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Timestamp: 2016-12-09 10:29:04
Document Index: 323876290

Matched Legal Cases: ['§ 222', '§ 222', '§ 151', '§ 222', '§ 201', '§ 1']

decided: July 27, 1977.
RCA GLOBAL COMMUNICATIONS, INC., PETITIONER,v.FEDERAL COMMUNICATIONS COMMISSION AND UNITED STATES OF AMERICA, RESPONDENTS, AND ITT WORLD COMMUNICATIONS INC., TRT TELECOMMUNICATIONS CORPORATION AND WESTERN UNION INTERNATIONAL, INC., INTERVENORS
Petition for review of Federal Communications Commission Report, Order and Notice of Proposed Rulemaking, amending a formula governing the distribution of international telegraph traffic, pursuant to Communications Act § 222(e), 47 U.S.C. § 222(e). The Order is vacated and the case is remanded to the Commission for further proceedings in accordance with this opinion.
Moore, Feinberg, Gurfein, Circuit Judges. Feinberg, C.j., concurring.
Petitioner, RCA Global Communications, Inc. ("RCA") by its petition seeks to review and set aside, in part, a " REPORT AND ORDER AND NOTICE OF PROPOSED RULEMAKING" issued on January 7, 1976 by the Federal Communications Commission (the "Commission" or "FCC") which, in substance, purported to strike down a formula (sometimes referred to as the "international formula") which had been created in, and utilized since, 1943 when such a formula was deemed necessary to insure a fair distribution of unrouted international telegraph traffic and thus avoid possible monopoly power in the Western Union Telegraph Company ("WU") as a result of its merger with Postal Telegraph Cable Company ("Postal"). To make this merger possible, Congress added Section 222 to the Communications Act ("the Act"), 47 U.S.C. § 151 et seq.
". . . distribute among the international telegraph carriers, telegraph traffic by wire or radio destined to points without the continental United States, and divide the charges for such traffic, in accordance with such just, reasonable, and equitable formula in the public interest as the interested carriers shall agree upon and the Commission shall approve . . . ."
WU is the only domestic carrier which receives messages from the public. The messages fall into two categories: (1) "routed" wherein the customer specifies a particular IRC which he wishes to transmit his message overseas; and (2) "unrouted" wherein the particular IRC is designated.
Congress, as part of the merger legislation, specifically provided with respect to "distribution of telegraph traffic among telegraph carriers or any division of charges therefor that if ", after a full hearing, the Commission finds that either of them
". . . is or will be unjust, unreasonable, or inequitable, or not in the public interest, the Commission shall by order prescribe the distribution of such telegraphic traffic, or the division of charges therefor, which will be just, reasonable, equitable and in the public interest . . . ." 47 U.S.C. § 222(e)(3)
Initiation of any such proceeding was to be "upon a complaint or upon its [the Commission's] own initiative."
For all practical purposes, the proceeding remained dormant until November 1973 when the Commission issued an order*fn1 instituting an investigation to determine whether the distribution of telegraph traffic handled by WU was within the statutory language of unjust, unreasonable, etc., and if so, what the Commission should do about it. In addition to ITT, RCA, WUI, TRT and WU, The French Telegraph Cable Co., Canadian National Railway Co., Canadian Pacific, Ltd., and United States-Liberia Radio Corporation were made parties respondent. A timetable was set up for the filing of statements of fact, memoranda of law, responses and replies.
This the respondents, RCA, ITT, WUI and TRT, did in great volume. (JA 169-672). There were statements of position, replies to each others' comments, supplemental comments and further replies thereto. Throughout RCA demanded an oral hearing to develop facts, albeit on many occasions RCA presented by memoranda and/or affidavits its views. The record before us discloses at least thirty-three separate statements arguing the parties' respective causes. Out of this impressive array of fact and argument came a final decision by the Commission released on January 7, 1976 supplemented by a decision released on September 27, 1976.
