Opinion ID: 397828
Heading Depth: 2
Heading Rank: 1

Heading: Western Union's Petitions

Text: 19 WU asserts in this court no objection to the interjection of competition into telecommunications markets. It does, however, object strongly to the Commission's failure to equalize the regulatory burdens to which it and Graphnet are subject, and urges reversal of both PMS and Formula on that basis. WU further claims that PMS may be reversed because the Commission failed to explain its inconsistent analysis of the applicability of its Free Direct Access decision to Graphnet's application, and because the Commission based Graphnet's PMS authorization on controverted factual assertions without benefit of a hearing. 20 WU's latter claims may be briefly considered. WU argues that the Commission's grant of Graphnet's application rests on unsupported pleading allegations and that the Commission simply ignored WU's attempts to apprise the Commission (1) that Graphnet's proposed service would be far inferior to the existing service provided by Western Union and (2) that diversion of traffic to Graphnet would cause upward pressure on Western Union's unit costs (and hence rates). Brief for Petitioner WU at 33. WU also contends that these factual disputes could have been resolved at the designated hearing which the FCC, (f)or some unexplained and inexplicable reason, cancelled. Id. at 31. 21 We agree with the Commission that these allegations miss the mark. The Commission was not required to address the factual disputes which WU raises here because Graphnet's certification did not rest on their resolution. Instead, that authorization was granted pursuant to the Commission's adoption of an open-entry policy. As the Commission recognized, a rulemaking of this nature may dispose of any need to address the issues of the need for new service, the adequacy of existing service, and the desirability of competitive entry, on a case-by-case basis. PMS, 71 F.C.C.2d at 520-21. See American Telephone and Telegraph Co. v. FCC, 539 F.2d 767, 774-75 (D.C.Cir.1976); Washington Utilities and Transportation Commission v. FCC, 513 F.2d 1142 (9th Cir.), cert. denied, 423 U.S. 836, 96 S.Ct. 62, 46 L.Ed.2d 54 (1975). Because the allegations which WU claims the Commission ignored are primarily relevant to the issue of whether multiple entry is desirable, and the Commission has determined that issue in its rulemaking, the Commission is not required to redetermine the issue in the context of Graphnet's application. If WU wishes to press its allegations further, it must challenge the Commission's conclusion that a competitive PMTS market is in the public interest, a course it specifically disavows in this proceeding. Brief for Petitioner WU at 21-22. Additionally, because controverted facts did not form the predicate for Graphnet's certification, the Commission's cancellation of the hearing previously designated was reasonable. See AT&T, 539 F.2d at 775. 22 WU also challenges as arbitrary and capricious the Commission's failure to explain its inconsistent action regarding the applicability of the FDA decision to Graphnet's application. In support of this challenge, WU argues that to the extent the Commission's discussion in PMS implies that a grant of section 214 authority itself renders FDA policies inapplicable, that discussion conflicts with the Commission's previous statement that FDA provided a separate basis for rejecting Graphnet's proposal. WU further claims that the Commission's reliance on the proposition that, if so authorized, Graphnet would operate as a participating carrier with the IRCs on a bona fide division of revenues basis, is inconsistent with its earlier rejection of that arrangement as contrary to FDA. 10 23 In Graphnet Systems, Inc., 64 F.C.C.2d 1021 (1977), the Commission cited two reasons for its rejection of Graphnet's tariff revisions. First, the service proposed therein was a public message service and thus outside the scope of Graphnet's section 214 authority. Id. at 1023. Second, the offering was apparently contrary to the Commission's FDA decision. In that decision, the Commission stated, it had held 24 that where hinterland delivery was performed by any party other than Western Union, the customer would have to pay the charges for service from the gateway to the hinterland location and that the alternative delivery mode could not be the agent of the IRC. 25 Id. Under Graphnet's proposal the IRC could select either Graphnet or WU for hinterland delivery and, because Graphnet (like WU) would be compensated for its delivery on a division of revenues basis, the charges to the consumer would be unaffected by the IRC's selection. Thus, the IRC would be absorbing the landhaul charge and ... Graphnet would be the agent of the IRC-a result contrary to the Commission's FDA policies. 11 Id. at 1024. 