1 BEFORE THE WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION RE: Possible Rules Relating to ) Prepaid Telephone Service ) Docket No. UT-971469 Chapter 480-121-040(2)(b) WAC ) ) SUPPLEMENTAL COMMENTS OF THE TELECOMMUNICATIONS RESELLERS ASSOCATION The Telecommunications Resellers Association (“TRA”), on behalf of its members and pursuant to the Washington Utilities and Transportation Commission’ s (“Commission”) July 16, 1998 Notice of Additional Opportunity to Comment, hereby submits supplemental comment regarding additional amendments to the Commission’s proposed prepaid telephone service rules. TRA again commends the Commission for its collaborative approach to promulgating rules which effectively protect the public against the potential for prepaid calling card abuse while mitigating regulatory burdens imposed on legitimate providers. The proposed rules and amendments reflect the Commission’s intent to develop comprehensive rules which accord flexibility to the prepaid calling card industry yet do not compromise the public interest. Regrettably, prepaid calling card abuse will likely continue to be perpetrated by unscrupulous entities and individuals who disregard their responsibility to the public, the industry, and the Commission. Despite the Commission’s best efforts to protect the public from such abuse, even the most comprehensive rules will not end abusive practices from rouge providers. The Commission’s prepaid calling card rules must, therefore, be accompanied by vigorous enforcement action against unscrupulous service providers who intentionally abuse the public, if the public is to be fully protected. Commission imposition of stringent penalties and fines for willful non-compliance of its rules, as envisioned in subsection (10), will be as critical to protecting against prepaid calling card abuse as will the promulgation of the proposed rules themselves. Strict enforcement must go hand in hand with the adoption of the proposed rules. With the above consideration in mind, TRA focuses its comments on the specific prepaid calling card rules and amendments proposed by the Commission. WAC 480-120-xxx – Protection of Advances and Deposits Corporate Debt Rating Demonstrations. Addition of the new corporate debt rating demonstration under subsection WAC 480-120-xxx(1)(a) provides an effective alternative for prepaid calling card providers to demonstrate financial viability and be relieved of onerous bonding or escrow requirements. The proposed debt rating demonstration will facilitate compliance for most companies. Yet smaller and newly formed providers will not likely be able to benefit from subsection (1)(a). While TRA supports adoption of the corporate debt rating demonstration option, TRA urges the Commission to further amend subsection WAC 480-120-xxx(4) by adding a provision that will allow waiver of the bonding or escrow account at such time that an entity who previously was unable to demonstrate a favorable corporate debt rating may at a later time demonstrate compliance with the corporate debt rating standard. Such an amendment would enable smaller and newly formed entities, or those who were otherwise unable to meet this standard, to be granted a waiver of the bonding or escrow requirements upon a demonstration that the corporate debt rating standard had been met. This provision could be incorporated into WAC 480-120-xxx(4) as follows: WAC 480-120-xxx(4)(c) … of service.; or (d) confirmation that the company fulfills the requirements of WAC 480-120-xxx(1)(a). In-State Financial Institution Requirements. New subsection WAC 480-120-xxx(1)(c) retains the Commission’s policy of requiring deposits of customer prepayments or deposits to be maintained in a bank, savings and loan association, mutual savings bank, or licensed escrow agent located in Washington. This requirement may represent a challenge for providers who are not physically located in Washington State, and those with limited Washington operations in particular. For entities with a limited Washington presence, there may be significant difficulties associated with finding a qualifying financial institution or escrow agent. Providers should be able to fulfill the requirements of subsection (1)(c) by maintaining balances in qualified financial institutions located outside of Washington State. At a minimum, providers should be authorized to establish escrow accounts with multi-state financial institutions located in their states of domestication have Washington State branches. Deposit and Prepayment Reporting Requirements. Subsection (2)(a), as proposed, has the propensity for confusion because of the combined references to “deposit” and “prepayment reporting” requirements. Subsection (2)(a) should be bifurcated to contain separate reporting requirements for entities who collect deposits and those who collect prepayments. While the rules may allow for consolidated reporting in instances where an entity may collect both deposits and prepayments, the separation of the reporting requirements into two distinct sections will clarify the requirements, avoid potential confusion, and mitigate the potential for reporting of inapplicable information. Provider Bond/Escrow Account Adjustments. Lastly, Subsection (3)(b) should be amended to clarify that