Opinion ID: 338309
Heading Depth: 1
Heading Rank: 2

Heading: the instant proceeding

Text: 8 On July 11, 1973 USTS filed with the Commission the instant applications to construct new microwave radio stations pursuant to Specialized Carriers. Through these applications USTS proposed to establish the backbone of an interstate common carrier system to provide specialized private line services along a corridor from New York City to Houston via Atlanta. As summarized in the Commission's Decision the services USTS offered would in some respects duplicate services already offered by existing common carriers and in other respects supplement and provide additional services to those previously available. 15 Specifically, the initial market projected in the applications was provision of voice-grade private line service similar to that already offered in the corridor by AT&T; 16 secondarily the applications contemplated provision of services, along the backbone as well as through spurs and future expansion, that in a number of ways would differ significantly from those previously available, e. g., by guarantee of specifically limited data error rates and availability of band widths wider than voice. 17 9 On October 4, 1973 AT&T filed a petition to deny the applications, arguing that the services proposed were neither new nor innovative but duplicated voice and data services already available from the Bell System and that the USTS system would affirmatively disserve the public interest by wasteful construction, by misuse of scarce spectrum space, and by diverting from AT&T millions of dollars per year in revenues. 18 In response USTS argued that many of its services would supplement and otherwise add to the services already available and that the AT&T petition to deny was simply an attempt to renew arguments considered and rejected in the Specialized Carriers proceeding. 10 In a Memorandum Opinion and Order released September 13, 1974 the Commission denied AT&T's petition and granted USTS's applications. 19 The Commission identified the issue essentially as whether the concept of competition as developed in (Specialized Carriers) is to be reevaluated in light of these applications. 20 It then noted that the Commission has adequate regulatory jurisdiction    to prevent USTS, or any other carrier competing in the specialized communications market, from employing unfair competitive practices. 21 Finally, it concluded that 11 the public interest will be served by the addition of a well-financed, competent carrier which we believe USTS will become. Aside from general considerations, we would also note that the instant applications propose substantial new service to the Southeastern United States which is largely unserved at present by specialized carrier facilities. 12    (W)e find that the proposed facilities would serve the public interest, convenience and necessity, and that USTS is technically, financially and otherwise qualified to construct and operate them for the provision of interstate service.    22 13 This appeal followed. Jurisdiction is pursuant to Section 402(a) of the Communications Act, 47 U.S.C. § 402(a) (1970), and 28 U.S.C. §§ 2341-2350 (1970).III. THE MERITS 14 Much of appellant's argument is an attempt to reassert its objections, made in Specialized Carriers and subsequently, that a general policy in favor of entry by specialized carriers into the private line communications market is unwarranted. In essence, AT&T argues first of all that if Specialized Carriers is given a broad interpretation it violates the principles of RCA, supra, and otherwise disserves the public interest by duplicating existing services, wasting spectrum space, and diverting revenues. As indicated above, this initial argument has been considered and rejected by the Commission on several occasions. Moreover, AT&T pressed the argument again in the instant proceeding and again the Commission rejected it, concluding: We do not believe the circumstances surrounding the instant applications are sufficient to warrant reevaluation of the open entry policy promulgated in (the Specialized Carriers ) proceeding. 23 15 More significantly, this particular argument was finally decided in Washington Utilities, supra, where the Ninth Circuit affirmed the Commission's decision in Specialized Carriers. Appellants in that case pressed the issues of duplicated services and diverted revenues and expressly argued that Specialized Carriers, if read broadly, violated RCA. The court examined these issues at some length and concluded: 16 The Supreme Court's disposition of RCA Communications is flatly inconsistent with (appellant's) contention that new entry is impermissible if it will result in duplication of facilities of existing carriers capable of furnishing the service.    17 As the Commission puts it, RCA Communications stands for the proposition that while wasteful duplication is generally to be avoided, duplication is not wasteful where a certificating agency appropriately concludes that competition is reasonably feasible and may be expected to have some beneficial effect. 29 F.C.C.2d at 902 n. 20. 24 18 The court went on specifically to find the Commission's response adequate on the issues of duplication of services and diversion of revenues. 25 We find no reason to reexamine that holding. 19 What remains for appellant here, however, is its alternative argument that the Commission in fact intended the Specialized Carriers rulemaking to be read not broadly but narrowly and that by granting USTS's application the Commission departed materially from this prior policy without adequate justification or explanation. See, e. g., Secretary of Agriculture v. United States, 347 U.S. 645, 74 S.Ct. 826, 98 L.Ed. 1015 (1954). Specifically, AT&T contends that in the Specialized Carriers decision the Commission relied heavily upon the primary objective of new applicants to provide new and different services. This finding played a role of central importance: it enabled the Commission to warrant and explain a major benefit that the Commission expected in authorizing new carriers to meet the contention of unnecessary and wasteful duplication of facilities and services; and it supported the decision's attempt to minimize the risk of harm through traffic diversion, by assuming that the customers of the new carriers would primarily be new customers seeking services not otherwise provided by the existing carriers. 26 20 Appellant's narrow interpretation of the reach of Specialized Carriers, however, finds no persuasive support in the decision itself and, in fact, it has been plainly rejected not only by the Commission but by the courts and regulatory agencies that have had occasion to examine it. The decision, for instance, speaks in terms generally of private line services without differentiating among categories of such services on the basis of their present availability. 27 Rather, in its Specialized Carriers decision the Commission expressly contemplate(d) full and fair competition in the specialized field among all carriers, both established and new. 28 It stated its ultimate conclusion in broad terms: a general policy in favor of the entry of new carriers in the specialized communications field would serve the public interest, convenience, and necessity. 