Policy and Rules Concerning the Interstate, Interexchange Marketplace; Implementation of Section 254(g) of the Communications Act of 1934, as Amended

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 42, 61 and 64

[CC Docket No. 96-61; FCC 96-424]

Policy and Rules Concerning the Interstate, Interexchange

Marketplace; Implementation of Section 254(g) of the Communications Act

of 1934, as Amended

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: The Second Report and Order (Order) released October 31, 1996

relieves nondominant interexchange carriers from filing with the

Commission tariffs for interstate, domestic, interexchange services.

The Order furthers the pro-competitive and deregulatory objectives of

the Telecommunications Act of 1996 by ending a regulatory regime that

is no longer necessary for nondominant interexchange carriers in the

interstate, domestic, interexchange market and by fostering increased

competition in this market.

EFFECTIVE DATE: December 23, 1996.

[[Page 59341]]

FOR FURTHER INFORMATION CONTACT: Melissa Waksman, Attorney, or

Christopher Heimann, Attorney, Common Carrier Bureau, Policy and

Program Planning Division, (202) 418-1580. For additional information

concerning the information collections contained in this Report and

Order contact Dorothy Conway at 202-418-0217, or via the Internet at

[email protected].

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Second

Report and Order adopted October 29, 1996, and released October 31,

1996. The full text of this Second Report and Order is available for

inspection and copying during normal business hours in the FCC

Reference Center (Room 239), 1919 M St., NW., Washington, DC. The

complete text also may be obtained through the World Wide Web, at

http://www.fcc.gov/Bureaus/Common Carrier/Orders/fcc96325.wp, or may be

purchased from the Commission's copy contractor, International

Transcription Service, Inc., (202) 857-3800, 2100 M St., NW., Suite

140, Washington, DC 20037. Pursuant to the Telecommunications Act of

1996, the Commission released a Notice of Proposed Rulemaking, 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 (61 FR 14717 (April 3, 1996)) to seek

comment on rules to implement section 254(g) of the 1996 Act.

Regulatory Flexibility Analysis

As required by the Regulatory Flexibility Act, the Report and Order

contains a Final Regulatory Flexibility Analysis which is set forth in

the Second Report and Order. A brief description of the analysis

follows.

Pursuant to Section 604 of the Regulatory Flexibility Act, the

Commission performed a comprehensive analysis of the Second Report and

Order 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 Second Report and Order; (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

Second Report and Order as a result of the comments; (3) a description

of and an estimate of the number of small entities and small incumbent

LECs to which the Second Report and Order will apply; (4) a description

of the projected reporting, recordkeeping and other compliance

requirements of the Second Report and Order, 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 Second Report and Order 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 Second Report and Order are necessary to

implement the provisions of the Telecommunications Act of 1996.

Paperwork Reduction Act

OMB Approval Number: 3060-0704.

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:

----------------------------------------------------------------------------------------------------------------

Number of respondents Annual hour burden per

Information collection (approx.) response Total annual burden

----------------------------------------------------------------------------------------------------------------

Detariffing *.................. 0 0...................... 0

Certification requirement...... 519 0.5 hour............... 259.5

Tariff cancellation 519 2 hours per page (1,252 2,504 (one-time)

requirement: completely cancel pages) (one-time).

tariffs.

Tariff cancellation 519 2 hours per page 72,094 (one-time)

requirement: revise mixed (36,047 pages) (one-

tariffs to remove domestic time).

services.

Information disclosure 519 120 hours (one-time)... 62,280 (one-time)

requirement.

Recordkeeping requirement...... 519 2 hours................ 1,038

----------------------------------------------------------------------------------------------------------------

* The Commission has eliminated the tariffing requirement now imposed on nondominant interexchange carriers for

interstate, domestic, interexchange services.

Total Annual Burden: 138,175.5 hours, of which 136,878 will be one-

time.

Frequency of Response: Annual, except for tariff cancellation

requirement, which will be one-time.

Estimates Costs Per Respondent: $435,000.

Needs and Uses: The attached item eliminates the requirement that

nondominant interexchange carriers file tariffs for interstate,

domestic, interexchange telecommunications services. In order to

facilitate enforcement of such carriers' statutory obligation to

geographically average and integrate their rates, and to make it easier

for customers to compare carriers' service offerings, the attached

Order requires 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.

Synopsis of Second Report and Order

I. Introduction

1. On February 8, 1996, the Telecommunications Act of 1996 (1996

Act) was enacted. Telecommunications Act of 1996, Public Law 104-104,

110 Stat. 56, codified at 47 U.S.C. 151 et seq. The goal of the 1996

Act is to establish ``a pro-competitive, de-regulatory national policy

framework'' in order to make available to all Americans advanced

telecommunications and information technologies and services ``by

opening all telecommunications markets to competition.'' Joint

Explanatory Statement of the Committee of Conference, S. Conf. Rep. No.

230, 104th Cong., 2d Sess. 113 (1996). An integral element of this

framework is the requirement in Section 10 of the Communications Act of

1934, as amended (Communications Act), that the Commission forbear from

applying any provision of the Communications Act, or any of the

Commission's regulations, to a telecommunications carrier or

telecommunications service, or class thereof, if the Commission

[[Page 59342]]

makes certain specified findings with respect to such provisions or

regulations. 47 U.S.C. 160(a).

2. On March 25, 1996, the Commission released a Notice of Proposed

Rulemaking initiating a review of its regulation of interstate,

domestic, interexchange telecommunications services in light of the

passage of the 1996 Act and the increasing competition in the

interexchange market over the past decade. 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, Notice of Proposed Rulemaking, 61 FR 14717 (April 3, 1996) (NPRM).

In this Report and Order (Order), we consider issues raised in the NPRM

relating to tariff forbearance. We also consider, but decline to act at

this time on, the Commission's proposal in the NPRM to allow

nondominant interexchange carriers to bundle customer premises

equipment (CPE) with interstate, interexchange telecommunications

services. In the NPRM, the Commission also raised issues relating to:

market definition; separation requirements for nondominant treatment of

local exchange carriers in their provision of certain interstate,

interexchange services; and implementation of the rate averaging and

rate integration requirements in new section 254(g) of the

Communications Act. On August 7, 1996, the Commission issued a Report

and Order implementing the rate averaging and rate integration

requirements. See 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, Report and

Order, 61 FR 42558 (August 16, 1996) (Geographic Rate Averaging Order).

We will address the market definition and separation requirements in an

upcoming order.

3. For the reasons set forth below, we conclude that the statutory

forbearance criteria in Section 10 are met for the Commission to no

longer require or allow nondominant interexchange carriers to file

tariffs pursuant to Section 203 for their interstate, domestic,

interexchange services. We conclude that a policy of complete

detariffing (i.e., not permitting nondominant interexchange carriers to

file tariffs) for such services would further advance the statutory

objectives of the forbearance provision, Section 10. We therefore order

all nondominant interexchange carriers to cancel their tariffs for

interstate, domestic, interexchange services within nine months from

the effective date of this Order. In addition, we conclude that our

decision to order complete detariffing renders moot the contract tariff

and reseller issues raised in the NPRM.

4. The actions we take here will further the pro-competitive,

deregulatory objectives of the 1996 Act by fostering increased

competition in the market for interstate, domestic, interexchange

telecommunications services. Since the early 1980's, the Commission has

gradually adapted its regulatory regime for such services from one in

which all interexchange carriers were subject to the full panoply of

Title II regulatory requirements, including Section 203 tariff filing

requirements, to one in which pricing and other regulatory requirements

have been replaced by market forces. Our decision in this proceeding

marks the end of the transformation of the regulatory regime governing

interstate, domestic, interexchange services. After our policy of

complete detariffing has been implemented, carriers in the interstate,

domestic, interexchange marketplace will be subject to the same

incentives and rewards that firms in other competitive markets

confront. We seek ultimately to accomplish the same result in every

telecommunications market, because we believe that effectively

competitive markets produce maximum benefits for consumers, carriers

and the nation's economy.

5. Our decision to forbear from applying the statutory requirement

that compels nondominant interexchange carriers to file tariffs for

interstate, domestic, interexchange services and to implement a policy

of complete detariffing does not signify in any way a departure from

our historic commitment to protecting consumers of interstate

telecommunications services against anticompetitive practices. We

reaffirm our pledge to use our complaint process to enforce vigorously

our statutory and regulatory safeguards against carriers that attempt

to take unfair advantage of American consumers. Moreover, when

interstate, domestic, interexchange services are completely detariffed,

consumers will be able to take advantage of remedies provided by state

consumer protection laws and contract law against abusive practices.

6. We note that the California Public Utilities Commission recently

adopted a complete detariffing regime for intrastate long-distance

services offered in California. Public Utilities Commission of the

State of California, Rulemaking on the Commission's Own Motion to

Establish a Simplified Registration Process for Non-Dominant

Telecommunications Firms, R. 94-02-003, Interim Opinion, at Appendix A,

Rule 7 (released September 20, 1996). We encourage other state

regulatory commissions to seek the legislative authority necessary to

enable them to adopt a complete detariffing policy when they find, as

the California Commission did, that competition is sufficient to

obviate the need for tariffing of intrastate long-distance services.

II. Forbearance From Tariff Filing Requirements for Nondominant

Interexchange Carriers

A. Background

i. The Telecommunications Act of 1996

7. The 1996 Act provides for regulatory flexibility by requiring

the Commission to forbear from applying any regulation or any provision

of the Communications Act, to telecommunications carriers or

telecommunications services, or classes thereof, if the Commission

determines that certain conditions are satisfied. Specifically, the

1996 Act amends the Communications Act to provide that:

[T]he Commission shall forbear from applying any regulation or

any provision of this Act to a telecommunications carrier or

telecommunications service, or class of telecommunications carriers

or telecommunications services, in any or some of its or their

geographic markets, if the Commission determines that--

(1) Enforcement of such regulation or provision is not necessary

to ensure that the charges, practices, classifications or

regulations by, for, or in connection with that telecommunications

carrier or telecommunications service are just and reasonable, and

are not unjustly or unreasonably discriminatory;

(2) Enforcement of such regulation or provision is not necessary

for the protection of consumers; and

(3) Forbearance from applying such provision or regulation is

consistent with the public interest.

In making the public interest determination, the 1996 Act requires

the Commission to consider whether forbearance will promote competitive

market conditions, including the extent to which forbearance will

enhance competition among providers of telecommunications services. New

Section 10(b) also provides that, ``[i]f the Commission determines that

such forbearance will promote competition among providers of

telecommunications services, that determination may be the basis for a

Commission finding that forbearance is in the public interest.''

[[Page 59343]]

ii. The Competitive Carrier Proceeding

8. In the Competitive Carrier proceeding, the Commission pursued

pro-competitive and deregulatory goals similar to those underlying the

1996 Act. The Commission examined how its regulations should be adapted

to reflect and promote increasing competition in interexchange

telecommunications markets, and sought to reduce or eliminate its

tariff filing and facilities authorization requirements for nondominant

interexchange carriers. In Competitive Carrier, the Commission

distinguished between two kinds of carriers--those with market power

(dominant carriers) and those without market power (nondominant

carriers).

9. In a series of orders beginning in 1982, the Commission

established a permissive detariffing policy for nondominant carriers,

pursuant to which such carriers were permitted, although not required,

to file tariffs with the Commission. See Second Report and Order, 47 FR

37899 (August 27, 1982); Fourth Report and Order, 48 FR 52452 (November

18, 1983); Fifth Report and Order, 50 FR 1215 (January 10, 1985). The

Commission found that ``there was no evidence that it is in the public

interest for us to continue receiving streamlined tariff and Section

214 filings from certain specialized common carriers to prevent them

from charging unjust and unreasonable rates or making service

unavailable.'' The Commission concluded that market forces, together

with the Section 208 complaint process and the Commission's ability to

reimpose tariff-filing and facilities-authorization requirements, were

sufficient to protect the public interest with respect to nondominant

interexchange carriers subject to forbearance. The Commission also

noted that firms lacking market power could not charge unlawful rates

because customers could always turn to competitors. Sixth Report and

Order, 50 FR 1215 (January 10, 1985).

10. In 1985, in the Sixth Report and Order, the Commission

established a mandatory detariffing policy for all carriers subject to

the Commission's forbearance policy, because it concluded that policy

would further its objectives of ensuring just and reasonable rates, and

that it could rely instead on market forces, the complaint process, and

its ability to reimpose tariff requirements, if necessary, to fulfill

its mandate under the Communications Act. The Commission stated:

``Throughout this rulemaking, we have determined that enforcement of

Sections 201 and 202 objectives of just and reasonable rates could be

effectuated for certain carriers without the filing of tariffs and

through market forces and the administration of the complaint

process.'' Carriers subject to forbearance were required to ``file

supplements to cancel their tariffs on file with the Commission within

six months of the effective date of [the Sixth Report and Order].'' In

order to facilitate the complaint process and its enforcement of

statutory requirements that carriers charge just and reasonable rates,

the Commission also ordered carriers to maintain price and service

information on file in their offices that could be produced readily

upon inquiry from the Commission in order to substantiate the

lawfulness of the carriers' rates, terms and conditions for service.

11. The Sixth Report and Order subsequently was vacated and

remanded by the U.S. Court of Appeals for the D.C. Circuit, on the

ground that the Commission lacked the statutory authority to prohibit

carriers from filing tariffs. MCI Telecommunications Corp. v. FCC, 765

F.2d 1186, 1192 (D.C. Cir. 1985). The court, however, did not reach the

issue of whether the Commission's earlier permissive detariffing orders

were valid. Id. at 1196. The Commission, accordingly, continued to

apply its permissive detariffing policy to nondominant interexchange

carriers until 1992, when the U.S. Court of Appeals for the D.C.

Circuit vacated the Commission's permissive detariffing regime in AT&T

Co. v. FCC. AT&T Co. v. FCC, 978 F.2d 727 (D.C. Cir. 1992), cert.

denied, MCI Telecommunications Corp. v. AT&T Co., 509 U.S. 913 (1993).

The court, in reviewing an FCC decision disposing of a complaint filed

by AT&T against MCI, vacated the Commission's Fourth Report and Order,

thereby invalidating the Commission's permissive detariffing policy for

nondominant carriers. Id. at 737. While stating that it did ``not

quarrel with the Commission's policy objectives,'' the court found that

the Communications Act as it existed at that time did not give the

Commission authority to adopt such a policy. Id. at 736.

12. Prior to the issuance of the U.S. Court of Appeals' decision

invalidating the permissive detariffing policy, the Commission adopted

a Report and Order in a rulemaking proceeding commenced in response to

AT&T's complaint. See Tariff Filing Requirements for Interstate Common

Carriers, CC Docket No. 92-13, Report and Order, 7 FCC Rcd 8072 (1992).

(While adopted prior to the court's finding that the Commission's

permissive detariffing policy exceeded the Commission's statutory

authority, the order was released after the court vacated the Fourth

Report and Order). The Commission again determined that permissive

detariffing was within its authority under the Communications Act. Id.

at 8074. The U.S. Court of Appeals for the D.C. Circuit granted summary

reversal of the Commission's order based on the court's earlier AT&T v.

