[Federal Register Volume 65, Number 150 (Thursday, August 3, 2000)]
[Rules and Regulations]
[Pages 47678-47693]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-17981]


=======================================================================
-----------------------------------------------------------------------

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 0, 1, and 64

[CC Docket No. 94-129; FCC 00-135]


Implementation of the Subscriber Carrier Selection Changes 
Provisions of the Telecommunications Act of 1996, Policies and Rules 
Concerning Unauthorized Changes of Consumers Long Distance Carriers

AGENCY: Federal Communications Commission.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: This document amends certain liability rules, grants in part 
petitions for reconsideration of our Slamming proceeding. We believe 
these modifications will strengthen the ability to deter slamming, 
while addressing concerns raised with respect to our previous 
administrative procedures.

DATES: Effective September 5, 2000, except for Secs. 1.719(a) through 
(d), 64.1110(a) and (b), 64.1140(a) and (b), Secs. 64.1150(a) through 
(d), 64.1160(b) through (f), and 64.1170(b) through (f), which contain 
information collection requirements that have not been approved by the 
Office of Management Budget (OMB). The Commission will publish a 
document in the Federal Register announcing the effective date of those 
sections.

FOR FURTHER INFORMATION CONTACT: Michele Walters, Associate Division 
Chief, Accounting Policy Division, Common Carrier Bureau, (202) 418-
7400.

SUPPLEMENTARY INFORMATION: This is a summary of a Commission's Order in 
CC Docket No. 94-129 released on May 3, 2000. The full text of this 
document is available for public inspection during regular business 
hours in the FCC Reference Center, Room CY-A257, 445 Twelfth Street, 
SW., Washington, DC 20554.

I. Introduction

    1. In our Second Report and Order and Further Notice of Proposed 
Rulemaking (Section 258 Order), 64 FR 7763 (February 16, 1999) we 
adopted rules to implement section 258 of the Communications Act of 
1934 (Act), as amended by the Telecommunications Act of 1996 (1996 
Act). The goal of section 258 is to eliminate the practice of 
``slamming,'' which is the unauthorized change of a subscriber's 
preferred carrier. In the Section 258 Order, we adopted various rules 
addressing verification of preferred carrier changes and preferred 
carrier freezes. We also adopted liability rules designed to take the 
profit out of slamming. In this First Order on Reconsideration (Order), 
we amend certain of our liability rules, granting in part petitions for 
reconsideration of our Section 258 Order. Specifically, the revised 
rules provide for slamming disputes between consumers and carriers to 
be brought before appropriate state commissions, or this Commission in 
cases where the state has not opted to administer our rules, rather 
than to authorized carriers. In light of this decision, we deny a 
petition filed by several long distance carriers seeking waiver of the 
slamming liability rules and proposing an industry-sponsored slamming 
liability administrator. In this order, we also modify the liability 
rules that apply when a consumer has paid charges to a slamming 
carrier. In such instances, our new rules require slamming carriers to 
pay out 150% of the collected charges to the authorized carrier, which, 
in turn, will pay to the consumer 50% of his or her original payment. 
Finally, the order sets forth certain notification requirements to

[[Page 47679]]

facilitate carriers' compliance with the liability rules. We believe 
these modifications will strengthen the ability of our rules to deter 
slamming, while addressing concerns raised with respect to our previous 
administrative procedures.

II. Discussion

A. Absolution

1. Retaining Limited Absolution
    2. We restate our conviction that the limited absolution of 
consumer charges ordered by our slamming rules is essential to 
deterring slamming. By depriving unauthorized carriers of slamming 
revenues in the first instance, absolution takes the profit out of this 
illegal practice. Several petitioners and commenters, including all of 
the groups representing consumer and state interests, agree that 
absolution is ``a reasonable and practical extension of the statutory 
intent reflected in section 258 that the slamming carrier not be 
allowed to keep any of its ill-gotten gains.'' The only commenters who 
oppose absolution are carriers that would be subject to the more 
stringent liability created by these rules.
    3. As detailed in the Section 258 Order, we concluded that more 
aggressive slamming liability rules are essential because our previous 
rules had failed to stem the growth of slamming. As we summarized in 
that order:

     * * * our experience in this area leads us to the inescapable 
conclusion that slamming has become a profitable business for many 
carriers. For this reason, the rules we adopt in this Order not only 
seek to strengthen the existing verification rules, but are more 
broadly designed to prevent carriers from making any profits when 
they slam consumers * * * the strongest incentive for such carriers 
to implement strictly our verification rules is to know that failure 
to comply may mean that they will not get paid or any services 
rendered after such an unauthorized switch.

    4. Accordingly, we reject the arguments of those long distance 
carriers that assert we failed to explain our departure from the 
slamming liability policies adopted in the 1995 Order, 60 FR 35846 
(July 12, 1995). Under those previous rules, consumers remained 
obligated to pay charges to their slamming carriers in the amount they 
would have paid their authorized carriers absent the unauthorized 
change. Several commenters quote piecemeal from the 1995 Order to 
support their argument that our current approach to slamming liability 
is inexplicably inconsistent. We note, however, that those commenters 
fail to include in their filings the cautionary language in that order. 
In particular, the Commission there specifically warned that absolution 
might be an appropriate rule if the prior rules failed to abate the 
growth of slamming:

    Despite the compelling arguments of those favoring total 
absolution of all toll charges from unauthorized IXCs, we are not 
convinced that we should, as a policy matter, adopt that option at 
this time * * * We recognize, however, that [liability limited to 
re-rating] may not be the best deterrent against slamming. Some IXCs 
engaging in slamming may not be deterred unless all revenue gained 
through slamming is denied them. At this time, we believe that the 
equities tend to favor the ``make whole'' remedy and therefore 
support the policy of allowing unauthorized IXCs to collect from the 
consumer the amount of toll charges the consumer would have paid if 
the PIC had never been changed * * * However, we recognize that if 
``slamming'' continues unabated--perhaps through abuses in areas 
other than the use of the LOA--we may have to revisit this question 
at a later date.

    5. As noted, the number of slamming complaints processed by this 
Commission have more than doubled since adoption of the 1995 Order. The 
state commissions, which cumulatively receive a larger share of 
slamming complaints than this Commission, have seen a similar growth. 
Thus, consistent with our previous warning, and in light of the need 
for stronger and more effective deterrents to slamming, we are 
convinced that absolving consumers of liability for charges incurred 
over a limited time-period is now the appropriate policy. We point out 
that consumer groups and states support absolution from slamming 
charges as an effective method of deterring slamming. Indeed, many 
states have adopted absolution as a remedy for their own consumers.
    6. As we stated in the Section 258 Order, absolution minimizes 
slamming carriers' physical control over slamming revenues, and thereby 
minimizes the incentive to slam consumers. The Commission has seen 
several cases in which slamming carriers went out of business or 
declared bankruptcy after the Commission or state enforcement agencies 
detected their illegal activities. Such evasion has made it difficult 
to provide restitution to injured consumers. Accordingly, it is 
important to deprive a slamming carrier of slamming revenues in the 
first instance.
    7. Our absolution rules also place appropriate incentives on both 
consumers and carriers. They encourage consumers to scrutinize their 
telephone bills immediately and carefully. In doing so, absolution 
engages the general public in detecting slamming. Absolution also 
provides carriers with the incentive to verify all carrier changes 
properly, in order to protect themselves against any possible 
inappropriate consumer claims of slamming. The rules will motivate 
carriers not only to comply strictly with our verification procedures, 
but also to use methods that provide convincing proof of a subscriber's 
authorization.
    8. Finally, limited absolution compensates a slammed subscriber, at 
least in part, for the inconvenience and frustration that results from 
an unauthorized change. In our extensive experience handling slamming 
complaints since the 1995 Order, it has become evident that consumers 
often experience a high level of confusion upon being slammed. After 
discovering the unauthorized change, consumers frequently have great 
difficulty in returning to their authorized carriers and in getting 
their telephone bills adjusted correctly. Indeed, as long as slamming 
carriers continue to receive payment, they have little incentive to be 
responsive to consumer complaints. Therefore, absolution also furthers 
Congress' desire to ``provide that consumers are made whole.''
    9. As stated previously, the only parties that oppose the concept 
of absolution are the carriers themselves. States and consumer groups 
overwhelmingly support absolution as the best method to deter slamming. 
We are unpersuaded by the arguments of TRA and others that our 
absolution rule is inconsistent with the provisions of section 258 
requiring slamming carriers to reimburse authorized carriers for 
forgone revenue. As we explained in the Section 258 Order, we believe 
that our absolution remedies are complementary to the congressional 
scheme and not inconsistent. The language of section 258 does not 
mandate that slammed consumers pay either the authorized or the 
unauthorized carrier. Rather, by its terms, section 258(b) applies only 
when a consumer in fact has made a payment. Furthermore, section 258 
specifically states that its remedies are ``in addition to any other 
remedies available by law.'' We emphasized in the Section 258 Order 
that the authorized carrier is free to seek compensation for lost 
profits or other damages in proceedings against the slamming carrier 
before the Commission or in a state or federal court. Furthermore, our 
rules do not deprive the authorized carrier of all charges incurred by 
the subscriber. The subscriber only receives absolution for service 
provided during the first 30 days after being slammed. The authorized 
carrier is entitled to collect charges for service provided after the 
first 30 days,

[[Page 47680]]

even though that service was provided by the slamming carrier.
2. Time Period for Absolution
    10. We decline to extend the absolution period beyond the 30-day 
limit, as suggested by several petitioners, because we find that the 
30-day limit strikes a reasonable balance between the interests of 
consumers and carriers. We find that the period of absolution should be 
limited in order to give consumers the incentive to look at their bills 
promptly and not to delay reporting slams. We also find that the time 
limitation should be tied to an event that is verifiable and easily 
tracked, such as the date a slam occurs, rather than an event that is 
not verifiable, such as the date the consumer notices an unauthorized 
change. Accordingly, we retain the limitation that absolution is only 
available for charges incurred within the first 30 days after the 
unauthorized change.
    11. Furthermore, as explained in the Section 258 Order, we will 
grant waivers where special circumstances warrant a longer period of 
absolution, such as where the subscriber's telephone bill does not 
provide reasonable notice of a carrier change. We disagree with NTCA's 
contention that we should extend the time period for absolution because 
the waiver process is not a practical solution for consumers. NTCA's 
viewpoint appears to be based on the assumption that large numbers of 
consumers will be unable to detect carrier changes on their telephone 
bills. We acknowledged in the Truth-In-Billing proceeding that unclear 
telephone bills can prevent customers from recognizing that their 
carrier of choice has been switched. The principles adopted in that 
order address these concerns by requiring telephone bills to highlight 
when a consumer's preferred interLATA or intraLATA carrier has been 
changed. Our Truth-In-Billing Order also requires that telephone bills 
contain clear and conspicuous disclosure of consumer inquiry 
information, enabling consumers to report slamming and begin the 
process of returning to their authorized carrier. Accordingly, in the 
future, consumers should be better-equipped to detect and respond to 
unauthorized carrier changes. We also note that deliberate efforts by a 
carrier to conceal an unauthorized carrier switch may be the basis for 
extending the 30-day limit, and may also warrant additional enforcement 
action by the Commission.

