Brief for the Respondent in Opposition — National Ass'n of Regulatory Utility Commissioners v. Federal Communications Commission

WIBRARY

SUPREME COURT, & & JUL 29 1975

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IN THE

Supreme Court of the United States

OcToBER TERM, 1974

No. 74-1550

NATIONAL ASSOCIATION OF REGULATORY UTILITY

CoMMISSIONERS, Petitioner,

v.

FEDERAL COMMUNICATIONS CoMMISSION, et al.,

Respondents.

On Petition for a Writ of Certiorari to the United States

Court of Appeals for the Ninth Circuit

BRIEF OF THE RESPONDENT SOUTHERN PACIFIC

COMMUNICATIONS COMPANY IN OPPOSITION

THORMUND A. MILLER

RicHarp 8S. Kopr

JAMES M. Tosin

One Market Street

San Francisco, Cal, 94105

Hersert FE. Forrest

1250 Connecticut Avenue, N.W.

Washington, D. C. 20036

Attorneys for Respondent :

Southern Pacific Communica- .

tions Company

STEPTOE & JOHNSON

2 1250 Connecticut Avenue, N.W. :

a Washington, D. C. 20036

* Of Counsel i

a July 29, 1975

ei

4 :

My Press or Byron S. ApAMs PRINTING, INC., WASHINGTON, D. C. S

4

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TABLE OF CONTENTS

Page

CURR ROU i cs ncecnsvinwadeeanatenaeenecnaes 2

PO 35.5 caccenwiehnsanes koneinenn Chasackenen 2

Questions Presented for Review ............. 0.000 2

A GE TD SBOE ok aN oie sscacbepdukicnsaces 3

ORE vives 5a bac teN candace Shewetwwacsecnreyees 9

COIR 9k. cok nds cece ie ints vote dec aceebewisennas 18

TABLE OF AUTHORITIES

CasEs:

Allocation of Frequencies Above 890 Mc, 27 F.C.C. 359

CREE. 06086 eRiwdedehans Ndataecncee ts ¥en ks ters 16

AT&T (TAT-4), 37 F.C.C. 1151 (1957) ............. 16

Belt System Tariff Offerings, 44 F.C.C. 2d 245 (1973),

46 F.C.C. 2d 413 (1974), affirmed, Bell Tel. Co. of

Pennsylvania v. FCC, 503 F.2d 1250 (3rd Cir.

1975), petition for certiorari denied, AT&T v.

FCC, 48 U.S.L.W. 3654 (June 16, 1975), petition

SOP CI I i. kk Kone binban eccanes 3, 10

Domestic Satellite Service, 42 F.C.C. 2d 654 (1973) .. 16

Economic Implications and Interrelationships Arising

from Policies and Practices Relating to Customer

Interconnection, Jurisdictional Separations and

Rate-Structures, 46 F.C.C. 2d 214 (1974), 49

F.C.C, 2d 1238 (1974), 50 F.C.C. 2d 574 (1974)

3, 8, 12

Establishment of Domestic Communication-Satellite

Facilities by Nongovernmental Entities, 35 F.C.C.

2d 844, reconsideration granted in part, 38 F.C.C.

OE COMER She N an dwame be nad (ceaak deck ¥abues 16

FCC v. RCA Communications Inc. (Three Circuits

Case), SH UG. OB CRUGRD css cvenvccccavessnas 10

POR RS EIR ODE TR OER TLR HOSS Aree

|

PITS ES ELSE, SOLE OD

ee

FRE EAE LAPS a INGE NIB NEN IS OR AIA Se =

li Table of Authorities Continued

Page

FPC v. Texaco, Inc., 417 U.S. 380 (1974) ......... 9, 10, 11

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

Implementation of the National Environmental Policy

Act of 1969:

Notice of Proposed Rule Making, 36 F.C.C. 2d

BEE EE WA wh hoe vpn en cence ws nenas'nedaeses

Report and Order, 49 F.C.C. 2d 1813 (1974) ...

Order, 50 F.C.C. 2d 814 (1975) ..............

Mackay Radio and Telegraph Co., 19 F.C.C. 1321 af-

firmed, RCA Communications vy. FCC, 238 F.2d 24

(D.C. Cir. 1956), certiorari denied, 352 U.S. 1004

SEE dts nad eUe RAVeas pW an kod ene dch naa esos

Microwave Communications, Inc., 18 F.C.C, 2d 953

(1969), reconsideration denied, 21 F.C.C. 2d 190

(1970), modifications granted, 27 F.C.C. 2d 380

ER GSS pil ns ie Spiel ee

Minnesota Rate Cases, 230 U.S. 352 (1918) ..........

