Opinion
5-25-1954
PACIFIC TEL. & TEL. CO. v. CITY OF LOS ANGELES. * Civ. 19443.
Roger Arnebergh, City Atty., Bourke Jones, John L. Flynn, Asst. City Attys., and Weldon L. Weber, Deputy City Atty., Los Angeles, for appellant. John A. Sutro, Francis N. Marshall, Noble K. Gregory, and Pillsbury, Madison & Sutro, San Francisco, and Oscar Lawler, Leslie C. Tupper, and Lawler, Felix & Hall, Los Angeles, for respondent.
PACIFIC TEL. & TEL. CO.
v.
CITY OF LOS ANGELES.
May 25, 1954.
Rehearing Denied June 14, 1954.
Hearing Granted July 21, 1954.
Roger Arnebergh, City Atty., Bourke Jones, John L. Flynn, Asst. City Attys., and Weldon L. Weber, Deputy City Atty., Los Angeles, for appellant.
John A. Sutro, Francis N. Marshall, Noble K. Gregory, and Pillsbury, Madison & Sutro, San Francisco, and Oscar Lawler, Leslie C. Tupper, and Lawler, Felix & Hall, Los Angeles, for respondent.
VALLEE, Justice.
Appeal by defendant, city of Los Angeles, from an adverse judgment in an action in which plaintiff, Pacific Telephone and Telegraph Company, sought a declaration: (a) that it owns, and has not surrendered any part of its state-wide franchise, and is entitled, without obtaining a franchise from the city, to operate its telephone and telegraph system and business in, and to occupy with its telephone and telegraph lines the public highways and other public places within, the areas which have been annexed to and consolidated with the city since May 19, 1905, in such manner as not to incommode the public use of the roads or highways or interrupt the navigation of the waters; and (b) that to the extent to which plaintiff is required to obtain a franchise from the city, the latter may not charge it for such franchise more than 2% of the gross annual receipts arising from the use, operation, or possession of such franchise.
The principal questions presented for decision involve Pacific's rights and obligations under section 536 of the Civil Code which reads: 'Telegraph or telephone corporations may construct lines of telegraph, or telephone lines along and upon any public road or highway, along or across any of the waters or lands within this state, and may erect poles, posts, piers, or abutments for supporting the insulators, wires, and other necessary fixtures of their lines, in such manner and at such points as not to incommode the public use of the road or highway or interrupt the navigation of the waters.'
In 1891 the city, by Ordinance 1130, granted Sunset Telephone and Telegraph Company, its successors and assigns, a franchise to continue and maintain its then telephone system and to erect telephone poles upon and to run wires over and upon the public highways within the city for 25 years.
In 1902 the city granted M. A. King and his assigns a franchise to construct, maintain, and operate conduits, poles, and wires upon the public highways within the city for 50 years, and to transmit sound, signals, conversation, and intelligence through and over its lines by means of electricity . In 1903 this franchise was assigned to Home Telephone and Telegraph Company.
Pacific was organized on December 31, 1906, and after January 2, 1907, engaged in the telephone business in various parts of the state, including parts of the city. It acquired the entire capital stock of Sunset, leased its properties, and operated its system. It constructed and maintained telephone lines along and upon the public highways in unincorporated territories then surrounding the city, including areas annexed to the city after 1891, without obtaining a franchise from the county or from the city. In 1916, pursuant to an order of the Railroad Commission, it acquired all of the properties of Sunset, including its rights under section 536. In 1916 Pacific organized a subsidiary, Southern California Telephone Company. Pursuant to an order of the Railroad Commission, Southern acquired all the franchises and properties of Home and all the properties and franchises theretofore owned by Sunset, including its rights under section 536, and such franchises and properties of Pacific as would enable Southern to furnish telephone service within the areas in which service had been furnished by Home and Pacific, not including Pacific's toll lines.
After the order of the Railroad Commission had been made, consent of the city was sought to the assignment of the King franchise to Southern. On December 29, 1916, the council of the city enacted Ordinance 35,474 by which the city reserved the right to purchase the properties of Southern under specified procedure. Ordinance 35,474 provided that Southern, its successors and assigns, should operate within the limits of the city as the limits then or might thereafter exist, solely under the rights and privileges granted by the King franchise; and that it, its successors and assigns, should surrender without compensation at the option of the city all rights acquired by it by or through any other franchise theretofore granted and effective in any part of the city as the same then existed, or by or through any other franchise theretofore or thereafter granted in any territory outside the limits of the city as the same then existed and which might thereafter be incorporated in or annexed to the city, or which might become part of the city by consolidation. The city, by Ordinance 35,474, reserved the right to require Southern to install service and to extend its system into all parts of the territory within the limits of the city as the limits might then or thereafter exist, and imposed the condition that the principal office of Southern, its successors or assigns, should be located and remain in the city. Southern accepted the terms and conditions imposed by Ordinance 35,474 on April 30, 1917.
From May 1, 1917, until 1930, Southern engaged in an exchange telephone business within parts of the city and adjacent areas; and Pacific continued to engage in both an exchange and toll business in other parts of the state and provided exchange service within parts of the city not served by Southern.
In 1930, pursuant to authorization of the Railroad Commission, Pacific sold to Southern all its franchises and properties in the southern part of the state and withdrew from service in those areas. Thereafter until 1947 Southern provided exchange and toll service in the Los Angeles area. In 1947, pursuant to authorization of the Railroad Commission, Southern merged with Pacific. Before the merger became effective, the city by Ordinance 91,409 consented to the assignment of the King franchise to Pacific. Ordinance 91,409 amended Ordinance 35,474 to the extent that the latter required Southern to maintain its principal office in the city; and, as a condition to the city's consent to the assignment, it required Pacific to agree to the terms and conditions imposed by Ordinance 35,474 and to an agreement entered into January 31, 1947, under which the city and Southern had settled a dispute over the compensation provisions of the King franchise. Pacific accepted the assignment and agreed to the conditions.
From 1850 to 1899 there were 5 annexations to the city. From 1899 to 1906 there were none. From 1906 to October 1951 there were 10 consolidations, 1 exclusion, 6 detachments, and 101 annexations.
On May 24, 1950, the council of the city adopted a resolution purporting to exercise the option reserved in Ordinance 35,474 to require Pacific to surrender rights acquired by it under franchises other than those granted by Ordinances 6,959, 35,474, and 91,409.
The King franchise was to expire on February 8, 1952. On August 24, 1951, Pacific applied to the city for a 21-year franchise to continue to construct, maintain, and operate telephone and telegraph lines along and upon the public highways and other public places within the city as it existed on May 19, 1905, the effective date of section 536 of the Civil Code. On December 17, 1951, the city rejected the application on the grounds that it did not cover the areas annexed to or consolidated with the city after May 19, 1905, and that the city was entitled to compensation in excess of the amount provided in the application. Pacific then filed this action, seeking a declaration of its franchise rights and obligations within the city.
The court in part declared:
1. Pacific is not required to obtain a franchise from the city to operate its business within the city.
2. Pacific has a valid and subsisting franchise from the state under Civil Code section 536 in all areas annexed to or consolidated with the city since May 19, 1905, which has not been surrendered or forfeited in whole or in part.
3. Under its state franchise, Pacific may, without the payment of any money compensation, and has the obligation to, occupy with its telephone and telegraph lines the public highways and other public places, including all the lands owned by the city in its governmental capacity, now or hereafter located within all areas which have been annexed to or consolidated with the city since May 19, 1905, for the purpose of providing a communication service to the people of the state.
4. Pacific's lines include all equipment used in rendering a communication service by means of the transmission of electrical impulses and may be used for transmitting telephone messages, telegraph messages, teletypewriter messages, telephotographs, program services (including radio and television broadcasts), and any other communication service by means of the transmission of electric impulses.
5. The lines must be constructed and maintained in such manner and at such points as not to incommode the public use of public highways and public places.
The city's first point is that the power to issue primary franchises to operate a telephone business rests in the city. A primary franchise as defined by the city is not the franchise to be and exist as a corporation, but is the privilege of conducting a telephone business within the city, as distinguished from the right to use the public highways and other public places. It is argued that after the expiration of the King franchise, Pacific cannot do any business within the city without first obtaining a franchise so to do from the city. The contention cannot be upheld.
The contention is first premised on the ground that the city is a freeholders' charter city and on the assertions that the power to grant a franchise to a telephone company to engage in business is a municipal affair not controlled by general laws and that the city's charter gives it the power to grant such a franchise. The power to grant so-called primary franchises to telephone companies does not rest in the city. There is nothing in the charter provisions on which the city relies giving it such power. They merely authorize the city to regulate telephone rates and service and to regulate or prohibit the erection of telephone poles and wires. See Oro Electric Corp. v. Railroad Commission, 169 Cal. 466, 473-480, 147 P. 118.
The right of Pacific to carry on the business of supplying telephone service is a franchise. The conducting of a telephone business in the city is not a municipal affair; it is a matter of state-wide concern. City of San Diego v. Southern California Telephone Co., 92 Cal.App.2d 793, 800, 208 P.2d 27. See Bay Cities Transit Co. v. City of Los Angeles, 16 Cal.2d 772, 776-777, 108 P.2d 435; People v. Willert, 37 Cal.App.2d Supp. 729, 733, 93 P.2d 872. The operation of Pacific's business is not local to the city; it extends over and outside the state. The right of Pacific to be a corporation and to conduct a telephone business comes from the state. City and County of San Francisco v. Pacific Tel. & Tel. Co., 166 Cal. 244, 251, 135 P. 971; Bank of California v. San Francisco, 142 Cal. 276, 279-280, 75 P. 832, 64 L.R.A. 918.
