[Federal Register Volume 64, Number 30 (Tuesday, February 16, 1999)]
[Rules and Regulations]
[Pages 7746-7762]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-3657]
[[Page 7745]]
_______________________________________________________________________
Part VII
Federal Communications Commission
_______________________________________________________________________
47 CFR Part 64
Implementation of the Subscriber Carrier Selection Changes Provisions
of the Telecommunications Act of 1996; Unauthorized Changes of
Consumers' Long Distance Carriers; Final Rule and Proposed Rule
Federal Register / Vol. 64, No. 30 / Tuesday, February 16, 1999 /
Rules and Regulations
[[Page 7746]]
FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 64
[CC Docket 94-129; FCC 98-334]
Implementation of the Subscriber Carrier Selection Changes
Provisions of the Telecommunications Act of 1996; Unauthorized Changes
of Consumers' Long Distance Carriers
AGENCY: Federal Communications Commission.
ACTION: Final rule.
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SUMMARY: The Commission adopted a Second Report and Order which
establishes new rules and policies governing the unauthorized switching
of subscribers telecommunications, an activity more commonly known as
``slamming.'' The Commission's decision is intended to deter and
ultimately eliminate unauthorized changes in subscribers
telecommunications carriers.
DATES: The effective date of the rules adopted in this Order is April
29, 1999, except for 47 CFR 64.1100(c), 64.1100(d), 64.1170, and
64.1180, which contain information collection requirements which have
not been approved by OMB and which will be effective 90 days after
publication in the Federal Register.
FOR FURTHER INFORMATION CONTACT: Kimberly Parker, Enforcement Division,
Common Carrier Bureau (202) 418-7393. For additional information
concerning the information collections contained in this Order contact
Judy Boley at 202-418-0214, or via the Internet at jboley@fcc.gov.
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Second
Report and Order in CC Docket No. 94-129 [FCC 98-334], adopted on
December 17, 1998 and released on December 23, 1998. The full text of
the Order is available for inspection and copying during normal
business hours in the FCC Reference Center, Room 239, 1919 M Street,
N.W., Washington, D.C. The complete text of this decision may also be
purchased from the Commission's duplicating contractor, International
Transcription Services, 1231 20th Street, N.W., Washington, D.C.
Paperwork Reduction Act: This Report and Order contains a new or
modified information collection. The Commission, as part of its
continuing effort to reduce paperwork burdens, invites the general
public and the Office of Management and Budget (OMB) to comment on the
following information collections contained in the Report and Order as
required by the Paperwork Reduction Act of 1995, Public Law 104-13. OMB
notification of action is due 60 days from the date of publication of
the Report and Order in the Federal Register. Comments should address:
(a) whether the new or modified information collection is necessary for
the proper performance of the functions of the Commission, including
whether the information shall have practical utility; (b) the accuracy
of the Commission's burden estimates; (c) ways to enhance the quality,
utility, and clarity of the information collected; and (d) ways to
minimize the burden of the collection of information on the
respondents, including the use of automated collection techniques or
other forms of information technology.
OMB Control Number: 3060-0787.
Title: Implementation of the Subscriber Carrier Selection Changes
Provisions of the Telecommunications Act of 1996; Unauthorized Changes
of Consumers' Long Distance Carriers, CC Docket No. 94-129.
Form No.: N/A.
Type of Review: Revised collections.
Respondents: Business or other for-profit.
----------------------------------------------------------------------------------------------------------------
Est. time per
Section/title No. of response Total annual
Respondents (hours) burden (hours)
----------------------------------------------------------------------------------------------------------------
a. Section 64.1100 1800 1.5 2,700
b. Section 64.1150............................................. 675 1.5 844
c. Section 64.1160............................................. 1800 1.5 2,700
d. Section 64.1170............................................. 1800 5 9,000
e. Section 64.1180............................................. 1800 4 7,200
f. Section 64.1190............................................. 1800 2 3,600
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Total Annual Burden: 26,044 hours.
Estimated Costs Per Respondent: N/A.
Needs and Uses: Section 258 of the Communications Act of 1934
(Act), as amended by the Telecommunications Act of 1996, makes it
unlawful for any telecommunications carrier to ``submit or execute a
change in a subscriber's selection of a provider of telecommunications
exchange service or telephone toll service except in accordance with
such verification procedures as the Commission shall prescribe.'' The
section further provides that any telecommunications carrier that
violates such verification procedures and that collects charges for
telephone exchange service or telephone toll service from a subscriber,
shall be liable to the carrier previously selected by the subscriber in
an amount equal to all charges paid by the subscriber after such
violation. The information collections contained within the Report and
Order are necessary to accommodate the Commission's implementation of
Section 258.
Final Regulatory Flexibility Analysis
1. As required by the Regulatory Flexibility Act (RFA), an Initial
Regulatory Flexibility Analysis (IRFA) was incorporated in the Further
Notice of Proposed Rule Making and Memorandum Opinion and Order on
Reconsideration (Further Notice and Order) in Policies and Rules
Concerning Unauthorized Changes of Consumers' Long Distance Carrier.
The Commission sought written public comment on the proposals in the
Further Notice and Order, including comment on the IRFA. The comments
received are discussed below. This present Final Regulatory Flexibility
Analysis (FRFA) conforms to the RFA.
i. Need for and Objectives of This Order and the Rules Adopted Herein
2. Section 258 of the Act makes it unlawful for any
telecommunications carrier ``to submit or execute a change in a
subscriber's selection of a provider of telephone exchange service or
telephone toll service except in accordance with such verification
procedures as the Commission shall prescribe.'' Accordingly, the
Commission adopts rules to implement this provision.
[[Page 7747]]
ii. Summary of the Significant Issues Raised by the Public Comments in
Response to the IRFA
3. In the IRFA, the Commission found that the rules it proposed to
adopt in this proceeding may have a significant impact on a substantial
number of small businesses as defined by 5 U.S.C. 601(3). The IRFA
solicited comment on the number of small businesses that would be
affected by the proposed regulations and on alternatives to the
proposed rules that would minimize the impact on small entities
consistent with the objectives of this proceeding.
4. America's Carriers Telecommunications Association (ACTA) has
submitted comments directly in response to the IRFA. ACTA states that
the Commission violated the RFA in its IRFA by not addressing
sufficiently the ``impact of the vague and standardless environment
surrounding enforcement of the anti-slamming campaign on small
carriers.'' ACTA asserts that because the proposed rules define
slamming to include unintentional acts, small carriers will suffer
disproportionately. ACTA states that the only proposal the Commission
made to minimize the impact of its proposed rules on small carriers was
the proposal to require private settlement negotiations regarding the
transfer of charges arising due to section 258 liability. ACTA states
that this proposal is inadequate because liability for inadvertent
slams should not be imposed in the first place. ACTA submits that
imposing liability for inadvertent slams will allow dishonest customers
to claim falsely that they were slammed in order to avoid payment for
legitimate services. Even when a complaint is not prosecuted to a
formal decision, ACTA states, handling allegations of slamming are
expensive and time-consuming for small carriers. ACTA also claims that
the Commission is prejudiced against small carriers and that this
attitude is reflected in unbalanced proposals that will allow large
carriers and the Commission to subject small carriers to misdirected
enforcement efforts and monetary losses and fines, as well as skew
competition. ACTA also objects to the following as being harmful to
small carriers: (1) elimination of the welcome package because it is an
economical verification method for small carriers; (2) imposing the
same verification procedures for in-bound and out-bound calls because
that would overburden small carriers; (3) non-preemption of state
regulation because small carriers would have difficulty in meeting the
requirements of different states.
5. We disagree with ACTA's contentions. We believe that imposing
liability for all intentional and unintentional unauthorized changes is
not vague, but rather that it is so clear as to eliminate any doubts as
to the circumstances that would constitute a slam. The bright-line
standard that we adopt in this Order should help all carriers,
including small carriers, to avoid making unauthorized changes to a
subscriber's selection of telecommunications provider. We also disagree
with ACTA's contention that defining slamming to include accidental
slams would disproportionately affect small carriers. Section 258
prohibits slamming by any telecommunications carrier and does not
distinguish between intentional and inadvertent conduct. Regardless of
its size, no carrier has the right to commit unlawful acts. We believe
that holding carriers liable for intentional and inadvertent
unauthorized changes to subscribers' preferred carriers will reduce the
overall incidence of slamming. We also disagree with ACTA's allegation
that the Commission is biased against small carriers and that this bias
is evident in the rules we proposed in the Further Notice and Order.
The rules we adopt require all carriers, regardless of size, to take
precautions to guard against the harm to consumers that is caused by
slamming. Finally, regarding the preemption of state law, we decline to
exercise our preemption authority at this time because the commenters
have failed to establish a record upon which a specific preemption
finding could be made.
iii. Description and Estimates of the Number of Small Entities to Which
the Rules Adopted in the Order in CC Docket No. 94-129 Will Apply
6. The RFA directs agencies to provide a description of and, where
feasible, an estimate of the number of small entities that may be
affected by the adopted rules. The RFA generally defines the term
``small entity'' as having the same meaning as the terms ``small
business,'' ``small organization,'' and ``small governmental
jurisdiction.'' In addition, the term ``small business'' has the same
meaning as the term ``small business concern'' under the Small Business
Act. A small business concern is one which: (1) is independently owned
and operated; (2) is not dominant in its field of operation; and (3)
satisfies any additional criteria established by the Small Business
Administration (SBA).
7. The most reliable source of information regarding the total
numbers of certain common carrier and related providers nationwide, as
well as the numbers of commercial wireless entities, appears to be data
the Commission publishes annually in its Telecommunications Industry
Revenue report, regarding the Telecommunications Relay Service (TRS).
According to data in the most recent report, there are 3,459 interstate
carriers. These carriers include, inter alia, local exchange carriers,
wireline carriers and service providers, interexchange carriers,
competitive access providers, operator service providers, pay telephone
operators, providers of telephone toll service, providers of telephone
exchange service, and resellers.
8. The SBA has defined establishments engaged in providing
``Radiotelephone Communications'' and ``Telephone Communications,
Except Radiotelephone'' to be small businesses when they have no more
than 1,500 employees. Below, we discuss the total estimated number of
telephone companies falling within the two categories and the number of
small businesses in each, and we then attempt to refine further those
estimates to correspond with the categories of telephone companies that
are commonly used under our rules.
9. Although some affected incumbent local exchange carriers (ILECs)
may have 1,500 or fewer employees, we do not believe that such entities
should be considered small entities within the meaning of the RFA
because they are either dominant in their field of operations or are
not independently owned and operated, and therefore by definition not
``small entities'' or ``small business concerns'' under the RFA.
Accordingly, our use of the terms ``small entities'' and ``small
businesses'' does not encompass small ILECs. Out of an abundance of
caution, however, for regulatory flexibility analysis purposes, we will
separately consider small ILECs within this analysis and use the term
``small ILECs'' to refer to any ILECs that arguably might be defined by
the SBA as ``small business concerns.''
10. Total Number of Telephone Companies Affected. The U.S. Bureau
of the Census (``Census Bureau'') reports that, at the end of 1992,
there were 3,497 firms engaged in providing telephone services, as
defined therein, for at least one year. It is reasonable to conclude
that fewer than 3,497 telephone service firms are small entity
telephone service firms or small ILECs that may be affected by the
proposed rules, if adopted.1
11. Wireline Carriers and Service Providers. We estimate that fewer
than 2,295 small telephone communications
[[Page 7748]]
companies other than radiotelephone companies are small entities or
small ILECs that may be affected by the proposed rules, if
adopted.1
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\1\ The proposed rule referenced in paragraphs 10-16 are
published in the same separate part of this issue.
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12. Local Exchange Carriers. We estimate that fewer than 1,371
providers of local exchange service are small entities or small ILECs
that may be affected by the proposed rules, if adopted.
13. Interexchange Carriers. We estimate that there are fewer than
143 small entity IXCs that may be affected by the proposed rules, if
adopted.
14. Competitive Access Providers. We estimate that there are fewer
than 109 small entity CAPs that may be affected by the proposed rules,
if adopted.
