[Federal Register Volume 64, Number 77 (Thursday, April 22, 1999)]
[Rules and Regulations]
[Pages 19722-19725]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-10023]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 42
[CC Docket No. 96-61; FCC 99-47]
Nondominant Interexchange Carriers
AGENCY: Federal Communications Commission.
ACTION: Final rule.
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SUMMARY: In this Second Order on Reconsideration, the Commission
consider again whether nondominant interexchange carriers (IXCs) should
be required to make available to the public information concerning the
rates, terms, and conditions for all of their interstate, domestic,
interexchange services. Like other common carriers, IXCs historically
have been required to file tariffs with the appropriate regulatory body
(this Commission, in the case of interstate services) establishing the
rates, terms, and conditions of service. The tariff does not simply
serve as a public source of such information; under the judicially
created ``filed-rate'' doctrine, the tariffed rate for a service is the
only lawful rate that the carrier may charge for that service. Even if
a carrier intentionally misrepresents its rate and a customer relies on
the misrepresentation, the carrier cannot be held to the promised rate
if it conflicts with the tariffed rate. When a single carrier dominated
the interstate, interexchange market, tariffing was an effective tool
for ensuring compliance with various common carrier requirements,
including rules that require nondiscrimination among customers.
EFFECTIVE DATE: May 24, 1999.
FOR FURTHER INFORMATION CONTACT: Andrea Kearney, Attorney, Common
Carrier Bureau, Policy and Program Planning Division, (202) 418-1580.
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Second
Order On Reconsideration and Erratum adopted March 18, 1999, and
released March 31, 1999 (FCC 99-47). The full text of this Order is
available for inspection and copying during normal business hours in
the FCC Reference Center, 425 12th Street, SW, Washington, D.C. the
complete text also may be obtained through the World Wide Web, at
http:/www.fcc.gov/Bureaus/Common Carrier/Order/fcc9947.wp, or may be
purchased from the Commission's copy contractor, International
Transcription Service, Inc., (202) 857-3800, 1231 20th St., N.W.,
Washington, D.C. 20036.
Synopsis of Second Order on Reconsideration and Erratum Overview
A. Overview
1. In this Second Order on Reconsideration, we consider again
whether nondominant interexchange carriers (IXCs) should be required to
make available to the public information concerning the rates, terms,
and conditions for all of their interstate, domestic, interexchange
services. Like other common carriers, IXCs historically have been
required to file tariffs with the appropriate regulatory body (this
Commission, in the case of interstate services) establishing the rates,
terms, and conditions of service. The tariff does not simply serve as a
public source of such information; under the judicially created
``filed-rate'' doctrine, the tariffed rate for a service is the only
lawful rate that the carrier may charge for that service. Even if a
carrier intentionally misrepresents its rate and a customer relies on
the misrepresentation, the carrier cannot be held to the promised rate
if it conflicts with the tariffed rate. When a single carrier dominated
the interstate, interexchange market, tariffing was an effective tool
for ensuring compliance with various common carrier requirements,
including rules that require nondiscrimination among customers.
2. With the advent of competition in the provision of interstate,
interexchange services, however, tariffing became less beneficial and,
in some ways, harmful to consumers. The Commission previously has
concluded that tariffing can discourage competitive pricing, restrict
the flexibility of carriers seeking to offer service arrangements
tailored to an individual customer's needs, and impose unnecessary
regulatory costs on carriers. In view of these concerns as well as the
potentially harsh consequences of the ``filed-rate'' doctrine for
consumers, and pursuant to a statutory amendment contained in the
Telecommunications Act of 1996, the Commission in the Second Report and
Order, 61 FR 59340 (November 22, 1996) required the complete
detariffing of interstate, domestic, interexchange services offered by
nondominant carriers.
3. At the same time, the Commission sought to retain the one aspect
of tariffing that continued to serve the public interest, i.e., giving
consumers access to information about the rates, terms and conditions
of services offered by these carriers. Thus, in the same order in which
the Commission eliminated tariffing of interstate, domestic,
interexchange services, the Commission imposed a public disclosure
requirement.