FCC decision. AT&T Co. v. FCC, Nos. 92-1628, 92-1666, 1993 WL 260778

(D.C. Cir. June 4, 1993) (per curiam), aff'd, MCI Telecommunications

Corp. v. AT&T Co., 114 S. Ct. 2223 (1994). In affirming the U.S. Court

of Appeal's ruling, the Supreme Court found that Section 203(b)(2) of

the Communications Act gives the Commission authority to modify the

Communications Act's tariff filing requirement, but not to eliminate it

entirely. MCI Telecommunications Corp. v. AT&T Co., 114 S. Ct. 2223,

2229-31 (1994). The Commission thereafter modified the tariff filing

requirements and established a one-day tariff notice period for all

nondominant interexchange carriers after again concluding that

traditional tariff regulation of nondominant interexchange carriers is

not necessary to ensure just and reasonable rates. Tariff Filing

Requirements for Nondominant Common Carriers, 58 FR 44457 (August 23,

1993) (Nondominant Filing Order), vacated on other grounds,

Southwestern Bell Corp. v. FCC, 43 F.3d 1515 (D.C. Cir. 1995) (finding

the range of rates provision in the Nondominant Filing Order violated

Section 203(a) of the Communications Act). The Commission subsequently

eliminated the range of rates provision and reinstated the other tariff

filing requirements, including the one-day notice period, adopted in

the Nondominant Filing Order. Tariff Filing Requirements for

Nondominant Common Carriers, 60 FR 52865 (October 11, 1995)

(Nondominant Filing Order II). In addition, under the streamlined

regulatory procedures for nondominant carriers established in the

Competitive Carrier proceeding, such carriers are not subject to price

cap regulation, and their tariff filings are presumed to be lawful and

do not require cost support data. See First Report and Order, 45 FR

76148 (November 18, 1980). Nondominant carriers also are subject to

streamlined Section 214 procedures for the construction, extension or

operation of new transmission facilities, as well as for the proposed

reduction or discontinuance of service.

13. Against this background, Congress enacted Section 401 of the

1996 Act, adding Section 10 to the

[[Page 59344]]

Communications Act. As discussed below, we find that this section

provides the Commission with the forbearance authority that the courts

had previously concluded was lacking. The Commission now has express

authority to eliminate unnecessary regulation and to carry out the pro-

competitive, deregulatory objectives that it pursued in the Competitive

Carrier proceeding for more than a decade.

B. Analysis of Statutory Requirements

i. Introduction

14. In the NPRM, the Commission tentatively concluded that it could

make the determinations necessary to forbear from applying the

provisions of Section 203 to nondominant carriers with respect to their

interstate, domestic, interexchange services. Specifically, the

Commission tentatively found that enforcement of the Section 203 tariff

filing requirements with respect to nondominant interexchange carriers:

(1) Is not necessary to ensure that such carriers' charges, practices,

or classifications are just and reasonable, and are not unjustly or

unreasonably discriminatory; and (2) is not necessary for the

protection of consumers. The Commission also tentatively found that

forbearing from applying Section 203 to nondominant interexchange

carriers is consistent with the public interest. The Commission

therefore tentatively concluded that it must forbear from applying

Section 203 tariff filing requirements to nondominant interexchange

carriers with respect to their interstate, domestic, interexchange

services. The Commission also tentatively concluded that it should not

permit nondominant interexchange carriers to file tariffs for such

services (that is, that it should adopt a policy of complete

detariffing), because it found that allowing nondominant interexchange

carriers to file tariffs on a voluntary basis would not be in the

public interest, and that complete detariffing would promote

competition in the interstate, domestic, interexchange market, deter

price coordination, and better protect consumers.

15. In this section, we consider whether the complete detariffing

policy proposed in the NPRM satisfies each of the statutory forbearance

criteria. We note that our analysis under the first two criteria does

not differentiate between our proposal in the NPRM to adopt a complete

detariffing policy and other detariffing options, such as detariffing

on a permissive basis (that is, allowing, but not requiring,

nondominant interexchange carriers to file tariffs with respect to

their interstate, domestic, interexchange services). Based on the

language of the first two statutory criteria, the analysis of all

detariffing proposals under the first two forbearance criteria would be

the same, because in each case the relevant inquiries are whether

tariff filings are necessary to ensure that nondominant interexchange

carriers' charges, practices, or classifications are just and

reasonable, and are not unjustly or unreasonably discriminatory, and

whether tariff filings are necessary to protect consumers. However, the

third statutory forbearance criterion, which requires an analysis of

whether the proposed forbearance is consistent with the public

interest, necessitates an analysis specific to the type of forbearance

at issue. Accordingly, in addressing the third criterion, we consider

whether adoption of a complete, or permissive, detariffing policy is

consistent with the public interest.

ii. Statutory Criteria for Forbearance

a. Are Tariff Filing Requirements Necessary To Ensure that the

Charges, Practices, Classifications or Regulations for the Interstate,

Domestic, Interexchange Services of Nondominant Interexchange Carriers

Are Just and Reasonable, and Are Not Unjustly or Unreasonably

Discriminatory?

(1) Background

16. As noted above, the 1996 Act requires the Commission to forbear

from applying Section 203 tariff filing requirements to interstate,

domestic, interexchange services offered by nondominant interexchange

carriers if the Commission determines that the three statutory

forbearance criteria are satisfied. With respect to the first

criterion, the Commission in the NPRM tentatively concluded that tariff

filing requirements are not necessary to ensure that nondominant

interexchange carriers' charges, practices, classifications or

regulations for interstate, domestic, interexchange services are just

and reasonable, and are not unjustly or unreasonably discriminatory.

The Commission also tentatively concluded that the Communications Act's

objectives of just, reasonable, and not unjustly or unreasonably

discriminatory rates could be achieved effectively through other means,

specifically through market forces and the administration of the

complaint process. The Commission therefore tentatively concluded that

elimination of tariff filing requirements for nondominant interexchange

carriers for their interstate, domestic, interexchange offerings would

satisfy the first statutory prerequisite for forbearance.

(2) Comments

17. Many commenters concur with the Commission's tentative

conclusion that requiring nondominant interexchange carriers to file

tariffs for their interstate, domestic, interexchange service offerings

is unnecessary to ensure that charges, practices, and classifications

for such services are just and reasonable, and are not unjustly or

unreasonably discriminatory. These parties claim that nondominant

carriers cannot rationally impose prices or terms that are unjust,

unreasonable, or unjustly or unreasonably discriminatory, because any

attempt to do so would result in a loss of market share. Several of

these parties add that the Section 208 complaint process is adequate to

remedy any illegal carrier conduct that does occur. Thus, they conclude

that market forces and the administration of the complaint process will

prevent nondominant interexchange carriers from behaving

anticompetitively in violation of Sections 201(b) and 202(a) of the

Communications Act.

18. Other commenters, however, argue that market forces are

currently inadequate to ensure that the charges, practices,

classifications or regulations of nondominant interexchange carriers

are just and reasonable, and are not unjustly or unreasonably

discriminatory, because the market for interstate, domestic,

interexchange services is not yet fully competitive. In addition, the

Tennessee Attorney General and ACTA argue that AT&T is able profitably

to charge higher rates than its competitors, demonstrating that

existing competition alone does not constrain AT&T's prices, and

therefore is not sufficient to regulate the marketplace.

19. Several commenters, including a number of state commissions,

argue that in the absence of tariffs, the Section 208 complaint process

would not be adequate to ensure that the charges, practices, and

classifications of nondominant interexchange carriers are just and

reasonable, and not unjustly or unreasonably discriminatory.

These commenters insist that tariffs provide information necessary

to enforce Sections 201 and 202 and to investigate fraudulent

practices. In addition, they argue that tariffs ensure accurate

information in the event of a dispute. They conclude that, without

tariffs, consumers and other interested parties will lack adequate

information to bring a complaint. TRA adds that the

[[Page 59345]]

complaint process is too limited because it focuses only on legal

issues, while the tariff review process allows policy analysis as well.

20. TRA argues that eliminating tariff filing requirements in a

market that is less than perfectly competitive will enable carriers to

discriminate against resellers, many of which are small and mid-sized

businesses. TRA claims that the resale market will not survive

detariffing, and that such a result is contrary to the objectives of

the Communications Act and Commission policy, which recognizes that a

vibrant resale market provides residential and small business customers

with access to lower rates, puts downward pressure on prices, and helps

prevent discriminatory pricing by increasing the number of parties

offering similar services.

(3) Discussion

21. We adopt the tentative conclusion in the NPRM that tariffs are

not necessary to ensure that the rates, practices, and classifications

of nondominant interexchange carriers for interstate, domestic,

interexchange services are just and reasonable and not unjustly or

unreasonably discriminatory. We conclude, consistent with the AT&T

Reclassification Order, that the high churn rate among consumers of

interstate, domestic, interexchange services indicates that consumers

find the services provided by interexchange carriers to be close

substitutes, and that consumers are likely to switch carriers in order

to obtain lower prices or more favorable terms and conditions. In

addition, as we found in the AT&T Reclassification Order, residential

and small business customers are highly demand-elastic, and will switch

carriers in order to obtain price reductions and desired features.

Because of the high elasticity of demand for interstate, domestic,

interexchange services, we find it is highly unlikely that

interexchange carriers that lack market power could successfully charge

rates, or impose terms and conditions, for interstate, domestic,

interexchange services that violate Section 201 or 202 of the

Communications Act, because any attempt to do so would cause their

customers to switch to different carriers. Thus, we believe that market

forces will generally ensure that the rates, practices, and

classifications of nondominant interexchange carriers for interstate,

domestic, interexchange services are just and reasonable and not

unjustly or unreasonably discriminatory. Moreover, if nondominant

interexchange carriers service offerings violate Section 201 or Section

202 of the Communications Act, we have other, more effective means of

remedying such conduct. Specifically, we can address any illegal

carrier conduct through the exercise of our authority to investigate

and adjudicate complaints under Section 208.

22. We also reject the unsupported suggestion that current levels

of competition are inadequate to constrain AT&T's prices. In the AT&T

Reclassification Order, we found that AT&T cannot unilaterally exercise

market power in the interstate, domestic, interexchange market. We

based this finding on, inter alia, AT&T's declining market share, the

supply elasticity in this market, the fact that both residential and

business customers are highly demand-elastic, and an analysis of AT&T's

cost, structure, size, and resources. The Tennessee Attorney General

and ACTA offer no new evidence that would lead us to alter our

conclusion that AT&T lacks market power in this market.

23. We also are not persuaded that tariffs are necessary to

constrain the prices and practices of nondominant interexchange

carriers with respect to interstate, domestic, interexchange services.

As discussed below, we find that evidence of tacit price coordination

in the market for interstate, domestic, interexchange services is

inconclusive. Moreover, we find that tariff filings by nondominant

interexchange carriers for interstate, domestic, interexchange services

may facilitate, rather than deter, price coordination, because under a

tariffing regime, all rate and service information is collected in one,

central location. Therefore, we believe that complete detariffing,

along with additional, competitive, facilities-based entry into the

interstate, domestic, interexchange market, will help deter attempts to

increase rates for interstate, domestic, interexchange services through

tacit price coordination. We therefore conclude that complete

detariffing of interstate, domestic, interexchange services offered by

nondominant interexchange carriers will further the Communications

Act's objective that carriers' rates, practices, classifications, and

regulations be just, reasonable and not unjustly or unreasonably

discriminatory.

24. In the NPRM, the Commission acknowledged that the Commission

initially relaxed its regulation of nondominant carriers in the

Competitive Carrier proceeding in part because it concluded that the

availability of service from a nationwide dominant carrier subject to

full Title II regulation would further constrain nondominant carriers.

We therefore sought comment on whether the absence of a nationwide

dominant carrier should affect our determination to forbear from

requiring nondominant interexchange carriers to file tariffs for

interstate, domestic, interexchange services. No commenter addressed

this issue, and we conclude that the absence of a dominant

interexchange carrier in today's competitive interstate, domestic,

interexchange market should not alter our analysis, because nondominant

interexchange carriers cannot successfully price their services

anticompetitively in this market. In addition, the Commission has

previously found that market forces effectively discipline nondominant

carriers even in the absence of a dominant carrier. See Implementation

of Sections 3(n) and 332 of the Communications Act, Regulatory

Treatment of Mobile Services, 59 FR 18493 (April 19, 1994).

25. We also reject the claim that, without tariffs, consumers and

other parties will lack sufficient information to challenge the

lawfulness of nondominant interexchange carriers' rates, terms and

conditions for domestic service, in particular on the ground that such

carriers' rates, practices, and classifications are unjustly or

unreasonably discriminatory. In the absence of tariffs, customers will

still receive rate information in the same manner they always have,

through the billing process. In addition, carriers likely will be

obligated to notify their customers of any changes in their rates,

terms and conditions for service as part of their contractual

relationship. Moreover, tariffs may not be the best vehicle for

disclosure of rate and service information for nondominant

interexchange carriers to residential and small business customers,

because such end-users rarely, if ever, consult these tariff filings,

and few of them are able to understand tariff filings even if they do

examine them. We further believe that nondominant interexchange

carriers will generally provide customers rate and service information

that currently is contained in tariffs, in an accessible format in

order to market their services and to retain customers. Nevertheless,

we acknowledge that, even in a competitive market, nondominant

interexchange carriers might not provide complete information

concerning all of their interstate, domestic, interexchange service

offerings to all consumers, and that some consumers may not be able to

determine the particular rate plans that are most appropriate for them,

based on their individual calling patterns. (For

[[Page 59346]]

example, nondominant interexchange carriers might engage in targeted

advertising concerning particular discounts and rate plans that might

be the least costly, and most appropriate, plan for some, but not all,

consumers.) Accordingly, and in light of considerations regarding the

enforcement of the 1996 Act's geographic rate averaging and rate

integration requirements, we will require carriers to provide rate and

service information to the public, as we discuss below. In addition, as

the Commission did in the Sixth Report and Order, we will require

nondominant interexchange carriers to maintain price and service

information and to make such information available on a timely basis to

the Commission upon request. We therefore conclude that, in the absence

of tariffs for nondominant carriers' interstate, domestic,

interexchange services, consumers and other parties will have access to

sufficient information about such services for purposes of bringing

complaints. On June 12, 1996, the Office of Management and Budget

approved the Commission's proposal in the NPRM to require nondominant

interexchange carriers to maintain at their premises price and service

information regarding their interstate, interexchange offerings that

they can submit to the Commission upon request. Notice of Office of

Management and Budget Action, OMB No. 3060-0704 (June 12, 1996). In

reviewing the proposed information collection requirements in the NPRM,

including the proposal to eliminate tariff filing requirements by

nondominant interexchange carriers for interstate, domestic,

interexchange services, the Office of Management and Budget ``strongly

recommend[ed] that the [Commission] investigate potential mechanisms to

provide consumers, State regulators, and other interested parties with

some standardized pricing information.''