The city says that section 19, article XI of the Constitution as amended in 1911 conferred on it the power to grant or refuse primary franchises, and places reliance on Matter of Russell, 163 Cal. 668, 126 P. 875. The facts are not analogous. Russell only involved the power of a city to refuse to allow a gas company to occupy the streets. Dictum on which the city relies was disapproved in Oro Electric Corp. v. Railroad Commission, 169 Cal. 466, 482, 147 P. 118. The 1911 amendment of section 19, article XI did not in itself confer any power on the city. It merely authorized the city to exercise such powers over public utilities as were given by its charter to the extent that such powers were municipal affairs. Oro Electric Corp. v. Railroad Commission, supra, 169 Cal. 482, 147 P. 123, 124; People v. Willert, 37 Cal.App.2d Supp. 729, 734, 93 P.2d 872.
If the city ever had the power to grant a franchise to a telephone company to engage in business, it was taken away in 1912. In 1911, section 23 of article XII of the Constitution was amended to vest in the Railroad Commission such power and jurisdiction to supervise and regulate public utilities as should be conferred upon it by the Legislature. Pursuant to this provision the Legislature adopted the Public Utilities Act of 1911. In 1915 the Act of 1911 was re-enacted in substantially its same form as the Public Utilities Act of 1915.
Under the statutes referred to, the Railroad Commission had, and the Public Utilities Commission now has, all power of supervision and regulation of public utilities which are consistent with the context and purpose of section 23, article XII of the Constitution and the Public Utilities Act. Motor Transit Co. v. Railroad Commission, 189 Cal. 573, 579-580, 209 P. 586. One of the objects of the Public Utilities Act was to vest in the Railroad Commission the power of the state to determine whether the rights and interests of the general public would be advanced by permitting a particular public utility to engage in business. Oro Electric Corp. v. Railroad Commission, 169 Cal. 466, 475-476, 147 P. 118. Another object was to authorize the Commission to prevent a public utility from withdrawing either entirely from public service or from public service in any part of the territory served. Van Hoosear v. Railroad Commission, 184 Cal. 553, 554-556, 194 P. 1003.
It is asserted that two provisos found in section 23, article XII of the Constitution as adopted in 1911 conferred on cities rather than the state the power to grant primary franchises to conduct a telephone business. The first proviso said that section 23 would not affect 'such powers of control over any public utility vested in' any city as the electors in such city should vote to retain, and until such election such powers should continue unimpaired. In 1914 section 23 was amended to its present wording to deprive cities of any powers they may have had other than the making and enforcement of such police regulations as the electors of a city should vote to retain, and until such election such powers should continue unimpaired. The first proviso is limited to those powers possessed by a charter city which relate solely to the regulation and control of municipal affairs. Bay Cities Transit Co. v. City of Los Angeles, 16 Cal.2d 772, 775-777, 108 P.2d 435; Los Angeles Ry. Corp. v. City of Los Angeles, 16 Cal.2d 779, 783-788, 108 P.2d 430; People v. Willert, 37 Cal.App.2dSupp. 729, 736-740, 93 P.2d 872. Since, as we have seen, at the time of the adoption of section 23, article XII, the city had no power to grant primary franchises, this proviso did not preserve a power the city did not have.
The second proviso on which the city relies states that section 23 shall not affect the right of a city to grant franchises for public utilities upon the terms and conditions and in the manner prescribed by law. This proviso granted no rights. It merely reserved to a city such rights to grant franchises as may have been vested in it before 1914. It does not refer to the right to engage in a public utility business. People v. Willert, 37 Cal.App.2dSupp. 729, 740, 93 P.2d 872. Section 50(b) of the Public Utilities Act of 1911 authorized the Railroad Commission to grant certificates of public convenience and necessity to exercise any right or privilege under any franchise or permit theretofore granted. Section 51(a) required an order of the Commission before any public utility could dispose of 'any franchises.' Sections 50(b) and 51(a) are virtually identical with sections 68 and 70 of chapter 429 of article IV of the 1907 Laws of New York. In People ex rel. Long Acre Electric Light & Power Co. v. Public Service Commission, 137 App.Div. 810, 122 N.Y.S. 641, appeal dismissed 199 N.Y. 254, 92 N.E. 629, it was said, 122 N.Y.S. 646, that 'the word 'franchise' as used in these sections refers to the secondary franchise or consent of the local authorities, and not to the primary franchise to be a corporation, and carry on business as such, derived from the fact of incorporation.'
We conclude that the power to issue primary franchises to engage in the telephone business does not rest in the city.
The second contention of the city is that a franchise granted by section 536 of the Civil Code is not controlling on a charter city, that such a city alone possesses the power to grant a franchise. The argument is predicated on the premise that a franchise granted by section 536 is a sort of piecemeal proposition--that section 536 grants a franchise on different public highways and other public places progressively as the state's offer is accepted by the installation of telephone lines along and upon a public highway or other public place, called the pro tanto theory. Therefore, so the city says, Pacific's franchise under section 536 does not embrace new streets, the widened portions of streets existing prior to annexation or consolidation, relocated streets, or public property owned by the city which was in privte ownership at the time of annexation or consolidation. Pacific's contention, upheld by the trial court, is that section 536 constitutes an offer of a franchise; by the construction of telephone lines along or upon public highways within the state it accepted the offer; having accepted the offer it may construct lines along and upon the public highways and other public places in any part of the state except within the boundaries of certain freeholders' charter cities as they existed on May 19, 1905, such as Los Angeles, called the entirety theory.
Section 536 did not confer any rights on telephone companies prior to its re-enactment in 1905. Accordingly it has been held that the re-enacted section did not grant such companies a franchise to use the highways of a city within the boundaries of such city as they existed on May 19, 1905, if such city previously had been given full control of its streets under a freeholders' charter. Sunset Tel. & Tel. Co. v. City of Pasadena, 161 Cal. 265, 118 P. 796; City of Salinas v. Pacific Tel. & Tel. Co., 72 Cal.App.2d 494, 164 P.2d 905. Los Angeles has been a freeholders' charter city since 1889. Its charter was amended with respect to its power to grant franchises on February 16, 1905. On May 19, 1905, it possessed the power to grant franchises to telephone companies to use the public highways within the city.
The history and legal effect of section 536 is succinctly stated by Mr. Chief Justice Gibson, writing for the court, in County of Los Angeles v. Southern California Telephone Co., 32 Cal.2d 378, at page 381, 196 P.2d 773, at page 776, as follows: 'Section 536 was originally enacted at the time of the adoption of the codes in 1872, but similar provisions had existed for many years prior thereto. (See Stats. 1850, p. 369; Stats. 1857, p. 171.) When first enacted the section applied only to telegraph corporations. It made no mention of telephone companies, and it did not grant any rights to such companies prior to 1905, when the section was repealed and reenacted to apply to both telegraph and telephone corporations. (Citation.) As applied to telegraph companies, it has been held that section 536, as it existed prior to 1905, was effectual to grant a state franchise, and that the use of the highways, and the maintenance and operation of the telegraph system, constituted and acceptance of the provisions of the statute and resulted in a contract between the company and the state which was secured by the federal Constitution against impairment by subsequent state legislation. (Citations.) The purpose of the change in 1905 was to add telephone corporations to the section, and, except for this extension, there is nothing in the amendment to indicate any intention to alter the effect and operation of the statute. (Citation.) In view of the construction given to this section as it existed prior to 1905, and the absence of other changes, it must be held that the intention was to offer the grant of a franchise to telephone as well as telegraph companies upon acceptance by the construction and operation of communication facilities. * * * [32 Cal.2d at page 384, 196 P.2d at page 777.] The franchise is conditioned not only on the establishment of lines by a telegraph or telephone corporation, but also, by necessary implication, on the continued operation of the system. The grand under section 536 must be construed in favor of the state. (Civ.Code, § 1069.) As so construed it must be held to be a grant to use public roads and highways so long as telegraph or telephone communication service is continued and that the acceptance of the franchise involves an assumption of the duty to furnish proper and adequate communication service to the public.' The grant was 'free from any grant made by subordinate legislative bodies'. County of Inyo v. Hess, 53 Cal.App. 415, 425, 200 P. 373, 377.
The city's pro tanto theory has been repudiated repeatedly. Russell v. Sebastian, 233 U.S. 195, 34 S.Ct. 517, 58 L.Ed. 912, Ann.Cas.1914C, 1282; Lukrawka v. Spring Valley Water Co., 169 Cal. 318, 326-332, 146 P. 640; City of Beverly Hills v. City of Los Angeles, 175 Cal. 311, 314, 165 P. 924; Postal Telegraph-Cable Co. v. Railroad Comm., 200 Cal. 463, 472-474, 254 P. 258; County of Inyo v. Hess, 53 Cal.App. 415, 420-425, 200 P. 373; City of Salinas v. Pacific Tel. & Tel. Co., 72 Cal.App.2d 494, 497, 164 P.2d 905.
