COMMENTS OF THE PUBLIC COUNSEL SECTION OFFICE OF ATTORNEY GENERAL NOTICE OF PROPOSED RULEMAKING TELECOMMUNICATIONS FAIR PRACTICES DOCKET NO. UT-960942 June 19, 1997 I. INTRODUCTION The office of Public Counsel, Washington Attorney General, submits the following comments in response to the Commission's Notice of Proposed Rulemaking dated May 21, 1997. Public Counsel filed comments in the CR 101 phase of this proceeding, and refers to the Commission to those, as well as to the following comments. Public Counsel strongly supports the Commission's efforts to address consumer protection issues raised by the emergence of competition in telecommunications. These proposed rules begin the process of addressing this important topic. As Public Counsel has argued in its earlier comments, there are additional areas which the Commission should also address as implementation of competition continues. The topics contained in the notice are a reasonable start, but they should be viewed as the beginning of a multi-stage process to adopt necessary consumer protections. Our comments below are intended to suggest alternative and expanded provisions to address the topics that are proposed for the current rulemaking. II. PROPOSED RULES While Public Counsel generally concurs with the general direction of the draft rules attached to the NPRM, we suggest a number of changes and additions. These changes and additions are designed to clarify the proposed rules, add important provisions that relate to enforcement and prevention of unfair practices, and more clearly state the Commission’s overall policy with regard to a consumer’s right to privacy with regard to information obtained by telephone companies. Our proposed rule language is attached to these comments as Appendix B. A. PRIVACY The Commission’s proposed rules, in WAC 480-120-139 (2)-Business Practices, contain several provisions that address consumer privacy concerns. Although not labeled as relating to privacy concerns, subsections 2(a)-(c) establish a set of rules designed to address a carrier’s use of “customer specific information.” Public Counsel agrees with the intent of the proposed rules, but suggests that it would be more appropriate to address customer privacy concerns directly and separately from any regulation designed to prevent a carrier from using customer-specific information in an unfair and competitive manner to the detriment of similarly situated competitors. These are two sets of distinct policies and with two separate directives in the Telecommunications Act of 1996. Section 222 47 U.S.C. §222. of the federal Act mandates that all telecommunication carriers abide by certain requirements affecting the use and release of customer proprietary network information (CPNI). As such, this provision requires the FCC to take privacy concerns into account in its establishment of policies to expand and encourage competition. This directive must be viewed in the context of the prior FCC regulation of CPNI. The FCC’s existing regulatory regime focuses on the ability of some carriers to use CPNI for marketing enhanced services and customer premises equipment, confirming that the FCC was primarily motivated to address concerns with competition policy, not privacy. The FCC has initiated a new rulemaking proceeding Telecommunications Carriers’ Use of Customer Proprietary Network Information and Other Customer Information, Notice of Proposed Rulemaking, CC Docket No. 96-115, FCC No. 96-221, 11 FCC Rcd 12513 (1996). to explore the implications of the Act’s elevation of privacy to a concern equal to competition and has solicited comments on how and whether the existing regulations should be expanded and strengthened. This privacy concern must be coordinated with the competition rules contained in Sections 271 and 272 of the Act. (A copy of Section 271 was attached to the Commission’s CR 102 notice.) These sections are designed to regulate the Bell Operating Companies’ entry into long distance competition, and are not, therefore, applicable to other telephone companies, such as GTE or MCI. While these sections impose some restrictions on the BOC’s use of CPNI in their possession, those restrictions are designed primarily to prevent the BOCs from obtaining an unfair advantage, based on their local exchange monopoly, through the use of such information as they enter into the long distance market. Public Counsel supports the development of Washington-based rules that can be enforced by the WUTC to implement both of these provisions. Privacy issues are historically a matter of state concern. Washington telephone customers should be able to look to local enforcement authorities for these important issues. There is nothing in the federal law that suggests that the states should not or cannot enact their own privacy protection rules. Furthermore, we believe that the privacy issues should be addressed separately and not as part of a provision (as proposed by the WUTC draft rules at issue here) that is primarily related to the prevention of slamming or business practices designed to prevent unfair