Federal Trade Commission
In the Matter of
Pay-Per-Call Rule Review
FTC File No. R611016
To: The Commission
COMMENTS OF ATLANTIC TELE-NETWORK, INC.
Atlantic Tele-Network, Inc. ("ATN"),(1) by its attorneys, hereby files these comments(2) in the above-captioned rulemaking proceeding.(3) The Federal Trade Commission ("Commission" or "FTC") has proposed rules that would subject international audiotext services(4) to regulation under the Telephone Disclosure and Dispute Resolution Act of 1992 ("TDDRA"), 15 U.S.C. 5701 et seq., as "pay-per-call" services.(5)
Through its majority ownership interest in Guyana Telephone & Telegraph Ltd. ("GT&T"), ATN terminates a diverse array of international audiotext services from the United States and other countries. Based on its operations and industry experience, ATN estimates that 68% of international audiotext traffic involves chat services, and the remaining 32% involves other types of information services.(6) There is great consumer demand for these services, along with a significant growth potential. For example, in 1998, ATN terminated over 55 million minutes of U.S.-originated audiotext calls.(7) ATN estimates that total U.S.-originated international audiotext traffic in 1998 was approximately 250 million minutes.(8) International audiotext services have been provided in the same manner, and pursuant to essentially the same technology, since they were first introduced in 1990 and since GT&T first began terminating these calls in 1992.(9) ATN has a long history of voluntary compliance with standards proposed by the FTC and the industry to ensure reasonable international audiotext practices.
ATN respectfully submits that Section 701(b) of the Telecommunications Act of 1996 does not give the FTC the authority to reclassify international audiotext services as pay-per-call services. That section applies only to "similar services" which the FTC finds are "susceptible to the unfair and deceptive practices" that are prohibited by section 201(a) of the TDDRA. International audiotext services do not meet this standard, and therefore the FTC lacks authority to classify them as pay-per-call services.
Further, the proposed "express authorization" rule would have a devastating impact upon international audiotext providers, and thus is fundamentally inconsistent with the TDDRA, which is designed to promote "the continued growth of the legitimate pay-per-call industry." The proposed rule does not reflect a balance between the goals of promoting the growth of the legitimate pay-per-call industry and reducing unfair and deceptive practices, as required by the TDDRA, because it would put most, if not all, international audiotext providers out of business immediately. The certainty of the harm to the international audiotext industry contrasts dramatically with the lack of any record evidence showing that the proposed rule is needed today, particularly given the availability of less restrictive alternatives.
Lastly, the proposed rules would violate the First Amendment on two levels. First, the proposed rules are impermissibly based on the content of international audiotext transmissions and accordingly are unlawful on their face under a strict scrutiny standard. Second, the proposed rules plainly are far more restrictive than necessary to address any alleged "problems" arising from international audiotext services, and thus are unlawful for overbreadth under the First Amendment.
For these reasons, ATN submits that the FTC should not adopt its proposal to extend the definition of "pay-per-call" services to include international audiotext services.
I. CONGRESS ADOPTED THE TDDRA IN 1992 TO ADDRESS THE PROBLEM OF PROVIDERS IMPOSING CHARGES ABOVE AND BEYOND THE LONG DISTANCE CHARGE FOR THE CALL
Congress first addressed pay-per-call services in 1992 when it enacted the TDDRA to encourage the growth of the legitimate pay-per-call industry by curtailing specific types of unfair and deceptive practices engaged in by certain pay-per-call businesses.(10) At that time, providers of pay-per-call services typically made consumers pay "a charge in addition to the regular long distance charges" associated with the phone call for access to their services (the "additional charges").(11) The overwhelming majority of unfair and deceptive practices that provoked Congress to enact the TDDRA related directly to the amount of, or the mere existence of, these additional charges.(12) For example, unscrupulous providers of pay-per-call services were:
- Failing to disclose in advertising for pay-per-call services that consumers must pay charges in addition to the regular long distance charges;
- Using illegible print or inaudible audio messages in advertising for pay-per-call services to obscure the charges that consumers must pay in addition to the regular long distance charges;
- Using misleading advertisements for 800 numbers, which when called instruct the caller to call a 900 number, but not disclosing that there will be a charge in addition to the regular long distance charges for the call to the 900 number; and
- Advertising fraudulent sweepstakes in which consumers are told to call a pay-per-call service, the charges for which are not disclosed, to claim a "prize" that typically was not delivered.
Congress directed the TDDRA at these specific types of unfair and deceptive practices by enumerating them in the language of the TDDRA itself.(13) In so doing, Congress hoped to end the unfair and deceptive practices of unscrupulous pay-per-call service providers that had been giving the legitimate pay-per-call industry a bad reputation.
Congress found that the types of services for which consumers paid additional charges, several of which were "as high as $25 per call or $10 per minute,"(14) were particularly susceptible to these specific types of unfair and deceptive practices. Consumers of such services could learn the cost of the additional charges only from the provider of the pay-per-call service itself, not from the common carrier providing the consumers' regular long distance services. As such, these consumers were at the mercy of the provider of the pay-per-call service itself to obtain accurate information about the amount of the additional charges, which created undue incentives for fraud. Moreover, services for which consumers paid additional charges, unlike regular long distance services, were not regulated before enactment of the TDDRA. Finally, the additional charges did not appear separately on the consumers phone bill - they were mixed with the regular long distance charges for transmission of the call - which made it difficult for consumers to verify whether they had been correctly charged.
By contrast, services for which consumers paid no additional charges were not particularly susceptible to the specific types of unfair and deceptive practices Congress wanted to address in the TDDRA. Because consumers paid only the regular long distance charges for transmission of the call, they could learn the full extent of the charges they would pay for purchasing such services in advance simply by calling their regular long distance service provider, whose number was listed on the consumers' long distance bills. Moreover, the consumers could verify that they had been accurately charged for such services by viewing the per-minute rate and total minutes charged on their regular long distance bills. Finally, these services were regulated by, and tariffed at, the FCC, unlike services for which consumers paid additional charges.
