[Federal Register Volume 62, Number 213 (Tuesday, November 4, 1997)]
[Rules and Regulations]
[Pages 59583-59605]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-29117]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Parts 42 and 61
[CC Docket No. 96-61; FCC 97-293]
Policy and Rules Concerning the Interstate, Interexchange
Marketplace
AGENCY: Federal Communications Commission.
ACTION: Final rule.
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SUMMARY: The Order on Reconsideration (Order) released August 20, 1997
reconsiders the Second Report and Order in this docket (61 FR 59340
(November 22, 1996)). The Order modifies the Second Report and Order
by: adopting permissive detariffing for interstate, domestic,
interexchange direct-dial services; adopting permissive detariffing for
the first 45 days of service to new customers that contact the local
exchange carrier to choose their primary interexchange carrier; and
eliminating the requirement that nondominant interexchange carriers
make publicly available information concerning current rates, terms,
and conditions for all of their interstate, domestic, interexchange
services, except in the case of dial-around 0+ services from aggregator
locations.
EFFECTIVE DATE: December 4, 1997.
FOR FURTHER INFORMATION CONTACT: Lisa Choi, Attorney, Common Carrier
Bureau, Policy and Program Planning Division, (202) 418-1580. For
additional information concerning the information collections contained
in this Order contact Judy Boley at (202) 418-0214, or via the Internet
at jboley@fcc.gov.
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Order
adopted August 15, 1997, and released August 20, 1997. The full text of
this Order is available for inspection and copying during normal
business hours in the FCC Reference Center, 1919 M St., NW, Room 239,
Washington, DC The complete text also may be obtained through the World
Wide Web, at http://www.fcc.gov/Bureaus/Common Carrier/Orders/fcc97-
293.wp, or may be purchased from the Commission's copy contractor,
International Transcription Service, Inc., (202) 857-3800, 1231 20th
St., NW, Washington, DC 20036.
Regulatory Flexibility Analysis
As required by the Regulatory Flexibility Act, the Order contains a
Final Regulatory Flexibility Analysis on Reconsideration which is set
forth in the Order on Reconsideration. A brief description of the
analysis follows. Pursuant to section 604 of the Regulatory Flexibility
Act, the Commission performed a comprehensive analysis of the Order on
Reconsideration with regard to small entities. This analysis includes:
(1) A succinct statement of the need for, and objectives of, the
Commission's decisions in the Order on Reconsideration; (2) a summary
of the significant issues raised by the public comments in response to
the initial regulatory flexibility analysis, a summary of the
Commission's assessment of these issues, and a statement of any changes
made in the Order on Reconsideration as a result of the comments; (3) a
description of and an estimate of the number of small entities to which
the Order on Reconsideration will apply; (4) a description of the
projected reporting, recordkeeping and other compliance requirements of
the Order on Reconsideration, including an estimate of the classes of
small entities which will be subject to the requirement and the type of
professional skills necessary for compliance with the requirement; (5)
a description of the steps the Commission has taken to minimize the
significant economic impact on small entities consistent with the
stated objectives of applicable statutes, including a statement of the
factual, policy, and legal reasons for selecting the alternative
adopted in the Order on Reconsideration and why each one of the other
significant alternatives to each of the Commission's decisions which
affect small entities was rejected.
The rules adopted in this Order on Reconsideration are necessary to
implement the provisions of the Telecommunications Act of 1996.
Paperwork Reduction Act
The Federal Communications Commission (FCC) has received Office of
Management and Budget (OMB) approval for the following public
information collections pursuant to the Paperwork Reduction Act of
1995, Pub. L.104-13. An agency may not conduct or sponsor and a person
is not required to respond to a collection of information unless it
displays a currently valid control number.
OMB Control Number: 3060-0704.
Expiration Date: February 28, 1998.
Title: Policy and Rules Concerning the Interstate, Interexchange
Marketplace; Implementation of section 254(g) of the Communications Act
of 1934, as amended, CC Docket No. 96-61.
Respondents: Business or other for-profit.
Public reporting burden for the collection of information is
estimated as follows:
[[Page 59584]]
----------------------------------------------------------------------------------------------------------------
No. of
Information collection respondents Annual hour burden per response Total annual burden
(approx.)
----------------------------------------------------------------------------------------------------------------
Detariffing*..................... 0 0.............................. 0.
Certification requirement........ 519 0.5 hour....................... 259.5.
Tariff cancellation requirement: 519 2 hours per page (1,252 pages) 2,504 (one-time).
completely cancel tariffs. (one-time).
Tariff cancellation requirement: 519 2 hours per page (36,047 pages) 72,094 (one-time).
revise mixed tariffs to remove (one-time).
domestic services.
Information disclosure 0 0.............................. 0.
requirement**.
Recordkeeping requirement........ 519 2 hours........................ 1,038.
----------------------------------------------------------------------------------------------------------------
* The Commission affirmed its decision in the Second Report and Order to eliminate the requirement that
nondominant interexchange carriers file tariffs for interstate, domestic, interexchange services. In the
Order, the Commission has decided to (1) permit nondominant interexchange carriers to file tariffs for the
provision of dial-around 1+ services using a nondominant interexchange carrier's carrier access code; (2)
permit nondominant interexchange carriers to file tariffs for the initial 45 days of domestic, interstate,
interexchange service, or until there is a written contract between the carrier and the customer, whichever is
earlier; and (3) eliminate the public disclosure requirement.
** The Commission has eliminated the information disclosure requirement.
Total Annual Burden: 75,895.5 hours, of which 74,598 will be one-
time.
Frequency of Response: Annual, except for tariff cancellation
requirement, which will be one-time, and on occasion.
Estimated Annual Reporting and Recordkeeping Costs: $435,000.
Needs and Uses: The attached item affirms the Commission's previous
decision in the Second Report and Order to eliminate the requirement
that nondominant interexchange carriers file tariffs for interstate,
domestic, interexchange telecommunications services. In this Order, the
Commission has eliminated this information disclosure requirement. In
addition, the Commission has reconsidered its decision to require
affected carriers to maintain, and to make available to the public in
at least one location, information concerning their rates, terms and
conditions for all of their interstate, domestic, interexchange
services.
Public reporting burden for the collection of information is as
noted above. Send comments regarding the burden estimate or any other
aspect of the collections of information, including suggestions for
reducing the burden to Performance Evaluation and Records Management,
Washington, DC 20554.
Synopsis of Order on Reconsideration
I. Introduction
1. On October 29, 1996, the Commission adopted the Second Report
and Order (61 FR 59340 (November 22, 1996)) in its proceeding reviewing
the regulation of interstate, domestic, interexchange
telecommunications services in light of the passage of the
Telecommunications Act of 1996 (1996 Act) and the increasing
competition in the interexchange market over the last decade.
Consistent with the intent of the 1996 Act to provide a ``pro-
competitive, deregulatory'' national policy framework for
telecommunications and information technologies and services, Congress
directed the Commission to forbear from applying any provision of the
Communications Act or the Commission's regulations if certain
conditions are met.
2. We determined in the Second Report and Order that the statutory
forbearance criteria in section 10 of the Communications Act were met
for complete detariffing (``Complete detariffing'' refers to a policy
of neither requiring nor permitting nondominant interexchange carriers
to file tariffs pursuant to section 203 of the Communications Act for
their interstate, domestic, interexchange services. ``Permissive
detariffing'' refers to a policy of allowing, but not requiring,
nondominant interexchange carriers to file tariffs for such services.)
of the interstate, domestic, interexchange services offered by
nondominant interexchange carriers, and, therefore, that we would no
longer allow such carriers to file tariffs pursuant to section 203 of
the Communications Act for their interstate, domestic, interexchange
services, with the limited exception of AT&T's provision of 800
directory assistance and analog private line services. At the same
time, we recognized that a transition period was necessary to allow
nondominant interexchange carriers time to adapt to complete
detariffing. We therefore ordered all nondominant interexchange
carriers to cancel their tariffs for such services within nine months
from the effective date of the Second Report and Order. We maintained
the tariffing requirement for the international portion of bundled
domestic and international service offerings. We further required
nondominant interexchange carriers to: (1) File an annual certification
stating that they are in compliance with the geographic rate averaging
and rate integration requirements of section 254(g) of the
Communications Act; (2) maintain supporting documentation on the rates,
terms, and conditions of their interstate, domestic, interexchange
services that they could submit to the Commission within ten business
days upon request; and (3) make publicly available information
concerning current rates, terms, and conditions for all of their
interstate, domestic, interexchange services. The basis for the
information disclosure requirement was to ensure that the public was
provided with the information necessary to determine whether a
nondominant interexchange carrier was adhering to the rate averaging
and rate integration requirements of section 254(g) of the
Communications Act. In addition, we determined that a public disclosure
requirement would promote the public interest by making it easier for
consumers, including resellers, to compare service offerings.
3. Our actions in the Second Report and Order were intended to
advance Congress' pro-competitive and deregulatory objectives by
eliminating regulatory requirements that the Commission determined were
no longer necessary to protect consumers or serve the public interest.
We concluded that our actions would foster increased competition in the
market for interstate, domestic, interexchange services by deterring
tacit price coordination, eliminating the possible invocation of the
``filed-rate'' doctrine, and establishing market conditions that more
closely resemble an unregulated environment. We found that elimination
of the possible invocation of the ``filed-rate'' doctrine is in the
public interest
[[Page 59585]]
because, pursuant to the ``filed-rate'' doctrine articulated by the
courts, where a filed tariff rate, term, or condition differs from a
rate, term, or condition in a non-tariffed carrier-customer contract,
the carrier is required to assess the tariff rate, term, or condition.
See Armour Packing Co. v. United States, 209 U.S. 56 (1908); American
Broadcasting Cos., Inc. v. FCC, 643 F.2d 818 (D.C. Cir. 1980); see also
Aero Trucking, Inc. v. Regal Tube Co., 594 F.2d 619 (7th Cir. 1979);
Farley Terminal Co., Inc. v. Atchison, T. & S.F. Ry., 522 F.2d 1095
(9th Cir.), cert. denied, 423 U.S. 996 (1975). Consequently, if a
carrier unilaterally changes a rate by filing a tariff revision, the
newly filed rate becomes the applicable rate for all customers of that
service unless the revised rate is found to be unjust, unreasonable, or
unlawful under the Communications Act. See 47 U.S.C. 201(b); see also
Maislin Industries, U.S., Inc. v. Primary Steel, Inc., 497 U.S. 116
(1990).
4. Several parties appealed the Second Report and Order to the
United States Court of Appeals for the District of Columbia Circuit and
filed motions requesting that the court stay the Second Report and
Order pending judicial review. On February 13, 1997, the court granted
these motions. The Commission's rules adopted in this proceeding,
therefore, are stayed until the court issues its determination on the
merits of the appeal. Accordingly, nondominant interexchange carriers
are currently required to file tariffs for their interstate, domestic,
interexchange services.
5. In addition, eleven parties filed petitions requesting that we
reconsider or clarify the rules we adopted in the Second Report and
Order. The United States Court of Appeals for the District of Columbia
Circuit deferred the briefing schedule in the appeal of the rules
adopted in the Second Report and Order to allow the Commission to act
on these petitions for reconsideration. MCI Telecommunications Corp. v.
FCC, No. 96-1459 (D.C. Cir. April 4, 1997). The court directed the
parties to file motions to govern further proceedings 60 days after
April 4, 1997. Id. The Commission issued a public notice to establish a
pleading cycle for the issues raised in the petitions for
reconsideration and clarification. The public notice sought comments on
or oppositions to the petitions and replies. Policy and Rules
Concerning the Interstate, Interexchange Marketplace, CC Docket No. 96-
61, Public Notice, Petitions for Reconsideration and Clarification of
Action in Rulemaking Proceedings (released January 7, 1997). For
convenience, we will cite the parties' filings in these three phases as
petitions, comments, and replies, respectively. For the reasons set
forth below, we grant requests for reconsideration on three issues.
Specifically, we modify the Second Report and Order by: (1) Adopting
permissive detariffing for interstate, domestic, interexchange direct-
dial services to which end-users obtain access by dialing a carrier's
access code (CAC); (2) adopting permissive detariffing for the first 45
days of service to new customers that contact the local exchange
carrier (LEC) to choose their primary interexchange carrier (PIC); and
(3) eliminating the requirement that nondominant interexchange carriers
make publicly available information concerning current rates, terms,
and conditions for all of their interstate, domestic, interexchange
services, except in the case of dial-around 0+ services from aggregator
locations, pursuant to section 226 of the Communications Act. In
another proceeding, we are considering the issue of forbearing from
applying section 226, which requires operator service providers to file
informational tariffs. See Billed Party Preference for InterLATA 0+
Calls, CC Docket No. 92-77, Second Further Notice of Proposed
Rulemaking, 11 FCC Rcd 7274 (1996); Public Notice, DA 96-1695 (released
October 10, 1996) (seeking further comment). We deny all of the other
petitions for reconsideration. We also make a number of clarifications
in this Order on Reconsideration.
II. Detariffing Issues
A. Forbearance From Tariff Filing Requirements for the Interstate,
Domestic, Interexchange Services of Nondominant Interexchange Carriers
i. Background
6. In the Second Report and Order, we concluded that the statutory
forbearance criteria in section 10 were satisfied, based on our
findings that: (1) Tariffs are not necessary to ensure that the rates,
practices, classifications, and regulations of nondominant
interexchange carriers for interstate, domestic, interexchange services
are just and reasonable and not unjustly or unreasonably
discriminatory; (2) tariffs for interstate, domestic, interexchange
services of nondominant interexchange carriers are not necessary to
protect consumers; and (3) complete detariffing of interstate,
domestic, interexchange services provided by nondominant interexchange
carriers, and not permissive detariffing of such services, is in the
public interest. We concluded that permissive detariffing of
interstate, domestic, interexchange services provided by nondominant
interexchange carriers is not in the public interest because it: (1)
Would not necessarily eliminate possible invocation of the ``filed-
rate'' doctrine; (2) would create a risk that nondominant interexchange
carriers would file tariffs to send price signals and to manipulate
prices; and (3) would impose administrative costs on the Commission,
which must maintain and organize tariff filings for public inspection.
We further concluded that the Commission has the authority under
section 10 to prohibit carriers from filing tariffs. Accordingly,
pursuant to section 10, we determined that we must forbear from
applying section 203 tariff filing requirements to the interstate,
domestic, interexchange services offered by nondominant interexchange
carriers and not permit nondominant interexchange carriers to file
tariffs for their interstate, domestic, interexchange services, with
the limited exception of AT&T's provision of 800 directory assistance
and analog private line services.
ii. Positions of the Parties
7. Frontier, Telecommunications Resellers Association (TRA), and
Telco petition the Commission to reconsider its decision to adopt
complete detariffing, and urge the Commission to adopt permissive
detariffing for the interstate, domestic, interexchange services
offered by nondominant interexchange carriers. TRA further argues that
the increased costs and burdens of a complete detariffing regime will
adversely affect small and mid-sized nondominant interexchange
carriers, which have fewer resources. TRA proposes specifically that
the Commission adopt permissive detariffing in conjunction with a
carrier-administered electronic tariff filing system, thereby relieving
the Commission of the burden of administering and maintaining tariff
filings. AT&T, CompTel, SBC, U S WEST, and WorldCom also support
permissive detariffing.
