1 WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION DOCKET NO. UT-980675 CRAMMING/SLAMMING COMMENTS OF GTE AUGUST 12, 1998 INTRODUCTION GTE Northwest Incorporated (“GTENW”) and GTE Communications Corporation (“GTECC”), collectively “GTE” GTENW is a local exchange carrier and provides billing and collection services. GTECC provides long distance, competitive local exchange, and other services. It does not presently provide billing and collection services for the parties., provide the following comments in response to the Commission’s July 21, 1998 “Notice of Opportunity to Participate” (“Notice”) in the Commission’s review of possible solutions to reduce cramming and slamming complaints, which will be discussed at a workshop scheduled for August 14th. Slamming and cramming are serious issues for consumers and the industry. The presence of a few unprincipled carriers deprives customers of the benefits of competition and harms the overwhelming majority of industry players who treat customers fairly. GTE respectfully submits that while the Notice’s cramming solution options are intended as a good first step to open discussion toward an effective industry-wide solution, they are flawed and will likely be subject to meritorious legal attacks. A hurried push to achieve a quick regulatory fix is not in the best interest of Washington consumers. GTE recommends that the Commission allow self-policing by the industry to be the remedy for cramming. Start up businesses and the creation of new opportunities often result in a period where a small percentage of new entrants violate or stretch the rules. The Commission should let the free market operate and give the industry the opportunity to eliminate the problem. This is what happens in competitive markets, and only after it is shown that the industry cannot police itself, should a regulatory body become involved and issue rules and restrictions. As is shown below, the industry has acted quickly and responsibly to eliminate these problems. Moreover, competitors who use these tactics will not be in the market for long, as the public will eliminate them. These industry-wide solutions should be used instead of implementing another layer of regulation when it is not necessary. The Commission should allow the industry to continue to work towards global solutions and in the interim collect the best practices that have been developed to fight cramming. GTE and others in the industry have been working on these issues, particularly cramming, and have best practices to share with the Commission. This may be a good springboard for further investigation as to what the industry is already doing and what appears to be most effective. 2. GENERAL RESPONSE Before addressing the specific rules, GTE provides general comments on the Commission’s jurisdiction to take many of the actions in the Notice’s options. The Commission is without the requisite jurisdiction, and the options would need to be modified to a substantial extent before rules could be enacted. In any event, the solution to the issue is not to try to fix the problem through the local exchange carriers’ (“LECs’”) billing and collection contracts. The seven “options” set forth in the Notice are implicitly based on an assumption that the Commission may regulate billing and collection (“B&C”) services that the LECs provide on a contractual basis to other carriers. This is an incorrect assumption. First, most cramming complaints involve activities subject to interstate billing and collection activity, over which the Commission has no jurisdiction. Second, to the extent that any intrastate billing and collection activities might be involved, they are generally competitively classified in Washington. Therefore, the Notice’s options would involve complex re-regulation steps by the Commission. As explained below, such steps are not necessary. Third, not all current billing and collection contracts with the carriers contain terms and conditions that permit the action envisioned by the Notice’s options. Any attempt by the Commission to unilaterally change the terms of those contracts would run afoul of constitutional principles concerning impairment of contracts and would be an ultra vires act of the Commission. While GTE supports all commercially reasonable efforts to control slamming and cramming, they must be taken in a manner that is within the Commission’s jurisdiction and which places the burden on the offending parties. The Commission should focus any regulatory action on the offending carriers and not the LECs. 3. ALLOW INDUSTRY TIME TO IMPLEMENT SOLUTIONS GTE has been working diligently to eliminate incidents of cramming before the implementation of any regulatory directives. GTENW is proactively attempting to eliminate cramming by initiating three programs. First, GTENW is in the process of renegotiating contracts to strengthen its rights in this area and is seeking amendments that contain stringent requirements. GTENW is seeking the right to remove questionable charges from a customer’s bill and send these charges back to the service providers. Moreover, as contracts expire, GTENW is requiring companies to sign comprehensive billing and collection contracts with stringent requirements before GTENW will bill on their behalf. These provisions allow GTENW to categorize the complaint and, if the restrictive complaint threshold for that B&C client has been reached, to impose a series of administrative fees and remedies on the offending client, up to and including termination of the contract. Indeed, in some instances GTENW has decided, based on a carrier’s prior conduct, that it will not bill for a carrier at all on a prospective basis. GTE is already in front of multiple tribunals defending its commercially