B. Liability Where Consumer Has Paid Unauthorized Carrier

    12. Frontier has requested reconsideration of the requirement in 
the Section 258 Order that an authorized carrier that collects slamming 
proceeds from an unauthorized carrier remit to the subscriber the 
difference between what the subscriber paid the unauthorized carrier 
and what he would have paid the authorized carrier absent a slam. 
Frontier asserts that this ``re-rating'' requirement is inconsistent 
with the specific statutory language of section 258, which mandates 
that the unauthorized carrier ``shall be liable to the carrier 
previously selected by the subscriber in an amount equal to all charges 
paid by such subscriber after such violation.''
    13. In the Section 258 Order, we concluded that requiring 
authorized carriers to remit to the subscriber amounts in excess of 
what they would have received but for the slam was consistent with the 
statute and the Congressional intent underlying section 258. Pointing 
to the language of the legislative history specifically directing that 
the Commission's rules implementing section 258 ``should also provide 
that consumers be made whole,'' we concluded that Congress intended 
that subscribers who pay for slamming charges should pay no more than 
they would have paid their authorized carrier for the same service had 
they not been slammed. We also noted in the Section 258 Order that such 
a rule was consistent with existing Commission policy requiring 
slamming carriers to refund to subscribers amounts in excess of what 
the subscriber would have paid its preferred carrier; while the 
interpretation proffered by Frontier on reconsideration would leave 
consumers worse off than before passage of the legislation.
    14. On reconsideration of this issue, we have considered comments 
filed in response to the Further Notice of Proposed Rulemaking (FNPRM) 
in this proceeding. Among the issues raised in the FNPRM, we asked 
whether we had authority under section 258 or other provisions of the 
Act to require the unauthorized carrier to pay to the authorized 
carrier double the amount of charges paid by the subscriber during the 
first 30 days after a slam, with the authorized carrier then remitting 
one-half that amount back to the subscriber. The modified liability 
approach we adopt here is a variation on that proposal in that it 
requires unauthorized carriers to disgorge more than the amount 
collected from the subscriber in order to compensate both the 
subscriber and the authorized carrier. In light of the comments 
received on the FNPRM and petitions for reconsideration, we now adopt a 
different liability scheme, for cases where the subscriber has paid 
charges to the unauthorized carrier, that we conclude more fully 
implements the congressional intent underlying section 258. 
Specifically, we now establish a remedy that both allows the authorized 
carrier to retain an amount of money equal to ``all charges paid by the 
subscriber'' to the unauthorized carrier, and also ensures that 
subscribers are ``made whole'' by reimbursing them the amount they paid 
in excess of what they would have paid their preferred carrier absent 
the slam (or a proxy for such amount). Thus, once a state commission or 
the FCC has made a finding that a slam has occurred, the unauthorized 
carrier will be required to disgorge to the authorized carrier an 
amount adequate to satisfy both of these obligations. As discussed, we 
find that an appropriate proxy for this harm is 150% of the amounts 
collected by the unauthorized carrier from the subscriber following a 
slam. Upon receipt of this money, the authorized carrier will then be 
required to remit one-third of this amount (i.e., 50% of what the 
subscriber paid to the unauthorized carrier) to the injured subscriber.
    15. We specifically reject Frontier's petition to the extent it 
asserts that any re-rating of the consumers' bill would be inconsistent 
with the statute. To the contrary, Frontier's interpretation would 
completely ignore the congressional intent that consumers be ``made 
whole,'' by leaving consumers that pay money to an unauthorized carrier 
having paid more than they would have paid absent the slam. Even 
setting aside any time and expense incurred by the consumer in 
remedying the slam, such an approach cannot be considered making the 
subscriber ``whole'' in any meaningful sense. We note, in particular, 
that many of the long distance carriers favoring reconsideration of the 
absolution requirement apparently agree that the dual Congressional 
intent of section 258 mandates that slammed consumers should pay no 
more than they would have paid absent the slam.
    16. We conclude that the approach we adopt here is both authorized 
by section 258, and is the most appropriate method for satisfying the 
dual congressional purposes reflected in the legislative history. The 
specific language of section 258 provides that the unauthorized carrier 
shall be liable to the authorized carrier for all amounts collected 
from the subscriber. As Frontier asserts, a

[[Page 47681]]

reasonable interpretation of this language is that Congress intended 
for the authorized carrier to retain all such amounts, even though they 
likely will be more than the authorized carrier would have received 
from the subscriber absent a slam. Such a bonus may serve as additional 
incentive for the authorized carrier to go after the unauthorized 
carrier to collect these amounts, thereby acting as an additional 
disincentive to slamming. Section 258 also specifically provides that 
this remedy is ``in addition to any other remedies available at law.'' 
One such remedy that assuredly is available is the ability of consumers 
to bring a claim to the Commission or in federal court, or where 
allowed under state law to the state commissions, for damages due to 
slamming. For example, pursuant to sections 206-208 of the Act, a 
consumer bringing a complaint is entitled to actual and consequential 
damages following a finding of a slam. Indeed, prior to the Section 258 
Order, Commission orders compensated slammed consumers by requiring 
slamming carriers, pursuant to sections 201(b) and 208 of the Act, to 
refund to the subscriber any amounts paid to the slamming carrier in 
excess of what he would have paid his preferred carrier absent the 
slam. Our modified liability requirements thus satisfy the 
congressional mandate of making consumers ``whole,'' by retaining the 
availability of other existing remedies to ensure that subscribers pay 
no more for service than they would have but for being slammed. 
Accordingly, we find that the modifications to our liability rules 
adopted here most fully satisfy the dual congressional mandate of 
section 258. Thus, our decision to require the slamming carrier to 
disgorge 150% of the amount paid to it by the subscriber relies on our 
section 258 authority only with respect to that provision's express 
permission for the Commission to use ``any other remedies available by 
law.''
    17. We note that, in response to the FNPRM, some carriers assert 
that we do not have jurisdiction to require the unauthorized carrier to 
disgorge more than it collected from the subscriber because this would 
result in punitive damages not authorized by the Act. We disagree. Even 
if such damages can be considered punitive, rather than purely 
compensatory, any punitive aspect arises from the specific statutory 
provision providing that the authorized carrier is entitled to amounts 
over and above what it would have collected if the slam had not 
occurred. The amount going to the subscriber, on the other hand, is no 
more than compensatory, and well within the range of relief authorized 
in other statutory provisions. As the statute specifically authorizes 
this additional liability to the authorized carrier, we find that it is 
clearly within our jurisdiction.
    18. Finally, as noted, we find that 50% of the amount collected 
from the subscriber by the unauthorized carrier is an appropriate proxy 
for re-rating that also responds to concerns raised by the carriers 
that actual re-rating is administratively difficult and expensive. 
Frontier, for example, argues that obtaining the necessary call detail 
from the offending carrier, collecting the revenues from the offending 
carrier, re-rating calls, and remitting the difference to affected 
customers is a time-consuming, manual and expensive process. Other 
long-distance carriers similarly argue that administrative systems 
(such as electronic interfaces between carriers) would have to be 
developed to allow for accurate re-rating, imposing costs on the 
authorized carrier that has not been accused of slamming. In response 
to this perceived difficulty, the long-distance carriers themselves 
(including Frontier and MCI) have argued in conjunction with the Joint 
Waiver Petition that the Commission should provide carriers the option 
of refunding 50% to the subscriber, rather than requiring them to 
engage in an actual calculation of the amount paid by the subscriber in 
excess what he would have paid his preferred carrier. These carriers 
assert that such a proxy fully compensates the subscriber while not 
requiring the carriers to engage in a difficult and expensive 
comparison of rates of other carriers. As discussed more thoroughly, we 
agree that this is an appropriate remedy for these purposes and will 
significantly simplify the flow of money from the unauthorized carrier 
to the authorized carrier and subscriber.

C. Administration of the Slamming Liability Rules

1. Forum for Administration of Slamming Liability Rules
    19. In the Section 258 Order, we set forth rules that imposed on 
authorized carriers certain responsibilities for resolving disputes 
between subscribers and allegedly unauthorized carriers. Recognizing 
that other alternatives might better serve consumer interests under our 
slamming liability scheme, however, we agreed to entertain requests for 
waiver of our rules if carriers implemented an independent third party 
administrator to discharge carrier obligations for resolving slamming 
disputes. We specified that such a proposal should give consumers a 
single point of contact to resolve slamming problems and provide 
consumers with a neutral forum for resolving disputes regarding 
slamming liability. On March 30, 1999, a coalition of interexchange 
carriers filed a Waiver Petition proposing a plan for an industry-
funded third party to administer our slamming liability rules. On April 
20, 1999, state commissions, through the National Association of 
Regulatory Utilities Commissions (NARUC), filed a letter asserting that 
they are well-equipped to handle slamming complaints and requesting 
that the Commission consider allowing them to be the primary 
adjudicators of slamming disputes. NARUC argues that the state 
commissions are more appropriate than the industry's proposed third-
party administrator to execute our slamming liability provisions 
because the states have existing, neutral, and comprehensive mechanisms 
to handle slamming disputes.
    20. We conclude that it is in the public interest to have state 
commissions, rather than a third party designated by carriers, perform 
the primary administrative functions of our slamming liability rules. 
In fact, it appears to be both appropriate and effective to establish 
this type of alliance with the states. The language of Section 258 
itself contemplates a state and federal partnership to deter slamming. 
In addition, the states and the Commission have been working together 
for some time to share information and develop new and creative 
solutions to combat slamming. For example, the State and National 
Action Plan (SNAP), comprising staff from NARUC, the FCC, and the 
National Regulatory Research Institute, regularly meet to develop joint 
public information strategies to increase awareness of 
telecommunications issues affecting consumers, coordinate enforcement 
actions to protect consumers against abuses in the telecommunications 
marketplace, and coordinate regulatory initiatives. Joint state-federal 
activities have been very effective in protecting consumers against 
various types of telecommunications fraud. It is imperative that the 
states and the FCC continue to cooperate, and expand their interaction, 
in order to eradicate slamming.
    21. We also find that the state commissions are, for several 
reasons, more appropriate for resolving slamming disputes than the 
administrator proposed by the long distance carriers. We agree with 
NARUC that the states are particularly well-