A telephone line from its nature and the service to be rendered is never complete. To meet the demands of the public it must be, and it is in fact, constantly extended by adding new lines, using public highways therefor. The cases recognize the fact. In Russell v. Sebastian, supra, the Supreme Court of the United States, discussing the nature and extent of a statewide franchise to use the public highways granted directly by the Constitution of California, said, 233 U.S. 205, 34 S.Ct. 520, 58 L.Ed. 921: 'The controversy in the present case relates to the extent to which the grant had become effective through acceptance. It is not contended that the change in the Constitution could disturb the company's rights in the streets used previous to the amendment; but it is insisted that such actual user measured the range of the acceptance of the grant, and hence defined the limits of its operation. * * * [233 U.S. at pages 206, 207, 34 S.Ct. at pages 520, 521, 58 L.Ed. at page 922] There is no ambiguity as to the scope of the offer. It was not simply of a privilege to maintain pipes actually laid, but to lay pipes so far as they might be required in order to effect an adequate distribution. * * * The breadth of the offer was commensurate with the requirements of the undertaking which was invited. * * * [I]t [the constitutional offer] did not attempt to confine the privilege to particular streets or areas, or to make the laying of the necessary pipes conditional upon the renewal of the offer street by street, or foot by foot, as the pipes were put in the ground. * * * When accepted and acted upon it would become binding--not foot by foot, as pipes were laid, but as an entirety, in accordance with its purpose and express language. * * * [233 U.S. at page 208, 34 S.Ct. at page 521, 58 L.Ed. at page 923] In view of the nature of the undertaking in contemplation, and of the terms of the offer, we find no ground for the conclusion that each act of laying pipe was to constitute an acceptance pro tanto. We think that the offer was intended to be accepted in its entirety as made, and that acceptance lay in conduct committing the person accepting to the described service. The offer was made to the individual or corporation undertaking to serve the municipality, and when that service was entered upon and the individual or corporation had changed its position beyond recall, we cannot doubt that the offer was accepted. * * * In this view, the grant embraced the right to lay the extensions that were needed in furnishing the supply within the city.'
Speaking of a franchise under section 536, the court in Postal Telegraph-Cable Co. v. Railroad Comm., supra, 200 Cal. 463, at page 473, 254 P. 258, at page 262, said: 'In view of the nature of the business of the telegraph company, and the broad and unrestricted terms of the offer contained in section 536, which has not been withdrawn or modified, we find no ground for the contention that each act of constructing a telegraph line, or an extension of service, was to constitute an acceptance pro tanto. The offer was intended to be, and was, accepted in its entirety as made. Petitioner has now exactly the same rights under its state franchise that it has had from the time it constructed and began to maintain and operate its first telegraph line within the borders of the state.'
The offer made by the state in section 536 was accepted in its entirety by Pacific's predecessors on May 19, 1905, by constructing, maintaining, and operating telephone lines along and upon the public highways of the state; the rights thereby acquired were assigned to Pacific; and Pacific, after January 2, 1907, accepted the offer in its entirety in the same manner. Since January 2, 1907, Pacific has continuously been engaged in operating a local, state-wide, and interstate telephone system and business and has constructed its lines along and upon the public highways and other public places within the state. As new public highways are opened, or relocated, or widened, and as new public places are created, Pacific has the right and the obligation to furnish telephone service. It follows that Pacific has the same rights within the city, excluding the territory within its boundaries on May 19, 1905, under its state franchise 'that it has had from the time it constructed and began to maintain and operate its first [telephone line] within the borders of the state', embracing within the scope of its state franchise highways in territories annexed to and consolidated with the city since May 19, 1905, new highways opened and highways relocated in such territories since annexation or consolidation, widened parts of highways existing prior to annexation or consolidation, and embracing other public places whether existing before or created after annexation or consolidation. Further, Pacific must continue to construct, maintain, and operate such lines in order to provide telephone service to the public.
The city next contends that section 536 did not confer on Pacific any right to engage in the business of receiving and transmitting telephotographs, teletypewriter messages, radio programs, television programs, wired music, or mobile and ship-to-shore communications; and that, in any event, it has no right to use the public highways of the city in the rendition of such services.
Section 536 from its original enactment in 1872 until its re-enactment in 1905 granted a state franchise to 'telegraph corporations' to construct 'lines of telegraph' along and upon any public highway. Similar provisions had existed from 1850. As re-enacted in 1905, it granted a state franchise to 'telegraph or telephone corporations' to construct 'lines of telegraph or telephone lines' along and upon any public highway. Section 536 has not been amended since it was re-enacted.
The section was re-enacted for the purpose of 'subjecting telephone corporations to the duties imposed upon, and conferring upon them the privileges granted to telegraph corporations.'
The court found that those parts of Pacific's lines which are located along and upon the public highways in the city are and may be used interchangeably for the transmission of electrical impulses of telephone conversations and the other types of communications to which the city objects, and that such other communications are all of the same types, kind, and character as have been used since prior to 1905 by telephone companies for rendering telephone and other communication services. The city argues that in re-enacting section 536, the Legislature distinguished between those electrical impulses required for the transmission of telegraph messages and those required for the transmission of articulate speech; that this was accomplished by the enumeration of 'telephone corporations' and 'telephone lines' separately and distinctly from 'telegraph corporations' and 'lines of telegraph'; that the special types of communication service were unknown in 1905; that it is obvious the Legislature did not intend to make 'electrical impulse' the measure of Pacific's authority to engage in its activities and that it did not grant any rights to engage in the special types of service we have enumerated; that such power rests in the city; and in any event, Pacific has no right to use the public highways of the city in the rendition of such services. Pacific does not contend that it may use the highways within the 1905 city for these purposes without a franchise from the city. The judgment so declares. It claims it may do so outside the 1905 city under its section 536 franchise.
We have held that the power to grant primary franchises to operate a telephone business does not rest in the city. For the same reasons, the power to grant primary franchises to engage in the business of furnishing the special types of communication service does not rest in the city. The question is whether Pacific, under its state franchise granted by section 536, may use its lines along and upon the public highways and other public places within the city, excluding the 1905 city, to transmit teletypewriter messages, telephotographs, radio programs, television programs, wired music, or ship-to-shore and mobile communications.
Only that which is granted in clear and explicit terms passes by a grant of a franchise. Statutory grants of that character are to be construed strictly in favor of the public, and whatever is not unequivocably granted is withheld. Nothing passes by implication. Civ.Code, § 1069; Sunset Tel. & Tel. Co. v. City of Pasadena, 161 Cal. 265, 273-274, 118 P. 796; County of Los Angeles v. Southern California Telephone Co., 32 Cal.2d 378, 384, 196 P.2d 773.
The city relies on City of Richmond v. Southern Bell Tel. & Tel. Co., 174 U.S. 761, 19 S.Ct. 778, 43 L.Ed. 1162; Indianapolis Cable St. R. Co. v. Citizens' St. R. Co., 127 Ind. 369, 24 N.E. 1054, 8 L.R.A. 539; Galveston Wharf Co. v. Gulf, C. & S. F. Ry. Co., 81 Tex. 494, 17 S.W. 57, 59; Peru Turnpike Co. v. Town of Peru, 91 Vt. 295, 100 A. 679, L.R.A.1917E, 559; Sunset Tel. & Tel. Co. v. City of Pasadena, 161 Cal. 265, 118 P. 796; and City of Hanford v. Hanford Gas, etc., Co., 169 Cal. 749, 147 P. 969.
In City of Richmond v. Southern Bell Tel. & Tel. Co., supra, it was claimed that the act of Congress of July 24, 1866, which granted to any 'telegraph company' accepting the provisions of the act the right to construct, maintain, and operate 'lines of telegraph' over and along military and post roads, applied to telephone companies. In holding it did not, the court stated, 174 U.S. 774, 19 S.Ct. 783, 43 L.Ed. 1167: 'It may be that the public policy intended to be promoted by the act of Congress of 1866 would suggest the granting to telephone companies of the rights and privileges accorded to telegraph companies. And it may be that, if the telephone had been known and in use when that act was passed, Congress would have embraced in its provisions companies employing instruments for electrically transmitting articulate speech. But the question is, not what congress might have done in 1866 nor what it may or ought now to do, but what was in its mind when enacting the statute in question. Nothing was then distinctly known of any device by which articulate speech could be electrically transmitted or received between different points, more or less distant from each other, nor of companies organized for transmitting messages in that mode. Bell's invention was not made public until 1876. Of the different modes now employed to electrically transmit messages between distant points, congress, in 1866, knew only of the invention then and now popularly called the 'telegraph.' When, therefore, the act of 1866 speaks of telegraph companies, it could have meant only such companies as employed the means then used or embraced by existing inventions for the purpose of transmitting messages merely by sounds of instruments any by signs or writings. * * *
'It is not the function of the judiciary, because of discoveries after the act of 1866, to broaden the provisions of that act so that it will include corporations or companies that were not, and could not have been at that time, within the contemplation of congress. * * * [I]t is clear that the courts should not construe an act of congress relating in terms only to 'telegraph' companies as intended to confer upon companies engaged in telephone business any special rights in the streets of cities and towns of the country, unless such intention has been clearly manifested. We do not think that any such intention has been so manifested. The conclusion that the act of 1866 confers upon telephone companies the valuable rights and privileges therein specified is not authorized by any explicit language used by congress, and can be justified by implication only. But we are unwilling to rest the construction of an important act of congress upon implication merely, particularly if that construction might tend to narrow the full control always exercised by the local authorities of the states over streets and alleys within their respective jurisdictions. If congress desires to extend the provisions of the act of 1866 to companies engaged in the business of electrically transmitting articulate speech,--that is, to companies popularly known as 'telephone companies,' and never otherwise designated in common speech,--let it do so in plain words.'
Galveston Wharf Co. v. Gulf, C. & S. F. Ry. Co., supra, 81 Tex. 494, 17 S.W. 57, applying the rule of strict construction, held that a city ordinance which granted a wharf company the right to construct a railroad along a street and make switches to its wharves north of the street so as not to obstruct the south side of the street gave no right to construct switches on the south side of its main track on the street. In Peru Turnpike Co. v. Town of Peru, supra, 91 Vt. 295, 100 A. 679, L.R.A.1917E, 559, it was held that the charter of a turnpike company granted in 1814 which gave it the right to take tolls for 'wheeled vehicles or sleighs drawn by beasts' did not give it the right to take tolls for automobiles. We do not find anything in Indianapolis Cable St. R. Co. v. Citizens' St. R. Co., supra, 127 Ind. 369, 24 N.E. 1054, 8 L.R.A. 539, that is helpful.