15. Resellers (including debit card providers). We estimate that
there are fewer than 339 small entity resellers that may be affected by
the proposed rules, if adopted.
16. Cellular Licensees. We estimate that there are fewer than 804
small cellular service carriers that may be affected by the proposed
rules, if adopted.
iv. Summary of Projected Reporting, Recordkeeping and Other Compliance
Requirements
17. Below, we analyze the projected reporting, recordkeeping, and
other compliance requirements that may affect small entities and small
incumbent LECs.
18. Verification rules. The Commission's verification rules shall
apply to all carriers, excluding for the present time CMRS carriers,
that submit or execute carrier changes on behalf of a subscriber.
19. Elimination of the welcome package. Carriers may not use the
welcome package as a verification method.
20. Verification of in-bound telemarketing sales. Carriers must
comply with our verification rules for all calls that result in carrier
changes that are submitted on behalf of subscribers, whether those
calls are consumer-initiated or carrier-initiated.
21. Third Party Administrator for Dispute Resolution. The effective
date of the Commission's liability rules (47 CFR 64.1100(c),
64.1100(d), 64.1170, and 64.1180) is delayed until 90 days after
publication in the Federal Register to enable carriers to develop and
implement an alternative carrier dispute resolution mechanism involving
an independent administrator. If carriers successfully implement such a
plan, the Commission will entertain carriers' requests for waiver of
the administrative requirements of our liability rules where such
carriers voluntarily agree to use the independent administrator.
22. Preferred Carrier Freeze Procedures. The Commission's rules
require carriers who offer preferred carrier freeze protection to
follow certain procedures.
v. Steps Taken To Minimize the Significant Economic Impact of This
Order on Small Entities and Small Incumbent LECs, Including the
Significant Alternatives Considered
23. Verification rules. Ameritech, SBC, and U S WEST propose
systems that would impose fines or more stringent verification
requirements on carriers with a history of slamming, as determined by
the LEC or otherwise. We decline to adopt such proposals because they
would impose more stringent verification requirements on carriers only
after such carriers have slammed significant numbers of consumers.
Furthermore, we find such proposals to be problematic because they
could permit LECs to target certain carriers for ``punishment.''
24. Elimination of the welcome package. Several commenters propose
modifications to the welcome package, rather than elimination of it
entirely, because the welcome package is an inexpensive verification
option that is suitable for use by smaller carriers. We conclude that
it is better to eliminate the welcome package entirely, rather than
attempt to ``fix'' it with modifications that fail to provide adequate
protection against fraud or curtail its usefulness.
25. Verification of in-bound telemarketing. Several commenters
propose that less burdensome verification procedures apply to in-bound
telemarketing. We decline to adopt these proposals because we feel that
they offer little protection to a consumer against an unscrupulous
carrier.
26. Independent Third Party Verification. Several commenters
submitted proposals for determining the independence of a third party
verifier. These commenters support the criteria that the Commission has
adopted in this Order.
27. Verification Records. Several commenters, including NAAG and
NYSDPS, support a requirement that carriers retain verification records
for a certain period of time. We choose a retention period of two years
because any person desiring to file a complaint with the Commission
alleging a violation of the Act must do so within two years of the
alleged violation.
28. Liability rules. To address concerns that smaller carriers may
suffer from the imposition of our liability rules, we note that a
carrier accused of slamming has the opportunity to provide evidence of
verification, in order to prove that it did not slam a subscriber,
before having to remit any revenues to an authorized carrier.
29. Third Party Administrator for Dispute Resolution. This
provision will benefit smaller carriers by providing them with an
alternative means of compliance with our liability rules. Carriers are
given a choice of complying with our liability rules in whole by
administering the requirements themselves, or of complying by using an
independent third party to administer the requirements.
30. Preferred Carrier Freeze Procedures. States are free to impose
restrictions on the use of preferred carrier freezes for local exchange
and intraLATA toll services if they determine that such steps are
necessary in light of the availability of local competition in a
particular market. Furthermore, we impose certain requirements that
will prevent carriers from using preferred carrier freezes in an
anticompetitive manner, such as easy procedures to lift freezes. In
this way, the existence of preferred carrier freeze programs will not
impede carriers wishing to compete in local services, especially
smaller carriers.
31. The Commission will send a copy of the Order, including this
FRFA, in a report to be sent to Congress pursuant to the Small Business
Regulatory Enforcement Fairness Act of 1996. In addition, the
Commission will send a copy of the Order, including the FRFA, to the
Chief Counsel for Advocacy of the Small Business Administration. A copy
of the Order and FRFA (or summaries thereof) will also be published in
the Federal Register.
I. Introduction
32. In this Second Report and Order and Second Further Notice of
Proposed Rulemaking (Order), we adopt rules proposed in the First
Further Notice of Proposed Rulemaking and Memorandum Opinion and Order
on Reconsideration (Further Notice and Order) to implement section 258
of the Communications Act of 1934 (Act), as amended by the
Telecommunications Act of 1996 (1996 Act). Section 258 makes it
unlawful for any telecommunications carrier to ``submit or execute a
change in a subscriber's selection of a provider of telephone exchange
service or telephone toll service except in accordance with such
verification procedures as the
[[Page 7749]]
Commission shall prescribe.'' The goal of section 258 and this Order is
to eliminate the practice of ``slamming.'' Slamming occurs when a
company changes a subscriber's carrier selection without that
subscriber's knowledge or explicit authorization.
33. Despite the Commission's existing slamming rules, our records
indicate that slamming has increased at an alarming rate. In 1997, the
Commission processed approximately 20,500 slamming complaints and
inquiries, which is an increase of approximately 61% over 1996 and an
increase of approximately 135% over 1995. From January to the beginning
of December 1998, the Commission processed 19,769 slamming complaints.
Furthermore, the number of slamming complaints filed with the
Commission is a mere fraction of the actual number of slamming
incidents that occur.
34. The Commission recently has increased its enforcement actions
to impose severe financial penalties on slamming carriers. Since April
1994, the Commission has imposed final forfeitures totaling $5,961,500
against five companies, entered into consent decrees with eleven
companies with combined payments of $2,460,000, and has proposed
$8,120,000 in penalties against six carriers. Additionally, the
Commission may sanction a carrier by revoking its operating authority
under section 214 of the Act.
35. The new rules we adopt in this Order operate to establish a new
comprehensive framework to combat aggressively and deter slamming in
the future. Our new rules absolve subscribers of liability for some
slamming charges in order to ensure that carriers do not profit from
slamming activities, as well as to compensate subscribers for the
confusion and inconvenience they experience as a result of being
slammed. As an additional deterrent, we strengthen our verification
procedures and broaden the scope of our slamming rules.
II. Background
36. The Commission's current slamming rules, which apply only to
long distance carriers, require such carriers to first obtain
authorization from subscribers for preferred carrier changes and then
to verify that authorization. The current rules also require IXCs to
verify all PIC changes using either a written letter of agency (LOA)
or, if the carrier has used telemarketing to solicit the customer, one
of the following four procedures: (1) obtain an LOA from the
subscriber; (2) receive confirmation from the subscriber via a call
from the subscriber to a toll-free number provided exclusively for the
purpose of confirming change orders electronically; (3) use an
independent third party to verify the subscriber's order; or (4) send
an information package, also known as the ``welcome package,'' that
includes a postage-paid postcard which the subscriber can use to deny,
cancel, or confirm a service order, and wait 14 days after mailing the
packet before submitting the PIC change order. A carrier that makes
unauthorized changes to a subscriber's selection of telecommunications
provider and charges rates higher than that of the authorized carrier
must re-rate that subscriber's bill to ensure that the subscriber pays
no more than what he or she would have paid the authorized carrier. The
unauthorized carrier must also pay for any carrier-change charges
assessed by the LEC.
III. Discussion
A. Section 258(b) Liability
i. Liability of the Slammed Subscriber
37. We adopt a rule absolving consumers of liability for unpaid
charges assessed by unauthorized carriers for 30 days after an
unauthorized carrier change has occurred. Any carrier that the
subscriber calls to report the unauthorized change, whether that entity
is the subscriber's LEC, unauthorized carrier, or authorized carrier,
is required to inform the subscriber that he or she is not required to
pay for any slamming charges incurred for the first 30 days after the
unauthorized change. If a subscriber pays charges to his or her
unauthorized carrier, however, such subscriber's liability will be
limited to the amount he or she would have paid the authorized carrier.
We note that, as explained fully in the discussion on Third Party
Administrator for Dispute Resolution, we delay the effective date of
the liability rules for 90 days to provide interested carriers an
opportunity to implement a dispute resolution mechanism involving an
independent administrator.
38. Many state commissions and consumer protection organizations
support absolving the consumer of liability for charges incurred after
being slammed. Our liability rules that provide for limited absolution
for slamming charges will deter slamming by minimizing the opportunity
for unauthorized carriers to physically take control of slamming
profits for any period of time. Even though section 258(b) requires the
unauthorized carrier to remit to the authorized carrier all charges
collected from the subscriber, several commenters state that absolution
is preferable to using the remedy in section 258(b) because the
slamming carrier is likely to refuse to remit revenues to the
authorized carrier.
39. This rule also makes slamming unprofitable because it provides
consumers with incentive to scrutinize their monthly telephone bills
early and carefully. By providing subscribers with a remedy that is
easy to administer, i.e., consumers simply refuse to pay telephone
bills containing slamming charges, we provide a quick and simple
process to stop slamming. We also choose to absolve consumers of
liability for a limited time because it provides some compensation to
consumers for the time, effort, and frustration they experience as a
result of being slammed, as well as for the loss of choice and privacy.
40. We balance this need to compensate the consumer, however,
against the possibility of consumers improperly reporting that they
were slammed in order to obtain free telephone service. To address such
concerns about fraud, we point out that subscribers may only be
absolved of liability if they have in fact been slammed. Carriers can,
as described below, produce proof of valid verification to refute a
subscriber's claim that he or she was slammed. This approach has the
added benefit of strengthening carriers' incentive to comply strictly
with our verification procedures in order to protect themselves from
inappropriate claims by consumers that they have been slammed.
41. We limit the absolution period to 30 days after an unauthorized
change has occurred. Several carriers support a 30-day limit to
absolution. To the extent that the subscriber receives additional
charges from the slamming carrier after the 30-day absolution period,
the subscriber shall pay such charges to the authorized carrier at the
authorized carrier's rates after the authorized carrier has re-rated
such charges. In most cases, the consumer will discover the
unauthorized change upon receipt of the first monthly bill after the
unauthorized change occurs, because that bill generally provides the
consumer with the first notice that a carrier change has been made. The
limitation on absolution for the first 30 days after an unauthorized
change may be waived by the Commission in circumstances where it is
necessary to extend the period of absolution in order to provide a
subscriber with a fair and equitable resolution. The special
circumstances that may affect this period of absolution would likely be
[[Page 7750]]
practices used to delay the subscriber's realization of the carrier
change. For example, a waiver of the 30-day limit might be appropriate
if the subscriber's telephone bill failed to provide reasonable notice
to the subscriber of a carrier change, or if the slamming carrier did
not have a monthly billing cycle.
42. A limited absolution rule does not substantially harm the
authorized carrier, who has not provided service to the slammed
consumer during the period of absolution. We conclude that, although
the authorized carrier is deprived of profits that it would have
received but for the unauthorized change, it also has not actually
provided any service to the subscriber and it appears that the
authorized carrier is not out of pocket for most costs that it would
have borne if it had in fact provided service. We emphasize that,
should the authorized carrier conclude that it is entitled to any
compensation from the slamming carrier that it does not receive under
our rules, such as lost profits or other damages, the authorized
carrier has recourse against the slamming carrier in the appropriate
forum, such as before the Commission or in a state or federal court.
43. Several commenters, including AT&T and GTE, state that
consumers should pay for services received in order to give effect to
the remedy in section 258(b), which requires unauthorized carriers to
give authorized carriers all charges collected from slammed
subscribers. By its terms, that remedy applies only when the consumer
has in fact made payment to the unauthorized carrier. Section 258(b)
does not require the consumer to pay either the authorized carrier or
the unauthorized carrier. As discussed in the following section, if a
subscriber does pay his or her unauthorized carrier, the authorized
carrier will be entitled to collect that amount from the unauthorized
carrier in accordance with section 258(b).
