Appendix — American Telephone & Telegraph Co. v. Litton System, Inc.

Supreme Court brief1984

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No. 82-2128 | de ga 1933

IN THE | Saat ot

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Supreme Court of the United Statew

OCTOBER TERM, 1982

AMERICAN TELEPHONE AND TELEGRAPH COMPANY, WEST-

ERN ELECTRIC COMPANY, INC., BELL TELEPHONE LAB-

ORATORIES, INC., NEW YORK TELEPHONE COMPANY,

INC., NEW JERSEY BELL TELEPHONE COMPANY, SOUTH-

ERN BELL TELEPHONE AND TELEGRAPH COMPANY, THE

OHIO BELL TELEPHONE COMPANY, SOUTHWESTERN BELL

TELEPHONE COMPANY, THE PACIFIC TELEPHONE AND

TELEGRAPH COMPANY, and PACIFIC NORTHWEST BELL

TELEPHONE COMPANY,

.. Petitioners,

LITTON SYSTEMS, INC., LITTON BUSINESS TELEPHONE SyYs-

TEMS, INC., LITTON BUSINESS SYSTEMS, INC., and LIT-

TON INDUSTRIES CREDIT CORPORATION,

Respondents.

On Petition for a Writ of Certiorari to the

United States Court of Appeals for the

Second Circuit

APPENDIX TO

BRIEF FOR THE RESPONDENTS IN OPPOSITION

WILLIAM SIMON

(Counsel of Record)

JOHN BODNER, JR.

RALPH GORDON

ALBERT O. CORNELISON, JR.

KEVIN P. MCENERY

Lewis M. BARR

Howrey & SIMON

1730 Pennsylvania Avenue, N.W.

Washington, D.C. 20006

(202) 783-0800

Of Counsel Perer E. FLEMING, JR.

THEODORE F. CRAVER CurRTIs, MALLET-PREVOsT, COLT &

Larry L. YSTTER MOSLE

Lrrron Inpustaigs, INC. 101 Park Avenue

860 North Crescent Drive New York, New York 10005

Beverly Hills, CA 90210 Counsel for Respondents

ie . : ° . B.C. 20001

TABLE OF CONTENTS

Page

Appendix A—Brief for the United States As Amicus

Curiae in Union Electric Company v.

City of Kirkwood, 103 S.Ct. 814 (1983).. la

Appendix B—Questions to be Answered by the Jury

I TD PI inc scieceesccceneseaceceedicdaien ie 19a

Appendix C—Hush-A-Phone Corp. v. AT&T, 22 F.C.C.

I RE es En 9 Ee 25a

Appendix D—Jn re Carterfone Device, 13 F.C.C. 2d

420 (1968) (Appendix A and Appendix

B, 13 F.C.C.2d 427-29, omitted) ........... 3la

Appendix E—IJn re Carterfone Device, 14 F.C.C. 2d

571 (1968) (on reconsideration)........ 4la

Appendix F—First Report and Order in Docket 19528,

56 F.C.C. 2d 593 (1975) (New Part 68

of the Commission’s Rules and Regula-

tions, 56 F.C.C. 2d 614-22, omitted) ... 49a

Appendix G—Second Report and Order in Docket

19528, 58 F.C.C. 2d 736 (1976) ............ 77a

Appendix H—IJn re Primary Instrument Concept, 68

F.C.C. 2d 1157 (1978) (Appendix, 68

F.C.C. 2a 1178-91, omitted) 000000. 95a

APPENDIX A

Brief for the United States as Amicus Curiae in

Union Electric Company v. City of Kirkwood,

103 S.Ct. 814 (1983)

No, 81-2278

In the Supreme Court of the United States

OCTOBER TERM, 1982

UNION ELECTRIC COMPANY, PETITIONER

Vv.

City OF KIRKWOOD, MISSOURI

ON PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

BRIEF FOR THE UNITED STATES

AS AMICUS CURIAE

REx E. LEE

Solicitor General

WILLIAM F.. BAXTER

Assistant Attorney General

LAWRENCE G. WALLACE

Deputy Solicitor General

JERROLD J. GANZFRIED

Assistant to the Solicitor General

BARRY GROSSMAN

NANcyY C. GARRISON

Attorneys

Department of Justice

Washington, D.C. 20530

(202) 633-2217

QUESTIONS PRESENTED

1. Whether a utility that charges wholesale and

retail rates at levels that unfairly prevent its com-

petitor-customers from competing with it (“price

squeeze” conduct) is immune from the antitrust laws

under the Noerr-Pennington doctrine solely because

the rates were filed with state and federal regulatory

agencies that did not order any changes creating or

increasing the alleged anticompetitive effect.

2. Whether such an alleged “price squeeze” is im-

mune from the federal antitrust laws by implication

from the Federal Power Act, which creates no ex-

press antitrust exemption for wholesale electric rates

subject to regulation by the Federal Energy Regula-

tory Commission and which confers no authority on

FERC to regulate retail rates.

3. Whether such an alleged “price squeeze” is im-

mune from the federal antitrust laws under the “state

action” doctrine, where the conduct at issue is the

result of essentially private decisions not compelled

by the state, the state has articulated no policy in

favor of the conduct at issue, and the state has no

authority to regulate wholesale rates.

4. Whether electricity is a “commodity” within the

meaning of the Robinson-Patman Act.

Iu the Supreme Court of the United States

OCTOBER TERM, 1982

No. 81-2278

UNION ELECTRIC COMPANY, PETITIONER

Vv.

Crry OF KIRKWOOD, MISSOURI

ON PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

BRIEF FOR THE UNITED STATES

AS AMICUS CURIAE

This brief is filed in response to the Court’s invita-

tion to the Solicitor General to express the views of

the United States.

STATEMENT

1. Petitioner Union Electric Company (UE) is an

electric utility that produces, transmits, and delivers

electric power to wholesale and retail customers in

Missouri, Iowa, and Illinois (Pet. App. A-3). Re-

spondent (Kirkwood), a municipal corporation, sells

electric power at retail to customers in approxi-

mately two-thirds of its geographic area (ibid.).

Kirkwood does not produce electricity, but buys it at

wholesale from UE. Customers in the area of Kirk-

wood not served by the municipal distribution system.

buy power at retail from UE (ibid.).

UE’s wholesale rates are regulated by the Federal

Energy Regulatory Commission (FERC)* under the

Federal Power Act, 16 U.S.C. (& Supp. V) 824 et

seq. UE’s retail rates are regulated by the Missouri

Public Service Commission under Mo. Ann. Stat. ch.

393 (Vernon 1952 & Cum. Supp. 1982).

The Federal Power Act requires that all rates sub-

ject to FERC’s jurisdiction be just and reasonable,

and not unduly discriminatory or preferential. 16

U.S.C. 824d(a) and (b). Public utilities, such as UE,

must file with FERC “schedules showing all [whole-

sale] rates and * * * all contracts which in any man-

ner affect or relate to such rates.” 16 U.S.C. 824d(c).

Before making any modification of such rates, the

utility must give 60 days notice to FERC and the

public. 16 U.S.C. (Supp. V) 824d(d). On complaint

or on its own initiative, FERC may order a hearing

into the lawfulness of a filed rate change and may

suspend the proposed change for up to seven months.

16 U.S.C. (Supp. V) 824d(d) and 16 U.S.C. 824d(e).*

If FERC does not order a hearing on a proposed rate

change, the new rate takes effect at the end of the

60-day notice period.

1 Prior to October 1, 1977, the Federal Power Commission

(FPC) had essentially the same statutory authority insofar

as is here relevant. References to FERC in this brief should

be interpreted, where appropriate, as referring to the FPC.

2 If a hearing is not completed before the expiration of the

suspension period, the proposed rate schedule takes effect, but

FERC may require the utility to refund with interest any

portion of the increase subsequently found “not justified.”

In addition, on its own motion or on complaint,

FERC may order a hearing to determine whether any

previously established rate or contract is “unjust, un-

reasonable, unduly discriminatory or preferential”; if

it finds that it iss FERC may establish a just and

reasonable rate or contract that the utility must ob-

serve. 16 U.S.C. 824e(a).

Missouri state law requires that utilities file their

retail electric rates with the Missouri Public Service

Commission (PSC). A retail rate cannot go into ef-

fect until the PSC approves it, but the PSC must act

within 11 months after a rate proposal is filed. Mo.

Ann. Stat. § 393.150 (Vernon Cum. Supp. 1982).

The standard applied by the PSC in deciding whether

to approve a rate is whether it is unjust, unreason-

able, unjustly discriminatory, or unduly preferential.

Mo. Ann, Stat. § 393.140(5) (Vernon Cum. 1982).

2. On September 1, 1977, Kirkwood filed a com-

plaint alleging that UE had violated the Sherman

Act, 15 U.S.C. 1 et seqg., and the Robinson-Patman

Act, 15 U.S.C. 13 et seg. It sought damages and

injunctive relief. The complaint alleged that UE

had monopolized and attempted to monopolize the re-

tail distribution and sale of electric power by impos-

ing an anticompetitive “price squeeze” * on Kirkwood

8A “price squeeze” may arise in a situation in which a

firm competes with its supplier. In the present case, Kirk-

wood is a retailer that competes with its wholesale supplier,

UE, for retail business. Thus, if UE raises its wholesale

prices to Kirkwood, but maintains its retail prices at a level

that would not allow Kirkwood to make a profit based on its,

increased wholesale costs, then Kirkwood is subjected to a.

“price squeeze.” Whether a “price squeeze” is anticompeti-

tive depends on a number of factors, including the relative

efficiency of the competing firms and whether the price rela-

tion complained of is attribuiable to the supplier’s conduct,

rather than forced on the supplier by.a public authority.

by manipulating the relationship between its whole-

sale rate to Kirkwood and its retail rates. In 1975,

UE was alleged to have increased its wholesale rate

for electric power by more than 33% while taking no

action to increase its retail rates. Pet. App. A-30. As

a result, Kirkwood alleged, it “paid approximately 35

percent more than Union was selling comparable

power at retail to its large industrial primary service

customers.” Jbid. This practice, Kirkwood alleged,

was similar to previous UE rate practices. Although

UE subsequently increased its retail rates and re-

duced its wholesale rates somewhat (as a result of

settlement of FPC proceedings), it was Kirkwood’s

contention that the price squeeze continued. Jd. at

A-31.

According to Kirkwood, the price squeeze caused

antitrust injury by precluding Kirkwood from com-

peting with UE for retail sales.* The complaint also

alleged that the disparity between UE’s wholesale

and retail rates had substantially lessened competi-

tion between UE and Kirkwood, thus violating the

Robinson-Patman Act, 15 U.S.C. 13(a).

3. The district court granted summary judgment

for UE. Pet. App. A-19 to A-24.° The court held that

‘ Kirkwood alleged that it was precluded from “selling

power to its customers at retail at the same rates charged by

[UE] at retail without impairing the traditional benefits

derived by [Kirkwood] from its municipally owned system”

(Pet. App. A-30 to A-31), and that this “result[ed] in a loss

of revenues and/or pressure on the citizens and officials of

[Kirkwood] to discontinue operating the utility and to offer

to sell or lease it to [UE]” (ibid.).

5 The district court had previously dismissed the Robinson-

Patman Act claim on the grounds that electricity is not a

“commodity” within the meaning of the Act and that the

Kirkwood’s exclusive remedy for the alleged price

squeeze was with the state and federal regulatory

agencies. UE’s rates, the court also held, were exempt

from antitrust challenge because they were subject to

federal regulation under the Federal Power Act and

state regulation by the Missouri PSC. Finally, the

court held that UE’s filing of tariffs with FERC and

the state commissions, and its collection of rates pur-

suant to those tariffs were immune from antitrust

liability under the First Amendment and the Noerr-

Pennington doctrine.®

4, The court of appeals reversed. It held that

FERC and PSC did not have exclusive jurisdiction

over the price squeeze claim. Pet. App. A-6 to A-11.

Rather, the court held, under this Court’s decisions

in Cantor v. Detroit Edison Co., 428 U.S. 579 (1976),

and Otter Tail Power Co. v. United States, 410 US.

366 (1973) (Otter Tail), the antitrust laws are ap-

plicable to regulated utilities and an award of anti-

trust damages would not infringe on FERC’s regula-

tory jurisdiction. The court of appeals further held

that the price sq.«eze claims were not immunized by

the state action doctrine because there was no legisla-

tive policy favoring the conduct at issue and because

the interrelation of the wholesale and retail rates was

not controlled by regulatory authorities. Finally, the

court held that there was no immunity under Noerr-

Pennington because: “It is not for expression of

complaint did not sufficiently allege sales in interstate com-

merce. Kirkwood moved for reconsideration of that order,

but the district court granted summary judgment in favor

of UE without specifically ruling on that motion.

* Eastern Railroad Presidents Conference v. Noerr Motor

Freight, Inc., 365 U.S. 127 (1961) (Noerr); United Mine

” Workers V. Pennington, $81 U.S. 657 (1965) (Pennington).

10a

opinion that Kirkwood seeks to compel UE to respond

in damages, but rather for UE’s conduct in the mar-

ket place.” Pet. App. A-14 to A-15.’

DISCUSSION

The decision of the court of appeals is correct and

does not conflict with any decision of this Court or

any other court of appeals.* Review by this Court is

therefore unwarranted.

1. Petitioner argues first that the alleged price

squeeze ° is immunized from antitrust scrutiny by the

Noerr-Pennington doctrine. This argument was prop-

erly rejected by the court of appeals. The Noerr-

Pennington doctrine reflects this.Court’s conclusion

that “no violation of the [Sherman] Act can be predi-

cated upon mere attempts to influence the passage or

enforcement of laws.” Noerr, supra, 365 U.S. at 135.

7 The court of appeals also held that electricity is a “com-

modity” for purposes of Kirkwood’s Robinson-Patman Act

claim.

®The court of appeals did not address the merits of re-

spondent’s antitrust claims. The fact that petitioner’s conduct

is not exempt from the antitrust laws does not, of course,

establish an antitrust violation. See Group Life & Health

Insurance Co. Vv. Royal Drug Co., 440 U.S. 205, 210 n.5

(1979) ; Union Labor Life Insurance Co. Vv. Pireno, No. 81-..

389 (June 28, 1982), slip op. 5.

* A firm that has monopoly power is said to have engaged

in a “price squeeze” and has violated Section 2 of the Sher-

man Act, 15 U.S.C. 2, if it discriminates against customers

who are its competitors in another market (i.e., charges them

higher prices not justified by differences in costs), if that dis-

crimination unduly impedes competition, and if the monopo-

list’s pricing is intended to have that effect. See United States

v. Aluminum Co. of America, 148 F.2d 416, 486-488 (2d Cir.

1945).

lla

In other words, Congress did not intend the antitrust

laws to apply to attempts by private parties to obtain

government action that would restrain competition—

even where the result is subsequent government ac-

tion that in fact imposes such a restraint.

Noerr-Pennington is inapplicable here, however, be-

cause Kirkwood did not base its complaint on the

results of restrictive governmental action sought by

UE or on UE’s efforts to obtain such governmental

action. Kirkwood does not challenge the legality of

either the wholesale rate approved by FERC or the

retail rate approved by the Missouri PSC. Rather,

Kirkwood has alleged that it was injured by the re-

lationship between those rates, decided upon and put

into effect by a private party, UE, for the purpose of

eliminating Kirkwood as a competitor. Since no reg-

ulatory body imposed, or had jurisdiction to impose,

the combination of rates whose competitive effect is*

challenged, petitioner’s Noerr-Pennington arguments

were properly rejected by the court of appeals.”

Petitioner’= argument that such private conduct is

immunized merely because UE obtained governmental

acquiescence or approval constitutes an unwarranted

attempt to expand the Noerr doctrine, and is directly

contrary to this Court’s holding in Cantor v. Detroit

Edison Co., 428 U.S. 579, 601-602 (1976), that anti-

competitive conduct pursuant to a tariff filed with a

regulatory body is not immune from antitrust scru-

tiny.” See also California v. FPC, 369 U.S. 482, 488-

10 A similar Noerr-Pennington defense to a price squeeze

claim was rejected by the Seventh Circuit in City of Misha-

waka Vv. American Electric Power Co., 616 F.2d 976, 981-983

(1980), cert. denied, 449 U.S. 1096 (1981).

" Petitioner contends (Pet. 7) that the court of appeals’

reliance on Cantor was unjustified because the Court’s refer-

12a

489 (1962); United States v. RCA, 358 U.S. 334,

350-352 (1959). Indeed, in Georgia v. Pennsylvania

R.R., 324 U.S. 489 (1945), this Court held that pri-

vate actions designed to influence rates that are

subject to regulation are not immune from the

antitrust laws because of subsequent regulatory adop-

tion of the rates—a holding that has not been over-

ruled by Noerr or any other decision.

2. Petitioner also contends (Pet. 9-12) that this

Court’s decision in Gordon v. New York Stock Ex-

change, Inc., 422 U.S. 659 (1975), requires a holding

that the Federal Power Act creates an implied™

antitrust exemption for the price squeeze at issue in

this case.* The court of appeals correctly rejected

this argument.