reasonable steps in this area. Second, through customer education, GTE is attempting to constrain cramming by making the customers more aware of the charges that appear on their bills and the recourse available to them. Customer education is being pursued through bill inserts, “page intentionally left blank” bill messages, and added detail on GTE's Internet Web Page, and GTE is pursuing the addition of a consumer alert to the front of each GTE telephone directory. Third, GTE has instituted a corporate policy that GTE's local phone bills will include only charges related to telecommunications or information services. Further, GTENW is committed to providing its customers with prompt resolution of these billing issues, removing the disputed charges, and sending these charges back to the offending carrier. The industry is actively reviewing a series of anti-cramming best practices that LECs can implement, depending on their customers and the types of problems they have experienced. GTE recommends that the Commission defer consideration of proposed cramming rules until more information on the effectiveness of industry-provided solutions becomes available. 4. THE NOTICE’S OPTIONS Below are GTE’s comments and concerns regarding the seven possible options listed in the Notice. Option 1. Prohibit billing for services or products when the request for the service is adjunct to entering a contest or similar promotion. This Option does not make clear whether the “services or products” it addresses are limited to telecommunications services, or are intended to include non-telecommunications items. In addition to the jurisdiction issues mentioned above, GTE does not believe that the Commission can restrict billing for services that are not regulated telecommunications services in the State of Washington. Therefore, this Option would, at a minimum, need to be expressly confined to telecommunications services subject to the Commission’s jurisdiction. In any event, GTENW has already implemented a number of billing and collection contract changes that would address these concerns. First, GTENW will only allow for the billing of telecommunications and information services on its bill. Second, GTENW requires that companies provide their marketing information to GTENW for verification of compliance with GTENW’s billing and collection policies. GTENW reviews this to confirm that any sales related documentation, from which the customer will make a decision to buy, provides clear and accurate information on the product/service. GTENW also confirms that the documentation to order the product/service will be separate from any contest/sweepstakes entry form. Option 2. Allow a customer to “bill block” service, which would allow them to choose to be billed only for services provided directly by their LEC or by their preferred long distance carrier, but not by others. Again, the Commission may not enforce “bill blocking” of services that are not regulated telecommunication services in the State of Washington. Beyond the jurisdictional authority issues, GTE and other industry participants on the FCC Anti-Cramming Coalition noted that there are significant implementation issues associated with any “bill blocking” option. There would be significant technical challenges, costs and timelines. If individual provider blocking were to be provided, it would require the implementation of a standardized nationwide process to universally identify every service provider. This is not currently available. Further, service providers would require due notification of the block as part of the implementation. These are not issues that can be resolved in a short period of time, and the Commission should drop consideration until such options are technically feasible and cost effective. Option 3. Require billing entities to evaluate existing billing contracts with service providers when the providers develop a history of cramming complaints and to terminate those contracts if the complaint problem is not rectified. Please refer to discussion above on jurisdictional authority issues. GTENW has already implemented a billing and collection complaint reduction program to monitor, carrier practices and take action up to and including contract termination against service providers who have excessive billing and collection complaints. Option 4. Require billing entities to modify their billing contracts to avoid services or products that are common cramming problems. See GTE’s comments on Option 1, above. Option 5. Require billing entities to provide clear descriptions of services or products for which customers are billed, and to include in the bill a valid phone number for each provider where customers can dispute directly with the underlying carrier. GTENW will be implementing a more stringent text phrase review process over the next few months. GTENW will require that the following information accompany any request for a new or modified text phrase: Proposed detailed text phrase language Name, date, and issue number of any publication in which the product or service will be or is being advertised. Copy of actual print advertising media (i.e., actual print advertisement, tape of television or radio advertisement). Internet web page address Detailed description of how product or service is ordered Detailed description of how product or service can be canceled Copy of post sale fulfillment documentation GTENW’s billing and collection contracts and processes already address the issue of billing inquiries with the underlying carrier. If GTENW performs the billing inquiry function, then the telephone number of the GTENW contact center appears on the end-user bill. GTENW will then speak to the end-user and process adjustments, if necessary. If