In the Matter of
Pay-Per-Call Rule Review
FTC File No. R611016
COMMENTS OF GTE SERVICE CORPORATION
Dated: March 10, 1999
GTE Service Corporation and its affiliated operating companies
Andre J. Lachance
GTE Service Corporation and its affiliated companies (collectively "GTE")(1) respectfully submit these comments in response to the Notice of Proposed Rulemaking "NPRM" in the above-captioned proceeding.(2) In the NPRM, the Federal Trade Commission ("FTC" or "Commission") proposes to amend and expand the Commission's 900-Number Rule.
I. INTRODUCTION AND SUMMARY
GTE fully supports the Commission's efforts to expand the protection of the 900-Number Rule to include audiotext services accessed through international or toll-free numbers or other alternative dialing patterns. The use of international and toll-free numbers to hide the cost of audiotext services and to circumvent the 900-Number Rule creates customer confusion and misunderstandings and undermines the rights of consumers.
GTE opposes other measures proposed in the NPRM aimed at stemming the practice of "cramming" - submitting billing records to billing entities for services or products that were not authorized by the end-user. GTE and the rest of the telecommunications industry, reacting largely to competitive pressure to eliminate or at least reduce cramming complaints, have recently taken strong measures to eradicate cramming. GTE believes that these efforts will be successful and urges the FTC to allow them to work.
Should the FTC proceed with its proposals to adopt rules to address cramming, however, GTE has a number of concerns with the proposed rules. First, GTE opposes the efforts by the FTC to expand the definition of "telephone-billed services" to include all purchases that are charged to a customer's telephone bill. GTE believes this expanded definition will apply regulation to transactions that have not typically caused consumer problems.
GTE also believes the FTC's proposed rules, in many instances, are misdirected. In particular, the rules address the cramming problem largely by regulating billing entities as opposed to the vendors who create the problems or the telephone subscribers who fail to adequately monitor the use of their telephone by others.
GTE has serious concerns that the proposed rules will hold billing entities liable for billing for services that were not, in fact, authorized by the billed customer. Yet, in most instances, the billing entity has no way of knowing the nature of the charges being billed.
This and other requirements and penalties proposed in the NPRM may make the offering of billing and collection services cost-prohibitive. Local exchange companies are not required to provide billing and collection services. GTE is concerned that if the proposed rules are adopted, LECs may exit the billing and collection business.
It is GTE's experience that customers wish to have communications-related services on their local phone bills as an efficient means of making bill payments and determining their total telecommunications costs. Regulations that increase the administrative burden and cost of billing and collection without effectively reducing the incidence of cramming would not be in the public interest, and would, ultimately, preclude customers from obtaining the billing convenience they desire.
A. GTE supports extending the reach of the 900-Number Rule to include alternative dialing patterns.
GTE applauds the efforts of the FTC to extend the reach of the 900-Number Rule to include alternative dialing patterns for pay-per-call services. GTE fully supports the Commission's efforts to expand the protection of the 900-Number Rule to include audiotext services accessed through international or toll-free numbers or other alternative dialing patterns. The use of international and toll-free numbers to hide the cost of audiotext services and to circumvent the 900-Number Rule creates customer confusion and misunderstandings and undermines the rights of consumers under the Telephone Disclosure and Dispute Resolution Act of 1992 ("TDDRA"). (3)
The focus of the existing 900-Number Rule is on the vendors of pay-per-call services who use deceptive or misleading advertisements for their services or who fail to fully disclose the cost or content of their services to unsuspecting customers. The 900-Number Rule requires telephone subscribers to act responsibly and to supervise the use of their telephone by family members and guests. GTE believes the widely acclaimed success of this Rule is attributable to the fact that the 900-Number Rule focused on the problem causer, the unethical 900 pay-per-call services provider, and also required the telephone subscriber to act responsibly to protect the use of the subscriber's telephone.
A testament to the effectiveness of the Commission's 900-Number Rule is that unscrupulous service providers have gone to extraordinary means to disguise the nature of the pay-per-call services by using toll-free 800 numbers, international toll calls or dialing patterns other than a 900-number prefix. The motivation for using alternative dialing patterns is to escape the disclosure requirements of the Commission's 900-Number Rule and to take advantage of the unsuspecting or unsophisticated end-user by avoiding the protections offered by the TDDRA. Because some service providers are using alternative dialing patterns to avoid the 900-Number Rule, GTE supports expanding the rule to apply to pay-per-call services employing alternative dialing patterns.
