX service to San

Diego. Specifically, Pacific was asked to connect a SPCC San

Diego-Los Angeles line (1) at the southern end to Pacific’s San

Diego exchange, and (2) at the Los Angeles end to Pacific’s

Common Control Switching Arrangement (CCSA)?’ to permit

interconnection to American Airlines’ nation-wide private line

system. By this arrangement SPCC would be able to furnish

American Airlines San Diego FX exchange service, which could

be accessed from any telephone on that company’s network,

including Los Angeles and other cities in California.®

Pacific furnished SPCC the facilities and connections re-

quested. However, recognizing that these arrangements con-

flicted with the recent CPUC Order prohibiting the offering of

intrastate FX service by SPCC, it initiated proceedings before

the California Commission for instructional advice.

In response, SPCC, on June 15, 1975, petitioned the FCC

for a declaratory ruling to the effect that Bell System companies

7CCSAs are large switching machines, located in telephone

company central offices, which are used to switch private line network

traffic.

®SPCC, in its pleadings, estimated approximately 18% of the

traffic over the San Diego-Los Angeles line originates in California

(Ct. of App., Jt App. p. 334).

j

must provide FX interconnections to SPCC’s private lines

whenever such lines are connected by a switch to interstate

facilities. Pacific. CPUC and others filed comments and

statements with the FCC opposing SPCC’s petition. Based

solely on these pleadings, the FCC, on October 9, 1975, issued a

Memorandum Opinion and Order, granting, in effect, the relief

sought by SPCC (App. B).

In its opinion the FCC recognized that the facilities

involved were located wholly within California and would be

used to provide foreign exchange service in San Diego from

points both in and out of the State of California. However, in

analyzing its jurisdictional authority, the Commission con-

cluded that the physical location of the facilities was not

jurisdictionally determinative. Rather, the Commission rea-

soned, the nature of the communications passing through the

facilities should control federal-state regulatory jurisdiction.

Applying this test, the Commission determined it was entitled

to assert preemptive jurisdiction because the facilities con-

stituted an integral part of a dedicated interstate commu-

nications network carrying interstate communications (App.

a. :

Although it had no evidentiary record before it, the

Commission further concluded it would be contrary to the

public interest to limit SPCC’s San Diego-Los Angeles private

line to interstate calls. Accordingly, the FCC exercised preemp-

tive jurisdiction and ordered the Bell System (Pacific) to

continue to provide the facilities in question to SPCC.

The Court of Appeals for the District of Columbia Circuit

affirmed the FCC’s Order by a two-to-one vote (App. A). The

majority’s opinion accepted the FCC’s conclusions that it would

be impractical to segregate interstate from intrastate FX service,

and, consequently, because the “facilities are part of a dedi-

cated interstate communications network” Commission jurisdic-

tion was present. The majority further adopted without

discussion the Fourth Circuit’s interpretation of Section 2(b) of

the Communications Act to the effect that such section does not

encroach substantially upon the FCC’s broad powers under

Title 11. North Carolina Util. Com’n v. FCC, 537 F. 2d 787,

793, affirming Telerent Leasing Corp., 45 F.C.C. 2d 204, cert.

denied USS. , 59 L. Ed. 2d 63 (1976). Judge

Robinson, in a well reasoned dissent, agreed that the FCC is

empowered to regulate intrastate communications, but only

when an unavoidable federal and state regulatory conflict

occurs. However, based on careful analysis of the record, Judge

Robinson concluded that the evidence before the Commission

did not substantiate a clearly imperative need for the Commis-

sion to assert federal preemption.

REASONS FOR GRANTING THE WRIT

The jurisdictional issue posed—whether the FCC’s asser-

tion of preemptive jurisdiction is prohibited by the Commu-

nications Act—is extremely important and merits plenary con-

sideration on certiorari. This issue in the case at bar is broader

than the conventional preemptive issue—whether a particular

federal statute conflicts with and preempts a particular state

statute.

The case sub judice arguably holds that the FCC can

broadly regulate intrastate telephone services, except possibly

local exchange rates, whenever federal and state jurisdictions

overlap to any degree. The decision, unless reversed by this

Court, could alter drastically a great number of the regulatory

laws of every state, not merely one particular statute in one

state.