26. We reject TRA's claim that the complaint process is inadequate

to protect consumers. TRA maintains that the Commission addresses only

legal issues in a complaint proceeding, whereas in the tariff review

process, the Commission can address policy issues as well. TRA is

incorrect, however. Regardless of whether the inquiry is part of a

complaint or a tariff review proceeding, the Commission can address all

relevant legal and policy issues. In the particular context of Section

208 complaint proceedings, we will continue to examine legal, and,

where appropriate, policy matters to give full effect to the

requirements that a carrier's rates, terms, and conditions are just,

reasonable, and not unreasonably discriminatory, as well as the

requirements of our rules and orders.

27. Contrary to TRA's assertions that the resale market will not

survive in the absence of tariffs, we conclude that our decision to

forbear from requiring nondominant interexchange carriers to file

tariffs for interstate, domestic, interexchange services will not

affect such carriers' obligations under Sections 201 and 202 to charge

rates, and to impose practices, classifications and regulations, that

are just and reasonable and not unjustly or unreasonably

discriminatory. In addition, as discussed below, we will require

nondominant interexchange carriers to provide rate and service

information on all of their interstate, domestic, interexchange

services to consumers, including resellers. Thus, resellers will be

able to determine whether nondominant interexchange carriers have

imposed rates, practices, classifications or regulations that

unreasonably discriminate against resellers, and to bring a complaint,

if necessary.

28. For the reasons discussed herein, we conclude that 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. We therefore conclude that the

proposal to adopt complete detariffing meets the first of the statutory

forbearance criteria.

b. Are Tariff Filing Requirements for the Interstate, Domestic,

Interexchange Services of Nondominant Interexchange Carriers Necessary

for the Protection of Consumers?

(1) Background

29. In the NPRM, the Commission tentatively concluded that

requiring nondominant interexchange carriers to file tariffs for

interstate, domestic, interexchange services is not necessary to

protect consumers, and that such tariff filing requirements could harm

consumers by undermining the development of vigorous competition.

(2) Comments

30. A number of parties support the Commission's tentative

conclusion that requiring nondominant interexchange carriers to file

tariffs for interstate, domestic, interexchange service offerings is

not necessary to protect consumers. Several of these parties claim that

nondominant interexchange carriers cannot rationally charge prices, or

impose terms and conditions that harm consumers without losing

customers. In addition, many parties assert that the complaint process

is adequate to remedy any illegal carrier conduct that violates the

Communications Act and harms consumers.

31. Several commenters also support the Commission's tentative

conclusion that tariff filing requirements actually harm consumers by

impeding the development of vigorous competition and by leading to

higher rates.

32. A number of state commissions and other commenters assert,

however, that, without tariffs, the complaint process would not be

adequate to protect consumers. They claim that the complaint process is

cumbersome, expensive and time-consuming, and that without tariffs,

consumers will lack sufficient information on which to base a complaint

that a carrier has violated Section 201 or 202, or failed to comply

with the rate averaging and rate integration requirements of Section

254(g). A number of state commissions and other parties also assert

that detariffing will impede state regulatory or law enforcement

functions, because state officials depend on information contained in

tariffs filed with the Commission to protect consumers, to prevent

fraudulent practices, and to promote state objectives and policies,

such as ensuring that rates for intraLATA services are no higher than

those for interLATA services. In addition, some state commissions are

concerned that tariff forbearance by the Commission might preempt state

tariff filing requirements because Section 10(e) of the Communications

Act provides that ``a State commission may not continue to apply or to

enforce any provision of this Act that the Commission has determined to

forbear from applying.'' Several parties add that tariffs also ensure

that the Commission has access to accurate information in the event of

a dispute.

33. The Ad Hoc Users and BellSouth maintain, however, that, even in

the absence of tariffs, carriers will make price and service

information available to the public through methods such as

advertising, bill inserts and brochures; and that those methods are

more effective at informing consumers than tariff filings, which are

not readily available to consumers and which most consumers therefore

never examine.

34. Some commenters suggest that, if the Commission detariffs, the

Commission should limit forbearance from tariff filing requirements to

individually-negotiated service

[[Page 59347]]

arrangements. They urge the Commission to retain tariff filing

requirements for mass market services offered to residential and small

business customers because, they claim, tariffs are necessary to

protect consumers of such services.

35. In addition, American Telegram argues that tariffs are

necessary to protect consumers with respect to terms and conditions,

but not rates and charges, of nondominant interexchange carriers.

American Telegram asserts that tariffs are necessary to protect

consumers with respect to terms and conditions of service, because,

without tariffs, each customer would have to challenge its individual

contract with the carrier in order to establish the illegality of the

carrier's terms or conditions for service. American Telegram claims

that, by contrast, when a tariff is challenged, any changes to the

tariffed terms and conditions apply automatically to all customers of

that service.

(3) Discussion

36. We adopt the tentative conclusion in the NPRM that tariff

filings by nondominant interexchange carriers for interstate, domestic,

interexchange services are not necessary to protect consumers. Rather,

as discussed above, we find that it is highly unlikely that

interexchange carriers that lack market power could successfully charge

rates, or impose terms and conditions, for interstate, domestic,

interexchange services that violate Sections 201 and 202 of the

Communications Act. We therefore conclude that market forces, our

administration of the Section 208 complaint process, and our ability to

reimpose tariff filing requirements, if necessary, are sufficient to

protect consumers.

37. We also adopt the tentative conclusion that in the interstate,

domestic, interexchange market, requiring nondominant interexchange

carriers to file tariffs for interstate, domestic, interexchange

services may harm consumers by impeding the development of vigorous

competition, which could lead to higher rates. We agree with NYNEX that

``forbearance will promote competition and deter price coordination,

which can threaten competitive benefits.'' By promoting competition,

detariffing will better protect consumers against the imposition of

rates, terms, or conditions that violate the Communications Act.

38. We reject the argument that, for interstate, domestic,

interexchange services offered by nondominant interexchange carriers,

the complaint process is inadequate to protect consumers. As an initial

matter, we note that we are not simply relying on the complaint process

to protect consumers. Rather, as set forth above, we believe that

market forces, together with the complaint process, will adequately

protect consumers. In addition, we find that our complaint process is

adequate to redress any harm to consumers should a nondominant

interexchange carrier establish prices, or impose terms and conditions,

that violate Sections 201 or 202, or engage in other conduct that

violates the Communications Act or our regulations. Moreover, we note

that in the absence of tariffs, consumers will be able to pursue

remedies under state consumer protection and contract laws in a manner

currently precluded by the ``filed-rate'' doctrine.

39. While we agree with those commenters that argue that the

Commission and the public may need access to information concerning

carriers' rates, terms and conditions to ensure carrier compliance with

the requirements of Sections 201, 202, and 254(g) of the Communications

Act, we are not persuaded that tariffs filed pursuant to Section 203

are the only, or most effective, means of disseminating such

information. As an initial matter, we note that the majority of

complaints by consumers about the lawfulness of carriers' rates, terms,

or conditions for interstate, domestic, interexchange services are

based on information obtained through the billing process, rather than

information obtained from carriers' tariffs. As set forth above, we

believe that nondominant interexchange carriers likely will provide

rate and service information currently contained in tariffs to their

customers in order to establish a legal relationship with such

customers or as part of the billing process. Moreover, nondominant

carriers likely will publicize their rates, terms and conditions for

service in order to maintain, or improve, their competitive positions

in the market. We therefore conclude that the public will have access

to sufficient information to bring to the Commission's attention

possible violations of the Communications Act without the risk of

anticompetitive effects inherent in tariff filing requirements.

40. Additionally, we find no basis for the claim that the

detariffing of the interstate, domestic, interexchange services of

nondominant interexchange carriers will significantly impede state

regulatory or law enforcement functions. The rules we adopt in this

proceeding will not interfere with, and in fact may facilitate, a state

agency's ability to obtain directly from carriers price and service

information regarding interstate, domestic, interexchange services. Our

action here also does not affect state tariff filing requirements for

intrastate services. Section 10(e) of the Communications Act, which

provides that ``a State commission may not continue to apply or to

enforce any provision of this Act that the Commission has determined to

forbear from applying,'' does not prohibit states from requiring

nondominant interexchange carriers to file tariffs with respect to

their intrastate, interexchange services based on our action here.

41. We reject the suggestion that tariffs are necessary to protect

consumers of mass market interstate, domestic, interexchange services

provided by nondominant interexchange carriers, and therefore that the

Commission should limit forbearance only to individually-negotiated

service arrangements. We find that the reasons supporting our

conclusion that tariff filings are not necessary to protect consumers

of interstate, domestic, interexchange services provided by nondominant

interexchange carriers apply to all such services, and not only to

those provided pursuant to individually-negotiated arrangements.

Specifically, any increase in competition resulting from the

elimination of tariffs will redound to the benefit of consumers of all

interstate, domestic, interexchange services. For example, we believe

that eliminating tariffs for mass market services will increase

carriers' incentive to reduce prices for such services, and reduce

their ability to engage in tacit price coordination. In addition,

detariffing of mass market services will likely provide greater

protection to consumers, because, as discussed below, carriers will

likely be required, as a matter of contract law, to give customers

advance notice before instituting changes that adversely affect

customers. Carriers will also continue to provide rate information to

customers as part of the billing process, and in order to market their

services and to retain customers.

42. Similarly, we do not agree with American Telegram's claim that

tariffs are necessary to protect consumers with respect to terms and

conditions, but not rates and charges, of interstate, domestic,

interexchange services provided by nondominant interexchange carriers.

Just as we believe that competition is sufficient to ensure that

nondominant interexchange carriers' charges for interstate, domestic,

interexchange services are just and reasonable, and not unreasonably

discriminatory, and to protect consumers, we believe that competitive

forces will ensure that nondominant

[[Page 59348]]

carriers' non-price terms and conditions are reasonable. Moreover, we

concur with BellSouth that even non-price tariff filings can be used to

facilitate tacit coordination by carriers. In addition, we reject

American Telegram's argument that tariffs concerning nondominant

carriers' terms and conditions for interstate, domestic, interexchange

service are necessary to protect consumers, because, without such

tariffs, each customer seeking to challenge a carrier's terms or

conditions would have to show that its individual contract is unlawful.

Nondominant interexchange carriers are likely to use standard contracts

for most services rather than individually negotiate a different

contract with each customer. As a result, following a successful

challenge to a carrier's standard service agreement, that carrier is

likely to modify the unlawful contract with all of its customers,

rather than face additional complaints or litigation in which the

previous determination that the contract is unlawful would likely be

given preclusive effect. As in nearly every other business that is

conducted without tariffs, we find that tariffs by nondominant

interexchange carriers for interstate, domestic, interexchange services

are not necessary to protect consumers. In the absence of such tariffs,

consumers will not only have our complaint process, but will also be

able to pursue remedies under state consumer protection and contract

laws.

43. For the reasons discussed herein, we conclude that tariffs for

the interstate, domestic, interexchange services of nondominant

interexchange carriers are not necessary to protect consumers. We

therefore conclude that the proposal to adopt complete detariffing

meets the second of the statutory forbearance criteria.

c. Is Forbearance From Applying Section 203 Tariff Filing

Requirements to the Interstate, Domestic, Interexchange Services

Offered By Nondominant Interexchange Carriers Consistent With the

Public Interest?

(1) Background

44. The third statutory criterion requires us to determine whether

forbearance from applying Section 203 tariff filing requirements to the

interstate, domestic, interexchange services of nondominant

interexchange carriers is consistent with the public interest. In

making this determination, the statute specifically requires us to

consider whether forbearance will promote competitive market

conditions, including the extent to which forbearance will enhance

competition among providers of telecommunications services. In

addition, Section 10(b) provides that, ``[i]f the Commission determines

that such forbearance will promote competition among providers of

telecommunications services, that determination may be the basis for a

Commission finding that forbearance is in the public interest.'' In the

NPRM, the Commission tentatively concluded that it should not permit

nondominant interexchange carriers to file tariffs for interstate,

domestic, interexchange services of nondominant interexchange carriers,

because complete detariffing of such services will promote competition

and deter price coordination in the interstate, domestic, interexchange

market, and will better protect consumers.

(2) Comments

45. Several commenters, including large consumers of

telecommunications services, agree with the Commission's tentative

conclusion that complete detariffing of nondominant interexchange

carriers' interstate, domestic, interexchange services is in the public

interest. These commenters argue that allowing nondominant

interexchange carriers to continue to file tariffs undermines the

development of vigorous competition because: (1) Tariffs delay a

carrier's ability to respond to market changes; (2) even under

streamlined tariff filing procedures, the preparation, filing, and

defense of tariffs imposes substantial uneconomic costs on carriers;

(3) absent tariffs, a carrier could no longer 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;

(4) tariffs reduce incentives to engage in competitive price

discounting, because competitors can respond to any price change before

it has the desired effect of capturing market share. Several parties

further argue that tariffs facilitate coordinated pricing by enabling

carriers to ascertain their competitors' rates, terms, and conditions

for service at one, central location. APCC argues that forbearance from

tariff filing requirements would eliminate a regulatory requirement

that is especially burdensome on small carriers. Some of these

commenters additionally argue that complete detariffing would eliminate

the possible invocation of the ``filed-rate'' doctrine. It is well

established that, pursuant to the ``filed-rate'' doctrine, in a

situation where a filed tariff rate, term or condition differs from a

rate, term, or condition set 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).

Consequently, if a carrier unilaterally changes a rate by filing a

tariff revision, the newly filed rate becomes the applicable rate

unless the revised rate is found to be unjust, unreasonable, or

unlawful under the Communications Act. See Maislin Industries, U.S.,

Inc. v. Primary Steel, Inc., 497 U.S. 116 (1990).

46. Interexchange carriers and other commenters contend that

complete detariffing is not in the public interest, because prohibiting

nondominant interexchange carriers from filing tariffs with respect to

interstate, domestic, interexchange services will impede competition

and increase carriers' costs. Specifically, these parties argue that

complete detariffing would: (1) Significantly increase transaction

costs by forcing nondominant interexchange carriers to conclude

literally millions of written agreements with customers in order to

establish legally enforceable contractual relationships; (2) make

casual calling options more difficult, if not impossible; and (3)

prevent carriers from reacting quickly to market conditions because

carriers would be forced to notify each individual customer of any

changes to their rates, terms, and conditions before such changes could

be effective. (Casual calling refers to services that do not require a

consumer to open an account or otherwise presubscribe to a service,

including use of a third-party credit card, collect calling, or dial-

around through the use of an access code. Several parties argue that

tariffs are essential to casual calling services because callers use

the services on a temporary basis without a preexisting contractual

relationship, and that tariffs are the only cost-efficient way to

establish a legal relationship with casual callers.) ACTA further

argues that any increased transaction costs would be especially

burdensome on small carriers that have fewer resources. LDDS contends

that the increased transaction costs due to detariffing would

discourage nondominant interexchange carriers from serving certain

market segments (e.g., low-usage residential, small business, and

casual callers), thereby decreasing competitive choices for these

customers. In addition, several parties argue that tariffs actually

promote competition by sending accurate economic signals and

disseminating rate and service information to consumers and

competitors. In particular, they argue that residential and small

business

[[Page 59349]]

customers require access to such information to obtain the best rates

available, and that small nondominant interexchange carriers need such

information to compete with larger interexchange carriers. Several

parties further argue that complete detariffing would not deter price

coordination, to the extent it exists, both because rate and service

information would continue to be available to competitors and because

the existing streamlined tariff filing procedures prevent price

signalling. A few parties suggest that, if the Commission is concerned

about tacit price coordination, it could remedy the problem by

requiring nondominant interexchange carriers to file tariffs on no more

than one day's notice, rather than not permitting such carriers to file

tariffs.