Network Project v. FCC, 511 F.2d 786 (D.C. Cir. 1975)

Pacific Tel. € Tel. Co. v. Southern Pacific Communica-

tions Co., Case No. 9728 (Cal. PUC Decision No.

ae re

Regulatory and Policy Problems Presented by the

Interdependence of Computer and Communication

Service and Facilities, 38 FC.C. 2d 267 (1971), re-

consideration denied, 34 F.C.C. 2d 577 (1972),

modified, GTE Service Corp. v. United States, 474

TE, BOND hence case eesdceceeesenss

Smith v. Illinois Bell Tel. Co., 282 U.S. 133 (1980) ....

Specialized Common Carrier Inquiry:

Notice of Inquiry to Formulate Policy, Notice of

Proposed Rule Making, and Order, 24 F.C.C.

ET i wc hasstuews ise shaneerkeaes

First Report and Order, 29 F.C.C. 2d 870 (1971)

16

16

16

6

eS aap 2, 4, 5, 10, 11, 12, 13, 15

Table of Authorities Continued lil

Page

Memorandum Opinion and Order denying re-

consideration, 31 F.C.C. 2d 1106 (1971) (Pet.

BOG. TD) ci vccasccscsscvsccscnvessccvess 2, 4, 16

United Video, Inc., a Corporation, Application for a

Certificate of Convenience and Necessity to Oper-

ate a Telephone Company to Serve the Territory

Within the Corporate Limits of the Cities uf Tulsa

and Oklahoma City, Cause No. 24892 (Okla. Corp.

Comm. Nov. 14, 1974), petition in error pending

(Okla. Sup. Ct. No. 48045) ......cccssccscesees 17

Washington Utilities & Transportation Commission v.

FCC, 513 F.2d 1142 (9th Cir. 1975) (Pet. App. A),

petition for writ of certiorari pending, National

Association of Regulatory Utility Commissioners

v. FCC, No. 74-1550 ........ ». 22,4, 5, 8, 10, 13, 14, 17

STATUTES:

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

BREE OF WOR. osc cwes hues cake naess ctundaeee cues 11

National Environmental Policy Act of 1969, 42 U.S.C.

SR OSRE OC. COE. cava cdcenecdswessaunsecses 7, 13, 14, 15

ON RET, SUCRE si cbs se bicinecsdaanssecvesasacs 2

MISCELLANEOUS:

Hinehman, Walter R., Chief, Common Carrier Bureau,

Federal Communications Commission, Remarks

Before the Annual Conference of the International

Communications Association, San Francisco, Cali-

OE SO Bey BE hanson shir noes caccanensas 14

comoens PO RAVES ct RE

IN THE

Supreme Court of the United States

OcTOBER TERM, 1974

No. 74-1550

NATIONAL ASSOCIATION OF REGULATORY UTILITY

CoMMISSIONERS, Petitioner,

V.

FEDERAL COMMUNICATIONS CoMMISSION, et al.,

Respondents.

On Petition for a Writ of Certiorari to the United States

Court of Appeals for the Ninth Circuit

BRIEF OF THE RESPONDENT SOUTHERN PACIFIC

COMMUNICATIONS COMPANY IN OPPOSITION

Southern Pacific Communications Company (South-

ern Pacific), a party intervenor to the proceedings in

the United States Court of Appeals for the Ninth Cir-

cuit whose judgment is sought to be reviewed, respect-

fully submits this brief in opposition to the petition of

the National Association of Regulatory Utility Com-

missioners (NARUC) for a writ of certiorari in the

above-entitled proceeding.

aR ee nT EES

j

2

OPINIONS BELOW

The First Report and Order of the Federal Commu-

nications Commission (the Commission) is reported at

29 F.C.C.2d 870 (1971), and appears as petitioner’s

Appendix C (Pet. App. C). The Commission’s Memo-

randum Opinion and Order denying reconsideration is

reported at 31 F.C.C.2d 1106 (1971), and appears as

petitioner’s Appendix D (Pet. App. D). The opinion

of the United States Court of Appeals for the Ninth

Circuit is reported at 573 F.2d 1142 (1975), and ap-

pears as petitioner’s Appendix A (Pet. App. A).

