In the Matter of
Pay-Per-Call Rule Review
File No. R611016
COMMENTS OF AMERITECH
Michael S. Pabian
Dated: March 10, 1999
Table of Contents
Ameritech submits these comments in response to the Federal Trade Commission's ("Commission's") Notice of Proposed Rulemaking in the above in the above-captioned matter.(1) In the NPRM, the Commission seeks comments on proposed changes to Part 308 of its rules -- its Trade Regulation Rule Pursuant to the Telephone Disclosure and Dispute Resolution Act of 1992 -- otherwise known as its 900-Number Rule. In these comments, Ameritech will show that the Commission should not adopt certain of the proposed changes. In particular, the Commission should not:
These proposals either conflict with express statutory language or are overbroad. Moreover, the industry itself is already undertaking substantial efforts to address the issue of "cramming" -- unauthorized charges on telephone bills -- as well as the format and content of those bills. This mitigates any immediate "need" for some of the extraordinary aspects of the Commission's proposals.
In addition, the Commission should make a minor change to its definition of "vendor" to avoid the unintended inclusion of carriers in that category. Also, the Commission should delay implementation of its billing statement disclosure requirements applicable to telephone-billed purchases until the Ordering and Billing Forum ("OBF") has had an opportunity to set standards for data submission to billing entities.
Congress passed the Telephone Disclosure and Dispute Resolution Act of 1992 ("TDDRA") to address problems associated with access to and charges for pay-per-call services and other telephone-billed purchases. Pursuant to that Act, the Federal Communications Commission ("FCC") and the Commission passed implementing rules.(2) The Commission's rules are contained in 16 CFR Part 308 and deal with unfair and deceptive acts and practices in connection with pay-per-call services and requirements applicable to advertising and preambles associated with those services (the subject of Title II of TDDRA) and the resolution of billing disputes associated with telephone-billed purchases (the subject of Title III of the TDDRA). These portions of the TDDRA are codified at 15 USC §5701, et seq.
In §701 of the Telecommunications Act of 1996 ("1996 Act"), Congress adopted changes to Title I of the TDDRA, codified at §228 of the Telecommunications Act of 1934, as amended.(3) It also, in subsection 701(b), modified the definition of "pay-per-call services" and specified that, for the purpose of Title II of the TDDRA, the Commission could extend the definition under certain circumstances.
In March, 1997, the Commission solicited comments on the overall effectiveness its 900-Number Rule and also on whether the definition of pay-per-call services should be extended. In addition, in June, 1997, the Commission conducted a public workshop on those issues.
The rule changes proposed in the NPRM are the result of the Commission's consideration of the comments and input it received in 1997, its view of the changes in the industry since the 900-Number Rule was enacted as well as its view of the authority and the mandate given it by Congress in the TDDRA and the modifications contained in the 1996 Act.
For the purpose of the portion of the TDDRA dealing with pay-per-call services, §204(4) (as amended by the 1996 Act) provides:
Section 228(i) of Title 47 (as amended by the 1996 Act) provides in relevant part:
The TDDRA provision permitting the Commission to extend the definition of pay-per-call services was, obviously, intended to allow the Commission to address problems associated with audiotext services regardless of whether there are charges in excess of those for transmission and regardless of the dialing pattern used to access those services. Consistent with that purpose, the Commission , in §308.2(g) of the proposed rule, has tendered a revised definition of pay-per-call services that adds to the §228(i) definition virtually any service providing audio information or audio entertainment whereby the action of placing or receiving a call results in a charge to the customer. In principal, these changes comport with the spirit of the 1996 amendments and the evolution of audiotext services.
In the revised definition, the Commission also notes the statutory exemption for directory services provided by common carriers or their affiliates. However, it purports to "clarify" the exemption by adding the word "tariffed" to qualify the type of directory services included in the exemption. The Commission did this, it says, "to prevent unscrupulous vendors from seeking to abuse the exemption."(5) That change -- which effectively excludes from the exemption any non-tariffed directory services offered by common carriers or their affiliates -- is unauthorized and completely unsupported by the language of the statute.