Sunset Tel. & Tel. Co. v. City of Pasadena, supra, 161 Cal. 265, 118 P. 796, held that prior to its re-enactment in 1905 section 536 was not applicable to telephone companies. The court applied the rule of strict construction and stated, 161 Cal. at page 277, 118 P. at page 801: 'As we have said, the telephone was unknown at the time of the enactment of section 536 of the Civil Code in the year 1872. While the possibility of transmitting speech along wires had previously been suggested by scientists, no one had ever succeeded in devising a practical instrument therefor until Bell made his discovery in the year 1875. To show that the idea of such transmission of the human voice was up to that time but a dream of scientists, reference need only be made to the Telephone Cases [Dolbear v. American Bell Tel. Co.], 126 U.S. 1, 8 S.Ct. 778, 31 L.Ed. 863. Under these circumstances, our Legislature granted the right to construct lines of telegraph, with the necessary poles, etc., along and upon the public highways of the state. We have seen that this court has expressly recognized that, from a strict etymological point of view, telephone lines would not be included in the words 'lines of telegraph,' or telephone corporations, within the words 'telegraph corporations.' We have seen further that the circumstances at that time were such that in its common acceptation the word 'telegraph' must have meant only the kind of communication then known and in practical use under that name, entirely excluding all idea of any such thing as the direct transmission of the human voice, and that by the simple method of speaking into an instrument of such slight cost that it could be placed in every dwelling house and place of business, with the necessary result that the use of practically all of the streets would be required. It is to be remembered that the question in determining the meaning of the word 'telegraph' contained in this statutory grant is: What was in the minds of the legislators as to its meaning when they used it? No rule of construction applicable to public grants warrants the inclusion therein of privileges not embraced within the common acceptation of the language used. * * * [161 Cal. at page 279, 118 P. at page 802] Any other construction would, it appears to us, make this statutory grant include rights and impose burdens on the public that were never within the cotemplation of the Legislature, and this case is a striking illustration of the wisdom of the rule that requires a grant by the public to be strictly construed in favor of the grantor.'
In City of Hanford v. Hanford Gas, etc., Co., supra, 169 Cal. 749, 147 P. 969, it was claimed that the constitutional grant of a franchise to use the public streets in a municipality for the purpose of supplying "gaslight or other illuminating light" applied to supplying gas for heat and power. The city of Hanford had granted a franchise to use the streets to supply gas for heat, light, and power, which had been accepted by the defendant. The defendant claimed it was not bound by that franchise; that it had the right to use the streets for supplying gas for heat and power under its constitutional franchise. It argued that since the same mains and laterals were used for supplying gas for heat and power as were used for supplying gas for "gaslight or other illuminating light," no additional burden was imposed on the municipality or the streets. Holding the constitutional grant did not include the use of the streets for supplying gas for heat and power, the court stated, 169 Cal. at page 753, 147 P. at page 970: 'The franchise granted by the city of Hanford did not attempt to touch upon, nor deal with, defendant's rights to supply gas for illuminating purposes. Unquestionably, while the same gas may be used through the same mains and laterals, the use of gas for heat and power is a distinct and different use from its use for illumination, and it is only the right to the latter use which is protected and, so to speak, given free under the constitution. * * * If the use is different, the right to the use is different. Conceivably a corporation might be formed for the purpose of supplying a gas unfit for illumination, but eminently well suited for purposes of heat and power. Could such a company without a franchise occupy the streets for this purpose under the constitutional grant of a right to occupy the streets for the supplying of illuminating gas? If it could not, then per contra a company supplying illuminating gas has acquired no right to supply a gas for the other separate enumerated uses. The vital question then is: Did the defendant, in accepting this franchise from the city of Hanford, acquire anything of value? If it did, then, no element of fraud entering into the case, it is bound by its contract. We think clearly that it did. Up to the time that it acquired the right to supply gas for purposes of heat and power it had the franchise right to supply gas solely for purposes of illumination, with the added guaranty under the decisions of this court that its franchise to supply illuminating gas would not be forfeited merely because it permitted its gas to be used for these other purposes. It was not told that it had the right, and it did not have the legal right, to permit its gas so to be used. If effort had been directed to that end, this use could undoubtedly have been restrained.'
The question is not answered by the fact that the challenged types of communication are transmitted by electrical impulses. If that were the answer it would have been held that prior to 1905 section 536 applied to telephone corporations and to telephone lines, since telegraph messages were transmitted by electrical impulses prior to 1905. If so, the Legislature did a useless act in adding 'telephone corporations' and 'telephone lines' in 1905. The term 'telephone lines' is not all-inclusive to embrace all types of communication transmitted by electrical impulses. The Legislature did not use language embracing future discoveries as to the use of transmitting electrical impulses. When the public policy underlying a statute requires that future discoveries be covered, it is common practice to do so by use of appropriate language. Neither can the problem be answered by treating all of the various types of communications as being of the same character, as does the city. Nor is the question answered by the fact that the same lines are used for all the various types of communications. As to any use not granted by the Legislature in 1905, the city retained control. The question is: What was in the mind of the Legislature when enacting section 536 with respect to each type of communication? In specifying telephone companies, the Legislature meant only such companies as employed the means then used or embraced by existing inventions. And the test laid down in the Richmond case and in the Pasadena case is: Are the lines used to transmit articulate speech--the human voice? Wires and cables are not 'telephone lines' when used for other types of communication.
In another view of the problem it may be asked whether plaintiff had a duty under its section 536 franchise to provide all the services it now provides other than transmission of the human voice. We have seen that it has an obligation commensurate with the privileges which it enjoyes under its franchise. The services which it renders, other than transmission of the human voice, embrace the transmission of telephotographs, instrumental music, and visual images such as were unknown, and by means that were undiscovered, at the time the franchise rights were acquired. Unless plaintiff undertook to render any and all types of wire service which might develop through future discoveries and inventions, it could not reasonably claim that it acquired the right to render them. It seems clear that plaintiff in accepting its franchise did not undertake to render types of service which were not only nonexistent but unanticipated.
The principle of construction applied in the Richmond case and in the Pasadena case which we are compelled to follow, does not deny to section 536 a fair and reasonable construction, nor does it withhold that which the grant was intended to convey.
In a telephone conversation the human voice is converted into electrical impulses in the instrument. The impulses are transmitted over the lines, and in some instances through exchanges, to the receiver in which they are reconverted into the human voice. In some cases, Pacific transmits telephone conversations converted into electrical impulses partly over its lines and partly by radio by means of electrical waves without the use of connecting wires. The latter service began in the United States in 1920.
Teletypewriter communication is the transmission of telegraph messages by use of a teletypewriter. The court found that Pacific is the owner of a franchise under section 536 to construct, maintain, and operate 'telegraph lines along and upon the public roads and highways' throughout the state, including areas which have been annexed to and consolidated with the city since May 19, 1905. Thus Pacific has the right and the obligation to use its lines along and upon the public highways of the city, other than within the 1905 city, for the transmission of teletypewriter messages without a franchise from the city.
The transmission of telephotographs is patently not the transmission of the human voice. Photographs are converted into electrical impulses which are transmitted over Pacific's lines and are reconverted into the photographs at a receiving terminal. It cannot be said that in 1905 when the Legislature used the phrase 'telephone corporations' it intended to embrace corporations engaged in transmitting photographs by electrical impulses or that when it used the words 'telephone lines' it intended to comprehend lines used for that purpose. Such use exceeds the limits of Pacific's section 536 franchise.
Radio programs consist in part of instrumental music and in part of articulate speech in one form or another. Transmission of instrumental music is not transmission of the human voice. Pacific has a franchise under section 536 to transmit over its lines those parts of radio programs which consist of the transmission of the human voice. It does not have a franchise under section 536 to transmit instrumental music over its lines.
There are two phases to the transmission of a television program: the video or image phase and the audio or sound phase. In transmitting a television program two separate transmitters are employed, one for sound, the other for image. The sound phase is transmitted over different lines from those used in transmitting the image phase. Transmission of the image phase is not transmission of the human voice. Pacific is required to obtain a franchise from the city for the transmission over and along the public highways of the city of the image phase of such programs. That use exceeds the limits of its section 536 franchise. The sound phase of television programs consists in part of instrumental music and in part of articulate speech in one form or another. Pacific has a franchise under section 536 to transmit over its lines those parts of the sound phase of television programs which consist of the transmission of the human voice. It does not have a franchise under section 536 to transmit over its lines those parts of the sound phase which consist of instrumental music.
In this connection Pacific relies on Ohio Tel. & Tel. Co. v. Steen, Ohio Com. Pl., 85 N.E.2d 579, an Ohio trial court opinion. That was a proceeding in eminent domain. The company had the power to condemn land for telegraph and telephone purposes. It was claimed that in addition to the transmission of telephonic messages the line would be used for television. The court held that the right of eminent domain for telegraph and telephone purposes conferred by the Ohio statute was applicable to television. The opinion is of no value in this state. We are bound by Sunset Tel. & Tel. Co. v. City of Pasadena, 161 Cal. 265, 118 P. 796, and the test there declared.
As we read the record wired music programs do not consist in the transmission of the human voice. Instrumental music is converted into electrical impulses and transmitted over Pacific's lines used for voice communication to receiving stations where the impulses are reconverted into music. Patently the Legislature did not have the transmission of instrumental music in mind in 1905. Such use exceeds the limits of Pacific's section 536 franchise.