4. Following a stay of the Second Report and Order by the Court of
Appeals for the District of Columbia Circuit, and upon the petitions of
a number of parties who claimed that the public disclosure requirement
would lead to some of the same ills that prompted the Commission to
order complete detariffing, the Commission eliminated the public
disclosure requirement in the Order on Reconsideration. Acting on
petitions for reconsideration of that order, we now conclude that in a
detariffed and increasingly competitive environment, consumers should
have ready access to information concerning the rates, terms, and
conditions governing the provision of interstate, domestic,
interexchange services offered by nondominant IXCs. We therefore
reinstate the public disclosure requirement that was originally
established in the Second Report and Order, and also require
nondominant IXCs that have Internet websites to post this information
on-line.
B. Procedural Background
5. On October 29, 1996, the Commission adopted the Second Report
and Order in its proceeding reviewing the regulation of interstate,
domestic, interexchange telecommunications services. Throughout this
proceeding, the Commission's objective has remained constant: to foster
increased competition in the market for interstate, domestic,
interexchange telecommunications services by eliminating unnecessary
regulation, in accordance with the goals established by Congress in the
1996 Act. The 1996 Act added section 10 to the Communications Act,
which requires the Commission to forbear from applying any provision of
the Communications Act, or any of the Commission's regulations, to a
telecommunications carrier or telecommunications service, or class
thereof, if the Commission makes certain specified findings with
respect to such provisions or regulations.
[[Page 19723]]
6. For more than a decade prior to the 1996 Act, the Commission
attempted to forbear from tariff regulation of nondominant IXCs, but
was struck down by the courts. Subsequently, the Commission requested,
and Congress granted in section 10 of the Act, forbearance authority,
with the express understanding that it would be used to effectuate
interexchange detariffing. Exercising its forbearance authority, the
Commission eliminated its tariff filing requirements for nondominant
IXCs in the Second Report and Order. While tariffs originally were
required to protect consumers from unjust, unreasonable, and
discriminatory rates in a virtually monopolistic market, the Commission
concluded that such tariffs had become unnecessary for this purpose in
an increasingly competitive market. The Commission found that it is
highly unlikely that interexchange carriers that lack market power
could successfully charge rates, or impose terms and conditions, for
interstate, domestic, interexchange services that violate sections 201
and 202 of the Communications Act because consumers could simply switch
to a competing provider that offered better rates, terms, and
conditions. Instead of tariffs, the Commission found that it could rely
on market forces, the section 208 complaint process, and its ability to
reimpose tariff requirements, if necessary, to fulfill its mandate
under the Communications Act to ensure that rates are just and
reasonable and not unreasonably discriminatory, and to protect
consumers. Moreover, the Commission concluded that tariffs can have
negative effects that impair market efficiency and increase costs to
consumers. The Commission found that, in particular, tariffs impede
competition by permitting carriers to invoke the ``filed-rate''
doctrine and by not requiring carriers to provide rate and service
information directly to consumers. The Commission also stated that
tariffs provide a source of information that carriers can use to engage
in tacit price coordination.
7. Although the Commission concluded that tariffs harm competition
in the market for interstate, domestic, interexchange services, it also
acknowledged that in the absence of some rate disclosure requirement,
even in a competitive market, consumers might not have access to
sufficient information about such services for purposes of bringing
complaints under section 254(g) of the Act or for choosing the
particular rate plan that best suits their individual needs. Yet the
Commission also recognized that requiring carriers to make such
information publicly available for these purposes may be at odds with
its goals to reduce regulatory burdens on nondominant IXCs and to
foster additional competition in the interstate, domestic,
interexchange market. In addition, an information disclosure
requirement may detract from the Commission's goal of deterring any
tacit price coordination that might exist because rate and service
information would be collected and made available in a single, central
location.
8. The Commission determined in the Second Report and Order that
the statutory forbearance criteria in section 10 of the Communications
Act were met for complete detariffing of the interstate, domestic,
interexchange services offered by nondominant IXCs. The Commission
concluded that complete detariffing would foster increased competition
without failing to protect consumers by eliminating the possible
invocation of the ``filed-rate'' doctrine in ways that would otherwise
lead to harsh results for consumers, establishing market conditions
that more closely resemble an unregulated environment, and deterring
any potential for tacit price coordination.