[[Page 47682]]

equipped to handle complaints because they are close to the consumers 
and familiar with carrier trends in their region. As NARUC describes, 
establishing the state commissions as the primary administrators of 
slamming liability issues will ensure that ``consumers have realistic 
access to the full panoply of relief options available under both state 
and federal law. . . .'' Moreover, state commissions have extensive 
experience in handling and resolving consumer complaints against 
carriers, particularly those involving slamming. In fact, the General 
Accounting Office (GAO) has reported that all state commissions have 
procedures in place for handling slamming complaints, and that those 
procedures have been effective in resolving such complaints. We 
specifically note that at present more than 35 states have committed to 
provide the resources necessary to resolve slamming disputes in a 
timely and fair manner.
    22. Based upon these representations and the proven track record of 
customer satisfaction, we conclude that state commissions have the 
ability and desire to provide prompt and appropriate resolution of 
slamming disputes between consumers and carriers in a manner consistent 
with the rules adopted by this Commission. In most situations, state 
commissions will be able to provide consumers with a single point of 
contact for each state, thereby enabling slammed consumers to rectify 
their situations, receive refunds, and get appropriate relief with one 
phone call. State commissions also will be able to provide consumers 
and carriers with timely processing of slamming disputes. Finally, but 
of critical importance, states will provide a neutral forum for the 
resolution of slamming disputes. As noted, this was one of the 
essential criteria we set forth for the approval of a slamming 
liability administrator. We do not conclude here that an industry-
sponsored administrator could not act as a ``neutral'' adjudicator of 
disputes between carriers and consumers. Nonetheless, we are troubled 
by the concerns raised by several consumer groups that such an entity 
would be perceived by consumers as biased in favor of carriers. The 
slamming liability rules are intended to protect consumers, and the 
effectiveness of any administrative mechanism we select will be 
dependent upon consumers having confidence in the fairness and 
impartiality of the process. We agree with the arguments of NARUC that 
state commissions will be perceived by consumers as more ``neutral'' 
adjudicators of disputes than the third-party administrator proposed by 
the interexchange carriers.
    23. We recognize, however, that not all states have the resources 
to resolve these slamming complaints, or may choose not to take on this 
primary responsibility. Consumers in these states accordingly may seek 
resolution of their slamming disputes by filing a complaint with this 
Commission. To provide consumers who opt to file complaints with this 
Commission the full complement of rights and remedies contemplated by 
this order, we are amending our own rules for the adjudication of 
slamming complaints.
    24. Our conclusion that states should have primary responsibility 
for administering our slamming liability rules shall not preclude a 
consumer from electing to file a slamming complaint with this 
Commission. In cases where the state has indicated it will administer 
our rules, however, this Commission will refer informal complaints to 
the appropriate state commission for resolution, unless the complainant 
expressly indicates it wishes to have the matter resolved by this 
Commission. This Commission will not adjudicate a complaint based on an 
allegation of slamming while the complainant has a complaint arising 
from the same set of facts pending before a state commission that has 
opted to administer our slamming rules. Additionally, these rules do 
not preclude the filing of a petition for declaratory ruling alleging 
that a state has improperly implemented our verification or liability 
rules. Finally, nothing in these procedures is intended to abrogate any 
party's right to pursue relief for a slamming violation in state or 
federal court.
3. Administrative Procedures
    a. State Notification of Participation in Adjudication of 
Complaints.
    25. To ensure full and seamless administration of complaints among 
this Commission and the states, each state commission that chooses to 
take on the primary responsibility for resolving consumer slamming 
complaints must notify this Commission of the procedures it will use to 
adjudicate individual slamming complaints on the effective date of 
these revised rules. Each state commission's notification should 
explain how consumers may file complaints (including where the 
complaint is to be filed, what if any filing fees a consumer must pay, 
and what documentation a consumer must provide in its complaint), any 
and all deadlines parties must adhere to that are shorter than those 
explicitly stated in these rules, what safeguards exist to ensure 
procedural fairness to consumers and carriers, and what rights parties 
have to appeal an initial decision.
    26. If, after the effective date of these rules, additional states 
opt to administer complaints under the rules, they may do so by filing 
such notification in the captioned docket and sending a copy to the 
Chief of the FCC Consumer Information Bureau. In addition, state 
notification of an intention to discontinue administering complaints 
under the rules shall be filed in the captioned docket, with a copy of 
such notification provided to the Chief of the FCC Consumer Information 
Bureau.
    b. Preliminary Consumer Relief is Granted upon Slamming Allegation.
    27. We retain the requirement that an alleged unauthorized carrier 
must remove all charges assessed for the first 30 days of services from 
a subscriber's bill upon the subscriber's allegation that he or she was 
slammed. Several carriers state that the allegation of a slam should 
not trigger preliminary relief because many slamming complaints will 
turn out to be invalid or fraudulent. As we explained in the Section 
258 Order, the fact that a subscriber can only be absolved of liability 
if he or she has in fact been slammed minimizes our concerns about 
fraud by consumers. In accordance with the revised rules described, if 
a carrier is able to produce proof of verification, it is entitled to 
receive full payment from the subscriber for all services provided. Our 
rules will motivate carriers to comply strictly with our verification 
procedures to protect themselves from inappropriate claims of slamming. 
We also explained in the Section 258 Order that the absolution remedy 
we adopted provides an easily administered remedy for consumers who 
have been slammed. The absolution remedy would not be as effective if 
the consumer had to pay for slamming charges in the first instance; we 
have emphasized repeatedly how essential it is to minimize the 
opportunity for unauthorized carriers to physically take control of 
slamming profits for any period of time. Accordingly, our rules will 
continue to require that, upon an allegation of a slam, the alleged 
unauthorized carrier must remove all charges assessed for the first 30 
days of service immediately from the subscriber's bill.
    28. Our retention of the requirement that an alleged unauthorized 
carrier must remove all charges assessed for the first 30 days of 
service from a subscriber's bill upon the subscriber's allegation that 
he or she was slammed, along with our modification of the 
administration procedures, creates the

[[Page 47683]]

need for an additional administrative rule. Specifically, because the 
subscriber receives preliminary relief pending a final determination of 
whether or not a slam occurred, our rules need to ensure that the 
subscriber benefiting from the relief promptly files a complaint with 
the state commission (or the FCC), thus giving the alleged unauthorized 
carrier an opportunity to provide proof of verification. Therefore, we 
modify our rules to require that the allegedly unauthorized carrier 
notify the subscriber that it must file a complaint with the 
appropriate state commission (or the FCC) within 30 days of the date it 
notifies the allegedly unauthorized carrier that a slam occurred, or be 
subject to re-billing for charges incurred. The allowance of such re-
billing does not, however, prohibit the subscriber from subsequently 
filing a complaint alleging that a slam occurred with the state 
commission (or the FCC) and proceeding in accordance with the 
Commission's rules.
    c. General procedures.
    29. As discussed, when an allegedly unauthorized carrier is 
informed by a subscriber of an alleged slam, that carrier is required 
to remove charges for the first 30 days of service from the 
subscriber's bill. The subscriber must then file a complaint with a 
state commission (or the FCC) seeking a factual determination that a 
slam occurred. We recognize that some carriers may choose to make it 
their practice not to challenge allegations of slamming and to provide 
subscribers who allege a slam has occurred with all the relief to which 
they would be entitled under our rules. We do not intend for these 
rules to discourage carriers from providing subscribers with the most 
expedient relief possible. Accordingly, where an allegedly unauthorized 
carrier chooses to not challenge the allegation of a slam and provides 
the subscriber alleging that a slam occurred with all the relief to 
which the subscriber would be entitled pursuant to our rules, had the 
subscriber prevailed on a slamming complaint, the allegedly 
unauthorized carrier shall inform the subscriber of the remedies our 
rules provide and that the subscriber has the option of filing a 
complaint with the appropriate state commission (or the FCC) if the 
subscriber is not satisfied with the resolution of its dispute with the 
carrier.
    30. We require any carrier that is informed by a subscriber of a 
slam to direct each unsatisfied subscriber to the proper state 
commission (or the FCC) for resolution of the slamming problem and 
inform such unsatisfied subscriber of all the relevant filing 
requirements. We conclude that this will achieve one of our objectives 
for a slamming liability administrator set forth in the Section 258 
Order--minimizing the effort consumers must expend to resolve slamming 
disputes. We also expect that the states that have sufficient resources 
will launch public information campaigns to inform consumers of their 
rights and responsibilities with regard to slamming liability. We 
anticipate a productive state and federal partnership in this effort. 
Additionally, in order to fulfill our responsibilities under section 
258 of the Act and to assist our enforcement efforts, we will require 
states that choose to administer the Commission's rules to regularly 
file information with the Commission that details slamming activity in 
their regions. Such filings should identify the number of slamming 
complaints handled, including data on the number of valid complaints 
per carrier; the identity of top slamming carriers; slamming trends; 
and other relevant information. Such reports will help the Commission 
to identify appropriate targets for slamming enforcement actions, such 
as forfeiture or section 214 revocation proceedings.
    31. We also revise our rules to add a notification requirement to 
facilitate the administration of long distance slamming complaints. 
SBC, AT&T, and Sprint state that, because our rules lack a notification 
requirement that would enable carriers to learn each others' identity, 
the carriers involved in a slamming incident might not be able to take 
appropriate action against each other. Furthermore, this notification 
issue was also raised in the MCI WorldCom Motion for Stay filed with 
the D.C. Circuit. We will require an executing carrier who is informed 
of a slam by the subscriber to immediately notify both the authorized 
and alleged unauthorized carriers of the incident, including the 
identity of each carrier involved. We note that the industry has 
already taken steps to facilitate the transfer of this information 
between carriers. We agree that a notification requirement is important 
to the correct functioning of the liability mechanism. Requiring the 
LEC to notify both the authorized and the alleged unauthorized carriers 
of the other's identity in a slamming incident will enable the 
unauthorized carrier to forward appropriate amounts collected from the 
subscriber if it is determined that a slam occurred. This will also 
enable the authorized carrier to bring appropriate actions, such as a 
complaint before a state commission (or the FCC), against the 
unauthorized carrier should the unauthorized carrier fail to fulfill 
its responsibilities to the authorized carrier.
    32. Upon receipt of a slamming complaint, the state commission (or 
this Commission if the complainant is from a non-participating state or 
has expressly indicated that it wants this Commission to resolve its 
complaint) will notify the allegedly unauthorized carrier of the 
slamming complaint and ensure that the carrier removes immediately all 
unpaid charges from the subscriber's bill, if it has not done so 
already. Within 30 days after notification of the slamming complaint, 
or such lesser time as required by the state commission, the alleged 
unauthorized carrier shall provide to the state commission (or the FCC) 
a copy of the valid proof of verification of the carrier change. This 
proof of verification should contain clear and convincing evidence that 
the subscriber knowingly authorized the carrier change, such as a 
written Letter of Agency (LOA) or an audiotape of an independent third 
party verification. The state commission (or the FCC) will make a 
determination on whether a slam occurred using proof supplied by the 
allegedly unauthorized carrier and any evidence supplied by the 
subscriber.
    33. The following review procedures apply when a state commission 
has resolved a slamming complaint. Challenges to the factual 
determinations made by a state commission applying our rules shall be 
made in accordance with the relevant review provisions that are 
applicable to each state commission. Challenges to whether a state 
commission's process for resolving slamming complaints are consistent 
with this order must be brought to the FCC in the form of a petition 
for declaratory ruling. The following review procedures apply when the 
staff of this Commission has resolved a slamming complaint. A 
subscriber seeking to challenge the FCC staff's determination of 
whether a slam occurred may file a formal complaint against the 
allegedly unauthorized carrier in accordance with our formal complaint 
rules. An allegedly unauthorized carrier seeking to challenge the FCC 
staff's determination of whether a slam occurred may file a petition 
for declaratory ruling with this Commission.
    d. Where the subscriber has not paid charges.
    34. The following procedures shall apply when the subscriber has 
not paid charges to the allegedly unauthorized carrier. If the state 
commission (or the FCC) determines that the carrier change was 
authorized, the carrier may re-bill the subscriber for