44. We do recognize that by absolving the consumer of liability for
a certain period of time, our remedy goes beyond the specific statutory
remedy that is explicitly set forth in section 258(b) of the Act.
Section 258(b) also states, however, that ``the remedies provided by
this section are in addition to any other remedies available by law.''
Absolving slammed subscribers of liability for a limited period of time
is within the Commission's authority under section 201(b) to
``prescribe such rules and regulations as may be necessary in the
public interest to carry out the provisions of [the] Act,'' as well as
under section 4(i) to ``perform any and all acts, make such rules and
regulations, and issue such orders, not inconsistent with [the] Act, as
may be necessary in the execution of its functions.'' Pursuant to such
authority, we have determined that the most effective method of
deterring slamming is to deprive carriers of revenue from slamming by
absolving consumers of liability for 30 days after the unauthorized
change. As we have already stated, by enabling the consumer to forgo
payment to the slamming carrier, we limit the opportunities for
slamming carriers to profit from slamming. Furthermore, the absolution
remedy we adopt is not inconsistent with section 258 because the
section 258(b) remedy only applies to charges that have been paid to
the slamming carrier and does not reference charges that have not been
paid.
45. We also recognize that, to the extent that our rules permit
authorized carriers to collect some charges, at their rates, for
services provided by slamming carriers beyond the 30-day absolution
period, these requirements are not in accordance with Section 203(c),
which requires carriers to collect charges in accordance with their
filed tariffs. Because tariffs only permit carriers to collect charges
for service they actually provide, our new rule requiring authorized
carriers to collect charges for service provided by slamming carriers
would not be in accordance with their tariffs. Section 10 of the Act,
however, permits the Commission to forbear from applying section 203
tariff requirements to interstate, domestic, interexchange carriers if
the Commission determines that three statutory forbearance criteria are
satisfied. We conclude that these criteria are met.
46. First, we find that enforcement of section 203(c) in this
instance is not necessary to ensure that the charges, practices,
classifications, or regulations by, for, or in connection with that
carrier or service are just and reasonable and are not unjustly or
unreasonably discriminatory. The circumstances under which we permit
the authorized carrier to collect charges that are not in accordance
with its tariff are very limited. In fact, by requiring the subscriber
to pay the authorized carrier rather than the slamming carrier, our
rule helps to deter the unlawful, unjust, and unreasonable practices of
slamming carriers by preventing them from making profits from slammed
consumers. Under these limited circumstances, our rule is not necessary
to ensure that the authorized carrier's charges, practices,
classifications, or regulations from being just and reasonable, and not
unjustly or unreasonably discriminatory.
47. Second, enforcement of section 203(c) under these circumstances
is not necessary for the protection of consumers. On the contrary,
requiring subscribers to pay their slamming carriers rather than their
authorized carriers would be harmful to consumers. Our rule operates to
protect consumers from the abusive practices of slamming carriers by
depriving such carriers of slamming profits. Therefore enforcement of
section 203(c) in this particular situation is not necessary to protect
consumers.
48. Third, forbearance from applying section 203(c) in this
instance is consistent with the public interest. In making this
determination, section 10(b) also requires us to consider whether
forbearance will promote competitive market conditions, including the
extent to which forbearance will enhance competition among providers of
telecommunications services. We conclude that permitting the subscriber
to pay the authorized carrier for charges imposed by slamming carriers
after the 30-day absolution period is consistent with the public
interest. Slamming distorts competition in the marketplace because it
rewards carriers who employ fraud and deceit over carriers that are
conducting lawful activities. Slamming also deprives a consumer of
choice. Because our rule deters slamming by making slamming
unprofitable, it promotes the public interest, including enhancing
competition for telecommunications services.
ii. When the Slammed Subscriber Pays the Unauthorized Carrier
49. We concluded above that a slammed subscriber is not liable for
charges incurred during the first 30 days after an unauthorized carrier
change. In the event that a subscriber nevertheless pays the
unauthorized carrier for slamming charges, two rules shall govern.
First, the unauthorized carrier is obligated to remit to the authorized
carrier all charges paid by the subscriber. Second, after receiving
this amount from the unauthorized carrier, the authorized carrier shall
provide the subscriber with a refund or credit for any amounts the
subscriber paid in excess of what he or she would have paid the
authorized carrier absent the unauthorized change.
a. Liability of the Unauthorized Carrier
50. We adopt the rule proposed in the Further Notice and Order to
provide that any telecommunications carrier that violates the
Commission's verification procedures and that collects charges for
[[Page 7751]]
telecommunications service from a subscriber shall be liable to the
subscriber's properly authorized carrier in an amount equal to all
charges paid by such subscriber after such violation. This remedy is
directed specifically by the language in section 258(b) of the Act.
51. We also impose certain additional penalties on unauthorized
carriers. We also require the unauthorized carrier to pay for
reasonable billing and collection expenses, including attorneys' fees,
incurred by the authorized carrier in collecting charges from the
unauthorized carrier. Requiring the unauthorized carrier to pay for
expenses incurred by the authorized carrier in collecting charges from
the unauthorized carrier ensures that the authorized carrier does not
suffer further economic loss because of the unauthorized change, and
adds an economic incentive for the authorized carrier to seek
reimbursement for slamming. Additionally, since the rule increases the
penalty for slamming, the unauthorized carrier may facilitate
reimbursement to the authorized carrier in order to avoid payment of
any additional expenses for billing and collection.
52. We also require the unauthorized carrier to pay for the
expenses of restoring the subscriber to his or her authorized carrier.
By requiring the unauthorized carrier to pay the change charge to the
authorized carrier, we ensure that neither the authorized carrier nor
the subscriber incurs additional expenses in restoring the subscriber
to his or her preferred carrier. Furthermore, requiring the
unauthorized carrier to pay these additional charges will serve as a
further deterrent to unauthorized changes.
b. Subscriber Refunds or Credits
53. Our new rules will enable subscribers to prevent carriers from
profiting by absolving them of liability for the first 30 days after an
unauthorized change. We conclude, however, that the specific provisions
of section 258(b) appear to prevent us from absolving consumers of
liability to the extent that they have already made payments to their
unauthorized carriers. We conclude that Congress intended that
subscribers who pay for slamming charges should pay no more than they
would have paid to their authorized carriers for the same service had
they not been slammed. Indeed, the legislative history reflects
Congressional intent that ``the Commission's rules should also provide
that consumers be made whole.'' Therefore our rules will require the
authorized carrier to refund or credit the subscriber for any charges
collected from the unauthorized carrier in excess of what the
subscriber would have paid the authorized carrier absent the switch.
This approach is consistent with the Commission's current rules that
ensure that the slammed subscriber pays no more for service than he or
she would have paid before the unauthorized switch. Furthermore, we
conclude that requiring a refund of the excess amounts paid by the
subscriber does not harm the authorized carrier who has in fact
received payment for service that it did not provide to the subscriber.
Should the authorized carrier conclude that it is suffering some
financial harm, nothing in our rules would preclude the carrier from
filing a claim against the unauthorized carrier for lost profits or
other damages.
54. If the authorized carrier fails to collect the charges paid by
the subscriber from the unauthorized carrier, the authorized carrier is
not required to provide a refund or credit to the subscriber. The
authorized carrier, who has done no wrong, should not be penalized by
having to provide the subscriber with a refund paid out of the
authorized carrier's pocket. We require the authorized carrier,
however, to notify the subscriber within 60 days after the subscriber
has notified the authorized carrier of an unauthorized change, if the
authorized carrier has failed to collect from the unauthorized carrier
the charges paid by the slammed subscriber. Upon receipt of the
notification, the subscriber will have the opportunity to pursue a
claim against the slamming carrier for a full refund of all amounts
paid to the slamming carrier. The subscriber is entitled to the entire
amount paid, rather than merely a refund or credit of charges paid in
excess of the authorized carrier's rates. This is because it is the
subscriber who is collecting the charges from the slamming carrier
rather than the authorized carrier. The language of section 258(b)
generally prevents the subscriber from being absolved of liability for
charges paid because it indicates that the authorized carrier may make
a claim for, and keep, amounts paid to the slamming carrier. Where the
authorized carrier has failed in collecting charges from the slamming
carrier, however, the language of section 258(b) would not apply.
Therefore the subscriber, who is not bound by the carrier remedy in
section 258(b), would be entitled to a refund from the slamming carrier
of all slamming charges paid. If the subscriber has difficulty in
obtaining this refund from the slamming carrier, the subscriber has the
option of filing a complaint with the Commission pursuant to section
208.
iii. Investigation and Reimbursement Procedures
a. When the Subscriber Has Not Paid the Unauthorized Carrier
55. A subscriber may refuse to pay any charges imposed by the
slamming carrier for 30 days after the unauthorized change occurred.
The record supports, however, giving the carrier who has been deprived
of charges the opportunity to refute a subscriber's slamming claim. We
therefore impose the following mechanism to limit the ability of
subscribers to fraudulently claim that they have been slammed.
56. After the subscriber has reported an allegedly unauthorized
change and requested to be switched back to the authorized carrier, the
slamming carrier shall remove from the subscriber's bill, whether
billed through a LEC or otherwise, all charges that were incurred for
the first 30 days after the unauthorized change occurred. If the
allegedly unauthorized carrier has proof of the consumer's valid
verification of authorization to change to it, however, then the
allegedly unauthorized carrier shall, within 30 days of the
subscriber's return to the originally authorized carrier, submit to the
originally authorized carrier a claim for the amount of charges for
which the consumer was absolved, along with proof of the subscriber's
verification of the disputed carrier change. The authorized carrier
shall conduct a reasonable and neutral investigation of the claim,
including, where appropriate, contacting the subscriber and the carrier
making the claim. Within 60 days after receipt of the claim and the
proof of verification, the originally authorized carrier shall issue a
decision to the subscriber and the carrier making the claim. If the
originally authorized carrier decides that the subscriber did in fact
authorize a carrier change to the carrier making the claim, it shall
place on the subscriber's bill a charge equal to the amount of charges
for which the subscriber was previously absolved. Upon receiving this
amount, the originally authorized carrier shall forward this amount to
the carrier making the claim. If the authorized carrier determines that
the subscriber was slammed by the carrier filing the claim, the
subscriber shall not be required to make any payments for the charges
for which he or she was absolved. If either the subscriber or the
carrier making the claim believes that the authorized carrier's
investigation or
[[Page 7752]]
adjudication of the dispute was in any way improper or wrong, then it
has the option of filing a section 208 complaint.
b. When the Subscriber Has Paid the Unauthorized Carrier
57. When the subscriber has paid charges to the slamming carrier,
the following procedures shall apply. First, we require the authorized
carrier to submit to the allegedly unauthorized carrier, within 30 days
of notification of an unauthorized change, a request for proof of
verification of the subscriber's requested carrier change. Second, we
require the allegedly unauthorized carrier to provide proof of
verification to the authorized carrier within ten days of the
authorized carrier's request. If the allegedly unauthorized carrier
does provide proof of verification, consistent with the Commission's
verification procedures, of the disputed carrier change request, then
the burden shifts to the authorized carrier to prove that an
unauthorized change occurred. The proof of verification must provide
clear and convincing evidence that the subscriber provided knowing
authorization of a carrier change.
