In the Matter of
FTC File No. R611016
COMMENTS OF CABLE & WIRELESS (W. I.) LTD.
To: The Commission
Cable & Wireless (W. I.) Ltd. ("CWWI"), by its attorneys, hereby submits these Comments on the Federal Trade Commission's ("Commission") Notice of Proposed Rulemaking ("Notice") in the above-captioned rulemaking. The Commission in this proceeding is considering amendments to its Trade Regulation Rule (the "900-Number Rule"), 16 C.F.R. Part 308, issued pursuant to the Telephone Disclosure and Dispute Resolution Act of 1992 ("TDDRA"), 15 U.S.C. §5701 et seq., that would subject international audiotext services to the same regulatory scheme as U.S. domestic "pay-per-call" services.1 CWWI and its operating company subsidiaries are telecommunications companies, located in various countries in the Caribbean region, that provide transport and termination services to service bureaus and information providers offering audiotext services to consumers around the world. As such, CWWI has a direct interest in this proceeding.
CWWI supports without hesitation the Commission's intent to ensure that consumers receive information on the nature and price of the international audiotext services they are purchasing and have rights of redress in the event of dissatisfaction.2 CWWI, in fact, has instituted measures over the last five years that afford consumers many of the same protections when they use audiotext services provided over CWWI's facilities.
Our experience, however, makes us believe that a literal application of the existing domestic rules to international pay-per-call services as proposed by the Commission will not be in the public interest. It would not only hinder the future development of the industry - to the ultimate detriment of consumers - but is inconsistent with the Congressional objectives underlying the TDDRA. Thus, CWWI suggests that as an alternative to its current proposal, the Commission adopt rules that will ensure that consumers are treated fairly in their purchase of all international telecommunications services while allowing the international audiotext industry to develop in accordance with the dictates of the marketplace. CWWI's specific suggestions in that regard are discussed below.
This proceeding is critically important to the future of the international audiotext industry. By separate letter being submitted concurrent with the submission of these comments, CWWI respectfully requests permission to participate in the Commission's forthcoming workshop on these issues. As evidenced by these Comments, CWWI's participation in the workshop would promote a balance of interests being represented at the workshop as well as the consideration and discussion of a variety of issues raised in the Notice.
II. CWWI Agrees With Congress That the Rights of Consumers Must Be Protected to Encourage the Growth of the Pay-Per-Call Industry and Thus CWWI Has Instituted Its Own Measures to Ensure That Consumers Are Fully Informed and Fairly Treated When Purchasing International Audiotext Services.
The statute and its legislative history make plain that Congress enacted the TDDRA to ensure the rights of consumers in dealing with the audiotext industry, as well as to allow the teleservices industry to employ pay-per-call technology and to meet expanding market demands. As noted in Section 1(b) of TDDRA, 15 U.S.C.§ 5701(b), pay-per-call services provide valuable information to consumers. Audiotext services are convenient (as they are available 24 hours a day), easy to use, and provide a cost-effective means for vendors to meet expanding consumer demands.3
Business and home consumer acceptance of audiotext services provides evidence of the growing value of pay-per-call services to the public in the U.S. and abroad. Applications for audiotext technology include customer service and consumer protection, call-in banking, investment services, sports information, news updates, traffic reports, business teleconferencing, and the like. For example, in the U.S. the Better Business Bureau has installed a 24-hour automated voice response system (accessed through a 900 number) to provide information on particular businesses to consumers.4 Increasingly, pay-per-call technology can be found in state government and non-profit ventures; e.g., the Arkansas State Medical Board uses a 900 system to give the general public, hospitals, and other institutions a quick way to check the medical credentials of healthcare professionals.5 Pay-per-call technology is now being used to provide audiotext services, such as travel and weather information for the Caribbean region to consumers in the U.S., that have greater appeal to particular audiences.