Lines used for mobile and ship-to-shore communications clearly come within the phrase 'telephone lines.' The lines are used to electrically transmit the human voice. A telephone transmitter is at one end and a telephone receiver at the other end. The electrical impulses are carried part of the distance from the transmitter to the receiver by microwave. This does not alter the fact that the use made of the lines is transmission of the human voice.
We conclude that Pacific has a franchise under section 536 to use its lines over and along the public highways and other public places of the city outside the 1905 boundaries for the transmission of teletypewriter messages, those parts of radio programs and those parts of the sound phase of television programs which consist of the transmission of the human voice, and mobile and ship-to-shore communications; that it does not have such a franchise for the transmission of telephotographs, the image phase of television programs, so much of the sound phase of radio and television programs as consists of instrumental music, or wired instrumental music, and that it is required to obtain a franchise from the city to use the public highways and other public places within the city, including the areas annexed to and consolidated with the city since May 19, 1905, for such services.
The city claims that Pacific contracted away its franchise under section 536 and is estopped to deny such contract. The claim is premised on the argument that Pacific, by accepting the provisions of Ordinance 35,474, agreed to surrender at the option of the city its rights and obligations under section 536. The claim is untenable.
The court found that Ordinance 35,474 was not intended by the city to require a surrender or forfeiture of any rights or obligations under section 536, and that neither Southern nor Pacific agreed to surrender any such rights or obligations.
Evidence was received, without objection, in aid of interpretation of Ordinance 35,474 and conflicting inferences may be drawn therefrom. The finding is supported by the evidence any may not be disturbed. The city says the question is one of law. Assuming, without deciding, it to be a question of law and that Pacific had the power to surrender or forfeit its obligations under section 536, there are two answers to the city's claim. First: We think it obvious from a reading of Ordinance 35,474 that the option given the city to require a surrender or forfeiture of any franchise did not extend for all time but for the life of the king franchise. We find nothing in the opinion or order of the Railroad Commission which stated that Southern would operate under the King franchise, indicating that it approved relinquishment of Southern's rights under section 536. Second: The claim is answered by City of San Diego v. Southern California Telephone Co., 92 Cal.App.2d 793, 208 P.2d 27. San Diego adopted a freeholders' charter in 1889. In 1886, 1896, and 1904, Pacific's predecessors were granted franchises to use streets by city ordinances. In 1914, by Ordinance 5681, the city granted Pacific a franchise for 30 years over and along all of the public streets and places 'now or hereafter existing' in the city. Pacific accepted the franchise. In 1930 Pacific, pursuant to authorization of the Railroad Commission, assigned the 1914 franchise to Southern. From 1914 to 1944 the terms of the franchise were complied with, both with respect to the territory within the city as it existed in 1914 and as to territory annexed to and consolidated with the city after 1914. On expiration of the franchise in 1944, Southern claimed it had a franchise to use all streets in the city under section 536. The city claimed that Pacific, having accepted the franchise as to all public streets and places 'now or hereafter existing,' the annexed and consolidated areas could not be segregated from the rest of the city. The court held first that Southern did not have a franchise under section 536 within the city as it existed on May 19, 1905. Rejecting the city's claim, the court stated, 92 Cal.App.2d at page 808, 208 P.2d at page 36: 'We are not here concerned with the effect these matters might have had upon the contract between the parties, expressed in Ordinance No. 5681, had the defendant attempted to violate the terms of that contract during the 30-year period of its existence. This they did not do and the sole question on this appeal depends upon the situation as it existed in 1916 and thereafter, when the various annexations to the city were made. No charter provisions to the contrary existed when the amended section 536 took effect in the areas which were later annexed to San Diego. It is now clearly established that when a telephone company has acquired a state franchise through its acceptance of the offer made by section 536, as amended in 1905, with respect to a certain territory, it has a vested right which may not be interfered with by any local authority. (Citations.) This right would not be lost by subsequently acting, for a time, in compliance with a franchise issued by the city. City of Oakland v. Great Western Power Co., 186 Cal. 570, 200 P. 395.'
Finally, the city contends that a freeholders' charter city is not bound by the provisions of the Broughton Act. There is no dispute on the point. Pacific agrees that the city is not bound by the act. The city's contention on this point is that the provisions of the judgment with respect to payments under any future franchise it may grant are erroneous. It says the judgment applies the Broughton Act and compels it to follow the method of payment prescribed by that act in any franchise it may later grant to use the public highways within the city as it existed on May 19, 1905. We do not so construe the judgment.
The judgment in this respect declares:
1. The city may not require Pacific to pay for any franchise it may obtain for that part of the city within its boundaries on May 19, 1905, any compensation based on or related to revenues attributable to plant or investment located on private property within and without the areas covered by such franchise.
2. The method of computing the payments required by the King franchise and by an agreement of January 31, 1947, between the city and Southern, would be unreasonable if applied to any new franchise covering the area as it existed on May 19, 1905; and the city may not require the same.
3. The court does not direct or order the parties to agree to any formula for computing payments in the event the city should grant a franchise to Pacific.
4. The city may not grant any franchise pursuant to Ordinance 58,200, the ordinance prescribing the procedure for granting franchises, without it first submitting such franchise for competitive bidding; and it must be awarded to the highest bidder on the basis or bases prescribed in the advertisement for bids. The only limitation the city may impose on such bidding shall be that if the advertisement invites bids on the basis of a percentage of gross annual receipts received from the use, operation, or possession of such franchise, the bid shall not be less than 2% of such gross annual receipts.
5. The city 'may not require as a condition to the granting to plaintiff of a franchise that plaintiff provide said City with free telephone service.'
The use of public highways within the area of the city as it existed on May 19, 1905, is a municipal affair and the provisions of the city charter are controlling over general laws. City of San Diego v. Southern California Telephone Co., 92 Cal.App.2d 793, 800-803, 208 P.2d 27; City of San Diego v. Kerckhoff, 49 Cal.App. 473, 480, 193 P. 801. The charter of the city gives it the power to grant a franchise to a telephone company to use the public streets and other public places within the city.
Ordinance 58,200 of the city, the ordinance prescribing the procedure for granting franchises, provides that the payment by the holder of a franchise shall be 'the highest percentage of gross annual receipts received from the use, operation or possession of such franchise, permit or privilege; provided, that such percentage of gross annual receipts shall not be less than two per cent (2%) of such gross annual receipts.'
The payment by the holder of a franchise is in the nature of a toll or charge for the privilege of using the public highways covered by the franchise. City of San Diego v. Southern, etc., Tel. Corp., 42 Cal.2d 110, 266 P.2d 14; County of Tulare v. City of Dinuba, 188 Cal. 664, 670, 206 P. 983; San Francisco-Oakland Terminal Rys. v. County of Alameda, 66 Cal.App. 77, 82, 225 P. 304. Under Ordinance 58,200 the holder pays a percentage of the gross annual receipts 'received from the use, operation and possession of such franchise.' The holder of the franchise does not, as the city says, pay 'a charge determined by a percentage of the total gross receipts derived by the company from its business within the City.'
The provision of the judgment that the city may not require Pacific to pay any compensation based on revenue attributable to its property located on private property, is manifestly proper. The city has no power either directly or indirectly to exact rental for the use by a public utility of its own property not located along or upon public highways or other public places. Ocean Park, etc., Corp. v. City of Santa Monica, 40 Cal.App.2d 76, 84-87, 104 P.2d 668, 879.
The provision of the judgment that the method of computing payments required by the King franchise and by the agreement of January 31, 1947, between the city and Southern, would be unreasonable, is in accord with Ordinance 58,200 and is also proper.
The judgment does not determine, as argued, that the city cannot require as the condition of a city franchise that minimum compensation be in excess of 2% if based on gross annual receipts received from the use, operation, or possession of the franchise. It does not require the parties to agree to use any particular formula or method of determining compensation should the city grant a franchise to Pacific. The provisions with respect to advertising for bids competitive bidding, award to the highest bidder, and that the only limitation the city may impose is that if bids are invited on the basis of a percentage of gross annual receipts received from the use, operation, or possession of the franchise, the bid shall not be less than 2% of such receipts,--are nothing more than a restatement of the provisions of Ordinance 58,200. Neither under the judgment nor under the ordinance is the city compelled to invite bids on the basis of a percentage of the gross receipts received from the use operation, or possession of the franchise. It may, as provided in the ordinance, invite bids on the basis that the holder of the franchise pay 'such other compensation or consideration for the use * * * as may be prescribed by the Council in the advertisement for bids and notice of sale,' or the city may invite bids on 'any one, or all, or any part of the bases prescribed' in the ordinance.
We are of the opinion that the provision of the judgment to the effect that the city may not require that Pacific provide the city with free telephone service cannot stand. The matter of granting a franchise within the 1905 limits of the city, and within the present boundaries of the city as to the types of communication for which a franchise is required therein, is one of contract between the city and the successful bidder. In its advertisement for bids the city may impose such terms as it sees fit so long as they comply with Ordinance 58,200 and so long as they are reasonable rental for the use of the public highways and other public places. There is no reason why the city may not, as a part of the reasonable rental, include the value of telephone service furnished the city. The total of the value of telephone service furnished the city and whatever other rental is charged may not exceed reasonable rental for the use of the public highways and other public places.
The judgment insofar as it declares that Pacific's lines may be used for the transmission of telephotographs, so much of radio programs and so much of the sound phase of television programs as consists of instrumental music, the image phase of television programs, and wired instrumental music programs, and insofar as it declares that the city may not require as a condition to the granting to plaintiff of a franchise that plaintiff provide the city with free telephone service is reversed with directions to the superior court to amend its findings of fact, conclusions of law, and judgment in accord with the views expressed in this opinion. In all other respects the judgment is affirmed. The parties shall bear their own costs on appeal.