58. If the allegedly unauthorized carrier cannot provide proof of
verification, then it must provide to the authorized carrier, also
within ten days of the authorized carrier's request for proof of
verification, a copy of the subscriber's bill, an amount equal to any
charge required to return the subscriber to his or her authorized
carrier, and an amount equal to any charges paid by the subscriber, if
applicable. In the event that the authorized carrier is unable to
obtain an appropriate response from the slamming carrier, the
authorized carrier may bring an action in federal or state court, where
appropriate, or before the Commission, against the slamming carrier.
iv. Restoration of Premiums
59. Premiums are bonuses, such as frequent flier miles, that are
given to subscribers as rewards for each dollar spent on
telecommunications services. The legislative history of the 1996 Act
states that ``the Commission's rules should require that carriers
guilty of `slamming' should be liable for premiums, including travel
bonuses, that would otherwise have been earned by telephone subscribers
but were not earned due to the violation of the Commission's rules. * *
* '' Therefore we require an authorized carrier to reinstate the
subscriber in any premium program in which the subscriber was enrolled
prior to being slammed, if that subscriber's participation in the
premium program was terminated because of the unauthorized change. We
also require the authorized carrier restore to the subscriber any
premiums that the subscriber lost due to slamming if a subscriber has
paid the unauthorized carrier for slamming charges. We emphasize that
the authorized carrier is entitled to receive from the slamming carrier
charges paid by the slammed subscriber, and we expect that authorized
carriers will make every effort to pursue their claims against slamming
carriers. In the event that an authorized carrier is unable to recover
from the unauthorized carrier charges that were paid by the subscriber,
however, the authorized carrier is still required to restore the
subscriber's premiums. On the other hand, an authorized carrier is not
required to restore any premiums lost by that subscriber if the
subscriber has not paid for the charges incurred after being slammed.
60. Although the Commission proposed in the Further Notice and
Order to require the unauthorized carrier to remit to the properly
authorized carrier an amount equal to the value of premiums to be
restored to the subscriber, we find that this is not necessary to
enable the authorized carrier to restore premiums to its subscribers.
If the unauthorized change had never occurred, the authorized carrier
would have provided the premium to the subscriber on the basis of the
subscriber's payment to the authorized carrier. Therefore the
authorized carrier is no worse off than it would have been if it is
required to restore subscriber premiums upon receipt of the amount paid
by the subscriber to the unauthorized carrier.
v. Liability for Inadvertent Unauthorized Changes
61. We reiterate that the statute and our rules impose liability
for any unauthorized change in a subscriber's preferred carrier,
whether intentional or inadvertent. Section 258 of the Act makes it
illegal for a carrier to ``submit or execute a change in a subscriber's
selection of a provider of telephone exchange service or telephone toll
service except in accordance with such verification procedures as the
Commission shall prescribe.'' Although several commenters assert that
our rules should apply only to intentional acts that result in
slamming, the statutory language does not establish an intent element
for a violation of section 258. Several commenters, such as Ameritech,
BellSouth, and the North Carolina Commission, support the application
of a strict liability standard, in which a carrier would be liable for
slamming if it was responsible for an unauthorized change, regardless
of whether the unauthorized carrier did so intentionally. We agree that
such a strict liability standard is required by the statute. We also
find that the rights of the consumer and the authorized carrier to
remedies for slamming should not be affected by whether the slam was an
intentional or accidental act. Regardless of the intent, or lack
thereof, behind the unauthorized change, the consumer and the
authorized carrier have suffered injury. We recognize, however, that
even with the greatest care, innocent mistakes will occur and may
result in unauthorized changes. In such cases, we will take into
consideration in any enforcement action the willfulness of the carriers
involved.
vi. Determining Liability Between Carriers
62. In order to avoid or minimize disputes over the source or cause
of unauthorized carrier changes, or over liability for such carrier
changes, we delineate the duties and obligations of the submitting and
executing carriers.
63. As proposed in the Further Notice and Order, we adopt the
following ``but for'' liability test: (1) where the submitting carrier
submits a carrier change request that fails to comply with our rules
and the executing carrier performs the change in accordance with the
submission, only the submitting carrier is liable as an unauthorized
carrier; (2) where the submitting carrier submits a change request that
conforms with our rules and the executing carrier fails to execute the
change in conformance with the submission, only the executing carrier
is liable for the unauthorized change; and (3) finally, where the
submitting carrier submits a carrier change request that fails to
comply with our rules and the executing carrier fails to perform the
change in accordance with the submission, only the submitting carrier
is liable as an unauthorized carrier.
B. Third Party Administrator for Dispute Resolution
64. We have formulated several mechanisms in this Order that rely
on the authorized carrier to provide relief to its slammed subscribers
and to determine whether its subscriber was slammed. We recognize,
however, that some carriers may find it to be in their interest to make
other mutually agreeable arrangements that might better serve to
address our concerns. For instance, several carriers, particularly MCI,
have indicated that they are willing and able to create quickly a
system using an independent third party
[[Page 7753]]
administrator to discharge carrier obligations for resolving disputes
among carriers and subscribers with regard to slamming, including re-
rating subscriber telephone bills and returning the subscriber to the
proper carrier. We agree that this concept has merit. Consumers would
benefit by having one point of contact to resolve slamming problems.
Carriers would benefit by having a neutral body to resolve disputes
regarding slamming liability. LECs would no longer be the recipients of
angry phone calls from consumers who have been slammed by long distance
carriers, while IXCs would be able to divert their resources to
preventing slamming rather than resolving slamming disputes. Although
this approach holds promise, we do not believe that we should abandon
the rules adopted herein because they provide an appropriate mechanism
for all carriers to render appropriate relief and dispute resolution to
slammed consumers and carriers. We do, however, encourage carriers to
work out such arrangements and we will be open to receiving requests
for waiver of the liability provisions of our rules for carriers that
agree to implement an acceptable alternative.
65. To afford carriers time to develop and implement an industry-
funded independent dispute resolution mechanism and to file waiver
requests as described above, we delay the effective date of the
liability rules set forth above until 90 days after Federal Register
publication of this Order. Any waiver request must be filed in a timely
manner so that the Commission may evaluate and grant or deny such
request in enough time to enable carriers to implement and utilize the
mechanism by the effective date of the liability rules. In submitting
waiver requests, carriers should bear in mind that we would be inclined
to grant a waiver only if we are satisfied that any such neutral entity
would fulfill the obligations imposed by our rules with regard to
liability, in the timeframes specified in the rules. We note that
nothing in the Commission's liability rules or the use of the third
party administrator shall preclude a consumer or carrier from filing a
section 208 complaint or other action in state or federal court.
C. Verification Rules
i. The Welcome Package
66. One of the verification procedures available to carriers under
the Commission's rules is the ``welcome package.'' As set forth in
section 64.1100(d), after obtaining the subscriber's authorization to
make a carrier change, the IXC may send the consumer a welcome package
containing information and a prepaid postcard, which the customer can
use to deny, cancel, or confirm the change order. Section 64.1100(d)(8)
provides that the package must contain a statement that if the
subscriber does not return the postcard, the subscriber's long distance
service will be switched within 14 days after the date the package was
mailed. In the Further Notice and Order, the Commission sought comment
on whether the welcome package verification option should be eliminated
because it could be used in the same manner as a negative-option LOA.
b. Discussion
67. The record, as well as our experience with consumer complaints,
supports our decision to eliminate the welcome package as a
verification option. The welcome package has been a significant source
of consumer complaints regarding slamming. As many of the commenters
note, consumers often fail to receive the welcome package, or they
throw it away as junk mail, or they have their service switched despite
the fact that they returned postcards requesting that their service not
be changed. The welcome package becomes a particularly ineffective
verification method when used in combination with a misleading
telemarketing script. If a subscriber does not even realize that he or
she has agreed to change his or her service because the telemarketing
solicitation was so misleading, that subscriber would reasonably
conclude that the welcome package is a solicitation, not a
confirmation, and thus discard it without examination. In all
instances, however, we find that the welcome package is an ineffective
verification method because it does not provide evidence, such as a
written signature or recording, that the subscriber has in fact
authorized a carrier change. Moreover, even where the subscriber
actually receives and reads the information in a welcome package, this
approach places an affirmative burden on the subscriber to avoid having
his or her preferred carrier switched. As with negative-option LOAs, we
do not think consumers should have to take affirmative action to avoid
being slammed.
ii. Application of the Verification Rules to In-Bound Calls
68. The Commission concluded in the 1995 Report and Order that it
should extend our verification procedures to consumer-initiated ``in-
bound'' calls. On its own motion the Commission stayed the application
of the verification rules to in-bound calls pending its decision on
several petitions for reconsideration by AT&T, MCI, and Sprint. We now
find that verification of in-bound calls is necessary to deter slamming
and, accordingly, we lift the stay imposed in the In-bound Stay Order.
We apply the same verification requirements to in-bound and out-bound
calls. This will enable carriers to adopt uniform verification
procedures for all calls. We agree with the state commissions and some
IXCs that the opportunity for slamming is as great with in-bound calls
as with out-bound calls. Equally important, we recognize that excluding
in-bound calls from our verification requirements would open a loophole
for slammers. Through this loophole, unscrupulous carriers could slam
not only consumers who initiate calls for reasons other than to change
carriers, but also consumers who have simply never called in. Consumers
slammed in this way would have difficulty proving that they had never
initiated calls to a carrier.
69. U S WEST included in its comments a Petition for
Reconsideration of that portion of the 1995 Report and Order that
applied the Commission's verification rules to in-bound calls. U S WEST
states that because the 1995 Report and Order pertained only to
interexchange services and IXCs, a LEC such as U S WEST would not have
been expected to seek reconsideration of those rules at that time. We
find that U S WEST's Petition for Reconsideration of the Commission's
1995 Report and Order is untimely filed. Nevertheless, in making our
decision regarding in-bound verification in this Order, we have taken
into consideration the comments regarding in-bound verification
submitted by U S WEST in its Petition for Reconsideration. Based on the
evidence in the record, the additional comments sought and received,
and the anticipated competitive climate, we conclude that imposing
verification rules on in-bound calls is in the public interest and that
U S WEST's request to the contrary should be denied.
iii. Independent Third Party Verification
70. Our existing rules provide for verification by using an
``appropriately qualified and independent third party operating in a
location physically separate from the telemarketing representative''
who obtained the carrier change request. We now set forth the following
specific criteria to determine a third party verifier's independence.
These criteria are not intended to be exhaustive, but rather the
Commission
[[Page 7754]]
will evaluate the particular circumstances of each case. First, the
third party verifier should not be owned, managed, controlled, or
directed by the carrier. Ownership by the carrier would give the third
party verifier incentive to affirm carrier changes, rather than to
determine whether the consumer has given authorization for a carrier
change. Second, the third party verifier should not be given financial
incentives to approve carrier changes. For example, an independent
third party verifier should not receive commissions for telemarketing
sales that are confirmed because such a compensation scheme provides
the third party verifier with incentive to falsely confirm sales. As
another example, a carrier should not require an independent third
party verifier to agree to an exclusive contract with the carrier, such
that the independent verifier is wholly dependent on that particular
carrier for revenue. Third, we reiterate that the third party verifier
must operate in a location physically separate from the carrier. We
note that our rules already require this, but we highlight this
requirement because we find it to be an important one. Requiring third
party verifiers to be in different physical locations from carriers
reinforces the arms-length nature of their relationship.
71. Several commenters also propose disclosure requirements for the
scripts used by third party verifiers. Based on the record, we conclude
that the scripts used by the independent third party verifier should
clearly and conspicuously confirm that the subscriber has previously
authorized a carrier change. The script should not mirror any carrier's
particular marketing pitch, nor should it market the carrier's
services. Instead, it should clearly verify the subscriber's decision
to change carriers. We note that we seek additional comment on
proposals for script requirements in the Further Notice of Proposed
Rulemaking.
iv. Other Verification Mechanisms
72. The Commission sought comment in the Further Notice and Order
on additional mechanisms for reducing slamming. We received multiple
proposals and have evaluated them accordingly. We adopt a rule
requiring carriers to retain LOAs and other verification records for
two years. We choose a retention period of two years because any person
desiring to file a complaint with the Commission alleging a violation
of the Act must do so within two years of the alleged violation. We
reject remaining proposals made by the commenters because, although
they might be helpful in preventing slamming, they would be impractical
to implement. These proposals include, for example, ideas for assigning
subscribers personal identification numbers (PINs). Several commenters
suggest limiting our verification options to only written LOAs or to
independent third party verification, while others propose to add more
options, such as audio recording. We decline to further limit the
verification options because we find that a range of verification
options is necessary to continue to give carriers the maximum
flexibility to choose a verification method appropriate for their
needs. Furthermore, the verification rules, as we have modified them in
this Order will provide consumers with protection against slamming
while still providing them with the ability to change carriers without
unnecessary burdens.
