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authority as it now has and at the same time would provide for the necessary flexibility in reporting requirements.
Senator PASTORE. For a better understanding of what that means, can you give us an example?
Mr. COWGILL. Yes. Undoubtedly the reporting requirements were originally designed to take care of the large carriers, such as the telephone and telegraph companies of the country. Over the years we have grown into an increased usage, for example, of the land mobile stations, the taxicab people who are engaged as common carriers. They may have 10, 20, 30 customers. For us to require them to have to come in with these voluminous detailed annual reports just does not make sense. We want the discretion carried into the second sentence so that we can tailor their annual report to a sensible report of data to us. This is the whole purpose.
Senator PASTORE. In other words, the request you are making is the requirement of a big telephone company as against a small taxicab company. You wouldn't expect the same thing.
Mr. CowGILL. That is the comparison. The design of all these proposed amendments to the common carrier section of the act is procedure saving, money saving. In our opinion not too controversial. It is now provided in section 221 (a) of the act that the Commission must hold public hearings upon all applications for authority to consolidate telephone properties or for authority for one telephone company to acquire the property of another or the control of another. Our proposal is that this mandatory hearing requirement be eased, since many of the applications are of such minor significance that hearings are not justified. This is particularly true since in most of these cases all conceivable parties in interest are actively supporting the transaction. A provision similar to the one we are proposing was placed in the Interstate Commerce Commission Act in 1949 and has been successful in saving the time of both the Commission and its regulated carriers.
The amendment to section 221 (a) as it now reads would permit the Commission to dispense with the hearing in any case where the Commission determines that a hearing is not necessary in the public interest. However, the United States Independent Telephone Association, as the representative of most of the independent telephone companies in this country, has voiced two objections to the amendment as now proposed: (1) that the public might not receive adequate notice of an application, and (2) that the Commission might decide that a public hearing is not necessary in some cases even though an association of telephone companies or a telephone company other than the applicant might request a hearing and raise questions as to whether a proposed transaction would serve the public interest. While we believe the public interest would be adequately protected by the Commission's administration of this section as the amendment now reads, we have worked with the association to arrive at a further revision which would be acceptable to both the association and this Commission.
The proposed further revision would specify that the Commission shall (1) give general public notice of all applications received, (2) hold a hearing in every case if requested by a telephone company or an association of telephone companies, and (3) hold a public hearing
in all other cases unless the Commission determines that a hearing is not necessary in the public interest.
I understand that the representative of the United States Independent Telephone Association, who follows me in this hearing, will present the language we have agreed to that would accomplish the association's objectives. We have no objections to the change which the association will propose. We are satisfied that such a proposed revision of section 221 (a) will adequately protect the public interest and at the same time eliminate the holding of many unnecessary hearings.
Senator PASTORE. If I may interrupt you at this point, I think this is a section which might run into a little trouble especially if it is not properly understood. There may be some who not knowing the background or knowing the spirit with which this is being suggested, might feel that this is putting a foot in the door for the creation of further monopolies without public interest being protected.
What would be wrong, therefore, in your proposed amendment, not only to confine it to a telephone company or any association of telephone companies, because that is not fundamentally the real problem, but how about on the part of a public agency or public utility commission or an involved city or subscriber? Why don't you say "or any other interested party"? Where you do not have any objection, in other words, then you would have the discretion to dispose of the hearing where you thought it was not in the public interest to hold it. Usually you are talking about cases where no one objects anyway.
What if the director of public utilities in a community felt that the community's interest was being prejudiced by this merger, and they made an objection? Why then should you be placed in a position of determining whether or not you should hold a hearing? I think a hearing ought to be held in that case.
Mr. CowGILL. I am sure that a hearing would be held.
Senator PASTORE. I know, but I am afraid you will run into a little trouble here unless you spell it out. I know that the Federal Communications Commission isn't going to turn its back on an appeal made by a community that is involved in a merger of this kind, or consolidation. I think you ought to be a little more specific otherwise you might run into trouble on this amendment. So why don't you consider that further?
