Petition for Writ of Certiorari — National Ass'n of Radiotelephone Systems v. Federal Communications Commission

Supreme Court brief1976

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TABLE OF CONTENTS

Page

RN NN i in te ee 1

PS ing 4-0 tasers eae ke wanes <n

PO DI ao ob vic ckc eis cneh nectacccess 2

StaTuTory Provisions INVOLVED .............ccccee- 5

DTACRMENT OF THE CARD ow on cic ick ccc naccesecdccees 5

Reasons FOR GRANTING THE WRIT .............000c0; 20

CRE NIT 1 tre Te eae en Ee mS Se 34

TABLE OF AUTHORITIES

Court CasgEs:

Ashbacker Radio Corp. v. FCC, 326 U.S. 327 (1945) .. 26

Bell Telephone Company of Pennsylvania v. FCC, 503

F.2d 1250 (3d Cir. 1974), cert. den. 95 S.Ct. 2620

SII 505 6a Sst dae bh aca ex a ca he A 18

California Public Utilities Commission v. FCC, No.

Sees Or, CU MRED 6 gin 5 ke dc done nee wae 32

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

UE UD ks se kb cis wa Kwdwrekeieeke sack 20, 26, 27

FPC y. Texaco, Inc., 417 U.S. 380 (1974) ....20, 24, 25, 26

Gulf States Utilities Co. v. FPC, 411 US. 747 (1973)

20, 22, 23, 24

Head v. New Mexico Board of Examiners, 374 U.S. 424

RON i eee tin ncurenGaceeenaiaad eels coarse 20, 26, 27

National Association of Regulatory Utility Commis-

stoners v. FCC, No. 75-1075, — U.S. App. D.C. —,

—F.2d — (February 10, 1976) ................30,32

North Carolina Utilities Commission vy. FCC, No. 74-

Dey CO CE RED oo vvis von oo onda deed nee 32

North Carolina Utilities Commission v. FCC, No. 76-

ee Se ED oo citi s Skene eve eded aaa 32

Philadelphia Television Broadcasting Co. v. FCC, 123

U.S. App. D.C. 298, 359 F.2d 282 (1966) ........ 30

li Table of Authorities Continued

Page

SEC v. Chenery Corp., 318 U.S. 80 (1943) ....5, 20, 28, 29

SEC yv. Chenery Corp., 332 U.S. 194 (1947) ......... 29

United States v. American Telephone and Telegraph

Company, et al., D.C.D.C. Civ. Action No. 74-1698

ini a nw wiew awe 11, 23

United States v. Drum, 368 U.S. 370 (1962) ......... 31

United States v. Paramount Pictures, 334 U.S. 131

NIE MOSS East A RSE eee 24

FeperaL Communications Commission CasEs:

Po A Ry be ye | ee 32

Carterfone, 13 F.C.C. 2d 420 (1968), recon. den. 14

RS ee er 18

Computer Inquiry, 28 F.C.C. 2d 267 (1971) .......... 30

Frontier Broadcasting Co. v. Collier, 24 F.C.C. 251

ee eee 30

General Mobile Radio Service, 13 F.C.C. 1190 (1949) .. 10

General Telephone Company of California, 21 Pike &

Fischer Radio Reg. 19 (1960) .................. 10

In the Matter of Application of Illinois Bell Telephone

Company, File No. 20115-CD-P-(—)-76 (July 31,

eee te ed eid ks aikihin nya ees Khe nee 17

Industrial Radiolocation Service, 5 F.C.C. 2d 197

ee EN hinik unennwsninan n« 50

Interstate and Foreign Message Toll Telephone Serv-

Oe ee Ege.) 32

ITT Mobile Telephone Company, 1 Pike & Fischer

TS Be ene 10

Telerent Leasing Corp., 45 F.C.C. 2d 204 (1974) .... 32

FrEepErRAL STATUTES:

Administrative Procedure Act, 5 U.S.C.

A ch Sheehy ance eee nen ses 5

ee ea SL aieadene ae ce cank.oe 32

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

at ahaa werd ekeniien ewes sawn ses 5

orcen THEeOLIGH

Table of Authorities Continued lii

Page

Ne eee te 6

SER See CES alte OE ap pene 9,14

a ee 30

td bariatric T e Ne 26

I ei ores hie re ee a ero ia 9

a eee ee tas 14, 26

NENG A SE a a a ca a a ee 14

eh aC ga re Par ae rian neat hea aC eee eye mae rae 14

i eee ete ee bp ede ha 4, 9, 14, 26

I cA ee en ek 9,13

RN ate eee ee he ECL eS eel. co ee 3, 13, 22

eee ene ee ee he 3

DR Woe arom ee kW elon oe ee 13

RCRD SESE ci aN kee er eee 13, 26

SERA eat he teenth Rene a UID 10, 13

ERS Aare Oe Set ye ea el Deon EAR ee oe 26

a Re as ek a te hE AD 26

Bk ede hr ee eae 13, 23, 24

te ee eek oa eos er te eee 13, 23

Det a a alae Je Ne Wey ae 13

ND ERE eNO Cae ean 17

Judicial Review Act, 28 U.S.C.

AN Ce ee be UL as COW ga we eo hike eee 17

Judiciary and Judicial Procedure Act, 28 U.S.C.

Es pak whol uis ee oe ove aoe wih 6 kha wk 2

Natural Gas Act, 15 U.S.C.

BSR ee ee eC er 35

IE eee re alle wal kg Go od oincak aie knw Cow aaion 25

Rv es oF THE FeperaL Communications CoMMISSION :

ee Fe CTD ons vc caedcdnendaueecens 6,7

OO TIE ooo sos vnc co cccsveccsnces. 10

SIE COUIED ican ds cw e'na vosweveadescede 10

ae ORM, COD ons cccsséodvcceseecca 8,11

Parte 89, 91 amd 93 (1978) .....cccccccccccveces 8, 29

MIscELLANEOUS:

Lohr, ‘‘Scenario Change Needed for 900 Megahertz

Frequencies,’’ Communicator, Vol. 17, No. 11 (De-

EE I ice tae Ciaies Genwi ccien cucuihns 10

IN THE

Supreme Court of the United States

OcTOBER TERM, 1975

No.

NATIONAL ASSOCIATION OF RADIOTELEPHONE SYSTEMS,

Petitioner,

Vv.

FEDERAL COMMUNICATIONS COMMISSION, ET AL.,

Respondents.

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE

DISTRICT OF COLUMBIA CIRCUIT

Petitioner, the National Association of Radiotele-

phone Systems (‘‘NARS’’), respectfully prays that a

writ of certiorari issue to review the judgment and

opinion of the United States Court of Appeals for the

District of Columbia Circuit (the ‘‘Court of Appeals’’)

entered in this proceeding on January 5, 1976.

OPINIONS BELOW

The opinion of the Court of Appeals, which has not

yet been officially reported, appears at Appendix A

to this petition.” The Second Report and Order of re-

The opinion is reported at 35 Pike & Fischer Radio Reg. 2d

1484 (1976).

? The appendices are separately bound in a companion volume,

hereinafter cited as ‘‘Pet. App.’’ The opinion appears at Pet. App.

la-33a.

}

REDE. EPL es

Prax Bsematie ees

spondent Federal Communications Commission (the

**FCC’’), which is reported at 46 F.C.C. 2d 752 (1974),

appears at Appendix B (Pet. App. 34a-134a); its

Memorandum Opinion and Order on reconsideration,

reported at 51 F.C.C. 2d 945 (1975), appears at Ap-

pendix C (Pet. App. 135a-266a) ; and its Memorandum

Opinion and Order denying further reconsideration,

reported at 55 F.C.C. 2d 771 (1975), appears at Ap-

pendix D. (Pet. App. 267a-273a).

JURISDICTION

The judgment of the Court of Appeals (Opinion by

Wilkey, Cir. J.) was entered on January 5, 1976, and

this petition for writ of certiorari is filed within 90

days of that date. The Court of Appeals, upon motion

of this petitioner and after considering the FCC's

brief in opposition, granted a stay of its mandate

pending the filing of this petition for certiorari. The

jurisdiction of this Court is invoked under 28 U.S.C.

§ 1254(1) (1970).

QUESTIONS PRESENTED

The Monopoly Issues

(a) AT&T and the Cellular System

1. Whether the Court of Appeals erred in affirm-

ing a rulemaking order of the FCC disposing of a vast

band of the radio spectrum on a basis such that, as the

Court of Appeals found, American Telephone and

Telegraph Company (‘‘AT&T’’) ‘appears likely to

dominate substantially the field of radio telephone

service, which has heretofore been occupied in sig-

nificant part by radio common carriers operating in a

highly competitive environment,’’ or whether the rul-

ings violate the antitrust component of the ‘public

Ko TRAE

RLEED THROUGH

convenience, interest, or necessity’? standard of the

Communications Act (the ‘‘Act’’) (47 U.S.C. § 303) ?

2. Whether the Court of Appeals erred in affirm-

ing a rulemaking order of the FCC which, as the Court

of Appeals found, enhances AT&T’s monopoly power

by “elimination of a requirement that wireline oper-

ators [AT&T and associated telephone companies] of-

fer to interconnect radio common carriers into their

systems,’’ or whether the rulings violate the ‘public

interest’’ standard of the Act, supra?

3. Whether the Court of Appeals erred in affirm-

ing a rulemaking order of the FCC which will enhance

AT&T's monopoly position, as the Court of Appeals

found, by authorizing it to ‘‘become a significant force

in the now highly competitive market for private dis-

patch services’’?

(b) Motorola and the Non-Cellular Operators (SMRS)

4. Whether the Court of Appeals erred in affirm-

ing a rulemaking order of the FCC which, for the first

time in the more than 30-year history of the industry,

authorizes radio equipment manufacturers (especially

Motorola, Inc., which, as the Court of Appeals finds,

“enjoys substantial domination of the sales market

for mobile radio systems’’) to obtain licenses and

operate on a vertically-integrated basis in competition

with small radio common carriers which must rely

upon them for equipment—an FCC action which the

Court of Appeals finds ‘could discourage competi-

tion’’?

5. Whether the Court of Appeals erred in affirm-

ing a rulemaking order of the FCC allocating nearly

SA ete vl ele SS, aha eB SRSA SPER OPEL A Rit

three times the total radio spectrum now available for

land mobile radio service on a basis which effectively

excludes the independent, regulated radio common car-

riers from access thereto and which will virtually eli-

minate them as competitive factors in the service?

The Common Carrier Issue: Deregulation

(a) Deregulation

6. Whether the Court of Appeals erred in affirm-

ing a rulemaking order of the FCC decreeing that the

common carrier provisions of the Act will not apply to

non-cellular land mobile radio service to be provided

to the public in the newly authorized spectrum on

an ‘‘entrepreneurial,’’ for-hire, for-profit basis, or

whether this deregulation is contrary to the explicit

provisions of the Act (47 U.S.C. §153(h)) ?

(b) Definition of Common Carrier

7. Whether the Court of Appeals erred in holding

that entrepreneurs authorized to provide service to

the publie on a for-hire, for-profit basis are not com-

mon carriers as defined by the Act and are not subject

to the regulatory provisions of the Act and of state

laws, on the grounds that these entrepreneurs may

elect not to serve the public?

The Preemption Issue

8. Whether the Court of Appeals erred in affirm-

ing the Commission’s order decreeing the ‘‘preemp-

tion’”’ of state regulatory jurisdiction, despite the fact

that the Act expressly vests regulatory authority in

the states (47 U.S.C. §§ 152(b) and 221(b)) ?

The Judicial-Review Issues

9. Whether the Court of Appeals erroneously de-

parted from the fundamental Chenery rule (SEC v.

Chenery Corp., 318 U.S. 80, 95 (1943)) by affirming

the Commission’s deregulation order on the grounds

that the licensees are free to refuse to serve the public:

grounds which were neither stated nor considered by

the Commission and which contradict the Commis-

sion’s design for providing service to the public.

10. Whether the Court of Appeals erred in refusing

to set aside the Commision’s order on the grounds that

the monopoly and common carrier issues could be the

subject of ‘‘future challenge’’ and private litigation ?

STATUTORY PROVISIONS INVOLVED

Federal Communications Act of 1934, as amended,

47 U.S.C. § 151 et seq. (1970) ; Federal Administrative

Procedure Act, 5 U.S.C. § 551 et seq. (1970). Relevant

sections of the statutes are set out in Appendices E

and F, respectively. (Pet. App. 274a-293a).

STATEMENT OF THE CASE

In this ease, petitioner seeks review of a decision of

the Court of Appeals which affirms, in toto, an order

of the FCC allocating for the mobile radio services a

vast amount of the limited radio spectrum and estab-

lishing rules for licensing the use of such spectrum.

A. Background

1. Identity of Petitioner. Petitioner is the national

trade association representing the approximately 550

independent radio common earriers (**RCCs’’), de-

seribed hereinafter.

2. The Service Involved. This case involves the land

mobile radio communications service: i.e., the use of

radio signals for communications between fixed trans-

mitting (base) radio stations and moving vehicles, or

between moving vehicles themselves. There are pres-

ently about four million users of the land mobile radio

service. It is of great and growing importance to

business and industry and to public services and

agencies such as police and fire departments. The

spectrum heretofore assigned to the service is ap-

proaching exhaustion due to the phenomenal growth

of its use.

The service was in existence prior to the Communi-

cations Act of 1934. It was expressly defined and in-

cluded in the Act,’ along with telephone, cable and

other wireless and radio service; and it is subject to

the comprehensive regulatory scheme of the Act de-

signed to control the use of radio frequencies and to

provide for regulation of the service.

The service takes three forms:

a. ‘*General’’ (or radiotelephone) service, which in-

volves two-way radiotelephone communications be-

tween ordinary telephones and mobile transmitter /

receivers (usually located in a car or truck). 47 C.F.R.

§ 21.1 (1974). This service requires interconnection of

the radio facilities with the nationwide telephone net-

work of AT&T and associated telephone companies.

b. ‘*Dispatch’’ service, which involves two-way

radio communications (such as used by taxicab com-

panies, utilities, delivery and service companies) be-

tween mobile transmitter/receivers and either (1) a

847 U.S.C. §§ 153(1), (m) and (n) (definitions of ‘‘mobile

station,’’ ‘‘land station’’ and ‘‘mobile service’’).

SEILER PIER PM ee : minal

RLEED THF OUGH

fixed location transmitter /receiver or (2) other mobile

units. 47 C.F.R. § 21.1 (1974).

e. ‘‘Signaling’’ (or paging) service (excluded from

this case by the FCC), which involves a one-way radio

communication to a small portable receiver carried by

persons. 47 C.F.R. § 21.1 (1974). The ‘‘beepers”’ ear-

ried by physicians or repairmen alerting them to eall

their offices are examples of this service.

3. The Participants in the Service. The design of the

Communications Act, heretofore implemented by the

FCC regulations, provides that licensed mobile radio

service may be provided in one of two ways: to the

publie by common carriers; to an individual user or a

cooperative group of users by licensing for their pri-

vate, not-for-hire, non-profit use. No provision is

made for service to the publie which does not own and

operate its own system, either individually or cooper-

atively, except by regulated common earriers.

a. The Common Carriers: The telephone industry

has historically provided land mobile radio service as

an adjunct to ordinary telephone service. Local tele-

phone companies are separately licensed by regulatory

authorities for this purpose.

The non-telephone company carriers engaged in this

service are the radio common earriers represented by

petitioner. There are about 550 RCCs located through-

out the United States. Despite their great importance

in providing service (see infra), the RCCs are small,

independent entrepreneurial enterprises not affiliated

with the telephone, telegraph, private line microwave

or domestic satellite industries, or with any other form

of communications common earriage. Many of them

are outgrowths of small ‘‘mom and pop”’ telephone

answering services. A recent study showed that 67 per-

cent of the RCCs in 1973 had gross annual revenues of

$0-$50,000. There are a few RCCs of substantial size.‘

The RCCs, as well as the telephone companies, are li-

censed and regulated as common carriers in the Domes-

tic Public Land Mobile Radio Service (‘“* DPLMRS’’)*®

by the FCC, and by state regulatory authorities.°

b. The Private Users. FCC rules provide that land

mobile radio service users, instead of obtaining service

from the common carriers, may obtain a license and

operate mobile radio systems for their own private use.

Many private users have availed themselves of this

option, either on a single or cooperative basis. Private

operations must be on a not-for-hire, ‘‘non-profit,”’

‘‘non-common earrier’’ basis as explicitly provided in

the detailed rules of the Commission. 47 C.F.R. Parts

89, 91 and 93 (1973). Obviously, private users are not

subject to common carrier regulation as to rates, serv-

ices, ete, and the rules, until the present orders, have

been carefully designed to forbid their offering service

to the public.

ce. Basis of Participation. The Act gives the FCC

comprehensive control over the allocation and use of

the radio spectrum. Both common carriers and pri-

vate users must obtain licenses from the FCC for the

radio frequencies which they may use in a given area.

* According to the study, 1.9 percent of the RCCs had gross

annual revenues in excess of $400,000. Perrin Affidavit, Exhibit 5F

to petitioner's Motion for Stay to the Court of Appeals, filed May 6,

1975.

547 C.F.R. § 21.500, et seq. (1974).

* All but five states have applicable regulatory laws: Connecticut,

Iowa, New Jersey, Oregon and Rhode Island. Where no state law

is in effect, the Act permits regulation of rates, practices and serv-

ices by the FCC.

PEE Sp LEON AME RE AEK GRIST LE OOLS NE ESE GL ALE, AIL ION LILIES

orocoen rwo cyiicHn

47 U.S.C. § 301. Due to the relatively limited range

of the radio equipment employed (about 25-30 miles),

land mobile radio operations are ‘‘intrastate’’. Under

the Act, these operations are classified as ‘‘intrastate”’

even if a portion of the service is interstate or foreign

communication and even if intercounected with the

telephone network. 47 U.S.C. §§152(b), 153(e),

221(b).