29 Moreover, in subsequent interpretation of its Specialized Carriers decision the Commission has consistently stressed that one objective of its policy was promotion of full competition over the entire range of private line services and that provision of new and innovative services and development and expansion of the total market, rather than being improvements which an applicant must generate in advance in order to be granted authority to proceed, are merely public benefits which the Commission expects will enure from its policy of competitive entry. 30 21 Decisions from both the Third and Ninth Circuits confirm this broad reading of Specialized Carriers. In Bell Telephone Co. of Pa. v. FCC, 503 F.2d 1250 (3d Cir. 1974), cert. denied, 422 U.S. 1026, 95 S.Ct. 2620, 45 L.Ed.2d 684 (1975), the Third Circuit examined the scope of Specialized Carriers in order to decide whether the FCC properly ordered AT&T and the Bell Telephone Company of Pennsylvania to provide certain interconnection services to specialized common carriers. The court based its affirmance of the orders in large measure on its finding that in Specialized Carriers the Commission intended to authorize the new carriers to provide all elements of private line services theretofore furnished by the established carriers. 31 And in Washington Utilities, supra, the Ninth Circuit, in affirming Specialized Carriers, similarly characterized the issue presented to and resolved by the Commission as whether it ought generally to authorize competitive entry to the full market of specialized carriers which offer all types of private line communications including many types already available from or capable of being provided by established carriers. 32 Furthermore, the state regulatory agencies which have had occasion to interpret the Commission's decision have reached similar conclusions in authorizing, pursuant to Specialized Carriers, intrastate competitive entry of specialized carriers despite explicit findings that the services proposed were already available from established carriers. 33 22 In short, appellant's restricted interpretation is contrary to the plain meaning of Specialized Carriers. In announcing a general policy in favor of competitive entry the Commission decided broadly that the public interest, convenience, and necessity would be served by permitting specialized common carriers to provide a full range of private line communications services in direct competition with established carriers so long as the particular applicant is qualified and the proposed service is technically and economically sound. Moreover, the Commission's decision makes good sense. The Commission reasonably determined that its objectives of adding new and innovative services and developing latent submarkets could not be achieved immediately and required in any event that new carriers be allowed to offer a package of services some of which necessarily would overlap those already available. It further recognized that a certain amount of creamskimming would naturally occur. 23 (D)evelopment of new markets must always take place gradually and begin in those particular submarket areas where maximum demand can be stimulated at minimum cost. This is the manner in which all new products and services are introduced, and it is practiced by the established carriers.    34 24 In the Commission's view such start-up difficulties are justified and moreover can adequately be controlled by carefully monitoring implementation of its policy. 35 Appellant has not convinced us that this reasonable approach must be disturbed. 25 In arguing for reversal on the ground that the Commission's action in this case represents an unexplained departure from a previously narrow interpretation of Specialized Carriers, appellant does not dispute the Commission's adequately supported finding that USTS is financially well qualified and the service it proposes is technically and economically sound. Instead, its argument rests on the absence of a specific finding that USTS will provide substantial new service, for which there is presently an unmet need. 36 Since we have concluded that this latter contention is based on a faulty premise, there is no basis for reversing the Commission on this ground. 37 26 Finally, appellant contends that reversal is warranted in any event since the Commission, contrary to Section 309 of the Communications Act, 47 U.S.C. § 309 (1970), failed to hold an evidentiary hearing on factual issues pertinent to the public interest before granting USTS's applications. Section 309 provides for a full hearing whenever the application presents a substantial and material question of fact. 47 U.S.C. § 309(e). The Commission, of course, has a large discretion to avoid time-consuming hearings in this field whenever possible. Southwestern Operating Co. v. FCC, 122 U.S.App.D.C. 137, 138, 351 F.2d 834, 835 (1965); Stone v. FCC, 151 U.S.App.D.C. 145, 466 F.2d 316 (1972). Moreover, the Commission may obviate the need for repetitious hearings on previously considered issues of public policy by establishing, through rulemaking, criteria against which to judge specific applications. United States v. Storer Broadcasting Co., 351 U.S. 192, 202-205, 76 S.Ct. 763, 100 L.Ed. 1081 (1956). 38 In such cases a hearing is not required unless the party opposed to the adopted policies  set(s) forth reasons, sufficient if true, to justify a change or waiver of the (policies). Id. at 205, 76 S.Ct. at 772. As the Ninth Circuit stated, in a somewhat different context, with regard to the Specialized Carriers rulemaking: Though the Commission said it would pass separately upon the merits of each pending application, presumably the rule would govern individual cases. That is its function. Washington Utilities, 513 F.2d at 1164. 27 In the instant case AT&T's argument that the Commission wrongfully denied it a Section 309 hearing rests, as does much of its argument throughout, on the assumption that the Commission was required, in light of the RCA decision, to determine that USTS would immediately provide new and innovative service, would develop latent submarkets, and would not otherwise duplicate existing services or divert revenues from established carriers. AT&T does not argue that its petition to deny raised substantial and material questions of fact regarding the financial qualifications of USTS or the technical soundness of its proposed services. In essence, AT&T concedes that unless its arguments on duplication of services and diversion of revenues are accepted it has no claim that its right to a Section 309 hearing was violated. But as discussed above AT&T's underlying assumption is faulty. Specialized Carriers decided those issues in favor of full competition. Consequently, the Commission was not presented with specific facts and circumstances which would make the general rule inapplicable and accordingly it was not required to hold a hearing. Tucson Radio, Inc. (KEVT) v. FCC, 147 U.S.App.D.C. 48, 50, 452 F.2d 1380, 1382 (1971).