The strict standards that govern judicial determi-

nation of implied antitrust immunity based on subse-

ence to Noerr appears in a portion of Justice Stevens’ opinion

not concurred in by a majority of the Court (428 U.S. at 601-

602) and because the Cantor decision did not turn on Noerr-

Pennington. We believe relience on Cantor was appropriate.

No member of the Court expressed the view that the conduct

at issue in Cantor was immunized by Noerr. Moreover, if a

majority in Cantor.had concluded that Noerr conferred im-

munity, there would have been no need to remand the case.

12 The Federal Power Act contains no express antitrust

exemption applicable to the conduct at issue in this case. In

contrast, the Interstate Commerce Act, for example, provides

an express and limited antitrust exemption for collective

ratemaking agreements approved by the ICC. 49 U.S.C.

(Supp. IV) 10706(a) (2) (A).

“ Petitioner concedes (Pet. 9) that federal and state regu-

lation of electric utilities has been held by this Court not to

create any general exemption or immunity from

antitrust laws. Otter Tail Power Co. v. United States, 410

U.S. 366 (1973) ; Cantor v. Detroit Edison Co., 428 U.S. 579

(1976).

13a

quent regulatory statutes have been articulated by

this Court in a long line of cases and “are well estab-

lished.” National Gerimedical Hospital and Gerontol-

ogy Center v. Blue Cross, 452 U.S. 378, 388 (1981)

(National Gerimedical). Exemptions from the anti-

trust laws are not favored; such exemptions “ ‘can be

justified only by a convincing showing of clear repug-

nancy between the antitrust laws and the regulatory

system.’” National Gerimedical, supra, 452 U.S. at

388, quoting United States v. National Association of

Securities Dealers, Inc., 422 U.S. 694, 719-720

(1975); see also Gordon v. New York Stock Ex-

change, Inc., supra, 422 U.S. at 682; United States v.

Philadelphia National Bank, 374 U.S. 321, 350-351

(1963); Otter Tail Power Co. v. United States, 410

U.S. 366, 372 (1973). Even then, repeal of the anti-

trust laws is implied narrowly, only to the minimum

extent necessary to make the regulatory scheme work

—so as to effectuate the fundamental principles of

the antitrust laws to the maximum extent consistent

with the regulatory scheme. National Gerimedical,

supra; Silver v. New York Stock Exchange, 373 U.S.

341, 357-359 (1963).

It follows that no implied exemption should be

found in this case because, contrary to petitioner’s

contention, there is no “clear repugnancy” between

the Federat Power Act and the application of the

Sherman Act to the conduct at issue. There is no

indication in the language or legislative history of the

Federal Power Act that it was intended to authorize

a price squeeze. Nor is there any inherent inconsist-

ency between the requirement of the Federal Power

Act that rates be “just and reasonable” and the ap-

plication of Section 2 of the Sherman Act to price

l4a

squeezes.* Thus, as in Otter Tail,* the conduct at

issue here remains subject to the Sherman Act.

The situation is entirely different from that which

led this Court to find implied immunity in Gordon.

There, the implied exemption for the conduct at is-

sue—the fixing of rates for brokerage commissions—

was based on actual conflict between the antitrust

laws and the applicable regulatory statute. The

Court found that the securities laws were intended

to authorize, subject to regulatory supervision, the

fixing of brokerage commission rates, which other-

wise would have constituted price fixing—a per se

violation of the Sherman Act. It was Congress’ au-

thorization of the conduct at issue,” and not the mere

44 The possibility that conflict might arise in the future

(if, for example, a price squeeze were proved and if the

district court then ordered UE to remedy the price squeeze

by lowering its wholesale rates to a level dcemed unreason-

ably low by FERC) does not warrant a grant of immunity

in the absence of any actual conflict. Otter Tail, supra, 410

U.S. at 376.

18 Petitioner seeks to distinguish this case from Otter Tail

and Cantor (a case that involved the state action exemption,

see pages 12-13, infra) on the ground that (Pet. 9-10)

“Tt)he alleged violations of the antitrust laws in those cases

involved various activities other than the filed electric rates”

while in this case “the alleged violation is based solely on the

economic effect of [UE’s] rates * * *”” (emphasis in original).

This distinction, however, does not affect the basic principle

applicable to this case: antitrust immunity will not be implied

in the absence of actuai conflict with a federal regulatory

statute.

1¢ Congress, of course, may authorize private conduct that

otherwise would violate the antitrust laws. Under the Su-

premacy Clause (Article 6, Clause 2), however, states cannot

override federal antitrust law. Therefore, the implied repeal

doctrine does not apply to state legislation. This is to be dis-

tinguished from the state action doctrine, which recognizes

15a

existence of federal regulatory authority to review

conduct under a standard different from that of the

Sherman Act, that led to a determination that the

restraints at issue were immune from antitrust lia-

bility.”

Petitioner also is incorrect in contending (Pet. 13-

14) that FPC v. Conway Corp., 426 U.S. 721 (1976),

precludes application of the Sherman Act to the al-

leged price squeeze. This Court held in Conway that

the FPC has jurisdiction to consider the relationship

between jurisdictional (wholesale) and nonjurisdic-

tional (retail) rates in determining whether jurisdic-

tional rates are just, reasonable and nondiscrimina-

tory. Conway did not hold that the FPC’s jurisdic-

tion to consider price squeeze allegations was exclu-

sive, and there is no indication that Congress intended

to give FERC sole jurisdiction to consider and remedy

that Congress did not intend the Sherman Act to prohibit re-

straints that are fairly attributable to state decisions to re-

place competition with state supervision and control rather

than private conduct. Parker v. Brown, 317 U.S. 341, 350-351

(1943). Where conduct is fairly attributable to private par-

ties it is subject to the Sherman Act even if approved by a

state. California Retail Liquor Dealers Association v. Midcal

Aluminum, Inc., 445 U.S. 97, 106 (1980) ; City of Lafayette v.

Louisiana Power & Light Co., 485 U.S. 389, 415 n.45 (1978) ;

Cantor Vv. Detroit Edison Co., supra; Parker v. Brown, supra,

317 U.S.-at 351.

1? Thus, the fact that an agency must consider the competi-

tive effects of action subject to its jurisdiction before approv-

ing it as consistent with the public interest as defined by the

regulatory statute does not justify an implied antitrust im-

munity. See, e.g., United States v. RCA, 358 U.S. 384 (1959)

(FCC approval of exchange of broadcast licenses does not

confer antitrust immunity) ; California v. FPC, 369 U.S. 482

(1962) (FPC approval of acquisition does not confer anti-

trust immunity).

l6a

alleged price squeezes."* Application of the antitrust

laws to alleged price squeezes would not frustrate

FERC’s regulation of wholesale rates. On the con-

trary, the availability of antitrust relief provides a

necessary complement to FERC’s limited power to

remedy a price squeeze. All that FERC can do pro-

spectively is to adjust the wholesale rate within the

zone of reasonableness.” See FPC v. Conway Corp.,

supra, 426 U.S. at 278. If this is inadequate to rem-

edy a price squeeze, FERC cannot compel a utility to

file higher retail rates.”

3. Petitioner’s final argument for antitrust im-

munity is that the conduct at issue falls within the

state action exemption of Parker v. Brown, 317 U.S.

341 (1943). The conduct alleged to violate the anti-

trust laws in this case, however, does not constitute

“state action” as that doctrine has been articulated

by this Court. Rather, what is at issue is an essen-

tially private restraint that is fully subject to the

antitrust laws.

18 Nor can FERC award damages for the effects of unrea-

sonable or discriminatory rates. City of Mishawaka Vy. Indiana

& Michigan Electric Co., 560 F.2d 1314, 1825 (7th Cir.

1977), cert. denied, 436 U.S. 922 (1978); see also CF Indus-

tries, Inc. V. Transcontinental Gas Pipe Line Corp., 614 F.2d

33, 35-36 (4th Cir. 1980); State of Louisiana v. FPC, 503

F.2d 844, 867-868 (Sth Cir. 1974).

1” With respect to past harm, FERC can award refunds

only in cases where it has suspended the rate; it cannot other-

wise provide retroactive relief. City of Batavia v. FERC,

672 F.2d 64, 89 (D.C. Cir. 1982).

* Under the doctrine of primary jurisdiction the antitrust

court may refer to FERC any issues calling for the agency’s

expertise. Far Hast Cvuference v. United States, 342 U.S.

570, 574-575 (1952) ; City of Mishawaka v. Indiana & Michi-

gan Electric Co., supra, 560 F.2d at 1822.

17a

This Court held in Goldfarb v. Virginia State Bar,

421 U.S. 773 (1975), that “anticompetitive activities

must be compelled by direction of the State acting as

a sovereign” in order for private defendants to claim

state action immunity for their conduct. 421 U.S. at

791 (emphasis added). This holding was reaffirmed

in Cantor v. Detroit Edison Co., supra, 428 U.S. at

592-598.% Nothing in the Court’s subsequent state

action decisions involving state agencies and instru-

mentalities * has altered this compulsion standard for

assessing private conduct. Neither the price squeeze

at issue in this case nor UE’s retail rates themselves

are compelled by the state of Missouri. Therefore,

under this Court’s prior holdings, the state action

defense is not available to UE.

In addition, even if the state action criteria ap-

plicable to governmentally imposed restraints (rather

than the compulsion test) were applied to UE’s al-

leged price squeeze, it still would be subject to the

antitrust laws under the standard of California Re-

tail Liquor Dealers Association v. Midcal Aluminum,

Inc., swpra, 445 U.S. at 105. As the court of appeals

correctly found (Pet. App. A-13), there is no clearly

articulated state policy in favor of the alleged price

squeeze, and the relationship between UE’s wholesale

and retail rates cannot be “actively supervised” by

the state of Missouri since it has no authority over

UE’s wholesale rates.

*1 See also 428 US. at 600 (plurality opinion) ; 428 U.S.

at 604 (Burger, C.J., concurring) ; 428 U.S. at 609 (Black-

mun, J., concurring) ; 428 U.S. at 623-626 (Stewart, J., dis-

senting) (all indicating approval of Goldfarb compulsion

test) .

2 City of Lafayette v. Louisiana Power & Light Co.. supra;

California Retail Liquor Dealers Association v. Midcal Alumi-

num, Inc., supra; Community Communications Co. Vv. City of

Boulder, 455 US. 40 (1982).

18a

CONCLUSION

The petition for a writ of certiorari should be

denied.”

Respectfully submitted.

REx E. LEE

Solicitor General

WILLIAM F.. BAXTER

Assistant Attorney General

LAWRENCE G. WALLACE

Deputy Solicitor General

JERROLD J. GANZFRIED

Assistant to the Solicitor General

BARRY GROSSMAN

NANCY C. GARRISON

Attorneys

DECEMBER 1982

23 The other issue presented in the petition—whether elec-

tricity is a “commodity” within the meaning of the Robinson-

Patman Act—does not warrant review by this Court at this

stage of the litigation. Petitioner has failed to show that the

Eighth Circuit’s holding on this issue is in conflict with that

of any other court of appeals. At most, it has-shown 2 con-

flict with two district court decisions (Pet. 16-17). Nor is

the issue of sufficiently great importance to require decision

by this Court in the absence of conflict; it has amsen only

rarely in reported decisions of the lower courts. See Pet.

16-17; Br. in Opp. 17-19.

Moreover, the question whether electricity is a “commodity”

may not dispose of petitioner’s Robinson-Patman Act claim.

The district court also held that claim defective for failure

to allege that the challenged sales took place in interstate

commerce. As the court of appeals noted (Pet. App. A-15):

“Kirkwood asked for leave to amend its complaint to correct

the supposed deficiency, but the District Court never ruled

on the request.” Thus, any review of this issue should await

final determination of the Robinson-Patman Act claim by the

lower courts.

19a

APPENDIX B

Questions to be Answered by the Jury and its

Answers (Pet. App. 156a-160a)

2la

Questions To Be Answered By The Jury

Claim 1—Monopolization

Did defendants possess monopoly power in

a relevant market?

If so, did defendants wilfully maintain such

monopoly power by predatory or anti-com-

petitive conduct?

If so, was such wilful maintenance of mo-

nopoly power a proximate cause of injury

to plaintiffs?

Claim 2—Attempted monopolization

Did defendants have a specific intent to ob-

tain monopoly power in a relevant market?

If so, did defendants attempt to obtain such

monopoly power by anti-competitive or

predatory conduct?

If so, was there a dangerous probability

that defendants would succeed in obtain-

ing such monopoly power?

If so, was such attempt a proximate cause

of injury to plaintiffs?

Claim 83—Conspiracy to monopolize

10.

Did AT&T and one or more of the Bell com-

panies, acting as separate entities, conspire

or agree to monopolize a relevant market?

If so, did these companies have the specific

intent to maintain monopoly power in the

relevant market?

If so, did any of the conspirators commit

any overt acts in furtherance of the con-

spiracy?

Yes

(Yes or No)

Yes

(Yes or No)

Yes

(Yes or No)

Yes

(Yes or No)

Yes

(Yes or No)

Yes

(Yes or No)

Yes

(Yes or No)

22a

11. If so, was the conspiracy a proximate cause

of injury to plaintiffs?

Claim 4—Conspiracy in restraint of trade

12. Did AT&T and one or more of the Bell

companies, acting as separate entities, con-

spire or agree to engage in conduct which

unreasonably restrained trade?

13. If so, was any such conduct a proximate

cause of injury to plaintiffs?

14. What amount of money will fairly and rea-

sonably compensate plaintiffs for the in-

juries they sustained to their telephone ter-

minal equipment business as a proximate

result of the violation or violations which

you have found?

15. If you have found under any one or more

of the four claims that the interface device

requirement was a violation of the antitrust

laws, what amount of money will fairly and

reasonably compensate plaintiffs for the in-

juries they sustained by having to pay for

the installation and monthly rentals of de-

fendants’ interface devices, as a proximate

result of such violation?

Explanation of Answers to Questions 2 and/or 5

(Not required if you answered “No” to both

questions)

16. If your answer to either Question 2 or Ques-

tion 5 is “Yes,” on which of the following

alleged practices of defendants have you

based your finding of predatory or anticom-

petitive conduct:

a. Filing of the interface device tariff in

bad faith?

(Yes or No)

$91,900,000

$ 268,243

Yes

(Yes or No)

23a

. Intentional delay in providing and in-

stalling interface devices?

. Opposing certification in bad faith?

. Intentionally providing unduly expen-

sive, inefficient or unreliable interface

devices?

Intentional pricing of PBX and key

telephone services below incremental

costs?

Discriminating against purchasers of

competitive terminal equipment in the

price of network service?

. Misuse of information obtained through

supplying of the interface devices to at-

tempt to cause customers who have in-

dicated their intention to purchase com-

petitive equipment to lease Bell equip-

ment instead ?

. Bad faith refusal to sell inside wiring

at all or on a reasonable basis?

Bad faith delay in making cutovers?

Yes

(Yes or No)

Yes

(Yes or No)

Yes

(Yes or No)

Yes

(Yes or No)

25a

APPENDIX C

Hush-A-Phone Corp. v. AT&T, 22 F.C.C. 112 (1957)

27a

112 Federal Communications Commission Reports

BEFORE THE

FEDERAL COMMUNICATIONS COMMISSION

Wasuinoton 25, D. C.

In the Matter of

Hosn-A-Pxrone Corp. and Harry C. Torrie,

COMPLAINANTS

v. Docket No. 9189

Asrertcan TeLeruone & TeLecrarn Co., ET AL.,

DEFENDANTS

APPEARANCES

Louis G. Caldwell, Kelley E. Griffith, Max E. Wildman, and Wa-

liam I. Symmes, Jr, on behalf of the complainants; Prank A. Frita,

7’. Brook Price, and Edmund S. Hawley, on behalf of the defendants;

Walter 2. McDonald, and Austin L. Roberts, Jr., on behalf of the

National Association of Railroad and Utilities Commissioners; Vor-

man S. Case, on behalf of the United States oy ape Telephone

Association; and Bernard Strassburg, William G@. Butts, and Willis §.

Ryza, on behalf of the Federal Communications Commission,

Decision AND Orper on RemMAND

(Adopted: February 6, 1957)

By rue Cosmission : Cosatisstoner Dorrrer abstaining from voting.

1. On November 8, 1956, the United States Court of Appeals for the

District of Columbia Circuit issued its decision in Hush-A-Phone

Corp. v. U. S., 238 F. 2d 266, in which it set aside the Commission’s

decision and order of December 21, 1955, herein, dismissing the com-

plaint of Hush-A-Phone Corp. against defendants American Tele-

hone & pes Co. and the associated Bell System companies.

he court remanded the case to the Commission for further proceed-

ings not inconsistent with its decision.