The FCC’s assertion of jurisdiction in this case and,

potentially, in many others, will impact telephone company

intrastate revenue to such an extent that local exchange rates,

clearly within the jurisdiction of the state commissions, will be

substantially affected. This Court has not yet quantified the

9

regulatory balance of the federal-state Title II authority estab-

lished by the Communications Act of 1934. Consequently, the

case presents an “important question of federal law which has

not been, but which should be settled by this Court” [S.Ct. R.

19(1)(b)].9

Moreover, even if it is assumed that the Communications

Act does vest preemptive jurisdictional authority in the FCC

when an irreconcilable conflict occurs between federal and state

regulation, the record in this case does not support the Commis-

sion’s exercise of such drastic authority. The FCC’s conclusion

that it was obligated to assert preemptive jurisdiction rests on a

factual assumption unsupported by the evidence. The FCC,

although requested, did not see fit to hold hearings and,

consequently, no opportunity was afforded the parties to devel-

op and present the evidentiary issues. Instead, as Judge

Robinson pointed out in his dissent in the Court of Appeals,

“The Commission proffered only an ambiguous finding

unaccompanied by any evidentiary data whatsoever” (App. A,

p. 15). The FCC’s choice of procedure in this case has patently

deprived the parties of their due process nghts and represents

such a departure from “the accepted and usual course of

judicial proceedings . . . as to call for an exercise of this court’s

power of supervision.” [S.Ct. R. 19(1)(b)].

9This Court has repeatedly recognized its responsibility to deli-

neate the jurisdictional boundaries fixed by federal regulatory statutes

(Communications Act) United States v. Southwestern Cable Co., 302

U.S. 157 (1968); Regents of Georgia v. Carroll, 338 U.S. 586

(1950); (Federal Power Act) FPC v. Conway Corp., 426 U.S. 271

(1976); Chemehuevi Tribe of Indians v. FPC, 420 U.S. 395 (1975);

( Natural Gas Act) Phillips Petroleum Co. vy. Wisconsin, 347 U.S. 672

(1954); FPC v. Transcontinental Pipe Line Corp., 365 U.S. 1 (1961);

California v. FPC, 369 U.S. 482 (1962); (Interstate Commerce Act)

North Carolina v. United States, 325 U.S. 507 (1945); Florida v.

United States, 282 U.S. 194 (1931).

10

The FCC’s cavalier treatment of the preemption issue

conflicts with decisions of this Court, as stated in Florida Lime

& Avocado Growers v. Paul, 373 U.S. 132, 142 (1963):

“ _. federal regulation of a field of commerce should

not be deemed preemptive of state regulatory power in the

absence of persuasive reasons . . . either that the nature of

the regulated subject matter permits no other conclusion or

that the Congress has unmistakably so ordered.”

The past 30 years of joint federal-state regulation of telephony

clearly demonstrates that the nature of the subject matter does

not necessitate federal preemption. Nor has Congress

“unmistakably . . . ordered” federal preemption of imtrastate

telephone communications. ‘In fact, Section 2(b) of the Com-

munications Act reflects the exact opposite intent. Thus, in

order to avoid further erosion of established standards for

federal preemption, certiorari should be granied.

1. Certiorari Should Be Granted Because of the Nature and Impor-

tance of the Jurisdictional Issue.

The FCC’s usurption of California’s authority in this case

presents a delicate issue of federal-state relations. The Court

has repeatedly granted certiorari when federal power is invoked

to override powers historically exercised by the states. '°

The imperative for Supreme Court review in cases of

asserted federal preemption applies with special force to the

instant case. Practically all telephone facilities in the United

States are interconnected and used interchangeably for both

interstate and intrastate messages. If the holding of the Court

below is permitted to stand, the specter of intervention will

hang constantly over the regulatory processes of each individual

state. Continuing the trend illustrated by the Telerent decision,

10F.g., FPC v. Conway Corp., 426 U.S. 271 (1976); Chemehuevi

Tribe of Indians v. FPC, 420 U.S. 395 (1975); United States v.

Southwestern Cable Co., 392 U.S. 157 (1968); FTC v. Bunte Bros.,

312 US. 349 (1941); Rice v. Board of Trade, 331 U.S. 247 (1947).

supra, the FCC will undoubtedly assert the power to abrogate

State authority over intrastate telephone rates, services and

facilities whenever, in its sole opinion, such preemption would

best serve the national public interest.

