COMMUNICATIONS SATELLITE CORPORATION, PETITIONER V. FEDERAL
COMMUNICATIONS COMMISSION, ET AL.

   No. 89-1687

   In The Supreme Court Of The United States

   October Term, 1989

   On Petition For A Writ Of Certiorari To The United States Court Of
Appeals For The District Of Columbia Circuit

   Brief For Federal Respondents In Opposition

            TABLE OF CONTENTS
   Question Presented
   Opinions below
   Jurisdiction
   Statement
   Argument
   Conclusion

                            OPINIONS BELOW

   The order of the court of appeals (Pet. App. 1a-2a) is not
reported.  The order of the Federal Communications Commission (Pet.
App. 3a-35a) is reported at 3 F.C.C. Rcd 2643.

                             JURISDICTION

   The judgment of the court of appeals was entered on November 17,
1989.  A petition for rehearing was denied on February 2, 1990.  Pet.
App. 74a.  The petition for a writ of certiorari was filed on April
30, 1990.  The jurisdiction of this Court is invoked under 28 U.S.C.
1254(1).

                          QUESTION PRESENTED

   Whether the Federal Communications Commission has authority under
the Communications Act of 1934, 47 U.S.C. 151 et seq., to enforce its
1978 prescription of a rate of return by requiring the carrier to
refund revenues collected from August 1984 through December 1986 in
excess of the maximum prescribed return.

                               STATEMENT

   1. a. Under the Communications Act of 1934, 47 U.S.C. 151 et seq.,
the Federal Communications Commission is responsible for ensuring that
the regulations, classifications, charges, and practices of carriers
of interstate and foreign communications are just, reasonable, and
nondiscriminatory.  47 U.S.C. 201(b), 202(a).  The Act provides the
Commission with a number of regulatory tools to carry out that broadly
defined responsibility.  In particular, under Section 205(a), the
Commission may investigate a carrier's rates and practices;  if, after
a hearing, it finds that a rate or practice is or will be unlawful
under the Act, the Commission may prescribe just and reasonable rates
or practices "to be thereafter observed." 47 U.S.C. 205(a).  Such a
prescription is binding on the carrier, which "shall not thereafter
publish, demand, or collect any charge other than the charge so
prescribed, or in excess of the maximum * * * so prescribed * * * and
shall conform to and observe the regulation or practice so
prescribed." Ibid.  Any such prescription is binding for the time
specified in the Commission's order or until the Commission or a court
of competent jurisdiction issues a superseding order.  47 U.S.C. 408.
/1/

   The Commission has additional powers to investigate the lawfulness
of proposed new practices or charges under Section 204 of the Act, 47
U.S.C. 204.  The Commission may suspend the effectiveness of such
practices or rates for up to five months pending its investigation.
In the case of a proposed rate increase, if the Commission does not
complete its investigation within the specified period of suspension,
the Commission must allow the rate to take effect but may require the
carrier to keep an accounting of the amounts it collects under the
rate.  At the end of the investigation, the Commission may order the
carrier "to refund, with interest, to the persons in whose behalf such
amounts were paid, such portion of such charge * * * as * * * shall be
found not justified." 47 U.S.C. 204(a).

   Supplementing those and other express provisions of the Act,
Section 4(i) authorizes the agency to "perform any and all acts, make
such rules and regulations, and issue such orders, not inconsistent
with this chapter, as may be necessary in the execution of its
functions." 47 U.S.C. 154(i).  This "necessary and proper clause"
(North American Telecomm. Ass'n v. FCC, 772 F.2d 1282, 1292 (7th Cir.
1985)) gives the Commission the flexibility to implement Congress's
broadly worded directives defining the Commission's rate regulation
and other responsibilities.  /2/

   b. In 1972, the Commission, under its Section 4(i) authority to
take necessary and proper measures to implement its Section 205 power
to prescribe just and reasonable rates and practices, asserted the
authority to prescribe the rate of return a carrier may earn.  See New
England Telephone & Telegraph Co. v. FCC, 826 F.2d 1101, 1104-1105
(D.C. Cir. 1987), cert. denied, 109 S. Ct. 1942 (1989);  Nader v. FCC,
520 F.2d 182, 187-191 (D.C. Cir. 1975).  /3/ The D.C. Circuit upheld
that authority, ruling that such rate of return prescriptions are
"necessary for the Commission to carry out its (ratemaking) functions
in an expeditious manner." 520 F.2d at 204.  /4/ The court explained
that a rate of return prescription, like any other Section 205
prescription, is binding:  it limits the utility prospectively to the
prescribed return.  Id. at 201.  The court further pointed out that,
although such a prescription protects the carrier from "the
possibility of refunds on the ground that (the prescribed) rate of
return (is) too high, the Commission retains full latitude to order
refunds on all other grounds." Id. at 205 n.25.