JURISDICTION

The judgment of the Court of Appeals was entered

on January 20, 1975. <A petition for rehearing was

denied by the Court of Appeals (Pet. App. B) on

March 12, 1975. The petition for a writ of certiorari

was filed on June 9, 1975. The time for all non-Fed-

eral respondents to file a response to the petition was

extended by the Clerk to and including July 29, 1975.

The jurisdiction of this Court is invoked under 28

U.S.C. § 1254(1).

QUESTIONS PRESENTED FOR REVIEW

1. Whether the Commission acted within its author-

ity in adopting a general policy in a rule making pro-

ceeding that the public interest would be served by

permitting the entry of competing new carriers in the

field of specialized communications services, on the

basis of more than 200 comments and reply comments,

oral argument before the Commission en bane, and

detailed factual determinations, forecasts, and expert

judgments.

}

I

| ie ts MONE ADS AUN eter es eS tT

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3

2. Whether the subsequent institution by the Com-

mission of a fact finding inquiry into the economic im-

plications and interrelationships of pricing practices

and regulatory policies, required reversal of the Com-

mission’s determination in an extensive rule making

proceeding that the anticipated beneficial effects from

the entry of competing specialized carriers outweighed

any possible adverse effects of competition upon exist-

ing carriers and their services.

3. Whether the failure of the Commission to discuss

environmental impact in adopting a general policy ex-

tending competition in the field of specialized commu-

nications services required reversal, where none of the

numerous parties participating in the general rule

making proceeding had raised the issue before the

Commission, and the issue was deemed by the Court of

Appeals to be too insubstantial, and disruptive of the

administrative process, to be considered for the first

time on appeal.

STATEMENT OF THE CASE

In 1969, after an evidentiary hearing commenced six

years earlier, the Commission authorized a new com-

mon carrier to provide specialized communications

common carrier private line service * between St. Louis

? Specialized common carriers are engaged in the transmission

of communications (voice, data, or both), between intercity loca-

tions by full-time dedicated private circuits giving their custo-

mers continuous communications without requiring the carriers

to establish a new connection for each call or message. See Bell

System Tariff Offerings, 44 F.C.C.2d 245 (1973), 46 F.C.C.2d 413,

416 (1974), affirmed Bell Tel. Co. of Pennsylvania v. FCC, 503

F.2d 1250 (8rd Cir. 1974), petition for certiorari denied, AT&T

v. FCC, 43 U.S.L.W. 3654 (June 16, 1975), petition for rehearing

pending.

Teer a Ceca or Rear TSOP aOR NSE

25 Rat eet

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4

and Chicago in competition with the Bell System and

The Western Union Telegraph Company.? After a

large number of applications were thereupon filed by

various companies to construct and operate microwave

radio and other facilities to provide specialized com-

munications services, particularly for data transmis-

sion,® the Commission instituted a rule making pro-

ceeding to formulate policy and to establish rules with

respect to the specific issues, including particularly *

A. Whether as a general policy the public inter-

est would be served by permitting the entry of new

carriers in the specialized communications field;

and, if so,

B. Whether comparative hearings on the vari-

ous claims of economic mutual exclusivity among

the applicants are necessary or desirable in the

circumstances * * * ,

More than 200 comments and reply comments were

filed by interested parties, including the Department

of Justice and the Small Business Administration,’

2 Microwave Communications, Inc., 18 F.C.C.2d 953 (1969), re-

consideration denied, 21 F.C.C.2d 190 (1970), modifications

granted, 27 F.C.C.2d 380 (1971).

8 As of March 15, 1971, 33 applicants had submitted 46 separate

proposals for the operation of 1877 microwave stations. First

Report and Order, Specialized Common Carrier Inquiry, 29 F.C.C.

2d 870, 871 fn. 1 (1971) (Pet.App. 50a), reconsideration denied,

31 F.C.C.2d 1106 (1971) (Pet.App. 189a), affirmed Washington

Utilities & Transportation Commission v. FCC, 513 F.2d 1142,

1145 fn. 1 (9th Cir. 1975) (Pet.App. 2a), petition for writ of

certiorari pending, National Association of Regulatory Utility

Commissioners v. FCC, No. 74-1550.

4Notice of Inquiry to Formulate Policy, Notice of Proposed

Rule Making, and Order, Specialized Common Carrier Inquiry, 24

F.C.C.2d 318, 327 (1970).