[[Page 47684]]

charges incurred. If the state commission (or the FCC) determines that 
the subscriber was slammed, then the subscriber is entitled to 
absolution from the charges incurred during the first 30 days after the 
slam occurred, and the carrier may not pursue any collection actions 
against the subscriber to recover these charges.
    35. If the subscriber has incurred charges for more than 30 days 
after the slam occurred, then the unauthorized carrier shall forward to 
the authorized carrier the billing information for service provided 
from the 31st day after the slam occurred through the date the 
unauthorized carrier stopped providing service. The authorized carrier 
has the option of billing the subscriber for calls made after the first 
30 days after the slam at the rates the subscriber would have paid the 
authorized carrier absent the slam. After receiving billing information 
from the unauthorized carrier, the authorized carrier may re-rate such 
service according to its own rates and then bill the subscriber for 
such service. If the authorized carrier so chooses, rather than 
actually re-rating the service provided by the unauthorized carrier, it 
may bill the subscriber in accordance with a 50% proxy rate. In other 
words, it may bill the subscriber for 50% of the rate the unauthorized 
carrier would have charged. If the subscriber believes, however, that 
paying 50% results in a greater charge than re-rating to the authorized 
carrier's rates, at the request of the subscriber, the authorized 
carrier shall perform actual re-rating.
    36. We note that we do not necessarily agree with the carriers' 
assessment of the administrative difficulty of re-rating. Although the 
carriers admit that the only information needed for re-rating is the 
length and time of the call, they fail to explain why the re-rating 
process, as described in the Section 258 Order, would require 
``electronic systems that interconnect with other carrier's billing and 
usage systems, so that they can exchange relevant price and call data 
electronically.'' Indeed, the carriers admit that manual re-rating can 
be easily accomplished for any particular complainant. Nevertheless, we 
permit authorized carriers to have the option of using a 50% proxy 
because the carriers assert that re-rating is an administrative burden, 
and because we are persuaded that a 50% proxy will generally yield a 
reasonable and fair result for the subscriber. Giving carriers this 
option will ensure that, in most cases, the authorized carrier is able 
to collect charges without having to perform re-rating and that the 
subscriber will receive adequate compensation.
    e. Where the subscriber has paid charges.
    37. The following procedures shall apply when the subscriber does 
not discover a slam until after he or she has already paid charges to 
the alleged unauthorized carrier. As explained in the Section 258 
Order, section 258 requires the unauthorized carrier to pay the 
authorized carrier any charges collected following an unauthorized 
switch. We concluded in that order that this provision of the statute 
prevents us from providing absolution to slammed subscribers who have 
already paid charges to their unauthorized carriers.
    38. As explained, however, we have herein modified the liability 
rules applicable in cases where the consumer has paid charges to the 
unauthorized carrier in order to more fully implement the dual goals of 
section 258 of compensating both the subscriber and the authorized 
carrier. Pursuant to this modified liability scheme, a carrier found to 
have slammed will be required to disgorge to the authorized carrier 
150% of the amounts collected by that slamming carrier from the 
subscriber. Accordingly, when the state commission (or the FCC) 
determines that the alleged unauthorized carrier did slam the consumer, 
then it shall direct such carrier to forward to the authorized carrier 
150% of (or one and one-half times) all amounts collected from the 
subscriber, as well as a copy of the customer's bill for the amounts 
paid. Upon receipt of these charges from the unauthorized carrier, the 
authorized carrier shall remit (either directly or through bill 
credits) one-third of this amount to the subscriber. As explained, this 
amount, which equals 50% of the charges paid by the subscriber to the 
unauthorized carrier, constitutes a reasonable proxy for the damages 
sustained by the subscriber, while not requiring the authorized carrier 
to engage in the arguably difficult and expensive task of actually re-
rating the subscriber's bill. The authorized carrier shall also notify 
the state commission (or the FCC) that it has paid this amount to the 
subscriber. If the subscriber is failed to be made whole by the 50% 
proxy, the subscriber may ask the authorized carrier to re-rate the 
unauthorized carrier's charges based on the rates of the authorized 
carrier and, on behalf of the subscriber, seek an additional refund 
from the unauthorized carrier, to the extent that the re-rated amount 
exceeds the 50% of all charges paid by the subscriber to the 
unauthorized carrier.
    39. Finally, we note that if the authorized carrier does not 
collect any amounts from the unauthorized carrier, the authorized 
carrier is not responsible for providing refunds or credits to the 
subscriber. As explained in the Section 258 Order, the authorized 
carrier should not be, in effect, penalized for the wrongdoing of 
another carrier by having to pay a refund out of its own pocket. In 
such cases, of course, both the subscriber and the authorized carrier 
retain any other existing avenues to obtain relief from the 
unauthorized carrier.

D. Waiver Petition

    40. As explained, petitioners filed a Waiver Petition setting forth 
a proposal for a third-party administrator to administer the liability 
aspects of the slamming rules. Petitioners seek a waiver of the 
following liability rules for those carriers electing to participate in 
the proposed third-party administrator plan: Secs. 64.1100(c); 
64.1100(d); 64.1170; and 64.1180. On April 8, 1999, the Commission 
issued a public notice seeking comment on the third-party administrator 
proposal. Because we believe that it is in the public interest for 
state commissions to undertake the responsibilities envisioned for the 
third-party administrator, we deny the waiver request.
    41. Waiver of the Commission's rules is appropriate only if special 
circumstances warrant a deviation from the general rule, and such a 
deviation will serve the public interest. A waiver of the Commission's 
general rules may only be granted if such waiver would not undermine 
the policy underlying that general rule. Petitioners have failed to 
demonstrate that the third party administrator proposal is in the 
public interest. In evaluating whether a waiver of these rules is in 
the public interest, our overriding criterion is whether a waiver would 
further the policy goals of section 258 and our implementing rules: to 
protect the rights of consumers who are slammed and, ultimately, to 
eliminate this type of fraud.
    42. We find that adopting the third-party administrator proposal 
would not be in the public interest because, as described, we have 
revised our rules to address many of the concerns that prompted the 
filing of the waiver petition. The Waiver Petition sets forth an 
alternative administration scheme that would place a neutral, industry-
endorsed entity in the role of resolving disputes between alleged 
slamming carriers and subscribers.
    43. In addition to the fact that the state commissions (or the FCC) 
will better serve the public interest in administering the slamming 
liability rules, the record demonstrates that

[[Page 47685]]

segments of the industry have failed to reach consensus on the 
operation and administration of a third-party administrator. The local 
exchange and long distance carriers disagree strongly on many important 
aspects of the third-party administrator proposal. In inviting the 
industry to submit proposals for a third-party administrator, the 
Commission did not anticipate that the third-party administrator would 
be a mandatory requirement for all carriers. We did contemplate, 
however, that a workable third-party slamming liability administrator 
would have broad acceptance among different segments of the industry as 
well as the states and consumer interest groups. As reflected in the 
comments, the proposal put forth by the petitioning long distance 
carriers has not engendered such broad support, particularly among 
state and consumer interest representatives. We find this discord 
troubling. Despite many months of discussion between the local exchange 
and long distance carriers, and despite input from consumer groups and 
the states, the Commission has seen these various groups settle more 
firmly into their disparate positions rather than moving closer to 
resolution.
    44. This lack of comprehensive industry participation and consumer 
group support undermines several important potential benefits of the 
third-party administrator proposal. We find that the lack of consensus 
will prevent the third-party administrator from being the single point 
of contact for the consumer. Without local exchange carrier 
participation and support of the third-party administrator mechanism, 
we are concerned that local exchange carriers will have no incentive to 
refer consumers to the third-party administrator. Accordingly, 
consumers may continue to call several entities in order to resolve 
their slamming disputes, undermining one of the primary benefits of a 
third-party administrator identified in the Section 258 Order--
providing a single point of contact for slammed subscribers. We have 
additional concerns that, if a substantial portion of the industry does 
not participate in the third party administrator process, the non-
participants may be able to derail the time limits and other procedures 
set by the third-party administrator, resulting in the delayed 
resolution of slamming complaints.
    45. We believe that our revised rules address the concerns raised 
in the Waiver Petition in a manner that more fully satisfies the 
criteria set forth in the Section 258 Order. Our revised rules provide 
for state commissions (or the FCC) to handle administration of our 
slamming liability rules, rather than imposing burdens on authorized 
carriers, as originally provided in the Section 258 Order. Furthermore, 
authorized carriers now have the option of using a 50 % proxy to 
calculate refunds and subscriber charges, rather than performing actual 
re-rating, as was prescribed in the Section 258 Order.
    46. In sum, we conclude that our revised rules will protect 
consumers more effectively than the third-party administrator proposed 
by the long distance industry. Consumer interest groups disagree with 
many aspects of the third-party administrator proposal, contending that 
the administrator will not be neutral towards consumers. Accordingly, 
the revised rules provide that state commissions (or the FCC) will 
resolve slamming disputes, thereby alleviating any neutrality concerns. 
Based on the states' representations discussed, we find that the 
majority of states have the resources and knowledge to provide prompt 
and effective resolution of slamming disputes. For these reasons, the 
public interest favors adoption of the revised rules, which utilize 
appropriate state commissions as reliable, timely, and neutral dispute-
resolution forums, rather than the proposed industry-sponsored third-
party administrator.

III. Procedural Issues

A. Supplemental Regulatory Flexibility Analysis

    47. As required by the Regulatory Flexibility Act (RFA), an Initial 
Regulatory Flexibility Analysis (IRFA) was incorporated in the First 
Further Notice of Proposed Rulemaking and Memorandum Opinion and Order 
and Order on Reconsideration. The Commission sought written public 
comment on the proposals in the Further Notice and Order, including 
comment on the IRFA. Based on comments received in the Further Notice 
and Order, a Final Regulatory Flexibility Analysis (FRFA) was 
incorporated in the Second Report and Order and Further Notice of 
Proposed Rulemaking. Petitions for Reconsideration and a Joint Petition 
for waiver of certain rules were filed in response to the rules adopted 
in the Section 258 Order. This present Supplemental Final Regulatory 
Flexibility Analysis (SFRFA) conforms to the RFA.
1. Need for and Objectives of this Order and the Rules Adopted Herein
    48. The goal of Section 258 of the Act is to eliminate the illegal 
practice of slamming--the unauthorized change of a subscriber's 
preferred carrier. Faced with over 20,000 slamming complaints a year 
from individuals and small businesses, the Commission created a 
comprehensive framework for combating slamming in the Section 258 Order 
by adopting rules to implement section 258 and strengthening existing 
anti-slamming rules. The cornerstone of that framework was a set of 
aggressive liability rules designed to take the profit out of slamming. 
In this Order, we make certain modifications to our liability rules, 
granting in part petitions for reconsideration of the Section 258 
Order. The modifications are intended to resolve concerns raised in 
this proceeding and in the petitions for stay filed both with this 
Commission and with the D.C. Circuit.
2. Summary of Significant Issues Raised by Public Comments
    49. We received no petitions for reconsideration directly 
addressing issues in the previous FRFA.
    50. Re-Rating Rules. Commenters contend that requiring each 
authorized carrier to perform a re-rating to determine the size of the 
refund to each slammed subscriber would place a complex and costly 
administrative burden on them. Although we do not necessarily agree 
with carriers about the dimensions of this burden, we believe that the 
50% proxy that authorized carriers propose to give to their slammed 
subscribers will benefit consumers in most cases. In those instances 
where a subscriber does not believe that it will benefit from the 50% 
proxy, the subscriber may request an actual re-rating. In most 
circumstances, however, authorized carriers will be able to avoid the 
alleged burden.
    51. Creation of an industry-sponsored third-party administrator. As 
discussed in this Order, some commenters proposed that slamming 
complaints be adjudicated by an industry-funded third-party 
administrator. These commenters aver that the third-party administrator 
would benefit consumers and industry alike by creating a single point 
of contact to resolve slamming complaints and simplifying the complaint 
process. We reject this proposal, and instead conclude that state 
commissions should perform the primary function in administering our 
slamming liability rules.
    52. The benefit claimed by proponents of the third-party 
administrator was belied by the fact that no workable proposal was 
offered. Various industry segments disagreed on the form and workings 
of the proposed third-party administrator, and states and consumer 
groups expressed their

