[Federal Register Volume 59, Number 236 (Friday, December 9, 1994)]
[Unknown Section]
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From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-30330]


[[Page Unknown]]

[Federal Register: December 9, 1994]


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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 64

[CC Docket No. 94-129; FCC 94-292]

 

Policies and Rules Concerning Unauthorized Changes of Consumers' 
Long Distance Carriers

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: The Commission adopted this Notice of Proposed Rule Making to 
propose rules that prescribe the form and content of the letter of 
agency for changing long distance carriers and prohibit offers or 
inducements of any kind from being part of the letter of agency 
document. This action was taken to seek comment on whether to make the 
letter of agency a separate document, thus freeing consumers from 
certain deceptive or confusing marketing practices of some 
interexchange carriers.

DATES: Comments must be submitted on or before January 9, 1995. Reply 
comments must be submitted on or before February 8, 1995.

ADDRESSES: Federal Communications Commission, 1919 M Street NW., 
Washington, DC 20554.

FOR FURTHER INFORMATION CONTACT:
Wilbert E. Nixon, Jr., Enforcement Division, Common Carrier Bureau, 
(202) 418-0960.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Notice 
of Proposed Rule Making in CC Docket No. 94-129 [FCC 94-292], adopted 
November 10, 1994 and released November 10, 1994. The full text of the 
Notice of Proposed Rule Making is available for inspection and copying 
during normal business hours in the FCC Reference Center, Room 239, 
1919 M Street NW., Washington, DC 20554. The full text of this Notice 
of Proposed Rule Making may also be purchased from the Commission's 
duplicating contractor, International Transcription Services, 2100 M 
Street NW., Suite 140, Washington, DC 20037, (202) 857-3800.

Summary of Notice of Proposed Rule Making

    1. On November 10, 1994, the Commission adopted a Notice of 
Proposed Rule Making (NPRM) in CC Docket No. 94-129 (released November 
10, 1994; FCC 94-292) proposing rules to prescribe the form and content 
of letters of agency for changing long distance carriers. The proposed 
rules are intended to protect consumers from unauthorized changes of 
their long distance carriers through the use of deceptive and 
misleading letters of agency.
    2. The Commission, on its own motion, initiates this rule making 
proceeding to review its policies and propose rules regarding 
unauthorized changes of consumers' long distance carriers, a practice 
commonly known as ``slamming.'' The Commission received over four 
thousand complaints during the past two fiscal years alone (Fiscal 
Years 1993 and 1994) alleging unauthorized or unknowingly authorized 
changes of consumers' long distance carriers, a substantial number of 
which involve the use of potentially misleading or confusing letters of 
agency (LOAs) by interexchange carriers (IXCs). An LOA is a document, 
signed by the customer, which states that a particular carrier has been 
selected as that customer's primary interexchange carrier (PIC). IXCs 
present change orders, including LOAs, to local exchange carriers 
(LECs), on behalf of potential IXC customers.

Background

    3. Despite the adoption of consumer safeguards set forth in earlier 
orders, the Commission continues to receive complaints from consumers 
who allege that their PIC selections have been changed without their 
permission. Many of these complaints describe apparently deceptive 
marketing practices in which consumers are induced to sign a form 
document that does not clearly advise the consumers that they are 
authorizing a change in the PIC. Consumers, for example, have 
complained that the ``LOA'' forms were ``disguised'' as contest entry 
forms, prize claim forms, solicitations for charitable contributions, 
or checks made payable to the consumer. Such inducement checks, which 
consumers must sign in order to cash, typically contain a statement 
near the signature line purporting to authorize a PIC change. Consumers 
may cash the checks without intending to change their long distance 
carriers. The Commission has also received complaints against IXCs 
because of ``negative option LOA'' forms. These forms typically offer 
prizes to consumers if they return the forms and may ``require'' 
consumers to check a box at the end of the form if they do not want to 
change their long distance service. The characteristic common to all of 
these marketing practices is that the inducement is combined with the 
LOA and the inducement language is prominently displayed on the 
inducement/LOA form while the PIC change language is not, thus leading 
to consumer confusion. Consumers assert that when they enter the 
contests, claim the prizes, respond to the charity solicitations, or 
endorse the checks, they did not intend to switch their long distance 
carriers.