the onus for making subsequent quarterly bond or trust account adjustments should reside with the provider. The requirement is implicit, but not entirely clear. It remains potentially uncertain whether the Commission or company would be expected to initiate adjustments. Subsection (3)(b) should further clarify that the actual outstanding card account balances should serve as the basis for adjustment to the bond or trust account at the time the quarterly report is made. Current references to “quarterly reports data” lack specificity and could be subject to interpretation and potential manipulation of the bond/escrow account amount. TRA proposes the following amendment to Subsection (3)(b) to provide additional definition and clarity to the ongoing bond/escrow account requirement: WAC 480-120-xxx(3)(b) The subsequent level of the bond or trust must be adjusted by the company based upon quarterly reports data the outstanding balance of customer prepayments and deposits at the beginning of the reporting period and the company must notify the commission of that adjustment. WAC 480-120-xxx – Prepaid Local Exchange Service Technical Assistance Staffing Requirements. Proposed subsection WAC 480-120-xxx(3) would impose a requirement on prepaid local service providers to staff technical assistance centers with live personnel 24 hours per day, 7 days per week. Such a requirement could impose a significant burden particularly on smaller companies with limited resources. While TRA does not dispute the criticality of ensuring that local customers have ready access to technical assistance, the live staffing requirements of subsection (3) are especially onerous. Alternatively, the requirement should be amended to impose specific response times to customer inquiries which would ensure timely response without imposing costly staffing requirements. Proposed subsection (3) could be amended to offer providers the option of staffing technical assistance centers on a full time basis or requiring that providers respond to customer inquiries within a set period of time; no more than 30 minutes, for example. The latter alternative would enable local providers to place technical assistance or customer service personnel “on call” or allow the use of pagers without assuming the expense of full time staffing. Network Performance Standards. Proposed Subsection WAC 480-120-xxx(7) establishes prepaid local exchange service performance standards. Again, TRA does not dispute the importance of such standards. Yet under the proposed language, all prepaid local service providers, including non-facilities-based providers, could be considered entirely responsible for network-related call completion requirement under subsection (7)(a)(i), even for network or underlying carrier failures outside of the reseller’s control. Network-related call completion standards are under the purview of a reseller’s underlying carrier. Proposed subsection 7(a)(i) imposes a requirement on the provider to ensure compliance. This requirement appropriately obligates the provider to obtain sufficient network access to meet subscriber demand. This provision should not hold non-facilities-based providers responsible for network-related failures beyond their control. To the extent that such non-facilities-based resellers are not held responsible for underlying carrier call completion failures beyond the reseller’s control, no amendment to proposed subsection 7(a)(i) is necessary. WAC 480-120-xxx – Prepaid Calling Service Prepaid Calling Services Definition. The Prepaid Calling Services definition contained in subsection (1)(a) makes no distinction between prepaid local services and other non-local prepaid telecommunications services. Because the proposed rules would establish separate requirements for prepaid local and non-local services, the Prepaid Calling Services definition in subsection (1)(a) of the Prepaid Calling Service rules should make such a distinction. The Prepaid Calling Service rule should be clear as to its applicability exclusively to prepaid services other than the prepaid local services which are subject to the proposed Prepaid Local Exchange Service rule. Prepaid local services should be explictly excluded from the Prepaid Calling Services definition accordingly. Response to Subscriber Inquiries. Subsection (2) requires that business offices be staffed with personnel who are capable of responding to “all inquiries”. Such a requirement is overly broad and virtually impossible to comply with given the nature of potential questions which could be asked by subscribers beyond relevant service-related questions. What remains important is that business office personnel respond to service-related questions posed by subscribers. This provision should be amended to apply to “all service-related ” questions. Its amendment in no way minimizes the requirement for customer service staff to remain responsive to subscriber inquiries. Technical Assistance Staffing. The 24 hour per day, seven day per week technical assistance staffing requirements appearing in subsection (3) imposes an unreasonable and burdensome requirement on non-local prepaid service providers which should be amended. Notwithstanding TRA’s concerns over the perpetual prepaid local service technical assistance