73. We clarify that, regardless of the solicitation method used,
all carrier changes must be verified. We modify our rules to make clear
that a carrier must use one of our three verification options (written
LOA, electronic author ization, and independent third party
verification) to verify any carrier change. Specifically, the current
rules appear to create a dichotomy between verification methods to be
used when a carrier change is obtained through telemarketing, and when
other marketing methods are used. A strict reading of the rules would
indicate that, pursuant to current section 64.1100, a telemarketing
carrier has several verification options, but that a carrier that does
not telemarket must obtain a written LOA pursuant to current section
64.1150. This would seem to penalize carriers that use methods other
than telemarketing, such as in-person solicitations or Internet sign
ups, by denying them flexibility in their verification methods. We are
also aware that some carriers have interpreted the difference between
current sections 64.1100 and 64.1150 to argue that they are not
required to verify their carrier change requests because such changes
were not obtained through telemarketing. This is incorrect, as the
Commission's previous orders have clearly stated that all carrier
changes must be authorized and verified. Because some confusion appears
to exist among carriers regarding this subject, we modify our rules
accordingly.
v. Use of the Term ``Subscriber''
74. We modify current section 64.1100 to use the term
``subscriber'' in place of ``customer,'' as proposed in the Further
Notice and Order. We also amend current section 64.1150(e)(4) to change
the word ``consumer'' to ``subscriber.'' Because section 258 uses the
term ``subscriber'' rather than ``customer,'' this will make the
language in our rules consistent with the statutory language.
D. Extension of the Commission's Verification Rules to the Local Market
i. Application of the Verification Rules to the Local Market
75. In the Further Notice and Order, the Commission sought comment
on whether the current verification rules, which apply only to IXCs,
should be applied to the local market (i.e., local exchange service and
intraLATA toll service). We adopt a rule requiring that all changes to
a subscriber's preferred carrier, including local exchange, intraLATA
toll, and interLATA toll services, must be authorized by that
subscriber and verified in accordance with our procedures. With the
advent of competition in the provision of local exchange and intraLATA
toll services we anticipate a greater incidence of slamming generally
if effective rules are not put into place.
76. We also require carriers to identify specifically the types of
service or services being offered (e.g., interLATA toll, intraLATA
toll, local exchange) in any preferred carrier solicitation or letter
of agency, and to obtain separate authorization and verification for
each service that is being changed. The separate authorization and
verification may be received and conducted during the same
telemarketing solicitation or obtained in separate statements on the
same LOA form. By requiring carriers to describe fully the services
they offer, and obtain separate authorization and verification for
different services, carriers will be prevented from taking advantage of
consumer confusion and changing the preferred carriers for all of a
subscriber's telecommunications services where the subscriber merely
intended to change one. Several commenters support more targeted
proposals, rather than the general application of more rigorous
verification rules, purportedly to avoid unnecessary costs and harm to
competition. For example, Ameritech, SBC, and U S WEST propose systems
that would impose fines or more stringent verification requirements on
carriers with a history of slamming, as determined by the LEC or
otherwise. In light of the high incidence of slamming violations we
currently face, we prefer to adopt the approach taken in the rules in
this Order because they will help to prevent carriers from slamming
consumers in the first place. Furthermore, such proposals could
[[Page 7755]]
permit LECs to target certain carriers, including those that are
offering competing services.
ii. Application of the Verification Rules to All Telecommunications
Carriers
77. We adopt a rule requiring that no telecommunications carrier
shall submit or execute a change on behalf of a subscriber in the
subscriber's selection of a provider of telecommunications service
except in accordance with the Commission's verification procedures,
consistent with the language of section 258. Based on the record,
however, we create an exception for CMRS providers. We conclude that
CMRS providers should not be subject to our verification rules at this
time because slamming does not occur in the present CMRS market. CMRS
providers are not currently subject to equal access requirements. In
other words, a CMRS provider is free to designate any toll carrier for
its subscribers unless it has voluntarily chosen not to do so. It is
our understanding that the CMRS carrier, which has made contractual
arrangements with the toll carriers, is in control of this selection
process and must be contacted by the subscriber in order for any change
in toll carriers to occur. Furthermore, Bell Atlantic Mobile and CTIA
state that, at this time, a CMRS carrier cannot change a customer's
wireless local exchange service without that customer's express
approval, because the customer must typically physically reprogram the
handset to initiate service with a new carrier. In light of these
considerations, we believe that unauthorized changes are much less
likely to occur and we are not aware of any slamming complaints in this
area. We may revisit this issue should slamming become a problem in the
CMRS market.
iii. The States' Role
78. Section 258 charges the Commission with the responsibility for
establishing verification procedures for carriers who ``submit or
execute a change in a subscriber's selection of a provider of telephone
exchange service or telephone toll service.'' Therefore, section 258
explicitly grants the Commission authority to create verification
procedures for both interstate and intrastate services, and our rules
here indeed apply to both sets of services. Many carriers urge us
generally to preempt state regulation of slamming by local exchange and
intrastate interexchange carriers in order to create uniform rules.
79. We decline to preempt generally state regulation of carrier
changes. The states and the Commission have a long history of working
together to combat slamming, and we conclude that state involvement is
of greater importance than ever before. We find that, although a state
must accept the same verification procedures as prescribed by the
Commission, a state may accept additional verification procedures for
changes to intrastate service if such state concludes that such action
is necessary based on its local experiences. We further note that
nothing in our rules prohibits states from deterring slamming through
means other than regulation of verification procedures, such as general
consumer protection requirements or direct regulation of telemarketing
sales. States must, however, write and interpret their statutes and
regulations in a manner that is consistent with our rules and orders,
as well as section 258. For example, a state may not adopt the welcome
package as an additional verification method because we have determined
that the welcome package fails to protect consumers.
80. Furthermore, we are obligated and willing to examine state
rules on a case-by-case basis if it appears that they conflict with the
purpose of our rules, for instance, by prohibiting or having the effect
of prohibiting the ability of any entity to provide telecommunications
service. With regard to the issue of preemption of state verification
procedures, the Commission will not make a preemption determination in
the absence of an adequate record clearly describing the state law or
action to be preempted and precisely how that state law or action
conflicts with federal law or obstructs federal objectives. The record
in this proceeding does not contain any comprehensive identification or
analysis of which particular state laws would be inconsistent with our
verification rules or would obstruct federal objectives. Accordingly,
the record does not contain sufficient information about various state
requirements to allow us to assess the ability of carriers to comply
with both federal and state anti-slamming mechanisms.
81. Section 258 expressly grants to the states authority to enforce
the Commission's verification procedure rules with respect to
intrastate services. A state therefore may commence proceedings against
a carrier for violation of the Commission's rules governing changes to
a subscriber's intrastate service. We conclude that enforcement is
another area in which the states and the Commission may work together
to eradicate slamming. A single unauthorized change may result in the
switching of both a subscriber's intrastate and interstate service in
violation of the Commission's verification procedures. In the case of
an unauthorized change that results in changes to intrastate and
interstate service, a state's proceeding to enforce the Commission's
rules with respect to the intrastate violation will yield factual
findings regarding the interstate violation as well. The state's
factual finding in such a case will be given great weight in the
Commission's proceeding to determine whether the carrier violated the
Commission's interstate verification procedures.
E. Submitting and Executing Carriers
i. Definition of ``Submitting'' and ``Executing'' Carriers
82. A submitting carrier will be generally any carrier that (1)
requests on the behalf of a subscriber that the subscriber's
telecommunications carrier be changed; and (2) seeks to provide retail
services to the end user subscriber. We have modified the rule proposed
in the Further Notice and Order to take into account the roles of
underlying carriers and their resellers. We note, however, that either
the reseller or the facilities-based carrier may be treated as a
submitting carrier if it is responsible for any unreasonable delays in
the submission of carrier change requests or if it is responsible for
submitting unauthorized carrier change requests, including fraudulent
authorizations.
83. We note that in situations in which a customer initiates or
changes long distance service by contacting the LEC directly,
verification of the customer's choice would not need to be verified by
either the LEC or the chosen IXC. In this situation, neither the LEC
nor the IXC is the submitting carrier as we have defined it. The LEC is
not providing interexchange service to that subscriber. The IXC has not
made any requests--it has merely been chosen by the consumer.
Furthermore, because the subscriber has personally requested the change
from the executing carrier, the IXC is not requesting a change on the
subscriber's behalf. If a LEC's actions in this situation resulted in
the subscriber being assigned to a different interexchange carrier than
the one originally chosen by the subscriber, however, then that LEC
could be liable for violations of its duties as an executing carrier.
84. We adopt the definition proposed in the Further Notice and
Order for an executing carrier, so that an executing carrier is
generally any carrier that effects a request that a subscriber's
telecommunications carrier be changed.
[[Page 7756]]
This rule will apply even where a reseller competitive local exchange
company (CLEC) receives carrier changes and submits such changes to its
underlying facilities-based LEC. We conclude that the executing carrier
should be the carrier who has actual physical responsibility for making
the change to the subscriber's service, rather than a carrier that is
merely forwarding a carrier change request on behalf of a subscriber.
We also emphasize, however, that either the reseller or the facilities-
based carrier may be treated as an executing carrier if it is
responsible for any unreasonable delays in the execution of carrier
changes or for the execution of unauthorized carrier changes, including
fraudulent authorizations.
85. We also note that our definition of an executing carrier could
also include an IXC in the current environment. When a facilities-based
IXC resells service to a switchless reseller, the switchless reseller
uses the same carrier identification code (CIC) as the facilities-based
IXC. Subscribers of both the facilities-based IXC and the switchless
reseller would therefore be on the network of the facilities-based IXC,
with the same CIC. CICs are used by LECs to identify different IXCs so
that LECs will know to which carrier they should route a subscriber's
interexchange traffic. Where a subscriber changes from a facilities-
based IXC to a reseller of that facilities-based IXC's services, the
reseller submits a carrier change order to the facilities-based IXC.
That facilities-based IXC does not submit that change order to the
subscriber's LEC because, as far as the LEC is concerned, the routing
of calls for that subscriber has not changed due to the fact that the
CIC remains the same (i.e., the LEC will still send interexchange calls
from that subscriber to the same facilities-based carrier). The
facilities-based IXC uses the carrier change request to process the
change in its own system, which enables the reseller to begin billing
the subscriber. Therefore, in this very limited situation, the
executing carrier is the facilities-based IXC, not the LEC. In fact,
the facilities-based IXC would be the executing carrier for all carrier
changes in which the subscriber remains on the facilities-based IXC's
network, regardless of whether the subscriber has changed from a
switchless reseller to the reseller's facilities-based IXC, from the
facilities-based IXC to a switchless reseller of that IXC's service, or
from a switchless reseller of the facilities-based IXC's service to
another switchless reseller of that same IXC's service.
86. Based on BellSouth's recommendation, we clarify that a billing
agent has no liability under our verification rules if it is neither an
executing or submitting carrier, as defined by our rules.
ii. Application of Verification Rules to Submitting and Executing
Carriers
87. In the Further Notice and Order, the Commission tentatively
concluded that the submitting carrier's compliance with our
verification rules would facilitate timely and accurate execution of
any carrier change, and that an executing carrier would not be required
to duplicate the carrier change verification efforts of the submitting
carrier. We conclude that executing carriers should not verify carrier
changes prior to executing the change. We agree with several commenters
that requiring such verification would be expensive, unnecessary, and
duplicative of the submitting carrier's verification. Although
executing carriers do not have verification obligations under our
rules, they do have a responsibility to ensure that subscribers'
carrier changes are executed as soon and as accurately as possible,
using the most technologically efficient means available. Executing
carriers are required to execute promptly and without any unreasonable
delay changes that have been verified by the submitting carrier.
88. Some LECs believe that additional verification of carrier
changes by executing carriers would further reduce the incidence of
slamming. We find that permitting executing carriers to verify
independently carrier changes that have already been verified by
submitting carriers could have anticompetitive effects. We have
concerns that executing carriers would have both the incentive and
ability to delay or deny carrier changes, using verification as an
excuse, in order to benefit themselves or their affiliates.
