BEFORE THE WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION In the Matter of Consumer Protections Related to “Cramming” and “Slamming” DOCKET NO. UT-980675 INITIAL COMMENTS OF PUBLIC COUNSEL AND CONSUMER PROTECTION These following comments are submitted by Public Counsel and by the Consumer Protection Division of the Washington Attorney General, pursuant to the Commission’s Notices of July 10 and 21, 1998. Public Counsel and Consumer Protection strongly support the Commission’s efforts to address consumer protection issues, and especially applaud attempts to stop slamming and cramming, two vexing problems facing telecommunications consumers today. In considering changes to its rules on slamming, we urge the Commission to be guided by the following three principles: a) all financial incentives to slam consumers must be removed; b) consumers must be given the necessary tools to protect themselves against this practice; and c) local phone companies must be both empowered and required to take action that will assist in eliminating this practice. Despite steep fines and penalties assessed by the FCC and imposed by the courts through state enforcement actions against slamming entities, the business of slamming continues to prosper. Unless and until all financial incentives for slamming are removed, the continued enforcement efforts by these governmental agencies will be of limited value. Recommendations for Cramming Rules The options Staff is considering (listed in the July 21, 1998 letter) are excellent ideas, and would help prevent or impede cramming. We also add the following suggestions: 1The “negative option” sales method should not be allowed. Telephone companies send materials to consumers saying that if the customer does not respond within a certain time, a new phone service will be added. This places an unfair burden on the consumer, who may want to continue with their existing provider, but may not check their mail regularly, or may have overlooked the letter as a mere promotional attempt. Negative option sales are disfavored in this state. 1Third-party verification may be ineffective to prevent cramming, given the existing opportunities for fraud. Since the “third party” could just be someone in the next cubicle, there is no way for the local exchange carrier (LEC) to tell whether the customer actually authorized any new services. Other methods of verification should be explored. 1Consumers should have no liability to pay for services they did not order, and the carrier responsible for cramming should not be paid anything. 1LECs should be empowered and required to stop collecting for unauthorized service additions. 1The Commission should consider including enforcement provisions detailing the consequences to companies if they persist in cramming. Recommendations for Slamming Rules Public Counsel and Consumer Protection praise the continued efforts of the Commission to address the widespread problem of slamming. Despite recent efforts made at both the state and federal level, the number of consumer complaints related to slamming continues to grow. In facing this growing problem, two policy considerations need to be balanced. First, customers need protections from unauthorized changes in service. Second, the competitive market and the customer’s right to choose his or her phone company should not be unduly hampered by making it too difficult for a customer to change service providers. In light of these considerations, Public Counsel and Consumer Protection make the following suggestions: 1Consumers should be allowed to decide whether they want their long distance provider to be switched only upon written authorization, or whether they want to be able to switch their phone company more easily (i.e., with a phone call). This could be included as an option on the telephone bill. 1The “negative option” sales method should not be allowed. WAC 480-120-139(2)(viii) provides that once an informational packet is mailed to a consumer informing them of a change in their long distance carrier, the consumer must return a postcard if the consumer does not want their long distance service changed. This form of negative option imposes unreasonable burdens on consumers who have been slammed. This rule should be changed to require that the consumer’s long distance carrier will not be changed unless and until the postcard is returned. 1Third-party verification has not been sufficiently effective to prevent slamming; perhaps other methods of verification need to be explored. 1LECs should have the authority and responsibility to require proof of authorization for service switches from IXCs. 1LECs should be required to give notice of any changes in service on the next billing statement. If the LEC knows the name of the IXC the customer was switched to, the LEC should include that information. Methods should be created to provide this information to the LEC who can then provide it to the consumer. 1LECs, upon receipt of a slamming complaint by a consumer, should be required to suspend all billing and collecting for charges assessed after the alleged slam. The long distance carrier or reseller should then be obliged to produce, within a short but reasonable period of time, verification of the change order. Some commentators may argue that a rule absolving consumers of liability will engender fraud by consumers who might claim that they have been slammed in order to avoid paying lawful and duly authorized charges. We reject this argument. First, it has not been substantiated. Second, the hypothetical possibility that a few consumers might defraud carriers should not outweigh the documented fact that numerous long distance carriers and resellers have, through slamming, defrauded thousands of consumers. Third, carriers have the ability to protect themselves from this possibility by obtaining and retaining valid verifications of change orders. 1LECs should be required to deny billing and collection services altogether if the number of slamming complaints against a particular carrier or reseller rises above a certain threshold. 1Require the change fee to be paid by the IXC, thereby discouraging IXCs from making unauthorized service switches. 1Consider increasing the fee to IXCs for restoring a customer to his or her original carrier, thereby compensating the LEC for its time and further discouraging IXCs from making unauthorized switches. 1Take the profit out of slamming for IXCs so that the IXC gets no payment if they cannot prove the switch was authorized. Although the Rule currently provides that a slamming company “shall receive no payment for service provided”, many carriers and local providers express confusion over this provision as it relates to consumer liability. Others simply ignore the rule, and instead follow the FCC’s rerating policy which still obligates the consumer, but only up to the amount that their original carrier would have charged. This rerating policy is unacceptable for a number of reasons. First, it rewards the wrongdoer and provides no deterrent function. Allowing a slamming company to receive any benefit from its illegal actions only encourages it to slam again. Second, this policy is contrary to the long established equitable principle, codified in Washington law, that consumers need not pay for goods and services they did not request. RCW 19.56.020. 1The Commission should consider including enforcement provisions detailing the consequences to companies if they persist in slamming. The widespread practice of slamming is undermining consumer confidence in the telecommunications system, and the government’s ability to protect the public. It is also chilling the climate for smaller companies to attract customers. The existing market must be adjusted and consumers should be given tools to prevent slamming.