International audiotext services that provide information in the U.S. for the benefit of consumers from other countries have emerged in response to the need of consumers abroad to access data and services in the States. For example, the California Visitor Information Program employs audiotext technology to make information on shopping, restaurants, and other attractions in Los Angeles available in Japanese to foreigners who are visiting or considering a visit to the area.6 While the U.S. leads the world in this area, consumers in other countries also routinely access U.S. databases via audiotext technology to obtain, inter alia, U.S. and foreign airline flight information. The audiotext industry is truly a global business whereby people get information on any topic from anywhere in the world at reasonable prices. As international audiotext has gained such worldwide acceptance, any regulations adopted by the Commission will have global ramifications and thus the Commission should proceed cautiously in adopting any rules regarding this industry.
From its perspectives as both an early proponent of the benefits of audiotext and a provider of telecommunications facilities that support this growing industry, CWWI views both objectives of TDDRA as interdependent. CWWI strongly believes that the nascent international audiotext industry has great potential to serve growing public needs. However, as with any service to the public, the audiotext industry will survive and thrive only if the public is satisfied that it is being treated fairly in all respects. The audiotext industry does not provide a necessary service, and thus its future lies totally with consumer acceptance. Obviously if consumers do not accept international audiotext services, they will stop purchasing them and the audiotext industry will disappear. Congress acknowledged this fact in finding that "the continued growth of the pay-per-call industry is dependent upon consumer confidence that unfair and deceptive behavior will be effectively curtailed and that consumers will have adequate rights of redress."7
In this regard, CWWI has instituted a number of measures to ensure that consumers who purchase audiotext services offered on its network facilities have the necessary and appropriate information about the service they are purchasing and are satisfied with their purchase. First, since 1994 CWWI has required service bureaus and their information service providers to adopt and comply with a "code of practice" that governs the provision of audiotext services. A typical CWWI code of practice is provided in Attachment 1. Key requirements of this Code include the following:
Most importantly, the Code provides that the CWWI operating company may, at its sole discretion, terminate service in the event that the information provider is found to be in breach of the Code of Practice. CWWI notes that in the past its operating company subsidiaries have blocked numbers and withheld payment to service bureaus on the grounds of noncompliance with the Code.
International audiotext services, like other international telecommunications services, are provided by a number of carriers, U.S.-based and foreign, as essentially a joint offering. Thus, second, CWWI has entered into agreements with U.S. carriers establishing procedures for handling uncollectible charges for audiotext calls. Pursuant to these agreements, CWWI identifies to U.S. carriers the telephone numbers in its serving areas that are being used for international pay-per-call services and provides other information regarding audiotext calls. As a result, U.S. carriers are able, inter alia, to separate international audiotext calls from other toll charges on a customer's bill. CWWI has expressly supported such measures in appropriate cases. When certain audiotext calls are uncollectible, these agreements allow the U.S. carriers to deduct the uncollectible amounts from settlement charges due CWWI for outbound U.S. audiotext calls. Thus, these agreements allow customers to question charges and obtain refunds if appropriate, and they enable U.S. carriers to conduct billing inquiries and allow associated costs to be passed onto information providers.
Finally, CWWI has instituted a standard preamble that all information providers must use. The preamble must be delivered in a deliberate and comprehensible manner, and must include a short description of the services (including age restrictions where applicable). Most notably, the preamble must indicate that international call rates apply, and thus effectively satisfies the cost disclosure requirements imposed by the Commission in International Audiotext Services.8 With these requirements, CWWI's preamble ensures that customers purchasing audiotext services provided over its facilities have sufficient information to make a reasoned judgment about their audiotext purchases.
CWWI believes that the measures it has adopted to curb the potential for fraud and abuse in the provision of international audiotext services are demonstrably effective. Customers are satisfied with international audiotext calls provided over CWWI's facilities, as evidenced by the fact that the number of international audiotext calls placed to CWWI's service territory have grown to nearly two million per month. Significantly, CWWI receives very few if any customer complaints regarding international audiotext services provided over its facilities. Equally telling, uncollectibles for international audiotext calls continue to decline to IMTS levels, from a high in 1998 of 8.5 percent to below 5 percent today.
CWWI is not alone in ensuring consumer protection. Other service providers in the international audiotext industry also have taken steps to protect consumers interests in purchasing international audiotext services. As discussed in the comments of the International Telemedia Association ("ITA"), being filed concurrent with the submission of these Comments, the international audiotext industry as a whole has taken affirmative steps to prevent and deter unfair or deceptive trade practices in the provision of service to consumers.9 The Commission's Notice unfortunately did not reflect the fact that the international audiotext industry is actively and successfully policing its ranks.
