B-154279, JUL. 7, 1965

B-154279, JUL. 7, 1965

TO CHAIRMAN, UNITED STATES ATOMIC ENERGY COMMISSION:

FURTHER REFERENCE IS MADE TO LETTER OF JANUARY 28, 1965, FROM THE GENERAL MANAGER, REQUESTING OUR VIEWS CONCERNING OWNERSHIP OF THE OUTSIDE CABLE AND WIRE DISTRIBUTION PLANT OF THE COMMUNITY TELEPHONE SYSTEM AT LOS ALAMOS, NEW MEXICO. THE OUTSIDE CABLE INTERCONNECTS THE VARIOUS PBX'S AT LOS ALAMOS (LA) AND THE INDIVIDUAL TELEPHONE STATIONS TO THE PBX-S.

THE UTILITIES TRANSFER PROVISIONS OF THE ATOMIC ENERGY ACT OF 1965, AS AMENDED, 42 U.S.C. 2371-2375, AUTHORIZE THE ATOMIC ENERGY COMMISSION TO TRANSFER THE COMMUNITY TELEPHONE SYSTEM AT LA TO ONE OR MORE OF THE ENTITIES SPECIFIED THEREIN, PROVIDED THE TRANSFEREE HAS LEGAL AUTHORITY TO RECEIVE AND OPERATE THE SYSTEM. IT IS STATED THAT EVEN BEFORE THE COMMUNITY ACT WAS AMENDED IN SEPTEMBER 1962 (76 STAT. 664) TO PERMIT DISPOSAL OF THE FACILITIES OF LA THE LA AREA OFFICE (LAAO) HAD RECEIVED SEVERAL EXPRESSIONS OF INTEREST IN ACQUISITION OF THE SYSTEM FROM VARIOUS PRIVATE TELEPHONE COMPANIES EVEN THOUGH NO PROPOSALS HAD BEEN SOLICITED. THE MOUNTAIN STATES TELEPHONE AND TELEGRAPH COMPANY (MST AND T), A SUBSIDIARY OF AT AND T, AND UNIVERSAL TELEPHONE, INCORPORATED, AN INDEPENDENT COMPANY, HAVE DISPLAYED CONTINUOUS INTEREST IN ACQUISITION OF THE SYSTEM. FOLLOWING ENACTMENT OF THE 1962 AMENDMENT TO THE COMMUNITY ACT THE LAAO CONCLUDED THAT MST AND T WAS THE ONLY COMPANY LEGALLY AUTHORIZED TO OPERATE THE SYSTEM AND IT RECOMMENDED THAT THE COMMISSION SELL ITS INTEREST IN THE SYSTEM TO THAT COMPANY.

IT IS STATED IN THE ABOVE REQUEST THAT THE TELEPHONE SYSTEM AT LA CONSISTS OF MAIN AND AUXILIARY TELEPHONE BUILDINGS AND UNDERLYING LAND, PBX SWITCHBOARDS, DIAL TELEPHONES, RELATED TIE LINE AND STATION EQUIPMENT, CABLE AND WIRE DISTRIBUTION FACILITIES, AND SUPPORTING STRUCTURES CONSISTING OF POLES, GUYS, ANCHORS, UNDERGROUND CONDUITS AND MANHOLES; THAT THE SWITCHBOARDS, DIAL EQUIPMENT, TELEPHONES, RELATED TIE LINE AND STATION EQUIPMENT AND CABLE AND WIRE SYSTEMS WITHIN THE BUILDINGS ARE OWNED BY AND RENTED FROM MST AND T; THAT THE BUILDINGS AND UNDERLYING LAND AND SUPPORTING STRUCTURES ARE OWNED BY THE GOVERNMENT; AND THAT THERE HAS BEEN NO DISPUTE BY ANYONE CONCERNING OWNERSHIP BY MST AND T OR THE GOVERNMENT OVER THE FACILITIES AS STATED. IT IS STATED, HOWEVER, THAT A QUESTION HAS ARISEN OVER OWNERSHIP OF THE OUTSIDE CABLE AND WIRE DISTRIBUTION PLANT WHICH WAS FURNISHED, INSTALLED AND MAINTAINED BY MST AND T ON AN INSTALLATION PLUS CARRYING CHARGE BASIS; THAT MST AND T CONSISTENTLY HAS ASSERTED OWNERSHIP OVER THE CABLE AND WIRE DISTRIBUTION PLANT; AND THAT OTHER THAN THE BUILDINGS, LAND, AND SUPPORTING STRUCTURES MOST OF THE FACTILITIES COMPRISING THE LA COMMUNITY TELEPHONE SYSTEM WERE INSTALLED BY MST AND T UNDER VARIOUS CONTRACTS. AFTER AEC ACQUIRED JURISDICTION AT LA A MEMORANDUM AGREEMENT DATED JUNE 22, 1951, WAS ENTERED INTO BETWEEN THE MANAGER AT AEC'S SANTA FE OPERATIONS OFFICE AND MST AND T OUTLINING THE TERMS AND CONDITIONS UNDER WHICH MST AND T WOULD FURNISH THE PHONE AND TELETYPEWRITER EXCHANGE SERVICE AT LA. PARAGRAPH 3B OF THIS AGREEMENT PROVIDED THAT:

"* * * THE COMMISSION WILL OPERATE THE ENTIRE TELEPHONE SYSTEM AT LOS ALAMOS, NEW MEXICO, AND WILL MAINTAIN ALL CONTRACTS WITH THE PUBLIC AND OFFICIAL USERS OF SUCH TELEPHONE SERVICE. THE COMMISSION WILL DETERMINE INSIDE AND OUTSIDE PLANT REQUIREMENTS AND WILL NEGOTIATE WITH THE TELEPHONE COMPANY FOR MEETING THE SAME. THE COMMISSION'S TELEPHONE SERVICE PROCEDURES WILL FOLLOW TM24-205. THE COMMISSION AND THE TELEPHONE COMPANY MAY VARY SUCH PROCEDURE BY MUTUAL CONSENT.'

AS TO THE APPLICATION OF THE FOREGOING QUOTED PROVISIONS THE AREA MANAGER IN LETTER OF OCTOBER 25, 1962, INFORMED UNIVERSAL THAT:

"* * * THE AEC DOES "OPERATE" THE SYSTEM IN THE SENSE THAT AEC IS MOUNTAIN STATES TELEPHONE AND TELEGRAPH COMPANY'S ONLY "SUBSCRIBER" HERE AND THAT WE IN TURN COLLECT TOLLS AND CHARGES FROM INDIVIDUAL USERS.'

AS STATED ABOVE MST AND T HAS CONSISTENTLY CONTENDED THAT IT IS THE OWNER OF THE OUTSIDE CABLE AND WIRE DISTRIBUTION PLANT AND THAT AEC HAS NO TRANSFERABLE PROPERTY RIGHTS AND NOTHING TO SELL EXCEPT POSSIBLY THE SUPPORTING STRUCTURES AND THAT, THEREFORE, THE DISPOSAL PROVISIONS OF THE LAW HAVE NO REAL APPLICATION TO THE LA TELEPHONE SYSTEM. MST AND T HAS CONTENDED FURTHER THAT THE INSTALLATION AT LA IS NOT NOW AND NEVER HAS BEEN AN ARMY-OWNED OR A GOVERNMENT-OWNED SYSTEM AND THAT IN INSTALLING THE SYSTEM THE PARTIES UNDERSTOOD THAT ALL OF THE FACILITIES AND EQUIPMENT REQUIRED EXCEPT THE SUPPORTING STRUCTURES WOULD BE OWNED BY MST AND T.