B. In light of the strong steps GTE and other telecommunications industry members are taking to eradicate cramming, further FTC cramming regulations are not necessary at this time.
The term "cramming" refers to the practice of submitting billing records to billing entities for services or products that were not authorized by the end-user. GTE provides billing services to more than fifty interexchange carriers and clearinghouses that, in turn, provide billing services for a larger number of vendors of telecommunications products and services. As such, GTE is concerned about cramming and the effect cramming can have on GTE's customers.
The telecommunications industry has been proactively addressing cramming independent of any actions taken by regulators and legislators. The industry also issued strict "Anti-Cramming Best Practices Guidelines" in July 1998 as a result of a Federal Communications Commission ("FCC") sponsored industry summit.(4) GTE has already implemented the vast majority of the Best Practices Guidelines developed by the industry. GTE is also committed to implement the remaining Guidelines and will deploy the last major piece, bill blocking, by the end of the third quarter 1999.(5)
As a result of the policies implemented by GTE to combat cramming and other deceptive billing practices, GTE believes it has the toughest anti-cramming policy in the industry. For example, GTE's billing services agreement specifically prohibits the submission of objectionable or deceptive billing records.(6) Billing service customers who violate these rules are subject to significant fines if end-user complaints exceed an established threshold level. If customer complaints continue, additional penalties could include termination of particular billing services, such as pay-per-call, or even contract suspension, non-renewal or termination.(7)
GTE's policy regarding pay-per-call services is to automatically recourse pay-per-call charges back to the billing service customers the first time an end-user complains or requests such action.(8) GTE also offers the end-user a free 900 pay-per-call blocking service. If the customer declines the block and, if a subsequent complaint or request for removal of pay-per-call charges is received, GTE will impose the block, but only if allowed to do so under state public utility commission rules.
Further, GTE has placed additional requirements on its billing and collection clients effective January 1, 1999. GTE now requires advance approval of text phrases used to describe products and services, new products offered, promotional advertising and customer verification procedures. GTE has also made significant changes in its billing and collection agreements to provide incentives to billing services customers to avoid cramming charges.
GTE believes that these policies demonstrate that GTE will not tolerate cramming activity by its billing and collection customers and is taking affirmative action to protect end-users from unauthorized charges. As a result of these industry initiatives, the FCC has opted to give the industry time to prove the effectiveness of the industry's self-policing efforts. GTE suggests that the FTC follow the FCC's lead and allow these industry-wide solutions sufficient time to work before implementing further regulations.
C. If the FTC elects to adopt additional anti-cramming rules, several of the proposed rules should be amended.
In the NPRM, the FTC proposes to expand the definition of "telephone-billed purchase" to include "all purchases that are charged to a customer's telephone bill."(9) GTE opposes this proposed change.
As an initial matter, the FTC lacks the authority to amend the definition of "telephone-billed purchase." In enacting the TDDRA, Congress defined the term "telephone-billed purchase" to mean "any purchase that is completed solely as a consequence of the completion of the call or a subsequent dialing, touch tone entry, or comparable action of the caller."(10) The FTC does not have the authority to amend a definition created by statute.
Moreover, Congress also established the FTC's authority to enact regulations in terms of the statutory definition of the term "telephoned-billed purchase." Thus, the FTC is required to "prescribe rules establishing procedures for the correction of billing errors with respect to telephone-billed purchases. The rules established by the Commission shall also include provisions to prohibit unfair or deceptive acts or practices that evade such rules or undermine the rights provided customers under this subchapter." (11) Accordingly, any attempt by the FTC to broaden the definition of "telephone-billed purchase" has the dual effect of increasing the FTC's rulemaking authority. Only Congress can increase a regulatory agency's rulemaking authority.
GTE also opposes the expanded definition of "telephone-billed purchase" because the proposed definition creates a broad brush that would regulate many more transactions than is necessary or useful. In particular, GTE is concerned that the definition of telephone-billed purchases should specifically exclude telephone exchange services and adjunct telecommunications services that are offered and billed by the same LEC. The rule should also exclude voicemail and Internet services offered and billed by the same LEC. These services should be excluded from the definition of "telephone-billed purchase" because customers associate these offerings with their telecommunications services and expect bills for these services to appear on their monthly telecommunications services bill. Moreover, the sale and billing of these services has not generally been the source of cramming complaints.
One of GTE's major concerns with the NPRM is the shifting of responsibility for controlling the use of the subscriber's telephone away from the subscriber and assigning that responsibility to the billing entity. This shift manifests itself in the definition of the term "billing error."
