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.

common carrier companies in a number of cases, but its activities for the most part consisted of supervision over routine matters. The Commission had established no separate departments, bureaus, or divisions to deal exclusively with communications problems, the work being distributed throughout the organization as set up to supervise railroad policy. It was perceived in Congress that the agency lacked an effective legislative mandate to implement its mission. The Federal Radio Commission possessed the authority to oversee the operation, but not the rates and charges of radio companies. Jurisdiction over the granting of cable landing licenses resided in the executive branch, with the right to reserve and assign bands of radio frequencies to Government agencies; and this remained unaffected by the passage of the new act. In the summer of 1933 the Secretary of Commerce appointed an interdepartmental committee on communications to consider a national communications policy. In its report the committee recommended that a Federal Communications Commission be established to centralize the jurisdiction of the Interstate Commerce Commission over wire and radio common carriers, of the Federal Radio Commission, and of the Postmaster General over telegraph companies and telegraph lines.21 In considering the bill sent to it from the Senate, the House committee had before it a comprehensive report on the subject of holding companies, authored by a consultant to supplement the proceedings of the interdepartmental committee. The "Splawn Report" presented statistics documenting the assets owned by companies in the various communications fields. It also reported the degree of concentration among domestic common carriers, and remarked on the relationship between facilities construction and the level of rates:

There is a higher degree of concentration of ownership of telephone facilities than of telegraph and cable facilities, as has been made apparent from the comparison of selected financial and operating statistics hereinafter set forth ***. The extent to which there is actual or potential competition between telephone companies may be observed when it is pointed out that the Bell System operates in all 48 States and the District of Columbia *** [in] 12 States and the District of Columbia *** the Bell System meets absolutely no competition from any other telephone company, unless it be such small companies as do not report to the Interstate Commerce Commission, and rural or farmer lines, for which no data were available ***

Again, the competition which the Bell System meets may be determined from the fact that all companies other than those of the Bell System had gross revenues of only 5.72 percent of the total ***

During the period 1922 to 1932, inclusive, American Telephone & Telegraph Co. made only four voluntary rate reductions in toll rates ***

The holding company has been found as a result of this investigation to be as prolific of abuses in the field of communications as in other utilities already studied. What is dis

21 Study of Communications by an Interdepartmental Committee Report No. 1273, 73d Cong., 2d sess. (1934) (Roper Report).

closed by the examination of the Associated Telephone Utili-
ties Co. is, in my judgment, but typical of what may occur
under existing laws. Moreover, American Telephone & Tele-
graph Co., which is both a holding and an operating company,
is more powerful and skilled than any State government with
which it has to deal. A bill regulating communications in
interstate commerce will fall far short of being effective un-
less it first restricts the use of the holding company to what
is absolutely essential and necessary and second, unless the
regulation is extended to the holding company in like manner
as to the operating company.

The magnificent plant that the American Telephone & Tele-
graph Co. system owns has in the main been paid for by the
users of the service. There is no difficulty about obtaining
further capital for necessary expensions. The American peo-
ple are entitled to know if they are being overcharged for this
service.22

Both the House and Senate communications bills contained, with minor differences, an almost exact derivative of section I (18)-(22) of the Interstate Commerce Act.23 In presenting the proposed legislation to the House, Sam Rayburn, chairman of the sponsoring committee, succinctly stated the source and purpose of section 214:

Section 214, relating to extensions of lines, is based upon section 1(18)-(22) of the Interstate Commerce Act, which relates only to transportation. It requires a certificate of public convenience and necessity from the Commission for the construction of a new interstate line but permits the construction of local lines without such certificate. The section is designed to prevent useless duplication of facilities, with consequent higher charges upon the users of the service.24

There was not a great deal of remark offered on the proposed section during hearing deliberations, although opinions were solicited intermittently. Conjecture as to its necessity was ambivalent:

The CHAIRMAN. Coming down to the meat of the proposal, which is to require a certificate of convenience and necessity for a new interstate telephone line *** what is your position on that?

Mr. GIFFORD. I think that in order to avoid duplicate plant in communication companies, I rather favor that, but how to 'do it and do it without time to study it that I think the new commission should have, I do not know. It is a very difficult thing to do, because it is like regulating the number of cars that should go on a train to take them on or off.

The CHAIRMAN. I am not at all certain that this provision ought to be in here *** But my point is this, laying all this aside, the question I would like to get an answer to is whether or not you think it is a desirable provision to prohibit or to require a certificate of convenience and necessity for interstate telephone line construction?

23 Preliminary Report on Communications Companies, H. Rep. No. 273, 73d Cong., 2d Sess., pp. xii, xvii, xxx-xxxi (1934).

23 See, for comparison of S. 2910 and H.R. 8301, Communications Act of 1934, Conference Report, Rep. No. 1918, 73d Cong., 2d Sess. (1934).

24 78 Cong. Rec. 10314 (1934).

Mr. GIFFORD. So far as the telephone business is concerned, I do not think it amounts to anything one way or the other, by working with the commission, if they want to take it up we can go over our projected program in advance and get together on some working basis.