8. AT&T, CompTel, and WorldCom argue that section 10 only
authorizes the Commission to refrain from requiring tariffs, and does
not empower the agency to prohibit carriers from voluntarily complying
with section 203. These parties, and others, also challenge the
Commission's determination that permissive detariffing is not in the
public interest. Specifically, these parties argue that: (1) The
``filed-rate'' doctrine would no longer apply if the Commission adopted
a permissive detariffing regime because the tariffed
[[Page 59586]]
rate would no longer be the only permissible rate; (2) even if the
``filed-rate'' doctrine would continue to apply, that doctrine and
carriers' ability to limit their liability through tariff provisions,
benefit consumers because the terms of the carrier-customer
relationship are certain; (3) price coordination would be difficult, if
not impossible, with permissive detariffing, because carriers would at
best have fragmentary information about their competitors' rates,
terms, and conditions; (4) requiring nondominant interexchange carriers
to make price and service information publicly available allows
carriers to coordinate prices as easily as with filed tariffs; (5) even
under a system of permissive detariffing, a carrier could not refuse to
accommodate a customer's request for services tailored to its specific
needs on the ground that the request is beyond the scope of the
carrier's tariff; (6) complete detariffing significantly increases
transactional and administrative costs, especially for small carriers,
by forcing nondominant interexchange carriers to conclude written
agreements with every customer and notify them of modifications to the
carriers' rates, terms, and conditions; and (7) permissive detariffing,
or even mandatory tariffing, promotes vigorous competition to an even
greater extent than complete detariffing, because carriers can react to
market conditions quickly and without appreciable costs by filing a new
tariff.
9. Ad Hoc Users Committee, American Petroleum Institute (API), and
the Television Networks oppose the petitions of TRA and Frontier, at
least to the extent that they request reconsideration of complete
detariffing of individually-negotiated service arrangements. Ad Hoc
Users Committee and API contend that the petitions for reconsideration
should be denied because they merely repeat arguments previously made
and rejected by the Commission in the Second Report and Order. In
addition, these parties argue that complete detariffing, and not
permissive detariffing, of interstate, domestic, interexchange services
offered by nondominant interexchange carriers is in the public
interest, because: (1) The ``filed-rate'' doctrine would continue to
apply under a system of permissive detariffing; (2) the ``filed-rate''
doctrine harms consumers because it allows carriers unilaterally to
alter or abrogate agreements; (3) complete detariffing ensures that
carriers would no longer be able to refuse to accommodate a customer's
request for services tailored to its specific needs on the grounds that
the request conflicts with the carriers' tariffs; and (4) tariffs delay
rapid responses to customer demands. API further argues that the 1996
Act gives the Commission authority to prohibit tariff filings.
iii. Discussion
10. We deny the petitions of Frontier, Telco, and TRA urging us to
adopt permissive detariffing for all interstate, domestic,
interexchange services. As discussed infra, arguments presented by
these petitioners, and others, have persuaded us that permissive
detariffing is warranted in certain limited circumstances.
Specifically, we find that permissive detariffing is warranted for: (1)
Interstate, domestic, interexchange direct-dial services to which end-
users obtain access by dialing a carrier's CAC (dial-around 1+
services); (A CAC enables callers to reach any carrier (presubscribed
or otherwise) from any telephone. During the current transition from
five to seven digit CACs, both five digit CACs (10XXX) and seven digit
CACs (101XXXX) are in use. On April 11, 1997, the Commission determined
that the transition will end on January 1, 1998. See Administration of
the North American Numbering Plan, Carrier Identification Codes (CICs),
CC Docket 92-237, Second Report and Order, 62 FR 19056 (April 18,
1997), stay and recon. pending. Thus, after January 1, 1998, only seven
digit CACs may be used.) and (2) interstate, domestic, interexchange
services provided by a nondominant interexchange carrier for the
initial 45 days of service or until there is a written contract between
the carrier and the customer, in those limited circumstances in which a
prospective customer contacts the LEC to select an interexchange
carrier or to initiate a PIC change (LEC-implemented new customer
services). Aside from these two limited categories of service, the
petitions and comments do not present any arguments that were not
considered and addressed in the Second Report and Order. Thus, we find
no basis upon which to reconsider our determination that the statutory
criteria are met for completely detariffing all other interstate,
domestic, interexchange services of nondominant interexchange carriers,
except for dial-around 0+ services from aggregator locations, pursuant
to section 226 of the Communications Act.
11. In the Second Report and Order, we extensively considered and
rejected the argument that the Commission does not have statutory
authority under section 10 to adopt complete detariffing. No new
arguments have been presented that persuade us to reconsider our
decision. Therefore, we reaffirm our earlier conclusion that Congress,
in section 10, provided the Commission with broad forbearance authority
that enables the agency to eliminate tariff filings under section 203.
12. In the Second Report and Order, we also considered all of the
arguments advanced by those parties now urging us to reconsider our
determination that permissive detariffing is in the public interest and
complete detariffing is not. With the exception of dial-around 1+
services and LEC-implemented new customer services, we affirm our
conclusion in the Second Report and Order that permissive detariffing
of interstate, domestic, interexchange services offered by nondominant
interexchange carriers is not in the public interest, for the reasons
set forth in our prior order. We are not persuaded that a permissive
detariffing regime would eliminate possible invocation of the ``filed-
rate'' doctrine. In a permissive detariffing regime, a nondominant
interexchange carrier may choose to file a tariff for an interstate,
domestic, interexchange service, even if the carrier has signed an
underlying contract with the customer. If a carrier files a tariff for
an interstate, domestic, interexchange service with the Commission,
whether on a permissive or mandatory basis, section 203(c) requires the
carrier to provide service at the rates, and on the terms and
conditions, set forth in the tariff until the carrier files a
superseding tariff cancelling, or changing the rates, terms, and
conditions of the tariffed offering. Thus, if the tariffed rates,
terms, and conditions differ from those in the contract, section
203(c), in all likelihood, requires the carrier to provide service at
the rates, and on the terms and conditions, set forth in the tariff.
Because the ``filed-rate'' doctrine is a judicially-created doctrine,
the determination of how to apply the doctrine in a permissive
detariffing regime when the tariffed rates, terms, or conditions differ
from those contained in a contract must necessarily be left to the
courts. See supra paragraph 3. Only with a complete detariffing regime,
under which the carrier-customer relationship would more closely
resemble the legal relationship between service providers and customers
in an unregulated, competitive environment, can we definitively avoid
the negative consequences for consumers of the ``filed-rate'' doctrine.
The Common Carrier Bureau, on numerous occasions, has issued Orders
Designating Issues for Investigation to examine whether a carrier's
proposed unilateral changes in a tariff meet the ``substantial cause''
[[Page 59587]]
standard applied by the Commission. See AT&T Contract Tariff No. 374,
Transmittal Nos. CT 2952 and CT 3441, Order Designating Issues for
Investigation, DA 95-1784 (Common Carrier Bureau released August 11,
1995); AT&T Communications Contract Tariff No. 360, Transmittal No. CT
3076, CC Docket No. 95-146, Order Designating Issues for Investigation
(Common Carrier Bureau released September 8, 1995).
13. Moreover, we reject carriers' arguments that the ``filed-rate''
doctrine benefits customers by creating certainty in the carrier-
customer relationship. In fact, the ``filed-rate'' doctrine creates
uncertainty in the carrier-customer relationship. Invocation of the
``filed-rate'' doctrine can be especially harmful to consumers who have
signed long-term service contracts with interexchange carriers. As Ad
Hoc Users Committee, API and the Television Networks point out, the
doctrine permits interexchange carriers subsequently to file a tariff
that differs from the long-term contract, and if justified by
substantial cause, unilaterally to alter or abrogate their contractual
obligations in a manner that is not available in most commercial
relationships and that undermines consumers' legitimate business
expectations. The ``filed-rate'' doctrine also harms residential and
small business consumers who utilize mass market services and do not
enter into long-term service arrangements. Such customers may purchase
these mass market services in response to representations made by sales
agents of the interexchange carrier or advertisements. In addition,
such customers may assume the interexchange carrier will not modify its
rates without actual notice to the customer. In the event of a dispute
about the representations made by a sales agent, or a subsequent
modification to an interexchange carrier's rates, terms, or conditions
without actual notice to customers, a customer would be bound by the
tariffed rates, terms, and conditions.
14. Moreover, we reaffirm our finding that permissive detariffing
would facilitate tacit price coordination, because nondominant
interexchange carriers could file tariffs to send price signals. On
further reflection, however, we are persuaded by the comments of AT&T,
TRA, and Telco, which maintain that complete detariffing, in
conjunction with a public disclosure requirement, may not effectively
impede tacit price coordination, because a nondominant interexchange
carrier's rates, terms, and conditions for its interstate, domestic,
interexchange services would still be available to its competitors in
one location. We adopted the public disclosure requirement primarily to
aid enforcement of the geographic rate averaging and rate integration
requirements of section 254(g). In response to petitions asking us to
reconsider the information disclosure requirements, we determine, as
discussed below, that we can effectively meet our obligations to
enforce section 254(g) without the public disclosure requirement. We
conclude that complete detariffing, without a public disclosure
requirement, will more effectively deter tacit price coordination.
15. We recognized in the Second Report and Order that complete
detariffing would change in significant respects the manner in which
nondominant interexchange carriers conduct their business. We
considered the arguments raised by the parties in their petitions for
reconsideration and comments regarding costs and administrative burdens
associated with complete detariffing that would be avoided if carriers
were allowed to file tariffs. With the exception of casual calling
services and LEC-implemented new customer services, these arguments
either essentially restate claims that were advanced in the initial
phase of this proceeding in response to the NPRM and were rejected in
the Second Report and Order, or are new, but unsupported by credible
evidence. For example, Frontier, CompTel and SBC contend, as numerous
parties did in earlier comments in this proceeding, that complete
detariffing will increase the costs and administrative burdens on
nondominant interexchange carriers because they will have to enter into
individually negotiated contracts with every end user in order to
establish a binding contractual relationship. Commenters assert that
the costs associated with establishing an enforceable contractual
relationship in the absence of tariffs will be ``enormous,''
``significant,'' and ``substantial;'' however, they do not provide any
evidence in support of these claims. In short, these parties did not
raise any new arguments or provide any credible new evidence concerning
the costs of providing interstate, domestic, interexchange service in a
detariffed environment, as required by section 405 of the
Communications Act. We, therefore, affirm our conclusion, for the
reasons set forth in the Second Report and Order, that requiring
nondominant interexchange carriers to conduct their businesses as do
other businesses in unregulated markets will not substantially increase
their costs.
16. In contrast, parties offered additional credible evidence on
reconsideration concerning the costs and burdens to carriers of
providing dial-around 1+ services and LEC-implemented new customer
services in the absence of tariffs. As discussed below, we reconsider
our decision in light of this evidence, and determine that permissive
detariffing in these specific, limited instances is in the public
interest. With respect to other interstate, domestic, interexchange
services, we affirm our finding that the benefits and pro-competitive
effects of complete detariffing outweigh any increased transactional or
administrative costs resulting from the shift to complete detariffing.
17. Finally, we reject the argument that permissive detariffing or
mandatory tariffing would promote competition more effectively than
complete detariffing. As discussed above, allowing nondominant
interexchange carriers to file tariffs for interstate, domestic,
interexchange services creates the risk that such carriers will use
these tariffs to send price signals in an effort to manipulate prices.
Moreover, for the reasons discussed above and in the Second Report and
Order, requiring nondominant interexchange carriers to conduct their
businesses as do other businesses in unregulated markets will not
substantially increase their costs. We, therefore, conclude that
complete detariffing of the interstate, domestic, interexchange
services of nondominant interexchange carriers is in the public
interest, with the exception of dial-around 1+ services, LEC-
implemented new customer services and section 226 tariffs associated
with dial-around 0+ calls.
B. Casual Calling Services
i. Background
18. In contrast to other interstate, domestic, interexchange
services, casual calling services are those services that do not
require the calling party to establish an account with an interexchange
carrier or otherwise presubscribe to a service. ``Casual calling''
refers to services such as collect calling, the use of a third-party
credit card, or dial-around through the use of an access code. Casual
calling does not include services for which customers presubscribe to
an interexchange carrier or otherwise establish an account with an
interexchange carrier prior to using the service, such as by obtaining
a calling card, in advance, from an interexchange carrier. References
to
[[Page 59588]]
casual calling in this reconsideration do not pertain to section 226
informational tariffs. We concluded in the Second Report and Order that
the record did not support a finding that complete detariffing would
cause nondominant interexchange carriers to cease offering such
services. Rather, we found that nondominant interexchange carriers have
options other than tariffs by which they can ensure the establishment
of a contractual relationship with casual callers that would legally
obligate such callers to pay for the telecommunications service they
use and bind them to the carriers' terms and conditions. Second Report
and Order at 59350, paragraph 58. We stated that a casual caller
providing billing or payment information, such as a credit card or
billing number, and completing use of the telecommunications service,
may be deemed to have accepted a legal obligation to pay for any such
services rendered. We also noted that a carrier could alternatively
seek recovery under an implied-in-fact contract theory. An implied-in-
fact contract ``refers to that class of obligations which arises from
mutual agreement and intent to promise, when the agreement and promise
have simply not been expressed in words. Despite the fact that no words
of promise or agreement have been used, such transactions are
nevertheless true contracts, and may properly be called inferred
contracts or contracts implied in fact.'' 1 Williston on Contracts,
Sec. 1.5, at 20-21 (4th ed. 1990); see also 1 Arthur L. Corbin, et al.,
Corbin on Contracts, Sec. 1.19, at 55-57 (rev. ed. 1993) (stating that
an implied-in-fact contract requires the same terms as an express
contract and those terms are determined through a process of
implication and inference). We further concluded on the basis of the
record before us at that time that the competitive benefits of complete
detariffing of nondominant interexchange carriers' interstate,
domestic, interexchange service outweighed any potential increased
costs resulting from detariffing such services.
ii. Positions of the Parties
19. AT&T, Frontier, Telco, and TRA petition the Commission to
reconsider its decision to adopt complete detariffing for casual
calling services and argue that the Commission, instead, should allow
nondominant interexchange carriers to file tariffs for these services.
CompTel, Television Networks, SBC, Sprint and WorldCom support this
request. TRA and Sprint contend that unlike most other businesses,
common carriers are required by statute to provide service upon demand
prior to payment for their services. AT&T argues that allowing
nondominant interexchange carriers to file tariffs for casual calling
services is the simplest and most efficient means of ensuring a
contractual relationship between carriers and casual callers. These
parties, and others, contend that, in the absence of tariffs, carriers
would need to develop costly and burdensome mechanisms to ensure the
establishment of a legal relationship with casual callers to obligate
them to pay for the services they receive and to bind casual callers to
the terms and conditions of the service, including limitations on
liability.
20. Several of these parties also maintain that the alternatives to
tariffs that the Commission suggested in the Second Report and Order
are insufficient to ensure that carriers have a contractual basis for
enforcing their rates, terms, and conditions for casual calling
services. Specifically, these parties assert that neither the implied-
in-fact contract theory nor requiring customers to provide credit card
information or a billing number guarantees that a carrier will be able
to recover its charges for calls made by casual callers, because the
carrier will have to demonstrate that the parties agreed upon definite
terms. AT&T, Sprint, CompTel, and SBC assert that without tariffs,
interexchange carriers would have to resort to costly, repetitive,
state-by-state litigation to secure payment for services rendered. They
assert that the outcome of such litigation is uncertain, and that the
associated costs would inevitably be passed on to consumers.
