UNITED STATES COURT OF APPEALS FOR THE D.C. CIRCUIT


MCI WORLDCOM INC

v.

FCC


96-1459a

D.C. Cir. 2000


*	*	*


Silberman, Circuit Judge: Petitioners, the large long- distance
telecommunications carriers, seek review of an FCC  order prohibiting
them from filing tariffs with the Commis- sion. We reject their


I.


Commission efforts to move to a nontariff environment for 
interexchange carriers--insofar as those carriers do not exer- cise
market power--have not had an easy time with this court  and the
Supreme Court. For over six decades a tariff regime  was mandated by
the Communications Act of 1934, which  requires the FCC to review
telecommunications carriers'  tariffs to ensure their reasonableness.


202. The Act requires carriers to file their tariffs with the  FCC, see
47 U.S.C. s 203(a), and they are prohibited from  charging consumers
except as provided in the tariffs. See 47  U.S.C. s 203(c)
(establishing what is popularly known as the  "filed-rate doctrine").
Starting in the early 1980s, the Com- mission tried to prohibit
tariff-filing by nondominant carri- ers--in essence, those other than
AT&T--but that effort was  successfully challenged in this court in
MCI Telecommunica- tions Corp. v. FCC, 765 F.2d 1186 (D.C. Cir. 1985),
where we  struck down "mandatory detariffing" as inconsistent with the


There remained some confusion as to whether the FCC's  surviving
"permissive detariffing" policy for nondominant car- riers--allowing
those carriers to choose whether to file tar- iffs--was premised on an
agency nonenforcement position,  subject to only very limited judicial
review, or whether it  constituted a substantive regulatory framework.
AT&T, by  filing a complaint against MCI with the Commission over 
MCI's non-filing (as it had a right to do under section 208 of  the
Communications Act, 47 U.S.C. s 208(a)), put the cat  among the
canaries and forced the Commission, by defending  MCI, to embrace the
substantive position which we had  rejected. The result was more
Commission reversals, see  American Tel. & Tel. Co. v. FCC, 978 F.2d
727 (D.C. Cir.  1992); American Tel. & Tel. Co. v. FCC, 1993 WL 260778
 (D.C. Cir. 1993), this time affirmed by the Supreme Court.  See MCI
Telecommunications Corp. v. American Tel. & Tel.  Co., 512 U.S. 218
(1994). The upshot of all of this was that  the Commission simply
could not suspend (permissively or  mandatorily) the tariff-filing
obligations for interexchange  carriers, whether they had market power


The landscape changed, however, when Congress passed  the
Telecommunications Act of 1996, which requires the FCC  to


forbear from applying any regulation or any provision of  this chapter
to a telecommunications carrier or telecom- munications service, or
class of telecommunications carri- ers or telecommunications services,
in any or some of its 


or their geographic markets, if the Commission deter- mines that--


(1) enforcement of such regulation or provision is not  necessary to
ensure that the charges, practices, classifi- cations, or regulations
by, for, or in connection with that  telecommunications carrier or
telecommunications ser- vice are just and reasonable and are not
unjustly or  unreasonably discriminatory;


(2) enforcement of such regulation or provision is not  necessary for
the protection of consumers; and


(3) forbearance from applying such provision or regula- tion is
consistent with the public interest.


47 U.S.C. s 160(a).1


Armed with this new statutory authority, the FCC moved  once more to
detariff the interstate, domestic, interexchange  services of
nondominant carriers--now all of the interex- change companies. In a
Notice of Proposed Rulemaking, 11  F.C.C. R. 7141 (1996), the
Commission tentatively concluded  that the 1996 Act required it to
"forbear from applying" the  tariffing requirement to nondominant
carriers, and that per- mitting carriers to file tariffs at all would
not be in the public  interest. It thus announced its intention to
implement man- datory detariffing by "forbearing from applying" s
203(a) of  the 1934 Act. Following a comment period the FCC con-
firmed that enforcement of the tariffing provision is neither 
necessary to ensure just and reasonable, nondiscriminatory  rates, nor
necessary for the protection of consumers, and  ordered mandatory
detariffing. See Second Report and Or- der, 11 F.C.C.R. 20730,


