Detariffing

It came as no surprise to see staff's initial recommendation to detariff all competitive services draw as much response as any other issue in this rulemaking.⁷⁸ It was also not surprising that carriers are generally against the idea. What made this topic different was the greater crossover of views. The largest ILEC supports detariffing competitive services, while consumer representatives and government agencies were split on the issue.

Carriers and others cited a number of reasons for retaining tariffs. The first reason is legal. Some interpret the Public Utilities Code to grant the Commission authority to permit, but not require, detariffing. Section 495.7 does grant the Commission authority to partially or completely exempt telecommunications services other than basic exchange service from the tariffing requirements of Sections 454, 489, 491 and 495. To do so, it must find that the provider lacks significant market power for that service, or that competitive services are available and consumer protection and enforcement mechanisms are sufficient to minimize the risks from unfair competition and anticompetitive behavior.

Commenters' second reason for retaining tariffs is their efficiency. Supporters find tariffs to provide an efficient, cost-effective way to establish rates, terms and conditions of service. They allow carriers to establish a legal relationship with customers more quickly than do contracts. No administrative rules, the argument goes, could embody all of a carrier's legal obligations the way tariffs do. Carriers also worry that the process of detariffing existing services would put them in a position of having to require every current customer to execute a contract before service could continue.

Next, supporters point to tariffs for their ability to ensure that service is provided on a non-discriminatory basis. Detariffing would not relieve the Commission of its duty to enforce anti-discrimination requirements of Section 453. Service agreements are a poor substitute, they believe, because each is specifically tailored to one customer's needs and thereby necessarily treats that customer differently from others.

Lastly, tariffs provide a ready means for resolving customer disputes. Without tariffs as a foundation, the Commission would have to review thousands of individual contracts in resolving complaints. Mandatory detariffing would compromise the Commission's jurisdiction to pursue carriers who violated consumer protection policies that would otherwise have been tariffed. Absent tariffs, disputes would become breach of contract suits in court, bringing into play the common law rules of contract for each individual carrier/ customer relationship.

Some of these arguments have merit; others are questionable.

Supporters of staff's proposal to detariff competitive services tended to be less strident in their advocacy. They see tariffs not so much as an inherently consumer-hostile mechanism as an otherwise-legitimate regulatory method turned to harm through neglect and misuse. That may explain why some consumer advocates would retire them, while others would reform and return them to their original consumer-protective role.

Carriers are fond of characterizing tariffs that have been accepted for filing as "approved by the PUC." While this may provide cover when problems arise, the reality is that the volume of carrier tariff filings is so large as to make a thorough review of each completely infeasible. As staff acknowledges, "Because the Commission does not regulate the rates of competitive services, the continued filing of tariffs for competitive services and Commission review of such tariffs has largely become perfunctory." Tariff rules are written by the carriers for the carriers, receive little or no staff review before going into effect, and thereafter are enforced as legally binding requirements. Staff notes, "For the Commission to formally change a tariff rule in effect is a contentious and time consuming endeavor, especially considering the number of individual utilities and their individual tariffs." Moreover, tariff filing and maintenance drains staff resources that could be better used in enforcement and elsewhere.

With the stage thus set, tariffs intended to aid consumers are instead turned against them through application of the filed rate doctrine⁷⁹ before both the Commission and the courts. This is where consumer advocates who support detariffing converge with those who would retain tariffs. Both agree that the filed rate doctrine as it is frequently invoked today undermines consumers' legitimate business expectations because carriers can unilaterally abrogate their written contract prices and terms by simply changing their tariffs, with consumers either unaware or powerless to protect themselves. At least two commenters suggested the Commission use Section 532⁸⁰ to override the filed rate doctrine when carrier fraud or deception is involved. We agree -- it would be just and reasonable to establish the sort of exception permitted by Section 532, in cases where carriers have misrepresented their rates, terms or conditions for competitive services. No carrier should be able to rely on its filed tariffs for protection against the consequences of its own unlawful or deceptive conduct. Former Rule 2(g) was included in the June 2002 draft to ensure that customers are not abused by misleading advertising or disingenuous use of the filed rate doctrine to deflect their legitimate claims. As revised, it now becomes part of Rule 2(d), which echoes the Federal Trade Commission remedy for false advertising. Carriers who misrepresent their rates, terms or conditions must make whole a subscriber who was affected by the misrepresentation.

Staff's proposal to detariff competitive services goes hand in hand with establishing these consumer protection rules. First establish the rules, then use them to safeguard consumers' rights as tariff protections drop away. As many have noted, we need to be particularly cautious at the second stage because once tariffs are gone, consumers are at risk until the rules prove effective. Some commenters suggested a transition period during which both the rules and tariffs are in effect. We intend to adopt that suggestion.

Detariffing competitive services as staff proposes is an excellent goal. Once the rules are in effect, we expect them to bring about significant improvement. But achieving their full potential will require other steps that we have not yet taken: steps to educate consumers about their rights and the rules, steps to monitor carriers' practices as they implement the rules, and steps to enforce compliance when the rules are violated. With so much at stake, the prudent course is to put the new rules into effect without cutting away the tariff safety net. For now, that is what we will do.