21. AT&T argues that nondominant interexchange carriers, to ensure
the establishment of a contractual relationship with a casual caller,
would likely need to provide casual callers with the rates, terms, and
conditions, or at a minimum, the option of obtaining the rates, terms,
and conditions, prior to completion of the call. AT&T contends that
using a recorded announcement that provides the rates, terms, and
conditions of the call would greatly inconvenience callers by adding a
delay in call set-up time of between 1.5 and 2 minutes. AT&T further
maintains that even providing casual callers with the option of hearing
such information would add between 7 and 9 seconds to the call set-up
time. AT&T argues that this time delay is especially burdensome to the
casual caller because in most instances, the caller is placing the call
from a telephone away from the home in circumstances that necessitate
simplicity, convenience and speed. Moreover, AT&T contends that these
mechanisms would increase by approximately $0.33 to $0.77 the cost of
each call. AT&T asserts that the costs would be higher if the
nondominant interexchange carrier announces the rates, terms, and
conditions and lower if the carrier provides the option of hearing the
information. AT&T further argues that it may have underestimated this
incremental cost per call, because it was unable to calculate the cost
of playing an announcement to dial-around callers. AT&T also argues
that computers and fax machines are unable to recognize the
announcement, and, therefore, that any announcement would interfere
with a caller's ability to use casual calling services for computer
access or sending faxes. AT&T states, further, that an announcement of
the rates, terms, and conditions transmitted to a computer or fax
machine may be insufficient to create an enforceable contractual
relationship with the caller.
22. AT&T and Sprint also claim that a recorded announcement may not
even be an option for callers who use dial-around 1+ services, because
interexchange carriers may be unable to distinguish these calls from
direct dial 1+ calls placed from telephones presubscribed to that
carrier. Letter from Marybeth M. Banks, Director, Federal Regulatory
Affairs, Sprint, to William F. Caton, Acting Secretary, Federal
Communications Commission, April 30, 1997 (Sprint April 30 Ex Parte);
Letter from Marybeth M. Banks, Director, Federal Regulatory Affairs,
Sprint, to William F. Caton, Acting Secretary, Federal Communications
Commission, March 21, 1997 (Sprint March 21 Ex Parte). Direct-dial 1+
calls are those interstate, interexchange calls that an end-user makes
using his or her presubscribed interexchange carrier. A caller
completes this call by simply dialing 1 before the number being called.
In contrast, dial-around 1+ calls are generally those made by end-users
to access the interstate, domestic, interexchange services of an
interexchange carrier other than the carrier presubscribed to that
line. Once an end-user dials a carrier's CAC, the caller is connected
to that interexchange carrier, and may place a 1+ (dial-around 1+) or a
0+ (dial-around 0+) call using the services of that interexchange
carrier. End-users may use a dial-around service to take advantage of a
lower rate offered by a competing interexchange carrier for that
specific call, or during outages of its presubscribed interexchange
carrier's network. Sprint contends that the technology to distinguish
between these two types of
[[Page 59589]]
calls exists, but that this feature is not universally offered by all
LECs. Sprint contends that only those LECs with switches capable of
providing signalling using Signalling System 7 (SS7) protocol are able
to provide this feature. Moreover, Sprint asserts that several LECs
that have switches capable of providing SS7 do not offer this feature.
Sprint and AT&T further argue that the cost of implementing this
technology, where available, is significant and inevitably will be
passed on to consumers.
23. Several parties state that the increase in costs related to
ensuring that a legally enforceable relationship is established with
casual callers in the absence of tariffs may make it difficult for
carriers effectively to provide casual calling services, and may
ultimately result in carriers ceasing to offer these services
altogether.
24. Telco and SBC also argue that possible invocation of the
``filed-rate'' doctrine--a primary reason the Commission adopted
complete detariffing in the Second Report and Order--is not an issue
with respect to casual calling services, for which carriers do not
negotiate individual contracts. Frontier and SBC claim, moreover, that
contrary to the Commission's conclusions in the Second Report and
Order, the ``filed-rate'' doctrine is actually beneficial to consumers
because the ability to tariff a service ``promotes certainty'' in the
carrier-customer relationship. Frontier contends that this certainty is
particularly beneficial in situations such as casual calling, where the
carrier provides the service prior to establishing an enforceable
contractual relationship with the customer.
25. Finally, Western Union urges the Commission to allow
nondominant interexchange carriers to file tariffs for consumer
messaging services (e.g., telegram services). Western Union advances
essentially the same arguments in support of this claim that other
parties make in urging the Commission to adopt permissive detariffing
for casual calling services. Western Union asserts that customers often
convey to Western Union by telephone the message that they want
transmitted by telegram. As a result, Western Union contends that it
does not have an opportunity to formalize a written contract with the
customer that would bind the customer to its terms and conditions.
Western Union states that although the carrier could provide such
information orally at the time the customer telephones Western Union to
place an order, such a method of conveying the information would
confuse customers, and may not create a legally enforceable contract
that effectively limits the carrier's liability. Western Union further
contends that if carriers are unable to limit their liability
effectively, they may be forced to increase their rates or cease
offering consumer messaging services altogether, which would not be in
the public interest.
iii. Discussion
26. A number of parties urge us to reconsider our decision to adopt
complete detariffing for casual calling services in general. Sprint has
focused its comments on dial-around 1+ services. After examining
additional evidence presented by the parties on reconsideration, we
partially grant the petitions and adopt permissive detariffing, on an
interim basis, for a subset of casual calling services, specifically,
the provision of dial-around 1+ services. For all other types of casual
calling services that are the subject of this proceeding, we affirm our
determination that complete detariffing is warranted, and, therefore,
deny the petitions for reconsideration to this extent.
27. We note at the outset that the problems that nondominant
interexchange carriers maintain will arise with respect to ensuring the
establishment of a contractual relationship with casual callers in a
detariffed environment do not arise with calling cards. Because
customers obtain calling cards in advance of using the service, the
carrier can formalize a contractual relationship at the time the
customer obtains the card, rather than at the time the call is placed.
Consumers always have the option of obtaining a carrier's calling card
to make calls and carriers may choose to advertise calling cards as a
preferable alternative to casual calling in a detariffed environment.
28. With the exception of dial-around 1+ calls, discussed infra, we
affirm our prior finding that nondominant interexchange carriers have
reasonable options other than tariffs by which they can ensure the
establishment of a contractual relationship with casual callers that
would legally obligate such callers to pay for the services they use
and bind them to the carrier's terms and conditions. We recognize that
the implied-in-fact contract theory and the provision of credit card
information or a billing number, alone, do not guarantee that
nondominant interexchange carriers will have an enforceable contract
with the casual caller, if the caller does not have knowledge of the
carrier's rates, terms, and conditions prior to completion of the call.
Interexchange carriers, however, do not dispute that alternatives can
be created by which they can establish an enforceable contract with
casual callers. One alternative, as discussed by AT&T, is that
nondominant interexchange carriers could establish an enforceable
contract with casual callers by providing them with the rates, terms,
and conditions of the interstate, domestic, interexchange service by
operator or recorded announcements prior to completion of the call. The
parties acknowledge that an enforceable contract would exist if the
rates, terms, and conditions were provided prior to completion of the
call. Rather, these carriers argue only that providing such an
announcement of rates, terms, and conditions prior to completion of the
call would be burdensome to their casual calling customers. Many casual
calling services, including collect calling, and calls billed to third-
party numbers, however, already require intervention by the
interexchange carrier before the call is completed, and nondominant
interexchange carriers could provide this announcement at that time.
Furthermore, less burdensome alternatives may also be sufficient to
ensure the establishment of a contractual relationship. Another
alternative discussed by AT&T would be to provide casual callers with
the option of obtaining the rates, terms, and conditions prior to
completion of the call either through an operator or a recorded
announcement. We need not address whether this alternative is
sufficient to ensure the establishment of an enforceable contract,
because we conclude that providing the rates, terms, and conditions
prior to completion of the call would establish an enforceable contract
and, as discussed below, is a feasible alternative. Moreover, at a
minimum, we agree with Frontier and reaffirm our conclusion in the
Second Report and Order that if the customer has used the carrier's
service with knowledge of the rates, terms, and conditions, nondominant
interexchange carriers could seek recovery under an implied-in-fact
contract theory. Thus, we conclude that the fact that a casual caller
has not signed a written contract does not preclude a finding that a
legally enforceable obligation exists between the nondominant
interexchange carrier and the casual caller, especially when the
customer has knowledge of the carrier's charges.
29. We recognize that complete detariffing of casual calling
services may require nondominant interexchange
[[Page 59590]]
carriers to modify in significant respects the manner in which these
carriers bill and collect charges for their affected services. We
further recognize the concerns raised by AT&T and Sprint that the cost
of casual calls may increase and that casual callers may experience a
delay in call set-up time. Nevertheless, we affirm our prior conclusion
that the benefits of complete detariffing of casual calling services
except dial-around 1+ services are substantial. These benefits include
elimination of the possible invocation of the ``filed-rate'' doctrine,
decreased risk of tacit price coordination, and increased rate and
service information provided directly to casual callers to ensure that
a legal relationship is established between carriers and customers at
the time the caller uses the casual calling service. In our view, these
benefits outweigh the increased costs and delays in call set-up time
that AT&T and Sprint claim will result from complete detariffing. In
addition, we reiterate that casual callers always have the option of
obtaining and using an interexchange carrier's calling card, thereby
avoiding any increased cost or delay.
30. We also recognize AT&T's concern that complete detariffing of
casual calling services would impede the use of certain casual calling
arrangements for calls originated by computers and fax machines,
because the computer or fax machine would not recognize the
announcement, thereby interfering with the call, and because an
announcement transmitted to a computer or fax machine may be
insufficient to establish an enforceable contract. AT&T, however,
overstates the problem. Casual calling services such as collect calling
and calls billed to third-party numbers presently require intervention
by the interexchange carrier before the call is completed. Likewise,
use of a third-party credit card often requires interaction with the
carrier to provide the credit card information. Thus, the use of a
recorded announcement in a detariffed environment will not
significantly alter the current requirement of intervention by the
interexchange carrier. One casual calling service that does not require
intervention with the interexchange carrier prior to completion of the
call is dial-around 1+ service. As discussed infra, we are permitting
carriers to file tariffs for dial-around 1+ service through use of a
carrier's CAC. Concededly, there may be situations where callers using
third-party credit cards may be able to enter their credit card
information electronically by swiping the card prior to beginning a
call, and that in the absence of tariffs, these customers may face an
additional announcement of rates, terms, and conditions. We
nevertheless find that the negative consequences to the limited number
of those casual callers who may use third-party credit cards for
computer access and fax machines do not warrant reconsideration of our
decision to detariff completely casual calling except dial-around 1+
services in light of the benefits of complete detariffing of such
casual calling services and the fact that most casual calling services
already require intervention by an interexchange carrier. Moreover,
casual callers who now use third-party credit cards for computer access
and fax machines can avoid the announcement of rates, terms, and
conditions by obtaining in advance and using an interexchange carrier's
calling card. As discussed above, an interexchange carrier can
establish an enforceable contract with customers at the time they
obtain the calling card, rather than when the call is placed.
31. We also reject Telco's and SBC's argument that, because
carriers do not negotiate individual contracts with casual callers,
possible invocation of the ``filed-rate'' doctrine is not a concern for
casual callers. Although we agree with Telco and SBC that generally the
``filed-rate'' doctrine is an issue when a tariffed rate, term, or
condition differs from a rate, term, or condition in a contract,
invocation of the ``filed-rate'' doctrine may also harm casual callers.
Customers may use a casual calling service in response to an
advertisement or direct solicitation, which may provide rates, terms,
and conditions for the interstate, domestic, interexchange casual
calling service. If the interexchange carrier modifies these rates,
terms, or conditions in the future, the consumer would be bound by the
tariffed rates, terms, and conditions, even if the consumer did not
receive actual notice of the modification. In the absence of tariffs,
consumers will likely receive, or have the option of receiving, current
information on the rates, terms, and conditions for the specific
service they are about to use, because nondominant interexchange
carriers will likely disclose such information to the casual caller in
order to ensure the establishment of a contractual relationship.
32. While we continue to require complete detariffing for casual
calling services in general, we adopt permissive detariffing for dial-
around 1+ services using a nondominant interexchange carrier's access
code. We are persuaded that the means of ensuring the establishment of
an enforceable contract with customers of other casual calling services
cannot be implemented currently for dial-around 1+ services, because,
as explained below, the interexchange carrier does not have the ability
reasonably to distinguish a caller using dial-around 1+ services from
direct dial 1+ services, as required to provide the dial-around 1+
caller with the rates, terms, and conditions prior to completion of the
call. We note that this issue is not a concern for dial-around 0+ calls
from aggregator locations, because those calls require intervention
between the carrier and customer, at which time the carrier can
establish a contractual relationship with the customer. We further note
that not all dial-around 1+ calls are from casual callers. Presently,
some customers may need to dial their presubscribed interexchange
carrier's access code to use that carrier's interstate, domestic,
interexchange services, rather than the caller's LEC, for interstate,
intraLATA calls. After February 8, 1999, however, customers will no
longer need to dial their presubscribed interexchange carrier's access
code to use that carrier's interstate, domestic, interexchange services
because LECs are required to institute dialing parity and allow
customers to select a PIC for intraLATA toll calling by then. See
Implementation of the Local Competition Provisions of the
Telecommunications Act of 1996; Interconnection Between Local Exchange
Carriers and Commercial Mobile Radio; Area Code Relief Plan for Dallas
and Houston, Ordered by the Public Utility Commission of Texas;
Administration of the North American Numbering Plan; Proposed 708
Relief Plan and 630 Numbering Plan Area Code by Ameritech-Illinois, CC
Docket Nos. 96-98, 95-185, NSD File No. 96-8, CC Docket No. 92-237, IAD
File No. 94-102, Second Report and Order and Memorandum Opinion and
Order, 61 FR 47284 (September 6, 1996).
33. Sprint and AT&T have presented evidence that the technology to
distinguish dial-around 1+ calls from direct dial 1+ calls placed from
telephones presubscribed to an interexchange carrier is not universally
offered by all LECs either because some LEC switches are not capable of
providing signalling using SS7, which is necessary to provide this
feature, or because some LECs have chosen not to offer the technology
needed to distinguish dial-around 1+ calls from direct dial 1+ calls.
Sprint's and AT&T's unchallenged representations, which were not in the
record when we considered casual calling services in the Second Report
and Order, lead us to
[[Page 59591]]
find that adoption of complete detariffing at this time for dial-around
1+ services would not be in the public interest. Such a regime would
impose substantial costs and burdens on nondominant interexchange
carriers that offer dial-around 1+ services and their customers. The
rates, terms, and conditions of services provided to presubscribed
direct dial callers often differ from those provided to casual callers
using a dial-around 1+ service. Because nondominant interexchange
carriers would not always be able to distinguish between these two
types of calls, they would not always be able to determine the rates,
terms, and conditions for a particular call at the time the call is
placed. Moreover, the inability of nondominant interexchange carriers
to distinguish between these two types of calls would require these
carriers to implement for dial-around 1+ callers and direct dial 1+
callers the recorded announcement of the rates, terms, and conditions
or other means adopted by such carriers to ensure a contractual
relationship with dial-around 1+ callers. Such a recorded announcement
may confuse direct dial 1+ customers. Further, the increased costs and
the delay in call set-up time that AT&T and Sprint contend are
attendant with ensuring the establishment of a contractual relationship
would likely be imposed on both dial-around 1+ calls and direct dial 1+
calls from a presubscribed telephone line. We find that imposing these
increased costs and delays in call set-up time on both dial-around 1+
callers and customers using a direct dial 1+ service from a telephone
line presubscribed to that carrier--in all likelihood, the majority of
calls over that line--would impose an unreasonable burden on consumers
using direct dial 1+ services from their PIC. We note that these
concerns do not arise with respect to dial-around 0+ calls from
aggregator locations, because such calls always require intervention by
the interexchange carrier and, therefore, implementation of a recorded
announcement or some other means of providing customers with the rates,
terms, and conditions of the call would not affect consumers making
calls other than dial-around 0+ calls. We reach this conclusion because
the volume of direct dial 1+ calls from a PIC is vastly larger than the
volume of dial-around 1+ calls, and therefore, the costs and burdens
associated with providing an announcement of rates, terms, and
conditions for dial-around 1+ callers would be imposed on this much
larger group. In contrast, the increased costs and delays in call set-
up time for other casual calling services would be imposed only on
those customers using that particular casual calling service, and the
benefits of completely detariffing those casual calling services
outweigh the costs, as discussed above.