2. The complaint of the Hush-A-Phone Corp., among other things,

attacked the justness and reasonableness and, therefore, the lawful-

ness, under section 201 (b) of the Communications Act.of 1934, as

amended, of defendants’ so-called “foreign attachment” tariff regu=—

lations * insofar as they barred the use by defendants’ subscribers of :

2 One form of such tariff lation, filed by two of the defendants, the Bell Telephone

Company of Pennsylvania and the Diamond State Telephone Co., 8 - as follows:

o pautpenent. apparatus and lines furnished by the Telephone ny shall be ca

used and no equipment, apparatus or lines not furnished by the Te

t sed i th unless authorized

mg ee A cubseclber one aed

in connection equipment, apparatus or lines furnished by the Telephone Company,

22 F.0.C.

28a

Hush-A-Phone Corp. et al. v. A. T. & T. Co. et al. 113

the Hush-A-Phone device in connection with interstate and foreign

telephone service. In dismissing the complaint, the Commission

found, among other things, that the use of the Hush-A-Phone device

affords some measure of privacy as well as a more quiet telephone

wire by reason of exclusion of surrounding noise; that no physical

damage of any consequence results to defendants’ facilities when the

Hush-A-Phone is used; but that the use of the Hush-A-Phone for

the primary any Sa for which it was designed, to wit, privacy, is

accompanied by an impairment in the quality of telephone transmis-

sion; and that the unrestricted use of the Hush-A-Phone could result

in a general deterioration of the quality of interstate and foreign

service. Accordingly, the Commission concluded that it was not an

unjust and unreasonable practice upon the part of the defendants to

prohibit the use of the Hush-A-Phone device in connection with

their telephone service.

3. In setting aside the Commission’s order dismissing the complaint

of Hush-A-Phone and remanding the case to the Commission, the

Court of Appeals held that defendants’ tariffs, under the Commis-

sion’s decision are in unwarranted interference with the telephone

subscriber’s right reasonably to use his telephone in ways which are

privately beneficial without being publicly detrimental. The court

points out that the Commission’s conclusions of systemic or public

injury resulting from the use of a Hush-A-Phone are not warranted

where the only effect of such use is a diminution of volume and clarity

of the Hush-A-Phone user’s voice as heard by the party to whom he is

speaking. It further points out that the user may obtain privacy of

conversation by cupping his hand around the transmitter with similar

diminution of volume and clarity.

4. In addition to invalidating the defendants’ foreign attachment

tariff regulations insofar as they bar the use of the Hush-A-Phone de-

vice, an inescapable consequence of the Court’s opinion is to render

such tariff regulations unjust and unreasonable insofar as they may

be construed or applied to bar a customer from using other devices

which serve the customer’s convenience in his use of the facilities fur-

nished by the defendants and which do not injure the telephone com-

panies’ employees or facilities, or the public in the use of defendants’

services, or impair the operation of the telephone system. As we con-

strue the Court’s opinion, a tariff regulation which amounts to a blan-

ket prohibition upon the customer's use of any and all devices without

discriminating between the harmful and harmless encroaches upon

the right of the user to make reasonable use of the facilities furnished

by the defendants. Such a regulation goes beyond what is reasonably

the equipment. apparatus and lines furnished by the customer or subscriber must be con-

nected solely with the Telephone Company's system. Any equipment furnished by the

Telephone Company shall remain the property of the Telephone Company and upon ter-

mination of service for any cause whatsoever be returned to it, in condition, reason-

able wear and tear thereof excepted.”

Another form of tariff regulation, filed by the remaining defendants (other than the

American Toenene & Telegraph Ce. ), pravides : ¢ teratiel te te Séuchene ©

a ratus, circuit or device not furn e ne Com

shall be attached to or connected with the facilities furnished the Telephone Compans,

whether physically, by induction or otherwise, except as provi in this tariff. In case

er nsatporines ettachepent or cenneetion is mate, the =yiephene ay shall

v righ remove disconnect same; or service ering

continuance of attachment or connection ; or to terminate service.”

29a

114 Federal Communications Commission Reports

required in the interest of protecting the defendants’ employees, fa-

cilities, the telephone system and the public from adverse effects. Ac-

cordingly, we conclude that the tariif regulation is unjust and un-

reasonable and, therefore. unlawful to the extent we have indicated.

». Lt ix ordered, That defendants herein shall file tariff schedules,

effective no later than April 1, 1957, on not less than 30 days notice to

the Commission and the public, rescinding and canceling any tariff

regulations to the extent that they prohibit a customer from using, in

connection with interstate or foreign telephone service, the Hush-A-

Phone device or any other device which does not injure defendants?

employees, facilities, the public in its use of defendants’ services, or

unpair the operation of the telephone system.

se F-C.C.

dukes

3la

APPENDIX D

In re Carterfone Device, 13 F.C.C. 2d 420 (1968) (Appendix A

and Appendix B, 13 F.C.C. 2d 427-29, omitted)

38a

420 Federal Communications Commni‘ssion. Reports

FCC 68-661

BEFORE THE

FEDERAL COMMUNICATIONS COMMISSION

Wasuincton, D.C. 20554

In the Matter of

Use or THE Canterroxe Device 1x Messace| Docket No. 16942

Toit TELEPHONE SERVICE

In the Matter of

Tuomas F. Carrer snp Carter ELectrronics

Corr.. Datias, Tex. (COMPLAINANTS), e Docket No. 17075

American TELEPHONE AND TELEGRAPH Co..,

Assocritep Bett System Companres,

Soctuwestrrs Bett Terernone Co., ano

Gexerat TeterHoxr Co. oF THE SovUTH-

WEST (DEFENDANTS) }

APPEARANCES

Messrs. Bill Brice and Ray G. Besing (Geary, Brice & Lewis) on

behalf of Thomas F. Carter and Carter Electronics Corp.: Messrs.

Reed Miller and David H. Lloyd (Arnold & Porter), and Mr. Hubert

M. Preston on behalf_of General Telephone Co. of the Southwest:

Messrs: Titodore F. Brophy. Dona) F. McCarthy, Reed Miller and

David H. Lloyd on behalf of G.T. & E. Service Corp.: Mr. W. H.

Borghesani. Jr. (Keller and Heckman) on behalf of National Retail

Merchants Association: Messrs. Joseph E. Heller and W. H. Borqhe-

sani, Jr. (Keller and Heckman) on behalf of Central Committee on

Communication Facilities of the American Petroleum Institute;

Messrs. Wayne E. Babler, Melvin R. Quinlan, Harold J. Cohen and

Raymond F. Scully on behalf of Bell System Respondents; Mr. Warren

E. Baker (Chadbourne, Parke, Whiteside & Wolff) on behalf of United

States Independent Telephone Association: and Messrs. John 4M.

Lothschuetz and Paul W. Hammack on behalf.of Chief, Common Car-

rier-Bureau, Federal Communications Commission.

DEcIsION.

(Adopted June 26, 1968)

By Comsissionrr JOHNSON FOR THE Com™MIssION: CoMMISSIONER

LoEVINGER DID NOT PARTICIPATE IN THE DECISION IN THIS CASE.

This proceeding involves the application of American Telephone

and Telegraph Co. tariffs to the use by telephone subscribers of the

Carterfone. ave

The Carterfone is designed to be connected to a two-way radio at

the base station serving a mobile radio system. When callers on the

radio and on the telephone are both in contact with the base station

13 F.C.C, 24

34a

Carter fone 421

operator, the handset of the operator’s telephone is placed on a cradle

in the Carterfone device. A voice control circuit in the Carterfone

automatically switches on the radio transmitter when the telephone

caller is speaking; when he stops speaking, the radio returns to a

receiving condition. A separate speaker is attached to the Carterfone

to allow the base station operator to monitor the conversation, adjust

the voice volume, and hang up his telephone when the conversation

has ended.

The Carterfone device, invented by Thomas F. Carter, has been

produced and marketed by the Carter Electronics Corp., of which

\{r. Carter is president, since 1959. From 1959 through 1966 approxi-

mately 4.500 Carterfones were produced and 3,500 sold to dealers

and distributors throughout the United States and in foreign

countries. .

The defendant telephone companies, acting in accordance with their

interpretation of tariff FCC No. 132, filed April 16, 1957,* by Ameri-

can Telephone and Telegraph Co., advised their subscribers that the

Carterfone, when used in conjunction with the subscriber’s telephone,

is a prohibited interconnecting device, the use of which would subject

= user to the penalties provided in the tariff. The tariff provides

that:

No equipment, apparatus, circuit or derice not furnished by the telephone

company shall be attached to or connected with the facilities furnished by

the telephone company, whether physically, by induction or otherwise.

* * * (A fuller text is provided in appendix A.)

A private antitrust action was brought by Carter against American

Telephone and Telegraph Co. and General Telephone Co. of the

Southwest, The District court held that because of its “special com-

petence and ‘expertise’” in the technical and complex matter of

telephone communication, the Federal Cormmunications Commission,

under the doctrine of primary jurisdiction, is vested with the right

to determine the “justness, reasonableness, validity, application, and

effect of the tariff and practices here involved.” Carter v. AT&T,

250 F. Supp. 188, 192 (N.D. Texas, 1966). The court reserved juris-

diction to pass ultimately upon the antitrust issues after proceedings

before the Commission should be concluded. The United States Court

of Appeals for the Fifth Circuit affirmed the District court’s decision

on August 17, 1966. Carter v. American Telephone and Telegraph Co.

365 F. 2d 486 (5th Cir., 1966). On October 20, 1966, the Commission

on its own motion ordered that a public hearing be held to resolve

“the question of the justness, reasonableness, validity, and effect of

the tariff rezulations and practices complained of,” assigning docket

No. 16942. The following five specific issues were designated for

1. The nature and extent of the public need and demand for the use

of the Carterfone device in connection with interstate or foreign message

toll telephone service ;

2 The effect of the use of the Carterfone device upon the operation of

the telephone system used to provide interstate and foreign telephone mes-

sage toll telephone services to the public or upon the employees and facilities

“This tariff is now superseded by tariff FCC No. 263,

13 F.C.C. 2d °

85a

422 Federal Communications Commission Reports

of the telephone companies providing such services or upon the public in

its use of such telephone srstem;

3. Whether the provisions of tariff FCC No. 132 filed by American Tele-

phone and Telegraph Co. may properlr be construed to prohibit any tele-

phove user from attaching the Carterfone device to the facilities of the

telephone companies for use fm connection with interstate and foreign

message toll telephone services ;

4. If the aforesaid tariff provisions may properly be construed to prohibit

telephone users from attaching the Carterfone device to the facilities of:

the telephone companies for use in connection with interstate or foreign

message toll telephone services;

(a) Whether such regulations are, or will be, unjust and unreasonable

and, therefore, unlawful within the meaning of section 201(b) of the

Communications Act of 1934, as amended, or are, or will be unduly dis-

criminatory or preferential in violation of section 202(a) of said Act;?

(b) Whether, in the light of facts developed in connection with the

foregoing issues, the Commission, in accordance with the provisions of

section 205 of the Act, should prescribe tariff regulations which will

pernit the use of the Carterfone device in connection with interstate and

foreign toll telephone service and, if so, the kind of tariff regulations

which should be prescribed ;

. If the aforesaid tariff reculations of the telephone com) anies may not

properly be construed to prohibit telephone users from attaching the Carter-

fone device to the facilities of the telephone companies for use in connection

with interstate or foreign message toll telephone services, what action, if

any, should be taken bs the Commission witb respect thereto.

Thomas F. Carter and Carter Electronics Corporation (hereafter

Carter), American Yu, ee and Telegraph Co. and 22 associated Bell

System companies (A.T, & T.), and General Telephone Co. of the

Southwest (General) were named parties respondent. vey ae EG

several parties were allowed to intervene. The United States Independ-

ent Telephone Association and G.T, & E. Service Corp. intervened on

the side of A.T. & T. and General, and the Central Committee on Com-

munications Facilities of the American Petroleum Institute, and the

Retail] Research Institute of the National Retail Merchants Association

intervened on the side of Carter.

On December 21, 1966, Carter filed a formal complaint pursuant to

section 208 of the Communications Act, 47 U.S.C. § 208, against Gen-

eral and certain of the Bell companies, and further proceedings in

docket No. 16942 were held in abeyance pending disposition of the

complaint (docket No. 17073). By order released March 8, 1967, the

complaint was consolidated for hearing with docket No. 16942, and the

following issues were added:

1. Whether, with respect to the period from February 6, 1957, to December

21, 1966, the regulations and practices in tariff FCC No. 132 of the American

Telephone and Telegraph Co. were properly construed and applied to prohibit

any telephone user from attaching the Carterfone device to the facilities of

the telephone companies for use in connection with interstate and foreign

message toll telephone service ; and if so

2 Sec. 201(b) provides: “All charges, practices, classifications, and regulations for and

in connection with such communication service, sball be just and reasonable, and any

such charge. practice, classification, or regulation that is unjust or unreasonable is

declared to be unlawful: * * *”

. 202(n) provides: “It shall be unlawful for any common carrier to make any unjust

or unredsonable discrimination in cha practices. classifications, regulations. facilities.

or services for or in connection with like communication service, directly or indirectly. by

any means or device, or to make or give any undue or unreasonable erence or advantage

to any particular person. class of persons, or jocality. or to sub any particular Derson,

class persons, or locality to any undue or unreasonable prejudice or disadvantage,

13 F.C.C, 2a

36a

Carterfone 423

2. Whether, during the aforesaid period, such regulations’ and practices

Were unjust und unreasonable, and therefore unlawful within the meaning

of section 201(b) of the Communications Act of 1934, as amended, or were

> ged discriminatory or preferential in violation of section 202(a) of said

The examiner found that there was a need and demand for a device

to connect the telephone landline system with mobile radio systems

which could be met in part by the Carterfone. He also found that the

Carterfone had no material adverse effect upon use of the telephone

system. He construed the tariff to prohibit attachment of the Carter-

fone whether or not it harmed the telephone system, and determined

that future prohibition of its use would be unjust and unreasonable.

He also found that it would be unduly discriminatory under section

202(a) of the Act, since the telephone companies permit the use of

their own interconnecting devices. However, he did not find the tariff

rohibitions to have been unlawful in the past, largely because the

armless nature of the Carterfone was not known to the telephone

companies, and he did not find that a general prohibition against non-

telephone company supplied interconnecting devices was unjust or

unwise, because of the risk he saw of “serious harm to the heart of

the nation’s communications network.”

We agree with and adopt the examiner's findings that the Carter-

fone fills a needs and that it does not adversely atfect the telephone

system. They are fully supported by the record. We also agree that

the tariff broadly prohibits the use of interconnection devices, in-

cluding the Carterfone. Its provisions are clear as to this. Finally, in

view of the above findings, we hold, as did the examiner, that appli-

cation of the tariff to bar the Carterfone in the future would be un-

reasonable and unduly discriminatory. However, for the reasons to

be given, we also conclude that the tariff has been unreasonable, dis-

criminatory, and unlawful in the past, and that the provisions pro-

hibiting the use of customer-provided interconnecting devices should

accordingly be striken.

We hold that the tariff is unreasonable in that it prohibits the use

of interconnecting devices which do not adversely affect the telephone

system. See H/ush-A-Phone Corp. v. U.S.,99 U.S. App. D.C. 190, 193,

238 F.2d 266, 269 (D.C. Cir., 1956), holding that a tariff prohibition

of a customer supplied “foreign attachment” was “in unwarranted

interference with the telephone subscriber's right reasonably to use

his telephone in 0 which are privately beneficial without being

publicly detrimental.”? The principle of Hush--Phone is directly

applicable here, there being no material distinction between a forei

attachment such as the Hush-A-Phone and an interconnection device

13 F.C.C, 2d

87a

424 Federal Communications Commission. Reports

such as the Carterfone, so far as the present problem is concerned.?

Even if not compelled by the Hush-A-Phone decision, our conclusion

here is that a customer desiring to use an interconnecting device to

wm capl the utility to him of both the telephone system and a private

radio system should be able to do so, so long as the interconnection

does not adversely affect the telephone company’s operations or the

telephone system’s utility for others. A tariff which prevents this is

unreasonable; it is also unduly discriminatory when, as here, the

telephone company’s own interconnecting equipment is approved for

use. The vice of the present tariff, here as in Hush-A-Phone, is that

it prohibits the use of harmless as well as harmful devices.

A.T. & T. has urged that since the telephone companies have the

responsibility to establish, operate and improve the telephone system,

they must have absolute control over the quality, installation, and

maintenance of all parts of the system in order effectively to carry

out that responsibility. Installation of unauthorized equipment, ac-

cording to the telephone companies, would have at least two negative

results. First, it would divide the responsibility for assuring that each

part of the system is able to function effectively and, second, it would

retard development of the system since the independent equipment

supplier would tend to resist changes which would render his equip-

ment obsolete.

There has been no adequate showing that nonharmful interconnec-

tion must be prohibited in order to permit the telephone company to

carry out its _— responsibilities. The risk feared by the examiner

has not been demonstrated to be substantial, and no reason presents

itself why it should be. No one entity need provide all interconnec-

tion equipment for our telephone system any more than a single source

is needed to supply the parts for a space probe. We are not holding that

the telephone companies may not prevent the use of devices which ac-

tually cause harm, or that they may not set up reasonable standards

to be met by interconnection devices. These remedies are appro-

priate; we believe they are also oe to fully protect the system.

Nor can we assume that the telephone companies would be hindered

in improving telephone service by any tendency of the manufacturers

and users of interconnection devices to resist change. The telephone

companies would remain free to make improvements to the telephone

system and could reflect any such improvements in reasonable revised

standards for nontelephone company provided devices used in con-

nection with the system. Manufacturers and sellers of such devices

would then have the responsibility of offering for sale or use only

such equipment as would be in compliance with such revised standards.

