Policy and Rules Concerning the Interstate, Interexchange Marketplace

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 42 and 61

[CC Docket No. 96-61; FCC 97-293]

Policy and Rules Concerning the Interstate, Interexchange

Marketplace

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: The Order on Reconsideration (Order) released August 20, 1997

reconsiders the Second Report and Order in this docket (61 FR 59340

(November 22, 1996)). The Order modifies the Second Report and Order

by: adopting permissive detariffing for interstate, domestic,

interexchange direct-dial services; adopting permissive detariffing for

the first 45 days of service to new customers that contact the local

exchange carrier to choose their primary interexchange carrier; and

eliminating the requirement that nondominant interexchange carriers

make publicly available information concerning current rates, terms,

and conditions for all of their interstate, domestic, interexchange

services, except in the case of dial-around 0+ services from aggregator

locations.

EFFECTIVE DATE: December 4, 1997.

FOR FURTHER INFORMATION CONTACT: Lisa Choi, Attorney, Common Carrier

Bureau, Policy and Program Planning Division, (202) 418-1580. For

additional information concerning the information collections contained

in this Order contact Judy Boley at (202) 418-0214, or via the Internet

at [email protected].

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

adopted August 15, 1997, and released August 20, 1997. The full text of

this Order is available for inspection and copying during normal

business hours in the FCC Reference Center, 1919 M St., NW, Room 239,

Washington, DC The complete text also may be obtained through the World

Wide Web, at http://www.fcc.gov/Bureaus/Common Carrier/Orders/fcc97-

293.wp, or may be purchased from the Commission's copy contractor,

International Transcription Service, Inc., (202) 857-3800, 1231 20th

St., NW, Washington, DC 20036.

Regulatory Flexibility Analysis

As required by the Regulatory Flexibility Act, the Order contains a

Final Regulatory Flexibility Analysis on Reconsideration which is set

forth in the Order on Reconsideration. A brief description of the

analysis follows. Pursuant to section 604 of the Regulatory Flexibility

Act, the Commission performed a comprehensive analysis of the Order on

Reconsideration with regard to small entities. This analysis includes:

(1) A succinct statement of the need for, and objectives of, the

Commission's decisions in the Order on Reconsideration; (2) a summary

of the significant issues raised by the public comments in response to

the initial regulatory flexibility analysis, a summary of the

Commission's assessment of these issues, and a statement of any changes

made in the Order on Reconsideration as a result of the comments; (3) a

description of and an estimate of the number of small entities to which

the Order on Reconsideration will apply; (4) a description of the

projected reporting, recordkeeping and other compliance requirements of

the Order on Reconsideration, including an estimate of the classes of

small entities which will be subject to the requirement and the type of

professional skills necessary for compliance with the requirement; (5)

a description of the steps the Commission has taken to minimize the

significant economic impact on small entities consistent with the

stated objectives of applicable statutes, including a statement of the

factual, policy, and legal reasons for selecting the alternative

adopted in the Order on Reconsideration and why each one of the other

significant alternatives to each of the Commission's decisions which

affect small entities was rejected.

The rules adopted in this Order on Reconsideration are necessary to

implement the provisions of the Telecommunications Act of 1996.

Paperwork Reduction Act

The Federal Communications Commission (FCC) has received Office of

Management and Budget (OMB) approval for the following public

information collections pursuant to the Paperwork Reduction Act of

1995, Pub. L.104-13. An agency may not conduct or sponsor and a person

is not required to respond to a collection of information unless it

displays a currently valid control number.

OMB Control Number: 3060-0704.

Expiration Date: February 28, 1998.

Title: Policy and Rules Concerning the Interstate, Interexchange

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

of 1934, as amended, CC Docket No. 96-61.

Respondents: Business or other for-profit.

Public reporting burden for the collection of information is

estimated as follows:

[[Page 59584]]

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No. of

Information collection respondents Annual hour burden per response Total annual burden

(approx.)

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

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

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

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

completely cancel tariffs. (one-time).

Tariff cancellation requirement: 519 2 hours per page (36,047 pages) 72,094 (one-time).

revise mixed tariffs to remove (one-time).

domestic services.

Information disclosure 0 0.............................. 0.

requirement**.

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

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

* The Commission affirmed its decision in the Second Report and Order to eliminate the requirement that

nondominant interexchange carriers file tariffs for interstate, domestic, interexchange services. In the

Order, the Commission has decided to (1) permit nondominant interexchange carriers to file tariffs for the

provision of dial-around 1+ services using a nondominant interexchange carrier's carrier access code; (2)

permit nondominant interexchange carriers to file tariffs for the initial 45 days of domestic, interstate,

interexchange service, or until there is a written contract between the carrier and the customer, whichever is

earlier; and (3) eliminate the public disclosure requirement.

** The Commission has eliminated the information disclosure requirement.

Total Annual Burden: 75,895.5 hours, of which 74,598 will be one-

time.

Frequency of Response: Annual, except for tariff cancellation

requirement, which will be one-time, and on occasion.

Estimated Annual Reporting and Recordkeeping Costs: $435,000.

Needs and Uses: The attached item affirms the Commission's previous

decision in the Second Report and Order to eliminate the requirement

that nondominant interexchange carriers file tariffs for interstate,

domestic, interexchange telecommunications services. In this Order, the

Commission has eliminated this information disclosure requirement. In

addition, the Commission has reconsidered its decision to require

affected carriers to maintain, and to make available to the public in

at least one location, information concerning their rates, terms and

conditions for all of their interstate, domestic, interexchange

services.

Public reporting burden for the collection of information is as

noted above. Send comments regarding the burden estimate or any other

aspect of the collections of information, including suggestions for

reducing the burden to Performance Evaluation and Records Management,

Washington, DC 20554.

Synopsis of Order on Reconsideration

I. Introduction

1. On October 29, 1996, the Commission adopted the Second Report

and Order (61 FR 59340 (November 22, 1996)) in its proceeding reviewing

the regulation of interstate, domestic, interexchange

telecommunications services in light of the passage of the

Telecommunications Act of 1996 (1996 Act) and the increasing

competition in the interexchange market over the last decade.

Consistent with the intent of the 1996 Act to provide a ``pro-

competitive, deregulatory'' national policy framework for

telecommunications and information technologies and services, Congress

directed the Commission to forbear from applying any provision of the

Communications Act or the Commission's regulations if certain

conditions are met.

2. We determined in the Second Report and Order that the statutory

forbearance criteria in section 10 of the Communications Act were met

for complete detariffing (``Complete detariffing'' refers to a policy

of neither requiring nor permitting nondominant interexchange carriers

to file tariffs pursuant to section 203 of the Communications Act for

their interstate, domestic, interexchange services. ``Permissive

detariffing'' refers to a policy of allowing, but not requiring,

nondominant interexchange carriers to file tariffs for such services.)

of the interstate, domestic, interexchange services offered by

nondominant interexchange carriers, and, therefore, that we would no

longer allow such carriers to file tariffs pursuant to section 203 of

the Communications Act for their interstate, domestic, interexchange

services, with the limited exception of AT&T's provision of 800

directory assistance and analog private line services. At the same

time, we recognized that a transition period was necessary to allow

nondominant interexchange carriers time to adapt to complete

detariffing. We therefore ordered all nondominant interexchange

carriers to cancel their tariffs for such services within nine months

from the effective date of the Second Report and Order. We maintained

the tariffing requirement for the international portion of bundled

domestic and international service offerings. We further required

nondominant interexchange carriers to: (1) File an annual certification

stating that they are in compliance with the geographic rate averaging

and rate integration requirements of section 254(g) of the

Communications Act; (2) maintain supporting documentation on the rates,

terms, and conditions of their interstate, domestic, interexchange

services that they could submit to the Commission within ten business

days upon request; and (3) make publicly available information

concerning current rates, terms, and conditions for all of their

interstate, domestic, interexchange services. The basis for the

information disclosure requirement was to ensure that the public was

provided with the information necessary to determine whether a

nondominant interexchange carrier was adhering to the rate averaging

and rate integration requirements of section 254(g) of the

Communications Act. In addition, we determined that a public disclosure

requirement would promote the public interest by making it easier for

consumers, including resellers, to compare service offerings.

3. Our actions in the Second Report and Order were intended to

advance Congress' pro-competitive and deregulatory objectives by

eliminating regulatory requirements that the Commission determined were

no longer necessary to protect consumers or serve the public interest.

We concluded that our actions would foster increased competition in the

market for interstate, domestic, interexchange services by deterring

tacit price coordination, eliminating the possible invocation of the

``filed-rate'' doctrine, and establishing market conditions that more

closely resemble an unregulated environment. We found that elimination

of the possible invocation of the ``filed-rate'' doctrine is in the

public interest

[[Page 59585]]

because, pursuant to the ``filed-rate'' doctrine articulated by the

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

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

the carrier is required to assess the tariff rate, term, or condition.

See Armour Packing Co. v. United States, 209 U.S. 56 (1908); American

Broadcasting Cos., Inc. v. FCC, 643 F.2d 818 (D.C. Cir. 1980); see also

Aero Trucking, Inc. v. Regal Tube Co., 594 F.2d 619 (7th Cir. 1979);

Farley Terminal Co., Inc. v. Atchison, T. & S.F. Ry., 522 F.2d 1095

(9th Cir.), cert. denied, 423 U.S. 996 (1975). Consequently, if a

carrier unilaterally changes a rate by filing a tariff revision, the

newly filed rate becomes the applicable rate for all customers of that

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

unlawful under the Communications Act. See 47 U.S.C. 201(b); see also

Maislin Industries, U.S., Inc. v. Primary Steel, Inc., 497 U.S. 116

(1990).

4. Several parties appealed the Second Report and Order to the

United States Court of Appeals for the District of Columbia Circuit and

filed motions requesting that the court stay the Second Report and

Order pending judicial review. On February 13, 1997, the court granted

these motions. The Commission's rules adopted in this proceeding,

therefore, are stayed until the court issues its determination on the

merits of the appeal. Accordingly, nondominant interexchange carriers

are currently required to file tariffs for their interstate, domestic,

interexchange services.

5. In addition, eleven parties filed petitions requesting that we

reconsider or clarify the rules we adopted in the Second Report and

Order. The United States Court of Appeals for the District of Columbia

Circuit deferred the briefing schedule in the appeal of the rules

adopted in the Second Report and Order to allow the Commission to act

on these petitions for reconsideration. MCI Telecommunications Corp. v.

FCC, No. 96-1459 (D.C. Cir. April 4, 1997). The court directed the

parties to file motions to govern further proceedings 60 days after

April 4, 1997. Id. The Commission issued a public notice to establish a

pleading cycle for the issues raised in the petitions for

reconsideration and clarification. The public notice sought comments on

or oppositions to the petitions and replies. Policy and Rules

Concerning the Interstate, Interexchange Marketplace, CC Docket No. 96-

61, Public Notice, Petitions for Reconsideration and Clarification of

Action in Rulemaking Proceedings (released January 7, 1997). For

convenience, we will cite the parties' filings in these three phases as

petitions, comments, and replies, respectively. For the reasons set

forth below, we grant requests for reconsideration on three issues.

Specifically, we modify the Second Report and Order by: (1) Adopting

permissive detariffing for interstate, domestic, interexchange direct-

dial services to which end-users obtain access by dialing a carrier's

access code (CAC); (2) adopting permissive detariffing for the first 45

days of service to new customers that contact the local exchange

carrier (LEC) to choose their primary interexchange carrier (PIC); and

(3) eliminating the requirement that nondominant interexchange carriers

make publicly available information concerning current rates, terms,

and conditions for all of their interstate, domestic, interexchange

services, except in the case of dial-around 0+ services from aggregator

locations, pursuant to section 226 of the Communications Act. In

another proceeding, we are considering the issue of forbearing from

applying section 226, which requires operator service providers to file

informational tariffs. See Billed Party Preference for InterLATA 0+

Calls, CC Docket No. 92-77, Second Further Notice of Proposed

Rulemaking, 11 FCC Rcd 7274 (1996); Public Notice, DA 96-1695 (released

October 10, 1996) (seeking further comment). We deny all of the other

petitions for reconsideration. We also make a number of clarifications

in this Order on Reconsideration.

II. Detariffing Issues

A. Forbearance From Tariff Filing Requirements for the Interstate,

Domestic, Interexchange Services of Nondominant Interexchange Carriers

i. Background

6. In the Second Report and Order, we concluded that the statutory

forbearance criteria in section 10 were satisfied, based on our

findings that: (1) Tariffs are not necessary to ensure that the rates,

practices, classifications, and regulations of nondominant

interexchange carriers for interstate, domestic, interexchange services

are just and reasonable and not unjustly or unreasonably

discriminatory; (2) tariffs for interstate, domestic, interexchange

services of nondominant interexchange carriers are not necessary to

protect consumers; and (3) complete detariffing of interstate,

domestic, interexchange services provided by nondominant interexchange

carriers, and not permissive detariffing of such services, is in the

public interest. We concluded that permissive detariffing of

interstate, domestic, interexchange services provided by nondominant

interexchange carriers is not in the public interest because it: (1)

Would not necessarily eliminate possible invocation of the ``filed-

rate'' doctrine; (2) would create a risk that nondominant interexchange

carriers would file tariffs to send price signals and to manipulate

prices; and (3) would impose administrative costs on the Commission,

which must maintain and organize tariff filings for public inspection.

We further concluded that the Commission has the authority under

section 10 to prohibit carriers from filing tariffs. Accordingly,

pursuant to section 10, we determined that we must forbear from

applying section 203 tariff filing requirements to the interstate,

domestic, interexchange services offered by nondominant interexchange

carriers and not permit nondominant interexchange carriers to file

tariffs for their interstate, domestic, interexchange services, with

the limited exception of AT&T's provision of 800 directory assistance

and analog private line services.

ii. Positions of the Parties

7. Frontier, Telecommunications Resellers Association (TRA), and

Telco petition the Commission to reconsider its decision to adopt

complete detariffing, and urge the Commission to adopt permissive

detariffing for the interstate, domestic, interexchange services

offered by nondominant interexchange carriers. TRA further argues that

the increased costs and burdens of a complete detariffing regime will

adversely affect small and mid-sized nondominant interexchange

carriers, which have fewer resources. TRA proposes specifically that

the Commission adopt permissive detariffing in conjunction with a

carrier-administered electronic tariff filing system, thereby relieving

the Commission of the burden of administering and maintaining tariff

filings. AT&T, CompTel, SBC, U S WEST, and WorldCom also support

permissive detariffing.

8. AT&T, CompTel, and WorldCom argue that section 10 only

authorizes the Commission to refrain from requiring tariffs, and does

not empower the agency to prohibit carriers from voluntarily complying

with section 203. These parties, and others, also challenge the

Commission's determination that permissive detariffing is not in the

public interest. Specifically, these parties argue that: (1) The

``filed-rate'' doctrine would no longer apply if the Commission adopted

a permissive detariffing regime because the tariffed

[[Page 59586]]

rate would no longer be the only permissible rate; (2) even if the

``filed-rate'' doctrine would continue to apply, that doctrine and

carriers' ability to limit their liability through tariff provisions,

benefit consumers because the terms of the carrier-customer

relationship are certain; (3) price coordination would be difficult, if

not impossible, with permissive detariffing, because carriers would at

best have fragmentary information about their competitors' rates,

terms, and conditions; (4) requiring nondominant interexchange carriers

to make price and service information publicly available allows

carriers to coordinate prices as easily as with filed tariffs; (5) even

under a system of permissive detariffing, a carrier could not refuse to

accommodate a customer's request for services tailored to its specific

needs on the ground that the request is beyond the scope of the

carrier's tariff; (6) complete detariffing significantly increases

transactional and administrative costs, especially for small carriers,

by forcing nondominant interexchange carriers to conclude written

agreements with every customer and notify them of modifications to the

carriers' rates, terms, and conditions; and (7) permissive detariffing,

or even mandatory tariffing, promotes vigorous competition to an even

greater extent than complete detariffing, because carriers can react to

market conditions quickly and without appreciable costs by filing a new

tariff.

