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The abandonments amendment also accommodated the high-priority war effort. The term "community” was broad enough, it was believed, to prevent the discontinuance of service to a military establishment or a war production plant.6
Section 214(a) was further refined to include a definition of the word "line." 7 The Communications Act had not previously included such a definition; both the Commission and A.T. & T. took the opportunity to obtain an understandable interpretation of the term. A.T. & T. asked for a definition which would have limited the term to conductors—that is, pole lines, wires, or cable. The Commission supported an interpretation meaning "any channel of communication," and it was this definition that was added to section 214(d):
The tremendous scientific advance in communications has outmoded the old belief that a line is a copper wire strung on poles. Modern scientific development has made it possible by the installation of such gadgets as “phantom circuits” and “repeater coils” to carry on as many as 244 simultaneous conversations on a single pair of wires. As a result, carriers have felt that they have been unduly burdened by having to file applications **** in which major installations * * * were not at issue. This has added to the book and paper work of the Communications Commission and of the carriers. The definition of "line” * * * conforms in substantial degree
with the definition heretofore exercised by the Commission. The definition was meant also to supplement the term "service” in the discontinuance provision so as to make it "extend over a much wider field technically and practically.". The proviso clause that accompanied the definition was the main vehicle for removing paperwork requirements for inconsequential facility changes.
Finally, the language in section 214(d) was adjusted to conform with 214(a) as part of the effort to insure that no "community would be deprived, as a result of merger, of “any element of service." 10 In this case, after merger, one or two existing offices in the same town must still be maintained, and “under the very language of the bill, a community can get service if it is entitled to it." B. The Commission
Beginning shortly after the enactment of the Communications Act, there was considerable confusion surrounding section 214 applications due to the dearth of statutory explanation of the term "line and hence of the Congressional intent for actual administration of the approval or denial of extensions. Consequently, the first applications filed by the Bell System companies were quite inclusive and were examined thoroughly by the FCC staff, particularly as to questions of engineering justification and accounting impact. The interpretation put forth by the Commission law department was apparently very broad. However, by the time, in the latter part of the decade, that the Commission began
6 Consolidation and Mergers of Domestic Telegraph Carriers, H.R. Rept. No. 69, 78th Cong., 1st sess. (1943), p. 10.
7 See appendix B(3).
to issue its significant rulemakings on the issue, the domestic carriers had apparently decided that section 214 required applications only for the construction of physical pole lines whose terminals were located in different States. “Authorizations in the international sector did not devolve on explicit problems of definition. While the statutory mechanism was not the same, section 214 standards were utilized here early in the FCC's career and were judicially affirmed. There was no concern expressed about control of facility investments as a matter of section 314 regulation in the international sector. Route mileage does not affect cost increments in the radio mode; and capital investment was mostly a function of the establishment of transmitting stations pursuant to construction permits issued prior to licensing. What follows is an introductory review of the Commission's initial formulation of controlling certification goals in the domestic and international sectors, preceding a detailed analysis in casebook fashion.
The proceeding in Mackay Radio and Telegraph Co. was the first formal Commission attempt to adjudicate the purpose of section 214. A determination of the term “line" was pivotal to the outcome since that established the reach of the statute for the purpose of regulating competitive service offerings. It was companion to Southwestern Bell Telephone Co., which determined the effect of new additions to intrastate facilities. As will be seen, the test for facilities requiring authorization was whether or not they were intended to provide interstate "channels of communication." The Commission expanded the application of the term "line" in the "phantom circuits" case-American Telephone and Telegraph Co.—to insure that carriers would not misinterpret their certification responsibilities while installing newly-developed and capital-intensive rate base acquisitions.