An owner or user of a device which failed to meet reasonable revised

standards for such devices, would either have to have the device re-

built to comply with the revised standards or discontinue its use. Such

is the risk inherent in the private ownership of any equipment to be

used jn connection with the telephone system.

*The Hush-A-Phone was a cup-like device mechanically fastened to the mouthpiece of a

Ghephone. bandect. The Carterfone by means of acoustic and inductive coupling effectively

ach an “interconnection” between the public toll telephone system and private

mobile radio systems, These differences are immaterial, however, insofar as the Hush-A-

Phone boiding is concerned. .

13 F.0.0, 2a

38a

Caricrfone 425

The present unlawfulness of the tariff also permeates its past. It has

heen unreasonable and unreasonably discriminatory since its Incep-

tion, for the reasons eiven above. That the telephone companies may

not have known prior to the proceedings herein that the Carterfone

was in fact harmless is irrelevant. since they barred its use without re-

ward to its etlect upon the telephone system. Furthermore, the tari

vas the carrier 3 own. It was not prescribed by the Commission.

has remained subject to complaint and to a finding that. it had been

unlawful since its inception.

A Commission-prescribed rate or practice must be followed by the

carrier. It becomes the lawful rate or practice. But where the carrier

seself witiates the rate or practice Its jaw fulness remains open, not only

to 2 prespective inding but. also to a retroactive one. Ayizona Grocery

Co. ¥. eLtchixon. T.& SF. Ry. ©- os4 US. 370 (1032). And it is not

a bar to such a {inding of past unlawfulness that the turiff has been

ermitted to remain in effect and has not, until now been the subject

of a determination 25 to its lawfulness.’ See Interstate Commerce Com-

mission Vs Inland Waterways Corp. »19 U.S. 671 (1945), finding no

agency prescription even where the agency had stated that a rate was

‘shown to be just and yeasonable” Interstate Commerce Commission

x. Mechta. da) US. 567, ye ere (1947): Public ltilities Commis

sion of Califorma’. United States. 956 F. 2d 236 (9th Cir, 1966). AS

was said in Rirminaham Slag Co. ¥. United States, 11 F. Supp. 456;

487 (XD. Ala., 1939) ¢

Our conclusion js that (the Commission] « * * without adjudging their

judividual reasonableness, werely authorized the carriers to put in the

general jevel of rates, at their risk, if ther were ¢0 advised, and remove

certain incidental obstructions to the carriers doivg $0, which were present

py section 13:4) of the act (49 USCA § 3(4)), and agreed not tv wake @

suspensory order, in advance of bearing, under eomplaints filed under Sec-

an 1s 7°.” We think the rates in controversy were carrier, and net Com-

iissien-made putes. Their validity hax not heen declared. nor bas the Com

piissien ordered then put in effect. They stand just as if filed by the carrier

with the Commission. with no action on the part of the Commission making

gheir validity & matter of adjudication against the shippers. and the shippers’

right to a day in court is not impaired, cither as to the ipvalidity of the rate,

or the right to reparations.

seu wise Alqontl Cowl & Coke Co. N: Lyited Ntales. 11 F. Supp- 487

(ELD. Va. 150).

In view of the unlaw fulness of the tariff there would be no pot

in merely declaring it invalid as applied to the Carterfone and per-

mitting 11 to continue Mm operation as to other interconnecnon devices.

This would also put a clearly improper burden upon the manufacturers

and users of other devices. The appropriate remedy 15 to strike the

tariff and permit the carriers; if they, 5° desire; to propose new tariff

provisions gecordance With this opinion. We make no rulings a5 to

—_———_—

4On May 16. i957. the Commission isened a publie potice stating that the Conmission

bac “elected te permit” the revised tarif subroitted bY the telephone. corapanies to co into

effect. ‘The prohibitions a» to interconnection devices were mentioned in the public notice.

Thereafter. the Commission on various occasions cited the prohibitions in response TO

juquirtes about attachments or interconnecting devices. without quenteen the ralidity

of tne gorecdattest bedi Tbhe Examiuer § nding that the tariff prov sions in question were

valia prier te the instore hearing appears to hare been pased in part on this history.

Jlawerer, Done of this made the wirif one prescribed by the Commission.

13 F.C.C. 2d

89a

496 Federal Communications Commission Reports

damazes since that relief has not heen requested? As noted above, the

carriers may submit new tariffs which will protect the telephone sys-

fem against harmful devices, and may specify technical standards if

they wish.

Accordingly, we find that taritf FCC No. 265, paragraphs 2.6.1 and

2.6.9 are, and have since their inception been, unreasonable, unlawful

and unreasonably discriminatory under sections 201(b) and 202 (a)

of the Communications Act of 1934, as amended.

Other ancillary matters require our attention and disposition. On

March 27, 1968, the Chief. Common Carrier Bureau, requested that

the Commission take official notice of a new Canadian statute, entitled

“An Act Respecting the Bell Telephone Company of Canada,” which

became effective on March 7, 1965. The statute has some relevance to

this proceeding because it states the national policy with respect to for-

cign attachments of a neighboring country whose telephone system is

completely interconnected with the telephone system of the United

States. Accordingly, the Common Carrier Bureau's request for official

notice will be granted.

On March 18, 1968, the Commission received a petition to accept an

amicus curiae brief. together with the brief, from Prof. Willis Rokes

of the Municipal University of Omaha, Omaha. Nebr. In general,

Professor Rokes supports the position advanced by Carter and the

Common Carrier Bureau. The Commission appreciates obtaining the

carefully considered views of interested members of the public in

matters of great public concern such as we have here. Accordingly,

the petition will be granted and the brief amicus curiae accepted.

On May 3, 1968, motions to correct the transcript of oral argument

were filed by the Bell System Parties, the United States Independent

Telephone Association, the General Telephone Co. of the Southwest,

G. T. & E. Service Corporation, the Chief, Common Carrier Bureau,

and the United States Department of Justice. No oppositions were

filed to any of these requests, and they will be granted.

It is ovdered, that the “Request for Official Notice,” filed March 27,

1068, by Chief, Common Carrier Bureau, /s granted;

It ix further ordered. that the petition to accept an amicus curiae

brief filed on March 18, 1968, by Prof. Willis Rokes Js granted, and

that the said brief /s accepted;

It is further ordered. that the motions to correct transcript of oral

argument filed on May 5, 1968, by the Bell Svstem Parties, the United

States Independent Teleplione Association, the General Telephone Co.

of the Southwest, G. T, & E. Service Corp., the Chief, Common Car-

rier Bureau, and the United States Department of Justice, .Are

granted;

ft is further ordered, that paragraphs 2.6.1 and 2.69 of tariff F.C.C,

No, 26:3 be stricken and not thereafter be published or given any effect ;

We «io not intend to determine any issues which may arise in the pending litication.

C9... — that the Carterfone mar bare been harmful as manufactured at some time

OQ the plas

13 F.C.C, 2d

40a

Carterfone 427

It is further ordered, that this proceeding Js terminated; and

at is further ordered, that this Order shall be effective July 29,

1968,

Fecrrit ComMeUnications Commission,

Ben F. War e, Secretary.

4la

APPENDIX E

In re Carterfone Device, 14 F.C.C. 2d 571 (1968)

(on reconsideration)

43a

Carterfone 571

FCC 68-922

BEFORE THE

FEDERAL COMMUNICATIONS COMMISSION

Wasutnoton, D.C. 20554

In the Matter of

User or tHe Cartrerronxe Drvicr 1x Messace) Docket No. 16942

Tort Terernone Service

In the matter of

Tuomas F. Carter anp Carter Exvrcrronics | Docket No, 17073

Corr., Dauuas, Tex., CoMPLAINANTS

Aosrentcan Terternonr & Trirorarir Co., As-

soctateD Betu Systea Co., Socriuwrstern

Bewt Terernone Co., ano Generar Treir-

PIIONE Co, of THE SOUTHWEST, DEFENDANTS

Mexoranptm Oprsion ano Onper

(Adopted September 11, 1968)

By tue Cosmission:

1, The Commission has before it petitions for reconsideration of

our Decision herein released June 27, 1968 (13 FCC 2d 420), filed by

American Telephone & Telegraph Co. and Bell ‘Telephone System

Associated Cos. (hereafter A.T. & T.) ; General Telephone Co. of the

Southwest and G.T. & E. Service Corp. (General) ; U.S. Independent

Telephone Association; National Association of Regulatory Utility

Commissioners (NARUC); Tennessee Public Service Commission;

South Carolina Public Service Commission; Mississippi Public Serv-

ice Commission; Georgia Public Service Commission and Arizona

oo Commission.* Oppositions to reconsideration have been

by the Chief, Common Carrier Bureau; Thomas F. Carter and

Carter Electronics Snes (Carter) ; the United States of America; the

National Retail Merchants Association (NRMA) (in docket No.

16942) ; and the Central Committee on Communication Facilities of

the American Petroleum Institute (API). Several replies to the oppo-

sitions have also been filed.

2. It may be helpful to recapitulate briefly our decision of June 27,

1968 before taking up the arguments made upon reconsideration. This

*These State regulatory bodies have not been parties to this proceeding, and the

National Retail Merchants Association has moved to strike their petitions for failure to

show’ good cause for late participation. Petitions for reconsideration were also sub-

mitted by the following eg commissions: Colorado Public Utilities Commission,

y 31, 1968; Idaho Public Utilities Commission, Aug. 1, 1968: Public Service Commis-

sion of Kentucky, Jay 31, 1968; Montana Public Service Commission, Aug. 5, 1968; Publie

ice Commission of Wyoming, Aug. 19, 1968. The Western Union Telegraph Co, has also

a mn for limited intervention to comment in support of the

-on Sept. 3, 1968

telephone companies’ pos!

14 F.0.C. 24

44a

572 Federal Communications Commission Reports

is a consolidated proceeding. Docket No, 16942 was instituted upon

our own motion to determine the need for the Carterfone, a device

use| to interconnect mobile radio systems to the interstate and foreign

message toll telephone system; the effect of use of the Carterfone upon

telephone service; whether A.T. & T. Tariff FCC No. 132 (now No.

263) prohibited use of the Carterfone as an interconnection device and,

if so, whether the tariff regulations are lawful. A further issue was

to determine whether the Commission should itself prescribe tariff

regulations which would permit the use of the Carterfone. Issues on

the past effect and lawfulness of the tariff were added in docket No.

17073 upon the filing of a complaint by Carter.

3. We held that the Carterfone filled a need, that its use did not

adversely affect the telephone system, that its use was nevertheless

yrecluded by the tariff, and that the tariff was unlawful, and had been

in the past, because it prohibited the use of the Carterfone and other

interconnecting devices without regard to actual harm caused to the

telephone system. We did not prescribe the terms of a new tariff, but

left that to the initiative of the telephone companies, pointing out that

they were in no wise precluded from adopting reasonable standards

to prevent harmful interconnection. Basic to our holding was a rejec-

tion of A.T. & T.’s position that because A.T. & T. cannot control the

interconnected private system, interconnection is by definition a deg-

radation of the message toll telephone system without regard to the

quality of the interconnecting device or of the interconnected mobile

radio system, i.e., without regard to actual harmful effects. We viewed

this position * and the rule embodying it as unreasonable. General has

contended that the Commission has “opened the door to customer

ownership of telephone handsets.” The facts of this case did not in-

volve the furnishing of purely telephone system equipment telephone-

to-telephone on the message toll telephone system. Nor, of course,

were we concerned with the interconnection of telephone companies.

With this recapitulation, we can turn to the contentions presented for

reconsideration.

4. The primary contention upon reconsideration is that our decision

permits the use of a myriad of customer-provided devices for inter-

connection without adequate exploration of the technical and economic

problems. This record convinces us that there can be interconnection

without harmful technical effects. With respect to possible economic

effects from the interconnection of private systems—“the piecing out

of common carrier services with unregulated systems”—no substantial

effort was made on this record to demonstrate any harm from the

2That this was A.T. & T.'s position is clear, se¢, e.g., Tr. 565-567, 570-571, 577-578,

607-621. We found no substantial factors outweighing the necessity of eliminating the

arbitrary tariff. Standards to prevent the introduction of harmful inputs can be devised

Tr. 626-627; see also par. 2.6.9 of tarif? No, 263 containing a general probibition

against barmful attachments, and tariff No. 260, par. 2.1.4(D)), and enforcing them

would be no more difficult than enforcing the present absolute Probidition. Furthermore,

notification to the carrier of the installation of a connecting device, which would be a

reasonable requirement, would greatly relieve any problems of discovering the source of

any harmful interconnection (Tr, 912). The record also showed that terminal devices m

be under a standard making actual harm a factor, and the distinction between term!-

nal devices and interconnection appears to be solely one of function unrelated to inherent

propensity for injurious effects (Tr, 606-696, 1033-1036),

14 F.C.C. 24

45a

Carterfone 573

interconnection of private mobile radio systems,’ and we therefore had

no occasion to address ourselves to that question. We agree that eco-

nomic eifects upon the carriers’ rate structure might well be a public

interest question. But it is an issue, if a carrier seeks to raise it, to be

decided upon the facts, i.e., will there be a “cream skimming” effect,

what will “ the extent of it, and how does it weigh against the benefits

of interconnection. As is the case with the question of technical harm,.

a tariff is unreasonable if it assumes a priori a conclusion as to such

an issue. Thus, aside from the use of the Carterfone to interconnect

private mobile systems—as to which we iound no technical harm and

any cream skimming (for existing systems certainly) had already:

taken place when such systems were authorized—our decision does not

have the asserted effect of delineating any particular interconnections

as permissible, What it does is to require tariffs reasonably addressed

to the asserted problems.* Nothing else new of substance 1s presented

on this question. p

5. We also reject the related claim that the decision goes beyond the

issues. To say, as some of the parties do, that the hearing related solely

to the Carterfone * and not to the validity of the tarif's broad prohibi-

tion would make the hearing essentially meaningless. The issues plainly

‘included consideration of the basic validity of the tariff if it was the

total prohibitory effect of the tariff which rendered its application to

the Carterfone unreasonable. As we pointed out in our June decision

such a fault in a tariff can only be remedied by its revision. It should

be noted in this connection that it was well understood that this was

an “interconnection” case, and A.T. & T, and General both argued on

a broad base (eg., A.T. & T. exhibit 1; Tr. 81-85; Brief to Examiner,

pp. 36-37; General’s Proposed Findings, p. 86) the need for a general

prohibition against all interconnection not arranged by them.®

6. It is also urged that present unlawfulness of the tariff, assuming:

such unlawfulness to have been properly determined, does not ar

a finding of past unlawfulness. But in this case the basis upon whi

the tariff was found to be presently unlawful is fully applicable to the

past as well as the present. We recognize that an order for reparations

and an order setting future rates are separate matters, and that a new

rescription may be made without finding a past rate to have been un-

awful, if there is a reason, as where an initially lawful rate has gradu-

ally become unreasonable with the passage of time. See Baer Brothers

v. Denver & R.G.R.R., 233 U.S. 479; Ashland Coal & Ice Co. v. United

> While A.T, & T. adverted to this problem (A.T. & T. exhibit 1, pp. 15-16), it made no

effort to demonstrate adverse economic effects, and we cannot go on § tion, Allocation

of Microwave Frequencies Above 890 Mc., 27 FCC 359, 411-413 (1959). The issues in-

cluded substantiation of any such claimed economic injury. The further contention that

the carriers and the public will be adversely affected by a loss of revenue from existing

interconnection equipment is unsubstantiated and insubstantial,

* We also struck down the prohibition against direct electrical connection. A.T. & T. seema-

to regard this ax a special category but is unable to define it consistently as including or

excluding inductive couplings, compare Tr. 972-074 with petition for reconsideration, p. 5.

If wire-to-wire connections present a special problem, the nature of that problem should

be ~~ Fs Ay an explanation accompanying any new tariff. The term should also be

® The exclusion of evidence going beyond the Carterfone concerned the effect of a modifi-.

cation of the Carterfone, and the examiner properly ruled that other devices were not in

issue. (Tr, 518-529.) This did not menn the tariff was not in issue.

*The clear issues and understanding of the posties cannot be changed by a statement in-

oral argument to the Commission (Tr, 1217) that general mterconnection was not at issue,

14 BE.C.O, 24.

106-508—68——2

46a

574 Federal Communications Commission Reports

States, 61 F. Supp. 708 (E. D. Va., 1945). But such cases have no ap-

lication here where the invalidity obtained throughout the period in

ssue.’ The decisive element, of course, is the reason why 2 tariff is

found to be unlawful. If, as here, the reason applies as well to the past

as to the present and future, there is no ground for disparate findings.

