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Western Union International Inc. v. Federal Communications Commission

decided: December 21, 1977.


Petition for review of Decision and Orders of the Federal Communications Commission, requiring the American Telephone and Telegraph Company to eliminate a discrimination by which it charged the international record carriers lower rates under contracts than it charged for "like" services provided to other common carriers under tariff.

Kaufman, Chief Judge, Meskill, Circuit Judge, and Bartels, District Judge.*fn*

Author: Kaufman

KAUFMAN, Chief Judge

Just over a century ago, Alexander Graham Bell marked the beginning of a new era with the invention of the telephone. Little did he know that successive generations would treat his "creation" as but the simplest building block in a communications system of extraordinary complexity. We are asked, on this appeal, to unravel some of these intricacies in applying the mandate of ยง 202(a) of the Communications Act that there be no unjust discrimination in the rates charged for "like" communications services. Several international record carriers ("IRCs"), namely companies carrying messages overseas, petition for review of the Federal Communications Commission's ("FCC") determination that the facilities they lease from the American Telephone and Telegraph Company ("AT & T") are "like" those used by specialized domestic carriers. Pursuant to its finding of likeness, the FCC ordered AT&T to eliminate the existing disparity in rates governing the domestic and international carriers. As a result, AT&T filed tariffs raising the charges paid by the IRCs to parity with the cost to the domestics. We find the FCC's decision to be fully supported by substantial evidence in the record and, accordingly, deny the petition.


To fully understand the factual and legal questions presented by this appeal, a familiarity with the position and function of licensed communications carriers is essential. The facts, which at first blush seem to require the expertise of a DeForest or a Kettering, can upon reflection be readily disentangled.

The International Record Carriers. Petitioners Western Union International, Inc. ("WUI"), RCA Global Communications, Inc. ("RCA"), ITT World Communications Inc. ("ITT"), and intervenor TRT Telecommunications Corp. ("TRT") are international record carriers. As such, they are empowered by the FCC to provide communications services*fn1 between the United States and points overseas. Pursuant to their licenses, the IRCs are permitted to transmit and receive messages from and between five so-called "gateway cities."*fn2 The services of the IRCs cannot extend beyond this rather limited network.

The operating procedure of the IRCs is relatively uncomplicated. Once a message is received in a gateway city, it is then transmitted overseas either through the medium of submarine cables or international satellites. The cables are jointly owned and operated by the IRCs, AT&T, and various foreign governments; the satellites are owned by INTELSTAT, an international consortium from whose American representative the IRCs merely lease "space". To link up to a cable or satellite system, however, the message must first be transmitted to, respectively, "cable heads" or "earth stations". These terminals are jointly owned and used by AT&T and the IRCs.

The IRCs thus have an ownership interest in many of the international transmission facilities. Yet, they are completely dependent on the circuits owned by AT&T which connect one gateway operating center to another ("intercity facilities") and which join each of the five centers to cable heads and earth stations ("entrance facilities"). Pursuant to private contractual agreements, the IRCs lease these "interconnection facilities" from AT&T.*fn3

The Domestics. Recently, the FCC has encouraged the entry of new carriers into the domestic communications field. In the early 1970's the Commission began licensing various Domestic Satellite Common Carriers ("DSCCs") and Specialized Common Carriers ("SCCs") to offer, in competition with AT&T, private line service*fn4 to governmental and large private commercial users. See, e.g., Specialized Common Carrier Services, 29 F.C.C.2d 870 (1971); Domestic Communications Satellite Facilities, 35 F.C.C.2d 844 (1972).

In spite of their competitive position vis-a-vis AT&T, the so-called "domestics" often found it necessary to use that company's landline interconnection facilities. They soon discovered, however, that AT&T was restricting their access to its circuits and was charging discriminatory rates for the provision of services. In 1974, after receiving numerous complaints, the FCC ordered AT&T to provide the domestics with interconnection facilities and to promulgate standardized charges. Bell System Tariff Offerings, 46 F.C.C.2d 413 (1974), aff'd sub nom. Bell Telephone Co. of Pennsylvania v. FCC, 503 F.2d 1250 (3d Cir.), cert. denied, 422 U.S. 1026, 45 L. Ed. 2d 684, 95 S. Ct. 2620 (1975). AT&T subsequently filed tariffs governing the use of interconnection facilities, and the FCC indicated that it would study the propriety of these rates in light of the widespread concern among the domestics over them. AT&T Offer of Facilities for Use by Other Common Carriers, 47 F.C.C.2d 660 (1974). To obviate the need for a full-scale FCC investigation, the FCC and AT&T agreed that AT&T would attempt to settle its differences with the various carriers through negotiation. Because some of the proposed tariffs would have affected aspects of the IRC operation,*fn5 the international carriers also participated in these discussions.

In due course, a "Settlement Agreement" between the parties was reached, and they requested the FCC to accept their resolution of the dispute. While the Settlement Agreement applied to all of the interconnection facilities used by the domestics, it explicitly excluded from its scope those used by the IRCs, and justified that limitation by reference to the alleged "unique needs" of the international communications network. This exclusion was made at the insistence of the IRCs, presumably because the then existing contractual rates were lower than the rates proposed in the Settlement Agreement.

The FCC Investigation. Because the terms embodied by the Settlement Agreement would lower the rates paid by the domestics for the use of AT&T's facilities and were, accordingly, in the public interest, the FCC accepted the accord on May 7, 1975 "without necessarily approving it." AT&T Offer of Facilities for Use by Other Common Carriers, 52 F.C.C.2d 727 (1975). The Commission did, however, take issue with the Agreement's representation that the IRC facilities were unique:

The Settlement Agreement points out, however, that, notwithstanding the furnishing of similar facilities to other common carriers pursuant to tariffs, entrance and intercity facilities furnished by AT&T to the IRCs continue to be furnished pursuant to contract. In apparent support, the parties noted "the unique needs of the [IRCs] between gateway cities and for entrance channels from cable heads and earth stations to those carriers' central offices in metropolitan areas." We still believe that a substantial question exists as to whether we should order AT&T to provide ...

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