## Facts

- AT&T and affiliated Bell System companies offered “Telpak,” a discounted bulk private-line service providing continuous point-to-point communications capacity.
- Telpak was designed to compete with customers’ potential use of private microwave systems that could bypass common carriers.
- Telpak eligibility and “sharing” rules favored limited categories (e.g., government, certain carriers, right-of-way companies, utilities), allowing those users to pool demand to meet minimum volume thresholds.
- Other customers with similar communications needs were excluded from sharing and could not qualify for Telpak discounts.
- After investigation and hearings, the FCC concluded the limited sharing plan caused unreasonable discrimination under the Communications Act.
- The FCC ordered carriers to allow essentially unlimited sharing, permitting customers without categorical limits to pool needs to meet minimum bulk-use levels.
- AT&T petitioned for review, challenging both the evidentiary basis for the unlimited-sharing prescription and the FCC’s internal procedure allowing staff with adversarial roles to assist in decisionmaking and drafting.

## Issues

1. Whether the FCC reasonably found Telpak’s limited sharing rules to be unjust or unreasonable discrimination under § 202(a) of the Communications Act.
2. Whether the FCC made the necessary findings and provided substantial evidentiary support to prescribe an unlimited-sharing remedy.
3. Whether due process or the Communications Act was violated when FCC staff performed both adversarial (investigatory/prosecutorial) and advisory/decisional functions in the same proceeding.

## Decision

- The court affirmed the FCC’s finding that Telpak’s limited sharing rules were unlawfully discriminatory under § 202(a).
- The court reversed the FCC’s prescription of unlimited sharing and remanded for further proceedings because the Commission did not make the necessary findings to justify that specific remedy.
- The court rejected AT&T’s procedural and due process challenge to the staff’s combined roles, finding no statutory violation or demonstrated actual bias.

## Legal Principles

- The FCC may treat tariff classifications or sharing restrictions as unlawfully discriminatory when they confer preferences on certain customer classes over other similarly situated users, and such determinations receive deference when supported by substantial evidence.
- A finding of discrimination does not automatically justify a particular remedial prescription; the FCC must articulate reasoned, record-supported findings connecting the remedy to statutory requirements, including just and reasonable rates and nondiscriminatory practices.
- In agency ratemaking and similar proceedings, combining investigatory/prosecutorial and advisory functions within agency staff is not per se unlawful; absent proof of actual bias, improper influence, or abdication of decisional responsibility, due process is not violated.

## Conclusion

The court upheld the FCC’s determination that Telpak’s restricted sharing produced unlawful discrimination, but set aside the Commission’s unlimited-sharing mandate because the order lacked specific, evidence-based findings explaining why that remedy was required and consistent with statutory rate standards, while also sustaining the FCC’s internal staff procedures against a due process challenge.


Am. Tel. & Tel. Co. v. FCC, 449 F.2d 439 (2d Cir. 1971)