The goals and intent of Congress in passing the TDDRA were clear: services for which consumers paid additional charges were susceptible to specific types of fraud and deceit and thus should be subject to special safeguards; services for which consumers did not pay additional charges were not susceptible to the same types of fraud and deceit and thus did not need to be subjected to special safeguards. Therefore, Congress adopted a definition for "pay-per-call" services in the TDDRA that included only services "for which the caller pays a per-call or per-time-interval charge that is greater than, or in addition to, the charge for transmission of the call."(15) Congress also explicitly excluded any service "the charge for which is tariffed" in order to ensure that services for which consumers paid only the regular long distance charge for transmission of the call, which could be only offered pursuant to a tariff, were not included within the definition for pay-per-call services.(16) The TDDRA subjected pay-per-call services to specific safeguards, including fair advertising requirements, free preambles to remind callers about the charges they would incur if they continued to remain on the line, number blocking upon request, and special procedures to contest charges.
Apart from the TDDRA, Congress has provided the FTC the necessary means to address all types of unfair and deceptive practices related to telecommunications services. Section 5(a) of the Federal Trade Commission Act ("FTC Act"),(17) for example, provides that unfair or deceptive acts or practices in or affecting commerce are unlawful. Misrepresentations and omissions of material facts made to induce a reasonable consumer to purchase products or services, including the purchase of information, are deceptive acts or practices that are prohibited by Section 5(a) of the FTC Act. Section 13(b) of the FTC Act(18) empowers federal courts to grant injunctive and other ancillary relief, including consumer redress, disgorgement and restitution, to prevent and remedy any violations of any provision of law enforced by the FTC. The FTC has used these provisions successfully to prosecute providers of international audiotext services using unfair and deceptive practices.(19) In sum, Congress authorized the FTC to prosecute all unfair and deceptive practices relating to any type of telecommunications service under Section 5(a) of the FTC Act, and to adopt rules pursuant to the TDDRA to protect consumers from the specific types of unfair and deceptive practices associated with pay-per-call services - all of which are enumerated in the TDDRA.
II. CONGRESS ADOPTED SECTION 701(B) TO ENABLE THE FTC TO PREVENT PROVIDERS FROM EVADING THE STATUTORY REQUIREMENTS GOVERNING ADDITIONAL CHARGES
Soon after Congress passed the TDDRA, unscrupulous pay-per-call operators began devising ways to evade its requirements. By 1996, the means for evading the TDDRA were well known, and Congress amended the statutory definition of pay-per-call services in order to end these specific practices.(20) The amendments were adopted in Section 701 of the Telecommunications Act of 1996, which is entitled "Prevention of Unfair Billing Practices for Information or Services Provided Over Toll-Free Telephone Calls."(21)
One of the most popular evasion techniques was to use 800 numbers, which were not subject to the TDDRA, to defeat the blocking of pay-per-call services, and then to charge the unsuspecting callers of 800 numbers high prices when they expected the call to be free. In 1996, Congress noted that:
"toll free numbers have been used to defeat the blocking of 'pay-per-call' numbers by connecting a caller to a 'pay-per-call' service after a toll free connection has been made. Households, businesses and other institutions have been billed for 'pay-per-call' charges even though 'pay-per-call' blocking techniques were used. This provision [, Section 701,] is intended to stop that practice."(22)
In order to "protect against the use of toll free telephone numbers to connect an individual to a 'pay-per-call' service,"(23) Congress amended the TDDRA "to clarify that subscribers who call an 800 number or other toll-free numbers shall not be charged for the calls unless the calling party agrees to be charged under a written subscription agreement or other appropriate means."(24)
Another popular evasion technique was to file a tariff for the pay-per-call service, because tariffed services were exempt from the TDDRA. By automatically exempting all tariffed services from the TDDRA, Congress had inadvertently created a loophole that allowed unscrupulous pay-per-call providers to continue using the fraudulent and deceptive practices that Congress intended the TDDRA to prevent. In 1996, Congress recognized that:
"Many information providers have taken advantage of this exemption by filing tariffs - especially for 1-500, 1-700 and 10XXX numbers - and charging customers high prices for the services. This exemption has proven to be a problem because consumers have none of the protections that were enacted as part of the [TDDRA]. Section 701(b) . . . closes that loophole."(25)
Accordingly, Congress removed the exemption from the TDDRA for tariffed services. Congress made clear, however, that it repealed the exemption for tariffed services merely to close the loophole it had inadvertently created, not because it intended to change the fundamental concept of "pay-per-call" services.(26)
In addition to foreclosing these popular evasion techniques, Congress authorized the FTC to expand the definition of "pay-per-call" services under specified limited circumstances if necessary to prevent unscrupulous pay-per-call service providers from finding new, unforeseen legal loopholes to evade the TDDRA. In other words, Congress clearly defined the types of services it wanted to regulate as pay-per-call services under the TDDRA, and then authorized the FTC to prevent the providers of such services from using technicalities or creative service configurations to avoid regulation. However, Congress did not authorize the FTC to make its own, separate determination whether the public interest would be served by regulating additional types of services under the TDDRA.
Congress adopted a specific mechanism the FTC must use to determine whether the definition of pay-per-call services should be expanded to close unintentional loopholes, and limited the FTC's jurisdiction to application of this specific expansion mechanism.(27) Congress designed the mechanism to ensure that the FTC maintained the current state of regulation, not to expand the realm of regulation to cover new types of services Congress had not intended to regulate under the original TDDRA.