34. We recognize that nondominant interexchange carriers, to avoid
burdening their presubscribed customers, could decide not to provide an
announcement of rates, terms, and conditions prior to completion of
dial-around 1+ calls. In this circumstance, as in any circumstance
where there is no contract, the carrier, at a minimum, could seek to
recover under a theory of quantum meruit (Quantum meruit is an
``equitable doctrine, based on the concept that no one who benefits by
the labor and materials of another should be unjustly enriched thereby;
under those circumstances, the law implies a promise to pay a
reasonable amount for the labor and materials furnished, even absent a
specific contract therefor.'' Black's Law Dictionary 1243 (6th ed.
1990).) for the value of its services. Because we appreciate the
somewhat greater burden of pursuing a collection action when only a
quantum meruit theory of recovery is available, however, we find that
allowing nondominant interexchange carriers to file tariffs for dial-
around 1+ services at this time is in the public interest. We are also
concerned that nondominant interexchange carriers, to avoid imposing
these costs and delays on their presubscribed customers, may decide not
to offer a dial-around 1+ service option. Such a result would limit
consumers' choices, and, therefore, would also not be in the public
interest.
35. We realize that the unique problems created by dial-around 1+
services as they are presently handled could be eliminated if we were
to require LECs to deploy universally switches capable of providing
SS7. We are not requiring LECs to take such measures in this Order on
Reconsideration. A significant number of LEC switches do not presently
have SS7 capability, and we do not have an adequate record in this
proceeding to evaluate the costs that such a decision would impose on
LECs. We note, however, that LECs have been rapidly deploying switches
capable of providing SS7, and therefore, the unique technological
concerns about the ability to distinguish between dial-around 1+ calls
and direct dial 1+ calls from presubscribed customers will not be an
issue in the near future. Once LECs universally deploy switches that
are capable of providing SS7, we will reexamine this issue to determine
whether we will completely detariff dial-around 1+ services for the
same reasons that we determine that complete detariffing of other
casual calling services is in the public interest. In the meantime, we
conclude that permissive detariffing of dial-around 1+ services offered
by nondominant interexchange carriers is in the public interest as an
interim measure. In addition, we strongly encourage nondominant
interexchange carriers to provide dial-around 1+ services on a
detariffed basis as soon as they have the capability to do so. Because
we are adopting permissive detariffing for dial-around 1+ services, we
need not address concerns raised by Sprint that the ``bad debt ratio''
is higher for dial-around 1+ calls than for calls from presubscribed
customers.
36. We recognize that adopting permissive detariffing for dial-
around 1+ services may raise concerns about invocation of the ``filed-
rate'' doctrine for customers of these services. Due to the unique
technological concerns with dial-around 1+ services that prevent the
interexchange carrier from reasonably being able to provide the dial-
around 1+ caller with the rates, terms, and conditions prior to
completion of the call, discussed above, we conclude, on balance, that
the costs to consumers of adopting complete detariffing for dial-around
1+ services outweigh the benefits of complete detariffing with respect
to this particular type of service.
C. Initial Period of Service to Presubscribed Customers
i. Background
37. The Second Report and Order did not specifically address
whether complete detariffing is in the public interest with respect to
the provision of interstate, domestic, interexchange service to new
customers that select and use an interexchange service before receiving
information about the rates, terms, and conditions of that service.
None of the comments filed in response to the NPRM raised this issue.
ii. Positions of the Parties
38. AT&T contends that we should permit carriers to file tariffs
that are effective for the initial 45 days of service to residential
and small business customers, or until a contract with the new customer
is consummated, whichever is earlier. AT&T claims that many of the
concerns carriers raise with respect to casual calling services in a
detariffed environment are also relevant with respect to presubscribed
customers during the initial period of service. AT&T states that,
absent tariffs, nondominant interexchange carriers
[[Page 59592]]
will be required to provide service to new customers prior to the
formalization of a contractual relationship during the period: (1)
After the customer contacts the LEC to designate an interexchange
carrier or initiate a PIC change, but before the nondominant
interexchange carrier is able to ensure the establishment of an
enforceable contractual relationship; and (2) when the customer
contacts the interexchange carrier or its marketing agents directly,
but before the contract can be prepared and mailed to the customer.
AT&T contends that in both situations, tariffs are the only means by
which the interexchange carrier can enforce its rates, terms, and
conditions and limit its liability before a contract is finalized,
without resort to costly, repetitive litigation. AT&T concludes that
permitting nondominant interexchange carriers to file tariffs before
they have an opportunity to finalize a written contract with a new
customer will not adversely affect consumers because market forces will
ensure that the filed rates, terms, and conditions will be just,
reasonable, and nondiscriminatory, and the Commission's complaint
process is available as an additional safeguard. Several commenters
support AT&T's request.
iii. Discussion
39. We grant, in part, AT&T's petition for reconsideration urging
us to adopt permissive detariffing for the initial 45 days of
nondominant interexchange carriers' provision of interstate, domestic,
interexchange mass market services to new residential and business
customers, or until a written contract is consummated, whichever is
earlier. We find, based on the evidence presented by the parties, that
permitting interexchange carriers to file tariffs to cover the
provision of service during this period is in the public interest in
the limited circumstance when a new customer contacts the LEC to select
an interexchange carrier or to initiate a PIC change. We expect each
LEC to process service requests promptly. Interexchange carriers are
reminded that during the effective period of their tariffs, they must
make their services generally available to all similarly-situated
customers, pursuant to section 202(a). During the effective period of a
tariff, interexchange carriers are required, pursuant to section
201(a), to make all efforts to provide service quickly, even under
protest. See In the Matter of Hawaiian Telephone Company, 78 F.C.C. 2d
1062, 1065 (1980). Carriers are also bound by section 201 when
providing service pursuant to individually-negotiated contracts. We
conclude, however, that the interexchange carriers have not
demonstrated that this exception to our detariffing policy should be
extended to the initial period of service to a new customer when the
customer directly contacts the interexchange carrier or its marketing
agents.
40. We find persuasive AT&T's argument that when a residential or
small business customer contacts the LEC in order to presubscribe to an
interexchange carrier or initiate a PIC change, (We note that
residential and small business customers that contact the LEC to
presubscribe to an interexchange carrier or initiate a PIC change are
generally those customers that utilize mass market services.) the
selected interexchange carrier, because it does not have direct contact
with the customer, may be unable immediately to ensure that a legal
relationship is established with that customer. AT&T presented evidence
establishing that: (1) It takes some LECs up to 60 days to notify AT&T
of the PIC designation; (The 45-day period during which we are allowing
permissive detariffing was requested by the parties. Although AT&T
asserts that it takes LECs up to 60 days to notify it of a PIC change,
AT&T's petition for reconsideration requests only that we adopt
permissive detariffing for at most 45 days to enable it to formalize a
contract. See AT&T Petition at 9, 11-12 & n.12. Other parties supported
AT&T's request. See supra note . AT&T subsequently clarified that
allowing interexchange carriers to file tariffs that are applicable for
a maximum of 45 days after the customer begins taking service would
provide the interexchange carrier a sufficient amount of time to
establish a contractual relationship with the customer in almost all
cases. Letter from E. E. Estey, Government Affairs Vice President,
AT&T, to William F. Caton, Acting Secretary, Federal Communications
Commission, July 16, 1997.) (2) AT&T, because of the enormous churn
rate in the industry, processes in excess of 30 million PIC changes or
requests annually (an average of more than 600,000 requests per week);
and (3) an additional two weeks may elapse after AT&T receives notice
that it has been designated as a customer's PIC before contract
information is mailed to that customer. Thus, during some initial
period after interexchange service is established, carriers may be
providing interstate, domestic, interexchange service to new customers
without adequate assurance that the carriers' rates, terms, and
conditions will be legally enforceable, and as a result, may be
required to seek recovery of unremitted charges under alternative
equitable theories, as discussed above.
41. We have considered various means by which LECs could convey to
new customers of a nondominant interexchange carrier the information
necessary to ensure the establishment of an enforceable contract during
the initial period after the customer contacts the LEC and before the
nondominant interexchange carrier can formalize the contractual
relationship. We conclude, however, that none of these means adequately
ensures an enforceable contractual relationship between the nondominant
interexchange carrier and the customer during this initial period.
Nondominant interexchange carriers conceivably could contract with LECs
to act as agents of the interexchange carrier to establish a
contractual relationship with the prospective customer by orally
providing the rates, terms, and conditions of the interexchange
service. We are reluctant, however, to adopt a policy that may have the
effect of mandating such agency arrangements, especially since the LEC
may have an affiliate that offers competing interstate interexchange
services. Alternatively, if prospective customers are required to
contact nondominant interexchange carriers directly prior to the
commencement of service in order to establish the necessary contractual
relationship, such a requirement would preclude residential and
business customers from changing or selecting a PIC by contacting the
LECs as they do today. That, in turn, could diminish competition among
interexchange carriers by making it more difficult for customers to
switch interexchange carriers. Finally, the nondominant interexchange
carrier may decide to delay provisioning of the service until a
contractual relationship is formalized, which also may discourage
residential and business customers from making PIC changes, thereby
deterring competition in the interexchange market. We, therefore,
conclude that the benefits of allowing nondominant interexchange
carriers to file tariffs, at their discretion, for the limited period
before the customer executes a written contract outweigh any potential
benefits resulting from complete detariffing in this particular
situation. Consistent with the deregulatory framework of the 1996 Act,
we are allowing nondominant interexchange carriers to file tariffs
under the circumstances described herein, as opposed to requiring
tariffs, to allow nondominant interexchange
[[Page 59593]]
carriers and LECs to agree upon alternatives to tariffs for the purpose
of adequately ensuring a contractual relationship between the
nondominant interexchange carrier and the customer before the customer
formally executes the written contract.
42. We reject AT&T's arguments that we should also allow
nondominant interexchange carriers to provide an initial period of
service under tariff when a customer contacts the interexchange carrier
or its marketing agent directly. AT&T claims that even when the
customer contacts the carrier or its marketing agents directly to begin
interexchange service or initiate a PIC change, it is unable to
consummate a written contract prior to the commencement of service,
given the large number of requests it receives and the period of time
it takes to process customers' requests. When a customer contacts the
interexchange carrier or its marketing agent directly, however, there
is an opportunity for the interexchange carrier to establish, at a
minimum, an oral contract by relating to the customer the rates, terms,
and conditions that will be in effect from the commencement of service
until such time as the customer formalizes a written contract with the
interexchange carrier. This situation is distinguishable from both the
situation in which the prospective customer contacts the LEC to select
an interexchange carrier or to initiate a PIC change, and when a
customer places a casual call using a carrier's CAC. The interexchange
carrier does not have an opportunity in either of those cases to
interact with the customer. In contrast, a customer who contacts the
nondominant interexchange carrier directly is in essentially the same
position as customers of other businesses in unregulated, competitive
markets, i.e., they have an opportunity to interact with the service
provider before the service is initiated. We are not persuaded,
therefore, that we should reconsider our decision to require complete
detariffing when a customer contacts the interexchange carrier or its
marketing agent directly to begin interexchange service or to initiate
a PIC change. We reaffirm our finding that complete detariffing when a
customer contacts the interexchange carrier or its marketing agent
directly to begin interexchange service or to initiate a PIC change is
in the public interest.
43. Moreover, we find that permitting nondominant interexchange
carriers to file tariffs effective for the initial 45 days of service
or until there is a written contract between the carrier and the
customer, whichever is earlier, in those limited instances where
prospective customers contact the LEC to select an interexchange
carrier or to initiate a PIC change, is not inconsistent with a primary
reason we adopted complete detariffing in the Second Report and Order,
i.e., eliminating the ability of carriers to invoke the ``filed-rate''
doctrine. We believe that the ability of carriers to invoke the
``filed-rate'' doctrine does not create significant problems when a
customer contacts the LEC to select an interexchange carrier or to
initiate a PIC change because the proposed tariff is in place only for
a limited time, i.e., the initial 45 days of service or until a written
contract between the carrier and the customer is consummated, whichever
is earlier. The limited term of the tariff would prevent carriers from
unilaterally changing the terms of negotiated agreements or
unilaterally limiting their liability for damages after the initial
period of service. Upon expiration of the tariff, the legal
relationship between carriers and customers will much more closely
resemble the legal relationship between service providers and customers
in an unregulated environment, a goal of detariffing delineated in the
Second Report and Order.
44. We recognize that permitting nondominant interexchange carriers
to file tariffs for service to new customers that contact the LEC
raises the risk that carriers could use these tariffs to send price
signals for their mass market services. We believe, however, that we
cannot address the unique problems raised by the commenters about
establishing a contractual relationship with these new customers in a
detariffed environment without allowing nondominant interexchange
carriers to file tariffs for a short period needed to formalize the
contract. We note that should we become aware of evidence indicating
that nondominant interexchange carriers are using these tariffs to send
price signals for their mass market services, we can reexamine our
decision to adopt permissive detariffing for LEC-implemented new
customer services.
D. Tariff Filing Requirements for Bundled Domestic and International
Service Offerings
i. Background
45. In the NPRM in this rulemaking docket, the Commission sought
comment on whether it should forbear from requiring nondominant
interexchange carriers to file tariffs for the international portions
of service offerings that include both interstate, domestic,
interexchange services and international services. The Commission noted
that it was reserving for a separate proceeding the issue of whether it
should consider generally forbearing from requiring tariffs for
international services provided by nondominant carriers.
46. We determined in the Second Report and Order that there was
insufficient record evidence to find that each of the statutory
criteria necessary to forbear from requiring nondominant interexchange
carriers to file tariffs for the international portions of bundled
domestic and international service offerings had been satisfied. We
concluded that we should address detariffing of the international
portions of bundled domestic and international service offerings in a
separate proceeding in which we could examine the state of competition
in the international market. We therefore required nondominant
interexchange carriers with bundled domestic and international services
to bifurcate their bundled domestic and international service offerings
and file a tariff that includes only the international portions of
their service offerings.
47. We also adopted a nine-month transition period in the Second
Report and Order to allow nondominant interexchange carriers time to
adjust to detariffing. We determined that the Commission would not
accept new tariffs for interstate, domestic, interexchange services, or
revisions to existing tariffs, for long-term service arrangements
during the nine-month transition.
ii. Positions of the Parties
48. API and SDN Users request that the Commission detariff the
international portions of bundled domestic and international services
offered by nondominant interexchange carriers. Ad Hoc Users Committee
and the Television Networks support API's and SDN Users' petitions for
reconsideration. AT&T and CompTel argue that the international services
portion of bundled service offerings should be treated on the same
basis as the interstate, domestic, interexchange services portion,
without specifying whether both portions should be tariffed or
detariffed. SDN Users, AT&T, Ad Hoc Users Committee, and CompTel
contend that requiring tariffs only for the international portions of
bundled domestic and international service offerings confuses customers
and complicates negotiations. API further argues that the statutory
forbearance criteria are satisfied with respect to the international
portion of bundled international and domestic services, because the
policy considerations that
[[Page 59594]]
support the Commission's decision to detariff the interstate, domestic,
interexchange market are equally relevant to the international portion
of bundled international and domestic offerings. In particular, API
states that the public interest objectives of eliminating the possible
invocation of the ``filed-rate'' doctrine and establishing market
conditions that more closely resemble an unregulated environment are
also served by detariffing the international portions of bundled
international and domestic offerings. API further argues that there is
no evidence in the record that would support a need to retain tariffs
for the international portions of bundled offerings.
