Agenda Date: February 10, 1999 Item Number: Docket: UT-980675 Company: Telecommunications General - Rulemaking Staff: Vicki Elliott, Consumer Affairs Manager Glenn Blackmon, Assistant Director - Telecommunications Tani Thurston, Consumer Program Specialist Rebecca Beaton, Regulatory Consultant David Griffith, Senior Engineer Bob Wallis, Review Judge Recommendation 1) Issue a Notice of Opportunity to Comment under the CR-101 in Docket UT-980675 which proposes slamming rules that are consistent with the newly adopted FCC rules. 2) Direct the Secretary to issue a letter which requires continued reporting by the local exchange companies regarding the number of complaints received from their customers about cramming for the months of January, February and March. Clarify the term “complaints” to clearly state that this includes any call made by a customer to the company in which the customer claims the telephone bill contains an unauthorized charge. Introduction On July 8, 1998, the Commission approved filing with the Code Reviser a preproposal statement of inquiry (CR-101) that explored the need for rules to protect consumers from an unauthorized change in their preferred carrier (slamming); and from the addition of unauthorized charges on their telephone bills (cramming). The CR-101 was issued, and elicited written comments from interested persons in August 1998. Additionally, staff held a workshop on August 14, 1998, to invite further comment. Cramming Discussion At about the same time, on July 22, 1998, the FCC and industry representatives adopted voluntary guidelines as “best practices” for local exchange companies to address the cramming problem. These practices offer guidelines designed to prevent, deter and eliminate the addition of unauthorized charges on customers’ bills. On August 26, 1998, staff came before the Commission at its regularly scheduled open meeting to recommend the secretary require Washington local exchange companies to file reports with the Commission that described the extent to which companies are implementing the FCC guidelines; the specific actions they are taking to prevent cramming; and provided data about Docket UT-980675 February 10, 1999 Page 2 complaints companies receive from their customers about cramming. The Commission approved staff’s recommendation, and the local exchange companies have reported the required information. In addition, staff has gathered information about cramming from customers directly affected by the practice and from the complaint experience of our consumer affairs staff. The results of staff’s data gathering effort is described below. Company Actions in Response to the Federal Guidelines U S WEST, GTE, AT&T Local Service (ALS), Sprint, United, Century Tel and Hood Canal all reported individually to staff’s survey about what actions local exchange companies are taking in response to the FCC’s guidelines of July 1998. WITA responded for Ellensburg, Hat Island, Inland, Kalama, Mashell, Pend Oreille, Pioneer, St. John, TDS-Asotin, Tenino, Toledo, Western Wahkiakum, Whidbey and Yelm. In general, staff found the following information: •U S WEST, GTE, ALS and Sprint limit the products or services for which other providers can bill. •GTE and Sprint do not allow billing resulting from sweepstakes entries. U S WEST has recently revised its policies so that it no longer bills for sweepstakes entries, opt-out programs or psychic programs. •U S WEST, GTE and Sprint require preapproval of text phrases before they are added to the telephone bill; and these companies also review marketing materials of service providers. •U S WEST, GTE, Sprint and Hood Canal consider billing aggregators responsible for the actions of the underlying service provider. •U S WEST monitors and tracks contract violations for service providers and billing aggregators. •U S WEST, GTE and Sprint have discontinued billing for providers with a high number of customer complaints that indicate a pattern of cramming. •To resolve a dispute, U S WEST’s original policy was to refer the consumer to the billing company, and recourse charges only if the consumer refuses to work with the billing company. However, they have recently established a process by which disputed charges are recoursed immediately. GTE either transfers the consumer to the billing company or recourses charges. Century Tel offers immediate recourse. •The companies represented by the WITA report indicate they have not taken any steps to address cramming, since it has not been a problem for them. Docket UT-980675 February 10, 1999 Page 3 Several companies reported that some of these guidelines were still in the development stage, and would be in place by the end of 1998. Commission Complaint Experience The Commission received a total of 180 complaints in 1998 from customers who claimed charges were added to their telephone bill without their permission. Consumer affairs staff received 89 of those complaints in the first six months of the year; and 91 in the second six months (an average of 15 complaints per month). Eight complaints have been received in January 1999. Of those complaints, 103 of those consumers were customers of U S WEST; 53 of GTE; 3 of United; 1 of TDS; 1 of Tenino; 1 of Whidbey; and 6 did not identify their local exchange company. The records indicate that 120 of the 180 complaints were filed against a total of 6 billing