Although the modifications to §204 the TDDRA noted above do authorize the Commission to extend the definition of pay-per-call services, that authority is not unlimited. Rather, the amendment, by stating "notwithstanding subparagraphs (B) and (C) of section 228(i)(1)," authorizes the Commission to extend the definition of pay-per-call services only those services that would have been excluded from the definition by operation of of the subparagraphs cited. There is nothing in this authorization that permits the Commission limit or reduce the exemptions from the definition of pay-per-call services contained in paragraph 228(i)(2) of Title 47. In fact, the Commission admits as much when it states:
Yet in its purported "clarification" that is exactly what the Commission did. It eliminated the exemption for non-tariffed directory services offered by common carriers or their affiliates.
Perhaps, Commission's "clarification," is based on a belief that Congress intended the exemption to apply only to tariffed offerings since it would have expected that all such offerings would be tariffed in any event. However, any such belief would be misplaced. While one might expect the directory service offerings of common carriers to be tariffed, there is absolutely no reason to believe that Congress was under the impression that such offerings by affiliates of common carriers would ever be tariffed. Thus, there is no basis whatsoever to conclude that Congress intended that exempted directory service offerings be tariffed. Therefore, the Commission has no authority to create such a restriction by rule.
In Ernst & Ernst v Hochfelder, 425 US 185 (1976), the Supreme Court dealt with a similar issue. The Securities and Exchange Commission had attempted to expand upon statutory requirements in a manner inconsistent with the unambiguous language of the legislation. The SEC had attempted to impose liability on petitioners for violating its rule 10b-5 by negligently failing to conduct an audit. The Court found that the SEC's position was not supported by the language of §10(b) of the Securities Exchange Act of 1934(7) which makes it "unlawful for any person (b) [t]o use or employ any manipulative or deceptive device or contrivance " By that language , the Court reasoned, Congress intended to proscribe "intentional or willing conduct designed to deceive or defraud "(8), not negligence. So, too, in this case, the Commission's proposed rule change limits the statutory exemption in a way that is not supported by the clear language of the law itself.
Furthermore, there is no evidence that there is any compelling need to include non-tariffed directory service offerings of common carriers or their affiliates within the scope of regulations applicable to pay-per-call services generally. In some states, legislation may have resulted in the detariffing of traditionally common carrier services such as directory service. That is the case for Ameritech's national directory service in Michigan. The result of the proposed change would be that the service would be considered a pay-per-call service in Michigan while the same service in Illinois would not. The result is incongruous and not consistent with Congress's own unqualified exemption for carrier or affiliate-provided directory services. The Commission, therefore, should remove the word "tariffed" from the exemption for directory services provided by a common carrier or its affiliate contained in §308.2(g)(3)(iii) of its proposed rule.
"Telephone-billed purchases" are subject to the special billing and collection protections contained in Title III of the TDDRA (15 USC §§5721-5724) and the Commission's rules adopted pursuant to those provisions. The statute defines telephone-billed purchase as:
The statute also contains exclusions which are not relevant to this discussion. The Commission has proposed, in §308.2(g) of its rule, a definition that goes well beyond the statute. While the Commission's proposed definition does adopt the same exclusions as the statute, it includes "any purchase that is charged to customers telephone bill." (Emphasis added.)
Section 301 of the TDDRA(10) directs the Commission to prescribe rules establishing procedures for the correction of billing errors with respect to telephone-billed purchases. In proposing the expansive change to the definition of telephone-billed purchase, however, the Commission relies heavily on further provisions of that section directing the Commission to also include rules to prohibit unfair deceptive acts or practices that evade its billing error rules or undermine the rights provided to customers under the subchapter (TDDRA Title III).(11) The Commission also relies on the provisions of §303 of TDDRA(12) giving the Commission the authority to prescribe regulations necessary to implement the provisions of Title III.(13) The Commission also cites the need for an expansive definition because of the dangers of "cramming."
While the ingenuity of "scammers" has resulted in the cramming of charges that may be different in nature from those that were prevalent in 1992, the fact is that the scope of Title III of the TDDRA has not changed. Title III deals with telephone-billed purchases. That term has a very specific definition. While the 1996 Act made modifications to Title II of the TDDRA giving the Commission's specific authority to expand the definition of pay-per-call services for the purpose of Title II, no such authority was given the Commission at any time with respect the definitional focus of Title III.
