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Regulatory News – IXC Slamming Plan Won’t Work, States Say

Posted: 09/1999

Regulatory News

IXC Slamming Plan Won’t Work, States Say
By Kim Sunderland

An industry-sponsored proposal calling for an independent third-party administrator
(TPA) to handle slamming complaints just isn’t feasible, according to state regulators.

Companies that slam, or switch a consumer’s long distance or local carrier without
permission, are committing deceptive trade practices, which "are illegal," says
William R. Schulte, director of the California Public Utilities Commission’s (CPUC’s)
safety and enforcement division. "It’s just a fancy name for fraud, theft and
racketeering."

Schulte, speaking during the National Association of Regulatory Utility Commissioners’
(NARUC’s) summer meetings, echoed the sentiments of fellow state regulators, who are
grappling with how to handle their No.1 consumer complaint in telecommunications services.
As the lobbying group for state regulators, NARUC has passed a resolution it will forward
to the Federal Communications Commission (FCC) that says the TPA "will not be an
effective solution for reducing nationwide slamming complaints." The FCC now is
considering the TPA plan, as well as other suggestions, since its own slamming rules were
put on hold by the U.S. Court of Appeals for the District of Columbia Circuit earlier this
year. NARUC has urged the FCC to act on any pending petitions for reconsideration so the
appeals court can lift the stay on the FCC’s slamming rules.

State regulators question whether consumers could trust a TPA operated and funded by
the industry. They also say the TPA wouldn’t work because:

  • It won’t remove the financial incentive to slam;
  • The startup costs and the maintenance of a centralized complaint center could prove
    costly and eventually could get passed through implicit or explicit charges;
  • It won’t handle other related billing complaints, such as cramming and spamming; and
  • It doesn’t address local slamming and doesn’t provide for neutral, inclusive oversight.

NARUC members say the TPA will hinder the states’ ability to enforce their
"rigorous verification requirements," which they say are tougher enforcement
rules than the FCC slamming rules. State regulators believe they’re in a better position
to handle slamming complaints because they’re closer to consumers and more familiar with
carrier trends in their region. The TPA plan likely would add more confusion for
consumers, they said in their resolution.

State regulators have urged the FCC to move forward in adopting meaningful
anti-slamming rules that serve as a minimum federal floor for slamming enforcement. But if
the FCC does approve the IXC-backed TPA plan, "the NARUC strongly urges the FCC to
incorporate an optional state ‘off-ramp’ in any future proposal" as a way out for
states not interested in using a TPA plan.

Glenn Reynolds, chief of the FCC’s enforcement division, says the federal agency is
attempting to improve its efforts against slamming through such efforts as educational
outreach and coordination on the federal and state levels. "No one has sufficient
resources to do it by themselves," Reynolds says. "We need to share resources
and information." He says the FCC is working closely with the Federal Trade
Commission (FTC) on slamming issues, and that the industry can expect joint work from both
agencies this fall.

Local jurisdictions throughout the nation also must be involved, according to Nettie
Hoge, director of California TURN, The Utilities Reform Network, a consumer advocate
group. "Monitoring and education must occur at the local level," Hoge says.
"The essential ingredients include high standards, enforcement and effective
monitoring. She suggests that community business groups and non-governmental organizations
get involved in "creative solutions" that can help end slamming.

Slammers, Schulte says, have to be hit where it hurts: in their pockets. While the
classic answer to combat slamming might be more regulation, "this is the absolute
wrong thing to do," he says. "We have enough rules. Now we must enforce
them."

Attacking the problem can be done through an impact analysis group that can go after
slammers. To protect consumers, "states have to have the will" to take slammers
out of business, Schulte says. He has taken companies to court for grand theft and fraud,
and had the assets of other slammers frozen. "You must discourage profits to change
the behavior," he says.


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