Discussion

A. Proposed Rule

    4. The Commission continues to believe that the LOA is a useful and 
important consumer protection mechanism. The Commission believes it 
necessary to consider amending the rules to ensure that when consumers 
sign an LOA, they are aware that they are authorizing a change in their 
long distance telephone service. The requirement that IXCs must obtain 
LOAs for resolving disputes regarding changes in customer service was 
``designed to ensure that end users were afforded protection both from 
mistakes made by the LECs during the conversion process and from [IXC] 
marketing abuses.'' Although the Commission has prescribed the minimum 
information that must be included in the LOA form, the numerous 
consumer complaints concerning LOAs indicate that some carriers have 
abused the flexibility granted by the current requirements to create 
LOAs that mislead consumers with respect to the nature and propose of 
the documents. Such IXCs, among other things, have combined inducements 
with LOAs in the same document in such a way as to mislead or confuse 
consumers. Accordingly, the Commission finds it necessary to propose 
rules clearly delineating what must be included in an LOA document and, 
equally important, what may not be included in an LOA document. The 
proposed rules are intended to limit the contents of an LOA document so 
that its sole purpose and effect are to authorize a PIC change. The 
proposed restrictions should eliminate consumer confusion about the 
intent of the form.
    5. The Commission's previous orders on this subject permit all IXCs 
to seek customer commitments to use their services and designate the 
IXC as the potential customer's primary IXC. Under those requirements, 
written commitments must be in the form of a statement signed by the 
customer and at a minimum must contain the following provisions: (1) 
The customer designates the IXC to act as the customer's agent for the 
presubscription process; (2) the customer understands that only one IXC 
may be designated as the customer's primary IXC for any one telephone 
number and that selection of multiple carriers will invalidate all such 
selections; (3) the customer understands that any primary IXC selection 
after the initial balloting will involve a charge to the customer; and 
(4) the specific telephone number(s) for which the primary IXC is being 
designated must be listed. The Commission issued a simplified 
restatement of the minimum requirements for an LOA. In summary, any LOA 
obtained by an IXC must be signed by the customer, explain what occurs 
when a PIC is changed, and confirm: (1) The customer's billing name and 
address and each telephone number to be covered by the PIC change 
order; (2) the customer's decision to make the IXC his or her PIC; and 
(3) the customer's understanding of the PIC change fee.
    6. Paragraph (d) of the proposed rule restates and organizes the 
earlier LOA requirements into one standard rule. The Commission 
proposes that the LOA contain clear and unambiguous language that 
confirms: (1) The customer's billing name and address and each 
telephone number covered by the PIC change order; (2) the customer's 
decision to replace his or her current PIC with the IXC soliciting the 
LOA; (3) the customer's designation of the IXC to act as the customer's 
agent for the PIC change; (4) the customer's understanding that only 
one IXC may be designated as the customer's PIC; and (5) the customer's 
understanding that any PIC selection he or she makes may lead to a PIC 
change charge for the customer. In addition, the Commission seeks 
comment on whether it should require the phone number to be preprinted 
on the LOA. Although it seeks comment on whether it should prescribe 
specific language for the LOA, the Commission believes that IXCs acting 
in good faith can implement these minimum guidelines without 
difficulty.
    7. Based on its investigation of hundreds of consumer complaints 
concerning LOAs, the Commission finds that much of the abuse, 
misrepresentation, and consumer confusion occur when an inducement and 
an LOA are combined in the same document, often on the same piece of 
paper. Therefore, the Commission proposes to require the LOA to consist 
of a separate document--that is, a separate piece of paper that 
contains no inducements. The Commission believes that these 
restrictions will prohibit certain current deceptive marketing 
practices. The Commission's proposed rule would, for example, prohibit 
the use of forms that combine LOAs with contest entry forms, checks, or 
other negotiable instruments. The proposed rule would also prohibit 
``negative option'' LOAs, which require consumers to take some action 
to avoid having their long distance service changed.
    8. The Commission does not propose to prohibit inducements 
altogether because they may be proper and effective marketing devices 
for attracting customers to an IXC's service. The Commission believes, 
however, that physically separating the LOA document from the 
inducement material within the same envelope will significantly reduce 
consumer confusion over the LOA. As long as the inducement and the 
formal LOA are separate, clear, and unambiguous, it appears that there 
should be little chance of consumer confusion. Although it is not 
proposing changes in this regard, the Commission seeks comment on 
whether inducements of any kind should be prohibited altogether and, if 
not, whether the Commission should prohibit inducements from being 
mailed in the same envelope as the LOA.
    9. Further, the Commission proposes to require the text of the LOA 
to be clear and unambiguous and to be printed in type that is 
sufficiently large and of such a style to be clearly legible. The 
Commission seeks comment on whether it should prescribe the text of the 
LOA, the font, and its point size. The Commission invites parties that 
support such requirements to submit specific suggestions.