competition. The FCC has not taken any action to finalize the NOPR on CPNI issued in 1996. We are about to enter local competition without any significant control over or customer safeguards with respect to the use telephone companies may make of the private (and valuable, from a marketing perspective) information many telephone companies receive from their customers. Our proposal rests on two basic principles. First, customer-specific information should not be used by a carrier for anything other than billing, collecting and providing the telecommunication services requested by the customer, without the customer’s express written permission. Second, customers should be informed of their privacy rights periodically. We have drawn upon the statutes and regulations in effect in California, Oregon and Ohio for our proposal. The citations to these and other state telecommunications statutes and rules that we have consulted for Public Counsel’s draft rules are set out in Appendix A to our comments. Our proposal contains two of the three proposals (subsections (2)(a) and (b)) found in the WUTC draft rule. The third, relating to a carrier’s ability to telemarket its services to customers with unlisted or unpublished numbers is discussed below as well, although not adopted in our proposal. Subsection 1. General duty. It is important to state the overall objective and purpose served by regulating a carrier’s use of customer specific information. This subsection establishes the duty to protect the privacy of customer proprietary network information, other personal information in the possession of the carriers and the records of a customer’s transactions for both local exchange and toll services. The following provisions then establish key definitions, specific practices, and describe when and how a carrier can use a customer’s specific information. Subsection 2: CPNI. This subsection addresses the use of CPNI, defined in paragraph (f) as individual subscriber data which a carrier obtains in the course of providing services to a subscriber. The term refers to information obtained about a telecommunications service and is based on the definition of CPNI in Section 222 of the federal Act. The specific prohibitions contained in this section are directed to the use of CPNI that may occur because of the transmittal of such information between carriers to effectuate the customer’s ordering of a telecommunications service. In other words, the proposed rules are needed because of the transmittal of CPNI between and among carriers. In general, a carrier should not be allowed to transmit CPNI to another carrier (except for specific purposes that are identified in the rule) without the express written consent of the subscriber. Subsection 3: Subscriber personal information. This subsection addresses customer specific information other than CPNI that is in the possession of a carrier, such as personal identifying information, calling pattern, financial information, household income, employment and other personal information that carriers may gather to determine credit worthiness, collect an outstanding bill or provide advice and services to customers who cannot pay their bill in full. This information is broader than that typically defined as CPNI in subsection 2, and will probably encompass information that is technically not regulated by the federal Act because of its reliance on the term CPNI. Again, the overall objective is to prohibit the transmittal of such information to any person or organization (not limited to other carriers) without the customer’s consent. Subsection 4: Exceptions. Public Counsel’s proposal recognizes the traditional and proper exceptions to the transfer of CPNI or other customer specific information: directory information; directory assistance services (except unlisted or non-published numbers); information provided to an emergency assistance agency; information provided to a law enforcement agency in response to a lawful process; information required by regulatory agencies; and information released to credit reporting agencies and debt collection agencies in conformance with state and federal law. Subsection 5: Annual Notice. It is vital that subscribers understand the type of information retained by carriers, what their rights are with respect to the use and release of this information and how to give and rescind a written authorization. Our proposal requires all telephone companies to provide an annual notice to their subscribers of their privacy rights. This information could be contained in telephone directories or included as an annual bill insert. We also propose that customers with unlisted or non-published numbers be notified that their listing restrictions do not protect them from telemarketing by their own company or third parties (see discussion below). Subsection 6: Equal access to aggregate CPNI. This provision is directly related to the unfair use of CPNI to gain a competitive advantage. Public Counsel suggests that companies that make aggregate (that is, non-customer specific) CPNI available to its