47. Interexchange carriers and several other commenters that oppose

complete detariffing contend that permissive detariffing would be

consistent with the public interest. They maintain that: (1) Permissive

detariffing would be the most deregulatory and pro-competitive option

because carriers could determine the most efficient means to establish

contractual relations with their customers (e.g., carriers could file

tariffs for such mass market offerings as residential and small

business services, reducing transactions costs to carriers and

consumers); (2) the ``filed-rate'' doctrine would no longer apply if

the Commission adopted a permissive detariffing regime, because the

tariffed rate would no longer be the only legally permissible rate; (3)

price coordination would be difficult, if not impossible, with

permissive detariffing because carriers would at best have fragmentary

information concerning their competitors' rates, terms, and conditions;

and (4) casual calling options would still be feasible with permissive

detariffing.

48. Several commenters, however, argue that permissive detariffing,

that is, allowing nondominant interexchange carriers to file tariffs if

they wish to do so, is not in the public interest. Several of these

parties argue that permissive detariffing is contrary to the public

interest, because it would allow nondominant interexchange carriers to

``game'' the system by filing tariffs when it serves their interest to

do so, for example, to take advantage of the ``filed-rate'' doctrine or

to engage in price signaling. Contrary to the interexchange carriers'

assertions, these parties claim that the ``filed-rate'' doctrine would

continue to exist if detariffing were implemented on a permissive

basis. TRA, which opposes any detariffing at all, argues that

permissive detariffing would enable carriers to discriminate against

resellers.

49. Some commenters suggest that the Commission limit forbearance

from tariff filing requirements to individually-negotiated service

arrangements and retain tariff filing requirements for mass market

services offered to residential and small business customers, because

tariffs allow carriers to establish a legal relationship with customers

quickly and inexpensively. In addition, several parties urge the

Commission to limit the scope of forbearance only to certain

nondominant interexchange carriers, or to certain types of information.

For example, TRA and ACTA suggest that the Commission should forbear

from applying Section 203 tariff filing requirements to those carriers

with less than a certain percentage of the market and that are not

affiliated with certain incumbent local exchange carriers, such as the

BOCs.

50. In addition, several commenters contend that it is premature to

detariff now, in light of the dynamic changes occurring in the market,

such as the reclassification of AT&T in October 1995, and the opening

of all telecommunications markets to increased competition following

enactment of the 1996 Act. These commenters urge the Commission to

defer any decision concerning forbearance from tariff filing

requirements until it can evaluate the effect of these changes on the

interstate, domestic, interexchange market.

51. Finally, several parties commented on how the Commission should

treat the BOCs upon their entry into the interstate, domestic,

interexchange services market in order to promote competition in this

market. A number of BOCs and other parties argue that detariffing will

only provide competitive benefits if we also detariff the BOCs once

they enter the interstate, domestic, interexchange market. They argue

that failure to do so, would place the BOCs, which they claim lack

market power in the interstate, domestic, interexchange market, at a

competitive disadvantage vis-a-vis existing interexchange carriers,

which currently control the market, and would inhibit competition,

thereby undermining Congress' objective in passing the 1996 Act. Others

argue that, because the BOCs exercise market power in the exchange

access market, the Commission should require the BOCs to file tariffs

for interstate, domestic, interexchange services until the Commission

has experience with the type and level of safeguards necessary to

prevent cross-subsidization and other unlawful practices.

(3) Discussion

52. We adopt the tentative conclusion in the NPRM that not allowing

nondominant interexchange carriers to file tariffs for the provision of

interstate, domestic, interexchange services is consistent with the

public interest, with the limited exception, as discussed below, of

AT&T's provision of 800 directory assistance and analog private line

services. Section 10(b) specifically requires the Commission, in

determining whether forbearance from enforcing a provision of the

Communications Act or a regulation is in the public interest, to

consider whether forbearance will promote competitive market

conditions, including the extent to which forbearance will enhance

competition among providers of telecommunications services. We find

that a regime without nondominant interexchange carrier tariffs for

interstate, domestic, interexchange services is the most pro-

competitive, deregulatory system. Specifically, we find that not

permitting nondominant interexchange carriers to file tariffs with

respect to interstate, domestic, interexchange services will enhance

competition among providers of such services, promote competitive

market conditions, and achieve other objectives that are in the public

interest, including eliminating the possible invocation of the filed

rate doctrine by nondominant interexchange carriers, and establishing

market conditions that more closely resemble an unregulated

environment. Moreover, we find that permitting nondominant

interexchange carriers to file tariffs on a voluntary basis would

undermine several of these benefits, and therefore is not in the public

interest.

53. The record in this proceeding supports our tentative conclusion

that not permitting nondominant interexchange carriers to file tariffs

for interstate, domestic, interexchange services will promote

competition in the market for such services. Even under existing

streamlined tariff filing procedures, requiring nondominant

interexchange carriers to file tariffs for interstate, domestic,

interexchange services impedes vigorous competition in the market for

such services by: (1) Removing incentives for competitive price

discounting; (2) reducing or taking away carriers' ability to make

rapid, efficient responses to changes in demand and cost; (3) imposing

costs on carriers that attempt to make new offerings; and (4)

preventing consumers from seeking out or obtaining service

[[Page 59350]]

arrangements specifically tailored to their needs. (These findings are

consistent with the Commission's findings in the Competitive Carrier

proceeding. Sixth Report and Order. The Commission recently reiterated

these findings in the Regulatory Treatment of Mobile Services Order, 59

FR 18493 (April 19, 1994).) Moreover, we believe that tacit

coordination of prices for interstate, domestic, interexchange

services, to the extent it exists, will be more difficult if we

eliminate tariffs, because price and service information about such

services provided by nondominant interexchange carriers would no longer

be collected and available in one central location.

54. In addition, requiring tariffs for interstate, domestic,

interexchange services offered by nondominant interexchange carriers

impedes competition by preventing customers from seeking out or

obtaining price and service arrangements tailored to their needs. As Ad

Hoc Users and others note, carriers, in some cases, have refused to

accommodate customers' requests for particular service terms on the

ground that the requested terms are not contained in the carriers'

tariffs, and that the Commission would reject any term or condition for

service that differed from the carriers' general tariffs. Eliminating

tariff filings by nondominant interexchange carriers will prevent such

carriers from refusing to negotiate with customers based on the

Commission's tariff filing and review processes. As a result, carriers

may become more responsive to customer demands, and offer a greater

variety of price and service packages that meet their customers' needs.

55. Complete detariffing would also further the public interest by

eliminating the ability of carriers to invoke the ``filed-rate''

doctrine. As noted above, courts have long held that, in a situation

where a filed tariff rate, or other term or condition, differs from a

rate, term, or condition set in a non-tariffed carrier-customer

contract, the carrier is required to impose the tariffed rate, term or

condition. While the Commission has held that unilateral changes that

alter material terms and conditions of long-term service arrangements

are reasonable only if justified by substantial cause, the filed rate

doctrine provides carriers with the ability to alter or abrogate their

contractual obligations in a manner that is not available in most

commercial relationships. In addition, complete detariffing would

further the public interest by preventing carriers from unilaterally

limiting their liability for damages. Accordingly, by permitting

carriers unilaterally to change the terms of negotiated agreements, the

filed rate doctrine may undermine consumers' legitimate business

expectations. Absent filed tariffs, the legal relationship between

carriers and customers will much more closely resemble the legal

relationship between service providers and customers in an unregulated

environment. Thus, eliminating the filed rate doctrine in this context

would serve the public interest by preserving reasonable commercial

expectations and protecting consumers.

56. Eliminating tariffs for the interstate, domestic, interexchange

services of nondominant interexchange carriers will not, as some

suggest, reduce such carriers' incentive or ability to offer discounts

or respond quickly to market changes by forcing them to give customers

advance notice of all changes to their rates, terms, and conditions for

service. Our experience over the past several years indicates that

interexchange carriers' competitive offerings to residential and small

business customers are typically optional calling plans in which

consumers must affirmatively elect to participate. In order to induce

customers to participate in such plans, carriers have widely advertised

the terms and availability of these calling plans. Thus, detariffing of

interstate, domestic, interexchange services is likely to have little,

if any, impact on nondominant interexchange carriers' incentives or

ability to engage in competitive price discounting. In addition, as a

matter of contract law, nondominant interexchange carriers would not

necessarily be required to provide notice before instituting changes

that benefit, or do not adversely affect in a material way, customers

(e.g., reducing rates). For example, carriers could expressly reserve

the right to make rate reductions or new discounts immediately

available to existing customers. Carriers could also include in their

service contracts provisions giving them flexibility to alter specific,

incidental contract terms in a manner not adverse to the customer. See

Restatement (Second) of Contracts Sec. 34 (1981) (discussing the

analogous practice of allowing one or both parties to a contract to

select certain terms during the performance of the contract). Such

carriers would, however, likely be required, as a matter of contract

law, to give advance notice of those changes that adversely affect

customers (e.g., rate increases). We conclude that it would not be

unduly burdensome for nondominant interexchange carriers to provide

customers advance notice of the latter changes through billing inserts

or other measures. Such notice would provide greater protection to

consumers and is more pro-competitive than allowing carriers to

increase their rates by filing tariff changes with the Commission on

one day's notice.

57. We recognize that detariffing may change significant aspects of

the way in which nondominant interexchange carriers conduct their

business. Contrary to the suggestion of some parties, however, tariffs

are not the only feasible way for carriers to establish legal

relationships with their customers, nor will nondominant interexchange

carriers necessarily need to negotiate contracts for service with each,

individual customer. As some parties note, such carriers could, for

example, issue short, standard contracts that contain their basic

rates, terms and conditions for service. Moreover, parties that oppose

complete detariffing have not shown that the business of providing

interstate, domestic, interexchange services offered by nondominant

interexchange carriers should be subject to a regulatory regime that is

not available to firms that compete in any other market in this

country. We conclude that requiring nondominant interexchange carriers

to withdraw their tariffs and conduct their business as other

enterprises do will not impose undue burdens on such carriers,

substantially increase their costs, or, as LDDS suggests, force such

carriers to abandon segments of the market to the detriment of

residential and small business customers. Moreover, we reject ACTA's

argument that detariffing will disproportionately burden small,

nondominant interexchange carriers. While some of the increased

administrative costs that carriers may incur initially as a result of

the shift to a detariffed environment are likely to be fixed (such as

the cost of developing short, standard contracts), many such costs will

vary based on the area or number of customers served by such carriers

(e.g., advertising expenditures, the cost of promotional mailings or

billing inserts). Nonetheless, we find that, on balance, the pro-

competitive effects of not allowing nondominant interexchange carriers

to file tariffs for their interstate, domestic, interexchange services

outweigh any potential increase in transactional or administrative

costs resulting from the shift to a detariffed environment.

58. We are also not persuaded that complete detariffing will make

casual calling impossible. We believe nondominant interexchange

carriers have options other than tariffs by which

[[Page 59351]]

they can establish legal relationships with casual callers pursuant to

which such callers would be obligated to pay for the telecommunications

services they use. For example, a carrier could seek recovery under an

implied-in-fact contract theory if a customer has used the carrier's

services, with knowledge of the carrier's charges, but has not executed

a written contract. Under this theory, the customer's acceptance of the

services rendered would evidence his agreement to the contract terms

proposed by the carrier. By providing billing or payment information

(e.g., credit card information or a billing number) and completing use

of the telecommunications service, casual callers may be deemed to have

accepted a legal obligation to pay for any such services rendered.

(Similarly, a casual caller who uses a carrier's access code to obtain

service from the carrier may be deemed to have accepted an outstanding

offer from the carrier to provide casual calling service, and therefore

be obligated to pay for any services rendered.) We do not believe that

these options will prove unduly burdensome for carriers. In any event,

we conclude that, on balance, the competitive benefits of complete

detariffing of nondominant interexchange carriers' interstate,

domestic, interexchange services outweigh any potential increased costs

resulting from the shift to detariffing. We further believe that the

nine-month transition period established by this Order, will afford

carriers sufficient time to develop efficient mechanisms to provide

casual calling services in the absence of tariffs.

59. We reject the suggestion that eliminating tariff filing

requirements for nondominant interexchange carriers' interstate,

domestic, interexchange services would impede competition for such

services by reducing information available to consumers and small

nondominant interexchange carriers. As discussed above, nondominant

interexchange carriers are likely to make rate and service information,

currently contained in tariffs, available to the public in a more user-

friendly form in order to preserve their competitive position in the

market, and as part of their contractual relationship with customers.

In addition, as we discuss below, we will require nondominant

interexchange carriers to provide rate schedules for all of their

interstate, domestic, interexchange services to consumers.

60. As noted, several parties, asserting that complete detariffing

is not in the public interest, instead argue that permissive

detariffing would be in the public interest. We reject their arguments

for several reasons. Contrary to the assertions of AT&T and others, we

believe that a permissive detariffing regime would not necessarily

eliminate possible invocation of the ``filed-rate'' doctrine by

nondominant interexchange carriers. Section 203(c) provides that a

carrier may not ``charge, demand, collect, or receive a greater or less

or different compensation * * * than the charges specified in the

schedule then in effect.'' Thus, it is possible that, once a carrier

files a tariff with the Commission, even if it is on a permissive

basis, Section 203(c) may require the carrier to provide service at the

rates, and on the terms and conditions, set forth in the tariff until

or unless the carrier files a superseding tariff cancelling, or

changing the rates and terms of, the tariff. Because the filed rate

doctrine is a legal doctrine developed by judicial precedent, it is not

entirely clear how courts would apply the filed rate doctrine if

nondominant interexchange carriers were permitted to file tariffs and

the filed tariff rate differed from the rate set in a non-tariffed

contract. We believe that 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 environment, can we definitively eliminate these

possible anticompetitive practices and protect consumers.