B. Other Unauthorized Conversion Issues

    10. The Commission has also received many complaints describing 
other consumer problems arising from misleading LOAs.
    In light of those complaints, it seeks comment on several other 
issues pertaining to LOAs, including whether LOAs should contain only 
the name of the carrier that directly provides the interexchange 
service to the customer. The Commission recognizes that there may be 
more than one carrier technically involved in the provision of long 
distance service to a consumer. For example, there may be an underlying 
carrier whose facilities provide the long distance capacity and a 
resale carrier that actually sets the rates charged to the end user 
consumer. In some cases, there also may be a carrier that acts as a 
billing and collection or marketing agent. One possible approach to 
this problem would be to allow an LOA to name only the IXC that is 
actually setting the rates, and to prohibit the inclusion of the name 
of any carrier providing the underlying interexchange capacity to the 
reseller. The Commission seeks comment on whether it should restrict 
the LOA so that only the IXC that actually sets the rates for the 
customer is identified in the LOA. Alternatively, the Commission also 
seeks comment on whether other carriers' names can be included in the 
LOA without misleading or confusing consumers, if their roles are 
clearly described.
    11. The Commission also seeks comment on whether business and 
residential customers should be treated differently with respect to our 
LOA requirements. Unlike the situation with residential customers, LOA 
forms sent to businesses might not be received and processed by the 
person authorized to order long distance presubscription for the 
business. Thus, even an LOA that is properly executed may result in an 
unauthorized change insofar as the person who executed the LOA had no 
authority to do so.
    12. The Commission also seeks comment on the effect that 
unauthorized PIC conversions have on optional calling plans and the 
consumers enrolled in them. In cases of unauthorized PIC conversions, 
the consumer may not be aware of the change for at least one billing 
cycle. Often, these consumers continue to pay a flat, minimum monthly 
charge to their previous carrier for a discount calling plan despite 
the fact that they are no longer presubscribed to that carrier. The 
Commission seeks comment on whether it should absolve these consumers 
of liability for any payments to optional calling plans after 
unauthorized conversions. Alternatively, it seeks comment on the means 
or procedures, if any, that might be used to help consumers recoup 
their losses in this situation.
    13. The Commission also seeks comment on whether any adjustments to 
long distance telephone charges should be made for consumers who are 
the victims of unauthorized PIC conversions. Specifically, it seeks 
comment on whether consumers should be liable for the long distance 
telephone charges billed to them by the unauthorized IXC and if so, to 
what extent. Should consumers be liable for: (a) The total billed 
amount from the unauthorized IXC; (b) the amount consumers would have 
paid if their PIC were never changed; (c) or nothing at all?
    14. The Commission has received complaints alleging that some IXCs 
target non-English speaking consumers with bilingual and non-English 
inducements and LOAs. These consumers allege that the non-English 
versions of the LOA do not contain all of the text of the English 
versions of the LOA. As a result, material portions of the LOA are in 
only one language, typically English, which the non-English speaking 
consumers may not fully understand. The Commission seeks comment on 
whether it should adopt rules to govern bilingual or non-English 
language LOAs. For example, should the Commission require all parts of 
the LOA to be translated if any parts are translated? It also seeks 
comment on whether all LOAs should be required to be captioned ``An 
Order to Change My Long Distance Telephone Service Provider'' or given 
some other title that is more descriptive and less technical.
    15. Finally, the Commission seeks comment on how consumers have 
been affected by the IXC marketing practice of ``encouraging'' 
consumers who call an IXC's 800 number to switch to the IXC, even when 
the consumers' calls are not initiated for the purpose of changing 
PICs. Typically, the consumers respond to an advertisement and are just 
requesting information about the IXC.
    It may be argued that because the IXC does not initiate the call, 
the PIC order is not generated by telemarketing and thus the order 
verification protections in Section 64.1100 of our rules do not apply. 
The Commission seeks comment on whether an 800 number should be used 
only for verification purposes or whether it could be used, with proper 
safeguards, for verification purposes and placing initial orders. 
Finally, the Commission seeks comment on what those safeguards might 
be.

