Rca Communications, Inc. v. Federal Communications Commission

201 F.2d 694

• Court: Court of Appeals for the D.C. Circuit
• Decided: March 9, 1953
• Docket: 10951
• Status: Published

Opinions

EDGERTON, Circuit Judge.

This appeal is from a decision and order of the Federal Communications Commission, two Commissioners dissenting, which granted applications of the present intervenor, Mackay Radio and Telegraph Company, Inc., (Mackay), a public-service radiotelegraph carrier, for modification of its license so as to authorize it to operate, in competition with appellant RCA Communications, Inc., (RCAC), direct radiotelegraph circuits between the United States and the Netherlands and between the United States and Portugal. Since we declined to stay the Commission’s order pending this appeal Mackay’s proposed operations and arrangements may probably have come into actual effect. However that may be, we shall call them “proposed” because we have to discuss the situation that existed when the Commission entered its order.

Mackay is a wholly-owned subsidiary of American Cable and Radio Corporation (AC&R), which also owns The Commercial Cable Company (Commercial) and All America Cables and Radio, Inc., (All America). International Telephone and Telegraph Corporation owns a majority of the capital stock of AC&R. At the time of the Commission’s hearing Mackay operated licensed radiotelegraph circuits to about 40 foreign points. It handled very little Portuguese traffic and this only indirectly, by relay through an All America radio station in Peru. It handled almost no Netherlands traffic.¹

Appellant RCAC, a party to the proceeding before the Commission, is a wholly-owned subsidiary of Radio Corporation of America. It operates ² licensed radiotelegraph circuits to about 65 foreign points. It operates direct radiotelegraph circuits between the United States and the Netherlands and also between the United States and Portugal. At the time of the Commission hearing no other carrier did so.

Both Commercial and Western Union Telegraph Company (Western Union) furnish cable service between the United States and European points.³ Commercial owns cables between New York and Eire. Its Netherlands traffic is relayed from Eire to London and retransmitted to Rotterdam over leased facilities. Traffic to Portuguese points routed via Commercial is sent over owned and leased cables to the Azores, where it is relayed to Lisbon over foreign cables. Western Union has cables to England, whence traffic is forwarded to Amsterdam through connecting cables and land-lines. Western Union messages destined for Portugal are transmitted in basically the same way as Commercial’s.

RCAC’s radiotelegraph circuit between New York and Amsterdam is operated in conjunction with the Netherlands Administration of Posts, Telephones, and Telegraph. Mackay’s proposed contract with the same correspondent provides that the Netherlands Administration will turn over to Mackay a proportion of its westbound traffic to the United States equal to Mackay’s proportion of the total eastbound radio traffic sent to the Netherlands by all United States radiotelegraph' carriers. Mackay will guarantee that at least 50% of AC&R-controlled traffic to the Netherlands will be transmitted by radiotelegraph. In order to meet this commitment AC&R will divert from Commercial to Mackay all unrouted non-Rotterdam Netherlands traffic. The Commission estimates that as a result of the agreement approximately 50% of Commercial’s eastbound traffic will be diverted to Mackay.

Similarly, in the cáse' of Portugal, Mackay proposes to deal with Portuguese Marconi, which is the RCAC correspondent. Portuguese Marconi will follow the same formula as the Netherlands Administration in determining the amount of westbound traffic to be given Mackay, and the AC&R system will transmit by Mackay and Marconi its unrouted eastbound traffic. The Commission estimates that 25% of Commercial’s traffic will be thus diverted to Mackay.

The Commission found among other things:⁴ (1) Existing telegraph facilities (cable plus radio) are in excess of those required to handle present and expected traffic. (2) Mackay’s proposed operations will redistribute present traffic rather than generate any appreciable amount of new traffic. (3) “It does not appear that Mackay’s proposed service to each of the points at issue will result in lower rates or speedier service, or will otherwise be superior to or more comprehensive than the service now available via RCAC.” (4) There is some possibility that Mackay will need additional frequencies, for Netherlands traffic, to provide continuous service throughout the eleven-year sunspot cycle. (5) Both Mackay’s revenue and its expenses will be increased, but the net result will be financially beneficial to Mackay and to the AC&R system oí which it is a part. (6) The revenue of other carriers will be reduced, but their expenses will not. (7) “When the over-all effect of a grant of the applications is considered, it appears that the added costs which might result on an industry-wide basis will be relatively small so that the impact on the rate structure as a whole should not be substantial.” (8) Mackay is technically, financially and legally qualified and able to render adequate service. (9) There is “at present active competition not only between cable carriers and between cable and radiotelegraph carriers serving the points at issue, but also between such telegraph service provided by these carriers and the airmail and the radiotelephone services;” Granting Mackay’s application (10) will “not endanger the ability of RCAC and Western Union to-continue to provide competitive service either to the points at issue or, generally, in the field of international telegraph communications”; (11) “while resulting ■ in some decrease in cable competition, wilt increase over-all competition for telegraph traffic generally * * and (12) will “introduce competition between direct radiotelegraph circuits” and consequently “more effective competition between radiotelegraph carriers”. The “ability of a carrier to provide direct communication service is an important factor in appealing for customer patronage * * * .”