SHINN, P. J., and PARKER WOOD, J., concur. --------------- * Vacated 282 P.2d 36. 1 The city of Los Angeles is referred as 'the city.' 2 Pacific Telephone and Telegraph Company is referred to as 'Pacific.' 3 Plaintiff also prayed that it be declared that the amount of such gross receipts should be determined by applying the following formula: (a) That proportion of plaintiff's gross receipts arising from the rendering of local (exchange) service in the Los Angeles extended area that the amount of exchange plant on the streets and other public places within the franchise area bears to the total plant of the plaintiff used in rendering local service in the Los Angeles extended area; and (b) That proportion of plaintiff's total gross receipts arising from the rendering of toll service attributable to the state of California that the amount of toll plant located on the streets and other public places within the franchise area bears to the total toll plant of plaintiff in the state of California. 4 In 1951 section 536 was repealed and re-enacted in its identical wording as Public Utilities Code, section 7901. For convenience, however, we refer to the statute as 'section 536.' We refer to a franchise under section 536 as a 'state franchise.' The term 'public highways' includes the streets of cities. Western Union Telegraph Co. v. Hopkins, 160 Cal. 106, 118, 116 P. 557. 5 Sunset Telephone and Telegraph Company is referred as 'Sunset.' 6 The franchise to M. A. King is referred to as the 'King franchise.' 7 Home Telephone and Telegraph Company is referred to as 'Home.' 8 There is evidence that 'all development outside of the Old Charter Boundary [of the city in 1891] and within the City Limits of to-day [1916] have been constructed and operated to date without any franchise right so to do.' 9 Southern California Telephone Company is referred to as 'Southern.' 10 11 C.R.C. 806. 11 12 C.R.C. 115, 118. 12 34 C.R.C. 584. The order provided that Southern 'may engage in the telephone and telegraph business in said territory,' which included parts of the city and adjacent areas. 13 47 C.R.C. 152. 14 See Stats.1889, pp. 455, 462-4. Stats.1911, pp. 2051, 2063-4. 15 In the recent case of People ex rel. Public Utilities Comm. v. Mountain States Tel. & Tel. Co., 125 Colo. 167, 243 P.2d 397, 401, the court, holding telephone service to be a state-wide affair, stated, 243 P.2d 401: 'No good purpose would be served by including in this opinion the numerous authorities from the various states which hold that telephone service has come to be generally recognized as not being local or municipal to any particular city or town; and that the only effective and logical regulation to which major telephone companies should be subjected is regulation upon a state-wide basis. The weight of authority to this effect is overwhelming.' (See, also, City of Owensboro v. Cumberland Tel. & Tel. Co., 230 U.S. 58, 72, 33 S.Ct. 988, 57 L.Ed. 1389, 1396; City of Wichita v. Old Colony Trust Co., 8 Cir., 132 F. 641, 650; City of Tulsa v. Southwestern Bell Tel. Co., 10 Cir., 75 F.2d 343, 353; Iowa Tel. Co. v. City of Keokuk, D.C.S.D.Iowa, 226 F. 82, 97-99; Bland v. Cumberland Tel. & Tel. Co., 109 S.W. 1180, 1181, 33 Ky.L.Rep. 399; Cumberland Tel. & Tel. Co. v. City of Calhoun, 151 Ky. 241, 151 S.W. 659, 661; Metropolitan Home Tel. Co. v. Emerson, 202 Mass. 402, 88 N.E. 670, 671; Michigan Tel. Co. v. City of Benton Harbor, 121 Mich. 512, 80 N.W. 386, 388, 47 L.R.A. 87; City of Duluth v. Duluth Tel. Co., 84 Minn. 486, 87 N.W. 1127, 1130; Northwestern Tel. Exch. Co. v. City of Minneapolis, 81 Minn. 140, 83 N.W. 527, 86 N.W. 69, 70, 53 L.R.A. 175; State, by Van Riper v. Traffic Tel. Workers' Federation, 2 N.J. 335, 66 A.2d 616, 9 A.L.R.2d 854, 864-865; Village of Carthage v. Central New York Tel. & Tel. Co., 185 N.Y. 448, 78 N.E. 165, 166, 113 Am.St.Rep. 932; City of Rochester v. Bell Tel. Co., 52 App.Div. 6, 64 N.Y.S. 804, 807; People ex rel. Long Acre Electric Light & Power Co. v. Public Service Comm., 137 App.Div. 810, 122 N.Y.S. 641, appeal dismissed, 199 N.Y. 254, 92 N.E. 629; City of Brownwood v. Brown Tel. & Tel. Co., 106 Tex. 114, 157 S.W. 1163, 1165; Wisconsin Tel. Co. v. City of Oshkosh, 62 Wis. 32, 21 N.W. 828, 832. 16 The court found: 'Plaintiff's telephone and telegraph lines are used by it in rendering a local, statewide and interstate communication service to the people of the State of California. Said communication service includes exchange and toll telephone service, private line telephone service, telegraph service, teletypewriter service, private line teletypewriter service, the transmission of telephotographs, program transmission (including radio and television programs), and other communications by means of the transmission of electrical impulses. Such communication business and service is regulated by the Public Utilities Commission of the State of California and by the Federal Communications Commission. As a part of such communication service plaintiff provides telephone service directly, and by connecting with sixty-seven other telephone companies in California, to the people throughout the State of California; it provides a communication service by connecting with other telephone companies outside of California to people throughout the United States and other countries. Plaintiff also provides telephone and other communication services to agencies of the State and Federal governments and to statewide and local businesses and industries. Plaintiff's local exchange telephone business is integrated with its statewide and interstate communication service and is not related to the political boundaries of any city or political subdivision. Plaintiff's right to engage in such communication service and business is not a municipal affair but is a matter of state and nation concern regulated by the State and Federal governments.' In 1951 over 17 million telephone calls were made from the Los Angeles Extended Area, which includes the city, to places throughout the state and the world; and over 20 million telephone calls were made from outside the Los Angeles Extended Area to subscribers within that area. 17 The germane part of section 23, article XII, reads: 'The Railroad Commission shall have and exercise such power and jurisdiction to supervise and regulate public utilities, in the State of California, and to fix the rates to be charged for commodities furnished, or services rendered by public utilities as shall be conferred upon it by the Legislature, and the right of the Legislature to confer powers upon the Railroad Commission respecting public utilities is hereby declared to be plenary and to be unlimited by any provision of this Constitution.' 18 Stats.Ex.Sess.1911, p. 18. 19 Stats.1915, p. 115. In 1951 the Act was incorporated in the Public Utilities Code, section 203 et seq. 20 See 44 C.R.C. 396, 406. Since 1917, exchange telephone service in a large part of the city and surrounding territory has been provided by Pacific and its predecessors pursuant to specific authorization of the Railroad (or Public Utilities) Commission. 11 C.R.C. 806, 860; 34 C.R.C. 584, 593-4; 47 Cal.P.U.C. 152. 21 The two provisos in the 1911 provision were: 'From and after the passage by the Legislature of laws conferring powers upon the Railroad Commission respecting public utilities, all powers respecting such public utilities vested in boards of supervisors, or municipal councils, or other governing bodies of the several counties, cities and counties, cities and towns, in this State, or in any commission created by law and existing at the time of the passage of such laws, shall cease so far as such powers shall conflict with the powers so conferred upon the Railroad Commission; provided, however, that this section shall not affect such powers of control over any public utility vested in any city and county, or incorporated city or town as, at an election to be held pursuant to laws to be passed hereafter by the Legislature, a majority of the qualified electors voting thereon of such city and county, or incorporated city or town, shall vote to retain, and until such election such powers shall continue unimpaired; but if the vote so taken shall not favor the continuation of such powers, they shall thereafter vest in the Railroad Commission as provided by law; and provided, further, that where any such city and county or incorporated city or town shall have elected to continue any powers respecting public utilities, it may, by vote of a majority of its qualified electors, voting thereon, thereafter surrender such powers to the Railroad Commission in the manner to be prescribed by the Legislature; or if such municipal corporation shall have surrendered any powers to the Railroad Commission, it may, by like vote, thereafter reinvest itself with such power.' 22 The pertinent part of the 1914 amendment of section 23 reads: 'From and after the passage by the Legislature of laws conferring powers upon the Railroad Commission respecting public utilities, all powers respecting such public utilities vested in boards of supervisors, or municipal councils, or other governing bodies of the several counties, cities and counties, cities and towns, in this State, or in any commission created by law and existing at the time of the passage of such laws, shall cease so far as such powers shall conflict with the powers so conferred upon the Railroad Commission; provided, however, that this section shall not affect such powers of control over public utilities as relate to the making and enforcement of local, police, sanitary and other regulations, other than the fixing of rates, vested in any city and county or incorporated city or town as, at an election to be held pursuant to law, a majority of the qualified electors of such city and county, or incorporated city or town, voting thereon, shall vote to retain, and until such election such powers shall continue unimpaired; but if the vote so taken shall not favor the continuation of such powers they shall thereafter vest in the Railroad Commission as provided by law; and provided, further, that where any such city and county or incorporated city or town shall have elected to continue any of its powers to make and enforce such local, police, sanitary and other regulations, other than the fixing of rates, it may, by vote of a majority of its qualified electors voting thereon, thereafter surrender such powers to the Railroad Commission in the manner prescribed by the Legislature; and provided, further, that this section shall not affect the right of any city and county or incorporated city or town to grant franchises for public utilities upon the terms and conditions and in the manner prescribed by law.' Const. art. XII, § 23. 23 In Bay Cities Transit Co. v. City of Los Angeles, 16 Cal.2d 772, at page 776, 108 P.2d 435, at page 438, the court said: "It is settled that the term 'vested' as used in section 23, article XII of the Constitution is limited to those powers possessed by a chartered city relating solely to the regulation and control of municipal affairs." 24 Stats.Ex.Sess.1911, ch. 14, p. 43. Section 50(b) of the Public Utilities Act of 1911 is now Public Utilities Code section 1002. 