I make that suggestion for the gentleman who is going to testify here, and spell it out that where anyone makes an objection, any interested party, whether a subscriber or public utility, that in that event you would have to hold a public hearing.
I am afraid you might run into some trouble on this unless you do. Mr. CowGILL. The only thought we have had along those lines is if the door is too wide open to requests for hearing, the thing may become abused by people who would just ask for a hearing for no good reason.
Senator PASTORE. You are up against that now. You have nothing to lose. At least it is a step in the right direction. Later on if that should develop, you can amend it. The impression that this section would create, this contemplated amendment to the law, in the minds of many people who really don't know the background as you and I
know it, is that here is an attempt to hush-hush people who have to pay the telephone bill.
First of all they have no opportunity of a public hearing. In many telephone-rate hearings the procedure which is being adopted more and more in many States permits the appointment of a consumer representative, usually appointed by a chief executive of the government. I had to do that in my State when I was Governor. There is a lot of pressure when these things happen. There is a lot of misunderstanding. People don't have the proper knowledge of exactly what you are getting at. Usually these things happen in the public interest. People get better service when you have the consolidation of some of these small companies.
I think myself it would do no harm to show that you have a widespread protection here so no one could raise a question in the Congress that there is anything but the public interest involved.
I think you ought to give that serious thought. I am not telling you how to amend it.
Mr. CowGILL. I might explain, if I may, the background of this particular section.
Senator PASTORE. In other words, the fright of the telephone companies and independent companies in suggesting this amendment is no more serious than the fright on the part of the subscriber who feels he wants to be protected, too.
Go ahead. If you disagree with me, just tell me so.
Mr. CowGILL. It is a question of degree, where you would want to draw the line. Our purpose is merely to try to save the Government money, save the companies involved money, because we are scheduling hearings in the neighborhood of 20 a year. They bring in their attorneys from all over the country, we have to have witnesses, and we have to have a hearing examiner set up dates, and all the paperwork. No one is opposing it except in a rare case. It is simply on all sides trying to cut costs and to get the system working more efficiently than it has in the past.
Senator PASTORE. Let's assume that a public-utility administrator or governor of a State asked you for a hearing. What are the chances of the Commission granting it?
Mr. COWGILL. Without any question he would get a hearing.
Senator PASTORE. If you had it in the law that a subscriber could ask for a hearing he would have to come to Washington. The hearing would not amount to a great deal unless he showed up and carried out the suggestion. So you would not have any problem there. At least, you have protection in the law that would give you some kind of safeguard that you are not trying to do anything through the back door that cannot be done through the front door.
Mr. CowGILL. We do not want to leave that impression, I am sure. Senator PASTORE. The very thing that aroused the suspicion of the independent companies is the very thing that might arouse the suspicions of some public-utility administrators in some of the States. You know there is always this question of what is allocated to intrastate use of telephone and interstate use of telephone; how the rates are established. That is always in the picture. You know that. I think that you would obviate some headache. Give it some serious thought, please.
Mr. CowGILL. The fourth section: With regard to the proposed amendment to section 410 (a) of the act, in the Communications Act Amendments of 1952, Congress rewrote section 409 (a) of the act so as to provide that adjudicatory hearings should be conducted only by the Commission or by one or more examiners. This had the effect of forbidding the hearing of adjudicatory matters by a single member of the Commission. With section 409 (a) so rewritten it was necessary to make certain amendments to section 410 (a) to bring it into conformity with the new language of section 409 (a).
In amending section 410 (a) Congress provided that certain questions might continue to be referred to a joint board composed of a member, or members, selected from each of the States affected. In delineating the jurisdiction and powers conferred upon such joint boards, they were given all the jurisdiction and powers conferred by law upon the Commission whereas the language replaced gave these joint boards only the same powers as possessed by a single member of the Commission when designated by the Commission to hold a hearing. It would seem that the new delegation of jurisdiction and powers is undesirably broad.