61. Another consideration that precludes us from finding that

permissive detariffing of the interstate, domestic, interexchange

services of nondominant interexchange carriers is in the public

interest is that, unlike complete detariffing, permissive detariffing

would not eliminate the collection and availability of rate information

in one centralized location. Although we recognize that nondominant

interexchange carriers under a complete detariffing regime would still

be able to obtain information concerning their competitors' rates and

service offerings, we believe that tacit price coordination, to the

extent it exists, will be more difficult. In contrast, allowing

nondominant interexchange carriers to file tariffs on a voluntary basis

would create the risk that carriers would file tariffs merely to send

price signals and thus manipulate prices. In this respect, we are not

persuaded by Frontier and CSE who argue that permissive detariffing

would eliminate any risk of coordinated pricing because carriers could

not be certain of their competitors' rates, terms, and conditions for

service. Carriers could use tariffs to engage in price signalling,

because any nondominant carrier that opted to file a tariff would be

bound by its terms until or unless the carrier cancelled or modified

the tariff through a new tariff filing, and thus competing carriers

would be certain of such carrier's rates, terms and conditions for

service while its tariff is in effect.

62. In addition, we note that permitting nondominant interexchange

carriers to file tariffs for interstate, domestic, interexchange

services imposes administrative costs on the Commission, which must

maintain and organize tariff filings for public inspection. In light of

our conclusion that market forces, the complaint process, and our

ability to reimpose tariff filing requirements are adequate to protect

consumers and ensure that nondominant interexchange carriers' rates,

terms and conditions for interstate, domestic, interexchange services

are just, reasonable and not unreasonably discriminatory, we believe

that the public interest would be better served by the Commission

devoting these resources to its enforcement duties.

63. With two limited exceptions described below, we also do not

believe that there is a sound basis for concluding that forbearance is

in the public interest only with respect to certain interstate,

domestic, interexchange services, such as individually negotiated

service arrangements offered by nondominant interexchange carriers. We

find that the competitive benefits of not permitting nondominant

interexchange carriers to file tariffs for interstate, domestic,

interexchange services, discussed above, apply equally to all segments

of the interstate, domestic, interexchange services market. Moreover,

as discussed above, we reject the argument that detariffing mass market

services offered to residential and small business customers will lead

to substantially higher transactions costs. Similarly, we are not

persuaded that the public interest benefits differ depending on the

type of tariffed information that is at issue. The public interest

benefit of removing carriers' ability to invoke the ``filed-rate''

doctrine applies equally with respect to terms and conditions as to

rates. Moreover, permitting or requiring large nondominant

interexchange carriers to file tariffs for interstate, domestic,

interexchange services would not eliminate the risk of tacit price

coordination among such carriers, and would raise the possibility that

such carriers' tariffed rates would become a price umbrella. Finally,

we agree with AT&T that there is no basis

[[Page 59352]]

to differentiate among nondominant interexchange carriers, because all

such carriers are unable to exercise market power in the interstate,

domestic, interexchange market.

64. Nor do we believe that we should delay our decision to detariff

the interstate, domestic, interexchange services of nondominant

interexchange carriers. Because we find the statutory criteria for

forbearance are met at this time for all interstate, domestic,

interexchange services offered by nondominant interexchange carriers,

we are required by the 1996 Act to forbear from applying Section 203

tariff filing requirements to these services. Should circumstances

change such that the statutory forbearance criteria are no longer met,

we have the authority to revisit our determination here, and to

reimpose Section 203 tariff filing requirements.

65. Finally, with respect to the regulatory treatment of BOC

interexchange affiliates upon their entry into the interstate,

domestic, interexchange market, we find no basis to exclude such

carriers from the purview of this Order if they are classified as

nondominant in their provision of interstate, domestic, interexchange

services. We note that we are addressing the issue of whether incumbent

local exchange carriers, including the BOCs, should be classified as

dominant or nondominant in their provision of interstate, domestic,

interexchange services in a separate ongoing proceeding. See

Implementation of the Non-Accounting Safeguards of Sections 271 and 272

of the Communications Act of 1934, as amended; Regulatory Treatment of

LEC Provision of Interexchange Services Originating in the LEC's Local

Exchange Area, CC Docket No. 96-149, Notice of Proposed Rulemaking, 61

FR 39397 (July 29, 1996).

66. For the reasons explained herein, we find that complete

detariffing of interstate, domestic, interexchange services offered by

nondominant interexchange carriers is in the public interest, and that

permissive detariffing of such services is not in the public interest.

iii. Authority To Eliminate Tariff Filings

a. Background

67. In the NPRM, the Commission sought comment on whether it has

the authority under Section 10 of the Communications Act not to permit

carriers to file tariffs.

b. Comments

68. Several interexchange carriers and others argue that the plain

language of Section 10 authorizes the Commission only to refrain from

requiring tariffs, but not to prohibit carriers from voluntarily

complying with Section 203. AT&T contends that the Commission has used

the term ``forbearance'' to apply only to permissive detariffing, and

used the terms ``cancellation'' of all filed tariffs and

``elimination'' of future filings in adopting complete detariffing in

the Competitive Carrier proceeding. AT&T adds that Congress used

different terms in other provisions of the Communications Act to

authorize the Commission to adopt complete detariffing. Specifically,

AT&T argues that Congress gave the Commission authority to specify

certain provisions of Title II of the Communications Act as

``inapplicable'' to CMRS providers. AT&T claims that by failing to use

this term in Section 10, and instead using such permissive terms as

``forbear from applying'' or ``enforcing,'' Congress did not intend to

give the Commission authority to adopt complete detariffing.

69. Other parties, however, argue that the 1996 Act gives the

Commission legal authority to prohibit carriers from filing tariffs. Ad

Hoc Users argues that the Commission has used the term ``forbearance''

to refer to both mandatory and permissive detariffing. Ad Hoc Users

further argues that federal agencies and the courts have construed

similar statutory provisions as authorizing federal agencies to adopt

mandatory deregulation. Specifically, Ad Hoc Users contends that: (1)

The Commission adopted mandatory detariffing for CMRS based on Section

332(c)(1)(A) of the Communications Act, which gave the Commission

authority to specify certain provisions of Title II of the

Communications Act as ``inapplicable'' to CMRS providers; and (2) the

Civil Aeronautics Board (CAB) mandatorily deregulated the airline

industry based on an amendment to the Federal Aviation Act that gave

the CAB authority to ``exempt'' certain domestic air carriers from the

requirements of the Federal Aviation Act if it found that such

exemption was ``consistent with the public interest.'' Ad Hoc Users

argues that these statutory grants of authority are substantially

similar to Section 10, and that AT&T's argument (i.e., that Section 10

only allows permissive deregulation) could be made about each of those

statutes.

c. Discussion

70. We conclude that the Commission has authority under Section 10

to refuse to permit nondominant interexchange carriers to file tariffs

for interstate, domestic, interexchange services. We reject the

argument advanced by AT&T and others that by using the term

``forbear,'' Congress intended to authorize the Commission merely to

``refrain from enforcing'' its regulations or provisions of the

Communications Act where the statutory forbearance criteria are met,

and not to authorize the Commission to refuse to permit nondominant

carriers to comply with such regulations or provisions voluntarily. We

conclude that the plain meaning of the statute does not support their

argument, and that federal agencies and the courts have construed

similar statutory provisions as authorizing agencies to bar regulated

entities from filing rate schedules and other tariff equivalents.

71. As noted, AT&T and others argue that the dictionary definition

of the term ``forbear'' authorizes the Commission to detariff only on a

permissive basis. We agree with Ad Hoc Users that, in this context,

such reliance solely on dictionary definitions is inappropriate, and

can be misleading, where the historical usage of a term endows that

term with a distinct meaning. The Commission has consistently used the

term ``forbear,'' or a variation thereof, to refer to mandatory, as

well as to permissive, detariffing. For example, in the Sixth Report

and Order, the Commission stated that its mandatory detariffing

proposal, if adopted, ``would result in the cancellation of all

forborne carrier tariffs currently on file with the Commission and

would eliminate future federal tariff filings by carriers treated by

forbearance.'' Similarly, in Regulatory Treatment of Mobile Services,

the Commission stated that it would ``forbear from requiring or

permitting tariffs of interstate service offered directly by CMRS

providers to their customers,'' based on the Commission's authority to

specify any provision of Title II as ``inapplicable'' to any CMRS

provider.

72. The courts and Congress have also used the term ``forbear'' to

apply to circumstances involving this agency's authority to refuse to

permit carriers to file tariffs. In MCI Telecommunications Corp. v.

FCC, the U.S. Court of Appeals for the D.C. Circuit used the term

``forbearance'' to refer to our previous mandatory detariffing policy,

noting that ``[t]he Sixth Report * * * changed the permissive

forbearance arrangement to a mandatory one.'' MCI Telecommunications

Corp. v. FCC, 765 F.2d 1186, 1189 (D.C. Cir. 1985). In addition, in

describing the Commission's previous tariff forbearance policy, the

Senate Commerce, Science, and Transportation Committee applied the term

``forbearance'' to the entire Competitive

[[Page 59353]]

Carrier proceeding, encompassing both mandatory and permissive

detariffing. See Telephone Operator Consumer Services Improvement Act

of 1990, S. Rep. No. 439, 101st Cong., 2d Sess. 3 n.10 (1990) reprinted

in 1990 U.S.C.C.A.N. 1577, 1579 (stating that ``[t]he FCC has chosen to

`forbear' from regulating the rates of `non-dominant' carriers because

they do not possess market power and thus have little ability to charge

unjust or unreasonable rates in violation of the Communications Act of

1934,'' and citing, inter alia, the Sixth Report and Order).

73. It was against this background that Congress adopted Section

10(a). Accordingly, we concur with Ad Hoc Users that the term

``forbear'' must be construed within its historical and regulatory

context, and not in a vacuum.

74. We further note that in construing a similar statutory

provision, the U.S. Court of Appeals for the D.C. Circuit rejected a

virtually identical argument that Congress had only provided the CAB

authority to deregulate the airline industry on a permissive basis. In

an amendment to the Federal Aviation Act, Congress granted the CAB

authority to ``exempt'' domestic air carriers from statutory

requirements of the Federal Aviation Act. National Small Shipments

Traffic Conference, Inc. v. CAB, 618 F.2d 819, 822 n.2, 823, 827 (D.C.

Cir. 1980). The CAB used this authority to prohibit certain air

carriers from filing tariffs and certain intercarrier agreements. In

National Small Shipments Traffic Conference, Inc., petitioners argued

that the CAB's ``authority to exempt airlines from certain requirements

cannot be used to prohibit airlines from filing [intercarrier]

agreements * * * if they choose to do so.'' Id. at 835. The court

rejected this argument, noting that the CAB's exemption authority was

``broad'' and that its refusal to permit airlines to file intercarrier

agreements was consistent with Congress' deregulatory purpose. Id.

75. Moreover, the action we take here is consistent with the

Commission's order adopting complete detariffing for domestic CMRS

providers. In Section 6002(b) of the Omnibus Budget Reconciliation Act

of 1993 (OBRA), Congress granted the Commission authority to declare

``inapplicable to [any commercial mobile] service or person'' any

provision of Title II, subject to certain limitations. This grant of

authority, while not identical, is similar to the Commission's

authority under Section 10. In response to this grant of authority

under Section 6002(b), the Commission determined that it would

``forbear from requiring or permitting tariffs for interstate service

offered directly by CMRS providers to their customers.''

76. In addition, we conclude that Section 203, which was ``enacted

to control monopoly abuse'' by the carriers, does not grant to carriers

a statutory right to file tariffs. As noted in the 1996 Act's

legislative history, ``given that the purpose of this legislation is to

shift monopoly markets to competition as quickly as possible, the

Committee anticipates this forbearance authority will be a useful tool

in ending unnecessary regulation.'' Thus, it seems inconceivable that

Congress intended Section 10 to be interpreted in a manner that allows

continued compliance with provisions or regulations that the Commission

has determined were no longer necessary in certain contexts.

iv. Summary of Findings and Conclusions

77. We therefore conclude that 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. In addition, we conclude that tariffs for

the interstate, domestic, interexchange services of nondominant

interexchange carriers are not necessary to protect consumers.

Moreover, we find that complete detariffing of interstate, domestic,

interexchange services provided by nondominant interexchange carriers

is in the public interest, and that permissive detariffing of such

services is not in the public interest. Accordingly, pursuant to the

requirements of Section 10, we conclude 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. We also

conclude that the Commission has authority under Section 10 to refuse

to permit nondominant interexchange carriers to file tariffs for

interstate, domestic, interexchange services. We therefore order that

nondominant interexchange carriers cancel all tariffs for such services

currently on file with the Commission, subject to the procedural

details specified below, and prohibit nondominant interexchange

carriers from filing tariffs for such services in the future.

C. Maintenance and Disclosure of Price and Service Information;

Certifications

i. Background

78. In the NPRM, the Commission tentatively concluded 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. In addition, the Commission tentatively

concluded that it would require nondominant providers of interexchange

telecommunications services to file certifications stating that they

are in compliance with the geographic rate averaging and rate

integration requirements of Section 254(g) in order to ensure

compliance with those requirements. The Commission further tentatively

concluded that it would rely on the complaint process under Section 208

to bring violations of Section 254(g) to its attention.

ii. Comments

79. Several commenters recommend that, if the Commission adopts

detariffing, it should require nondominant interexchange carriers to

make their rates available to the public in some other fashion, such as

by posting pricing information on-line, submitting current rate

information to the Commission, or making such information available to

any member of the public upon request. These commenters argue that the

public needs such information to determine whether a carrier is

complying with the geographic rate averaging and rate integration

requirements of Section 254(g) as well as with the nondiscrimination

requirements of Section 202. Several of these commenters further argue

that consumers, especially residential and small business customers,

need information on rates, terms and conditions to compare carriers'

service offerings. Several small businesses that analyze tariff

information for business and residential customers argue that they need

such information to conduct their businesses.

80. Other commenters, however, oppose any record-keeping

requirement. They argue that imposing such a requirement would

eliminate any cost savings resulting from detariffing. Several parties

further insist that carriers will make rate and service information

available to consumers through other means.

[[Page 59354]]

81. AT&T argues that, to the extent the Commission seeks to justify

its decision to detariff on the ground that complete detariffing would

eliminate the ``filed-rate'' doctrine, a requirement that carriers make

rate information available on-line or through a clearinghouse would

undermine this objective. AT&T insists that the ``filed-rate'' doctrine

would continue to apply if such a requirement is imposed, because the

doctrine is based on the imposition of a filing requirement and not on

the manner or place of filing.

82. Several interexchange carriers and BOCs contend that the

Commission's proposed certification requirement and the complaint

process are appropriate mechanisms to enforce the requirements of

Section 254(g). Others, however, argue that the Commission should not

require certifications, but should rely instead on the complaint

process and its ability to examine rates upon request. These parties

argue that certifications do little to advance the Commission's

enforcement objectives, and that the complaint process and the

Commission's ability to examine rates upon request are the only

effective means to ascertain whether carriers are in compliance with

their statutory obligations.

iii. Discussion

83. We adopt the tentative conclusion in the NPRM that nondominant

providers of interstate, domestic, interexchange telecommunications

services should be required to file annual certifications signed by an

officer of the company under oath that they are in compliance with

their statutory geographic rate averaging and rate integration

obligations. We believe that annual certifications will emphasize the

importance that we place on the rate averaging and rate integration

requirements of the 1996 Act and put carriers on notice that they may

be subject to civil and criminal penalties for violations of these

requirements, especially willful violations.