staffing requirements addressed above – concerns equally applicable to this section – 24 hour per day, seven day per week staffing is simply unnecessary for discretionary services such as non-local prepaid calling services. The discretionary nature of non-local prepaid services does not demand the same level of responsiveness that may be required when providing prepaid local services. Unlike prepaid local services, subscribers of non-local prepaid services have ample access to alternative services in the event that service problems are experienced. Non-local prepaid service subscribers do not require, nor should they necessarily expect to receive, 24 hour per day customer service. Round-the-clock customer service staffing for non-basic, discretionary services should be a function of competitive pressure, not regulatory obligation. The perpetual staffing requirements in subsection (3) further conflicts with the requirement in subsection (2) which allows the staffing of business offices “by live personnel during regular business hours[emphasis added]”. A subsection (2) business hour staffing requirement imposes a far more reasonable requirement for providers of discretionary prepaid calling card services. The staffing requirements in subsection (3) should mirror the business hour staffing requirements appearing in subsection (2). Should the Commission intend to establish a subscriber inquiry response time for non-local prepaid services, subsection (3) may be amended to require that service providers record subscriber inquiries placed during non-business hours and respond to recorded subscriber inquiries no later than close of business of the next business day. Commission Consumer Complaint Number Notification. Under subsections (5)(b)(v) and (6)(x) prepaid calling card providers would be required to direct subscribers to the Commission and include the Commission’s toll-free consumer complaint number in service-related materials. To comply, providers would be obligated to produce Washington State-specific materials at significant cost, particularly to regional and national providers. Such costs are not warranted given the public’s ready access to Commission information through directories and the provider’s own customer service groups. Moreover, the likelihood of a prospective subscriber recalling Commission contact information long after the purchase of service is negligible, mooting any perceived benefit of providing Commission contact information at point of sale. Subsections (5)(b)(v) and (6)(x) should be deleted in their entirety. Alternatively, subsections (5)(b)(v) and (6)(x) should be amended to require that Commission contact information be given to Washington subscribers by the company in instances where a subscriber’s complaint can not be resolved. Pre-call Account Balance Announcements. The requirement that companies who offer prepaid calling service must provide an announcement at the beginning of each call indicating the time remaining on the card or account, subsection 7(a)(i) imposes a difficult, if not impossible, requirement for some service providers. While pre-call account balance information is helpful to subscribers, it is not imperative that subscribers be informed of their current account balances prior to placing calls. Pre-call account balance information is in any event available to subscribers at no charge from the provider’s customer service representatives. Moreover, not all prepaid calling card platforms may be capable of providing pre-call account balance announcements. Subsection (7)(a)(i) should be deleted or the provider should be allowed to seek a waiver of the requirement pursuant to subsection (12) of the Prepaid Calling Services rule. Network-Related Performance Standards. TRA’s concerns regarding network-related performance standards contained under subsection (7)(a)(i) discussed above are equally applicable to subsection (9)(a)(I) and will not be repeated here. Service Termination Notification. TRA does not oppose the customer service termination notification requirements contained at subsection (8)(b) to the extent that the Commission recognizes, as apparently it does, that prepaid calling card providers will not have subscriber contact information for all subscribers. To the extent that subscriber contact information is not given to the provider, the provider should be under no obligation to attempt to contact unknown subscribers, particularly given the notification provisions of proposed subsections (8)(c) and (d). CONCLUSION The proposed prepaid calling card service rules generally strike a fair balance between protecting the public interest and mitigating regulatory burdens on competitive prepaid calling service providers. While promulgation of the proposed rules will certainly contribute to the prevention of abuse, strict enforcement of the rules and imposition of penalties pursuant to subsection (10) will be the most effective weapon against prepaid calling card abuse. TRA urges the Commission to promulgate the proposed rules with such amendments as are proposed herein. Respectfully submitted, Telecommunications Resellers Association By: Andrew O. Isar Director – Industry Relations 4312 92nd Avenue NW Gig Harbor, WA 98335 253.265.3910 aisar@ harbor-group.com 6 August 1998