The Commission was “of the opinion that in those instances where there is only one direct radiotelegraph circuit to a point, [the Commission] should authorize a second competing radiotelegraph circuit where the applicant demonstrates that such competition is reasonably feasible”. Finding it feasible here, the Commission granted Mackay’s applications.

The record supports the Commission’s basic findings that we have numbered (1) to (12) with the possible exception of the statement in (11) about “over-all competition”, and we shall assume it supports that finding also. It may follow that, as the Commission thought, the proposed competition is reasonably feasible. But that is not the question. The Communications Act authorizes the Commission to grant licenses only if it “shall determine that public interest, convenience, or necessity would be served by the granting thereof * * 47 U.S.C.A. § 309. The Commission did so determine here. But we agree with the dissenting Commissioners that the Commission’s basic findings do not support this determination.

The Commission said “The question before us herein of whether duplicate radiotelegraph circuits should be authorized is very similar, if not the same, as that which was before this Commission in connection with the Oslo case.” We agree. In this case as in the Oslo case the question before the Commission was whether a duplication that would do the public little harm ⁵ and no good,⁶ but was feasible and would create competition, met the statutory standard of “public interest, convenience, or necessity”. But in the Oslo case the Commission decided this question the other way and we affirmed its decision. Mackay Radio & Telegraph Co. v. Federal Communications Commission, 68 App.D.C. 336, 97 F.2d 641. In that case it appeared that RCAC carried about 60% of eastbound and 88% of westbound telegraph traffic (radio plus cable) between the United States and Norway. Commercial and Western Union carried, by cable, practically all the rest. And there was “only one direct service, whether by cable or radio, between the United States and Norway; * * * the radio circuit operated at the American end by the intervener RCAC, and at the Norwegian end by the Norwegian Department of Telegraphs.” 68 App.D.C. at page 337, 97 F.2d at page 642. Mackay applied to the Commission for a license to operate a direct radiotelegraph circuit to Norway. But the Commission found among other things that there were “adequate radio and cable facilities, keen competition, and service with which there is no complaint. The proposed new circuit would not offer new or improved service, reduce rates, or create traffic * * *. The total revenue to the American owned companies * * * would be redttced and additional expense incurred.” In the Matter of Mackay Radio & Telegraph Company, Inc., 2 F.C.C. 592, 600. Accordingly the Commission decided that a grant of Mackay’s application would not serve the public interest, convenience, or necessity. In affirming that decision we observed that the Communications Act does not show “a congressional belief that two radiotelegraph circuits are necessarily better than one. Such a belief would be as strange as a belief that two telephone systems, or two railroads, are necessarily better than one. * * * Though the Communications Act forbids the licensing of concerns which violate the anti-trust laws, [it] does not apply to the radiotelegraph business the policy of free competition,⁷ but a contrary policy. * * * [It] forbids competition by all who cannot prove that their entry will serve the ‘pubic interest, convenience or necessity.’ ” 68 App.D.C. at page 338, 97 F.2d at page 643.

Neither Congress nor the Supreme Court has limited the effect of the Oslo case, though Congress was promptly asked to do so. We decided the case April 11, 1938. Beginning May 2, 1938, a subcommittee of the Senate Committee on Interstate Commerce held hearings, in which the Oslo decision was discussed, on a bill, S. 3875, that proposed to amend. § 313 of the Communications Act, 47 U.S.C.A. § 313, by adding: “ ‘It is hereby declared to be the intention and policy of the Congress to prevent monopoly and to encourage competition in direct foreign radio telegraph communication; and, for the purposes of this act, in considering applications for licenses to engage in direct foreign radio telegraph communications, or applications for modifications or renewals of such licenses, the Federal Communications Commission shall consider competition in such communication to be in the public interest.’ ”⁸ It was brought out at the hearing that the Commission had reported to Congress on February 5, 1935: “Competition has its worst effects in the field of foreign communication. Communications in most foreign countries are handled as a monopoly. Where the monopoly has two competing American companies offering to establish circuits, it can drive progressively harder bargains to the detriment of American interests.”⁹ S. 3875 was not enacted.