   Some ten years later, the Commission's authority was again
challenged in the D.C. Circuit by various carriers -- a challenge that
was nearly identical to the one petitioner advances in this case.  /5/
In New England Telephone & Telegraph Co. v. FCC, supra, the court of
appeals held that the Commission had authority under Sections 4(i) and
205 to enforce its rate of return prescription by requiring carriers
to refund earnings in excess of the prescribed return.  The court
stated that "the Commission may determine what rate of return must be
thereafter observed in the same way it may set a just and reasonable
rate to be thereafter observed." 826 F.2d at 1106-1107.  And the court
recognized that the Commission, in prescribing a rate of return, did
not merely require the carriers to file rates targeted to achieve the
prescribed return.  Rather, the Commission's prescription limited the
carriers' earnings to the maximum prescribed level.  Id. at 1106.
Finally, the court of appeals rejected the carriers' contention that
the refund order constituted retroactive ratemaking or distorted the
regulatory balance between ratepayers and carriers.  The court
determined that the Commission's refund order was a permissible means
of enforcing a prior prescription order that had been purely
prospective.  Id. at 1106-1109.  /6/

   2. a. Like New England Telephone & Telegraph Co., this case
involves the Commission's enforcement of a rate of return
prescription.  In February 1978, petitioner, Communications Satellite
Corporation (Comsat), settled a protracted rate investigation with the
Commission's staff.  Communications Satellite Corp., 68 F.C.C.2d 941
(1978), reconsid. denied, 70 F.C.C.2d 1449 (1979).  Under the
settlement agreement, Comsat's authorized annual rate of return would
be 11.48 percent, with an additional one percent buffer or increment
as an incentive for increased efficiency.  Pet. App. 6a;  68 F.C.C.2d
at 954.  /7/ The agreement also provided that the Commission's order
approving the settlement agreement would have the effect of a
Commission prescription.  Id. at 955.  In May 1978, the Commission
approved the agreement, thereby prescribing a rate of return of 11.48
percent for Comsat.  Id. at 941.

   Comsat, however, filed a series of revised tariffs setting rates
designed to achieve a higher rate of return and so informed the
Commission.  In April 1979, Comsat filed tariffs that projected an
average return of 14.17 percent for the period July through December
1979.  Pet. App. 7a.  /8/ In December 1979, Comsat filed revised
tariffs that projected average earnings would be 17.88 percent.  Ibid.
 In October 1980, Comsat reduced its rates again, but informed the
Commission "that its projected rate of return for 1981 with the new
rates was between 14.2 and 16.7 percent." Ibid.  /9/ The Commission
did not reject or suspend Comsat's filed tariffs and thus the rates
Comsat set became effective without any determination regarding their
lawfulness.  Ibid.; see 47 U.S.C. 204(a);  Aeronautical Radio, Inc. v.
FCC, 642 F.2d 1221, 1234 (D.C. Cir. 1980), cert. denied, 451 U.S. 920
(1981).  /10/

   b. In 1980, the Commission initiated a separate rulemaking
proceeding to review Comsat's corporate structure, operations, and
accounting practices.  See Changes in the Corporate Structure and
Operations of the Communications Satellite Corporation, 81 F.C.C.2d
287 (1980).  As a result of that proceeding, the Commission ordered
Comsat in 1984 to file tariff revisions to conform to changes in its
accounting and cost allocation system.  The Commission also informed
Comsat that it was "aware that Comsat's recent earnings (had)
exceed(ed) authorized levels," and therefore ordered Comsat to file
tariff revisions that would "be in compliance with (Comsat's)
authorized rate of return (11.48%-12.48%)." Changes in the Corporate
Structure and Operations of the Communications Satellite Corporation,
97 F.C.C.2d 145, 179 (Second Structure Order), reconsid. denied in
part, 99 F.C.C.2d 1040 (1984) (Second Structure Reconsideration
Order);  Pet. App. 8a.

   Comsat petitioned the Commission to reconsider its order requiring
the firm to file tariffs that complied with the 1978 rate of return
prescription, citing, among other things, changes that had occurred in
the economy and the firm since 1978.  The Commission rejected that
argument:

      Comsat had every opportunity since the 1978 Settlement Agreement
      to petition us for relief if it believed its authorized rate of
      return was too low and did not reflect * * * changed
      circumstances * * *.  For whatever reason, it did not do so.
      Until it does so and until relief is granted, Comsat shall
      submit tariffs reflecting cost-based rates that will earn the
      corporation its authorized rate of return.  Comsat simply cannot
      unilaterally modify its authorized rate of return.