Several other proceedings involving both Mackay Radio and RCA Communications illustrate how the Commission came to apply certification to extensions of service in the international communications industry. As has been seen, the services under discussion required title III rulings for radio licensing rather than section 214 certification; and they inherited a strongly competitive mandate from the Radio Act. However, the FCC denied Mackay's request in the initial case, holding itself to an examination of the “public interest” impacts of entry. The Court of Appeals subsequently affirmed the FCC's denial after indirectly examining the purpose of section 214 through reference
to that of 1(18)-(22) of the Interstate Commerce Act. The war years saw a procedure of állowing duplication for national security purposes, and shortly afterward, while ruling on the "Bermuda Circuits" proceeding, the FCC made a distinct preference for this policy reversal. As related in the text of that decision, however, this inclination was frustrated by a "single circuit” agreement entered into with the British Commonwealth. Later, in the 1951 decision of Mackay Radio and Telegraph Co., the Commission attempted to make assignments to Mackay in order to conform with what was seen as a "national policy” of competition. On remand from the Supreme Court, the agency was obliged to refine and justify its ruling. Although the FCC was now loathe to, articulate general policy on the matter one way or the other, it did, from then on, make grants of duplicative direct circuits in radiotelegraphy.
1. Domestic common carrier (a) Mackay Radio and Telegraph Co., Inc., 6 FCC 562 (1938).—The facts of the Mackay case are as follows: In March 1936, RCA Communications, Inc., received a certificate of public convenience and necessity from the FCC to acquire and operate a two-way telegraph circuit between New York, Washington, and Baltimore. The circuit was to be leased from Western Union Telegraph Co. as specified in the application submitted by RCA.
In June 1936, Mackay leased from Postal Telegraph Cable Co. (both associates of the International Telephone & Telegraph System) a similar facility between Washington and Baltimore. In so doing, Mackay was competing with RCA, and it had never applied for or received a section 214 certificate. The circuit
leased by Mackay was not permanently confined to any particular Postal circuit or wire; the arrangement required no new physical construction or capital outlay. Mackay's practice of transferring its circuit from one part of Postal's facility to another was similar to that followed by other carriers:
The Mackay Radio System is constantly utilizing circuits derived from Postal's existing plant, and numerous interchanges are made from time to time of the use of circuits between Western Union and Postal on the one hand and the Bell System companies on the other. These interchanges are of various types and are often required to be made upon an hour's or even a few minutes' notice in order to meet the exigencies of the service, but always involve the utilization of circuits derived from existing plant. In the Bell System additional circuits are procured from existing plant in two ways, (1) from existing facilities owned by the company in question, and (2) from existing facilities owned by other companies, such other companies being either Bell or independ
ently owned.12 In September 1936, the Commission instituted a notice of inquiry to determine whether a telegraph carrier needed a section 214 certificate to extend service to a new territory through lease of wire telegraph circuits. The proceeding was also to consider whether additional rules were needed to implement section 214.
In the context of this question of entry regulation, the actual issue on which testimony was received was whether, as argued by Mackay and supported by Postal and A.T. & T., the term "line" was limited to the acquisition of physical wire to supplement interstate pole lines. The decision cited Transit Comm. v. U.S.18 and extensively reviewed the legislative history of section 214.
The Commission found that section 214 applied to the acquisition of circuits through lease for the extension of telegraph service, regardless of whether interchange facilities were needed to extend the service to a new point of communication or whether the lease provided for the exclusive use of the lessor's physical facilities. 14
12 Mackay Radio, at 565. 13 289. U.S. 121 (1932). The Supreme Court interpreted the intent of sec. I(18) of the ICA by holding that a railroad operation over tracks leased from another carrier was an "extension" for which a certificate was required. The FCC regarded this case as analogous to Mackay's lease arrangement with Postal,