[[Page 47686]]

disapproval of, and lack of confidence in, the idea. The absence of 
consensus, and the accompanying possibility that a substantial portion 
of the industry would not participate in the third-party administrator, 
could result in greater confusion for consumers and authorized 
carriers. The system we adopt, which requires all carriers to forward 
complaints they receive to the appropriate governmental agency (in most 
cases, the state commission) will provide a more efficient and 
comprehensive mechanism for all parties, including small entities. 
Moreover, the experience, neutrality, and resources of state 
commissions make them well-equipped forums for resolving slamming 
complaints.
3. Description and Estimate of the Number of Small Entities To Which 
the Proposed Rules Will Apply
    53. The RFA directs agencies to provide a description of and, where 
feasible, an estimate of the number of small entities that may be 
affected by the proposed rules, if adopted. The RFA generally defines 
the term ``small entity'' as having the same meaning as the terms 
``small business,'' ``small organization,'' ``small governmental 
jurisdiction,'' and ``small business concern'' under Section 3 of the 
Small Business Act. A small business concern is one which: (1) Is 
independently owned and operated; (2) is not dominant in its field of 
operation; and (3) satisfies any additional criteria established by the 
Small Business Administration (SBA). A small organization is generally 
``any not-for-profit enterprise which is independently owned and 
operated and is not dominant in its field.'' Nationwide, as of 1992, 
there were approximately 275,801 small organizations. ``Small 
governmental jurisdiction'' generally means ``governments of cities, 
counties, towns, townships, villages, school districts, or special 
districts, with a population of less than 50,000.'' As of 1992, there 
were approximately 85,006 such jurisdictions in the United States. This 
number includes 38,978 counties, cities, and towns; of these, 37,566, 
or 96 percent, have populations of fewer than 50,000. The Census Bureau 
estimates that this ratio is approximately accurate for all 
governmental entities. Thus, of the 85,006 governmental entities, we 
estimate that 81,600 (96 percent) are small entities. According to SBA 
reporting data, there were 4.44 million small business firms nationwide 
in 1992. We further describe and estimate the number of small entity 
licensees and regulatees that may be affected by the proposed rules, if 
adopted.
    54. The most reliable source of information regarding the total 
numbers of certain common carrier and related providers nationwide, as 
well as the number of commercial wireless entities, appears to be data 
the Commission publishes in its Trends in Telephone Service report. In 
a recent news release, the Commission indicated that there are 4,144 
interstate carriers. These carriers include, inter alia, local exchange 
carriers, wireline carriers and service providers, interexchange 
carriers, competitive access providers, operator service providers, pay 
telephone operators, providers of telephone service, providers of 
telephone exchange service, and resellers.
    55. The SBA has defined establishments engaged in providing 
``Radiotelephone Communications'' and ``Telephone Communications, 
Except Radiotelephone'' to be small businesses when they have no more 
than 1,500 employees. We discuss the total estimated number of 
telephone companies falling within the two categories and the number of 
small businesses in each, and we then attempt to refine further those 
estimates to correspond with the categories of telephone companies that 
are commonly used under our rules.
    56. We have included small incumbent LECs in this present RFA 
analysis. As noted, a ``small business'' under the RFA is one that, 
inter alia, meets the pertinent small business size standard (e.g., a 
telephone communications business having 1,500 or fewer employees), and 
``is not dominant in its field of operation.'' The SBA's Office of 
Advocacy contends that, for RFA purposes, small incumbent LECs are not 
dominant in their field of operation because any such dominance is not 
``national'' in scope. We have therefore included small incumbent LECs 
in this RFA analysis, although we emphasize that this RFA action has no 
effect on FCC analyses and determinations in other, non-RFA contexts.
    57. Total Number of Telephone Companies Affected. The U.S. Bureau 
of the Census (``Census Bureau'') reports that, at the end of 1992, 
there were 3,497 firms engaged in providing telephone services, as 
defined therein, for at least one year. This number contains a variety 
of different categories of carriers, including local exchange carriers, 
interexchange carriers, competitive access providers, cellular 
carriers, mobile service carriers, operator service providers, pay 
telephone operators, covered specialized mobile radio providers, and 
resellers. It seems certain that some of these 3,497 telephone service 
firms may not qualify as small entities or small ILECs because they are 
not ``independently owned and operated.'' For example, a PCS provider 
that is affiliated with an interexchange carrier having more than 1,500 
employees would not meet the definition of a small business. It is 
reasonable to conclude that fewer than 3,497 telephone service firms 
are small entity telephone service firms or small ILECs that may be 
affected by the new rules.
    58. Wireline Carriers and Service Providers. The SBA has developed 
a definition of small entities for telephone communications companies 
except radiotelephone (wireless) companies. The Census Bureau reports 
that there were 2,321 such telephone companies in operation for at 
least one year at the end of 1992. According to the SBA's definition, a 
small business telephone company other than a radiotelephone company is 
one employing no more than 1,500 persons. All but 26 of the 2,321 non-
radiotelephone companies listed by the Census Bureau were reported to 
have fewer than 1,000 employees. Thus, even if all 26 of those 
companies had more than 1,500 employees, there would still be 2,295 
non-radiotelephone companies that might qualify as small entities or 
small ILECs. We do not have data specifying the number of these 
carriers that are not independently owned and operated, and thus are 
unable at this time to estimate with greater precision the number of 
wireline carriers and service providers that would qualify as small 
business concerns under the SBA's definition. Consequently, we estimate 
that fewer than 2,295 small telephone communications companies other 
than radiotelephone companies are small entities or small ILECs that 
may be affected by the new rules.
    59. Local Exchange Carriers. Neither the Commission nor the SBA has 
developed a definition for small providers of local exchange services 
(LECs). The closest applicable definition under the SBA rules is for 
telephone communications companies other than radiotelephone (wireless) 
companies. According to the most recent Telecommunications Industry 
Revenue data, 1,348 incumbent carriers reported that they were engaged 
in the provision of local exchange services. We do not have data 
specifying the number of these carriers that are either dominant in 
their field of operations, are not independently owned and operated, or 
have more than 1,500 employees, and thus are unable at this time to 
estimate with greater precision the number of LECs that would qualify 
as small

[[Page 47687]]

business concerns under the SBA's definition. Consequently, we estimate 
that fewer than 1,348 providers of local exchange service are small 
entities or small ILECs that may be affected by the new rules.
    60. Interexchange Carriers. Neither the Commission nor the SBA has 
developed a definition of small entities specifically applicable to 
providers of interexchange services (IXCs). The closest applicable 
definition under the SBA rules is for telephone communications 
companies other than radiotelephone (wireless) companies. According to 
the most recent Trends in Telephone Service data, 171 carriers reported 
that they were engaged in the provision of interexchange services. We 
do not have data specifying the number of these carriers that are not 
independently owned and operated or have more than 1,500 employees, and 
thus are unable at this time to estimate with greater precision the 
number of IXCs that would qualify as small business concerns under the 
SBA's definition. Consequently, we estimate that there are fewer than 
171 small entity IXCs that may be affected by the new rules.
    61. Competitive Access Providers. Neither the Commission nor the 
SBA has developed a definition of small entities specifically 
applicable to competitive access services providers (CAPs). The closest 
applicable definition under the SBA rules is for telephone 
communications companies other than radiotelephone (wireless) 
companies. According to the most recent Trends in Telephone Service 
data, 212 CAP/CLECs carriers and 10 other LECs reported that they were 
engaged in the provision of competitive local exchange services. We do 
not have data specifying the number of these carriers that are not 
independently owned and operated, or have more than 1,500 employees, 
and thus are unable at this time to estimate with greater precision the 
number of CAPs that would qualify as small business concerns under the 
SBA's definition. Consequently, we estimate that there are fewer than 
212 small entity CAPs and 10 other LECs that may be affected by the new 
rules.
    62. Operator Service Providers. Neither the Commission nor the SBA 
has developed a definition of small entities specifically applicable to 
providers of operator services. The closest applicable definition under 
the SBA rules is for telephone communications companies other than 
radiotelephone (wireless) companies. According to the most recent 
Trends in Telephone Service data, 24 carriers reported that they were 
engaged in the provision of operator services. We do not have data 
specifying the number of these carriers that are not independently 
owned and operated or have more than 1,500 employees, and thus are 
unable at this time to estimate with greater precision the number of 
operator service providers that would qualify as small business 
concerns under the SBA's definition. Consequently, we estimate that 
there are fewer than 24 small entity operator service providers that 
may be affected by the new rules.
    63. Pay Telephone Operators. Neither the Commission nor the SBA has 
developed a definition of small entities specifically applicable to pay 
telephone operators. The closest applicable definition under SBA rules 
is for telephone communications companies other than radiotelephone 
(wireless) companies. According to the most recent Trends in Telephone 
Service data, 615 carriers reported that they were engaged in the 
provision of pay telephone services. We do not have data specifying the 
number of these carriers that are not independently owned and operated 
or have more than 1,500 employees, and thus are unable at this time to 
estimate with greater precision the number of pay telephone operators 
that would qualify as small business concerns under the SBA's 
definition. Consequently, we estimate that there are fewer than 615 
small entity pay telephone operators that may be affected by the new 
rules.
    64. Resellers (including debit card providers). Neither the 
Commission nor the SBA has developed a definition of small entities 
specifically applicable to resellers. The closest applicable SBA 
definition for a reseller is a telephone communications company other 
than radiotelephone (wireless) companies. According to the most recent 
Trends in Telephone Service data, 388 toll and 54 local entities 
reported that they were engaged in the resale of telephone service. We 
do not have data specifying the number of these carriers that are not 
independently owned and operated or have more than 1,500 employees, and 
thus are unable at this time to estimate with greater precision the 
number of resellers that would qualify as small business concerns under 
the SBA's definition. Consequently, we estimate that there are fewer 
than 388 small toll entity resellers and 54 small local entity 
resellers that may be affected by the new rules.
    65. Toll-Free 800 and 800-Like Service Subscribers. Neither the 
Commission nor the SBA has developed a definition of small entities 
specifically applicable to 800 and 800-like service (``toll free'') 
subscribers. The most reliable source of information regarding the 
number of these service subscribers appears to be data the Commission 
collects on the 800, 888, and 877 numbers in use. According to our most 
recent data, at the end of January 1999, the number of 800 numbers 
assigned was 7,692,955; the number of 888 numbers that had been 
assigned was 7,706,393; and the number of 877 numbers assigned was 
1,946,538. We do not have data specifying the number of these 
subscribers that are not independently owned and operated or have more 
than 1,500 employees, and thus are unable at this time to estimate with 
greater precision the number of toll free subscribers that would 
qualify as small business concerns under the SBA's definition. 
Consequently, we estimate that there are fewer than 7,692,955 small 
entity 800 subscribers, fewer than 7,706,393 small entity 888 
subscribers, and fewer than 1,946,538 small entity 877 subscribers may 
be affected by the new rules.
    66. Cellular Licensees. Neither the Commission nor the SBA has 
developed a definition of small entities applicable to cellular 
licensees. Therefore, the applicable definition of small entity is the 
definition under the SBA rules applicable to radiotelephone (wireless) 
companies. This provides that a small entity is a radiotelephone 
company employing no more than 1,500 persons. According to the Census 
Bureau, only twelve radiotelephone firms from a total of 1,178 such 
firms which operated during 1992 had 1,000 or more employees. 
Therefore, even if all twelve of these firms were cellular telephone 
companies, nearly all cellular carriers were small businesses under the 
SBA's definition. In addition, we note that there are 1,758 cellular 
licenses; however, a cellular licensee may own several licenses. In 
addition, according to the most recent Telecommunications Industry 
Revenue data, 808 carriers reported that they were engaged in the 
provision of either cellular service or Personal Communications Service 
(PCS) services, which are placed together in the data. We do not have 
data specifying the number of these carriers that are not independently 
owned and operated or have more than 1,500 employees, and thus are 
unable at this time to estimate with greater precision the number of 
cellular service carriers that would qualify as small business concerns 
under the SBA's definition. Consequently, we estimate that there are 
fewer than 808 small cellular service carriers that may be affected by 
the new rules.