Second Structure Reconsideration Order, 99 F.C.C.2d at 1055-1056.  The
Commission reiterated that Comsat was bound by the 1978 rate of return
prescription and must set its rates to comply with that prescription.
Id. at 1056, 1064.  Comsat sought no further review of the
Commission's determination.

   3. a. In November 1985, the Commission released an order initiating
an investigation into the lawfulness of Comsat's rates.
Communications Satellite Corp., CC Docket Nos. 80-634 and 85-268,
Mimeo No. 0672 (Common Carrier Bureau, released Nov. 8, 1985), as
modified by erratum, Mimeo No. 1703 (Common Carrier Bureau, released
Dec. 27, 1985).  As a result of the investigation, the Commission
staff determined that Comsat's earnings between 1983 and 1986 had
exceeded the maximum prescribed level by $61.7 million.
Communications Satellite Corp., 2 F.C.C. Rcd 3706, 3707 (1987),
modified, DA 87-526 (Common Carrier Bureau, released May 4, 1987).
The staff therefore ordered Comsat to show cause why it should not
refund the excess earnings to ratepayers.  2 F.C.C. Rcd at 3716.

   Comsat contested the show cause order, principally contending that
the Commission "does not have the power (outside of Section 204) to
order refunds for the violation of a rate of return prescription."
Pet. App. 10a.  In addition, Comsat argued

      that the (Commission's) 1979 and 1980 decisions to accept
      tariffs that were expressly targeted to produce a greater return
      effectively vacated the 1978 rate of return prescription * * *
      (and) that, even if the prescription remained effective, it
      would be inequitable to apply that prescription to periods that
      precede the Second Structure decisions which "revive" the 1978
      prescription.

Ibid.

   b. In January 1988, the Commission released its final decision,
ordering Comsat "to refund to its customers taking service between
August 1, 1984 and December 31, 1986, the aggregate sum of $38,775
million dollars, representing the revenues accrued during that period
in excess of 12.48 percent return and accrued interest." Pet. App.
29a.

   The Commission found that "Comsat's general arguments relating to
(the) Commission's refund power are essentially the same as the
arguments * * * presented * * * (and) decisively rejected (by the
court of appeals in New England Telephone & Telegraph Co. v. FCC,
supra)." Pet. App. 10a.  Accordingly, the Commission reaffirmed its
authority to order refunds under Sections 4(i), 201(b), and 205(a) of
the Act.  Pet. App. 10a-11a, 29a.  The Commission rejected Comsat's
contention that the Commission's previous acceptance of its tariffs
effectively "vacated" the 1978 rate of return prescription.  The
Commission reminded Comsat that the Second Structure orders
"unequivocally concluded that the 1978 prescription is still in effect
and will remain in effect until a proceeding is initiated and
completed to vacate or modify that prescription." Id. at 13a.  /11/
Since "Comsat did not appeal those decisions," the Commission
concluded, it "should not be permitted to reopen the question." Ibid.
Finally, the Commission found "some merit" to Comsat's contention that
refunds should not be ordered for the period before release of the
Second Structure Order in 1984.  Id. at 14a.  Exercising "the
equitable discretion inherent in agency consideration of refund
matters," id. at 5a, the Commission directed Comsat to refund only
those excess earnings that had accrued after August 1, 1984 -- the
effective date of the tariffs filed in compliance with the Second
Structure Order.  Id. at 15a.

   4. Comsat then filed a petition for review of the Commission's
refund order in the District of Columbia Circuit.  After certain
procedural maneuvers, /12/ the Commission in August 1989 moved for
summary affirmance in light of the court's recent decision in New
England Telephone & Telegraph Co. v. FCC, supra.