In any event, with the wording of section 410 (a) inserted by the Communications Act Amendments, 1952, it does not seem likely that the Commission would ever find it desirable to refer any matter to a joint board. It is believed that if the second sentence of section 410 (a) were changed to give joint boards the same jurisdiction that is now conferred on an examiner, it would be more nearly what Congress must have intended and would make the section more usable to the Commission in the administration of the act.
Senator PASTORE. In other words, that judgment would be the judgment of the Commission rather than the expression of the philosophy of an individual.
Mr. CowGILL. The final judgment in the particular case winds up at the Commission level.
Senator PASTORE. I think that makes a great deal of sense.
Mr. CowGILL. That concludes the testimony I have.
Senator PASTORE. Thank you very, very much, Mr. Cowgill.
STATEMENT OF BRADFORD ROSS, ATTORNEY AT LAW, REPRESENTING THE INDEPENDENT TELEPHONE COMPANIES, WASHINGTON, D. C.
Mr. Ross. Mr. Chairman, my name is Bradford Ross. I appear on behalf of the United States Independent Telephone Association, a trade organization representing the independent telephone industry, an industry in which there are 5,100 companies over the Nation independent of the Bell System. These independents operate over 81⁄2 million telephones through 11,000 separate exchanges.
Independent telephone companies in the United States provide telephone service in approximately 11,000 cities, towns, and communities serving approximately two-thirds of the geographical area of the country. These companies are located principally in suburban communities and rural areas, and obviously are for the most part small-business enterprises. In the aggregate they constitute a small portion of the telephone industry as compared to the Bell System.
The independent telephone industry owns about one-sixth of over 50 million telephones in service in the United States and from 10 to 11 percent of approximately $16 billion plant investment in telephones. The remainder of the telephones and plant investment is, of course, operated and owned by Bell System. Thus it may be seen that the American Telephone & Telegraph Co. owns and controls a very large proportion of the telephone business in the United States. Its control of the long-distance telephone wires in the United States is even greater than its control over the number of telephones in service. A. T. & T. also controls a correspondingly high percentage of the telephone equipment sold in the United States.
Despite the dominant position of the Bell System, the independent telephone business in the aggregate is a substantial and vital component of the telephone industry in this country. It generally is increasing in importance and success, as the rural and other subscribers become more and more dependent upon modern-day communication. Particularly is the independent industry growing and improving economically in areas where expanding urban development brings growing numbers of new subscribers into independent exchange areas.
With the improvement in the prospects of the independent companies during the last few years, particularly in areas near the larger cities, the number of acquisitions of independent companies by the Bell System is stepping up. If this trend continues, the independent industry, whose real strength lies in total united effort for improvement of service, may be weakened.
It is the independents' view that a strong independent segment in this industry is in the public interest and that the Nation derives strength from the fact that thousands of independent telephone companies, for the most part small business enterprises in the real sense, are growing and are contributing their share to the technological and social advances which the telephone industry contributes to the Nation.
It is suggested that the continued solicitude of Congress for many years to advance the opportunity and success of small business enterprises should be applied in matters such as we present here in order that the future of the independent telephone companies may be protected.
The independent telephone companies purchase most of their equipment from manufacturers other than those controlled by the Bell System, and the United States Independent Telephone Association, for which I speak, includes among its members manufacturing companies which are independent of the Bell System. The success and future of these independent manufacturers of telephone equipment is largely dependent upon the continued independence and success of the independent telephone operating companies.
Without reviewing in detail the history of the growth of the Bell and the independent segments of the industry, it is, of course, true that following the institution of antitrust proceedings in the year 1912 against a portion of the Bell System, a settlement was effected which was designed to halt the further expansion of Bell toward complete monopoly.
From that time until the passage of the Willis-Graham Act in 1921 amending the Transportation Act of 1920, the substance of which is now contained in section 221 of the Communications Act, the only