The telephone companies will likewise be placed in an

untenable position. To illustrate the quandry, the Court need

only consider the result of this case. The California Commis-

sion’s policy is to maintain local exchange rates for the general

body of customers at the lowest possible level through subsidi-

zation from services such as FX. On the other hand, the FCC’s

policy is to promote competition by pricing interstate private

line and other special services on a cost basis. Because of these

divergent policies, California intrastate private line rates are

priced several times higher per circuit mile than interstate rates.

Companies such as American Airlines, which maintain inter-

State networks with linking intrastate lines will, as a result of

this case, switch to specialized common carriers, such as SPCC,

as a matter of business economics.

The record reflects that telephone companies in California

will suffer a fifteen million dollar annual revenue loss by reason

of the FCC’s order in this case. (Ct. of App. Jt. App. Vol. 2 p.

247). This revenue deficiency can only be made up by general

rate increases on exchange and other intrastate services. The

savings which will accrue to large users will ultimately come out

of the pocket of the average residence telephone user. Con-

sequently, the inequities of this case present a public interest

issue of national magnitude.'' The general body of telephone

users (i.e., the American public) is entitled to a determination

by this Court as to whether the FCC or the individual states

should control intrastate rate policies.

"This Court has traditionally granted certiorari in cases in-

volving principles which are of importance to the general public, as

distinguished from the parties alone. Rice v. Sioux City Memorial

Parks Cemetery, 349 U.S. 70 (1955).

12

2. The Decision Below Misconstrees the Communications Act's

Reservation of State Jurisdiction and Disregards Long-Standing

Rules of Statutory Construction Established By This Court.

Certiorari is further justified because of basic legal errors in

the majority opinion. The decision below, sustaining the FCC’s

claim of jurisdiction, is literally irreconcilable with the plain

language of the Communications Act. Further, it disregards the

Act’s legislative history and decisions of this Court which hold

that long-standing state regulation is not to be preempted

without the clearest evidence that Congress intended such

displacement.

Initially, the language of the statute must be examined to

ascertain its meaning. Caminetti v. United States, 242 U.S. 470,

485 (1917). The language of Section 2(b) of the Commu-

nications Act is quite clear. It reads in pertinent part:

“Subject to the provisions of section 30! [regarding the

licensing of radio frequency uses}, nothing in this Act shall

be construed to apply or to give the Commission jurisdiction

with respect to ... charges, classifications, practices, serv-

ices, facilities, or regulations for or in connection with

intrastate communication service . . .” (EMPHASIS

ADDED.)

The emphasized language absolutely precludes the FCC from

regulating intrastate FX service or the facilities used to provide

such service. The section contains no caveat authorizing federal

preemption in the event of a federal-state policy conflict nor

does the fact that facilities may also be used to carry interstate

messages vest the FCC with more than concurrent jurisdiction.

The FCC, to justify its action preempting state jurisdiction,

relies heavily upon Title I, Section | of the Act, 47 U.S.C. 151.

That section is a statement of general objectives to be achieved

by the FCC through regulation of interstate commerce, as

provided by Titles I] and III." However, the Commission

12Section | states, inter alia, that the purpose of the Act is to

provide nationwide wire “communication servic with adequate facil-

ities at reasonable charges.”

13

cannot impose the general goals of Section | in an unlimited

fashion upon intrastate commerce in view of the fact that its

jurisdiction is explicitly limited by Section 2. Otherwise, Section

2 becomes meaningless. It is an elementary rule of statutory

construction that specific terms prevail over general terms

which might otherwise control. Fourco Glass Co. v. Transmirra

Products Corp., 353 U.S. 222, 228-229 (1957). Nevertheless,

the FCC, in this case, has ignored this rule and has almost

totally denuded the more specific Section 2(b) of its plain

meaning by construing it to refer only to those services and

facilities used exclusively for intrastate communications. This

interpretation of the statute is irrevocably in conflict with the

express statutory language that “nothing in the Act” shall be

construed to give the Commission jurisdiction with respect to

“services or facilities for or in connection with intrastate commu-

nication.” The words in connection with can only refer to

facilities communally used for interstate and intrastate mes-

sages. Therefore the power balance in event of controversy

rests in the states, not the FCC.

