Public Utility Regulation Is a common carrier always a public utility? Is a public utility always a common carrier?

1. Public Utility RegulationIs a common carrier always a public utility?Is a public utility always a common carrier? • Rhetorical Questions: SM586.01

2. PUBLIC UTILITY THEORY- Natural Monopoly Concept- The Social Contract Concept- What Makes a Corporation a Public Utility? SM586.01

3. Public Utility TheoryDefinition of Public Utility • "A privately owned and operated business whose services are so essential to the public as to justify the grant of special franchises for the use of public property or of the right of eminent domain, in consideration of which the owners must serve all persons who apply, without discrimination. It is always a virtual monopoly." • From Black’s Law Dictionary. SM586.01

4. Public Utility TheoryDefinition of Public Utility • ".. the test for a public utility is whether it has held itself out as ready, able and willing to serve the public. The term implies a public use of an article, product, or service, carrying with it the duty of the producer or manufacturer, or one attempting to furnish the service, to serve the public and treat all persons alike, without discrimination." SM586.01

5. Public Utility TheoryDefinition of Public Utility • "The devotion to public use must be of such character that the product and service is available to the public generally and indiscriminately, or there must be the acceptance by the utility of public franchises or calling to its aid the police power of the state." • To recap: What are the principle elements of a Public Utility? SM586.01

6. Public Utility Elements:- Engaged in Providing the Public with a Necessary Service- Ready, Willing, and Able to Serve the Public, Indiscriminately- Franchised or Licensed by the State • A Private Company. . . SM586.01

7. Delegation of State Power to Public Utilities- “Police Power”- Lawful Takings- Eminent Domain • The Constitutional Concept of: SM586.01

8. The State Franchise Concept- Certificate of Public Interest, Convenience and Necessity- Dominant Provider- Provider of Last Resort • What State Commissions Require: SM586.01

9. Common Carriers: U. S. Origins • - State Common Carrier Laws-Arose late in the 19th Century -Encourage service to entire public, by private companies -Reasonable prices • - Limit Liability • - Federal Common Carrier Laws-Interstate Commerce Clause of U.S. Constitution -Federal Administrative Agencies (early 1930s) SM586.01

10. Common Carriers: Europe • - Government- Owned • - Followed Postal, Telephone and Telegraph Model SM586.01

11. The Communications Act of 1934 • Dual Regulation, to be shared with the states • States have exclusive jurisdiction within their boarders • Newly-created FCC regulates interstate and international telecommunications, plus some other items common to all telephony (e.g., telephone numbers) • FCC regulates Commercial Spectrum • FCC regulates NS/EP (national security/emergency preparedness communications • ‘34 Act modified many times since 1934; most recently in 1996 (Telecommunications Act of 1996). SM586.01

12. The Communications Act of 1934: • - Created the FCC • - Established Dual-Regulatory Scheme: Federal Jurisdiction is Interstate and International State Jurisdiction is Intrastate • - Codified in Seven Titles, 47 U.S.C. §§ 151 et seq.:Title I- General ProvisionsTitle II- Common CarriersTitle III- Provisions Related to RadioTitle IV- Procedural and Administrative ProvisionsTitle V- Penal Provisions; ForfeitureTitle VI- Cable CommunicationsTitle VII-Miscellaneous Provisions SM586.01

13. Federal Common Carrier Statutes, 47 U.S.C.: • §151- Purpose of FCC; Extent of FCC Jurisdiction • §201- Common Carrier Rates and Charges • §202- Discrimination and Preferences • §203- Schedules of Charges (tariffs) • §204- Lawfulness of New Charges/Suspension Hearing • §205- Commission can Establish Just and Reasonable Rates • §214- Extension of Lines SM586.01

14. State Regulatory Authority: • Intrastate Telephony Includes:All Landline Telephony Within the State • Intrastate Telephony Does Not Include:Video ServicesWireless Services • Who Regulates the Internet? • Is the Internet Interstate or Intrastate? SM586.01

15. New Regulatory Paradigm:The Telecommunications Act of 1996 • AKA “The Telecommunications Lawyers’ Full Employment Act of 1996” • Extends Federal Jurisdiction over competitive local exchange interconnection • Establishes a universal service contribution obligation for all carriers, not just public utilities • Requires access charge parity • Compels open connection and wholesale program offerings to competitors by monopoly cable TV operators • Gives “Forbearance Authority” to the FCC (new Section 10) • Requires biannual review of all FCC rules and regulations • Does not extend traditional regulation to the internet SM586.01

16. FEDERAL REGULATION • Executive Branch: • White House • Department of Commerce: • National Telecommunications and Information Agency (NTIA) • Department of State • Department of Justice • USTR SM586.01