14 Mackay Radio, at 569.
In discussing the deletion of the word "circuit” from the original draft of section 214, the Commission continued :
It is our opinion that the deletion referred to was merely to meet a technical objection *** so as to make it perfectly clear that there was no intention on the part of Congress to limit the right of carriers to make full use of their own physical facilities by the derivation of as many circuits thereon or therefrom as might be possible. Therefore, it is not our opinion that section 214 requires a certificate of public convenience and necessity when a company of the Bell System rearranges its circuits or derives new circuits so as to make maximum use of its facilities, when the result is not an extension of a particular company's service into fields not theretofore served by it. Nor are the provisions of this section necessarily invoked every time one of these companies enters into a different contractual arrangement in order to more effectively serve an area already served by it by some other arrangement. It is thought that the discussions that took place in the course of the passage of the Communications Act indicate a congressional purpose to give the Commission considerable latitude to interpret and administer this section in such a manner as not to obstruct the fullest development of efficiency of operation of the various companies in the territory or area served by
Mackay contended that it acquired a wire circuit, which functioned merely as an electrical path for the transmission of impulses; and that since this did not entail construction, section 214 did not apply to the lease arrangement. It is clear, however, that the FCC was concerned with its ability to control competition brought about through any "acquisition," "operation,” or transmission "over or by means of" additional or extended lines. Section 214 contained these terms, in addition to its application to "construction"; and they enhanced the Commission's ability to determine whether competitive entry would be in the public interest.16
With regard to the intent of section 214 for conditions of duplication and competition, the Commission explicitly held itself to interpretations construed under the ICA:
[We conclude] that the twofold purpose of the corresponding provision of the Interstate Commerce Act is definitely involved in section 214 of the Communications Act; to wit*: (1) To prevent a carrier from weakening itself by constructing or acquiring or operating superfluous lines, and (2) to protect a carrier from being weakened by another carrier operating a competing line not required in the public in
terest. 17 Thus, the Mackay case clearly rejected limiting section 214 to the construction of physical wire lines, and that carrier was directed to submit an application to lease the circuit. In order to prevent destruc
15 td., at 573.
tive carrier competition, the Commission construed the term “line” to encompass the communication service to be rendered over a "line," the circuits necessary for such service, and, by implication, the physical facilities required for, or incidental to , such operation. Exempted were only the rearrangements of circuits so as to make maximum use of authorized existing facilities to render authorized service to points of communication.
Impliedly also, the installation of new switches is accomplished in part through the exempted action of "when a company of the Bell System rearranges its circuits or derives new circuits so as to make maximum use of its facilities * * * ”. Switches are also arguably involved when circuits are attained through partial lease or by the use of "numerous interchanges" to derive the various actual circuits which made up the "circuit” leased to Mackay. Likely because toll-board switches constituted a relatively minor segment of the interstate transmission function at that time, the Commission did not discuss the effect of switching, and evidently did not perceive the question of jurisdiction over these discrete facilities. This relegation of the switching issue occurs also in the Southwestern case, concluded the same day, though the function of toll switching created an additional jurisdiction controversy. It is notable, too, that the Commission did not promulgate rules which might have clarified the application of section 214 then and now.
(6) Southwestern Bell Telephone Co., 6 FCC_529 (1938):-The factual situation in Southwestern is as follows: A.T. & T. applied for certification to supplement its existing facilities between Dallas and San Antonio. It requested authority to string an additional pair of wires (with mention of associated switching equipment) upon existing pole equipment owned by Southwestern Bell. The construction was to be performed by Southwestern in conjunction with its expansion of intrastate toll facilities along the same routes. Southwestern's facilities were to terminate at switchboards located within the State of Texas, but 10 percent of the traffic was estimated to be interstate, directed through switching connections effected from time to time at those switchboards.
The Commission granted the A.T. & T. application, but directed the companies to file a statement to support their contention that the Southwestern Bell facilities did not require a section 214 application and certificate. The National Association of Railroad and Utilities Commissioners (NARUC) was also granted leave to intervene and file a statement.
A.T. & T. conceded that its new facilities constituted part of its interstate system. However, the carriers argued in favor of the "physical line plant” theory, that the terminal apparatus must be located in separate States, and that physical construction must extend across State lines before jurisdiction may be invoked. Any interstate transmission conducted through the switching function could not be responsible to Federal authority, it was argued, as that would invade State jurisdiction.
The decision noted that it was not denied that proposed facilities were to be part of Southwestern Bell's interstate system, and were not to be discrete from its interstate facilities. It reviewed railroad cases in which the Supreme Court had rejected the exception provided in