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Regulatory News – FCC Takes More Action Against Slamming

Posted:  06/2000

Regulatory News

FCC Takes More Action Against Slamming
States to PlayLarger Role in Disputes
By Kim Sunderland

The FCC has adopted stricter rules in
its battle against slamming, which continues to grow as the commission’s largest
source of consumer complaints.

Slamming, the unauthorized switching of a
consumer’s long-distance company, now will be handled by state regulators, who
the FCC (www.fcc.gov) says are better equipped
than the industry to resolve slamming disputes.

The commission ruled April 13 that such disputes should be brought before state regulators, or to the FCC in cases where a state elects not to administer the rules.

The FCC’s new rules also require slamming carriers to pay 150 percent of all payments received from consumers.

The commission had delayed the effective date of its 1998 slamming liability rules so the telecom industry could reach agreement on a plan to have an independent third-party administrator (TPA) resolve slamming disputes and determine liability. But the industry was unable to reach consensus on an administrator, sources say.

Compounding
the issue, the U.S. Court of Appeals for the D.C. Circuit stayed the liability
rules in May 1999 at the request of MCI WorldCom Inc. (www.wcom.com).

To
break the logjam on anti-slamming rules, more than 35 state commissions of the
National Association of Regulatory Utility Commissioners (www.naruc.org),
during winter meetings in Washington, adopted a resolution saying they would
take the lead in administering anti-slamming rules.

The FCC now will allow the states to “opt-in” to a combined slamming enforcement scheme.

NARUC
President Bob Rowe said in a prepared statement that "the FCC’s action is
another good example of cooperative federalism. It will help provide effective
complaint resolution ‘close to the customer’–at the state commission. It is
responsive to proposals that NARUC has been developing since last May."

FCC Fact Sheet on Slamming
(As of April 25, 2000)

Summary/Background

* Slamming is the practice of changing consumers’ telecommunications carriers without their knowledge or permission.

* To deter slamming, the FCC adopted new anti-slamming rules in December 1998 by:

  1. Strengthening the liability rules to take the profit out of slamming by absolving consumers of 30 days of slamming charges.
  2. Strengthening the procedures by which carriers must obtain customer verification of preferred carrier change requests.
  3. Broadening the scope of these verification procedures to apply to local as well as long-distance carriers.
  4. Establishing rules governing preferred carrier freezes, which prohibit carriers from changing a consumer’s preferred carrier without that consumer’s express authorization to “lift the freeze.”

* The majority of the FCC’s slamming rules took effect April 27, 1999. The effective date of the liability rules were delayed for 90 days to let the industry implement a plan for an independent third-party arbitrator hear disputes and help resolve and administer the liability rules. However, the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) stayed the liability rules on May 18, 1999 at MCI WorldCom Inc.’s request.

* The liability rules were at the core of the FCC’s efforts to eliminate slamming by giving consumers meaningful redress.

Court Stay

* March 30, 1999–MCI WorldCom, AT&T Corp.,
CompTel, Sprint Corp., TRA, Excel Telecommunications, Frontier Corp., and Qwest Communications International Corp. filed a joint petition of the FCC’s liability rules.

* May 10, 1999–MCI WorldCom entered a Motion for Stay Pending Judicial Review in the D.C. Circuit asking the court to stay the liability rules while the court decides whether they are arbitrary, capricious or otherwise unlawful.

* May 18, 1999–The D.C. Circuit issued a stay of the FCC’s liability rules pending further order of the court. The court order did not affect other slamming rules adopted, which went into effect in April 1999. The court ordered the case be held in abeyance and directed the parties to file motions to govern further proceedings within 30 days of the commission’s disposition of the pending petitions for reconsideration of the slamming order. Therefore, the effective date of the liability rules was indefinitely delayed.

Slamming Complaints

* Slamming has been the single largest source of complaints to the FCC during the past several years.

* Written complaints the FCC has processed:

  • 1996 – 12,795
  • 1997 – 20,475
  • 1998 – 20,124
  • 1999 – 21,868
  • 2000 – 3,000 complaints in the first quarter of the year

* Enforcement Actions

Since April 1994, the FCC has:

  1. Imposed final forfeitures against eight companies for $10,321,500.
  2. Entered into consent decrees with 12 carriers with combined payments of $2,710,000.
  3. Proposed $7,640,000 in Notices of Apparent Liability
    (NALs) against five companies.

Washington Utilities and Transportation Commission (www.wutc.wa.gov)
Commissioner Bill Gillis, chairman of the NARUC consumer affairs committee and
a liaison to the FCC on the issue, called the commission’s decision "an
important step forward to assure that state commissions can continue to work
hand in hand with our federal partners to eliminate slamming."

The action also reaffirmed that when a customer hasn’t paid a slammer, that customer doesn’t have to pay for service for up to 30 days after being slammed. But in cases where the consumer has paid the slammer, the FCC modified its liability rules requiring that a slammer pay 150 percent of the charges it received from the consumer to the authorized IXC. In turn, the authorized carrier will reimburse the consumer 50 percent of the charges the consumer paid to the slammer.

The
modification could further confuse consumers, says H. Russell Frisby Jr.,
president of the Competitive Telecommunications Association (www.comptel.org).

“We are concerned that the FCC’s refusal to adopt a TPA mechanism will result in more, not less, consumer confusion,” Frisby said in a statement released after the FCC’s ruling.

Regarding the circuit court’s stay, the FCC says its ruling “should remove any concern that may have prompted the court to impose a stay, and will ensure that consumers are fully protected from slamming.” MCI WorldCom was reviewing the decision at press time.

In
related news, the Colorado Public Utilities Commission (www.dora.state.co.us/puc)
says the FCC’s new rules follow closely on the heels of an agreement reached by
Denver-based Qwest Communications International Inc. (www.qwest.com),
which adopted a new anti-slamming policy to address its slamming problems.

The company recently settled slamming complaints in several states, the most recent being its $175,000 settlement to the Arizona Attorney General to cover costs of investigating slamming complaints against the company in that state. Qwest also has been fined $2.08 million by the FCC for slamming in Arizona.

The
fines against Qwest might prompt regulators to make customer-service standards a
prerequisite for approval of Qwest’s merger with US WEST Inc. (www.uswest.com),
some analysts speculate.

The commission conditionally approved in March the companies’ merger application, reserving final approval on whether they demonstrate they will comply with Section 271 of the Telecommunications Act of 1996.

In other states around the nation, regulators continue to issue severe penalties against companies convicted of slamming in their areas.

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