Docket No. 16942; Docket No.
17073
FEDERAL COMMUNICATIONS
COMMISSION
13 F.C.C.2d 420 (1968); 13
Rad. Reg. 2d (P & F) 597
RELEASE-NUMBER: FCC 68-661
June 26, 1968 Adopted
BY COMMISSIONER JOHNSON FOR THE COMMISSION: COMMISSIONER LOEVINGER DID
NOT PARTICIPATE IN THE DECISION IN THIS CASE.
[*420] 1. This proceeding involves the application of
American Telephone and Telegraph Co. tariffs to the use by telephone
subscribers of the Carterfone.
The Carterfone is designed to be connected to a two-way radio at the
base station serving a mobile radio system. When callers on the radio and
on the telephone are both in contact with the base station [*421]
operator, the handset of the operator's telephone is placed on a cradle in the
Carterfone device. A voice control circuit in the Carterfone
automatically switches on the radio transmitter when the telephone caller is
speaking; when he stops speaking, the radio returns to a receiving
condition. A separate speaker is attached to the Carterfone to allow the
base station operator to monitor the conversation, adjust the voice volume, and
hang up his telephone when the conversation has ended.
The Carterfone device, invented by Thomas F. Carter, has been produced
and marketed by the Carter Electronics Corp., of which Mr. Carter is president,
since 1959. From 1959 through 1966 approximately 4,500 Carterfones were
produced and 3,500 sold to dealers and distributors throughout the United
States and in foreign countries.
The defendant telephone companies, acting in accordance with their
interpretation of tariff FCC No. 132, filed April 16, 1957, * by American
Telephone and Telegraph Co., advised their subscribers that the Carterfone,
when used in conjunction with the subscriber's telephone, is a prohibited
interconnecting device, the use of which would subject the user to the
penalties provided in the tariff. The tariff provides that:
* This tariff is now superseded by tariff FCC No. 263.
No equipment, apparatus, circuit or device not furnished by the
telephone company shall be attached to or connected with the facilities
furnished by the telephone company, whether physically, by induction or
otherwise. * * * (A fuller text is provided in appendix A.)
A private antitrust action was brought by Carter against American
Telephone and Telegraph Co. and General Telephone Co. of the Southwest.
The District court held that because of its "special competence and
'expertise'" in the technical and complex matter of telephone
communication, the Federal Communications Commission, under the doctrine of
primary jurisdiction, is vested with the right to determine the "justness,
reasonableness, validity, application, and effect of the tariff and practices
here involved." Carter v. AT&T, 250 F. Supp. 188, 192 (N.D. Texas,
1966). The court reserved jurisdiction to pass ultimately upon the
antitrust issues after proceedings before the Commission should be
concluded. The United States Court of Appeals for the Fifth Circuit
affirmed the District court's decision on August 17, 1966. Carter v.
American Telephone and Telegraph Co. 365 F. 2d 486 (5th Cir., 1966). On
October 20, 1966, the Commission on its own motion ordered that a public
hearing be held to resolve "the question of the justness, reasonableness,
validity, and effect of the tariff regulations and practices complained
of," assigning docket No. 16942. The following five specific issues
were designated for hearing:
1. The nature and extent of the public need and demand for the
use of the Carterfone device in connection with interstate or foreign message
toll telephone service;
2. The effect of the use of the Carterfone device upon the
operation of the telephone system used to provide interstate and foreign
telephone message toll telephone services to the public or upon the employees
and facilities [*422] of the telephone companies providing such
services or upon the public in its use of such telephone system;
3. Whether the provisions of tariff FCC No. 132 filed by American
Telephone and Telegraph Co. may properly be construed to prohibit any telephone
user from attaching the Carterfone device to the facilities of the telephone
companies for use in connection with interstate and foreign message toll
telephone services;
4. If the aforesaid tariff provisions may properly be construed
to prohibit telephone users from attaching the Carterfone device to the
facilities of the telephone companies for use in connection with interstate or
foreign message toll telephone services;
(a) Whether such regulations are, or will be, unjust and unreasonable
and, therefore, unlawful within the meaning of section 201(b) of the
Communications Act of 1934, as amended, or are, or will be unduly
discriminatory or preferential in violation of section 202(a) of said Act; n1
n1 Sec. 201(b) provides: "All
charges, practices, classifications, and regulations for and in connection with
such communication service, shall be just and reasonable, and any such charge,
practice, classification, or regulation that is unjust or unreasonable is
hereby declared to be unlawful: * * *"
Sec. 202(a) provides: "It shall be unlawful for any common carrier
to make any unjust or unreasonable discrimination in charges, practices, classifications,
regulations, facilities, or services for or in connection with like
communication service, directly or indirectly, by any means or device, or to
make or give any undue or unreasonable preference or advantage to any
particular person, class of persons, or locality, or to subject any particular
person, class of persons, or locality to any undue or unreasonable prejudice or
disadvantage."