In their comments, petitioners did not dispute the Commis- sion's
tentative conclusion that tariffing was no longer neces-




__________

n 1 The 1996 Act was passed in the expectation that telecommunica-
tions carriers would actively seek detariffing. See 47 U.S.C.  s
160(c) ("Any telecommunications carrier, or class of telecommuni-
cations carrier, may submit a petition to the Commission requesting 
that the Commission exercise the authority granted under this  section
with respect to that carrier or those carriers....").


sary, but argued that the Commission's intention to order  mandatory
detariffing--rather than permissive detariffing-- both exceeded the
Commission's statutory authority and was  unreasonable. They claimed
that under the 1996 Act the  FCC may forbear from enforcing s 203, but
cannot actually  forbid the filing of tariffs. Petitioners also
complained that  detariffing would lead to their customer
relationships being  governed by state contract laws, which, in some
cases, might  require the execution of a new contract whenever the
carrier  would want to change its rates. According to petitioners, the
 necessity of mailing new contracts to customers would in- crease
their transaction costs resulting in higher prices for  consumers,
make casual-calling options more difficult, and  hinder their ability
to respond quickly to competitors' price  changes. See id. at
20755-56.2 If tariffs were permitted,  petitioners claimed, they could
still negotiate individual con- tracts with large customers, but also
file tariffs for millions of  mass-market consumers, the optimal
result for both groups.  In response to objections by consumer groups
that carriers  might negotiate contracts with individual customers and
then  rely on the filed-rate doctrine to collect higher tariff rates, 
petitioners argued that courts would not apply the doctrine  because
permissive detariffing would gut its rationale: the  filed rate would
no longer be the only lawful rate. See id. at  20757.


The Commission rejected petitioners' statutory and prac- tical
arguments. The FCC concluded that outside the filing  requirement of s
203(a) there was no provision granting  carriers a right to file
tariffs, so its forbearance authority  under the 1999 Act inherently
contemplated mandatory detar- iffing. It found petitioners' proposed
distinction between  large and small customers immaterial, because the
competi- tive benefits of detariffing would be felt by both. The 
Commission was also concerned that courts might not inter- pret the
interplay of permissive detariffing and the filed-rate  doctrine quite
as petitioners suggested, and that carriers 




__________

n 2 Casual calling refers to collect calls, credit-card calls, or dial-
around calling.


would use the continued existence of the filed-rate doctrine to  refuse
to negotiate individualized contracts with customers.  The risk that
tariffs might serve to facilitate price fixing was  also a factor
cited by the Commission in its order, but in  response to two
petitions for reconsideration the Commission  abandoned this
rationale. See id. at 20760, 20765-67, 20772;  Order on
Reconsideration, In re Policy and Rules Concern- ing the Interstate,
Interexchange Marketplace, 12 F.C.C.R.  15014 (1997); Second Order on
Reconsideration and Erra- tum, In re Policy and Rules Concerning the
Interstate,  Interexchange Marketplace, 14 F.C.C.R. 6004 (1999).


Petitioners challenge both the order and the reconsidera- tion orders,
and raise before us the same concerns presented  to the Commission.
They argue that the mandatory detariff- ing order is ultra vires
because the FCC lacks statutory  authority to forbid the filing of
tariffs. Petitioners claim  alternatively that the order is arbitrary
and capricious be- cause the Commission's preference for mandatory
detariffing  over permissive detariffing is not supported by facts or
logic,  the Commission failed to respond to a third alternative ad-
vanced by AT&T, and the Commission based its decision in  part on a
misunderstanding of the filed-rate doctrine.


II.


We begin with petitioners' argument that the 1996 Act does  not give
the FCC authority to implement mandatory detariff- ing--it cannot
forbid the filing of tariffs. The Act states that  the FCC "shall
forbear from applying any regulation or any  provision of this chapter
... if the Commission determines  that (1) enforcement ... is not
necessary [to ensure rates are  just, reasonable, and
nondiscriminatory], (2) enforcement ...  is not necessary for the
protection of consumers, and (3)  forbearance from applying such
provision or regulation is  consistent with the public interest." 47
U.S.C. s 160(a) (em- phasis added). Petitioners urge that under the
plain lan- guage of the statute the Commission is empowered merely to 
exercise its discretion not to enforce a provision under such 
circumstances. In other words, to forbear is to "refrain from 


action," see Pet. Br. at 17 (citing, e.g., Black's Law Dictionary  329
(5th ed. 1983)); nonenforcement is therefore forbearance,  but barring
the doors of the FCC to lawyers bearing tariff  filings and throwing
out extant tariffs, both affirmative acts,  are not.