affiliate must also make such information available to other companies under the same rates, terms and conditions. Should the Commission determine that a set of fair business practice rules or code of conduct will be necessary to govern the activities of a telecommunications company and its affiliates, this provision could best be included in that general approach. However, since that approach has not been proposed in these draft rules, it does make sense to include all aspects of a carrier’s use of CPNI in one location. Telemarketing to unlisted and non-published subscribers. The WUTC draft prohibits a carrier from telemarketing its own services to customers who have bought a non-published or unlisted telephone number. This would presumably not prohibit marketing to such customers altogether, merely the use of telemarketing. Although Public Counsel is sympathetic to the objective of the proposed rule and would not object to including it in a final rule, there are some balancing considerations which should be taken into account. Customers have perhaps mistakenly assumed that they have bought privacy from such marketing approaches with the purchase of a non-published or unpublished number. Unfortunately, this is not the case. When customers provide their telephone number to any provider of a service to them, such as in an application for a credit card, magazine subscription, purchase a car or register their appliance purchase, those telephone numbers are often included in the sale of an organization’s lists to marketers for similar products. Customers with unlisted or non-published numbers are subject to telemarketing in the normal course and have the same (but no greater) rights as other consumers when responding to what are admittedly often annoying invasions of our homes at dinner time. The Telephone Consumer Protection Act of 1991 (47 U.S.C. §227) establishes a procedure which allows customers to remove their telephone numbers from telemarketing lists. Telephone customers who have purchased an unlisted or non-published number have obtained only a telephone service, that is, the removal of their name and number from directories and the blocking of others to their telephone number through directory assistance. This service does not assure them of privacy or freedom from telemarketing. Other steps are necessary to obtain this protection. We propose rule language that would require, as part of the annual notice of rights, that customers with unlisted or nonpublished numbers be told that they are not automatically protected from telemarketing. B. CHANGE OF CARRIER ("SLAMMING”) No issue has resulted in greater customer dissatisfaction with telephone competition than slamming, the practice of changing a customer’s long distance telephone company without their permission. At both the federal and state level, this has been the number one complaint and has resulted in unprecedented calling levels to both state and federal complaint centers. Public Counsel strongly endorses the general principles contained in the WUTC draft rule, WAC 480-120-139. The draft rules adopt the current FCC rules 47 CFR §64.1100., which are applicable to the change of a long distance service provider. The adoption of WUTC rules on this issue will allow the Commission to enforce these provisions against any carrier for any improper change order submitted for local exchange service and intraLATA toll service. New York has proposed to adopt anti-slamming policies that will require a company that relies on a Letter of Agency (as opposed to oral third party verification) to obtain the customer’s written authorization In the Matter of the Unauthorized Switching of Telephone Customers from One Telephone Carrier to Another Through the Practice Known as “Slamming”(NY P.S.C., December 13, 1996) (Case 95-C-0806).. New York thus rejected the FCC approach which allows a company that relies on a Letter of Agency for confirmation to impose a "negative option" on customers. Under a negative option approach a customer is changed to the new service unless they notify the company in writing otherwise after receipt of the LOA. Both the FCC and the WUTC proposed rule follow this approach. Ohio has adopted an anti-slamming policy that, like New York's, also rejects the use of the negative option and requires the telephone company to confirm the change either by electronic authorization (the customer electronically records the agreement to change carrier), use of an independent third party for verification, or written confirmation when the company relies on the use of a LOA to confirm the change. In re Establishment of Local Exchange Competition (Ohio P.U.C. November 7, 1996) (NO. 95-845-TP-COI), at 88. Several states, including Ohio and California, have also adopted much stricter enforcement approaches to slamming compared to the FCC. Both states put the customer back in the position that existed prior to the slam, that is, the customer is returned to his original telephone company and does not owe any charges to the company that did the slamming. If the customer did not in fact