Section 301 directs the Commission to prescribe rules dealing with the correction of billing errors with respect to telephone-billed purchases -- as defined in the statute. That section also tells the Commission to include provisions in those rules that prohibit unfair or deceptive acts or practices that evade "such rules" or undermine the rights provided to customers in Title III. However, the term, "such rules" refers rules related to correcting billing errors with respect to telephone-billed purchases; and the rights provided customers under Title III deal only with telephone-billed purchases as defined by Congress. Similarly, §303 merely gives Commission the authority to prescribe such regulations that are necessary to implement the provisions of Title III. Again, Title III deals solely with telephone-billed purchases as defined by Congress.
Indeed, the fact that Congress permitted the Commission to expand the definition of pay-per-call services for the purpose of Title II indicates that Congress is well aware that "problems" in this area have progressed beyond the types identified in 1992. Nevertheless, while Congress made changes to Title II, it did not see fit to change the focus of Title III.
The Commission appears to believe that Congress intended that Title III apply to virtually all charges appearing on a telephone bill. The Commission points to §301(a)(2)(14) as indicating Congress's intent that the Commission prescribe dispute resolution procedures for telephone-billed purchases substantially similar to dispute resolution protections afforded credit card users.(15) The Commission seems to interpret this as a mandate to apply such protections to all "products and services billed to a telephone number."(16) However, if that had been Congress's intent, there would have been no need for it to have drawn the definition of telephone-billed purchase so narrowly at the time the TDDRA was passed. If Congress's concern was to subject all charges on a telephone bill (except for local and interexchange telephone service charges) to same dispute resolution procedures applicable to credit card purchases, then it could have defined the term "telephone-billed purchase" as expansively as the Commission proposes in the NPRM. It did not.
As it stands, the Commission's proposed definition would apply the extraordinary remedies of Title III and the Commission's rules to a telephone company's charges to its own customers for such items as telephone equipment, voice mail, paging, and inside wiring services. Such remedies apply to no other merchants that provide invoices to their own customers. There is nothing to indicate that Congress intended the TDDRA to sweep so broadly.
While the Commission, by its proposed expansive definition of "telephone- billed purchase," is attempting to launch a general assault on the problem of "cramming," the industry itself is already taking significant steps, under the auspices of the FCC, to address the issue.
In April, 1998, FCC Chairman, William Kennard invited group of the largest local exchange carriers and representatives of the United States Telephone Association, the Association of Local Telecommunication Services ("ALTS"), and CompTel (an association of smaller interexchange service providers) to participate in a voluntary workshop to develop a set of guidelines that represent best practices to combat "cramming." The workshop kicked off on May 20 and resulted in the issuance of a set of industry best practices guidelines. These guidelines can be found at the FCC's website.(17) As those guidelines note:
FCC Common Carrier Bureau Chief (then Deputy Bureau Chief) Lawrence Strickling, on September 28, 1998, testified at a hearing of the House Subcommittee on Telecommunications, Trade, and Consumer Protection dealing with problems of "cramming" and "spamming". Mr. Strickling described the cramming workshop process:
More recently, in a February 17, 1999, speech before the Florida Communications Policy Symposium, FCC Commissioner Susan Ness noted:
For Ameritech's part, it has implemented steps to track customer complaints and to take action against crammers who utilize Ameritech's billing and collection services. As a result, Ameritech has already ceased billing for almost 40 providers/programs since the guidelines were adopted. In addition, Ameritech plans to offer customers the ability to block the billing of "miscellaneous" items by third parties. These are the types of charges with which cramming complaints are most often associated.
In short, with the industry engaged in a veritable all-out war against cramming, there is no imminent reason for the Commission to expand its own attack on cramming by defining "telephone-billed purchase" in manner inconsistent with the statutory definition. Industry efforts appear to be working. Moreover, the Commission can continue to dealt with the worst "crammers" through traditional targeted enforcement actions against deceptive or unfair practices that violate §5 of the Federal Trade Commission Act.
The current 900-Number Rule requires billing entities to provide their customers with notice of their billing error rights either annually or with each billing statement.(18) The Commission's proposed changes would eliminate the annual notification option.(19) The Commission states that, as a result of the change, "customers will be assured of timely notice of their rights and obligations in the event that a billing dispute arises." (20) The new "every bill" requirement is likely, however, to have counterproductive results.