ON THE OTHER HAND, UNIVERSAL ORIGINALLY CONTENDED THAT SINCE THE GOVERNMENT PAID THE ENTIRE INSTALLATION COST THE GOVERNMENT OWNS THE OUTSIDE CABLE PLANT AND THAT MST AND T IS NOT THE OPERATOR BUT MERELY THE CONTRACTOR. UNIVERSAL RECENTLY HAS STATED THAT THE QUESTION OF LEGAL TITLE IS IRRELEVANT AND IT NOW CONTENDS THAT EVEN IF THE GOVERNMENT DOES NOT OWN THE OUTSIDE PLANT IT HAS A TRANSFERABLE INTEREST THEREIN BECAUSE IT HAS A RIGHT TO USE SAME FOR THE REMAINDER OF THE USEFUL LIFE OF THE PLANT. SPECIFICALLY, IT HAS SUMMARIZED ITS CONTENTIONS AS FOLLOWS:

"1) SINCE THE U.S. GOVERNMENT PAID THE FULL COST OF INSTALLATION, IT HAS THE RIGHT TO THE REMAINING LIFE OF THE CABLE PLANT WITHOUT THE EXPOSURE TO FORFEITURE. THE RIGHT OF THE GOVERNMENT TO USE THE OUTSIDE DISTRIBUTION PLANT IS SEPARATE AND SEVERABLE FROM ANY RIGHTS IN THE MAINTENANCE CONTRACT NOW IN EXISTANCE WITH MOUNTAIN STATES. THE QUESTION OF LEGAL TITLE IS IRRELEVANT.

"2) SINCE THE U.S. GOVERNMENT HAS THIS RIGHT, AND HAS PAID FOR THE EVENTUAL REMOVAL OF THE PLANT, THE U.S. GOVERNMENT, OR ITS ASSIGNEE, HAS THE RIGHT TO KEEP THE OUTSIDE DISTRIBUTION PLANT IN PLACE AS LONG AS THE U.S. GOVERNMENT, OR ITS SUCCESSOR, DESIRES. IT IS THE GOVERNMENT WHO MUST MAKE THE ELECTION AS TO THE TIME OF EFFECTING SALVAGE AND, THEREFORE, IS THE OWNER OF THE INTEREST.

"3) SINCE THE RIGHT TO USE OF THE PLANT AS LONG AS IT DESIRES IS IN THE U.S. GOVERNMENT AND IS SEPARATE FROM THE CONTRACT FOR MAINTENANCE OF THAT PLANT, THE U.S. GOVERNMENT HAS THE PRESENT RIGHT TO ORDER ANY TELEPHONE COMPANY OUT OF THE AREA WHILE STILL RETAINING THE OUTSIDE DISTRIBUTION PLANT IN PLACE. CONVERSELY, THE TELEPHONE COMPANY CANNOT ORDER THE U.S. GOVERNMENT TO SURRENDER ITS PLANT, OPERATIONS AND RIGHTS.

"4) SINCE THE U.S. GOVERNMENT POSSESSES SOVEREIGN RIGHTS, AND PARTICULARLY SINCE THERE EXISTS NO LANGUAGE IN THE INSTALLATION CONTRACT RESTRICTING ASSIGNABILITY, THOSE RIGHTS RESTING IN THE U.S. GOVERNMENT CAN BE ASSIGNED TO ANY TELEPHONE COMPANY AND NOT ONLY TO MOUNTAIN STATES TELEPHONE AND TELEGRAPH COMPANY. THE SOVEREIGN CAN ALSO ASSIGN THE MAINTENANCE CONTRACT, HOWEVER, IT CAN BE TERMINATED BY EITHER THE ASSIGNEE OR MOUNTAIN STATES AT ANY TIME.

"5) SINCE MOUNTAIN STATES HAS ALREADY (BEEN) PAID FOR THE SALVAGE VALUE OF THE OUTSIDE DISTRIBUTION PLANT, THIS IS THE ONLY RIGHT THEY COULD POSSIBLY POSSESS, BUT THEY ALSO HAVE INCURRED THE OBLIGATION FOR THE COST OF REMOVAL OF THE OUTSIDE DISTRIBUTION PLANT WHEN THE U.S. GOVERNMENT OR ITS ASSIGNEE SO ORDERS.

"THE QUESTION OF WHETHER LEGAL TITLE TO THE OUTSIDE DISTRIBUTION PLANT LIES WITHIN THE U.S. GOVERNMENT HAS NO IMPORTANCE AS FAR AS UNIVERSAL'S OFFER IS CONCERNED. UNIVERSAL IS AGREEABLE TO ACCEPTING A QUIT-CLAIM DEED TO ALL GOVERNMENT PROPERTY TO BE TRANSFERRED, BUT MUST ALSO RECEIVE AN ASSIGNMENT OF THE U.S. GOVERNMENT'S RIGHTS AND INTERESTS IN THE INSTALLATION CONTRACT AND IN THE MAINTENANCE CONTRACT, EVEN THOUGH THE LATTER RIGHTS MIGHT BE OF LIMITED DURATION. OBVIOUSLY THE SOVEREIGN HAS THE EXCLUSIVE OPERATING RIGHTS IN THE TELEPHONE SYSTEM AT LOS ALAMOS SINCE IT CANNOT BE FORCED TO DISCONTINUE THE ACTIVITY OF ITS COMMUNICATIONS OPERATIONS AND WE WOULD ASSUME THIS WOULD ALSO BE PART OF THE PROPOSED TRANSFER.'

FOLLOWING THE DISPOSAL RECOMMENDATION BY THE LAAO UNIVERSAL TOOK ISSUE WITH THE LAAO CONCLUSION AS TO THE EXCLUSIVE OPERATING RIGHTS OF MST AND T. THEREAFTER, YOUR GENERAL COUNSEL, AFTER AN EXTENSIVE STUDY AND CONSIDERATION OF VOLUMINOUS BRIEFS SUBMITTED BY THE TWO COMPANIES, CONCURRED IN THE LAAO CONCLUSION SUBJECT, HOWEVER, TO CHANGES IN THE EXISTING FACTUAL SITUATION AND CHANGES IN FEDERAL OR STATE LAW. ON JUNE 24, 1964, HOWEVER, AEC ANNOUNCED THAT "IN ORDER TO AFFORD ALL COMPANIES INTERESTED IN ACQUIRING THE GOVERNMENT'S INTEREST IN THE COMMUNITY TELEPHONE SYSTEM THE MAXIMUM OPPORTUNITY TO DO SO CONSISTENT WITH THE PROVISIONS OF THE COMMUNITY ACT, THE COMMISSION INTENDS TO INVITE PROPOSALS FROM ALL INTERESTED COMPANIES AND TO SELECT THE TRANSFEREE UNDER SECTION 73B OF THE COMMUNITY ACT.' PRIOR TO THE ABOVE ANNOUNCEMENT UNIVERSAL HAD SUBMITTED A FORMAL OFFER IN THE AMOUNT OF $750,000 FOR A "QUIT-CLAIM DEED" WHICH CONTEMPLATED "THE ASSIGNMENT TO UNIVERSAL OF THE CONTRACT OF THE U.S. GOVERNMENT FOR THE LIFETIME INTEREST IN THE OUTSIDE DISTRIBUTION PLANT.'

UNIVERSAL'S OFFER, HOWEVER, HAS SINCE BEEN CONDITIONED AS FOLLOWS:

"* * * IF THE U.S. GOVERNMENT WERE TO WITHDRAW THEIR RIGHTS IN THE OUTSIDE CABLE PLANT FROM THE PROPOSED TRANSFER, UNIVERSAL MIGHT WANT THE OPPORTUNITY TO REEVALUATE THE AMOUNT OF ITS OFFER BUT WOULD STILL BE DESIROUS OF SUBMITTING ITS BID FOR THE REMAINDER OF THE PROPERTY TO BE TRANSFERRED, WHATEVER INTEREST UNIVERSAL CAN OBTAIN IN THE MAINTENANCE CONTRACT AND FOR THE OPERATING RIGHTS IN THE AREA.'