Furthermore, we find that an executing carrier that attempts to verify
a carrier change request would be acting in violation of section
222(b), which states that a carrier that ``receives or obtains
proprietary information from another carrier for purposes of providing
any telecommunications service shall use such information only for such
purpose[.]'' The information contained in a submitting carrier's change
request is proprietary information because it must submit that
information to the executing carrier in order to obtain provisioning of
service for a new subscriber. Therefore, pursuant to section 222(b),
the executing carrier may only use such information to provide service
to the submitting carrier, i.e., changing the subscriber's carrier, and
may not attempt to verify that subscriber's decision to change
carriers.
89. Notwithstanding our prohibition on verification of carrier
changes by executing carriers, we find that executing carriers may
still provide a similar level of protection to their customers in ways
that do not raise anticompetitive concerns, by making preferred carrier
freezes available for subscribers who have concerns about slamming.
Executing carriers also have a variety of methods to notify their
subscribers that their carriers have changed. For example, as discussed
in the Truth-in-Billing NPRM, carriers may choose to include a separate
section in their subscriber bills to highlight any changes that have
occurred on a subscriber's account, including changes to preferred
carriers.
iii. Concerns With Certain Executing Carriers
a. Interference With the Execution Process
90. The Commission sought comment in the Further Notice and Order
on whether ILECs should be subject to different requirements and
prohibitions because they may have the incentive and the ability to
delay or refuse to process carrier change orders in order to avoid
losing local customers, or in order to favor an affiliated IXC.
Although we find that ILECs may very well have incentive to act
anticompetitively, their ability to do so is limited by several
statutory provisions in the Act. For example, section 251 requires
incumbent LECs to provide facilities and services to requesting
telecommunications carriers in a nondiscriminatory manner, section
201(b) prohibits unjust and unreasonable practices, and section 202(a)
prohibits unjust and unreasonable discrimination. Furthermore, any
carrier that imposes unreasonable delays in executing carrier changes,
both for itself and others, will be in violation of our verification
procedures or acting unreasonably in violation of section 201(b), even
if it is not acting in violation of a non-discrimination requirement.
b. Timeframe for Execution of Carrier Changes
91. We decline at this time to adopt any deadlines for execution of
carrier changes. Mandating a specific deadline for execution of all
carrier changes could be problematic because there may be many
legitimate reasons for a delay
[[Page 7757]]
in the execution of a carrier change, such as a consumer request for a
delay in implementation, or the administrative burden of processing a
large number of change orders. We also find that it would not be
feasible to establish a specific deadline for execution of changes that
would accommodate the needs of the wide variety of carriers in the
marketplace, including smaller carriers. We believe, however, that
subscribers should be informed of how long it will take for a carrier
change to become effective and therefore we strongly encourage a
submitting carrier to inform subscribers of the expected timeframe for
implementing the carrier change, if it is able to obtain such
information from the executing carrier.
c. Marketing Use of Carrier Change Information
92. In the Further Notice and Order, the Commission voiced concern
that an incumbent LEC might attempt to engage in conduct that would
blur the distinction between its role as a neutral executing carrier
and its objectives as a marketplace competitor. Specifically, the
Commission stated that an example of this type of conduct could occur
if an incumbent executing carrier sends a subscriber who has chosen a
new carrier a promotional letter (winback letter) in an attempt to
change the subscriber's decision to switch to another carrier. We
conclude that this is a valid concern and therefore find that an
executing carrier may not use information gained from a carrier change
request for any marketing purposes, including any attempts to change a
subscriber's decision to switch to another carrier. Many commenters
support this decision. As explained above, we find that carrier change
information is carrier proprietary information and, therefore, pursuant
to section 222(b), the executing carrier is prohibited from using such
information to attempt to change the subscriber's decision to switch to
another carrier. The executing carrier otherwise would have no
knowledge at that time of a consumer's decision to change carriers,
were it not for the executing carrier's position as a provider of
switched access services. Therefore, when an executing carrier receives
a carrier change request, section 222(b) prohibits the executing
carrier from using that information to market services to that
consumer.
F. Use of Preferred Carrier Freezes
i. Background
93. In the Further Notice and Order, the Commission sought comment
on whether it should adopt rules to address preferred carrier freeze
practices. The Commission noted that, although neither the Act nor its
rules and orders specifically address preferred carrier freeze
practices, concerns about carrier freeze solicitations have been raised
with the Commission. The Commission noted, moreover, that MCI filed a
Petition for Rulemaking on March 18, 1997, requesting that the
Commission institute a rulemaking to regulate the solicitation, by any
carrier or its agent, of carrier freezes or other carrier restrictions
on a consumer's ability to switch his or her choice of interexchange
(interLATA or intraLATA toll) and local exchange carrier. The
Commission determined that it was appropriate to consider MCI's
petition in the Further Notice and Order and, therefore, incorporated
MCI's petition and all responsive pleadings into the record of this
proceeding.
ii. Overview and Jurisdiction
94. We adopt rules to clarify the appropriate use of preferred
carrier freezes because we believe that, although preferred carrier
freezes offer consumers an additional and beneficial level of
protection against slamming, they also create the potential for
unreasonable and anticompetitive behavior that might affect negatively
efforts to foster competition in all markets. While we are confident
that our carrier change verification rules, as modified in this Order,
will provide considerable protection for consumers against unauthorized
carrier changes, we recognize that many consumers wish to utilize
preferred carrier freezes as an additional level of protection against
slamming. As noted in the Further Notice and Order, a carrier freeze
prevents a change in a subscriber's preferred carrier selection until
the subscriber gives the carrier from whom the freeze was requested his
or her written or oral consent.
95. In the Further Notice and Order, however, we stated that
preferred carrier freezes may have the effect of limiting competition
among carriers. We share commenters' concerns that in some instances
preferred carrier freezes are being, or have the potential to be,
implemented in an unreasonable or anticompetitive manner. By
definition, preferred carrier freezes create an additional step
(namely, that subscribers contact directly the LEC that administers the
preferred carrier freeze program) that customers must take before they
are able to obtain a change in their carrier selection. Incumbent LECs
may have incentives to market preferred carrier freezes aggressively to
their customers and to use different standards for placing and removing
freezes depending on the identity of the subscriber's carrier. It also
appears that, at this time, facilities-based LECs--most of which are
incumbent LECs--are uniquely situated to administer preferred carrier
freeze programs.
96. We conclude, contrary to the assertions of Bell Atlantic, that
we have authority under section 258 to address concerns about
anticompetitive preferred carrier freeze practices for intrastate, as
well as interstate, services. Congress, in section 258 of the Act, has
granted this Commission authority to adopt verification rules
applicable to both submission and execution of changes in a
subscriber's selection of a provider of local exchange or telephone
toll services. Preferred carrier freezes directly impact the
verification procedures which Congress instructed the Commission to
adopt because they require subscribers to take additional steps beyond
those described in the Commission's verification rules to effectuate a
carrier change. Moreover, where a preferred carrier freeze is in place,
a submitting carrier that complies with our verification rules may find
that its otherwise valid carrier change order is rejected by the LEC
administering the freeze program. Since preferred carrier freeze
mechanisms can essentially frustrate the Commission's statutorily
authorized procedures for effectuating carrier changes, we conclude
that the Commission has authority to set standards for the use of
preferred carrier freeze mechanisms.
iii. Nondiscrimination and Application of Rules to All Local Exchange
Carriers
97. We conclude that preferred carrier freezes should be
implemented on a nondiscriminatory basis so that LECs do not use
freezes as a tool to gain an unreasonable competitive advantage.
Accordingly, local exchange carriers must make available any preferred
carrier freeze mechanism to all subscribers, under the same terms and
conditions, regardless of the subscribers' carrier selection. We also
conclude that our rules for preferred carrier freezes should apply to
all local exchange carriers and reject those proposals to place
additional requirements on incumbent LECs, to the exclusion of
competitive LECs.
iv. Solicitation and Implementation of Preferred Carrier Freezes
98. We find that the most effective way to ensure that preferred
carrier freezes are used to protect consumers, rather than as a barrier
to competition, is to ensure that subscribers fully
[[Page 7758]]
understand the nature of the freeze, including how to remove a freeze
if they chose to employ one. We thus conclude that any solicitation and
other carrier-provided information concerning a preferred carrier
freeze program should be clear and not misleading. We specifically
decide that, at a minimum, carriers soliciting preferred carrier
freezes must provide: (1) an explanation, in clear and neutral
language, of what a preferred carrier freeze is and what services may
be subject to a preferred carrier freeze; (2) a description of the
specific procedures necessary to lift a preferred carrier freeze and an
explanation that these steps are in addition to the Commission's
regular verification rules for changing subscribers' carrier selections
and that the subscriber will be unable to make a change in carrier
selection unless he or she lifts the freeze; and (3) an explanation of
any charges associated with the preferred carrier freeze service. We
also conclude that preferred carrier freeze procedures, including any
solicitation, must clearly distinguish among telecommunications
services subject to a freeze, i.e., between local, intraLATA toll,
interLATA toll, and international toll services. We do this to reduce
consumer confusion about the differences among telecommunications
services and to prevent unscrupulous carriers from placing freezes on
all of a subscriber's services when the subscriber only intended to
authorize a freeze for a particular service or services.
99. We adopt our proposal to extend our carrier change verification
procedures to preferred carrier freeze solicitations and note that this
proposal was supported by a wide range of carriers, state commissions,
and consumer organizations. This will reduce customer confusion about
preferred carrier freezes and prevent unscrupulous carriers from
imposing preferred carrier freezes without the consent of subscribers.
v. Procedures for Lifting Preferred Carrier Freezes
100. We conclude that a LEC administering a preferred carrier
freeze program must accept the subscriber's written and signed
authorization stating an intent to lift a preferred carrier freeze.
Such written authorization--like the LOAs authorized for use in carrier
changes and to place a preferred carrier freeze--should state the
subscriber's billing name and address and each telephone number to be
affected. In addition, the written authorization should state the
subscriber's intent to lift the preferred carrier freeze for the
particular service in question. We also require that LECs must accept
oral authorization from the customer to remove a freeze and must permit
submitting carriers to conduct a three-way conference call with the LEC
and the subscriber in order to lift a freeze. Three-way calling allows
a submitting carrier to conduct a three-way conference call with the
LEC administering the freeze program while the consumer is still on the
line, e.g., during the initial telemarketing session, so that the
consumer can personally request that a particular freeze be lifted. We
believe that three-way calling will effectively prevent fraud because a
three-way call establishes direct contact between the LEC and the
subscriber.
101. We decline to enumerate all acceptable procedures for lifting
preferred carrier freezes. Rather, we encourage parties to develop new
means of accurately confirming a subscriber's identity and intent to
lift a preferred carrier freeze, in addition to offering written and
oral authorization to lift preferred carrier freezes. Other methods
should be secure, yet impose only the minimum burdens necessary on
subscribers who wish to lift a preferred carrier freeze.
102. The essence of the preferred carrier freeze is that a
subscriber must specifically communicate his or her intent to request
or lift a freeze. We therefore disagree with MCI that third-party
verification of a carrier change alone should be sufficient to lift a
preferred carrier freeze because it does not offer the subscriber any
additional protection from slamming.
103. We conclude that, depending on the circumstances, a carrier
that is asked to lift a freeze should not be permitted to attempt to
change the subscriber's decision to change carriers. This practice
could violate the ``just and reasonable'' provisions of section 201(b).