[[Page 47688]]

4. Summary of Projected Reporting, Recordkeeping, and Other Compliance 
Requirements
    67. We analyze the projected reporting, recordkeeping, and other 
compliance requirements that may affect small entities.
    68. Liability Rules That Apply When a Subscriber Has Not Paid 
Charges. Our liability rules retain the requirement that, upon 
allegation of a slam, the unauthorized carrier must absolve the 
subscriber of charges for up to thirty days following the slam, where 
the subscriber has not paid the unauthorized carrier. If the relevant 
governmental agency ultimately determines that the carrier change was 
authorized, and the limited absolution granted to the subscriber was 
therefore unwarranted, the carrier may re-bill the subscriber for 
charges incurred. The carrier has the option of re-rating the 
subscriber's calls from the unauthorized carrier's rates to the 
authorized carrier's rates using a 50% proxy, that is, reducing what 
the subscriber would have been billed by the unauthorized carrier by 
50%. If, however, the subscriber would prefer an actual re-rating of 
the calls to the authorized carrier's rates, it can require that of the 
authorized carrier.
    69. Liability Rules That Apply When a Subscriber Has Paid Charges. 
The revised liability rules require that, where the subscriber has paid 
the unauthorized carrier, the unauthorized carrier must forward 150% of 
the charges it collected from the subscriber to the authorized carrier. 
The authorized carrier will pay the subscriber one-third of that amount 
(50% of the original payment) and retain the remainder of the money 
received from the unauthorized carrier. Use of this proxy will reduce 
administrative burdens on carriers and, we believe, will adequately 
compensate most subscribers. When a subscriber believes that the 50% 
proxy refund or credit of the charges it paid is too low, it may 
request an actual re-rating from the authorized carrier and the 
authorized carrier may seek any additional money owed as a result of 
this actual re-rating from the unauthorized carrier.
    70. State Resolution of Most Slamming Complaints. Designating 
appropriate state commissions, or this Commission, as the primary 
administrators of the slamming liability rules, rather than authorized 
carriers, is likely to reduce significantly the administrative burdens 
on carriers associated with these rules. Under this scheme, carriers 
must comply with certain notification requirements, listed. In 
addition, a carrier that is the subject of a slamming complaint must 
respond to the complaints filed with the relevant governmental agency, 
either the appropriate state commission or this Commission. If the 
carrier denies the alleged slam, it must provide the relevant 
governmental agency with evidence to refute the allegation, such as a 
valid carrier change authorization from the subscriber.
    71. Notification Requirements. We revise our rules in this Order to 
add certain notification requirements to facilitate the resolution of 
slamming complaints. These include a requirement that, when an 
executing carrier (typically, the LEC that effects a carrier change) 
learns about an alleged slam, it must immediately notify both the 
authorized and alleged unauthorized carriers of the slamming allegation 
and the identities of the carriers involved. Requiring the LECS to 
notify the authorized and alleged unauthorized carriers of each others' 
identities will enable the unauthorized carrier to forward to the 
authorized carrier all amounts needed to satisfy the remedies this 
Order requires.
    72. The revised rules also add a requirement that an allegedly 
unauthorized carrier that chooses not to challenge the allegation of a 
slam and provides the subscriber with all the relief to which the 
subscriber would be entitled pursuant to our rules, had the subscriber 
prevailed on a slamming complaint, must inform the subscriber of the 
remedies our rules provide. In addition, that carrier must inform the 
subscriber that it has the option to file a complaint with the 
appropriate state commission, or this Commission, if the subscriber is 
not satisfied with the resolution of its dispute with the carrier.
    73. Under the revised rules, any carrier that is informed by a 
subscriber of a slam must direct each unsatisfied subscriber to the 
proper state commission, or this Commission, for resolution of the 
slamming problem and inform such unsatisfied subscriber of all the 
relevant filing requirements. To execute this notification requirement, 
carriers will be obligated to periodically request from this Commission 
a list of states that have opted to administer federal slamming rules. 
This modest notification requirement will help achieve an important 
objective: minimizing the effort consumers must expend to resolve 
slamming disputes.
5. Steps Taken to Minimize the Significant Economic Impact of This 
Order on Small Entities, Including the Significant Alternatives 
Considered
    74. Liability Rules That Apply When a Subscriber Has Not Paid 
Charges. Our liability rules retain the requirement that, upon 
allegation of a slam, the unauthorized carrier must absolve the 
subscriber of charges for up to thirty days following the slam, where 
the subscriber has not paid the unauthorized carrier. If the relevant 
governmental agency ultimately determines that the carrier change was 
authorized, and the limited absolution granted to the subscriber was 
therefore unwarranted, the carrier may re-bill the subscriber for 
charges incurred. The carrier has the option of re-rating the 
subscriber's calls from the unauthorized carrier's rates to the 
authorized carrier's rates using a 50% proxy, that is, reducing what 
the subscriber would have been billed by the unauthorized carrier by 
50%. If, however, the subscriber would prefer an actual re-rating of 
the calls to the authorized carrier's rates, it can require that of the 
authorized carrier.
    75. Liability Rules that Apply When a Subscriber Has Paid Charges. 
The new requirement, under the revised liability rules, that an 
unauthorized carrier forward 150% of the charges collected from the 
subscriber to the authorized carrier is more advantageous to authorized 
carriers than the remedy provided under the old rules. The authorized 
carrier generally will pay the subscriber one-third of that amount (50% 
of the original payment) and retain the remainder of the money received 
from the unauthorized carrier. When a subscriber believes that the 50% 
proxy refund or credit of the charges it paid is too low, it may 
request an actual re-rating from the authorized carrier and the 
authorized carrier may seek any additional money owed as a result of 
this actual re-rating from the unauthorized carrier. This modification 
of the Commission's liability scheme will alleviate some problems of 
lost revenues that authorized carriers, including small carriers, face 
when slammed and will make slamming even more unprofitable for 
unauthorized carriers.
    76. Re-rating. Several authorized carriers raised concerns about 
the administrative burden that re-rating may place on them. Although we 
do not necessarily agree with carriers about the dimensions of this 
burden, we revise our rules to address these concerns. The revision 
allows the authorized carrier to provide a refund or credit to the

[[Page 47689]]

subscriber of one-third of the payment the unauthorized carrier must 
make to the authorized carrier, which is prescribed to be 150% of the 
charges collected from the subscriber. Only when a subscriber believes 
that the 50% proxy refund or credit of the charges it paid is too low, 
and requests an actual re-rating, must the authorized carrier provide 
such re-rating.
    77. State Resolution of Most Slamming Complaints. The modifications 
we adopt in this Order provide that disputes between alleged slamming 
carriers and subscribers now will be brought before an appropriate 
state commission, or this Commission in cases where the state has not 
elected to administer these rules, rather than to the authorized 
carriers, as provided in the Section 258 Order. Although we considered 
the third-party administrator alternative proposed by certain carriers, 
the lack of a consensus among industry, state regulators, and consumer 
groups left the Commission with concerns about the efficacy of such a 
plan. Designating states as the primary adjudicators of slamming 
complaints, rather than authorized carriers, lessens the administrative 
burden on authorized carriers, including small carriers. By placing 
these disputes before a neutral arbiter with experience in resolving 
slamming complaints and resources to do so expeditiously, the new 
administrative scheme will benefit carriers and subscribers, both 
groups that include small businesses.
    78. Notification Requirements. We believe that the modest 
notification requirements we have adopted in this Order are necessary 
to ensure the seamless administration of slamming complaints under this 
scheme and will not impose an undue burden on carriers who are small 
businesses. These include a requirement that, when an executing carrier 
(typically, the LEC that effects a carrier change) learns about an 
alleged slam, it must immediately notify both the authorized and 
alleged unauthorized carriers of the slamming allegation and the 
identities of the carriers involved. This requirement, as pointed out 
in comments and in the petition for stay filed in the D.C. Circuit, is 
important to the functioning of the liability mechanism. With this 
information, the unauthorized carrier will be able to forward to the 
authorized carrier all amounts needed to satisfy the remedies this 
Order requires, and the authorized carrier will be able to bring 
appropriate action against the unauthorized carrier, if necessary. The 
industry has already taken steps to facilitate the transfer of this 
information between carriers.
    79. The revised rules also add a requirement that an allegedly 
unauthorized carrier that chooses not to challenge the allegation of a 
slam and provides the subscriber with all the relief to which the 
subscriber would be entitled pursuant to our rules, had the subscriber 
prevailed on a slamming complaint, must inform the subscriber of the 
remedies our rules provide. This requirement will ensure that the rules 
do not discourage carriers from providing subscribers with the most 
expedient relief possible. In addition, the unauthorized carrier in 
this situation must inform the subscriber of the subscriber's ability 
to file a complaint with the appropriate state commission, or this 
Commission, if it is unsatisfied with the resolution of its dispute 
with the carrier.
    80. Under the revised rules, any carrier that is informed by a 
subscriber of a slam must direct each unsatisfied subscriber to the 
proper state commission, or this Commission, for resolution of the 
slamming problem and inform such unsatisfied subscriber of all the 
relevant filing requirements. To execute this modest notification 
requirement, carriers will be obligated to periodically request from 
this Commission a list of states that have opted to administer federal 
slamming rules. This notification requirement will achieve an important 
objective: minimizing the effort consumers must expend to resolve 
slamming disputes.
6. Report to Congress
    81. The Commission will send a copy of the Order, including this 
SFRFA, in a report to Congress pursuant to the Small Business 
Regulatory Enforcement Fairness Act of 1996. In addition, the 
Commission will send a copy of the Order, including the SFRFA, to the 
Chief Counsel for Advocacy of the Small Business Administration. A copy 
of the Order and SFRFA (or summaries thereof) will also be published in 
the Federal Register.

B. Final Paperwork Reduction Act Analysis

    82. The action contained herein has been analyzed with respect to 
the Paperwork Reduction Act of 1995 and found to impose new or modified 
reporting and recordkeeping requirements or burdens on the public. 
Implementation of these new or modified reporting and recordkeeping 
requirements will be subject to approval by the Office of Management 
and Budget (OMB) as prescribed by the Act, and will go into effect upon 
announcement in the Federal Register of OMB approval.