5 See Appendix B to First Report and Order listing participat-

ing parties, Note 3 supra, 29 F.C.C.2d at 945-949,

4

ee PEMD EERIE EEN SOILS

5

and oral argument was presented before the Commis-

sion en bane on behalf of more than 30 parties over

two days.

In an extensive First Report and Order,’ the Com-

mission carefully reviewed and considered the various

contentions and materials submitted by the parties,

including specifically the new, diverse, and improved

services and benefits to be realized by the entry of addi-

tional competing specialized carriers, weighed against

the possible adverse effects of competition upon exist-

ing carriers and their services,’ and on the basis of

various subsidiary factual determinations, forecasts,

and expert judgments detailed in its report® unani-

mously reached the following ultimate findings and

conclusion: °

We find that: there is a public need and demand

for the proposed facilities and services and for

new and diverse sources of supply, competition in

the specialized communications field is reasonably

feasible, there are grounds for a reasonable ex-

pectation that new entry will have some beneficial

effects, and there is no reason to anticipate that

new entry would have any adverse impact on serv-

ice to the public by existing carriers such as to

outweigh the considerations supporting new entry.

We further find and conclude that a general pol-

icy in favor of the entry of new carriers in the

specialized communications field would serve the

public interest, convenience, and necessity.

® Note 3 supra. The First Report and Order covers 144 pages

in petitioner’s Appendix, pp. 48a-188a.

TNote 3 supra, 29 F.C.C.2d at 910-914 (Pet.App. 131a-138a),

513 F.2d at 1159 (Pet.App. 25a).

8 Note 3 supra, 513 F.2d at 1156 (Pet.App. 20a).

® Note 3 supra, 29 F.C.C.2d at 920 (Pet.App. 147a-148a).

a wy nd NC STA oe ie ae Li tarenin Maron tLe

i SIE pe a

6

The Commission also concluded that it would be con-

trary to the public interest and inconsistent with its

policy determination in favor of entry to attempt gen-

erally to limit entry among pending applicants by

holding comparative hearings on issues of economic

exclusivity.”

On reconsideration, the Commission rejected ‘‘the

somewhat novel, but legally dubious, claim’’ of the Na-

tional Association of Regulatory Utility Commission-

ers (NARUC), petitioner herein, that the Commis-

sion should pursue a policy of generating excess inter-

state earnings which should be applied to subsidize the

revenue requirements applicable to local exchange

services subject to state regulatory jurisdiction: ™

The Commission fully appreciates the objective of

the NARUC to minimize the rates and revenue re-

quirements of the telephone companies applicable

to intrastate local services. We do not believe,

however, that either as a matter of law or prac-

tice, this can be accomplished by arbitrarily in-

flating the cost of service subject to Federal juris-

diction and deflating by like amount the costs ap-

plicable to services subject to state jurisdiction.

The allocation of joint costs incurred in furnish-

ing telephone services subject to both Federal and

state jurisdiction is, of course, a complex and at

times controversial matter. Nevertheless, it is in-

cumbent upon Federal and state rate-making au-

thorities, as a matter of law to employ allocation

procedures which will fairly and reasonably re-

flect the legitimate costs of each service. See

Smith v. Illinois Bell Tel. Co., 282 U.S. 133 (1930) ;

Minnesota Rate Cases, 230 U.S. 352 (1913). Allo-

1 Note 3 supra, 29 F.C.C.2d at 923 (Pet.App. 153a).

1 Note 3 supra, 31 F.C.C.2d at 1108 (Pet.App. 192a-193a).

BL

NERS — ,

BLEED THROUGH

7

cations cannot and should not be designed to arti-

ficially shift any part of the revenue requirement

applicable to one jurisdiction into another. This,

clearly, would lead to confusion, if not chaos, in

maintaining a system of dual Federal/State regu-

lation on a rational and manageable basis. As the

NARUC is well aware, procedures and mecha-

nisms are available and have been employed over

the years on a cooperative Federal/State basis as

a means of establishing and maintaining fair and

equitable jurisdictional allocations. This proceed-

ing is not the appropriate forum to address that

subject.

Petitions for review were filed by the Washington

Publie Utilities Commission and NARUC, but not by

the Bell System or by Western Union. While the

petitions for review were pending, the Commission in

August, 1972, issued a notice of proposed rule making

to implement the National Environmental Policy Act

of 1969 (NEPA),” and in December, 1974, issued a

report and order adopting rules and regulations in

which it identified enumerated types of facilities con-

sidered to be major and required that information re-

lating to such facilities be submitted to the Commis-

sion with applications for construction permits after

January 20, 1975, so that environmental impact state-

ments might be required where the environmental con-

sequences were considered to be significant.”