84. While we believe that carrier certifications will be an

important mechanism for enforcing the 1996 Act's geographic rate

averaging and rate integration requirements, we are persuaded by the

arguments of many parties, including numerous state regulatory

commissions and consumer groups, that publicly available information is

necessary to ensure that consumers can bring complaints, if necessary,

to enforce those requirements. As noted above, we find that it is

highly unlikely that interexchange carriers that lack market power

could successfully charge rates, or impose terms and conditions, for

interstate, domestic, interexchange services in ways that violate

Sections 201 and 202 of the Communications Act, and that such carriers

will generally provide rate and service information to consumers to

preserve or improve their competitive position in the market. We

recognize, however, 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). Because the public should have the ability to bring violations

of the geographic rate averaging and rate integration requirements of

the 1996 Act to our attention, we believe it is appropriate to require

carriers to make available to the public the information that is

necessary for the public to determine whether a carrier is adhering to

the geographic rate averaging and rate integration requirements of

Section 254(g). Accordingly, we will require 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 an easy to understand format and in a timely manner.

(A nondominant interexchange carrier must make available to any member

of the public such information about all of that carrier's interstate,

domestic, interexchange services.) We note that, by adopting this

requirement, we do not intend to require carriers to disclose more

information than is currently provided in tariffs, in particular in

contract tariffs.

85. The requirement that nondominant interexchange carriers make

available to the public information concerning the current rates, terms

and conditions for all of their interstate, domestic, interexchange

services also will promote the public interest by making it easier for

consumers, including resellers, to compare carriers' service offerings.

While nondominant interexchange carriers will generally provide rate

and service information to consumers in order to attract and retain

customers, some consumers may find it difficult to determine the

particular service plans that are most appropriate, and least costly,

for them, based on their calling patterns, because of the wide array of

calling plans offered by the scores of carriers. Businesses and

consumer organizations that analyze and compare the rates and services

of interexchange carriers perform a valuable function in assisting

consumers to judge the specific carriers' rates and service plans that

are best suited to their individual needs. The foregoing requirement

will ensure that such businesses, many of which are small businesses,

continue to have access to the information they need to provide their

services.

86. In order to minimize the burden on nondominant interexchange

carriers of complying with this requirement, we will not require

nondominant interexchange carriers to make rate and service information

available to the public in any particular format, or at any particular

location. We reject the suggestion that we should require nondominant

interexchange carriers to provide information on their interstate,

domestic, interexchange services at a central clearinghouse or on-line.

We find that mandating such a requirement would be unduly burdensome at

this time. Rather, we will require only that a carrier make such

information available to the public in at least one location during

regular business hours. We will also require 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. In addition, because we are simply

requiring carriers to make information available to the public, we need

not address AT&T's argument that requiring nondominant interexchange

carriers to make price and service information available on-line or at

a central clearinghouse is a filing requirement within the meaning of

Section 203. (Although we do not require carriers to make such

information available to the public at more than one location, we

encourage carriers to consider ways to make such information more

widely available, for example, posting such information on-line,

mailing relevant information to consumers, or responding to inquiries

over the telephone.)

87. Finally, we adopt the tentative conclusion in the NPRM that we

should require nondominant interexchange carriers to maintain price and

service information regarding all of their interstate, domestic,

interexchange service offerings, that they can submit to the Commission

upon request. We believe it is appropriate that this information should

include the information that carriers provide to the public as required

above, as well as documents supporting the rates, terms, and conditions

of the carriers' interstate, domestic, interexchange offerings. We note

that we will not require carriers to make such supporting documentation

available to the public. We also find that it is appropriate to require

nondominant

[[Page 59355]]

interexchange carriers to retain the foregoing records for a period of

at least two years and six months following the date the carrier ceases

to provide services on such rates, terms and conditions, in order to

afford the Commission sufficient time to notify a carrier of the filing

of a complaint, which generally must be commenced within two years from

the time the cause of action accrues. We note that, in the event a

complaint is filed against a carrier, we will require the carrier to

retain documents relating to the complaint until the complaint is

resolved. We will also require 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 will further require that nondominant interexchange

carriers maintain the foregoing records in a manner that allows

carriers to produce such records within ten business days of receipt of

a Commission request. We conclude that the availability of such records

will enable the Commission to meet its statutory duty of ensuring that

such carriers' rates, terms, and conditions for service are just,

reasonable, and not unreasonably discriminatory, and that these

carriers comply with the geographic rate averaging and rate integration

requirements of the 1996 Act. In addition, maintenance of such records

will enable the Commission to investigate and resolve complaints.

D. Transition

i. Comments

88. Several commenters suggest that if the Commission were to adopt

the complete detariffing proposal, it should also implement an

appropriate transition period to afford nondominant interexchange

carriers time to adapt their operations to a detariffed regime. Ad Hoc

Users and API suggest that we adopt a six-month transition period.

Eastern Tel, AT&T, and LDDS recommend a period of at least one year,

and LCI suggests a phase-in period of 18-24 months. In addition, AT&T

urges the Commission to ``make clear that the terms of individual

carrier/customer deals currently on file at the Commission stay on file

and remain unchanged by a decision to prohibit the filing of tariffs.''

Ad Hoc Users and API, on the other hand, urge the Commission to prevent

carriers from filing tariffs that supersede existing contracts during

the transition period. API further recommends that during the

transition period, carriers should not be permitted to require that the

terms of existing pricing arrangements be extended as a condition for

negotiating contracts to replace existing tariffs. Finally, Eastern Tel

requests the Commission to work with industry to develop a standard

contract for telecommunications services, similar to the form contracts

used in the real estate industry, that address such issues as the

collection procedures that can be utilized.

ii. Discussion

89. We agree that we should allow nondominant interexchange

carriers an appropriate transition period to adjust to detariffing. We

conclude that a nine-month period is sufficient to provide for an

orderly transition. We believe that this transition period will afford

carriers sufficient time to adjust to detariffing. We do not believe

that a more extended period is needed for nondominant interexchange

carriers to adjust their operations. Nondominant interexchange carriers

are not required to negotiate a new contract with each customer.

Nondominant interexchange carriers may utilize various methods to

establish legal relationships with customers in the absence of tariffs,

including, for example, the use of short standard agreements. We

therefore order all nondominant interexchange carriers to cancel their

tariffs for interstate, domestic, interexchange services on file with

the Commission within nine months of the effective date of this Order

and not to file any such tariffs thereafter. We note that the effective

date of this Order (i.e., the date the rules and requirements

promulgated by this Order will become effective) will be 30 days from

the date of publication of this Order in the Federal Register.

90. Nondominant interexchange carriers may cancel their tariffs for

interstate, domestic, interexchange services at any time during the

nine-month period. Pending such cancellation, the Commission will

accept new tariffs and revisions to the carrier's tariffs for mass

market interstate, domestic, interexchange services. We believe that it

is appropriate to allow nondominant interexchange carriers to revise

their tariffs for mass market interstate, domestic, interexchange

services on file with the Commission during the nine-month transition

period in order to respond to changes in the market. However, in order

to preserve the legitimate business expectations of customers taking

service pursuant to long-term service arrangements, and to limit the

ability of carriers to unilaterally alter or abrogate such arrangements

by invoking the filed rate doctrine, the Commission will not accept new

tariffs, or revisions to carriers' existing tariffs, for long-term

service arrangements (such as contract tariffs, AT&T's Tariff 12

options, MCI's special customer arrangements, and Sprint's custom

network service arrangements) during the transition period. We

recognize that many such long-term service arrangements incorporate by

reference mass market tariffs. By precluding carriers during the

transition period from filing tariffs or revisions to tariffs for long-

term service arrangements, we do not intend to limit carriers' ability

to file tariffs and tariff revisions for mass market services.

91. Carriers that have on file with the Commission ``mixed'' tariff

offerings that contain services subject to detariffing pursuant to this

Order, may comply with this Order either by: (1) Cancelling the entire

tariff and refiling a new tariff for only those services subject to

tariff filing requirements; or (2) issuing revised pages cancelling the

material in the tariffs that pertain to those services subject to

forbearance. A ``mixed'' tariff offering is a tariff that includes

services for which the carrier is subject to different tariff filing

requirements. One example of a ``mixed'' tariff offering would be a

tariff that contains interstate, domestic, interexchange services for

which the carrier is nondominant and therefore prior to the

effectiveness of this Order was subject to a one-day tariff filing

requirement, as well as international services for which the carrier is

nondominant and therefore subject to a one-day tariff filing

requirement. Another example would occur where a carrier is dominant

for certain services and nondominant for others and includes both types

of services in one tariff. As discussed below in section II.E., we

determine that a carrier that has mixed tariff offerings that include

interstate, domestic, interexchange services for which the carrier is

nondominant, as well as international services for which the carrier is

nondominant, must continue to tariff the international portions of such

bundled or mixed tariff offerings. Accordingly, such a carrier must

comply with this requirement. This requirement also applies to a

carrier that has other types of mixed tariff offerings that are

affected by this Order, such as where the carrier offers in one tariff

interstate, domestic, interexchange services for which it is

nondominant with other services for which the carrier is dominant.

92. We note that, while complete detariffing will change the legal

[[Page 59356]]

framework for long-term service arrangements, we do not intend by our

actions in this Order to disturb existing contractual or other long-

term arrangements. Accordingly, our detariffing policy should not be

interpreted to allow parties to alter or abrogate the terms of long-

term arrangements currently on file with the Commission. Because we

have determined that our action here does not entitle parties to a

contract-based, or other long-term, service arrangement to take a

``fresh look'' at such arrangements, we need not address API's

suggestion that we prohibit nondominant interexchange carriers from

demanding that the terms of existing pricing arrangements be extended

beyond their currently applicable terms.

93. Finally, we decline to follow Eastern Tel's suggestion that the

Commission work with industry during the transition period to establish

a standard contract for telecommunications services. As noted above, we

believe that nondominant interexchange carriers may use various methods

to provide service to their customers. We find that it would be more

consistent with the pro-competitive and deregulatory objectives of the

1996 Act to allow carriers and customers freely to determine the most

efficient methods for providing interexchange services without tariffs.

E. Tariff Filing Requirements for the International Portion of Bundled

Domestic and International Services

i. Background

94. A number of nondominant interexchange carriers currently file

bundled tariffs that include both interstate, domestic, interexchange

services and international services. In the NPRM, the Commission sought

comment on whether it should forbear from requiring nondominant

interexchange carriers to file tariffs for the international portions

of bundled domestic and international service offerings if the

Commission forbears from requiring such carriers to file tariffs for

their domestic services. The Commission noted that it was reserving for

another day, in a separate proceeding, the broader question of whether

it should consider generally forbearing from requiring tariffs for

international services provided by nondominant carriers.

ii. Comments

95. Several commenters support detariffing the international

portions of bundled domestic and international services offered by

nondominant interexchange carriers. Ad Hoc Users, API and AT&T argue

that different tariff filing requirements for the domestic and

international portions of bundled offerings would require the

artificial partition of unified service arrangements, which would

impose substantial costs on both customers and carriers. Ad Hoc Users

also contends that different tariff rules would lead to separate

minimum revenue requirements for domestic and international services.

API and the Television Networks argue that international services

offered by nondominant carriers should be detariffed whether or not the

international services are bundled with domestic services.

96. Other parties argue that the Commission should not detariff

international portions of bundled offerings until nondominant

international carriers are relieved generally of tariff filing

requirements. MCI expressed concern that, if the Commission detariffed

the international portion of bundled or ``mixed'' tariff offerings,

AT&T, which was regulated as dominant in international markets when

comments in this proceeding were due, would be freed of tariff

regulation in connection with its `` `mixed' international offerings.''

97. AMSC, which provides mobile telecommunications services using

satellites that cover the continental United States, Hawaii, Alaska,

Puerto Rico, and the U.S. Virgin Islands, as well as adjacent

international waters and northern parts of South America, urges the

Commission to detariff the international portions of the offerings of

nondominant CMRS providers, including its own services. The Commission

detariffed AMSC's domestic services two years ago when it adopted

mandatory detariffing for CMRS providers. AMSC argues that there is no

rationale for maintenance of a tariff filing requirement for the

international services of AMSC or other CMRS providers. In addition,

AMSC argues that because it offers a mobile service via satellite, it

cannot determine whether a call originates in a domestic or

international area and that most of its international service is

provided to users in international waters.

iii. Discussion

98. In the NPRM, the Commission indicated that it would consider in

a separate proceeding the question of whether it should generally

forbear from requiring tariffs for international services provided by

nondominant carriers, but it sought comment on whether it should

forbear from requiring nondominant interexchange carriers to file

tariffs for the international portions of bundled domestic and

international service offerings. There is not sufficient evidence in

the record to make findings that each of the statutory criteria are met

to forbear from requiring nondominant interexchange carriers to file

tariffs for the international portions of bundled domestic and

international service offerings. We therefore believe that detariffing

the international portions of bundled domestic and international

service offerings would be better addressed as part of a separate

proceeding in which the Commission can further examine the state of

competition in the international market. Accordingly, we will require

nondominant interexchange carriers to continue to file tariffs for the

international portions of bundled domestic and international service

offerings until we find that the statutory criteria are met for

international services provided by nondominant carriers. A nondominant

carrier with bundled domestic and international services may comply

with this Order either by cancelling its entire tariff and refiling a

new tariff only for the international portions of its service offerings

or by issuing revised pages that cancel the material in its tariffs

which pertains to those services subject to forbearance. Because we

will require nondominant interexchange carriers to continue to file

tariffs for international services, we need not address MCI's concern

that dominant international carriers might be freed from tariff

requirements for the international portions of bundled domestic and

international services.

99. Our decision here will not impose substantial administrative

expenses on carriers or customers. In addition, to respond to concerns

about the cost of partitioning bundled offerings, we are modifying our

rules to permit nondominant interexchange carriers to cross reference

detariffed interstate, domestic, interexchange service offerings in

their tariffs for international services for purposes of calculating

discounts and minimum revenue requirements.

100. We similarly find that there is insufficient record evidence

in this proceeding to detariff the international portions of CMRS

services, or to address AMSC's concerns with regard to its specific

services at this time.

[[Page 59357]]

F. Effect of Forbearance on AT&T's Commitments

i. Background

101. In the AT&T Reclassification proceeding, AT&T made certain

voluntary commitments that AT&T stated were intended to serve as

transitional arrangements to address concerns expressed by parties

about possible adverse effects of reclassifying AT&T. These commitments

concerned: service to low-income and other customers; analog private

line and 800 directory assistance services; service to and from the

State of Alaska and other regions subject to the Commission's rate

integration policy; geographic rate averaging; changes to contract

tariffs that adversely affect existing customers; and dispute

resolution procedures for reseller customers. In the AT&T

Reclassification Order, the Commission accepted AT&T's commitments and

ordered AT&T to comply with those commitments.