III. Application of the 900-Number Rule to International Audiotext as Proposed by the FTC Will Threaten the Viability of the International Pay-Per-Call Industry to the Ultimate Detriment of U.S. Consumers and thus Is Not Consistent with the Objectives of Congress in Enacting TDDRA.
In its Notice, the Commission recognizes the Congressional mandate in TDDRA to encourage the growth of the audiotext industry, and thus to "strike a balance" between maximizing consumer protections and minimizing the burdens on the audiotext industry.10 CWWI submits, however, that the Commission fails to achieve such a balance in proposing to apply its existing 900-Number Rule to international audiotext services as described in the Notice. As discussed below, application of the 900-Number Rule as written would have unnecessarily deleterious effects on the international pay-per-call industry.
Unlike 900 services, international audiotext is provided via the infrastructure of facilities and carrier relationships that were established for the provision of international message toll services ("IMTS") long before international audiotext services were introduced. There is no "hiding" of audiotext charges in international calls as the Commission suggests; rather, calls are charged to consumers at appropriate international collection rates, and the revenues collected by the terminating carrier are shared with information providers in payment for the traffic they have stimulated. As such, international audiotext services are no different than any other call stimulation campaign involving the payment of commissions for calls stimulated; international audiotext calls are simply a subset of all international calls.11
Thus, it is not surprising that policies, developed in the context of domestic 900 services, are incompatible with the manner and means by which international audiotext services are provided today. Literal and exact compliance with the existing regulations in the international audiotext context will be extraordinarily difficult at best and, more importantly from the perspective of foreign terminating carriers such as CWWI, largely dependent on the cooperation of U.S. carriers. For example, it is not possible to disclose the precise costs callers will incur when they access international audiotext services, since these charges are not controlled by the audiotext provider but by the long distance carrier that the caller has selected to originate the call. Other parties have discussed the problems of providing international audiotext services in compliance with the existing rules at length on the record in this proceeding and the Commission properly recognized many of those problems in its Notice.12
CWWI submits that the Commission's proposal represents an overly broad intrusion into the workings of the marketplace. An example is the objective of TDDRA that consumers are suitably informed of the price of the service they are purchasing. As the Commission has recognized, it is not possible with international audiotext services for service providers to anticipate the exact price of an audiotext call, since it is U.S. carriers that establish and change the rates for international calls. As a rule, audiotext service providers have no advance knowledge of the carriers' pricing decisions. However, consumers can make informed decisions if they are told the possible range of charges per minute so that they can predict the maximum total charge for the call. Indeed, as the Interactive Audiotext Services decision recognizes, consumers can make informed decisions just by knowing that "international rates apply."
While the Commission states in the Notice that "the proposed rule does not require that pay-per-call services be offered only over 900 numbers," as a practical matter that will be the effect of the Commission's decision. This, in turn, will lessen competition to the obvious detriment of U.S. consumers.13 International audiotext provides businesses and consumers an effective alternative to 900 pay-per-call services. Moreover, if audiotext services must become 900 pay-per-call services, the promise of the industry will never be fulfilled. Application of the proposed rules to international audiotext services would thwart the development of the industry and associated public benefits.
At the very least, the promise of broader public benefits from the international audiotext industry would be curtailed by a literal application of the existing 900-Number Rule and the barriers to entry those rules would create. Many media industries (e.g., VCR and pay-per-view) began by providing programming aimed at the broadest possible appeal so as to attract necessary revenues and capital to develop the industry. These industries ultimately broadened their focus to provide services to more discrete groups of consumers at a reasonable cost. The fact that new types of international pay-per-call services are being introduced into the market at this time (as discussed in the previous section) suggests that the international audiotext market is already developing along these lines. Such development of new and different services for consumers could be severely delayed, or abandoned, if the international audiotext industry must bear the costs of complying with the 900-Number Rule as currently written.