9. The Commission also adopted a public disclosure requirement in
the Second Report and Order because it recognized that, even in a
competitive market, nondominant IXCs might not provide complete
information about the rates, terms, and conditions of their interstate,
domestic, interexchange services to enable customers to bring to the
Commission's attention violations of the Communications Act and to
choose the calling plan that best suits their individual needs. For
example, nondominant IXCs might engage in targeted advertising
concerning particular discounts and rate plans that might be the most
appropriate plan for some, but not all, consumers. The Commission
required nondominant IXCs to disclose to the public information about
the rates, terms, and conditions of all of their interstate, domestic,
interexchange services, in at least one location during regular
business hours. The Commission did not, however, require that public
disclosure be made in any particular format or at any particular
location, although it encouraged nondominant IXCs to consider ways to
make this information more widely available to the public, for example,
posting such information on-line, mailing relevant information to
consumers, or responding to inquiries over the telephone. In addition
to adopting the public disclosure requirement, the Commission required
nondominant IXCs 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,
and (2) maintain supporting documentation on the rates, terms, and
conditions of all of their interstate, domestic, interexchange services
that they could submit to the Commission and to state commissions
within ten business days upon request.
10. Several parties filed petitions for review of the Second Report
and Order in 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.
In addition, a number of parties filed petitions requesting that the
Commission reconsider or clarify the rules it adopted in the Second
Report and Order.
11. On August 15, 1997, the Commission adopted the Order on
Reconsideration. The Commission placed more weight on its concern that
making available rate and service information to the public may detract
from its objectives of deterring tacit price coordination and allowing
market forces rather than regulation to discipline carriers. The
Commission recognized that elimination of the public disclosure
requirement could make the access to rate and service information more
difficult for businesses, including consumer groups that offer their
analyses of the rates and services of IXCs to the public, as well as
for resellers that are both customers and competitors of IXCs. The
Commission nevertheless concluded that the benefits of eliminating the
public disclosure requirement would outweigh any adverse effects. The
Commission determined that elimination of the public disclosure
requirement would decrease the regulatory burden on nondominant IXCs
and deter any tacit price coordination that might exist. The Commission
also found that, in all likelihood, consumers would still receive the
information they need to ensure that they have been correctly billed
and to bring to the Commission's attention possible violations of
section 254(g) and other provisions of the Act. The Commission stated,
however, that it remained willing to revisit its decision regarding the
elimination of the public disclosure requirement. The Commission did
not modify the requirements adopted in the Second Report and Order that
nondominant IXCs file an annual certification and that they maintain
supporting
[[Page 19724]]
documentation on their interstate, domestic, interexchange services
that they could submit to the Commission and to state regulatory
commissions within ten business days upon request.
12. Five parties filed petitions for further reconsideration asking
the Commission to reinstate the public disclosure requirement. The D.C.
Circuit subsequently deferred the briefing schedule in the appeal of
the Second Report and Order to allow the Commission to act on these
petitions. The judicial stay of the Commission's rules adopted in this
proceeding, therefore, remains in effect.
13. The single issue raised on reconsideration is whether the
Commission should require nondominant IXCs to make available to the
public information on the rates, terms, and conditions of their
interstate, domestic, interexchange services. For the reasons set
forth, we reinstate the public disclosure requirement that was
originally specified in the Second Report and Order and also require
that carriers make this information publicly available on-line at their
Internet websites.
C. Discussion
14. The parties who filed the petitions for reconsideration that
are before us today express grave concerns about the effects on
consumers of the Commission's decision to eliminate the public
disclosure requirement. These parties generally disagree with the
Commission's finding in the Order on Reconsideration that consumers
will have access to the information they need to select a
telecommunications carrier and to bring to the Commission's attention
possible violations of the Communications Act without a specific public
disclosure requirement. Eighty-five percent of consumers believe that
the public disclosure requirement will serve their interests, according
to a study commissioned by one of the members of petitioner TURN/TMISC.
Consumers find that IXCs' billing information often is ``inaccurate and
difficult to understand'' and that their marketing information is
``confusing,'' according to findings of other studies cited by
petitioners. Consumers find it impossible to obtain accurate and
detailed information directly from carriers concerning their calling
plans, according to TURN/TMISC and TRAC, on the basis of their own
experiences in attempting to obtain such information directly from
IXCs. These petitioners claim that carrier representatives: (1)
provided information that was generally incomplete or inaccurate; (2)
referred callers to their filed tariffs rather than provide information
verbally; (3) withheld information about lower-cost calling plans; and
(4) provided information verbally, but only reluctantly confirmed it in
writing. We also note that MCI WorldCom recently ended its cooperation
with TRAC to provide information that TRAC summarizes in its
comparative chart of long distance calling plans, citing the ``time-
consuming nature of gathering and confirming information,'' and
referred the organization to its filed tariffs.