   In November 1989, the court of appeals summarily affirmed the
Commission's refund order in a brief unpublished order.  Pet. App.
1a-2a.  The court of appeals concluded that "(t)he issues presented in
(Comsat's) petition for review are controlled by this court's decision
in New England Telephone & Telegraph Co. v. FCC, * * * which is
binding precedent in this circuit until rejected by the court en banc
or overruled by the Supreme Court." Id. at 1a.  The court accordingly
held that "(t)he merits of the parties' positions are * * * so clear
as to justify summary action." Id. at 1a-2a.  /13/

                               ARGUMENT

   Following its decisions in New England Telephone & Telegraph Co. v.
FCC, supra, and Nader v. FCC, supra, the court of appeals correctly
held that the Commission had authority under Section 4(i) to enforce
its earlier rate of return prescription by directing Comsat to pay
back its excess collections.  That ruling, in an unpublished order,
does not conflict with any decision of this Court or of any other
court of appeals.  Moreover, petitioner's principal challenge to the
decision below raises the same issues the Court declined to review
last Term in Southern Bell Telephone & Telegraph Co. v. FCC, 109 S.
Ct. 1942 (1989), and New England Telephone & Telegraph Co. v. FCC, 109
S. Ct. 1942 (1989).  Petitioner offers no persuasive reason for the
Court to take a different approach here.  /14/ Accordingly, further
review of this case is not warranted.

   1. Petitioner principally contends that the Commission's use of
Section 4(i) to enforce rate of return prescriptions impermissibly
"replace(s) the statutory scheme of prospective ratemaking set forth
in the Communications Act with an FCC-devised scheme of retroactive
rate regulation." Pet. 8-9;  see Pet. 8-26.

   a. The Commission has the authority, under Section 4(i) in
conjunction with Section 205, to prescribe rates of return for the
communications carriers it regulates.  Section 205 permits the
Commission to prescribe just and reasonable "charges," and Section
4(i) broadly authorizes the Commission to make rules and to issue
orders that are "necessary in the execution of its functions."
Prescribing a rate of return allows the Commission to settle one of
the critical issues that determine the lawfulness of particular rates,
freeing both carriers and the Commission to focus on the other issues,
such as rate structures and the validity of elements of the rate base
and of particular expenses.  Such authority is well within the broad
authority that ratemaking agencies have "to make the pragmatic
adjustments which may be called for by particular circumstances."
Permian Basin Area Rate Cases, 390 U.S. 747, 776-777 (1968) (quoting
FPC v. Natural Gas Pipeline Co., 315 U.S. 575, 586 (1942)).  Such
authority has been well established since 1975, and, indeed,
petitioner appears to recognize as much.  See Pet. 13-16 & n.45.  /15/

   A prescription issued under Section 205 has binding, coercive
effect.  Section 205 declares that a "charge" or "practice" prescribed
under that provision is "to be thereafter observed";  and Section 205
further states that carriers "shall not thereafter publish, demand, or
collect any charge other than the charge so prescribed, or in excess
of the maximum * * * so prescribed * * * and shall conform to and
observe the regulation or practice so prescribed." 47 U.S.C. 205(a).
/16/ Before the issuance of the 1978 prescription at issue here,
moreover, Nader v. FCC made clear that a rate of return prescription
had the binding effect of limiting the carrier to the prescribed rate
of return (plus the buffer or increment).  520 F.2d at 201-202.
Indeed, as this Court has acknowledged, when an agency exercises its
power to prescribe "it speaks as the legislature, and its
pronouncement has the force of a statute." Arizona Grocery Co. v.
Atchison, Topeka & Santa Fe Ry., 284 U.S. 370, 386 (1932).

   An inherent and necessary corollary of the power to adopt binding
rate of return prescriptions is the authority to enforce those
prescriptions.  This Court has often recognized in the ratemaking
context that "the width of administrative authority must be measured
in part by the purposes for which it was conferred * * *." FPC v.
Texaco Inc., 417 U.S. 380, 389 (1974) (quoting Permian Basin Area Rate
Cases, and proper" clause, North American Telecomm. Ass'n v. FCC, 772
F.2d at 1292-1293, consequently enables the Commission to carry out
its statutory responsibilities with the flexibility it needs to
regulate communications carriers.  That provision authorizes agency
action that, although not specifically enumerated in the
Communications Act, is reasonably calculated to achieve the express
objectives of the Act.  See, e.g., United States v. Southwestern Cable
Co., 392 U.S. 157, 181 (1968).  The enforcement of a prescription that
is authorized under Section 205 is at the core of the enforcement
authority that Section 4(i) grants the Commission.

