Agenda Date: April 12, 2000 Item Number: Docket: UT-000067 Company Name: USLD Communications, Inc. Staff: Vicki Elliott, Assistant Director, Consumer Affairs Paul Curl, Deputy Director, Regulatory Services, Glenn Blackmon, Assistant Director, Telecommunications Carlene Hughes, Program Coordinator Mark Halliday, Compliance Manager Jonathan Thompson, Assistant Attorney General Dennis Shutler, Investigator Bruce Grimm, Investigator Alan Dickson, Investigator Gail Griffin-Wallace, Consumer Program Specialist Recommendation: Issue a Complaint against USLD Communications, Inc. Accept the proposed Agreement to Penalties and Consumer Remedies to resolve the Complaint. Discussion: The proposed Complaint and Agreement to Penalties and Consumer Remedies in this matter comes from a staff investigation into the business, billing, and disclosure practices of USLD Communications, Inc.(USLD). The investigation was prompted by a high number of consumer complaints received by Consumer Affairs from consumers who claimed they were charged excessively high rates for intrastate calls made from payphones where USLD is the operator services provider and/or presubscribed long distance carrier. To date, Consumer Affairs has received over ninety complaints against the company. Staff notified USLD, by letter dated November 23, 1999, that Staff opened an investigation. In the same letter, Staff requested specific billing records. By letter dated December 10, 1999, USLD acknowledged a billing problem for Washington intrastate calls, asserted the company was in full compliance with the Commission’s rate disclosure rule; and transmitted the billing information requested by Staff. During the ensuing investigation, Staff found the following violations of state law and rule: Wrong Rates and Charges: RCW 80.36.130 prohibits a telecommunications company operating in Washington State from charging rates or fees other than those specified in its schedule on file with the Commission and in effect at the time the service is rendered. During the period July 1, 1999, through October 31, 1999, USLD billed Washington consumers for intrastate calls from payphones at a higher rate than specified in its tariff and price list. USLD’s tariff was in effect from July 1, 1999, through October 18, 1999; and its price list was in effect October 19, 1999, through October 31, 1999. Noncompliance with Verbal Disclosure Requirements: RCW 80.36.520 directs the Commission to adopt rules to assure appropriate disclosure to consumers of the rates, charges, and fees for services provided by an operator services provider. The Commission adopted rules in WAC 480-120-141 on December 29, 1998. Staff investigated a number of payphones serviced by USLD, which included test calls to determine how the company provided disclosure of rates, charges, and fees. In no instance did Staff find USLD in compliance with the Commission’s disclosure rules. Staff investigated USLD’s operating practices regarding calls charged to a customer’s credit card. In following USLD’s instructions to place such a call, Staff was provided a verbal prompt to obtain a rate quote for the call and a menu of options to allow the consumer to receive the rate quote by pressing specific keys, but not within the maximum number of two keys as specified in our rule. In addition, Staff found the rate quote to be consistently wrong. The rate quoted by the USLD operator was substantially less than what the actual charge would be according to the company’s current price list (effective December 6, 1999). A typical example is a test call Staff made from Bremerton to East Wenatchee on December 23, 1999, at 2:10 p.m. The rate quote provided by USLD was $2.75 for the first three minutes which included an “operator charge” of $1.80 and a “property imposed fee” of $.25. The actual charge for this call, according to USLD’s price list in effect at the time of the call, would have been a minimum of $7.84 ($4.90 operator surcharge; three minutes at $.98/minute; payphone surcharge $0.00; and $0.00 for a subscriber surcharge). The maximum charge according to the price list would have been $13.90 ($5.66 operator surcharge; three minutes at $.98/minute; payphone surcharge $.30; and $5.00 subscriber surcharge). WAC 480-120-141(2)(b), specifically states, “Charges to the user must not exceed the quoted rate.” For calls charged to the called party (collect calls), Staff found USLD out of compliance with WAC 480-121-141 in several ways. First, USLD does not offer a verbal prompt for a rate quote to the calling party as required in our rule on verbal disclosure of rates. In every test call Staff made, once the investigator told the USLD operator that it was a collect call, the operator asked for a name and the call was put through with no verbal prompt for a rate quote. Second, the Commission’s rule requires that both the calling party and the called party receive a verbal prompt for a rate quote before completing or accepting a collect call. In all instances, the called party was not verbally advised of the option to receive a rate quote before accepting the call. Third, when Staff requested a rate quote, the operator was unable to comply. Improper Posting, Branding, and Billing: During Staff’s inspections of payphones serviced by USLD, they noted a number of instances of company name confusion and improper branding (verbal disclosure of the operator service provider). Some placards contained the name “US Long Distance, Inc.” and some branding was also in this name. In one instance, no branding at all was provided by the USLD operator. Posting and branding rules in WAC 480-120-141 require the company to use the company name as registered with the Commission. Staff’s investigation included receipt of billed charges from USLD. The provider’s name, as displayed on the customer’s bill, was “US Long Distance,” not USLD Communications, Inc. Inadequate Price List: Staff also believes that USLD’s current price list does not comply with WAC 480-120-027(2). Page 28 of USLD’s December 9, 1999, price list states, “A surcharge of up to $5.00 per call may be billed to consumers on behalf of USLD’ s customers.” WAC 480-120-027(2) requires that price lists “provide sufficient detail for customers and potential customers to reasonably determine what is being offered and what charges the customer incurs in obtaining the service.” Clearly, a variable surcharge does not provide sufficient detail for a consumer to determine what the charge will be from a particular payphone or for the Commission to determine whether or not USLD charged the correct rate. On February 18, 2000, Staff notified USLD of its findings and invited the company to enter into discussions to resolve these issues. Over the next several weeks, Commission Staff, the Attorney General’s Consumer Protection Division, and USLD shared information and discussed a possible resolution. These discussions resulted in the proposed Agreement to Penalties and Consumer Remedies you see today. Briefly, in the Agreement, USLD has admitted to violation of state laws and rules, and has agreed to the following sanctions: $1,000,000 in penalties; a minimum of $700,000 in refunds to customers charged in excess of allowed rates; reimbursement of approximately $25,000 to the Commission for the cost of the investigation; reimbursement of approximately $15,000 to the Commission for funding a consumer education program for payphone users in our state; and, of course, immediate and continued compliance with all state laws and rules. Recommendation Staff recommends the Commission issue a Complaint against USLD Communications, Inc.; and accept the proposed Agreement to Penalties and Consumer Remedies to resolve the Complaint.