3. In support of its petition, American argues: (a) that a Canadian system at Sault Ste. Marie, Canada, receives the same signals as are supplied to Michigan subscribers, and that these viewers will lose some NBC service if program exclusivity is provided; (b) that since its systems are low band, WTOM-TV's signal cannot be carried without deleting the signal of WNEM-TV, Bay City, Mich., from both the Canadian and Michigan systems; (c) that WTOM-TV's network signal is inferior to WNEM-TV's; (d) that a temporary stay of the Commission's most recent order should be granted until the Sault Ste. Marie systems can be all-banded. Great Lakes supports American's argument, and states that General Electric Co. engineers have advised it that WTOM-TV's intercity relay system has technical defects which would cause an inferior signal on WTOM-TV's network programing. 4. We rule on American's arguments as follows: (a) the terms under which the Canadian Government permits a United States citizen to own the system in Sault Ste. Marie, Ontario, specify only that the same signals be distributed to the Canadian system as are furnished to the Michigan subscribers. That condition will be met under our order; (b) the Second Report and Order explains why a television station placing a predicted grade B or better contour over the community served by a CATV system is entitled to program exclusively against lower priority stations, and petitioners' arguments are not responsive to the policies of the Second Report and Order; (c), (d) American's allegations are not adequately supported factually. 5. In view of the foregoing, the Commission finds that grant of American Cablevision Co.s' petition for hearing and request for temporary stay of rule 74.1103 would not be consistent with the public interest. Further, in view of American's earlier procrastination, we believe it appropriate to issue the requested order to show cause why American Cablevision Co., should not be ordered to cease and desist from operating in violation of section 74.1103 of the Commission's rules. 6. The public interest requires that the hearing process be conducted as expeditiously as possible. The examiner is so directed and shall issue his initial decision as promptly as possible after the conclusion of the hearing. Further, pursuant to section 0.365 of the rules, any review of the initial decision shall be by the Commission rather than the Review Board. Accordingly, It is ordered, That the petition for hearing and request for temporary stay of rule 74.1103 filed April 11, 1968, by American Cablevision Co., Is denied. It is further ordered, That the petition for issuance of order to show cause filed May 27, 1968, by Midwestern Broadcasting Co. Is granted. It is further ordered, That pursuant to sections 312 (b) and (c) and 409 (a) of the Communications Act of 1934, as amended, 47 U.S.C. 312 (b) and (c) and 409 (a), American Cablevision Co. Is directed to show cause, why it should not be ordered to cease and desist from further violation of section 74.1103 of the Commission's rules and regulations on its CATV system at Sault Ste. Marie, Mich. It is further ordered. That American Cablevision Co., Is directed to appear at a hearing to be held in Washington, D.C. at a time and place before an examiner, to be specified by subsequent order, unless the hearing is waived, in which event a written statement may be submitted. It is further ordered, That Midwestern Broadcasting Co. and Chief, Broadcast Bureau are made parties to this proceeding. It is further ordered, That the examiner shall conduct the hearing expeditiously and issue the initial decision as promptly as possible, in accordance with paragraph 6, above. It is further ordered, That the Secretary of the Commission shall send copies of this order by certified mail to American Cablevision Co. FEDERAL COMMUNICATIONS COMMISSION, BEN F. WAPLE, Secretary. 18 F.C.C. 2d F.C.C. 69-709 BEFORE THE FEDERAL COMMUNICATIONS COMMISSION WASHINGTON, D.C. 20554 In the Matter of AMERICAN TELEPHONE & TELEGRAPH Co., ITT Applications For Authorizations To Con- File No. P-C-6290 MEMORANDUM OPINION AND ORDER (Adopted June 25, 1969) BY THE COMMISSION: COMMISSIONERS BARTLEY AND WADSWORTH ABSENT; COMMISSIONER JOHNSON CONCURRING IN THE RESULT. 1. On January 16, 1969, the Communications Satellite Corp. (Comsat), filed a petition requesting the Commission: (a) to issue an order directed to American Telephone & Telegraph Co. (A.T. & T.), and ITT World Communications Inc. (ITT Worldcom), requiring them to show cause why they have not leased and apparently do not intend to lease, effective January 1, 1969, a hundred-circuit satellite between the United States and Puerto Rico through the Cayey, P.R., earth station instead of the seventy circuits actually leased; alternatively, (b) to issue an order directed to A.T. & T., ITT Worldcom, ITT Communications, Inc.-Virgin Island (ITTCIVI), RCA Global Communications, Inc. (RCA), Transoceanic Communications, Inc. (Transoceanic), Western Union International, Inc. (WUI), and such other carriers as may have a direct or indirect interest in the second Florida-St. Thomas submarine cable, requiring them to show cause why services between the mainland and the Puerto Rico/Virgin Islands area and points. beyond are not being met on a 50-50 cable-satellite basis effective January 1, 1969; or, alternatively, (c) to grant such other relief as may be appropriate. Oppositions, to which Comsat has replied, have been filed by respondents. 2. All entities against whom relief is sought are holders of authorizations and licenses, issued by the Commission, for the second Virgin Islands cable, and except Transoceanic (a wholly owned nonoperating subsidiary of A.T. & T.), are communications common carriers fur nishing service between the mainland United States and the Puerto Rico/Virgin Islands area. A.T. & T., operating on the mainland, corresponds with ITTCIVI in the Virgin Islands, and with All America Cables & Radio, Inc. (AAC&R), (formerly ITT Cable & Radio, Inc.Puerto Rico) in Puerto Rico, to furnish voice services. ITT Worldcom, which with AAC&R and ITTCIVI are wholly owned subsidiaries of the International Telephone & Telegraph Co. (ITT), furnishes record services and voice/data services between the mainland and the Puerto Rico/Virgin Islands area, as does RCA, WUI furnishes such services through corresponding with Cable & Wireless/Western Union International, Inc. (C&W/WUI), a partially owned subsidiary, in Puerto Rico and the Virgin Islands. 