There were some reservations voiced, as well as some quite strenuous objections, to what was regarded as a direct and indiscriminate transfer of the provision intended for railroad regulation into a law devised for a largely unrelated industry:

Before considering the meaning of the provisions of this section as applied to the telephone business, I wish to make the general comment that there is no presumption in favor of the legislative method that has been followed in drafting this section. There is no reason to suppose that laws which are proper or necessary in connection with railroads are desirable or will work when applied to telephone systems. It has not been supposed heretofore that any sound conception of public policy required restrictions of this kind so far as telephone companies are concerned, and we do not know of any reason whatever why Congress should now, contrary to past experience, come to a different conclusion. Moreover, no one should be surprised if it appears from an examination of these provisions that they become impossible and absurd when the attempt is made to apply them to an entirely different business from that for which they were originally enacted.

Such a process of drafting important legislation is almost certain, it would seem to me, to lead to surprising and unintended results.31

The CHAIRMAN. This principle for carriers is 14 years old, however. It is not something new. It was put into the Transportation Act of 1920.

Mr. GIFFORD. But it has never been applied to telephone companies.

The CHAIRMAN. Oh, no.

Mr. GIFFORD. And my point is that there is a big difference between a railroad track and a right-of-way, as a matter of fact, and the stringing of a couple of wires, or additional wires on a telephone pole.32

*

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[B]ecause the bill is so largely patterned after the Interstate Commerce Act, there should not be the same need for court test of its provisions as is usually true of new legislation. On the other hand, the mere fact that any unnecessary change has been made is apt to lead to a conclusion by the courts that a different construction of the new provision is intended. Mere rearrangement of existing provisions would not, of course, necessarily bring about that result, and generally little attention has been given to the order in which the provisions are set forth in the bill. But where there is any departure from the language of the acts which could open the doors to a different construction, our recommendations have been influenced by the thought that such possibility should not be permitted, unless clearly intended. Detailed consideration follows the arrangement of the bill.

Testimony of Walter Gifford, U.S. Senate, op. cit., n. 25, p. 88.
Testimony of Walter Gifford, U.S. House, op. cit., n. 27, p. 171.

-20 Interstate Commerce Act as to certificates of public conven-do boeivon Section 214: The provisions of section 1 (18)-(22) of the ience and necessity for rail construction are here adapted to o construction of lines and circuits. Whether it is practicable Tot or good policy to so extend these provisions, we do not undertake to say. Several provisions, however, undoubtedly will require further consideration.haos fegongo d abandonment of lines is intentional.or It is assumed that the omission of the provisions relating to

they are self-sufficient, but any necessary definition should no
The words "line" and "circuit" are not defined. Perhaps that
not be overlooked. A definition of "extension" also would
seem desirable, so that the provisions would not hinder or
preclude such necessary operating changes or rearrangements
of existing lines or circuits for the purpose of meeting
changes in the flow of traffic, which otherwise might tech-
nically be regarded as extensions of the prior separate lines

the retention of competition between the telegraph carriers:
It was frequently observed that the amendment was ill-suited for

Section 214 of the bill is another section incorporating
provisions of the interstate commerce laws which relate only
to railroads without proper consideration of the differences
requiring different treatment between the regulation of rail-
roads, and the regulation of communications services. The
provisions of section 214 ***
bill which perpetuates, as this one does, the principle of
competition between the telegraph companies, since these
provisions could only result in weakening the competition of
the smaller of the two competing telegraph companies.
are totally inappropriate in a

In order that competition in this field may be continued in
graph companies should be left in a position in which it is
hy fate, it is essential that each of the competing tele-
able to extend its lines and services freely and quickly, either
by construction, by contract with the telephone company,
with the independent telephone companies, with railroads or
public utility companies, or by any other means. The proper
conduct of a competing telegraph service frequently demands
that the service be extended practically overnight into some
new territory; and competition should not be hampered by
the enactment of provisions such as those contained in section
214, unless it is determined to do away with competition be-
tween the two telegraph companies by permitting their con-
solidation subject to adequate safeguards.

railroad tracks. Such extensions create no additional prob-
telegraph facilities as there is in limiting the extension of
There is no such public interest in limiting the extension of
lems of highway transportation or additional dangers to the

public, as in the case of railroad extensions.