(b) Whether, in the light of facts developed in connection with the
foregoing issues, the Commission, in accordance with the provisions of section
205 of the Act, should prescribe tariff regulations which will permit the use
of the Carterfone device in connection with interstate and foreign toll
telephone service and, if so, the kind of tariff regulations which should be
prescribed;
5. If the aforesaid tariff regulations of the telephone companies
may not properly be construed to prohibit telephone users from attaching the
Carterfone device to the facilities of the telephone companies for use in
connection with interstate or foreign message toll telephone services, what
action, if any, should be taken by the Commission with respect thereto.
Thomas F. Carter and Carter Electronics Corporation (hereafter Carter),
American Telephone and Telegraph Co. and 22 associated Bell System companies
(A.T. & T.), and General Telephone Co. of the Southwest (General) were
named parties respondent. Subsequently, several parties were allowed to
intervene. The United States Independent Telephone Association and G.T.
& E. Service Corp. intervened on the side of A.T. & T. and General, and
the Central Committee on Communications Facilities of the American Petroleum
Institute, and the Retail Research Institute of the National Retail Merchants
Association intervened on the side of Carter.
On December 21, 1966, Carter filed a formal complaint pursuant to
section 208 of the Communications Act, 47 U.S.C. § 208, against General
and certain of the Bell companies, and further proceedings in docket No. 16942
were held in abeyance pending disposition of the complaint (docket No.
17073). By order released March 8, 1967, the complaint was consolidated
for hearing with docket No. 16942, and the following issues were added:
1. Whether, with respect to the period from February 6, 1957, to
December 21, 1966, the regulations and practices in tariff FCC No. 132 of the
American Telephone and Telegraph Co. were properly construed and applied to
prohibit any telephone user from attaching the the Carterfone device to the
facilities of the telephone companies for use in connection with interstate and
foreign message toll telephone service; and if so
[*423] 2. Whether, during the aforesaid period, such
regulations and practices were unjust and unreasonable, and therefore unlawful
within the meaning of section 201(b) of the Communications Act of 1934, as
amended, or were unduly discriminatory or preferential in violation of section
202(a) of said Act.
The examiner found that there was a need and demand for a device to
connect the telephone landline system with mobile radio systems which could be
met in part by the Carterfone. He also found that the Carterfone had no
material adverse effect upon use of the telephone system. He construed
the tariff to prohibit attachment of the Carterfone whether or not it harmed
the telephone system, and determined that future prohibition of its use would
be unjust and unreasonable. He also found that it would be unduly
discriminatory under section 202(a) of the Act, since the telephone companies
permit the use of their own interconnecting devices. However, he did not
find the tariff prohibitions to have been unlawful in the past, largely because
the harmless nature of the Carterfone was not known to the telephone companies,
and he did not find that a general prohibition against nontelephone company
supplied interconnecting devices was unjust or unwise, because of the risk he
saw of "serious harm to the heart of the nation's communications
network."
We agree with and adopt the examiner's findings that the Carterfone
fils a needs and that it does not adversely affect the telephone system.
They are fully supported by the record. We also agree that the tariff
broadly prohibits the use of interconnection devices, including the
Carterfone. Its provisions are clear as to this. Finally, in view
of the above findings, we hold, as did the examiner, that application of the
tariff to bar the Carterfone in the future would be unreasonable and unduly
discriminatory. However, for the reasons to be given, we also conclude
that the tariff has been unreasonable, discriminatory, and unlawful in the
past, and that the provisions prohibiting the use of customer-provided
interconnecting devices should accordingly be striken.