26 In PMS, the Commission recognized that these policies had constituted an independent ground for rejection. PMS, 71 F.C.C.2d at 525. It explained, however, that the authorization of multiple entry changed an essential premise in its analysis of FDA 's applicability. Under an appropriate grant of section 214 authority, Graphnet could, like WU, pick up, carry and deliver telegrams and telegraph messages ... between the hinterland points and the gateway locations of the IRCs as a domestic telegram carrier. Id. at 526 (emphasis added). Moreover, unlike the carriers in FDA whose offering and responsibility therefor ran only to the IRC with whom they contracted, Graphnet proposed to accept responsibility for hinterland pickup and delivery ... and to offer international service as a participating carrier with the IRCs on a bona fide division of revenue basis. Id. at 527. Since in this context Graphnet would not be an IRC agent, but a domestic telegraph carrier responsible to the hinterland customer, the Commission concluded that its FDA policies were inapplicable to Graphnet. 27 We find the Commission's course of action neither arbitrary nor capricious. Although, as indicated above, the Commission did change its position regarding FDA 's applicability to Graphnet's situation, the basis for that change was carefully stated in the Commission's PMS discussion. We believe that reference to that discussion readily explains the specific inconsistencies of which WU complains, and for that reason find no basis on which to require the Commission to explain each of its previous statements on the issue. We therefore decline WU's invitation to reverse Graphnet's certification on this ground. 28 WU's final claim encompasses both the PMS and the Formula orders. In that claim, WU argues that this court's stay order of June 18, 1979, establishes that the Commission's certification of Graphnet, absent contemporaneous changes in its regulatory scheme, was arbitrary and capricious. WU further contends that the Formula order did not cure the defects of PMS and urges reversal of both orders until regulatory parity is achieved. 29 In assessing this claim, we note initially that in its stay order this court observed that WU had a prima facie meritorious claim and directed that the Commission propose for consideration action modifying or terminating certain regulatory requirements imposed on WU. It did not dictate the result the Commission was to reach in that further consideration. We also note that the Commission has in fact provided much of WU's requested regulatory relief. 12 WU contends, however, that the more significant burdens remain. For this reason it challenges the Commission's deferred consideration and ultimate disposition of WU's request for exemption from the requirements of section 61.38 of the FCC rules, 47 C.F.R. § 61.38 (1980), and its refusal either to amend the formula or to make it applicable to Graphnet. 30 Section 61.38 requires all common carriers to file with proposed tariff changes extensive financial information and market data supporting those changes. In the Formula Notice, the Commission noted the suggestion that these support requirements be simplified or eliminated. It declined, however, to evaluate the merits of that suggestion in the context of the Formula proceeding. Instead, because tariff support requirements applied to all carriers' tariff changes, the Commission deferred consideration of the issue to an inquiry which shall properly review the burdens placed on all competitive carriers in the context of their peculiar market situation. Formula Notice at 2, n.3. 31 As promised, the Commission instituted a rulemaking proceeding in which it proposed, inter alia, to relieve non-dominant carriers of some of their section 61.38 obligations. Competitive Common Carrier Services, 77 F.C.C.2d 308 (1979). In that proceeding, however, it determined that WU was a dominant carrier for purposes of applying the revised regulatory standards, and on that basis denied WU its requested relief. WU claims that this refusal to grant it relief subjects WU to a regulatory burden which others, similarly situated, do not bear. WU's injury, however, did not arise from the Commission's decision in Formula; the Commission's denial of WU's request for exemption was encompassed in its Competitive Carriers order-a decision not presently before us. In its Formula decision, the Commission's only action with respect to the applicability of section 61.38 requirements was a reiteration of its decision to address the issue in another, ongoing proceeding. Formula, 75 F.C.C.2d at 373 n.15. Because that issue was in fact addressed, WU cannot claim injury from a failure to act on this petition for relief. The Commission has broad authority to order its own docket. 13 Thus, WU can only complain of the Commission's disposition of that petition. As we have stated, such a complaint must be lodged in a petition for review of the Competitive Carriers order. 