MST AND T NOW HAS SUBMITTED A FORMAL OFFER OF A REFUND OF THAT PART OF THE ESTIMATED FUTURE DEPRECIATION PAID BY AEC AS AN INSTALLATION CHARGE ON THE OUTSIDE PLANT DISTRIBUTION FACILITIES CONSTRUCTED BY MST AND T PURSUANT TO ORDERS BY AEC UNDER THE INSTALLATION-AND-CARRYING CHARGE OR INSTALLATION-AND-MAINTENANCE METHOD.

FOLLOWING THE REFUSAL OF AEC TO ACCEPT UNIVERSAL'S OFFER OF $750,000 FOR THE LA TELEPHONE FACILITIES, UNIVERSAL, BY LETTER DATED MAY 21, 1964, TO OUR OFFICE AND SUBSEQUENT LETTERS, PROTESTED SUCH REFUSAL AND REQUESTED THAT OUR OFFICE OPEN AN INVESTIGATION TO INSURE THAT THE GOVERNMENT CONSIDER THE HIGHEST OFFER FOR THE FACILITIES. BY DECISION OF SEPTEMBER 4, 1964, TO UNIVERSAL, IT WAS HELD THAT IN VIEW OF THE PROVISIONS OF THE ATOMIC ENERGY COMMUNITY ACT OF 1955, AS AMENDED (42 U.S.C. 2371-2375), IF THE COMMISSION SHOULD CONCLUDE TO SELL THE UTILITY, THE CHARGES AND TERMS OF THE TRANSFER "MAY BE ESTABLISHED BY ADVERTISING AND COMPETITIVE BID, OR BY NEGOTIATED SALE OR OTHER TRANSFER AT SUCH PRICES, TERMS AND CONDITIONS AS THE COMMISSION SHALL DETERMINE TO BE FAIR AND EQUITABLE.' 42 U.S.C. 2375. THEREFORE, IT WAS STATED THAT IT WAS CLEAR THAT PRICE ALONE WOULD NOT BE THE CONTROLLING FACTOR IN THE COMMISSION'S DETERMINATION, BUT ONLY ONE OF SEVERAL FACTORS. IT WAS FURTHER STATED, THAT WHILE THE COMMISSION HAD MADE NO FINAL DETERMINATION AS TO THE ENTITY WHICH HAD LEGAL AUTHORITY TO RECEIVE AND OPERATE THE UTILITY, SINCE IT WAS INDICATED THAT THE COMMISSION, IN TRANSFERRING THE UTILITY, INTENDED TO FOLLOW THE REQUIREMENTS OF THE ACT AND TO RECEIVE PROPOSALS FROM INTERESTED TELEPHONE UTILITY COMPANIES AND TO EFFECT TRANSFER ONLY TO AN ENTITY WHICH HAS LEGAL AUTHORITY TO RECEIVE AND OPERATE THE UTILITY, THERE WOULD BE NO LEGAL BASIS FOR OBJECTING TO THE PROPOSED ADMINISTRATIVE ACTION. ACCORDINGLY, UNIVERSAL WAS ADVISED THAT WE PERCEIVED NO JUSTIFICATION FOR OUR OFFICE TO VOLUNTARILY ENTER INTO OR OVERSEE THE DECISIONAL PROCESS OF THE COMMISSION IN DETERMINING THE TRANSFEREE OF THE UTILITY.

IN VIEW OF UNIVERSAL'S CURRENT PROTEST AND ITS ASSERTION THAT THE GOVERNMENT OWNS THE OUTSIDE CABLE AND WIRE DISTRIBUTION PLANT AND THAT IT HAS AN INTEREST IN THEM WHICH MAY BE SOLD YOU HAVE REQUESTED OUR VIEWS ON (1) WHETHER THE GOVERNMENT OR MST AND T OWNS THE OUTSIDE CABLE AND WIRE DISTRIBUTION PLANT, AND (2) IF OWNERSHIP IS HELD TO BE IN MST AND T, WHETHER THE GOVERNMENT HAS AN INTEREST THEREIN WHICH IS TRANSFERABLE TO A THIRD PARTY.

THE ENCLOSURES ATTACHED TO YOUR LETTER AND OTHER DATA SHOW THAT THE HISTORY OF LA AS A GOVERNMENT INSTALLATION BEGAN IN 1942, WHEN ON NOVEMBER 25, 1942, THE UNDER SECRETARY OF WAR DIRECTED THAT THE LA SITE BE ACQUIRED FOR A NUCLEAR WEAPONS LABORATORY; THAT OPERATION AT LA BEGAN IN 1943 UNDER THE AUSPICES OF THE MANHATTAN ENGINEER DISTRICT AS A HIGHLY CLASSIFIED ROJECT; THAT PRESENTLY THE LAAO IS RESPONSIBLE FOR THE MANAGEMENT OF THE COMMUNITY; THAT IT ADMINISTERS A CONTRACT WITH THE ZIA COMPANY WHICH PROVIDES MAINTENANCE AND SUPPORT FOR THE LABORATORY AND THE COMMUNITY AND OPERATES CERTAIN UTILITIES AND MANY OF THE COMMUNITY FACILITIES.

IN THE BEGINNING LA WAS OUTSIDE AND REMOTE FROM ANY ESTABLISHED BASE-RATE AREA OF AN EXCHANGE OF MST AND T. INITIALLY, THE COMPANY FURNISHED FLAT RATE (PRIVATE BRANCH EXCHANGE) SERVICE TO THE ARMY AT LA OVER THE OTOWI BRANCH LINE. PBX SWITCHBOARDS AND STATION FACILITIES WERE INSTALLED AND FOREIGN EXCHANGE TRUNKS WERE EXTENDED BY THE COMPANY FROM ITS EXCHANGE AT SANTA FE AND CHARGED FOR ON A FOREIGN EXCHANGE MILEAGE BASIS. THE PBX SWITCHBOARDS WERE OPERATED BY EMPLOYEES OF THE MANHATTAN DISTRICT OF THE CORPS OF ENGINEERS AND SERVED ALL OFFICIAL AND NON-OFFICIAL STATIONS THROUGHOUT THE LA PROJECT. IN MARCH 1947 THE ARMY DISCONTINUED LEASING THE FOREIGN EXCHANGE TRUNKS TO SANTA FE. THEREAFTER, ALL UNOFFICIAL TELEPHONE CALLS BETWEEN LA AND SANTA FE WERE HANDLED AS TOLL CALLS. OFFICIAL CALLS BETWEEN LA AND OFF-SITE LOCATIONS HAVE BEEN HANDLED OVER TIE LINES OR AS TOLL CALLS. WITHIN THE LA PROJECT, THE PBX OUTSIDE DISTRIBUTION PLANT WAS PROVIDED BY MST AND T ON THE INSTALLATION-PLUS- CARRYING CHARGE BASIS. A LETTER DATED JANUARY 28, 1943, FROM COLONEL L. ROSENBERG, CORPS OF ENGINEERS, TO MST AND T, IS THE EARLIEST DOCUMENT THAT COULD BE FOUND BY THE LAAO AUTHORIZING THE CONSTRUCTION OF THE LA TELEPHONE SYSTEM. THIS LETTER AUTHORIZED MST AND T TO BEGIN THE CONSTRUCTION OF A TELEPHONE LINE FROM TESUQUE, NEW MEXICO, TO THE ADMINISTRATION BUILDING, LA RANCH SCHOOL AND STATED THAT THE LINE WOULD BE CONSTRUCTED IN ACCORDANCE WITH THE AGREEMENT BETWEEN MR. HAYES OF THE ENGINEER'S OFFICE AND MR. PHILLIPS OF MST AND T. THE LETTER FURTHER STATED THAT "FORMAL CONTRACT NO. W911-ENG.-1173 AND SPECIFICATIONS OF THIS WORK WILL FOLLOW AT A LATER DATE.' ALSO, THE LETTER STATED THAT IT WAS UNDERSTOOD THAT THE APPROXIMATE COST OF THE CONSTRUCTION WOULD BE $12,000, THAT THE SERVICE CHARGE WOULD NOT EXCEED $150 PER MONTH; AND THAT LONG DISTANCE CALLS FROM THE PROJECT WOULD BE COMPUTED WITH SANTA FE AS THE ORIGINATING STATION. WHILE THE CITED CONTRACT WAS REFERRED TO SUBSEQUENTLY INCIDENT TO CONSTRUCTION OF ADDITIONAL FACILITIES, THE TERMS OF THE CONTRACT ARE NOT AVAILABLE SINCE IT HAS BEEN REPORTED THAT NEITHER LAAO NOR MST AND T HAS BEEN ABLE TO LOCATE A COPY THEREOF AND THERE IS NOTHING IN THE RECORD BEFORE US INDICATING ANY OF THE TERMS OF THE CONTRACT OR JUST WHEN THE CONTRACT DISAPPEARED. CURRENT REQUESTS MADE TO YOUR COMMISSION AND TO THE SIGNAL CORPS HAVE FAILED TO LOCATE A COPY OF THE MISSING CONTRACT. PRESUMABLY, THE GOVERNMENT'S COPY HAS NOW BEEN DESTROYED UNDER AUTHORITY OF H.R.NO. 1973, 87TH CONGRESS, 2D SESSION, JULY 13, 1962.

