In the Matter of USE OF THE CARTERFONE DEVICE IN MESSAGE TOLL TELEPHONE SERVICE; In the Matter of THOMAS F. CARTER AND CARTER ELECTRONICS CORP., DALLAS, TEX. (COMPLAINANTS), v. AMERICAN TELEPHONE AND TELEGRAPH CO., ASSOCIATED BELL SYSTEM COMPANIES, SOUTHWESTERN BELL TELEPHONE CO., AND GENERAL TELEPHONE CO. OF THE SOUTHWEST (DEFENDANTS)
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* This tariff is now superseded by tariff FCC No. 263.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.
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.
2.6.1 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)."
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.
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.
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.