have a contract with the company that slammed him, he owes nothing for services provided without authorization. This is unlike the FCC rule which requires the customer to pay up to the amount that would have been charged by his or her original telephone company. Policies and Rules Concerning Unauthorized Changes of Consumers’ Long Distance Carriers, 10 FCC Rcd 9560 (1995). This approach has been supplemented recently with a Notice of Apparent Liability for Forfeiture issued by the Common Carrier Bureau, relying on the authority in 47 U.S.C. §503(b)(2)(B)to assess a forfeiture of up to $100,000 for each violation up to a statutory maximum of $1,000,000 for a single act or failure to act. See, e.g., In the Matter of Long Distance Services, Inc., Notice of Apparent Liability for Forfeiture, DA 96-2102, December 17, 1996. Any state anti-slamming rule must balance the need to prevent fraud, which suggests the need for written authorization for any switch, with the equally important need to stimulate the development of competition in the face of the significant market power of the incumbent, thus suggesting the need for allowing oral confirmation. Whatever the merits of the more liberal approach, i.e., relying on oral confirmation, the history of slamming in the interstate long distance industry suggests that some additional constraints are necessary. Therefore, Public Counsel recommends the use of oral confirmation when a customer initiates the contact with the telephone provider, and allows the use of oral confirmation by an independent third party when the provider initiates the contract via telemarketing. If oral confirmation is not obtained with these options, the provider must obtain the customer’s written authorization on an approved Letter of Agency. No negative option is allowed in these circumstances. Furthermore, the use of a check as an LOA is prohibited. Of course, no approach can work if a provider is intent on fraudulent conduct, such as forgery. Any instance of this conduct should result in a severe penalty, preferably, certificate cancellation. Public Counsel’s proposed amendments to the WUTC draft are modeled on the state regulations in California, Ohio and proposed rules pending in New York. Our approach differs from the WUTC draft rules by clarifying when a customer can obtain a change in provider by orally contacting their local service provider to request a change; specifying the form and content of a Letter of Agency and requiring that the new provider provide the customer with certain written disclosures to confirm the change in carrier; prohibiting the use of a check to operate as a LOA; and specifying enhanced enforcement tools for the Commission to respond to violations of the change of provider rules. Neither our draft nor the WUTC proposal address the issue of a PIC freeze, that is, a request by a customer to their local exchange provider to halt any change in their long distance service provider without their express written permission. This service has the effect of prohibiting the local exchange provider from responding to a change order submitted by a new provider who has complied with the options for change orders set forth in this rule. When a state moves to either intra-LATA presubcription or local exchange competition, this service has the effect of preventing the customer from easily entering the competitive market and choosing a new in-state toll or local exchange provider even though the customer requested this service to respond to unwanted provider changes for interstate long distance. Public Counsel recommends that the Commission investigate the extent of the use of PIC freezes in Washington prior to addressing this matter. At the very least, those companies who have instituted this service option should be required to inform the affected customers how to change (and then freeze if desired) their service provider. Our further comments are organized by our draft rule attached to these comments: Subsection 1: General duty. While the WUTC draft contains a general obligation not to submit a change order unless confirmed according to several optional procedures, our draft in effect defines the term “change order” and establishes an affirmative obligation on all carriers to establish internal procedures and monitor its employees and agents to prevent an authorized change of a company by a consumer. Subsection 2: Subscriber-initiated inbound call. Public Counsel’s proposed rule allows a customer to initiate a change in provider by calling the new carrier to make the change. The new carrier should be able to notify the customer’s old carrier of this change (or, in the case of a toll carrier, notify the customer’ local exchange carrier) without further authorization. Subsection 3: Telecommunication company-initiated sales. Both the WUTC draft and Public Counsel’s allow the use of an electronic verification or third-party verification as options to demonstrate the customer’s assent to the change in provider. However, our draft combines the form of the written authorization from the customer (Section 139(1)(a) of the WUTC draft) and the Letter of Agency approach (Section 139(1)(d) of the WUTC draft. The main difference is that the Public Counsel’s proposal does not allow a provider to issue a customer a written package of information which operates as a negative option, that is, changes the customer’s carrier unless the customer returns the postcard. This approach, authorized by the current FCC rule, is the cause of much mischief because it requires the customer to take action to halt a change in service provider he or she may never have ordered. Furthermore, our draft prohibits the use of a check as a form of written authorization when signed or cashed by the customer. The Public Counsel’s draft requires that if the new provider has initiated the contact with the customer (whether by telemarketing or direct mail), the customer must approve the change by a written authorization. A failure to return the written authorization (which could be in the form of a postcard, but not a check, prize or other money order) would mean that the customer’s provider would not change. In addition, we propose in subsection 3(d) of our slamming rule draft that all customers whose provider is changed as a result of either direct contact by the customer; electronic verification; or third-party authorization must receive an information package with key disclosures within three business days. A customer whose written authorization is obtained from a LOA will have already received similar information. Subsection 4: Disputes. There must be no doubt that the telecommunications company who disputes the customer’s authorization to change carriers bears the burden of providing the evidence to demonstrate compliance with the provisions of the state regulation. Subsection 5: Remedies. While the WUTC has the authority to impose fines and revoke a license of a carrier that violates its rules, the Public Counsel’s draft contains specific remedies relating to the violation of the anti-slamming rules. The current FCC rules are inadequate in this regard and do not prevent continued violations. Our proposal will allow the Commission to order a violator to pay the customer’s previous service provider an amount equal to the charges paid by the subscriber to the violator or owed to the violator. Furthermore, a subscriber should not have to pay one dime to a company that violates these rules and payments made should be promptly refunded. Our rules also allow the Commission to order a company to rely solely on a written authorization from new customers prior to any switch if there is a demonstrated pattern or practice of noncompliance. Any documentation of forgery by a carrier should immediately cause that carrier’s license to do business in Washington to be revoked. There can be no tolerance for this outrageous conduct. C. DIRECTORY LISTINGS The WUTC draft rule contains one provision relating to directory listings. The amendment requires directory listings by incumbent local exchange carriers or competitive LECs to include the name and address of all exchange carriers registered to provide service in the geographic area covered by the directory. Public Counsel agrees with this proposal. Our draft rule on this topic incorporates the WUTC proposal and adds the requirement that the listing should be placed in a prominent location near the front of the directory. It will not achieve the purpose of the proposed rule to place this list of competitors in a location unlikely to be viewed by most customers. Our proposal also requires the local exchange company’s directory service to offer registered exchange providers the ability to purchase a larger space, up to 1/8 of a page, to more clearly describe their proposed services. In addition to the requirement that directories include a listing of all registered exchange providers, Public Counsel also proposes that all directories contain a listing of subscribers served by competitors in the geographic area served by the directory. The telephone directory service will soon lose its value as a source of comprehensive information on customers, addresses and telephone numbers if it does not contain all customers served by the local exchange companies offering service within that geographic area. III. CONCLUSION Public Counsel supports the Commission's efforts to address these important areas. We respectfully urge the Commission to consider and adopt the changes and additions proposed in our comments in order to clarify and enhance the Commission's efforts in this area. Respectfully submitted, Simon J. ffitch Assistant Attorney General Public Counsel Section F:\CASES\UT\UT960942\COMMENT2.DOC APPENDIX A COMMENTS OF PUBLIC COUNSEL UT 960942 STATE RULES REGARDING TELEPHONE COMPETITION California: Re Order Instituting Rulemaking on the Commission’s own Motion into Competition for Local Exchange Services (Cal.P.U.C., July 24, 1995 (Docket No. R. 95-04-043, I. 95-04-044) Appendix B. See also Cal. Public Utility Code §§2891, 2891.1, and 2893. Ohio: Re Local Service Guidelines, Appendix A (Ohio P.U.C., November 7, 1996 (Case No. 