15. There is abundant evidence that making information available to
consumers is beneficial to competitive markets. In addition to the
evidence set forth and in prior orders in this proceeding, several of
our recent decisions clearly recognize the beneficial effects of
publicly available information on competitive markets and consumers.
For instance, we proposed rules in the Truth-in-Billing Notice to make
telephone bills more readable and accurate, because we believe that
``consumers must have adequate information about the services they are
receiving, and the alternatives available to them, if they are to reap
the benefits of a competitive market.'' In 1998, we adopted a price
disclosure requirement for long distance carriers providing service at
public phones that ``more readily enables consumers to obtain valuable
information necessary in making the decision whether to have that
[carrier] carry the call at the identified rates, or to use another
carrier.'' We took these actions to address concerns that consumers
were not receiving sufficient information to protect themselves against
fraud and misinformation, and to select telecommunications services and
providers that best suit their individual needs. There are many
examples of government mandating disclosure of information to protect
and promote consumer interests.
16. In comparison with abundant evidence in this proceeding of the
benefits of information to competition and consumers, the
anticompetitive effect of a public disclosure requirement is sparse and
indeterminate. Moreover, the growing number of competitors in this
market substantially lessens the risk of tacit price collusion. As
antitrust law recognizes, tacit price collusion is more likely to occur
where there are only a few competitors who have an oligopoly in the
market. Where there are greater numbers of competitors and low barriers
to entry, as in the long distance market, the likelihood of such
coordinated behavior is marginal. In light of the ``conflicting and
inconclusive'' evidence of tacit price collusion and the competitive
nature of the market, we now are convinced that the public availability
of pricing information presents only the slimmest opportunity for
collusion and thus a public disclosure requirement need not be
eliminated on that basis. Consequently, in light of the very positive
public benefits of a limited public disclosure requirement, we believe
that the Commission erred in previously eliminating that requirement in
the Order on Reconsideration. In addition, the growth of competition in
the long distance market means that consumers have more choices and, in
turn, need more information in order to choose the long distance
service plan that best suits their needs. We also note that IXCs have
superior resources and incentives to stay informed of the rate plans of
their competitors whether or not rate and service information is made
publicly available. Therefore, it is consumers who likely will
experience the most harm in the absence of a meaningful public
disclosure requirement. We clearly recognize that tacit price collusion
is one of the grounds on which the Commission relied in choosing to
forbear from the tariffing requirement and that basis is incongruous
with our current holding. Nonetheless, we emphasize that the Commission
substantially rested its detariffing decision on grounds other than
collusion that remain compelling; thus, we find no conflict between the
Commission's decision to order complete detariffing and our decision to
require public disclosure.
17. We agree with Ad Hoc that the ``filed-rate'' doctrine that the
courts have applied to the tariff filing requirement should not apply
to the public disclosure requirement. The ``filed-rate'' doctrine is
applied to the rates, terms, and conditions of services specified in
tariffs that are ``duly filed'' with the Commission in accordance with
section 203 of the Communications Act. The ``filed-rate'' doctrine is
inapplicable to the public disclosure requirement because it is not a
filing requirement within the meaning of section 203, but rather simply
requires carriers to make information available to the public.
Moreover, the Commission has long held that the ``filed-rate'' doctrine
is harmful to competition and consumers, as noted.
18. In the face of opposing positions on whether public disclosure
should be required, we strike the balance once again in favor of
consumer concerns. We therefore reinstate the public disclosure
requirement as originally established in the Second Report and Order.