9. Ad Hoc Users Committee, American Petroleum Institute (API), and

the Television Networks oppose the petitions of TRA and Frontier, at

least to the extent that they request reconsideration of complete

detariffing of individually-negotiated service arrangements. Ad Hoc

Users Committee and API contend that the petitions for reconsideration

should be denied because they merely repeat arguments previously made

and rejected by the Commission in the Second Report and Order. In

addition, these parties argue that complete detariffing, and not

permissive detariffing, of interstate, domestic, interexchange services

offered by nondominant interexchange carriers is in the public

interest, because: (1) The ``filed-rate'' doctrine would continue to

apply under a system of permissive detariffing; (2) the ``filed-rate''

doctrine harms consumers because it allows carriers unilaterally to

alter or abrogate agreements; (3) complete detariffing ensures that

carriers would no longer be able to refuse to accommodate a customer's

request for services tailored to its specific needs on the grounds that

the request conflicts with the carriers' tariffs; and (4) tariffs delay

rapid responses to customer demands. API further argues that the 1996

Act gives the Commission authority to prohibit tariff filings.

iii. Discussion

10. We deny the petitions of Frontier, Telco, and TRA urging us to

adopt permissive detariffing for all interstate, domestic,

interexchange services. As discussed infra, arguments presented by

these petitioners, and others, have persuaded us that permissive

detariffing is warranted in certain limited circumstances.

Specifically, we find that permissive detariffing is warranted for: (1)

Interstate, domestic, interexchange direct-dial services to which end-

users obtain access by dialing a carrier's CAC (dial-around 1+

services); (A CAC enables callers to reach any carrier (presubscribed

or otherwise) from any telephone. During the current transition from

five to seven digit CACs, both five digit CACs (10XXX) and seven digit

CACs (101XXXX) are in use. On April 11, 1997, the Commission determined

that the transition will end on January 1, 1998. See Administration of

the North American Numbering Plan, Carrier Identification Codes (CICs),

CC Docket 92-237, Second Report and Order, 62 FR 19056 (April 18,

1997), stay and recon. pending. Thus, after January 1, 1998, only seven

digit CACs may be used.) and (2) interstate, domestic, interexchange

services provided by a nondominant interexchange carrier for the

initial 45 days of service or until there is a written contract between

the carrier and the customer, in those limited circumstances in which a

prospective customer contacts the LEC to select an interexchange

carrier or to initiate a PIC change (LEC-implemented new customer

services). Aside from these two limited categories of service, the

petitions and comments do not present any arguments that were not

considered and addressed in the Second Report and Order. Thus, we find

no basis upon which to reconsider our determination that the statutory

criteria are met for completely detariffing all other interstate,

domestic, interexchange services of nondominant interexchange carriers,

except for dial-around 0+ services from aggregator locations, pursuant

to section 226 of the Communications Act.

11. In the Second Report and Order, we extensively considered and

rejected the argument that the Commission does not have statutory

authority under section 10 to adopt complete detariffing. No new

arguments have been presented that persuade us to reconsider our

decision. Therefore, we reaffirm our earlier conclusion that Congress,

in section 10, provided the Commission with broad forbearance authority

that enables the agency to eliminate tariff filings under section 203.

12. In the Second Report and Order, we also considered all of the

arguments advanced by those parties now urging us to reconsider our

determination that permissive detariffing is in the public interest and

complete detariffing is not. With the exception of dial-around 1+

services and LEC-implemented new customer services, we affirm our

conclusion in the Second Report and Order that permissive detariffing

of interstate, domestic, interexchange services offered by nondominant

interexchange carriers is not in the public interest, for the reasons

set forth in our prior order. We are not persuaded that a permissive

detariffing regime would eliminate possible invocation of the ``filed-

rate'' doctrine. In a permissive detariffing regime, a nondominant

interexchange carrier may choose to file a tariff for an interstate,

domestic, interexchange service, even if the carrier has signed an

underlying contract with the customer. If a carrier files a tariff for

an interstate, domestic, interexchange service with the Commission,

whether on a permissive or mandatory basis, section 203(c) requires the

carrier to provide service at the rates, and on the terms and

conditions, set forth in the tariff until the carrier files a

superseding tariff cancelling, or changing the rates, terms, and

conditions of the tariffed offering. Thus, if the tariffed rates,

terms, and conditions differ from those in the contract, section

203(c), in all likelihood, requires the carrier to provide service at

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

Because the ``filed-rate'' doctrine is a judicially-created doctrine,

the determination of how to apply the doctrine in a permissive

detariffing regime when the tariffed rates, terms, or conditions differ

from those contained in a contract must necessarily be left to the

courts. See supra paragraph 3. Only with a complete detariffing regime,

under which the carrier-customer relationship would more closely

resemble the legal relationship between service providers and customers

in an unregulated, competitive environment, can we definitively avoid

the negative consequences for consumers of the ``filed-rate'' doctrine.

The Common Carrier Bureau, on numerous occasions, has issued Orders

Designating Issues for Investigation to examine whether a carrier's

proposed unilateral changes in a tariff meet the ``substantial cause''

[[Page 59587]]

standard applied by the Commission. See AT&T Contract Tariff No. 374,

Transmittal Nos. CT 2952 and CT 3441, Order Designating Issues for

Investigation, DA 95-1784 (Common Carrier Bureau released August 11,

1995); AT&T Communications Contract Tariff No. 360, Transmittal No. CT

3076, CC Docket No. 95-146, Order Designating Issues for Investigation

(Common Carrier Bureau released September 8, 1995).

13. Moreover, we reject carriers' arguments that the ``filed-rate''

doctrine benefits customers by creating certainty in the carrier-

customer relationship. In fact, the ``filed-rate'' doctrine creates

uncertainty in the carrier-customer relationship. Invocation of the

``filed-rate'' doctrine can be especially harmful to consumers who have

signed long-term service contracts with interexchange carriers. As Ad

Hoc Users Committee, API and the Television Networks point out, the

doctrine permits interexchange carriers subsequently to file a tariff

that differs from the long-term contract, and if justified by

substantial cause, unilaterally to alter or abrogate their contractual

obligations in a manner that is not available in most commercial

relationships and that undermines consumers' legitimate business

expectations. The ``filed-rate'' doctrine also harms residential and

small business consumers who utilize mass market services and do not

enter into long-term service arrangements. Such customers may purchase

these mass market services in response to representations made by sales

agents of the interexchange carrier or advertisements. In addition,

such customers may assume the interexchange carrier will not modify its

rates without actual notice to the customer. In the event of a dispute

about the representations made by a sales agent, or a subsequent

modification to an interexchange carrier's rates, terms, or conditions

without actual notice to customers, a customer would be bound by the

tariffed rates, terms, and conditions.

14. Moreover, we reaffirm our finding that permissive detariffing

would facilitate tacit price coordination, because nondominant

interexchange carriers could file tariffs to send price signals. On

further reflection, however, we are persuaded by the comments of AT&T,

TRA, and Telco, which maintain that complete detariffing, in

conjunction with a public disclosure requirement, may not effectively

impede tacit price coordination, because a nondominant interexchange

carrier's rates, terms, and conditions for its interstate, domestic,

interexchange services would still be available to its competitors in

one location. We adopted the public disclosure requirement primarily to

aid enforcement of the geographic rate averaging and rate integration

requirements of section 254(g). In response to petitions asking us to

reconsider the information disclosure requirements, we determine, as

discussed below, that we can effectively meet our obligations to

enforce section 254(g) without the public disclosure requirement. We

conclude that complete detariffing, without a public disclosure

requirement, will more effectively deter tacit price coordination.

15. We recognized in the Second Report and Order that complete

detariffing would change in significant respects the manner in which

nondominant interexchange carriers conduct their business. We

considered the arguments raised by the parties in their petitions for

reconsideration and comments regarding costs and administrative burdens

associated with complete detariffing that would be avoided if carriers

were allowed to file tariffs. With the exception of casual calling

services and LEC-implemented new customer services, these arguments

either essentially restate claims that were advanced in the initial

phase of this proceeding in response to the NPRM and were rejected in

the Second Report and Order, or are new, but unsupported by credible

evidence. For example, Frontier, CompTel and SBC contend, as numerous

parties did in earlier comments in this proceeding, that complete

detariffing will increase the costs and administrative burdens on

nondominant interexchange carriers because they will have to enter into

individually negotiated contracts with every end user in order to

establish a binding contractual relationship. Commenters assert that

the costs associated with establishing an enforceable contractual

relationship in the absence of tariffs will be ``enormous,''

``significant,'' and ``substantial;'' however, they do not provide any

evidence in support of these claims. In short, these parties did not

raise any new arguments or provide any credible new evidence concerning

the costs of providing interstate, domestic, interexchange service in a

detariffed environment, as required by section 405 of the

Communications Act. We, therefore, affirm our conclusion, for the

reasons set forth in the Second Report and Order, that requiring

nondominant interexchange carriers to conduct their businesses as do

other businesses in unregulated markets will not substantially increase

their costs.

16. In contrast, parties offered additional credible evidence on

reconsideration concerning the costs and burdens to carriers of

providing dial-around 1+ services and LEC-implemented new customer

services in the absence of tariffs. As discussed below, we reconsider

our decision in light of this evidence, and determine that permissive

detariffing in these specific, limited instances is in the public

interest. With respect to other interstate, domestic, interexchange

services, we affirm our finding that the benefits and pro-competitive

effects of complete detariffing outweigh any increased transactional or

administrative costs resulting from the shift to complete detariffing.

17. Finally, we reject the argument that permissive detariffing or

mandatory tariffing would promote competition more effectively than

complete detariffing. As discussed above, allowing nondominant

interexchange carriers to file tariffs for interstate, domestic,

interexchange services creates the risk that such carriers will use

these tariffs to send price signals in an effort to manipulate prices.

Moreover, for the reasons discussed above and in the Second Report and

Order, requiring nondominant interexchange carriers to conduct their

businesses as do other businesses in unregulated markets will not

substantially increase their costs. We, therefore, conclude that

complete detariffing of the interstate, domestic, interexchange

services of nondominant interexchange carriers is in the public

interest, with the exception of dial-around 1+ services, LEC-

implemented new customer services and section 226 tariffs associated

with dial-around 0+ calls.

B. Casual Calling Services

i. Background

18. In contrast to other interstate, domestic, interexchange

services, casual calling services are those services that do not

require the calling party to establish an account with an interexchange

carrier or otherwise presubscribe to a service. ``Casual calling''

refers to services such as collect calling, the use of a third-party

credit card, or dial-around through the use of an access code. Casual

calling does not include services for which customers presubscribe to

an interexchange carrier or otherwise establish an account with an

interexchange carrier prior to using the service, such as by obtaining

a calling card, in advance, from an interexchange carrier. References

to

[[Page 59588]]

casual calling in this reconsideration do not pertain to section 226

informational tariffs. We concluded in the Second Report and Order that

the record did not support a finding that complete detariffing would

cause nondominant interexchange carriers to cease offering such

services. Rather, we found that nondominant interexchange carriers have

options other than tariffs by which they can ensure the establishment

of a contractual relationship with casual callers that would legally

obligate such callers to pay for the telecommunications service they

use and bind them to the carriers' terms and conditions. Second Report

and Order at 59350, paragraph 58. We stated that a casual caller

providing billing or payment information, such as a credit card or

billing number, and completing use of the telecommunications service,

may be deemed to have accepted a legal obligation to pay for any such

services rendered. We also noted that a carrier could alternatively

seek recovery under an implied-in-fact contract theory. An implied-in-

fact contract ``refers to that class of obligations which arises from

mutual agreement and intent to promise, when the agreement and promise

have simply not been expressed in words. Despite the fact that no words

of promise or agreement have been used, such transactions are

nevertheless true contracts, and may properly be called inferred

contracts or contracts implied in fact.'' 1 Williston on Contracts,

Sec. 1.5, at 20-21 (4th ed. 1990); see also 1 Arthur L. Corbin, et al.,

Corbin on Contracts, Sec. 1.19, at 55-57 (rev. ed. 1993) (stating that

an implied-in-fact contract requires the same terms as an express

contract and those terms are determined through a process of

implication and inference). We further concluded on the basis of the

record before us at that time that the competitive benefits of complete

detariffing of nondominant interexchange carriers' interstate,

domestic, interexchange service outweighed any potential increased

costs resulting from detariffing such services.

ii. Positions of the Parties

19. AT&T, Frontier, Telco, and TRA petition the Commission to

reconsider its decision to adopt complete detariffing for casual

calling services and argue that the Commission, instead, should allow

nondominant interexchange carriers to file tariffs for these services.

CompTel, Television Networks, SBC, Sprint and WorldCom support this

request. TRA and Sprint contend that unlike most other businesses,

common carriers are required by statute to provide service upon demand

prior to payment for their services. AT&T argues that allowing

nondominant interexchange carriers to file tariffs for casual calling

services is the simplest and most efficient means of ensuring a

contractual relationship between carriers and casual callers. These

parties, and others, contend that, in the absence of tariffs, carriers

would need to develop costly and burdensome mechanisms to ensure the

establishment of a legal relationship with casual callers to obligate

them to pay for the services they receive and to bind casual callers to

the terms and conditions of the service, including limitations on

liability.

20. Several of these parties also maintain that the alternatives to

tariffs that the Commission suggested in the Second Report and Order

are insufficient to ensure that carriers have a contractual basis for

enforcing their rates, terms, and conditions for casual calling

services. Specifically, these parties assert that neither the implied-

in-fact contract theory nor requiring customers to provide credit card

information or a billing number guarantees that a carrier will be able

to recover its charges for calls made by casual callers, because the

carrier will have to demonstrate that the parties agreed upon definite

terms. AT&T, Sprint, CompTel, and SBC assert that without tariffs,

interexchange carriers would have to resort to costly, repetitive,

state-by-state litigation to secure payment for services rendered. They

assert that the outcome of such litigation is uncertain, and that the

associated costs would inevitably be passed on to consumers.

21. AT&T argues that nondominant interexchange carriers, to ensure

the establishment of a contractual relationship with a casual caller,

would likely need to provide casual callers with the rates, terms, and

conditions, or at a minimum, the option of obtaining the rates, terms,

and conditions, prior to completion of the call. AT&T contends that

using a recorded announcement that provides the rates, terms, and

conditions of the call would greatly inconvenience callers by adding a

delay in call set-up time of between 1.5 and 2 minutes. AT&T further

maintains that even providing casual callers with the option of hearing

such information would add between 7 and 9 seconds to the call set-up

time. AT&T argues that this time delay is especially burdensome to the

casual caller because in most instances, the caller is placing the call

from a telephone away from the home in circumstances that necessitate

simplicity, convenience and speed. Moreover, AT&T contends that these

mechanisms would increase by approximately $0.33 to $0.77 the cost of

each call. AT&T asserts that the costs would be higher if the

nondominant interexchange carrier announces the rates, terms, and

conditions and lower if the carrier provides the option of hearing the

information. AT&T further argues that it may have underestimated this

incremental cost per call, because it was unable to calculate the cost

of playing an announcement to dial-around callers. AT&T also argues

that computers and fax machines are unable to recognize the

announcement, and, therefore, that any announcement would interfere

with a caller's ability to use casual calling services for computer

access or sending faxes. AT&T states, further, that an announcement of

the rates, terms, and conditions transmitted to a computer or fax

machine may be insufficient to create an enforceable contractual

relationship with the caller.