17. Federal Regulation - Executive Branch: • The White House: • The President establishes telecommunications policy with his cabinet, including legislative proposals that are sent from the White House to Congress • The President and Cabinet are advised by their “Think Tank”: Office of Science and Technology Policy • 36 federal employees divided into four divisions • Science, Technology, Environment, and National Security/International Affairs SM586.01

18. Federal Regulation - Executive Branch: • National Telecommunications and Information Agency • A part of the Department of Commerce • NTIA’s Director is below Cabinet Rank • NTIA is organized into eight offices: • Policy Coordination and Management • Chief Counsel • Policy Analysis & Development • Public Affairs • Telecom/Information Applications • Spectrum Mgt. • Intern’l Affairs •Congress. Affairs • Institute for Telecommunications Sciences (labs) SM586.01

19. Federal Regulation - Executive Branch • NTIA (Continued) • NTIA’s Chief is a Presidential appointee. Does not hold cabinet rank, but his boss, the Dept. of Commerce Chief, serves on the President’s Cabinet. • NTIA manages all spectrum allocated by the federal government for government use, including DOD use. • Who manages all spectrum allocated by the federal government for commercial use? SM586.01

20. Federal Regulation - Executive Branch • Department of State • DOS Chief holds Cabinet Rank • Why is the DOS interested in telecom trade? • US has technological lead in Telecom and IS • US has over a $6 billion trade deficit in telecom services • Provides representation to the: • World Trade Organization • International Telecommunications Union • World Administrative Radio Conference (WARC) • World Administrative Telephone and Telegraph Conference SM586.01

21. Federal Regulation - Executive Branch • Department of Justice • Attorney General of the U.S. holds Cabinet Rank; Presidential appointee • Administers the Federal Courts • Antitrust Division: • Investigates and prosecutes the two antitrust evils associated with telecommunications firms: cross-subsidization and monopolization (more about antitrust issues later in course) • Along with the FTC and FCC, the DOJ Antitrust Division reviews and approves the merger and acquisition of telecommunications firms. SM586.01

22. Federal Regulation - Congress • House/Senate Commerce Committees • House Commerce Committee • Senate Commerce Committee • The General Accounting Office (GAO) • Conducts audits and reviews of all Federal agencies, including the FCC • Recommends to Congress proper funding levels SM586.01

23. Federal Regulation - The FCC • Federal Communications Commission: • Independent Federal Agency • Approximately 2,300 employees world-wide • Led by five Commissioners • Appointed by the President and approved by the Senate • At least two of the Commissioners must not be from the President’s political party. Commissioners serve for five-year terms • One of the five is appointed Chairperson of the FCC; today, the Republican Chairman is the Hon. Michael Powell. SM586.01

24. Federal Regulation - The FCC • FCC Organization (major parts): • Bureaus: Wireline Competition, Wireless Telecommunications, Media, International, Consumer Information and Governmental Affairs, and Enforcement • Offices: Secretary, Engineering and Technology, Technology Assessment, General Counsel, Managing Director, Workplace Diversity, and Disabilities Rights SM586.01

25. Federal Regulation - The FCC • Statutory Authority (Major Items): • Communications Act of 1934, as amended (1996 Act) • Communications Satellite Act of 1962 • Clayton Act • Telephone Disclosure and Dispute Resolution Act • Communications Assistance for Law Enforcement Act • Americans with Disabilities Act • Submarine Cable Statute • NTIA Act SM586.01

26. FCC Regulation - The FCC • Funding: • Approximately 95% of FCC funding comes from fees charged by the FCC to process spectrum licenses, construction permits, and petitions, and from other services provided to the public. • The remainder if appropriated by Congress, after Presidential approval. • Independent Agency: • The FCC has statutory authority to provide all three functions of the government: executive, legislative, and judicial. • The FCC must also answer, separately, to all three, which is tough when the respective government branches disagree on telecommunications policy. SM586.01

27. Federal Regulation - The FCC • All Federal Agencies, including the FCC, fall under the Administrative Procedure Act (APA), which requires the FCC to provide: • Procedural and substantive due process to all who may be affected by its decisions • Notice and Comment Rulemaking process • A record, based upon comment and evidence requested in advance, upon which a decision can be reached • Publish all proposed rulemakings and orders in the Federal Register, in a manner that clearly articulates the Commission’s intentions, lawful basis, and reasoning. SM586.01

28. Federal Regulation - The FCC • The APA compels Federal agencies to comply with two fundamental principles: • Agencies must act only within their statutory bounds • Decisions must be anchored firmly in the statutes that empower the agency to act. • Agencies must not act in an “arbitrary and capricious” manner • All agency decisions must be based upon the record developed by the agency in full view of the public • All agency decisions must be clearly articulated. SM586.01