We similarly adhere to our ruling that the tariff was carrier-initiated,

and so remained open to a finding of past unlawfulness.* The Com-

mission's decision on remand in //ush-A-Phone, 22 FCC 112 (1957)

did not prescribe the terms of tariff revision, but left it to the carrier

to formulate new provisions consonant with the Court’s decision. It

cannot now be contended by A.T. & T. that it construed the remand de-

cision as a prescription by the Commission of a tariff prohibiting inter-

connection in view of A.T. & T.’s own statement in submitting a revised

tariff that in their decisions “neither the Commission nor the Court

dealt with the interconnection problem, which involves considerations

different from those involved in the use of attachments.” (A.T. & T.

exhibit 3, attachment C, page 9.) Therefore, there was no Commission

prescription of the interconnection prohibitions at that time, either in

fact or as understood by A.T. & T. Furthermore, the decision to permit

the filing of the revised tariff, and subsequent Commission references

to it,’ cannot be deemed prescription. The Commission’s acceptance of

the tariff for filing was not an adjudication of the tariff’s validity and

did not make it a Commission-prescribed tariff, and the tariff of course

had to be complied with by telephone customers so long as it was on

file, Chicago, M., St. P.& P.R. Co. v. Alouette Peat Products, 253 F.

2d 449 (C.A. 9, 1957). In sum, the Commission did not prescribe the

tariff, and until now had made no ruling on its lawfulness.?® The cases

cited in our June decision are conclusive on this point.

7. A.T. & T. further contends that the tariff cannot be found to be

in violation of section 202(a) of the act because that section prohibits

discrimination among customers only. General agrees, but the Com-

mon Carrier Bureau does not. We find it unnecessary to resolve this

question ** and will not rely upon section 202(a).

8. Other arguments made in the various petitions have been con-

sidered but do not warrant further discussion. Finally, we must dis-

miss the State commission petitions for reconsideration. The NARUC

was permitted an amicus participation upon a late intervention, and

has presented the views of the State bodies. While some of the parties

* Nor is William N. Feinatein & Co. v. United States, 209 F. Supp. 613 (S.D.N.Y., 1962),

affirmed 317 F. 24 509 (C.A. 2. 1963), relevant. There, a later decision finding no past

unlawfulness was held to be valid even if apparently inconsistent with an earlier decision

of the agency. It was pointed out, in addition, that there had been a shift in the burden of

proof in the two ———s (in the first case, the burden was on the proponent of certain

charges to show their present lawfulness, while in the later case the burden was on the

complainant to show past unlawfulness), as well as different evidence, which might have

accounted for the apparently inconsistent results,

* We do not mean to suggest that if a question of damages were before us, we would award

dama where a device was in fact harmful. See footnote 5 of our June Decision.

* We note in this connection that Chairman Henry's letter to Mr. Carter, relied upon be-

cause of its statement that the Commission was of the opinion that the tariff conformed to

its Order (4.T. & T. exhibit 3, attachment L), was not a Commission action and, moreover,

{nvited the fling of a complaint.

* As the Common Carrier Bureau points out, the Commission in 1962 refused to find the

ingergennection prohibitions to be lawful. A.T. € T. (Hailroad Interconnection), 32 FCC

. 540,

4. This is so although the record contained evidence that.the carrier in fact discriminated

Among customers in the application of the tariff.

14 F.C.C, 24

47a

Carlerfone 575

‘now seeking intervention have filed within 30 days of the release of our

decision, we cannot find good cause for such late participation in the

contention that it was not known that the issues would “include con-

sideration of the validity of tariffs restricting interconnection of cus-

tomer-owned devices” (Georgia petition). (See sec. 1.106(b) of our

rules, 47 CFR 1.106(b).) In light of what has been said above, this

is an inadequate statement. The other State petitions are additionally

untimely under section 405 of the Communications Act, 47 U.S.C. 405,

not having been filed within 30 days of the release of our decision.

The petition of the Western Union Telegraph Co. for leave to inter-"

vene on a limited basis to support A.T. & T.’s position will also be

denied for failure to show gocd cause or need for such late

participation.

9. [tis ordered, That, except as specified above, the petitions for re-

ne filed by the parties hereto and by NARUC Ave denied;

10. /t 7s further ordered, That the stay of our June 27, 1968 decision

which was ordered on July 26, 1968 (FCC 68-774) Js dissolved ettec-

tive November 1, 1968: and

11. /t és further ordered, That the petitions for reconsideration or

intervention filed by the State regulatory bodies referred to in para-

graph 1 and footnote 1 above Are dismissed ; and

12. /t is further ordered, That the petition for limited intervention

filed by the Western Union Telegraph Co. on September 3, 1968 Js

denied.

Feperit ComMenNications Comission,

Ben F. Wapte, Secretary.

14 F.C.C. 2d

49a

APPENDIX F

First Report and Order in Docket 19528, 56 F.C.C. 2d 593

(1975) (New Part 68 of the Commission’s Rules and

Regulations, 56 F.C.C. 2d 614-22, omitted)

5la

Interstate and Foreign Message Toll Telephone, ete. 593

FCC 75-1248

BEFORE THE

FEDERAL COMMUNICATIONS COMMISSION

Wasurneton, D.C. 20554

In the Matter of

a FOR meg —aoeg- caniae oF

NTERSTATE AND ForeEIGn sace Tout \Docket Ni

TzrzrHone Service (MTS) ann Wmez i

Axes TeLerHone Service (WATS)

Fmst Report anp OppeR

(Adopted October 31, 1975; Released November 7, 1975)

Br tae Comsussion: Comsissioner Rem aBsENT; CoMMISSIONERS

AND RopINsON CONCURRING AND ISSUING STATEMENTS.

PRELIMINARY STATEMENT

1, The Commission has under consideration the Recommended

First Report and Order of the Federal-State Joint Board (Joint

Board) in this matter, together with its recommendation that we also

consider the General Order establishing the California registration

program. We also have before us the comments conce these

— which we requested interested persons to file in our Memo-

randum Opinion and Order released May 27, 1975 Sar FCC 2d 219).

2. Timely comments were filed by Ad Hoc Telecommunications

Committee, Adcor Electronics, Inc., American Pstroleum Institute,

American Ly oe and Telegraph Company (AT&T), Association

of American Railroads, Association of Data Processing Service

izations, California Public Utilities Commission, Communica-

tion Certification Laboratory, Computer and Business Equipment

Manufacturer’s Association, Continental Telephone Corporation,

DASA Corporation, Dictaphone Corporation, Electronic Industries

Association. Executone Communication Systems, The GTE Com-

panies, Independent Data Communications Manufacturers Asso-

ciation, International Business Machines, National Telephone

Cooperative Association, National Retail Merchant’s Association,

North American Telephone Association, North Carolina Utilities

Commission, Office of Consumer Affairs by Virginia H. Knauer,

Phonetele, Inc., Public Utilities Commission of Ohio, Rochester Tele-

hone Company, Rollings Protective Service Company, Scott-Buttner

unications, Sentry Technology, Inc., T.A.D. Avanti, Inc.

United States Department of Justice, United States eey ee

Telephone Association, and Utilities Telecommunications i

In addition we have received approximately two hundred letters

addressing this subject.

3. We also received Le a Comments filed by Phone Mate, Inc.,

an Opposition to the Reply Comments of Phone Mate, Inc. filed by

BFCO 2

52a

594 Federal Communications Commission Reporte

AT&T, a Petition for Leave to File Further Comments and Further

Comments filed by the Ohio Public Utilities Commission, Motion for

Acceptance of Late Filing and Comments of New York Public Serv-

ice Commission, Supplemental Comments filed by the Computer and

Business aa ment Manufactnrer’s Association, and Supplemental

Comments filed by International Business Machines. While we only

provided for the filing of.comments in our Memorandum Opinion

and Order, supra, and made no provision for the filing of any fur-

ther comments, we believe the subject before us to be of such signifi-

cance that we have accepted such late filed comments and further,

comments to assist us in determining our course of action. _

4. GTE Service Corporation has filed a motion requesting that

the Commission establish certain additional procedural dates or

meetings for the purpose of obtaining comments on AT&T’s Author-

ized Protective Connecting Module program, Continental Telephone

Corporation filed Comments supporting this motion. AT&T has also

filed a motion requesting us to institute further proceedings to explore

the option of allowing connection of terminal equipment through

discrete protective modules. In view of the action we are |

herein, we perceive no necessity for the procedures or meetings G

Service Corporation and AT&T have requested, since in accordance

with our Memorandum Opinion and Order released November 5,

1974. 49 FCC 2d 580. we have considered AT&T’s Authorized Pro-

tective Connecting Module program within the context of Docket

No. 19528. In this regard we also believe the record in this matter

suffices for our deliberations and that oral argument is neither neces-

sary nor helpful in this matter.

5. The Commission also has pending before it (1) a Petition filed

December 27, 1973, by the North American Telephone Association For

Amendment of Procedures. Issuance of a Notice of Proposed Rule

Making and Establishment of Interim Procedures relative to the inter-

connection of customer-provided terminal communication ——

and systems and (2) a Motion filed September 26, 1974, by the Com-

puter and Business Equipment Manufacturers Association for Separa-

tion of Issues and for an Order Authorizing a Program of Direct

Interconnection of Customer Ovwiied Data Terminal Equipment and

Ancillary Telephone Equipment. In view of the action we are

herein, we will dismiss these pleadings as moot.

BACKGROUND

6. This Commission and the courts have consistently enunciated the

subscriber's right to make beneficial use of an interconnected device

or communications system without causing harm to a age tens om

pany’s operations. On remand in H[ush-4-Phone,* the

enunciated the following broad principle of law and policy:

In addition to invalidating the defendants foreign attachment tariff regula-

tions insofar as they bar the use of the Hush-A-Phor.c 4evice, an

consequence of the Court's opinion is to render such tariff regulations unjust and

unreasonable insofar aa they may be construcd or applied to bar a customer from

using other devicca which scrve the customer's convenience in his usc of the

facilitica furnished by the defendants qnd ichich do not injure the telephone

1 Hush-A-Phone Corp. ¥. U.8., 99 U.8, App. D.C, 190, 238, F. 24 266 (D.C. Cir, 1956).

5 F.C.C. 24

58a

Interstate and Foreign Message Toll Telephone, etc. 595

companies’ employees or facilities, or the public in the use of defendants serv-

ices, or impair the operation of the telephone system. A’ we construe the Court's

opinion, a tariff regulation which amounts to a blanket prohibition against the

customer's use of any and all devices without discriminating betwecn the harmful

and harmless encroachcs upon the right of the user to make reasonable use of the

facilities furnished by the defendants. Such a regulation goes beyond what is

reasonably required in the interest of protecting the defendants’ employees,

facilities, the telephone system and the public from adverse effects. (emphasis

supplied) 22 FCC 112, 113-114 (1957)

7. Relying on the holding //ush-A-Phone. supra, we found in

Carterfone* that a device used to interconnect inobile radio systems

to the interstate and foreign message telecommunications systein filled

a need, that its use did not adversely affect the telephone system. and

that the AT&T tariff prohibiting its use was unreasonable and unlaw-

ful within the meaning of Section 201(b) of the Communications Act

of 1934. In making it clear that our Carterfone decision was not lim-

ited to the Carterfone clevice per se, but was rather a broad general

policy, we stated :

In view of the unlawfulness of the tariff there would be no point in merely

declaring it invalid as applied to the Carterfone and permitting it to continue in

operation as to other interconnection devices. This would also put a clearly im-

proper burden upon the manufacturers and users of other devices. The appropri-

ate remedy is to strike the tariff and permit the carriers, if they so desire, to

propose new tariff provisions in accordance with this opinion. 13 F.C.C. 2d

420, 425

8. We further held that this broad Carterfone policy applied equally

to devices which had direct electrical connections.* We noted that

AT&T considered this to be a special category but had not clearly

demonstrated the basis for this exception * (14 F'.C.C. 2d 571, 573 (ftn.

4)), and went on to comment:

The primary contention upon reconsideration is that our decision permits the

use of a myriad of customer-provided devices ivr interconnection without ade-

quate exploration of the technical and economic problems. This record convinces

us that there can be interconnection without harmful technical effects, With re-

spect to possible economic effects from the interconnection of private systems—

“the piecing out of common carrier services with nnregulated systems”—no sub-

stantial effort was made on this record to demonstrate any harm froin the inter-

connection of private mobile radio systems, and we therefore had no occasion to

address ourselves to that question. We agreed that economic effects upon the car-

riers’ rate structure might well be a public interest question. But it is an ixsue,

if a carrier seeks to raise it, to be decided upon the facts, Le. will there be a

“cream skimming” effect, what will be the extent of it, and how does it weigh

against the benefits of interconnection. As is the case with the question of tech-

nical harm, a tariff is unreasonable if it assumes a prioria conclusion as to anch

an issue. (emphasis supplied) (footnotes omitted). 14 F.C.C. 2d 571, 572-573.

9. We did not prescribe the terms of the tariff revisions required to

satisfy the Carterfone policy. but left that to the initiative of the tele-

phone company. AT&T filed new and revised tariffs and subsequent

amendments on behalf of itself and concerned interstate carriers,

which allow the interconnection of customer-provided equipment (1)

through the use of carrier-supplied connecting arrangements subject

to certain technical requirements, and, if required, network control sig-

nalling units; (2) in accordance with a carrier-administered attesta-

* Carterfone, 13 FCC 2:1 420 (1968), reconsideration denied, 14 FCC 2a 571 (1968).

3Nee ITT v. General Telephone and Electronica Corp., 518 F. 2d 913, 923 (9

“Nee Phonetele, inc. v. California Public Utilithes Commission, 11 C. 3d 1 .

400 (1974), © ;

56 F.C.C. 2d

54a

596 Federal Communications Commission Reports

tion program for headsets and non-powered conferencing devices; and

(3) in accordance with a carrier-administered program for conform-

ing answering devices.

10. The Carterfone Decision placed the burden of proof squarely

upon the carriers—not the users or this Commission—to demonstrate

that a particular unit or class of customer-provided equipment would

cause either technical or economic harm to the telephone network, note

4, supra; this burden was to be met prior to the filing of a tariff re-

stricting the use of such equipment. The information accompanying

the tariff revisions filed pursuant to Carterfone did not demonstrate

that the direct electrical connection of all customer-provided equip-

ment would cause harm unless accomplished through the carrier-su

plied connecting arrangements provided for in the tariff. At best, it

simply reflected one manner in which to protect the network. It was

not even argued that this protection was the minimum protection

required or the most cost effective. Nevertheless, the Commission, exer-

cising an abundance of caution in protecting the telephone network

from any possible harm, allowed the tariffs ry cnt effective without

ruling explicitly on their lawfulness.®

11. At the same time, the Commission instituted informal proceed-

ings to obtain technical and operational data to assist its evaluation of

the public interest factors involved in liberalizing the network control

signalling unit and connecting arrangement provisions of the revised

tariffs. Contracts to study these possible revisions were issued to the

National Academy of Sciences and Dittberner Associates, and their

subsequent reports together with comments fromm interested parties

indicated that consideration should be given to revisions in MTS and

WATS offerings under a program that would protect the telephone

network from four atc of harm: (a) hazardous voltages; (b) ex-

cessive signal power levels; (c) improper network control signalling

and (cd) line imbalance. Thereafter, the Commission created two

advisory committees, pursuant to Executive Order 11007, to study

the possibilities of initiating such a standards program for selected

classes of equipment such as (1) customer-provided PBX’s and (2)

automatic dialers and recording and answering devices,

DOCKET NO. 19528 PROCEEDINGS

12. On June 14, 1972, the Commission instituted this i

by Notice of Inquiry and Proposed Rule Making, 35 FCC 2d 539

(1972), to determine whether and under what terms, conditions, or

limitations the interstate MTS and WATS tariffs should be revised

to allow customers to have the option of furnishing any needed network

control signaling units and connecting arrangements (or the functional

equivalent thereof), and to determine what rules, if any, the Commis-

sion should adopt with respect to the foregoing. In addition, a Federal-

State Joint Board was established pursuant to Section 410 of the Com-

munications Act of 1934, as amended, to submit its recommendations

to the Commission concerning this matter.

13. In our First Supplemental Notice in Docket No. 19528, 40 FCC

2d 315 (1973), we questioned whether, at that time, it was feasible

SATAT “Foreign Attachment” Tarif R

denied, 18 FCC 24 871 (1969). 7 Revisions, 15 FCC 2d 605 (1968), reconsideration

&% F.C.C, 2d

55a

Interstate and Foreign Message Toll Telephone, etc. 597

from a technical, engineering, operational and administrative view-

point to establish an optional program in lieu of or in addition to the

present tariff requirements for carrier-provided network control sig-

nalling units and connecting arrangements and requested comments

concerning a number of reports and proposals. These reports and pro-

posals include: (1) the report roe recommendations of the PBX

Standards Advisory Committee; (2) the proposal of the Office of the

Chief Engincer of this Commission; and (3) the proposal of the Na-

tional Association of Regulatory Utility Commissioners (NARUC)

Statf Subcommittee Report on Communication Interconnection. In

addition to these specific proposals, we also invited comments concern-

ing other alternatives such as: (1) the Rochester Telephone Com-

pany’s NPD program; (2) the establishment of standards by the car-

riers and the incorporation of such standards in tariffs or technical

references with the carriers being responsible for the program’s en-

forcement; and (3) leaving the tariffs unchanged but requiring the

carriers to improve their services and applying the same practices to

both carrier and customer-provided facilities. The Joint Board we

convened in this matter has reviewed these comments and issued its

Recommended First Report and Order which is presently before us

for consideration.