For present appellate review purposes this mass of material can be distilled down to the two points which RCA urges as entitling it to have the Commission's order of January 7, 1976 vacated and set aside and the case remanded to the Commission for appropriate further proceedings, namely, that " THE COMMISSION'S ' NOTICE-AND-COMMENT' PROCEDURE DID NOT AFFORD RCA [GLOBCOM] THE ' FULL HEARING' TO WHICH SECTION 222(e)(3) ENTITLED IT", and " THE COMMISSION'S PRESCRIPTION OF A NEW INTERIM FORMULA IS NOT SUPPORTED BY ADEQUATE FINDINGS". As a corollary, RCA claims that such findings as are purported to have been made are arbitrary, capricious and unsupported by substantial evidence.
Bell Telephone Company of Pennsylvania v. FCC, 503 F.2d 1250, 1264-65 (3rd Cir. 1974), cert. denied, 422 U.S. 1026, 95 S. Ct. 2620, 45 L. Ed. 2d 684 (1975) (footnote omitted).
The court in Bell Telephone went on to hold that in the absence of a clear statutory directive, it would not create a per se rule that an evidentiary hearing was required in § 201 proceedings. The facts of each case would determine the type of hearing required.*fn2 The spread of this flexible approach to the interpretation of the term "hearing" in regulatory statutes is an outgrowth, to a large extent, of the Supreme Court decision in United States v. Florida East Coast Ry. Co., 410 U.S. 224, 35 L. Ed. 2d 223, 93 S. Ct. 810 (1973). The narrow holding of that case was that the words "after hearing" in the Interstate Commerce Act § 1(14)(a) do not require trial-type proceedings. Judge Friendly of this Court has described the import of the Florida East Coast decisions as follows:
H. Friendly, " Some Kind of Hearing ", 123 U. Pa. L.Rev. 1267, 1307 (1975) (footnotes omitted).
The Commission had set out in detail the issues to be studied and ordered the parties to file statements of fact and memoranda of law.*fn3 The International Formula Committee ("IFC") and the International Quota Bureau ("IQB") were made parties for the purpose of furnishing information in their possession required by the Commission. The Commission stated further that after reviewing the written submissions, it would consider the necessity or desirability of an oral hearing, upon its own or any party's motion.
In each of five submissions, RCA devoted one sentence to asserting its right to an oral hearing. It did not give any specific reasons for the necessity of an oral hearing, any necessity for cross-examination, any importance of witness credibility, or any evidence that could only be presented orally. In fact, in its August 1, 1975 submission, it stated that "using the Western Union derived data, [it was able] to compile an accurate summary of the effects of the ITT and TRT proposal on RCA Globcom." (JA 510) (emphasis added).
However, the form of the hearing does not exempt the Commission from the burden of making findings that its interim formula will be just, reasonable, equitable, and in the public interest ". (Emphasis added). "Interim" is defined as "temporary" or "provisional".*fn4 Obviously anything on an interim basis looks to something more permanent. That "something" is readily discernible from the Commission's order reflecting its belief that anyone who desires to send a transoceanic telegram must specify at the time of delivering the message to be transmitted, the particular carrier (the IRC) by which he or she desires the message sent. This objective is gleaned from such statements as the Commission expects "the parties during this [the interim] period to work out mutually-agreeable procedures for implementation of the all-routed distribution systems so that we can avoid later controversy on this point." (JA 27). The Commission concedes that it cannot move immediately to require customer routing (JA 3) but it agrees "in principle that we should proceed in this new direction". (JA 27) The "interim" period, so states the Commission, is to be used so "that the IRCs will use this period to expand their solicitation efforts, so that the customer routing system will work smoothly and efficiently". (JA 28).
The Commission's determination to abolish the customer's right to merely hand in his message for transmission is clear from its statements that "in place of the present formula, we will place distribution of traffic on the choice of the customer", i.e., "routed" messages, and that in the interim it prescribes "a new formula which distributes unrouted traffic among the IRCs in the same proportions as each carrier handles routed traffic". (JA 3).
The record discloses that in 1974*fn5 some three million messages were "unrouted" and that of the 3.9 million messages handled by WU, 76.5% were unrouted and 23.5% routed. Thus, as the Commission recognizes, "unrouted traffic continues to represent a substantial portion of outbound traffic and the equitable division is a matter of consequence to the IRCs". (JA 11).
