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AMEND COMMON CARRIER SECTIONS OF COMMUNICATIONS ACT 3

also a letter received from Mr. Bradford Ross, attorney at law, representing United States Independent Telephone Association, in opposition to S. 1456. (The letters referred to are as follows:)

FEDERAL COMMUNICATIONS COMMISSION,

Washington, D. C., February 28, 1955. The VICE PRESIDENT, United States Senate,

Washington, D. C. DEAR MR. VICE PRESIDENT: The Federal Communications Commission wishes to recommend for the consideration of the Senate four amendments to the Communications Act of 1934, as amended, relating to its regulatory authority over communications common carriers, enactment of which, it is believed, will substantilly relieve the administrative burdens of such regulation on both the Commission and the carriers subject to its jurisdiction without in any way detracting from the essential regulatory authority of the Commission. These amendments are to sections 212, 219 (a), 221 (a), and 410 (a) of the act, respectively. A draft bill incorporating each of the amendments is attached.

Section 212 of the Communications Act presently makes it unlawful for any person to hold the position of officer or director of more than one carrier subject to the act, unless the dual holding is first authorized by Commission order upon a showing, in a manner to be prescribed by the Commission, that neither public nor private interests will be adversely affected thereby. An objective of Congress in enacting this requirement—the prevention of the exercise of indirect control over ostensibly competing carriers through such interlocking directorates-is, we believe, clearly salutary. But the all-embracing language of the section makes it applicable to dual holdings within an integrated communications system under common ownership and control as well as to interlocking relations between the competitive systems to which the section must have been primarily intended to apply. The result has been that in recent years the Commission has been called upon to consider a substantial number of requests by officers or directors of one company of a commonly owned and controlled system, such as the Bell System of the American Telephone & Telegraph Co., to serve as well in a similar capacity with respect to another company within the system. The Commission has felt that in such situations, where the dual holding cannot have any effect upon the ultimate control or management policy of either of the companies, the determination as to whether a particular individual can best serve the interests of the system by concentrating his efforts in one of the constituent companies or by making his talents available to more than one is a detail of carrier management which can and should be left to the discretion of the carrier itself. It has, accordingly, regularly issued orders approving such requests. It is believed, however, that in the interests of efficiency and avoidance of unnecessary effort by both the Commission and the carrier personnel involved, it would be advisable to amend section 212 to make possible elimination of unnecessary applications and Commission orders in such situations. This would be accomplished by amending section 212 to add the following proviso at the end of the first sentence: Provided, That the Commission may authorize persons to hold the position of officer or director in more than one such carrier, without regard to the requirements of this section, where it has found that one of the two or more carriers directly or indirectly owns more than 50 per centum of the stock of the other or cthers, or that 50 per centum or more of the stock of all such carriers is directly or indirectly owned by the same person.”

In addition, certain language changes will be required in the second sentence of the section, as revised, in view of the insertion of the new proviso. These are set out in full in the draft bill attached hereto.

The need for an amendment to section 219 (a) of the act arises partly out of an apparent ambiguity of the existing language and partly out of the development and growth of certain new types of limited or specialized common carriers in the communications field concerning the operation of which a somewhat lesser degree of annual information may be necessary in order to insure effective Commission regulation. The first sentence of this section presently authorizes the Commission to require the filing of annual reports by all carriers subject to the act, a provision taken over from the Interstate Commerce Act, as amended. However, the second sentence of the section, which was added at the time the Communications Act of 1934 was adopted, speaks in mandatory terms and provides that such annual reports "shall show in detail” a long list of specific types of

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information. The absolute nature of these requirements is, apparently, stressed by the language of the third and last sentence of the subsection which authorizes the Commission, by regulation to require that additional information be contained in such annual reports. And while the legislative history relating to the section is by no means extensive, what there is tends to reinforce the interpretation of the section which would make mandatory the inclusion in any annual report required to be filed by the Commission of all of the detailed information specified in the second sentence of the section.

Experience in recent years, especially with respect to certain types of specialized common carriers which have been established in the mobile and maritime services, has indicated that some of the information required by the second sentence of the section is unnecessary and serves little or no regulatory function. Accordingly, this section should be amended to make clear that the Commission has authority to tailor the annual reports required from particular types of carriers to the peculiar needs of the Commission with respect to each service and type of carrier. This would be accomplished by amending the second sentence of the section by inserting the words "Except as otherwise required by the Commission” at the beginning of the sentence so that it will read: “Except as otherwise required by the Commission, such annual reports shall show in detail.”