14. The Joint Board has proposed that customer and carrier-pro-

vided ancillary and data terminal equipment be directly connected to

the telecommiunications network if it is registered with the Commission

under a program similar to this Commission's existing type acceptance

program for radio transmitting equipment. The proposed plan is to

apply to all terminal equipment other than PBXs, key telephone sys-

tems, main telephones, extension telephones and coin telephones. Reg-

istration is to be based on representations and test data submitted by

an applicant to the Commission. If the representations and test data

concerning a particular device are found to comply with specific inter-

face criteria and other requirements and the Commission determines

that it is in the public interest, convenience and necessity, such device

would then be registered. The Joint Board proposal would require each

device to have affixed to it installation, maintenance and operating

instructions. and would allow connection of registered devices to the

network to be accomplished through the use of standard plugs, jacks

and other simple arrangements as provided in tariffs.

15. The California Public Utilities Commission in its General Order

No. 138 has adopted rules permitting the direct attachment to the tele-

communications network of customer-provided ancillary and data

terminal equipment and of protective couplers where they have been

certified by a registered electrical engineer qualified in the field of

communications equipment. The program applies only to customer-

provided equipment. not to carrier-provided equipment. Certification

is based on the registered engineer’s examination of the design and

operating characteristics of the device, the manufacturer's quality con-

trol procedures, and the servicing. The test standards and enforcement

procedures regarding these factors are not specified in the plan, but

are left to the discretion of the registered engineer. After rape granted

a registration number. the semuutactarer must keep records of his qual-

ity control procedures, and these records are to be examined annually

3% F.C.C. 2d

56a

598 Federal Communications Commission Reports

by the certifying engineer. Further, manufacturers or vendors must

offer a maintenance contract with all certified equipment.

16. We have given careful consideration to American Telephone and

Telegraph Company’s (AT&T) connecting arrangement program

(AT&T Tariff F.C.C. No. 263, Sections 2.6.4(.4) (1), (2) and (3);

2.64(B) (1); 2.64(D)(1)(a)) AT&T's manufacturer attestation

program for cnstomer-provicded headsets and non-powered conferenc-

ing equipment (Tariff 263, Section 2.64(E)),® AT&T's conformance

prograin (APCM prograin) for answering devices (Tariff 263, Sec-

tion 2.6.4(F)).° the Rochester Telephone Company’s NPD program

(Tariff 263, Section 2.9), the reports of the National Academy of

Sciences and Dittberner Associates, the various reports of the several

advisory committees and subcommittees, the recommendations of the

Federal-State Joint Board. the California registration program, and

all the comments of the many parties who have participated throngh-

out the various stages of the proceedings herein. In addition. we have

noticed other reports and materials. and where such were used in ar-

riving at our findings they are so noted. In the seven years which have

elapsed since our Carterfone ruling, the carriers have been afforded

ample opportunity to propose effective procedures and/or tariff con-

ditions to prevent harm without unduly restricting a customer's basic

right to make reasonable use of the facilities and services furnished by

the carrier. This the carriers have failed to do (with the possible

exception of non-powered conferencing devices. headsets and conform-

ing answering devices). The evidence before this Commission amply

demonstrates that many “special” entities (e.g., gas. oil. electric, and

transportation companies. selected industrial firms, the Department of

Defense, the National Aeronautics and Space Administration, an

customers in “hazardous or inaccessible locations”) have long been and

continue to be allowed to connect their equipment and facilities di-

rectly to the telephone network by means less restrictive than carrier-

provided connecting arrangements (Tariff 263. Sections 2.7.5, 2.7.6,

2.7.7 and 2.7.8) apparently without causing harm to the network. We

also note that there has been no demonstration of network harm re-

sulting from the interconnected operation of some 1600 independent

Jocal telephone companies and the Bell System (inelnding small rural.

municipal, and co-op systems)—many of whom purchase and connect

without benefit of carrier-supplied connecting arrangements the iden-

tical independently mannfactured terminal equipment for which the

individual user must lease carrier-supplied connecting arrangements.

-\ccordingly, in view of our findings in this proceeding concerning the

mechanisins which can cause technical harm and effective means for

preventing such harms. the Commission has now reached three sep-

arate and independent conclusions. First, the present tariff provisions

requiring the use of carrier-supplied connecting arrangements impose

an unnecessarily restrictive limitation on the customer's right to make

reasonable use of the services and facilities furnished by the carriers.

Second, they. constitute an unjust and unreasonable discrimination

both among users (or cla-ses of users) and among suppliers of termi-

nal equipment. Third. the standards and procedures prescribed herein

for the registration with this Commission of protective circuitry and/

one wim font provisions appear in other sections of Tariff 263 (MTS) as well as Tariff

%6 F.C.C. 24

57a

Interstate and Foreign Message Toll Telephone, ete. 599

or terminal equipment will provide the necessary minimal protection

aguinst network Care which has been specified in various carrier oper-

ating procedures and/or the recommendations of the Joint Board, the

California PUC, the NAS and Dittberner studies, and the Commis-

sion’s interconnect advisory cominittees, and will serve the public

interest. Equipment containing the appropriate FCC registered pro-

tective circuitry. or FCC registered terminal equipment, may, follow-

ing the effective date of this Order. be connected directly with the

telephone network pursuant to the procedures set forth in these rules,

without benefit of carrier-supplied connecting arrangements, Carriers

iia¥ continue to provide such connecting arrangements, if registered,

snd may require their use for equipment not registered with the FCC

or not tised in conjunction with appropriate FCC registered protective

cirenitry. Except as herein provided, carriers may not require the use

of such connecting arrangements or other interface devices or arrange-

ments for FCC registered equipment or protective circuitry, and may

not impose other taritf conclitions contrary to the Carterfone policy

without prior approval of the Commission.

THE FCC REGISTRATION PROGRAM

17. The programm which we are adopting was designed with the goals

of (1) protecting the public switched telephone network from harms

which might be caused by connection of terminal equipment to the net-

work and (2) keeping the program as simple and easy to administer

as is reasonably possible with a minimum of government intervention.

Basically the program allows users to connect any terminal equipment

to the telephone network if sich equipment is connected through pro-

tective circuitry registered with the Commission or if si.ch equipment

is itself registered with the Commission. The option of registering

only discrete protective circuitry rather than the entire terminal

equipment will (1) eliminate unnecessary documentation relating to

total system design and performance criteria (Even for complex ter-

minal equipment and/or systems, this option will require documenta-

tion relating only to the discrete protective circuitry.) ; (2) remove

the need for filing proprietary information, thus eliminating the need

to establish cumbersome procedures for handling such information;

(:3) allow users and manufacturers greater flexibility in satisfying the

requirements of our registration program through the separate pur-

chase of protective circuitry, if desired: and (4) enable us to ad-

wiinister our registration program with an absolute minimum of

expense to both the government and private industry—to the benefit of

the ultimate users—while at the same time protecting the public

switched telephone network from harms which could be caused by the

connection of faulty terminal equipment.

18. As noted above, the Federal-State Joint Board recommended

that PBXs, key telephone systems, and main station, extension and

coin telephones be excluded from the registration program at this time,

thus requiring that these devices continue to be interconnected with

the network via carrier-provided connecting arrangements. In this

respect the Joint Board plan differed from that proposed in 1972

the FCC's Office of the Chief Engineer, although the Joint Boa

largely adopted the Chief Engineer's proposal, Many parties have

56 F.CC. 2d

58a

600 Federal Communications Commission Reports

urged that some or all of these classes of terminal equipment be in-

cluded, and point to the Joint Board's failure to provide any basis for

such proposed exclusion. While it did not explicitly so state, we believe

the Joint Board’s recommendation to defer inclusion of these devices

was based primarily on technical concerns relating to the more com-

lex network control signalling functions performed by some of these

evices. In view of the clarification of network harms; the delineation

of the roles, responsibilities and incentives of the various parties in

protecting against these harms: and the registration standards and

procedures contained herein, we believe that many if not all the tech-

nical concerns reflected in the Joint Board’s exclusion of these equip-

ment classes have been mooted. With this clarification. we are tenta-

tively of the view that there is no valid distinction as to the potential

for harm from any of the excluded classes of devices. However, since

all parties may not have considered it necessary fully to address the

inclusion of PBX’s. key telephones. and main stations at this time, in

view of the Joint Board's recommendation. we shall afford interested

parties an opportunity to comment further on the inclusion of these

classes of equipment. Accordingly, PBX’s, key telephone systems.

main station telephones. coin telephones. and equipment connected to

arty lines * will be exluded from the registration program established

erein. pending further order of the Commission.®

19. Several of the parties to this proceeding have suggested that it

would be inappropriate to adopt new policies concerning interconnec-

tion prior to collection and evaluation of the pertinent data filed in

Docket No. 20003 concerning the economic effects of such intercon-

nection. Recognizing that Docket No. 20003 constitutes a broad fact-

finding investigation of the economic implications and interrelation-

ships among a number of industry developments, policies, and

practices—some instituted pursuant to regulatory policy. others car-

rier-initiated—we previously held that “the commencement of the

notice of inquiry in Docket No. 20003 does not necessarily preclude

further action in Docket No. 19528." * In short. the Docket No. 20003

inquiry is not to become a “dumping ground” for existing docketed

proceedings. Consistent with Carterfone. supi. as well as the more

recent decision in J/ebane. 53 F.C.C. 2d 473 (1975), we will afford any

carrier the opportunity to demonstrate the need to restrict specific

instances or classes of interconnection on the grounds of economic

harm. and will continue to examine the broad. long-term and inter-

related implications of interconnection. jurisdictional separations, and

rate structures in Docket No. 20003. The present decision relates only

to the requirements which interconnected devices must satisfy in order

*Since we do not now hare Interconnection criteria for Partr line service, we will,

in the meantime. allow enstomer-provided terminal equipment to he connected throuch

seactes-prevshes connecting arrangements as is now done nnder Presently effective tariffs,

Coin telephones are excluded because, under present regulatory policies, oniy telephone

carriers may provide coin telephone service,

* While the rules proposed by the Joint Board listed extension telephones in the equi

ment to be excluded from the registration program at this time, we concinde that extension

telephones properiy fall within th» catecory of “ancillary” devices tncinded in the Joint

oard recommendation. The record supports onr view that there is no ralid technical

distinction hetween extension telenhones and other “ancillary” devices. Beenuse the etand+

ards adopted herein are equally anniienble to extension telephones and hecanse inctusion

of extension telephones does not represent a significant departure from the Joint Roard’s

recommencations. we feel that the public interest ts best served br the prompt inclusion

of i Fectantens nh Lon + a our registration procram.

-conomic Implications Relating To Customer Interconnection Juriadictional Separe-

tone, and Rate Structures, Docket No, 20003, 49 F.C.C, 24 1238, 1240 (1974),

56 F.C.C. 24

59a

Interstate and Forcign Message Toll Telephone, ete. 601

to avoid technical harin to the telephone network. In view of our find-

ings in paragraph 16 above, we believe that the public interest would

be best served by the prompt implementation of our registration

program.” ;

20. The carriers have argued that, as they have every incentive as

well as the technical and operational means to maintain a high quality

service, a registration program for carrier-supplied equipment is un-

necessary, and may impose additional expenses on them which must

ultimately be borne by the telephone user. We do not question the car-

riers’ dedication to high quality service, nor their desire and ability to

protect the network from any harms which might be caused by

carrier-supplied equipment. However, we note that carrier-supplied

terminal equipment possesses the same pofevtial for harm to the net-

work as does custonier-supplied equipment—particularly in view of

the fact that much carrier-supplied equipment is purchased from

independent manufacturers who market identical equipment to the

general public. We also expect that the information provided by the

carriers in their registration applications will be of considerable aid

to the Commission as a benchmark against which other applications

may be judged. Furthermore, when one participant in a competitive

market is subject to regulatory constraints (e.g. registration of equi

ment) while another is not. there exists the possibility of using the

registration, notification. and complaint standards and procedures for

competitive advantage. In a related proceeding, the Courts have al-

ready commented on such a situation; * and the carriers themselves

have made the same argument in similar circumstances. These counter-

vailing considerations require.a careful weighing to ascertain wherein

the overall public interest rests. On balance. and particularly in view

of the relatively straightforward and inexpensive registration pro-

cram we envision. we believe the public interest will best be served

by requiring that carrier-supplied terminal equipment be registered,

and consistent with the Joint Board recommendation we shall so

order. However. we plan to reexamine the situation within the first

year of operation of this registration program to determine whether

the public benefits of requiring registration of carrier-provided equip-

ment continue to outweigh any costs resulting therefrom, and to rule

accordingly.

Technical Requirements

21. The National Academy of Sciences. in its 1970 report to the

Commission, identified four areas of potential “harm” which might

arise as a consequence of permitting uncontrolled direct connection of

equipment to the telephone network: (1) hazardous voltages, (2)

* Our Carterfone polles has permitted the public to utilize rarions trpes of equipment

with the public communications network. It ts our firm bellef that pnbile benefits have

resulted from thie policy. Lhe purpose of Docket 19528 {a not to revisit Cartcrfone but

rather to review the present limitations imposed on the attachment of equipment to this

network. Thies, isenes relating to the potential overall economic impact ot the Carterfone

policy are bevond the scope of this proceeding. The potential economic consequences of anw

decision in this proceeding are minimal, since they affect only the differential coats and

revenues Associated with customer-provided Vis-a-vis carrier-provided protective circuitry

and procedures—not with the terminal device per se. In view of this we would expect

vond — ern S ee = Ba a seppoens gare. and main station tele

r arguments to matters and n basic decision

enunciated in Carterfone. » pals tare aon

4 [ushA-Phone v. U.S., 238 F. 2d 206, 268-69 note 9 (D.C, Cir. 1056).

56 F.C.C, 24

60a

602 Federal Communications Commission Reports

excessive signal power levels, (3) excessive longitudinal imbalance,

and (4) improper network control signaling. The National Academy

of Sciences reported that the carrier-provided protective connecting

arrangements protected against such “harms” within the boundaries

of acceptablencss regardless of the design of particular equipment

connected thereto. Our program adopts a similar approach. We have

specified the boundaries which may not be exceeded for each of

hazardous voltage, signal power and longitudinal imbalance, Without

requiring any particular circuit design to be employed, we have re-

quired that the design of registered terminal equipment and registered

protective circuitry assure that these boundaries are not exceeded,

and will continue not to be exceeded, under foreseeable usage and

mechanical and electrical stress. Registered protective circuitry is re-

quired to provide assurance of conformance to our interface require-

ments regardless of the particular equipment connected thereto and

regardless of what failure modes such equipment may manifest. Reg-

istered terminal equipment is required to provide such assurance un-

der all foreseeable failure modes of such registered terminal equipment

and of equipment expected to be connected thereto. Such assurance

may be provided either by incorporating protective circuitry in the

registered terminal equipment. or, alternatively. by virtue of a design

which precludes violation of the boundary constraints.

22, With the exception of on-hook impedance, we do not believe

it is necessary to impose standards upon network control signaling.

We are not persuaded that individual violations of criteria on com-

patible network control sigualing will have any significant etfect upon

the telephone service of other telephone network users. Improper net-

work control signaling will most directly affect the telephone service

of the user of eqnipment which generates improper network control

signals. A nser thus has no incentive to generate improper network

control signals, as he will only decrease the utility of his own tele-

phone service by so doing (c.y. fail to receive telephone calls, be unable

to generate telephone calls. or reach wrong numbers) ; thus we feel

that any problems which may arise will be self-correcting. We would

note that the present telephone company-provided connecting arrange-

ments do not fully protect against improper network control signal-

ing.'* and that since such connecting arrangements were first offered

in 1969. the carriers have not increased the level of protection against

improper network control signaling provided by their connecting

arrangements. From this we conclude that improper network control

signaling has not been a significant problem to the carriers, and that

the presently-etfective approach of specifying proper network control

signals in the tariffs, and in informational materials (“Technical

References”) distributed to equipment manufacturers has been effec-

tive. and has provided the requisite protection. We encourage the

carriers to continue to provide informational materials to equipment

mantfacturers and others concerning net work control signaling, and

commend the reports of our advisory committees on PBXs, telephone

12 Sre Docket No. 19410 Tr. MORN-S5; ROST-N4: 4928-29: 4544-50; 4552-54; 4561-85;

73. Testimony of I. Hohmann. Tariff F.C.C. No. 263, § 2.8.2.

3 Section US.1L16(a) linposes the requirement that the carriers supply compatibility in-

formation upon request; to the extent that such Mformational materials effect com

with this rule, no additional action by the carriers will be necessary.

56 F.C.C. 2d

6la

Interstate and Foreign Message Toll Telephone, ete. 603

answering devices and telephone dialers to the attention of equipment

manufacturers as one source of such information,

23. Should improper network control signaling proliferate on the

telephone network, the point could be reached where telephone facili-

ties which are shared among many network users (e.g. central oftice

equipment, trunks, etc.) would be nonproductively engaged in reach-

ing wrong numbers, and incompleted calls, ete., a Bre would degrade

the overall service quality. While we are convinced that such a situa-

tion will not arise, due to the self-correcting mechanisins previously

noted, we would be receptive to amending our rules at any time to

include evaluation of network control signaling functions of regis-

tered terminal equipment and registered protective circuitry, or to

provide for manufacturer attestation of compatibility, should evidence

to the contrary become available.

