Pay-Per-Call Rule Review: Response to Notice of Proposed Rulemaking: 16 C.F.R. Part 308, FTC File No. R611016 #19

Submission Number:
Buck Bayliff
Association for Telecommunications Professionals in Higher Education
Initiative Name:
Pay-Per-Call Rule Review: Response to Notice of Proposed Rulemaking: 16 C.F.R. Part 308, FTC File No. R611016
Matter Number:


Before the Federal Trade Commission

Pay-Per-Call Rule Review-Comment

FTC File No. R611016
(63 FED REG 58524)
(64 FED REG 61)

Comments of ACUTA: The Association for Telecommunications Professionals in Higher Education

Pursuant to the Commission's request for public comment published in the Federal Register on October 30, 1998, ACUTA submits these comments on the above-captioned proposal.


The following comments are submitted on behalf of ACUTA: The Association for Telecommunications Professionals in Higher Education, a non-profit association whose members include over 800 colleges and universities throughout the United States, and some international members. ACUTA members include both large and small institutions of higher education, ranging from colleges with several hundred students to major research and teaching institutions with 25,000 students or more. ACUTA member representatives are responsible for managing telecommunications services on college and university campuses.

Unauthorized telephone charges represent a major problem for colleges and universities, and this problem has increased significantly in recent years. Specifically, higher education institutions have seen a major increase in unauthorized charges appearing on their monthly telephone bills consisting of pay-per-call services that are accessed using methods other than 900 number dialing, and telephone-billed purchases resulting in recurring monthly charges for services that were not authorized by the institution which is responsible for paying the bill.

This proliferation of unauthorized charges has been reported to the association by institutions in all parts of the United States, of all sizes and types, without regard to region or Local Exchange Carrier. It has resulted in significant time and dollar costs for institutions, which must invest additional time and staff resources to work with the myriad of vendors and billing entities to dispute these unauthorized charges and receive proper billing credit. Institutions, which are typically non-profit entities with limited telecommunications staff, have been forced to add or re-assign staff simply for the purpose of researching and resolving billing disputes for unauthorized charges In many cases, vendors and billing entities are non-responsive to efforts to resolve these problems, and the disputes extend for many months or are never resolved, resulting in late fees or other financial penalties.

For these reasons, ACUTA is supportive of the Federal Trade Commission's proposal to expand the scope of its "900-Number Rule" to include services that are accessed through dialing patterns other than dialing a 900 number. Further, we are supportive of the FTC's proposal to enact additional rules governing other purchases that result in charges assessed to the telephone bill.

We are particularly supportive of provisions that would require the express authorization of the person to be billed for the purchase, because of the manner in which telecommunications services are structured on college and university campuses.

Structure of College and University Telecommunications Services

Colleges and universities are particularly vulnerable to "cramming" and other forms of unauthorized charges. At the crux of this problem is the way in which telephone services are structured on college and university campuses. The college or university (institution) is the actual "owner" of the telephone lines, and is responsible for paying the telephone bill received from the Local Exchange Carrier (LEC) or Interexchange Carrier (IXC). The institution then makes telephone lines and telecommunications services available to students who are in residence on the campus, as well as to staff members of the institution. It is not unusual for institutions to be billed for services on 5,000 to 20,000 or more telephone lines, either through a Private Branch Exchange (PBX) owned by the campus, or through Centrex service obtained from the LEC.

Colleges and Universities are Ultimately Responsible for Payment of all Telephone Charges for their Students and Staff

Institutions are considered "aggregators" of telecommunications services under the rules of the Federal Communications Commission (FCC). They receive a single telephone bill from their LEC, and are responsible for paying that bill for all lines within the control of the institution. As an aggregator, the institution selects and contracts with telecommunications carriers to provide local and long distance telephone service, and any other telecommunications services, to their students and staff. The institution then bills students for their telephone lines and local and long distance services that they utilize. Or, the institution may contract out the billing function. However, in all cases the institution is the underlying entity that is responsible for paying the telephone bill that is received from the LEC or other billing entity.