Regulatory Flexibility Act Initial Analysis

16. Reason for Action

    The Commission is issuing this Notice of Proposed Rule Making to 
protect consumers from unauthorized switching of their long distance 
carriers and to ensure that consumers are fully in control of their 
long distance service choices.

17. Objectives

    The objective of this Notice of Proposed Rule Making is to initiate 
a proceeding to propose requirements and seek comments regarding 
unauthorized changes of consumers' long distance carriers.

18. Legal Basis

    Sections 1, 4(i), 4(j), 201-205, and 303(r) of the Communications 
Act of 1934, as amended, 47 U.S.C. Secs. 151, 154(i), 154(j), 201-205, 
303(r).

19. Description, Potential Impact, and Number of Small Entities 
Affected

    The proposed rules will require that interexchange carriers 
separate their LOA forms from any promotional inducements. Small 
entities may feel some economic impact in additional printing costs due 
to the proposed letter of agency requirements. However, all IXCs who 
submit orders to LECs on behalf of customers now are required to 
institute steps to obtain signed LOAs from customers. Therefore, all 
IXCs should be incurring printing costs for LOAs with sufficient 
advance notice, IXCs could revise and print new LOAs when their old 
inventory of LOAs is exhausted.

20. Reporting, Recordkeeping, and Other Compliance Requirements

    The proposed rules impose no reporting requirements and no new 
recordkeeping requirements. Carriers are currently required to obtain 
and retain records of customer orders.

21. Federal Rules Which Overlap, Duplicate, or Conflict With the 
Commission's Proposal

    None.

22. Any Significant Alteratives Minimizing Impact on Small Entities and 
Consistent With Stated Objectives

    None.

23. Comments Are Solicited

    The Commission requests written comments on this Initial Regulatory 
Flexibility Analysis.
    These comments must be filed in accordance with the same filing 
deadlines set for comments on the other issues in this Notice of 
Proposed Rule Making, but they must have a separate and distinct 
heading designating them as responses to this Regulatory Flexibility 
Analysis. The Secretary shall send a copy of the Notice to the Chief 
Counsel for Advocacy of the Small Business Administration in accordance 
with Section 603(a) of the Regulatory Flexibility Act. See 5 U.S.C. 
601, et seq.

Ex Parte Requirements

    24. This is a non-restricted notice and comment rule making 
proceeding. Ex parte presentations are permitted, except during the 
Sunshine Agenda period, provided they are disclosed as provided in 
Commission rules.