24. The technical requirements pertaining to registered terminal

equipment and registered protective circuitry are contained in Sub-

part D of Part 68, and are explained in the following paragraphs. The

term “reasonable application of eerth ground”, which appears in

several of the rules in Subpart D, deserves particular note. Because the

connection of earth ground to registered terminal equipment and regis-

tered protective circuitry may cause noncompliance with several of the

technical requirements, it is important that such registered terminal

equipment and registered protective circuitry be properly insulated

and isolated from any “reasonable application of earth ground”. In

evaluating equipment, the following guidelines should be followed: .

a. For protective circuitry, “reasonable application of earth

ground” shall include physical contact of all exposed surfaces of

the circuitry with a conductor connected with earth ground, and

of physical contact of each non-telephone line connection with a

conductor connected with earth ground, and with all possible

combinations thereof;

b. For terminal equipment, “reasonable application of earth

ground” shall include all reasonably foreseeable possibilities

whereby earth ground may become connected with such equip-

ment, including the possibility of physical contact of all exposed

surfaces with a conductor connected with earth ground, the possi-

bility of connection with earth ground of each power-line connec-

tion, and the possibility of connection with earth ground through

foreseeable connection with other equipment.

25. Environmental Stress Simulation. Registered terminal equip-

ment and registered protective circuitry will be subjected to various

environmental conditions during shipment and usage, and accordingly

we have required, in Section 68.302, that harm does not arise in re

tered equipment either prior to, or after the application of therein-

specified stresses.

26, The specitied requirements on vibration, temperature and humid-

ity cycling are directly in accord with the requirements on such cycling

presently etfective for conferencing devices, and are similar to those

employed for Authorized Protective Connecting Modules (APCMs)

% Foreseeable additional connection, must {nclude all expected poxsibilities, such as

accessory sockets (¢.4, ua earphone jack),

% F.C.C, 2d

62a

604 Federal Communications Commission Reports

vised with answering devices, both of which equipment classes are pres-

ently directly connected with telephone facilities.** :

97. The specification of the metallic voltage surge parameter is

derived from two presently-effective programs. The requirement im-

posed on conferencing devices is that a 1000 volt peak surge, having

a 10 microsecond rise time to erest and a 1000 microsecond decay time

to half crest be applied to the tip and ring telephone connections dur-

ing the off-hook state.** The requirement applied to APCMs is defined

in terms of a test circuit which — similar surges.

28, Various specifications of the longitudinal voltage surge param-

eter were suggested to us. The requirement imposed on conferencing

devices is that three 2500 volt peak surges of each polarity, having a

1.2 microsecond rise time to crest and a 50 microsecond decay time to

half crest be applied between all telephone connections, connected to-

gether, and earth ground, under all reasonable conditions of connec-

tion of the terminal equipment with earth ground. The Joint Board

recommended the use of such a surge only where external power is

supplied to terminal equipment.’? Our answering device commitfee

recommended that such a specification be applied to power-line con-

nections of that type of terminal equipment (and further recommended

that testing be conducted in stages—first by pulsing at 500 volts, then

1500 volts and finally at 2500 volts). The similar specification for

‘APCMs is defined in terms of a test circuit which charges a 0.1 micro-

farad capacitor to 2500 volts. and which then discharges that capacitor

through a 60 microhenry coil (de resistance less than 2.0 ohms) to

the tip and ring connections of the terminal equipment, across which

is connected a resistance of approximately 132 ohms. Such a circuit

applies a longitudinal voltage surce of approximately 2 microseconds

rise time to crest and 10 microseconds decay time to half crest to the

APCM under two conditions of test: first, with the non-telephone con-

nections grounded and the pulse applied to the telephone connections,

and second, with the telephone connections grounded and the pulse

applied to the non-telephone connections. In both tests, ground connec-

tions are made through a 14 microhenry coil, and the current through

this coil is required to be less than 0.3 amperes, peak.

29, The purpose of stressing terminal equipment with longitudinal

surges is to determine whether such equipment will continue to con-

form to our technical requirements if it is subjected to a voltage surge

resulting from lightning. Since lightning may affect either an exposed

telephone connection, or an exposed power connection to the terminal

eo. the APCM techniques of requiring testing by simulating

a lightning-caused voltage surge on both sets of connections has merit,

and we have adopted this approach. Thus, our rule requires that

2500 volt peak surges of each polarity, having a 2 microsecond rise

time to crest and a 50 microsecond decay time to half crest (formed

as the worst-case combination of the APCM and other specifications)

be applied fist between the telephone connections and earth ground,

13 Similar requirements are recommenied in onr adrisory committee renorts, and In such

reports detailed instructions on specific implementing tests are contained.

%6 This specificatiun was also contained in our advisory committee report on answering

devices.

7 Section 68.504(b) of the R :

Joiat Doar. (b) e Recommended Mirst Report and Order of the Federal-State

56 F.C.C. 2d

63a

Interstate and Foreign Message Toll Telephone, ete. 605

under all possibilities of connection of the equipment with earth

ground, and second between each power line connection and earth

- ground, and between each conductive surface on the exterior of the

equipment and earth ground, with the telephone connections indi-

vidually, and in combination, connected to earth ground.

30. Leakage Current Limitations. Registered terminal equipment

and registered protective circuitry are required to be adequately

insulated, to protect against telephone facilities becoming connected

with power-line energy (hazardous voltages) and earth ground

(longitudinal imbalance). While it is desirable to maintain perfect

insulation between the telephone connections and power-line and/or

ground, such insulation must be specified in terms of leakage current

under the application of test voltages. We have had various specifica-

tions of such leakage current recommended to us.

31. The Joint Board recommended that 1500 volts, 60 Hertz, be

applied to all possible combinations of interface leads, power leads,

exposed conducting surfaces and common circuit ground and that the

leakage current resulting therefrom be limited to 2.5 milliamperes,

rms,** only in the case of equipment which is externally powered.

California has required that leakage current in each of two test cases

be limited to 2.5 milliamperes: (1) when 1500 volts is applied between

telephone connections and power connections, and between power con-

nections and exposed surfaces, and (2) when 1000 volts is applied

between telephone connections and exposed surfaces.*® In addition,

California independently requires that power transformers have a

voltage breakdown rating greater than 1500 volts between prima

and "emi and between the transformer windings and Ghemias

ground.*°

$2. The requirement on conferencing devices ** is that leakage cur-

rent from the telephone connections, strapped together, to exposed

conductive surfaces (on the housing) and earth ground be less than

2.5 milliamperes under the application of 1000 volts, rms, 60 Hertz

between the points under test (the specific test required is to grad-

ually increase the test voltage from 0 to 1000 volts over a thirty second

time period, apply the full 1000 volts for one minute, and then deter-

mine the leakage current after this 114 minute time interval). The

APCM specification separately tests the dielectric insulation on the

APCM's internal isolating transformer, and the APCM’s housing

insulation. In the first case, 750 volts, rms. 60 Hertz is applied for

sixty seconds between the telephone connections (connected together)

and earth ground, with all non-telephone connections and conductive

surfaces on the housing of the APCM also connected to earth ground,

and the leakage current is required to not exceed 0.5 ma, rms. In the

second case, 1500 volts, rms, 60 Hertz is applied for sixty seconds

between the telephone and non-telephone connections (all connected

together) and earth ground, with conductive surfaces on the housing

of the PCM also connected to earth ground, and the leakage current

is similarly required to not exceed 0.5 ma, rms.

* Joint Board First Report and Order, Sections 68.304(c) and (d).

2 Culifornia General Order No. 138, Section 5.4(c).

2% fbid., Section 5.3(a).

"Section 6.3.2 of Bell tem Voice Communications Technical Reference. _ 45101,

“Interface Specification 2001 (Non-Powered Conferedfcing Devices)", Say 197

56 F.C.C. 2d

64a

606 Federal Communications Commission Reports

33. Our answering device committee recommended two separate

requirements: first, that leakage between the telephone connections

(connected together) and power connections not exceed 2.5 ma, rms.,

under the application of 1500 volts, rms, 60 Hertz. and second, that

leakage between the telephone connections and all exposed conductive

surfaces on the housing of such terminal equipment not exceed 2.5 ma,

rms. under the application of 1000 volts, rms, 60 Hertz. Finally, our

dialer committee recommended a slightly modified version of the an-

swering device committee's specification whereby leakage current is

required to not exceed 2.5 ma. rms. first, between the telephone connec-

tions and earth ground. and second. between the power connections and

earth ground, under the application of 1000 volts, rms, 60 Hertz and

1500 volts. rms, 60 Hertz. respectively. The dialer committee also rec-

ommended thai the 1500 volt test requirement be dispensed with for

euipment not connected to an external source of power.

34. The only case of a leakage current specification lower than 2.5

ma, rms. having been employed has been the APCM specification.

AT&T's use of the 2.5 ma. rms, specification for conferencing devices

(which predates the answering device tariff exception), as well as the

consistent use of this figure by our advisory committees and by the

Joint Board and California. convinces us that 2.5 ma, rms, is a reason-

able leakage current limit. As the Joint Board's requirement of deter-

mining leakage current under the application of 1500 volts. rms. for

all possibilities of leakage current (power line to telephone connec-

tions, power line to exposed conductive surfaces, and telephone connec-

tions to exposed conductive surfaces) is inclusive of possible lower test

voltages for some of these leakage current paths, we are adopting the

Joint Board's uniform use of 1500 volts. rms, for evaluation. with the

proviso that leakage current tests be performed on terminal equipment

regardless of whether it is connected to an external power source.

35. Hazardous Voltage Limitations. Section 68.306 sets forth “fail

safe” requirements on hazardous voltage. The stated limits are gener-

ally emploved thronghout the telephone industry as voitage limitations

below which special protection of telephone craft personnel is not re-

quired. Equipment must be designed to avoid the application of volt-

ages exceeding these limits under normal operation. since our other

technical rules specify that permissible metallic ac voltages in normal

operation, are defined by the signal power limitations (which are on

the order of one volt. rms). The hazardons voltage limits are worst-case

equipment failure limitations, and evaluation of equipment for com-

pliance with these limits reauires an analysis of all foreseeable failure

modes of the registered terminal equipment or registered protective cir-

enitry. and of equipment which is reasonably expected to be connected

thereto, Subsection (b) of this rule defines what we expect to be a

worst-case failure mode of equipment which might be connected with

registered protective circuitry—the application of commercial power

line voltage. We have chosen to require evaluation of the effects of ap-

plving 220 volts. rms, to protective circuitry in recognition of the usage

of such nower in data processing installations and commercial wiring,

and in the belief that power sources which are reasonably expected to

be available at locations where registered terminal equipment and reg-

istered protective circuitry will be employed will not exceed 220 volts,

rms.

%® F.C.C. 2d

65a

Interstate and Foreign Message Toll Telephone, ete. 607

86. The specific limits which we have chosen conform to the recom-

mendations of our PBX Advisory Committee and to AT&T's state-

ments in a pending proceeding. Docket No. 19419, wherein AT&T

stated the limits it employs for voltages permitted on its telephone

lant. In Docket No. 19419. AT&T testified that the allowable voltage

levels for continuous ac voltages are 70 volts, peak? and for continuous

de voltages the limit is 135 volts to ground.*? Our PBX Advisory Com-

mittee has recommended the following voltage limits between tele-

phone conductors: 71 volts. peak ac. 135 volts. de, 142 volts, peak for

combined ac and de: and the following voltage limits between a tele-

hone connection and grounl: 71 volts, ac, 135 volts. de, 71 volts. peak

r combined ac and de. We have specified voltage limits which con-

form to both the PBX Advisory Committee's recommendation. and to

AT&T's statement, as follows: between telephone conductors: 70 volts,

= ac, 135 volts. de. 140 volts. peak for combined ac and de: and

hetween a telephone connection and ground: 70 volts, peak ac, 135 volts,

de. 70 volts, peak for combined ac and de.

37. Signal Power Limitations. Signal power in the 300-5995 Hertz

d is required to conform to two different criteria: (1) the three

second averaged power. measured at a customer's premises is required

not to exceed 1.00 milliwatt. and (2) the three second averaged power

measured at a telephone company central office is required not to ex-

ceed 12 decibels below 1.00 milliwatt.** The first of these specifications

is constant for all installations. whereas the second is variable, as dif-

ferent local loop attenuations will permit equipment at the customer’s

premises to apply differing maximum signal power levels at the prem-

1ses without violating the central office power level limitation.

38. In the case of voice usage of the telephone network, the telephone

companies hare chosen to employ physical protection within their con-

necting arrangements only against violations of the first criterion

abore, i.c. the 1.00 milliwatt limitation measured at the customer's

premises.** Since there has been no evidence of problems arising from

this telephone company practice. our rule follows this approach.

39. The telephone companies have argued that data equipment does

not necessarily use telephone facilities in the same manner as does voice

equipment; i.e. that data signals clo not follow the statistical patterns

of voice signals an! tend to present constant amplitude tones. They

also argue that data signals of excessive power have a higher potential

for causing loss of communications privacy of other telephone network

users than would roice signals of similar excessive power. and that data

users have some incentive to violate the power level limitations in order

to lower their data error rates. Data equipment manufacturers have

argued that there is no incentive for users to exceed the power level

limitations as degradation to their data communications service may

result, and that the telephone companies’ suppositions have not been

substantiated.2* We are taking no position as to the validity of these

- he ae vettane ie tatended to mean one-half the peak-to-peak amplitude excursion of an

ernating voltace waveform.

3 Rell Pxnihit No. 3 In Docket No. 19419. testimony of L. Hohmann.

Tariff F.C.C. No. 263. Messace Telecommunications Service, Section 2.6.4.

=Thix has been done on the theory that due to the statistical nature of human speech,

and disincentive to riolate maximum power level requirements when humans are speaking,

prohibitory laneuace concerning the remaining power limitation which is contained within

the tartifx, and = informational material distribuged to equipment manufacturers (“Tech

1 provides te tection.

ws rhese arguments have been advanced both in this proceeding and in Docket No. 19418,

56 F.C.C. 2a

104-015—75-—-6

66a

608 Federal Communications Commission Reports

arguments, as this is at issue in a pending proceeding, Docket No.

19419. We note, however, that the carriers’ present data access arrange-

ments provide assurance of compliance with both sets of power limita-

tions, the 1.00 milliwatt customer’s premises limitation and the 12

decibel lower central office power limitation. Pending the outcome of

Docket No. 19419, and expressly subject to the ultimate findings and

conclusions which may be reached therein we are establishing rules

for connection of data terminal equipment which maintain the status

quo. Our rules = AT&T’s proposals for dealing with data equip-

ment signal power levels, as a practical and reasonable means of pro-

viding such protection.

40. A data equipment manufacturer is given the option of either

designing its terminal equipment, or protective circuitry, to assure

that data signal power levels do not exceed a universal, fixed level

of —4 dB with respect to one milliwatt, measurable at a simulation

of the interface, or. if it wishes to optimize performance of equip-

ment on each specific telephone line to which it may be connected,

it has the option of designing terminal equipment. or protective

circuitry, to assure that the data signal power level does not exceed

the particular, unique level, which that telephone line permits with-

out exceeding the —12 dB central office limitation. Again, following

AT&T's proposal, we are adopting the requirement of using a design

of such equipment or circuitry which is capable of responding to infor-

mation which the carrier will provide as to the particular permitted

signal power level for each telephone line to which the customer

intends to connect data equipment. The carrier will determine the

particular permitted power for each telephone line for which it

receives notification that its customer intends to connect data equip-

ment to a Programmable Data Jack, and will make appropriate

connections in the Jack to communicate this information, automati-

cally, to the data equipment, thereby removing the possibility of

improper adjustment of the signal power. The specific evaluation

required by Section 68.308 (b) (2) assures that registered data terminal

equipment, or registered data protective circuitry will appropriately

respond to the information provided it by the Programmed Data Jack.

41. Longitudinal Balance Limitations. Section 68.510 sets forth

minimum requirements on longitudinal balance. Longitudinal bal-

ance of terminal equipment depends upon the degree of balance of

the impedance of the tip and ring connections of the terminal equip-

ment to earth ground. Thus. evaluation of terminal equipment and

protective circuitry designs for conformance to the lonitudinal bal-

ance requirements must include consideration of all foreseeable possi-

ne of connection of such equipment and circuitry with earth

und.

or. We have received several different suggestions for an appro-

priate specification for longitudinal balance. The Joint Board and

alifornia recommended that each of the voltages on the two telephone

» connections (tip and ring) with respect to earth ground not differ by

more than one percent, in the voice frequency band. Conferencing

devices are required to maintain longitudinal balance, as given by the

parameter we have defined in our “Definitions” section, greater than

(120—20 log,. frequency) over the frequency range of 60 to 4000

56 F.C.C, 2d

67a

Interstate and Foreign Message Toll Telephone, cte. 609

Ilertz, which is about 85 decibels at 60 Hertz and 48 decibels at 4000

Ilertz.?? Our answering devices advisory committee recommended that

this same balance parameter exceed 40 decibels over the 60 to 4000

Hertz frequency range, and specified a particular test circuit for

determining balance i accordance with this parameter. Our PBX

advisory committee also recommended a minimum balance of 40

decibels over the 300 to 3400 Hertz frequency range.