In order to expand the definition of pay-per-call services, the FTC must make three rulings based on an evidentiary record. First, it must rule that the additional audio information or audio entertainment services which would be covered under the expanded definition are similar to the audio information or audio entertainment services covered by the FCC's definition of pay-per-call services as set forth in Section 228(i)(1).(28) Section 228(i)(1), as explained above, defined pay-per-call services as services for which consumers paid additional charges for audio information or entertainment, because such services were particularly susceptible to certain types of unfair and deceitful practices.(29)
Second, the FTC must rule that the additional services are susceptible to the same types of unfair and deceptive practices as traditional pay-per-call services. Thus, the FTC cannot expand the definition of pay-per-call services to include additional services solely merely because they are susceptible to unfair and deceptive practices. The additional services must be susceptible to the same unfair and deceptive practices as traditional pay-per-call services, which as Congress explained are particularly susceptible to "false and deceptive disclosure of rates and practices."(30)
Third, the FTC must rule that not only are the additional services susceptible to same of the same types of unfair and deceptive practices, but that these unfair and deceptive practices are within the scope and contemplation of both the existing statutory and regulatory requirements in Section 201(a) of the TDDRA.(31) In effect, Congress required the FTC to ensure that there is a reasonable fit between the current pay-per-call requirements and any service which the FTC may consider classifying as a pay-per-call service.
Comments On The FTC's Proposed Rules
III. RECLASSIFYING INTERNATIONAL AUDIOTEXT SERVICES AS PAY-PER-CALL SERVICES IS INCONSISTENT WITH SECTION 701(B) IN THE 1996 ACT
Section 701(b) authorizes the FTC to expand the definition of pay-per-call services only to include "other similar services" that the FTC determines are "susceptible to the unfair and deceptive practices that are prohibited by the rules prescribed pursuant to section 201(a)." ATN submits that international audiotext services do not satisfy even one of those three prongs, much less all three as required by Congress. Such services are not "similar" to the services which currently are classified as pay-per-call services, nor are they "susceptible to the unfair and deceptive practices" that the statutory and agency rules are designed to prohibit, and they are inconsistent in numerous respects with the statutory and regulatory pay-per-call requirements under Section 201(a) of the TDDRA. As a result, the FTC cannot lawfully reclassify international audiotext services as pay-per-call services pursuant to Section 701(b).(32)
A. Reliable Evidence on a Service-by-Service Basis.
The NPRM contains virtually no evidence of consumer problems with international audiotext services. Often, when stating the need to expand the coverage of the current rules, the FTC lumps international audiotext services together with toll-free numbers and other dialing patterns. E.g., NPRM at 7, 25. However, the fact that some consumers may experience problems with toll-free numbers does not prove or even suggest that they experience the same problems to the same degree for international audiotext services. In order to satisfy Congress' directive in Section 701(b), as well as the demands of reasoned decision-making under the Administrative Procedure Act, the FTC must obtain reliable evidence on a service-by-service basis to determine whether the statutory criteria are satisfied before it reclassifies a particular service as a pay-per-call service.(33) That Congress adopted Section 701(b) based on its concerns about 800 and other toll-free numbers - but not international audiotext services - underscores the importance of acting only on the basis of reliable evidence pertaining international audiotext services when deciding whether to adopt the proposal to reclassify those services as a pay-per-call service.(34)
Further, mere evidence that a few consumers have experienced problems with a particular service cannot justify reclassifying the service as a pay-per-call service under the statute. There is no telecommunications service provided by any carrier in any country that does not, at least on occasion, elicit complaints from consumers. The inquiry that Congress required is whether the nature and scope of the problems experienced by consumers with a particular service rise to the level of the 900 and other pay-per-call services that resulted in Congress' adoption of TDDRA in 1992. The FTC cannot reclassify international audiotext or any other service as a pay-per-call service unless it determines that such action is necessary to address significant problems that are not satisfactorily addressed under the current industry and regulatory regime.
One of the factors the FTC should consider in determining whether action is necessary is the extent to which its other powers can be used to address any alleged problems relating to international audiotext services. If there is any uncertainty as to whether the statutory criteria for expanding the definition of pay-per-call services has been satisfied, and ATN respectfully submits that there are numerous reasons for uncertainty, the FTC should not expand the definition, because Congress has already provided a mechanism for addressing unfair and deceptive practices relating to international audiotext services.
B. The Similarity Requirement
International audiotext services are not "similar" in nature to the services that Congress regarded as pay-per-call services when it adopted the TDDRA in 1992 and Section 701(b) in 1996 ("traditional pay-per-call services").(35) As Congress defined the term, pay-per-call services are services for which consumers pay additional charges above and beyond the regular long distance charge (if any) for the phone access to the service. By contrast, international audiotext services do not impose charges upon consumers above and beyond the regular long distance charge for the phone access to the service. This distinction is crucial, because the TDDRA targets unfair and deceptive practices relating to the additional charges, not the regular long distance charge for phone access to the service.
Traditional pay-per-call services and international audiotext services are different in terms of customer perception. First, a consumer's reasonable expectations about the total cost for the service, and his ability to verify those expectations, are radically different for traditional pay-per-call services and international audiotext services. This is due primarily to distinctions in the way that charges for the two types of services are calculated and charged to consumers.
The total cost for traditional pay-per call services is based on two components: (1) the regular long distance charges for the phone call to access the service; and (2) the additional charges for the service itself. By contrast, the total cost for international audiotext services is based on only one component: the regular international long distance charges for the international phone call to access the service. This crucial difference explains why Congress excluded international audiotext services from the original definition of "pay-per-call" services in the TDDRA, and why the FTC does not have the authority now to expand the definition to cover international audiotext services.
With respect to traditional pay-per-call services, a consumer could reasonably assume that the regular long distance charges for a traditional pay-per-call service are negligible or free, because such services can be accessed using various domestic dialing patterns, including normal domestic long distance, 1-800 and 1-900 numbers. However, this same reasonable assumption makes traditional pay-per-call services particularly susceptible to unfair and deceptive practices, because consumers may not know the amount of the additional charges they are paying for the service itself. In fact, a consumer might reasonably assume that there are no additional charges for the service, particularly for those services accessed through a 1-800 dialing pattern.
Even consumers who correctly assume that there will be additional charges for a traditional pay-per-call services must contact directly the provider of such services to verify their cost, despite the financial incentives for such providers either to downplay or conceal the total cost of the additional charges. Consumers cannot call their long distance service provider to verify the amount of additional charges they would pay for a particular pay-per-call service, or even to identify the provider of such services, because such charges are completely unrelated to the regular long distance charges. Until Congress adopted the TDDRA, consumers often could not identify the pay-per-call service provider, which is the only party who knows the true costs for the additional charges. Consequently, before the TDDRA, consumers frequently could not accurately determine the full cost of the pay-per-call service before calling, or complain about billing errors after calling. For this very reason Congress enacted the TDDRA which imposes safeguards designed specifically to ensure that the public would be adequately informed about the true cost of the additional charges and the nature of the services they were purchasing.