Ordering Clauses

    25. Accordingly, It is ordered, pursuant to Sections 1, 4(i), 4(j), 
201-205, 218, 226, and 303(r) of the Communications Act of 1934, as 
amended, 47 U.S.C. 151, 154(i), 154(j), 201-205, 218, 226, 303(r), that 
a Notice of proposed rule making is issued, proposing the amendment of 
47 CFR Part 64 as set forth below.
    26. It is further ordered, that pursuant to applicable procedures 
set forth in Secs. 1.415 and 1.419 of the Commission's Rules, 47 CFR 
Secs. 1.415, 1.419, comments SHALL BE FILED with the Secretary, Federal 
Communications Commission, Washington, D.C. 20554 on or before January 
9, 1995. Reply comments should be filed no later than February 8, 1995. 
To file formally in this proceeding, participants must file an original 
and four copies of all comments, reply comments, and supporting 
comments. if participants want each Commissioner to receive a personal 
copy of their comments, an original plus nine copies must be filed. In 
addition, parties should file two copies of any such pleadings with the 
Formal Complaints Branch, Enforcement Division, Common Carrier Bureau, 
Plaza Level, 1250 23rd Street NW., Washington, DC 20554. Parties should 
also file one copy of any documents filed in this docket with the 
Commission's copy contractor, International Transcription Services, 
Room 140, 2100 M Street NW., Washington, DC 20037. Comments and reply 
comments will be available for public inspection during regular 
business hours in the FCC Reference Center (Room 239) of the Federal 
Communications Commission, 1919 M Street NW., Washington, DC 20554.
    27. 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.
    28. It is further ordered, that the Secretary shall mail a copy of 
this Notice of Proposed Rule Making to the Chief Counsel for Advocacy 
of the Small Business Administration, in accordance with section 603(a) 
of the Regulatory Flexibility Act, 5 U.S.C. 603(a). The secretary shall 
also cause a summary of this Notice to appear in the Federal Register.

List of Subjects in 47 CFR Part 64

    Communications common carriers, Telephone.

Federal Communications Commission.
William F. Caton,
Acting Secretary.

Proposed Rules

    Part 64 of Chapter I of Title 47 of the Code of Federal 
Regulations, is proposed to be amended as follows:

PART 64--MISCELLANEOUS RULES RELATING TO COMMON CARRIERS

    1. The authority citation for part 64 continues to read as follows:

    Authority: Sec. 4, 48 Stat. 1066, as amended; 47 U.S.C. 154, 
unless otherwise noted. Interpret or apply secs. 201, 218, 226, 228, 
48 Stat. 1070, as amended, 1077; 47 U.S.C. 201, 218, 226, 228, 
unless otherwise noted.

    2. Section 64.1150 is added to Subpart K to read as follows:


Sec. 64.1150  Letter of agency form and content.

    (a) An interexchange carrier shall obtain any necessary written 
authorization from a subscriber for a primary interexchange carrier 
change by using a letter of agency as specified in this section. Any 
letter of agency that does not conform with this section is invalid.
    (b) The letter of agency shall be a separate document whose sole 
purpose is to authorize an interexchange carrier to initiate a primary 
interexchange carrier change. The letter of agency must be signed and 
dated by the subscriber to the telephone line(s) requesting the primary 
interexchange carrier change.
    (c) The letter of agency shall not be combined with inducements of 
any kind on the same document.
    (d) At a minimum, the letter of agency must be printed with a type 
of sufficient size and readable type to be clearly 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 primary interexchange carrier change order; 
and
    (2) The decision to change the primary interexchange carrier from 
the current interexchange carrier to the prospective interexchange 
carrier; and
    (3) That the subscriber designates the interexchange carrier to act 
as the subscriber's agent for the primary interexchange carrier change; 
and,
    (4) That the subscriber understands that only one interexchange 
carrier may be designated as the subscriber's primary interexchange 
carrier for any one telephone number and that selection of multiple 
carriers will invalidate all such selections; and
    (5) That the subscriber understands that any primary interexchange 
carrier selection they choose may involve a charge to the subscriber 
for changing the subscriber's primary interexchange carrier.
    (e) Letters of agency shall not purport to instruct the subscriber 
to take some action in order to retain the subscriber's current 
interexchange carrier.

[FR Doc. 94-30330 Filed 12-8-94; 8:45 am]
BILLING CODE 6712-01-M