49. Sprint opposes the request to allow domestic nondominant
carriers to detariff the international portions of bundled domestic and
international services offered by nondominant interexchange carriers.
Sprint argues that requiring carriers to detariff such international
services will confuse customers, because some carriers are dominant in
certain international markets and nondominant in others. Sprint
therefore urges the Commission to maintain tariff filing requirements
for all international services until the Commission is able to examine
the unique issues involved in applying its detariffing policies to
international services.
50. AT&T and CompTel further request that the Commission allow
permissive detariffing for mixed international and domestic services
offered by nondominant interexchange carriers during the nine-month
transition to allow carriers and customers to adjust to the new policy.
Ad Hoc Users Committee and API oppose this request on the ground that
such a policy would allow carriers to alter or abrogate long-term
arrangements by invoking the ``filed-rate'' doctrine. API disputes
AT&T's contention that customers are ``significantly confused'' by the
requirement that nondominant interexchange carriers bifurcate mixed
international and domestic service offerings and states that customers
have worked through issues with carriers that are far more daunting and
potentially confusing.
iii. Discussion
51. In order to determine whether the statutory criteria are
satisfied for us to forbear from requiring tariffs for the
international portion of bundled domestic and international service
offerings, we need to examine the state of competition for these
international services. We find nothing in the record on
reconsideration that enables us to make findings on the state of
competition for such services. API claims only that detariffing the
international portion of bundled domestic and international service
offerings would lead to the same public interest benefits as
detariffing interstate, domestic, interexchange services. Other parties
argue that requiring tariffs only for the international portions of
bundled domestic and international service offerings confuses customers
and complicates negotiations. The parties, however, have not provided
new evidence in the record that would enable us to determine that the
statutory forbearance criteria are met for detariffing the
international portion of bundled domestic and international service
offerings. The state of competition in the international market may not
be the same as in the domestic market, and, we do not have sufficient
evidence in this proceeding to make such a determination. We therefore
affirm our conclusion that the determination of whether to detariff the
international portions of bundled domestic and international service
offerings should be addressed as part of a separate proceeding in which
the Commission can further examine the state of competition in the
international market.
52. We need not address at this time AT&T's request that we adopt
permissive detariffing for bundled international and domestic service
offerings during the nine-month transition. The United States Court of
Appeals for the D.C. Circuit has stayed the Second Report and Order,
pending judicial review. Nondominant interexchange carriers, therefore,
are currently required to file tariffs for all of their interstate,
domestic, interexchange services, including those that are bundled with
international services. We delegate authority to the Common Carrier
Bureau to determine the appropriate transition period and address other
transition issues when the detariffing rules become effective.
E. Local Access Portion of Interstate, Domestic, Interexchange Services
i. Positions of the Parties
53. Ad Hoc Users Committee requests that the Commission clarify
that the Second Report and Order detariffed the exchange access
components of the interstate, domestic, interexchange services offered
by nondominant interexchange carriers, and not only the interoffice
component of such services. It argues that a requirement that
nondominant interexchange carriers separate their integrated end-to-end
service offerings into interexchange and exchange access services would
radically depart from the Commission's historical approach to
regulation of the interstate, domestic, interexchange marketplace and
would create a ``practical nightmare'' for nondominant interexchange
carriers to implement. API and Sprint support Ad Hoc Users Committee's
request for clarification.
54. Bell Atlantic contends that Ad Hoc's request, which deals with
the regulation of exchange access services and not the regulation of
interexchange services, is beyond the scope of this proceeding.
Moreover, Bell Atlantic argues that the Commission should not detariff
the exchange access services of nondominant providers without
detariffing such services for all providers.
ii. Discussion
55. We agree with Ad Hoc Users Committee that we detariffed
integrated end-to-end interstate, domestic, interexchange services in
the Second Report and Order, including both the interexchange portion
and the interstate exchange access components of such services when
offered on an integrated basis. We note that our conclusion that the
forbearance criteria are satisfied applies only to interstate exchange
access that is offered to customers as part of an integrated, end-to-
end interstate, domestic, interexchange service that the customer is
purchasing. We are not detariffing in this proceeding the sale of
interstate exchange access that is offered on a stand-alone basis. The
Commission, in another proceeding, recently granted, in part, two
petitions seeking forbearance from tariff filing requirements for
competitive access providers (CAPs) and non-dominant providers of
interestate exchange access services. In that proceeding, the
Commission adopted permissive detariffing for non-ILEC providers of
interstate exchange access services, and proposed the adoption of
complete detariffing for all non-ILEC providers of these services. See
In the Matters of Hyperion Telecommunications, Inc. Petition Requesting
Forbearance, Time Warner Communications Petition for Forbearance,
Complete Detariffing for Competitive Access Providers and Competitive
Local Exchange Carriers, Memorandum Opinion and Order and Notice of
Proposed Rulemaking, CC Docket No. 97-146, 62 FR 38244 (July 17, 1997);
see also Access Charge Reform; Price Cap Performance Review for Local
Exchange Carriers; Transport Rate Structure and Pricing; End User
[[Page 59595]]
Common Line Charges, CC Docket Nos. 96-262, 94-1, 91-213, 95-72, First
Report and Order, 62 FR 31868 (June 11, 1997) (Access Charge Reform
Order).
56. Nondominant interexchange carriers purchase or self provide
interstate exchange access as an input to providing integrated, end-to-
end interstate, domestic, interexchange service. Thus, access is merely
a component of a service offered to end users. We have found that
market forces generally will ensure that nondominant interexchange
carriers do not charge rates, or impose terms and conditions, for their
interstate, domestic, interexchange services that violate sections 201
and 202 of the Communications Act. Because market forces will generally
constrain nondominant interexchange carriers' charges for interstate,
domestic, interexchange services, there is no need to require the
nondominant interexchange carrier to break out and tariff a separate
charge for interstate exchange access.
F. Effect of Detariffing on AT&T/Alascom's Common Carrier Services
i. Background
57. AT&T/Alascom offers certain ``common carrier'' services that
the Commission has defined as ``all interstate interexchange transport
and switching services that are necessary for other interexchange
carriers to provide services in Alaska up to the point of
interconnection with each Alaska local exchange carrier.'' In the AT&T
Reclassification proceeding, AT&T made certain commitments, including,
inter alia, that it ``will comply with all of the obligations and
conditions contained in the Commission orders associated with AT&T's
purchase of Alascom, Inc., including the Alascom Authorization Order,
the Market Structure Order (59 FR 27496 (May 27, 1994)), and the Final
Recommended Decision (58 FR 63345 (December 1, 1993)).'' In the Second
Report and Order, we stated that our decision to forbear from requiring
nondominant interexchange carriers to file tariffs for interstate,
domestic, interexchange services would not affect AT&T's commitment to
comply with the Commission's orders associated with AT&T's purchase of
Alascom, and that AT&T would continue to be bound by this commitment.
ii. Discussion
58. We have been asked to clarify in this proceeding that the
Second Report and Order did not detariff AT&T/Alascom's common carrier
services. A similar issue has been raised in the AT&T Reclassification
Order. We believe this issue is better addressed in that proceeding in
light of AT&T's commitment in that proceeding to comply with the
Commission's orders associated with AT&T's purchase of Alascom. We
therefore incorporate the record filed in this proceeding on the issue
of detariffing AT&T/Alascom's common carriers services to the AT&T
Reclassification proceeding.
III. Information Disclosure Issues
A. Background
59. The Commission tentatively concluded in the NPRM that it would
require nondominant providers of interstate, domestic, interexchange
telecommunications services to file certifications that they are in
compliance with the geographic rate averaging and rate integration
requirements of section 254(g) of the Communications Act to ensure
compliance with those requirements. The Commission also tentatively
concluded in the NPRM that, if it were to adopt a complete detariffing
policy, nondominant interexchange carriers would be required to
maintain at their premises price and service information regarding all
of their interstate, domestic, interexchange service offerings, which
they could submit to the Commission upon request.
60. In the Second Report and Order, we adopted the tentative
conclusion in the NPRM and required nondominant interexchange carriers
to file an annual certification stating that they are in compliance
with the statutory rate averaging and rate integration requirements. We
further adopted the tentative conclusion in the NPRM and ordered
nondominant interexchange carriers to maintain supporting documentation
on the rates, terms, and conditions of their interstate, domestic,
interexchange services that they could submit to the Commission within
ten business days upon request. In addition, in the Second Report and
Order, we required nondominant interexchange carriers to make
information concerning current rates, terms, and conditions for all of
their interstate, domestic, interexchange services available to the
public in at least one location during regular business hours, although
we expressly stated that we did not intend to require nondominant
interexchange carriers to disclose more information than is currently
provided in tariffs.
B. Positions of the Parties
61. Several parties filed petitions asking the Commission to
reconsider or clarify various aspects of the public disclosure
requirement in the Second Report and Order. Ad Hoc Users Committee
requests that the Commission eliminate the public disclosure
requirement with respect to information on individually-negotiated
service arrangements. It argues that a public disclosure requirement
makes it easier for interexchange carriers to ascertain their
competitors' price and service information, and, therefore, the
requirement is inconsistent with the Commission's interest in deterring
price coordination. Ad Hoc Users Committee further argues that, because
the Commission decided to forbear from applying section 254(g) to
contract tariffs and similar customer-specific agreements, disclosure
of the rates and terms of individually-negotiated service arrangements
cannot be justified on the basis of enforcing section 254(g). Rather
than requiring public disclosure, Ad Hoc Users Committee contends that
the Commission could meet the objectives supporting a public disclosure
requirement in the Second Report and Order through: (1) The workings of
the competitive market; (2) the Commission's complaint process; and (3)
disclosure of rate and term information to Commission and state
regulatory staff, to Congress in connection with agency oversight, and
to complainants in discovery proceedings before the Commission or
courts.
62. API, Bell Atlantic, and Sprint support Ad Hoc Users Committee's
petition, arguing that a public disclosure requirement for customer-
specific arrangements will inhibit competition and that businesses in
other competitive markets are not required to disclose the terms of
customer-specific deals. Bell Atlantic further argues that, if the
Commission eliminates the public disclosure requirement, it should also
not require dominant interexchange carriers to disclose their prices to
the public through tariffs. Bell Atlantic maintains that requiring
dominant interexchange carriers to file tariffs or otherwise disclose
their prices would be anticompetitive, because nondominant
interexchange carriers would set their prices based on the dominant
carrier's disclosed prices.
63. TRA argues that the public disclosure requirement is necessary
to address, at least in part, its concerns that carriers will
discriminate against resellers in the absence of tariffs. Several other
parties request that the Commission strengthen the information
disclosure requirements in the Second Report and Order, which they deem
insufficient. Specifically, Rural
[[Page 59596]]
Telephone Coalition (RTC) asks the Commission to require carriers to
make information more widely available to consumers to ensure that they
have easy access to the information necessary to determine whether
nondominant interexchange carriers are complying with the rate
integration and rate averaging requirements of section 254(g). RTC
argues that the Second Report and Order's requirement that nondominant
interexchange carriers make information available in only one location
will prevent customers, especially those in rural areas, from obtaining
the information. Instead, RTC urges the Commission to require carriers
to make the information available on-line and at one public place in
each state in which the carrier operates. RTC contends that these
requirements would not be unduly burdensome on carriers. Alaska and
Hawaii support RTC's petition.
64. Telecommunications Management Information Systems Coalition
(TMISC) requests that we clarify the disclosure rules by specifying the
type and amount of information that must be made publicly available, as
well as the time limit within which nondominant interexchange carriers
must make the information publicly available. TMISC argues that,
without more specific information requirements, the Commission and
other interested parties may not be able effectively to enforce the
geographic rate averaging and rate integration requirements of section
254(g). TMISC further points out that a significant number of consumer
organizations, public interest organizations, and state governments
filed comments in this proceeding, arguing that effective public
disclosure requirements are not only necessary to enforce section
254(g), but also to enable consumers to make fully informed service
decisions. Hawaii argues that the Commission should require nondominant
interexchange carriers to disclose the same amount of information that
is currently provided in tariffs and also agrees with TMISC that the
current information disclosure provisions are inadequate.
65. AT&T responds to RTC and TMISC by arguing that complete
detariffing will impose substantial burdens on nondominant
interexchange carriers, particularly the costs associated with
establishing and maintaining a legal relationship with their customers.
AT&T contends that there is no reason to add to these costs by imposing
more burdensome information disclosure requirements.
C. Discussion
66. The basis for our decision in the Second Report and Order to
adopt a public disclosure requirement for all interstate, domestic,
interexchange services offered by nondominant interexchange carriers
was to provide the public with the information necessary to determine
whether a carrier was adhering to the rate integration and rate
averaging requirements of section 254(g). We recognized that, in
competitive markets, carriers would not necessarily maintain
geographically averaged and integrated rates for interstate, domestic,
interexchange services as required by section 254(g). We also
determined that a public disclosure requirement would promote the
public interest by making it easier for consumers, including resellers,
to compare service offerings and to bring complaints. We noted,
however, that nondominant interexchange carriers will generally provide
such information to consumers to improve or maintain their competitive
position in the market.
67. We sought to tailor this public disclosure requirement to meet
our objective of ensuring that nondominant interexchange carriers
comply with section 254(g) in their provision of interstate, domestic,
interexchange services, while minimizing any potential adverse effects
on our general policy of allowing market forces, rather than
regulation, to discipline the practices of these carriers. Although a
public disclosure requirement does not affect certain benefits of
complete detariffing, such as elimination of possible invocation of the
``filed-rate'' doctrine, it may detract from our objective of reducing
regulatory burdens and deterring tacit price coordination. Thus, we
minimized the burdens on nondominant interexchange carriers of
complying with this requirement by, for example, only requiring
nondominant interexchange carriers to make information available in one
location and not specifying a format for the disclosure.
68. Upon further examination, we agree with Ad Hoc Users Committee
that we can more narrowly tailor our information disclosure
requirement. We therefore grant Ad Hoc Users Committee's petition and
eliminate the public disclosure requirement for individually-negotiated
service arrangements. Individually-negotiated service arrangements, as
opposed to mass market services, are customer-specific arrangements,
such as contract tariffs, AT&T's Tariff 12 options, MCI's special
customer arrangements, and Sprint's custom network service
arrangements. We find that the disclosure of the rates, terms, and
conditions of individually-negotiated service arrangements cannot be
justified on the basis of the need to enforce the rate averaging
requirements of section 254(g). This is because the Commission decided
to ``forbear from applying section 254(g) to such arrangements,
consistent with the intent of Congress, to the extent necessary.'' The
Commission continues to require carriers to ensure that individually-
negotiated service offerings are available to all similarly-situated
customers, regardless of their geographic location. The Commission did
not forbear from applying the rate integration requirements to
individually-negotiated service arrangements. There are several means
to ensure that nondominant interexchange carriers make individually-
negotiated service arrangements available to all similarly-situated
customers without a public disclosure requirement. Market forces
generally will ensure that nondominant interexchange carriers that lack
market power do not charge rates, or impose terms and conditions, for
interstate, domestic, interexchange services that are unjustly or
unreasonably discriminatory. Specifically, if a nondominant
interexchange carrier could profit from selling an interstate,
domestic, interexchange service at one price to one customer and
attempted to sell the same service at an unjustly or unreasonably
discriminatory price to a similarly-situated customer, that customer
would purchase services from other facilities-based nondominant
interexchange carriers that could profit from selling the same services
to that customer at the lower market price. Moreover, we can remedy any
carrier conduct that violates the requirement that carriers make
individually-negotiated service arrangements available to all
similarly-situated customers through the section 208 complaint process.