Much as in the context of executing carriers and carrier change
requests, we think it is imperative to prevent anticompetitive conduct
on the part of executing carriers and carriers that administer
preferred carrier freeze programs. Carriers that administer freeze
programs otherwise would have no knowledge at that time of a consumer's
decision to change carriers, were it not for the carrier's position as
a provider of switched access services. Therefore, LECs that receive
requests to lift a preferred carrier freeze must act in a neutral and
nondiscriminatory manner. To the extent that carriers use the
opportunity with the customer to advantage themselves competitively,
for example, through overt marketing, such conduct likely would be
viewed as unreasonable under our rules.
vi. Information About Subscribers With Preferred Carrier Freezes
104. We do not require LECs administering preferred carrier freeze
programs to make subscriber freeze information available to other
carriers because we expect that, particularly in light of our new
preferred carrier freeze solicitation requirements, more subscribers
should know whether or not there is a preferred carrier freeze in place
on their carrier selection. We encourage LECs, however, to consider
whether preferred carrier freeze indicators might be a part of any
operational support system that is made available to new providers of
local telephone service.
vii. When Subscribers Change LECs
105. Based on the record developed on this issue, we conclude that
when a subscriber switches LECs, he or she should request the new LEC
to implement any desired preferred carrier freezes, even if the
subscriber previously had placed a freeze with the original LEC. We are
persuaded by the substantial number of LEC commenters asserting that it
would be technically difficult or impossible to transfer information
about existing preferred carrier freezes from the original LEC to the
new LEC.
viii. Preferred Carrier Freezes of Local and IntraLATA Services
106. We decline the suggestion of a number of commenters that we
prohibit incumbent LECs from soliciting or implementing preferred
carrier freezes for local exchange or intraLATA services until
competition develops in a LEC's service area. We remain convinced of
the value of preferred carrier freezes as an anti-slamming tool and do
not wish to limit consumer access to this consumer protection device.
We do recognize, however, that preferred carrier freezes can have a
particularly adverse impact on the development of competition in
markets soon to be or newly open to competition. We encourage parties
to bring to our attention, or to the attention of the appropriate state
commissions, instances where it appears that the intended effect of a
carrier's freeze program is to shield that carrier's customers from any
developing competition.
107. We also make clear that states may adopt moratoria on the
imposition or solicitation of intrastate preferred carrier freezes if
they deem such action appropriate to prevent incumbent LECs
[[Page 7759]]
from engaging in anticompetitive conduct. We note that a number of
states have imposed some form of moratorium on the implementation of
preferred carrier freezes in their nascent markets for local exchange
and intraLATA toll services. We find that states--based on their
observation of the incidence of slamming in their regions and the
development of competition in relevant markets, and their familiarity
with those particular preferred carrier freeze mechanisms employed by
LECs in their jurisdictions--may conclude that the negative impact of
such freezes on the development of competition in local and intraLATA
toll markets may outweigh the benefit to consumers.
IV. Ordering Clauses
108. Accordingly, it is ordered that pursuant to sections 1, 4,
201-205, and 258, of the Communications Act of 1934, as amended, 47
U.S.C. 151, 154, 201-205, and 258, the policies, rules, and
requirements set forth herein are adopted.
109. It is further ordered that 47 CFR 64 is Amended as set forth
below, effective 70 days after publication of the text thereof in the
Federal Register, except that the following rules set forth below will
not become effective until 90 days after publication of the text in the
Federal Register: sections 64.1100(c), 64.1100(d), 64.1170, and
64.1180.
110. It is further ordered that the stay of the application of the
Commission's verification rules to in-bound calls imposed in Policies
and Rules Concerning Unauthorized Changes of Consumers' Long Distance
Carriers, Order, 11 FCC Rcd 856 (1995) is lifted.
111. It is further ordered that pursuant to section 1.429(d) of the
Commission's rules, 47 CFR 1.429(d), U S WEST's Petition for
Reconsideration is dismissed as being untimely filed.
112. It is further ordered that a further Notice of Proposed
Rulemaking is issued.\2\
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\2\ See the proposed rule published in the same separate part of
this issue.
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113. 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.
114. It is further ordered that the Commission's Office of Public
Affairs, Reference Operations Division, shall send a copy of this
Order, including the Final Regulatory Flexibility Analysis and the
Initial Regulatory Flexibility Analysis, to the Chief Counsel for
Advocacy of the Small Business Administration.
115. The Order is adopted, and the requirements contained herein
will become effective 70 days after publication of a summary in the
Federal Register, except Secs. 64.1100(c), 64.1100(d), 64.1170, and
64.1180 which contain information that is contingent upon approval by
OMB. The effective date of Secs. 64.1100(c), 64.1100(d), 64.1170, and
64.1180 is delayed until 90 days after publication in the Federal
Register to enable carriers to develop and implement an alternative
carrier dispute resolution mechanism involving an independent
administrator. The Commission will publish a document in the Federal
Register announcing the effective date for Secs. 64.1100(c),
64.1100(d), 64.1170, and 64.1180.
List of Subjects in 47 CFR Part 64
Communications common carriers, Consumer protection,
Telecommunications.
Federal Communications Commission.
Magalie Roman Salas,
Secretary.
Rule Changes
Part 64 of the Commission's Rules and Regulations, Chapter I of
Title 47 of the Code of Federal Regulations, is amended as follows:
PART 64--[AMENDED]
1. The authority citation for part 64 continues to read as follows:
Authority: 47 U.S.C. 154, 254(k); secs. 403(b)(2)(B), (c),
Public Law 104-104, 110 Stat. 56. Interpret or apply 47 U.S.C. secs
201, 218, 226, 228, and 254(k) unless otherwise noted.
2. Revise Sec. 64.1100 to read as follows:
Sec. 64.1100 Changes in subscriber carrier selections.
(a) No telecommunications carrier shall submit or execute a change
on the behalf of a subscriber in the subscriber's selection of a
provider of telecommunications service except in accordance with the
procedures prescribed in this part. Nothing in this section shall
preclude any State commission from enforcing these procedures with
respect to intrastate services.
(1) No submitting carrier shall submit a change on the behalf of a
subscriber in the subscriber's selection of a provider of
telecommunications service prior to obtaining:
(i) authorization from the subscriber, and
(ii) verification of that authorization in accordance with the
procedures prescribed in Sec. 64.1150. For a submitting carrier,
compliance with the verification procedures prescribed in this part
shall be defined as compliance with sections (a) and (b) of this
section, as well with Sec. 64.1150. The submitting carrier shall
maintain and preserve records of verification of subscriber
authorization for a minimum period of two years after obtaining such
verification.
(2) An executing carrier shall not verify the submission of a
change in a subscriber's selection of a provider of telecommunications
service received from a submitting carrier. For an executing carrier,
compliance with the procedures prescribed in this part shall be defined
as prompt execution, without any unreasonable delay, of changes that
have been verified by a submitting carrier.
(3) Commercial mobile radio services (CMRS) providers shall be
excluded from the verification requirements of this part as long as
they are not required to provide equal access to common carriers for
the provision of telephone toll services, in accordance with 47 U.S.C.
332(c)(8).
(b) Where a telecommunications carrier is selling more than one
type of telecommunications service (e.g., local exchange, intraLATA/
intrastate toll, interLATA/interstate toll, and international toll)
that carrier must obtain separate authorization from the subscriber for
each service sold, although the authorizations may be made within the
same solicitation. Each authorization must be verified separately from
any other authorizations obtained in the same solicitation. Each
authorization must be verified in accordance with the verification
procedures prescribed in this part.
(c) Carrier liability for charges. Any submitting
telecommunications carrier that fails to comply with the procedures
prescribed in this part shall be liable to the subscriber's properly
authorized carrier in an amount equal to all charges paid to the
submitting telecommunications carrier by such subscriber after such
violation, as well as for additional amounts as prescribed in
Sec. 64.1170 of this part. The remedies provided in this part are in
addition to any other remedies available by law.
(d) Subscriber liability for charges. Any subscriber whose
selection of telecommunications service provider is changed without
authorization verified in accordance with the procedures set forth in
this part is absolved of liability for charges imposed by the
unauthorized carrier for service provided during the first 30 days
after the unauthorized change. Upon being
[[Page 7760]]
informed by a subscriber that an unauthorized change has occurred, the
authorized carrier, the unauthorized carrier, or the executing carrier
shall inform the subscriber of this 30-day absolution period. The
subscriber shall be absolved of liability for this 30-day period only
if the subscriber has not already paid charges to the unauthorized
carrier.
(1) Any charges imposed by the unauthorized carrier on the
subscriber after this 30-day period shall be paid by the subscriber to
the authorized carrier at the rates the subscriber was paying to the
authorized carrier at the time of the unauthorized change. Upon the
subscriber's return to the authorized carrier, the subscriber shall
forward to the authorized carrier a copy of any bill that contains
charges imposed by the unauthorized carrier after the 30-day period of
absolution. After the authorized carrier has re-rated the charges to
reflect its own rates, the subscriber shall be liable for paying such
re-rated charges to the authorized carrier.
(2) If the subscriber has already paid charges to the unauthorized
carrier, and the authorized carrier recovers such charges as provided
in paragraph (c), the authorized carrier shall refund or credit to the
subscriber any charges recovered from the unauthorized carrier in
excess of what the subscriber would have paid for the same service had
the unauthorized change not occurred, in accordance with the procedures
set forth in Sec. 64.1170 of this part.
(3) If the subscriber has been absolved of liability as prescribed
by this section, the unauthorized carrier shall also be liable to the
subscriber for any charge required to return the subscriber to his or
her properly authorized carrier, if applicable.
(e) Definitions. For the purposes of this part, the following
definitions are applicable:
(1) Submitting carrier. A submitting carrier is generally any
telecommunications carrier that requests on the behalf of a subscriber
that the subscriber's telecommunications carrier be changed, and seeks
to provide retail services to the end user subscriber. A carrier may be
treated as a submitting carrier, however, if it is responsible for any
unreasonable delays in the submission of carrier change requests or for
the submission of unauthorized carrier change requests, including
fraudulent authorizations.
(2) Executing carrier. An executing carrier is generally any
telecommunications carrier that effects a request that a subscriber's
telecommunications carrier be changed. A carrier may be treated as an
executing carrier, however, if it is responsible for any unreasonable
delays in the execution of carrier changes or for the execution of
unauthorized carrier changes, including fraudulent authorizations.
(3) Authorized carrier. An authorized carrier is generally any
telecommunications carrier that submits a change, on behalf of a
subscriber, in the subscriber's selection of a provider of
telecommunications service with the subscriber's authorization verified
in accordance with the procedures specified in this part.
(4) Unauthorized carrier. An unauthorized carrier is generally any
telecommunications carrier that submits a change, on behalf of a
subscriber, in the subscriber's selection of a provider of
telecommunications service but fails to obtain the subscriber's
authorization verified in accordance with the procedures specified in
this part.
(5) Unauthorized change. An unauthorized change is a change in a
subscriber's selection of a provider of telecommunications service that
was made without authorization verified in accordance with the
verification procedures specified in this part.
3. Revise Sec. 64.1150 to read as follows:
Sec. 64.1150 Verification of orders for telecommunications service.
(a) No telecommunications carrier shall submit a preferred carrier
change order unless and until the order has first been confirmed in
accordance with one of the following procedures:
(b) The telecommunications carrier has obtained the subscriber's
written authorization in a form that meets the requirements of
Sec. 64.1160; or
(c) The telecommunications carrier has obtained the subscriber's
electronic authorization to submit the preferred carrier change order.
Such authorization must be placed from the telephone number(s) on which
the preferred carrier is to be changed and must confirm the information
required in paragraph (a) of this section. Telecommunications carriers
electing to confirm sales electronically shall establish one or more
toll-free telephone numbers exclusively for that purpose. Calls to the
number(s) will connect a subscriber to a voice response unit, or
similar mechanism that records the required information regarding the
preferred carrier change, including automatically recording the
originating automatic numbering identification; or
(d) An appropriately qualified independent third party has obtained
the subscriber's oral authorization to submit the preferred carrier
change order that confirms and includes appropriate verification data
(e.g., the subscriber's date of birth or social security number). The
independent third party must not be owned, managed, controlled, or
directed by the carrier or the carrier's marketing agent; must not have
any financial incentive to confirm preferred carrier change orders for
the carrier or the carrier's marketing agent; and must operate in a
location physically separate from the carrier or the carrier's
marketing agent. The content of the verification must include clear and
conspicuous confirmation that the subscriber has authorized a preferred
carrier change; or
(e) Any State-enacted verification procedures applicable to
intrastate preferred carrier change orders only.
4. Add Sec. 64.1160 to read as follows:
Sec. 64.1160 Letter of agency form and content.
(a) A telecommunications carrier may use a letter of agency to
obtain written authorization and/or verification of a subscriber's
request to change his or her preferred carrier selection. A letter of
agency that does not conform with this section is invalid for purposes
of this part.
