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Regulatory News – Slammers Beware

Posted: 10/2000

Regulatory News

Slammers Beware
The Devil’s in the ‘Anti-Slamming’ Order Details
By Kim Sunderland

The FCC (www.fcc.gov) finally has released the long-awaited text of its anti-slamming rules, which are designed to improve how consumers choose their preferred telephone carrier, while making it harder for carriers to slam them.

So slammers take note: The FCC, in concert with state regulators, continues working diligently to eradicate the unauthorized switching of a customer’s presubscribed
IXC.

“The rules we adopt in this order will improve the carrier change process for consumers and carriers alike while making it more difficult for unscrupulous carriers to perpetrate slams,” the FCC said in its order.

In the text of the order, the FCC lays out clear ground rules regarding slamming in a number of areas, including resellers and carrier identification codes (CICs), as well as new reporting and registration requirements, all aimed at helping the FCC and the states shut down slammers.

With its anti-slamming order, the FCC says it has resolved the majority of the remaining open slamming issues. Specifically, preferred carrier changes are permitted and now can be conducted electronically through the use of Internet letters of agency (LOAs).

In addition to Internet LOAs, customers also must have the option of using alternative authorization and verification methods, such as written LOAs or independent third-party verifiers, the FCC says in its order.

Expect to Work Harder

The text of the FCC order also includes new reporting requirements. Specifically, the FCC order instructs all telecom carriers to submit forms twice a year listing the number of complaints they receive from customers who claim to have been slammed.

The commission will use the forms as an “early warning system” for detecting slammers, enabling it to take faster investigative action to stop the illegal practice.

“The number of slamming complaints filed with the commission reflects a mere fraction of the actual number of slamming incidents,” according to the FCC’s order. “Indeed, many incidents of slamming are reported to the IXCs themselves or the LECs and not to this commission.”

Carriers objecting to such an FCC requirement are concerned that the slamming complaint reports received by the LECs would produce bogus information. They argue the LECs could inflate the number of slams attributed to other carriers because the total number of slamming allegations reported wouldn’t reference their validity or their underlying causes, the FCC explains.

“We recognize that a subscriber complaint is not, in and of itself, dispositive proof of a slam,” the FCC says. “Nevertheless, an excessive number of complaints directed at a particular carrier, or an increase in the number of such complaints, suggest that an immediate investigation into that carrier’s practices may be warranted.”

The form requires carriers to report the number of slamming complaints, and the number of those complaints that were investigated and found to be valid. The report also must include the number of slamming complaints involving local intrastate and interstate interexchange service, investigated or not, that the carrier resolved directly with subscribers.

To ease the fears of opponents, the FCC says that because most subscribers who are slammed by an IXC report the slam to their LEC rather than the IXC, facilities-based LECs should include in their reports the company name at which the complaint is directed, and the number of complaints involving unauthorized changes that have been lodged against that company.

Reporting commences Feb. 15, 2001 for calendar year 2000, and then continues on a biannual basis. The slamming complaint reporting form is available in the FCC’s public reference room in Washington or by accessing the FCC’s website.

Killing Me Softly

The text of the commission’s order also shows how the FCC plans to address the problem of “soft slamming” by allowing switchless resellers to use CICs, which are numeric codes that enable local phone companies to identify a consumer’s preferred long-distance carrier.

As background, resellers frequently share CICs with the underlying carriers whose services they resell. This shared CIC use, the FCC says, gives rise to two related problems: soft slamming and carrier misidentification.

A soft slam is the unauthorized change of a subscriber from its authorized carrier to a new carrier that uses the same CIC. Because this change isn’t executed by the LEC–which continues using the same CIC to route the subscriber’s calls–a soft slam bypasses the preferred carrier freeze protection available to consumers from LECs.

Carrier misidentification occurs because LECs also identify carriers by their CICs for billing purposes. A LEC’s call record therefore is likely to reflect the identity of the underlying carrier whose CIC is used, even if the actual service provider is a reseller. As a result, the name of the underlying carrier may appear on the subscriber’s bill in place of, or along with, the reseller with whom the subscriber has a direct relationship.

“This makes it difficult for consumers to detect a slam and to identify the responsible carrier,” the FCC says.

From now on, the requirement that carriers purchase “Feature Group D” to obtain CICs is eliminated, which means switchless resellers now can be assigned CICs of their very own. This also will allow easier carrier identification, enhancing the ability to resolve conflicts, including disputes that involve slamming, according to the FCC.

“At the present time,” the FCC says, “we are not requiring resellers to obtain their own CICs … although we believe that requiring switchless resellers to obtain CICs may well be an effective solution to soft slamming and related carrier identification problems.”

The Feature Group D access service must be purchased by a carrier seeking to be assigned a CIC. The Feature Group D, in fact, has been called an unnecessary administrative burden for resellers.

That’s because a switchless reseller doesn’t require the physical or trunk access to the PSTN available through the purchase of Feature Group D and is unlikely to bear the expense simply to obtain a CIC, the FCC says.

In fact, opponents of a CIC requirement on resellers say its impact would:

  • Impose undue financial burdens on resellers and damage them competitively;
  • Require expensive and time-consuming LEC switch upgrades; and
  • Accelerate exhaustion of the four-digit CIC pool.

SBC Communications Inc. (www.sbc.com) and the United States Telecom Association
(USTA, www.usta.org), for instance, are concerned that a CIC requirement could exhaust the limited capacity of certain types of LEC switches. USTA also says that requiring investment in switch upgrades may be wasteful because the industry is moving toward new technology platforms.

Supporters of such a requirement, on the other hand, argue that it would be a cost-effective and administratively simple solution to soft slamming and other related problems.

