The opinion of the court was delivered by: GURFEIN
ITT World Communications, Inc. ("ITT") and RCA Global Communications, Inc. ("RCA") move for a preliminary injunction against the New York Telephone Company ("Telephone Company"). Telephone Company moves to dismiss the complaint, pursuant to Rule 12(b)(1) and (6) on the grounds that the Court lacks jurisdiction over the subject matter and that the complaint fails to state a claim upon which relief can be granted. The plaintiffs assert jurisdiction under Sections 214
of the Federal Communications Act. 47 U.S.C. §§ 214, 406. An evidentiary hearing was held on June 13, 1974.
For a number of years the Telephone Company has furnished local distribution facilities in the New York area to ITT and RCA. ITT is an international carrier of voice and data communications by wire and radio, serving customers throughout the United States and abroad from offices in the so-called "gateway" cities of New York, San Francisco, Washington and Miami. RCA is similarly situated. ITT and RCA and their respective customers depend upon the services and facilities of the Telephone Company.
In the past, those services have been furnished to the plaintiffs, among others, primarily in two forms of local distribution facilities which are telephone lines. These telephone lines permit communications between the international record carriers and their local customers either by voice (telephone) or teletypewriter.
In the New York metropolitan area, ITT serves about 3500 customers, and RCA about 4100 customers who transmit and receive international or interstate telex communications on teletypewriters located in the customers' offices, which are routed directly to far away stations via ITT or RCA facilities in Manhattan.
Those customers using the teletypewriter communications systems as distinguished from voice systems have been serviced by the Telephone Company up to now by facilities compatible with their teletypewriter equipment.
The two principal types of transmission services supplied by the Telephone Company in the New York metropolitan area are known as teletypewriter grade service and voice grade service.
For purposes of transmitting telex or teletypewriter communications, only teletypewriter grade service is presently used by the international record carriers. That service involves the use of direct current (DC) developed over a simple copper "wire pair," or a 43 type carrier which can work on DC, but which is, apparently, not in general use. On the other hand, voice grade service may consist of wire pairs or carrier circuits. The carrier circuits require the use of alternating current (AC). The equipment of the plaintiffs and the equipment of their customers who use the teletypewriter service is compatible only with the use of direct current and cannot be used with the alternating current that is used for voice grade service on carrier circuits.
The Telephone Company now proposes to commit itself to supply in the near future only voice grade service, utilizing a "carrier technology" which permits the simultaneous transmission of large numbers of messages, which operates only on alternating current, and which is, concededly, incompatible with the direct current teletypewriter equipment of the plaintiffs and their customers.
Adaptation to the alternating current system can be made by the installation for each telex customer of a pair of modulator-demodulators ("modems") which convert alternating current to use on direct current facilities.
It is estimated that these modems and their installation will require the expenditure of over a million dollars for ITT and a similar amount for RCA.
The engineer who testified for the plaintiffs estimated that a lead time of 2 1/2 years was required for the entire conversion,
since the modems would have to be designed and built to order and arrangements made to minimize the interruptions to customers during the changeover. Some interruption of service cannot be eliminated.
Prior and Pending Proceedings
The Telephone Company has been warning since March 1, 1971, that it was considering replacing the wire pair systems using direct current with carrier systems using alternating current for telex or teletypewriter systems.
The plaintiffs and other international record common carriers objected.
The Telephone Company has given several reasons for its intentions. First, it has asserted that the development of the photo telephone made it undesirable to have copper wire pairs adjacent to the carrier circuits. Then it has noted that copper wire pairs were becoming hard to get and that the sub-surface of New York City streets was getting so cluttered with wires that there would soon be no more room for additional wire pairs. Lastly, it has suggested that the new technology simply had to supersede the old, because it would be much more efficient.
To trace the controversy to its present legal stance we must go back a little. The international record carriers ("other common carriers"), like the plaintiffs, operated under agreements with the Telephone Company which substantially required the other common carriers to pay rates comparable to those set forth in the New York State Public Service Commission ("PSC") schedules, applicable to local users. There was in effect Tariff PSC No. 800 which related to similar services rendered to local customers like banks, brokerage houses and airlines. Under Tariff PSC No. 800, there had been a sharp difference in rate between teletypewriter grade service to telex systems and voice grade service, the former being much cheaper.
When negotiations between the Telephone Company and the international record carriers came to a standstill, the Telephone Company filed Tariff PSC No. 808 on September 25, 1973, to be effective October 26, 1973.
Tariff PSC No. 808 set forth the rates, terms and conditions to be applicable to the furnishing of local distribution facilities to "other common carriers." "Other common carriers" was defined to include "specialized common carriers, domestic or international public record carriers and domestic satellite carriers" which are not engaged in the business of providing ordinary telephone service. Tariff PSC No. 808 thus did not apply to other telephone companies or to local users who did not come within the definition.
Tariff PSC No. 808 had three important provisions: (1) Two point wire pair facilities working on DC and two point voice grade facilities were offered at a single rate -- the higher rate -- which would result in an increase of 71% to the international carriers over the rate they were paying. (2) The Telephone Company would no longer be required to provide wire pairs where the distance between the Telephone Company's central office providing facilities to another common carrier and the central office providing facilities to the customer of the other common carrier is in excess of five miles. (3) After October 1, 1975, the Telephone Company would not be obligated to furnish wire pairs, irrespective of the distance between the two serving central offices.
Tariff PSC No. 808 did not provide at all for 43 carrier grade service which could utilize DC current. It appears that, after October 1, 1975, no DC current service will be available.
Upon objection by ITT, the PSC, on October 24, 1973, deferred the effective date of Tariff No. 808 until February 23, 1974, and initiated formal proceedings concerning its propriety.
Before the PSC had time to act, except tentatively on rates, the Federal Communications Commission ("FCC") on October 4, 1973, wrote to American Telephone and Telegraph Co. that tariffs governing local distribution facilities should have been filed by its subsidiaries (which include the New York Telephone Company) with the FCC rather than the State Commission, and directed such filing.
Under protest, the Telephone Company, on November 12, 1973, filed a tariff provision with the FCC which was identical in all relevant respects with Tariff PSC No. 808. The proposed tariff, Tariff FCC No. 37 was to become effective on February 24, 1974. Its definition of "other common carriers" to whom alone it was to apply remained the same.
When the FCC ordered the filing of Tariff No. 37, the PSC deferred the effective date of Tariff PSC No. 808 to August 23, 1974. It is thus not yet in effect.
Following the filing of Tariff No. 37, a number of petitions to suspend or reject the proposed tariff were filed with the FCC by certain common carriers. On January 11, 1974, the Commission released a Memorandum Opinion and Order in which, considering Tariff No. 37 (with some others), the Commission agreed that the "petitioners [not including plaintiffs] have raised certain substantial questions with regard to the lawfulness of the tariffs which warrant further investigation." It deferred further action on the pleadings, however, "pending further proceedings we have initiated on December 12, 1973, in In the Matter of Bell System Tariff Offerings of Local Distribution ...