[Federal Register Volume 59, Number 236 (Friday, December 9, 1994)]
[Unknown Section]
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From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-30330]
[[Page Unknown]]
[Federal Register: December 9, 1994]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 64
[CC Docket No. 94-129; FCC 94-292]
Policies and Rules Concerning Unauthorized Changes of Consumers'
Long Distance Carriers
AGENCY: Federal Communications Commission.
ACTION: Proposed rule.
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SUMMARY: The Commission adopted this Notice of Proposed Rule Making to
propose rules that prescribe the form and content of the letter of
agency for changing long distance carriers and prohibit offers or
inducements of any kind from being part of the letter of agency
document. This action was taken to seek comment on whether to make the
letter of agency a separate document, thus freeing consumers from
certain deceptive or confusing marketing practices of some
interexchange carriers.
DATES: Comments must be submitted on or before January 9, 1995. Reply
comments must be submitted on or before February 8, 1995.
ADDRESSES: Federal Communications Commission, 1919 M Street NW.,
Washington, DC 20554.
FOR FURTHER INFORMATION CONTACT:
Wilbert E. Nixon, Jr., Enforcement Division, Common Carrier Bureau,
(202) 418-0960.
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Notice
of Proposed Rule Making in CC Docket No. 94-129 [FCC 94-292], adopted
November 10, 1994 and released November 10, 1994. The full text of the
Notice of Proposed Rule Making is available for inspection and copying
during normal business hours in the FCC Reference Center, Room 239,
1919 M Street NW., Washington, DC 20554. The full text of this Notice
of Proposed Rule Making may also be purchased from the Commission's
duplicating contractor, International Transcription Services, 2100 M
Street NW., Suite 140, Washington, DC 20037, (202) 857-3800.
Summary of Notice of Proposed Rule Making
1. On November 10, 1994, the Commission adopted a Notice of
Proposed Rule Making (NPRM) in CC Docket No. 94-129 (released November
10, 1994; FCC 94-292) proposing rules to prescribe the form and content
of letters of agency for changing long distance carriers. The proposed
rules are intended to protect consumers from unauthorized changes of
their long distance carriers through the use of deceptive and
misleading letters of agency.
2. The Commission, on its own motion, initiates this rule making
proceeding to review its policies and propose rules regarding
unauthorized changes of consumers' long distance carriers, a practice
commonly known as ``slamming.'' The Commission received over four
thousand complaints during the past two fiscal years alone (Fiscal
Years 1993 and 1994) alleging unauthorized or unknowingly authorized
changes of consumers' long distance carriers, a substantial number of
which involve the use of potentially misleading or confusing letters of
agency (LOAs) by interexchange carriers (IXCs). An LOA is a document,
signed by the customer, which states that a particular carrier has been
selected as that customer's primary interexchange carrier (PIC). IXCs
present change orders, including LOAs, to local exchange carriers
(LECs), on behalf of potential IXC customers.
Background
3. Despite the adoption of consumer safeguards set forth in earlier
orders, the Commission continues to receive complaints from consumers
who allege that their PIC selections have been changed without their
permission. Many of these complaints describe apparently deceptive
marketing practices in which consumers are induced to sign a form
document that does not clearly advise the consumers that they are
authorizing a change in the PIC. Consumers, for example, have
complained that the ``LOA'' forms were ``disguised'' as contest entry
forms, prize claim forms, solicitations for charitable contributions,
or checks made payable to the consumer. Such inducement checks, which
consumers must sign in order to cash, typically contain a statement
near the signature line purporting to authorize a PIC change. Consumers
may cash the checks without intending to change their long distance
carriers. The Commission has also received complaints against IXCs
because of ``negative option LOA'' forms. These forms typically offer
prizes to consumers if they return the forms and may ``require''
consumers to check a box at the end of the form if they do not want to
change their long distance service. The characteristic common to all of
these marketing practices is that the inducement is combined with the
LOA and the inducement language is prominently displayed on the
inducement/LOA form while the PIC change language is not, thus leading
to consumer confusion. Consumers assert that when they enter the
contests, claim the prizes, respond to the charity solicitations, or
endorse the checks, they did not intend to switch their long distance
carriers.