While the FCC says that CIC deployment costs may be viewed as a legitimate cost of doing business, and that the independent use of CICs clearly has competitive advantages for resellers, the commission is “concerned about restricting competition in the wholesale long-distance service market by limiting resellers’ ability to change and/or use multiple underlying carriers.”

For now, the North American Numbering Council
(NANC, www.fcc.gov/ccb/Nanc) is analyzing the CIC assignment and use issues and will issue a report to the FCC by Aug. 1, 2001. Therefore, switchless resellers can expect this issue to resurface again this time next year.

Ghost Names Won’t Work

The FCC’s text of its anti-slamming order also details streamlined carrier registration rules that prevent slammers from escaping detection simply by changing their names.

The benefits of the FCC’s new registration requirement is twofold: The FCC hopes to keep companies that are unqualified or have the intent to commit fraud from entering or remaining in the telecom marketplace, while being able to keep its eyes on carriers who may be engaged in slamming.

In amending its Telecommunications Reporting Worksheet (FCC Form 499), the commission now concludes that all new and existing common carriers providing interstate interexchange telecom service must register with the FCC.

“We believe such a registration requirement will bolster our efforts to curb slamming by enabling us to monitor the entry of carriers into the interstate telecommunications market and any associated increases in slamming activity,” the FCC says. “This requirement will also enhance our ability to take appropriate enforcement action against carriers that have demonstrated a pattern or practice of slamming.”

Before anyone screams about the additional paperwork, the FCC promises that that won’t happen. The commission has revised Form 499, filed annually by all telecom carriers, which now becomes FCC Form 499-A. The next scheduled filing of the Form 499-A is April 1, 2001.

And if it isn’t filed, the FCC says it will impose fines. Expect worse if provided information is false or misleading.

As a final note to resellers, the FCC also says facilities-based carriers “shall have an affirmative duty to ascertain whether a potential carrier-customer (i.e., a reseller) has filed a registration with the FCC prior to providing that carrier-customer with service.”

Some sources predict that this could create LEC-induced delays for resellers caught outside in the rain waiting for such confirmation.

Meanwhile, the FCC says this will deter facilities-based carriers from providing service to resellers that have not registered with the commission, which, in turn, will make it more difficult for “bad actor” resellers to stay in business.


Fact Sheet on Telephone Slamming

Background:

Section 258 of the Telecommunications Act of 1996 makes it unlawful for any telecommunications carrier to change a consumer’s telephone carrier except in accordance with the commission’s verification procedures. Any carrier that violates these procedures is liable to the subscriber’s authorized carrier for all charges collected.

The Electronic Signatures in Global and National Commerce Act (E-Sign Act), which was signed into law June 30, promotes the use of electronic signatures and records in interstate and foreign commerce. The E-Sign Act provides a specific framework for the use of electronic records and signatures, including a set of required consumer disclosures.

FCC’s Actions to Combat Slamming

To strengthen its anti-slamming rules, the FCC released in December 1998 the Second Report and Order and Second Further Notice of Proposed Rulemaking (FNPRM). The order:

  • Adopted aggressive new liability rules designed to take the profit out of slamming;
  • Broadened the scope of the slamming rules to encompass all telephone carriers; and
  • Imposed more rigorous verification measures.

Many of the rules adopted in the Second Report and Order released in December 1998 took effect, but the U.S. Court of Appeals for the District of Columbia Circuit stayed the slamming liability rules. To address the issues relating to the court stay, the FCC released the First Order on Reconsideration in May 2000. This order modified the slamming liability rules and also modified the procedures for administering them, allowing the state commissions to act as the primary administrators of slamming complaints.

On June 27, the D.C. Circuit granted the FCC’s motion to dissolve the stay the court had imposed on the slamming liability rules. The revised slamming liability rules will take effect 30 days after publication in the Federal Register and after the Office of Management and Budget approves information collection requirements. The FCC will publish a notification of the effective date of these rules in the Federal Register.

Timeline of Events

Following are key dates relevant to the Commission’s anti-slamming rulemaking proceeding:

Dec. 23, 1998–The FCC adopts the Second Report and Order to take the profit out of slamming.

April 27, 1999–The majority of the FCC’s slamming rules go into effect.

May 10, 1999–MCI WorldCom Inc.
(www.wcom.com) files a Motion for Stay Pending Judicial Review in the D.C. Circuit asking the court to stay the slamming liability rules.

May 18, 1999–The slamming liability rules are stayed by the D.C. Circuit Court.

April 13, 2000–The FCC, to address issues raised by the court stay, revises its slamming liability rules. Among other things, the commission rules that state regulatory commissions, rather than the industry, may resolve slamming disputes.

June 27, 2000–The D.C. Circuit Court grants the FCC’s motion to dissolve the stay of the slamming liability rules. The commission will publish a notification in the Federal Register of the effective date of these rules.

June 30, 2000–President Clinton signs the E-Sign Act, which promotes the use of electronic signatures by mandating that contracts or business transactions that are conducted electronically, and meet certain specifications, will be as enforceable and valid as written contracts and transactions. The E-Sign Act provides a specific framework for the use of electronic records and signatures, including a set of required consumer disclosures, and also places limits on the interpretation authority of federal and state regulatory agencies. Section 104 (e) of the E-Sign Act specifically addresses the FCC’s slamming rules. It provides that the commission “shall not hold any contract for telecommunications or letter of agency for a preferred carrier change, that otherwise complies with the FCC’s rules, to be legally ineffective, invalid, or unenforceable solely because an electronic record or signature was used in its formation or authorization.”

Source: FCC
(www.fcc.gov)


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