102. In the NPRM, the Commission sought comment on the effects of

the Commission's complete detariffing proposal on certain of AT&T's

commitments. Specifically, AT&T committed, for a period of three years,

to limit any price increases for interstate analog private line and 800

directory assistance services to a maximum increase in any year of no

more than the increase in the consumer price index. AT&T also

committed, for a period of three years, to file tariff changes

increasing the prices of these services on not less than five business

days' notice, and to identify clearly such tariff transmittals as

affecting the provisions of this commitment. In the NPRM, the

Commission tentatively concluded that AT&T should remain subject to

these commitments for the specified term of the commitments. The

Commission therefore tentatively concluded that if we were to adopt

detariffing, AT&T should be required to continue to file tariffs for

these services for the term of its commitments.

103. In addition, AT&T voluntarily committed, for a period of three

years, to offer two optional calling plans designed to mitigate the

impact of future increases in basic schedule or residential rates. The

first plan is targeted to low-income customers, and the second is

targeted to low-volume consumers, but is generally available to all

residential customers. Moreover, AT&T agreed to file on not less than

five business days' notice tariffs changing the structure of these

plans or significantly increasing the cost of its basic residential

service.

ii. Comments

104. The Pennsylvania PUC contends that AT&T should remain subject

to all of its voluntary commitments as a safeguard, because AT&T has

only been classified as a nondominant interexchange carrier for a short

period of time. The Florida PSC suggests that AT&T should remain

subject to its three-year commitment to offer calling plans intended

for low-income and low-volume consumers in order to eliminate concerns

about rate increases for basic long-distance rates. In contrast,

several interexchange carriers contend that AT&T should not be bound by

any commitments that do not apply equally to all nondominant

interstate, interexchange carriers.

105. AT&T states that it will abide by its commitments concerning

unilateral changes to contract tariffs, but argues that it should not

be subject to any additional burdens regarding contract tariffs that

are not imposed on other nondominant carriers. AT&T did not address its

other commitments in its comments in this proceeding.

iii. Discussion

106. We conclude that we should adopt the tentative conclusion in

the NPRM that AT&T should continue to comply with its commitments

relating to 800 directory assistance and analog private line services.

In the AT&T Reclassification Order, the Commission acknowledged that

there was evidence in the record that AT&T may have the ability to

control prices for 800 directory assistance service and analog private

line services, but also noted that these services generate de minimis

revenues when compared to total industry revenues. The Commission

stated, therefore, that the evidence regarding AT&T's ability to

control prices for these specific services did not mean that AT&T has

market power in the interstate, domestic, interexchange market as a

whole. The Commission further stated that it believed that ``AT&T's

voluntary commitments will effectively restrain AT&T's exercise of any

market power it may have with respect to these narrow service

segments.'' In light of the Commission's conclusions in the AT&T

Reclassification Order, and AT&T's statements that its commitments

serve as a transitional mechanism, we find that detariffing of analog

private line and 800 directory assistance services at this time is not

in the public interest, and would not meet the statutory forbearance

criteria. We, therefore, require AT&T to continue to file tariffs for

these services in accordance with, and for the specified term of, its

commitments. AT&T will be required to cancel its tariffs for these

services within nine months of the end of its three-year commitment,

consistent with the requirements we have adopted for other nondominant

interexchange carriers.

107. AT&T has not argued in this proceeding that it should be

relieved of its commitment in the AT&T Reclassification Order to offer

optional rate plans targeted at low-income and other residential

customers. Accordingly, we require that AT&T continue to offer an

optional calling plan targeted to low-income customers and a plan

targeted to low-volume customers, but which is generally available to

all residential customers, until the expiration of its original

commitment in the fall of 1998. In addition, we will continue to

monitor AT&T's compliance with its commitments to implement a consumer

outreach program to notify its customers of the availability of such

plans, and to offer for three years an interstate optional calling plan

that will provide residential customers a postalized rate of no more

than $0.35 per minute for peak calling and $0.21 per minute for off-

peak.

108. We note that our decision to preclude nondominant

interexchange carriers from filing tariffs for interstate, domestic,

interexchange services would effectively eliminate AT&T's commitments

to file changes to such optional plans and to file certain changes to

its average residential interstate direct dial services on not less

than five business days' notice. (AT&T committed to file changes to its

average residential interstate direct dial services on not less than

five business days' notice if those changes, (1) increase rates more

than 20% for customers making more than $2.50 in calls per month, or

(2) increase average monthly charges more than $.50 per month for

customers making less than $2.50 in calls per month, and to clearly

identify such tariff transmittals as affecting the provisions of this

commitment. Additionally, AT&T committed to file tariff changes to its

optional calling plans on not less than five business days' notice, and

only in the event of a significant change in the structure of the

interexchange industry (including a reprice or restructure of access

rates). AT&T also committed to identify such tariff transmittals as

affecting the provisions of this commitment.) Accordingly, consistent

with AT&T's intent that its commitments serve as a transitional

arrangement, we require AT&T, for the period of its

[[Page 59358]]

commitments, to notify consumers of changes to such plans, or of

changes to its average residential interstate direct dial services,

under the circumstances specified in the AT&T Reclassification Order,

on not less than five business days' notice.

109. Finally, we conclude that actions in this proceeding do not

affect AT&T's other commitments. In our Geographic Rate Averaging

Order, we found that the rules adopted in that proceeding would require

AT&T to provide interexchange service at geographically averaged and

integrated rates. We therefore released AT&T from its commitments

relating to rate integration and geographic rate averaging. We

expressly did not release AT&T from its more specific commitment to

comply with the Commission's orders associated with AT&T's purchase of

Alascom. We believe that detariffing would not affect these

commitments. AT&T's commitment regarding dispute resolution procedures

for resellers has no expiration date, and is also unaffected by

detariffing. Finally, AT&T's commitments concerning changes to contract

tariffs, quarterly performance reports on reseller order processing,

and providing an ombudsman to resolve reseller complaints, expire by

their own terms in the fall of 1996.

G. Additional Forbearance Issues

110. The Secretary of Defense raises two concerns regarding the

National Security and Emergency Preparedness (NSEP) system.

Specifically, two services, Telecommunications Services Priority (TSP)

and Government Emergency Telecommunications Service (GETS) are now

provided by nondominant interexchange carriers pursuant to tariffs.

Under tariffs filed to provide TSP service, circuits with NSEP

designations receive priority restoral and provisioning. The Secretary

of Defense argues that TSP tariffs not only establish a price for the

service, but also serve as a clear sign that a carrier understands and

accepts the responsibilities imposed by the Commission's TSP rules. The

Secretary of Defense also expressly acknowledges, however, that TSP

service could be provided on the basis of negotiated contracts.

Consequently, we find no basis in the record for excluding TSP services

from the requirements of this Order. The Secretary of Defense expresses

concern, however, that carriers may not be aware of the TSP rules.

While we concur with the Secretary of Defense that carriers must

understand their responsibilities under our TSP rules, and that

carriers should price such services, before an emergency occurs, we do

not believe that tariffs are necessary to fulfill these functions.

Rather, we conclude that carriers will be adequately informed of our

TSP rules and regulations when contracts for TSP services are

negotiated. In addition, we reaffirm our commitment to enforce the TSP

rules and regulations, and expect that officials responsible for the

NSEP TSP System will report any violations of these rules to us.

111. The second issue raised by the Secretary of Defense concerns

GETS, which provides NSEP-authorized personnel priority call completion

over the public switched network. The Secretary of Defense seeks

assurance that GETS would not be deemed to constitute unreasonable

discrimination in violation of Section 202(a) of the Communications

Act. The Secretary of Defense states that the Office of the Manager of

the National Communications System wrote to the Commission on November

29, 1993, asking for a declaratory ruling that GETS does not violate

Section 202(a). The Commission later determined that the request for a

declaratory ruling was moot, because ``[l]awful tariffs implementing

[GETS] have gone into effect.'' The Secretary of Defense is concerned

that the permissibility of GETS is dependent on filed tariffs. We

conclude, however, that our decision to forbear does not affect the

nondiscrimination provisions of Section 202(a). Thus, to the extent

that GETS did not constitute unreasonable discrimination under tariffs,

the service will not violate Section 202(a) following detariffing.

112. APCC urges the Commission not to take any action in this

proceeding that may be inconsistent with or jeopardize the Commission's

ongoing inquiry into operator services. In the NPRM in this proceeding,

the Commission indicated that it would consider operator services in

another proceeding and therefore expressly stated that it was not

addressing the issue of forbearance from applying Section 226 of the

Communications Act, which requires operator service providers (OSP) to

file informational tariffs. In the Nondominant Filing Order, the

Commission, in order to minimize tariff filing burdens on carriers,

permitted carriers that provide both operator services and other

services to file one single tariff under Section 203, rather than

separate tariffs under Sections 203 and 226, as long as the tariff

meets the requirements of both sections. As a result, the largest

nondominant interexchange carriers, or their affiliates, have filed

tariffs for interstate and international operator services pursuant to

Section 203 rather than Section 226. Our decision to forbear from

applying Section 203 tariff filing requirements to nondominant

interexchange carriers for interstate, domestic, interexchange services

does not relieve such carriers of the obligation to file informational

tariffs pursuant to Section 226. Accordingly, any carrier that has

included tariff information concerning interstate and international

operator services in a Section 203 tariff must refile an informational

tariff for such services, consistent with Section 226, upon cancelling

such Section 203 tariff. Thus, our actions in this proceeding will not

dictate the outcome of the Commission's inquiry into operator services.

III. Bundling of Customer Premises Equipment

113. In the Computer II proceeding, the Commission adopted a rule

requiring all common carriers to sell or lease CPE separate and apart

from such carriers' regulated communications services, and to offer CPE

solely on a non-tariffed basis. (Section 64.702(e) of our rules

provides: ``Except as otherwise ordered by the Commission, after March

1, 1982, the carrier provision of customer-premises equipment used in

conjunction with the interstate telecommunications network shall be

separate and distinct from provision of common carrier communications

services and not offered on a tariffed basis.'') Carriers previously

had provided CPE to customers as part of a bundled package of services.

The Commission required carriers to separate the provision of CPE from

the provision of transmission services, because it found that carriers'

continued bundling of telecommunications services with CPE could force

customers to purchase unwanted CPE in order to obtain necessary

transmission services, thus restricting customer choice and retarding

the development of a competitive CPE market. The Commission

acknowledged, however, that ``[i]f the markets for components of [a]

commodity bundle are workably competitive, bundling may present no

major societal problems so long as the consumer is not deceived

concerning the content and quality of the bundle.''

114. In the NPRM, the Commission tentatively concluded that, in

light of the development of substantial competition in the markets for

CPE and interstate long-distance services, it was unlikely that

nondominant interexchange carriers could engage in the type of

anticompetitive conduct that

[[Page 59359]]

led the Commission to prohibit the bundling of CPE with the provision,

inter alia, of interstate, interexchange services. The Commission also

tentatively concluded that allowing nondominant interexchange carriers

to bundle CPE with interstate, interexchange services would promote

competition by allowing such carriers to create attractive service/

equipment packages. The Commission therefore proposed to amend Section

64.702(e) of the Commission's rules to allow nondominant interexchange

carriers to bundle CPE with interstate, interexchange services. The

Commission sought comment on this proposal, and on the effect that the

proposed amendment of Section 64.702(e) would have on the Commission's

other policies or rules. The Commission also sought comment on: (1)

Whether interexchange carriers should be required to offer separately,

unbundled interstate, interexchange services on a nondiscriminatory

basis if they are permitted to bundle CPE with the provision of

interstate, interexchange services and (2) whether and how the

anticipated entry of local exchange carriers, in particular the BOCs,

into the market for interstate, interexchange services should affect

the Commission's analysis.

115. A number of commenters addressing this issue support the

Commission's proposal to amend Section 64.702(e) to allow nondominant

interexchange carriers to bundle CPE with the provision of interstate,

interexchange services, while other parties oppose such an amendment.

Many commenters further argue that if the Commission permits bundling

of CPE with interstate, interexchange services, it should require

nondominant interexchange carriers to continue to offer unbundled

interstate, interexchange services separately.

116. In its comments, AT&T strongly supported the Commission's

proposal, but suggested that it did not go far enough, and urged the

Commission also to eliminate restrictions on single-priced, bundled

packages of enhanced and interexchange services offered by nondominant

interexchange carriers. These restrictions (which are not codified in

the Commission's rules) were adopted by the Commission in the Computer

II proceeding. AT&T maintains that such restrictions are no longer

justified, in light of the Commission's findings regarding the

competitiveness of the interexchange market, and because the enhanced

services market is even more ``robust, competitive and diverse'' than

the CPE market. AT&T concludes that ``the rationale underlying the

Commission's proposal to eliminate the bundling restrictions for CPE

and interexchange services applies equally to enhanced services,'' and

it therefore urges the Commission to institute a supplemental notice of

proposed rulemaking ``to eliminate the restrictions against the

bundling of interexchange services and enhanced services by nondominant

interexchange carriers.'' ( In its comments, MCI assumed that the

proposed amendment of Section 64.702(e) would allow bundling of

transmission with enhanced services as well as CPE or ``any other

product or service that the carrier chooses to include in a bundle.'')

117. ITAA opposes AT&T's request on the grounds that enhanced

service providers (``ESPs'' ) require access to unbundled network

services at competitive prices and on nondiscriminatory terms in order

to succeed. ITAA claims that there are only three nationwide

facilities-based carriers, which ITAA contends collectively control the

bulk of the interexchange market, from which ESPs can purchase the

ubiquitous transmission services they require. ITAA maintains that

AT&T's proposal would chill the growth of the enhanced services market

by making ESPs vulnerable to discrimination by carriers in favor of

their own enhanced services.

118. We conclude that, at this time, we should defer action on our

earlier proposal to eliminate the CPE unbundling rule. We find that

AT&T's request presents issues similar to those raised in the NPRM

relating to the bundling of CPE with interstate, interexchange services

by nondominant interexchange carriers. AT&T's request, however, also

raises issues that have not been addressed in the record before us.

Because we believe it is appropriate to consider the Commission's

prohibitions against bundling CPE and enhanced services with

interstate, interexchange services together, in a single, consolidated

proceeding, we decline to act on the Commission's proposal in the NPRM

to amend Section 64.702(e) of the Commission's rules to allow

nondominant interexchange carriers to bundle CPE with interstate,

interexchange services at this time. We intend to issue a further

notice of proposed rulemaking that will address the continued

applicability of the prohibitions against the bundling of both CPE and

enhanced services with interstate, interexchange services by

nondominant interexchange carriers.