The Act requires that common carriers must charge

rates which are just and reasonable, must serve all

upon reasonable request, must avoid discriminations

and preferences, ete. 47 U.S.C. §§ 201, 202. None of

these requirements is applicable to non-common car-

riers.

Apart from the procedures and prohibitions of the

federal Act, the common carriers, under the specific

provisions of the Act, are subject to the exclusive

jurisdiction of state commissions as to ‘‘charges, clas-

sifications, practices, services, facilities, or regula-

tions,’’ where jurisdiction is exercised under state law.

47 U.S.C. §§ 152(b) and 221(b).’

4. The RCCs. Pursuant to their licenses from the

FCC and state authorities, RCCs operate base radio

station facilities and mobile radio units which they

purchase or lease from manufacturers and supply to

their customers for such radiotelephone and dispatch

services, as well as paging, as the regulatory agencies

determine that the public interest, convenience and ne-

cessity require. The RCC industry was authorized by

*47 U.S.C. §221(b) provides that the FCC shall have no juris-

diction ‘‘with respect to charges, classifications, practices, services.

facilities, or regulations . . . in any case where such matters are

subject to regulation by a State commission or by local govern-

mental authority.’’

the FCC in 1949 for the express purpose of competing

with the telephone industry (primarily AT&T and its

affiliates) in the provision of common carrier land

mobile communications services. General Mobile Radio

Service, 13 F.C.C. 1190 (1949).

In this competition, the RCCs have been remarkably

successful. Despite the handicap that they have been

allocated fewer frequencies by the FCC, they serve

substantially more mobile units than all telephone com-

panies combined.* RCC-served mobile units have been

growing at nearly three times the rate of telephone

company-served units.” In turn, the FCC, in past

years, itself has expressly and repeatedly found the

competition hetween RCCs and the telephone industry

to be desirable and in the public interest.”

In order to become licensed under the plan of the

Act, an RCC, as a common earrier, must obtain a cer-

tificate of public convenience and necessity from the

state commission, where required by state law. 47

C.F.R. §21.15(¢) (4) (1974). It then applies to the

FCC for a construction permit and assignment of a

frequency. 47 C.F.R. § 21.10 et seg. (1974). Quasi-

judicial hearings and proceedings are provided for, in

the usual form, 47 U.S.C. § 309. If the RCC-applicant

obtains a frequency assignment, it then operates under

® See, e.g., Lohr, ‘‘Scenario Change Needed for 900 Megahertz

Frequencies,’” Communicator, Vol. 17, No. 11 (December 1975),

p. 10.

® [bid.

10E.g., General Mobile Radio Service, 13 F.C.C. 1190, 1218

(1949); General Telephone Company of California, 21 Pike &

Fischer Radio Reg. 19 (1960); 7T7T Mobile Telephone Company,

1 Pike & Fischer Radio Reg. 2d 957 (1963).

PRE ERS Sah RA oer

RLEED THF OUGH

the technical supervision of the FCC as to the use of

the assigned frequencies and related matters. See 47

C.F.R. § 21.500 et seq. (1974). At the same time, it op-

erates under the rates, services and practices supervi-

sion of the state and the general requirements of the

Communications Act applicable to common carriers,

including the requirement as to just and reasonable

rates and the mandate to serve the general public

“upon reasonable request’? and to avoid diserimina-

tion—provisions which in practice are principally im-

plemented by state commissions.

5. AT&T and the Manufacturers (Motorola)

a. AT&T obviously occupies a key role in the indus-

try. Telephone companies are specially licensed to pro-

vide land mobile service, like the RCCs, and directly

compete with the RCCs. RCCs are absolutely depend-

ent upon AT&T and associated telephone companies

for their radiotelephone business, which requires inter-

connections between RCC radio facilities and the na-

tionwide telephone network. The attempts of the RCCs

to obtain such interconnections on reasonable terms

and conditions have been and are a source of continu-

ing controversy and litigation between the RCCs and

the AT&T-associated companies. In a pending mon-

opoly antitrust action, the United States Government

has expressly charged AT&T with monopolistic and

restrictive practices in this field: specifically, with con-

eerted action to ‘eliminate competition from other

telecommunications common carriers’? and with ‘‘ob-

struct[ing] the interconnection of Radio Common Car-

riers with the Bell System.’ *

11 Complaint, §§ 28(b), 29(c), United States v. American Tele-

phone and Telegraph Company, et al., D.C.D.C. Civ. Action No.

74-1698 (Nov. 20, 1974) (‘‘continuing agreement and concert of

Nevertheless, as the Court of Appeals found, the

FCC order in this case provides for ‘‘significant in-

creases in [AT&T’s] market power’’; will enable

AT&T to ‘‘dominate substantially the field of radio

telephone service, which has heretofore been occupied

in significant part by small radio common carriers op-

erating in a highly competitive environment’’; and

will enable AT&T to ‘‘become a significant force in the

now highly competitive market for private dispatch

services.’’ (Pet. App. lla-12a). (Despite these find-

ings, the Court of Appeals affirmed).

b. The RCCs are also totally dependent upon manu-

facturers of radio communications systems and facili-

ties to supply the base station facilities which they di-

rectly operate and also the mobile radio units which

RCCs lease or sell to their customers. As the Court of

Appeals found, Motorola, Ine., ‘‘enjoys substantial

domination of the sales market for mobile radio sys-

tems’’ (Pet. App. 30a). Motorola accounts for about

64 percent of the land mobile radio equipment market.

The next largest is General Electric Company with

about 15 percent. Motorola also directly controls the

prime base station antenna sites in many, if not most,

of the metropolitan areas across the country.” Access

to such sites is vital to any RCC.

Manufacturers have never before been vertically in-

tegrated, i.e., licensed to operate carrier communica-

action ... to prevent, restrict and eliminate competition from other

telecomunications common carriers’’, including, inter alia, ‘‘at-

tempt[ing] to obstruct and obstruct/ing] the interconnection of

Radio Common Carriers with the Bell System’’).

* Wolf Affidavit, Exhibit 5C to petitioner’s Motion for Stay to

the Court of Appeals, filed May 6, 1975.

BLEED THF OUGH

tions systems in competition with their customers; but

are now expressly permitted to do so under the subject

FCC order. The Court of Appeals found that Motor-

ola’s ‘‘size and financial power . . . could discourage

competition’’ and that cause may arise ‘‘for independ-

ent antitrust actions.’’ (Pet. App. 30a-3la). (The

court nevertheless affirmed).

B. The Regulatory Plan of the Communications Act

This petition presents issues arising particularly

under Title IT of the Communications Act (Common

Carriers) and Title III of that Act (Special Provi-

sions Relating to Radio). The Commission’s general

authority to make allocations and to authorize and is-

sue licenses to use the radio spectrum appears in Title

IIT. 47 U.S.C. §§ 301, 303, 307-309. All participants in

the mcbile radio communications field are subject to

these provisions. Title III prescribes the standard to

govern Commission action: ‘‘publie convenience, inter-

est or necessity’’. 47 U.S.C. §§ 307 and 309. It requires

that applications shall specify the ‘‘financial,’’ ‘‘char-

acter,’’ and other qualifications of the applicant (47

U.S.C. §§ 308(b) and 319); and, amoung other proce-

dural rights, it guarantees to ‘‘any party in interest”’

the right to file a petition to deny an application and

the right to a hearing if ‘‘a substantial and material

question of fact is presented’’. 47 U.S.C. § 309. And

it includes provisions to prevent or penalize defined

activities which are in restraint of trade or which are

monopolistic. 47 U.S.C. §§ 3138 and 314.

Title II of the Act applies to all communications

common carriers, whether by wire or radio. ‘‘Common

earrier’’ is defined as ‘‘a person engaged as a common

earrier for hire’’. 47 U.S.C. §153(h). In addition to

the requirement that common carriers must serve all

‘‘upon reasonable request therefor’’ (47 U.S.C. § 201),

Title II requires that the charges, practices, etc., of

common carriers shall be ‘‘just and reasonable,’’ and

it outlaws ‘‘unjust or unreasonable discrimination in

charges, practices,’’ unreasonable preferences by com-

mon carriers, ete. 47 U.S.C. §§ 201, 202(a). It provides

injured persons with a private remedy for damages

resulting from common carrier fault. 47 U.S.C. § 207.

It prohibits interlocking directorates among common

earriers. 47 U.S.C. § 212.

Jurisdiction with respect to ‘‘charges, classifica-

tions, practices, services, facilities, or regulations’”’

over common carriers in intrastate commerce is exclu-

sively vested in state commissions when such matters

are regulated by state law, and Commission authority

is explicitly precluded when the states provide for such

regulation. 47 U.S.C. § 221(b). The FCC has the right

and duty to regulate such matters in the absence of

state regulation. Ibid.

The Act contains no authority for the Commission to

exempt a common carrier from its provisions or from

the prescribed regulatory provisions. There is no pro-

vision for ‘‘contract”’ carriers: i.e., for carriers to pro-

vide for-hire, for-profit service to others on a ‘‘non-

common”’ carrier basis. There are only two categories

under the Act and the regulations prior to the present

order: service to the public, by common carriers; and

service for one’s own use, either on an individual or

cooperative (not-for-hire, non-profit) basis.

C. Proceedings Before the FCC

In the present rulemaking order affirmed by the

Court of Appeals, the FCC allocated 115 MHz of the

BLEED THF OUGH

public domain (i.e., the radio spectrum) in the 806-

960 MHz band to accommodate present and antici-

pated future land mobile service needs to approxi-

mately the end of the century. This is nearly three

times the amount of spectrum heretofore allocated to

all land mobile services combined.

1. AT&T; The Cellular System; Interconnection. Of

the 115 MHz, the FCC allocated 40 MHz for develop-

ment and licensing of a new and untried common car-

rier ‘‘cellular’’ mobile radio system, to furnish radio-

telephone and dispatch services. It is not scheduled to

become operative on a general basis until at least some-

time in the 1980s. This is a complex system which has

largely been devised by AT&T to provide mobile radio

service. As the Court of Appeals found, ‘‘AT&T is the

likely recipient of a virtual monopoly in the operation

of cellular systems’’. (Pet. App. 11a). The magnitude

of this monopoly ean be illustrated by the fact that

AT&T claims to have spent $20 million on its develop-

ment to date, and anticipates that additional millions

will have to be spent through 1978.

The Commission also relieved AT&T of its obliga-

tion to provide interconnections with the telephone

system to other radio carriers. (The Court of Appeals

characterized this as ‘‘somewhat puzzling’’, saying that

‘‘the Commission has given no justification’’ for it, and

that ‘‘[a] substantial anticompetitive impact seems

almost inevitable’. (Pet. App. 12a, fn. 29). (The court

nevertheless affirmed).

18 This part of the spectrum had previously been reserved for

UHF-TV channels, federal government radiolocation operations,

broadcast auxiliary services and industrial, scientific and medical

equipment.

2. SMRS; Motorola; Preemption. The FCC also al-

located 30 MHz for non-cellular service to private and

all other users, to be operated on a non-common car-

rier basis; and it kept 45 MHz in reserve. It made no

other provision for public use; it refused to make an

allocation for common carrier operation (which would

have been available for licensing to the RCCs) except

for the cellular system. Service to the public, in the

newly allocated 30 MHz band, apart from ‘‘private

users’’ (which is not at issue in this appeal), is to be

provided solely by unregulated ‘‘entrepreneurs’’ op-

erating on a for-hire, for-profit basis, but freed from

the substantive and procedural regulatory provisions

applicable to common carriers. This newly-invented

eategory is referred to in the Commission’s order as

‘Specialized Mobile Radio Systems’? (SMRS).

For the first time in history, the Commission autho-

rized radio equipment manufacturers, including Mo-

torola, Ine., the dominant manufacturer and supplier,

to qualify for this service and to enter the field as ver-

tically-integrated entrepreneurs (see infra).

As part of its deregulation of this service, the Com-

mission ‘‘preempted”’ state jurisdiction to issue certi-

ficates of convenience and necessity as a precondition

to entry, on the ground of federal ‘‘primacy’’.* It ex-

“The FCC originally preempted all state regulation of SMRS

(then known as ‘‘common user systems’’), but on reconsideration

it professed to preempt state jurisdiction over SMRS entry into the

field—the indispensable basis of state enforcement powers and

authority—and to ‘‘defer judgment as to any action by the states

relating to the regulation of other aspects of SMR operations.”’

(Pet. App. 189a.) It warned, however, that ‘‘rate-struetured, com-

mon-carrier-type regulation is inconsistent with the free-market

competitive environment we feel is necessary’’. (/bid.).

RLEED THROUGH

plained its surgical operation on the Act and on state

jurisdiction as necessary ‘‘to shed this heavy cloak

[common carrier provisions of the Act] and exchange

it for one with far greater flexibility’? (Pet. App. 59a).

The Commission confessed that this sweeping de-

regulation was ‘‘not free from doubt’’. (Pet. App.

157a). The Court of Appeals nevertheless affirmed

(see infra).

D. The Decision Below

Petitioners sought review of the FCC order by the

Court of Appeals pursuant to 47 U.S.C. §402(a) and

28 U.S.C. § 2342. Petitioner sought a stay pendente

lite, and by order entered June 10, 1975, the Court of

Appeals (Wright and MacKinnon, JJ.) stayed the

FCC order pending appeal ‘‘to the extent that it au-

thorizes the assignment or operation of radio spectrum

space to Specialized Mobil[e] Radio Systems’’. It did

not stay the portion of the order relating to private

users (which is not at issue in this appeal), or to cellular

systems which are not scheduled for operation in any

form until at least 1978.”

On the merits, the Court of Appeals (Tamm, Mac-

Kinnon and Wilkey, JJ.), per Wilkey, Circuit Judge,

affirmed the FCC order in toto. In substance, in a de-

cision which we respectfully characterize as at least

unusual, the court found as follows:

*On July 31, 1975, the Ilinois Bell Telephone Company (an

AT&T subsidiary) filed for authority from the FCC, pursuant to

the instant decision, to construct and operate a commercial ‘‘cellu-

lar’’ mobile radio system in the Chicago metropolitan area, esti-

mated to require an additional investment of at least $23.5 million

through 1978. In the Matter of Application of Illinois Bell Tele-

phone Company, File No. 20115-CD-P-(—)-76. This application

is pending.

1. On the Monopoly-Antitrust Issues:

a. AT&T. The court below found that under the FCC

order AT&T ‘‘is the likely recipient of a virtual mo-

nopoly in the operation of cellular systems’’; that

“this will result in significant increases in its market

power’’; that AT&T ‘appears likely to dominate sub-

stantially the field of radio telephone service, which

has heretofore been occupied in significant part by

small radio common earriers [the RCCs represented

by petitioner] operating in a highly competitive en-

vironment”’; that ‘‘[t]his threat [of AT&T dominance

of radiotelephone service] is made more severe by the

1975 Order’s elimination of a requirement that wire-

line operators offer to connect radio common carriers

into their systems’? (it found the FCC’s decision to

this effect unexplained and ‘‘somewhat puzzling’’) ;*

that AT&T ‘will become a significant force in the now

highly competitive market for private dispatch serv-

ices’’;"* and that the FCC provisions in the orders

under review to minimize such anticompetitive be-

havior (principally relating to accounting) ‘likely

... Will prove largely cosmetiec.’’ (Pet. App. 11a-13a).

The court nevertheless affirmed, stating that ‘‘we are

16 ATE&T’s continuing resistance to the interconnection of its

facilities with other communications systems has been ventilated

in various forums. See, e.g., Bell Telephone Company of Pennsyl-

vania V. FCC, 503 F.2d 1250 (38d Cir. 1974), cert. den. 95 S.Ct.

2620 (1975) (interconnection with specialized common carriers for

FX and CCSA private line service) ; Carterfone, 13 F.C.C. 2d 420

(1968), recon. den. 14 F.C.C. 2d 751 (1969) (interconnection of

private radio systems).

17 The Court of Appeals further states that it ‘‘is unclear whether

the authorization to engage in dispatch service is in violation of

the 1956 Western Electric consent decree.’’ But it affirms without

deciding this issue.

—_ : PASAT AOE RES TLRS DERE IIR TEI OM

eA A SEAN TAT RE ILLIA 7 PEER RTI BRIS AIS -

RLEED THF OUGH

not unaware of substantial anticompetitive effects

which may become more apparent as the date for gen-

eral implementation of the [cellular] systems draws

nearer. ... We make no comment upon the possible

success of any antitrust actions which may in the fu-

ture be brought’’. (Pet. App. 38a).

b. Motorola. The court found that the unprecedented

authorization to Motorola to operate as a radio carrier

on a vertically integrated basis is a ‘‘ potential threat’’

to competition and to small radio carriers. (Pet. App.

30a). The court held that the FCC’s authorization to

Motorola ‘‘could discourage competition’? and ‘‘may

provide cause for independent antitrust actions’’. (Pet.

App. 80a-31la). It nevertheless affirmed.

2. On the Common Carrier Issue: The court also

affirmed the FCC order relieving entrepreneurial, for-

hire, for-profit operators providing service to the pub-

lic in the 30 MIIz segment of the allocated spectrum

(the SMRS) from the common carrier regulatory pro-

visions of the Act. The FCC’s basis for its action was

its theory that it has the discretion to ‘‘econfer or not

confer common earrier status on a given entity, de-

pending upon the regulatory goals it seeks to achieve”’

(Pet. App. 26a), a theory which the FCC itself con-

fessed is ‘‘not free from doubt’? (Pet. App. 157a). The

court below sustained the FCC’s action on different

grounds, neither considered nor discussed by the FCC:

i.e., that these SMRS operators, although authorized

to serve the public, might choose to serve only selected

members of the public, and not to serve the public

‘‘indifferently’’. The court held that if the operators

discriminate in this fashion among those seeking serv-

ice from the public domain, they would not be ‘‘com-

mon carriers’’. The court conceded that the Commis-

sion’s order authorizes the SMRS to serve the public

generally, but it affirmed, stating that if the SMRS

do so the order ‘‘will be open to renewed attack’’. (Pet.