   As the court of appeals recognized here and in New England
Telephone & Telegraph Co. v. FCC, supra, once the validity of rate of
return prescriptions and the Commission's authority to enforce such
prescriptions are accepted, the power to require refunds readily
follows as a necessary tool to enforce the rate of return
prescription.  A refund is not only the most obvious means of ensuring
that a directive establishing a maximum rate of return is not
violated;  it may be the only effective remedy, because not until
revenues are actually collected can it be determined whether the
carrier exceeded the prescribed rate of return.  Thus, as the court of
appeals stated in New England Telephone & Telegraph Co. v. FCC, the
Commission's choice of a refund remedy to enforce a rate of return
prescription, in "a strictly technical sense," was "absolutely
necessary" because otherwise "the carriers in fact would not be
limited to (the prescribed) return * * * and the prescription would be
violated." 826 F.2d at 1107-1108.  /17/

   In any event, the Commission "enjoys significant discretion to
choose among a range of reasonable remedies, including refunds." New
England Telephone & Telegraph Co. v. FCC, 826 F.2d at 1108.  /18/ The
use of refunds is a well-established remedial device in utility
regulation.  See, e.g., Permian Basin Area Rate Cases, 390 U.S. at
825-828;  FPC v. Tennessee Gas Transmission Co., 371 U.S. 145, 150-155
(1962).  And the use of refunds to enforce a rate of return
prescription in particular is consistent with the Communications Act.
As petitioner points out (Pet. 11-13), Section 204(a), which empowers
the Commission to investigate rate increases and to require refunds,
is the only statutory provision that expressly authorizes the
Commission to order refunds.  That provision, however, does not itself
suggest that such a grant of authority bars the Commission from
ordering refunds as a remedy for the violation of an existing and
binding presciption order.

   Indeed, compensatory remedies are expressly provided for in other
common carrier provisions of the Communications Act.  Under Section
206, for example, a carrier may be "liable * * * for the full amount
of damages" resulting from its unlawful act.  47 U.S.C. 206.
Moreover, a person injured by a common carrier can file a complaint
with the Commission "for the recovery of damages for which such common
carrier may be liable," 47 U.S.C. 207, and the Commission may order
the payment of money to the complainant if justified, 47 U.S.C. 209.
It would therefore be inconsistent with the longstanding approach to
the interpretation of the broadly worded ratemaking statutes to
suggest -- and the court of appeals properly declined to do so -- that
the Commission, when choosing a means of enforcing an order which is
authorized but not specifically mentioned in the statute, is somehow
forbidden to adopt remedies that are specifically provided for
elsewhere in the statute.  /19/

   b. Contrary to Comsat's contention, the requirement that it refund
earnings in excess of the prescribed maximum return does not violate
the rule against retroactive ratemaking.  The obligation that the
Commission enforced was set prospectively in 1978 when the Commission
issued its rate of return prescription.  The refund order merely
imposed a remedy for Comsat's violation from August 1984 through
December 1986 of the duty that was imposed in 1978.  In other words,
the refund in this case flows not from a retroactive adjudication that
Comsat's rate of return after August 1, 1984, was too high, but rather
from the prospective restriction imposed on Comsat's earnings by the
1978 prescription.  See New England Telephone & Telegraph Co. v. FCC,
826 F.2d at 1108 (the refund order "merely recognized that the prior
prescription had been violated and imposed a remedy for that
violation").

   For that reason, Comsat's assertion (Pet. 17-22) that the decision
below conflicts with many decisions concerning retroactive ratemaking
is incorrect.  /20/ None of those decisions involved the situation at
issue in this case -- agency action enforcing an existing,
prospectively defined prescription.  Here, the rate of return
prescription made it unlawful for Comsat to maintain rates in excess
of the maximum return.  None of the cases cited by Comsat forbids a
ratemaking agency's use of a refund to enforce, in a practical,
administratively efficient manner, a valid prospective Commission
order.

   Similarly, the Commission's choice of remedy to enforce its rate of
return prescription does not disturb the balance between the interests
of carriers and customers that Congress has established in the
Communications Act.  To the contrary, the Commission's order properly
respects the statutory balance of carrier and ratepayer protection.

   First, the Commission permitted Comsat a margin of one percent
above the prescribed just and reasonable level of 11.48 percent,
recognizing the imprecision of ratemaking and providing the carrier
with an incentive for efficiency.  Only when -- and to the extent that
-- Comsat exceeded both the 11.48 percent prescription and the one
percent margin did the Commission require a refund.  The Commission's
actions thus "more than adequately protected the carriers' interests
in relation to the * * * rate-of-return prescription." New England
Telephone & Telegraph Co. v. FCC, 826 F.2d at 1109.

   Second, the prescription protected Comsat from the possibility that
the Commission would order a refund on the ground that the prescribed
rate of return was too high.  Thus, if the cost of capital had fallen
-- after the Commission's prescription order had become effective --
so that Comsat's achieved return had been far above a level reasonably
necessary to attract investment, the Commission would have been
foreclosed by its prescription order from requiring a refund on that
basis (as long as Comsat's return complied with the prescription).
See New England Telephone & Telegraph Co. v. FCC, 826 F.2d at 1108.
Instead, the Commission would have had to initiate and to complete a
proceeding to revise its prescription order prospectively in order to
eliminate that protection from Comsat and to lower its prescribed
ceiling to the level justified by the changed conditions.