Under the heading "II. FINDINGS: THE PRESENT FORMULA", the Commission has set forth figures which show a substantial disparity in unrouted messages handled by ITT, TRT, WUI and RCA. This disparity arises in the Commission's opinion because the original formula "sought to keep market shares static" in order to achieve a balance between carriers. But for this disparity the Commission states that "[it] cannot ignore the possibility that quality of service could have been improved absent the inequities of the formula" (JA 17) and upon this assumption the Commission concludes that these distortions "are injurious to the public interest and should be eliminated". (JA 17).
The Commission concedes that "the parties were not [on] notice that [it] would consider a requirement for specific routings"; that the parties hereto have not "addressed the legal or economic issues raised thereby"; and that it is "unable at this point to determine the extent of the economic burden which would result from a requirement for specified routings". Nevertheless "[it] agree[s] in principle that [it] should proceed in this direction [namely, 'customers be required to specify the routings']". (JA 27).
The Commission states that "none of the parties considered the increase in WU's costs which would follow from this expanded role, or the effect of that increase on the users of both domestic and international service". (JA 27). The Commission admits that "instructions and operational arrangements . . . are needed to guide WU in presenting the public a mandatory choice among IRCs" but that "the information now before us [the Commission], however, is insufficient to prescribe those instructions or operating arrangements." (JA 28).
In repealing the original formula directed by Congress to be achieved by agreement among the carriers and approved by the Commission, the Commission "concluded that the public interest . . . will be best served by relying primarily on consumer choice [i.e., routing] for the distribution of traffic among the several international record carriers", but that "due to certain unresolved questions concerning possible operational, economic and legal implications, [it] will not prescribe that all international telegraph traffic must be specifically routed by the customer". The Commission states that it expects "a more aggressive marketing effort and a consequential reduction in unrouted traffic". Finally, despite protestations that its interim formula is designed to serve the public interest, the Commission solicits "prompt comments concerning the operational, economic, and legal implications of an all-routed distribution in order [to] reach an early decision concerning whether the public interest would be served even better through this means". (JA 35).
Under the interim formula, unrouted messages are to be distributed so that each IRC will receive a volume of such messages which will equal its quota as defined in the formula. The parties were directed to file comments on or before March 26, 1976 with replies by April 23, 1976. The parties, RCA, ITT, TRT and WU were almost unanimous*fn6 in their comments that an all-routed plan would greatly increase costs, delay efficient service and result in confusion to the members of the public who desired to send telegrams. Particularly stressed is the thought that any such scheme would be highly adverse to the public interest. The views of WU are entitled to particular consideration because it is the originating source of all foreign-bound telegrams in the 50 states. It alone has the initial contact with the customer, namely, the telegram sender. If the all-routed plan contemplated by the Commission is required, the statute requires investigation as to whether it would be "in the public interest". Using the figures of 3 million unrouted messages a year and the assumption based upon comments of the parties that these messages are largely of a social nature and are not sent by any individual more than once or twice a year, well over one million customers would be involved. These messages would all have to be delivered to WU either across the counter by hand or by telephone. If the Commission's plan were to go into effect, the WU operator would have to inquire by what IRC the customer wished the message to be sent. Undoubtedly the customer would not have any idea what these initials stood for so that the operator would have to advise him that they referred to the carrier which transmitted the message abroad. The customer would, in all likelihood, say that he did not care so long as the message was delivered promptly. The operator would then have to inform the customer that he could not take the message unless the customer specified an IRC. This would require informing the customer as to the various IRCs and supplying him with material describing the merits of each. Were the customer to seek the operator's recommendations, this would put into the hands of WU the power to select and specify. The problems (even the absurdities) attendant to this situation have been well described in WUI's comments of May 10, 1976, wherein it said:
Assuming, as we do, that the notice-and-comment procedure is acceptable, there seems to be in the record no comment from the public or anyone who might speak in its behalf on the vital element in the statute, i.e., "public interest". Nor is there any factual showing that the service being rendered is not of the highest quality or that it could be improved by an all-routed scheme. To the contrary, high quality of service is conceded and there is no showing that the carriers have not availed themselves of the most modern technological devices.
The Commission has professed to be acting "to regulate [the carriers] in the public interest" and states that the public is interested "in a rapid, efficient communications service with adequate facilities and reasonable charges" (JA 75) but nowhere in the record is there any proof, much less a finding, that the public is not receiving such service. As to reasonable charges, the statements in the record are that as a result of the Commission's decree the public may be forced to bear higher charges.