App. 33a).

3. On the Preemption Issue: The FCC preempted

state jurisdiction on the grounds that it has discre-

tionary power to do so in the interest of facilitating its

overall plan, whether or not SMRS are considered to

be common carriers. The court sustained preemption,

but on a different ground: i.e., on the basis of its holding

that the SMRS are not common carriers.

REASONS FOR GRANTING THE WRIT

Petitioner respectfully submits that an extraordi-

nary number of reasons demonstrates that the writ of

certiorari should issue:

A. In Summary

1. The importance of the case merits review by this

Court.

2. The decision of the Court of Appeals is in con-

flict with decisions of this Court: Gulf States Utilities

Co. v. FPC, 411 U.S. 747 (1973) (the monopoly issue) ;

FPC v. Texaco, Inc., 417 U.S. 380 (1974) (deregula-

tion); SEC v. Chenery Corp., 318 U.S. 80 (1943)

(principles of appellate review) ; Head v. New Mezico

Board of Examiners, 374 U.S. 424 (1963) and Florida

Lime and Avocado Growers v. Paul, 373 U.S. 132

(1963) (preemption).

3. The decision of the Court of Appeals determines

fundamental questions as to the interpretation and

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EDEL OLED EE EN SEER LN eb SEBPLBLRS AX ET

application of the Communications Act of 1934 in con-

flict with that Act and applicable law.

4. The decision of the Court of Appeals determines

questions of fundamental importance in the interpre-

tation and application of the Communications Act of

1934, which have not heretofore been ruled upon by

this Court, but should be decided by it.

5. The decision of the Court of Appeals affirms the

preemption of state jurisdiction by agency decree in

direct violation of the specific direction of the Com-

munications Act of 1934 and in conflict with the rul-

ings of this Court.

6. The decision of the Court of Appeals violates the

fundamental Chenery rule: that a reviewing court may

not affirm agency action on grounds radically different

from those which impelled the action of the agency

itself. This case demonstrates the reason for the rule

(see infra).

7. The decision of the Court of Appeals is predi-

eated upon an erroneous judgment as to the role of

an appellate court reviewing an administrative rule-

making order of a regulatory agency: that is, instead

of reversing agency actions which the Court of Ap-

peals found to violate and to require and authorize

violations of law, the court ordered that the agency’s

order should stand, subject to future challenge.

B. Argument

1. Importance of the Case. The FCC order is of

fundamental importance to the mobile radio industry ;

to the 550 independent, small RCCs; to four million

present users; to many publie agencies; to American

business enterprises which require access to the essen-

tial instruments of mobile radio communication and

require it on non-discriminatory terms in order to

compete; to basic antitrust and antimonopoly objec-

tives of our law and national policy; to the definition

and application of the ‘‘common carrier’’ concept

which is fundamental to the Communications Act and

other laws; to federal-state relations; to the interpre-

tation and application of the Communications Act;

and to the principles of judicial review of agency

action.

2. Conflict with Decisions of this Court.

a. Gulf States Utilities Co. v. FPC and the monop-

oly issue. The statutory standard controlling FCC ac-

tion is ‘‘publie convenience, interest, or necessity’’. 47

U.S.C. $303. In Gulf States this Court held that the

‘‘public interest’? standard requires application of

antitrust standards by administrative agencies as a

‘‘first line of defense against those competitive prac-

tices that might later be the subject of antitrust pro-

ceedings’’. 411 U.S. at 760. The decision below is in

direct conflict with Gulf States which the court neither

cites nor seeks to reconcile with its decision.

(1) AT&T. The Court of Appeals found that the

FCC's order conferred a ‘‘virtual monopoly’’ of the

cellular system on AT&T; that it bestowed upon AT&T

substantial dominance in radiotelephone service to the

prejudice of ‘‘small radio common carriers operating

in a highly competitive environment”’; that it enabled

AT&T to “become a significant force in the now highly

competitive market for private dispatch services”’; and

that it, without explanation, eliminated AT&T’s obli-

gation to provide interconnections. Nevertheless, the

court held that this is not, ‘‘at this time, a breach of

RLEED THROUGH

“A001 ATI

AS.

the broad discretion allocated to the Commission’’. It

asserted that ‘‘there will be ample opportunity to chal-

lenge anticompetitive effects as the time approaches

when they will be felt’. (Pet. App. 14a-16a).*

We submit, first, that, on the merits, this decision is

in conflict with Gulf States and other decisions of this

Court on the monopoly issue and with the specific anti-

monopoly provisions and policies of the Communica-

tions Act (47 U.S.C. §§ 313, 314) ; and second, that the

Court of Appeals’ ‘‘deferral’’ of the monopoly issue

until after millions of dollars are spent on new facili-

ties, many RCCs are driven out of business, vested

interests are created, and much public injury has re-

sulted—is in obvious disregard of the facts and in con-

flict with appropriate principles of appellate review

(see infra).

(2) Motorola, Inc. The Court of Appeals found that

the FCC's unprecedented authorization to radio equip-

ment manufacturers and suppliers, especially to the

dominant supplier, Motorola, also to engage in the

business of providing carrier service on a vertically-

integrated basis is a ‘‘potential threat’’ to competi-

tion and to small radio carriers, and ‘‘may provide

cause for independent antitrust actions’’. (Pet. App.

30a-31a). But it inexplicably held that the authoriza-

tion is justifiable beeause the threat ‘‘arises from eco-

nomie power alone and not from any of Motorola’s

1’ The court did not refer to, or comment upon the implications

of, the Government's antitrust monopoly action against AT&T

secking to break up the Bell System for AT&T’s monopolistic

practices in this precise field. The Government’s complaint explicit-

ly covers AT&T's restrictive and monopolistic practices against

the RCCs. See supra; Complaint ({§28(b), 29(c)) in United

States v. American Telephone and Telegraph Company, et al.,

D.C.D.C. Civ. Action No. 74-1698 (Nov. 20, 1974).

> Fe I OR te ee ee nt ee ee rea |

os oem

mobile radio-related activities.’’ (Pet. App. 30a). The

court notes that ‘‘independent antitrust actions’? may

be brought to challenge the anticompetitive effects re-

sulting from the Commission’s order.

We must respectfully suggest that this reasoning

is insupportable and bewildering. The court does not

question—it affirms—that the FCC order will vest

Motorola with power to injure or destroy competition

in mobile radio communications because of the vertical

integration that it authorizes. Cf., United States v.

Poa: ‘mount Pictures, 334 U.S. 131, 174 (1948). This

power is the direct consequence of the Commission’s

order. The court’s conclusion is in conflict with estab-

lished antitrust law and with Gulf States Utilities Co.,

supra; it is in violation of the ‘‘ public interest”’ stand-

ard as construed by this Court; it is directly contrary

to the provision of the Communications Act specifically

providing that the antitrust laws are applicable to

‘*manufacture and sale of’’ radio apparatus. 47 U.S.C.

\ 315. Further, the court’s affirmance of the order with

respect to Motorola on the basis that future ‘‘inde-

pendent antitrust actions’? may be brought is an er-

roneous view of the responsibility of an appellate court

reviewing agency action.

We respectfully submit that the reviewing court is

not justified in affirming agency action in the face of

antitrust findings such as those in this case, and re-

mitting the parties and the public interest to possible

remedies after the damage is done.

b. FPC v. Texaco, Inc., and deregulation. In affirm-

ing the Commission’s extraordinary departure from

the mandate of the Communications Act in the inter-

ests of deregulation, the Court of Appeals does not

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Webehch aaa

cite or discuss this Court’s holding in FPC v. Texaco,

Inc., 417 U.S. 380 (1974). In that case, on the basis

of a rulemaking proceeding and a public interest ra-

tionale of much greater force than in the present case,

the FPC had substituted for the rate regulation pro-

cedures and standards of the Act (15 U.S.C. §§ 717e

and 717d), a ‘‘regulatory plan’’ by which adjustments

and refunds would be made in the rates charged by

small producers of natural gas if the market prices

realized were unreasonably high. This Court set aside

the FPC’s order. It ruled that the FPC does not have

the power ‘‘to set at naught an explicit provision of

the Act’”’ (417 U.S. at 394), or to substitute for regula-

tory jurisdiction which the Act mandated, a scheme by

which the market place would be the regulator (pre-

cisely what the FCC purports to do in the present case).

417 U.S. at 395-399. As Mr. Justice White observed,

writing for the unanimous Court, the Act ‘‘does not say

a little unlawfulness is permitied’’. 417 U.S. at 399.

In the present orders, the FCC does not even pur-

port to comply with the Act by substituting a different

type of regulation. It boldly affirms that its purpose

is completely to deregulate: in the Commission’s words,

‘to shed this heavy cloak [common carrier provisions

of the Act] and exchange it for one with far greater

flexibiiity’’. (Pet. App. 59a). To achieve this goal, the

FCC created a category of entrepreneurs which, as

the Court of Appeals stated, ‘‘are not required to be-

have and thus be regulated, as common earriers’”’.

(Pet. App. 29a). The Commission totally relieved the

for-hire for-profit purveyors of entrepreneurial com-

munications services to the publie (the SMRS) from

the substantive and procedural regulations of the Act:

from the hearing requirements—frequencies are to be

assigned ona ‘first-come, first-served”’ basis (Pet. App.

Se pif SNM ADLER LEAH LEONE LELAND ELISE OT HITE I

7a); from the requirement that their charges, prac-

tices, ete., be just and reasonable (47 U.S.C. § 201(b)) ;

from the prohibition against unjust or unreasonable

discrimination in charges, practices, ete., and unreason-

able preferences (47 U.S.C. § 202(a)); from state jur-

isdiction and oversight over intrastate operations (47

U.S.C. §§ 152(b) and 221(b)) ; from the required show-

ing of character and financial qualifications (47 U.S.C.

§ 308(b)) ; from the prescribed public notice and wait-

ing period (47 U.S.C. §309(f)); and from the right

of parties in interest to contest license applications

(47 U.S.C. §309(d)). Cf. Ashbacker Radio Corp. v.

FCC, 326 U.S. 327 (1945).

It did so in the interests of a grand design to pro-

mote more effective use of the spectrum, as it con-

ceived of it, and to avoid procedural burdens. But

neither these nor any other objectives sanction Com-

mission defiance of the statute. It is supposed to ad-

minister the statute, not to violate or rewrite it. As

stated by this Court in Tezaco: ‘‘The Commission may

have great discretion as to how to insure just and rea-

sonable rates, but it is plain enough to us that the Act

does not empower it to exempt small producer rates

from compliance with that standard.”’ 417 U.S. at 394.

ce. Head v. New Mexico Board of Examiners; Flor-

ida Lime and Avocado Growers v. Paul; preemption.

This Court has repeatedly insisted that federal pre-

emption of state authority is a power that must be

exercised only in clear cases and upon a clear showing.

The test is that state statutes may not be preempted

unless there is found ‘‘ ‘such actual conflict between

the two schemes of regulation that both cannot stand

in the same area, [or] evidence of a congressional de-

sign to preempt the field.’ Florida Lime and Avocado

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Growers v. Paul, 373 U.S. 132, 141, 83 S.Ct. 1210,

1217.’’** The congressional design in the present case

is precisely the opposite. It affirmatively prescribes

state jurisdiction which is the basic regulatory ma-

chinery of the Act. And certainly, there is no evidence

of ‘‘actual conflict between the two schemes of regula-

tion.’’ They have existed side-by-side for more than

30 years during which the industry has experienced

remarkable growth and development and public serv-

ice has expanded spectacularly.

Obviously, this is in precise contradiction of the

standards set by this Court (supra). The Commission

rested its decision to ‘‘preempt’’ on the grounds of

‘federal primacy’’—a claim of power which violates

our concepts of federal-state relationships and the

clear directions of this Court.

The Court of Appeals affirmed the Commission’s

preemption order, but on a somewhat different ground.

The court held that since the Commission had ex-

cluded the SMRS, as a matter of federal law, from

regulation as common carriers, ‘‘it follows that any

state regulation inconsistent with the policy adopted

may be pre-empted’’. As we shall discuss, the court’s

basic premise—that the Commission may validly ex-

clude the SMRS from regulation under federal law—is

clearly incorrect. They are ‘‘common ecarriers’’ and

must be subjected to regulation under federal and state

law as such. In any event, we submit that agency pre-

emption of state authority in a rulemaking proceeding,

prior to any experience, is at least suspect. In fact, if

the SMRS are not common carriers, preemption would

be idle and unnecessary since the state regulatory stat-

utes apply only to ‘‘common carriers.’’ If the SMRS are

1° Head v. New Mexico Board of Examiners, supra, 374 U.S. at

430. }

common carriers, as we submit, preemption is a sub-

version of the clear, explicit mandate of the Com-

munications Act and can, at best, be explained as based

upon anticipated convenience and not upon the ‘‘actual

conflict’ required by this Court’s standard.

d. SEC v. Chenery Corp: rule governing appellate

review of agency action. As we have described, the

Court of Appeals sustained the Commission’s decision

to deregulate the SMRS, but it rejected the Commis-

sion’s basis for deregulation. The Commission held that

it had discretionary authority to classify operators

as common carriers or non-common carriers. The

Court of Appeals emphatically rejected this claim of

‘‘unfettered discretion in the Commission to confer

or not confer common carrier status”? (Pet. App. 26a).

But it then proceeded to support the Commission’s

conclusion by holding that the SMRS are not common

carriers. Its basis was that, although the order au-

thorized the SMRS to serve the public, they might

choose not to do so, but to serve only selected custo-

mers.

The Commission, however, proceeded on the prinei-

ple, an essential part of its design, that service to the

publice—to the vast category of potential users—would

be provided by the SMRS. It assumed that the SMRS

would offer its service ‘to whatever public its service

may legally and practically be of use’? (Pet. App. 23a).

It made no other provision for general publie access to

the vast public domain which it allocated, except for the

cellular systems which are not expected to be in opera-

tion until the 1980s,

The Court of Appeals, seeking a way to affirm the

deregulation order, undermined this basic part of the

Commission’s order. In effect, the court’s action would

penalize any SMRS that offered to serve the public

generally. It would then, according to the court, be

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operating as a common carrier, and since it would not

be in compliance with the regulatory provisions of the

Act and of state law, it would be operating illegally.

The court’s decision that the SMRS are not common

carriers is incorrect, as we shall show. But, apart from

this, its grounds for sustaining deregulation are in

clear conflict with the principle which this Court has

characterized as ‘‘a simple but fundamental rule of

administrative law,’’ SEC v. Chenery Corp., 332 U.S.

194, 196 (1947), namely, that ‘‘an administrative or-

der cannot be upheld unless the grounds upon which

the agency acted .. . were those upon which its action

ean be sustained.’’ SEC vy. Chenery Corp., 318 U.S.

80, 95 (1948).

3. The Common Carrier Issue. The Court of Ap-

peals sustained the Commission’s deregulation of en-

trepreneurs authorized to serve the public on a for-

hire, for-profit basis (SMRS) on the grounds that

they are not ‘‘common carriers”’ as defined in the Act,

although, the court stated, they might become common

earriers if, as authorized by the Commission’s order,

they should in practice offer to serve the public gen-

erally.” The Court conceded that ‘it is undisputed

that they [the SMRS] would be permitted [under the

Commission’s order] so to hold themselves out if they

desired’’ (Pet. App. 26a); but it concluded that this

‘is not a sufficient basis for imposing the burdens that

go with common carrier status.’’ (Ibid.).

20The Commission’s second order purported to restrict the

SMRS to provide service only to ‘‘eligibles’?’ under Parts 89, 91

and 93 who may qualify for ‘‘private user’’ status. But these

‘‘eligibles’’ include virtually all conceivable members of the public

who might seek mobile radio service. The Court of Appeals rejected

the obviously spurious and insupportable suggestion that this

device converts the SMRS into some sort of ‘‘private’’ rather than

‘‘public’’ carrier (Pet. App. 23a).

The definition of ‘‘common carrier’? (47 U.S.C.

§153(h)) is an issue of recurring importance under

the Communications Act.” It is also of great impor-

tance with respect to the administration of other reg-

ulatory statutes, such as the Interstate Commerce Act,

the Federal Aviation Act and the Shipping Act, par-

ticularly in light of the current public debate concern-

ing deregulation. This Court has not ruled upon the

question for purposes of the Communications Act, but

should do so.

We respectfully submit that the decision of the court

below is clearly in error. The SMRS, under the FCC’s

order, are authorized and expected to serve the public.

Where an entrepreneur is granted a franchise to serve

the public under the Act, he is obliged to serve the

public. The Communications Act provides that a com-

mon carrier must serve the public ‘‘upon reasonable

request’’. 47 U.S.C. § 201(a). Classification as a com-

mon carrier does not depend upon whether he in fact

fulfills the obligation that is implicit in his license to

serve the public. It may be true that common carrier

status ean be voluntarily incurred by performance, i.e.,

by offering service to the public; but it does not follow,

logically or legally, that voluntary non-performance

21 See, e.g., National Association of Regulatory Utility Commis-

toners v. FCC, No. 75-1075, — U.S. App. D.C. —, — F.2d —

(February 10, 1976) (use of cable television access channels for

two-way point-to-point non-video communications service is common

carriage); Frontier Broadcasting Co. v. Collier, 24 F.C.C. 251

(1958) and Philadelphia Television Broadcasting Co. v. FCC, 123

U.S. App. D.C. 298, 359 F.2d 282 (1966) (conventional CATV

systems not common carriers); Computer Inquiry, 28 F.C.C, 2d

267 (1971) (establishing standards for distinguishing between

data processing services and common carriage involving data com-

munications) ; Industrial Radiolocation Service, 5 F.C.C. 2d 197

(1966) (radiolocation service not communications common car-

riage).