Colleges and Universities Vulnerable to Unauthorized Charges

Colleges and universities are particularly vulnerable to unauthorized charges or "cramming", as described in Section B. 1. of the NPRM, "Changes in the Marketplace." The types of unauthorized charges received on the telephone bills of ACUTA institutions include non-900 pay-per-call charges, and recurring charges for non-audiotext telephone-billed purchases such as voice mail, club memberships, sweepstakes entries, and others.

This vulnerability to unauthorized charges occurs when individual students or staff members make telephone-billed purchases or access non-900 pay-per-call services which cannot be blocked. Students receive numerous solicitations for such services. They may or may not realize that, although they receive a monthly telephone bill from the institution, they are not authorized to charge services to their telephone number because the institution---not the student---is the party responsible for paying the bill.

Institutions cannot block the entire toll free calling ranges, just to restrict those numbers being used as an entry into pay-per-call billed services. Thus, colleges and universities must operate in a reactive mode, blocking individual toll free numbers after learning that they are pay-per-call services. In addition, contrary to current regulations, we find that in many cases our telephone bills do not identify the toll free numbers used for these pay-per-call services.

Unauthorized Charges Based on ANI Capture

In the case of services which are billed based on ANI capture, the problem becomes more complex. It is often difficult to determine the purchaser of a pay-per-call service, when the institution uses a PBX to route incoming and outgoing calls. The billing number supplied in ANI information is often a trunk line coming into the PBX, rather than an active telephone line. The charge simply appears on the institution's monthly telephone bill without being attributable to any individual or extension.

For institutions with PBXs, this is a frequently occurring method of receiving unauthorized charges, which could be avoided if vendors, service bureaus and billing entities were required to check the Line Information Database (LIDB) maintained by each LEC prior to billing for these services (see Recommendation for Subscription to LIDB below.)

ACUTA Supports Requirement for Express Authorization

ACUTA endorses the Commission's proposal in Section C.2. of the Notice, to modify rule Section 308.17, imposing a requirement that express authorization be obtained from the person to be billed for any telephone-billed purchase, other than a 900-number pay-per-call purchase that is blockable pursuant to 47 U.S.C. 228(c). As telecommunications services are structured on college and university campuses, such "person" would be the college or university.

The proposed requirements in Section 308.17, which would require express authorization of the responsible party, and would prohibit vendors, service bureaus and billing entities from collecting or attempting to collect these charges when they know or should have known that the person ordering the service was not the responsible party, would help to resolve this situation.

One method of ensuring that vendors, service bureaus and billing entities have accurate information regarding the correct responsible party would be to require the vendor, service bureau and billing entity to subscribe to a database maintained by each LEC containing this information. One such database is the Line Information Database, or LIDB. This database contains information that would enable vendors, service bureaus and billing entities to bill accurately, including information as to the entity that owns the lines and various LEC restriction levels (i.e., lines that are blocked from receiving collect calls or being used as a bill-to number, etc.). By using this database, vendors, service bureaus, and billing entities would be able to perform the billing validation that is necessary to identify the person from whom express authorization must be obtained.

We recommend that the FTC consider imposing this requirement on vendors, service bureaus, and billing entities as defined in these rules.

ACUTA Supports Requirement for Pre-Subscription Agreement

ACUTA fully supports the Commission's proposed requirements for a Presubscription Agreement with the person who will actually be billed for the service, addressed in Section 308.2 (j) of the proposed rules. We also support the proposed requirement for a PIN as defined in proposed section 308.2 (i), with the specific proviso that such a PIN shall be issued only to the person who will be billed for services provided pursuant to a presubscription agreement. We wish to re-emphasize the importance of obtaining authorization from the correct responsible party---in our case the institution rather than an individual who may be using a university-owned line without authorization to order a telephone-billed purchase.

We also agree with the proposed requirements in Section 308.14 for a pre-subscription agreement with the person to be billed for the service (the institution), prior to receiving monthly or other recurring charges. The rules in their entirety as proposed would provide much-needed protection to consumers, including large business telephone customers such as colleges and universities, which are particularly subject to these abuses.