A "billing error" was previously defined in Section 308.2(b)(1) as a telephone-billed purchase that was not made by the customer nor made from a telephone of the customer who was billed for the purchase . . . (emphasis added). Proposed Section 308.2(b)(10), however, expands the definition of a "billing error" to include any charge not subject to 900 blocking that was not expressly authorized by the customer.(12) Thus, under the proposed rule, by operation of proposed rule section 308.20,(13) the customer being billed for a purchase can avoid having to pay charges authorized by someone other than the billed customer - even if the party authorizing the charges used the phone (or billed to the phone number) with the billed customer's consent.
GTE opposes this new language for two reasons. First, the new rule eliminates the responsibility of the billed customer for supervising the telephone under his/her direct control. No one is in a better position to limit the use of a particular telephone than the billed customer. By limiting the billed customer's liability for goods and services ordered over his/her telephone to only those goods and services he/she actually ordered, the FTC will remove the most powerful incentive for customers to police the use of their phones. The result, GTE fears, will be increased claims of cramming.
Second, GTE opposes the expanded definition of "billing error" because the proposed definition will likely lead to increased incidences of fraud. Unscrupulous persons will no doubt quickly learn that all they need do to avoid responsibility for charges billed to a subscriber account is claim that the billed party never authorized the charges. Under the proposed rules, neither the billing entity nor the vendor will be able to prevent such fraud.
In order to prevent these detrimental outcomes, then, GTE urges the Commission to retain the billing error definition that now appears in Section 308.2(b)(1).
GTE is concerned that the rules proposed in the NPRM may result in a finding that billing entities are liable for committing a "deceptive billing practice" - and therefore subject to criminal and civil penalties -- even though the billing entity has no actual knowledge of the billing error.
In particular, proposed Section 308.2(a) defines the term "billing entity" to include any person who transmits a billing statement or any other statement of debt to a customer for a telephone-billed purchase. Under this section, a billing entity also includes anyone who assumes responsibility for receiving and responding to billing error complaints or inquiries.(14) Proposed Section 308.17 provides that any telephone-billed purchase must have the express authorization of the person to be billed for the purchase. Under proposed Section 308.17, a billing entity will be deemed to have committed a deceptive act or practice and to have violated Section 308.17 if it bills for charges it knows were not authorized or for charges it should have known were not authorized. With respect to the "should have known" standard, the NPRM provides that "[a]ny billing entity that receives complaints from consumers who are being charged without their express authorization is on notice of the problem, and should take immediate action to stop the unlawful billing or risk violating proposed Section 308.17."(15)
While GTE understands the intent behind the proposed rule, GTE has serious concerns that application of the "should have known" standard will result in billing entities being found liable for acts it did not know about and could not have known about.
In order for the FTC to understand the effect of proposed rule Section 308.17, it must better understand how billing services typically work. The billing service consists of taking an electronic tape, magnetic tape or paper tape submission of toll messages (electronic message interface or EMI records) to be billed to customers within the GTE service areas, sorting the messages by customer, printing and mailing of customer bills, and collecting and remission of payments. The vast majority of toll messages are submitted in a ready invoice format which is simply transferred to the carrier's separate pages in the customer's bill and then totaled along with the charges for GTE services. There is no way to review invoice ready EMI records prior to bill printing.
GTE's billing contracts prohibit vendors from submitting billing records for any service or product, including membership fees, that is not directly related to a telecommunications service. Even though GTE's billing services contract contains these limitations, there is no technology today (and none within the foreseeable future) that would allow a billing entity to screen EMI records to ensure that a customer was not being billed for a particular service or product. Even if it were possible to review EMI records in advance, there is no way to determine if a particular message contains a charge for an audiotext service. Thus, unless the audiotext call is identified in the EMI record by the submitting service provider, GTE has no way of knowing in advance whether a carrier or clearinghouse is submitting a message record that contains a charge for audiotext services. Even after the bill is printed, it may not be possible to identify audiotext messages unless the 900/976 prefix is used. The first indication that a toll message may include a charge for an audiotext service, therefore, is when the end-user complains that the charges were unauthorized, not disclosed in advance, or were higher than the end-user was led to believe by the vendor.
Once such a complaint is received, GTE's policy, as noted above, is to remove the charge from the customer's bill and notify the billing service provider to stop submitting those types of billing records or face contract termination. In spite of these measures, however, GTE has no way of ensuring that the same or similar charges will not be billed again. There is nothing GTE can do to stop the billing service-provider from submitting subsequent EMI records short of immediate contract termination. Moreover, even if the contract is terminated, the underlying service provider who is responsible for the cramming violation can simply change its name and start submitting billing records though another billing aggregator.