It is presently 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. It is believed that this mandatory hearing requirement should be eased, as many of the applications being received are of such minor significance that hearings are not justified. This is particularly true since in a large number of these cases all conceivable parties in interest are actively in favor of the merger. The Congress on August 2, 1949, made an amendment similar to what the Commission is recommending, to section 5 (2) (b) of the Interstate Commerce Act by adding to a clause making public hearings mandatory in cases involving consolidations, mergers, and acquisitions of control of railroads a proviso that such hearings need not be held where the Commission determines that a public hearing is not necessary in the public interest.” In its 66th annual report for the fiscal year ended October 31, 1952, the Interstate Commerce Commission, commenting upon the results of the amendment of August 2, 1949, stated that during the year under report it "found that public hearings were not necessary in 32 out of 35 proceedings under section 5 (2)." It is believed that similar savings in time-consuming procedures would be realized in the Federal Communications Commission if section 221 (a) were similarly amended, as set forth in detail in the appendix. This amendment would permit the Commission to dispense with the hearing in any case where, after notifying all parties in interest and considering their views, the Commission determines that such a hearing is not necessary in the public interest. The new language proposed is patterned after language now in sections 220 (i) and 309 (a) of the act and the amendment of August 2, 1949, to section 5 (2) (b) of the Interstate Commerce Act.

In the Communications Act Amendments, 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 stating the jurisdiction and powers conferred upon such a joint board it was stated in the amendment adopted that any such board should have 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.

AMEND COMMON CARRIER SECTIONS OF COMMUNICATIONS ACT

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The consideration of these amendments by the Senate will be greatly appreciated. The Commission will be most happy to furnish any additional information that may be desired by the Senate or by any committee to which this material is referred. The Bureau of the Budget has advised the Commission that it has no objection to the submission of this letter.

GEORGE C. McConnaUGHEY,

Chairman (By direction of the Commission).

DEPARTMENT OF JUSTICE,

May 24, 1955. Hon. WARREN G. MAGNUSON, Chairman, Committee on Interstate and Foreign Commerce,

United States Senate, Washington, D. C. DEAR SENATOR: This is in response to your request for the views of the Department of Justice concerning the bill (S. 1456) to amend sections 212, 219 (a), 221 (a), and 410 (a) of the Communications Act of 1934, as amended.

Section 212 of the act provides, inter alia'"* * * it shall be unlawful for any person to hold the position of officer or director of more than one carrier subject to this Act, unless such holding shall have been authorized by order of the Commission, upon due showing in form and manner prescribed by the Commission, that neither public nor private interests will be adversely affected thereby." The bill would amend this section by adding at the end of the above-quoted provision the following proviso: "Provided, That the Commission may authorize persons to hold the position of officer or director in more than one such carrier, without regard to the requirements of this section, where it has found that one of the two or more carriers directly or indirectly owns more than 50 per centum of the stock of the other or others, or that 50 per centum or more of the stock of all such carriers is directly or indirectly owned by the same person.

Section 219 (a) of the act presently authorizes the Commission to require the filing of annual reports by all carriers subject to the act. The section further requires that such reports "shall show in detail” a long list of specific types of information. The bill proposes to amend this section by inserting the words except as otherwise required by the Commission” so that the section will read "Except as otherwise required by the Commission, such annual reports shall show in detail * * *"

The purpose of this proposed amendment is to make clear that the Commission has authority to specify the form of the annual reports for particular types of carriers so that such annual reports will reflect only information which the Commission needs in order to perform its regulatory function.

Section 221 (a) of the act, which the bill proposes to amend, presently provides 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 or control of another. The bill would amend this section so as to dispense with the necessity of a public hearing in cases where “the Commission determines that a (public) hearing is not necessary in the public interest. The purpose of this proposed change, it is understood, is to ease the mandatory public hearing requirement since many of the applications received by the Commission are of minor significance which may not warrant the holding of such public hearings.

The bill also proposes to amend section 410 (a) of the act, the effect of which would be to limit the jurisdiction and powers of certain joint boards to which the Commission, under this section, is authorized to refer certain matters. The authority of such joint boards would, under the amendment proposed by the bill, be equal to that possessed by an examiner rather than, as presently provided in the act, equal to that of the Commission. The effect of this proposed change would probably make the section more usable to the Commission in the administration of the act since the Commission presently does not find it desirable to refer matters to a joint board because of the broad powers of such boards.

Whether the bill should be enacted involves a question of policy concerning which this Department prefers to make no recommendation.

The Bureau of the Budget had advised that there is no objection to the submission of this report. Sincerely,

WILLIAM P. ROGERS,
Deputy Attorney General.