22. AT&T and Sprint also claim that a recorded announcement may not

even be an option for callers who use dial-around 1+ services, because

interexchange carriers may be unable to distinguish these calls from

direct dial 1+ calls placed from telephones presubscribed to that

carrier. Letter from Marybeth M. Banks, Director, Federal Regulatory

Affairs, Sprint, to William F. Caton, Acting Secretary, Federal

Communications Commission, April 30, 1997 (Sprint April 30 Ex Parte);

Letter from Marybeth M. Banks, Director, Federal Regulatory Affairs,

Sprint, to William F. Caton, Acting Secretary, Federal Communications

Commission, March 21, 1997 (Sprint March 21 Ex Parte). Direct-dial 1+

calls are those interstate, interexchange calls that an end-user makes

using his or her presubscribed interexchange carrier. A caller

completes this call by simply dialing 1 before the number being called.

In contrast, dial-around 1+ calls are generally those made by end-users

to access the interstate, domestic, interexchange services of an

interexchange carrier other than the carrier presubscribed to that

line. Once an end-user dials a carrier's CAC, the caller is connected

to that interexchange carrier, and may place a 1+ (dial-around 1+) or a

0+ (dial-around 0+) call using the services of that interexchange

carrier. End-users may use a dial-around service to take advantage of a

lower rate offered by a competing interexchange carrier for that

specific call, or during outages of its presubscribed interexchange

carrier's network. Sprint contends that the technology to distinguish

between these two types of

[[Page 59589]]

calls exists, but that this feature is not universally offered by all

LECs. Sprint contends that only those LECs with switches capable of

providing signalling using Signalling System 7 (SS7) protocol are able

to provide this feature. Moreover, Sprint asserts that several LECs

that have switches capable of providing SS7 do not offer this feature.

Sprint and AT&T further argue that the cost of implementing this

technology, where available, is significant and inevitably will be

passed on to consumers.

23. Several parties state that the increase in costs related to

ensuring that a legally enforceable relationship is established with

casual callers in the absence of tariffs may make it difficult for

carriers effectively to provide casual calling services, and may

ultimately result in carriers ceasing to offer these services

altogether.

24. Telco and SBC also argue that possible invocation of the

``filed-rate'' doctrine--a primary reason the Commission adopted

complete detariffing in the Second Report and Order--is not an issue

with respect to casual calling services, for which carriers do not

negotiate individual contracts. Frontier and SBC claim, moreover, that

contrary to the Commission's conclusions in the Second Report and

Order, the ``filed-rate'' doctrine is actually beneficial to consumers

because the ability to tariff a service ``promotes certainty'' in the

carrier-customer relationship. Frontier contends that this certainty is

particularly beneficial in situations such as casual calling, where the

carrier provides the service prior to establishing an enforceable

contractual relationship with the customer.

25. Finally, Western Union urges the Commission to allow

nondominant interexchange carriers to file tariffs for consumer

messaging services (e.g., telegram services). Western Union advances

essentially the same arguments in support of this claim that other

parties make in urging the Commission to adopt permissive detariffing

for casual calling services. Western Union asserts that customers often

convey to Western Union by telephone the message that they want

transmitted by telegram. As a result, Western Union contends that it

does not have an opportunity to formalize a written contract with the

customer that would bind the customer to its terms and conditions.

Western Union states that although the carrier could provide such

information orally at the time the customer telephones Western Union to

place an order, such a method of conveying the information would

confuse customers, and may not create a legally enforceable contract

that effectively limits the carrier's liability. Western Union further

contends that if carriers are unable to limit their liability

effectively, they may be forced to increase their rates or cease

offering consumer messaging services altogether, which would not be in

the public interest.

iii. Discussion

26. A number of parties urge us to reconsider our decision to adopt

complete detariffing for casual calling services in general. Sprint has

focused its comments on dial-around 1+ services. After examining

additional evidence presented by the parties on reconsideration, we

partially grant the petitions and adopt permissive detariffing, on an

interim basis, for a subset of casual calling services, specifically,

the provision of dial-around 1+ services. For all other types of casual

calling services that are the subject of this proceeding, we affirm our

determination that complete detariffing is warranted, and, therefore,

deny the petitions for reconsideration to this extent.

27. We note at the outset that the problems that nondominant

interexchange carriers maintain will arise with respect to ensuring the

establishment of a contractual relationship with casual callers in a

detariffed environment do not arise with calling cards. Because

customers obtain calling cards in advance of using the service, the

carrier can formalize a contractual relationship at the time the

customer obtains the card, rather than at the time the call is placed.

Consumers always have the option of obtaining a carrier's calling card

to make calls and carriers may choose to advertise calling cards as a

preferable alternative to casual calling in a detariffed environment.

28. With the exception of dial-around 1+ calls, discussed infra, we

affirm our prior finding that nondominant interexchange carriers have

reasonable options other than tariffs by which they can ensure the

establishment of a contractual relationship with casual callers that

would legally obligate such callers to pay for the services they use

and bind them to the carrier's terms and conditions. We recognize that

the implied-in-fact contract theory and the provision of credit card

information or a billing number, alone, do not guarantee that

nondominant interexchange carriers will have an enforceable contract

with the casual caller, if the caller does not have knowledge of the

carrier's rates, terms, and conditions prior to completion of the call.

Interexchange carriers, however, do not dispute that alternatives can

be created by which they can establish an enforceable contract with

casual callers. One alternative, as discussed by AT&T, is that

nondominant interexchange carriers could establish an enforceable

contract with casual callers by providing them with the rates, terms,

and conditions of the interstate, domestic, interexchange service by

operator or recorded announcements prior to completion of the call. The

parties acknowledge that an enforceable contract would exist if the

rates, terms, and conditions were provided prior to completion of the

call. Rather, these carriers argue only that providing such an

announcement of rates, terms, and conditions prior to completion of the

call would be burdensome to their casual calling customers. Many casual

calling services, including collect calling, and calls billed to third-

party numbers, however, already require intervention by the

interexchange carrier before the call is completed, and nondominant

interexchange carriers could provide this announcement at that time.

Furthermore, less burdensome alternatives may also be sufficient to

ensure the establishment of a contractual relationship. Another

alternative discussed by AT&T would be to provide casual callers with

the option of obtaining the rates, terms, and conditions prior to

completion of the call either through an operator or a recorded

announcement. We need not address whether this alternative is

sufficient to ensure the establishment of an enforceable contract,

because we conclude that providing the rates, terms, and conditions

prior to completion of the call would establish an enforceable contract

and, as discussed below, is a feasible alternative. Moreover, at a

minimum, we agree with Frontier and reaffirm our conclusion in the

Second Report and Order that if the customer has used the carrier's

service with knowledge of the rates, terms, and conditions, nondominant

interexchange carriers could seek recovery under an implied-in-fact

contract theory. Thus, we conclude that the fact that a casual caller

has not signed a written contract does not preclude a finding that a

legally enforceable obligation exists between the nondominant

interexchange carrier and the casual caller, especially when the

customer has knowledge of the carrier's charges.

29. We recognize that complete detariffing of casual calling

services may require nondominant interexchange

[[Page 59590]]

carriers to modify in significant respects the manner in which these

carriers bill and collect charges for their affected services. We

further recognize the concerns raised by AT&T and Sprint that the cost

of casual calls may increase and that casual callers may experience a

delay in call set-up time. Nevertheless, we affirm our prior conclusion

that the benefits of complete detariffing of casual calling services

except dial-around 1+ services are substantial. These benefits include

elimination of the possible invocation of the ``filed-rate'' doctrine,

decreased risk of tacit price coordination, and increased rate and

service information provided directly to casual callers to ensure that

a legal relationship is established between carriers and customers at

the time the caller uses the casual calling service. In our view, these

benefits outweigh the increased costs and delays in call set-up time

that AT&T and Sprint claim will result from complete detariffing. In

addition, we reiterate that casual callers always have the option of

obtaining and using an interexchange carrier's calling card, thereby

avoiding any increased cost or delay.

30. We also recognize AT&T's concern that complete detariffing of

casual calling services would impede the use of certain casual calling

arrangements for calls originated by computers and fax machines,

because the computer or fax machine would not recognize the

announcement, thereby interfering with the call, and because an

announcement transmitted to a computer or fax machine may be

insufficient to establish an enforceable contract. AT&T, however,

overstates the problem. Casual calling services such as collect calling

and calls billed to third-party numbers presently require intervention

by the interexchange carrier before the call is completed. Likewise,

use of a third-party credit card often requires interaction with the

carrier to provide the credit card information. Thus, the use of a

recorded announcement in a detariffed environment will not

significantly alter the current requirement of intervention by the

interexchange carrier. One casual calling service that does not require

intervention with the interexchange carrier prior to completion of the

call is dial-around 1+ service. As discussed infra, we are permitting

carriers to file tariffs for dial-around 1+ service through use of a

carrier's CAC. Concededly, there may be situations where callers using

third-party credit cards may be able to enter their credit card

information electronically by swiping the card prior to beginning a

call, and that in the absence of tariffs, these customers may face an

additional announcement of rates, terms, and conditions. We

nevertheless find that the negative consequences to the limited number

of those casual callers who may use third-party credit cards for

computer access and fax machines do not warrant reconsideration of our

decision to detariff completely casual calling except dial-around 1+

services in light of the benefits of complete detariffing of such

casual calling services and the fact that most casual calling services

already require intervention by an interexchange carrier. Moreover,

casual callers who now use third-party credit cards for computer access

and fax machines can avoid the announcement of rates, terms, and

conditions by obtaining in advance and using an interexchange carrier's

calling card. As discussed above, an interexchange carrier can

establish an enforceable contract with customers at the time they

obtain the calling card, rather than when the call is placed.

31. We also reject Telco's and SBC's argument that, because

carriers do not negotiate individual contracts with casual callers,

possible invocation of the ``filed-rate'' doctrine is not a concern for

casual callers. Although we agree with Telco and SBC that generally the

``filed-rate'' doctrine is an issue when a tariffed rate, term, or

condition differs from a rate, term, or condition in a contract,

invocation of the ``filed-rate'' doctrine may also harm casual callers.

Customers may use a casual calling service in response to an

advertisement or direct solicitation, which may provide rates, terms,

and conditions for the interstate, domestic, interexchange casual

calling service. If the interexchange carrier modifies these rates,

terms, or conditions in the future, the consumer would be bound by the

tariffed rates, terms, and conditions, even if the consumer did not

receive actual notice of the modification. In the absence of tariffs,

consumers will likely receive, or have the option of receiving, current

information on the rates, terms, and conditions for the specific

service they are about to use, because nondominant interexchange

carriers will likely disclose such information to the casual caller in

order to ensure the establishment of a contractual relationship.

32. While we continue to require complete detariffing for casual

calling services in general, we adopt permissive detariffing for dial-

around 1+ services using a nondominant interexchange carrier's access

code. We are persuaded that the means of ensuring the establishment of

an enforceable contract with customers of other casual calling services

cannot be implemented currently for dial-around 1+ services, because,

as explained below, the interexchange carrier does not have the ability

reasonably to distinguish a caller using dial-around 1+ services from

direct dial 1+ services, as required to provide the dial-around 1+

caller with the rates, terms, and conditions prior to completion of the

call. We note that this issue is not a concern for dial-around 0+ calls

from aggregator locations, because those calls require intervention

between the carrier and customer, at which time the carrier can

establish a contractual relationship with the customer. We further note

that not all dial-around 1+ calls are from casual callers. Presently,

some customers may need to dial their presubscribed interexchange

carrier's access code to use that carrier's interstate, domestic,

interexchange services, rather than the caller's LEC, for interstate,

intraLATA calls. After February 8, 1999, however, customers will no

longer need to dial their presubscribed interexchange carrier's access

code to use that carrier's interstate, domestic, interexchange services

because LECs are required to institute dialing parity and allow

customers to select a PIC for intraLATA toll calling by then. See

Implementation of the Local Competition Provisions of the

Telecommunications Act of 1996; Interconnection Between Local Exchange

Carriers and Commercial Mobile Radio; Area Code Relief Plan for Dallas

and Houston, Ordered by the Public Utility Commission of Texas;

Administration of the North American Numbering Plan; Proposed 708

Relief Plan and 630 Numbering Plan Area Code by Ameritech-Illinois, CC

Docket Nos. 96-98, 95-185, NSD File No. 96-8, CC Docket No. 92-237, IAD

File No. 94-102, Second Report and Order and Memorandum Opinion and

Order, 61 FR 47284 (September 6, 1996).

33. Sprint and AT&T have presented evidence that the technology to

distinguish dial-around 1+ calls from direct dial 1+ calls placed from

telephones presubscribed to an interexchange carrier is not universally

offered by all LECs either because some LEC switches are not capable of

providing signalling using SS7, which is necessary to provide this

feature, or because some LECs have chosen not to offer the technology

needed to distinguish dial-around 1+ calls from direct dial 1+ calls.

Sprint's and AT&T's unchallenged representations, which were not in the

record when we considered casual calling services in the Second Report

and Order, lead us to

[[Page 59591]]

find that adoption of complete detariffing at this time for dial-around

1+ services would not be in the public interest. Such a regime would

impose substantial costs and burdens on nondominant interexchange

carriers that offer dial-around 1+ services and their customers. The

rates, terms, and conditions of services provided to presubscribed

direct dial callers often differ from those provided to casual callers

using a dial-around 1+ service. Because nondominant interexchange

carriers would not always be able to distinguish between these two

types of calls, they would not always be able to determine the rates,

terms, and conditions for a particular call at the time the call is

placed. Moreover, the inability of nondominant interexchange carriers

to distinguish between these two types of calls would require these

carriers to implement for dial-around 1+ callers and direct dial 1+

callers the recorded announcement of the rates, terms, and conditions

or other means adopted by such carriers to ensure a contractual

relationship with dial-around 1+ callers. Such a recorded announcement

may confuse direct dial 1+ customers. Further, the increased costs and

the delay in call set-up time that AT&T and Sprint contend are

attendant with ensuring the establishment of a contractual relationship

would likely be imposed on both dial-around 1+ calls and direct dial 1+

calls from a presubscribed telephone line. We find that imposing these

increased costs and delays in call set-up time on both dial-around 1+

callers and customers using a direct dial 1+ service from a telephone

line presubscribed to that carrier--in all likelihood, the majority of

calls over that line--would impose an unreasonable burden on consumers

using direct dial 1+ services from their PIC. We note that these

concerns do not arise with respect to dial-around 0+ calls from

aggregator locations, because such calls always require intervention by

the interexchange carrier and, therefore, implementation of a recorded

announcement or some other means of providing customers with the rates,

terms, and conditions of the call would not affect consumers making

calls other than dial-around 0+ calls. We reach this conclusion because

the volume of direct dial 1+ calls from a PIC is vastly larger than the

volume of dial-around 1+ calls, and therefore, the costs and burdens

associated with providing an announcement of rates, terms, and

conditions for dial-around 1+ callers would be imposed on this much

larger group. In contrast, the increased costs and delays in call set-

up time for other casual calling services would be imposed only on

those customers using that particular casual calling service, and the

benefits of completely detariffing those casual calling services

outweigh the costs, as discussed above.

