Users Urge Court to Knock Out Tariffs

A federal court will soon decide whether enterprise users can fully rely on the terms of their negotiated term contracts with carriers or must remain at the mercy of sudden changes in tariff rates.

On March 14 the U.S. Court of Appeals for the District of Columbia will hold a hearing on a long-standing lawsuit by MCI WorldCom against the Federal Communications Commission.

The lawsuit seeks to overturn a series of FCC decisions beginning in 1996 that have tried to end the practice of filing tariffs - official documents carrying prices and conditions of service - by long-distance carriers.

Though carriers usually oppose regulation on themselves, MCI WorldCom, supported by AT&T and Sprint, says it should have the right to continue filing FCC tariffs, because they provide publicly available rate information.

But a bloc of enterprise user groups says the carriers have another motive in mind. They say the carriers want to continue filing tariffs because of a legal principle dating back to the 19th century called the filed-rate doctrine.

Under the filed-rate doctrine, tariff filings take legal precedence over private contracts between two parties. As a result, a carrier can file a tariff rate change for a voice or data service with as little as one day's notice, and the rate change will go into effect even for users in the middle of long-term contracts. The filed-rate doctrine for industries that employ tariffs was upheld as recently as last year by the Supreme Court, in an unrelated case involving AT&T and a telecommunications reseller.

The user groups last month sided with the FCC in a brief filed with the appeals court by Levine, Blaszak, Block & Boothby, a Washington, D.C., law firm. The user groups include the New York Clearing House Association - a group of leading commercial banks - and the Ad Hoc Telecommunications Users Association, a cross-vertical-industry coalition.

Carriers aren't filing sneaky tariff rate increases on per-minute tolls as often as they used to, the user lawyers concede. Instead, many of what they call "abuses" of the filed-rate doctrine are now coming on the surcharges that appeared after the Telecommunications Act of 1996.

For example, late last year AT&T quietly increased its universal-service surcharge on certain interstate traffic from 5.9% to 6.6% via a tariff filing after the government changed its universal-service funding formula, says Colleen Boothby, one of the user groups' attorneys.

For all the potential high-money stakes of the case, the court's decision may turn on the dictionary definition of a single word in the 1996 telecom act. The FCC based its decision to end tariffs on the fact that the 1996 law gives the FCC the right to "forbear" certain regulations to speed competition in the market.

MCI WorldCom and its supporters argue that the FCC's ability to "forbear" is permissive - it can allow carriers to stop filing tariffs but can't force them to do so.

The FCC, backed by the user groups, says if they "forbear" requiring tariffs, that means they can forbid them altogether. The user groups' court brief even hauled out a Biblical quotation to support this point - in Ezekial 24:17, Ezekial is ordered: "Forbear to cry, make no mourning for the dead."

The users' brief also ridicules a charge by the carriers in their court brief that a lack of tariffs would force them to send contract terms to all users - residential and business - and make them notify customers of any changes in their rates, terms and conditions. Such a complaint "reveals in a profound way how disconnected the carriers have become from the core principles of a market economy," the user attorneys say. They note that this is precisely how credit card companies deal with their tens of millions of customers.

A final ruling from the appeals court is due this spring or summer. Neither the FCC nor state regulators have proposed to de-tariff local carriers, but all sides agree that local tariffs are scrutinized by both states and the FCC more carefully than long-distance carriers tariffs, and are sometimes even disallowed.

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