The end result is that even if a billing entity like GTE learns that a charge appearing on a customer bill is unauthorized, there is nothing that entity can do to prevent that charge or other similar charges from appearing on future customer bills. Yet, under the scheme established in proposed rule 308.17, the FTC would likely find that a billing entity should have known it was billing for unauthorized charges even though there was no way it could have actually known the charges were in fact unauthorized. GTE strongly opposes imposing liability on billing entity for including "billing errors" on end user bills unless the billing entity actually knew of the billing error.
Proposed Section 308.20(m) would require that each billing statement contain a statement of a customer's billing rights.(16) GTE opposes this requirement. Requiring extensive monthly notification on bills would add substantial cost to the billing process. In addition, placing detailed customer rights information on customer bills would add clutter to customer bills at a time when the industry and the FCC are trying to simplify and clarify end-user bills. GTE notes in this regard that GTE has eliminated non-telecommunications/non-information services from appearing on its customers' bills and has clarified the bill line items that GTE will continue to accept. Further, on September 17, 1998, the FCC adopted a Notice of Proposed Rulemaking "In the Matter of Truth-in-Billing and Billing Format" (Docket No. 98-170). Further improvement to customer's bills will likely result from that rulemaking.
Rather than require additional language to be placed on each billing statement, GTE believes the FTC should continue to allow billing entities the option of providing a single annual notice of customers' billing rights. GTE understands that the FTC is concerned with ensuring that customers have a ready source of billing rights information. To address this concern, the FTC should consider allowing billing entities to include the statement of customer rights in the white pages directory rather than on customer bills. GTE has already adopted this practice. If the monthly notification requirement is retained, however, to eliminate excess verbiage, billing entities should only be required to inform customers where to locate the complete statement of billing error rights.
In the NPRM, the FTC proposes to require that personal identification numbers ("PINs") -- used to restrict unauthorized access to a billing account -- be unique to the individual who will be billed for the offered goods or services.(17) As such, if other members of a household are to be allowed to order goods and services, such individuals must establish their own individual PINs and their own billing accounts.
GTE opposes this requirement. Requiring individual PIN numbers is not a consumer-friendly solution to cramming. In GTE's experience, end-users have repeatedly indicated their preference for a single bill consolidating their telecommunications services. Requiring separate bills for each PIN number, therefore, runs counter to customer wishes. Moreover, requiring billing entities to send separate bills to each PIN number would be prohibitively expensive. Again, GTE believes the PIN number proposal is an example of addressing cramming through the billing entity/end-user relationship rather than by penalizing the primary source of cramming problems, the unscrupulous vendor.
D. GTE submits answers to specific questions posed by the FTC in the NPRM.
In addition to requesting comment on the proposals set forth in the NPRM, the FTC sought answers to specific questions posed in Section I.(18) In the comments above, GTE has addressed questions 1, 2, 12, 13, 15, 16 . Questions 4, 14 and 22 are addressed below. GTE has no specific comment or answers to the other questions at this time.
Question 4, service bureau. The proposed definition of "service bureau" (proposed 308.2(n)) is designed to include billing aggregators, and to prevent an entity from escaping liability under the Rule by hiding behind "common carrier" status. Does the revised definition include the appropriate entities? Are there other entities that should be included?
GTE's Answer: Since billing agreements and arrangements between billing entities and other carriers or vendors are not telecommunications services, the Commission should modify its rule to more accurately describe the information that it is most interested in monitoring. The rule should be constrained to the relationship between billing entities and vendors only as it pertains to the billing contracts between them.
Question 14, billing statement disclosures. Do the modifications regarding the disclosures on billing statements (proposed 308.18) adequately address the problem of consumers being unable to reach the entity whose telephone number is listed on the phone bill for billing inquiries? Does the provision adequately address the problem that consumers often cannot reach the entity with the authority to provide refunds or credits?
GTE Answer: GTE believes its anti-cramming policy is the toughest in the industry. GTE has undertaken considerable effort both to redesign its customer bills and implement voluntary anti-cramming practices. Because of competitive pressures, telecommunication companies are being forced to change their bills without the force of new regulations. Given that the market is forcing carriers to change their billing systems to remain competitive, detailed regulation is neither necessary nor appropriate. GTE feels strongly that in light of the voluntary changes already made and future demands that are anticipated by the market, additional regulation setting forth detailed billing requirements is not needed.