IV. Ordering Clauses

    83. Accordingly, it is ordered, pursuant to sections 1, 4(i), 4(j), 
206, 207, 208, and 258 of the Communications Act of 1934, as amended, 
47 U.S.C. 151, 154(i), 154(j), 206, 207, 208, 258 and Sec. 1.429 of the 
Commission's rules, that the petitions for reconsideration or 
clarification filed by AT&T Corp., Excel Telecommunications, Inc., 
Frontier Corp., GTE Service Corp., MediaOne Group, National Association 
of State Utility Consumer Advocates, National Telephone Cooperative 
Association, New York State Consumer Protection Board Petition for 
Reconsideration, RCN Telecom Services, Inc., Rural LECs, SBC 
Communications, Inc., and Sprint Corp. are granted in part and denied 
in part to the extent discussed.
    84. The provisions of Sec. 0.141, 64.1100, 64.1150, 64.1160, 
64.1170, and 64.1180 are amended in accordance with our discussion and 
as described, and that such rules shall be effective September 5, 2000. 
The collections of information contained in Secs. 64.1150 (a) through 
(d), 64.1160 (b) through (g), and 64.1170 (b) through (f) are 
contingent upon approval by the Office of Management and Budget. The 
procedures and relief described in these sections shall only be 
available to complainants who allege that the unauthorized carrier 
change occurred on or after the effective date of these sections.
    85. Sections 1.719, 64.1110, 64.1120, 64.1140, and 64.1160 are 
enacted in accordance with our discussion, and that these rules are 
effective September 5, 2000. The collections of information contained 
in Secs. 1.719 (a) through (d), 64.1110 (a) and (b), 64.1140 (a) and 
(b), are contingent upon approval by the Office of Management and 
Budget. The procedures and relief described in Sec. 1.719 shall only be 
available to complainants who allege that the unauthorized carrier 
change occurred on or after the effective date of this section.
    86. Pursuant to authority contained in sections 1, 4, and 258, of 
the Communications Act of 1934, as amended, 47 U.S.C. 151, 154, 258, 
that the waiver request filed by AT&T Corp., MCI WorldCom, Inc., Sprint 
Corp., Competitive Telecommunications Assn., Telecommunications 
Resellers Assn., Excel Telecommunications, Inc., Qwest Communications 
Corp., and Frontier Corp. on March 30, 1999 is denied.
    87. The Commission's Consumer Information Bureau, Reference 
Information Center, shall send a copy of this Order, including the 
Supplemental Final Regulatory Flexibility Analysis, to

[[Page 47690]]

the Chief Counsel for Advocacy of the Small Business Administration.
    88. The Joint Parties' Motion for Extension of the Effective Date 
of the Rules or, In the Alternative, For a Stay, is denied.

List of Subjects

47 CFR Part 0

    Classified information, Freedom of information, Reporting and 
recordkeeping.

47 CFR Part 1

    Administrative practice and procedure, Communications common 
carriers, Telecommunications.

47 CFR Part 64

    Communications common carriers, Reporting and recordkeeping 
requirements, Telephone.

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

Rule Changes

    For the reasons discussed in the preamble, the Federal 
Communications Commission amends 47
    CFR Parts 0, 1, 64 as follows:

PART 0--COMMISSION ORGANIZATION

    1. The authority citation for part 0 continues to read as follows:

    Authority: 47 U.S.C. 5, 48 Stat. 1068, as amended; 47 U.C.S. 
155, 225, unless otherwise noted.


    2. In Sec. 0.141 add paragraph (b)(1)(iii) to read as follows:


Sec. 0.141  Functions of the bureau.

* * * * *
    (b) * * *
    (1) * * *
    (iii) Resolve certain classes of informal complaints, as specified 
by the Commission, through findings of fact and issuance of orders.
* * * * *

PART 1--PRACTICE AND PROCEDURE

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

    Authority: 47 U.S.C. 151, 154(i), 154(j), 155, 225, 303(r), 309 
unless otherwise noted.


    4. Add Sec. 1.719 to subpart E to read as follows:


Sec. 1.719  Informal complaints filed pursuant to section 258.

    (a) Notwithstanding the requirements of Secs. 1.716 through 1.718, 
the following procedures shall apply to complaints alleging that a 
carrier has violated section 258 of the Communications Act of 1934, as 
amended by the Telecommunications Act of 1996, by making an 
unauthorized change of a subscriber's preferred carrier, as defined by 
Sec. 64.1100(e) of this chapter.
    (b) Form. The complaint shall be in writing, and should contain: 
The complainant's name, address, telephone number and e-mail address 
(if the complainant has one); the name of both the allegedly 
unauthorized carrier, as defined by Sec. 64.1100(d) of this chapter, 
and authorized carrier, as defined by Sec. 64.1100(c) of this chapter; 
a complete statement of the facts (including any documentation) tending 
to show that such carrier engaged in an unauthorized change of the 
subscriber's preferred carrier; a statement of whether the complainant 
has paid any disputed charges to the allegedly unauthorized carrier; 
and the specific relief sought.
    (c) Procedure. The Commission will resolve slamming complaints 
under the definitions and procedures established in Secs. 64.1100 
through 64.1190 of this chapter. The Commission will issue a written 
(or electronic) order informing the complainant, the unauthorized 
carrier, and the authorized carrier of its finding, and ordering the 
appropriate remedy, if any, as defined by Secs. 64.1160 through 64.1170 
of this chapter.
    (d) Unsatisfied Informal Complaints Involving Unauthorized Changes 
of a Subscriber's Preferred Carrier; Formal Complaints Relating Back to 
the Filing Dates of Informal Complaints. If the complainant is 
unsatisfied with the resolution of a complaint under this section, the 
complainant may file a formal complaint with the Commission in the form 
specified in Sec. 1.721. Such filing will be deemed to relate back to 
the filing date of the informal complaint filed under this section, so 
long as the informal complaint complied with the requirements of 
paragraph (b) of this section and provided that: The formal complaint 
is filed within 45 days from the date an order resolving the informal 
complaint filed under this section is mailed or delivered 
electronically to the complainant; makes reference to both the informal 
complaint number assigned to and the initial date of filing the 
informal complaint filed under this section; and is based on the same 
cause of action as the informal complaint filed under this section. If 
no formal complaint is filed within the 45-day period, the complainant 
will be deemed to have abandoned its right to bring a formal complaint 
regarding the cause of action at issue.

PART 64--MISCELLANEOUS RULES RELATING TO COMMON CARRIERS

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

    Authority: 47 U.S.C. 151, 154, 201, 202, 205, 218-220, and 332 
unless otherwise noted. Interpret or apply sections 201, 218, 225, 
226, 227, 229, 332, 48 Stat. 1070, as amended. 47 U.S.C. 201-204, 
208, 225, 226, 227, 229, 332, 501 and 503 unless otherwise noted.


    6. Revise Sec. 64.1100 to read as follows:


Sec. 64.1100  Definitions.

    (a) The term submitting carrier is generally any telecommunications 
carrier that requests on the behalf of a subscriber that the 
subscriber's telecommunications carrier be changed, and seeks to 
provide retail services to the end user subscriber. A carrier may be 
treated as a submitting carrier, however, if it is responsible for any 
unreasonable delays in the submission of carrier change requests or for 
the submission of unauthorized carrier change requests, including 
fraudulent authorizations.
    (b) The term executing carrier is generally any telecommunications 
carrier that effects a request that a subscriber's telecommunications 
carrier be changed. A carrier may be treated as an executing carrier, 
however, if it is responsible for any unreasonable delays in the 
execution of carrier changes or for the execution of unauthorized 
carrier changes, including fraudulent authorizations.
    (c) The term authorized carrier is generally any telecommunications 
carrier that submits a change, on behalf of a subscriber, in the 
subscriber's selection of a provider of telecommunications service with 
the subscriber's authorization verified in accordance with the 
procedures specified in this part.
    (d) The term unauthorized carrier is generally any 
telecommunications carrier that submits a change, on behalf of a 
subscriber, in the subscriber's selection of a provider of 
telecommunications service but fails to obtain the subscriber's 
authorization verified in accordance with the procedures specified in 
this part.
    (e) The term unauthorized change is a change in a subscriber's 
selection of a provider of telecommunications service that was made 
without authorization verified in accordance with the verification 
procedures specified in this part.
    (f) The term state commission shall include any state entity with 
the state-designated authority to resolve the complaints of such 
state's residents

[[Page 47691]]

arising out of an allegation that an unauthorized change of a 
telecommunication service provider has occurred that has elected, in 
accordance with the requirements of Sec. 64.1110(a), to administer the 
Federal Communications Commission's slamming rules and remedies, as 
enumerated in Secs. 64.1100 through 64.1190.
    (g) The term relevant governmental agency shall be the state 
commission if the complainant files a complaint with the state 
commission or if the complaint is forwarded to the state commission by 
the Federal Communications Commission, and the Federal Communications 
Commission if the complainant files a complaint with the Federal 
Communications Commission, and the complaint is not forwarded to a 
state commission.

    7. Add Sec. 64.1110 to subpart K to read as follows:


Sec. 64.1110  State notification of election to administer FCC rules.

    (a) Initial Notification. State notification of an intention to 
administer the Federal Communication Commission's unauthorized carrier 
change rules and remedies, as enumerated in Secs. 64.1100 through 
64.1190, shall be filed with the Commission Secretary in CC Docket No. 
94-129 with a copy of such notification provided to the Consumer 
Information Bureau Chief. Such notification shall contain, at a 
minimum, information on where consumers should file complaints, the 
type of documentation, if any, that must accompany a complaint, and the 
procedures the state will use to adjudicate complaints.
    (b) Withdrawal of Notification. State notification of an intention 
to discontinue administering the Federal Communication Commission's 
unauthorized carrier change rules and remedies, as enumerated in 
Secs. 64.1100 through 64.1190, shall be filed with the Commission 
Secretary in CC Docket No. 94-129 with a copy of such amended 
notification provided to the Consumer Information Bureau Chief. Such 
discontinuance shall become effective 60 days after the Commission's 
receipt of the state's letter.

    8. Add Sec. 64.1120 to subpart K to read as follows:


Sec. 64.1120  Verification of orders for telecommunications service.

    (a) No telecommunications carrier shall submit or execute a change 
on the behalf of a subscriber in the subscriber's selection of a 
provider of telecommunications service except in accordance with the 
procedures prescribed in this subpart. Nothing in this section shall 
preclude any State commission from enforcing these procedures with 
respect to intrastate services.
    (1) No submitting carrier shall submit a change on the behalf of a 
subscriber in the subscriber's selection of a provider of 
telecommunications service prior to obtaining:
    (i) Authorization from the subscriber, and
    (ii) Verification of that authorization in accordance with the 
procedures prescribed in this section. The submitting carrier shall 
maintain and preserve records of verification of subscriber 
authorization for a minimum period of two years after obtaining such 
verification.
    (2) An executing carrier shall not verify the submission of a 
change in a subscriber's selection of a provider of telecommunications 
service received from a submitting carrier. For an executing carrier, 
compliance with the procedures described in this part shall be defined 
as prompt execution, without any unreasonable delay, of changes that 
have been verified by a submitting carrier.
    (3) Commercial mobile radio services (CMRS) providers shall be 
excluded from the verification requirements of this part as long as 
they are not required to provide equal access to common carriers for 
the provision of telephone toll services, in accordance with 47 U.S.C. 
332(c)(8).
    (b) Where a telecommunications carrier is selling more than one 
type of telecommunications service (e.g., local exchange, intraLATA/
intrastate toll, interLATA/interstate toll, and international toll) 
that carrier must obtain separate authorization from the subscriber for 
each service sold, although the authorizations may be made within the 
same solicitation. Each authorization must be verified separately from 
any other authorizations obtained in the same solicitation. Each 
authorization must be verified in accordance with the verification 
procedures prescribed in this part.
    (c) No telecommunications carrier shall submit a preferred carrier 
change order unless and until the order has been confirmed in 
accordance with one of the following procedures:
    (1) The telecommunications carrier has obtained the subscriber's 
written authorization in a form that meets the requirements of 
Sec. 64.1130; or
    (2) The telecommunications carrier has obtained the subscriber's 
electronic authorization to submit the preferred carrier change order. 
Such authorization must be placed from the telephone number(s) on which 
the preferred carrier is to be changed and must confirm the information 
in paragraph (a)(1) of this section. Telecommunications carriers 
electing to confirm sales electronically shall establish one or more 
toll-free telephone numbers exclusively for that purpose. Calls to the 
number(s) will connect a subscriber to a voice response unit, or 
similar mechanism, that records the required information regarding the 
preferred carrier change, including automatically recording the 
originating automatic number identification; or
    (3) An appropriately qualified independent third party has obtained 
the subscriber's oral authorization to submit the preferred carrier 
change order that confirms and includes appropriate verification data 
(e.g. the subscriber's date of birth or social security number). The 
independent third party must not be owned, managed, controlled, or 
directed by the carrier or the carrier's marketing agent; must not have 
any financial incentive to confirm preferred carrier change orders for 
the carrier or the carrier's marketing agent; and must operate in a 
location physically separate from the carrier or the carrier's 
marketing agent. The content of the verification must include clear and 
conspicuous confirmation that the subscriber has authorized a preferred 
carrier change; or
    (4) Any State-enacted verification procedures applicable to 
intrastate preferred carrier change orders only.

