MCI WorldCom Inc. has settled a challenge to its practice that bars small businesses from taking billing disputes to court. However, officials at the Federal Communications Commission indicated yesterday that the agency may still review MCI's controversial arbitration requirements because they may hurt consumers.

In the fine print of a lengthy MCI document filed with the FCC, MCI said it requires that billing disputes of more than $10,000 be heard by an arbitration firm selected by the phone company--under rules written by the phone company. And these rules limit the evidence that can be presented, bar the making of a stenographic record and demand complete confidentiality.

Earlier this year, Innkeepers' Telemanagement & Equipment Corp. (ITEC) filed a complaint with the FCC, calling the arbitration provisions unjust and unreasonable. MCI tried to force ITEC into arbitration to resolve a $469,000 bill MCI said it was owed. ITEC said that not only did it not owe MCI any money, but that it was due some money from MCI.

ITEC and MCI settled their dispute earlier this week. Under the settlement, MCI agreed to drop its arbitration claim, while ITEC agreed to dismiss its complaint to the FCC; the agency formally dismissed the case yesterday.

FCC officials, who requested anonymity, said the agency remains concerned about any anti-consumer provisions that may be hidden in what are known as tariff documents, which all long-distance firms are required to file with the FCC. The tariff details rates and terms of service and is hundreds, sometimes thousands, of pages long. Courts have long ruled that whatever is in the tariffs automatically has the force of law--unless it is specifically overturned by the FCC.

At the same time that ITEC dropped its complaint, the Association of Trial Lawyers of America independently filed a new complaint with the FCC, saying MCI's arbitration provisions deprive "consumers of the fundamental constitutional right to trial by jury."

MCI's arbitration requirement is not unusual. A growing number of firms, including credit-card companies and auto dealers, now include in the fine print of their contracts, sales agreements and bill inserts a requirement that customers agree in advance to give up their right to sue and submit any disagreements to arbitrators.

ATLA President Richard Middleton said MCI's arbitration requirement "borders on the fraudulent" because it is contained "in a public filing that no consumer in America even knows exist. . . . Arbitration is good only when it's voluntary between all parties and fully and properly disclosed. This is absolutely not the case" with the MCI tariff.

MCI officials were unavailable for comment yesterday.