We think McLean Trucking Co. v. United States, 1944, 321 U.S. 67, 64 S.Ct. 370, 88 L.Ed. 544, on which the Commission places some reliance, confutes rather than supports its present theory. The Court there sustained orders of the Interstate Commerce Commission authorizing consolidation of seven large motor carriers. The Court said: “The history of the development of the special national transportation policy suggests * * * that the policies of the anti-trust laws determine ‘the public interest’ in railroad regulation only in a qualified way. And the altered emphasis in railroad legislation on achieving an adequate, efficient, and economical system of transportation through close supervision of business operations and practices rather than through heavy reliance on the enforcement of free competition * * * has its counterpart in motor carrier policy. * * * Congress recognized there may be occasions when ‘competition between carriers may result in harm to the public, as well as in benefit; and that when a [carrier] inflicts injury upon its rival, it may be the public which ultimately bears the loss.’”- 321 U.S. at pages 83-84, 64 S.Ct. at pages 378-379. Legislative history suggests that the Communications Act was intended to apply the same principles as the Interstate Commerce Act, 49 U.S.C.A. § 1 et seq.¹⁰

In its present decision the Commission pointed to the large increase in international telegraph traffic and the “strong trend” from cable to radio since it decided the Oslo case in 1936. No doubt such changes make duplication of radio circuits more feasible, but they do not show that competition in this regulated public-utility industry will benefit the public. The Commission said: “Competition can generally be expected to provide a powerful incentive for the rendition of better service at lower cost. Those seeking patronage of customers are spurred on to install the latest developments in the art in order to improve their services or products, and in order to enable them to reduce expenses and thereby lower their rates or prices. The benefits to be derived from competition should, therefore, not be lightly discarded.” This argument in favor of the Commission’s general theory is not a finding that the specific competition here in issue will produce better service or lower rates or any other public benefit. Any implication that benefit will result is contradicted by the Commission’s finding (3) above. The Commission’s brief on this appeal speaks in general terms of “long range” benefits of competition. But in deciding this case the Commission made no finding that long range benefits would result from its grant to Mackay, and nothing in its basic findings would have supported such a conclusion. Its unqualified finding (3) is broad enough to contradict such a conclusion. The Commission pointed out that it has licensed duplicating radiotelegraph circuits to foreign countries in a number of instances and has renewed such licenses. But it did not say what benefits, or that any benefits, have resulted in any instance.¹¹

Section 314 of the Communications Act, 47 U.S.C.A. § 414, is devoted, as we said in the' Oslo case, "wholly to an effort to maintain competition between radio circuits on the one hand and telegraph and cable lines on the other.” 68 App.D.C. at page 340, 97 F.2d at page 645. In the present case the Commission found that granting Mackay’s applications will “not result in such substantial reduction of competition between cable and radio, or in the creation of a monopoly, so as to bring the AC&R system companies, and particularly Mackay, into violation of Section 314 of the Communications Act.”' We need not consider whether in our opinion the record supports this conclusion.

Reversed.

1 . In 1947, the latest year covered by the record, telegraph traffic of all sorts between the points involved in this case was distributed as follows:

The Netherlands Portugal

Bast- Westbound bound Bast- Westbound bound

Commercial (cable) 22.7% 17.3% 6.5% 2.5%

Western Union (cable)' 47.4%, 29.8% 36.3% 13.9%

ItCAO (radio; direct) 29.8% 52.8% 51.4% 80.7%

Mackay (radio; indirect) 0.1% 0.1% 5.8% 2.9%

100 % 100 %, 100 % 100 %

2 . Throughout this opinion, statements of fact in the present tense usually refer to the time of the Commission’s hearing.

3 . Western Union participated in the Corn-mission hearing but did not intervene here.

4 . The numbering and sequence are ours.

5 . Findings 7 and 10 above.

6 . Findings 1, 2, and 3 above.

7 . We do not imply that tbe Commission has applied a policy of “free” competition in the present case. It has not.

8 . Hearings on S. 3875, 75th Cong., 3d Sess., p. 1.

9 . Ibid., p. 34.

In its present decision the Commission concedes there may be some danger of this sort but points out that it “has statutory authority, particularly in connection with its consideration of applications for renewal of licenses, which would enable it to take the appropriate action in those cases where a carrier persisted in making concessions which were seriously detrimental to the interests of the United States industry.”

10 . 73d Cong., 2d Sess., Sen.Rep.No.781.

11 . A footnote in the Commission's brief states that “in the field of international telegraph communications, which is competitive, rates during the period from the beginning of the last war have not gone up nearly as much as rates in the domestic telegraph and intrastate telephone industries, which are, for all practical purposes, non-competitive. See R. 3857; In the Matter of the Western Union Telegraph Co., 11 F.C.C. 263.”