LO US SER ORR RTA. A HN TRESS HT A BELT AMATI AN TRE AIIM,

BLEED THROUGH

relieves a common carrier of his responsibilities to be

licensed and regulated under law.

The Communications Act contains no provision for

exempting common carriers from its regulatory pro-

visions. It contains no provision for ‘‘contract’’ car-

riers who may pick and choose among the public to be

served. On the contrary, it permits only the licensing

of operators for their own private use, on a single or

cooperative basis, or as common carriers to serve the

public without discrimination and on ‘‘reasonable re-

quest’’.”?

The FCC recognized that the ‘‘entrepreneur-oper-

ated’? SMRS ‘‘could be licensed as common carriers

and regulated under Title IT of the Communications

Act”? (Pet. App. 54a). It decreed that it would not

do so on the grounds that it had discretion to make

such a decision—a conclusion which it admitted was

‘‘not free from doubt’’. The Court of Appeals rejected

its claim of ‘‘unfettered discretion’’, but then errone-

ously proceeded to construct a definition which, if al-

lowed to stand, would undermine the fundamental pur-

pose of the common carrier requirement: to require in-

discriminate service to all of the public in exchange

for the right to use the public domain ‘‘for-profit’’ and

‘*for-hire’’, on an entrepreneurial basis.

We submit that the decision below is in error and

that it is of such great importance that this Court

should review the issue.

4, The Preemption Issue. As discussed above, the

FCC’s claim of power to preempt, and the Court of

Appeals’ refusal to reverse its preemption decision, are

22 See, e.g., United States v. Drum, 368 U.S. 370, 375, 376 (1962)

(Motor Carrier Act of 1935) (application of the concept requires

‘‘reference to the clear but broad remedial purpose of a regula-

tory statute committed to agency discretion’’).

clearly erroneous. This is a recurring issue of vital im-

portance which this Court should review.”

5. The Function of Appellate Review. This Court

should grant review of the question precipitated by the

decision of the court below: the function of an appellate

court reviewing an administrative order in a rulemak-

ing proceeding: viz., whether it is the reviewing court’s

duty to decide the issues presented, and not to rubber-

stamp agency action, despite substantial infirmities, on

the grounds that future private or administrative ac-

tion may be available.”

The Court of Appeals in this case made findings of

palpable departures hy the FCC from the mandate of

the Communications Act and the law with respect to

22The FCC's power to preempt state regulation is also being

addressed by Courts of Appeals in various other current or pend-

ing cases where the FCC has recently asserted such power. See,

e.g., National Association of Regulatory Utility Commissioners v.

FCC, No. 75-1075, — U.S. App. D.C. —, — F.2d — (February

10, 1976) (FCC preemption of state jurisdiction over cable tele-

vision leased access channels used for two-way point-to-point non-

video communications services set aside) ; Telerent Leasing Corp.,

45 F.C.C. 2d 204 (1974), appeal pending North Carolina Utilities

Commission v, FCC, No, 74-1220, ef al., (4th Cir.) (FCC preemp-

tion of state jurisdiction over telephone station equipment) ; AT&T,

56 F.C.C. 2d 14 (1975), appeal pending California Public Utilities

Commission v. FCC, No, 75-2060, et al., (D.C. Cir.) (ICC pre-

emption of state jurisdiction over FX and CCSA private line

service interconnection) ; Interstate and Forcign Message Toll Tele-

phone Service, 56 ¥F.C.C. 2d 593 (1975), appeal pending North

Carolina Utilities Commission v. FCC No. 76-1002, et al., (4th

Cir.) (FCC preemption of state jurisdiction over customer-pro-

vided telephone equipment).

24The Administrative Procedure Act, 5 U.S.C. § 706(2), pro-

vides that a reviewing court shall ‘‘hold unlawful and set aside

agency action... found to be... not in accordance with law;

. . in excess of statutory jurisdiction, authority or limitations,

or short of statutory right’’.

Re SO a

the antitrust component of the ‘‘public convenience,

interest or necessity’’ standard of the Act and its com-

mon carrier requirements. But the Court of Appeals

refused to set aside the Commission’s order on the

apparent grounds that attack should await implemen-

tation of the order.

The Court of Appeals says that the cellular system

allocation ‘‘may be subject to successful challenge at

some future date’’ (Pet. App. 16a) ; it affirms the un-

precedented authorization to Motorola to obtain li-

censes to operate base stations and to deploy its verti-

cally integrated power, which, it acknowledges, ‘‘could

discourage competition’? and ‘‘may provide cause for

independent antitrust actions’ at a later date; it holds

that the FCC order authorizes the SMRS to operate as

common carriers, and that if ‘‘SMRS in practice be-

have as common earriers,’’ the FCC’s order ‘‘will be

open to renewed attack’’. (Pet. App. 33a). Despite all

of these infirmities, the Court of Appeals affirmed.

Petitioner submits that the court’s affirmance of the

FCC’s order, despite this extraordinary series of legal

infirmities in the order, and its insistence that effective

judicial review must wait until the damage is done,

is a novel and important restriction of the function and

duty of a reviewing court in a rulemaking proceeding

which should be reviewed by this Court.

For the reasons stated, a writ of certiorari should

issue to review the judgment and opinion of the United

States Court of Appeals for the District of Columbia

Circuit.

Respectfully submitted,

ABE Fortas

Kennetu E. HarpMan

Fortas AND KoveN

1200 Twenty-ninth Street, N.W.

Washington, D. C. 20007

Telephone (202) 337-5700

Attorneys for Petitioner

National Association of

Radiotelephone Systems

February 25, 1976

TABLE OF CONTENTS

Page

APPENDIX A, Opinion of the United States Court

of Appeals for the District of Columbia Circuit .. 1a

APPENDIX B, Second Report and Order of the Fed-

eral Communications Commission .............. 34a

APPENDIX C, Memorandum Opinion and Order (Re-

consideration) of the Federal Communications

PE SbwkndgotuiNenadecdadbuscachedbacs 135a

APPENDIX D, Memorandum Opinion and Order of

the Federal Communications Commission Denying

Further Reconsideration ...................... 267a

APPENDIX E, Federal Communications Act of 1934,

as amended, 47 U.S.C. § 151 et seq. ............. 274a

DUMARi chi 045 1s 6s Gv dehegedahecancendes snl 274a

| RAP ery ha een nt 275a

EEN Sdnestdees nGsnbpeeenatd danse vebenkinl 276a

DE ckacannnes 4444s saben doeneussiveawened 277a

BEE SSG 05 aden Skandia ds kuaue eke terinreun 278a

DEE dekéaedikdbba nls cisaeeenreteh teat 278a

DE Hea Nidep sak esedadanendexekscacesuewe 279a

DE SLAs abe eNed eRedweeedh each eea en sn el 280a

Berrie pcs oe porn ramrre Oe 282a

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DM Lchivaevestetskvehedvededeeenedeebant 288a

DE Geacebwavesavkvekeekneeaeese abate 289a

SE Sete iu cchenguchsadegeadeak chee eeeubel 291a

APPENDIX F, Federal Administrative Procedure

ee es ee OO ov vnnne ba dadvcevenzent 293a

SU Saas Vuhele goes sun eevasaiWevbeelweewne 293a

SSRs 8S IPED

BLEED THROUGH

IN THE

Supreme Court of the United States

OcToBER TERM, 1975

NATIONAL ASSOCIATION OF RADIOTELEPHONE SYSTEMS,

Petitioner,

Vv.

FEDERAL COMMUNICATIONS CoMMISSION, et al.,

Respondents.

PETITIONER’S APPENDIX

[654]

APPENDIX A

UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Nos. 74-1555, 74-1585, 74-1659, 74-1696.

NaTIoNAL AssociaTION OF ReGuLATORY UTILITY

Commissioners, Petitioner,

FreperaL CoMMUNICATIONS CoMMISSION

and United States of America, Respondents,

American Telephone and Telegraph Company, the Na-

tional Association of Business & Educational Radio,

Inc., General Electric Company, the Special Industrial

Radio Service Assn., Inc., the Central Committee on

Telecommunications of the American Petroleum Insti-

tute, Utilities Telecommunications Council, North Caro-

lina Utilities Commission, South Carolina Public Serv-

ice Comm., the People of the State of California and

the Public Utilities Commission of the State of Cali-

fornia, Intervenors.

NationaL AssociaTION oF RaDIOTELEPHONE SysTEMs,

Petitioner,

FeperaL Communications Commission and United States

of America, Respondents, The National Assn. of Busi-

ness & Educational Radio, Inc., A. T. & T. Inc., General

Electric Co., Special Industrial Radio Service Assn.,

Inc., Motorola, Inc., and Airsignal International, Inc.,

Intervenors.

Inurnois Association OF RaDIOTELEPHONE Systems, Inc.,

Petitioner,

FreperaL Communications Commission and United States

of America, Respondents, American Telephone and

Telegraph Company, National Association of Business

& Educational Radio, Ine., and General Electric Com-

pany, Intervenors.

Ram Broapcastinc Company, Petitioner,

FreperaL ComMMuUNICcATIONS CoMMISSION

and United States of America, Respondents,

National Association of Business and Educational Radio,

Ine., and General Electric Company, Intervenors.

[655]

Argued 12 Sept. 1975.

Decided 5 Jan. 1976.

[657]

Petitions for Review of an Order of the Federal

Communications Commission.

Kenneth E. Hardman, Washington, D.C., with whom

Paul Rodgers, Washington, D.C., was on the brief for peti-

tioner in No. 74-1555.

Abe Fortas, Washington, D.C., for petitioner in No. 74-

1585.

John EK. Ingle, Counsel, F.C.C., with whom Ashton R.

Hardy, Gen. Counsel, Daniel M. Armstrong, Acting Asso-

ciate Gen. Counsel, F.C.C. and Carl D. Lawson, Atty.,

Dept. of Justice, were on the brief for respondents. Jo-

seph Marino, Associate Gen. Counsel, F.C.C., at the time

the record was filed, also entered an appearance for re-

spondent F.C.C. Howard E. Shapiro, and Roger B. Ande-

welt, Attys., Dept. of Justice, entered an appearance for

respondent, United States of America in Nos. 74-1555 and

74-1585.

John P. Bankson, Jr., Washington, D.C., for intervenor

National Ass’n of Business and Educational Radio, Ince.

Louis Schwartz, Robert A. Woods and Lawrence M. Mil-

ler, Washington, D.C., were on the brief for petitioner in

No. 74-1659.

[658] James A. Koerner, Washington, D. C., was on a

statement filed in lieu of a brief, for petitioner in No.

74-1696.

Charles A. Horsky, Charles Lister, Washington, D. C.,

Alfred C. Patroll and F. Mark Garlinghouse, were on the

brief for intervenor American Telephone and Telegraph

Co. in Nos. 74-1555—74-1585 and 74-1659. Michael Boudin,

Washington, D. C., also entered an appearance for inter-

venor American Telephone and Telegraph Co.

Wayne V. Black and Larry S. Solomon, Washington,

D. C., were on the brief for intervenor Special Industrial

Radio Service Ass’n, Inc., in Nos. 74-1555 and 74-1585.

Joseph KE. Keller, Wayne V. Black and Larry S. Solo-

mon, Washington, D.C., were on the brief for intervenor

The Central Committee on Telecommunications of the

American Petroleum Institute in No. 74-1555.

RE Di ei et tak cx ound hate ean ks Ne eek

Charles M. Meehan and Peter M. Nemkov, Washington,

D. C., were on the brief for intervenor, Utilities Telecom-

munications Council.

Edward B. Hipp and Robert F. Page, Raleigh, N. C.,

were on the brief for intervenor North Carolina Utilities

Commission.

Richard D. Gravelle, J. Calvin Simpson, San Francisco,

Cal., and Randolph W. Deutsch were on the brief for in-

tervenors State of California and the Public Utilities Com-

mission of the State of California.

Frederick M. Rowe, John L. Bartlett and John B. Wyss,

Washington, D. C., were on the brief for intervenor Mo-

torola, Ine., in No. 74-1585.

Joseph M. Kittner and Edward P. Taptich, Washington,

D. C., entered appearances for intervenor General Electric

Co.

Robert E. Conn and Thomas J. McCabe, Washington,

D. C., entered appearances for intervenor Airsignal Inter-

national, Inc., in No. 74-1585.

M. John Bowen, Jr., Columbia, S. C., entered an ap-

pearance for intervenor South Carolina Public Service

Commission in No. 74-1555.

Before Tamm, MacKinnon and Witkey, Circuit Judges.

Opinion for the Court filed by Circuit Judge Wi_key.

Wirxey, Circuit Judge:

Petitioners seek review of a two-part 1975 F.C.C. Mem-

orandum Opinion and Order’ (hereinafter 1975 Order),

filed in a rulemaking proceeding of which notice was first

1Land Mobile Service, Docket No. 18262, 51 F.C.C.2d 945 (19

March 1975); Land Mobile Service, Docket No. 18262 (16 July

1975) (Proceeding terminated) (J.A. at 537-540).

given in 1968.2 The Order under review adopts the basic

approach, with some modification, of a Second Report and

Order,’ (hereinafter 1974 Order), which issued after two

rounds of comment had been received. This Court has jur-

isdiction to review the Orders under 47 U.S.C. § 402 (1970)

and 28 U.S.C. § 2342 (1970).

The Orders under review deal with the allocation of fre-

quency spectrum, in the 806-921 MHz band, to the land

mobile radio service, and with the development of regu-

lations pertaining to the future use of that spectrum. Land

mobile radio services are radio communication serv-

[659] ices, based on land, where either the transmitting

or receiving station is mobile.‘

Such services are of two general types. Public services

are operated by common carrier licensees and made avail-

able to members of the public. The most common type of

public services are radio telephone services which inter-

connect with existing telephone systems. Private services

apparently include all other mobile radio operations, 7. e.,

those not subject to common earrier regulation. They are

predominantly dispatch services such as those operated by

police departments, fire departments, and taxicab compa-

nies, for their own purposes. However, they are not limited

to services which an operator provides only to itself, but

also extend to services provided to a limited group of

users by third party operators.

The 1974 Order, as modified by the 1975 Order, embodies

three distinct actions. First, it allocates a total of 40 MHz

on the 900 MHz band (825-845 MHz and 870-890 MHz)

* Notice of Inquiry and Notice of Proposed Rule Making, Land

Mobile Use of 806-960 MHz Band, Docket No. 18262, 14 F.C.C.2d

311 (17 July 1968).

% Land Mobile Radio Service, Docket No. 18262, 46 F.C.C.2d 752

(1 May 1974).

*47 C.F.R. § 2.1 (1974).

Fae POS ¥e =. ‘ : — mio 2 A eee rt PT 25h a ed

PISS Nas Sie DRT PST, NORPRO ER a Pe FOR ?

to the development of a nationwide, broad-band ‘‘cellular’’

mobile radio communications system. (Initially, the Com-

mission intends to authorize use of the minimum spectrum

needed for developmental systems.)* Through the use of

expensive and sophisticated new technologies, the cellular

system will make possible more traffic intensity per unit of

spectrum than do present mobile communication methods.

When operative, which will not be before 1978, it is ex-

pected greatly to increase capacity for mobile communi-

cations in urban areas over what is now available. The

cellular system is clearly a public, common carrier system,

and will serve primarily to expand the capacity of radio

telephone service.

The 1974 Order limited the group of eligible applicants

for licenses to operate on these bands, to wireline (tele-

phone) earriers.. The 1975 Order removed this limitation

and extended eligibility to radio common carriers as well.’

Any applicant for a license will nonetheless be required

to demonstrate that it has the resources and technology

for rapid development of a cellular system." As well as

providing radio telephone service, cellular systems are

to be allowed to engage in dispatch operations.’ 46> Beers

pee et ee Le tt tt teed

Second, 50 MHz (806-821 MHz and 851-866 MHz) is al-

located to private services, to be licensed to operators in

the Public Safety, Industrial and Land Transportation

areas, as authorized under 47 C.F.R. 6§ 89, 91, 93. Thus,

under existing regulations, this allocation makes available

°46 F.C.C.2d at 761.

* Id. at 760.

751 F.C.C.2d at 953.

“Id. at 955.

® Jd. at 952, 46 F.C.C 2d at 761.

* Modification per 22 Jan. 1976 Order uf the Court of Appeals.

ee ae ee |

ta fee PF. OE. SUS

additional spectrum for eligible applicants who wish to

obtain a license to operate a station, either for their own

private purposes, or, with several other eligibles, on a

non-profit, cost-sharing basis."* In addition, the Orders

would create a new category of private mobile operators,

eligible for licensing on the 30 MIIz presently being allo-

cated. This new category of operators, known as Special-

ized Mobile Radio Systems (SMRS), would operate on a

commercial basis to provide service to third parties.

[660] Licensing is to be on a first-come, first-served basis,

with SMRS applications treated no differently than

those of other private applicants.'' Because it secks to uti-

lize a profit motive to speed development and refinement

of mobile radio technologies, the Commission concludes

that SMRS should not be subject to the common carrier

regulations of Title II of the Communications Act,” and

that state certification of SMRS should be pre-empted.”

Third and last, the 1975 Order designates the remaining

45 MHz of the total 115 MHz allocation for reserve and

future growth. This aspect of the Order is not challenged

in this proceeding.

I. 40 MHz Allocation for the Creation of Cellular Systems

The power to make this allocation of spectrum for the

development of sophisticated and band-efficient cellular

systems arises, if at all, under 47 U.S.C. § 303(c) and (g)

(1970)."° Section 303 sets forth the Commission’s power

47 CFR. § 89.604 (1974).

"O51 F.C.C.2d at 956-57.

46 F.C.C.2d at 762.

"91 F.C.C.2d at 974.

* Id. at 946.