   Third, the provisions of the statute embody a distinction between
carriers and ratepayers that the refund order reflects.  See New
England Telephone & Telegraph Co. v. FCC, 826 F.2d at 1108-1109.
Thus, while carriers propose their own rates, and may seek increases
when appropriate, ratepayers do not have a comparable power of
initiation:  they must generally rely on the Commission for
protection.  The Commission's order here assists in that protection.
Indeed, the Commission's order is consistent with statutory provisions
that permit recovery from a carrier for violations of a duty under the
Act.  47 U.S.C. 206-209.  In short, requiring Comsat to refund
earnings it received in violation of an outstanding prescription did
not disturb the statutory balance of interests, but rather vindicated
that balance.

   Finally, the Commission did not require Comsat to refund even the
entire amount of its overcharges over the one percent buffer.  Rather,
the Commission exercised equitable discretion in limiting the refund
to the excess earnings that accrued after the issuance of the Second
Structure Order in 1984.  See p. 10, supra.

   2. Comsat also contends (Pet. 26-28) that the court of appeals
failed to consider its "fundamental argument" that the Commission
effectively nullified the 1978 prescription when it accepted Comsat's
tariffs that were targeted to exceed the prescribed rate of return.
In New England Telephone & Telegraph Co. v. FCC, supra, one carrier
had raised a similar argument, contending that the rate of return
prescription at issue there had been superseded when the Commission
had accepted the tariffed rates.  See GTE Br. at 9-10,
Telecommunications Research & Action Center v. FCC, No. 85-1085 (D.C.
Cir.).  /21/ In affirming the Commission's order, however, the court
of appeals rejected that argument, explaining that the rate of return
prescription underlying the refund obligation at issue "had 'the force
of a statute'" and was "binding" on the carrier.  New England
Telephone & Telegraph Co. v. FCC, 826 F.2d at 1107 (quoting Arizona
Grocery Co. v. Atchison, Topeka & Santa Fe Ry., 284 U.S. at 386).  The
proper route for a carrier to seek relief from an allegedly deficient
prescription, the court stated, was to petition the Commission to
increase the prescribed rate of return.  New England Telephone &
Telegraph Co. v. FCC, 826 F.2d at 1105, 1109, 1110.  Since in New
England Telephone & Telegraph Co. v. FCC, supra, the D.C. Circuit had
determined that a carrier's unilateral tariff filings did not nullify
a rate of return prescription, the court of appeals here correctly
concluded that that decision foreclosed the identical issue raised by
Comsat.  See Pet. App. 1a-2a.

   In any event, Comsat failed to raise that issue at the appropriate
time before the Commission.  In the Second Structure proceeding, the
Commission "unequivocally concluded that the 1978 prescription is in
effect and will remain in effect until a proceeding is initiated and
completed to vacate or modify that prescription." Pet. App. 13a.
Comsat did not seek judicial review of the Commission's determination
and did not ask the Commission to modify its prescription.  The
Commission therefore properly determined that Comsat "should not be
permitted to reopen the question." Ibid.

   Finally, Comsat's argument collapses on the merits.  Section 408
provides that a Commission order "shall continue in force * * * until
the Commission or a court of competent jurisdiction issues a
superseding order." 47 U.S.C. 408;  see also 47 U.S.C. 205(a)
(prescriptions are to be "thereafter observed").  The Commission's
acceptance of a tariff that becomes effective by operation of law (47
U.S.C. 204(a) is not an agency determination that the components of
the tariff -- the filed rates or the rate of return -- are lawful.
See, e.g., Aeronautical Radio, Inc. v. FCC, 642 F.2d at 1234;  cf.
Southern Ry. v. Seaboard Allied Milling Corp., 442 U.S. at 452-454.
By filing tariffs targeted to exceed its prescribed return, Comsat
could violate the rate of return prescription, but could not nullify
it.

                              CONCLUSION

   The petition for a writ of certiorari should be denied.

   Respectfully submitted.

   JOHN G. ROBERTS, JR.