A customer can file a section 208 complaint and allege that a carrier
has unreasonably discriminated against it in the provision of either
contract or mass market services. The customer complainant, as always,
under section 208, bears the initial burden of establishing that: (1)
The complainant sought substantially the same service arrangement under
the same terms and conditions that were made available to another
customer; and (2) the carrier refused to make that service available to
the complainant on terms similar to those of another customer's service
arrangement. If a complainant establishes this, the burden
[[Page 59597]]
shifts to the carrier which must demonstrate why the discrimination is
reasonable. In addition, we will be able to investigate carriers'
compliance with our rules through the requirement adopted in the Second
Report and Order that interexchange carriers maintain price and service
information on all of their interstate, domestic, interexchange
services and make this information available to the Commission upon
request. Thus, eliminating public disclosure for individually-
negotiated service arrangements will not hinder enforcement of the
requirement that carriers make such services available to all
similarly-situated customers, and will also decrease the regulatory
burden on nondominant interexchange carriers and deter tacit price
coordination.
69. Although Ad Hoc Users Committee requests that the Commission
eliminate the public disclosure requirement only for individually-
negotiated service arrangements, the arguments it raises about the
effect of public disclosure on tacit price coordination and the need to
tailor more narrowly the information requirements apply to mass market
services as well. Although no party specifically requested that the
Commission eliminate the public disclosure requirement for mass market
services, the Commission, in light of pending petitions for
reconsideration, retains jurisdiction to reconsider its rules on its
own motion. See Central Florida Enters., Inc. v. FCC, 598 F.2d 37, 48
n.51 (D.C. Cir. 1978), cert. dismissed, 441 U.S. 957 (1979). We
therefore conclude on reconsideration that we should also eliminate the
public disclosure requirement for mass market interstate, domestic,
interexchange services offered by nondominant interexchange carriers.
Mass market interstate, domestic, interexchange services are those
services that are not individually-negotiated service arrangements,
and, therefore, we are eliminating the public disclosure requirement
for all interstate, domestic, interexchange services offered by
nondominant interexchange carriers. Bell Atlantic's argument that we
should also not require dominant interexchange carriers to disclose
their rates, terms, and conditions is now largely moot in light of our
determination that LECs providing interstate, domestic, interexchange
services will generally be classified as nondominant in their provision
of such services, pursuant to Regulatory Treatment of LEC Provision of
Interexchange Services Originating in the LEC's Local Exchange Area;
and Policy and Rules Concerning the Interstate, Interexchange
Marketplace, CC Docket Nos. 96-149, 96-61, Second Report and Order and
Third Report and Order, (62 FR 35974 (July 3, 1997)). Because this
proceeding concerns detariffing only nondominant interexchange
carriers' interstate, domestic, interexchange services and the record
on dominant interexchange carrier regulation is extremely limited, we
will address the issue of the regulatory treatment of dominant
interexchange carriers if and when we determine that an interexchange
carrier should be classified as dominant in its provision of
interstate, domestic, interexchange services. We emphasize, however,
that this decision does not suggest any diminution in our commitment to
enforce the geographic rate averaging and rate integration
requirements. To that end, we require nondominant interexchange
carriers to file annually certifications stating that they are in
compliance with their obligations under section 254(g) and to maintain
price and service information on all of their interstate, domestic,
interexchange services that they must make available to the Commission
and to state regulatory commissions upon request. In addition, we will
further our goal of deterring tacit price coordination, because a
nondominant interexchange carrier's rate, terms, and conditions for
interstate, domestic, interexchange services will not be collected and
available in one location, although we recognize that nondominant
interexchange carriers may still be able to obtain information about
their competitors' rates and service offerings in the absence of a
public disclosure requirement.
70. We believe that our decision to eliminate the public disclosure
requirement for mass market services will not deprive residential and
other low volume customers of information about nondominant
interexchange carriers' interstate, domestic, interexchange service
offerings that they need to ensure that they have been correctly billed
and to bring to the Commission's attention possible violations of the
Communications Act, particularly section 254(g). To the contrary, we
find nothing in the record of this reconsideration proceeding that
would cause us to modify our conclusion in the Second Report and Order
that consumers will have access to information concerning the rates,
terms, and conditions for interstate, domestic, interexchange services
offered by nondominant interexchange carriers to consumers through,
inter alia, the billing process, information provided by nondominant
interexchange carriers to establish a contractual relationship with
their customers, notifications required by service contracts or state
consumer protection laws, and advertisements and marketing materials.
We note that the majority of consumer complaints about the lawfulness
of carriers' rates, terms, or conditions for interstate, domestic,
interexchange services are based on information obtained through the
billing process. Moreover, as set forth in the Second Report and Order,
we find that it is highly unlikely that interexchange carriers that
lack market power could successfully charge rates, or impose terms and
conditions that violate sections 201 and 202 of the Communications Act.
Consumers will also have the information they need to select the
service best suited to their calling patterns through the mechanisms
discussed above and the workings of the competitive market. Because
consumers will have access to rate and service information about
nondominant interexchange carriers' interstate, domestic, interexchange
services in a detariffed environment without a public disclosure
requirement, we conclude that the public disclosure requirement in the
Second Report and Order, let alone an expanded public disclosure
requirement as RTC and TMISC request, is unnecessary to protect
consumers.
71. We recognize that elimination of the public disclosure
requirement will make the collection of information more difficult for
businesses, including consumer groups, that analyze and compare the
rates and services of interexchange carriers and offer their analysis
to the public for a fee. These businesses, however, will have access to
the information that nondominant interexchange carriers provide to the
public in order to market their services and improve their competitive
position in the market. On balance, we conclude that the benefits of
eliminating the public disclosure requirement for consumers, e.g.,
decreased risk of tacit price coordination and increased competition in
the interstate, domestic, interexchange market, outweigh any potential
adverse effects on these businesses. Moreover, as stated above,
consumers will not be deprived of the information they need and will
receive additional information directly from nondominant interexchange
carriers that will provide rate and service information to consumers in
order to ensure the establishment of a contractual relationship with
them in a detariffed environment. Although we find on the basis of the
record in this
[[Page 59598]]
proceeding that a public disclosure requirement is not necessary to
ensure that interexchange carriers comply with their obligation under
section 254(g), we are prepared to revisit this issue in the event that
evidence shows that the safeguards we have implemented are inadequate.
One tool at our disposal is to conduct audits of interexchange carrier
compliance with the rate averaging obligations of section 254(g).
72. We also recognize the concerns of resellers, as expressed by
TRA, that, without rate and service information through either tariffs
or a public disclosure requirement, resellers will not have adequate
information to prevent nondominant interexchange carriers from
discriminating against resellers, which are not only customers, but
also competitors of the carriers. We conclude, however, that the
resellers' concern that the resale market will not survive in a
detariffed environment without a public disclosure requirement is
overstated. As noted in the Second Report and Order, our decision to
forbear from requiring nondominant interexchange carriers to file
tariffs for interstate, domestic, interexchange services does not
affect such carriers' obligations under sections 201 and 202. Thus, as
discussed below, our long-standing policies barring prohibitions on
resale and restrictive eligibility requirements will continue in full
force to the same extent as prior to detariffing. Moreover, we agree
with Ad Hoc Users Committee that it is unreasonable to assume that in a
substantially competitive market, facilities-based carriers will not
provide resellers with service options at reasonable rates. As TRA
noted, in another proceeding, AT&T has just begun to ``reform its
conduct with respect to resellers'' when its market share declined to
fifty percent. If a carrier does not provide resellers with service
options at reasonable rates, resellers are not only likely to find
another facilities-based carrier that will do so, but resellers also
have the right to file a section 208 complaint with the Commission. We
therefore find that the increased benefits to interexchange carriers
and consumers of complete detariffing without a public disclosure
requirement, e.g., decreased risk of tacit price coordination and
increased competition in the interstate, domestic, interexchange
market, and a reduced regulatory burden justify any negative effect
upon resellers of eliminating the public disclosure requirement.
73. Finally, we make clear that the annual certification
requirement and the requirement that nondominant interexchange carriers
maintain price and service information on all of their interstate,
domestic, interexchange services that they must submit to the
Commission upon request, discussed herein, are the same as those
contained in the Second Report and Order.
IV. Miscellaneous Issues
A. Nondiscriminatory Access to Interstate, Domestic, Interexchange
Services
i. Positions of the Parties
74. TRA asks the Commission to clarify that nondominant
interexchange carriers are required to make available, upon request,
all interstate, domestic, interexchange services, including contract-
based services, on a nondiscriminatory basis, to all qualified
entities, including resellers. TRA argues that the Commission has
required nondominant interexchange carriers to make such service
offerings generally available, and has declared unlawful restrictive
eligibility requirements that unreasonably discriminate against
similarly-situated customers. TRA notes that the Commission addressed
its concerns in the Second Report and Order, in part, by requiring
nondominant interexchange carriers to make publicly available price and
service information on all of their interstate, domestic, interexchange
services. TRA contends, however, that the Second Report and Order does
not expressly declare that the ``general availability'' requirement
will continue to apply.
ii. Discussion
75. The Commission has long-standing policies of prohibiting
restrictions on resale and barring restrictive eligibility requirements
for interstate, domestic, interexchange services that have the effect
of unreasonably discriminating against similarly-situated customers.
The Commission has further concluded that individually-negotiated
service arrangements do not violate section 202(a)'s prohibition
against ``unjust or unreasonable discrimination,'' if the terms of the
service arrangement are made available to similarly-situated customers.
In the Second Report and Order, we made clear that our decision to
forbear from requiring nondominant interexchange carriers to file
tariffs for interstate, domestic, interexchange services does not
affect carriers' obligations under sections 201 and 202. Thus,
nondominant interexchange carriers are prohibited from imposing
restrictions on resale and restrictive eligibility requirements that
unreasonably discriminate against similarly-situated customers to the
same extent that they were prohibited from doing so prior to adoption
of the Second Report and Order. TRA also stated in its petition that
the Commission partially addressed its concerns by requiring
nondominant interexchange carriers to disclose publicly certain
information regarding their interstate, domestic, interexchange
services. As stated above, we have eliminated the public disclosure
requirement in this Order on Reconsideration. For a discussion of this
issue and TRA's concerns, see supra paras. 59-73.
B. Law Governing the Lawfulness of Rates, Terms, and Conditions for
Interstate Services
i. Positions of the Parties
76. AT&T requests that the Commission clarify that federal, and not
state, law governs the determination as to whether a nondominant
interexchange carrier's rates, terms, and conditions for interstate,
domestic, interexchange services are lawful. AT&T contends that parties
may interpret the statement in the Second Report and Order that, with
complete detariffing, ``consumers will also be able to pursue remedies
under state consumer protection and contract laws'' as allowing
challenges under state law to the lawfulness of rates, terms, and
conditions for these interstate services. AT&T argues that any
interpretation that authorizes such challenges under state law is
foreclosed by numerous judicial decisions recognizing that sections 201
and 202 of the Communications Act preempt state law with respect to the
reasonableness of rates, terms, and conditions for interstate
telecommunications services. Sprint, and WorldCom support AT&T's
petition, arguing that the Communications Act, and not state law,
governs rates, terms, and conditions for interstate telecommunications
services. U S WEST argues that the Commission should adopt permissive
detariffing until it conducts a new proceeding to determine the law
that governs the relationship between carriers and customers in a
detariffed environment. API opposes U S WEST's request that the
Commission conduct a new proceeding to determine the applicability of
state and federal law in a detariffed environment.
ii. Discussion
77. In the Second Report and Order, we stated that our decision to
forbear from requiring nondominant interexchange carriers to file
tariffs for interstate, domestic, interexchange
[[Page 59599]]
services will not affect our enforcement of carriers' obligations under
sections 201 and 202 to charge rates, and impose practices,
classifications, and regulations that are just and reasonable, and not
unjustly or unreasonably discriminatory. We therefore agree with AT&T,
Sprint, and WorldCom that the Communications Act continues to govern
determinations as to whether rates, terms, and conditions for
interstate, domestic, interexchange services are just and reasonable,
and are not unjustly or unreasonably discriminatory. While the parties
only sought clarification that the Communications Act governs the
determination as to the lawfulness of rates, terms, and conditions, we
note that the Communications Act does not govern other issues, such as
contract formation and breach of contract, that arise in a detariffed
environment. As stated in the Second Report and Order, consumers may
have remedies under state consumer protection and contract laws as to
issues regarding the legal relationship between the carrier and
customer in a detariffed regime.
78. We reject U S WEST's argument that we should adopt permissive
detariffing until there is greater certainty about the law that would
govern the relationship between carriers and customers in the absence
of tariffs. We adopted a nine-month transition in the Second Report and
Order, during which nondominant interexchange carriers are permitted to
file new tariffs and revise existing tariffs for mass market services.
This transition provides for a period of permissive detariffing to
allow nondominant interexchange carriers time to adjust to detariffing.
We believe that a lengthier period of time is unnecessary to address U
S WEST's concern.
C. Private Contract Clauses Preserving the ``Filed-Rate'' Doctrine
i. Positions of the Parties
79. Ad Hoc requests that the Commission clarify that the intent of
the Second Report and Order is not to permit carriers to preserve the
``unfair advantages'' they would enjoy under ``filed-rate'' doctrine,
but to eliminate the ability of nondominant interexchange carriers to
invoke the ``filed-rate'' doctrine. Ad Hoc contends that some
interexchange carriers are attempting to preserve their right to make
unilateral changes to contracts by including a contract clause pursuant
to which the carrier is permitted to alter the terms of the contract at
any time, and for any reason.
ii. Discussion
80. In the Second Report and Order, we stated that not permitting
nondominant interexchange carriers to file tariffs for the provision of
interstate, domestic, interexchange services will achieve the public
interest objective of eliminating the ability of nondominant
interexchange carriers to invoke the ``filed-rate'' doctrine. We also
observed that eliminating the ability of carriers to invoke the
``filed-rate'' doctrine benefits consumers by creating a legal
relationship that more closely resembles the legal relationship between
service providers and customers in an unregulated environment, and is
in the public interest. While we do not support attempts by carriers to
preserve their ability to alter unilaterally the terms of a contract,
pursuant to a contract clause, we will rely on private negotiations
between the parties in the first instance to resolve such issues. The
issue of whether a particular contract clause is ``just and
reasonable,'' as required by section 201(b) of the Communications Act,
is not before us in this proceeding, however, such an issue would be an
appropriate matter for a section 208 complaint.
D. Relationship of Detariffing to Access Charge Reform and Universal
Service
i. Positions of the Parties
81. RTC urges the Commission in this proceeding to ensure adequate
universal support for access charges in high-cost areas to minimize the
incentive of interexchange carriers to deaverage their rates. RTC
contends that, notwithstanding the statutory requirement that
interexchange carriers charge ``reasonably comparable'' rural and urban
interexchange rates, interexchange carriers have an incentive to
deaverage their rates, especially as they face increased competition
from BOCs and others. RTC further argues that eliminating tariffs and
curtailing public information availability will decrease interexchange
carriers' incentive to average interexchange rates. Although RTC
recognizes that the Commission is considering universal service support
and access charge reform in other dockets, it nevertheless contends
that there is an overlap between this proceeding and those other
dockets. Thus, RTC urges the Commission in this proceeding to reduce
the incentive to deaverage rates by ensuring adequate support
mechanisms for high-cost areas.
