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and to protect them from being weakened by another car-
rier operating in interstate commerce a competing line not
required in the public interest; and to preserve well balanced
competition among competing carriers, that being deemed in
the public interest.40

40 Union Pacific R. Co. v. Denver & Rio Grande Western R. Co., 198 F. 2d, 854, 859 (Ninth Circuit, 1952).

III. THE COMMUNICATIONS VERSION OF I(18)–(22)

A. Industry structure and regulation prior to 1934

1. Domestic common carrier

The first Federal entry into the regulation of the domestic industry was the enactment in 1866 of the Post Roads Act. This statute allowed for the grant of franchised rights-of-way for the construction of telegraph poles and lines, primarily in association with railroad tracks and public thoroughfares. Much like that of the railroads, this subsidy represented a policy of stimulating the growth of communications facilities. However, never in the history of common carier communications did there evolve the degree of investment and wholesale risk on the part of the various levels of government as occurred during the growth of railroad service.

What little State public utility law existed into the early twentieth century was handled mostly by franchise, with stipulations regarding maximum rates and certain aspects of service. As the domestic industry grew, Western Union achieved dominance in telegraph during the 1870's through mergers with its competitors. It remains the main source of telegraphy to the present day, with the American Telephone & Telegraph Company, Inc., becoming its counterpart for voice telephone service.

A.T. & T. was organized in 1885 as the central and controlling company of the Bell System, several years after the invention of the telephone and the incorporation of the American Bell Telephone Co. It has since grown into a role as the major planning authority and manufacturing source for the development of a nationally coordinated telephone system. It provides local exchange service in concert with several hundred independent local companies; and Bell Long Lines manages the long-distance intercity network. This service is a complete contrast to the fragmented development of the railroad system, in which each regional and local corporation provided a fraction of the total service of moving people and freight nationwide. Never did the requisities for rational, end-to-end planning of railroad performance develop, either before or after the passage of the 1920 act.

(a) The network. The construction of manual switchboards to interconnect telephone lines immediately followed the invention of the telephone. Local exchange networks developed rapidly in the United States, and the interconnection of local networks spread as quickly as advances in the art of transmission permitted. Exchanges in both New York and California opened early in 1878, following the installation of the first experimental switchboard in Boston the year before. Circuits were first placed in service between the east and west coasts in

1915.1

1 William B. Macurdy and Alistair S. Ritchie, The Network: Forging Nationwide Telephone Links, 53 Bell Lab. Records, No. 1 (January 1975), p. 6.

of a counterpart in the United States. However, with the advent of American participation in World War I, the U.S. Navy took control of all the Marconi Co.'s radio stations in the United States, as well as stations operated by French and German interests. Under the wartime controls, the Government combined the patent and scientific resources of all electrical manufacturers, resulting in the development of new means for satisfactory long-distance radio transmission and reception.

Following the war, the U.S. Government encouraged the consolidation of all these vital radio communication developments into one entity. Consequently, the Radio Corp. of America was formed in 1919. Its function was to handle international point-to-point radiotelegraph service from stations turned over to it by the Navy, after having purchased the assets of the British company. During its effort to break into a field dominated by cable, RCA recognized the competitive advantage of radio transmission due to the insensitivity of cost to distance. The cable companies had traditionally implemented their rates and charges to follow the cable routes, rather than a logical relationship to actual distance between points. Traffic was usually diverted from New York, for instance, through London to reach the Suez Canal area, and rates reflected this planning. RCA began to compete with the cable companies, with reduced rates not related to distance.

In 1920, RCA established radiotelegraph circuits between the United States and Great Britain, Hawaii, Japan, Norway, Germany, and France. A circuit to Italy was established in 1921, and to Poland in 1923. (As these services grew, RCA established two subsidiaries to conduct business that had previously been operated by company departments; they were Radiomarine Corp. of America, for service to and from ships, and RCA Communications, Inc. [RCAC, now RCA Global Communications, Inc.] for point-to-point service between stations.) This gave rise not only to intense competition between technologies, but also, as other radio companies entered the field, the worry that the old cable entities, threatened by the new mode, would attempt to control the radio companies to stifle competition.

The concern for preventing the "dead hand of the past," the cables, from controlling the future of radio was one impetus for the United States to enact regulatory legislation and to impose controls in the field.11 A second concern during those very early years was to prevent monopoly and enhance competition in the manufacture of electronic equipment.12 These two ideas grew out of the initial purpose of creating "order out of chaos." 13 The Interstate Commerce Commission had retained authority over domestic common carriers, but its limited power to regulate and license radio stations 14 had been abrogated by judicial decree.15 Congress was obliged to reinstate and strengthen this power by creating the Federal Radio Commission.16 Two provisions

11 Id., p. 151.

12 RCA was apparently a main offender in this instance. See, generally, Report of the Federal Trade Commission on the Radio Industry to the House of Representatives, 67th Cong. 4th sess. (1923), chap. IV.