aggregators. Billing aggregators do not directly supply products or services to customers. Instead, they aggregate the charges of any number of small telecommunications companies; consolidate the charges into one billing; and put that amount on the consumer’s bill through the consumer’s local exchange company. This practice is allowed by the contract the billing aggregator has with the local exchange company. Company Complaint Experience The information that companies provided in response to the reporting requirements of August 26, 1998, was not what staff expected. Companies were required to report the number of complaints they received from their customers about cramming for the months of October, November and December 1998. For these three months, consumer affairs received 52 complaints from consumers about unauthorized charges on their bills. For this same period, reporting companies indicated they received only 33 complaints. WITA, who reported on behalf of many smaller local exchange companies, indicated that none of those companies received any complaints about cramming. It is the experience of consumer affairs staff that generally, companies receive many more complaints about a particular issue than the commission receives, because consumers usually call their local exchange company before coming to the commission with complaints. It appears there may have been a misunderstanding regarding staff’s intent in using the word “complaint.” In this instance, staff intended the word “complaint” to mean any contact in which a consumer called the local exchange company to report that an unauthorized charge appeared on the consumer’s telephone bill. It may be that the company received a number of contacts, but that the company did not categorize them as “complaints.” Customer Complaint Experience To gather information directly from customers who have experienced the addition of Docket UT-980675 February 10, 1999 Page 4 unauthorized charges on their bills, staff surveyed, by mail, every customer who filed a complaint with the Commission in 1998. Of the 180 customers who complained, 153 received survey requests. Of those, 83 responded with completed surveys (a response rate of 54%). Not all respondents answered all questions. The percentages presented below represent those that responded to the individual question. While 65% of the customers could identify from their bills which company was charging for the unauthorized charges, over 78% could not understand what services the charges represented. Most customers (92%) stated the bills should clearly show other companies’ charges (i.e., these should be listed on separate pages or separate sections of the bill; or should be highlighted through the use of special shadings or color fonts). Most customers (85%) stated there was a toll-free number to contact the billing company, however, half of the customers who called the toll-free number could not get through to the company. When the customer was able to reach the company, many times the company maintained their records proved the customers did authorize the charges while the customers insisted they did not. The company was unwilling to remove the charges. Over 96% of the customers who could not get the billing company to resolve these issues contacted their local telephone company. Approximately two-thirds stated their local telephone company referred them back to the billing company or stated they could not help them. A few customers were told to contact the commission for assistance. The majority of the customers (88%) believe charges should only be made upon written authorization for acceptance of services. They advised that companies should provide a truthful, accurate, written description of the service being offered with full disclosure of all charges. All customers (the 76 who answered this question) stated the local telephone companies should allow bill blocking so no other company’s charges could appear on the telephone bill without the customer’s permission. Half of the customers commented that the local telephone company should inform them of this option. Over 97% of the customers stated the local telephone company should be required to remove any charges the customer claims are unauthorized. In addition, once these charges are removed, the billing company should not be allowed to bill them directly for these charges. Conclusion Staff is recommending that we continue to monitor the progress of the local exchange companies toward deterring cramming problems. Staff believes this is the appropriate course of action for several reasons. First, staff is encouraged by the steps companies have taken in the last few Docket UT-980675 February 10, 1999 Page 5 months. Many companies have developed processes, which did not exist before, to identify and address cramming issues. It appears the industry is taking the responsibility to address this problem in lieu of formally adopted Commission rules. Second, staff is somewhat encouraged by Commission complaint numbers. While cramming complaints in the last half of 1998 did not decrease, they also did not increase. The new processes developed by companies in the last few months would not necessarily be reflected in the complaint numbers for the last quarter of 1998, since they would not directly affect customer bills for about a month after implementation. Staff is hopeful that the low