The CHAIRMAN. I may say to you that there was some doubt as to the wisdom of it being put in here. We had to get the reaction to see what would happen.25

The CHAIRMAN. Mr. Gifford, one of the very great reasons for that is just because nobody had control of the building of new lines, and a lot of improvident lines were built. Industries were built up along them, and now they are nothing but two streaks of rust, and the whole community has gone to the bad. *** I wanted to know what objection you have to authority being lodged in some administrative commission or power, to see to or approve the extension of lines, or new lines, in a field that is already served.

Mr. GIFFORD. I do not think that I have any objection, if it were worked out on a practical basis. This particular bill does not. I can see that it is not an easy thing to do.

The CHAIRMAN. What we are doing in this section is to give the power to approve, or veto, applications for extensions of new lines, or the building of new lines.

Mr GIFFORD. But, we would have to submit every case to the Commission, I understand.

The CHAIRMAN. Yes; that is correct.

Mr. GIFFORD. And it runs into thousands almost every day.
The CHAIRMAN. You mean extensions of lines?

Mr. GIFFORD. Circuits, extensions of circuits.26

The CHAIRMAN. I am limiting myself to the extensions of existing lines, or building new lines. Do you think that that would be very serious?

Mr. GIFFORD. I do not think that that would be impossible. The CHAIRMAN. Do you not think that there are a great many cases where it would have been a very fine thing and in the public interest to have had proper supervision as to the construction of some telephone lines. Do you not think that there have been a lot of improvident systems built that have cost some people a lot of money which they are going to lose? Mr. GIFFORD. I do not think that they are in the telephone business, Mr. Chairman.

The CHAIRMAN. You do not?

25 Testimony of Walter Gifford, president, AT&T Co., U.S. Senate, Committee on Interstate Commerce, Hearings on S. 2910, Federal Communications Commission, 73d Cong., 2d Sess., pp. 90-91 (1934).

28 In the original drafts of S. 2910 and H.R. 8301, sec. 214 was entitled "Extension of Lines and Circuits", and required carriers to obtain certificates before they could extend, construct, acquire, or operate any line or circuit. The witness voiced a technical objection to the inclusion of telephone circuits in the requirements: "These provisions would prevent the placing of a new circuit on an existing pole line, although sudden changes in the demands for service frequently make it necessary to do such work, which could be done in a few days, if necessary, except for the securing of the permit. This was incidental. I cannot believe it was meant. ." Id.. pp. 89-90. See discussion, Mackay Radio and Telegraph Company, Docket No. 4124, 6 FCC 562 (1938). Logically, the word was deleted "to meet a technical objection elaborated upon by a witness for the Bell System, 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 as possible." at 573.

44-667-79-5

Mr. GIFFORD. No sir.

The CHAIRMAN. Well, you do not hear them all cry like I do.

Mr. GIFFORD. I beg your pardon.

The CHAIRMAN. I say, you do not hear them all cry like

I do.

Mr. GIFFORD. I have heard no complaint.

The CHAIRMAN. I do not mean that all of them cry. I mean that those who do cry, come around here and tell their stories.27 A feeling existed during passage of the Communications Act that section 214 should explicitly prevent construction and extension into existing telephone exchange areas:

In connection with certificates of necessity and convenience, we think the provisions in section 214, for requiring such certificates are in substance wise and salutary provisions. The language of the bill, however, is perhaps broader than is or should be intended. We suggest one change in section 214(a) and one in section 214 (e) as follows:

By adding after the *** word 'circuit' * * * the words ‘in the territory or to points or places not already served by such carrier with service of the same class.' *** And after the word 'any', the word 'such', so that it would then read:

Sec. 214(a) No carrier shall undertake extension of its line or circuit in the territory or to points or places not already served by such carrier with service of the same class, or shall require or operate any such line or circuit or extension thereof, or shall engage in transmission over or by means of such additional or extended line.28

*

*

*

*

[S]ection 214 *** after the word 'circuit' add: 'If the territory through which a contemplated extended line or circuit is already, in part or in whole, occupied by another common carrier, the right of extension will not be granted without due notice to the carrier already occupying said territory and after due hearing by the Commission, and no common carrier subject to the provisions of this act shall invade or occupy the territory served by another carrier without due notice and a due and lawful hearing by the Commission *** and the Commission, if the territory is already occupied by another carrier, shall give due and timely notice to the end that the carrier already occupying said territory may appear and defend its right, if any, to continue to occupy said territory.' These proposals for protecting carrier territory were apparently not acted upon, since they or any like them were not contained in the section as enacted.30

29

27 Testimony of Walter Gifford, president. A.T. & T.. U.S. House, Committee on Interstate and Foreign Commerce, hearings on H.R. 8301, Federal Communications Commission, 73d Cong., 2d Sess., pp. 171-72 (1934).

28 Testimony of R. B. White, president, Western Union Telegraph Co., U.S. Senate, op. cit., n. 25. pp. 104-05.

29 Amendments proposed by the American Radio Audience League, U.S. Senate, id., pp. 114-15.

30 Sec. 214 may have intended the Commission to prevent existing exchanges from being affected by certifications of carrier facilities, consistent with the intent of the original ICA clause and State regulation of local exchange telephone service. These market territories would be recognized by sec. 214 protection from incursion.