We hold that the tariff is unreasonable in that it prohibits the use of
interconnecting devices which do not adversely affect the telephone
system. See Hush-A-Phone Corp. v. U.S., 99 U.S. App. D.C. 190, 193, 238
F. 2d 266, 269 (D.C. Cir., 1956), holding that a tariff prohibition of a
customer supplied "foreign attachment" was "in unwarranted
interference with the telephone subscriber's right reasonably to use his
telephone in ways which are privately beneficial without being publicly
detrimental." n2 The principle of
Hush-A-Phone is directly applicable here, there being no material distinction
between a foreign attachment such as the Hush-A-Phone and an interconnection
device [*424] such as the Carterfone, so far as the present problem
is concerned. n3 Even if not compelled by the
Hush-A-Phone decision, our conclusion here is that a customer desiring to use
an interconnecting device to improve the utility to him of both the telephone
system and a private radio system should be able to do so, so long as the
interconnection does not adversely affect the telephone company's operations or
the telephone system's utility for others. A tariff which prevents this
is unreasonable; it is also unduly discriminatory when, as here, the telephone
company's own interconnecting equipment is approved for use. The vice of
the present tariff, here as in Hush-A-Phone, is that it prohibits the use of
harmless as well as harmful devices.
n2 After Hugh-A-Phone, the Commission
directed A.T. & T. to "file tariff schedules * * * rescinding and
canceling any tariff regulations to the extent that they prohibit a customer
from using, in connection with interstate, or foreign telephone service, the
Hush-A-Phone device or any other device which does not injure defendants'
employees, facilities, the public in its use of defendants' services or impair
the operation of the telephone system." Hush-A-Phone, decision and order
on remand, 22 F.C.C. 112 (Feb. 6, 1957). The Commission additionally
stated in its decision and order on remand: "As we construe the court's
opinion, a tariff regulation which amounts to a blanket prohibition upon the
customer's use of any and all devices without discriminating between the
harmful and harmless encroaches upon the right of the user to make reasonable
use of the facilities furnished by the defendants." The modification of
the offending tariff provision filed by A.T. & T., and designated paragraph
B24 of tariff FCC No. 132, is at issue here.
n3 The Hush-A-Phone was a cup-like device
mechanically fastened to the mouthpiece of a telephone handset. The
Carterfone by means of acoustic and inductive coupling effectively achieves an
"interconnection" between the public toll telephone system and
private mobile radio systems. These differences are immaterial, however,
insofar as the Hush-A-Phone holding is concerned.
A.T. & T. has urged that since the telephone companies have the
responsibility to establish, operate and improve the telephone system, they
must have absolute control over the quality, installation, and maintenance of
all parts of the system in order effectively to carry out that
responsibility. Installation of unauthorized equipment, according to the
telephone companies, would have at least two negative results. First, it
would divide the responsibility for assuring that each part of the system is
able to function effectively and, second, it would retard development of the
system since the independent equipment supplier would tend to resist changes
which would render his equipment obsolete.
There has been no adequate showing that nonharmful interconnection must
be prohibited in order to permit the telephone company to carry out its system
responsibilities. The risk feared by the examiner has not been
demonstrated to be substantial, and no reason presents itself why it should
be. No one entity need provide all interconnection equipment for our
telephone system any more than a single source is needed to supply the parts
for a space probe. We are not holding that the telephone companies may
not prevent the use of devices which actually cause harm, or that they may not
set up reasonable standards to be met by interconnection devices. These
remedies are appropriate; we believe they are also adequate to fully protect
the system.
Nor can we assume that the telephone companies would be hindered in
improving telephone service by any tendency of the manufacturers and users of
interconnection devices to resist change. The telephone companies would
remain free to make improvements to the telephone system and could reflect any
such improvements in reasonable revised standards for nontelephone company
provided devices used in connection with the system. Manufacturers and
sellers of such devices would then have the responsibility of offering for sale
or use only such equipment as would be in compliance with such revised
standards. An owner or user of a device which failed to meet reasonable
revised standards for such devices, would either have to have the device
rebuilt to comply with the revised standards or discontinue its use. Such
is the risk inherent in the private ownership of any equipment to be used in
connection with the telephone system.