"47 U.S.C. §303(¢) and (g) (1970) provides:

Except as otherwise provided in this chapter, the Commis-

sion from time to time, as publie convenience, interest, or

‘

and duties in the regulation of radio, and states that the

exercise of all powers should be guided by the require-

ments of ‘‘public convenience, interest, or necessity.’’

The authorizations of powers under subpart (c) to as-

sign bands of frequencies to various classes of stations,

and under subpart (g) to provide for experimental uses

and encourage the more effective use of radio, appear

on their face to justify the allocation at issue here. How-

ever, it has been challenged on a variety of grounds, as

exceeding the discretion allowed the Commission under the

public convenience, interest or necessity standard.

First, the argument is made that the allocation is exces-

sive in light of both the technological requirements for the

development of cellular systems, and the extent of need

which the system will ultimately satisfy. It appears there

is substantial uncertainty as to how much spectrum will

be necessary or desirable for the functioning of cellular

systems, which are now in the developmental stage at

least three years away from operation. In its tentative

First Report, which preceded the 1974 and 1975 Orders

now under review, the Commission proposed an allocation

of 75 MHz." After substantial negative comment was re-

necessity requires, shall

. . 7m > * . . . .

stations, and assign frequencies for each individual station

and determine the power which each station shall use and

the time during which it may operate;

a . > . . * . . .

(g) Study new uses for radio, provide for experimental

uses of frequencies, and generally encourage the larger and

more effective use of radio in the public interest.

First Report and Order, Spectrum Space for Land Mobile

Services, Docket No. 18262, 19 Pike & Fischer R.R.2d 1663, 1664

(1970).

ceived, including reports by the Department of Justice *

and the Office of Telecommunications Policy,’* the con-

clusion [661] was reached in the 1974 Order to reduce

the allocation to 40 MHz.”

AT & T, which initially proposed the cellular system

and is the company now most deeply involved in its devel-

opment, argued in response to that Order for an increase

of the allocation to 64 MHz. It argued that the proposed

reduction to 40 MHz would substantially increase the im-

plementation cost of ‘‘attractive’’ design features then

under development.” At the other extreme, the Report

of the Office of Telecommunications Policy, written in 1973,

concludes that 14 MHz should be adequate for the devel-

opment of a cellular system to meet projected mobile tele-

phone needs.”

The Orders under review reveal that the Commission

has given serious consideration to the arguments raised

as to the extent of the allocation. They reveal also that

the determination of how much band width to allocate to

cellular systems is at once a highly technical and somewhat

speculative undertaking. The amount of spectrum that is

appropriate depends upon an estimate of the nature and

capabilities of technology that is now only partially devel-

DTA ep gnty

** Letter (undated) from the Assistant Attorney General, Anti-

trust Division, U. S. Department of Justice (hereinafter Justice

Dept. Report). (J.A. at 345-353).

* Letter dated 17 August 1973, from the Director, Office of Tele-

communications Policy, and enclosed comments (hereinafter OTP

Report) (J.A. at 328-44).

* 46 F.C.C.2d at 756.

7°51 F.C.C.2d at 948.

** (J.A. at 333). Also, Motorola has argued in some detail that

an allocation of 19 MHz would be sufficient. Motorola Reply Com-

ments at 68-84. (J.A. at 245-70).

2 51 F.C.C.2d at 948 ; 46 F.C.C.2d at 756-57.

a PTE RS NEGRO TEPER ETRE ONE TG TLE LPT, CLINE RE eee |

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oped, and upon projected demands for radio telephone

service.

We conclude that such determinations are precisely the

sort that Congress intended to leave to the broad discre-

tion of the Commission, by imposing a broad public con-

venience, interest, or necessity standard. In cases of such

broad delegations to expert agencies, the standard of re-

view is that of the reasonableness of the conclusions

reached.** In light of the wide ranging arguments as to

appropriate spectrum width, we cannot say that the alloca-

tion of 40 MHz to this experimental mobile radio system

was either unreasonably large or unreasonably small.

More substantial arguments are raised pertaining to

possible anticompetitive effects of the 40 MHz allocation.

It is alleged, first that the allocation will prove in effect to

be a grant to the Bell system of monopoly power over the

urban radio telephone market. Second, it is stated that the

authorization of dispatch service (in all but fleet-dispatch

capacities)** to be performed by cellular systems will re-

sult in a substantial impairment of competition in the now

highly competitive dispatch market. Both of these results

are said to put the Order in violation of the antitrust com-

ponent of the public convenience, interest or necessity

standard.**

23 United States v. Allegheny-Ludlum Steel Corp., 406 U.S. 742,

749, 92 S.Ct. 1941, 32 L.Ed.2d 453 (1972); S. BE. C. v. New Eng-

land Elec. Sys., 390 U.S. 207, 211, 88 S.Ct. 916, 19 L.Ed.2d 1042

(1968); Gray v. Powell, 314 U.S. 402, 411, 62 S.Ct. 326, 86 L.Ed.

301 (1941).

** 51 F.C.C.2d at 952 and n. 16; 46 F.C.C.2d at 761.

25 There is a good deal of authority for the proposition that com-

petitive factors may properly be considered by the Commission

under the public convenience, interest or necessity standard. See

United States v. R. C. A., 358 U.S. 334, 351, 79 S.Ct. 457, 3 L.Ed.2d

354 (1959); F.C. C. v. R. C. A. Comm., Inc., 346 U.S. 86, 94, 73

S.Ct. 998, 97 L.Ed. 1470 (1953); N. B. C. v. United States, 319

ok to telly

lla

[662] On the face of the record, there appears to be

a significant plausibility of both of these assertions.

While the Order provides for separate licensing of individ-

ual cellular systems, and no explicit grant of monopoly

rights to AT & T is made, there is good reason to believe

that AT & T will operate most, if not all, of the cellular

systems eventually put in operation. The cellular system

was initially proposed by AT & T* in response to the

Commission’s First Notice of Inquiry on this Docket, and

AT & T has already made a substantial investment in its

development. In spite of the 1975 Order’s determination

to allow other than wireline carriers to compete for the

opportunity to operate cellular systems, the Commission

itself still believes that only wireline carriers will be able

to demonstrate that they have the resources and expertise

which are a prerequisite to licensing.”

If it is thus true that AT & T is the likely recipient of

a virtual monopoly in the operation of cellular systems,

this will result in significant increases in its market pow-

er, where cellular systems are operative, in two fields apart

from traditional wireline communications.

First, AT & T appears likely to dominate substantially

the field of radio telephone service, which has heretofore

been occupied in significant part by small radio common

carriers operating in a highly competitive environment.**

US. 190, 223, 63 S.Ct. 997, 87 L.Ed. 1344 (1943); Radio Relay

Corp. v. F. C. C., 409 F.2d 322, 326 (2a Cir. 1969). But sec

Hawaiian Telephone Co. v. F. C. C., 162 U.S.App.D.C. 229, 235,

498 F.2d 771, 777 (1974) (F.C.C. may not ‘‘automatically equate

the public interest with additional competition.’’).

Whether and to what extent decisions of the Commission are

reversible for failure to consider particular factors is much less

clear.

7646 F.C.C.2d at 753-54.

*7 51 F.C.C.2d at 953.

** OTP Report, supra note 18, at 8 (J.A. at 337).

BP SE RNS

12a

This threat is made more severe by the 1975 Order’s elim-

ination of a requirement that wireline operators offer to

interconnect radio common carriers into their systems.”

Such substantial domination would be undesirable both

because it would weaken incentives for development of

improved mobile radio systems,*° and because it would

enhance the already enormous overall economic power of

the Bell System.

Second, AT & T will become a significant force in the

now highly competitive market for private dispatch serv-

ices." [663] Whether it will be able to dominate that

market presently appears difficult to determine. One sig-

7°51 F.C.C.2d at 946. See OTP Report. supra note 18, at 12

(J.A. at 341); Justice Dept. Report, supra note 17, at 7 (J.A.

at 351).

This part of the Commission's decision is somewhat puzzling. A

substantial anticompetitive impact seems almost inevitable and

the Commission has given no justification for dropping the inter-

connection requirement except to say that such intereonnection is

“‘unnecessary”’ in light of its decision not to license trunked

systems. We agree with the original recommendations of the Office

of Telecommunications Policy and the Justice Department that

nondiseriminatory interconnections must be assured, but await the

proof by the results.

%° Justice Dept. Report, supra note 17, at 2 (J.A. at 346).

*' It is unclear whether the authorization to engage in dispatch

service is in violation of the 1956 Western Electrie consent decree.

That decree bars AT & T from engaging ‘‘in any business other

than the furnishing of common carrier communications services, ”’

but excepts from the bar ‘‘services incidental to the furnishing

. . . of common carrier communications services.’ United States

v. Western Elec. Co., Civ. No. 17-49, 1956 Trade Cas. § 68,246, at

71,138 (D.N.J. 1956).

Because of our general disposition of these competitive issues,

see infra, we reserve for decision in a future case the issues of

whether the dispatch services to be carried on by AT & T can

be characterized as ‘‘common carrier communications services,”’

and if not, whether the dispatch services carried on are ‘‘inci-

dental.’’

—— - - << + +. tf. =}

l3a

nificant factor is the extent to which AT & T’s other com-

munications activities may facilitate its operations in the

dispateh market.”

Although the Commission has included in the 1975 Order

certain actions that are designed to minimize possible anti-

competitive effects of the Order, it seems likely that they

will prove largely cosmetic. These actions do little or

nothing to curtail the projected market power of AT & T

in either cellular system or dispatch operations. In particu-

lar, the 1975 Order requires that separate companies be

established for the operation of cellular systems, and that

separate account boeks and payrolls be maintained.** This

requirement is designed to prevent eross-subsidization of

the activities of the cellular system by profits of the parent

corporation, as might make possible predatory behavior

against radio common carriers or private dispatch opera-

tors. However, even perceived most favorably, this action

does nothing except attempt to make financially impossible

with AT & T capital predatory behavior which is already

illegal and subject to prosecution under the antitrust

laws.**

The 1975 Order also imposes certain restrictions on the

manufacture, provision, and servicing of equipment for

* See Justice Dept. Report, supra note 17, at 6. (J.A. at 350)

(asserting that ‘‘ [t]he advantages adherent in the telephcne service

monopoly enjoyed by the wireline carriers vis-a-vis potential com-

petitors in other communications services are competitively sig-

nificant.’”).

“51 F.C.C.2d at 951.

*“* Cutting prices below marginal cost in order to discourage eom-

petition is the most blatant form of predatory behavior and, at

least where the price cutter holds significant market power, is

subject to attack under Sherman Act §2, 15 U.S.C. §2 (1970).

E. g., Standard Oil Co. v. United States, 221 U.S. 1, 43. 31 S.Ct.

002, 55 L.Ed. 619 (1910). Sce Areeda & Turner. Predatory Pricing

and Related Practices Under Scction 2 of the Sherman Act, 88

Harv.L.Rev. 697 (1975).

l4a

cellular system operations. Were stringent regulations im-

posed to exclude wireline operators from these related

fields, they might result in other corporations becoming

involved in these manufacture and service functions. Even

then, however, though they would keep AT & T out of these

other fields, they would do nothing to increase competition

for licensing of cellular systems, or to improve the com-

petitive situation in the dispatch market.

Even the modest expectation of increasing competition

in the manufacture, supply and maintenance of equipment

is made doubtful by the narrow scope of the limits imposed

by the 1975 Order.” First, the restrictions apply only with

regard to mobile equipment, and not to the base station

equipment now under development by AT & T. There

appears to be no substantial expectation that any inde-

pendent sources for base station equipment will be devel-

oped. Second, the 1975 Order eliminated the 1974 Order’s

bar on supply and maintenance (as distinguished from

manufacture) of mobile equipment by wireline carriers,

and stated that there would be no automatic bar to use

of carrier-manufactured mobile equipment in the devel-

opmental systems.” The only clear restriction remaining

is a general bar on manufacture of mobile equipment by

wireline carriers, and that will not have unexceptioned

application until the systems become gener- [664] ally

operative, which will not be for at least several years.

In spite of our conclusion that significant anticom-

petitive effects may well result in the form of AT&T

monopolization of cellular operations and impairment of

the now highly competitive dispateh market, the court

holds that the 40 MHz allocation is not, at this time, a

35 51 F.C.C.2d at 951-52.

id. at 952.

BLEED THF OUGH

lda

breach of the broad discretion * allocated to the Commis-

sion under the statute. The anticompetitive effects envis-

ioned above are contingent upon a variety of factors sur-

rounding the development and implementation of cellular

technology. Thus far, the Commission has stated its clear

intention to authorize only a developmental system in the

Chicago area, which will utilize only 12.5 MHz of the 40

MH Zz allocation. The Commission retains a duty of contin-

ual supervision of the development of the system as a

whole, and this includes being on the lookout for possible

anticompetitive effects.** The serious anticompetitive ef-

fects, if they arise at all, will do so only after full imple-

mentation begins.

We are strongly influenced by the position of the Jus-

tice Department in full support of the proposed F. C. C.

Orders.” It is true that the Justice Department has ex-

pressed reservations about several elements of the 1974

Order, and that the 1975 Order does not fully ameliorate

several of Justice’s concerns.*® Nonetheless, the Depart-

** The substantial discretion generally allowed the F. C. C. in

determining both what and how it can properly regulate, is often

attributed to the highly complex and rapidly expanding nature of

communications technology. Because Congress could neither foresee

nor easily comprehend the fast-moving developments in the field,

it ‘“‘gave the Commission not niggardly but expansive powers.’

N. B.C. v. United States, 319 U.S. 190, 219, 63 S.Ct. 997, 1010,

87 I..Ed. 1344 (1943); United States v. Southwestern Cable Co.,

392 U.S. 157, 172-73, 88 S.Ct. 1994, 20 L.Ed.2d 1001 (1968) ;

F. C. C. v. Pottsville Broadcasting Co., 309 U.S. 134, 138, 60

S.Ct. 437, 84 L.Ed. 656 (1940); Philadelphia Television Broad-

casting Co. v. F. C. C., 123 U.S.App.D.C. 298, 300, 359 F.2d 282,

284 (1966).

38 See note 25 supra.

°° Respondent’s Brief is filed jointly by the F. C. C. and the

Justice Department.

*°In particular, the Order authorizes entry of wireline carriers

into the dispatch market, and eliminates any requirement that

wireline carriers extend non-discriminatory interconnection rights

aemeertes

LEREE REP LECT IE PR SE Tee we a a ale

16a

ment is apparently satisfied that the Order as a whole

poses no immediate and substantial competitive problems.

Their action, like ours, would appear to be based in part

on the view that there will be ample opportunity to chal-

lenge anticompetitive effects as the time approaches when

they will be felt, and the extent of the impact on competi-

tion becomes more readily assessable. The Justice Depart-

ment no doubt will make a continuing assessment.

Our affirmance of the 40 MHz allocation for the devel-

opment of a cellular common carrier system is with the

implicit recognition that it may be subject to successful

challenge at some future date. It is the broad statutory

power of the Commission to experiment and encourage

new uses of radio,*' coupled with the lack of urgeney sur-

rounding the projected anticompetitive effeets, which leads

us to our conclusion. We do not hold that the projected

effects considered above would not constitute a breach

of the antitirust component of the public convenience,

interest and necessity [665] standard,** were they more

immediate in time or more susceptible of precise assess-

ment. Nor do we make any comment with regard to the

particular applicability of antitrust statutes, which issue

is not presently before us.“

II. 30 MHz Allocation for Use by Private Mobile Service,

Including a New Class of Entrepreneurial Operators

Known as Specialized Mobile Radio Systems (SMRS)

The aspect of the 30 MHz allocation which is challenged

is the authorization of a new category of entrepreneurial

to all providers of land mobile services. See Justice Dept. Report,

supra note 17, at 6, 7 (J.A. at 350-51).

47 U.S.C. 303(g¢) (1970).

*? See note 7-3 supra.

*3 Under 47 U.S.C. §313(a) (1970), the antitrust laws are fully

applicable to the manufacture, sale and trade in radio apparatus,

and to interstate or foreign radio communications.

Dricoeon THROLIC 4

a SRP ASA os eo?

A RO

l7a

mobile operators who will share access to the allocated

spectrum with private operators eligible under the Public

Safety, Industrial and Land Transportation Radio Serv-

ices.** Private operations involve primarily dispatch serv-

ices which the operator provides to himself, such as those

provided by police departments and taxicab companies.

Prior to the present Order, they have also included sys-

tems operated on a nen-peefit * cooperative basis for the

benefit of several affiliated users.*® The significant action

taken under the present Order is the assimilation, with

the above operations, of profit-motivated systems run [by

an entrepreneur ]|* solely for the use of third party clients.

In authorizing the creation of these entrepreneurial Spe-

cialized Mobile Radio Systems (SMRS), the Commission

seeks to deal with them precisely as it deals with the more

traditionally private mobile operators.*® Applications of

** See 47 C.F.R. §§ 89, 91, and 93 (1974).

tions for two types-of eooperatine enterprises achieh pradate+the

[Under 47 C.F.R. § 89. 604 (a) and (b), several operators may be

separately licensed to use a single system.] Such systems, known

as ‘‘community repeaters,’’ were explicitly approved by the Com-

mission in 1970. Memorandum Opinion and Order, Multiple Liecns-

ing—Safety and Special Radio Services, Docket No, 18921, 24

F.C.C.2d 510 (15 July 1970).

651 F.C.C.2d at 956-57. In processing applications for use of

the 30 MHz allocated by this Order, the Commission intends to

consider those of commercial enterprises ‘‘on the same basis’’ as

those of applicants for ‘‘private or shared communication facili-

ties.’’ 47 C.F.R. § 89.803(b) (as amended per 1975 Order, 51

F.C.C.2d at 999).

* Modification per 22 Jan. 1976 Order of the Court of Appeals.