complaint rate for January 1999 (only 8 complaints) is the beginning of a trend toward decreasing complaints. Third, if the next three months’ data indicates the steps taken by the companies does not significantly decrease the number of reported cramming cases, staff can fairly quickly respond with draft rules which would apply to the entire industry. Slamming Discussion At the August 26, 1998 open meeting, staff recommended no formal action be taken on the issue of slamming until the FCC had acted on its intent to adopt slamming rules. The FCC recently adopted rules which address slamming at the interstate level, and staff believes it is appropriate at this time to move forward on the slamming portion of this rulemaking. The new FCC rules are different than those the Commission currently has in WAC 480-120-139 in several ways: •The new FCC rules provide detailed requirements for obtaining a consumer’s written authorization for changing their preferred carrier not contained in current Commission rules. The written authorization cannot be combined with inducements of any kind, although it can be combined with a check if it meets certain conditions. The new rules also set requirements for third party verification of a change in a consumer’s preferred carrier; and they state that a company must obtain separate authorization and separate verification for each type of service a carrier may be selling (i.e., local, intraLATA, interLATA, and international services). Verification procedures apply to all carrier changes, even those initiated by the consumer. •The FCC rules prohibit an “executing carrier” (normally the local exchange carrier) from verifying a change order submitted by another carrier before making the change. •The rules do not require local exchange companies to offer a preferred carrier freeze to its customers, but they do set requirements for those carriers who offer a freeze. The requirements include a verification process similar to verification of a change in a preferred carrier. Docket UT-980675 February 10, 1999 Page 6 •Consumers who have been slammed and who complain within the first thirty days after the switch has occurred are not liable for charges incurred within the thirty days. Charges incurred after the thirty days must be paid to the original carrier, at the original carrier rates. •If the consumer has already paid the unauthorized carrier, the original carrier must refund or credit all charges in excess of what the consumer would have paid to the original carrier, provided the original carrier is able to collect those from the unauthorized carrier. The rules also hold the unauthorized carrier liable to the original carrier for all charges paid by the consumer. •The rules give the original carrier the authority to investigate and determine whether the consumer was changed without authorization. The rules describe the process by which the original carrier makes this determination, and includes time frames within which each carrier must react to the dispute. U S WEST, by letter dated January 21, 1999, has asked the Commission to adopt the new FCC rules on an emergency basis at today’s open meeting. The company states that the advent of one-plus dialing parity significantly increases the problem of slamming, because carriers are not generally obtaining separate authorization and verification of changes for each service offered (i.e., intraLATA and interLATA). U S WEST states that “over 65% of the customers who change their intraLATA carrier do not know or understand that the change has occurred.” The company contends this happens because many interLATA carriers do not appropriately describe the choices customers have in both interLATA and interLATA carriers, resulting in the change of both services without the consumer’s knowledge. MCI Worldcom (MCI), in a letter dated January 27, 1999, refutes U S WEST’s claims about the number of customers slammed in the one-plus environment. MCI states they already comply with the consumer protections prescribed by the FCC rules. Conclusion Staff is recommending the Commission issue an Opportunity to Comment, under the current docket, which proposes slamming rules that are consistent with the newly adopted FCC rules. In drafting rules, staff will likely propose that companies be required to offer a preferred carrier freeze to all customers, so that staff can receive comment on that issue. Staff does not believe there is sufficient grounds at this time to recommend adopting emergency rules. The Commission currently has slamming rules in place to protect consumers against intraLATA slamming. Once we receive comments on proposed changes to current rules under the CR-101 in this docket, we can move quickly to adopt new state rules. Docket UT-980675 February 10, 1999 Page 7 Recommendation 1) Issue a Notice of Opportunity to Comment under the CR-101 in Docket UT-980675 which proposes slamming rules that are consistent with the newly adopted FCC rules. 2) Direct the Secretary to issue a letter which requires continued reporting by the local exchange companies regarding the number of complaints received from their customers about cramming for the months of January, February and March. Clarify the term “complaints” to clearly state that this includes any call made by a customer to the company in which the customer claims the telephone bill contains an unauthorized charge.