the billing and collection customer performs its own inquiry function, then the billing and collection customer’s number appears on the end-user bill. If a GTENW customer calls GTENW rather than a billing and collection customer that performs its own inquiry function, GTENW will transfer the customer to the correct party. This ensures that customers receive prompt attention for their billing inquiries. GTE believes that its process is the most efficient and least confusing for the customer. GTENW would oppose any change to its billing and collection inquiry process. Option 6. Forbid the solicitation of customers for regulated telecommunications services through the use of contests or similar promotions. See GTE’s comments on Option 1, above. Option 7. Require billing agents, upon notice from a customer that a charge for services is unauthorized, to recourse the charge to the underlying creditor. Require the billing agent to inform the customer that such charges will be removed, but that the underlying creditor may attempt to collect the charges using a different collection method. GTENW has already implemented a final recourse process whereby GTENW immediately recourses the disputed charge(s) back to the billing and collection customer. The end user customer is then informed that the creditor may attempt some other mechanism for collection. SLAMMING GTE urges the Commission to avoid the misconception that slamming can only be addressed effectively through the creation of new rules. This view is a misconception because it overlooks the nature of the two general categories of carriers involved in this conduct. The first consists of carriers that disregard existing rules and engage in slamming virtually as a way of doing business. These are the carriers that submit PIC change orders to LECs without ever having contacted any of the customers included in the orders. These are the carriers that, in telemarketing to consumers, defraud consumers into believing they are affiliated with (or part of) the consumers’ local or long distance telephone company. These are the carriers that obtain bogus third party verifications because they have duped the consumer into believing that all the consumer is changing is a calling plan, not a pre-existing long distance carrier. The list goes on and on. For these carriers, new rules are simply annoyances to be circumvented or ignored. New rules will have little or no effect on their conduct. The other type of carrier is the one that is in the business for the long haul. This is the carrier that takes pride in its brand name, that expends resources building goodwill with its customers, and that knows that slamming will destroy rather than build its business. Occasionally, this type of carrier will find that it has “slammed” some consumers. The slamming may occur through a rogue employee, a sales agent turned bad, an order entry error, or a poorly trained employee failing to obtain proper verification. With human nature being what it is, mistakes of this type will occasionally be made and this form of “slamming” will never be completely eradicated. More importantly, however, in these instances slamming occurs because of a breakdown within the carrier’s operations, not because existing rules are inadequate. Accordingly, GTE firmly believes that new rules should be enacted only when there is sufficient evidence that they will be effective in deterring some form of deliberate conduct. A proliferation of rules governing the relationship between carriers and their customers necessarily makes that relationship more complicated and more confusing to the average consumer. They also increase the cost of doing business for the vast majority of carriers that operate legitimately. Thus, GTE urges the Commission to review all proposed rules with an eye toward avoiding the enactment of measures that will be ineffective, unduly complicate the carrier/customer relationship, heighten customer confusion or unnecessarily increase the overall cost of doing business for legitimate carriers. In addition, all measures should be competitively neutral to all carriers. No rules should make it any easier or any more difficult for one set of carriers to gain new customers than for any other set of carriers. The Commission should also avoid the temptation to burden selected carriers, such as local exchange carriers, with responsibility for policing or reporting on the rest of the industry. Designating one segment of an increasingly competitive industry to police or report on another will also invite litigation as legitimate reporting errors become “deliberate” attempts to damage competitors. Every carrier authorized to do business within the state must be required to assume responsibility for compliance with existing rules, including any proactive reporting requirements. The most effective way to reduce slamming is to actively enforce existing rules and fully utilize available remedies. So long as unscrupulous carriers believe that they can operate for a significant period of time (or indefinitely) without being prosecuted for slamming and that there is money to be made, they will have every incentive to engage in this conduct. Taking the incentive to make slamming a way of doing business away from these carriers is the most effective way to deter their conduct. 6. CONCLUSION GTE appreciates the opportunity to provide these initial comments on the proposed options. In order to facilitate the elimination of instances where customers have unauthorized changes made to their designated service provider or receive unauthorized charges on their bills, GTE stands ready to work with the Commission on the development of informal guidelines which the industry can utilize to solve these customer issues.