Court Upholds FCC Order to End Tariff Filings

WASHINGTON (05/04/2000) - After 31/2 years of legal wrangling, a federal appeals court late last month upheld a 1996 decision by the U.S. Federal Communications Commission ordering long-distance carriers to stop filing tariffs with the government.

Unless appealed, the decision means that business users will be free to negotiate term contracts with major carriers without the threat of having their rates and terms changed in the middle of their contract.

That's because the ruling may be the end of the road for the "filed-rate doctrine." Under this long-standing principle, any tariff filed with a government agency in a regulated industry has legal precedence over a private contract. For example, a user could negotiate a carrier contract for a 40% discount below tariff rates for three years. But if the carrier filed a tariff rate increase in the middle of the three years, the effective rate the user paid often would immediately go up, albeit still with a 40% discount.

In its ruling, the court said the FCC was correct that canceling all long-distance tariffs should knock out the "filed-rate doctrine." The result:

The carriers, like other vendors, can publish list prices if they wish, but with no protected legal meaning.

Consultants who help large users negotiate carrier contracts hailed the decision. In recent years, some carriers have written into user contracts that if tariffs were thrown out, the terms of the tariff would be automatically incorporated into existing contracts. So the effect on current deals may be limited, says Hank Levine, a Washington lawyer who negotiates large-user carrier contracts.

But on new contracts, users will have more freedom, he says. For example, they can try to get carriers to give them the same amount of time to report overcharges as the carrier gets to locate and recover undercharges, says Levine. Carrier tariffs often give the carrier much more time to find errors in their favor than the other way around.

Users will also be able to negotiate stronger termination options, especially if installation intervals suffer or network performance goes bad. "You'll be able to walk in 60 days," Levine says.

The court decision itself turned largely on semantics. Led by MCI WorldCom Inc., which originally got a stay of the FCC's decision, all the major long-distance carriers argued that the FCC has the right to stop "enforcing" tariffs, but can't stop carriers from filing them if they want to. The court disagreed, noting that the Telecommunications Act of 1996 gives the FCC the right to stop "applying" unneeded regulations. The court ruled that using the word "applying" meant that the FCC could throw out tariffs entirely.

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