43. We are rejecting the specification advanced by the Joint Board

which is ambiguous. This specification is stated in terms of percent-

ege, without stating the base on which such percentage is to be com-

ated. Proper design of equipment ‘ntended for connection to the

switched telephone network requires that essentially no longitudinal

voltage be applied by terminal equipment at the interface. The am-

biguous specification employed by the J oint Board will not necessarily

insure this.

44. The longitudinal balance parameter which we have defined has

been used by our advisory committees, and by the telephone companies

in setting requirements on conferencing devices. We have also defined

the balance parameter in terms of a particular test circuit which may

be applied to terminal equipment to further remove ambiguity. This

rest. circuit was advanced by our answering device advisory committee

in its report.?® In our view, the answering device advisory committee's

requirement of testing longitudinal balance with an applied longitu-

dinal voltage of 12.5 volts. rms (that is, by applying equal voltages of

95 yolts. rms. to tip and ring) is sound, as semiconductors which only

enter the “active” state on the application of a sufficiently high test

voltage will thereby be activated. The remainder of the advisory com-

mittee’s test circuit flows from the definition of the balance parameter.

Finally. we have adopted the balance requirement which the telephone

companies have required of conferencing devices. Such dev ices are

presently exempt from the general tariff requirement of connection

solely through a protective connecting arrangement which prevents

longitudinal imbalance from affecting a telephone line. The telephone

companies’ requirement on conferencing devices is a clear and unam-

hignous statement by them of what they consider acceptable, Thus,

the longitudinal balance is required to exceed (120—20 logs, frequency)

at all frequencies in the hand 60 to 4000 Hertz.

45. On-hook Impedance Limitations. As previously noted, we are

rsuaded that protection against improper network con rol signaling

is not generally required. However. there is a need to impose con litions

on one aspect of network control signaling—the on-hook impedance.

Tf a telephone call is made to 2 telephone line to which an excessively

low impedance is connected, or to a telephone line which causes exces-

sive de current to flow during the application of a ringing signal. the

called party’s ceiaral oflice will immediately cause the ringing signal

to cease. The calling party will hear no audible ringing tone (a “ring-

hack” tone) and will assume that the call did not go through.*? We are

Section 6.5.5 of Tell oan Votce Communientions Technical Reference, PUR 45101,

“Intertace Specification 2001 (Non-Poweret Conferencing Devices)”, May 1973.

= Sce section 5.10 of the -\dvisory Committee Report on Answering Devices, May 21,

975.

Skee Delt Fx. 5 and Tr. 4004-05 In Docket No 194 ”

“false trip’ and the expected efects AB, et No 19419 for discussion of “pretrip” and

56 F.C.C. 2d

68a

610 Federal Communications Commission Reports

persuaded by the carriers’ arguments that after several repeated tries

to complete such a call. the caller will usually involve telephone com-

any repair personnel. To prevent this non-productive use of telephone

acilities, we are requiring assurance that on-hook impedances (the

impedances presented to a ringing signal) are adequately controlled.

46. However, the particular permitted on-hook impedance on any

iven telephone line is variable. and depends upon such factors as the

ength of the line. the type of central office. and the electrical charac-

teristics of the line (and in the case of PBX trunk connections, may

depend on whether or not double-speed dialing is to be used). Normal

telephone lines may be connected with one to five paralleled standard

telephone ringers. depending upon these factors. The telephone com-

panies have dealt with this requirement by rating each telephone line

for the maximum number of “ringing bridges”, or paralleled standard

ringing impedances, through the use of tables which account for the

factors involved in such a determination.*® When a telephone company

customer requests that additional equipment be provided by the tele-

phone company (including equipment such as a connecting arrange-

ment), the telephone company determines whether the addition of such

equipment will exceed the “ringing bridge” limitation on the cus-

tomer’s telephone line.

47. We have established a similar mechanism for all terminal equip-

ment, Section 68.312(b) requires that a determination be mace as to

the equivalent number of standard telephone ringers (the Ringer

Equivalence Number), which one unit of registered terminal equipment

or registered protective circuitry represents.*! The customer merely

adds the number of ringers which are connected to a telephone line

to the Ringer Equivalency Number which will appear on the label *

of registered terminal equipment or registered protective cirenitry

which he may wish to connect. The sum must not exceed the “ringing

bridge” maximum which the telephone company specifies for his par-

ticular line. This technique imposes no additional record-keeping re-

quirements on the telephone companies as it follows their already-

established practices. At the same time. it provides some added Hexi-

bility to equipment manufacturers. as they are not limited to using

the same impedances as the telephone companies’ telephone sets now

use—they may use higher impedances and chesstie perniit more equip-

ment to be connected to a customer's telephone line.

48. Our specific test requirements are drawn from the telephone

companies’ submitted ringer impedance curves and from comments of

® Section 812-015-170 of the Bell Srstem Practices, AT&T Company Standard, Iesne 2.

June 1972 “Rincine Rances and Rincine Bridge Limitations for Lines in Dial Offices”:

Nection 471-100-040 of the General System Practices. GT&E Standard, Issue 1, January

1908 “Line Leakage and Ringing Bridge Limitations’, Ofticial notice of both of these

documents Is hereby taken. :

% Ficure 1 of Section 68.216/n) of the Joint Board's Recommended First Report and

Order is an ineorrect (and ambiguous) graph of a standard ringing impelance. This eraph

was first published by our answering devices advisory committee in ite draft and final

reports on requirements for such devices during 1973, and was (apparentiy) reproduced by

the Joint Board. AT&T and GTE both maintained at the time of publication of the anawer-

ing devices report. and in their comments on the Joint Board Report that the curve was

incorrect, but until we informalls requested that a correct curve he furnished, no such

oare a ——-, —— . geet ove, AT&T and GTP tneicated that in

order to provide such information, they recently ran laborator ’

the cort ; - eure Pa y . vi y tests specifically to derive

Section 8! a) of onr rules reqnires that the Ringer Equirale N deter-

mined in accordance with Section 65.312, be disMayed on the equipment ae”

56 F.C.C, 2d

69a

Interstate and Foreign Message Toll Telephone, ete. 611

the telephone companies on the answering device advisory committee’s

report. Since the telephone companies have provided us with magni-

tuce-impedance versus frequency curves which were obtained through

the use of a 10 volt, rms, test oscillator, we have similarly required that

determinations of magnitude-impedance be made using a 10 volt

source. The advisory committee report specified 1.5 ma as the maxi-

mum permitted de current to be drawn by a ringing impedance during

the application of a simulated ringing signal, and we have adopted

this specification. As General Telephone and Electronics had com-

mented that their central offices use ringing signals in the frequency

range of 1624 to 6624 Hertz, and ringing voltages that might be as

high as 75 volts de superimposed on 100 volts, rms, we have adopted

these parameters as an inclusive specification which is slightly more

stringent than AT&T's use of 20 or 30 Hertz ringing signals at slightly

lower voltages.

Standard Plugs and Jacks

49, Section 68.104 requires that. except for telephone company-

provided ringers, all terminal equipment be connected to the telephone

network through standard plugs and jacks. Telephone company-pro-

vided ringers are pooooniel ¢ so as to permit a customer to have a

permanently connected ringer not subject to accidental disconnection.

The general requirement for standard plugs and jacks is based on the

assumption that any user will be able to plug in terminal equipment

without special installation instructions or training. By imposing this

requirement. we believe it is unnecessary to impose special require-

ments pertaining to installation of registered equipment.*? We have

purposefully declined to prescribe specific standard plugs and jacks,

including a Programmed Data Jack design. in the belief that accept-

able designs will be voluntarily arrived at by cooperative action

between the carriers and the terminal equipment industry.

If jointly sponsored designs for stanclard plugs and jacks are not ex-

pecitiously arrived at, we will prescribe specific designs. We will re-

quire that any entity be permitted to manufacture and supply standard

plugs for use with registered terminal equipment and registered pro-

tective circuitry, without being subject to licensing by a telephone

company and without any other telephone company-imposed

restrictions.

Notification to Telephone Company

50. We have included a requirement that any customer desiring to

connect terminal equipment to the telephone network must give notice

to the son rag company. This will allow tie telephone company to

keep complete and accurate records of all equipment connected to each

telephone line, and will aid in the performance of both routine main-

tenance and repairs. It will also enable the telephone companies to

have at their disposal certain statistical information regarding inter-

connection (which may at a future date be required to be furnished

this Commission). Since the notification to the telephone company

= We note that thia approach has alrendy heen adopted by elephone

——— prcusaae for aan ag —_ non- were con eoonetag y Fo by By

ormance program for answering derices, an their lon nding pract providi

portable extension telephones, : . — . we "s

% F.C.C, 24

70a

612 Federal Communications Commission Reports

includes the F.C.C. Registration Number. this information will

enable the telephone company to identify all customers using a par-

ticular type of registered equipment, if it should become necessary to

notify such customers, in special circumstances such as revocation of

an —— registration number. Furthermore, since the notification

also includes the Ringer Equivalence Number, the telephone company

will be able to inform its customers as to whether such registered equip-

ment may be connected to the telephone line without exceeding the

ringing bridge limitation (maximum number of ringers which may be

connected) for that telephone line.

Incidence of Harm

51. Although our rules are designed to assure that no harm from

terminal equipment will ever reach the telephone network, Section

GS.108 wives the telephone company the right to temporarily discon-

tinue a customer's service, should any harm to the telephone network

be caused by such customer's terminal equipment. Assuming full com-

pliance with all the rules and regulations in Part 68, we would expect

that no such temporary discontinuances would occur; however, out 0

extreme caution, we believe that the telephone company should hare

the option available to it of temporarily discontinuing a customers

<ervice, should the facts of a given situation clearly warrant such ex-

treme action. If a complaint is brought against the telephone company

as a result of a temporary discontinuance. the telephone company wi

have the burden of proving that such action was reasonable.

Repair of Equipment

52, Section 68.216 sets forth our requirements on the repair of regis-

tered terminal equipment and registered protective eircuitry.* In

order to maintain the level of assurance accorded by the design and

manufacture of such equipment, repairs must be performed by the

manufacturer or assembler of such equipment or by their authorized

agent. However, we will allow routine repairs, such as fuse replace-

ment. the changing of a pilot lamp, etc., to be performed by users,

where the manufacturer or assembler satisfactorily demonstrates that

the performance of such routine repairs will not result in a violation

of the requirements of Subpart D of our rules. This limited exception,

however, is to be construed narrowly, as we do not wish it to open the

door to uncontrolled maintenance activities Which may have some

effect upon compliance with our technical requirements.”

Registration Procedures

53, Subpart C of the rules contains all the rules governing the proce-

dures to be followed in registering terminal equipment and protective

cirenitry. These rules have eon designed to insure that the Commission

retains complete control over the registration program, while at the

same time the required interaction hetween industry and the Commis-

sion is reduced to a minimum. We have accomplished this by adopting

—_—_—

% Gection 09.218 I* in no war intended to limit a nser’s ability to repair any parte

in terminal esuipment other than reciatered protective elrenifry.

& We would‘note that where registered protective ciren\try ts fabricated on a plogdin

subassembly in euch manner that by no foreseeable failure to properly invert or reraove

such a subassembly. can A stelatton of the requirements of Subpart D of there rules

econ. then we would consider the limited? excentiga to this rule as if the user

“repairs” failed registered protective circultry by plug-ia

7la

Interstate and Foreign Message Toll Telephone, ete. 613

a plan whereby equipment sought to be registered is to be tested by the

manufacturer or assembler rather than the government with the test

results submitted along with the application for registration. While we

do not expect that the administration of this program will routinely

entail physical examination and/or testing of terminal equipment or

protective circuitry, the Commission specifically reserves the right to do

so upon complaint or upon its own motion. We feel that this approach

is simple and etlicient from a regulatory point of view and will entail

a minimum of administrative and other expense.

54. While we have provided that applications for registration will

be placed on public notice, we wish to stress that we will not permit

this procedure to become a means for delaying registration grants. All

comments must be supported by relevant data and address the capa-

bility of the em ery or circuitry to comply with the technical re-

quirements of Subpart D. Comments addressing other issues will not

be entertained. In setting forth the rules relating to registration pro-

cedures, we have not specified the particular form an application should

take nor have we indicated appropriate fees for registration. These,

and other procedural matters will be addressed in future orders prior

to the effective date of these rules.

CONCLUSION

55. We conclude that the Federal registration program described

above and set out in the appendix hereto will provide the necessary

protection for the telephone network from harms caused by the con-

nection of terminal equipment thereto, and that adoption of this pro-

am will serve the public interest. In view of the action we are taking

rerein, i.e., adoption of a Federal registration —— applicable to

all classes of terminal equipment, we have further concluded that the

proceedings in Docket No. 19523 should be terminated. However, as

the registration program established herein is new, we believe it should

be subject to continuing review and modification. if necessary, as actual

—— under the — warrants. Accorcingly, the Commission

will continue to confer, as appropriate, with state commissions con-

cerning those interconnection matters over which the state commis-

sions and this Commission have jurisdiction.

56. In view of the foregoing, IT IS HEREBY ORDERED. pur-

suant to Sections 4(i), 4(j), 201-205, 208, 215, 218. 313, 314. 403. 404,

410 and 602 of the Communications Act that the Commission's Rules

and Regulations are amended by adding a new Part 68 as shown in the

appendix hereto, effective April 1, 1976.°*

57, IT IS FURTHER ORDERED That the pieadings mentioned

in paragraph 4 above are DENIED and the pleadings mentioned in

paragraph 5 aboye are DISMISSED. ;

58. ITIS THER ORDERED That interested parties may file

commefts not later than December 11, 1975, directed to the planned

= 68 of the Commis ‘on's Rules and Regulations ts applicable to terminal

equipment connected to the te network prior to the e date of these rules.

56 F.C.C. 2d

72a

614 Federal Communications Commission Reporte

inclusion of PBXs, key telephone systems and main station telephones

in our registration program.

59, IT IS FURTHER ORDERED That AT&T revise its Tariffs

F.C.C. Nos, 259 (WATS) and 263 (MTS), on not less than 60 days

notice, in accordance with the requirements of this Report and Order,

to be etfective on the effective date of the rules in Part 68.

Fepernan Comscyications Cosrsrisston,

Vincent J. Mewurns, Secretary.

73a

Conccrrixe Statement or Cosrisstoner Bexsaury L, Hoors

(In re Connection of Terminal Equipment to the Telephone

Network)

As a member of the Federal-State Joint Board which has been

working on interconnect problems for the past several years, I concur

in the main with the program hereinabove devised as a plausible solu-

tion to the principal issue of physical harm to the existing network.

While the program is no doubt imperfect. and experience is likely to

expose deficiencies in operational aspects (¢.g., attribution of responsi-

&% F.CC. 24

74a

Interstate and Foreign Message Toll Telephone, etc. 623

bility for malfunctions, assessment of service costs, enforcement

against non-complying manufacturers, installers and maintenance

suppliers, accreditation of testing sources), the Commission, for better

or worse, has made the fundamental judgment that terminal intercon-

nection is in the public interest; and, thus, reasonable standards are

mandatory to effect this policy. :

In concurring, however, I fully reserve the arguments I made in

Mebane Home Telephone Company of North Carolina* with respect, _.

to expansion of our interconnection program in advance of the out-

come of our Docket 20003 proceeding which is examining the economic

impact of our interconnect policies. I remain concerned about the loss

of revenues to the telephone companies, particularly—as in Mebane—

the small. rural systems and cannot help but ponder the manner in

which such losses, if significant, will be offset.

I cannot. nevertheless, fully join my majority colleagues in the re-

quirement that telephone companies also register all their equipment

with the Commission prior to installation.* Although sympathetic to

the need to ensure that the telcos do not clamor for higher protection

standards from independent manufacturers than imposed on them-

selves and favor an approach that assures that required competition is

as fair as possible, registration of the phone companies’ own equip-

ment is an unnecessary over-reaction.

The telephone companies. unlike the independent manufacturers,

have an inherent incentive in protecting the network (viz., reduction

of maintenance and service, promotion of overall telephone usage) ;

that is why we have never required equipment clearance in the past.

To clo so now merely because some protection from foreign attachments

is necessary is regulatory overkill which cannot be supported by logic

or experience. We have ways. short of meaningless registration, to

preclude possible anti-competitive practices. Our record, thus far,

contains no such anti-competitive finding.

If. in the future, it appeared that the phone companies were abusing

equipment clearance procedures for competitive advantage, we might

impose such bureaucratic rigmarole as telco equipment registration as

a last resort. We should not. however. impose such expenses on the

public (through increased governmental and industry costs) at the

outset.

-\ccordingly, while I do not dissent to the program overall, the fore-

going prevents my unqualified approval and I would have invited

further comments on the telco registration aspect of our program

because the issue is

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