32 WU contends that as a result of the Commission's failure to abolish the formula or, in the alternative, to apply the formula to Graphnet, it remains exposed to competition from virtually unregulated new entrants while subject to significant regulatory burdens that inhibit its ability to compete. Brief for Petitioner WU at 23 (footnote omitted). WU further contends that the duration of its injury is indeterminate, claiming that absent some court-provided incentive, the present formula is likely to remain in effect for an extended period .... Id. at 24. 33 We find these contentions without merit. WU would have this court assess the reasonableness of the Commission's action solely in terms of the relief afforded WU. Any action taken with respect to the formula, however, necessarily implicates the relationship of WU with the IRCs and must be assessed in light of industry conditions rather than in the narrow context of the relative competitive positions of WU and Graphnet. When so assessed, the Commission's actions here must be upheld as reasonable. 34 The Commission's several decisions-Formula, the other orders released that same day, and PMS -were expected to alter significantly the industry's market structure and to necessitate concomitant adjustment of the carriers' interrelationships. As the Commission realized, however, expectations such as these do not provide a sufficiently specific basis upon which to premise the prescription of a new formula. The Commission therefore properly declined to abolish the current formula, providing instead a transition period in which the carriers could initiate the necessary market adjustments and thus supply some concrete information upon which the Commission could reasonably act. Formula, 75 F.C.C.2d at 370. We do not believe WU suffered unduly from this deferral. Although the Commission did not actually abolish the formula, it did find the present formula not in the public interest. Moreover, it indicated clearly its determination to obtain a formula more responsive to a competitive market structure. If the parties did not provide a sufficient basis for prescription within nine months, the Commission stated, it would take appropriate steps to revise the current formula. 75 F.C.C.2d at 370. 14 35 The Commission's refusal to apply the formula to Graphnet was also clearly reasonable. Although, as WU contends, that application might have provided the regulatory parity it seeks, equalization of competition is not itself a sufficient basis for Commission action. Instead, as the Commission recognized, it must evaluate that action in terms of the public benefits, as provided by Hawaiian Telephone Co. v. FCC, 498 F.2d 771, 775-76 (D.C.Cir.1974). In this instance, the Commission found no public benefits to be derived from an application of the current formula to Graphnet. Since Graphnet, so recently authorized to compete in the PMS market, had as yet shown no capability for exercising the kind of monopoly power the formula was designed to control, id. at 372, application of the formula would have been premature. Moreover, the Commission had found the current formula no longer in the public interest; therefore, its application to a new carrier would only compound the problems purportedly created by the formula's operation. Finally, although the Commission refused to subject Graphnet to the formula, the Commission stated that it would not allow Graphnet to use its possibly greater flexibility to obtain an unfair competitive advantage over Western Union, id., and indicated as proof of its position its invalidation of portions of contracts between Graphnet and the three largest IRCs. The deleted portions would have allowed distribution of outbound unrouted traffic to those IRCs in proportion to the amount of inbound traffic directed by those IRCs to Graphnet. 15 75 F.C.C.2d at 372. See Domestic Public Message Services, 73 F.C.C.2d 151, 157-64 (1979), on reconsideration of Graphnet Systems, Inc., 71 F.C.C.2d 471 (1979). 36 In sum, we believe that the Commission's order in Formula offers WU little ground for complaint. We realize that the Commission refused to equalize the competitive situations of WU and Graphnet, either by relieving WU of the burden of the formula or by imposing that burden upon Graphnet. The Commission was necessarily obliged to consider other interests, however, particularly the public's, and we cannot require their disregard for the sake of immediate regulatory parity. Moreover, the Commission was not unresponsive to WU's claims. Although it did not abolish the formula, the Commission did find it no longer in the public interest and established a defined transition period preparatory to its expected revision. Similarly, although the Commission did not mandate the formula's application to Graphnet, it clearly indicated that Graphnet would not be permitted to take undue advantage of its relative regulatory freedom. For these reasons we affirm as reasonable the Commission's actions with regard to WU.