[[Page 19725]]
Specifically, we require nondominant IXCs to make information available
to the public concerning current rates, terms, and conditions for all
of their interstate, domestic, interexchange services, in at least one
location during regular business hours. We also require such carriers
that have Internet websites to post this information on-line. Carriers
should post rate and service information at their Internet websites in
a timely and easily accessible manner and update such information
regularly. We agree with TRAC and Ad Hoc that an on-line public
disclosure requirement will make rate and service information more
readily available and beneficial for consumers directly, as well as for
businesses and consumer organizations that collect and analyze rate and
service information and offer their analyses to the public,
particularly in view of the tremendous growth in usage of the Internet
since the adoption of the Second Report and Order in 1996 and forecasts
for additional growth. We find that an on-line requirement is not
unduly burdensome, because the growth of Internet usage has increased
the benefits of an on-line requirement to consumers, and the costs of
maintaining an Internet website and posting the information on-line for
carriers are moderate. We exempt from the Internet posting requirement
nondominant IXCs that do not have Internet websites, to avoid imposing
undue burdens on such carriers.
19. Our decision to reinstate the public disclosure requirement can
be reconciled with our previous decision to implement complete
detariffing. The Commission's decision to forbear from applying the
tariff filing requirements to nondominant IXCs and require complete
detariffing is amply supported by evidence of numerous concerns that
are independent of, and more compelling than, tacit price coordination.
These concerns, as set forth in the Second Report and Order and the
Order on Reconsideration, include promoting competitive market
conditions, eliminating problems resulting from the ``filed-rate''
doctrine, and preserving the public's reasonable commercial
expectations. We believe that our decision to reinstate the public
disclosure requirement retains the one positive aspect of tariffing,
making information on the rates, terms, and conditions of interstate,
interexchange services available to the public, without the negative
aspects of tariffing.
II. Erratum
20. This Erratum corrects a final rule in the Order on
Reconsideration, which was released by the Commission on August 20,
1997 and published at 62 FR 46447, September 3, 1997. Rule changes to
the Order on Reconsideration is corrected to include a reference to
state regulatory commissions that was contained in the text of
paragraph 69 of the Order on Reconsideration, but was inadvertently not
included in the rule to be codified at 47 CFR 42.11. The corrected
final rule is contained in this order.
III. Ordering Clauses
Accordingly, it is ordered, that, pursuant to sections 1-4, 10,
201-205, 215, 218, 220, 226, and 254 of the Communications Act of 1934,
as amended, 47 U.S.C. 151-154, 160, 201-205, 215, 218, 220, 226, and
254, the second order on reconsideration is hereby adopted. The
requirements adopted in this Second Order on Reconsideration shall be
effective [30 days after publication of a summary thereof in the
Federal Register] or on the date when the requirements adopted in the
Second Report and Order in this proceeding become effective, whichever
is later.
22. It is further ordered that the Petitions for Further
Reconsideration filed in this proceeding are granted to the extent
described in this order.
23. It is further ordered that Part 42 of the Commission's rules,
47 CFR 42, is amended as set forth in the Rule Changes.
24. It is further ordered that the Commission's Office of Public
Affairs, Reference Operations Division, shall send a copy of this
Second Order on Reconsideration, including the Supplemental FRFA, to
the Chief Counsel for Advocacy of the Small Business Administration.
Federal Communications Commission.
Shirley S. Suggs,
Chief, Publications Branch.
Rules Changes
For the reasons discussed in the preamble, the Federal
Communications Commission amends 47 CFR Part 42 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.
2. The undesignated center heading preceding Sec. 42.11 is revised
to read as follows:
Specific Instructions for Carriers Offering Interexchange Services
3. Section 42.10 is added to read as follows:
Sec. 42.10 Public availability of information concerning interexchange
services.
(a) A nondominant interexchange carrier (IXC) shall 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 shall 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 shall specify that such information is available and the manner
in which the public may obtain the information.
(b) In addition, a nondominant IXC that maintains an Internet
website shall make such rate and service information specified in
paragraph (a) of this section available on-line at its Internet website
in a timely and easily accessible manner, and shall update this
information regularly.
4. Section 42.11 is amended by revising paragraph (a) to read as
follows:
Sec. 42.11 Retention of information concerning interexchange services.
(a) A nondominant IXC shall 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. The price and service
information maintained for purposes of this paragraph shall include
documents supporting the rates, terms, and conditions of the carrier's
interstate, domestic, interexchange offerings. The information
maintained pursuant to this section shall be maintained in a manner
that allows the carrier to produce such records within ten business
days.
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[FR Doc. 99-10023 Filed 4-21-99; 8:45 am]
BILLING CODE 6712-01-P