By contrast, international audiotext services can only be accessed by dialing a standard international direct dial ("IDD") number beginning with the prefix "011," the regular long distance charges for which a consumer knows are neither negligible nor free.(36) However, there are no additional charges for the international audiotext services. Indeed, international audiotext providers are technically incapable of charging consumers additional amounts for their services.(37) The calls are originated and carried by U.S. international carriers as standard "011" IDD calls, and the rates in those carrier's FCC-filed tariffs are the rates that apply to that call (and to any other non-audiotext call to the same country).(38) As such, the customer can call his long distance service provider to learn the full extent of charges for the service if he does not already know.(39)
Based on these distinctions, international audiotext services are not "similar" to pay-per-call services as defined by Congress. That conclusion is consistent with, and indeed mandated by, the legislative history underlying Section 701(b). Congress adopted that provision based on evidence that certain numbers - identified by Congress variously as 800 numbers, 1-500 numbers, 1-700 numbers, 10XXX numbers or, more generally, toll free numbers - were being used to provide audio information or entertainment services.(40) Similar to the services Congress regarded as pay-per-call services when it adopted TDDRA in 1992, each of these services resulted in callers receiving bills for calls which they reasonably could have thought were free or subject to negligible charges.
In adopting Section 701(b), Congress never once identified international audiotext services as the type of service which qualified as a pay-per-call service or required reclassification as a pay-per-call service. Unlike 800 numbers, 1-500 numbers, 1-700 numbers, and 10XXX numbers, which had first been used for pay-per-call services only after Congress enacted the TDDRA in 1992, international audiotext services were first introduced in 1990, and have been provided since then in the same manner, using the same technology. Congress' decision not to include international audiotext services in the list of services about which it was concerned shows that Congress did not regard these services as being "similar" in nature to pay-per-call services.(41)
The NPRM tries to equate international audiotext services with traditional pay-per-call services on the theory that international audiotext services somehow "conceal" the charge for the audio service, and that providers of this service have an incentive to prolong the length of these calls in order to maximize the charge to the consumers. NPRM at 27-28. That theory falls apart upon closer scrutiny. First, international audiotext providers do not "conceal" charges in any meaningful sense of that word. Callers are billed the exact same FCC-tariffed rate for the call that they would be billed for any non-audiotext IDD call to the same location. The rate for the call is disclosed fully, not concealed in any way. It is true, of course, that the rate for the call is used by the U.S. carrier and the terminating foreign carrier to cover various costs they incur, including, in this case, commission payments to service bureaus. However, the unexceptional fact that rates are used to cover costs (as they are for any telecommunications service) does not justify the FTC in condemning those costs as "concealed" from the end user. The key issue is whether all charges to consumers are disclosed, and international audiotext services impose a single charge on consumers that is fully disclosed.
The NPRM also tries to equate international audiotext services with traditional pay-per-call services on the theory that international audiotext providers have an incentive to prolong calls. This theory also crumbles upon closer scrutiny. As an initial note, every service provider who charges on a per-minute basis has an incentive to prolong calls, and many have the ability to affect directly the length of such calls. For example, many wireless service providers that charge on a per-minute basis theoretically have both the incentive and the ability to prolong calls made using the wireless service by requiring consumers to wade through lengthy menus to access optional services, providing lengthy voice mail answer messages, prolonging the time needed to obtain operator services, and requiring customers to hold while waiting to speak to a service representative. Ironically, wireless service providers would also be guilty of "concealing" charges under the FTC's theory if they paid outside contractors to provide any operator or value added services. However, wireless services, like international audiotext services, clearly are not similar to traditional pay-per-call services.
More importantly, however, is the fact that whether the service provider has an incentive to prolong the call is irrelevant to the statutory inquiry. Even assuming the FTC's belief is supportable,(42) Congress did not adopt the TDDRA to prevent service providers from finding ways to encourage subscribers to prolong calls. None of the TDDRA provisions, or the rules adopted by the FTC pursuant to TDDRA, address this alleged problem in any way whatsoever. It would be a statutory non sequitur for the FTC to reclassify international audiotext services as pay-per-call services based on this alleged incentive to prolong calls when neither the statute nor the FTC's rules address that problem.
Further, there is no reason why Congress (or the FTC) should be concerned about the call prolongation issue today. So long as callers understand that they are paying usage-based rates for calls, and so long as callers can limit their charges simply by hanging up the telephone at any time, there is no reason for Congress or the FTC to intervene. Further, given the fierce competition in the international audiotext industry today among different service providers, marketplace forces effectively prevent service providers from engaging in unreasonable practices.(43) Any provider who seeks to prolong calls unreasonably will be effectively disciplined by the loss of consumer patronage as consumers move to other service providers. In sum, the FTC's tentative determination that international audiotext providers have an incentive to prolong calls does not make that service "similar," as Congress used that term in Section 701(b), to the pay-per-call services that caused Congress to adopt the TDDRA in 1992.
C. Unfair and Deceptive Practices
International audiotext services are not "susceptible to the unfair and deceptive practices" that Congress sought to control by adopting the TDDRA. There is a critical distinction between international audiotext and pay-per-call services that the NPRM completely ignores. Unlike traditional pay-per-call services, international audiotext services are provided by companies that do not set, or have any influence over, the rates charged to callers for using their services.(44) As noted above, those rates are set by the callers' presubscribed U.S. international long distance carriers - in most cases carriers such as AT&T, MCI WorldCom and Sprint - in tariffs filed with the FCC. Because international audiotext providers have absolutely no control over the rates charged to end users for accessing their services, they do not have the incentive or the ability to engage in the types of practices which caused Congress to adopt the TDDRA. International audiotext providers cannot impose multiple charges on consumers, assess charges for services that appear to the consumer to be toll-free charges, or in any other way manipulate or change the rates that are charged for their services. Further, they have absolutely no control over the billing of those services, which is controlled by the U.S. international carriers and incumbent local exchange carriers. Therefore, international audiotext providers can manipulate neither the rates nor the billing process to the detriment of consumers.