82. AT&T counters that the Second Report and Order does not compel
a particular result in the Commission's universal service and access
charge reform proceedings. AT&T further argues that any relationship
between detariffing and access charge reform or universal service
should be considered in those particular dockets.
ii. Discussion
83. We have recently addressed universal service support and access
charge reform in separate proceedings. We agree with AT&T that these
issues are beyond the scope of this proceeding and better addressed in
those particular proceedings in which numerous parties commented
specifically on universal service and access charge reform issues.
Therefore, we decline to address these issues in this proceeding.
E. Fees for the Withdrawal of Tariffs
i. Positions of the Parties
84. TRA requests that the Commission refrain from collecting filing
fees from nondominant interexchange carriers that are required to
withdraw tariffs pursuant to the Second Report and Order. TRA argues
that Sec. 1.1113(a)(4) of the Commission's rules supports its argument
that it is inequitable to retain filing fees when carriers are
compelled to withdraw tariffs as a result of Commission action.
ii. Discussion
85. Pursuant to Sec. 1.1105 of the Commission's rules, tariff
filings must be accompanied by a filing fee, which is currently six
hundred dollars per tariff filing. After we adopted the Second Report
and Order, the Common Carrier Bureau received inquiries concerning
whether nondominant interexchange carriers must pay the tariff filing
fee to withdraw or revise tariffs pursuant to the Second Report and
Order, and whether nondominant interexchange carriers that pay such
fees would be entitled to a refund or return of the fee. On December
19, 1996, the Common Carrier Bureau issued the Public Notice Concerning
Implementation, in which it responded to these inquiries and addressed
the precise issue TRA raises here. The Common Carrier Bureau,
consistent with Commission precedent and practice, concluded in the
Public Notice Concerning Implementation that nondominant interexchange
carriers would need to pay tariff filing fees to withdraw or revise
existing tariffs pursuant to the Second Report and Order, and that such
carriers would not be entitled to a return or refund of the fee. We now
affirm this conclusion.
86. The purpose of the fee program is to assess and collect fees
for regulatory services provided to the public, and the
[[Page 59600]]
fees charged are based primarily on the costs to the Commission of
providing those services. In the Fee Program Order (52 FR 5285
(February 20, 1987)), the Commission concluded that Sec. 1.1113(a)(4)
was ``intended to apply in those rare instances where the Commission
creates a new regulation or policy, or the Congress and the President
approve a new law or treaty, that would make the grant of a pending
application a legal nullity.'' The Commission specifically concluded
that Congress, when it established the regulatory fee program, did not
envision an exemption from the payment of fees for additional tariff
filings required by changes to the Commission's rules. Based on its
analysis in the Fee Program Order, the Commission required Commercial
Mobile Radio Service providers to pay the tariff filing fee for
cancelling tariffs for domestic interstate services pursuant to a
Commission order. We are not aware of any distinction that justifies a
different determination in this case. We therefore conclude that
nondominant interexchange carriers cancelling their tariffs for
interstate, domestic, interexchange services, or revising their tariffs
for bundled international and domestic service offerings to exclude
interstate, domestic, interexchange services, will be required to pay
the tariff filing fee and will not be eligible for a return or refund
of that fee.
87. To minimize the cost to nondominant interexchange carriers of
cancelling or revising tariffs pursuant to the Second Report and Order,
we reiterate that such carriers may cancel or revise several tariffs
under one cover letter with the payment of one filing fee, as stated in
the Public Notice Concerning Implementation. In addition, organizations
that file tariffs on behalf of several carriers may request a waiver of
applicable filing rules so that they may cancel the tariffs of several
carriers or file revisions to tariffs of several carriers under one
cover letter with the payment of one filing fee.
V. Procedural Issues
A. Final Regulatory Flexibility Analysis on Reconsideration
88. As required by section 603 of the Regulatory Flexibility Act
(RFA), 5 U.S.C. 603, an Initial Regulatory Flexibility Analysis (IRFA)
was incorporated in the NPRM. The Commission sought written public
comments on the proposals in the NPRM. In addition, pursuant to section
603, a Final Regulatory Flexibility Analysis (FRFA) was incorporated in
the Second Report and Order. That FRFA conformed to the RFA, as amended
by the Small Business Regulatory Enforcement Fairness Act of 1996
(SBREFA). The Supplemental Final Regulatory Flexibility Analysis in
this initial Order on Reconsideration (Supplemental FRFA) also conforms
to the RFA.
i. Need for and Objectives of This Order on Reconsideration and the
Rules Adopted Herein
89. With the exception of dial-around 1+ services and LEC-
implemented new customer services, our decisions and rules in this
Order on Reconsideration detariff completely the interstate, domestic,
interexchange services of nondominant interexchange carriers. In this
Order on Reconsideration, we grant in part and deny in part several of
the petitions filed for reconsideration and/or clarification of the
Second Report and Order, in order to further the same needs and
objectives as those discussed in the FRFA in the Second Report and
Order, including reducing the costs and burdens of providing
interstate, domestic, interexchange services, in the absence of
tariffs, on nondominant interexchange carriers and customers, some of
which are small entities. First, we adopt permissive detariffing for
dial-around 1+ services using a nondominant interexchange carrier's
access code. Second, we adopt permissive detariffing for the initial 45
days of LEC-implemented interstate, domestic interexchange service to
new residential or small business customers, or until a written
contract is consummated, whichever is earlier. Third, we eliminate the
public disclosure requirement for all interstate, domestic,
interexchange service offered by nondominant interexchange carriers. In
addition, we require nondominant interexchange carriers to file annual
certifications stating that they are in compliance with their
obligations under section 254(g) and to maintain price and service
information on all of their interstate, domestic, interexchange
services that they must make available to the Commission upon request.
Finally, with the exception of dial-around 1+ services and LEC-
implemented new customer services, we affirm our conclusion that
permissive detariffing of all other interstate, domestic, interexchange
service of nondominant interexchange carriers is not in the public
interest.
ii. Analysis of Significant Issues Raised in Response to the FRFA
90. Summary of the FRFA. In the FRFA, we recognized that many of
the decisions and rules adopted in the Second Report and Order may have
a significant effect on a substantial number of the small telephone
companies identified by the Small Business Administration (SBA). Based
upon data contained in the most recent census and a report by the
Commission's Common Carrier Bureau, we estimated that fewer than 3,497
telephone service firms are small entity telephone service firms that
could be affected. We also discussed the reporting requirements imposed
by the Second Report and Order.
91. In addition, we discussed the steps we had taken to minimize
the impact on small entities, consistent with our stated objectives. We
concluded that our actions in the Second Report and Order would benefit
small entities by facilitating the development of increased competition
in the interstate, domestic, interexchange market, thereby benefitting
all consumers, some of which are small business entities. We found that
the record in that proceeding indicated that detariffing on a
permissive basis would not definitively eliminate the possible
invocation of the ``filed-rate'' doctrine and would create the risk of
price signalling. We concluded that only with complete detariffing
could we definitively eliminate these possible anticompetitive
practices and protect consumers, some of which are small business
entities. We noted that we attempted to keep burdens on nondominant
interexchange carriers to a minimum. For example, we did not require
nondominant interexchange carriers to make rate and service information
available to the public in any particular format, or at any particular
location.
a. Impact of Complete Detariffing on Small, Nondominant Interexchange
Carriers
92. Comments. Although not in response to the FRFA, TRA claims that
the Second Report and Order does not adequately address the impact of
complete detariffing on small, nondominant interexchange carriers. TRA
requests that the Commission permit nondominant interexchange carriers
to tariff their domestic, interstate, interexchange service offerings.
93. Discussion. As discussed in the Order on Reconsideration, we
permit carriers to file tariffs for dial-around 1+ services and LEC-
implemented new customer services. We base this decision on the
credible evidence offered by parties on reconsideration concerning the
costs and burdens to carriers and customers of providing these services
in the absence of tariffs. Permitting carriers
[[Page 59601]]
to file tariffs in these limited circumstances will ease the burdens on
nondominant interexchange carriers and customers, some of which are
small entities. We discuss these issues above in the Order on
Reconsideration.
iii. Description and Estimates of the Number of Small Entities Affected
by This Order on Reconsideration
94. For the purposes of this Order on Reconsideration, the RFA
defines a ``small business'' to be the same as a ``small business
concern'' under the Small Business Act, 15 U.S.C. 632, unless the
Commission has developed one or more definitions that are appropriate
to its activities. Under the Small Business Act, a ``small business
concern'' is one that: (1) Is independently owned and operated; (2) is
not dominant in its field of operation; and (3) meets any additional
criteria established by the SBA. The SBA has defined a small business
for Standard Industrial Classification (SIC) categories 4812
(Radiotelephone Communications) and 4813 (Telephone Communications,
Except Radiotelephone) to be small entities with fewer than 1,500
employees. We first discuss generally the total number of small
telephone companies falling within both of those SIC categories. Then,
we discuss the number of small businesses within the two subcategories
that may be affected by our rules, and attempt to refine further those
estimates to correspond with the categories of telephone companies that
are commonly used under our rules.
95. Total Number of Telephone Companies Affected. Many of the
decisions and rules adopted herein may have a significant effect on a
substantial number of the small telephone companies identified by the
SBA. The United States Bureau of the Census (the Census Bureau) reports
that, at the end of 1992, there were 3,497 firms engaged in providing
telephone services, as defined therein, for at least one year. This
number contains a variety of different categories of carriers,
including local exchange carriers, interexchange carriers, competitive
access providers, cellular carriers, mobile service carriers, operator
service providers, pay telephone operators, PCS providers, covered SMR
providers, and resellers. It seems certain that some of those 3,497
telephone service firms may not qualify as small entities or small
incumbent LECs because they are not ``independently owned and
operated.'' For example, a PCS provider that is affiliated with an
interexchange carrier having more than 1,500 employees would not meet
the definition of a small business. It seems reasonable to conclude,
therefore, that fewer than 3,497 telephone service firms are small
entity telephone service firms that may be affected by this Order on
Reconsideration.
96. Wireline Carriers and Service Providers. The SBA has developed
a definition of small entities for telephone communications companies
other than radiotelephone (wireless) companies. The Census Bureau
reports that there were 2,321 such telephone companies in operation for
at least one year at the end of 1992. According to the SBA's
definition, a small business telephone company other than a
radiotelephone company is one employing fewer than 1,500 persons. All
but 26 of the 2,321 non-radiotelephone companies listed by the Census
Bureau were reported to have fewer than 1,000 employees. Thus, even if
all 26 of those companies had more than 1,500 employees, there would
still be 2,295 non-radiotelephone companies that might qualify as small
entities or small incumbent LECs. Although it seems certain that some
of these carriers are not independently owned and operated, we are
unable at this time to estimate with greater precision the number of
wireline carriers and service providers that would qualify as small
business concerns under the SBA's definition. Consequently, we estimate
that there are fewer than 2,295 small entity telephone communications
companies other than radiotelephone companies that may be affected by
the decisions and rules adopted in this Order on Reconsideration.
97. Interexchange Carriers. Neither the Commission nor the SBA has
developed a definition of small entities specifically applicable to
providers of interexchange services. The closest applicable definition
under the SBA rules is for telephone communications companies other
than radiotelephone (wireless) companies. The most reliable source of
information regarding the number of interexchange carriers nationwide
of which we are aware appears to be the data that the Commission
collects annually in connection with Telecommunications Relay Services
(TRS). According to our most recent data, 97 companies reported that
they were engaged in the provision of interexchange services. Although
it seems certain that some of these carriers are not independently
owned and operated, or have more than 1,500 employees, we are unable at
this time to estimate with greater precision the number of
interexchange carriers that would qualify as small business concerns
under the SBA's definition. Consequently, we estimate that there are
fewer than 97 small entity interexchange carriers that may be affected
by the decisions and rules adopted in this Order on Reconsideration.
98. Resellers. Neither the Commission nor the SBA has developed a
definition of small entities specifically applicable to resellers. The
closest applicable definition under the SBA's rules is for all
telephone communications companies. The most reliable source of
information regarding the number of resellers nationwide of which we
are aware appears to be the data that we collect annually in connection
with the TRS. According to our most recent data, 206 companies reported
that they were engaged in the resale of telephone services. Although it
seems certain that some of these carriers are not independently owned
and operated, or have more than 1,500 employees, we are unable at this
time to estimate with greater precision the number of resellers that
would qualify as small business concerns under the SBA's definition.
Consequently, we estimate that there are fewer than 206 small entity
resellers that may be affected by the decisions and rules adopted in
this Order on Reconsideration.
99. In addition, the rules adopted in this Order on Reconsideration
may affect companies that analyze information contained in tariffs. The
SBA has not developed a definition of small entities specifically
applicable to companies that analyze tariff information. The closest
applicable definition under the SBA rules is for Information Retrieval
Services (SIC Category 7375). The Census Bureau reports that, at the
end of 1992, there were approximately 618 such firms classified as
small entities. This number contains a variety of different types of
companies, only some of which analyze tariff information. We are unable
at this time to estimate with greater precision the number of such
companies and those that would qualify as small business concerns under
the SBA's definition. Consequently, we estimate that there are fewer
than 618 such small entity companies that may be affected by the
decisions and rules adopted in this Order on Reconsideration.
100. We assume that most, if not all, small businesses purchase
interstate, domestic, interexchange telecommunications services. As a
result, our rules in this Order on Reconsideration would affect
virtually all small business entities. The SBA guidelines to the SBREFA
state that about 99.7 percent of all firms are small and have fewer
than 500 employees and
[[Page 59602]]
less than $25 million in sales or assets. There are approximately 6.3
million establishments in the SBA's database. The SBA database does
include nonprofit establishments, but it does not include governmental
entities. SBREFA requires us to estimate the number of such entities
with populations of less than 50,000 that would be affected by our new
rules. There are 85,006 governmental entities in the nation. This
number includes such entities as states, counties, cities, utility
districts and school districts. There are no figures available on what
portion of this number has populations of fewer than 50,000. This
number, however, includes 38,978 counties, cities and towns, and of
those, 37,566, or 96 percent, have populations of fewer than 50,000.
The Census Bureau estimates that this ratio is approximately accurate
for all governmental entities. Thus, of the 85,006 governmental
entities, we estimate that 96 percent, or 81,600, are small entities
that would be affected by the decisions and rules adopted in this Order
on Reconsideration.
iv. Summary Analysis of the Projected Reporting, Recordkeeping, and
Other Compliance Requirements and Steps Taken to Minimize the
Significant Economic Impact of This Order on Reconsideration on Small
Entities, Including the Significant Alternatives Considered and
Rejected
101. Structure of the Analysis. In this section of the Supplemental
FRFA, we analyze the projected reporting, recordkeeping, and other
compliance requirements that may apply to small entities as a result of
this Order on Reconsideration. As a part of this discussion, we mention
some of the types of skills that will be needed to meet the new
requirements. We also describe the steps taken to minimize the economic
impact of our decisions on small entities, including the significant
alternatives considered and rejected.