12Notice of Proposed Rulemaking, Implementation of the Na-

tional Environmental Policy Act of 1969, 36 F.C.C.2d 108 (1972).

18 Report and Order, 49 F.C.C.2d 1318 (1974). Microwave

antenna towers over 100 feet, but other towers over 300 feet, are

considered major facilities. The Commission is giving considera-

tion to the disparity in treatment of tower heights. 50 F.C.C.2d

814 (1975).

BO AT Sel OR ¢

8

In April, 1974, the Commission instituted an inquiry

‘into the effect of current pricing practices and regu-

latory policies on the level and distribution of cus-

tomer charges for various telecommunications services,

and in particular on the extent to which various cate-

gories of customers are now or will be under alterna-

tive pricing practices and regulatory policies subsi-

dizing the services required by others.’?* In the no-

tice of inquiry, and later in a memorandum opinion

and order” and in a first supplemental notice,’® the

Commission emphasized that the purpose of the in-

quiry was to gather information, views, and comments

from interested persons for the benefit of the Commis-

sion, state utility commissions, regulated carriers, and

others, as primarily a fact-finding inquiry, and that it

was not proposing in the particular proceeding to

adopt any rules or policies, as such.

The United States Court of Appeals for the Ninth

Circuit issued its opinion and judgment on January

20, 1975," holding that petitioners had standing to

bring petitions for review, but affirming in all respects

that the Commission had met the substantive and pro-

cedural requirements of the Communications Act of

1934, as amended, in weighing the asserted benefits

and possible adverse effects of competition, and in pro-

ceeding by rule making to determine policy; that the

14Notice of Inquiry, Economic Implications and Interrelation-

ships Arising From Policies and Practices Relating to Customer

Interconnection, Jurisdictional Separations and Rate-Structures,

46 F.C.C. 2d 214 (1974).

949 F.C.C.2d 1238 (1974).

1650 F.C.C.2d 574 (1974).

17 Note 3 supra (Pet.App. A).

)

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eee y SAT CT PLESSIS ey ee A

9

Commission had properly given careful consideration

to the relevant factors in concluding that comparative

hearings for the applicants were neither necessary nor

desirable; and that in the particular circumstances of

this case, the balance should be struck against review

and reversal because the Commission had not consid-

ered the environmental impact of its policy, a matter

raised for the first time on appeal.

ARGUMENT

1. Contrary to NARUC’s contention, the Commis-

sion’s policy determination in this case to permit the

entry of new carriers in the field of specialized com-

munications is not in conflict with this Court’s ruling

in FPC v. Texaco, Inc.,* holding that a regulatory

agency cannot place exclusive reliance on the prevail-

ing price in the marketplace to determine whether

rate are ‘‘just and reasonable’? under its statutory

mandate.

In the Texaco ease, this Court held that an FPC or-

der which provided a blanket certificate procedure for

small producers of natural gas was too ambiguous be-

cause it did not disclose the basis of its order with suffi-

cient clarity. The FPC had not exercised its discre-

tion to insure that the sales price for the gas would be

‘just and reasonable’ as mandated by the applicable

statute.” For the purpose of the proceedings that

might occur on remand, this Court stressed that ‘‘the

prevailing price in the marketplace cannot be the final

measure of ‘just and reasonable’ rates’’, inasmuch as

the Congress had subjected producers to regulation

18 417 U.S. 380 (1974).

19 417 U.S. at 395-397.

LOLOL ALLY OLN GEILE OI

OO RA PD EASY

PROT S

POT ET en ee

Eee SION

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because it had recognized the anticompetitive condi-

tions in the industry.”

The Texaco case is completely inapposite here. As

the Court below recognized, the Commission was fully

conscious of the guidelines announced by this Court in

the Three Circuits ease, FCC v. RCA Communications

Tne." concerning the weight to be given competitive

considerations, and sought conscientiously to follow

them in concluding that the reasonable expectation of

some beneficial effects from the new entry outweighed

the possible adverse effects of competition upon exist-

ing carriers and services.” By no means did the Com-

mission thereby abdicate its regulatory functions to

the marketplace. Unlike the FPC in the Texaco case,

which merely asserted in generalities that it ‘‘shall

consider all relevant factors’’,” this Commission spe-

cifically and in express detail weighed all the relevant

considerations in reaching its conclusions, including

the nature and extent of the potential market, the pub-

lie need and demand for the specialized new and im-

proved services by diverse and flexible means offered

by the new carriers, and the insubstantial effect of the

new entry upon the resources, revenues, and services

0.417 U.S. at 397-399.

“1346 U.S. 86 (1953).