Obligations of Service Bureaus and Billing Entities

In Section B. 2. of the Notice, Summary of Proposed Major Changes to the Rule, the Commission addresses the responsibilities of vendors, service bureaus and billing entities to ensure that express authorization is obtained from the person to be billed for the purchase.

ACUTA agrees with the proposed liability that would be placed on service bureaus under Section 308.16 of these rules. The actual experience of our members indicates that billing entities often seek to avoid responsibility for resolving complaints about unauthorized charges by simply referring the customer to the vendor of the service.

In addition, the Commission must recognize the important role that billing entities -- most commonly LECs -- play in ensuring that consumers are treated fairly in the allocation of charges for pay-per-call services. The proposed Section 308.17 provides one important means of encouraging LECs to deal only with legitimate providers that follow ethical business practices and obtain proper customer authorization. Moreover, LEC business practices also should include measures to confirm that the underlying vendor or service bureau has obtained the type of express authorization contemplated by the Commission's rules. These practices might include, for example, reviewing vendor verification procedures or requiring copies of relevant verification materials along with billing information.

By holding billing entities responsible for violations by any service bureau or vendor of pay-per-call services using their services, where they knew or should have known about the violation, the FTC will be creating an incentive for billing entities to cease billing for service bureaus or vendors which repeatedly violate these rules.

Dispute Resolution

We believe that the requirement in Section 308.20 that a billing dispute be initiated no later than 60 days after the billing entity transmits the first billing statement that contains the disputed charge does not provide sufficient protection for consumers who are the victims of cramming or other unauthorized charges.

The telephone bills received by colleges and other large business customers are often hundreds of pages in length, and very complex. Every effort is made to properly review these bills and identify unauthorized charges before paying the bill. However, in some cases, a billing error may not be discovered until an audit occurs subsequent to paying the bill.

In addition, institutions often do not actually receive their bills for three or four weeks after the actual billing date reflected on the bill. This is due to a combination of delays within the billing entity, and the time it takes for bills to be transmitted by U.S. mail. This further reduces the time available to customers such as colleges and universities to audit lengthy and complex telephone bills for billing errors, and to initiate dispute procedures.

For these reasons, we believe that the 60 day requirement is unreasonably restrictive and arbitrary. It would be far more reasonable to allow a minimum of 120 days from the date of transmission of the bill, rather than 60 days.

We recognize that vendors have an interest in resolving disputed charges in an expeditious manner and rightfully expect payment for services that were legitimately purchased. However, we believe that 60 days is an unreasonably short period of time to allow consumers to discover an error, learn the proper course of action to dispute a purported billing error, and file the required notifications.

In addition, we ask that the FTC consider that, for recurring unauthorized charges that are found to be billing errors, the vendor be liable to provide a refund or credit for any and all instances of that particular unauthorized charge from the first date that it appeared on the telephone bill. For example, if a monthly recurring unauthorized charge were discovered and disputed in February, 1999, and found to be in error, any prior instances of this same charge should also be considered in error and refunded, even if they occurred before the date on which the billing review was initiated.

ACUTA also suggests that consumers would be best served by an amendment to Section 308.20, requiring the LEC which transmits the telephone bill to be the consumer's point of contact as the entity designated to receive notices of billing errors and to initiate the billing review.

We believe that LECs receive substantial revenue from their arrangements to act as billing entities for vendors of pay-per-call services and other telephone-billed purchases. As such, they should also be required to accept responsibility to ensure that billing reviews are conducted, and billing errors corrected, in accordance with the applicable rules. By designating the LEC as the entity to receive notices of billing error, it would greatly simplify the dispute resolution procedure for consumers.


ACUTA commends the FTC for initiating this rulemaking procedure, and urges the adoption of the rules as proposed with the amendments suggested herein. We believe that, by doing so, the Commission will be providing a much needed solution to a problem that is rapidly proliferating and causing significant harm to consumers of telecommunications services.

Respectfully submitted,

The Association for Telecommunications Professionals in Higher Education
152 West Zandale Drive, Suite 200
Lexington, KY 40503

March 10, 1999

Buck Bayliff