3. Until recently, these carriers operated between the above areas principally over high-capacity submarine cables, including the new second Virgin Islands cable. Since the inauguration of communication satellite service between the United States mainland and the Puerto Rico/Virgin Islands area with the opening of an earth station at Cayey, P.R., they also have been using or propose to use satellite circuits. The Cayey earth station is licensed to a consortium, consisting of Comsat (the petitioner herein), AAC&R, ITT Worldcom, RCA, and WUI. Background of Controversy 4. The instant controversy results from the manner in which the Commission disposed of a series of competing applications for earth stations and cable facilities to provide service to the Puerto Rico/ Virgin Islands area and points reachable via this area. There had been pending before us applications from ITT Cable & Radio Inc.-Puerto Rico for an earth station in Puerto Rico (file No. 8-CSG-P-66); from Comsat for an earth station in the Virgin Islands (file No. 14-CSGP-66), later switched to Puerto Rico (file No. 28-CSG-P-67): and from A.T. & T. and ITT Communications Inc.-Virgin Islands for a cable between the mainland and the Virgin Islands (file No. PC-6290). Unless it could be found that both the cable and an earth station could be authorized, hearings would have been required to determine which facility should be authorized, and if it were to be the earth station, which of the two applications should be granted. Because of the urgent need for additional facilities to serve the Puerto Rico/Virgin Islands area in particular and the Caribbean area generally, discussions were held among the interested parties under the aegis of the Commission in an attempt to resolve differences and expedite the construction of needed facilities. 5. After analysis of their needs, in light of present and foreseeable traffic volumes, the proponents of the cable generally took the position that both cable and satellite facilities were justified, while Comsat ultimately took a position that the cable application could not be granted until there was an adequate demonstration that both types of facilities were economically justified, and if so, that measures would be taken to assure that the earth station would receive an adequate share of traffic. 6. In an attempt to demonstrate the validity of the position of the cable proponents, A.T. & T. filed a letter dated November 3, 1966, in which it furnished certain detailed data regarding its circuit requirements to the Caribbean area for the years 1967-75 inclusive. It also addressed itself to the economic feasibility of licensing both a cable and an earth station, and made the following representations to the Commission: There is an indicated shortage of 300 circuits early in 1969, 200 of which would be required to serve Puerto Rico and the Virgin Islands. Assuming we are given authority to proceed with the construction of the transistorized cable, we believe it could be placed in service early in 1968. On this basis it would be our plan to use cable circuits to reach all of the areas served via Puerto Rico and St. Thomas, and if both the cable and the satellite ground station are to be authorized, and assuming that suitable satellite circuits could be made available, taking into account the quality of service, and the economics, we and I.T. & T. would be prepared to meet the shortage to Puerto Rico by utilizing 100cable circuits, and 100 satellite circuits. For the following years there appears to be an annual need for approximately 50 additional circuits to Puerto Rico and the Virgin Islands, and it would be our intention that approximately one-half of these requirements would be met by satellite circuits and one-half by cable circuits. The provision of new high-capacity cable and satellite facilities to the Puerto Rico-Virgin Islands area will provide greater day-to-day diversity. Moreover, each facility will have adequate capacity to provide backup for the other in times of emergency. Existing facilities cannot meet this need. We have, of course, had limited experience to date with satellite circuits, and COMSAT rates are still in a very tentative state. Therefore, this commitment as to the use of satellite circuits may need review at such time as sufficient experience has been gained from the use of satellite circuits and firm facts are available as to service results and costs. While the rates for satellite circuits to Puerto Rico cannot, of course, be known at this time, and will be ultimately determined by the Commission after consideration of all relevant factors, if the assumption is made that the charges are to be those suggested by COMSAT, i.e., $30,000 per year per full circuit, it appears that the revenues from the use of satellite circuits as indicated should not only cover the Puerto Rico ground station revenue requirements but, in addition, should provide in the order of $1 million per year toward the space segment and the other ground station revenue requirements, beginning with the first full year of operation. 7. Upon consideration of all of the pleadings, including the abovecited letter, we issued a series of decisions in which we : (a) Concluded that the authorization of both facilities would be in the public interest and proposed to grant authorizations for each. We did, however, consider that it was essential to take measures to safeguard the viability of the earth station. We proposed to do so by requiring the carriers using the cable (which was to be completed before the earth station) to meet new circuit needs, between the mainland and the Eastern Caribbean area and beyond, arising after opening of the earth station by use of satellite circuits through such station until they were using the same number of satellite circuits as circuits in the new cable, and thereafter to maintain such equality. ITT Cable and Radio, Inc.-Puerto Rico, et al., 5 F.C.C. 2d 823 (1966 decision). (b) Authorized the construction and operation of the cable, and required that the above formula be applied. Recognizing that problems could arise, we reserved jurisdiction over all matters relating to management, use, and operation of the cable. A.T. & T. et al., 7 F.C.C. 2d 959 (1967 decision). (c) Authorized construction of the earth station by Comsat, Comsat et al., 8 F.C.C. 2d 1001, 1967. 8. Insofar as is relevant hereto, we stated in our 1966 decision at paragraph 33: 33. In order to eliminate potential future disputes and to give Comsat reasonable assurance of use, because it does not have direct access to the general-using public, we believe we should now fix the procedure under which circuit utilization shall be apportioned as between the new cable facilities and new satellite facilities for services to and from the Caribbean area. It appears that the cable facilities may be installed and operative before the earth station can be constructed. The cable will have the advantages of the pent-up demand which ac18 F.C.C. 2d |