34. We recognize that nondominant interexchange carriers, to avoid

burdening their presubscribed customers, could decide not to provide an

announcement of rates, terms, and conditions prior to completion of

dial-around 1+ calls. In this circumstance, as in any circumstance

where there is no contract, the carrier, at a minimum, could seek to

recover under a theory of quantum meruit (Quantum meruit is an

``equitable doctrine, based on the concept that no one who benefits by

the labor and materials of another should be unjustly enriched thereby;

under those circumstances, the law implies a promise to pay a

reasonable amount for the labor and materials furnished, even absent a

specific contract therefor.'' Black's Law Dictionary 1243 (6th ed.

1990).) for the value of its services. Because we appreciate the

somewhat greater burden of pursuing a collection action when only a

quantum meruit theory of recovery is available, however, we find that

allowing nondominant interexchange carriers to file tariffs for dial-

around 1+ services at this time is in the public interest. We are also

concerned that nondominant interexchange carriers, to avoid imposing

these costs and delays on their presubscribed customers, may decide not

to offer a dial-around 1+ service option. Such a result would limit

consumers' choices, and, therefore, would also not be in the public

interest.

35. We realize that the unique problems created by dial-around 1+

services as they are presently handled could be eliminated if we were

to require LECs to deploy universally switches capable of providing

SS7. We are not requiring LECs to take such measures in this Order on

Reconsideration. A significant number of LEC switches do not presently

have SS7 capability, and we do not have an adequate record in this

proceeding to evaluate the costs that such a decision would impose on

LECs. We note, however, that LECs have been rapidly deploying switches

capable of providing SS7, and therefore, the unique technological

concerns about the ability to distinguish between dial-around 1+ calls

and direct dial 1+ calls from presubscribed customers will not be an

issue in the near future. Once LECs universally deploy switches that

are capable of providing SS7, we will reexamine this issue to determine

whether we will completely detariff dial-around 1+ services for the

same reasons that we determine that complete detariffing of other

casual calling services is in the public interest. In the meantime, we

conclude that permissive detariffing of dial-around 1+ services offered

by nondominant interexchange carriers is in the public interest as an

interim measure. In addition, we strongly encourage nondominant

interexchange carriers to provide dial-around 1+ services on a

detariffed basis as soon as they have the capability to do so. Because

we are adopting permissive detariffing for dial-around 1+ services, we

need not address concerns raised by Sprint that the ``bad debt ratio''

is higher for dial-around 1+ calls than for calls from presubscribed

customers.

36. We recognize that adopting permissive detariffing for dial-

around 1+ services may raise concerns about invocation of the ``filed-

rate'' doctrine for customers of these services. Due to the unique

technological concerns with dial-around 1+ services that prevent the

interexchange carrier from reasonably being able to provide the dial-

around 1+ caller with the rates, terms, and conditions prior to

completion of the call, discussed above, we conclude, on balance, that

the costs to consumers of adopting complete detariffing for dial-around

1+ services outweigh the benefits of complete detariffing with respect

to this particular type of service.

C. Initial Period of Service to Presubscribed Customers

i. Background

37. The Second Report and Order did not specifically address

whether complete detariffing is in the public interest with respect to

the provision of interstate, domestic, interexchange service to new

customers that select and use an interexchange service before receiving

information about the rates, terms, and conditions of that service.

None of the comments filed in response to the NPRM raised this issue.

ii. Positions of the Parties

38. AT&T contends that we should permit carriers to file tariffs

that are effective for the initial 45 days of service to residential

and small business customers, or until a contract with the new customer

is consummated, whichever is earlier. AT&T claims that many of the

concerns carriers raise with respect to casual calling services in a

detariffed environment are also relevant with respect to presubscribed

customers during the initial period of service. AT&T states that,

absent tariffs, nondominant interexchange carriers

[[Page 59592]]

will be required to provide service to new customers prior to the

formalization of a contractual relationship during the period: (1)

After the customer contacts the LEC to designate an interexchange

carrier or initiate a PIC change, but before the nondominant

interexchange carrier is able to ensure the establishment of an

enforceable contractual relationship; and (2) when the customer

contacts the interexchange carrier or its marketing agents directly,

but before the contract can be prepared and mailed to the customer.

AT&T contends that in both situations, tariffs are the only means by

which the interexchange carrier can enforce its rates, terms, and

conditions and limit its liability before a contract is finalized,

without resort to costly, repetitive litigation. AT&T concludes that

permitting nondominant interexchange carriers to file tariffs before

they have an opportunity to finalize a written contract with a new

customer will not adversely affect consumers because market forces will

ensure that the filed rates, terms, and conditions will be just,

reasonable, and nondiscriminatory, and the Commission's complaint

process is available as an additional safeguard. Several commenters

support AT&T's request.

iii. Discussion

39. We grant, in part, AT&T's petition for reconsideration urging

us to adopt permissive detariffing for the initial 45 days of

nondominant interexchange carriers' provision of interstate, domestic,

interexchange mass market services to new residential and business

customers, or until a written contract is consummated, whichever is

earlier. We find, based on the evidence presented by the parties, that

permitting interexchange carriers to file tariffs to cover the

provision of service during this period is in the public interest in

the limited circumstance when a new customer contacts the LEC to select

an interexchange carrier or to initiate a PIC change. We expect each

LEC to process service requests promptly. Interexchange carriers are

reminded that during the effective period of their tariffs, they must

make their services generally available to all similarly-situated

customers, pursuant to section 202(a). During the effective period of a

tariff, interexchange carriers are required, pursuant to section

201(a), to make all efforts to provide service quickly, even under

protest. See In the Matter of Hawaiian Telephone Company, 78 F.C.C. 2d

1062, 1065 (1980). Carriers are also bound by section 201 when

providing service pursuant to individually-negotiated contracts. We

conclude, however, that the interexchange carriers have not

demonstrated that this exception to our detariffing policy should be

extended to the initial period of service to a new customer when the

customer directly contacts the interexchange carrier or its marketing

agents.

40. We find persuasive AT&T's argument that when a residential or

small business customer contacts the LEC in order to presubscribe to an

interexchange carrier or initiate a PIC change, (We note that

residential and small business customers that contact the LEC to

presubscribe to an interexchange carrier or initiate a PIC change are

generally those customers that utilize mass market services.) the

selected interexchange carrier, because it does not have direct contact

with the customer, may be unable immediately to ensure that a legal

relationship is established with that customer. AT&T presented evidence

establishing that: (1) It takes some LECs up to 60 days to notify AT&T

of the PIC designation; (The 45-day period during which we are allowing

permissive detariffing was requested by the parties. Although AT&T

asserts that it takes LECs up to 60 days to notify it of a PIC change,

AT&T's petition for reconsideration requests only that we adopt

permissive detariffing for at most 45 days to enable it to formalize a

contract. See AT&T Petition at 9, 11-12 & n.12. Other parties supported

AT&T's request. See supra note . AT&T subsequently clarified that

allowing interexchange carriers to file tariffs that are applicable for

a maximum of 45 days after the customer begins taking service would

provide the interexchange carrier a sufficient amount of time to

establish a contractual relationship with the customer in almost all

cases. Letter from E. E. Estey, Government Affairs Vice President,

AT&T, to William F. Caton, Acting Secretary, Federal Communications

Commission, July 16, 1997.) (2) AT&T, because of the enormous churn

rate in the industry, processes in excess of 30 million PIC changes or

requests annually (an average of more than 600,000 requests per week);

and (3) an additional two weeks may elapse after AT&T receives notice

that it has been designated as a customer's PIC before contract

information is mailed to that customer. Thus, during some initial

period after interexchange service is established, carriers may be

providing interstate, domestic, interexchange service to new customers

without adequate assurance that the carriers' rates, terms, and

conditions will be legally enforceable, and as a result, may be

required to seek recovery of unremitted charges under alternative

equitable theories, as discussed above.

41. We have considered various means by which LECs could convey to

new customers of a nondominant interexchange carrier the information

necessary to ensure the establishment of an enforceable contract during

the initial period after the customer contacts the LEC and before the

nondominant interexchange carrier can formalize the contractual

relationship. We conclude, however, that none of these means adequately

ensures an enforceable contractual relationship between the nondominant

interexchange carrier and the customer during this initial period.

Nondominant interexchange carriers conceivably could contract with LECs

to act as agents of the interexchange carrier to establish a

contractual relationship with the prospective customer by orally

providing the rates, terms, and conditions of the interexchange

service. We are reluctant, however, to adopt a policy that may have the

effect of mandating such agency arrangements, especially since the LEC

may have an affiliate that offers competing interstate interexchange

services. Alternatively, if prospective customers are required to

contact nondominant interexchange carriers directly prior to the

commencement of service in order to establish the necessary contractual

relationship, such a requirement would preclude residential and

business customers from changing or selecting a PIC by contacting the

LECs as they do today. That, in turn, could diminish competition among

interexchange carriers by making it more difficult for customers to

switch interexchange carriers. Finally, the nondominant interexchange

carrier may decide to delay provisioning of the service until a

contractual relationship is formalized, which also may discourage

residential and business customers from making PIC changes, thereby

deterring competition in the interexchange market. We, therefore,

conclude that the benefits of allowing nondominant interexchange

carriers to file tariffs, at their discretion, for the limited period

before the customer executes a written contract outweigh any potential

benefits resulting from complete detariffing in this particular

situation. Consistent with the deregulatory framework of the 1996 Act,

we are allowing nondominant interexchange carriers to file tariffs

under the circumstances described herein, as opposed to requiring

tariffs, to allow nondominant interexchange

[[Page 59593]]

carriers and LECs to agree upon alternatives to tariffs for the purpose

of adequately ensuring a contractual relationship between the

nondominant interexchange carrier and the customer before the customer

formally executes the written contract.

42. We reject AT&T's arguments that we should also allow

nondominant interexchange carriers to provide an initial period of

service under tariff when a customer contacts the interexchange carrier

or its marketing agent directly. AT&T claims that even when the

customer contacts the carrier or its marketing agents directly to begin

interexchange service or initiate a PIC change, it is unable to

consummate a written contract prior to the commencement of service,

given the large number of requests it receives and the period of time

it takes to process customers' requests. When a customer contacts the

interexchange carrier or its marketing agent directly, however, there

is an opportunity for the interexchange carrier to establish, at a

minimum, an oral contract by relating to the customer the rates, terms,

and conditions that will be in effect from the commencement of service

until such time as the customer formalizes a written contract with the

interexchange carrier. This situation is distinguishable from both the

situation in which the prospective customer contacts the LEC to select

an interexchange carrier or to initiate a PIC change, and when a

customer places a casual call using a carrier's CAC. The interexchange

carrier does not have an opportunity in either of those cases to

interact with the customer. In contrast, a customer who contacts the

nondominant interexchange carrier directly is in essentially the same

position as customers of other businesses in unregulated, competitive

markets, i.e., they have an opportunity to interact with the service

provider before the service is initiated. We are not persuaded,

therefore, that we should reconsider our decision to require complete

detariffing when a customer contacts the interexchange carrier or its

marketing agent directly to begin interexchange service or to initiate

a PIC change. We reaffirm our finding that complete detariffing when a

customer contacts the interexchange carrier or its marketing agent

directly to begin interexchange service or to initiate a PIC change is

in the public interest.

43. Moreover, we find that permitting nondominant interexchange

carriers to file tariffs effective for the initial 45 days of service

or until there is a written contract between the carrier and the

customer, whichever is earlier, in those limited instances where

prospective customers contact the LEC to select an interexchange

carrier or to initiate a PIC change, is not inconsistent with a primary

reason we adopted complete detariffing in the Second Report and Order,

i.e., eliminating the ability of carriers to invoke the ``filed-rate''

doctrine. We believe that the ability of carriers to invoke the

``filed-rate'' doctrine does not create significant problems when a

customer contacts the LEC to select an interexchange carrier or to

initiate a PIC change because the proposed tariff is in place only for

a limited time, i.e., the initial 45 days of service or until a written

contract between the carrier and the customer is consummated, whichever

is earlier. The limited term of the tariff would prevent carriers from

unilaterally changing the terms of negotiated agreements or

unilaterally limiting their liability for damages after the initial

period of service. Upon expiration of the tariff, the legal

relationship between carriers and customers will much more closely

resemble the legal relationship between service providers and customers

in an unregulated environment, a goal of detariffing delineated in the

Second Report and Order.

44. We recognize that permitting nondominant interexchange carriers

to file tariffs for service to new customers that contact the LEC

raises the risk that carriers could use these tariffs to send price

signals for their mass market services. We believe, however, that we

cannot address the unique problems raised by the commenters about

establishing a contractual relationship with these new customers in a

detariffed environment without allowing nondominant interexchange

carriers to file tariffs for a short period needed to formalize the

contract. We note that should we become aware of evidence indicating

that nondominant interexchange carriers are using these tariffs to send

price signals for their mass market services, we can reexamine our

decision to adopt permissive detariffing for LEC-implemented new

customer services.

D. Tariff Filing Requirements for Bundled Domestic and International

Service Offerings

i. Background

45. In the NPRM in this rulemaking docket, the Commission sought

comment on whether it should forbear from requiring nondominant

interexchange carriers to file tariffs for the international portions

of service offerings that include both interstate, domestic,

interexchange services and international services. The Commission noted

that it was reserving for a separate proceeding the issue of whether it

should consider generally forbearing from requiring tariffs for

international services provided by nondominant carriers.

46. We determined in the Second Report and Order that there was

insufficient record evidence to find that each of the statutory

criteria necessary to forbear from requiring nondominant interexchange

carriers to file tariffs for the international portions of bundled

domestic and international service offerings had been satisfied. We

concluded that we should address detariffing of the international

portions of bundled domestic and international service offerings in a

separate proceeding in which we could examine the state of competition

in the international market. We therefore required nondominant

interexchange carriers with bundled domestic and international services

to bifurcate their bundled domestic and international service offerings

and file a tariff that includes only the international portions of

their service offerings.

47. We also adopted a nine-month transition period in the Second

Report and Order to allow nondominant interexchange carriers time to

adjust to detariffing. We determined that the Commission would not

accept new tariffs for interstate, domestic, interexchange services, or

revisions to existing tariffs, for long-term service arrangements

during the nine-month transition.

ii. Positions of the Parties

48. API and SDN Users request that the Commission detariff the

international portions of bundled domestic and international services

offered by nondominant interexchange carriers. Ad Hoc Users Committee

and the Television Networks support API's and SDN Users' petitions for

reconsideration. AT&T and CompTel argue that the international services

portion of bundled service offerings should be treated on the same

basis as the interstate, domestic, interexchange services portion,

without specifying whether both portions should be tariffed or

detariffed. SDN Users, AT&T, Ad Hoc Users Committee, and CompTel

contend that requiring tariffs only for the international portions of

bundled domestic and international service offerings confuses customers

and complicates negotiations. API further argues that the statutory

forbearance criteria are satisfied with respect to the international

portion of bundled international and domestic services, because the

policy considerations that

[[Page 59594]]

support the Commission's decision to detariff the interstate, domestic,

interexchange market are equally relevant to the international portion

of bundled international and domestic offerings. In particular, API

states that the public interest objectives of eliminating the possible

invocation of the ``filed-rate'' doctrine and establishing market

conditions that more closely resemble an unregulated environment are

also served by detariffing the international portions of bundled

international and domestic offerings. API further argues that there is

no evidence in the record that would support a need to retain tariffs

for the international portions of bundled offerings.

