The FCC's Detariffing Rules: A New World For Carriers And Customers
December 5, 2000
Eric Fishman - New York
By a landmark order upheld by the U.S. Court of Appeals earlier this year (the Detariffing Order), all non-dominant interexchange carriers (IXCs) are required (with certain exceptions set forth below) to cancel their contract-type tariffs for interstate, domestic, interexchange services on file with the FCC by January 31, 2001, and their tariffs for mass market consumer domestic interstate services by April 30, 2001. This new policy affects virtually all domestic long-distance service providers in the United States. What follows is a brief summary of the FCC’s order and related rulings, the specific measures which non-dominant IXCs must follow, and a few suggestions of how IXCs and customers should modify their business practices in the absence of tariffs.
Tariff Requirements
General Requirement. For all contract-type tariffs by January 31, 2001, and for all mass market consumer arrangements by April 30, 2001, non-dominant IXCs must cancel their tariffs for interstate, domestic, interexchange services currently on file with the FCC. There are only two exceptions to this general rule:
Dial-Around Services. Non-dominant IXCs are permitted to file tariffs for dial-around 1+ services made by accessing the interexchange carrier through the use of that carrier’s carrier access code.
New Customer Services. Non-dominant IXCs also may file tariffs for interstate services applicable to those customers who contact their local exchange carrier to designate an IXC or to initiate a change with respect to their primary IXC. The purpose of these tariffs is to enable the non-dominant IXC to provide service to the customer until the IXC and the customer consummate a written agreement. In no event, however, may the IXC provide service to its customer pursuant to such tariffs for more than 45 days.
Procedure and Format. Tariffs may be cancelled by replacement, supplement or expiration. A supplement is identical to a tariff page but should be designated as a supplement instead of a numbered page. The contents of the supplement should state: "Pursuant to the Detariffing Order, CC Docket 96-61, 11 FCC Rcd 20730 (1996), this tariff is cancelled in its entirety effective (state date of cancellation)." Tariff cancellations must be submitted on diskette or CD-ROM, in Word Perfect 5.1, Microsoft Word 6.0 or Microsoft Word 97 software, nd must be accompanied by a filing fee, which is currently $655.
"Mixed" Tariffs. A "mixed" tariff offering is a tariff that includes services for which the carrier is subject to different tariff filing requirements. One example of a mixed tariff offering would be a tariff that contains both domestic interstate and international telecommunications services. Carriers that have on file with the FCC "mixed" tariffs that contain services subject to detariffing must either cancel the entire tariff and refile a new tariff for only those services subject to tariff filing requirements; or (2) issue revised pages cancelling the material in the tariff that pertain to those services subject to detariffing. Until further notice, however, carriers may file a bundled domestic and international tariff with a disclaimer stating that the domestic portion is informational only.
Reduction of Filing Fees. In order to minimize costs, carriers may cancel several tariffs or revise several tariffs under on cover letter with the payment of one filing fee provided that each tariff has the same issuing carrier name and the issued date is identical for each tariff. In addition, organizations that file tariffs on behalf of several carriers may request 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. Waiver of the applicable filing rules for this purpose must be requests by filing an Application for Special Permission, including the applicable filing fee ($655).
Whom Does the FCC’s Order NOT Affect?
For the time being, the FCC’s new rules DO NOT AFFECT the following carriers and services:
Dominant Domestic Carriers. Under the FCC’s current policies with virtually no exceptions, the only carriers currently regulated as dominant are incumbent local exchange carriers (ILECs) with respect to the local exchange services they provide in their own service territories. The FCC’s new rules do not apply to the provision of local exchange services by ILECs in their own territories.
International Services. In a Notice of Proposed Rule Making released on October 18, 2000, the Commission has proposed to extend its detariffing policies to the provision of international interexchange services by non-dominant interexchange carriers. For the time being, however, the Commission’s rules currently require all international carriers to file tariffs for the provision of international telecommunications services.
Intrastate Services. Since the FCC has jurisdiction over interstate and international services only, its detariffing order has no effect on intrastate services. These services are regulated by state public service commissions, most of whom require carriers to offer service pursuant to filed tariffs.