Ameritech is one of those companies that did choose the annual option. It did so to avoid confusing customers and as part of a concerted attempt to keep bills and bill packages as uncluttered and as user-friendly possible. Ameritech determined that the details of the annual notification coupled with the segregation of pay-per-call services in a separate bill subsection provides customers who have legitimate billing disputes with adequate notification of their rights. At the same time, it avoids subjecting all customers to a birage of information that they do not, and may never, need and which would contribute visual "noise" which would likely make it harder for many customers to understand what is on the bill.
Similarly, the Commission must consider the fact that its "every bill" requirement will likely have the opposite effect that it intends. If the notice is on the bill itself, it will make the bill long, confusing, harder to read, and even intimidating. If it is on a separate statement that appears in the bill envelope every month, it will likely get thrown in the trash and never be read. Moreover, both of these options would entail significant additional costs over those associated with the annual option.
The Commission should also be aware that FCC is currently addressing the issue of the content and structure of telephone bills in its Truth-in-Billing docket.(21) The FCC's focus is on investigating whether telephone bills could be made clearer and less intimidating, with the specific intent of making it easier for customers to detect when they are being billed for unauthorized charges -- i.e., "crammed." Also, Ameritech has spent millions of dollars implementing a revised bill format that it believes will make it easier for customers to read and understand. The Commission's "every bill" notification requirement would conflict with these industry efforts to make it easier for customers to detect unauthorized charges and to address customers' desire for more concise bills. For that reason, and because there has been no showing that the annual notification option, coupled with the bill segregation of charges subject to the special dispute resolution process, has prejudiced customers, the Commission should not eliminate the option of annual notification.
The Commission proposes a new rule §308.17 by which it directs that a billing entity is guilty of committing a deceptive act or practice and violating the Commission's rule if it bills or attempts to collect payment for a telephone-billed purchase where it "knew or should have known" that the charge was not expressly authorized by the person from whom payment is being sought.(22) It goes without saying that the "knew or should have known" standard is a subjective one and, for that reason, intrinsically vague. However, the Commission's discussion of the rule can only lead to the conclusion that it is overbroad as well. Specifically, the Commission states:
Ameritech can certainly understand the concern about a vendor that submits a large number of bad charges for billing. However, the Commission seems to be saying that it would be a deceptive practice to bill for any charges if the vendor has billed "numerous" consumers without authorization. What if a vendor had billed a charge to 100,000 customers in a particular month and 500 were unauthorized? One might argue that 500 is "numerous" and, under these circumstances, Ameritech, as a billing entity, might well decide that the error rate was too high for its customers and take action against the vendor. However, the Commission's rule appears to be saying that it would be unlawful for the billing entity to attempt to collect any charges under the circumstances, when its experience is that 99.5% of the charges are unchallenged.
Instead, the Commission's standard for unlawfulness should be a more objective one -- at least for billing entities. Ameritech agrees with Bell Atlantic that an appropriate standard would be one similar to the one adopted by Congress in the Digital Millennium Copyright Act of 1998.(24) As Bell Atlantic notes, Congress specifically rejected a "should have known" standard for liability of on-line service providers for the actions of their customers. Instead, Congress determined that an on-line service provider would be liable for actions of its customers only if it is "aware of circumstances from which the infringing activity is apparent."(25) Similarly, a billing entity should be considered guilty of a deceptive practice, if at all, only when it is aware of facts or circumstances from which it is apparent that the particular charge in question would be inappropriate.
As noted above, the Commission proposes a rule that would make it unlawful for a billing entity to bill or attempt to collect a charge that was not expressly authorized "by the person to be billed for the purchase."(26) Such a change goes beyond the scope of ordinary contract law. Moreover, it ignores the facts of ordinary commercial behavior -- even at the consumer level. For example, under the proposed rule, it would be deceptive practice for a billing entity to include a charge on the telephone bill that is in one spouse's name if the charge was, in fact, authorized by the other spouse.
If the concern is lack of proper authorization, then this section should only require that -- i.e., proper authorization. Since many persons in a household may be authorized to charge items to the telephone account, the test should be whether the charges have been authorized by one reasonably believed to be in authority. This will leave all parties free to conduct business in the ordinar manner while still allowing customers to challenge crammed charges.