AT THE TIME OF THE FIRST CONSTRUCTION AUTHORIZATION THERE WAS IN EXISTENCE A GENERAL CONTRACT AND AGREEMENT EFFECTIVE AS OF JULY 1, 1937, BETWEEN THE WAR DEPARTMENT AND THE AMERICAN TELEPHONE AND TELEGRAPH COMPANY ON EBHALF OF ITSELF AND EACH OF THE TELEPHONE COMPANIES JOINING THEREIN (INCLUDING MST AND T). PARAGRAPH ONE OF THIS AGREEMENT STATED THAT IT WAS THE POLICY OF THE TELEPHONE COMPANIES PARTIES THERETO TO FURNISH, OWN, MAINTAIN AND CONTROL ALL INSTRUMENTALITIES NECESSARY TO THE FURNISHING OF SERVICE OFFERED TO THE PUBLIC AND THAT THIS POLICY WAS DEEMED BY THE TELEPHONE COMPANIES TO BE VITAL AND FUNDAMENTALLY ESSENTIAL TO THE PRESERVATION OF THE INTEGRITY OF THE SERVICE AND THE PROTECTION OF THE PUBLIC INTEREST. PARAGRAPH TWO STATED THAT BY REASON OF MILITARY NECESSITY HOWEVER, IT WAS DEEMED BY THE WAR DEPARTMENT TO BE ESSENTIAL TO THE CONDUCT OF ITS TECHNICAL, TACTICAL, AND ADMINISTRATIVE BUSINESS THAT THE TELEPHONE SYSTEMS SERVING MILITARY POSTS, STATIONS, AND OTHER ACTIVITIES BE OWNED IN THEIR ENTIRETY BY THE UNITED STATES GOVERNMENT AND OPERATED AND MAINTAINED BY THE WAR DEPARTMENT AS ARMY TELEPHONE SYSTEMS AND THAT THESE SYSTEMS SHOULD BE CONNECTED BY SUITABLE TRUNKS WITH THE NEAREST AVAILABLE CENTRAL OFFICES OF THE TELEPHONE COMPANIES. IT WAS STATED THAT THE WAR DEPARTMENT DEEMED SUCH OWNERSHIP TO BE IN THE BEST INTERESTS OF THE MILITARY SERVICE DUE TO THE IMPORTANCE OF MAINTAINING A NUCLEUS OF TRAINED PERSONNEL, THE NECESSITY OF FLEXIBILITY IN THE ESTABLISHMENT OF TELEPHONE CONNECTIONS REQUIRED IN THE CONDUCT OF TACTICAL PROBLEMS FOR THE TRAINING AND DEVELOPMENT OF PLANS FOR THE MILITARY DEFENSE OF THE UNITED STATES AND THE NECESSITY FOR MAINTAINING SECRECY WITH REFERENCE TO SUCH PLANS. PARAGRAPH FIVE PROVIDED THAT THE DETERMINATION OF WHICH MILITARY POSTS, STATIONS OR OTHER ACTIVITIES WOULD BE SERVED BY ARMY TELEPHONE SYSTEMS WOULD BE MADE ON THE BASIS OF MILITARY NECESSITY FOR SUCH OWNERSHIP. PARAGRAPH SIX PROVIDED THAT ALL THE CONNECTIONS, SERVICES, AND FACILITIES WOULD BE COVERED BY SEPARATE CONTRACTS BETWEEN THE TELEPHONE COMPANY CONCERNED AND THE SIGNAL OFFICER OF THE PARTICULAR CORPS AREA INVOLVED. PARAGRAPH EIGHT REFERRED TO THE CIRCUIT FACILITIES RENTED FROM THE TELEPHONE COMPANIES AND THE WAR DEPARTMENT'S FURNISHING THE FACILITIES FOR CONNECTING THE CIRCUITS ON THE MILITARY RESERVATIONS. SPECIFICALLY, IT WAS STATED THAT IT WAS UNDERSTOOD AND AGREED THAT IN MAKING TRUNKING CONNECTIONS TO ARMY TELEPHONE SYSTEMS, OR IN CASES WHERE ANY OF THE CIRCUIT FACILITIES CONTEMPLATED IN PARAGRAPH 3 (B) WERE RENTED FROM THE TELEPHONE COMPANY, THE WAR DEPARTMENT WOULD FURNISH THE PLANT FACILITIES FOR THE CONNECTING CIRCUITS LOCATED ON THE MILITARY RESERVATION AND THAT EXCEPT AS THEREAFTER INDICATED THE PLANT FACILITIES FOR SUCH CONNECTING CIRCUITS LOCATED OFF THE MILITARY RESERVATION WOULD BE FURNISHED BY THE TELEPHONE COMPANY AND WOULD BE CONNECTED WITH THE CIRCUIT FACILITIES OF THE WAR DEPARTMENT AT A POINT LOCATED AS CLOSE TO THE ACTUAL BOUNDARY OF THE RESERVATION AS CONSISTENTLY POSSIBLE WITH THE COMMON ENGINEERING PRACTICES APPLICABLE TO THE TYPE OF CONSTRUCTION INVOLVED. PARAGRAPH 11 (B) PROVIDED THAT ALL SERVICES AND FACILITIES FURNISHED BY A TELEPHONE COMPANY WOULD BE SUBJECT TO REGULAR RULES AND REGULATIONS OF THE TELEPHONE COMPANY UNLESS OTHERWISE SPECIFIED, WHICH OF COURSE WOULD INCLUDE THE COMPANY'S TARIFFS.