*2 Note 3 supra, 513 F.2d at 1159 (Pet.App. 23a). The Third

Cireuit has also ruled that the Commission’s First Report and

Order in the Specialized Common Carrier Inquiry ‘‘fully comports

with the principles articulated in RCA. * * * We regard the

listing of factors (independent of competition) and the identi-

fication of benefits (reasonably expected) as proof that the FCC

viewed competition as a means, rather than as a goal in and of

itself,’’ in this proceeding. Bell Tel. Co. of Pennsylvania v. FCC,

note 1 supra, 503 F.2d at 1271, 1272.

*3 Note 18 supra, 417 U.S. at 397.

ae RFA NAL LE SO BELLI EEE 8 TNL LS EPIL LIT ITE IIE DIE EL AP RE TE a

11

of the existing established carriers.** The Commission

pointed out that its disposition of the policy aspect did

not constitute a determination that all or any of the

pending applications will be granted, since each appli-

cation must still meet the applicable statutory stand-

ards and comport with the Commission’s established

policies, and each applicant must make a satisfactory

showing that it is qualified and the service it seeks to

offer is technically and economically sound and other-

wise in the public interest.” Thereafter, upon grant

of its applications, each applicant becomes subject to

the full sweep of Commission regulation over inter-

state carriers under the Communications Act of 1934,

as amended.

Unlike Texaco, where the market was characterized

by anticompetitive practices, and the Commission

merely indicated in generalities that it intended to

review new contract prices,” the Commission below

particularized how its rate making and regulatory

policies and practices would be appropriately adapted

to promote and maintain an environment of free and

open competition in the sale of specialized services.”

Unlike Teraco, where the Commission was found to

have placed exclusive reliance upon market factors,

rather than considering the market to be one relevant

factor to be taken into consideration,” the Commission

below did consider many other factors beyond the

24 Note 3 supra, 29 F.C.C.2d at 904-920 (Pet.App. 117a-147a).

5 Note 3 supra, 29 F.C.C.2d at 900 (Pet.App. 110a-111a).

26 Note 18 supra, 417 U.S. at 397-399.

27 Note 3 supra, 29 F.C.C.2d at 915-917 (Pet.App. 139a-142a).

28 Note 18 supra, 417 U.S. at 399, 400.

STBAPBS ALS PRA OG AGERE) SF PRE CPE Eg

THR OUGH

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marketplace, and retained jurisdiction to examine the

qualifications of each applicant and to review its pro-

cedures in the light of experience. It considered other

factors such as the desirability of avoiding delay in

the institution of services needed by the public now,

the benefit to the public in the availability of diverse

options, the lack of public detriment in the event some

new carriers should fail, and the ability of the Com-

mission to review the policy later in the light of

changed circumstances, in concluding that it would be

contrary to the public interest and inconsistent with

its policy determinations to attempt generally to limit

entry among pending applicants by holding compara-

tive hearings on issues of economic exclusivity.”

2. NARUC is incorrect that the Commission’s action

in 1974 instituting an inquiry into the economic impli-

cations and interrelationships of current pricing prac-

tices and regulatory policies is in any wise inconsistent

with the Commission’s policy in favor of entry of new

: carriers. The notice of inquiry and the subsequent

Commission memorandum opinion and order and sup-

plemental notice do not in the least question the sound-

ness of the First Report and Order in the Specialized

Common Carrier Inquiry,” but to the contrary stress

that the purpose of the inquiry is only to gather infor-

mation, views, and comments from interested persons

for possible future proceedings, but not to adopt any

rules or policies, as such, in the particular proceeding.”

paged aie os al

As the Court of Appeals below observed, ‘‘ Against

these benefits [of new entry], the Commission carefully

2929 F.C.C.2d at 923-927 (Pet.App. 153a-160a).

39 Note 3 supra.

31 Notes 14-16 supra.

SAS Sa ARS MIII at ais Sih NRTA TE aS NE

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| SAAD EAT RL PLS ROA ES Fe PETARE ELIE LOE ORT ETN