Furthermore, the Commission must recognize that application of the 900-Number Rule to international audiotext services under these circumstances could have international ramifications as well. Other regulatory agencies, most notably the International Telecommunication Union, have proposed regulating international audiotext services, yet the Commission's proposal fails to take this fact into account.14 Although CWWI supports the establishment of realistic and reasonable measures to protect the rights of consumers in purchasing international audiotext services (as discussed in Section IV infra), there are significant legal arguments over the Commission's jurisdiction to impose the requirements of its pay-per-call regulations on foreign telecommunications carriers such as CWWI. The acts of foreign carriers in their own jurisdictions are beyond the territorial jurisdiction of the Commission. Any attempt to exercise jurisdiction over these foreign carriers would constitute an invasion of the sovereignty of the relevant foreign nation. Even assuming jurisdiction, an attempt to regulate the actions of foreign carriers could create tremendous tensions with other countries. Foreign administrations could restrict the operations of U.S. businesses abroad in an attempt to create reciprocal effects.
IV. The Commission Should Adopt Regulations That Promote Consumer Protection While Allowing the International Audiotext Industry to Grow, Thus Satisfying the Objectives of TDDRA.
CWWI is not suggesting in these Comments that the Commission should abandon its attempts to regulate the provision of international audiotext services. As noted previously, CWWI firmly recognizes that it is in the best interests of all that consumer rights are protected and customers are satisfied with their audiotext purchases. However, the Commission must recognize the problem all regulatory agencies face: no regulatory scheme can anticipate all circumstances and market conditions, especially in rapidly evolving markets such as international telecommunications. Any regulatory scheme designed to protect against all possible undesirable outcomes will, out of necessity, be so broad and burdensome to inevitably fail - it will fail to protect consumers, and it will fail to provide consumers the services they want at reasonable rates.
Reasoned decisionmaking, CWWI respectfully suggests, requires a recognition that improper actions that are not covered by a general policy can be remedied on an ad hoc basis. Accordingly, the Commission should adopt regulations that provide general protections to the public that are realistic and practical considering the nature of the service being regulated. To that end, CWWI recommends that the Commission focus its efforts on the two requirements discussed below.
First, the Commission should require a free preamble for international audiotext calls, i.e., callers who disconnect at the completion of the preamble are not charged for the call. CWWI believes that it is technically and economically feasible to include a free preamble in international audiotext services - a belief that has been informally confirmed by various U.S. carriers -- and thus that a requirement to this effect is appropriate. The terminating carrier would simply wait a short period after the conclusion of the preamble to signal the originating carrier that the call was completed and that billing should commence. However, no terminating carrier would take such measures without the agreement and cooperation of the originating carrier to avoid possible accusations of fraudulent billing. Obviously the costs for a free preamble would be borne by the originating and terminating carrier.
The Commission's existing rules require that the preamble disclose the nature of the service, the location of the service provider, and the price to be charged for the call. CWWI's suggested free preamble for international audiotext calls could identify the service and the service provider without difficulty. However, as noted previously, it is not possible to specify the precise charge for the call, since international audiotext calls are charged at the same rates as other international calls and these rates are set and subject to change by the originating U.S. carrier. In light of the Commission's order in Interactive Audiotext Services, a statement that "international rates apply" should suffice. At most, information providers should be required to specify a range of per-minute rates in the preamble to callers. Since international calling rates are subject to tariff by U.S. carriers and by law callers are deemed to have knowledge of these rates, CWWI believes that either of these alternatives reflect an acceptable compromise. In addition, the Commission may wish to consider approaching the FCC about the establishment of a special accounting rate for international audiotext services. A special accounting rate could make it easier for U.S. carriers to provide more information to consumers about the charges for international audiotext calls.
Second, CWWI believes it would be reasonable for the Commission to require U.S. carriers to enter into agreements with terminating carriers regarding chargeback procedures. This requirement is dependent upon the terminating carrier identifying international audiotext calls. As CWWI has shown in practice this is eminently feasible, as long as the terminating carrier places audiotext services on separate, identifiable local numbers. Consultation with U.S. carriers by the Commission should allow it to discern what other requirements are feasible and appropriate. CWWI will cooperate fully with U.S. carrier/Commission decisions in this regard.