13 Ende, op. cit., n. 10, p. 154.

14 Act of Aug. 13, 1912, ch. 287, 37 Stat. 302 [Radio Act of 1912].

15 See, e.g., Hoover v. Intercity Radio Co., 286 F. 1003 (1923).

16 Act of Feb. 23, 1927, ch. 169, 44 Stat. 1162 [Radio Act of 1927]. See also discussion, Telecommunications: Economics and Regulation, Reprint ed. [New York: Arno Press Inc., 1974], ch. X.

were included in the Radio Act of 1927 to establish a procompetition policy in international communications. They were sections 15 and 17, which have been carried over as sections 313 and 314, respectively, of the Communications Act of 1934.17

Section 313, or the old section 15, was designed primarily to prevent monopolies in the manufacture of electrical or electronic equipment, and in interstate and foreign communications. By this provision the antitrust laws are made applicable to the manufacture and sale of radio appartus and to radio communications under the agency's jurisdiction. Section 314, or the former section 17, addressed the need to separate cable from radio ownership and to insure that competition be maintained between cable and radio as two separate and distinct means of international communication. It prohibits ownership, control, and operation by any cable carrier of any radio entity engaged in interstate and foreign communications if the purpose or effect is to substantially lessen competition or to unlawfully create a monopoly. Entitled "Preservation of Competition in Commerce", section 314 became the converse of section 214 in title II, and the statutory basis for the FCC's authorization of competitive telegraph circuits. Substantive regulation in the international field, then, started with the Radio Act of 1927.

As is clear from a carefully worded statement of policy issued by the Federal Radio Commission, duplicating applications for entry were to be granted, when feasible:

The Commission, in making the foregoing decision, [issuance
of construction permits and licenses for radiotelegraph serv-
ice] adopted the following principle for its own guidance:

That competitive service be established where there are competing applications, or an application or applications to compete with the already established service, and that in the grant of competing licenses, fairness of competition be established, except that as to an isolated country, which, in the judgement of the Commission, will not afford sufficient business for competing wireless lines, only one grant of license shall be made, preferably the first application in priority.18 By this time, international point-to-point radio service seemed to have enormous business potential, and other companies began to move into the field shortly after RCA. For instance, by 1926, the Tropical Radio Telegraph Co. established 12 direct radiotelegraph circuits to the West Indies, Central America, and South America, and the International Telephone & Telegraph Co. organized Mackay Radio Co. in Delaware to challenge RCA's monopoly in worldwide radiotelegraph operations. By 1933, Mackay established circuits to countries in Europe and South America, and an associate, Mackay Radio & Telegraph Co. of California, provided transpacific service.19 Government policy was to grant transoceanic frequencies only on a public utility basis, and not for private use.

17 Ende, op. cit., n. 10, p. 155. See appendix (B) (2).

18 Second Annual Report of the Federal Radio Commission to the Congress, 1928, p. 30. 19 John M. Kittross, ed., Documents in Telecommunications Policy, Reprint ed. (New York: Arno Press, Inc., 1977), p. 132.

Although the technical capacity of radio transmission was initially limited to telegraph communication, experiments in the field of radiotelephony were begun by the U.S. Government in 1915. The first international radiotelephone circuit was established in 1927 between New York and London for general use. By the end of 1933, 10 direct radiotelephone circuits were established between North America and Western Europe; and in some cases line-wire connections were extended to countries beyond the distant radio circuit terminals. As the operations of the international record carriers evolved, A. T. & T. became the sole entity providing overseas message telephone service from the U.S. mainland.

The dicotomy of voice from record services between the United States and foreign points persists to this day, as an outgrowth of the historic distinction in the domestic sector. As do A. T. & T.'s and Western Union's domestic operations, the international record carriers derive their income from the rate of return they are allowed to earn on their rate base. The economic structure has been different, with regulation maintaining a monopoly for interstate service, and an oligopoly for delivery to overseas points. The international communications industry includes one dominant firm offering voice services, five providers of record services, and one technological monopolist (Comsat) which supplies satellite circuits (the dominant, present-day version of overseas radio) through a carriers' carrier arrangement with the other firms.

As a result, the Robert Dollar Steamship Co. organized Globe Wireless, Ltd., the United Fruit Co. created the Tropical Radio Telegraph Co. (now TRT Telecommunications Corp.), and the Firestone Tire & Rubber Co. created the United States-Liberia Radio Corp. to meet their special requirements. The facilities were made available to any

customers.

Meanwhile, competition had been the rule in international cable transmission. France and Germany, as well as the United States, had observed the need to own and operate cable facilities to supplement those owned by England. Western Union Cables and the Commercial Cable Co. competed not only with each other, but also with foreign entities across the Atlantic. The distinction was maintained between the international record carriers using submarine telegraph cables and those using high frequency radio, to insure competition between the two means of transmission.

Nonetheless, as a result of the cost advantages and the tremendous marketing expansion of the radio medium, there were no major cable landings established after the mid-1920's, until the TAT series was begun in 1956. During this time, the operations of the cable carriers remained relatively static both in the United States and abroad. B. Section 214

The legislative history of the Communications Act of 1934 20 indicates both a consensus that regulatory jurisdiction over the various facets of the communications field needed to be centralized, and a desire to harness the early monopolies. The Interstate Commerce Commission had dealt with the rates and practices of broadcasting and

20 47 U.S.C. 151 et seq.

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