95-845-TP-COI). Oregon: Oregon Administrative Rules, Chapter 860, Division 35 (PUC), §860- 35-090: Access to CPNI. New York: Re Transition to Competition in the Local Exchange Market (N.Y. P.S.C., May 22, 1996) (Case No. 94-C-0095, Opinion No. 96-13); In the Matter of the Unauthorized Switching of Telephone Customers from One Telephone Carrier to Another Through the Practice Known as “Slamming", Notice Soliciting Comments, Case No. 95-C-0806, December 13, 1996. Minnesota: Minnesota Statutes 1996, §237.66, Disclosure of local service options. F:\CASES\UT\UT960942\COMMENT2.DOC APPENDIX B PUBLIC COUNSEL DRAFT PROPOSED RULES (6/19/97) WUTC DOCKET No. UT-960942 WAC 480-120-xxx Privacy. (1) General duty. Every telecommunications company shall have a duty to preserve the privacy of customer proprietary network information, other personal information in the possession of the telecommunications company, and the record of subscriber transactions involving local exchange service and toll service. Every telecommunications company shall protect such information and transaction records from commercial abuse and unauthorized disclosure. (2) Customer Proprietary Network Information (CPNI). (a) A telecommunications company that receives or obtains CPNI from another telecommunications company to provide a telecommunications service to its own subscriber shall use that information only for the provision of that specific service. A telecommunications company shall not use the information for its own marketing efforts unless the information is accessed in response to a call initiated by the subscriber and the subscriber orally approves of the use of such information for marketing services to the subscriber. (b) No telecommunications company shall access or use the CPNI obtained from an interconnecting telecommunications company for the purpose of marketing its services to the subscribers of the interconnecting telecommunications company. (c) No telecommunications company shall solicit another telecommunications company’s subscriber or applicant where the interconnecting telecommunications company is in the Draft Rules, WUTC Docket No. UT-960942 Page 1 process of waiting for the telecommunications company to provide facilities necessary to serve that same subscriber or applicant. (d) A telecommunications company may only make CPNI available to another telecommunications company after it obtains prior written authorization from the subscriber for the provision of subscriber-specific CPNI to the other telecommunications company. (e) A telecommunications company or its affiliate shall not provide CPNI to any telecommunications equipment manufacturer or telecommunications company for use with or in connection with the manufacturing of telecommunications equipment or the provision of local exchange, interLATA, information, enhanced, or video services that are disseminated by means of such local exchange company’ s or any of its affiliates’ facilities without the prior affirmative and written consent of the subscriber. (f) “Customer Proprietary Network Information” is defined as individual subscriber data which a telecommunications company obtains in the course of providing services to a subscriber. CPNI means information that relates to the quantity, technical configuration type, destination, and amount of use of a telecommunications service obtained by the subscriber, and that is made available to the company by the subscriber solely by virtue of the subscriber relationship. CPNI includes information contained in the bills pertaining to telecommunications services received by a subscriber, except that this term does not include subscriber list information. (g) The term “subscriber list information” means information identifying the listed names of subscribers of a telecommunications company and the subscribers’ telephone numbers, addresses and primary advertising classifications or any combination of such listed names, numbers, addresses or classifications, if such information has been published or caused to be published by the telecommunications company or its affiliate in any directory format. (3) Subscriber personal information. Unless the telecommunications company has obtained the subscriber’s prior affirmative and written consent , no telecommunications company shall make available to any other person or organization, any of the following personal information: (a) The subscriber’s personal calling pattern, including any listing of the telephone or other access numbers called by the subscriber, except for the purposes of billing information provided to the person who makes the call and also except for the identification of the telephone number from which the call was placed pursuant to a Commission-approved subscriber call identification service; (b) The subscriber’s credit or other personal financial information, except to a credit reporting agency for lawful purposes or a debt collection agency for the collection of unpaid debts owed to the telecommunications company, (c) The services which the subscriber purchases from the telecommunicatio