Petitioners offer in support of their interpretation our  opinion in
American Telephone & Telegraph, where we stated  that the FCC "went
beyond mere forbearance ... by making  detariffing mandatory and by
telling non-dominant carriers  that it would no longer even accept
their rate filings...."  978 F.2d at 729-30. But we ourselves have
used the word  forbear in two different ways. In MCI
Telecommunications,  we said "forbearance was made mandatory" and the
Commis- sion "changed the permissive forbearance arrangement into a 
mandatory one." 765 F.2d at 1191 n.4, 1189. So it is hardly  open to
us to deny the ambiguity which accompanies the  statutory use of that
term--particularly when Congress acted  against a backdrop of our
decisions. Moreover, the crucial  phrase in the statute is not
"forbear from enforcing" but  rather "forbear from applying," which
suggests a broader  authority. As the Commission correctly points out
no provi- sion of the Communications Act except s 203(a) requires 
tariffing, and no provision gives a carrier a positive right to  file
a tariff, so if it forbears from applying s 203(a) the  Commission's
staff is not obliged to accept filings. We there- fore think that the
Commission's interpretation of the Act is  entitled to Chevron
deference. See Chevron U.S.A. Inc. v.  Natural Resources Defense


Petitioners alternatively claim that the Commission's order  is
arbitrary and capricious, and, to use the Act's terminology,  against
the "public interest" because its stated objectives  easily can be met
by adopting a permissive-detariffing re- gime, and therefore the extra
transaction costs imposed on  the carriers--and passed through to
consumers--are unnec-




__________

n 3 Petitioners seem to argue that the delegation of the authority to 
"forbear" implicitly precludes authority to forbid but that is even 
more of a stretch.


essary. The major thrust of petitioners' arguments is that  the
Commission inadequately responded to their comments,  and therefore
the case should be remanded to the FCC so as  to require the agency to
do so. (It is worth noting that we  have stayed the Commission's order
so the status quo favors  the petitioners for so long as they can
maintain it.)


The Commission, as we have mentioned, wishes to disen- tangle the
interexchange carriers' prices from the filed-rate  doctrine. The
Commission has long been concerned that the  necessity of filing
tariffs hinders competitive responsiveness.  And, according to
consumer representatives' comments pre- sented to the FCC, the
filed-rate doctrine has been used by  the carriers as a shield to
avoid individual contract negotia- tions with large and small users,
thereby reducing competi- tion among carriers. Petitioners argue that
streamlined tar- iff procedures already adopted by the FCC, see Tariff
Filings  Requirements for Nondominant Common Carriers, 8  F.C.C.R.
6752 (1993), and carriers' ability to file tariffs for  individual
consumers have obviated those concerns. But the  Commission reasonably
disagreed, in part relying on the  consumers' reported experience
under those procedures, and  in part because it was wary that the
filed-rate doctrine might  be interpreted by state and federal courts
to interfere with  free-market behavior. See Second Report and Order,


Perhaps the most interesting argument in the case relates  to an AT&T
ex parte letter (suitably filed) sent after the  comment period ended.
In a rather downplayed alternative  argument AT&T suggested in a
single paragraph that if the  Commission's interpretation of
forbearance was legitimate  (which of course AT&T denied) the
Commission could elimi- nate certain problems with tariffs--and
thereby move to only  permissive detariffing--if it would forbear from
enforcing--or  even forbid the application of--the filed-rate
doctrine, 47  U.S.C. s 203(c). The Commission did not respond to this 
rather subtle suggestion and petitioners contend that that  failure
alone requires a remand. The FCC argues that  AT&T's comment was only
a throwaway, inconsistent with  petitioners' primary argument that


ultra vires, and not even part of its formal comment, so we  should not
regard the issue as properly presented to the  Commission under 47
U.S.C. s 405(a). If that were so, we  would not have jurisdiction to
consider the point. We do not  think that is quite correct, although
it is a close question.