Ongoing Requirements for Detariffed Services
Geographic Rate Averaging and Rate Integration. Pursuant to the FCC’s geographic rate averaging and rate integration rules, 47 C.F.R. § 64.1801, the rates charged by IXCs to subscribers in rural and high-cost areas may be no higher than the rates charged by the IXC to its subscribers in urban areas, and an IXC must provide interstate, interexchange services to its customers in each U.S. state at rates no higher than the rates charged to its subscribers in any other state. For purposes of these rules, the term "interstate" includes all 50 states, the District of Columbia, and all U.S. territories and possessions, including Puerto Rico, the U.S. Virgin Islands and Guam.
Pursuant to Section 64.1900 of the rules, a non-dominant provider of interexchange services, which provides detariffed interstate, domestic interexchange service, must file with the FCC, on an annual basis, a certification that it is providing such service in compliance with its geographic rate averaging and rate integration obligations. The certification must be signed by an officer of the company under oath.
Carriers with tariffs currently on file should file this certification letter with the Secretary of the FCC, 445 12th Street, SW, Washington, D.C. 20554, Attention: Competitive Pricing Division, Common Carrier Bureau. The certification should be filed initially, at the same time and in a separate package as the filing that either cancels their domestic, interstate interexchange service tariff(s) or revises the existing tariff(s) to remove references to interstate, domestic interexchange services. Carriers who are not currently providing such services, and therefore do not have tariffs on file with the FCC, should file this certification letter with the FCC by the time they begin to offer interstate, domestic interexchange services to the public. This filing is an annual requirement. There is no filing fee required for the certification letter.
Public Disclosure. Pursuant to Section 42.10 of the FCC’s rules, a non-dominant IXC must make available to any member of the public, in at least one location, during regular business hours, information concerning its current rates, terms and conditions for all of its interstate, domestic, interexchange services. Such information must be made available in an easy- to-understand format and in a timely manner. Following an inquiry or complaint from the public concerning rates, terms and conditions for such services, a carrier must specify that such information is available and the manner in which the public may obtain the information.
Web Sites. Section 42.10 of the rules also requires a non-dominant IXC that maintains an Internet Web site to make information concerning its current rates, terms and conditions for all of its interstate, domestic, interexchange services available online at its Internet Web site in a timely and easily accessible manner, and to update this information within 24 hours after any rate or term changes.
Retention of Records. Pursuant to Section 42.11 of the FCC’s rules, a non-dominant IXC must maintain, for submission to the Commission and to state regulatory commissions upon request, price and service information regarding all of the carrier’s interstate, domestic, interexchange service offerings. This price and service information must include documents supporting the rates, terms, and conditions of the carrier’s interstate, domestic, interexchange offerings. The information must be maintained in a manner that allows the carrier to produce such records within 10 business days. The price and service information must also be retained for a period of at least two years and six months following the date the carrier ceases to provide services pursuant to such rates, terms and conditions.
Contact Persons. Non-dominant IXCs must file with the FCC, and update as necessary, the name, address and telephone number of the individual, or individuals, designated by the carrier to respond to FCC inquiries and requests for documents.
Contracts. The FCC’s decision to require the cancellation of virtually all domestic, interstate tariffs by non-dominant IXCs compels carriers to modify many of their current business practices, and heightens the importance of their customer service agreements. Prior to the cancellation of affected tariffs, non-dominant IXCs must, at a minimum, remove from their subscriber agreements all references to filed FCC domestic interstate tariffs. More critically, effective upon cancellation, carriers no longer will be able to rely on the protections created by the so-called "filed rate" doctrine, which gave filed tariffs priority over customer contracts in the event of a conflict. The doctrine allowed carriers unilaterally to change the terms of negotiated agreements.
The combination of these factors forces affected carriers to scrutinize their existing customer contracts carefully to ensure that they address all critical issues governing their relationship with subscribers, and afford maximum flexibility for future service or rate modifications. At the same time, carriers should strive to keep their contracts as short and clear as possible, so as not to scare away prospective new customers. What follows are a few suggestions on how affected carriers may wish to address these different goals.