49. Sprint opposes the request to allow domestic nondominant

carriers to detariff the international portions of bundled domestic and

international services offered by nondominant interexchange carriers.

Sprint argues that requiring carriers to detariff such international

services will confuse customers, because some carriers are dominant in

certain international markets and nondominant in others. Sprint

therefore urges the Commission to maintain tariff filing requirements

for all international services until the Commission is able to examine

the unique issues involved in applying its detariffing policies to

international services.

50. AT&T and CompTel further request that the Commission allow

permissive detariffing for mixed international and domestic services

offered by nondominant interexchange carriers during the nine-month

transition to allow carriers and customers to adjust to the new policy.

Ad Hoc Users Committee and API oppose this request on the ground that

such a policy would allow carriers to alter or abrogate long-term

arrangements by invoking the ``filed-rate'' doctrine. API disputes

AT&T's contention that customers are ``significantly confused'' by the

requirement that nondominant interexchange carriers bifurcate mixed

international and domestic service offerings and states that customers

have worked through issues with carriers that are far more daunting and

potentially confusing.

iii. Discussion

51. In order to determine whether the statutory criteria are

satisfied for us to forbear from requiring tariffs for the

international portion of bundled domestic and international service

offerings, we need to examine the state of competition for these

international services. We find nothing in the record on

reconsideration that enables us to make findings on the state of

competition for such services. API claims only that detariffing the

international portion of bundled domestic and international service

offerings would lead to the same public interest benefits as

detariffing interstate, domestic, interexchange services. Other parties

argue that requiring tariffs only for the international portions of

bundled domestic and international service offerings confuses customers

and complicates negotiations. The parties, however, have not provided

new evidence in the record that would enable us to determine that the

statutory forbearance criteria are met for detariffing the

international portion of bundled domestic and international service

offerings. The state of competition in the international market may not

be the same as in the domestic market, and, we do not have sufficient

evidence in this proceeding to make such a determination. We therefore

affirm our conclusion that the determination of whether to detariff the

international portions of bundled domestic and international service

offerings should be addressed as part of a separate proceeding in which

the Commission can further examine the state of competition in the

international market.

52. We need not address at this time AT&T's request that we adopt

permissive detariffing for bundled international and domestic service

offerings during the nine-month transition. The United States Court of

Appeals for the D.C. Circuit has stayed the Second Report and Order,

pending judicial review. Nondominant interexchange carriers, therefore,

are currently required to file tariffs for all of their interstate,

domestic, interexchange services, including those that are bundled with

international services. We delegate authority to the Common Carrier

Bureau to determine the appropriate transition period and address other

transition issues when the detariffing rules become effective.

E. Local Access Portion of Interstate, Domestic, Interexchange Services

i. Positions of the Parties

53. Ad Hoc Users Committee requests that the Commission clarify

that the Second Report and Order detariffed the exchange access

components of the interstate, domestic, interexchange services offered

by nondominant interexchange carriers, and not only the interoffice

component of such services. It argues that a requirement that

nondominant interexchange carriers separate their integrated end-to-end

service offerings into interexchange and exchange access services would

radically depart from the Commission's historical approach to

regulation of the interstate, domestic, interexchange marketplace and

would create a ``practical nightmare'' for nondominant interexchange

carriers to implement. API and Sprint support Ad Hoc Users Committee's

request for clarification.

54. Bell Atlantic contends that Ad Hoc's request, which deals with

the regulation of exchange access services and not the regulation of

interexchange services, is beyond the scope of this proceeding.

Moreover, Bell Atlantic argues that the Commission should not detariff

the exchange access services of nondominant providers without

detariffing such services for all providers.

ii. Discussion

55. We agree with Ad Hoc Users Committee that we detariffed

integrated end-to-end interstate, domestic, interexchange services in

the Second Report and Order, including both the interexchange portion

and the interstate exchange access components of such services when

offered on an integrated basis. We note that our conclusion that the

forbearance criteria are satisfied applies only to interstate exchange

access that is offered to customers as part of an integrated, end-to-

end interstate, domestic, interexchange service that the customer is

purchasing. We are not detariffing in this proceeding the sale of

interstate exchange access that is offered on a stand-alone basis. The

Commission, in another proceeding, recently granted, in part, two

petitions seeking forbearance from tariff filing requirements for

competitive access providers (CAPs) and non-dominant providers of

interestate exchange access services. In that proceeding, the

Commission adopted permissive detariffing for non-ILEC providers of

interstate exchange access services, and proposed the adoption of

complete detariffing for all non-ILEC providers of these services. See

In the Matters of Hyperion Telecommunications, Inc. Petition Requesting

Forbearance, Time Warner Communications Petition for Forbearance,

Complete Detariffing for Competitive Access Providers and Competitive

Local Exchange Carriers, Memorandum Opinion and Order and Notice of

Proposed Rulemaking, CC Docket No. 97-146, 62 FR 38244 (July 17, 1997);

see also Access Charge Reform; Price Cap Performance Review for Local

Exchange Carriers; Transport Rate Structure and Pricing; End User

[[Page 59595]]

Common Line Charges, CC Docket Nos. 96-262, 94-1, 91-213, 95-72, First

Report and Order, 62 FR 31868 (June 11, 1997) (Access Charge Reform

Order).

56. Nondominant interexchange carriers purchase or self provide

interstate exchange access as an input to providing integrated, end-to-

end interstate, domestic, interexchange service. Thus, access is merely

a component of a service offered to end users. We have found that

market forces generally will ensure that nondominant interexchange

carriers do not charge rates, or impose terms and conditions, for their

interstate, domestic, interexchange services that violate sections 201

and 202 of the Communications Act. Because market forces will generally

constrain nondominant interexchange carriers' charges for interstate,

domestic, interexchange services, there is no need to require the

nondominant interexchange carrier to break out and tariff a separate

charge for interstate exchange access.

F. Effect of Detariffing on AT&T/Alascom's Common Carrier Services

i. Background

57. AT&T/Alascom offers certain ``common carrier'' services that

the Commission has defined as ``all interstate interexchange transport

and switching services that are necessary for other interexchange

carriers to provide services in Alaska up to the point of

interconnection with each Alaska local exchange carrier.'' In the AT&T

Reclassification proceeding, AT&T made certain commitments, including,

inter alia, that it ``will comply with all of the obligations and

conditions contained in the Commission orders associated with AT&T's

purchase of Alascom, Inc., including the Alascom Authorization Order,

the Market Structure Order (59 FR 27496 (May 27, 1994)), and the Final

Recommended Decision (58 FR 63345 (December 1, 1993)).'' In the Second

Report and Order, we stated that our decision to forbear from requiring

nondominant interexchange carriers to file tariffs for interstate,

domestic, interexchange services would not affect AT&T's commitment to

comply with the Commission's orders associated with AT&T's purchase of

Alascom, and that AT&T would continue to be bound by this commitment.

ii. Discussion

58. We have been asked to clarify in this proceeding that the

Second Report and Order did not detariff AT&T/Alascom's common carrier

services. A similar issue has been raised in the AT&T Reclassification

Order. We believe this issue is better addressed in that proceeding in

light of AT&T's commitment in that proceeding to comply with the

Commission's orders associated with AT&T's purchase of Alascom. We

therefore incorporate the record filed in this proceeding on the issue

of detariffing AT&T/Alascom's common carriers services to the AT&T

Reclassification proceeding.

III. Information Disclosure Issues

A. Background

59. The Commission tentatively concluded in the NPRM that it would

require nondominant providers of interstate, domestic, interexchange

telecommunications services to file certifications that they are in

compliance with the geographic rate averaging and rate integration

requirements of section 254(g) of the Communications Act to ensure

compliance with those requirements. The Commission also tentatively

concluded in the NPRM that, if it were to adopt a complete detariffing

policy, nondominant interexchange carriers would be required to

maintain at their premises price and service information regarding all

of their interstate, domestic, interexchange service offerings, which

they could submit to the Commission upon request.

60. In the Second Report and Order, we adopted the tentative

conclusion in the NPRM and required nondominant interexchange carriers

to file an annual certification stating that they are in compliance

with the statutory rate averaging and rate integration requirements. We

further adopted the tentative conclusion in the NPRM and ordered

nondominant interexchange carriers to maintain supporting documentation

on the rates, terms, and conditions of their interstate, domestic,

interexchange services that they could submit to the Commission within

ten business days upon request. In addition, in the Second Report and

Order, we required nondominant interexchange carriers to make

information concerning current rates, terms, and conditions for all of

their interstate, domestic, interexchange services available to the

public in at least one location during regular business hours, although

we expressly stated that we did not intend to require nondominant

interexchange carriers to disclose more information than is currently

provided in tariffs.

B. Positions of the Parties

61. Several parties filed petitions asking the Commission to

reconsider or clarify various aspects of the public disclosure

requirement in the Second Report and Order. Ad Hoc Users Committee

requests that the Commission eliminate the public disclosure

requirement with respect to information on individually-negotiated

service arrangements. It argues that a public disclosure requirement

makes it easier for interexchange carriers to ascertain their

competitors' price and service information, and, therefore, the

requirement is inconsistent with the Commission's interest in deterring

price coordination. Ad Hoc Users Committee further argues that, because

the Commission decided to forbear from applying section 254(g) to

contract tariffs and similar customer-specific agreements, disclosure

of the rates and terms of individually-negotiated service arrangements

cannot be justified on the basis of enforcing section 254(g). Rather

than requiring public disclosure, Ad Hoc Users Committee contends that

the Commission could meet the objectives supporting a public disclosure

requirement in the Second Report and Order through: (1) The workings of

the competitive market; (2) the Commission's complaint process; and (3)

disclosure of rate and term information to Commission and state

regulatory staff, to Congress in connection with agency oversight, and

to complainants in discovery proceedings before the Commission or

courts.

62. API, Bell Atlantic, and Sprint support Ad Hoc Users Committee's

petition, arguing that a public disclosure requirement for customer-

specific arrangements will inhibit competition and that businesses in

other competitive markets are not required to disclose the terms of

customer-specific deals. Bell Atlantic further argues that, if the

Commission eliminates the public disclosure requirement, it should also

not require dominant interexchange carriers to disclose their prices to

the public through tariffs. Bell Atlantic maintains that requiring

dominant interexchange carriers to file tariffs or otherwise disclose

their prices would be anticompetitive, because nondominant

interexchange carriers would set their prices based on the dominant

carrier's disclosed prices.

63. TRA argues that the public disclosure requirement is necessary

to address, at least in part, its concerns that carriers will

discriminate against resellers in the absence of tariffs. Several other

parties request that the Commission strengthen the information

disclosure requirements in the Second Report and Order, which they deem

insufficient. Specifically, Rural

[[Page 59596]]

Telephone Coalition (RTC) asks the Commission to require carriers to

make information more widely available to consumers to ensure that they

have easy access to the information necessary to determine whether

nondominant interexchange carriers are complying with the rate

integration and rate averaging requirements of section 254(g). RTC

argues that the Second Report and Order's requirement that nondominant

interexchange carriers make information available in only one location

will prevent customers, especially those in rural areas, from obtaining

the information. Instead, RTC urges the Commission to require carriers

to make the information available on-line and at one public place in

each state in which the carrier operates. RTC contends that these

requirements would not be unduly burdensome on carriers. Alaska and

Hawaii support RTC's petition.

64. Telecommunications Management Information Systems Coalition

(TMISC) requests that we clarify the disclosure rules by specifying the

type and amount of information that must be made publicly available, as

well as the time limit within which nondominant interexchange carriers

must make the information publicly available. TMISC argues that,

without more specific information requirements, the Commission and

other interested parties may not be able effectively to enforce the

geographic rate averaging and rate integration requirements of section

254(g). TMISC further points out that a significant number of consumer

organizations, public interest organizations, and state governments

filed comments in this proceeding, arguing that effective public

disclosure requirements are not only necessary to enforce section

254(g), but also to enable consumers to make fully informed service

decisions. Hawaii argues that the Commission should require nondominant

interexchange carriers to disclose the same amount of information that

is currently provided in tariffs and also agrees with TMISC that the

current information disclosure provisions are inadequate.

65. AT&T responds to RTC and TMISC by arguing that complete

detariffing will impose substantial burdens on nondominant

interexchange carriers, particularly the costs associated with

establishing and maintaining a legal relationship with their customers.

AT&T contends that there is no reason to add to these costs by imposing

more burdensome information disclosure requirements.

C. Discussion

66. The basis for our decision in the Second Report and Order to

adopt a public disclosure requirement for all interstate, domestic,

interexchange services offered by nondominant interexchange carriers

was to provide the public with the information necessary to determine

whether a carrier was adhering to the rate integration and rate

averaging requirements of section 254(g). We recognized that, in

competitive markets, carriers would not necessarily maintain

geographically averaged and integrated rates for interstate, domestic,

interexchange services as required by section 254(g). We also

determined that a public disclosure requirement would promote the

public interest by making it easier for consumers, including resellers,

to compare service offerings and to bring complaints. We noted,

however, that nondominant interexchange carriers will generally provide

such information to consumers to improve or maintain their competitive

position in the market.

67. We sought to tailor this public disclosure requirement to meet

our objective of ensuring that nondominant interexchange carriers

comply with section 254(g) in their provision of interstate, domestic,

interexchange services, while minimizing any potential adverse effects

on our general policy of allowing market forces, rather than

regulation, to discipline the practices of these carriers. Although a

public disclosure requirement does not affect certain benefits of

complete detariffing, such as elimination of possible invocation of the

``filed-rate'' doctrine, it may detract from our objective of reducing

regulatory burdens and deterring tacit price coordination. Thus, we

minimized the burdens on nondominant interexchange carriers of

complying with this requirement by, for example, only requiring

nondominant interexchange carriers to make information available in one

location and not specifying a format for the disclosure.

68. Upon further examination, we agree with Ad Hoc Users Committee

that we can more narrowly tailor our information disclosure

requirement. We therefore grant Ad Hoc Users Committee's petition and

eliminate the public disclosure requirement for individually-negotiated

service arrangements. Individually-negotiated service arrangements, as

opposed to mass market services, are customer-specific arrangements,

such as contract tariffs, AT&T's Tariff 12 options, MCI's special

customer arrangements, and Sprint's custom network service

arrangements. We find that the disclosure of the rates, terms, and

conditions of individually-negotiated service arrangements cannot be

justified on the basis of the need to enforce the rate averaging

requirements of section 254(g). This is because the Commission decided

to ``forbear from applying section 254(g) to such arrangements,

consistent with the intent of Congress, to the extent necessary.'' The

Commission continues to require carriers to ensure that individually-

negotiated service offerings are available to all similarly-situated

customers, regardless of their geographic location. The Commission did

not forbear from applying the rate integration requirements to

individually-negotiated service arrangements. There are several means

to ensure that nondominant interexchange carriers make individually-

negotiated service arrangements available to all similarly-situated

customers without a public disclosure requirement. Market forces

generally will ensure that nondominant interexchange carriers that lack

market power do not charge rates, or impose terms and conditions, for

interstate, domestic, interexchange services that are unjustly or

unreasonably discriminatory. Specifically, if a nondominant

interexchange carrier could profit from selling an interstate,

domestic, interexchange service at one price to one customer and

attempted to sell the same service at an unjustly or unreasonably

discriminatory price to a similarly-situated customer, that customer

would purchase services from other facilities-based nondominant

interexchange carriers that could profit from selling the same services

to that customer at the lower market price. Moreover, we can remedy any

carrier conduct that violates the requirement that carriers make

individually-negotiated service arrangements available to all

similarly-situated customers through the section 208 complaint process.