PARAGRAPH 12 PROVIDED THAT NOTHING IN THE AGREEMENT SHOULD BE CONSTRUED AS LIMITING THE WAR DEPARTMENT IN THE EXERCISE OF ITS PREROGATIVE TO OWN AND FURNISH ANY CIRCUIT FACILITIES REQUIRED FOR TELEPHONE, TELEGRAPH, AND OTHER ELECTRICAL COMMUNICATION REQUIRED INCIDENT TO THE MILITARY DEFENSE OF THE UNITED STATES WITHOUT REGARD TO THE LOCATION OF SUCH FACILITIES.

PARAGRAPH FOUR OF SCHEDULE A, ATTACHED TO THE AGREEMENT AND FORMING A PART THEREOF, PROVIDED THAT WHERE THE ARMY TELEPHONE SYSTEM WAS LOCATED OUTSIDE THE BASE-RATE AREA OF AN EXCHANGE AND BEYOND THE AREA REGULARLY OR DIRECTLY SERVED BY THE CENTRAL OFFICE WITH WHICH THE SYSTEM WAS CONNECTED, ARRANGEMENTS WOULD BE MADE ACCORDING TO THE CIRCUMSTANCES IN EACH CASE.

SCHEDULE B OF THE AGREEMENT, CONCERNING CHARGES FOR SPECIAL SERVICES AND FACILITIES, PROVIDED THAT PAYMENT THEREFOR WOULD BE BASED UPON RATES, TERMS, AND CONDITIONS CONTEMPLATED IN REGULARLY ESTABLISHED TARIFFS OR IN THE ABSENCE OF ESTABLISHED TARIFFS APPLICABLE TO THE SPECIAL SERVICES FURNISHED, THEN IN ACCORDANCE WITH THE RATES, TERMS, AND CONDITIONS APPLICABLE TO OTHERS FOR SIMILAR SERVICES AND FACILITIES, OR IN ACCORDANCE WITH SPECIAL RATES, TERMS AND CONDITIONS AGREED UPON BY THE CONTRACTING OFFICER AND TELEPHONE COMPANY IN THE WRITTEN ORDER.

CONTRACT NO. 1070-SC-128, DATED JULY 5, 1938, WHICH SUPPLEMENTED THE AGREEMENT OF JULY 1, 1937, CONTINUED THE OWNERSHIP POLICY OF TELEPHONE SYSTEMS AT GOVERNMENT MILITARY POSTS AND INSTALLATIONS AND PROVIDED UNDER ARTICLE 6 (A) THAT REGULAR SERVICES OF THE TELEPHONE COMPANY COULD BE PROVIDED AT "LEGALLY ESTABLISHED RATES AND CHARGES FOR SIMILAR SERVICES AND FACILITIES OFFERED TO THE SUBSCRIBERS OF THE SAME EXCHANGE" WHICH IS TAKEN TO MEAN "ESTABLISHED TARIFFS.' ARTICLE 6 (D) PROVIDED THAT THE SPECIAL SERVICES CONTEMPLATED IN ARTICLE 4 WOULD BE BASED ON RATES, TERMS, AND CONDITIONS CONTEMPLATED IN REGULARLY ESTABLISHED TARIFFS, EXCEPT AS THEREIN PROVIDED. ARTICLE 11 PROVIDED THAT ALL SERVICES AND FACILITIES OF THE COMPANY WOULD BE FURNISHED AND USED SUBJECT TO THE COMPANY'S REGULAR RULES AND REGULATIONS.

A GENERAL CONTRACT NO. W-1070-SC-262 ENTERED INTO UNDER DATE OF AUGUST 6, 1942, BETWEEN THE SIGNAL OFFICER, EIGHTH CORPS AREA, U.S. ARMY AND MST AND T INDICATED A CHANGE IN POLICY FROM ARMY-OWNED AND MAINTAINED TELEPHONE SYSTEMS LOCATED AT MILITARY ESTABLISHMENTS WITHIN THE OPERATING TERRITORY OF MST AND T TO PERMIT OPERATION AND MAINTENANCE SERVICES IN SUCH CASES TO BE PERFORMED BY MST AND T IN ACCORDANCE WITH ITS TARIFFS WHEN SUCH OPERATION AND MAINTENANCE SERVICES WERE REQUESTED BY DULY EXECUTED ORDERS EXECUTED BY THE SIGNAL OFFICER. IT WAS SPECIFICALLY PROVIDED, HOWEVER, THAT THE NEW ARRANGEMENT WOULD NOT AFFECT OTHER ARRANGEMENTS MADE OR TO BE MADE FOR TELEPHONE SERVICE BUT THAT IT WOULD BE IN ADDITION THERETO.

A MEMORANDUM OF AGREEMENT ENTERED INTO ON JULY 24, 1946, BETWEEN MST AND T AND THE FOURTH ARMY, U.S. ENGINEERS, COVERED AGREEMENTS THAT LA WAS ABOUT TO BE OPERATED AS AN EXCHANGE UNDER WHICH THE TELEPHONE SERVICE TO THE UNITED STATES ENGINEERS WOULD BE FURNISHED THROUGH THE LA EXCHANGE AND THAT, THEREFORE, IT WAS REQUIRED TO OBTAIN REASONABLE PROTECTION FROM THE GOVERNMENT IN ORDER TO AVOID POSSIBLE LOSSES OF A SHORT-LIVED EXCHANGE. ALSO, THE MEMORANDUM INDICATED THAT THE MANUAL PBX SYSTEM WAS INSUFFICIENT TO CARE FOR THE TRAFFIC, THUS RESULTING IN UNSATISFACTORY SERVICE. AS TO MST AND T'S ASSUMPTION, IT WAS STATED THAT SUCH ASSUMPTION APPEARED TO BE INCORRECT AND THAT THE MILITARY RESERVATION WAS NO DIFFERENT FROM ANY OTHER MILITARY RESERVATION SINCE THE LAND WAS OWNED BY THE GOVERNMENT AS WELL AS ALL BUILDINGS AND OTHER INSTALLATIONS. ALSO, IT WAS STATED THAT ALL TELEPHONE COMMUNICATIONS ON THE RESERVATION WERE AT THAT TIME AND WOULD CONTINUE TO BE CONTROLLED BY THE ARMY; THAT BUSINESSES WERE ONLY PERMITTED ON THE RESERVATION, THE SAME AS ANY OTHER RESERVATION; AND THAT MILITARY CONTROL AT LA SINCE THE CLOSE OF THE WAR APPEARED TO BE MORE STRICT AT THAT TIME THAN ON THE USUAL MILITARY RESERVATION. BECAUSE OF THE FOREGOING AND THE UNSATISFACTORY SERVICE EXISTING INCIDENT TO THE MANUAL PBX SWITCHBOARD AND THE CONTEMPLATED EXPANSION, IT WAS AGREED TO SUBSTITUTE THEREFOR A 701-A DIAL (OR ITS EQUIVALENT) PBX SYSTEM. THE AGREEMENT INDICATED THAT THE U.S. ENGINEERS WOULD FURNISH MST AND T WITH AN ADEQUATE SPOT MAP SHOWING ESTIMATED STATION AND LINE REQUIREMENTS AND THAT MST AND T WOULD SUPERIMPOSE UPON THIS MAP THE EXISTING OUTSIDE DISTRIBUTION FACILITIES AND THE FACILITIES REQUIRED FOR EXPANSION. THE AGREEMENT STATED THAT PLANS SHOWING THE OUTSIDE DISTRIBUTION PLANT, CONTEMPLATED ADDITIONS THERETO, TOGETHER WITH ESTIMATES OF THE INSTALLATION CHARGE AND MONTHLY CARRYING CHARGES TO BE BILLED ARMY WOULD BE SUBMITTED TO THE FOURTH ARMY AS SOON AS POSSIBLE.