Discussion
A. Proposed Rule
4. The Commission continues to believe that the LOA is a useful and
important consumer protection mechanism. The Commission believes it
necessary to consider amending the rules to ensure that when consumers
sign an LOA, they are aware that they are authorizing a change in their
long distance telephone service. The requirement that IXCs must obtain
LOAs for resolving disputes regarding changes in customer service was
``designed to ensure that end users were afforded protection both from
mistakes made by the LECs during the conversion process and from [IXC]
marketing abuses.'' Although the Commission has prescribed the minimum
information that must be included in the LOA form, the numerous
consumer complaints concerning LOAs indicate that some carriers have
abused the flexibility granted by the current requirements to create
LOAs that mislead consumers with respect to the nature and propose of
the documents. Such IXCs, among other things, have combined inducements
with LOAs in the same document in such a way as to mislead or confuse
consumers. Accordingly, the Commission finds it necessary to propose
rules clearly delineating what must be included in an LOA document and,
equally important, what may not be included in an LOA document. The
proposed rules are intended to limit the contents of an LOA document so
that its sole purpose and effect are to authorize a PIC change. The
proposed restrictions should eliminate consumer confusion about the
intent of the form.
5. The Commission's previous orders on this subject permit all IXCs
to seek customer commitments to use their services and designate the
IXC as the potential customer's primary IXC. Under those requirements,
written commitments must be in the form of a statement signed by the
customer and at a minimum must contain the following provisions: (1)
The customer designates the IXC to act as the customer's agent for the
presubscription process; (2) the customer understands that only one IXC
may be designated as the customer's primary IXC for any one telephone
number and that selection of multiple carriers will invalidate all such
selections; (3) the customer understands that any primary IXC selection
after the initial balloting will involve a charge to the customer; and
(4) the specific telephone number(s) for which the primary IXC is being
designated must be listed. The Commission issued a simplified
restatement of the minimum requirements for an LOA. In summary, any LOA
obtained by an IXC must be signed by the customer, explain what occurs
when a PIC is changed, and confirm: (1) The customer's billing name and
address and each telephone number to be covered by the PIC change
order; (2) the customer's decision to make the IXC his or her PIC; and
(3) the customer's understanding of the PIC change fee.
6. Paragraph (d) of the proposed rule restates and organizes the
earlier LOA requirements into one standard rule. The Commission
proposes that the LOA contain clear and unambiguous language that
confirms: (1) The customer's billing name and address and each
telephone number covered by the PIC change order; (2) the customer's
decision to replace his or her current PIC with the IXC soliciting the
LOA; (3) the customer's designation of the IXC to act as the customer's
agent for the PIC change; (4) the customer's understanding that only
one IXC may be designated as the customer's PIC; and (5) the customer's
understanding that any PIC selection he or she makes may lead to a PIC
change charge for the customer. In addition, the Commission seeks
comment on whether it should require the phone number to be preprinted
on the LOA. Although it seeks comment on whether it should prescribe
specific language for the LOA, the Commission believes that IXCs acting
in good faith can implement these minimum guidelines without
difficulty.
7. Based on its investigation of hundreds of consumer complaints
concerning LOAs, the Commission finds that much of the abuse,
misrepresentation, and consumer confusion occur when an inducement and
an LOA are combined in the same document, often on the same piece of
paper. Therefore, the Commission proposes to require the LOA to consist
of a separate document--that is, a separate piece of paper that
contains no inducements. The Commission believes that these
restrictions will prohibit certain current deceptive marketing
practices. The Commission's proposed rule would, for example, prohibit
the use of forms that combine LOAs with contest entry forms, checks, or
other negotiable instruments. The proposed rule would also prohibit
``negative option'' LOAs, which require consumers to take some action
to avoid having their long distance service changed.