LAAORIOVLEVE YS IEP LE) OE LPO EC LEP MIME TREE AEE SEN EEL

>Re eg

18a

all private operators including SMRS, are to be processed,

up to spectrum capacity, on a first-come, first-served ba-

sis.*7 Believing that competition between many operators

is the best way to hasten the development of improved

technologies, the Commission seeks to treat SMRS, like all

other private operators, as non-common carriers, and to

pre-empt state regulation of entry.

The non-common carrier classification is the pivot upon

which the Commission’s scheme for regulating SMRS

turns. It makes clearly inapplicable the stringent rate and

service regulations of the Title II Common Carrier pro-

visions.” Also, it renders inapplicable certain provi-

sions of [666] Title III (Radio Licensing), which require

a 30-day waiting period prior to the granting of any

application * and which guarantee the right to petition

for denial of the application.” Finally the classification as

non-common carriers appears to have certain effects on the

power of federal pre-emption, which power the Commis-

sion has sought to exercise here by barring state entry

regulation.

A. Classification of SMRS as Non-Common Carriers

1. Statutory Definition of Common Carrier

For purposes of the Communications Act, a common

carrier is ‘‘any person engaged as a common earrier for

*7 51 F.C.C.2d at 957.

4847 U.S.C. §§ 201-05 (1970). We do not here hold that the Com-

mission is required to exercise its affirmative Title II powers wher-

ever a common carrier within its jurisdiction is found to exist. We

only hold that the language of that Title becomes applicable, and

leave to a case presenting that issue the problem of whether Title

II powers are mandatory or discretionary.

947 U.S.C. § 309(b) (1970).

5947 U.S.C. § 309(d) (1970). Section (d) applies to the categories

set forth in section (b).

waits ioe sone ee 2 eee

19a

hire... .’’*' The Commission’s regulations offer a slightly

more enlightening definition: ‘‘any person engaged in rend-

ering communication service for hire to the public.’’ *

However, the concept of ‘‘the public’’ is sufficiently in-

definite as to invite recourse to the common law of car-

riers to construe the Act.

In secking an applicable common law definition of com-

mon ecarrier, a good deal of confusion results from the long

and complicated history of that concept. Originally, the

doctrine was used to impose a greater standard of care

upon carriers who held themselves out as offering to serve

the public in general. The rationale was that by holding

themselves out to the public at large, otherwise private

carriers took on a quasi-public character. This character,

coupled with the lack of control exercised by shippers or

travellers over the safety of their carriage, was seen to

justify imposing upon the carrier the status of an in-

surer.**

The late nineteenth century saw the advent of common

carriers being subjected to price and service regulations

as well, At first challenged as deprivations of property

without due process, these early regulations were upheld

on the basis of the near monopoly power exercised by the

railroads, coupled with the fact that they ‘‘exercise a sort

of public office’ in the duties which they perform. Sub-

47 U.S.C. § 153(h) (1970).

*? 47 C.F.R. § 21.1 (1974).

*§ This insurance obligation has never been unexceptioned, and

has not extended to acts of God, damages resulting from warfare,

or causes beyond the control of the carrier which are expressly

excepted in the bill of lading. Propeller Niagara v. Cordes, 62 U.S.

(21 How) 7, 23, 16 L.Ed. 41 (1858).

** Munn v. Illinois, 94 U.S. (4 Otto) 113, 130, 24 L.Ed. 77 (1876).

For an historical discussion of the idea that businesses affeeted with

a public interest are subject, on that account, to governmental

20a

sequently, legislation has been upheld imposing stringent

regulations of various types on entities found to be af-

fected with a public character, even where nothing ap-

proaching monopoly power exists. In such cases as the Mo-

tor Carrier Act of 1935,” relatively competitive carrying

industries have been subjected to entry, rate and equip-

ment regulations on the basis of the quasi-public character

of the activities involved.”

Whether the common carrier concept is invoked to sup-

port strict tort liability or as a justifying basis for regu-

lation, it appears that the critical point is the qua- [667]

si-public character of the activity involved. To create

this quasi-public character, it is not enough that a

carrier offer his services for a profit, since this would

bring within the definition private contract carriers which

the courts have emphatically excluded from it.” What ap-

pears to be essential to the quasi-public character implicit

in the common carrier concept is that the carrier ‘‘under-

takes to carry for all people indifferently ....’’™

om?

regulation, see McAllister, Lord Hale and Business Affected with

a Public Interest, 43 Uarv.L. Rev. 759 (1930).

* 49 U.S.C. §§ 301-27 (1970).

“ See American Trucking Ass’ns, Inc. v. United States, 101 F.

Supp. 710 (N.D.Ala. 1951) (upholding the Act against Constitu-

tional challenge ).

* Home Ins. Co. v. Riddell, 252 F 2d 1 (Sth Cir. 1958) ; Ciaccio

v. New Orleans Public Belt. R. R., 285 F Supp. 373 (E.D.La. 1968).

™ Semon v. Royal Indemnity Co., 279 F.2d 737, 739 (5th Cir.

1960); Home Ins. Co. v. Riddell, 252 F.2d 1, 3 (Sth Cir. 1958) ;

Ciaccio v. New Orleans Public Belt R.R., 285 F Supp. 373, 375

(E.D.La. 1968) ; State v. Sinclair Pipe Line Co., 180 Kan. 425, 304

P.2d 930, 941 (1957); Utilities Comm. v. Gulf Atlantic Towing

Corp., 251 N.C. 105, 110 S.E.2d 886, 889 (1959).

The following cases state the test in similar wording, while not

finding that a given carrier was a non-common carrier: Washing-

—________—_4

2la

This does not mean a given carrier’s services must prac-

tically be available to the entire public. One may be a

common carrier though the nature of the service rendered

is sufficiently specialized as to be of possible use to only

a fraction of the total population. And business may be

turned away either because it is not of the type normally

accepted or because the carrier’s capacity has been ex-

hausted. But a carrier will not be a common carrier where

its practice is to make individualized decisions, in particu-

lar cases, whether and on what terms to deal.” It is not

necessary that a carrier be required to serve all indiscrim-

inately; it is enough that its practice is, in fact, to do so.”

ton ex rel. Stimson Lumber Co. v. Kuykendall, 275 U.S. 207, 211,

48 S.Ct. 41, 72 L.Ed. 241 (1927); Terminal Taricab Co. v. Kutz,

241 U.S. 252, 255, 36 S.Ct. 583, 60 L.Ed. 984 (1916); Grace Line,

Inc. v. FP. M. B., 280 F.2d 790, 792 (2d Cir. 1960); Arrow Aria-

tion, Inc. v. Moore, 266 F.2d 488, 490 (8th Cir. 1959); Circle

Erpress Co. v. Commerce Comm., 249 Towa 651, 86 N.W.2d 888,

893 (1957); State ex rel. Anderson v. Witthaus, 340 Mo. 1004, 102

S.W.2d 99, 102 (1937); Ferguson Trucking Co. v. Rogers Truck

Line, 164 Neb. 85, 81 N.W.2d 915, 922 (1957).

The F. C. C. has expressed a similar view of the common carrier

concept as applied to communications. ‘‘[T]he fundamental con-

cept of a communications common carrier is that such a carrier

makes a public offering to provide, for hire, facilities by wire or

radio whereby all members of the public who choose to employ

such facilities may communicate or transmit intelligence of their

own design and choosing . . . .’’ Report and Order, /ndustrial Radio-

location Service, Docket No. 16106, 5 F.C.C_2d 197, 202 (5 October

1966).

* Semon v. Royal Indemnity Co., 279 F.2d 737, 739-40 (5th Cir.

1960).

* Washington ex rel. Stimson Lumber Co. v. Kuykendall, 275

U.S. 207, 211-12, 48 S.Ct. 41, 42, 72 L.Ed, 241 (1927), (‘‘a com-

mon carrier is such by virtue of his occupation, not by virtue of

the responsibilities under which he rests.’’); See Lone Star Steel

Co. v. McGee, 380 F.2d 640, 647-48 (5th Cir. 1967).

This requirement, that to be a common carrier one must

hold oneself out indiscriminately to the clientele one is

suited to serve, is supported by common sense as well as

case law. The original rationale for imposing a stricter

duty of care on common carriers was that they had im-

plicitly accepted a sort of publie trust by availing them-

selves of the business of the public at large. The common

carrier concept appears to have developed as a sort of

quid pro quo whereby a carrier was made to bear a special

burden of care, in exchange for the privilege of soliciting

the public’s business.

Moreover, the characteristic of holding oneself out to

serve indiscriminately appears to be an essential ele-

ment, if one is [668] to draw a coherent line between

common and private carriers. The eases make clear

both that common carriers need not serve the whole pub-

lie,“ and that private carriers may serve a significant cli-

entele, apart from the carrier himself.” Since given pri-

vate and common carriers may therefore be indistinguish-

able in terms of the clientele actually served, it is difficult

to envision a sensible line between them which does not

turn on the manner and terms by which they approach

and deal with their customers. The common law require-

ment of holding oneself out to serve the public indiscrim-

inately draws such a logical and sensible line between the

two types of carriers.

Finally, the holding out prerequisite to common carrier

status is not without implicit support in the F. C. C. Regu-

lations themselves. In defining ‘‘ public correspondence,”’

the Regulations focus upon the element of being at the

disposal of the public.“ Unlike ‘public correspondence, ”’

** Terminal Taricab Co. v. Kutz, 241 US, 252, 255. 36 S.Ct. 583,

60 L.Ed. 984 (1927).

* Home Ins. Co. v. Riddell, 252 F 2d 1, 4 (5th Cir. 1958).

“**Public correspondence. Any telecommunieation which the of.

fices and stations, by reason of their being at the disposal of the

public, must accept for transmission.’’ 47 C.F.R. § 21.1 (1974).

RLEED THROUGH

‘‘private line service’’ is distinguished by its being set

aside for the use of particular customers, so as not to be

generally available to the public.“ This public-private di-

chotomy is generally regarded as synonymous with the

distinction between common carrier and non-common car-

rier operators.

2. Application of Common Carrier Definition to

SMRS

In order to overturn the Commission’s classification of

SMRS as non-common carriers, the Court must find a

substantial likelihood that SMRS will hold themselves out

to serve indifferently those who seek to avail themselves

of their particular services. It is not an obstacle to com-

mon carrier status that SMRS offer a service that may

be of practical use to only a fraction of the population,

nor that the Order limits possible subscribers to SMRS

services to eligibles under Sections 89, 91 and 93 of the

Regulations.“ The key factor is that the operator offer

indiscriminate service to whatever public its service may

legally and practically be of use. In making this determin-

ation, we must inquire, first, whether there will be any

legal compulsion thus to serve indifferently, and if not,

second, whether there are reasons implicit in the nature

of SMRS operations to expect an indifferent holding out

to the eligible user public.

As to possible regulatory compulsion, there is no indi-

eation in the proposed regulations that SMRS are to be

in any way compelled to serve any particular applicant,

or that their discretion in determining whom, and on what

“**Private line service. A service whereby facilities for com-

munication between two or more designated points are set aside

for the exclusive use or availability for use of a particular customer

and authorized users during stated periods of time.”’ 47 C.F.R.

§ 21.1 (1974).

* 47 C_F_R. § 89.604(¢) (as amended per 1975 Order, 51 F.C.C.2d

at 993).

ede tee et

24a

terms, to serve, is to be in any way limited. The applica-

tion provisions require that SMRS applicants certify that

they will not provide service to ineligibles, but say nothing

about any obligation to provide services to eligibles who

[669] seek them. Nor does the section setting forth

limitations on mode of operation contain any such pro-

vision.”

Nor is there evidence in the administrative scheme of an

implicit intent so to require. The Order evidences a clear

intent not to discriminate between any of the types of

‘‘private’’ operators, including SMRS, in the granting of

license applications.* It would appear that the FCC might

have made special provision assuring adequate allocation

to SMRS particularly, if SMRS were regarded as perform-

ing some public access function not performed by the other

types of ‘‘private’’ systems.

Finally, the fact that the same Order provides for per-

formance of dispatch services by cellular common carriers “”

suggests that any Commission concern about free public

access to dispatch services may have been dealt with by

authorizing dispatch services by common carrier who, due

to their general status as common carriers, arguably can-

not discriminate against particular users.

Since one may be a common carrier by holding oneself

out as such, we must inquire further whether there is good

reason to believe that SMRS will in fact serve the user

public more or less indifferently, even absent any regula-

*°47 C.F.R. § 89.702(a)(2) (as amended per 1975 Order, 51

F.C.C.2d at 996-97).

* 47 C.F.R. § 89.655 (as amended per 1975 Order, 51 F.C.C.2d

at 995-96).

** 47 C.F.R. § 89.803(b) (as amended per 1975 Order, 51 F.C.C.2d

at 999).

®° 51 F.C.C.2d at 952.

RLEED THPOUGH

25a

tory compulsion to do so. At the outset it appears that this

inquiry must be highly speculative, both because no operat-

ing SMRS are now in existence, and because the parties

have not addressed in any detail the issue of the prospec-

tive SMRS business operations.

The nature of the dispatch services which SMRS will

primarily offer appear necessarily to involve the establish-

ment of medium-to-long-term contractual relations, where-

by the SMRS supply the needs of users for dispatch facil-

ities for a period of time.” In such a situation, it is not un-

reasonable to expect that the clientele might remain rela-

tively stable, with terminations and new clients the excep-

tion rather than the rule. It might even be that the turn-

over will be sufficiently minor that, except for the com-

mercial mode of operation, SMRS will be much like non-

profit community repeaters.” ‘‘Repeaters’’ are required on

application to submit the names and addresses of all cost-

sharing participants,” which would seem to indicate a high

level of stability among those employing the service.

If the SMRS business is as hypothesized above, and

nothing in the briefs or argument indicates otherwise, there

would appear to be little reason to expect any sort of hold-

ing out to the public at all. Moreover, even as openings

arise, there may be many reasons that the operator would

desire and expect to negotiate with and select future clients

on a highly individualized basis. The operator may be

concerned about the personal and operational compatibility

of a given applicant vis-a-vis the SMR system as a whole

and the other clients already using it. Methods of opera-

tion and time demands may be highly individualized and

7° See 47 C.F.R. § 89.702(a) (2) (iii) (as amended per 1975 Order,

51 F.C.C.at 2d 997) (making clear that SMRS business will be

done under written contract).

™ See note 45 supra.

247 C.F.R. § 89.702(a) (2) (iii) (1974).

| <BR eee

| Sas bo atte ft eens POSS pve LP GARIN IOL ALE BOOS IEEE BA Ra a

26a

[670] may be a very sound basis for accepting or rejecting

an applicant, when considered in light of the methods

already being employed and the particular time demands

already being put on the system.”

We therefore conclude that nothing in the record indi-

eates any significant likelihood that SMRS will hold them-

selves out indifferently to serve the user public. While it is

undisputed that they would be permitted so to hold them-

selves out if they desired, that is not sufficient basis for

imposing the burdens that go with common carrier status.

In so holding, we do not foreclose the possibility of future

challenge to the Commission’s classification, should the

actual operations of SMRS appear to bring them within the

common carrier definition.

Further, we reject those parts of the Orders which imply

an unfettered discretion in the Commission to confer or

not confer common carrier status on a given entity, de-

pending upon the regulatory goals it seeks to achieve.* The

common law definition of common earrier is sufficiently

definite as not to admit of agency discretion in the classi-

*° For example, an operator might be in a position to accept an

applicant whose primary needs are between certain hours, but to

reject one whose needs are different. See 51 F.C.C.2d at 965-66,

for further discussion of the way that different systems may be

suited to different users and different user needs.

™ The strongest statement of this sort is in the 1974 Order:

We are fully aware . . . that some of the entities we propose

to license, i.e., entrepreneur-operated, common-user systems,

could be licensed as common carriers and regulated under

Title II of the Communications Act. However, our basie goal

in this proceeding is . . . to make available to the land mobile

service additional spectrum and to do this in a way that

would promote the larger and more effective use of this spec-

trum. . . . In accomplishing this goal, we are free, we be-

lieve, to adopt whatever comprehensive regulatory scheme is

best suited for the purpose.’ 46 F.C.C.2d at 763-64. See also

51 F.C.C.2d at 957-59.

ocrececn THEOUGH

27a

fication of operating communications entities. A particular

system is a common carrier by virtue of its functions,

rather than because it is declared to be so. Thus, we af-

firm the Commission’s classification not because it has any

significant discretion in determining who is a common car-

rier, but because we find nothing in the record or the com-

mon earrier definition to cast doubt on its conclusions that

SMRS are not common ecarriers.”* If practice and experi-

ence show the SMRS to be common carriers, then the Com-

mission must determine its responsibilities from the lan-

guage of the Title IT common carrier provisions.

[671] Finally, we reject any implications in the Orders ™

and argument of the Commission that there is any mu-

tual exclusivity of application of the Title II Common

Carrier provisions and the Title III provisions pertaining

to Radio. It may be true that when enacted, the two titles

were seen as applying to two largely discrete realms of

activity.” Certainly radio technology had not, by 19534,

73 United States v. California, 297 U.S. 175, 181, 56 S.Ct. 421,

80 L.Ed. 567 (1936); Lone Star Steel Co. v. McGee, 380 F.2d 640,

648 (5th Cir. 1967).

But see Philadelphia Television Broadcasting v. F.C.C., 123 US.

App. D.C. 298, 300, 359 F.2d 282, 284 (1966) (upholding F.C.C.

classification of cable T.V. as a non-common carrier: ** [D]|eference

to the ageney’s interpretation of its governing statute is reinforced

where, as here, the legislative history is silent, or at best unhelpful,

with respect to the point in question.’’)

7° The statements of the Order can be made to square with the

view of this court, if they are read to mean that the Commission

could have treated SMRS as common carriers by imposing on

them requirements which would have made them common carriers.

Without asserting that this was the Commission’s meaning, it is

clear that the Commission had discretion to require SMRS to

serve all potential customers indifferently, thus making them com-

mon ¢arriers within the meaning of the statute.