In addition, the structure of the international audiotext industry contains checks and balances that are not present for 900 or other pay-per-call services. As noted above, a consumer who dials an international audiotext IDD number is making a standard international switched telephone call, and the rate that consumer pays is the exact same rate that a consumer would pay for making a non-audiotext IDD call to the same country. No U.S. carrier has sought to impose a higher charge for international audiotext calls, and indeed any such attempt undoubtedly would constitute unreasonable discrimination in violation of Section 202(a) of the Communications Act.(45) The fact that rates for international audiotext calls are tied to the rates charged for non-audiotext calls is a powerful mechanism for ensuring that the rates charged to consumers are reasonable and non-discriminatory. Because there is no similar system of checks and balances for 900 and other pay-per-call services, those services have experienced problems with the imposition of exorbitant or undisclosed charges on unsuspecting consumers.
In addition, the provision and billing of international audiotext services always have been more open than for 900 and other pay-per-call services. For international audiotext services, consumers can call their own domestic long distance provider, or check that provider's tariffs on file with the FCC, to learn the long distance charges that will apply to their calls. No similar mechanisms existed with respect to 900 and other pay-per-call services prior to the TDDRA.
D. The Rules Prescribed Pursuant to TDDRA Section 201(a).
Section 701(b) expressly limits the FTC to expanding the definition of pay-per-call service to include services which are susceptible to the practices "that are prohibited by the rules prescribed pursuant to section 201(a)." In effect, Congress has required the FTC to ensure that there is a reasonable fit between the current pay-per-call requirements (both statutory and regulatory) and any service which is newly classified as a pay-per-call service.
There are at least two glaring inconsistencies between the FTC's proposed expansion of the pay-per-call definition and the current pay-per-call rules. First, the TDDRA and the FTC's rules require pay-per-call services to be included in a portion of the customer's bill that is identified as "not being related to local and long distance telephone services."(46) However, for international audiotext services, it would be a falsehood to tell customers that an international audiotext call is not related to long distance telephone service. As noted above, such calls are dialed, completed and carried in the exact same manner as any "011" IDD call, and they are billed by U.S. carriers in exactly the same manner and at exactly the same FCC-filed rates as all IDD calls to those countries. As a result, international audiotext calls indisputably constitute long distance telephone service. It should be presumed that Congress did not intend for any service to be classified as a pay-per-call service if such a classification would result in consumers receiving bills with false representations.
In this case, it would be particularly harmful to classify international audiotext services as pay-per-call services due to the massive consumer confusion it would cause. When a customer dials an "011" international call (whether audiotext or otherwise), the customer expects to be billed for that call (as occurs today) just as the customer is billed for any other "011" IDD call.(47) For international audiotext calls suddenly to begin appearing on a billing insert reserved for non-long distance calls would confuse millions of consumers and cause many disputes over audiotext charges that callers knowingly incurred.(48) Because it would undermine rather than promote the congressional goals underlying the TDDRA for the FTC to classify international audiotext services as a pay-per-call service, the FTC should withdraw its proposal.
Second, the TDDRA and the FTC's rules require pay-per-call providers to provide certain information in a preamble while permitting the consumer to hang up at the end of the preamble without incurring any charges.(49) As part of the preamble, the service provider must "clearly" specify "the total cost or the cost per minute and any other fees for that service."(50) As the FTC is aware, international audiotext providers (through no fault of their own) cannot comply with this requirement. As noted above, the rates imposed on callers for these services are established by the U.S. international carriers. Those rates vary from one U.S. carrier to another, and even for a single U.S. carrier the rates may vary based on the length of the call, the rate plan selected by the customer, and the volume of calls the customer has made during that billing period. Also, those rates may change at any time without the knowledge or consent of the international audiotext provider.(51) As a result, it is impossible for an international audiotext provider to supply in advance "the total cost or the cost per minute" of the call in a preamble to the consumer.(52) The preamble requirement is compelling proof that Congress did not intend for services to be classified as pay-per-call services except in situations where the service providers set their own rates and therefore are in a position to comply with this requirement.
Moreover, there is no need for a preamble for international audiotext services as there is for 900 and other pay-per-call services. Congress adopted that requirement because many consumers learn about pay-per-call numbers through word-of-mouth, and therefore they will not see any disclosures that may appear in advertisements or other marketing materials. By contrast, international audiotext calls almost always begin with the caller reading or seeing an advertisement for the service. These "011" numbers are simply too long and lacking in independent meaning(53) for consumers to remember them apart from the advertisement or to learn of them via word-of-mouth sources.(54) As a result, these callers can be fully informed about the rates and other terms of the international audiotext service from the advertisements, and there is no need to impose a preamble requirement.(55) Once again, Congress certainly did not intend for the FTC to classify international audiotext as a pay-per-call service when there is no need to require a free preamble similar to that which existed for 900 and other current pay-per-call services.
The TDDRA and the rules adopted pursuant to section 201(a) of the TDDRA contain safeguards designed to target specific unfair and deceptive practices. Congress explicitly instructed the FTC not to expand the definition of "pay-per-call services" and subject additional services to the safeguards of the TDDRA, which are expensive to implement, unless the safeguards were absolutely necessary to prevent the exact same types of unfair and deceptive practices. Congress already has declared all other types of unfair and deceptive practices, including misrepresentations and omissions of material facts made to induce a reasonable consumer to purchase products or services, to be illegal,(56) and has empowered federal courts to grant injunctive and other ancillary relief, including consumer redress, disgorgement and restitution.(57) Thus, Congress has created two separate mechanisms to address unfair and deceptive practices relating to pay-per-call services and international audiotext services, and has mandated that the mechanism for addressing pay-per-call services not be expanded unless necessary to prevent such existing services from creating new loopholes to evade regulation. To the extent the requirements of the TDDRA are contradictory or otherwise not suitable to international audiotext services, that is probative evidence that Congress did not authorize the FTC to regulate such services as pay-per-call services.