IN ADDITION, IT WAS AGREED, AMONG OTHER THINGS, THAT THE ARMY WOULD PROVIDE QUARTERS FOR THE PBX EQUIPMENT, INCLUDING THE OPERATOR'S REST ROOM AND FURNISH HEAT, LIGHT, AND JANITOR SERVICE AND POWER FOR THE OPERATION OF THE TELEPHONE EQUIPMENT WITHOUT COST TO MST AND T; THAT THE ARMY WOULD CONTINUE TO PROVIDE POLES, CONDUIT AND OTHER SUPPORTING STRUCTURES FOR TELEPHONE LINES AND PERMIT ATTACHMENTS TO LIGHT AND POWER POLES OWNED BY THE GOVERNMENT WITHOUT CHARGE TO MST AND T; THAT THE GOVERNMENT WOULD PERMIT MST AND T TO REMOVE ALL OF ITS EQUIPMENT AT ITS DISCRETION UPON TERMINATION OF THE CONTRACT; THAT MST AND T WOULD FURNISH THE DIAL PBX SYSTEM AT ITS REGULAR RATES AND CHARGES INCLUDING BASIC TERMINATION CHARGES FOR PBX SERVICE AND THAT THE INSTALLATION CONSTRUCTION CARRYING CHARGE BASIS OF CHARGING FOR OUTSIDE DISTRIBUTION PLANT WOULD BE CONTINUED FOR OUTSIDE DISTRIBUTION PLANT ADDITIONS REQUIRED FOR THE DIAL PBX SYSTEM.

THE FOREGOING REPRESENTED THE STATUS OF THE TELEPHONE SYSTEM IN 1947 WHOM AEC TOOK OVER THE ENTIRE ATOMIC ENERGY PROGRAM AND THE LA PROJECT FOLLOWING THE ENACTMENT OF THE ATOMIC ENERGY ACT OF 1946, 60 STAT. 755, AND THE CREATION OF THE ATOMIC ENERGY COMMISSION. ALL PERSONNEL OF THE MANHATTAN ENGINEER DISTRICT WERE TRANSFERRED TO AEC BY EXECUTIVE ORDER NO. 9816, DATED DECEMBER 31, 1946.

ON DECEMBER 20, 1947, THE ENTIRE SYSTEM WAS CONVERTED TO AN ATTENDED DIAL SYSTEM. IN 1951 A PBX SYSTEM WAS INSTALLED TO SERVE THE TECHNICAL AREA, INCLUDING OFFICIAL DIAL PHONES. OVER THE YEARS THE SYSTEM HAS BEEN CONVERTED TO THE PRESENT ONE CONSISTING OF 17 PBX'S SERVING APPROXIMATELY 8,400 TELEPHONES AT LA (NOT INCLUDING WHITE ROCK) OF WHICH APPROXIMATELY 4,600 ARE UNOFFICIAL.

EFFECTIVE APRIL 1, 1948, THE RESPONSIBILITY FOR TELEPHONE SERVICES AT LA WAS TRANSFERRED FROM THE WAR DEPARTMENT TO AEC. THEREAFTER, TELEPHONE SERVICE AT LA WAS SUPPLIED UNDER BUREAU OF FEDERAL SUPPLY TREASURY DEPARTMENT, CONTRACT NO. TPS-77875 WITH MST AND T WHICH WAS A BLANKET CONTRACT UNDER WHICH MST AND T AGREED TO FURNISH AND THE GOVERNMENT AGREED TO TAKE TELEPHONE AND TELETYPEWRITER SERVICES AS MIGHT BE REQUIRED FOR THE OPERATION OF FEDERAL AGENCIES AND ESTABLISHMENTS IN THE ENTIRE ROCKY MOUNTAIN AREA SERVED BY THE COMPANY. ARTICLE II PROVIDED THAT THE SERVICES SUPPLIED THEREUNDER AND THE CHARGES THEREFOR SHOULD BE AS SET FORTH IN THE CONTRACTOR'S TARIFFS FROM TIME TO TIME. BY AMENDMENT NO. 2, THE CONTRACT WAS AMENDED TO PROVIDE FOR SERVICES FROM APRIL 1, 1948, TO JUNE 30, 1948, AND THEREAFTER UNTIL 10 DAYS WRITTEN NOTICE IS GIVEN BY EITHER PARTY.

THE FIRST INDEPENDENT CONTRACTUAL ARRANGEMENT BETWEEN LAAO AND MST AND T CONSISTED OF THE MEMORANDUM AGREEMENT DATED JUNE 22, 1951, DESCRIBED AS "A RECAPITULATION OF EXISTING ARRANGEMENTS BETWEEN THE TELEPHONE COMPANY AND THE COMMISSION" AND "INTENDED AS ADDITIONAL STIPULATIONS OR INSTRUCTIONS DEEMED NECESSARY BUT NOT INCONSISTENT WITH THE TERMS OF CONTRACT TPS- 77875.' PARAGRAPH ONE OF THE AGREEMENT OF JUNE 22, 1951, WHICH IS STILL IN EFFECT, AS MODIFIED, STATED THAT THE AGREEMENT SUPPLEMENTED CONTRACT NO. TPS-77875 BUT THAT IT DID NOT SUPERSEDE IT IN WHOLE OR PART. PARAGRAPH TWO PROVIDED THAT TECHNICAL MANUAL TM 24-205, ISSUE OF DECEMBER 1946, WOULD SERVE AS A BASIS FOR ADMINISTRATIVE PROCEDURES WHERE INCORPORATED BY REFERENCE. PARAGRAPH 3B PROVIDED THAT COMMISSION'S TELEPHONE SERVICE PROCEDURES WOULD FOLLOW TM 24-205. PARAGRAPH 7A PROVIDED THAT MST AND T WOULD CONTINUE TO PROVIDE CABLE DISTRIBUTION AND OTHER OUTSIDE TELEPHONE PLANT FACILITIES TO MEET AEC'S REQUIREMENTS AND THAT THE CHARGES THEREFOR WOULD CONTINUE TO BE COMPUTED ON A CONSTRUCTION PLUS CARRYING CHARGE BASIS IN ACCORDANCE WITH THE PROVISIONS OF TM 24- 205. PARAGRAPH EIGHT PROVIDED THAT MST AND T WOULD PROVIDE AND MAINTAIN PUBLIC COIN BOX TELEPHONE STATIONS AND LINE EQUIPMENT IN ACCORDANCE WITH ITS PRACTICES AND TARIFFS AND WOULD MAKE ALL PUBLIC COIN BOX TELEPHONE COLLECTIONS AND PERFORM NECESSARY ACCOUNTING INCIDENT THERETO; THAT PUBLIC COIN TELEPHONE TRAFFIC WOULD BE HANDLED IN CONJUNCTION WITH NORMAL SWITCHBOARD OPERATION AND OPERATOR EXPENSE WOULD BE APPORTIONED; THAT MST AND T WOULD CHARGE THE USER 5 CENTS FOR EACH INTRA-LA TELEPHONE CALL ORIGINATING AT PUBLIC COIN BOX TELEPHONES; AND THAT MST AND T WOULD PAY THE GOVERNMENT A COMMISSION OF 15 PERCENT OF THE GROSS REVENUE RECEIVED FROM LA PUBLIC COIN BOX TELEPHONES.

