article

Competitors urge FCC to approve Internet changes

Posted:  03/2000

Regulatory News

Competitors urge FCC to approve Internet changes
KIM SUNDERLAND

Although it has been a dormant issue for several months, competitors have renewed their
efforts to push the FCC into permitting customer requests to change a carrier over the
Internet.

During the past several years, Congress, the FCC and many states increasingly have
become active in establishing formal procedures for changes in a customer’s presubscribed
carrier, according to Neil S. Ende, founder and partner in the Technology Law Group LLC (www.tlgdc.com).

This has been done largely to alleviate slamming. Essentially, the rules currently
require that all changes in a customer’s PC be verified either by a written and signed
letter of authorization (LOA), by toll-free electronic verification or through independent
third-party verification (TPV).

Ende says the FCC currently is considering revisions to its TPV rules, including
verifications via the Internet.

The FCC now requires a company to obtain customer permission to change long-distance
service. One method to do this is an LOA, through which customers indicate in writing that
they want to switch long-distance carriers.

The FCC’s investigation of slamming complaints revealed a significant cause for the
problem has been confusion regarding the purpose of the LOAs, Ende says. For instance,
many long-distance carriers combine LOAs with promotions, such as contest entries, prize
giveaways and checks, which are designed to bring in new customers.

As a result, recipients may be unaware that by signing a document to enter a contest,
claim the prizes, or cash the checks, they also are "authorizing" a carrier
switch, Ende says.

A recent case in point is Qwest Communications Inter-national Inc. (www.qwest.com), which got burned late last year by an FCC
enforcement action to the tune of more than $2 million.

The FCC found Qwest "apparently willfully or repeatedly violated Section 258"
of the Telecommunications Act of 1996, as well as commission rules, by changing the
designated presubscribed carriers of 30 consumers without their authorization. The FCC
said 22 of the complaints "are particularly egregious because Qwest relied on LOAs
that appear to contain forged or falsified signatures of the unsuspecting consumers."

In another four complaints, the FCC said Qwest provided no evidence to rebut the
complainants’ allegations that although the consumers never communicated with the company,
Qwest changed the consumers’ presubscribed carriers without their authorization.

In the remaining four complaints, Qwest submitted PC change requests based upon LOAs
completed by individuals who weren’t authorized to make changes on the accounts that were
switched.

Qwest reportedly tried to lay blame on its marketers, but the FCC didn’t buy it.

"We have stated on numerous occasions that reliance on actions of third-party
marketers does not constitute a defense to an allegation of slamming," the FCC said.
"Pursuant to the act and commission rules, carriers are responsible for the actions
of their sales agents, whether they are employees or third-party contractors."

To further protect consumers, the FCC has proposed that:

* LOAs be separate from other promotional or inducement materials;

* LOAs be limited strictly to authorizing a change in long-distance carriers;

* LOAs be clearly identified as an LOA; and

* The language in the LOA be clear and unambiguous and that the print be of sufficient
size and readable style to be clear to the consumer that the document, if signed, would
change his or her long-distance company.

As part of these proposals, the Competitive Telecommunications Assoc-iation (CompTel, www.comptel.org) again has asked the FCC to move quickly
to ensure consumers can order telecom services easily through the Internet.

CompTel specifically wants the commission to rule that Internet LOAs are permissible as
evidence of customer intent to switch their local and long-distance providers. Swift FCC
action permitting Internet LOAs is more crucial now than ever in the wake of the FCC’s
decision approving Bell Atlantic Corp.’s (www.bell-atl.com)
Sec. 271 application for New York, according to CompTel. "Specifically, Bell Atlantic
has begun offering a special calling plan to customers that sign up for long-distance
service through the Internet," wrote CompTel General Counsel Carol Ann Bischoff in a
letter to FCC Chairman William E. Kennard.

The Lowdown on LOAs
Pros Cons
Simplicity and low cost in direct sales situations.

Very useful in
direct mail campaigns.

They carry the presumption that goes with a signed, written document.

FCC rules on content and format offer some safeguards.

Relatively easy to forge.

More expensive in some sales situations.

Historically abused as far as content and format (sweepstakes in particular).

Useless for protecting illiterate consumers and those who don’t read English (estimated
at up to 44 million Americans)

Not a legal form of verification for consumers in California,
and discouraged in some other states
Source: VoiceLog LLC (www.voicelog.com)

"Our concern is not with Bell Atlantic’s offering," Bischoff continued.
"Our concern remains that CompTel’s members do so at much greater risk in the absence
of electronic LOAs. In contrast, Bell Atlantic can offer such long-distance calling plans
at less risk than other carriers since Bell Atlantic currently has an existing
relationship with nearly all customers through its position as the dominant provider of
local telephone service in New York. This existing customer relationship–in the absence
of Internet LOAs–means that Bell Atlantic is at less risk than other long-distance
providers of liability for slamming complaints."

James Veilleux, president of VoiceLog LLC (www.voicelog.com),
a TPV, says his company generally supports LOAs as long as there are safeguards in place
to avoid fraud, especially forgery.

However, he says "Internet LOAs are particularly easy to forge in quantity. This
isn’t a problem where the carrier has an online order form and has not provided a sales
incentive, like a sales commission, for its use. But it is a huge problem in any situation
in which a sales agent has an incentive to get customers to sign up via the web."

VoiceLog has developed a form of TPV called VoiceLog.com that’s designed to verify
Internet orders, Veilleux adds, and he notes that MCI WorldCom Inc. (www.wcom.com) and the staff of the California Public
Utility Commission (www.cpuc.ca.gov) have concluded
TPV provides more protection against slamming than LOAs.

"In fact, in California, after the law was passed that required TPV for consumers
but not for business, slamming went down dramatically for consumers but continued to
increase for businesses, where LOAs were still allowed," he says.

While many regulators and legislators still presume LOAs to be the best evidence of a
customer’s consent, the empirical data show that properly implemented TPV is the most
effective means of protecting consumers from slamming and protecting carriers from
slamming complaints, Veilleux adds.

"At this point, Internet LOAs are definitely not sufficient as forms of
verification for carrier change orders."


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