IV. THE FTC SHOULD NOT ADOPT THE PROPOSED "EXPRESS AUTHORIZATION" REQUIREMENT
The TDDRA imposes numerous specific requirements on pay-per-call providers, and the FTC, as directed by Congress, has adopted rules to implement those requirements. However, the NPRM goes several steps beyond what Congress has mandated by proposing additional pay-per-call rules. From the perspective of international audiotext providers, a critical proposed rule is Section 308.17, which provides that for services not subject to blocking at the request of consumers, billing is prohibited unless the consumer has given its "express authorization." The FTC proposes to apply the term "express authorization" narrowly to require measures such as a tape recording of the caller's consent to the charges or a signed agreement. NPRM at 67-68. As shown in more detail below, the "express consent" rule would have a devastating impact upon international audiotext providers. In light of that impact, and the less restrictive alternatives available to the FTC for addressing this issue, it would be unlawful under the TDDRA, Section 701(b) of the 1996 Act, and the Administrative Procedure Act for the FTC to adopt the "express authorization" rule as proposed.(58)
A. Balancing Competing Factors Based on Record Evidence
In adopting TDDRA, Congress sought to encourage the growth of the legitimate pay-per-call industry. Congress believed that statutory provisions and agency rules curbing unfair and deceptive practices would be consistent with that goal because permitting such practices to continue unabated would stunt industry-wide growth. Congress emphasized its commitment to promoting this industry when it stated that "[s]uch services are convenient to consumers, cost-effective to vendors, and profitable to communications common carriers."(59) Congress also declared that "[m]any pay-per-call businesses provide valuable information, increase consumer choices, and stimulate innovation and responsive services that benefit the public."(60) In adopting TDDRA, and by amending it with Section 701(b) of the 1996 Act, Congress saw the goals of reducing unfair and deceptive practices, on the one hand, and promoting the growth of the legitimate pay-per-call business, on the other hand, as being in harmony.
The NPRM does not acknowledge the public benefits of international audiotext services. To the contrary, the NPRM goes out of its way to propose an "express authorization" rule that, if adopted, would effectively eliminate the international audiotext industry. In proposing that rule, the FTC failed to take into account the need to promote the legitimate pay-per-call industry as a factor to be considered in deciding what rules to promulgate, and how those rules should be structured to impose the least onerous burden on international audiotext services necessary while addressing any alleged "problems" perceived by the FTC. The FTC also did not rely upon any evidence that there is a serious problem in the audiotext industry that needs to be addressed. ATN submits that the FTC must consider the impact of its proposed rules upon the legitimate international audiotext industry, and rigorously analyze less restrictive alternatives to its proposed rules, based on record evidence in order to satisfy the congressional goals underlying the TDDRA and Section 701(b).
B. Impact and Need.
If adopted, the proposed "express authorization" rule would put most if not all international audiotext providers out of business immediately.(61) The two methods suggested by the FTC for proving "express authorization" - taped voice consent or a signed agreement - are not remotely cost-effective for the international audiotext industry. As regards voice tapes, the expense of obtaining and taping millions of voice consents, retaining millions of such tapes for many months, processing tapes in response to complaints, and proving that a one- or two-syllable taped voice consent corresponds to the billed party far outweighs the economic value of those calls to the audiotext provider.(62) As regards a signed agreement, the FTC itself recognized that this solution is infeasible when it underscored the "instantaneous nature" of these transactions. E.g., NPRM at 26, 27. International audiotext service is inherently a casual calling service, which precludes using an agreement signed in advance as the basis for providing service.(63) Adopting the "express authorization" requirement in its current form is the functional equivalent of banning international audiotext services, and adopting that rule would stray beyond the FTC's rulemaking authority under TDDRA. Nowhere in the text of the TDDRA or the 1996 Act, or even in the legislative histories of these acts, is there any support for the proposition that the FTC has the authority to ban altogether a method for providing audio information or entertainment services.
Moreover, Congress did not intend to encourage consumer fraud by enacting legislation that would allow consumers to abuse express authorization or bill forgiveness requirements in order to obtain services free of charge.(64) However, the proposed rule would encourage consumer fraud by allowing consumers to abuse the "express authorization" requirements in order to obtain free services.
The certainty of the harm to the international audiotext industry caused by the rule contrasts dramatically with the lack of any record evidence showing a need for this rule today. To the contrary, it is ATN's experience that the marketplace already has developed a satisfactory set of procedures to ensure that consumers do not pay for calls they did not authorize. The vast majority of consumers who complain that they did not consent to such charges are successful in having those charges canceled.(65) Further, ATN has facilitated that result by negotiating an agreement with the U.S. carrier who originates most of GT&T's audiotext traffic from the United States to reduce that carrier's settlement payments by an amount estimated to represent the higher non-payment rate for international audiotext calls.(66) This agreement ensures that the U.S. carrier does not suffer losses when it agrees to write off charges that are disputed by consumers on the ground that they did not consent to pay them. As a result, ATN simply is not aware of any significant problem in the industry today with consumers who are forced (or aggressively pursued) to pay charges for international audiotext services when they claim that they did not consent to such charges. Given the disastrous impact and unproven need for the "express authorization" rule, ATN submits that the FTC cannot lawfully adopt that rule under its governing statutes and the Administrative Procedure Act.
C. Less Restrictive Alternatives.
The NPRM does not consider whether alternative rules would effectively address the perceived problem while having a less severe impact upon international audiotext providers. In particular, if the FTC believes that it is a problem that consumers cannot opt to block international audiotext numbers, ATN submits that the most logical and appropriate solution would be for U.S. carriers to be required to block those numbers upon request. Certainly, there is no difficulty in identifying audiotext numbers for foreign carriers, such as GT&T, who are willing to provide a complete list of those numbers to U.S. carriers.(67) Further, based upon its experience as a telecommunications carrier, ATN submits that it is technically feasible for U.S. carriers to block international audiotext numbers upon request.(68) Indeed, it is ATN's understanding that certain U.S. carriers (e.g., MCI WorldCom) block international audiotext numbers today for consumers with large outstanding balances on their accounts. To the extent the FTC may believe it lacks jurisdiction to require U.S. carriers to engage in blocking, the FTC should work closely with the FCC to achieve that result. Certainly, there is no justification for prohibiting international audiotext services through the "express authorization" requirement when it is technically feasible for U.S. carriers to offer blocking upon request.