[*425] The present unlawfulness of the tariff also
permeates its past. It has been unreasonable and unreasonably
discriminatory since its inception, for the reasons given above. That the
telephone companies may not have known prior to the proceedings herein that the
Carterfone was in fact harmless is irrelevant, since they barred its use
without regard to its effect upon the telephone system. Furthermore, the
tariff was the carrier's own. It was not prescribed by the
Commission. It has remained subject to complaint and to a finding that it
had been unlawful since its inception.
A Commission-prescribed rate or practice must be followed by the
carrier. It becomes the lawful rate or practice. But where the
carrier itself initiates the rate or practice its lawfulness remains open, not
only to a prospective finding but also to a retroactive one. Arizona
Grocery Co. v. Atchison, T. & S.F. Ry. Co., 284 U.S. 370 (1932), And it is
not a bar to such a finding of past unlawfulness that the tariff has been
permitted to remain in effect and has not, until now been the subject of a
determination as to its lawfulness. n4 See
Interstate Commerce Commission v. Inland Waterways Corp., 319 U.S. 671 (1943),
finding no agency prescription even where the agency had stated that a rate was
"shown to be just and reasonable"; Interstate Commerce Commission v.
Mechling, 330 U.S. 567, 571-572 (1947); Public Utilities Commission of California
v. United States, 356 F. 2d 236 (9th Cir., 1966). As was said in
Birmingham Slay Co. v. United States, 11 F. Supp. 486, 487 (N.D. Ala., 1935):
n4 On May 16, 1957, the Commission issue
a public notice stating that the Commission had "elected to permit"
the revised tariff submitted by the telephone companies to go into
effect. The prohibitions as to interconnection devices were mentioned in
the public notice. Thereafter, the Commission on various occasions cited
the prohibitions in response to inquires about attachments or interconnecting
devices, without questioning the validity of the prohibitions. The
Examiner's finding that the tariff provisions in question were valid prior to
the instant hearing appears to have been based in part on this history.
However, none of this made the tariff one prescribed by the Commission.
Our conclusion is that [the Commission] * * * without adjudging their
individual reasonableness, merely authorized the carriers to put in the general
level of rates, at their risk, if they were so advised, and remove certain
incidental obstructions to the carriers doing so, which were presented by
section 13(4) of the act (49 USCA § 13(4)), and agreed not to make a
suspensory order, in advance of hearing, under complaints filed under section
13. * * * We think the rates in controversy were carrier, and not
Commission-made rates. Their validity has not been declared, nor has the
Commission ordered them put in effect. They stand just as if filed by the
carrier with the Commission, with no action on the part of the Commission
making their validity a matter of adjudication against the shippers, and the
shippers' right to a day in court is not impaired, either as to the invalidity
of the rate, or the right to reparations.
See also Algoma Coal & Coke Co. v. United States, 11 F. Supp. 487
(E.D. Va., 1935).
In view of the unlawfulness of the tariff there would be no point in
merely declaring it invalid as applied to the Carterfone and permitting it to
continue in operation as to other interconnection devices. This would
also put a clearly improper burden upon the manufacturers and users of other
devices. The appropriate remedy is to strike the tariff and permit the
carriers, if they so desire, to propose new tariff provisions in accordance
with this opinion. We make no rulings as to [*426] damages
since that relief has not been requested. n5 As
noted above, the carriers may submit new tariffs which will protect the
telephone system against harmful devices, and may specify technical standards
if they wish.
n5 We do not intend to determine any
issues which may arise in the pending litigation, e.g., a claim that the
Carterfone may have been harmful as manufactured at some time in the past.
Accordingly, we find that tariff FCC No. 263, paragraphs 2.6.1 and
2.6.9 and, and have since their inception been, unreasonable, unlawful and
unreasonably discriminatory under sections 201(b) and 202(a) of the
Communications Act of 1934, as amended.
Other ancillary matters require our attention and disposition. On
March 27, 1968, the Chief, Common Carrier Bureau, requested that the Commission
take official notice of a new Canadian statute, entitled "An Act
Respecting the Bell Telephone Company of Canada," which became effective
on March 7, 1968. The statute has some relevance to this proceeding
because it states the national policy with respect to foreign attachments of a
neighboring country whose telephone system is completely interconnected with
the telephone system of the United States. Accordingly, the Common
Carrier Bureau's request for official notice will be granted.