IV. Other Issues

A. Pricing Issues

i. Background

119. In the AT&T Reclassification Order, the Commission found the

evidence in the record regarding the existence of alleged tacit price

coordination among interexchange carriers for basic residential

services, or residential services generally to be inconclusive and

conflicting. The Commission concluded that, if there were tacit price

coordination in the interexchange market, the problem was generic to

the industry and would be better addressed by removing regulatory

requirements that may have facilitated such conduct. In the NPRM, the

Commission noted that its reclassification of AT&T removed one such

regulatory requirement--the longer advance notice period applicable

only to AT&T. The Commission also observed that the 1996 Act would

provide the best solution to the problem of tacit price coordination,

to the extent that it exists currently, by allowing for competitive

entry in the interstate interexchange market by the facilities-based

BOCs. Moreover, the Commission tentatively concluded that complete

detariffing of the interstate, domestic, interexchange services of

nondominant interexchange carriers would discourage price coordination

by eliminating carriers' ability to ascertain their competitors'

interstate rates and service offerings from publicly-available tariffs

filed with the Commission. The Commission sought comment on these

issues.

ii. Comments

120. BOCs and other commenters argue that there is substantial

evidence of tacit price coordination by the largest interexchange

carriers, which the BOCs claim have engaged in price signaling and

increased basic rates in lock-step, despite decreasing costs. Others,

including a number of interexchange carriers, contend that there is no

evidence of tacit price coordination, and that interexchange carriers

have raised their rates for basic services because their rates were

artificially kept below cost by price caps.

121. Several commenters argue that the best remedy for price

coordination, to the extent it exists, is competitive entry in the

interstate, domestic, interexchange market. Other commenters argue that

because the BOCs have bottleneck control over access facilities,

premature BOC entry may impede competition, because the BOCs will have

unfair advantages over

[[Page 59360]]

their competitors, forcing smaller carriers from the market.

122. Some commenters suggest that the Commission's proposal to

adopt complete detariffing will impede price coordination because

tariffs enable carriers to ascertain their competitors' rates, terms

and conditions for service at one, central location. Others argue that

complete detariffing will have little effect on price coordination

because carriers will be able to keep track of their competitors' rates

through other methods, such as through competitors' advertising and

because the current streamlined tariff filing requirements prevent

price signaling.

iii. Discussion

123. We find the evidence in the record regarding tacit price

collusion to be inconclusive. While data presented by Bell South and

Bell Atlantic could be consistent with the existence of tacit collusion

among interexchange carriers, these data are also consistent with

competition among interexchange carriers. For example, the fact that

increases in AT&T's basic rates have been matched almost immediately by

MCI and Sprint is consistent with a theory of evolving competition in

this marketplace. Between 1991 and 1995, while interexchange carriers

were increasing basic rates, they were also lowering prices to higher

volume customers through increases in discounts offered via discount

plans. A Commission staff study of best available rates from AT&T to

callers with different calling patterns shows that between 1991 and

1995, rates for customers with long-distance bills exceeding $10.00 per

month have decreased by between 15 and 28 percent. By contrast, the

best prices available to customers with less than $10.00 per month of

calls have risen about 16 percent since 1991. (These prices are based

on the basic rates, because no discount plans were generally available

for those customers making less than $10.00 per month in calls.) This

pattern is consistent with the view that, over time, interexchange

carriers began to compete more vigorously for high volume users than

for low volume users. Such a market strategy would tend to result in

lower prices for higher volume, more price sensitive customers, and

higher prices for lower volume, less price sensitive customers.

124. Other data not discussed by BellSouth also are more suggestive

of competition than collusion among interexchange carriers. For

example, in 1994 nearly 30 million customers changed their

presubscribed interexchange carriers, which is indicative of

competition among interexchange carriers for customers. In addition,

between 1989 and 1992, advertising expenditures by all interexchange

carriers increased 85 percent, to 1.6 billion dollars, which is further

evidence of increased competition among interexchange carriers and not

tacit collusion.

125. Based on the record in this proceeding, we find the evidence

of tacit price coordination to be inconclusive and conflicting. In

addition, we conclude that the detariffing rules we adopt today,

together with additional competitive entry consistent with the

provisions of the 1996 Act, provides the best solution to tacit price

coordination to the extent it exists. Regarding the Alabama PSC's

concern that the BOCs will have unfair advantages over their

competitors and thereby will force small carriers from the market, we

note that the 1996 Act provides safeguards to prevent the BOCs from

engaging in anticompetitive conduct to the detriment of long-distance

competitors, some of which are small nondominant interexchange

carriers. We will address implementation of these safeguards in

upcoming orders.

B. Contract Tariff Issues

126. In the AT&T Reclassification proceeding, commenters raised

certain issues regarding contract tariffs. The Commission deferred

consideration of those issues to this proceeding because it found that

those issues applied to all interexchange carriers and were unrelated

to the determination of whether AT&T possessed market power. In the

NPRM, the Commission noted that those issues would largely be mooted

if, as proposed in the NPRM, the Commission were to adopt a complete

detariffing policy. The Commission nevertheless sought comment on those

and other issues, because such issues would remain relevant if we

determined not to forbear from requiring nondominant interexchange

carriers to file tariffs.

127. MCI and GTE agree that the tariff-related issues raised in the

NPRM would be largely moot if the Commission adopts complete

detariffing. AT&T argues, however, that one of these issues,

application of the ``substantial cause'' test would not be moot

following adoption of a complete detariffing policy, because the

substantial cause test is an integral part of the ``just and

reasonable'' standard in section 201(b). AT&T argues that because the

Commission is not proposing to forbear from applying Section 201(b),

the ``substantial cause'' test would still apply even if the Commission

adopts a complete detariffing policy. No other party commented on

whether these issues would remain relevant if we were to adopt a

complete detariffing policy.

128. Because we are implementing complete detariffing, we conclude

that the contract tariff-related issues raised in the NPRM are largely

moot with respect to interstate, domestic, interexchange services

offered by nondominant interexchange carriers. We reject AT&T's

argument that the substantial cause test would continue to apply

regardless of whether we order complete detariffing. In the RCA

Americom Decisions, the Commission recognized that a dominant carrier's

proposal ``to modify extensively a long term service tariff may present

significant issues of reasonableness under Section 201(b) that are not

ordinarily raised in other tariff filings.'' Accordingly, the

Commission held that a carrier's unilateral tariff revisions that alter

material terms and conditions of a long-term service tariff will be

considered reasonable only if the carrier can show ``substantial

cause'' for the revision. While we recognize that the Commission may be

called upon to examine the reasonableness of a nondominant

interexchange carrier's rates, terms and conditions for interstate,

domestic, interexchange services, for example, in the context of a

Section 208 complaint proceeding, we find that following complete

detariffing, we will no longer have to assess the reasonableness of

modifications by such carriers to their tariffs for interstate,

domestic, interexchange services. Thus, although the substantial cause

test may continue to apply in other contexts, the test will no longer

apply to unilateral tariff modifications by nondominant interexchange

carriers regarding their interstate, domestic, interexchange services.

V. Final Regulatory Flexibility Analysis

129. As required by Section 603 of the Regulatory Flexibility Act

(RFA), an Initial Regulatory Flexibility Analysis (IRFA) was

incorporated in the NPRM. The Commission sought written public comments

on the proposals in the NPRM, including on the IRFA. The Commission's

Final Regulatory Flexibility Analysis (FRFA) in this Order conforms to

the RFA, as amended by the Contract With America Advancement Act of

1996 (CWAAA), Public Law 104-121, 110 Stat. 847 (1996).

[[Page 59361]]

A. Need for and Objectives of the Proposed Rules

130. In the 1996 Act, Congress sought to establish ``a pro-

competitive, de-regulatory national policy framework'' for the United

States telecommunications industry. One of the principal goals of the

telephony provisions of the 1996 Act is promoting increased competition

in all telecommunications markets, including those that are already

open to competition, particularly long-distance services markets.

Integral to this effort to foster competition is the requirement that

the Commission forbear from applying any regulation or any provision of

the Communications Act if the Commission makes certain specified

findings.

131. In this Order, the Commission proposes to exercise its

forbearance authority under Section 10 of the Communications Act to

detariff completely the interstate, domestic, interexchange services of

nondominant interexchange carriers. In addition, the Commission

promulgates rules in this Order that will require nondominant

interexchange carriers to make available to the public information on

the rates, terms, and conditions for all of their interstate, domestic,

interexchange services in order to aid enforcement of Section 254(g) of

the Communications Act. The objective of the rules adopted in this

Order is to implement as quickly and effectively as possible the

national telecommunications policies embodied in the 1996 Act and to

promote the development of competitive, deregulated markets envisioned

by Congress. In doing so, we are mindful of the balance that Congress

struck between this goal of bringing the benefits of competition to all

consumers and its concern for the impact of the 1996 Act on small

business entities.

132. In this Order, we also consider, but decline to act at this

time on, the Commission's proposal in the NPRM to allow nondominant

interexchange carriers to bundle CPE with interstate, interexchange

telecommunications services. The Commission also raised issues in the

NPRM relating to: market definition; separation requirements for

nondominant treatment of local exchange carriers in their provision of

certain interstate, interexchange services; and implementation of the

rate averaging and rate integration requirements in new section 254(g)

of the Communications Act. On August 7, 1996, the Commission issued a

Report and Order implementing the rate averaging and rate integration

requirements.

B. Summary of Significant Issues Raised by the Public Comments in

Response to the IRFA

133. In the NPRM, the Commission performed an IRFA. In the IRFA,

the Commission found that the rules it proposed to adopt in this

proceeding may have an impact on small business entities as defined by

section 601(3) of the RFA. In addition, the IRFA solicited comment on

alternatives to the proposed rules that would minimize the impact on

small entities consistent with the objectives of this proceeding.

i. Comments on the IRFA

134. No comments specifically address the Commission's initial

regulatory flexibility analysis. Several parties, however, assert in

their comments that the proposal to adopt complete detariffing would

have an impact on small business entities. Several parties argue that

tariffs send accurate economic signals and disseminate rate and service

information so that nondominant interexchange carriers are able to

price their services to compete with larger interexchange carriers.

ACTA further argues that increased transaction costs in a detariffed

environment--due to the need to establish a legal relationship with

customers and notify them of any modifications--would be especially

burdensome on small carriers that have fewer resources. In addition,

Eastern Tel requests the Commission to work with industry, in

particular small interexchange carriers, to develop a standard contract

for telecommunications services, similar to the form contracts used in

the real estate industry, that address such issues as the collection

procedures that can be utilized. APCC, however, argues that forbearance

from tariff filing requirements would eliminate a regulatory

requirement that is especially burdensome on small carriers.

135. Several parties contend that complete detariffing would harm

small business entities that are consumers of interstate, interexchange

telecommunications services, because: (1) Small business customers

require access to information contained in tariffs to obtain the best

rates available; and (2) increased transaction costs would discourage

nondominant interexchange carriers from serving certain market

segments, including certain small business markets, thereby decreasing

competitive choices for these small business customers.

136. TRA argues that detariffing would allow carriers to

discriminate against resellers, many of which are small and mid-sized

businesses. TRA claims that, as a result, the resale market will not

survive. TRA claims that a vibrant resale market provides residential

and small business customers with access to lower rates.

137. In addition, several small businesses that analyze tariff

information for business and residential customers argue that they need

such information to conduct their businesses.

ii. Discussion

138. We disagree with those commenters that argue that complete

detariffing will harm small nondominant interexchange carriers. As

discussed in section II, we find that not permitting nondominant

interexchange carriers to file tariffs with respect to interstate,

domestic, interexchange services will enhance competition among all

providers of such services (regardless of size), promote competitive

market conditions, and establish market conditions that more closely

resemble an unregulated environment. We further find, as APCC notes,

that filing tariffs imposes costs on carriers that attempt to make new

service offerings. Our decision to adopt complete detariffing,

therefore, should minimize regulatory burdens on all nondominant

interexchange carriers, including small entities.

139. We recognize that complete detariffing may change significant

aspects of the way in which nondominant interexchange carriers conduct

their business. As discussed above, however, tariffs are not the only

feasible way for carriers to establish legal relationships with their

customers, nor will carriers necessarily need to negotiate contracts

for service with each, individual customer. See para. 57. Carriers

could, for example, issue short, standard contracts that contain their

basic rates, terms and conditions for service. As discussed above,

nondominant interexchange carriers that provide casual calling services

have options other than tariffs by which they can establish legal

relationships with casual callers, and pursuant to which such callers

would be obligated to pay for the telecommunications services they use.

See para. 58. We believe that the nine-month transition period

established by this Order, will afford nondominant interexchange

carriers sufficient time to develop efficient mechanisms to provide

interstate, domestic, interexchange services in a detariffed

environment. Moreover, parties that oppose complete detariffing have

not shown that the business of providing interstate, domestic,

interexchange services should be subject

[[Page 59362]]

to a regulatory regime that is not available to firms that compete in

any other market in this country. We thus conclude that requiring

nondominant interexchange carriers to withdraw their tariffs and

conduct their business as other enterprises do will not impose undue

burdens on these carriers. Moreover, we disagree with ACTA's argument

that detariffing will disproportionately burden small interexchange

carriers. While some of the increased administrative costs that

carriers may initially incur as a result of detariffing are likely to

be fixed (such as the cost of developing short, standard contracts),

many such costs will vary based on the area or number of customers

served by such carriers (e.g., advertising expenditures, the cost of

promotional mailings or billing inserts). Nonetheless, we find that, on

balance, the pro-competitive effects of relieving nondominant

interexchange carriers of the obligation to file tariffs for their

interstate, domestic, interexchange services outweigh any potential

increase in transactional or administrative costs resulting from the

shift to a detariffed environment.

140. We are also unpersuaded by the argument that complete

detariffing will harm small business entities that utilize

telecommunications services. Requiring nondominant interexchange

carriers to file tariffs for interstate, domestic, interexchange

services impedes competition by removing incentives for competitive

price discounting, imposing costs on carriers that attempt to make new

offerings, and preventing consumers from seeking out or obtaining

service arrangements specifically tailored to their needs. As discussed

above, complete detariffing will better protect consumers, many of

which are small businesses, and will promote vigorous competition. See

section II.B.2.b. As a result, we believe that complete detariffing

will lead to lower prices for interstate, domestic, interexchange

services, thereby benefitting all consumers, including small business

ones. Moreover, because we do not agree that complete detariffing will

substantially increase nondominant interexchange carriers' costs, we

are unpersuaded that carriers will abandon segments of the market to

the detriment of small business customers, as LDDS suggests.

141. We reject the suggestion that eliminating tariff filing

requirements would impede competition by reducing information available

to consumers and small nondominant interexchange carriers. As discussed

above, we believe that nondominant interexchange carriers will make

rate and service information, currently contained in tariffs, available

to the public in a more user-friendly form in order to preserve their

competitive position in the market, and as part of their contractual

relationship with customers. See para. 25. Nevertheless, we acknowledge

that, even in a competitive market, nondominant interexchange carriers

might not provide complete information concerning all of their service

offerings to all consumers, and that some consumers may not be able to

determine which rate plan is most appropriate for them, based on their

individual calling patterns. Accordingly, and in light of

considerations regarding the enforcement of the 1996 Act's geographic

rate averaging and rate integration requirements, we will require

carriers to provide rate and service information to the public. See

paras. 84-86. This obligation will ensure that all customers, many of

which are small businesses, have access to such informatio

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