Supplementary Report of the Inte abandonment clausemmission, U.S. Senate, op. cit.,

33 p. 33 for discussion of

84

n. 25, pp. 200-01, U.S. House, n. 27, pp. 88-89.

༤

In any bill which perpetuates the principle of competition in the telegraph field, the provisions of section 214 should be wholly eliminated.35

The domestic telegraph systems to which the recommendation refers are the Western Union Telegraph Co. and the Postal Telegraph & Cable Co. The FCC did subsequently recommend an antitrust exemption in a new section 222 to permit consolidations and mergers of domestic telegraph carriers, subject to agency approval. This was one of a number of proposals submitted by the Commission pursuant to the directive in section 4 (k) of the act that it "make a special report not later than February 1, 1935, recommending such amendments to this act as it deems desirable in the public interest." (This clause was deleted by the Communications Act Amendments of 1952.)

It is notable that, as enacted, section 214(d) was the same language as that contained in section I (21) of the railroad legislation, undoubtedly carrying with it the due process obligations enunciated some years before in ICC v. Oregon-Washington Railroad & Navigation Co.36

A quite conservative element is evident from the facts that the telegraph consolidation issue was left in abeyance by the 73d Congress, and that the language in title II and so much else in the bill was adapted basically from transportation law as well as a preliminary, hardly improved upon communications common carrier statute. The 73d Congress was hardly as willing to explore new theory of regulation as had been the members of the 1920 Congress. The announcement by President Roosevelt of his support for a "single Government agency charged with broad authority" was for the purpose of little more than "for the sake of clarity and effectiveness" in the relationship of the Federal Government to the public utilities.37 Nor did there exist, as in the 19th century, a vocal public temper provoked by extortionate corporate practice. The commentary of the day,

35 Supplementary Memorandum on Behalf of International Telephone & Telegraph Co., et al., U.S. House, id., p. 229.

36 It seems that sec. 214 (d) was supplemented by such legislation as the 1949 amendments to the Rural Electrification Act of 1936 (Act of Oct. 28, 1949, ch. 776, sec. 2, 63 Stat. 948) authorizing the Rural Electrification Administration to make loans for the expansion and improvement of rural telephone service. The House Committee on Agriculture, in recommending a bill for this purpose, stated that the ratio of telephones to number of residents in rural areas was as little as about one-tenth of the urban ratio. Rural Telephone Service, report to accompany H.R. 2960, H.R. Report No. 246, 81st Cong., 1st sess. (1949), p. 6. It was apparent that of the many thousands of mutual and farmer-owned lines and systems that had operated in the nonservice areas, many had been combined with independent and Bell carriers extending service from nearby city exchanges. Id. The committee reviewed a telephone company policy that effectively denied service to areas with relatively sparce population density:

Although they claimed to favor the area service type of development, witnesses for the telephone industry, both independents and Bell system operators, almost unanimously refused to commit themselves to provide area service in the areas in which they operate and over which they have in most cases a monopoly. There is every indication that unless they are forced to take such action, they will continue their policy of "skimming the cream" of the telephone business running their lines down the highways into the most profitable areas and relegating farmers in the less profitable service areas perpetually to a nontelephone hinterland. Id., p. 8.

Without in any way elaborating on the due process implications of "forc[ing the telephone companies] to take such action," the committee felt that "[t]his bill, while giving every protection and preference to existing telephone companies, establishes the policy of area service as one of the criteria on which the Administrator will base his decision in granting applications for loans." Id., p. 9. By inference, the 81st Congress established a loan mechanism policy to provide and maintain an essential public utility service, as a preference to a commission-instituted and undoubtedly extensive hearing and compensation process which would have been necessary to satisfy the fifth amendment requirements of ICC v. Washington-Oregon R. Co.