102. We provide this summary analysis to provide context for our
analysis in this Supplemental FRFA. To the extent that any statement
contained in this Supplemental FRFA is perceived as creating ambiguity
with respect to our rules or statements made in the Second Report and
Order or preceding sections of this Order on Reconsideration, the rules
and statements set forth in the Second Report and Order and in the
preceding sections of this Order on Reconsideration shall be
controlling.
a. Permissive Detariffing for Dial-around 1+ Services
103. Summary of Projected Reporting, Recordkeeping and Other
Compliance Requirements. In the Second Report and Order, we concluded
that the record did not support a finding that complete detariffing
would cause nondominant interexchange carriers to cease offering casual
calling services. Rather, we found that nondominant interexchange
carriers have options other than tariffs by which they can ensure the
establishment of a contractual relationship with casual callers that
would legally obligate such callers to pay for the telecommunications
service they use and bind them to the carriers' terms and conditions.
In this Order on Reconsideration, we adopt permissive detariffing, on
an interim basis, for a subset of casual calling services,
specifically, the provision of dial-around 1+ services. This change in
the manner of conducting their business may require nondominant
interexchange carriers to use technical, operation, accounting,
billing, and legal skills.
104. Steps Taken to Minimize Significant Economic Impact on Small
Entities and Small Incumbent LECs, and Alternatives Considered. By
permitting nondominant interexchange carriers to file tariffs for dial-
around 1+ services, we enable these carriers and their customers, some
of which are small business entities, to avoid the substantial costs
and burdens associated with ensuring the establishment of an
enforceable contract in the absence of tariffs. The means of ensuring
the establishment of an enforceable contract with customers of other
casual calling services cannot be reasonably implemented currently for
dial-around 1+ services because the interexchange carriers do not have
the ability reasonably to distinguish dial-around 1+ calls from direct
dial 1+ calls placed from telephones presubscribed to an interexchange
carrier, as required to provide the dial-around 1+ caller with the
rates, terms, and conditions prior to completion of the call. The
inability of nondominant interexchange carriers to distinguish between
dial-around 1+ and direct dial 1+ calls would require these carriers to
implement the recorded announcement of the rates, terms, and conditions
or other means adopted by such carriers to ensure a contractual
relationship with dial-around 1+ callers for both dial-around 1+
callers and direct dial 1+ callers. The increased costs and the delay
in call set-up time that are attendant with ensuring the establishment
of a contractual relationship with dial-around 1+ callers would impose
an unreasonable burden on consumers using direct dial 1+ service from
their PIC. We find in this Order on Reconsideration that the technology
to distinguish dial-around 1+ calls from direct dial 1+ calls placed
from telephones presubscribed to an interexchange carrier is not
universally offered by all LECs, either because some LEC switches are
not capable of providing signalling using SS7, which is necessary to
provide this feature, or because a LEC has chosen not to offer this
feature.
105. In this Order on Reconsideration, we reject the option of
requiring LECs to deploy universally switches capable of providing SS7.
We reject this option, which might impose greater burdens on small
LECs, because a significant number of LEC switches do not presently
have SS7 capability and we do not have an adequate record in this
proceeding to evaluate the costs that such a decision would impose on
LECs.
b. Permissive Detariffing for LEC-Implemented New Customer Services
106. Summary of Projected Reporting, Recordkeeping and Other
Compliance Requirements. In the Second Report and Order, we did not
specifically address whether complete detariffing is in the public
interest with respect to the provision of interstate, domestic,
interexchange service to new customers that select and use an
interexchange service before receiving information about the rates,
terms, and conditions of that service. In this Order on
Reconsideration, we permit interexchange carriers to file tariffs to
cover the provision of service during the initial 45 days of
nondominant interexchange carriers' provision of interstate, domestic,
interexchange services to new residential and small business customers,
or until a written contract is consummated, whichever is earlier, in
the limited circumstance when a new customer contacts the LEC to select
an interexchange carrier or to initiate a PIC change. This change in
the manner of conducting their business may require nondominant
interexchange carriers to use technical, operation, accounting,
billing, and legal skills.
107. Steps Taken to Minimize Significant Economic Impact on Small
Entities and Alternatives Considered. Adoption of permissive
detariffing for the initial period of LEC-implemented interstate,
domestic, interexchange service to new residential and small business
customer enables the nondominant interexchange carriers and their
customers, some of which are
[[Page 59603]]
small business entities, to avoid the substantial costs and burdens
associated with ensuring the establishment of an enforceable contract
in the absence of tariffs.
108. In this Order on Reconsideration, we considered several means
by which LECs could convey to customers of nondominant interexchange
carriers the information necessary to ensure the establishment of an
enforceable contract during the initial period after the customer
contacts the LEC and before the nondominant interexchange carrier can
formalize the contractual relationship. We conclude, however, that none
of these means adequately ensures an enforceable contractual
relationship between the nondominant interexchange carrier and the
customer during this initial period of service. We reject the
alternative of requiring nondominant interexchange carriers to contract
with LECs to act as agents of the interexchange carrier to establish a
contractual relationship with the prospective customer by orally
providing the rates, terms, and conditions of the interexchange
service. We are reluctant to adopt a policy that may have the effect of
mandating such agency arrangements, especially since the LEC may have
an affiliate that offers competing interstate interexchange services.
In addition, requiring prospective customers to contact nondominant
interexchange carriers directly prior to the commencement of service in
order to establish the necessary contractual relationship would
preclude residential and small business customers from changing or
selecting a PIC by contacting the LECs as they do today. Finally,
nondominant interexchange carrier could decide to delay provisioning of
the service until a contractual relationship is formalized, but such a
delay may also discourage residential and small business customers from
making PIC changes, thereby deterring competition in the interexchange
market.
c. Information Disclosure Requirements
109. Summary of Projected Reporting, Recordkeeping and Other
Compliance Requirements. In the Second Report and Order, we required
nondominant interexchange carriers to make information on current
rates, terms, and conditions for all of their interstate, domestic,
interexchange services available to the public in at least one location
during regular business hours. We also required carriers to inform the
public that this information is available when responding to consumer
inquiries or complaints and to specify the manner in which the consumer
may obtain the information. We further required nondominant
interexchange carriers to maintain, for a period of two years and six
months, the information provided to the public, as well as documents
supporting the rates, terms, and conditions for all of their
interstate, domestic, interexchange offerings, that they can submit to
the Commission upon request. In addition, we required nondominant
interexchange carriers to file with the Commission, and update as
necessary, the name, address, and telephone number of the individual,
or individuals, designated by the carrier to respond to Commission
inquiries and requests for documents. We further required nondominant
providers of interstate, domestic, interexchange telecommunications
services to file annual certifications signed by an officer of the
company under oath that the company is in compliance with its statutory
geographic rate averaging and rate integration obligations.
110. In this Order on Reconsideration, we eliminate the requirement
that nondominant interexchange carriers make publicly available
information concerning rates, terms, and conditions for all of their
interstate, domestic, interexchange services. To enforce the geographic
rate averaging and rate integration requirements applicable to mass
market services, we require nondominant interexchange carriers to file
annual certifications stating that they are in compliance with their
obligations under section 254(g) and to maintain price and service
information on all of their interstate, domestic, interexchange
services that they must make available to the Commission upon request.
Compliance with this obligation may require the use of accounting,
billing, and legal skills.
111. Steps Taken to Minimize Significant Economic Impact on Small
Entities and Small Incumbent LECs, and Alternatives Considered. We
recognize that elimination of the public disclosure requirement will
make the collection of information more difficult for businesses,
including consumer groups, that analyze and compare the rates and
services of interexchange carriers and offer their analysis to the
public for a fee. These businesses, however, will have access to the
information that nondominant interexchange carriers provide to the
public in order to market their services and improve their competitive
position in the market. Moreover, we conclude that consumers will not
be deprived of the information they need and will receive additional
information directly from nondominant interexchange carriers that will
provide rate and service information to consumers in order to ensure
the establishment of a contractual relationship with them in a
detariffed environment.
112. We also recognize the concerns of resellers that, without rate
and service information made available through either tariffs or a
public disclosure requirement, resellers will not have adequate
information to prevent nondominant interexchange carriers from
discriminating against resellers, which are not only customers, but
also competitors of the carriers. We find, however, that the increased
benefits to interexchange carriers and consumers of complete
detariffing without a public disclosure requirement, e.g., decreased
risk of tacit price coordination and increased competition in the
interstate, domestic, interexchange market, and a reduced regulatory
burden justify any negative effect upon resellers of eliminating the
public disclosure requirement.
v. Report to Congress
113. The Commission shall send a copy of this Supplemental FRFA,
along with this Order on Reconsideration, in a report to Congress
pursuant to the Small Business Regulatory Enforcement Fairness Act of
1996, 5 U.S.C. 801(a)(1)(A). A copy of this Supplemental FRFA will also
be published in the Federal Register.
B. Supplemental Final Paperwork Reduction Analysis
114. As required by the Paperwork Reduction Act of 1995, Pub. L.
104-13, the NPRM invited the general public and the Office of
Management and Budget (OMB) to comment on proposed changes to the
Commission's information collection requirements contained in the NPRM.
The changes to our information collection requirements proposed in the
NPRM included: (1) The elimination of tariff filings by nondominant
interexchange carriers for interstate, domestic, interexchange
telecommunications services; (2) the requirement that nondominant
interexchange carriers maintain at their premises price and service
information regarding their interstate, interexchange offerings that
they can submit to the Commission upon request; (3) the requirement
that providers of interexchange services file certifications with the
Commission stating that they are in compliance with their statutory
rate integration and geographic rate averaging obligations under
section 254(g) of the Communications Act; and (4) the requirement that
interexchange carriers advertise the availability of
[[Page 59604]]
discount rate plans throughout the entirety of their service areas.
115. On June 12, 1996, OMB approved all of the proposed changes to
our information collection requirements in accordance with the
Paperwork Reduction Act. In approving the proposed changes, OMB
``strongly recommend(ed) that the (Commission) investigate potential
mechanisms to provide consumers, State regulators, and other interested
parties with some standardized pricing information,'' which ``could be
provided as part of the certification process or could be made
available to the public in other ways.''
116. In this Order on Reconsideration, we adopt several changes to
our information collection requirements proposed in the NPRM.
Specifically, we have decided to: (1) Permit nondominant interexchange
carriers to file tariffs for the provision of dial-around 1+services
using a nondominant interexchange carrier's carrier access code; (2)
permit nondominant interexchange carriers to file tariffs for the
initial 45 days of domestic, interstate, interexchange service, or
until there is a written contract between the carrier and the customer,
whichever is earlier; (3) eliminate the public disclosure requirement.
We reaffirm our decision in the Second Report and Order to require
nondominant interexchange carriers to: (1) File annual certifications
with the Commission stating that they are in compliance with their
statutory rate integration and geographic rate averaging obligations
under section 254(g) of the Communications Act, and (2) maintain price
and service information on all their interstate, domestic,
interexchange services that they can make available to the Commission
upon request. Implementation of these requirements will be subject to
approval by OMB as prescribed by the Paperwork Reduction Act.
VI. Ordering Clauses
117. Accordingly, it is ordered that, pursuant to sections 1-4, 10,
201, 202, 203, 204, 205, 215, 218, 220, 226, and 254 of the
Communications Act of 1934, as amended, 47 U.S.C. 151-154, 160, 201,
202, 203, 204, 205, 215, 218, 220, 226, and 254, the Order on
Reconsideration is hereby adopted. The requirements adopted in this
Order on Reconsideration shall be effective December 4, 1997, or on the
date when the requirements adopted in the Second Report and Order in
this proceeding become effective, whichever is later. The collections
of information contained within are contingent upon approval by the
Office of Management and Budget.
118. It is further ordered that parts 42 and 61 of the Commission's
rules, 47 CFR parts 42 and 61 are amended as set forth herein.
119. It is further ordered that the Petitions for Reconsideration
filed by Ad Hoc Users Committee, AT&T, Frontier, Telco, and TRA are
granted in part and denied in part, as described herein. All other
Petitions for Reconsideration filed in this proceeding are denied.
120. It is further ordered that the Petitions for Clarification
filed in this proceeding are granted in part, and denied in part, as
described herein.
121. It is further ordered that whereas the Second Report and Order
in this proceeding was stayed by the United States Court of Appeals for
the District of Columbia Circuit, we direct the General Counsel
expeditiously to file the necessary papers with the court to request
clarification of that stay on the decision herein.
Accordingly, this Order on Reconsideration is stayed pending the
court's ruling.
List of Subjects in 47 CFR Parts 42 and 61
Communications common carriers, Reporting and recordkeeping
requirements, Telephone.
Federal Communications Commission.
William F. Caton,
Acting Secretary.
Rule Changes
Parts 42 and 61 of title 47 of the Code of Federal Regulations are
amended as follows:
PART 42--PRESERVATION OF RECORDS OF COMMUNICATIONS COMMON CARRIERS
1. The authority citation for part 42 continues to read as follows:
Authority: Sec. 4(i), 48 Stat. 1066, as amended, 47 U.S.C.
154(i). Interprets or applies secs. 219 and 220, 48 Stat. 1077-78,
47 U.S.C. 219, 220.
Sec. 42.10 [Removed]
2. Section 42.10 is removed.
3. Section 42.11 is amended by revising paragraph (a) and removing
paragraph (c).
Sec. 42.11 Retention of information concerning detariffed
interexchange services.
(a) A nondominant interexchange carrier shall maintain, for
submission to the Commission upon request, price and service
information regarding all of the carrier's detariffed interstate,
domestic, interexchange service offerings. The price and service
information maintained for purposes of this subparagraph shall include
documents supporting the rates, terms, and conditions of the carrier's
detariffed interstate, domestic, interexchange offerings. The
information maintained pursuant to this subsection shall be maintained
in a manner that allows the carrier to produce such records within ten
business days.
* * * * *
PART 61-- TARIFFS
4. The authority citation for part 61 continues to read as follows:
Authority: Secs. 1, 4(i), 4(j), 201-205, and 403 of the
Communications Act of 1934, as amended; 47 U.S.C.151, 154(i).
154(j), 201-205, and 4-3, unless otherwise noted.
5. Section 61.20 is revised to read as follows:
Sec. 61.20 Detariffing of interstate, domestic, interexchange
services.
(a) Except as otherwise provided in paragraphs (b) and (c), or by
Commission order, carriers that are nondominant in the provision of
interstate, domestic, interexchange services shall not file tariffs for
such services.
(b) Carriers that are nondominant in the provision of interstate,
domestic, interexchange services shall be allowed to file tariffs for
dial-around 1+services. For the purposes of this paragraph, dial-around
1+calls are those calls made by accessing the interexchange carrier
through the use of that carrier's carrier access code. A carrier access
code is a five or seven digit access code that enables callers to reach
any carrier, presubscribed or otherwise, from any telephone.
(c) Carriers that are nondominant in the provision of interstate,
domestic, interexchange services shall be allowed to file tariffs for
such service to those customers who contact the local exchange carrier
to designate an interexchange carrier or to initiate a change with
respect to their primary interexchange carrier. These tariffs shall
remain in effect until the interexchange carrier and the customer
consummate a written contract, but in no event for more than 45 days.
6. Section 61.72 is amended by revising the introductory text of
paragraph (a) to read:
Sec. 61.72 Posting.
(a) Offering carriers must post (i.e., keep accessible to the
public) during the carrier's regular business hours, a schedule of
rates and regulations for those services for which tariff filings are
[[Page 59605]]
required and those services for which carriers exercise the option to
file tariffs. This schedule must include all effective and proposed
rates and regulations pertaining to the services offered to and from
the community or communities served, and must be the same as that on
file with the Commission. This posting requirement must be satisfied by
the following methods:
* * * * *
[FR Doc. 97-29117 Filed 11-3-97; 8:45 am]
BILLING CODE 6712-01-P