Another possible adverse consequence of its decree, which the Commission itself raises, is whether the decree calling for "redistribution of traffic will unreasonably endanger the financial integrity of the carriers to the point that they are unable to adequately serve the public". (JA 75). The Commission recognizes that "with respect to ITT, TRT and FTC, the interim formula will likely result initially in their receiving increased unrouted traffic and increased revenues . . . [which would] improve their financial position" and that "with respect to RCA and WUI, the interim formula does appear likely initially to reduce their message volumes and revenues". (JA 75). The Commission estimates that the projected diversion of revenues is only 6.3% of RCA's net income*fn7 and that this loss "would not so reduce RCA's revenues as to put it into a loss situation or otherwise damage its ability to serve the public. . . ." (JA 75-76).
We find ourselves stymied in attempting to review the adequacy of the above findings of the Commission. Looking to applicable law and precedent, we find two principles well established: first, a reviewing "court's responsibility is not to supplant the Commission's balance of . . . interests with one more nearly to its liking, but instead to assure itself that the Commission has given reasoned consideration to each of the pertinent factors"; and second, "judicial review of the Commission's orders will therefore function accurately and efficaciously only if the Commission indicates fully and carefully the methods by which, and the purposes for which, it has chosen to act, as well as its assessment of the consequences of its orders for the character and future development of the industry". Permian Basin Area Rate Cases, 390 U.S. 747, 792, 20 L. Ed. 2d 312, 88 S. Ct. 1344 (1968) (emphasis added).
In Hawaiian Telephone Company v. F.C.C., 162 U.S. App. D.C. 229, 498 F.2d 771 (1974), the court said:
"Following the Supreme Court in [ F.C.C. v. RCA Communications, Inc., 346 U.S. 86, 73 S. Ct. 998, 97 L. Ed. 1470 (1953)] and other decisions, this court has long required that agencies present sufficient support for their conclusions in order that the court can properly review their decision. The court, and the parties, must not be left with post hoc rationalizations by counsel as the prime authority for the Commission decision." 498 F.2d at 777-78 (footnotes omitted)
In F.C.C. v. RCA Communications, Inc., 346 U.S. 86, 73 S. Ct. 998, 97 L. Ed. 1470 (1953), the Commission had authorized a competitor of RCA to open two new circuits to two European countries. RCA urged that this grant would constitute unnecessary duplicate competition. The Supreme Court (Mr. Justice Frankfurter), although recognizing that "the Commission is not required to make specific findings of tangible benefit" 346 U.S. at 96, said that "it is not too much to ask that there be ground for reasonable expectation that competition may have some beneficial effect". 346 U.S. at 97. Further, in referring to the Commission's statement that "'Competition can generally be expected to provide a powerful incentive for the rendition of better service at lower cost'", said: "Surely one cannot conclude from this bare statement that the Commission, whatever undisclosed awareness it may have of the problem, has sufficiently laid bare its mind to enable us to perform our reviewing function". 346 U.S. at 94-95, n.6.
For these reasons, before the consequences become a fait accompli, it would seem wise to ask the Commission to "present sufficient support for their conclusions in order that the court can properly review their decision", Hawaiian Telephone Company, 498 F.2d at 777, and "to gather the information [the Commission] need[s] for decision". (JA 28). And since the focal points of the report and order are public interest and the "unresolved questions concerning possible operational, economic and legal implications" (JA 35), it would seem advisable at this time to remand the case to the Commission to enable it to carry out its stated purpose and to indicate "fully and carefully the methods by which, and the purposes for which, it has chosen to act, as well as its assessment of the consequences of its orders for the character and future development of the industry." Permian Basin Area Rate Cases, 390 U.S. at 792. Such a remand would appear to be not inconsistent with the Commission's views because at the end of its report and order it stated:
FEINBERG, C.J., concurring:
I join fully in Part I of Judge Moore's opinion and also agree that the FCC's proposed interim formula in this case is not adequately supported by the record before us. See FCC v. RCA Communications, Inc., 346 U.S. 86, 97 L. Ed. 1470, 73 S. Ct. 998 (1953). Therefore, I concur in the decision to remand this case to the FCC for further proceedings.