37 Message to Congress, Feb. 26, 1934. reprinted in Regulation of Interstate and Foreign Communications by Wire and Radio, H.R. Rept. No. 1850, 73d Cong., 2d sess., p. 1 (1934).

and the talent and resources, were undoubtedly more occupied with critical enconomic havoc caused by the depression. The President did advise that the new commission be given, in addition to the powers transferred to it from other agencies, "full power to investigate and study the business of existing companies and make recommendations to the Congress for additional legislation at the next session," 38 but did not recommend that its powers be broadened or extended at that time.

The House committee that reported the bill remarked that the Interstate Commerce Act, as amended in 1910 to apply to communications, had never been perfected to encompass adequate oversight of the industry, but was really an adaptation from railroad regulation. Consequently, the intent of its bill was to account for the "many inconsistencies in terms of the act and [the] many important gaps which hinder effective regulation." 39 However, there existed both here and in the Senate committee a basic acquiescence to the adaptation of the intent of railroad law to the communications field:

In this bill the attempt has been made to preserve the value of court and commission interpretation of [the Interstate Commerce Act], but at the same time modifying the provision so as to provide adequately for the regulation of communication common carriers.40

[V]ariances or departures from the text of the Interstate Commerce Act are made for the purpose of clarification in their application to communications, rather than as a modification of congressional intent to attain a different objective.41

A. The Congress

IV. THE FORMATION OF POLICY

The only significant legislative attention to section 214 occurred in 1943 during the passage of section 222. The new legislation was needed to relieve the economic effects brought on by the inadequacy of demand for telegraph service from more than one enterprise. The telegraph industry's financial trouble had its basis mainly in the depression, facilities duplication, and the growing ascendancy of voice telephone service. Section 222 also imposed requirements for a traffic routing formula in an attempt to maintain relatively fixed market shares and thus discourage aggressive competition among the international record carriers.1

4

Section 214(a)-(d) was amended to make "certain technical clarifying changes in the present act to conform with the merger legislation." 2 A requirement was imposed in section 214 (a) that a certificate must be obtained to "discontinue, reduce, or impair service to a community or part of a community." It is noteworthy that there is no documentation that indicates specifically why the "abandonments" language was deleted in its conversion to the 1934 act. At any rate, the essential clause was made more definitive and reinstated to anticipate the objection that a consolidated company would not develop and maintain service to the degree that might occur under competitive conditions. The use of the term "service" in the amendment did not evidence a congressional intent to provide a loophole for facilities abandonment, as has sometimes been believed. The language was preferable to the House version of the clause, prohibiting the abandonment without Commission approval, of a "line, plant, office, or other physical facility." It was felt that this more explicit syntax might allow the abandonment of equipment which, though remote, could be critical to the operation of a line and hence of the maintenance of service. The broad term "service" was meant also to be a standard for evaluating whether the abandonment of a "line" was significant enough to warrant prior approval. It was to prevent an inadvertent requirement that the carriers file "literally thousands of applications for what are, in effect, minor installations or abandonments." 5

1 For a complete explanation of the sec. 222 provisions, refer to the report of the Federal Communications Commission, An Overview of International Telecommunications: Industry Structure and Commission Policies, Mar. 23, 1977. U.S. House, Committee on Interstate and Foreign Commerce, Hearings on International Communications Service, 95th Cong., 1st Sess., pp. 473-75.

289 Cong. Rec. 340 (1943).

8 See Appendix B (3).

It is interesting that,during debate on the 1943 amendments, there was discussed a suspicion of an "agreement, possibly collusion, between the telegraph companies and the telephone companies to the effect that the telegraph would abandon offices because they could save clerk hire and increase the telephone business by requiring the person sending the telegram to telephone [to] the point where a telegraph office was maintained." (89 Cong. Rec. 787). There is no other evidence that this allegation was in mind during drafting and approval of the abandonments amendment.

5 Remarks of Mr. McFarland, 89 Cong., Rec. 1093 (1943).