(b) The letter of agency shall be a separate document (or an easily
separable document) containing only the authorizing language described
in paragraph (e) of this section having the sole purpose of authorizing
a telecommunications carrier to initiate a preferred carrier change.
The letter of agency must be signed and dated by the subscriber to the
telephone line(s) requesting the preferred carrier change.
(c) The letter of agency shall not be combined on the same document
with inducements of any kind.
(d) Notwithstanding paragraphs (b) and (c) of this section, the
letter of agency may be combined with checks that contain only the
required letter of agency language as prescribed in paragraph (e) of
this section and the necessary information to make the check a
negotiable instrument. The letter of agency check shall not contain any
promotional language or material. The letter of agency check shall
contain in easily readable, bold-face type on the front of the check, a
notice that the subscriber is authorizing a preferred carrier change by
signing the check. The letter of agency language shall be placed near
the signature line on the back of the check.
(e) At a minimum, the letter of agency must be printed with a type
of sufficient size and readable type to be clearly
[[Page 7761]]
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 preferred carrier change order;
(2) The decision to change the preferred carrier from the current
telecommunications carrier to the soliciting telecommunications
carrier;
(3) That the subscriber designates [insert the name of the
submitting carrier] to act as the subscriber's agent for the preferred
carrier change;
(4) That the subscriber understands that only one
telecommunications carrier may be designated as the subscriber's
interstate or interLATA preferred interexchange carrier for any one
telephone number. To the extent that a jurisdiction allows the
selection of additional preferred carriers (e.g., local exchange,
intraLATA/intrastate toll, interLATA/interstate toll, or international
interexchange) the letter of agency must contain separate statements
regarding those choices, although a separate letter of agency for each
choice is not necessary; and
(5) That the subscriber understands that any preferred carrier
selection the subscriber chooses may involve a charge to the subscriber
for changing the subscriber's preferred carrier.
(f) Any carrier designated in a letter of agency as a preferred
carrier must be the carrier directly setting the rates for the
subscriber.
(g) Letters of agency shall not suggest or require that a
subscriber take some action in order to retain the subscriber's current
telecommunications carrier.
(h) If any portion of a letter of agency is translated into another
language then all portions of the letter of agency must be translated
into that language. Every letter of agency must be translated into the
same language as any promotional materials, oral descriptions or
instructions provided with the letter of agency.
5. Add Sec. 64.1170 to read as follows:
Sec. 64.1170 Reimbursement procedures.
(a) The procedures in this section shall apply only after a
subscriber has determined that an unauthorized change has occurred, as
defined by Sec. 64.1100(e)(5) of this part, and the subscriber has paid
charges to an allegedly unauthorized carrier. Upon receiving
notification from the subscriber or a carrier that a subscriber has
been subjected to an unauthorized change and that the subscriber has
paid charges to an allegedly unauthorized carrier, the properly
authorized carrier must, within 30 days, request from the allegedly
unauthorized carrier proof of verification of the subscriber's
authorization to change carriers. Within ten days of receiving such
request, the allegedly unauthorized carrier shall forward to the
authorized carrier either:
(1) Proof of verification of the subscriber's authorization to
change carriers; or
(2) The following:
(i) An amount equal to all charges paid by the subscriber to the
unauthorized carrier; and
(ii) An amount equal to any charge required to return the
subscriber to his or her properly authorized carrier, if applicable;
(iii) Copies of any telephone bill(s) issued from the unauthorized
carrier to the subscriber.
(b) If an authorized carrier incurs any billing and collection
expenses in collecting charges from the unauthorized carrier, the
unauthorized carrier shall reimburse the authorized carrier for
reasonable expenses.
(c) Where a subscriber notifies the unauthorized carrier, rather
than the authorized carrier, of an unauthorized subscriber carrier
selection change, the unauthorized carrier must immediately notify the
authorized carrier.
(d) Subscriber refunds or credits. Upon receipt from the
unauthorized carrier of the amount described in paragraph (a)(2)(i),
the authorized carrier shall provide a refund or credit to the
subscriber of all charges paid in excess of what the authorized carrier
would have charged the subscriber absent the unauthorized change. If
the authorized carrier has not received from the unauthorized carrier
an amount equal to charges paid by the subscriber to the unauthorized
carrier, the authorized carrier is not required to provide any refund
or credit. The authorized carrier must, within 60 days after it
receives notification of the unauthorized change, inform the subscriber
if it has failed to collect any charges from the unauthorized carrier
and inform the subscriber of his or her right to pursue a claim against
the unauthorized carrier for a refund of all charges paid to the
unauthorized carrier.
(e) Restoration of premium programs. Where possible, the properly
authorized carrier must reinstate the subscriber in any premium program
in which that subscriber was enrolled prior to the unauthorized change,
if that subscriber's participation in the premium program was
terminated because of the unauthorized change. If the subscriber has
paid charges to the unauthorized carrier, the properly authorized
carrier shall also provide or restore to the subscriber any premiums to
which the subscriber would have been entitled had the unauthorized
change not occurred. The authorized carrier must comply with the
requirements of this section regardless of whether it is able to
recover from the unauthorized carrier any charges that were paid by the
subscriber.
6. Add Sec. 64.1180 to read as follows:
Sec. 64.1180 Investigation procedures.
(a) The procedures in this section shall apply only after a
subscriber has determined that an unauthorized change has occurred and
such subscriber has not paid for charges imposed by the unauthorized
carrier for the first 30 days after the unauthorized change, in
accordance with Sec. 64.1100(d) of this part.
(b) The unauthorized carrier shall remove from the subscriber's
bill all charges that were incurred for service provided during the
first 30 days after the unauthorized change occurred.
(c) The unauthorized carrier may, within 30 days of the
subscriber's return to the authorized carrier, submit to the authorized
carrier a claim that the subscriber was not subjected to an
unauthorized change, along with a request for the amount of charges for
which the consumer was credited pursuant to paragraph (b) of this
section and proof that the change to the subscriber's selection of
telecommunications carrier was made with authorization verified in
accordance with the verification procedures specified in this part.
(d) The authorized carrier shall conduct a reasonable and neutral
investigation of the claim, including, where appropriate, contacting
the subscriber and the carrier making the claim.
(e) Within 60 days after receipt of the claim and the proof of
verification, the authorized carrier shall issue a decision on the
claim to the subscriber and the carrier making the claim.
(1) If the authorized carrier decides that the subscriber was not
subjected to an unauthorized change, the authorized carrier shall place
on the subscriber's bill a charge equal to the amount of charges for
which the subscriber was previously credited pursuant to paragraph (b)
of this section. Upon receiving this amount, the authorized carrier
shall forward this amount to the carrier making the claim.
(2) If the authorized carrier decides that the subscriber was
subjected to an unauthorized change, the subscriber shall not be
required to pay the charges for which he or she was previously
absolved.
7. Add Sec. 64.1190 to read as follows:
[[Page 7762]]
Sec. 64.1190 Preferred carrier freezes.
(a) A preferred carrier freeze (or freeze) prevents a change in a
subscriber's preferred carrier selection unless the subscriber gives
the carrier from whom the freeze was requested his or her express
consent. All local exchange carriers who offer preferred carrier
freezes must comply with the provisions of this section.
(b) All local exchange carriers who offer preferred carrier freezes
shall offer freezes on a nondiscriminatory basis to all subscribers,
regardless of the subscriber's carrier selections.
(c) Preferred carrier freeze procedures, including any
solicitation, must clearly distinguish among telecommunications
services (e.g., local exchange, intraLATA/intrastate toll, interLATA/
interstate toll, and international toll) subject to a preferred carrier
freeze. The carrier offering the freeze must obtain separate
authorization for each service for which a preferred carrier freeze is
requested.
(d) Solicitation and imposition of preferred carrier freezes.
(1) All carrier-provided solicitation and other materials regarding
preferred carrier freezes must include:
(i) An explanation, in clear and neutral language, of what a
preferred carrier freeze is and what services may be subject to a
freeze;
(ii) A description of the specific procedures necessary to lift a
preferred carrier freeze; an explanation that these steps are in
addition to the Commission's verification rules in Secs. 64.1150 and
64.1160 for changing a subscriber's preferred carrier selections; and
an explanation that the subscriber will be unable to make a change in
carrier selection unless he or she lifts the freeze; and
(iii) An explanation of any charges associated with the preferred
carrier freeze.
(2) No local exchange carrier shall implement a preferred carrier
freeze unless the subscriber's request to impose a freeze has first
been confirmed in accordance with one of the following procedures:
(i) The local exchange carrier has obtained the subscriber's
written and signed authorization in a form that meets the requirements
of Sec. 64.1190(d)(3); or
(ii) The local exchange carrier has obtained the subscriber's
electronic authorization, placed from the telephone number(s) on which
the preferred carrier freeze is to be imposed, to impose a preferred
carrier freeze. The electronic authorization should confirm appropriate
verification data (e.g., the subscriber's date of birth or social
security number) and the information required in
Secs. 64.1190(d)(3)(ii)(A) through (D). Telecommunications carriers
electing to confirm preferred carrier freeze orders electronically
shall establish one or more toll-free telephone numbers exclusively for
that purpose. Calls to the number(s) will connect a subscriber to a
voice response unit, or similar mechanism that records the required
information regarding the preferred carrier freeze request, including
automatically recording the originating automatic numbering
identification; or
(iii) An appropriately qualified independent third party has
obtained the subscriber's oral authorization to submit the preferred
carrier freeze and confirmed the appropriate verification data (e.g.,
the subscriber's date of birth or social security number) and the
information required in Sec. 64.1190(d)(3)(ii)(A) through (D). The
independent third party must not be owned, managed, or directly
controlled by the carrier or the carrier's marketing agent; must not
have any financial incentive to confirm preferred carrier freeze
requests for the carrier or the carrier's marketing agent; and must
operate in a location physically separate from the carrier or the
carrier's marketing agent. The content of the verification must include
clear and conspicuous confirmation that the subscriber has authorized a
preferred carrier freeze.
(3) Written authorization to impose a preferred carrier freeze. A
local exchange carrier may accept a subscriber's written and signed
authorization to impose a freeze on his or her preferred carrier
selection. Written authorization that does not conform with this
section is invalid and may not be used to impose a preferred carrier
freeze.
(i) The written authorization shall comply with Secs. 64.1160(b),
(c), and (h) of the Commission's rules concerning the form and content
for letters of agency.
(ii) At a minimum, the written authorization must be printed with a
readable type of sufficient size to be clearly legible and must contain
clear and unambiguous language that confirms:
(A) The subscriber's billing name and address and the telephone
number(s) to be covered by the preferred carrier freeze;
(B) The decision to place a preferred carrier freeze on the
telephone number(s) and particular service(s). To the extent that a
jurisdiction allows the imposition of preferred carrier freezes on
additional preferred carrier selections (e.g., for local exchange,
intraLATA/intrastate toll, interLATA/interstate toll service, and
international toll), the authorization must contain separate statements
regarding the particular selections to be frozen;
(C) That the subscriber understands that she or he will be unable
to make a change in carrier selection unless she or he lifts the
preferred carrier freeze; and
(D) That the subscriber understands that any preferred carrier
freeze may involve a charge to the subscriber.
(e) Procedures for lifting preferred carrier freezes. All local
exchange carriers who offer preferred carrier freezes must, at a
minimum, offer subscribers the following procedures for lifting a
preferred carrier freeze:
(1) A local exchange carrier administering a preferred carrier
freeze must accept a subscriber's written and signed authorization
stating her or his intent to lift a preferred carrier freeze; and
(2) A local exchange carrier administering a preferred carrier
freeze must accept a subscriber's oral authorization stating her or his
intent to lift a preferred carrier freeze and must offer a mechanism
that allows a submitting carrier to conduct a three-way conference call
with the carrier administering the freeze and the subscriber in order
to lift a freeze. When engaged in oral authorization to lift a
preferred carrier freeze, the carrier administering the freeze shall
confirm appropriate verification data (e.g., the subscriber's date of
birth or social security number) and the subscriber's intent to lift
the particular freeze.
[FR Doc. 99-3657 Filed 2-12-99; 8:45 am]
BILLING CODE 6712-01-P