On March 18, 1968, the Commission received a petition to accept an
amicus curiae brief, together with the brief, from Prof. Willis Rokes of
the Municipal University of Omaha, Omaha, Nebr. In general, Professor
Rokes supports the position advanced by Carter and the Common Carrier
Bureau. The Commission appreciates obtaining the carefully considered
views of interested members of the public in matters of great public concern
such as we have here. Accordingly, the petition will be granted and the
brief amicus curiae accepted.
On May 3, 1968, motions to correct the transcript of oral argument were
filed by the Bell System Parties, the United States Independent Telephone
Association, the General Telephone Co. of the Southwest, G.T. & E. Service
Corporation, the Chief, Common Carrier Bureau, and the United States Department
of Justice. No oppositions were filed to any of these requests, and they
will be granted;
It is ordered, that the "Request for Official Notice," filed
March 27, 1968, by Chief, Common Carrier Bureau, Is granted;
It is further ordered, that the petition to accept an amicus curiae
brief filed on March 18, 1968, by Prof. Willis Rokes Is granted, and that
the said brief Is accepted;
It is further ordered, that the motions to correct transcript of oral
argument filed on May 3, 1968, by the Bell System Parties, the United States
Independent Telephone Association, the General Telephone Co. of the Southwest,
G.T. & E. Service Corp., the Chief, Common Carrier Bureau, and the United
States Department of Justice, Are granted;
It is further ordered, that paragraphs 2.6.1 and 2.69 of tariff F.C.C.
No. 263 be stricken and not thereafter be published or given any effect; [*427]
It is further ordered, that this proceeding Is terminated; and It is further
ordered, that this Order shall be effective July 29, 1968.
FEDERAL COMMUNICATIONS COMMISSION, BEN F. WAPLE, Secretary.
APPENDIX A
The provisions against interconnecting devices and other attachments to
the telephone system not furnished by the telephone company are now found in
paragraphs 2.6.1 and 2.6.9 of tariff F.C.C. No. 263. n6
n6 Tariff F.C.C. No. 263, issued
Jan./2/68, effective Feb/1/68, supersedes tariff F.C.C. No. 132 which was the
tariff under which this action was originally instituted. Paragraph 2.6.1
of tariff F.C.C. No. 263 corresponds to and is substantially similar to
paragraph B.7 of tariff F.C.C. No. 132. The same is true of paragraphs
2.6.9 of tariff F.C.C. No. 263 and B.24 of tariff F.C.C. No. 132.
2.6 Connections
2.6.1 General Provisions
No equipment, apparatus, circuit or device not furnished by the
telephone company shall be attached to or connected with the facilities
furnished by the telephone company, whether physically, by induction or
otherwise except as provided in 2.6.2 through 2.6.12 following. 7 In case
any such unauthorized attachment or connection is made, the telephone company
shall have the right to remove or disconnect the same; or to suspend the
service during the continuance of said attachment or connection; or to
terminate the service.
* * *
2.6.9 Miscellaneous Devices Provided by the Customer
The provisions of paragraph 2.6.1. preceding shall not be construed or applied
to bar a customer from using devices which serve his convenience in his use of
the facilities of the telephone company in the service for which they are
furnished under this tariff, provided any such device so used would not
endanger the safety of telephone company employees or the public; damage,
require change in or alteration of, or involve direct electrical connection to
the equipment or other facilities of the telephone company; or interfere with
the proper functioning of such equipment or facilities; or impair the operation
of the telephone system or otherwise injure the public in its use of the
telephone company's services.
Except as provided in 2.6.5 (a) (1) preceding, n7 nothing herein shall be construed to permit the use of a device for the
recording of twoway telephone conversations, or of a device to interconnect any
line or channel of the telephone company with any other communications line or
channel of the company or of any other person. n8
n7 The exceptions noted are not relevant
to a determination of this case.
n8 The tariff also contains the
extraneous statement, which we find not to be correct, that it was "(Filed
in compliance with Federal Communications Commission order dated Feb. 6, 1957,
in Docket No. 9189)."