In the alternative, the FTC should adopt a broader definition of the term "express authorization." The FTC's proposed definition would exclude the most probative indication of authorization - proof that the call originated from the telephone of the billed party. The NPRM offers no reason for its decision to reject such proof as evidence of consent. NPRM at 67. In the vast majority of cases, the billed party either makes, or exercises control over who makes, telephone calls over a particular line.(69) Of course, this approach is not fool-proof in that parties occasionally may make calls on someone else's telephone without their consent. But the FTC's proposal is no more fool-proof. Even assuming it could be implemented in a cost-effective manner, the taped voice consent approach would simply produce disputes over the accuracy of the record-keeping and the identity of the voice in a one- or two-syllable taped consent. Similarly, reliance upon signed agreements would simply produce disputes over the validity of the signature and the accuracy of the record-keeping, and the existence of a signed agreement would not show that any specific call was made or authorized by the person who signed it. Among these alternatives, ATN submits that the best and most reasonable proxy for express authorization is whether the call originated from the telephone of the billed party. By adopting that definition, the FTC could promote its policy goals without the disabling impact upon the international audiotext industry that its proposed rule would cause.
Finally, the FTC can continue to prosecute providers of international audiotext services that use unfair and deceptive practices under section 5(a) of the FTC Act,(70) which prohibits misrepresentations and omissions of material facts made to induce a reasonable consumer to purchase products or services, including the purchase of information. Pursuant to Section 13(b) of the FTC Act, the FTC can ask a federal court to grant the appropriate injunctive or other ancillary relief, including consumer redress, disgorgement and restitution, to prevent and remedy any violations of any provision of law enforced by the FTC. The FTC has already used these provisions successfully to prosecute providers of international audiotext services using unfair and deceptive practices.(71)
V. THE PROPOSED RULE WOULD VIOLATE THE FIRST AMENDMENT
The FTC's proposed rules, in conjunction with the underlying TDDRA requirements, are overly restrictive and impermissibly infringe the right to free speech of the providers of international audiotext services. The proposed reclassification of international audiotext services undoubtedly regulates expressive activity within the scope of the First Amendment.(72) Based on the proposed rules, the FTC would subject telecommunications services to additional restrictions on the content and manner in which they are provided, requiring, among other things, that operators provide a free preamble which contains specific types of information. The proposed rules would also serve as an absolute ban on certain types of speech and speakers, including providers of international audiotext services, that cannot comply with the applicable restrictions. Therefore, the FTC must address the issue whether its proposed reclassification of international audiotext services comports with First Amendment requirements. ATN respectfully submits that, as shown below, the TDDRA and the FTC's rules would violate the First Amendment as applied to international audiotext services if the FTC adopts its proposals to reclassify such services as pay-per-call services.
A. The Proposed Rules Are Impermissibly Content Based
Although the TDDRA and its related rules do not on their face differentiate speech on the basis of content, the proposed reclassification of international audiotext services as pay-per-call services stems from an inchoate if not explicit desire to suppress speech based on its content.(73) The record in this proceeding contains many negative views about adult-oriented international audiotext services and numerous suggestions that they should be banned altogether.(74) Further, the FTC itself proposed rules without recognizing the benefits of international audiotext services, assessing the adverse impact of its rules on those services, or analyzing whether less restrictive alternatives would adequately promote its goals. Indeed, the FTC recognized that one of its proposals could not be complied with by international audiotext providers, yet it nevertheless put forward the proposal without making any attempt to balance the competing interests involved or examine alternatives.(75) In light of the FTC's more general failure to base its proposals upon any record evidence that international audiotext services satisfy the three statutory criteria for expanding the definition of pay-per-call services, the NPRM itself is strong evidence that the FTC's proposals are motivated by an effort to stamp out adult-oriented audiotext services by effectively banning all international audiotext services.
Government regulation that differentiates speech on the basis of content or the identity of the speaker is subject to the strict scrutiny standard of review.(76) "The First Amendment's hostility to content-based regulation extends not only to restrictions on particular viewpoints, but also to prohibition of public discussion of an entire topic."(77) Therefore, the proposed rules, if adopted in their current form, would be subject to the strict scrutiny standard of review.(78)
Laws and regulations that are subject to strict scrutiny because they are content-based are presumptively invalid "and survive constitutional review only if they promote a 'compelling interest' and employ 'the least restrictive means to further the articulated interest.'"(79) The proposed rules violate the First Amendment because they do not promote a compelling interest. The record demonstrates that the proposed rules are designed to ban adult-oriented international audiotext services or to silence international audiotext service providers, neither of which is a legally permissible goal.
The proposed rules also violate the First Amendment because they are not the least restrictive means to further the FTC's articulated interest. Congress could have taken innumerable means to address alleged unfair and deceptive practices relating to international audiotext services short of an outright ban. This point cannot seriously be contested. Consequently, Congress could not have included international audiotext services within the definition of pay-per-call services consistent with the First Amendment.
Further, because the safeguards of the TDDRA are statutorily mandated for all services that fit within the definition of pay-per-call services, the FTC has no discretion to modify the safeguards so that legitimate international audiotext services could still be provided. In other words, either a service fits the definition of pay-per-call services, in which case it is subject to all of the statutorily mandated safeguards, or it does not fit the definition, in which case it is not regulated under the TDDRA. Therefore, the FTC has no real option apart from excluding international audiotext services from the definition of pay-per-call services, because to include it would violate the First Amendment.