8. The Commission does not propose to prohibit inducements
altogether because they may be proper and effective marketing devices
for attracting customers to an IXC's service. The Commission believes,
however, that physically separating the LOA document from the
inducement material within the same envelope will significantly reduce
consumer confusion over the LOA. As long as the inducement and the
formal LOA are separate, clear, and unambiguous, it appears that there
should be little chance of consumer confusion. Although it is not
proposing changes in this regard, the Commission seeks comment on
whether inducements of any kind should be prohibited altogether and, if
not, whether the Commission should prohibit inducements from being
mailed in the same envelope as the LOA.
9. Further, the Commission proposes to require the text of the LOA
to be clear and unambiguous and to be printed in type that is
sufficiently large and of such a style to be clearly legible. The
Commission seeks comment on whether it should prescribe the text of the
LOA, the font, and its point size. The Commission invites parties that
support such requirements to submit specific suggestions.
B. Other Unauthorized Conversion Issues
10. The Commission has also received many complaints describing
other consumer problems arising from misleading LOAs.
In light of those complaints, it seeks comment on several other
issues pertaining to LOAs, including whether LOAs should contain only
the name of the carrier that directly provides the interexchange
service to the customer. The Commission recognizes that there may be
more than one carrier technically involved in the provision of long
distance service to a consumer. For example, there may be an underlying
carrier whose facilities provide the long distance capacity and a
resale carrier that actually sets the rates charged to the end user
consumer. In some cases, there also may be a carrier that acts as a
billing and collection or marketing agent. One possible approach to
this problem would be to allow an LOA to name only the IXC that is
actually setting the rates, and to prohibit the inclusion of the name
of any carrier providing the underlying interexchange capacity to the
reseller. The Commission seeks comment on whether it should restrict
the LOA so that only the IXC that actually sets the rates for the
customer is identified in the LOA. Alternatively, the Commission also
seeks comment on whether other carriers' names can be included in the
LOA without misleading or confusing consumers, if their roles are
clearly described.
11. The Commission also seeks comment on whether business and
residential customers should be treated differently with respect to our
LOA requirements. Unlike the situation with residential customers, LOA
forms sent to businesses might not be received and processed by the
person authorized to order long distance presubscription for the
business. Thus, even an LOA that is properly executed may result in an
unauthorized change insofar as the person who executed the LOA had no
authority to do so.
12. The Commission also seeks comment on the effect that
unauthorized PIC conversions have on optional calling plans and the
consumers enrolled in them. In cases of unauthorized PIC conversions,
the consumer may not be aware of the change for at least one billing
cycle. Often, these consumers continue to pay a flat, minimum monthly
charge to their previous carrier for a discount calling plan despite
the fact that they are no longer presubscribed to that carrier. The
Commission seeks comment on whether it should absolve these consumers
of liability for any payments to optional calling plans after
unauthorized conversions. Alternatively, it seeks comment on the means
or procedures, if any, that might be used to help consumers recoup
their losses in this situation.
13. The Commission also seeks comment on whether any adjustments to
long distance telephone charges should be made for consumers who are
the victims of unauthorized PIC conversions. Specifically, it seeks
comment on whether consumers should be liable for the long distance
telephone charges billed to them by the unauthorized IXC and if so, to
what extent. Should consumers be liable for: (a) The total billed
amount from the unauthorized IXC; (b) the amount consumers would have
paid if their PIC were never changed; (c) or nothing at all?
14. The Commission has received complaints alleging that some IXCs
target non-English speaking consumers with bilingual and non-English
inducements and LOAs. These consumers allege that the non-English
versions of the LOA do not contain all of the text of the English
versions of the LOA. As a result, material portions of the LOA are in
only one language, typically English, which the non-English speaking
consumers may not fully understand. The Commission seeks comment on
whether it should adopt rules to govern bilingual or non-English
language LOAs. For example, should the Commission require all parts of
the LOA to be translated if any parts are translated? It also seeks
comment on whether all LOAs should be required to be captioned ``An
Order to Change My Long Distance Telephone Service Provider'' or given
some other title that is more descriptive and less technical.