CWWI believes that the possible varied services and benefits that audiotext can bring U.S. consumers is almost unlimited. What services will develop will, of course, depend upon two things, the marketplace demands that will exist and consumer acceptance of the industry as a whole. CWWI respectfully suggests that regulation of this nascent industry be designed to deliver the public interest benefits of audiotext to consumers as quickly as feasible and at reasonable prices while protecting against abuses. CWWI believes its above recommendations achieve that balance.
The Commission is faced with a difficult task: providing consumer protections without stymieing or eliminating the consumer benefits that the industry is providing and will provide in the near future. CWWI has put forth what it believes is a regulatory program that achieves that balance. CWWI stands ready to cooperate with the Commission in implementing CWWI's proposal or to work with the Commission to develop a similar regulatory program that harms neither the public nor the industry.
CABLE & WIRELESS (W.I) LIMITED
Date: March 10, 1999
CODE OF PRACTICE
1. SCOPE AND INTERPRETATION
1.1 This Code of Practice is applicable to all International Audiotex Service Information Providers ("IP") whose facilities are hosted by Cable and Wireless (West Indies) Limited ("C&W") and is effective from 1 April 1998.
1.2 In this Code of Practice:
2.1 The International Audiotex Service will only be furnished where in the opinion of C&W suitable facilitates and operating conditions are available.
3. APPLICATION FOR SERVICE
3.1 C&W must be kept advised of the nature and scope of the Information Provider's Programmes, including languages to be used and the countries in which the IAS will be promoted. C&W must be advised of any changes to the nature and scope of message type, as well as the countries in which the IAS is advertised or promoted.
3.2 The Information Provider must provide, if called upon by C&W, the complete name, address and telephone number at a manned location of any of their Service Agents. C&W reserves the right to provide the general public, upon specific request, with this information in order that Callers may contact the Information Provider or one or more of their Service Agents.
3.3 The Information Provider must at C&W's request provide C&W with an updated list of Programmes, together with their allocated Programme Numbers.
4. DELIVERY STANDARDS
4.1 The Information Provider is responsible for the preparation and recording of all announcements and shall be solely responsible for the content of the announcements, and the quality of speech and sound of the recording of the Information Provider's Programmes.
4.2 The Information Provider will provide continuous uninterrupted recorded announcement or Interactive Programme service.
4.3 All messages or Programmes will start at the beginning.
4.4 In the case of recorded announcement the call holding time to receive the message of each announcement or interactive program shall not exceed twenty-five (25) minutes. In the case of live psychic operators the call holding time to receive the message shall not exceed thirty (30) minutes. The equipment used by the Information Provider must therefore automatically terminate the call at the end of the message or at the end of thirty minutes.
5. PROMOTION AND ADVERTISING
5.1 The identity of the Information Provider's Service Agents, and an accurate description of the International Audiotex Service shall be clearly indicated in all advertising and promotion material.
5.2 All advertisements, publications or other communications, must contain details of call charges to the Programme Numbers from the Country in which the message is being advertised.
5.3 Advertising and promotional material aimed at, or intended to be readily accessible to an audience of children or young persons, should include a statement indicating that the agreement of the parents should be sought before using the service.
5.4 Information Providers will ensure that their advertising is not misleading and may not engage in fraudulent or misleading call stimulation.
5.5 All advertisements, publications or other communications must conform to the laws and advertising standards of the countries in which the message is being advertised and this Policy.
5.6 No advertisements may include any obscene, indecent or otherwise morally offensive message or picture, whether of a political, racist, sexual, religious or otherwise prejudiced nature.
6. MESSAGE STANDARDS
6.1 General Message Standards
6.2 Professional Message Standards
7.1 The Information Provider is responsible for the contents of the Programs as well as the advertising materials. Complaints to C&W concerning the Information Provider's service will be investigated and the acceptability or otherwise of the message content decided upon at the sole discretion of C&W. If the Information Provider is found to have been in breach of the Code of Practice C&W has the absolute right in its sole discretion to discontinue the particular service or all service to the Information Provider forthwith.
7.2 The Information Provider is required to maintain at any given time a transcript in English of all Programmes provided in the last three (3) months and the original recorded material for inspection by the Company or other authorised body when required, and shall promptly provide same upon request.