A customer can file a section 208 complaint and allege that a carrier

has unreasonably discriminated against it in the provision of either

contract or mass market services. The customer complainant, as always,

under section 208, bears the initial burden of establishing that: (1)

The complainant sought substantially the same service arrangement under

the same terms and conditions that were made available to another

customer; and (2) the carrier refused to make that service available to

the complainant on terms similar to those of another customer's service

arrangement. If a complainant establishes this, the burden

[[Page 59597]]

shifts to the carrier which must demonstrate why the discrimination is

reasonable. In addition, we will be able to investigate carriers'

compliance with our rules through the requirement adopted in the Second

Report and Order that interexchange carriers maintain price and service

information on all of their interstate, domestic, interexchange

services and make this information available to the Commission upon

request. Thus, eliminating public disclosure for individually-

negotiated service arrangements will not hinder enforcement of the

requirement that carriers make such services available to all

similarly-situated customers, and will also decrease the regulatory

burden on nondominant interexchange carriers and deter tacit price

coordination.

69. Although Ad Hoc Users Committee requests that the Commission

eliminate the public disclosure requirement only for individually-

negotiated service arrangements, the arguments it raises about the

effect of public disclosure on tacit price coordination and the need to

tailor more narrowly the information requirements apply to mass market

services as well. Although no party specifically requested that the

Commission eliminate the public disclosure requirement for mass market

services, the Commission, in light of pending petitions for

reconsideration, retains jurisdiction to reconsider its rules on its

own motion. See Central Florida Enters., Inc. v. FCC, 598 F.2d 37, 48

n.51 (D.C. Cir. 1978), cert. dismissed, 441 U.S. 957 (1979). We

therefore conclude on reconsideration that we should also eliminate the

public disclosure requirement for mass market interstate, domestic,

interexchange services offered by nondominant interexchange carriers.

Mass market interstate, domestic, interexchange services are those

services that are not individually-negotiated service arrangements,

and, therefore, we are eliminating the public disclosure requirement

for all interstate, domestic, interexchange services offered by

nondominant interexchange carriers. Bell Atlantic's argument that we

should also not require dominant interexchange carriers to disclose

their rates, terms, and conditions is now largely moot in light of our

determination that LECs providing interstate, domestic, interexchange

services will generally be classified as nondominant in their provision

of such services, pursuant to Regulatory Treatment of LEC Provision of

Interexchange Services Originating in the LEC's Local Exchange Area;

and Policy and Rules Concerning the Interstate, Interexchange

Marketplace, CC Docket Nos. 96-149, 96-61, Second Report and Order and

Third Report and Order, (62 FR 35974 (July 3, 1997)). Because this

proceeding concerns detariffing only nondominant interexchange

carriers' interstate, domestic, interexchange services and the record

on dominant interexchange carrier regulation is extremely limited, we

will address the issue of the regulatory treatment of dominant

interexchange carriers if and when we determine that an interexchange

carrier should be classified as dominant in its provision of

interstate, domestic, interexchange services. We emphasize, however,

that this decision does not suggest any diminution in our commitment to

enforce the geographic rate averaging and rate integration

requirements. To that end, we require nondominant interexchange

carriers to file annually certifications stating that they are in

compliance with their obligations under section 254(g) and to maintain

price and service information on all of their interstate, domestic,

interexchange services that they must make available to the Commission

and to state regulatory commissions upon request. In addition, we will

further our goal of deterring tacit price coordination, because a

nondominant interexchange carrier's rate, terms, and conditions for

interstate, domestic, interexchange services will not be collected and

available in one location, although we recognize that nondominant

interexchange carriers may still be able to obtain information about

their competitors' rates and service offerings in the absence of a

public disclosure requirement.

70. We believe that our decision to eliminate the public disclosure

requirement for mass market services will not deprive residential and

other low volume customers of information about nondominant

interexchange carriers' interstate, domestic, interexchange service

offerings that they need to ensure that they have been correctly billed

and to bring to the Commission's attention possible violations of the

Communications Act, particularly section 254(g). To the contrary, we

find nothing in the record of this reconsideration proceeding that

would cause us to modify our conclusion in the Second Report and Order

that consumers will have access to information concerning the rates,

terms, and conditions for interstate, domestic, interexchange services

offered by nondominant interexchange carriers to consumers through,

inter alia, the billing process, information provided by nondominant

interexchange carriers to establish a contractual relationship with

their customers, notifications required by service contracts or state

consumer protection laws, and advertisements and marketing materials.

We note that the majority of consumer complaints about the lawfulness

of carriers' rates, terms, or conditions for interstate, domestic,

interexchange services are based on information obtained through the

billing process. Moreover, as set forth in the Second Report and Order,

we find that it is highly unlikely that interexchange carriers that

lack market power could successfully charge rates, or impose terms and

conditions that violate sections 201 and 202 of the Communications Act.

Consumers will also have the information they need to select the

service best suited to their calling patterns through the mechanisms

discussed above and the workings of the competitive market. Because

consumers will have access to rate and service information about

nondominant interexchange carriers' interstate, domestic, interexchange

services in a detariffed environment without a public disclosure

requirement, we conclude that the public disclosure requirement in the

Second Report and Order, let alone an expanded public disclosure

requirement as RTC and TMISC request, is unnecessary to protect

consumers.

71. We recognize that elimination of the public disclosure

requirement will make the collection of information more difficult for

businesses, including consumer groups, that analyze and compare the

rates and services of interexchange carriers and offer their analysis

to the public for a fee. These businesses, however, will have access to

the information that nondominant interexchange carriers provide to the

public in order to market their services and improve their competitive

position in the market. On balance, we conclude that the benefits of

eliminating the public disclosure requirement for consumers, e.g.,

decreased risk of tacit price coordination and increased competition in

the interstate, domestic, interexchange market, outweigh any potential

adverse effects on these businesses. Moreover, as stated above,

consumers will not be deprived of the information they need and will

receive additional information directly from nondominant interexchange

carriers that will provide rate and service information to consumers in

order to ensure the establishment of a contractual relationship with

them in a detariffed environment. Although we find on the basis of the

record in this

[[Page 59598]]

proceeding that a public disclosure requirement is not necessary to

ensure that interexchange carriers comply with their obligation under

section 254(g), we are prepared to revisit this issue in the event that

evidence shows that the safeguards we have implemented are inadequate.

One tool at our disposal is to conduct audits of interexchange carrier

compliance with the rate averaging obligations of section 254(g).

72. We also recognize the concerns of resellers, as expressed by

TRA, that, without rate and service information through either tariffs

or a public disclosure requirement, resellers will not have adequate

information to prevent nondominant interexchange carriers from

discriminating against resellers, which are not only customers, but

also competitors of the carriers. We conclude, however, that the

resellers' concern that the resale market will not survive in a

detariffed environment without a public disclosure requirement is

overstated. As noted in the Second Report and Order, our decision to

forbear from requiring nondominant interexchange carriers to file

tariffs for interstate, domestic, interexchange services does not

affect such carriers' obligations under sections 201 and 202. Thus, as

discussed below, our long-standing policies barring prohibitions on

resale and restrictive eligibility requirements will continue in full

force to the same extent as prior to detariffing. Moreover, we agree

with Ad Hoc Users Committee that it is unreasonable to assume that in a

substantially competitive market, facilities-based carriers will not

provide resellers with service options at reasonable rates. As TRA

noted, in another proceeding, AT&T has just begun to ``reform its

conduct with respect to resellers'' when its market share declined to

fifty percent. If a carrier does not provide resellers with service

options at reasonable rates, resellers are not only likely to find

another facilities-based carrier that will do so, but resellers also

have the right to file a section 208 complaint with the Commission. We

therefore find that the increased benefits to interexchange carriers

and consumers of complete detariffing without a public disclosure

requirement, e.g., decreased risk of tacit price coordination and

increased competition in the interstate, domestic, interexchange

market, and a reduced regulatory burden justify any negative effect

upon resellers of eliminating the public disclosure requirement.

73. Finally, we make clear that the annual certification

requirement and the requirement that nondominant interexchange carriers

maintain price and service information on all of their interstate,

domestic, interexchange services that they must submit to the

Commission upon request, discussed herein, are the same as those

contained in the Second Report and Order.

IV. Miscellaneous Issues

A. Nondiscriminatory Access to Interstate, Domestic, Interexchange

Services

i. Positions of the Parties

74. TRA asks the Commission to clarify that nondominant

interexchange carriers are required to make available, upon request,

all interstate, domestic, interexchange services, including contract-

based services, on a nondiscriminatory basis, to all qualified

entities, including resellers. TRA argues that the Commission has

required nondominant interexchange carriers to make such service

offerings generally available, and has declared unlawful restrictive

eligibility requirements that unreasonably discriminate against

similarly-situated customers. TRA notes that the Commission addressed

its concerns in the Second Report and Order, in part, by requiring

nondominant interexchange carriers to make publicly available price and

service information on all of their interstate, domestic, interexchange

services. TRA contends, however, that the Second Report and Order does

not expressly declare that the ``general availability'' requirement

will continue to apply.

ii. Discussion

75. The Commission has long-standing policies of prohibiting

restrictions on resale and barring restrictive eligibility requirements

for interstate, domestic, interexchange services that have the effect

of unreasonably discriminating against similarly-situated customers.

The Commission has further concluded that individually-negotiated

service arrangements do not violate section 202(a)'s prohibition

against ``unjust or unreasonable discrimination,'' if the terms of the

service arrangement are made available to similarly-situated customers.

In the Second Report and Order, we made clear that our decision to

forbear from requiring nondominant interexchange carriers to file

tariffs for interstate, domestic, interexchange services does not

affect carriers' obligations under sections 201 and 202. Thus,

nondominant interexchange carriers are prohibited from imposing

restrictions on resale and restrictive eligibility requirements that

unreasonably discriminate against similarly-situated customers to the

same extent that they were prohibited from doing so prior to adoption

of the Second Report and Order. TRA also stated in its petition that

the Commission partially addressed its concerns by requiring

nondominant interexchange carriers to disclose publicly certain

information regarding their interstate, domestic, interexchange

services. As stated above, we have eliminated the public disclosure

requirement in this Order on Reconsideration. For a discussion of this

issue and TRA's concerns, see supra paras. 59-73.

B. Law Governing the Lawfulness of Rates, Terms, and Conditions for

Interstate Services

i. Positions of the Parties

76. AT&T requests that the Commission clarify that federal, and not

state, law governs the determination as to whether a nondominant

interexchange carrier's rates, terms, and conditions for interstate,

domestic, interexchange services are lawful. AT&T contends that parties

may interpret the statement in the Second Report and Order that, with

complete detariffing, ``consumers will also be able to pursue remedies

under state consumer protection and contract laws'' as allowing

challenges under state law to the lawfulness of rates, terms, and

conditions for these interstate services. AT&T argues that any

interpretation that authorizes such challenges under state law is

foreclosed by numerous judicial decisions recognizing that sections 201

and 202 of the Communications Act preempt state law with respect to the

reasonableness of rates, terms, and conditions for interstate

telecommunications services. Sprint, and WorldCom support AT&T's

petition, arguing that the Communications Act, and not state law,

governs rates, terms, and conditions for interstate telecommunications

services. U S WEST argues that the Commission should adopt permissive

detariffing until it conducts a new proceeding to determine the law

that governs the relationship between carriers and customers in a

detariffed environment. API opposes U S WEST's request that the

Commission conduct a new proceeding to determine the applicability of

state and federal law in a detariffed environment.

ii. Discussion

77. In the Second Report and Order, we stated that our decision to

forbear from requiring nondominant interexchange carriers to file

tariffs for interstate, domestic, interexchange

[[Page 59599]]

services will not affect our enforcement of carriers' obligations under

sections 201 and 202 to charge rates, and impose practices,

classifications, and regulations that are just and reasonable, and not

unjustly or unreasonably discriminatory. We therefore agree with AT&T,

Sprint, and WorldCom that the Communications Act continues to govern

determinations as to whether rates, terms, and conditions for

interstate, domestic, interexchange services are just and reasonable,

and are not unjustly or unreasonably discriminatory. While the parties

only sought clarification that the Communications Act governs the

determination as to the lawfulness of rates, terms, and conditions, we

note that the Communications Act does not govern other issues, such as

contract formation and breach of contract, that arise in a detariffed

environment. As stated in the Second Report and Order, consumers may

have remedies under state consumer protection and contract laws as to

issues regarding the legal relationship between the carrier and

customer in a detariffed regime.

78. We reject U S WEST's argument that we should adopt permissive

detariffing until there is greater certainty about the law that would

govern the relationship between carriers and customers in the absence

of tariffs. We adopted a nine-month transition in the Second Report and

Order, during which nondominant interexchange carriers are permitted to

file new tariffs and revise existing tariffs for mass market services.

This transition provides for a period of permissive detariffing to

allow nondominant interexchange carriers time to adjust to detariffing.

We believe that a lengthier period of time is unnecessary to address U

S WEST's concern.

C. Private Contract Clauses Preserving the ``Filed-Rate'' Doctrine

i. Positions of the Parties

79. Ad Hoc requests that the Commission clarify that the intent of

the Second Report and Order is not to permit carriers to preserve the

``unfair advantages'' they would enjoy under ``filed-rate'' doctrine,

but to eliminate the ability of nondominant interexchange carriers to

invoke the ``filed-rate'' doctrine. Ad Hoc contends that some

interexchange carriers are attempting to preserve their right to make

unilateral changes to contracts by including a contract clause pursuant

to which the carrier is permitted to alter the terms of the contract at

any time, and for any reason.

ii. Discussion

80. In the Second Report and Order, we stated that not permitting

nondominant interexchange carriers to file tariffs for the provision of

interstate, domestic, interexchange services will achieve the public

interest objective of eliminating the ability of nondominant

interexchange carriers to invoke the ``filed-rate'' doctrine. We also

observed that eliminating the ability of carriers to invoke the

``filed-rate'' doctrine benefits consumers by creating a legal

relationship that more closely resembles the legal relationship between

service providers and customers in an unregulated environment, and is

in the public interest. While we do not support attempts by carriers to

preserve their ability to alter unilaterally the terms of a contract,

pursuant to a contract clause, we will rely on private negotiations

between the parties in the first instance to resolve such issues. The

issue of whether a particular contract clause is ``just and

reasonable,'' as required by section 201(b) of the Communications Act,

is not before us in this proceeding, however, such an issue would be an

appropriate matter for a section 208 complaint.

