Opinion ID: 402072
Heading Depth: 2
Heading Rank: 1

Heading: The Alleged Shift in Commission Policy

Text: 14 WUT's primary contention is that the Detariffing Order is inconsistent with the Unbundling Order. Thus, WUT claims that the Commission is required to explain more fully than it has its abandonment of a specific regulatory control ( (terminal equipment tariffs) ) which, but a year earlier, the Commission had found absolutely necessary to make competition work fairly and effectively in the international telex market. Brief for WUT at 29, 38 (citing Office of Communication of the United Church of Christ v. FCC, 560 F.2d 529, 532 (2d Cir. 1977) ((C)hanges in policy must be rationally and explicitly justified ....)). 15 WUT's argument is unpersuasive. It is clear that the Commission believed that the IRCs' bundled rate structure was inefficient, chiefly because it masked the true costs of the components of international telex services. 16 44. This is, indeed, the crux of the problem represented by the unified rate structure-it does not naturally assure that the costs of providing terminals and tielines are recovered from those who receive the benefit of those costs. From the IRC comments, it appears that this problem has manifested itself in at least two ways. First, the IRCs note that many of their customers routinely take teleprinters and tielines from two, three or more of the IRCs. Second, it appears that there are a fair number of customers who generate very low annual traffic volumes-sufficiently low, in fact, that larger-volume IRC subscribers are required to make up the deficit. 17 45. There is evidence that IRC-provided terminals and tielines are currently underused as a result of both of these phenomena. This is a matter of concern since telex terminal costs are not trivial. However, the precise level of current waste is not the most significant problem with the unified rate structure. Rather, the problem is that, by making those costs appear to be of no consequence, the rate structure does not force potential users to make an economic judgment as to what type of service meets their needs. 18 Unbundling Order, 76 F.C.C.2d at 78-79 (footnote omitted). Thus, (t)he (Commission) determined that, as a policy matter, the cross-subsidies between consumer groups inherent in bundled rates were undesirable and should end. Unbundling Review Decision, at 1152. 19 The Commission also recognized in the Unbundling Order that an increase in the number of points of domestic IRC operation would be unfair to WUT if IRC rates remained bundled while WUT assessed separate, cost-based charges for terminal equipment and transmission service. 5 Indeed, with the addition of the 21 service points, the IRCs will be able to reach directly more than 75 per cent of Western Union's overseas telex customers. They will thus be able to expand the existing system of tielines passively attached to the IRC switch which the unified rate structure, has allowed them to develop. Were we to allow them to expand their domestic operations under the unified rate structure they would be able to offer large numbers of current Western Union customers the lure of what would appear to be free, or minimal-cost, terminals and undercut Western Union service. 20 Unbundling Order, 76 F.C.C.2d at 79. But shortly after the Unbundling Order was issued, the Commission released its final decision in Second Computer Inquiry, 77 F.C.C.2d 384, 446 (1980), which allowed domestic telex providers to detariff their terminal offerings. Thus, the competitive disadvantage to which WUT would have been subjected had IRC terminal offerings been detariffed when the Unbundling Order was issued had been eliminated by the time the Detariffing Order was released. WUT and the IRCs are now on the same competitive footing with respect to regulation of terminal offerings. Therefore, the Commission was amply justified in concluding that any previous need for regulation of IRC equipment offerings to protect WUT from unfair competition had vanished. 6 21 The Commission ordered the IRCs to unbundle rates in an attempt to force the use of cost-based charges so that each consumer would pay the entire cost of its own use, but no more. The Unbundling Order did not, however, establish that the Commission believed regulation of equipment charges to be necessary. To the contrary, the Unbundling Order stated explicitly that the provision of terminal equipment and tielines are not, conceptually, inextricable from overall telex service(,) 76 F.C.C.2d at 78, and noted the Commission's tentative belief that (it) should deregulate the provision of terminal equipment(,) id. at 82. Therefore, WUT's claim that the Detariffing Order constitutes an unexplained departure from established Commission policy must be rejected. 22