Format. Carriers may wish to consider drafting their standard agreement in two parts. The first of these would be a brief Specific Terms and Conditions document identifying the subscriber and its premises, describing the specific service(s) ordered, itemizing the specific rates and conditions, and detailing any customer-specific requirements. Service arrangements with more complicated rate structures could be set forth in separate schedules. The second section would be a set of General Terms and Conditions describing the mutual rights and obligations of the carrier and customer, and addressing standard issues such as billing and collection, liabilities, warranties, indemnification, events of default, dispute resolution, remedies, governing law and the like. The General Terms and Conditions section should also contain provisions governing the implementation of future service and rate changes.
Electronic Contracts. Pursuant to the Electronic Signatures in Global and National Commerce Act, signed into law earlier this year, carriers and subscribers may enter into electronic telecommunications service contracts provided that the carrier complies with the consumer disclosure provisions of the Act and obtains required customer consents.
Term of Agreement. In a tariff regime, with the exception of contract-type tariffs, carriers and subscribers typically have not defined the term of their service arrangements, or addressed related issues, such as renewal and termination. With the abolition of tariffs, parties must now address these issues, informed by applicable federal and state law. Term conditions may, in turn, affect other contract provisions, including rates. Subscriber contracts must recognize the rights of subscribers, under federal law, to change their preferred pre-subscribed carriers at any time. Within this constraint, however, parties have broad latitude in negotiating the duration of service terms.
Rates of Service. Pursuant to Section 202 of the Communications Act, carriers may not engage in "unlawful or unreasonable discrimination" in charges, practices, facilities and services. The drafting of standard General Terms and Conditions can help insulate carriers against charges of unlawful discrimination in a non-tariff regime. At the same time, carriers and customers are free to negotiate individualized Specific Terms and Conditions which more accurately reflect subscriber needs and commitments, provided carriers are prepared to offer such terms to similarly situated customers. The body of the contract should also address other rate-related issues, such as universal service fund contributions and other regulatory fees.
Service and Rate Changes. Service contracts should expressly address the right of the carrier to institute service and rate changes during the term of the agreement. In its Detariffing Order, the FCC has concluded that, as a matter of contract law, non-dominant IXCs would not necessarily be required to provide notice before instituting changes that benefit, or do not adversely affect in a material way, customers (e.g., rate reductions). According to the Commission, however, such carriers would likely be required, as a matter of contract law, to give advance notice of those changes that adversely affect customers (e.g., rate increases). The Commission concluded that it would not be unduly burdensome for non-dominant IXCs to provide customers advance notice of the latter changes through billing inserts or other measures. In its Detariffing Order, the FCC also held that the "substantial cause" test, pursuant to which dominant carriers may not alter material terms and conditions of a long-term contract absent a showing of "substantial cause," would not apply to unilateral modifications by non-dominant IXCs regarding interstate, domestic interexchange services.
Applicable Law. In a tariff regime, carrier-subscriber relationships for interstate services are generally governed by federal law, and parties have not identified applicable state laws. While federal law will continue to govern many aspects of subscriber agreements, the FCC has made clear that state consumer protection laws and other statutes may apply also. Parties should identify their choice of governing state law, forums and procedures in the event of a dispute.
It is also important for parties to recognize that the applicable standards for evaluating the lawfulness of telecommunications service contract provisions are relatively new and in a state of flux. While there is a considerable amount of FCC case law on the reasonableness of specific tariff provisions relating to liability, service termination and other issues, the applicability of these precedents to non-dominant carriers in a non-tariff regime is not clear. At the same time, a number of states, such as California, have adopted rules and policies governing the form and content of subscriber agreements which negotiating parties should take into account.
Conclusion. Although the FCC has recently extended the transition period for its Detariffing Order, carriers should review their current subscriber contracts to ensure that they address all critical issues, contain no tariff references, and are user-friendly. Should you need any assistance in this matter, or need further information on the FCC’s initiative, please let us know.