7.3 The Information Provider must provide when requested by C&W, or other authorised body at any given time copies of all advertisements used in the last three (3) months related to the International Audiotex Services.
7.4 C&W's decision on the acceptability or otherwise of the Programme content or content of any advertising or promotional material, as covered by this Code of Practice, is final.
8. VARIATION OF TERMS AND CONDITIONS
C&W reserves the right to amend this Code of Practice at any time. C&W will notify the Information Provider of any such amendments and the Information Provider will be required to comply with such amendments within 30 days of the dispatch of such notice by C&W.
We hereby agree to be bound by the above Code of Practice, which is the Code of Practice referred to in the Agreement.
Name (please print)
for and on behalf of
1 CWWI supports the Commission's decision to defer to another proceeding consideration of the possible application of the 900-Number Rule to audiotext services provided via the Internet.
2 A unique situation exists here in that international audiotext calls are no different in price than any international call to an individual. There is no extra, or hidden, charge to access an audiotext service. See ftn 8, infra.
3 Capital requirements for launching an information services business employing audiotext technology are relatively low. As the legislative history of TDDRA notes, the audiotext market is characterized by extremely low barriers to entry, as a result of "the unique access to telephone subscribers, ease of billing, and lack of high start-up costs for vendors ..." This, in turn, stimulates the availability of innovative and responsive service offerings to the public. H.R. Rep. 102-430, 102nd Cong., 2nd Sess. 1992, 1992 WL 26892 (1992).
4 See Leila Morris, "Government and Non-Profits Tap Pay-Per Call Potential," INFOTEXT, May/June 1996, available at http://www.infotext.com/MayJun96.html (hereinafter Infotext Article).
5 See Infotext Article, supra note 4. MCI testified at the Commission's June 19, 1997 workshop that it raised over $50,000 in 1996 for breast cancer research through co-sponsorship of a fund-raising 900 application. See Transcript of Workshop on Pay-Per-Call Rulemaking, June 19, 1997, at 29.
6 See Accurate Telecom, case study on the California Visitor Information Program, available at http://www.accuratetelecom.com/av/cs8.htm.
7 15 U.S.C. § 5701(b)(7).
8 See Federal Trade Commission v. Interactive Audiotext Services, Case No. CV-98-3049 (C.D. Cal. 1998) ("Interactive Audiotext Services") (consent decree entered to remedy alleged deception by certain international audiotext providers requires only disclosure of the fact that international rates apply and the consumer able to obtain the exact rates by dialing 00).
9 CWWI is a member of ITA and adopts the substance of ITA's comments in this proceeding as well.
10 Notice at 9, 10.
11 Under these circumstances, any basis advanced for treating international audiotext calls in a different manner from what the Commission has termed "content neutral" calls (Notice at 28) is inherently flawed. Furthermore, the fact that international audiotext calls are provided via IMTS, a service regulated extensively by the Federal Communications Commission ("FCC"), creates the potential for serious conflict between the existing FCC's regulatory program and any Commission regulatory scheme adopted in this proceeding. If the Commission believes that consumers are not adequately informed about the price of international audiotext services, then the Commission should consider working with the FCC to regulate the availability of pricing information for consumers on all international calls.
12 Notice at 59-60. Moreover, CWWI has serious concerns whether it will be able to run any commission-based call stimulation campaigns in the U.S. should the Commission adopt its rules as proposed, since the Commission's definition of pay-per-call service is so broad as to be all encompassing and does not take into account the country of origin.
13 The prospect of international audiotext providers being driven out of business as a result of the Commission's application of the existing 900-Number Rule raises First Amendment issues, as the information supplied to consumers is commercial speech that is protected to some degree. Relevant case law provides that the Commission must be able to justify its rules as being tailored to achieve its goals. See Rubin v. Coors Brewing Co., 115 S.Ct. 1585, 1589 (1995) (regulation of commercial speech must directly advance a substantial government interest, and must not be more extensive than is necessary to serve that interest).
14 See International Telecommunication Union Recommendation E.155, "International Premium Rate Service," March 1998.