D. Relationship of Detariffing to Access Charge Reform and Universal

Service

i. Positions of the Parties

81. RTC urges the Commission in this proceeding to ensure adequate

universal support for access charges in high-cost areas to minimize the

incentive of interexchange carriers to deaverage their rates. RTC

contends that, notwithstanding the statutory requirement that

interexchange carriers charge ``reasonably comparable'' rural and urban

interexchange rates, interexchange carriers have an incentive to

deaverage their rates, especially as they face increased competition

from BOCs and others. RTC further argues that eliminating tariffs and

curtailing public information availability will decrease interexchange

carriers' incentive to average interexchange rates. Although RTC

recognizes that the Commission is considering universal service support

and access charge reform in other dockets, it nevertheless contends

that there is an overlap between this proceeding and those other

dockets. Thus, RTC urges the Commission in this proceeding to reduce

the incentive to deaverage rates by ensuring adequate support

mechanisms for high-cost areas.

82. AT&T counters that the Second Report and Order does not compel

a particular result in the Commission's universal service and access

charge reform proceedings. AT&T further argues that any relationship

between detariffing and access charge reform or universal service

should be considered in those particular dockets.

ii. Discussion

83. We have recently addressed universal service support and access

charge reform in separate proceedings. We agree with AT&T that these

issues are beyond the scope of this proceeding and better addressed in

those particular proceedings in which numerous parties commented

specifically on universal service and access charge reform issues.

Therefore, we decline to address these issues in this proceeding.

E. Fees for the Withdrawal of Tariffs

i. Positions of the Parties

84. TRA requests that the Commission refrain from collecting filing

fees from nondominant interexchange carriers that are required to

withdraw tariffs pursuant to the Second Report and Order. TRA argues

that Sec. 1.1113(a)(4) of the Commission's rules supports its argument

that it is inequitable to retain filing fees when carriers are

compelled to withdraw tariffs as a result of Commission action.

ii. Discussion

85. Pursuant to Sec. 1.1105 of the Commission's rules, tariff

filings must be accompanied by a filing fee, which is currently six

hundred dollars per tariff filing. After we adopted the Second Report

and Order, the Common Carrier Bureau received inquiries concerning

whether nondominant interexchange carriers must pay the tariff filing

fee to withdraw or revise tariffs pursuant to the Second Report and

Order, and whether nondominant interexchange carriers that pay such

fees would be entitled to a refund or return of the fee. On December

19, 1996, the Common Carrier Bureau issued the Public Notice Concerning

Implementation, in which it responded to these inquiries and addressed

the precise issue TRA raises here. The Common Carrier Bureau,

consistent with Commission precedent and practice, concluded in the

Public Notice Concerning Implementation that nondominant interexchange

carriers would need to pay tariff filing fees to withdraw or revise

existing tariffs pursuant to the Second Report and Order, and that such

carriers would not be entitled to a return or refund of the fee. We now

affirm this conclusion.

86. The purpose of the fee program is to assess and collect fees

for regulatory services provided to the public, and the

[[Page 59600]]

fees charged are based primarily on the costs to the Commission of

providing those services. In the Fee Program Order (52 FR 5285

(February 20, 1987)), the Commission concluded that Sec. 1.1113(a)(4)

was ``intended to apply in those rare instances where the Commission

creates a new regulation or policy, or the Congress and the President

approve a new law or treaty, that would make the grant of a pending

application a legal nullity.'' The Commission specifically concluded

that Congress, when it established the regulatory fee program, did not

envision an exemption from the payment of fees for additional tariff

filings required by changes to the Commission's rules. Based on its

analysis in the Fee Program Order, the Commission required Commercial

Mobile Radio Service providers to pay the tariff filing fee for

cancelling tariffs for domestic interstate services pursuant to a

Commission order. We are not aware of any distinction that justifies a

different determination in this case. We therefore conclude that

nondominant interexchange carriers cancelling their tariffs for

interstate, domestic, interexchange services, or revising their tariffs

for bundled international and domestic service offerings to exclude

interstate, domestic, interexchange services, will be required to pay

the tariff filing fee and will not be eligible for a return or refund

of that fee.

87. To minimize the cost to nondominant interexchange carriers of

cancelling or revising tariffs pursuant to the Second Report and Order,

we reiterate that such carriers may cancel or revise several tariffs

under one cover letter with the payment of one filing fee, as stated in

the Public Notice Concerning Implementation. In addition, organizations

that file tariffs on behalf of several carriers may request a waiver of

applicable filing rules so that they may cancel the tariffs of several

carriers or file revisions to tariffs of several carriers under one

cover letter with the payment of one filing fee.

V. Procedural Issues

A. Final Regulatory Flexibility Analysis on Reconsideration

88. As required by section 603 of the Regulatory Flexibility Act

(RFA), 5 U.S.C. 603, an Initial Regulatory Flexibility Analysis (IRFA)

was incorporated in the NPRM. The Commission sought written public

comments on the proposals in the NPRM. In addition, pursuant to section

603, a Final Regulatory Flexibility Analysis (FRFA) was incorporated in

the Second Report and Order. That FRFA conformed to the RFA, as amended

by the Small Business Regulatory Enforcement Fairness Act of 1996

(SBREFA). The Supplemental Final Regulatory Flexibility Analysis in

this initial Order on Reconsideration (Supplemental FRFA) also conforms

to the RFA.

i. Need for and Objectives of This Order on Reconsideration and the

Rules Adopted Herein

89. With the exception of dial-around 1+ services and LEC-

implemented new customer services, our decisions and rules in this

Order on Reconsideration detariff completely the interstate, domestic,

interexchange services of nondominant interexchange carriers. In this

Order on Reconsideration, we grant in part and deny in part several of

the petitions filed for reconsideration and/or clarification of the

Second Report and Order, in order to further the same needs and

objectives as those discussed in the FRFA in the Second Report and

Order, including reducing the costs and burdens of providing

interstate, domestic, interexchange services, in the absence of

tariffs, on nondominant interexchange carriers and customers, some of

which are small entities. First, we adopt permissive detariffing for

dial-around 1+ services using a nondominant interexchange carrier's

access code. Second, we adopt permissive detariffing for the initial 45

days of LEC-implemented interstate, domestic interexchange service to

new residential or small business customers, or until a written

contract is consummated, whichever is earlier. Third, we eliminate the

public disclosure requirement for all interstate, domestic,

interexchange service offered by nondominant interexchange carriers. In

addition, we require nondominant interexchange carriers to file annual

certifications stating that they are in compliance with their

obligations under section 254(g) and to maintain price and service

information on all of their interstate, domestic, interexchange

services that they must make available to the Commission upon request.

Finally, with the exception of dial-around 1+ services and LEC-

implemented new customer services, we affirm our conclusion that

permissive detariffing of all other interstate, domestic, interexchange

service of nondominant interexchange carriers is not in the public

interest.

ii. Analysis of Significant Issues Raised in Response to the FRFA

90. Summary of the FRFA. In the FRFA, we recognized that many of

the decisions and rules adopted in the Second Report and Order may have

a significant effect on a substantial number of the small telephone

companies identified by the Small Business Administration (SBA). Based

upon data contained in the most recent census and a report by the

Commission's Common Carrier Bureau, we estimated that fewer than 3,497

telephone service firms are small entity telephone service firms that

could be affected. We also discussed the reporting requirements imposed

by the Second Report and Order.

91. In addition, we discussed the steps we had taken to minimize

the impact on small entities, consistent with our stated objectives. We

concluded that our actions in the Second Report and Order would benefit

small entities by facilitating the development of increased competition

in the interstate, domestic, interexchange market, thereby benefitting

all consumers, some of which are small business entities. We found that

the record in that proceeding indicated that detariffing on a

permissive basis would not definitively eliminate the possible

invocation of the ``filed-rate'' doctrine and would create the risk of

price signalling. We concluded that only with complete detariffing

could we definitively eliminate these possible anticompetitive

practices and protect consumers, some of which are small business

entities. We noted that we attempted to keep burdens on nondominant

interexchange carriers to a minimum. For example, we did not require

nondominant interexchange carriers to make rate and service information

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

location.

a. Impact of Complete Detariffing on Small, Nondominant Interexchange

Carriers

92. Comments. Although not in response to the FRFA, TRA claims that

the Second Report and Order does not adequately address the impact of

complete detariffing on small, nondominant interexchange carriers. TRA

requests that the Commission permit nondominant interexchange carriers

to tariff their domestic, interstate, interexchange service offerings.

93. Discussion. As discussed in the Order on Reconsideration, we

permit carriers to file tariffs for dial-around 1+ services and LEC-

implemented new customer services. We base this decision on the

credible evidence offered by parties on reconsideration concerning the

costs and burdens to carriers and customers of providing these services

in the absence of tariffs. Permitting carriers

[[Page 59601]]

to file tariffs in these limited circumstances will ease the burdens on

nondominant interexchange carriers and customers, some of which are

small entities. We discuss these issues above in the Order on

Reconsideration.

iii. Description and Estimates of the Number of Small Entities Affected

by This Order on Reconsideration

94. For the purposes of this Order on Reconsideration, the RFA

defines a ``small business'' to be the same as a ``small business

concern'' under the Small Business Act, 15 U.S.C. 632, unless the

Commission has developed one or more definitions that are appropriate

to its activities. Under the Small Business Act, a ``small business

concern'' is one that: (1) Is independently owned and operated; (2) is

not dominant in its field of operation; and (3) meets any additional

criteria established by the SBA. The SBA has defined a small business

for Standard Industrial Classification (SIC) categories 4812

(Radiotelephone Communications) and 4813 (Telephone Communications,

Except Radiotelephone) to be small entities with fewer than 1,500

employees. We first discuss generally the total number of small

telephone companies falling within both of those SIC categories. Then,

we discuss the number of small businesses within the two subcategories

that may be affected by our rules, and attempt to refine further those

estimates to correspond with the categories of telephone companies that

are commonly used under our rules.

95. Total Number of Telephone Companies Affected. Many of the

decisions and rules adopted herein may have a significant effect on a

substantial number of the small telephone companies identified by the

SBA. The United States Bureau of the Census (the Census Bureau) reports

that, at the end of 1992, there were 3,497 firms engaged in providing

telephone services, as defined therein, for at least one year. This

number contains a variety of different categories of carriers,

including local exchange carriers, interexchange carriers, competitive

access providers, cellular carriers, mobile service carriers, operator

service providers, pay telephone operators, PCS providers, covered SMR

providers, and resellers. It seems certain that some of those 3,497

telephone service firms may not qualify as small entities or small

incumbent LECs because they are not ``independently owned and

operated.'' For example, a PCS provider that is affiliated with an

interexchange carrier having more than 1,500 employees would not meet

the definition of a small business. It seems reasonable to conclude,

therefore, that fewer than 3,497 telephone service firms are small

entity telephone service firms that may be affected by this Order on

Reconsideration.

96. Wireline Carriers and Service Providers. The SBA has developed

a definition of small entities for telephone communications companies

other than radiotelephone (wireless) companies. The Census Bureau

reports that there were 2,321 such telephone companies in operation for

at least one year at the end of 1992. According to the SBA's

definition, a small business telephone company other than a

radiotelephone company is one employing fewer than 1,500 persons. All

but 26 of the 2,321 non-radiotelephone companies listed by the Census

Bureau were reported to have fewer than 1,000 employees. Thus, even if

all 26 of those companies had more than 1,500 employees, there would

still be 2,295 non-radiotelephone companies that might qualify as small

entities or small incumbent LECs. Although it seems certain that some

of these carriers are not independently owned and operated, we are

unable at this time to estimate with greater precision the number of

wireline carriers and service providers that would qualify as small

business concerns under the SBA's definition. Consequently, we estimate

that there are fewer than 2,295 small entity telephone communications

companies other than radiotelephone companies that may be affected by

the decisions and rules adopted in this Order on Reconsideration.

97. Interexchange Carriers. Neither the Commission nor the SBA has

developed a definition of small entities specifically applicable to

providers of interexchange services. The closest applicable definition

under the SBA rules is for telephone communications companies other

than radiotelephone (wireless) companies. The most reliable source of

information regarding the number of interexchange carriers nationwide

of which we are aware appears to be the data that the Commission

collects annually in connection with Telecommunications Relay Services

(TRS). According to our most recent data, 97 companies reported that

they were engaged in the provision of interexchange services. Although

it seems certain that some of these carriers are not independently

owned and operated, or have more than 1,500 employees, we are unable at

this time to estimate with greater precision the number of

interexchange carriers that would qualify as small business concerns

under the SBA's definition. Consequently, we estimate that there are

fewer than 97 small entity interexchange carriers that may be affected

by the decisions and rules adopted in this Order on Reconsideration.

98. Resellers. Neither the Commission nor the SBA has developed a

definition of small entities specifically applicable to resellers. The

closest applicable definition under the SBA's rules is for all

telephone communications companies. The most reliable source of

information regarding the number of resellers nationwide of which we

are aware appears to be the data that we collect annually in connection

with the TRS. According to our most recent data, 206 companies reported

that they were engaged in the resale of telephone services. Although it

seems certain that some of these carriers are not independently owned

and operated, or have more than 1,500 employees, we are unable at this

time to estimate with greater precision the number of resellers that

would qualify as small business concerns under the SBA's definition.

Consequently, we estimate that there are fewer than 206 small entity

resellers that may be affected by the decisions and rules adopted in

this Order on Reconsideration.

99. In addition, the rules adopted in this Order on Reconsideration

may affect companies that analyze information contained in tariffs. The

SBA has not developed a definition of small entities specifically

applicable to companies that analyze tariff information. The closest

applicable definition under the SBA rules is for Information Retrieval

Services (SIC Category 7375). The Census Bureau reports that, at the

end of 1992, there were approximately 618 such firms classified as

small entities. This number contains a variety of different types of

companies, only some of which analyze tariff information. We are unable

at this time to estimate with greater precision the number of such

companies and those that would qualify as small business concerns under

the SBA's definition. Consequently, we estimate that there are fewer

than 618 such small entity companies that may be affected by the

decisions and rules adopted in this Order on Reconsideration.

100. We assume that most, if not all, small businesses purchase

interstate, domestic, interexchange telecommunications services. As a

result, our rules in this Order on Reconsideration would affect

virtually all small business entities. The SBA guidelines to the SBREFA

state that about 99.7 percent of all firms are small and have fewer

than 500 employees and

[[Page 59602]]

less than $25 million in sales or assets. There are approximately 6.3

million establishments in the SBA's database. The SBA database does

include nonprofit establishments, but it does not include governmental

entities. SBREFA requires us to estimate the number of such entities

with populations of less than 50,000 that would be affected by our new

rules. There are 85,006 governmental entities in the nation. This

number includes such entities as states, counties, cities, utility

districts and school districts. There are no figures available on what

portion of this number has populations of fewer than 50,000. This

number, however, includes 38,978 counties, cities and towns, and of

those, 37,566, or 96 percent, have populations of fewer than 50,000.

The Census Bureau estimates that this ratio is approximately accurate

for all governmental entities. Thus, of the 85,006 governmental

entities, we estimate that 96 percent, or 81,600, are small entities

that would be affected by the decisions and rules adopted in this Order

on Reconsideration.

iv. Summary Analysis of the Projected Reporting, Recordkeeping, and

Other Compliance Requirements and Steps Taken to Minimize the

Significant Economic Impact of This Order on Reconsideration on Small

Entities, Including the Significant Alternatives Considered and

Rejected

101. Structure of the Analysis. In this section of the Supplemental

FRFA, we analyze the projected reporting, recordkeeping, and other

compliance requirements that may apply to small entities as a result of

this Order on Reconsideration. As a part of this discussion, we mention

some of the types of skills that will be needed to meet the new

requirements. We also describe the steps taken to minimize the economic

impact of our decisions on small entities, including the significant

alternatives considered and rejected.