13

weighed possible adverse effects of competition upon

existing carriers and their services (29 F.C.C.2d at

910-14) [Pet. App. 130a-138a] before finally conclud-

ing that a general policy of new entry would serve

the public interest, convenience, and necessity.’’ *

NARUC’s principal contention, that new entry would

siphon off interstate revenues and earnings from the

telephone companies used to subsidize local exchange

service, was rejected by the Commission as ‘legally

dubious’’, since ‘‘[a]llocations cannot and should not :

be designed to artificially shift any part of the revenue é

requirement applicable to one jurisdiction into an- :

other.’ ** The fact finding inquiry into economic im-

plications and interrelationships looks to the future,

not to any reevaluation of the Commission’s decision i

in the Specialized Common Carrier Inquiry to author- ‘

ize the entry of new carriers into the field of special-

ized communications, and the inquiry is not designed

or constituted so as to Produce a reversal of the Com-

mission’s policy.

3. Finally, NARUC’s contention that the Court of

Appeals below was required to reverse the Commis-

sion’s decision because the Commission had failed to

consider the environmental impact of its policy under

NEPA is wholly without substance. The Court of

Appeals recognized that it could remand even though

the issue had not been raised before the Commission,

but it also recognized that any damage that might be

done at the review stage to NEPA interests was

‘‘problematical and, in any event, slight’; that

NARUC’s claim of environmental impact did not ap-

;

82 Note 3 supra, 513 F.2d at 1159 (Pet.App. 25a).

33 Note 3 supra, 31 F.C.C.2d at 1108.

— CHP DESAI NRT PR NEARY ONT IE AE RT TERE ATES LEE TTT YENI ES |

Rpene Sr hera” os ee rae

14

pear particularly substantial, since the basie question

was who would furnish the service (the new or the

established carriers), not whether it would be fur-

nished, or how much; and that a resolution of the

NEPA issue now would create great delay, waste, and

expense outweighing any benefit from reviewing the

NEPA question at this late stage.** The matter was

well within the Court’s discretion.

Significantly, despite the expressed concern of

NARUC with the environmental impact of microwave

operation, neither NARUC nor any Federal or State

agency, including those expressly charged with envi-

ronmental responsibilities, sought to challenge any of

the specialized carrier applications pending before the

administrative agency, where environmental consider-

ations can be weighed in the context of the specifie pro-

posals for tower height, radiated power, site location,

and other characteristics of the radio microwave sta-

tions to be constructed.

4, Contrary to NARUC’s contentions (pp. 14-15),

there are no issues presented here of great public im-

portance or great precedential significance. The entry

of the specialized carriers is unlikely to have any sig-

nificant impact on telephone revenues—in the last eal-

endar year, the total annual revenues of both the spe-

cialized and the domestic satellite carriers amounted

to approximately $15 million, or less than 5/100 of one

per cent of the $31.6 billion in total revenues of the

telephone companies.” As the Commission pointed out

34 Note 3 supra, 513 F.2d at 1167-1169.

5 Remarks by Walter R. Hinchman, Chief, Common Carrier

Bureau, Federal Communications Commission, before the 28th

Annual Conference of the International Communications Associ-

ation, San Francisco, California, May 16, 1975.

15

in its First Report and Order, even if the most san-

guine expectations of the new carriers were realized,

there is no reason to believe that there would be any

substantial diversion of telephone revenues, or any

significant adverse impact on telephone users, the in-

stallation of large capacity systems to meet growing

requirements, or the realization of declining unit

costs.*® The insignificance of the NEPA issue can be

seen from the circumstances that it did not occur to a

single party filing the 200 pleadings before the Com-

mission, and only to one of the petitioners for review;

that the Commission after comprehensive considera-

tion could see no need to establish an effective date be-

fore January 20, 1975; and that since the effective

date of the new rules, it has played no significant role

in the processing and grant of microwave radio appli-

cations.

The assertion of NARUC (p. 15) that the Commis-

sion’s decision will fundamentally alter the structure

of communications services to the public is without

foundation. As the Commission observed, ‘‘we see no

reason whatsoever to assume that the [specialized car-

rier] applications would divert all or even a substan-

tial portion of that comparatively small percentage of

existing and projected Bell System business that is

vulnerable to competition.’ ** The Commission’s deci-

sion implements a continuing policy to foster compe-

tition in communications where it would serve some

3699 F.C.C.2d at 912 (Pet.App. 83).

37 Note 3 supra, 29 F.C.C.2d at 912 (Pet.App. 133a).

4

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16

public benefit." It should be noted that the implica-

tion of NARUC’s position that the Bell System is the

chosen instrument of domestic communications was

also breached by the Commission’s decision to permit

competition in providing private line and even long

distance telephone service by domestic satellite car-

riers, without challenge by NARUC.”