    9. Add Sec. 64.1140 to subpart K to read as follows:


Sec. 64.1140  Carrier liability for slamming.

    (a) Carrier Liability for Charges. Any submitting 
telecommunications carrier that fails to comply with the procedures 
prescribed in this part shall be liable to the subscriber's properly 
authorized carrier in an amount equal to 150% of all charges paid to 
the submitting telecommunications carrier by such subscriber after such 
violation, as well as for additional amounts as prescribed in 
Sec. 64.1170. The remedies provided in this part are in addition to any 
other remedies available by law.
    (b) Subscriber Liability for Charges. Any subscriber whose 
selection of telecommunications services provider is changed without 
authorization verified in accordance with the procedures set for in 
this part is liable for charges as follows:
    (1) If the subscriber has not already paid charges to the 
unauthorized carrier, the subscriber is absolved of liability for 
charges imposed by the unauthorized carrier for service provided during 
the first 30 days after the unauthorized change. Upon being informed by 
a

[[Page 47692]]

subscriber that an unauthorized change has occurred, the authorized 
carrier, the unauthorized carrier, or the executing carrier shall 
inform the subscriber of this 30-day absolution period. Any charges 
imposed by the unauthorized carrier on the subscriber for service 
provided after this 30-day period shall be paid by the subscriber to 
the authorized carrier at the rates the subscriber was paying to the 
authorized carrier at the time of the unauthorized change in accordance 
with the provisions of Sec. 64.1160(e).
    (2) If the subscriber has already paid charges to the unauthorized 
carrier, and the authorized carrier receives payment from the 
unauthorized carrier as provided for in paragraph (a) of this section, 
the authorized carrier shall refund or credit to the subscriber any 
amounts determined in accordance with the provisions of 
Sec. 64.1170(c).
    (3) If the subscriber has been absolved of liability as prescribed 
by this section, the unauthorized carrier shall also be liable to the 
subscriber for any charge required to return the subscriber to his or 
her properly authorized carrier, if applicable.

    10. Revise Sec. 64.1150 to read as follows:


Sec. 64.1150  Procedures for resolution of unauthorized changes in 
preferred carrier.

    (a) Notification of Alleged Unauthorized Carrier Change. Executing 
carriers who are informed of an unauthorized carrier change by a 
subscriber must immediately notify both the authorized and allegedly 
unauthorized carrier of the incident. This notification must include 
the identity of both carriers.
    (b) Referral of Complaint. Any carrier, executing, authorized, or 
allegedly unauthorized, that is informed by a subscriber or an 
executing carrier of an unauthorized carrier change shall direct that 
subscriber either to the state commission or, where the state 
commission has not opted to administer these rules, to the Federal 
Communications Commission's Consumer Information Bureau, for resolution 
of the complaint.
    (c) Notification of Receipt of Complaint. Upon receipt of an 
unauthorized carrier change complaint, the relevant governmental agency 
will notify the allegedly unauthorized carrier of the complaint and 
order that the carrier remove all unpaid charges for the first 30 days 
after the slam from the subscriber's bill pending a determination of 
whether an unauthorized change, as defined by Sec. 64.1100(e), has 
occurred, if it has not already done so.
    (d) Proof of Verification. Not more than 30 days after notification 
of the complaint, or such lesser time as is required by the state 
commission if a matter is brought before a state commission, the 
alleged unauthorized carrier shall provide to the relevant government 
agency a copy of any valid proof of verification of the carrier change. 
This proof of verification must contain clear and convincing evidence 
of a valid authorized carrier change, as that term is defined in 
Secs. 64.1150 through 64.1160. The relevant governmental agency will 
determine whether an unauthorized change, as defined by 
Sec. 64.1100(e), has occurred using such proof and any evidence 
supplied by the subscriber. Failure by the carrier to respond or 
provide proof of verification will be presumed to be clear and 
convincing evidence of a violation.
    (e) Election of Forum. The Federal Communications Commission will 
not adjudicate a complaint filed pursuant to Sec. 1.719 or Secs. 1.720 
through 1.736 of this chapter, involving an alleged unauthorized 
change, as defined by Sec. 64.1100(e), while a complaint based on the 
same set of facts is pending with a state commission.

    11. Redesignate Sec. 64.1160 as Sec. 64.1130 and add a new 
Sec. 64.1160 to read as follows.


Sec. 64.1160  Absolution procedures where the subscriber has not paid 
charges.

    (a) This section shall only apply after a subscriber has determined 
that an unauthorized change, as defined by Sec. 64.1100(e), has 
occurred and the subscriber has not paid charges to the allegedly 
unauthorized carrier for service provided for 30 days, or a portion 
thereof, after the unauthorized change occurred.
    (b) An allegedly unauthorized carrier shall remove all charges 
incurred for service provided during the first 30 days after the 
alleged unauthorized change occurred, as defined by Sec. 64.1100(e), 
from a subscriber's bill upon notification that such unauthorized 
change is alleged to have occurred.
    (c) An allegedly unauthorized carrier may challenge a subscriber's 
allegation that an unauthorized change, as defined by Sec. 64.1100(e), 
occurred. An allegedly unauthorized carrier choosing to challenge such 
allegation shall immediately notify the complaining subscriber that: 
the complaining subscriber must file a complaint with a state 
commission that has opted to administer the FCC's rules, pursuant to 
Sec. 64.1110, or the FCC within 30 days of either; the date of removal 
of charges from the complaining subscriber's bill in accordance with 
paragraph (b) of this section or; the date the allegedly unauthorized 
carrier notifies the complaining subscriber of the requirements of this 
paragraph, whichever is later; and a failure to file such a complaint 
within this 30-day time period will result in the charges removed 
pursuant to paragraph (b) of this section being reinstated on the 
subscriber's bill and, consequently, the complaining subscriber's will 
only be entitled to remedies for the alleged unauthorized change other 
than those provided for in Sec. 64.1140(b)(1). No allegedly 
unauthorized carrier shall reinstate charges to a subscriber's bill 
pursuant to the provisions of this paragraph without first providing 
such subscriber with a reasonable opportunity to demonstrate that the 
requisite complaint was timely filed within the 30-day period described 
in this paragraph.
    (d) If the relevant governmental agency determines after reasonable 
investigation that an unauthorized change, as defined by 
Sec. 64.1100(e), has occurred, an order shall be issued providing that 
the subscriber is entitled to absolution from the charges incurred 
during the first 30 days after the unauthorized carrier change 
occurred, and neither the authorized or unauthorized carrier may pursue 
any collection against the subscriber for those charges.
    (e) If the subscriber has incurred charges for more than 30 days 
after the unauthorized carrier change, the unauthorized carrier must 
forward the billing information for such services to the authorized 
carrier, which may bill the subscriber for such services using either 
of the following means:
    (1) The amount of the charge may be determined by a re-rating of 
the services provided based on what the authorized carrier would have 
charged the subscriber for the same services had an unauthorized 
change, as described in Sec. 64.1100(e), not occurred; or
    (2) The amount of the charge may be determined using a 50% Proxy 
Rate as follows: Upon receipt of billing information from the 
unauthorized carrier, the authorized carrier may bill the subscriber 
for 50% of the rate the unauthorized carrier would have charged the 
subscriber for the services provided. However, the subscriber shall 
have the right to reject use of this 50% proxy method and require that 
the authorized carrier perform a re-rating of the services provided, as 
described in paragraph (e)(1) of this section.
    (f) If the unauthorized carrier received payment from the 
subscriber for services provided after the first 30 days after the

[[Page 47693]]

unauthorized change occurred, the obligations for payments and refunds 
provided for in Sec. 64.1170 shall apply to those payments. If the 
relevant governmental agency determines after reasonable investigation 
that the carrier change was authorized, the carrier may re-bill the 
subscriber for charges incurred.

    12. Revise Sec. 64.1170 to read as follows:


Sec. 64.1170  Reimbursement procedures where the subscriber has paid 
charges.

    (a) The procedures in this section shall only apply after a 
subscriber has determined that an unauthorized change, as defined by 
Sec. 64.1100(e), has occurred and the subscriber has paid charges to an 
allegedly unauthorized carrier.
    (b) If the relevant governmental agency determines after reasonable 
investigation that an unauthorized change, as defined by 
Sec. 64.1100(e), has occurred, it shall issue an order directing the 
unauthorized carrier to forward to the authorized carrier the 
following, in addition to any appropriate state remedies:
    (1) An amount equal to 150% of all charges paid by the subscriber 
to the unauthorized carrier; and
    (2) Copies of any telephone bills issued from the unauthorized 
carrier to the subscriber. This order shall be sent to the subscriber, 
the unauthorized carrier, and the authorized carrier.
    (c) Within ten days of receipt of the amount provided for in 
paragraph (b)(1) of this section, the authorized carrier shall provide 
a refund or credit to the subscriber in the amount of 50% of all 
charges paid by the subscriber to the unauthorized carrier. The 
subscriber has the option of asking the authorized carrier to re-rate 
the unauthorized carrier's charges based on the rates of the authorized 
carrier and, on behalf of the subscriber, seek an additional refund 
from the unauthorized carrier, to the extent that the re-rated amount 
exceeds the 50% of all charges paid by the subscriber to the 
unauthorized carrier. The authorized carrier shall also send notice to 
the relevant governmental agency that it has given a refund or credit 
to the subscriber.
    (d) If an authorized carrier incurs billing and collection expenses 
in collecting charges from the unauthorized carrier, the unauthorized 
carrier shall reimburse the authorized carrier for reasonable expenses.
    (e) If the authorized carrier has not received payment from the 
unauthorized carrier as required by paragraph (c) of this section, the 
authorized carrier is not required to provide any refund or credit to 
the subscriber. The authorized carrier must, within 45 days of 
receiving an order as described in paragraph (b) of this section, 
inform the subscriber and the relevant governmental agency that issued 
the order if the unauthorized carrier has failed to forward to it the 
appropriate charges, and also inform the subscriber of his or her right 
to pursue a claim against the unauthorized carrier for a refund of all 
charges paid to the unauthorized carrier.
    (f) Where possible, the properly authorized carrier must reinstate 
the subscriber in any premium program in which that subscriber was 
enrolled prior to the unauthorized change, if the subscriber's 
participation in that program was terminated because of the 
unauthorized change. If the subscriber has paid charges to the 
unauthorized carrier, the properly authorized carrier shall also 
provide or restore to the subscriber any premiums to which the 
subscriber would have been entitled had the unauthorized change not 
occurred. The authorized carrier must comply with the requirements of 
this section regardless of whether it is able to recover from the 
unauthorized carrier any charges that were paid by the subscriber.


Sec. 64.1180  [Removed and reserve].

    13. Remove and reserve Sec. 64.1180.

[FR Doc. 00-17981 Filed 8-2-00; 8:45 am]
BILLING CODE 6712-01-U