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64429-55

Ross, MARSH & FOSTER,

Washington 5, D. C., May 4, 1955. Hon. John O. PASTORE, Chairman, Subcommittee on Communications, Senate Interstate and Foreign Commerce Committee,

United States Senate, Washington, D. C. DEAR SENATOR PASTORE: It is my understanding that your subcommittee plans to hold a hearing on S. 1456 in the near future. As counsel for the United States Independent Telephone Association, it is requested that opportunity be given to me to appear at the hearing in behalf of the association in connection with the bill. Section 3 of the bill

, as presenly written, would deprive the independent segment of the telephone industry of the long-established opportunity to participate in hearings with respect to acquisitions of independent companies by Bell System companies. The proposed elimination of the requirement for a hearing would ε lso destroy such hearing rights as presently exist under sections 5, 7, and 8 of the Administrative Procedure Act, for such rights exist only where a hearing is required by law. Under the bill as written, acquisitions could be certified by the Federal Communications Commission without notice or hearing afforded the independent telephone industry. The importance of the foregoing is magnified by the fact that such certification would exempt the transaction from the antitrust laws.

The independent telephone industry desires that the law include assurance of an opportunity to be heard in opposition to Bell acquisitions. It does not believe that such opportunity should be left, as is presently provided in S. 1456, completely within the discretion of the regulatory agency. Very truly yours,

BRADFORD Ross. Senator PASTORE. Mr. Cowgill?

STATEMENT OF HAROLD G. COWGILL, CHIEF OF THE COMMON

CARRIER BUREAU OF THE FEDERAL COMMUNICATIONS COMMISSION

VIr. Cowgill. In the absence of Chairman McConnaughey I am here to testify on behalf of the Commission in support of S. 1456.

With your permission I would like to read into the record a statement which has been reviewed by the Commission and which would have been the testimony of Chairman McConnaughey had he been able to personally appear here today.

S. 1456 contains four amendments to the Communications Art which have been proposed by the Commission and which relate to our regulation of common carriers--the companies furnishing interstate and foreign communication service for hire by telephone and telegraph. These proposals represent a part of the Commission's continuing program to simplify the act and Commission regulations thereunder by eliminating nonessential procedural steps and to devote the time and effort thereby saved to more effective regulation in the fields where it is needed. The four amendments proposed are to sections 212, 219 (a), 221 (a), and 410 (a) of the Communications Act, respectively.

Section 212 relates to authority for a person to hold the position of officer or director of more than one carrier. This section now makes it unlawful for any person to hold the position of officer or director in more than one carrier subject to the act unless such holding shall have been authorized by order of the Commission upon due showing that neither public nor private interests will be adversely affected thereby. This provision is designed to prevent any abuses that might

AMEND COMMON CARRIER SECTIONS OF COMMUNICATIONS ACT

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stem from "'interlocking directorates" and in my opinion it is a highly desirable authority in the regulation of competing common carriers.

However, the all-embracing language of this section makes it applicable to dual holdings within an integrated communications system under common ownership and control, as well as to interlocking relations between separate systems or companies to which the section must have been primarily intended to apply. Nearly all the applications we receive under section 212 are from officers or directors of one company of a commonly owned or controlled system. Our experience has been that the dual holding of positions under these circumstances produces no adverse effect upon either public or private interests and we therefore feel that this is a detail of carrier management which can and should be left to the carrier itself. The unnecessary filing and processing of applications of this kind merely adds to the work of the carriers and this Commission. Our proposed amendment is designed to give the Commission discretion to eliminate such applications from persons who hold positions as officer or director in more than one carrier where such carriers are affiliated, within the terms of the amended section.

Senator PASTORE. In the history of this particular section, do you know of any one instance where you have never allowed the application where it was the same ownership and affiliate as contrasted with competing companies?

Mr. COWGILL. I know of none within the scope of the amendment we are proposing here.

Senator PASTORE. In other words, it has been a process that has produced a cumbersome procedure, and actually not bad results. Because where you do not have an interest which is inimical in cases of the same director serving on two boards, you really do not have the public interest involved to the extent that they can work this thing so that they would be actually furthering the creation of a monopoly so to speak?

Mr. CowGILL. That has been our experience.

The need for an amendment of section 219 (a) of the act arises partly out of an apparent ambiguity in the existing language and partly out of the development and growth of certain new types of limited or specialized common carriers in the communications field concerning the operation of which a lesser degree of annual information is necessary.

The first sentence of section 219 (a) gives the Commission discretionary authority to require common carriers to submit annual reports of financial statistical, and other information. The second sentence is inconsistent, however, because it speaks in mandatory terms and prescribes a long list of data which shall be included in such annual reports. The material listed in this section is desirable in the comprehensive annual reports required from large carriers and undoubtedly would be continued in future reports from those carriers.

On the other hand, such complete information ordinarily is not necessary in reports from smaller specialized carriers and furnishing it imposes a substantial unnecessary burden on them. Our proposed amendment would make clear that the Commission has authority to tailor the annual reports required from particular types of carriers to the peculiar needs of the Commission with respect to each service and type of carrier. This would give the ('ommission just as much

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