PARAGRAPH 11 PROVIDED THAT AEC WOULD FOLLOW TELEPHONE COMPANY POLICIES AND PROCEDURES IN THE OPERATION OF THE TELEPHONE TOLL SWITCHBOARD TO THE FULLEST EXTENT POSSIBLE, AND PARAGRAPH 15 PROVIDED THAT AEC IN ITS OPERATION OF THE LA TELEPHONE SYSTEM WOULD GRANT NO CONCESSIONS OR DISCOUNTS IN BUSINESS OR RESIDENCE TELEPHONE STATION OR TOLL CHARGES TO ANY OFFICIALS OR EMPLOYEES OF AEC OR THE TELEPHONE COMPANY. PARAGRAPH 20 PROVIDED THAT EITHER PARTY MIGHT TERMINATE THE AGREEMENT UPON 30 DAYS' NOTICE.

THE WAR DEPARTMENT'S TECHNICAL MANUAL TM 24-205 DATED DECEMBER 1946, CITED IN THE AGREEMENT OF JUNE 22, 1951, AS FURNISHING AEC'S TELEPHONE SERVICE PROCEDURES PROVIDED THAT THE ARMY (AEC) MIGHT PAY CONSTRUCTION CHARGES FOR OUTSIDE CABLE IN CERTAIN SPECIFIED INSTANCES (PARAGRAPH 104, PAGE 63); THAT OUTSIDE CABLE MIGHT BE INSTALLED ON EITHER A MILEAGE OR INSTALLATION-PLUS-CARRYING CHARGE (ICC) BASIS (PARAGRAPH 106, PAGE 63); THAT ICC BASIS IS MOST DESIRABLE (PARAGRAPH 106, PAGE 64); AND THAT IN THE EVENT OF REMOVAL OF PORTIONS OF THE PLANT, THE RECURRING MONTHLY CHARGE WOULD BE ADJUSTED (PARAGRAPH 106C (3) (G), PAGE 65). THE ICC BASIS WHICH WAS ADOPTED IN THIS INSTANCE IS EXPLAINED IN PARAGRAPH 106B. UNDER THIS TYPE OF CONTRACT, WHICH IS GENERALLY USED WHERE THE PROSPECTIVE PERIOD OF SERVICE IS INTENDED FOR ONLY A FEW YEARS, THE CUSTOMER (THE ARMY OR AEC) PAYS THE CAPITAL INSTALLATION COST (CALLED "ADVANCE DEPRECIATION" BY THE COMPANY) AND THE COMPANY CHARGES A FAIRLY LOW RATE FOR MAINTENANCE. DESPITE THE FACT THAT UNDER THE ICC ARRANGEMENT THE CUSTOMER PAYS THE COMPLETE COST OF INSTALLATION (LESS A SMALL SALVAGE VALUE) THERE IS NOTHING IN TM 24 205 SPECIFICALLY STATING IN WHOM, UNDER THE ICC BASIS, OWNERSHIP OF THE OUTSIDE CABLE PLANT RESTS. ON THE OTHER HAND, UNDER PARAGRAPH 108 (A) IT IS SPECIFICALLY STATED THAT ALL POLES, GUYS, ANCHORS, AND CONDUIT LOCATED ON A MILITARY RESERVATION, WHETHER THE TELEPHONE SYSTEM IS RENTED OR GOVERNMENT OWNED, ARE CONSIDERED TO BE SUPPORTING STRUCTURES AND THAT THEY SHALL BE OWNED BY THE GOVERNMENT.

AS INDICATED ABOVE, MANY OF THE CONTRACTS AND AGREEMENTS INVOLVING ACQUISITION OF THE TELEPHONE SERVICE BY THE ARMY AND AEC AT LA HAVE REFERRED TO MST AND T TARIFFS WHICH ARE ON FILE WITH THE STATE OF NEW MEXICO. FOR EXAMPLE, ARTICLE II OF CONTRACT NO. TPS-77875 AS REVISED, PROVIDES THAT CHARGES FOR SERVICE "SHALL BE AS SET FORTH IN THE TARIFFS OF THE CONTRACTOR FROM TIME TO TIME LAWFULLY IN FORCE AND EFFECT.' THE MST AND T GENERAL EXCHANGE TARIFFS FOR NEW MEXICO EFFECTIVE MARCH 1, 1936, AND DECEMBER 15, 1951, INCLUDED IN THE ENCLOSURES, PROVIDE THAT THE OWNERSHIP OF ANY POLE LINE OR CIRCUIT FACILITIES PROVIDED WHOLLY OR IN PART AT THE EXPENSE OF THE APPLICANT UNDER THE SECTION CAPTIONED "CONSTRUCTION AND INSTALLATION CHARGES AND ALLOWANCES" SHALL BE VESTED IN THE TELEPHONE COMPANY WHICH WILL BE RESPONSIBLE FOR THE MAINTENANCE AND REPLACEMENTS NECESSARY ON SUCH LINES AND THE TELEPHONE COMPANY MAY REQUIRE THE APPLICANT TO EXECUTE A CONVEYANCE THEREOF IN FAVOR OF THE COMPANY. THE TARIFFS EFFECTIVE SEPTEMBER 1, 1956, AND MAY 6, 1963, BOTH PROVIDE THAT OWNERSHIP OF ANY POLE LINE, CIRCUIT, OR OTHER FACILITIES PROVIDED WHOLLY OR IN PART AT THE EXPENSE OF THE APPLICANT UNDER THOSE TARIFFS SHOULD AT ALL TIMES BE VESTED EXCLUSIVELY IN THE TELEPHONE COMPANY OR ANOTHER COMPANY WITH WHICH IT HAS A JOINT AGREEMENT.

WITH RESPECT TO THE QUESTION AS TO THE OWNERSHIP OF THE OUTSIDE CABLE AND WIRE DISTRIBUTION PLANT IT IS STATED IN THE AEC REPORT OF AUGUST 14, 1964, THAT OVER THE PAST 20 YEARS A RECORD HAS BEEN MAINTAINED OF ALL OUTSIDE CABLE INSTALLATIONS AND REMOVALS AND THAT IN ALL INSTANCES WHERE CABLE HAS BEEN TAKEN OUT OF SERVICE, MST AND T, WITH THE KNOWLEDGE OF THE ARMY OR AEC, HAS REMOVED THE PROPERTY AND TREATED IT THE SAME AS ITS OWN. FURTHER EVIDENCE OF SUCH OWNERSHIP REFERENCE WAS MADE TO A LETTER DATED FEBRUARY 26, 1946, FROM THE OFFICE OF THE CHIEF SIGNAL OFFICER TO ALL COMMANDS CONCERNING "PBX DISTRIBUTING PLANT.' THIS LETTER CONCERNED THE REDUCED REQUIREMENTS OF INSTALLATIONS SERVED BY RENTED OUTSIDE CABLE DISTRIBUTING PLANTS OPERATED ON AN INSTALLATION-CARRYING-CHARGE BASIS AND IT WAS STATED THAT THE TELEPHONE COMPANY WOULD, OF COURSE, BE AT LIBERTY TO REMOVE THE PLANT AT ANY TIME.

OTHER EVIDENCE CITED AS TENDING TO SUPPORT OWNERSHIP OF THE OUTSIDE WIRE AND DISTRIBUTION PLANT IN MST AND T CONCERNS ITS METHOD OF BILLING IN WHICH THE INSTALLATION AT LA HAS ALWAYS BEEN REFERRED TO AS A RENTED SYSTEM. ALSO, MST AND T HAS STATED THAT FOR MANY YEARS IT HAS PAID AD VALOREM TAXES ON ALL TELEPHONE FACILITIES LOCATED WITHIN LOS ALAMOS COUNTY; THAT THERE HAS BEEN INCLUDED IN THE TAX BASE IN THE COUNTY CABLE AND WIRE FACILITIES LOCATED ON THE RESERVATION; THAT FROM 1956 TO DATE MST AND T, PURSUANT TO AN ORDNANCE PASSED BY THE COUNTY, HAS PAID AN OCCUPATION TAX OF $1 PER $1,000 OF BUSINESS DONE WITHIN THE COUNTY.