Moreover, if a statute is reasonably susceptible to more

than one meaning, the court must consult, not only the lan-

guage, but also felt and openly articulated concerns which

motivated the framers of that law. National Petroleum Refiners

Ass'n v. FTC, 482 F. 2d 672, 690 (D.C. Cir. 1973), cert. denied

415 U.S. 951 (1974). The legislative history of the Commu-

nications Act supports a reservation of jurisdiction in the states

for all services and facilities in connection with intrastate

commerce. At the time federal interstate regulation was

considered, the states rightfully anticipated that the FCC would

eventually reach for preemptive power. Congress responded to

those concerns by adding, in Section 2(b) and 221(b),"9

language which it contemplated would absolutely preclude

FCC preemption of intrastate regulation.

‘Section 221(b) vests regulation authority in the states with

respect to telephone exchanges bridging state lines.

14

The Communications Act of 1934 had its roots in bills

introduced by Senator Couzens, Chairman of the Senate Com-

mittee on Interstate Commerce in 1928 and 1929.4 These

bills, as originally drafted, incorporated the so-called Shreve-

port Doctrine and would have allowed the federal commission

to regulate intrastate commerce when necessary to protect

interstate commerce. Thirty-seven states and their national

association, predecessor of the NARUC, adopted resolutions

opposing the original bills and vehemently opposed any legisla-

tion that might empower the FCC to supersede existing state

jurisdicuon in the communications field.'5 In response to the

states’ protest the bills were revised to incorporate provisions

designed to protect the state commissions from being overriden

by the FCC and the states thereupon withdrew their opposi-

tion. 6

The chronology of the legislative resolution of the regu-

latory balance of power issue is well summarized in the

testimony of John E. Benton, General Solicitor of the NARUC,

given at the hearings:

“Unless the Congress wishes to bring control of local

telephone business, which is now subject to State regulation

under the domination of the new commission, it cannot

merely transfer the existing power of the Interstate Com-

merce Commission to this new commission. It must

describe the field within which the new commission shall

operate.

48, 2041, 70th Cong., Ist Sess. introduced Jan. 4, 1928, 69 Cong.

Rec, 928, S. 6, 7ist Cong., Ist Sess. introduced April 18, 1929, 71

Cong. Rec. 102.

‘SHearings on S. 6 before the Senate Committee on Interstate

Commerce, 71st Cong., Ist Sess, 2167-68 (1930),

‘Hearings on H.R. 8301 before the House Committee on

Interstate and Foreign Commerce, 73 Cong. 2d Sess. 136 (1934);

S.Rep.No. 781, 73d Cong. 2d Sess. 3 (1934).

15

“The Couzens communications commission bill, in the

Seventy-First Congress, as that bill was first introduced, did

not do that, It proposed to transfer the present powers of

the Interstate Commerce Commission to the new commis-

sion unchanged. The State commissions were greatly

alarmed, The national association in convention by unani-

mous action adopted a resolution protesting against the

passage of the bill and 37 State commissions by resolution

or otherwise took separate action in opposition, They were

heard at great length against the bill before the Senate

Committee; and I think we are justified in believing that we

satisfied the committee that no Federai commission ought

to be given powers which would enable it to interfere with

State regulation.”

“This bill has been drawn with care to safeguard State

power to regulate local telephone service. It has been

carefully considered by our executive and legislative com-

mittee representatives and has met their approval. They

believe that it provides for effective Federal regulation

where Federal regulation is necessary, and that it

safeguards State regulation.” Hearings H.R. 8301 at 136,

The legislative history of the Congress’ intent could not be

more clear, Yet the FCC, in an effort to broaden the markets of

the specialized common carriers, has deliberately asserted

preemptive jurisdiction over intrastate foreign exchange rates in

this case and the District of Columbia Court of Appeals, relying

on Telerent, has perfunctorily endorsed FCC jurisdiction.