7? See 46 F.C.C.2d at 763.

™ See IV B. Schwartz, The Economic Regulation of Business and

Industry 2374 (1973).

28a

achieved large scale application in the common carriage

area, and was largely limited to the broadcast activities

which were originally the primary target of Titie II]. None-

theless, the language of Title I], from time of first enact-

ment, extended its coverage to common carriage ‘*by wire

or radio’’.””

Moreover, the result of a radio operator being held sub-

ject to Title II is not to create any conflict with the already

applicable provisions of Title III, which basically allow for

licensing of transmitting stations in the public interest.*°

It is rather to make additionally applicable certain provi-

sions including those dealing with non-discriminatory serv-

ice and charges," liability for damages,” special corporate

obligations and duties of common carriers,** and right to

petition for denial of an application.** Therefore, if it is at

some time demonstrated that SMRS are actually common

carriers, there is nothing in the statute to prevent their

regulation under both Titles II and III.

B. Impact of Non-Common Carrier Status on

Federal Regulation

Our decision to uphold the Commission’s classification

of SMRS as non-common carriers leads directly to the

affirmance of the Orders, insofar as they create a scheme

of Federal regulation In essence, the Commission seeks

to license SMRS on a first-come, first-served basis, out of

a pool which includes, as well, all individual and system-

sharing eligibles under 47 C.F.R. §§ 89, 91 and 93. While

9 47 U.S.C. § 201 (1970).

°047 U.S.C. § 303 (1970).

*1 47 U.S.C. §§ 201-05 (1970).

4 7U.S.C. §§ 206-09 (1970).

*3 47 U.S.C. §§ 210-12 (1970).

47 U.S.C. § 309(b) and (d) (1970).

. ese NL AMS PEN RD PRIA

RLEED THROUGH

29a

the Commission expects to pass upon the legal and tech-

nical qualifications of applicants, it does not plan to ex-

amine their financial qualifications.** Most importantly, the

Commission intends to leave SMRS free of all federal reg-

ulation which would follow as a result of common carrier

status.

There is no facial violation of the statute resulting from

any of these actions, once the conclusion is reached that

SMRS are not common carriers. Obviously, the Title II

common ¢carrier provisions are inapplicable, as are certain

provisions of Title III which apply only to common ear-

riers.”

Also, the provision of 47 U.S.C. §308(b) authorizing

consideration of factors of ‘‘citizenship, character, and fi-

nancial, technical and other qualifications . . .’’ is not vio-

lated because it does not require scrutiny of an applicant’s

financial fitness. That section leaves it within the discre-

tion of the Commission to decide which facts relating

to such [672] factors it wishes to have set forth in ap-

plications. Since this leaves the Commission free to

have no facts set forth on any of these matters, if it finds

such action appropriate, it follows necessarily that the

Commission is not required to consider financial fitness

if it deems it irrelevant to its regulatory scheme.”

Nor, going beyond the words of the statute, can we con-

clude that in authorizing the creation of SMRS which are

not required to behave and thus be regulated, as common

carriers, that the F.C.C. has breached the broad discretion

85 51 F.C.C.2d at 957.

*° Sections 309(b), (d), dealing with delay before granting an

application and right to petition for denial of an application,

apply to several classes of stations, but only the common carrier

classification is potentially relevant to SMRS. 47 U.S.C. § 309(b),

(d) (1970).

8" 47 U.S.C. § 308(b) (1970). See also 51 F.C.C.2d at 960.

30a

granted it with regard to radio under the ‘‘public conven-

ience, interest and necessity’’ standard. The Commission

has concluded that a competitive environment is the best

and most feasible way to achieve its goal of most efficient

development and use of the 900 MHz band. The 1975 Order

reveals an in-depth consideration of the effects of such a

competitive approach“ so that we cannot say that the

F.C.C. may not have ‘‘given reasoned consideration to each

of the pertinent factors.’’ *

The allegation of a breach of discretion in failing to give

adequate consideration to possible anticompetitive effects

is likewise without merit. While it is true that Motorola

enjoys substantial domination of the sales market for

mobile radio systems, that fact does not confer upon any

aspect of the Order a clear anticompetitive character. Mo-

torola is to be allowed to apply for licensing to operate

SMRS. Although the company’s longstanding expertise in

the field of mobile radio certainly will not impair its efforts

to operate such systems, no reason has been made known

to us why it should be of any substantial competitive ad-

vantage either.”

Motorola’s substantial size and financial power is, of

course, a factor which could discourage competition, espe-

cially if most SMRS (and private dispatch) operators are

relatively small. However that potential threat arises from

economic power alone and not from any of Motorola’s mo-

bile radio-related activities. It is a factor which the Com-

8°51 F.C.C. at 967-71.

8° Permian Basin Area Rate Cases, 390 U.S. 747, 792, 88 S.Ct.

1344, 1373, 20 L.Ed2d 312 (1968). See Hawaiian Telephone Co. v.

F.C.C., 162 U.S.App. D.C. 229, 234-35, 498 F.2d 771, 776-77 (1974).

% See OTP Report, supra note 18, at 11 (J.A. at 340): ‘‘We see

no justification for excluding mobile radio equipment manufac-

turers and suppliers from the operation of mobile communications

systems, whether multi-user systems for hire or otherwise.’’

RLEED THF OUGH

Sla

mission must keep under scrutiny, and it may give cause

at some point for adoption of more exclusive licensing

policies. Also, it may provide cause for independent anti-

trust actions. However, on the present record, no such

anticompetitive effects have been shown as would consti-

tute a colorable violation of the antitrust component of

the public convenience, interest or necessity standard.”

C. Impact of Non-Common Carrier Status on Aspects of

The Order Relting to State Regulation

The 1975 Order pre-empts possible assertion of state

entry certification over SMRS.* This action appears

rea- [673] sonably necessary in order to create the at-

mosphere of free entry and competition which the Com-

mission has determined is desirable as a means of maxi-

mizing the development of mobile radio technology.” Be-

cause we have held above that the Commission’s treatment

of SMRS, from the standpoint of federal law, is within its

broad discretion under Title III, it follows that any state

regulation inconsistent with the policy adopted may be

pre-empted, unless such preemption is explicitly prohibited

by statute. Petitioners point to two sections of the Com-

munications Act which they say bar federal pre-emption

by denying any Commission jurisdiction over certain areas

regulated by the states.

*! See note 25 supra.

251 F.C.C.2d at 974. The 1974 Order had pre-empted all state

regulation of SMRS operations. In limiting the pre-emption to

entry certification, the 1975 Order expresses the hope ‘‘that states

will follow our lead towards a free, competitive environment for

SMR systems ...’’ but ‘‘defer[s] judgment as to any action by

the states relating to regulation of other aspects of SMR opera-

tions.’’ Id.

* See Florida Lime & Avocado Growers, Inc., et al. v. Paul, 373

U.S. 132, 142, 83 S.Ct. 1210, 10 L.Ed.2d 248 (1963).

Pe Tee. Cee ee eae ee Ce ae WIRE ae OUR? ene ew Nay “e Cs ei 2 ° a

32a

Section 221(b) of Title 47, U.S.C., denies Commission

jurisdiction except as provided by § 301, over ‘‘telephone

exchange service’’ which is subject to state regulation.

While it appears to us that SMRS are not likely to be sig-

nificantly engaged in ‘‘telephone exchange service,’’ and

further appears highly arguable that the § 301 licensing

power includes the power to draw up comprehensive

schemes providing the conditions under which licenses will

be granted, we do not dispose of this challenge on these

grounds. Rather the context of 4 221 within the Title deal-

ing with common carriers, and the section’s own reference

to ‘‘telephone companies’’ and ‘‘telephone exchange serv-

ice,’’ makes clear that its only application is to common

carriers. Since we have upheld the Commission’s non-com-

mon carrier classification of SMRS, § 221(b) has no ap-

plication here.

Section 152(b) of Title 47, U.S.C., expresses a similar

denial of Commission jurisdiction, except as provided by

§ 301, over radio or wire carriers whose operations are

either intrastate, or interstate or foreign only by intercon-

nection with another carrier with whom it has no inter-

locking control relationship. Reserving the same question

set forth above as to the breadth of the § 301 licensing

power, and not conceding that SMRS fit within the cate-

gories of intrastate and interconnection interstate opera-

tions to which the section applies, we again rest our hold-

ing on other grounds. Under 47 U.S.C. § 153(h), the term

‘‘carrier,’’? as used in § 152(b), is equated with ‘‘common

earrier.’’? Thus, §152(b) only has application to common

carriers, and our affirmance of the Commission’s non-com-

mon earrier classification of SMRS vitiates any objection

which might rest upon it.

hed eka adAdriwilh~ +e

33a

III. Conclusion

The 1974 Order, as modified by the 1975 Order, is upheld.

In affirming the allocation of 40 MHz for development of

a cellular system, we are not unaware of substantial anti-

competitive effects which may become more apparent as

the date for general implementation of the systems draws

nearer. In light of the Commission’s broad discretion in

experimentation and encouragement of the broader use of

radio, we conclude that those effects are at present too

speculative and distant in time to constitute this part of

the Order a breach of discretion. We make no comment

upon the possible success of any antitrust actions which

may in the future be brought, nor upon possible challenges

to Commission actions taken when anticompetitive effects,

if any, [674] have become more immediate and predict-

able.

In affirming the 30 MHz allocation and authorization of

SMRS, to be treated in the same way as private operators,

our holding is subject to future challenge should SMRS

in practice behave as common earriers. This part of the

Order, save the bare allocation of 30 MHz to the private

services, which the Commission itself has stated to be

severable,* will be open to renewed attack if it is later

concluded that SMRS are in fact common carriers.

Mio OOO

So ordered.

* 51 F.C.C.2d at 976.

» ON AMER GE IPEMB EE PEE SOE ERED! POLIT, ONDE IMI LT, NES

Sta

APPENDIX B

Before the

FEDERAL COMMUNICATIONS COMMISSION

Washington, D.C. 20554

FCC 74-470 11582

Docket No. 18262

In the Matter of

An Inquiry Relative to the Future Use of the Frequency

Band 806-960 MHz; and

Amendment of Parts 2, 18, 21, 73, 74, 89, 91, and 93 of the

Rules Relative to Operations in the Land Mobile

Service Between 806 and 960 MHz.

Secong Report and Order

Adopted: May 1, 1974 Released: May 2, 1974

By the Commission: Commissioners Reid and Hooks con-

curring in the result;

Commissioner Quello not participating.

1. This rulemaking proceeding deals with the allocation

of frequency spectrum in the 806-947 MHz band to the

land mobile radio service and to the development of regu-

lations pertaining to the future use of that spectrum. The

first phase of the proceeding, initiated on July 17, 1968,

with a Notice of Proposed Rule Making and Notice of

Inquiry (33 FR 10807) and consummated on May 20, 1970,

with a First Report and Order and Second Notice of In-

quiry (35 FR 8644), accomplished a general reallocation

of spectrum in the 806-947 MHz band with the effect of

providing an additional 115 MHz of spectrum to the land

mobile radio service. It also provided a tentative sub-allo-

cation of this spectrum within the land mobile service, with

-—-. - - <_< = -— . fF |

35a

75 MHz being allocated for the development of high ca-

pacity common carrier mobile communications systems to

be operated by wireline common carriers and 40 MHz for

the development of efficient private and shared systems for

use by eligibles in the Industrial, Land Transportation and

Public Safety Radio Services (Parts 89, 91 and 93 of the

Rules). The second and current phase of this proceeding

was initiated with the Second Notice of Inquiry, released

coincident with the First Report and Order, and deals in

greater detail with the questions of spectrum allocations

within the land mobile service and the development of sys-

tems standards and other regulations applicable to the

new 900 MHz land mobile bands.

2. In the Second Notice of Inquiry, the Commission

requested interested parties to undertake detailed tech-

nical and marketing studies looking toward the future use

of the 900 MHz band to meet the public need for land

mobile radio services to and beyond the year 1980. Special

emphasis was placed on the need for greater spectrum

efficiency in designing new systems for this band. In De-

cember of 1971, a number of parties submitted written

reports describing the results of their developmental ef-

forts. Supplemental filings and comments on the initial

reports were received in July of 1972. Many of the tech-

nical reports and comments contained new data or raised

policy questions which had not been previously addressed

in this proceeding. Therefore, to allow interested parties

an opportunity to present their views on these matters, the

Commission received oral presentations on May 14 and

15, 1973.

3. During the course of the second phase of this pro-

ceeding some 58 parties filed written statements and ‘or

were represented in oral arguments to the Commission.

The names of these parties are listed in Appendix A. Nu-

merous comments and letters have also been received from

members of the public and Congress and have been taken

y oa SO SABRC AS RY SN TNE TET EH EE TR RL EN Ee oe rene

——————— - te

into consideration. All of the information submitted to

the Commission has been thoroughly analyzed and care

taken to ensure that all positions and arguments are fully

understood. We have now reached the point in this pro-

ceeding where we believe it appropriate to decide the major

policy questions, to finalize the basic frequency allocation

and to adopt specifie regulations governing the licensing of

900 MHz land mobile systems. For convenience and clarity

we have arranged our discussion of these matters in three

sections. The first section deals with frequency allocation

and related matters; the remaining sections deal with poli-

cies and regulations pertaining to the various systems to be

accommodated in the 900 MHz band. Rules being adopted

at this time are contained in Appendix B.

CAE US

4. The main areas of controversy throughout the cur-

rent phase of this proceeding have centered on questions

of spectrum allocations and Commission policies toward

the regulation of the various land mobile systems which

have been proposed for operation in the 900 MHz band.

Before discussing our conclusions regarding those matters,

we believe it will be useful to briefly define the land mobile

systems which are being considered for this band.

5. The cellular system, as proposed by AT&T and others

in this proceeding, is a sophisticated, high capacity land

mobile system requiring a large capital investment and a

substantial spectrum allocation. The spectrum assigned

to such a system would be divided into discrete channels

which are assigned in groups to small geographical cells

covering a defined service area. The key to the cellular

system’s high capacity is its ability to shrink the size of

those cells while holding the total amount of spectrum

used by the system constant. What results is a multiple

re-use of channels throughout a given geographical area

and more traffic intensity per unit of spectrum in ad-

vanced stages of development than other land mobile com-

munications system proposed to date. This is achieved,

however, with considerable expense and technical com-

Tr vae ws

—— EL Ae I i A ee <a

pa -

37a

plexity. Fortunately, the expense can be shared over a c

much larger user base than with other systems. To date, . ?

two companies, Bell Laboratories and Motorola, have sub-

mitted detailed cellular system proposals to the Commis-

sion. Although the basic systems concepts are identical,

there are some technical differences which affect the

amount of spectrum each system would need to operate

efficiently. The primary technical difference lies in the

bandwidth of the discrete channels. The AT&T proposal

ealls for channel widths which are 60% wider than those

proposed by Motorola. On the surface it might appear that

60% more spectrum would then be needed for the AT&T

proposal over that of Motorola. However, complicating the

argument over bandwith is the ability to re-use channels

at close geographical spacing. According to AT&T, the

wider bandwidth allows for more intensive channel re-use,

which outweighs any initial spectrum saving due to the

narrower channels. There is also a difference in the type

of service to be provided on the two proposed systems.

The AT&T system would be utilized for fleet dispatch as

well as mobile telephone service, whereas Motorola’s sys-

tem is designed for mobile telephone service only. This

difference has a significant impact on the amount of spec-

trum each would need. AT&T’s dual purpose system calls

for 64 MHz while the initially proposed Motorola tele-

phone-only system would need 19 MHz.

6. The second class of system under consideration is the

multi-channel trunked system. This system is similar in

concept to so-called community repeaters widely employed

in the private dispatch service today except that the users

would have access to a number of channels instead of just

one. Actual channel access is controlled by a central com-

puter, which gives a user the first available channel or

places the user in a waiting line (queue) to be served in

turn. This technique provides the user a higher grade of

service than is possible in comparably loaded non-trunked

38a

systems by reducing the amount of time he must wait for

a channel and/or reducing the probability that his call will

be blocked. Small scale trunked land mobile systems are

presently being used to a limited degree by common car-

riers providing mobile telephone services in the 450 MHz

band. The innovation lies in its intended application to

vehicular fleet dispatching and the potential of using many

more channels per system than is now possible. As pro-

posed by both General Electric and Motorola, trunked dis-

patch systems would be suitable either for large single

users, cooperative groups of users on a cost shared basis,

or commercial operators providing service for hire. The

nature of trunked systems makes them particularly suit-

able for serving different types of users on the same group

of channels without interference. With today’s single-

channel systems it is generally desirable to put similar

types of users on the same channels in order to control

interference. That approach, however, requires separate

allocations of channels for the various classes of users

which often leads to spectrum inefficiencies. In the trunked

system, different types of users can be intermixed more

readily as they operate essentially independently of each

other, the computer assigning channels on demand. Once

a user is assigned a channel, it is his exclusively for the

duration of his call and no one else on the system can

listen or interrupt during normal operation.

7. The final category of system proposed for the 900

MHz band is the basie conventional land mobile system

in use today in the lower frequency bands. While these

systems may also employ one or more channels, their dis-

tinguishing feature is manually controlled channel access

as opposed to the computer control used in trunked sys-

tems. This makes the conventional system simpler and

cheaper, but causes some loss of traffic efficiency resulting

in either fewer mobiles per channel or lower service qual-

ity. The degree of such inefficiency depends largely upon

Me AY Tes 0 —

39a

the traffic characteristics of the users. Our analysis would

indicate that for a significant segment of the land mobile

requirement, particularly where short range, short mes-

sage communications are involved, the conventional sys-

tem can be as or more efficient than the trunked system.

Therefore, considering its lower cost and greater opera-

tional simplicity, the conventional system, we feel, has a

definite place in the 900 MHz band alongside the more

sophisticated systems described above.