Question 22, TDDRA blocking. What records do LECs maintain with respect to 900-number blocking? Do these records indicate the date a consumer-requested block became effective? What measures do LECs take to ensure that blocks are not turned off by someone other than the subscriber? Do LECs make blocking information available to billing entities who are conducting "reasonable investigations" of disputed charges for telephone-billed purchases? Should LECs be required to do so? What would be the costs and benefits associated with such a requirement?
GTE Answer: GTE will add a 900/976 block upon a verbal customer request. In order to remove the block, the customer must supply a written request including authorization such as a social security number. The customer profile will have a record of each date a block was requested or removed. GTE does not make blocking information available to billing entities.
GTE fully supports the FTC's efforts, through the instant NPRM, to extend the reach of the 900-Number Rules to apply to audiotext services accessed through international or toll-free numbers or other alternative dialing patterns. GTE opposes, however, the FTC's efforts to enact additional cramming regulations. Prior to enacting such regulations, the FTC should allow carrier-implemented anti-cramming measures to work. When and if the FTC does adopt anti-cramming regulations, such regulations should focus primarily on penalizing unscrupulous vendors that bill for unauthorized charges, and on inducing end-users to better police the use of their phones. Billing entities should not be held liable for billing for services that were not authorized unless the billing entity knew that that the goods or services were, in fact, not authorized.
Dated: March 10, 1999
GTE Service Corporation and its affiliated operating companies
John F. Raposa
1. GTE's operating companies are: GTE Alaska Incorporated, GTE Arkansas Incorporated, GTE California Incorporated, GTE Florida Incorporated, GTE Hawaiian Telephone Company Incorporated, The Micronesian Telecommunications Corporation, GTE Midwest Incorporated, GTE North Incorporated, GTE Northwest Incorporated, GTE South Incorporated, GTE Southwest Incorporated, Contel of Minnesota, Inc., and Contel of the South, Inc., GTE Wireless Incorporated, GTE Communications Corporation and GTE Long Distance.
2. Pay-Per-Call Rule Review, 63 Fed. Reg. 58524 (October 30, 1998).
3. 15 U.S.C. 5701 et seq.
4. These Guidelines are attached hereto as Exhibit 1.
5. Bill blocking will allow the end-user to block the billing of miscellaneous charges from all service providers other than the end-user's selected interexchange carrier and mandated charges, such as Universal Service Charges and Primary Interexchange Carrier Charges. The service will be available to all customers on a no-fee basis in the third quarter of 1999.
6. GTE prohibits messages that contain charges for the following: sexually explicit material; indecent, obscene or profane language; allusions to bigotry, racism, sexism or other forms of discrimination; deceptive advertising, content or delivery; services that may take unfair advantage of minors or the general public; or, that result in an unacceptable level of end-user complaints.
7. GTE's standard billing services contract requires billing entities using GTE's billing services to keep end-user complaints below established complaint thresholds. The threshold bands range from 0.0009% of the first 100,000 bills rendered to 0.001% of bills rendered over 12,000,000 bills. If a billing entity exceeds the established complaint threshold, it may be charged $2,000 for every complaint over the threshold. If complaints continue to exceed the threshold levels, particular billing services may be suspended or terminated or the entire billing services contract may be suspended or terminated.
8. The term "recourse" means the charge is removed from the customer's bill and the vendor is prohibited by contract from re-assessing the charge on a GTE bill. GTE's policy is to perform a warm transfer of all cramming complaints to the affected carrier (in effect a three-way call involving a GTE representative, GTE's billing customer and the end-user/complainant). If the call does not resolve the complaint to the end-user's satisfaction, GTE will immediately remove the charges from the end-user's bill.
9. NPRM, 63 Fed. Reg. at 58541-58542.
10. 15 U.S.C. § 5724(1).
11. 15 U.S.C. § 5721(a)(1) (emphasis added).
12. NPRM, 63 Fed. Reg. at 58532.
13. Proposed Section 308.20 requires, generally, that upon receiving notice from a customer that an alleged billing error has occurred, the billing entity must investigate the billing error and must not attempt to collect charges claimed as billing errors by the customer until the billing entity determines that the billed customer authorized such charges. NPRM, 63 Fed Reg. at 58550-58555.
14. NPRM, 63 Fed Reg. at 58530.
15. Id., at 58549.
16. Id., at 58553-58554.
17. Id., at 58536.
18. Id., at 58557-58559.