The Commission's proposed a definition of "vendor" reads as follows:
The intent of the second sentence is, obviously, to exclude from the definition a carrier that is providing only transmission or billing. The way it is drafted, however, a carrier who provides both transmission and billing services would not be covered by the exclusion. One solution would be to eliminate the second "only" in the second sentence so that it would read:
However, this would imply that a carrier that supplied a vendor with something more (e.g., office telephones, inside wire services, office voice mail, pencils, etc.) would be considered a vendor as well. That, obviously, should not be the case. Rather, the first sentence, by itself, is sufficient to exclude from the definition entities that merely supply the vendor with products or services (e.g., tax preparation services, office space, business vehicles) -- as long they do not offer or sell pay-per-call services or telephone-billed purchases. The second sentence of the definition can, therefore, be eliminated.
The Commission should be aware that, if its rules require that an expanded category of services be included in the separate portion of the bill identified as not being related to local and long distance telephone charges, a standard will be needed for vendors, services bureaus and billing aggregators to identify such charges on the data submitted to billing entities so that the charges may be properly positioned on their bills.(28)
The original rule for separation of charges applied only to pay-per-call services and, because of the extant definition, effectively only to calls to 900 numbers. Local exchange carrier billing systems were designed to strip out these calls from the billing items supplied by their billing and collection customers and place them in the appropriate separate section denominated as charges unrelated to local or long distance service. At least in Ameritech's case, these billing systems do not have the ability to identify other types of calls or charges as either pay-per-call services or telephone-billed purchases as defined by the Commission. For example, Ameritech has no way of distinguishing between a monthly recurring charge for voice mail (a telephoned-billed purchase under the Commission's new definition) and one associated with a calling plan or the recoupment of a carrier's universal service contributions (neither a pay-per-call service nor a telephone-billed purchase).
If these other charges are to be included in a separate section of the bill, the OBF will need to develop standards that vendors, billing aggregators, and service bureaus will have to use to identify those charges when they are submitted to local exchange carriers for billing. Therefore, if the Commission adopts its requirement for separate identification of these charges on customer bills, it should allow for sufficient time for the OBF to develop the necessary standards and for the industry to implement those standards.
In light of the foregoing, Commission should not:
In addition, the Commission should make a minor change to its definition of "vendor" to avoid the unintended inclusion of carriers in that category. Also, the Commission should delay implementation of any expanded billing statement disclosure requirements until the OBF has had an opportunity to set standards for data submission to billing entities.
Michael S. Pabian
Dated: March 10, 1999 (847) 248-6044
1. Notice of Proposed Rulemaking, 63 Fed. Reg. 58524 (October 30, 1998) ("NPRM").
2. The FCC's rules implementing Title I of the TDDRA are contained in 47 CFR §§64.1501, et seq.
3. 47 USC §228.
4. 15 USC §5714.
5. NPRM at 58536.
6. Id. at footnote 111.
7. 15 USC §78j(b).
8. 425 US at 199.
9. 15 USC §5724.
10. 15 USC §5721
11. NPRM at 58542.
12. 15 USC §5723.
13. NPRM at 58542.
14. 15 USC §5721(a)(2).
15. NPRM at 58541.
18. See current rule §308.7(n).
19. See proposed rule §308.20(m).
20. NPRM at 58554. The Commission also states (at footnote 286) that it is not aware of many instances where the annual option was being utilized.
21. See In the Matter of Truth-In-Billing and Billing Format, CC Docket No. 98-170, Notice of Proposed Rulemaking, FCC 98-232 (released September 17, 1998).
22. Ameritech will discuss the troublesome aspects of the "express authorization" requirement in the following section.
23. NPRM at 58549.
24. P.L. 105-304, §202.
25. 17 USC §512(c)(1)(A)(ii).
26. This proposed change tracks with changes the Commission is proposing to the definition of presubscription agreement in §308.2(j). However, Ameritech is not addressing those changes in these comments.
27. Proposed rule §308.2(t).
28. As noted above, however, expanding that list of services at this time is premature given the FCC's and the industry's efforts to combat cramming and to clarify customers' bills.