APPENDIX B
RULINGS ON EXCEPTIONS TO THE INITIAL DECISION EXCEPTIONS OF GENERAL
TELEPHONE SYSTEM
Exception Nos. Ruling 10, 12, 13, 19, 22, 23, Denied. The
findings of the Examiner adequately reflect 24, 25, 26, 27, 28, the
material and pertinent evidence of record.
30, 31, 38, 39. 5(c), 11, 16, 17, 34 Denied. The requested
finding is irrelevant to the disposition of this case.
4, 5(b), 6, 7, 8, 9, 14, 15, 18(a), 21,33, 35, 36, 44. Denied.
The requested findings are not of decisional significance, and the findings of
the Examiner are not shown to be inadequate.
29 Denied. The Examiner found that the Carterfone would not work
with some telephones, and customer resistance was not shown to be a substantial
factor.
18(b), 20 Denied. See opinion discussion.
1, 2 Denied. The Examiner's rulings on evidentiary matters are in
accordance with generally established rules of evidence.
3 Denied. The evidence would not be of decisional significance.
5(a) Granted, as to sentences 1, 2, and 4. For the reasons given
in our opinions, this does not affect the result.
32 Denied, in part as being not of decisional significance and in part
as being not supported.
37 Denied. The attempted substitution here, and elsewhere, of an
entire new set of findings without particularizing the objections to the
paragraph excepted to, is improper. The proposed findings are not germane
under our decision.
40 Denied.
41, 42 Denied. The findings support the conclusion.
43 Denied, except to the extent our opinion finds the tariff to have
been unreasonable in the past.
RULINGS ON EXCEPTIONS TO THE INITIAL DECISION
EXCEPTIONS OF A.T. & T.
Exception Nos. Ruling
1, 2 (b), 3, 4 Denied. Not material in light of the finding as to
harm.
5, 9(a), 10(c), 25, 28, 31(a), 33,38(a). Denied. Inaccurate
interpretation of the finding.
9(b), 10(a) Denied. Immaterial and not supported by the record.
11, 12, 13, 14, 15, 16(a), 17, 18, 19, 20, 21, 22, 23, 24, 26, 27(c),
29, 30, 31(b), 34(a),
34(b), 36, 39, 40,41, 44, 50. Denied. The record supports the
findings.
52, 57, 58,59 Denied.
2(a), 27(a) Denied. Unclear.
7, 16(b), 16(c), 35, 38(b), 45, 49(b), 51. Denied. Immaterial and
irrelevant.
32, 37 Denied. Statements not shown to be unreasonable or
otherwise unsound.
42 Denied. The inference is sound.
43, 56 Denied. The reason is valid.
46, 47, 48, 49(a), 55 Denied. The statement is accurate.
8, 61 Denied. The conclusions are correct.
63, 64 Denied. Does not comply with rules in requiring the
Commission to compare the proposed findings with the Examiner's opinion.
54, 60, 62 Denied. For reason stated in this opinion.
27 (b), 53 Denied. See Hush-A-Phone v. U.S., 238 F.2d 266.
6 Granted.
10(b) Granted. To the extent that the finding suggests that the
Carterfone is superior to telephone equipment.
BULINGS ON EXCEPTIONS TO THE INITIAL DECISION
EXCEPTIONS OF NATIONAL RETAIL MERCHANTS ASSOCIATION
Exception No. Ruling
1, 2, 3 Granted. See opinion.
EXCEPTIONS OF THOMAS F. CARTER AND CARTER ELECTRONICS CORP.
Exception No. Ruling
3, 4, 5, 8, 12, 13, 17 Denied. The findings of the Examiner
adequately reflect the material and pertinent evidence of record.
1 Denied. The requested finding is not of decisional
significance.
16 Denied. The paragraph has already been stricken.
2, 6, 14, 15, 18 Granted.
7, 9, 10, 11 Denied. The Examiner's inclusion of the disputed
findings is material and relevant to our consideration of the issues.
EXCEPTIONS OF THE COMMON CARRIER BUREAU
Exception No. Ruling
1 Granted, but the additional material requested need not be added to
the opinion.
2 Granted.
3 Granted.