25 Stats.Ex.Sess.1911, ch. 14, p. 44. Section 51(a) of the Public Utilities Act of 1911 is now Public Utilities Code section 851. See, also, sections 31 and 35 of the Public Utilities Acts of 1911 and 1915 now Public Utilities Code sections 701 and 761. 26 See, also, People ex rel. New York Edison Co. v. Willcox, 207 N.Y. 86, 100 N.E. 705, 709-710, 45 L.R.A.,N.S., 629; cited with approval in Oro Electric Corp. v. Railroad Commission, 169 Cal. 466, 475, 147 P. 118. 27 Stats.1889, p. 455. 28 Stats.1905, p. 980. 29 In People ex rel. Woodhaven Gaslight Co. v. Deehan, 153 N.Y. 528, 47 N.E. 787, approved in Illinois Central R. Co. v. City of Chicago, 176 U.S. 646, 666, 20 S.Ct. 509, 44 L.Ed. 622, and quoted from in Russell v. Sebastian, 233 U.S. 195, 34 S.Ct. 517, 58 L.Ed. 912, Ann.Cas.1914C, 1282, a grant of authority to lay conduits for gas through the streets of a town so as to render service to the people of the town, was held to extend as a property right not only to the streets then existing but to those later opened. The court said, 153 N.Y. 533, 47 N.E. 788: 'It is well known that business enterprises such as the relator is engaged in are based upon calculations of future growth and expansion. A franchise for supplying gas not only confers a privilege, but imposes an obligation, upon the corporation to serve the public in a reasonable way. * * * When the right to use the streets has been once granted in general terms to a corporation engaged in supplying gas for public and private use, such grant necessarily contemplates that new streets are to be opened and old ones extended from time to time, and so the privilege may be exercised in the new streets as well as in the old.' 30 The court found: 'Sunset Company and Home Company on May 19, 1905, accepted the offer of a statewide franchise contained in section 536 of the Civil Code in its entirety by the construction, maintenance and operation of telephone and telegraph lines within this state, and by so accepting said franchise assumed obligations commensurate with their rights under said section to furnish the people of this state with a communication service. Plaintiff by constructing, maintaining and operating telephone lines within this state since January 2, 1907, accepted and as the assignee of Sunset Company, and as the surviving corporation on the merger of Southern California Telephone Company into plaintiff, became the owner of the franchise offered by section 536 of the Civil Code and assumed the obligation commensurate with its rights under said franchise to provide the people of the State of California with a communication service. Pursuant to said franchise and the rights and obligations thereunder, as uninhabited areas have become populated and there has been a demand for service plaintiff has recognized and carried out its obligation to extend its lines, in so far as it has been reasonable so to do, to provide communication service to the people in said areas except where and to the extent that service has been and is provided by other telephone companies.' 31 Postal Telegraph-Cable Co. v. Railroad Comm., 200 Cal. 463, 473, 254 P. 258, 262. 32 The court found: 'Plaintiff's said telephone and telegraph lines were constructed, maintained and operated by plaintiff or its predecessors and are now maintained and operated by plaintiff in, upon, over, under, along and across the public roads, highways and streets (including streets, the underlying fee of which is owned by the City of Los Angeles) and other public places (including such real property as is owned by the City of Los Angeles in its governmental capacity) located within those areas which have been annexed to and consolidated with the City of Los Angeles since May 19, 1905, under and by virtue of plaintiff's state franchise under section 536 of the Civil Code (now Public Utilities Code section 7901), and plaintiff has the right and obligation, without obtaining a franchise from said City, to construct, maintain and operate said lines in said roads, highways and streets whether the same were laid out, opened and became public roads, highways and streets before or after annexation to or consolidation with the City of Los Angeles or may hereafter be laid out, opened and become public roads, highways and streets and public places for the purpose of providing a communication service to the people of the State of California; said service includes the transmission of any communication by means of electrical impulses; said lines include lines maintained by plaintiff on poles jointly owned and occupied by plaintiff and others. * * * Since May 19, 1905, there have been areas annexed to or consolidated with the City of Los Angeles, and between May 19, 1905, and the time said areas were annexed to or consolidated with said City plaintiff or one or more of its predecessors were engaged in the communication business within and furnished communication service to subscribers within all but a comparatively few of said annexed or consolidated areas. Said comparatively few areas in which plaintiff or one or more of its predecessors did not furnish communication service to subscribers were uninhabited at the time of annexation or consolidation. Plaintiff or its predecessors, pursuant to section 536 of the Civil Code, extended its or their lines throughout said annexed or consolidated areas to meet the demand for communication service as said areas became populated except to the extent that said areas were and are now served by other telephone companies.' Cases in other jurisdictions, holding that subsequent incorporation or annexation of territory covered by a franchise does not affect the rights and obligations under that franchise, include: People ex rel. Woodhaven Gaslight Co. v. Deehan, 153 N.Y. 528, 47 N.E. 787; City of Prichard v. Alabama Power Co., 234 Ala. 339, 175 So. 294; Mountain States Tel. & Tel. Co. v. Town of Belen, 56 N.M. 415, 244 P.2d 1112, 1120-1121. In City of Westport v. Mulholland, 159 Mo. 86, 60 S.W. 77, 53 L.R.A. 442, the Missouri Supreme Court said with respect to this proposition: 'That the city could not by its ordinance deprive the railroad company of its franchise, or impair the obligation of its contract with the county court, treating the grant of the franchise and its acceptance as a contract, is a proposition of law that has not been gainsaid in this country since the decision in the Dartmouth College Case [Trustees of Dartmouth College v. Woodward] in 1819, 4 Wheat. 518, 4 L.Ed. 629.' 33 Stats.1850, p. 369; Stats.1857, p. 171. 34 Stats.1905, p. 491. 35 Report of the Commissioners for the Revision and Reform of the Law, Recommendations Respecting the Civil Code, September 1, 1900, pp. 69-70. 36 The court found: 'Plaintiff's telephone and telegraph lines include all conduits, ducts, poles, wires, cables, instruments and appliances located in, upon, over, under, along and across public roads, highways and streets, other public places and private rights of way used by plaintiff in the rendition of a communication service by means of the transmission of electrical impulses. The portions of said lines which are located in, upon, over, under, along and across public roads, highways and streets and other public places within the City of Los Angeles and elsewhere are and may be used interchangeably for the transmission by electrical impulses of telephone conversations, telegraph messages, teletypewriter messages, telephotographs, program service (including the tranmission of wired music, radio and television programs), and other communications and are of the same type, kind and character as have been used since prior to 1905 by telephone companies for rendering telephone and other communication services.' 37 See, also, Central Union Tel. Co. v. State ex rel. Falley, 118 Ind. 194, 19 N.E. 604, 610, 10 Am.St.Rep. 114; Home Telegraph Co. v. Mayer, etc., of Nashville, 118 Tenn. 1, 101 S.W. 770, 773-776, 11 Ann.Cas. 824; Southern Telephone Co. v. King, 103 Ark. 160, 146 S.W. 489, 490, 39 L.R.A., N.S., 402. 38 Constitution, article XI, section 19, prior to its amendment in 1911. 39 City of Richmond v. Southern Bell Tel. & Tel. Co., 174 U.S. 761, 19 S.Ct. 778, 43 L.Ed. 1162. 40 Sunset Tel. & Tel. Co. v. City of Pasadena, 161 Cal. 265, 118 P. 796. 41 City of Richmond v. Southern Bell Tel. & Tel. Co., 174 U.S. 761, 19 S.Ct. 778, 43 L.Ed. 1162. 42 The various types of communications in question are all transmitted by electrical impulses. All of the equipment used in transmitting telephone messages and the various other types of communication is located on private property, with the exception of the wires through which electrical impulses are transmitted and the poles and conduits therefor located along and upon public highways and other public places. Amplifiers and repeaters are used to amplify the electrical impulses in all of the various types of communication. Amplifiers, battery plants providing 48 to 130 volts, are used to amplify voice communication. Amplifiers requiring 120 volts alternating current are used to amplify television impulses. The amplifiers and repeaters are not located along or upon public highways or other public places. 43 In teletypewriter message communications the message is typed on an electric teletypewriter. It comes out of the teletypewriter on a perforated strip of paper in code, which is sent through a transmitter. The transmitter sends the coded message by electrical impulses over the lines used by Pacific for voice communication to a receiving station. There the electrical impulses go into a teletypewriter and come out typed in the form of the familiar telegraph message. See In re Teletype Mach. No. 33335, 126 Pa.Super. 533, 191 A. 210. 44 The lines used in telephotographic service are the same as those used for voice communication. The receiving equipment is provided by the customer on his premises. Any picture intelligence may be so transmitted. Photographs are also transmitted by radio and by microwave. In some instances an exposed negative comes off the terminal; in others, a direct positive. Telephotographic service began commercially in the United States about 1927. 45 In radio programs, sometimes called 'audio' programs, sound, including the human voice, is converted into electrical impulses in the plant of Pacific or in equipment of a broadcaster, and transmitted over telephone lines, the same as used for 'ordinary telephone service,' to a privately owned broadcasting transmitter where it is broadcast over the air to receiving sets in which the electrical impulses are reconverted into sound or into the human voice. 