      Acting Solicitor General /22/

   JOHN E. INGLE

      Deputy Associate General Counsel

   LAUREL R. BERGOLD

      Counsel Federal Communications Commission

   JUNE 1990

   /1/ See Permian Basin Area Rate Cases, 390 U.S. 747, 779 (1968) (no
"limitations of time" imposed by statute on agency prescription
order);  New England Telephone & Telegraph Co. v. FCC, 826 F.2d 1101,
1106-1107 (D.C. Cir. 1987), cert. denied, 109 S. Ct. 1942 (1989);  AT
& T v. FCC, 487 F.2d 865, 880 (2d Cir. 1973).

   /2/ See, e.g., City of New York v. FCC, 486 U.S. 57, 66 (1988);
Capital Citites Cable, Inc. v. Crisp, 467 U.S. 691, 700 (1984);  New
England Telephone & Telegraph Co. v. FCC, 826 F.2d at 1106-1109;
North American Telecomm. Ass'n v. FCC, 772 F.2d at 1292-1293;  Nader
v. FCC, 520 F.2d 182, 203-205 (D.C. Cir. 1975).

   /3/ The rate of return is one of the components of the formula that
is typically used to determine the revenue requirements, and hence the
rates, of a regulated company.  The rate of return may be defined as
"the amount of money a utility earns, over and above operating
expenses, depreciation expense, and taxes, expressed as a percentage
of the legally established net valuation of utility property, the rate
base." P. Garfield & W. Lovejoy, Public Utility Economics 116 (1964).
Under one common form of rate regulation, a regulated carrier is
authorized to set rates that will recover its legitimate expenses
(including depreciation and taxes) plus a reasonable return (the rate
of return) on its rate base (the net investment in property that is
used in providing service).

   /4/ Cf. FPC v. Tennessee Gas Transmission Co., 371 U.S. 145,
150-155 (1962) (upholding FPC's order of refund based on determination
of the reasonable rate of return, before any determination of how the
costs of service should be allocated).

   /5/ In New England Telephone & Telegraph v. FCC, supra, petitioner
appeared as an amicus curiae in opposition to the Commission's
authority before both the court of appeals on the petitions for review
and this Court on the petitions for a writ of certiorari.

   /6/ The carriers, supported by petitioner as amicus curiae, filed
petitions for a writ of certiorari, in which they principally
challenged the Commission's statutory authority to order refunds as a
means of enforcing a rate of return prescription.  This Court denied
certiorari.  Southern Bell Telephone & Telegraph Co. v. FCC, 109 S.
Ct. 1942 (1989);  New England Telephone & Telegraph Co. v. FCC, 109 S.
Ct. 1942 (1989).

   In AT & T Co. v. FCC, 836 F.2d 1386, 1392 (D.C. Cir. 1988), the
court of appeals reaffirmed the Commission's authority "to order
refunds where a carrier has violated an outstanding rate-of-return
prescription." Although the court invalidated the specific rules
adopted in that case to implement an automatic refund policy, the
court stated that "New England Telephone clearly defeats the claim
that a refund scheme in conjunction with rate-of-return regulation is
necessarily incompatible with the regulatory scheme embodied in the
Communications Act." Ibid.

   /7/ The Commission uses the authorized rate of return to compute
rates for communications services.  The Commission, however, "has long
recognized the imprecision inherent in requiring carriers to set
tariff rates that will produce the exact level of revenues necessary
to produce the anticipated return." Pet. App. 22a.  As a consequence,
the Commission establishes a range or increment above the prescribed
level that defines the upper limit of a zone of reasonableness for
earnings.  See New England Telephone & Telegraph Co. v. FCC, 826 F.2d
at 1109.  Generally, the Commission takes action to enforce a rate of
return prescription only when, as in this case, a carrier exceeds both
the prescribed rate of return and the additional increment.  Pet. App.
23a.  In this case, the Commission ordered Comsat to refund earnings
in excess of 12.48 percent, the authorized return plus the one percent
increment.  Ibid.

   /8/ In response to the Commission's inquiry, Comsat projected
alternative rates of return of 9.8 and 12.6 percent for 1980,
depending upon how the state of the economy affected demand.  Pet.
App. 7a.

   /9/ Comsat later acknowledged that "the rates in effect from 1981
through July 1984 were targeted to achieve a rate of return in the
range of 14.25% to 15.4%." Pet. Supp. Resp. to Show Cause Order at 20,
In re Communications Satellite Corporation (filed July 9, 1986).

   /10/ At no time during this period did Comsat petition the
Commission for a change in its rate of return prescription.

   /11/ The Commission pointed out that neither the Commission nor its
staff had issued any order "that purported to vacate, modify or waive
the rate of return prescription." Pet. App. 14a.