15. Finally, the Commission seeks comment on how consumers have
been affected by the IXC marketing practice of ``encouraging''
consumers who call an IXC's 800 number to switch to the IXC, even when
the consumers' calls are not initiated for the purpose of changing
PICs. Typically, the consumers respond to an advertisement and are just
requesting information about the IXC.
It may be argued that because the IXC does not initiate the call,
the PIC order is not generated by telemarketing and thus the order
verification protections in Section 64.1100 of our rules do not apply.
The Commission seeks comment on whether an 800 number should be used
only for verification purposes or whether it could be used, with proper
safeguards, for verification purposes and placing initial orders.
Finally, the Commission seeks comment on what those safeguards might
be.
Regulatory Flexibility Act Initial Analysis
16. Reason for Action
The Commission is issuing this Notice of Proposed Rule Making to
protect consumers from unauthorized switching of their long distance
carriers and to ensure that consumers are fully in control of their
long distance service choices.
17. Objectives
The objective of this Notice of Proposed Rule Making is to initiate
a proceeding to propose requirements and seek comments regarding
unauthorized changes of consumers' long distance carriers.
18. Legal Basis
Sections 1, 4(i), 4(j), 201-205, and 303(r) of the Communications
Act of 1934, as amended, 47 U.S.C. Secs. 151, 154(i), 154(j), 201-205,
303(r).
19. Description, Potential Impact, and Number of Small Entities
Affected
The proposed rules will require that interexchange carriers
separate their LOA forms from any promotional inducements. Small
entities may feel some economic impact in additional printing costs due
to the proposed letter of agency requirements. However, all IXCs who
submit orders to LECs on behalf of customers now are required to
institute steps to obtain signed LOAs from customers. Therefore, all
IXCs should be incurring printing costs for LOAs with sufficient
advance notice, IXCs could revise and print new LOAs when their old
inventory of LOAs is exhausted.
20. Reporting, Recordkeeping, and Other Compliance Requirements
The proposed rules impose no reporting requirements and no new
recordkeeping requirements. Carriers are currently required to obtain
and retain records of customer orders.
21. Federal Rules Which Overlap, Duplicate, or Conflict With the
Commission's Proposal
None.
22. Any Significant Alteratives Minimizing Impact on Small Entities and
Consistent With Stated Objectives
None.
23. Comments Are Solicited
The Commission requests written comments on this Initial Regulatory
Flexibility Analysis.
These comments must be filed in accordance with the same filing
deadlines set for comments on the other issues in this Notice of
Proposed Rule Making, but they must have a separate and distinct
heading designating them as responses to this Regulatory Flexibility
Analysis. The Secretary shall send a copy of the Notice to the Chief
Counsel for Advocacy of the Small Business Administration in accordance
with Section 603(a) of the Regulatory Flexibility Act. See 5 U.S.C.
601, et seq.
Ex Parte Requirements
24. This is a non-restricted notice and comment rule making
proceeding. Ex parte presentations are permitted, except during the
Sunshine Agenda period, provided they are disclosed as provided in
Commission rules.
Ordering Clauses
25. Accordingly, It is ordered, pursuant to Sections 1, 4(i), 4(j),
201-205, 218, 226, and 303(r) of the Communications Act of 1934, as
amended, 47 U.S.C. 151, 154(i), 154(j), 201-205, 218, 226, 303(r), that
a Notice of proposed rule making is issued, proposing the amendment of
47 CFR Part 64 as set forth below.
26. It is further ordered, that pursuant to applicable procedures
set forth in Secs. 1.415 and 1.419 of the Commission's Rules, 47 CFR
Secs. 1.415, 1.419, comments SHALL BE FILED with the Secretary, Federal
Communications Commission, Washington, D.C. 20554 on or before January
9, 1995. Reply comments should be filed no later than February 8, 1995.