The assertions of NARUC, as the sole petitioner be-

fore this Court, must be measured against its primary

interest in this litigation in promoting a policy of gen-

erating excess interstate earnings to be applied to sub-

sidize local exchange revenue requirements, although

the Commission has said that this proceeding is not the

appropriate forum to address that subject. To be

noted is the absence of other petitioners with a public

or private interest in the resolution of the proceeding,

including any Federal or State agency charged with

38 E.g., international record common carrier services, Mackay

Radio and Telegraph Co., 19 F.C.C. 1321, 1334 (1955), affirmed

RCA Communications v. FCC, 238 F.2d 24, 27-28 (D.C. Cir. 1956),

certiorari denied, 352 U.S. 1004 (1957); transatlantic cables,

AT&T (TAT-4), 37 F.C.C. 1151, 1158-1159 (1957); Domestic

Satellite Service, 42 F.C.C.2d 654 (1973); domestic mobile tele-

phone service, General Mobile Radio Service, 13 F.C.C. 1190,

1218 (1949); private microwave use, Allocation of Frequencies

Above 890 Me, 27 F.C.C. 359, 412 (1959); data processing, Reg-

ulatory and Policy Problems Presented by the Interdependence

of Computer and Communication Service and Facilities, 28 F.C.C.

2d 267 (1971), reconsideration denied, 34 F.C.C.2d 577 (1972),

modified GTE Service Corp. v. United States, 474 F.2d 724 (2d

Cir. 1973).

39 Establishment of Domestic Communication-Satellite Facilities

by Nongovernmental Entities, 35 F.C.C.2d 844, reconsideration

granted in part, 38 F.C.C.2d 665 (1972) ; Network Project v. FCC,

511 F.2d 786 (D.C. Cir. 1975).

4° Note 3 supra, 31 F.C.C.2d at 1108 (Pet.App. 192a-193a).

ae LORE FLAN LIETLE LI ET NTN, PNRM LE LEE PRL CY EEDA CNT, WO LMR RINE HF

3 »,

17

public interest responsibilities, the established carriers

themselves, including the Bell System, Western Union,

or independent telephone companies, or any communi-

cations users or other members of the public. It is

particularly noteworthy that although the standing of

NARUC was accepted by the Court of Appeals as the

representative of state regulatory agencies,” in two

states where specialized carriers have sought state cer-

tificates of convenience and necessity to provide intra-

state communications service, the Corporation Com-

mission of the State of Oklahoma“ and the Public

Utilities Commission of the State of California “ have

both granted such certificates, with conditions, on the

basis of the benefits to the public to be realized by the

entry of competing carriers in meeting the growing

demand for specialized communications services.

41 Note 3 supra, 513 F.2d at 1154-1155 (Pet.App. 16a-18a) ;

but see concurring opinion of Circuit Judge Wallace rejecting

this position, 513 F.2d at 1169-1171 (Pet.App. 45a).

42 In the Matter of the Application of United Video, Inc., a Cor-

poration, for a Certificate of Convenience and Necessity to Operate

a Telephone Company to Serve the Territory Within the Corpo-

rate Limits of the Cities of Tulsa and Oklahoma City, Oklahoma,

Cause No. 24892 (Okla.Corp.Comm. Nov. 14, 1974), petition in

error pending (Okla.Sup.Ct. No. 48045). Southern Pacific is

the successor in interest to the specialized carrier facilities of

United Video, Ine.

43 Interim Opinion, Pacific Tel. & Tel. Co. v. Southern Pacific

Communications Co., Case No, 9728 (Cal.PUC Decision No. 84167,

March 4, 1975).

tale

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18

CONCLUSION

The petition for writ of certiorari should be denied.

Respectfully submitted,

THORMUND A. MILLER

RicuHarp 8. Kopr

JAMES M. Tosin

One Market Street

San Francisco, Cal, 94105

HeErBeErt E. Forrest

1250 Connecticut Avenue, N.W.

Washington, D. C. 20036

Attorneys for Respondent

Southern Pacific Communica-

tions Company

STEPTOE & JOHNSON

1250 Connecticut Avenue, N.W.

Washington, D. C. 20036

Of Counsel

July 29, 1975