Petitioners note that the Commission's order refers to  several ex
parte filings received after the filing in issue here.  See Second
Report and Order, 11 F.C.C.R. at 20781-82 nn.  253 & 254. AT&T's
filing was not long, and the relevant  paragraph concluded a
discussion on one of the key issues of  the proceeding: whether the
filed-rate doctrine would be an  impediment to permissive detariffing.
The paragraph--even  though presented as an alternative argument--does
suggest  that forbearance from s 203(c) would eliminate the
possibility  of carriers' invoking the filed-rate doctrine. Therefore,
we  think the argument was presented--if barely--to the Com-


Still, it is one thing to preserve a point for judicial review  and
quite another to raise the issue with sufficient force to  require an
agency to formally respond. An agency is not  obliged to respond to
every comment, only those that can be  thought to challenge a
fundamental premise. See Grand  Canyon Air Tour Coalition v. FAA, 154
F.3d 455, 468 (D.C.  Cir. 1998) ("An agency must ... demonstrate the
rationality  of its decisionmaking process by responding to those com-
ments that are relevant and significant.") (emphasis added).  In this
case, AT&T's late ex parte alternative comment does  not seem to us to
be forceful enough to have obliged the  Commission to squarely
confront it. Certainly the Commis- sion made clear its concern that if
tariffs were permitted it  could not foresee how the judiciary (in
this case, probably  state courts) would treat the filed-rate
doctrine. It seems  obvious to us that the Commission would not have
wished to  risk the doctrine's continued employment even had AT&T's 




__________

n 4 Since the filed-rate doctrine is applied by courts, even if it has 
its genesis in the 1934 Act, the Commission's concern about the 


Moreover, as we read the Commission's decision the es- sence of its
reasoning was a desire to put the interexchange  carriers under the
same market conditions as apply to any  other nonregulated provider of
services in our economy. The  Commission concluded that "a regime
without nondominant  interexchange carrier tariffs for interstate,
domestic, interex- change service is the most pro-competitive,
deregulatory sys- tem." Second Report and Order, 11 F.C.C.R. at 20760.
It  thought the public interest would best be served by "estab-
lishing market conditions that more closely resemble an  unregulated
environment." See id. It noted that the "par- ties that oppose
complete detariffing have not shown that the  business of providing
interstate, domestic, interexchange ser- vices offered by nondominant
interexchange carriers should  be subject to a regulatory regime that
is not available to  firms that compete in any other market in this
country." Id.  at 20763. And, importantly, the Commission found that 
permitting carriers to file tariffs on a voluntary basis would 
undermine the competition-enhancing effect of detariffing.  See id. at
20760.5 Under such circumstances, remand is not  necessary for the
agency to consider the proposed alternative.  See Center for Science
in the Public Interest v. Department  of the Treasury, 797 F.2d 995,


Tariff filing, in other words, in the Commission's view is an 
undesirable deviation from the market--at least where there  are no
market imperfections. Petitioners contend that the  Commission could
not foreclose a permissive detariffing with- out more justification
than simply a desire to embrace the  free market. We think, however,
the Commission was enti- tled to value the free market, the benefits
of which are rather  well established. Indeed, the 1996 Act provides
that "[i]f the  Commission determines that ... forbearance will




__________

n filed-rate doctrine is not unreasonable and is certainly not, as 
petitioners claim, legally erroneous.


5 The agency rejected an alternative similar to AT&T's without  even
referring to the danger of judicial mishandling of the filed-rate 
doctrine; the focus was squarely on competition. See id. at 20766-


competition ... that determination may be the basis for a ...  finding
that forbearance is in the public interest." 47 U.S.C.  s 160(b). It
was certainly reasonable to move regulation in  that direction even if
it ostensibly raises transaction costs for  the carriers.6


* * * *


The petition for review is denied.


So ordered.




__________

n 6 The Commission did not, as petitioners contend, ignore the 
probability of increased transaction costs. It simply found them 
insignificant compared to the competitive benefits of detariffing. 
See Second Report and Order, 11 F.C.C.R. at 20764.