   /12/ The court of appeals held Comsat's petition pending
disposition of the petition for rehearing and the suggestion of
rehearing en banc filed in New England Telephone & Telegraph Co. v.
FCC, supra.  Order, Communications Satellite Corp. v. FCC, No. 88-1243
(D.C. Cir. May 17, 1988).  As a result of the full court of appeals'
denial of en banc rehearing of that case, see Order, New England
Telephone & Telegraph Co. v. FCC, No. 85-1087 (D.C. Cir. Nov. 2,
1988), petitioner asked the court of appeals initially to hear its
case en banc.  The court denied that request.  Order, Communications
Satellite Corporation v. FCC, No. 88-1243 (D.C. Cir. Aug. 3, 1989).

   /13/ On February 2, 1990, the court of appeals denied Comsat's
petition for rehearing and suggestion of rehearing en banc.  Pet. App.
74a-75a.  Judges Buckley, Williams, and Sentelle dissented from the
denial of rehearing en banc.  Id. at 75a.

   /14/ Petitioner asserts that the decision below "ha(s) far-reaching
implications for a host of industries subject to federal rate
regulation, touching virtually every aspect of the economy." Pet. 9.
That assertion is groundless where, as here, the court of appeals'
decision -- a brief unpublished order -- has little, if any,
precedential value by virtue of D.C. Cir. G.R. 11(c), and thus affects
only the parties to this case.

   /15/ The D.C. Circuit expressly affirmed the Commission's authority
to prescribe rates of return in 1975, Nader v. FCC, 520 F.2d at
203-206, explaining that such prescriptions are "necessary for the
Commission to carry out its (ratemaking) functions in an expeditious
manner," id. at 204.  The court has since reaffirmed that authority.
See AT & T v. FCC, 836 F.2d at 1389, 1392;  New England Telephone &
Telegraph Co. v. FCC, 826 F.2d at 1104, 1106-1107.

   /16/ A prescription order remains binding "for the period of time
specified in the order or until the Commission or a court of competent
jurisdiction issues a superseding order." 47 U.S.C. 408.  Cf. Permian
Basin Area Rate Cases, 390 U.S. at 779 ("Nothing in (15 U.S.C.
717(d)(a)) imposes limitations of time upon the effectiveness of rate
determinations issued under it;  rather, the section provides that
rates held to be just and reasonable are 'to be thereafter observed .
. . .'").

   /17/ Comsat suggests that the Commission's available remedy "under
a rate of return regime (is) to direct the carrier to file new rates
reasonably calculated to achieve the appropriate level of return."
Pet. 22.  That suggestion, however, ignores the fact that the
Commission already had issued an order -- the rate of return
prescription -- that had been violated and had reaffirmed that
prescription in the Second Structure Order.  Nothing in the statutory
scheme supports the suggestion that the only enforcement tool for
violation of an agency order is to issue another order that may itself
be violated.

   /18/ Accord Nader v. FCC, 520 F.2d at 203;  see General Telephone
Co. v. United States, 449 F.2d 846, 865 (5th Cir. 1971) (courts "must
give deference to the choice of remedy selected by the agency," which
should be upheld if it is "reasonably calculated to effectuate the
policies of the Communications Act").

   /19/ See, e.g., FPC v. Natural Gas Pipeline Co., 315 U.S. at 585
(where refund order not explicitly authorized under the Act was in
interest of the public and was "in harmony with the purposes of the
Act," agency had discretion to issue it under the statutory provision
authorizing orders that are necessary or appropriate to carry out
provisions of the Act);  cf. Wisconsin v. FPC, 373 U.S. 294, 309
(1963) ("to declare that a particular method of rate regulation is so
sanctified as to make it highly unlikely that any other method could
be sustained would be wholly out of keeping with this Court's
consistent and clearly articulated approach to the question of the
Commission's power to regulate rates").

   /20/ In both Atlantic Refining Co. v. Public Service Comm'n, 360
U.S. 378, 389-390 (1959), and Arizona Grocery Co. v. Atchison, Topeka
& Santa Fe Ry., 284 U.S. at 390, for example, the Court concluded that
an agency, under its statutory authority to adopt prescriptions, could
not order refunds for the time period before the prescription was
adopted.  Here, by contrast, the Commission ordered the refund as a
means of remedying the carrier's violation of an existing
prescription.  The decision below is thus consistent with Atlantic
Refining and Arizona Grocery.

   /21/ That particular proceeding was consolidated with others on
petitions for review before the court of appeals under the caption New
England Telephone & Telegraph Co. v. FCC.  See 826 F.2d at 1106.

   /22/ The Solicitor General is disqualified in this case.