Discussion of Allocations

8. In the past, the Commission has treated land mo-

bile spectrum requirements from a service perspective,

allocating blocks of spectrum, usually on a nation-wide

basis, to each of the twenty or so radio service categories.

This method of allocation has led to parochialism among

the users and inequitable situations where spectrum short-

age and abundance exist side by side in the same cities. In

this docket, we are proceeding to meet land mobile spec-

trum requirements in a somewhat different manner. Rather

than allocating according to user categories or services, we

have chosen to allocate by system type and to allow the

market to determine ultimately how much spectrum is

utilized by the various types of users. With this in mind,

the allocation problem becomes a matter of defining the

systems to be accommodated, determining how much spec-

trum will be needed to satisfy the demand for such sys-

tems over a reasonable period of time, and arranging the

separate allocations in an orderly plan, taking into account

the technical characteristics of the systems and their elec-

trical compatibility with each other and with systems in

neighboring bands.

9. The concept of allocating spectrum for systems rather

than services has been accepted or encouraged by many

who have participated in this docket. To be sure, some of

today’s service groups have asked for their own private

or wd

SoS ae oe I. Ob ge RR 2

allocations of radio spectrum, but the weight of arguments

in the proceeding recognizes the drawbacks of such alloca-

tions and supports specific allocation proposals along the

lines of systems or broad types of service, e.g., dispatch

or mobile telephone. A half dozen different allocation plans

were proposed in the various filings in this proceeding,

each of which has been carefully considered in developing

our own plan.

10. Throughout this docket the Commission, industry,

and the public have been dealing with innumerable un-

knowns, ranging from radio propagation phenomena and

new system technologies to innovative service offerings and

future market projections for these services. While we now

believe that we have a better grasp of these factors through

our analysis of the information submitted to the Commis-

sion and discussions with industry and user groups, there

are still a number of technical questions which only further

developmental work can answer, and the ultimate demand

for the proposed systems can only be determined in the

market itself. For these reasons it is important that any

allocation plan be flexible enough to cope with new and

often unforeseen technological and economic forces. We

feel the allocation plan which we are advancing provides

us with that flexibility while amply satisfying presently

defined needs.

I. Frequency Allocations to Cellular Land Mobile

Communications Systems

11. Originally in this docket the Commission tentatively

allocated 75 MHz for the use of wireless common carriers

to develop cellular land mobile and air/ground systems.

The size of this allocation was generally supported by the

wireline industry and by a number of radio equipment

manufacturers. However, it was opposed as being excessive

by the radio common carriers, most radio equipment manu-

facturers, independent equipment sales outlets, private

BLEED THROUGH

SG ts sank ARR cA D

eer BNR ae 2 SLIP I ens IRE a EN AE ASRAIOLE ect MERE B pn

4la

user organizations, and a large number of private users

themselves. The Department of Justice and Office of Tele-

communications Policy also deemed this allocation to be

excessive.

i2. At the time the allocation was made, in 1970, there

was very little evidence to indicate if 75 MHz of spectrum

was too much or too little for the intended purpose. Little

was known about cellular technology and even less about

the potential market for such a system. Based on our cur-

rent understanding of these factors, we have concluded that

the 64 MHz which AT&T proposed for a domestic public

cellular land mobile system is somewhat excessive.’ Ac-

cording to most market projections, 64 MHz of spectrum

would handle the foreseeable demand for mobile telephone

and a substantial portion of the dispatch market to the end

of this century in our biggest cities. In the medium to

small urban areas, those of two million and under, such

an allocation would give the operator enough capacity to

handle the total land mobile demand, dispatch and tele-

phone, far beyond the time frame contemplated in this pro-

ceeding. Consequently, we are reducing the size of the

allocation for cellular systems to 40 MHz. In addition, we

will not assign the full 40 MHz to any single operator all

at once. Rather, in each area the system operator will be

given the minimum amount of spectrum required for that

area initially. Additional spectrum will be made available

upon a showing of need. This plan is similar to AT&T’s

as outlined for Philadelphia in its December 1970 technical

filing. In AT&T’s plan a start-up system could be estab-

lished by utilizing only 12.5 MHz. As the system grew it

would utilize additional spectrum until the allocation was

exhausted. After that, further expansion would require

cell division. Our plan, therefore, differs from AT&T’s in

the size of the total allocation and in the fact that the

* AT&T proposed to use the remaining 11 MHz for publie air-

ground service.

wremonmnall

42a

Commission will retain control over the unused portion

of the allocation until actually needed in each system. We

note that our approach is similar in effect to the recom-

mendation of the Office of Telecommunications Policy

which called for an initial allocation of 14 MHz for cellular

systems with additional reserve to be allocated as required.

13. A 40 MHz cellular system utilizing 40 KHz channel-

ing should have an ultimate capacity to handle about 105,-

000 telephone subscribers and 105,000 dispatch users (see

AT&T December 1970 filing, page 40). This is sufficient

capacity to handle the predicted market for mobile tele-

phone to the year 1990 in the largest cities, plus one quar-

ter or more of the dispatch market in those areas. There

is, however, considerable uncertainty involved in predict-

ing the mobile telephone market. This uncertainty results

primarily from the possibility of the service developing

into a consumer item. For this reason, we have also stra-

tegically placed spectrum reserves totalling 20 MHz in

proximity to the cellular allocation which could be used in

the event of unexpected growth. We must stress, however,

that the marketing studies submitted to the Commission

do not indicate that such would be the case, at least in the

foreseeable future. Moreover, should a consumer market

develop, it would most probably require spectrum in ex-

cess of the total available in the 900 MHz range. Therefore,

we cannot realistically plan for that kind of growth in this

proceeding but would have to look to other regions of the

spectrum to obtain the necessary capacity.

14. AT&T has argued that an allocation of less than 64

MHz for a cellular system would result in an increase in

the cost of the service. The Commission has studied this

point carefully, but we do not feel that the cost penalty

of reduction from 64 to 40 MHz would be significant. Using

AT&T’s own data, the proposed reduction in available

spectrum for the cellular system will raise the shared facil-

ity cost per mobile unit by about 20%. In as much as the

43a

shared facilities’ cost represents only about one-half to

one-third of the total cost to the user, the 20% cost penalty

is reduced to less than 10% in his overall bill. Moreover,

the capacity and ultimate cost of mobile telephone service

in a cellular system is highly dependent on technology. For

instance, a reduction in channel spacing, which some have

argued is feasible, could increase the total system capacity

and affect ultimate costs. The application of mass produc-

tion techniques and competition in the production of mo-

bile units for the cellular system could drive prices down

below that which is presently foreseen. Despite these un-

certainties over the future market for mobile telephone

service, we believe the 40 MHz proposed for a cellular

system is sufficient and will provide for adequate growth

and reasonable costs over the foreseeable future.

II. Frequency Allocations to Air/Ground Communications

Systems

15. At this time we are making no allocation for a public

air/ground system. AT&T had proposed that 11 MHz be

used for such a system although it made no factual show-

ing in this docket to substantiate any appreciable public

demand for the service which cannot be met through the

use of channels presently allocated for that purpose. Fur-

thermore, ARINC, in its July 1972 comments, noted the

Air Traffic Conference of 1963 adopted a resolution which,

in effect, prevents the use of public air/ground systems

in scheduled service. Therefore, the spectrum which might

have been allocated for air/ground service is being incor-

porated into the several reserve bands mentioned earlier.

Should it be warranted, a separate proceeding may be in-

stituted in the future to consider the overall question of

public air/ground communications spectrum requirements.

Also, the proposals of ARINC for additional spectrum for

general aviation use in this band are being denied on the

grounds that such proposals were considered on their

44a

merits and denied in the First Report and Order herein

(paragraphs 21 through 23). No new information has been

submitted by ARINC which would alter that decision. Fur-

thermore, this band is not well suited for aeronautical

services which generally require a high degree of interna-

tional standardization. The use of these frequencies for

mobile services in the United States will be in derogation

of ITU Region IT allocations and coordination of aero-

nautical service with neighboring countries would be diffi-

cult, if not impossible.

Ill. Frequency Allocations to Conventional and Trunked

Land Mobile Communications Systems

16. The next allocation which we will discuss is for con-

ventional and trunked systems. For the most part, we ex-

pect those systems to be used for fleet dispatch operations

of the kind now accommodated under the so-called private

land mobile services. In the 1970 Report and Order, the

Commission tentatively allocated 40 MHz of the 900 MHz

spectrum for private land mobile services. The size of this

allocation has not been seriously disputed in this proceed-

ing, although some parties, notably equipment manufac-

turers and user groups, urged that the private allocation

be larger. These same parties later supported the OTP

recommendation of 40 MHz to be allocated for ‘‘any mo-

hile service to be offered on a non-rate regulated competi-

tive basis’’.

17. At this time we are making available an allocation

of 30 MHz of spectrum for conventional and trunked sys-

tems with additional reserve bands so placed as to be

readily accessible for future growth if needed. Based on

market projections given by industry, 30 MHz should be

sufficient in most areas well into the 1980s, and the reserve

bands will take care of any unforeseen growth within and

beyond that time frame. As will be discussed further in a

later section, it is our intent that the allocation for conven-

45a

tional and trunked systems be available for both private

and commercial (third party) operation and used for

either mobile telephone or fleet dispatch service. These pro-

visions are discussed in more detail in the section below

dealing with the regulation of these systems.

IV. Frequency Provisions for Industrial Scientific and

Medical (ISM) Devices

18. Throughout this proceeding the General Electric

Company has urged us to reconsider our plan to reduce

the size of the ISM (industrial, scientific and medical)

svectrum provision from 50 MHz to 26 MHz. General Elec-

trie claims that such a reduction will make it impossible

to continue manufacturing economical microwave ovens

for this band. It argues that a minimum of 38 MHz is

needed to make an oven which is competitively priced and

capable of cooking all types of foods properly. Although

there appears to be some merit to GE’s arguments, we are

not inclined to give up our ultimate goal of reducing the

ISM emission limits to 26 MHz. To reopen all or a large

part of the original ISM provision would cause a serious

reduction in the amount of spectrum available for land

mobile communications services in this range. On the other

hand, it is likely to be 10 to 15 years before the full land

mobile allocation will be required and thus some interim

provision can be made for continued use of wide-band

ISM ovens during this period. This should provide neces-

sary time for the production of ovens capable of utilizing

the narrow emission, without crippling the industry by

forcing it into tighter standards which are not now feas-

ible. Our decision, therefore, is to establish a guard band

12 MHz wide immediately above the regular ISM provi-

sion so that the total spectrum available for microwave

ovens would be 38 MHz. However, this guard band would

carry a time limitation of 5 years, after which the band

would revert exclusively to land mobile use. This will pro-

vide an opportunity for the oven industry to continue de-

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46a

velopment of more spectrally efficient devices which can

meet the narrower bandwidth. In the meantime, the tem-

porary 12 MHz ISM guard band could be considered for

sharing by land mobile or related services which can tol-

erate oven interference and which do not require a paired

allocation.

V. Land Mobile Reserve Allocations

19. Most parties who filed allocation proposals in this

docket recommended the establishment of reserve bands to

accommodate new land mobile services or unexpected

growth in existing services. We feel that this concept is an

excellent one and a generous amount of reserve spectrum

has been incorporated into our allocation plan, Our plan

calls for 8 reserve bands with a total of 45 MHz. The bands

are so positioned as to allow the greatest flexibility in ex-

panding the proposed services and for accommodating new

services. The reserve bands also provide buffers between

high and low power land mobile stations and provide some

degree of flexibility in coping with special problems along

the Canadian and Mexican borders. These reserve bands

are not being allocated to any specific use at this time, but

are merely designated as land mobile reserve. Their allo-

cation in the future will be the subject of separate rule

making as the need arises.

VI. Treaty Considerations

90. Under present international treaty obligations land

mobile operations in the 900 MHz band will be in deroga-

tion of the ITU allocation table for Region ITI. Such deroga-

tions are permitted under No. 115 of the International

Radio Regulations, provided we afford protection to as-

signments operating in accordance with the ITU allocation

table and accept any interference from such operations.

The obligation to protect both Canadian and Mexican tele-

vision assignments between 806 and 890 MHz will mean

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47a

that the assignment of some types of land mobile opera-

tions, primarily high powered and/or omni-directional sta-

tions, will be impaired close to the border areas. This is

especially true in Detroit and Buffalo, where even low

powered mobile units might cause interference in certain

nearby Canadian UHF-TV coverage areas. In exceptional

cases such as these, the national allocation table we have

outlined might be modified to provide land mobile spec-

trum relief in the reserve sections above 890 MHz. The

need for such adjustment would be the subject of future

rule making if necessary. In order to meet international

commitments, we intend to examine all applications for

land mobile stations within possible interference range of

each border to ensure that harmful interference to Cana-

dian or Mexican assignments will not result. This proce-

dure will apply to land mobile operations within the entire

band 806 to 947 MHz. More specifie coordination proce-

dures may be adopted at a later date as a result of onr

continuing discussions with the respective administrations.

Policies Relating to Cellular Communications Systems

I. Ownership of Cellular Systems

21. The parties filing comments have generally not ques-

tioned allowing wireline carriers to operate cellular sys-

tems. There has been a general feeling of malaise about

letting wireline monopolies expand in the mobile commun-

ications market which has been traditionally served pri-

marily by competitive entities. However, the wireline ear-

riers are the only organizations which have demonstrated

that they possess the resources and the expertise necessary

to establish cellular systems which would have nationwide

compatibility. AT&T was the only entity which submitted

a comprehensive proposal for developing and implement-

ing compatible cellular systems. Therefore, we have con-

cluded that wireline carriers should be permitted to op-

erate cellular systems. Moreover, since a cellular system

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48a

is technically complex, expensive, and requires a large

amount of spectrum to make it economically viable, com-

peting cellular systems would not be feasible in the same

areas. Also, as these. systems will require extensive inter-

connection with the wireline telephone system, and nation-

wide compatibility is desirable, we have concluded that

only wireline carriers should be licensed to operate them.

Il. Restrictions on Wireline Telephone Companies

22. A major concern voiced to the Commission by vari-

ous parties to this proceeding deals with potential anti-

competitive action on the part of wireline telephone com-

panies through the use of cross-subsidies. It is feared that

the guaranteed revenues generated by the telephone com-

panies in their wireline operations will be used to give

them an advantage in the sale of mobile dispatch services

on the cellular system.

23. The Commission is fully aware of the danger of

unchecked cross-subsidization in a competitive communi-

cation market and we fully intend to take appropriate steps

to ensure that this practice does not take place. Therefore,

as a minimum we shall require that any wireline telephone

company establish a wholly separate operating company

with separate books of account, separate officers and sep-

arate personnel in order to operate a cellular land mobile

system as well as any other separation requirements we

may deem necessary to prevent cross-subsidization. We

shall establish detailed regulations and },rocedures for the

separation of subsidiary and parent organizations at a

later date.

24. While we think that establishment of separate op-

erating companies with separate books of account, separate

officers and separate operating personnel will go far to

prevent the cross-subsidization feared by many parties, we

will also impose certain other restrictions on the wireline

49a

companies. They, for the most part, have already been

accepted by the Bell System and the independent telephone

companies. Thus, the wireline companies will not be per-

mitted, directly or indirectly, to manufacturer, provide or

maintain mobile equipment. In addition, the base station

components must be manufactured by companies wholly

independent of the wireline carriers.? All contracts between

any telephone company and its mobile telephone. affiliate

or subsidiary shall be filed with the Commission and ree-

ords of all money flows and exchanges or flows of property

(of whatever kind) between them shall be maintained and

reported periodically in accordance with rules specified by

the Commission. Moreover, any telephone company will be

required to offer interconnection services to the public on

the same basis as it does to its mobile telephone affiliate or

subsidiary. We should like to think that these measures

are sufficient to provide regulatory control of the ecross-

subsidization problem.

25. A number of the parties filing comments expressed

a concern that permitting the wireline carriers to offer dis-

patch services through their cellular systems could, because

of their ability to cross-subsidize, result in anti-competitive

practices and eventual market dominance by the wireline

companies. On the other hand, dispatch or dispatch related

service makes up a substantial part of the initial market

for cellular systems proposed by the wireline carriers. To

exclude dispatch-type services entirely could delay or even

prevent the implementation of any cellular systems. Also,

if cellular systems can, through natur:! economies, provide

lower-priced dispatch services, the public should not be

denied that benefit. We have therefore concluded that the

operators of cellular systems should be allowed to provide

* Wireline carriers will be allowed to manufacture and maintain

radio equipment for use in initial development cellular systems.

However, this equipment may not be used when the system be-

comes operational or in developmental systems offering service to

the public.

50a

some dispatch services. With regard to the cross-subsidiza-

tion issue, we feel that the restrictive measures described

above will greatly minimize the ability of wireline carriers

to cross-subsidize. However, we think it desirable to place

some restriction on ‘‘fleet type’’ automatic dispatch offer-

ings by operators whereby a dispatcher can eall several

vehicles simultaneously. In this regard, there is technical

evidence that the widespread use of *‘ fleet call’’ in a cellular

system would substantially reduce its efficieney, thus elimi-

nating an important reason for having a cellular system

at all. Therefore, we will not allow cellular systems to offer

dispatcher-originated communications service with ‘* fleet

call’? capability whereby a single dispatcher can automati-

cally call several vehicles simultancously.

III. Developmental Authorization of Cellular Systems

26. Initially, we will authorize only developmental sys-

tems until we are reasonably sure that all factors neces-

sary for regular implementation are accomplished. Devel-

opmental systems will be authorized on a one-to-a-market

basis and only one system per telephone company. For

system planning purposes the entire 40 MHz of spectrum

may be considered as being available although the Com-

mission may limit initial assignments of spectrum to less

than 40 MHz. Therefore, any proposal for an initial de-

velopmental authorization must include a request for the

minimum amount of spectrum required for the area pro-

posed to be served. Additional spectrum, beyond that speci-

fied in initial develo

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