To file formally in this proceeding, participants must file an original
and four copies of all comments, reply comments, and supporting
comments. if participants want each Commissioner to receive a personal
copy of their comments, an original plus nine copies must be filed. In
addition, parties should file two copies of any such pleadings with the
Formal Complaints Branch, Enforcement Division, Common Carrier Bureau,
Plaza Level, 1250 23rd Street NW., Washington, DC 20554. Parties should
also file one copy of any documents filed in this docket with the
Commission's copy contractor, International Transcription Services,
Room 140, 2100 M Street NW., Washington, DC 20037. Comments and reply
comments will be available for public inspection during regular
business hours in the FCC Reference Center (Room 239) of the Federal
Communications Commission, 1919 M Street NW., Washington, DC 20554.
27. It is further ordered, that the Chief of the Common Carrier
Bureau is delegated authority to require the submission of additional
information, make further inquiries, and modify the dates and
procedures if necessary to provide for a fuller record and a more
efficient proceeding.
28. It is further ordered, that the Secretary shall mail a copy of
this Notice of Proposed Rule Making to the Chief Counsel for Advocacy
of the Small Business Administration, in accordance with section 603(a)
of the Regulatory Flexibility Act, 5 U.S.C. 603(a). The secretary shall
also cause a summary of this Notice to appear in the Federal Register.
List of Subjects in 47 CFR Part 64
Communications common carriers, Telephone.
Federal Communications Commission.
William F. Caton,
Acting Secretary.
Proposed Rules
Part 64 of Chapter I of Title 47 of the Code of Federal
Regulations, is proposed to be amended as follows:
PART 64--MISCELLANEOUS RULES RELATING TO COMMON CARRIERS
1. The authority citation for part 64 continues to read as follows:
Authority: Sec. 4, 48 Stat. 1066, as amended; 47 U.S.C. 154,
unless otherwise noted. Interpret or apply secs. 201, 218, 226, 228,
48 Stat. 1070, as amended, 1077; 47 U.S.C. 201, 218, 226, 228,
unless otherwise noted.
2. Section 64.1150 is added to Subpart K to read as follows:
Sec. 64.1150 Letter of agency form and content.
(a) An interexchange carrier shall obtain any necessary written
authorization from a subscriber for a primary interexchange carrier
change by using a letter of agency as specified in this section. Any
letter of agency that does not conform with this section is invalid.
(b) The letter of agency shall be a separate document whose sole
purpose is to authorize an interexchange carrier to initiate a primary
interexchange carrier change. The letter of agency must be signed and
dated by the subscriber to the telephone line(s) requesting the primary
interexchange carrier change.
(c) The letter of agency shall not be combined with inducements of
any kind on the same document.
(d) At a minimum, the letter of agency must be printed with a type
of sufficient size and readable type to be clearly legible and must
contain clear and unambiguous language that confirms:
(1) The subscriber's billing name and address and each telephone
number to be covered by the primary interexchange carrier change order;
and
(2) The decision to change the primary interexchange carrier from
the current interexchange carrier to the prospective interexchange
carrier; and
(3) That the subscriber designates the interexchange carrier to act
as the subscriber's agent for the primary interexchange carrier change;
and,
(4) That the subscriber understands that only one interexchange
carrier may be designated as the subscriber's primary interexchange
carrier for any one telephone number and that selection of multiple
carriers will invalidate all such selections; and
(5) That the subscriber understands that any primary interexchange
carrier selection they choose may involve a charge to the subscriber
for changing the subscriber's primary interexchange carrier.
(e) Letters of agency shall not purport to instruct the subscriber
to take some action in order to retain the subscriber's current
interexchange carrier.
[FR Doc. 94-30330 Filed 12-8-94; 8:45 am]
BILLING CODE 6712-01-M