102. We provide this summary analysis to provide context for our

analysis in this Supplemental FRFA. To the extent that any statement

contained in this Supplemental FRFA is perceived as creating ambiguity

with respect to our rules or statements made in the Second Report and

Order or preceding sections of this Order on Reconsideration, the rules

and statements set forth in the Second Report and Order and in the

preceding sections of this Order on Reconsideration shall be

controlling.

a. Permissive Detariffing for Dial-around 1+ Services

103. Summary of Projected Reporting, Recordkeeping and Other

Compliance Requirements. In the Second Report and Order, we concluded

that the record did not support a finding that complete detariffing

would cause nondominant interexchange carriers to cease offering casual

calling services. Rather, we found that nondominant interexchange

carriers have options other than tariffs by which they can ensure the

establishment of a contractual relationship with casual callers that

would legally obligate such callers to pay for the telecommunications

service they use and bind them to the carriers' terms and conditions.

In this Order on Reconsideration, we adopt permissive detariffing, on

an interim basis, for a subset of casual calling services,

specifically, the provision of dial-around 1+ services. This change in

the manner of conducting their business may require nondominant

interexchange carriers to use technical, operation, accounting,

billing, and legal skills.

104. Steps Taken to Minimize Significant Economic Impact on Small

Entities and Small Incumbent LECs, and Alternatives Considered. By

permitting nondominant interexchange carriers to file tariffs for dial-

around 1+ services, we enable these carriers and their customers, some

of which are small business entities, to avoid the substantial costs

and burdens associated with ensuring the establishment of an

enforceable contract in the absence of tariffs. The means of ensuring

the establishment of an enforceable contract with customers of other

casual calling services cannot be reasonably implemented currently for

dial-around 1+ services because the interexchange carriers do not have

the ability reasonably to distinguish dial-around 1+ calls from direct

dial 1+ calls placed from telephones presubscribed to an interexchange

carrier, as required to provide the dial-around 1+ caller with the

rates, terms, and conditions prior to completion of the call. The

inability of nondominant interexchange carriers to distinguish between

dial-around 1+ and direct dial 1+ calls would require these carriers to

implement the recorded announcement of the rates, terms, and conditions

or other means adopted by such carriers to ensure a contractual

relationship with dial-around 1+ callers for both dial-around 1+

callers and direct dial 1+ callers. The increased costs and the delay

in call set-up time that are attendant with ensuring the establishment

of a contractual relationship with dial-around 1+ callers would impose

an unreasonable burden on consumers using direct dial 1+ service from

their PIC. We find in this Order on Reconsideration that the technology

to distinguish dial-around 1+ calls from direct dial 1+ calls placed

from telephones presubscribed to an interexchange carrier is not

universally offered by all LECs, either because some LEC switches are

not capable of providing signalling using SS7, which is necessary to

provide this feature, or because a LEC has chosen not to offer this

feature.

105. In this Order on Reconsideration, we reject the option of

requiring LECs to deploy universally switches capable of providing SS7.

We reject this option, which might impose greater burdens on small

LECs, because a significant number of LEC switches do not presently

have SS7 capability and we do not have an adequate record in this

proceeding to evaluate the costs that such a decision would impose on

LECs.

b. Permissive Detariffing for LEC-Implemented New Customer Services

106. Summary of Projected Reporting, Recordkeeping and Other

Compliance Requirements. In the Second Report and Order, we did not

specifically address whether complete detariffing is in the public

interest with respect to the provision of interstate, domestic,

interexchange service to new customers that select and use an

interexchange service before receiving information about the rates,

terms, and conditions of that service. In this Order on

Reconsideration, we permit interexchange carriers to file tariffs to

cover the provision of service during the initial 45 days of

nondominant interexchange carriers' provision of interstate, domestic,

interexchange services to new residential and small business customers,

or until a written contract is consummated, whichever is earlier, in

the limited circumstance when a new customer contacts the LEC to select

an interexchange carrier or to initiate a PIC change. This change in

the manner of conducting their business may require nondominant

interexchange carriers to use technical, operation, accounting,

billing, and legal skills.

107. Steps Taken to Minimize Significant Economic Impact on Small

Entities and Alternatives Considered. Adoption of permissive

detariffing for the initial period of LEC-implemented interstate,

domestic, interexchange service to new residential and small business

customer enables the nondominant interexchange carriers and their

customers, some of which are

[[Page 59603]]

small business entities, to avoid the substantial costs and burdens

associated with ensuring the establishment of an enforceable contract

in the absence of tariffs.

108. In this Order on Reconsideration, we considered several means

by which LECs could convey to customers of nondominant interexchange

carriers the information necessary to ensure the establishment of an

enforceable contract during the initial period after the customer

contacts the LEC and before the nondominant interexchange carrier can

formalize the contractual relationship. We conclude, however, that none

of these means adequately ensures an enforceable contractual

relationship between the nondominant interexchange carrier and the

customer during this initial period of service. We reject the

alternative of requiring nondominant interexchange carriers to contract

with LECs to act as agents of the interexchange carrier to establish a

contractual relationship with the prospective customer by orally

providing the rates, terms, and conditions of the interexchange

service. We are reluctant to adopt a policy that may have the effect of

mandating such agency arrangements, especially since the LEC may have

an affiliate that offers competing interstate interexchange services.

In addition, requiring prospective customers to contact nondominant

interexchange carriers directly prior to the commencement of service in

order to establish the necessary contractual relationship would

preclude residential and small business customers from changing or

selecting a PIC by contacting the LECs as they do today. Finally,

nondominant interexchange carrier could decide to delay provisioning of

the service until a contractual relationship is formalized, but such a

delay may also discourage residential and small business customers from

making PIC changes, thereby deterring competition in the interexchange

market.

c. Information Disclosure Requirements

109. Summary of Projected Reporting, Recordkeeping and Other

Compliance Requirements. In the Second Report and Order, we required

nondominant interexchange carriers to make information on current

rates, terms, and conditions for all of their interstate, domestic,

interexchange services available to the public in at least one location

during regular business hours. We also required carriers to inform the

public that this information is available when responding to consumer

inquiries or complaints and to specify the manner in which the consumer

may obtain the information. We further required nondominant

interexchange carriers to maintain, for a period of two years and six

months, the information provided to the public, as well as documents

supporting the rates, terms, and conditions for all of their

interstate, domestic, interexchange offerings, that they can submit to

the Commission upon request. In addition, we required nondominant

interexchange carriers to file with the Commission, and update as

necessary, the name, address, and telephone number of the individual,

or individuals, designated by the carrier to respond to Commission

inquiries and requests for documents. We further required nondominant

providers of interstate, domestic, interexchange telecommunications

services to file annual certifications signed by an officer of the

company under oath that the company is in compliance with its statutory

geographic rate averaging and rate integration obligations.

110. In this Order on Reconsideration, we eliminate the requirement

that nondominant interexchange carriers make publicly available

information concerning rates, terms, and conditions for all of their

interstate, domestic, interexchange services. To enforce the geographic

rate averaging and rate integration requirements applicable to mass

market services, we require nondominant interexchange carriers to file

annual certifications stating that they are in compliance with their

obligations under section 254(g) and to maintain price and service

information on all of their interstate, domestic, interexchange

services that they must make available to the Commission upon request.

Compliance with this obligation may require the use of accounting,

billing, and legal skills.

111. Steps Taken to Minimize Significant Economic Impact on Small

Entities and Small Incumbent LECs, and Alternatives Considered. We

recognize that elimination of the public disclosure requirement will

make the collection of information more difficult for businesses,

including consumer groups, that analyze and compare the rates and

services of interexchange carriers and offer their analysis to the

public for a fee. These businesses, however, will have access to the

information that nondominant interexchange carriers provide to the

public in order to market their services and improve their competitive

position in the market. Moreover, we conclude that consumers will not

be deprived of the information they need and will receive additional

information directly from nondominant interexchange carriers that will

provide rate and service information to consumers in order to ensure

the establishment of a contractual relationship with them in a

detariffed environment.

112. We also recognize the concerns of resellers that, without rate

and service information made available through either tariffs or a

public disclosure requirement, resellers will not have adequate

information to prevent nondominant interexchange carriers from

discriminating against resellers, which are not only customers, but

also competitors of the carriers. We find, however, that the increased

benefits to interexchange carriers and consumers of complete

detariffing without a public disclosure requirement, e.g., decreased

risk of tacit price coordination and increased competition in the

interstate, domestic, interexchange market, and a reduced regulatory

burden justify any negative effect upon resellers of eliminating the

public disclosure requirement.

v. Report to Congress

113. The Commission shall send a copy of this Supplemental FRFA,

along with this Order on Reconsideration, in a report to Congress

pursuant to the Small Business Regulatory Enforcement Fairness Act of

1996, 5 U.S.C. 801(a)(1)(A). A copy of this Supplemental FRFA will also

be published in the Federal Register.

B. Supplemental Final Paperwork Reduction Analysis

114. As required by the Paperwork Reduction Act of 1995, Pub. L.

104-13, the NPRM invited the general public and the Office of

Management and Budget (OMB) to comment on proposed changes to the

Commission's information collection requirements contained in the NPRM.

The changes to our information collection requirements proposed in the

NPRM included: (1) The elimination of tariff filings by nondominant

interexchange carriers for interstate, domestic, interexchange

telecommunications services; (2) the requirement that nondominant

interexchange carriers maintain at their premises price and service

information regarding their interstate, interexchange offerings that

they can submit to the Commission upon request; (3) the requirement

that providers of interexchange services file certifications with the

Commission stating that they are in compliance with their statutory

rate integration and geographic rate averaging obligations under

section 254(g) of the Communications Act; and (4) the requirement that

interexchange carriers advertise the availability of

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discount rate plans throughout the entirety of their service areas.

115. On June 12, 1996, OMB approved all of the proposed changes to

our information collection requirements in accordance with the

Paperwork Reduction Act. In approving the proposed changes, OMB

``strongly recommend(ed) that the (Commission) investigate potential

mechanisms to provide consumers, State regulators, and other interested

parties with some standardized pricing information,'' which ``could be

provided as part of the certification process or could be made

available to the public in other ways.''

116. In this Order on Reconsideration, we adopt several changes to

our information collection requirements proposed in the NPRM.

Specifically, we have decided to: (1) Permit nondominant interexchange

carriers to file tariffs for the provision of dial-around 1+services

using a nondominant interexchange carrier's carrier access code; (2)

permit nondominant interexchange carriers to file tariffs for the

initial 45 days of domestic, interstate, interexchange service, or

until there is a written contract between the carrier and the customer,

whichever is earlier; (3) eliminate the public disclosure requirement.

We reaffirm our decision in the Second Report and Order to require

nondominant interexchange carriers to: (1) File annual certifications

with the Commission stating that they are in compliance with their

statutory rate integration and geographic rate averaging obligations

under section 254(g) of the Communications Act, and (2) maintain price

and service information on all their interstate, domestic,

interexchange services that they can make available to the Commission

upon request. Implementation of these requirements will be subject to

approval by OMB as prescribed by the Paperwork Reduction Act.

VI. Ordering Clauses

117. Accordingly, it is ordered that, pursuant to sections 1-4, 10,

201, 202, 203, 204, 205, 215, 218, 220, 226, and 254 of the

Communications Act of 1934, as amended, 47 U.S.C. 151-154, 160, 201,

202, 203, 204, 205, 215, 218, 220, 226, and 254, the Order on

Reconsideration is hereby adopted. The requirements adopted in this

Order on Reconsideration shall be effective December 4, 1997, or on the

date when the requirements adopted in the Second Report and Order in

this proceeding become effective, whichever is later. The collections

of information contained within are contingent upon approval by the

Office of Management and Budget.

118. It is further ordered that parts 42 and 61 of the Commission's

rules, 47 CFR parts 42 and 61 are amended as set forth herein.

119. It is further ordered that the Petitions for Reconsideration

filed by Ad Hoc Users Committee, AT&T, Frontier, Telco, and TRA are

granted in part and denied in part, as described herein. All other

Petitions for Reconsideration filed in this proceeding are denied.

120. It is further ordered that the Petitions for Clarification

filed in this proceeding are granted in part, and denied in part, as

described herein.

121. It is further ordered that whereas the Second Report and Order

in this proceeding was stayed by the United States Court of Appeals for

the District of Columbia Circuit, we direct the General Counsel

expeditiously to file the necessary papers with the court to request

clarification of that stay on the decision herein.

Accordingly, this Order on Reconsideration is stayed pending the

court's ruling.

List of Subjects in 47 CFR Parts 42 and 61

Communications common carriers, Reporting and recordkeeping

requirements, Telephone.

Federal Communications Commission.

William F. Caton,

Acting Secretary.

Rule Changes

Parts 42 and 61 of title 47 of the Code of Federal Regulations are

amended as follows:

PART 42--PRESERVATION OF RECORDS OF COMMUNICATIONS COMMON CARRIERS

1. The authority citation for part 42 continues to read as follows:

Authority: Sec. 4(i), 48 Stat. 1066, as amended, 47 U.S.C.

154(i). Interprets or applies secs. 219 and 220, 48 Stat. 1077-78,

47 U.S.C. 219, 220.

Sec. 42.10 [Removed]

2. Section 42.10 is removed.

3. Section 42.11 is amended by revising paragraph (a) and removing

paragraph (c).

Sec. 42.11 Retention of information concerning detariffed

interexchange services.

(a) A nondominant interexchange carrier shall maintain, for

submission to the Commission upon request, price and service

information regarding all of the carrier's detariffed interstate,

domestic, interexchange service offerings. The price and service

information maintained for purposes of this subparagraph shall include

documents supporting the rates, terms, and conditions of the carrier's

detariffed interstate, domestic, interexchange offerings. The

information maintained pursuant to this subsection shall be maintained

in a manner that allows the carrier to produce such records within ten

business days.

* * * * *

PART 61-- TARIFFS

4. The authority citation for part 61 continues to read as follows:

Authority: Secs. 1, 4(i), 4(j), 201-205, and 403 of the

Communications Act of 1934, as amended; 47 U.S.C.151, 154(i).

154(j), 201-205, and 4-3, unless otherwise noted.

5. Section 61.20 is revised to read as follows:

Sec. 61.20 Detariffing of interstate, domestic, interexchange

services.

(a) Except as otherwise provided in paragraphs (b) and (c), or by

Commission order, carriers that are nondominant in the provision of

interstate, domestic, interexchange services shall not file tariffs for

such services.

(b) Carriers that are nondominant in the provision of interstate,

domestic, interexchange services shall be allowed to file tariffs for

dial-around 1+services. For the purposes of this paragraph, dial-around

1+calls are those calls made by accessing the interexchange carrier

through the use of that carrier's carrier access code. A carrier access

code is a five or seven digit access code that enables callers to reach

any carrier, presubscribed or otherwise, from any telephone.

(c) Carriers that are nondominant in the provision of interstate,

domestic, interexchange services shall be allowed to file tariffs for

such service to those customers who contact the local exchange carrier

to designate an interexchange carrier or to initiate a change with

respect to their primary interexchange carrier. These tariffs shall

remain in effect until the interexchange carrier and the customer

consummate

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