IN LETTER DATED JULY 25, 1962, TO UNIVERSAL THE LA AREA MANAGER STATED:

"IN ORDER TO CLARIFY ANY MISUNDERSTANDING AS TO THE OWNERSHIP OF THE SUBJECT SYSTEM, WE SHOULD POINT OUT THAT THE EQUIPMENT IS OWNED BY MOUNTAIN STATES TELEPHONE AND TELEGRAPH COMPANY AND RENTED BY THE ATOMIC ENERGY COMMISSION. HOWEVER, THE COMMISSION DOES OWN THE SUPPORTING STRUCTURES; ALSO, THE COMMISSION CLAIMS AN EQUITY IN THE OUTSIDE CABLE PLANT, WHICH HAS BEEN INSTALLED ON AN INSTALLATION PLUS CARRYING CHARGE BASIS.'

THE AREA MANAGER IN ANOTHER LETTER DATED NOVEMBER 1, 1962, TO SENATOR CLINTON P. ANDERSON IN COMMENTING ON UNIVERSAL'S PROPOSAL STATED:

"* * * ACTUALLY, TELEPHONE SERVICES AT LOS ALAMOS ARE PURCHASED BY AEC UNDER A CONTRACT BETWEEN GENERAL SERVICES ADMINISTRATION AND THE MOUNTAIN STATES TELEPHONE AND TELEGRAPH COMPANY. BASICALLY, THE SYSTEM HERE IS A RENTED ONE, WITH THE CABLE PLANT BEING PROVIDED ON AN INSTALLATION PLUS CARRYING CHARGE BASIS. ALTHOUGH THERE CAN BE SOME DOUBT ABOUT OWNERSHIP OF THE CABLE PLANT, AND WE HAVE BEEN TRYING TO RESOLVE THAT DOUBT, WE ARE INCLINED TO BELIEVE MST AND T REALLY DOES HOLD TITLE TO THE CABLE PLANT AS WELL AS THE REST OF THE SYSTEM PROVIDED ON THE ABOVE BASIS.'

IN LETTER DATED MARCH 1, 1963, TO CONGRESSMAN MONTOYA, THE AREA MANAGER STATED THAT:

"* * * WITH CERTAIN EXCEPTIONS, THE TELEPHONE PLANT, INCLUDING THE 8400 TELEPHONES, IS A RENTED SYSTEM WITH OWNERSHIP VESTED IN MST AND T. STATION AND DIAL EQUIPMENT IS ORDERED AND PAID FOR BY A MONTHLY CHARGE BY MST AND T. OUTSIDE CABLE IS PROCURED AND INSTALLED BY MST AND T ON THE BASIS OF COST INSTALLATION PLUS A CARRYING CHARGE WHICH DOES GIVE AEC AN INTEREST IN THE UNAMORTIZED PORTION OF THE INSTALLATION CHARGES.

THE FOLLOWING STATEMENTS APPEAR IN THE MINUTES OF THE LOS ALAMOS COUNTY COMMISSION MEETING OF APRIL 1, 1963, IN REFERRING TO STATEMENTS MADE BY THE AREA MANAGER:

"/2) PUT GREAT STRESS ONCE AGAIN ON THE FACT THAT AEC HAS NOTHING TO SELL AND THAT MST AND T WAS THE ONLY COMPANY AEC COULD LEGALLY SELL TO.

"/3) CAMPBELL STATED AEC REQUESTED MST AND T TO PROVIDE AN OPINION REGARDING OWNERSHIP OF FACILITIES WHICH MST AND T GRACIOUSLY DID - THE RESULT - AEC OWNS ALL SUPPORTING STRUCTURES AND MST AND T EVERYTHING ELSE.'

LATER ON IN THE SAME MINUTES IT WAS STATED:

"/5) AEC RECOGNIZES THAT THE GOVERNMENT DOES OWN AN EQUITABLE RIGHT IN THE TELEPHONE SYSTEM.'

IN A SUBSEQUENT REPORT DATED AUGUST 14, 1964, THE AREA MANAGER FOLLOWING A REVIEW OF THE HISTORY OF THE LA TELEPHONE SYSTEM STATED:

"* * * AFTER A REVIEW OF THE ABOVE, WE CONCLUDE, AS WE DID BEFORE, THAT OWNERSHIP OF THE TELEPHONE SYSTEM OUTSIDE CABLE AT LOS ALAMOS IS IN MST AND T. HENCE, WE HAVE SERIOUS DOUBTS THAT THE AEC CAN INVITE PROPOSALS TO SELL EVEN AN UNAMORTIZED INTEREST IN IT TO A THIRD PARTY.'

A REVIEW OF THE BRIEFS BY EACH OF THE TWO COMPETING COMPANIES AND THE AREA MANAGER'S REPORT OF AUGUST 14, 1964, AND SUPPORTING DATA BEFORE US INDICATES OWNERSHIP OF THE OUTSIDE CABLE AND WIRE DISTRIBUTION PLANT OF THE COMMUNITY TELEPHONE SYSTEM TO BE VESTED IN MST AND T SUBJECT, HOWEVER, TO THE RIGHT OF AEC TO ITS CONTINUED USE FOR THE REMAINDER OF THE USEFUL LIFE OF THE SYSTEM AND THE RIGHT OF AEC TO REQUIRE ITS REMOVAL UPON TERMINATION OF THE CONTRACT THEN CURRENT.

WITH RESPECT TO YOUR SECOND QUESTION, IT IS OUR UNDERSTANDING THAT THE OFFER MADE BY UNIVERSAL IS NOT DEPENDENT UPON THE EXTENT OR VALUE OF ANY TRANSFERRABLE INTEREST THE GOVERNMENT MAY HAVE IN THE OUTSIDE PLANT. WE UNDERSTAND UNIVERSAL'S POSITION IT IS ASKING NO MORE THAN A QUIT-CLAIM DEED "TO ALL GOVERNMENT PROPERTY TO BE TRANSFERRED" INCLUDING "AN ASSIGNMENT OF THE U.S. GOVERNMENT'S RIGHTS AND INTERESTS IN THE INSTALLATION CONTRACT AND IN THE MAINTENANCE CONTRACT, EVEN THOUGH THE LATTER RIGHTS MIGHT BE OF LIMITED DURATION.' THUS, UNDER UNIVERSAL'S OFFER IT IS WILLING TO ASSUME THE RISK OF OPERATING RIGHTS AND BEING ABLE TO USE THE OUTSIDE CABLE PLANT FOR THE REMAINDER OF ITS USEFUL LIFE UNLESS THE GOVERNMENT SHOULD WITHDRAW ITS RIGHTS THERETO FROM THE PROPOSED TRANSFER IN WHICH EVENT UNIVERSAL HAS INDICATED IT MIGHT BE DESIROUS OF REEVALUATING THE AMOUNT OF ITS OFFER.

WE DO NOT FEEL THAT WE ARE REQUIRED TO ANSWER YOUR SECOND QUESTION, IF UNIVERSAL IS WILLING TO BUY WITHOUT WARRANTY WHATEVER INTEREST THE GOVERNMENT MAY HAVE. WHETHER IT IS IN THE BEST INTEREST OF THE GOVERNMENT TO ACCEPT SUCH AN OFFER FROM UNIVERSAL IS A MATTER FOR DETERMINATION BY YOUR AGENCY.

THE COPY OF WAR DEPARTMENT TECHNICAL MANUAL TM 24-205, TRANSMITTED HERE INFORMALLY IS RETURNED ..END :