Moreover, the appellate court, by ignoring the obvious

purport of Section 2(b), its legislative history and prior regu-

latory history, has contradicted this Court's repeated directive

that state and local regulatory control should not be superseded

without the clearest expression of Congressional intent, “As a

matter of statutory construction Congressional intention to

16

displace local laws in the exercise of the commerce power is not,

in general, to be inferred unless clearly indicated... ." Mauer

v. Hamilton, 309 U.S. 598, 614 (1940), This rule murrors

Congress’ own policy of preserving state authority over “mat-

ters heretofore left to local custom or local law.” FTC v, Bunte

Bros., Inc., supra, 3\2 US. at p, 354,

Unvarnished, the facts disclose here an improper assertion

of power on the part of the FCC which should not be condoned

by this Court. Certainly, there exists no “clear and manifest

purpose” of Congress to oust state control over intrastate

foreign exchange service merely because the same facilities may

be employed for interstate service. On the contrary, the

language of the Act, its structuring of Title I] authority, and its

legislative history all reflect that Congress intended state regu-

latory power to “remain unimpaired.” Florida Lime & Avo-

cado Growers v. Paul, 373 U.S. 132, 152 (1963),

3. Federal Preemption Was Not Warranted Under the Circum-

stances of This Case.

Certiorari is warranted for yet another reason. Even if

Section | confers federal preemptive authority, the law requires,

as pointed out by the dissent in the Appeals Court, that it be

exercised only when circumstances make it unavoidable, The

record in this case is totally devoid of evidence supporting such

an imperative.

The FCC in its order intitiated its anaylsis of the

jurisdictional issue by noting that interstate communications

would be transmitted over the physical intrastate FX facilities.

For this reason the FCC labeled the facilities interstate and

then employed that characterization to preempt entirely all

state jurisdiction over FX services provided over the facilities.

In the pleadings to the FCC, it was suggested that a

federal-state regulatory conflict could be avoided by limiting

transmissions over SPCC's line to interstate calls, leaving

intrastate transmissions to a separate FX line which would be

17

subject to state regulation, Responding to this possible solu-

tion, the FCC opined that such an arrangement would not be in

the national public interest and would, therefore, conflict with

its mandate under Section | because it would require the

customer to maintain redundant facilities. The Commission did

not and could not cite evidence to support its conclusion as none

was contained in the record, This finding, the only averment to

the necessity for preemption (if it can be labeled such) in the

Commission's opinion, is, as Judge Robinson put it “a far cry

from what is required.”

Absent federal legislation regulating commerce not admit-

ting of diversity of treatment and therefore requiring uniformity

of regulation, the states retain a wide range for permissible

exercise of regulatory power, even though interstate commerce

may be affected. The Minnesota Rate Cases, 230 U.S, 352,

398-402 (1913). Furthermore, state commissions retain

jurisdictional authority over intrastate services even though

common carriers may use the same facilities for providing

interstate service, Texas & CRR v. Northside Ry., 276 U.S. 475,

480 (1928). As stated in the Minnesota Rate Cases, at page

432, the “inter-blending of operations in the conduct of inter-

state and local business by interstate carriers” does not serve to

Oust state commissions of their authority to regulate in the

public interest. Consequently, if the Communications Act does

not preclude the FCC from asserting preemptive jurisdiction

over intrastate communications services, then its justification for

the exercise of that power must be imperative and clearly

apparent from the record. '’

The FCC has not provided evidentiary findings showing

continued state regulation of intrastate FX service would be

incompatible with, constitute, a burden on, or irreconcilably

conflict with its regulation of interstate private line services. Its

conclusion that a jurisdictional “split” of FX service would be

‘See cases cited in Footnote 10 and in Judge Robinson's dissent.

“technically and practically difficult” is unsupported. And even

if correct, would not substantiate the abrogation of state

regulation, National Association of Reg. Util. Comrs, v. FCC,

533 F. 2d 601 (D.C, Cir, 1976),

The FCC was not empowered to preempt state regulation

of intrastate FX service without first establishing, after an

evidentiary hearing and full consideration of all relevant fac-

tors, that such action was unavoidably necessary to protect the

availability of interstate private line communications, Cf, North

Carolina vy. United States, 325 U.S, 507 (1945); Panhandle

Eastern Pipeline Co. v. Michigan Public Service Com'n., 34\

U.S. 329 (1950). Its failure to do so has clearly violated the

parties’ right to due process and has fatally marred the validity

of its order, Goldberg v. Kelly, 397 U.S, 254, 269 (1970),

CONCLUSION

For the reasons stated, certiorari should be granted and the

case set for plenary review by this Court.

Respectfully submitted,

DONALD K. KING

1010 Wilshire Boulevard

Suite 1501

Los Angeles, CA 90017

Rosert V. KR. DALENBERG

140 New Montgomery Street

Room 1625

San Francisco, CA 94105

Counsel for The

Pacific Telephone and

Telegraph Company