46 The image phase is in some instances converted into electrical impulses at the point at which the picture is taken outside a broadcasting studio, as at a baseball game, and the impulses are transmitted over the same lines used by Pacific for voice communication to a central office in Hollywood, thence over its lines to a television broadcasting studio, from the studio over its lines to a central telephone office, and thence by microwave to a transmitter. In other instances the picture is taken in a studio, there converted into electrical impulses which are transmitted over Pacific's lines used for voice communication to a central telephone office, and thence by microwave to a transmitter. At the transmitter the microwaves are converted into electrical impulses and transmitted over Pacific's lines used for voice communication to the broadcasting studio where they are again converted into microwave and transmitted to television receivers in which they are reconverted into visible images. In some instances Pacific, and in others the broadcaster, transmits the image phase from the studio to the transmitter. In other instances the image phase is transmitted from the point where the picture is taken outside the studio directly to the transmitter, then to the studio for insertion of commercials, and back to the transmitter where the program is broadcast,--all by microwave. The sound phase of the program travels all the way to the transmitter over Pacific's lines, the same lines as are used for voice communication, but over different lines from those used for carrying the image impulses. The broadcasting equipment is provided by the broadcaster. The band of frequencies required for the transmission of the human voice may be up to two or three thousand cycles wide, whereas the band of frequencies required for television may extend up to several million cycles wide. The electrical impulses used in voice communication are one volt or less; those used in image transmission are one or two volts, peak to peak. Television was first transmitted over Pacific's lines commercially in 1948. 47 Warner, Radio and Television Law, § 71. 48 Mobile and ship-to-shore communications are similar. They are telephone communications with mobile units such as automobiles, trains, and ships in the near coastal waters using radio. Such communication is by conversion of the human voice into electrical impulses and their transmission, usually partly by telephone lines and partly by radio. Pacific began mobile radio telephone service in the Los Angeles area about 1947. 49 The surrender provisions of Ordinance 35,474 read: 'That said Southern California Telephone Company, its successors or assigns, shall operate its telephone system within the limits of the City of Los Angeles as said limits now or may hereafter exist solely under the rights and privileges granted by said Ordinance No. 6959 (New Series), and said Southern California Telephone Company, its successors or assigns, shall surrender, without compensation, at the option of the city, all rights acquired by it in any manner whatsoever by or through any other franchise heretofore granted and effective in any portion of the city as the same now exists, or heretofore or hereafter granted and effective in any territory outside of the limits of said city as the same now exists, and which may hereafter be incorporated in or annexed to said city, and shall surrender the whole of any such franchise, together with all rights and privileges granted thereby, and exercised thereunder, whenever the limits of said city shall be enlarged by the addition of territory through annexation or consolidation proceedings which territory is inclusive of the territory covered by said franchise. In the event said city shall exercise its option to require said Southern California Telephone Company, its successors or assigns, to surrender any of its rights or privileges under any of said franchises, as above provided, said city shall exercise the same by the adoption of a resolution of its legislative body, requiring said company to surrender the rights and privileges set forth in said resolution. Upon the adoption of any such resolution the rights or privileges therein contained shall ipso facto be and become forfeited, and said Southern California Telephone Company, its successors and assigns, shall, by the acceptance of the conditions contained in this ordinance, as hereinafter provided, be deemed to fully consent thereto.' 50 The court found: 'Subsection 2 of section of Ordinance No. 35,474 (New Series) (Exhibit 'B' to the complaint on file herein) was not intended by the City of Los Angeles or its Council to require, or to grant said City an option to require, a surrender or forfeiture of any rights or obligations of Southern California Telephone Company or plaintiff under the state franchise granted said corporations or either of them pursuant to section 536 of the Civil Code, and neither Southern California Telephone Company nor plaintiff agreed or intended to agree to the surrender or forfeiture of any rights or obligations under said franchise.' 'Neither plaintiff nor Southern California Telephone Company made any representation to the City of Los Angeles, the Public Utilities Commission of the State of California or the Railroad Commission of the State of California that it had surrendered or forfeited or would surrender or forfeit any of its rights or obligations under its state franchise granted by section 536 of the Civil Code within the areas or any of the areas annexed to or consolidated with the City of Los Angeles since May 19, 1905, that plaintiff would continue after February 8, 1952, making franchise payments to said City for the right to construct, maintain or operate telephone or telegraph lines on the public roads, highways and streets and other public places within areas which have been annexed to or consolidated with said City since May 19, 1905, or that under any new franchise it might obtain from said City plaintiff would make payments computed on the same basis as payments were computed under the franchise granted by Ordinance 6959 (New Series). No declaration, act or conduct of Southern California Telephone Company or plaintiff was intended by said Southern California Telephone Company or plaintiff to lead, nor has it led, the City of Los Angeles to believe that either Southern California Telephone Company or plaintiff had surrendered or forfeited or would surrender or forfeit any rights or obligations under said state franchise or that under any new franchise it might obtain from said City plaintiff would make payments computed on the same basis as payments were computed under the franchise granted by said Ordinance No. 6959.' 51 The correct rule is stated in Overton v. Vita-Food Corp., 94 Cal.App.2d 367, at page 370, 210 P.2d 757, at page 759: 'Appellant first says that we are not bound by the trial court's construction of the contract and are called upon to determine its meaning as a matter of law. Counsel cite Moore v. Wood, 26 Cal.2d 621, 630, 160 P.2d 772; In re Estate of Platt, 21 Cal.2d 343, 352, 131 P.2d 825, and Texas Co. v. Todd, 19 Cal.App.2d 174, 185, 64 P.2d 1180. This rule applies only where the trial court's decision was based solely on the terms of the written instrument. Union Nat. Bank v. Hunter, 93 Cal.App.2d 669, 673, 209 P.2d 621. This was the situation in the cases cited by counsel. The rule is otherwise where parol evidence is introduced in aid of interpretation of the contract and where the evidence is such that conflicting inferences may be drawn therefrom. In such case the rule is that a reviewing court will accept or adhere to the interpretation of a contract adopted by the trial court and not substitute another of its own. In re Estate of Rule, 25 Cal.2d 1, 11, 152 P.2d 1003, 155 A.L.R. 1319.' 52 See, also, Town of Suisun City v. Pacific Gas, etc., Co., 35 Cal.App. 380, 170 P. 1078; Iowa Telephone Co. v. City of Keokuk, D.C.S.D.Iowa, 226 F. 82, 99-100; Town of Golconda v. Field, 108 Ill. 419, 427-428; Abbott v. City of Duluth, C.C.D.Minn., 104 F. 833, 837-838; Farmer & Getz v. Columbiana County Telephone Co., 72 Ohio St. 526, 74 N.E. 1078; Wright v. Glen Telephone Co., 112 App.Div. 745, 99 N.Y.S. 85; State ex rel. Larimer v. Chariton Telephone Co., 173 Iowa 497, 155 N.W. 968, 970; City of Lansing v. Michigan Power Co., 183 Mich. 400, 150 N.W. 250, 251; T. B. Townsend Brick & Contracting Co. v. Central Trust Co., 6 Cir., 187 F. 63, 70. 53 Stats. 1905, p. 777, Public Utilities Code sections 6001-6017. 54 Stats.1905, pp. 980, 994, Charter, § 2, subd. 25. See Stats.1917, pp. 1686, 1691; Charter, art. 1, § 2, subd. 51. 55 The pertinent provisions of Ordinance 58,200 are: 'Sec. 5. 1. The council shall, if it proposes to grant any such franchise, permit or privilege, advertise the fact of such application, together with the statement that it is proposed to grant the same, once in a newspaper of general circulation, printed, published and circulated in said city. '2. Such advertisement shall state the character of the franchise, permit or privilege proposed to be granted, * * * shall state, (except in the case of a franchise granted for ten (10) years to replace a franchise about to expire), that sealed bids therefor will be opened at a stated time and place, and that the franchise, permit or privilege will be awarded to the bidder offering: '(a) To pay to the city during the franchise, permit or privilege, the highest percentage of gross annual receipts received from the use, operation or possession of such franchise, permit or privilege; provided, that such percentage of gross annual receipts shall not be less than two per cent (2%) of such gross annual receipts; or '(b) To pay to the city such other compensation or consideration for the use, permit or privilege as may be prescribed by the Council in the advertisement for bids and notice of sale; * * * provided, that the Council may, in said advertisement for bids and notice of sale, invite bids on any one, or all, or any part of the bases prescribed under paragraphs (a) and (b) of subsection 2, of section 5 of this ordinance. '(c) The terms and conditions to be imposed upon the grantee on account of the use, operation or possession of such franchise permit or privilege shall be included in said advertisement for bids and notice of sale. 56 See, also, City of Spokane v. Spokane Gas & Fuel Co., 175 Wash. 103, 26 P.2d 1034, 1035; City of Spokane v. Spokane Gas & Fuel Co., 182 Wash. 475, 47 P.2d 671, 674-675. 57 Under the King franchise, Southern, and later Pacific, paid the city 2% of their gross local telephone receipts from telephones located within the boundaries of the city as they from time to time existed, plus 2% of a portion of the gross toll receipts from the same telephones. The agreement of January 31, 1947, between the city and Southern settled litigation as to payments under the King franchise. It provided for payment of 2% of 85% of all gross amounts charged for telephone service at telephone stations of Southern within the city and classifiable to certain accounts of the uniform system of accounts for telephone companies prescribed by the Federal Communication Commission. Payments were made under the King Franchise and the agreement until February 8, 1952, when the King franchise expired. The court found that the payment provisions of the King franchise and of the agreement of January 31, 1947, as applied to a new franchise, would require Pacific to pay the city compensation based in part upon revenues attributable to plant on private property, both within and outside the franchise area, and plant on public property outside such area.