A telecommunications tariff is an open contract between a telecommunications service provider and the public, filed with a regulating body such as state and municipal Public Utilities Commissions and federal entities such as the Federal Communications Commission (FCC). Such tariffs outline the terms and conditions of providing telecommunications service to the public including rates, fees, and charges. Reasons for tariffs At a minimum, tariffs imposed must cover the cost of providing the service to the consumer. The consumer may be the final user or an intermediary such as a service provider. If a telecommunications operator cannot recover its costs, it will make a loss and the company will go bankrupt. Tariffs must also be used to cover maintenance, additional research and other indirect costs associated with providing the service. However, telecommunications service providers must be careful not to over-price each service, as prices have a direct influence on demand for that service (see supply and demand). Such an operator must constantly balance the need to provide cheaper rates, especially if there is strong competition, with the cost of maintaining the service at an optimum quality that is acceptable to the customer. If an operator charges too much, it risks alienating its customers, resulting in a loss of traffic and therefore revenue; if they charge too little, they will have insufficient capital to maintain the network's quality of service. Over time this will result in customer attrition. Components of tariffs Tariffing systems vary from country to country and company to company, but in general they are based on several simple principles. Tariffs are generally made up of two components: Standing charges: these are fixed charges that are used to pay for the cost of the connection to the nearest exchange and the equipment to monitor that customer's phone line or service connection. They are usually paid on a monthly basis, and called rental. Call charges: these charges are variable and are used to pay for the cost of the equipment to route a call from the caller's exchange to the recipient's exchange. These call charges can be calculated on a fixed per call basis, a variable basis depending on the time or distance of the call, or a combination of the two. Call charges can even vary at different times of the day. For many local calls the charge is zero; see flat rate. These components form a basic tariff system