B. The Proposed Rules Are Overly Restrictive
The First Amendment prohibits not only content-based restrictions that censor particular points of view, but also content neutral restrictions that unduly constrict the opportunities for free expression. Thus, even if the FTC were motivated solely by the desire to address fraudulent and deceptive practices, it may not do so by unduly constricting the opportunities for providers of international audiotext services to exercise their right to free expression.
The proposed rules unduly constrict the opportunities for free expression because the FTC already has means at its disposal to address unfair and deceptive practices related to international audiotext services. Section 5(a) of the Federal Trade Commission Act ("FTC Act")(80) provides that unfair or deceptive acts or practices in or affecting commerce are unlawful. Misrepresentations and omissions of material facts made to induce a reasonable consumer to purchase products or services, including the purchase of information, are deceptive acts or practices that are prohibited by Section 5(a) of the Act. Section 13(b) of the FTC Act, 15 U.S.C. 53(b), empowers federal courts to grant injunctive and other ancillary relief, including consumer redress, disgorgement and restitution, to prevent and remedy any violations of any provision of law enforced by the FTC. The FTC has already used these provisions successfully to prosecute providers of international audiotext services using unfair and deceptive practices.(81) Therefore, it cannot be seriously argued that an outright ban of international audiotext services is necessary to address the alleged fraudulent and deceptive practices. In any event, if additional safeguards were necessary, Congress could effectively address such alleged problems by adopting rules designed specifically to prevent the types of harms at issue.
The Supreme Court "has voiced particular concern with laws that foreclose an entire medium of expression."(82) If adopted, the proposed rules would entirely foreclose international audiotext services. The Court has explained that "[a]lthough prohibitions foreclosing entire media may be completely free of content or viewpoint discrimination, the danger they pose to the freedom of speech is readily apparent - by eliminating a common means of speaking, such measures can suppress too much speech."(83) Thus, regardless whether the proposed regulations are content-based, they are inconsistent with the First Amendment. Therefore, ATN respectfully urges the FTC not to include international audiotext services within the definition of pay-per-call services.
For the foregoing reasons, ATN urges the FTC not to expand the definition of "pay-per-call" services to include international audiotext services.
ATLANTIC TELE-NETWORK, INC.
Robert J. Aamoth
Todd D. Daubert
Kelley Drye & Warren, LLP
1200 19th Street, N.W.
Washington, DC 20036
March 10, 1999
1. ATN is a U.S. corporation with a direct or indirect majority ownership interest in several entities providing telecommunications services and/or equipment. Among those entities is Guyana Telephone & Telegraph Ltd. ("GT&T"), which terminates international telephone calls, including audiotext traffic, from the Untied States.
2. ATN files these comments pursuant to the Notice of Proposed Rulemaking ("NPRM") issued by the Federal Trade Commission on October 30, 1998, and the 60-day extension of comment period released on December 23, 1998.
3. These Comments are also filed on behalf of the ISLANDS TELEPHONE COMPANY LIMITED ("ITC"). ITC is a marketing organization in the Service Bureau arena. ITC's mission is to explore new opportunities and expand in the global audiotext industry. Formed under the laws of the Cayman Islands, ITC began operations in the Dominican Republic in 1991, and soon thereafter installed termination equipment and monitoring personnel in Guyana. ITC currently has operations in the Dominican Republic, Nicaragua, St. Vincent, Curacao, Colombia, Brazil, Hong Kong, and Israel. ITC presently advertises its international services not just in the United States, but in the equally dynamic foreign markets of the United Kingdom, France, Korea, Taiwan, and Japan. Brazilian, Argentinean, and Australian markets are being addressed as well.
4. In these comments, ATN uses the term "international audiotext" to refer to services where the consumer dials an international direct dial "011" number to a foreign destination, the call is routed to the foreign country corresponding to the IDD number, and the consumer pays the rate specified for the call in the tariff filed with the Federal Communications Commission by the originating U.S. international carrier. ATN does not use the term "international audiotext" to include services that are not accessed by dialing an "011" number, or that route calls to a country other than the country corresponding to the "011" IDD number. The NPRM also discusses international calls to countries that are part of the North American Numbering Plan. ATN does not terminate any such calls, and does not discuss them in these comments.
5. In a separate notice filed with the FTC today, March 10, 1999, ATN requests permission to participate in the related public workshop to be held on May 20-21, 1999.
6. See Affidavit of Lawrence Fuccella, Attachment at ¶7 [hereinafter "Fuccella Affidavit"].
7. Fuccella Affidavit at ¶4.
8. Fuccella Affidavit at ¶4.
9. Fuccella Affidavit at ¶8.
10. U.S.C. § 5701(b).
11. See, e.g., S. Rep. No. 102-190, at 1 (1991) ("When consumers call a 900 number, they are assessed a charge in addition to the regular long distance charges. Generally callers are either charged a flat fee per call or charged by the minute.")
12. See, e.g., id. at 2 ("The most frequent complaints received by both the FCC and FTC concern false or deceptive disclosure of rates and products.").
13. 15 U.S.C. §5711(a)(1).
14. S. Rep. No. 102-190, at 1 (1991).
15. The TDDRA originally defined "pay-per-call" as any service:
- (A) in which any person provides or purports to provide -
- (i) audio information or audio entertainment produced or packaged by such person;
- (ii) access to simultaneous voice conversation services; or
- (iii) any service, including the provision of a product, the charges for which are assessed on the basis of the completion of the call;
- (B) for which the caller pays a per-call or per-time-interval charge that is greater than, or in addition to, the charge for transmission of the call; and
- (C) which is accessed through use of a 900 telephone number or other prefix or area code designated by the Commission in accordance with subsection (b)(5).
- (2) Such term does not include directory services provided by a common carrier or its affiliate or by a local exchange carrier or its affiliate, or any service the charge for which is tariffed, or any service for which users are assessed charges only after entering into a presubscription or comparable arrangement with the provider of such service." (emphasis added).
16. See, e.g., S. Rep. No. 102-190 (1991).
17. 15 U.S.C. § 45(a).
18. 15 U.S.C. § 53(b).
19. See, e.g., FTC v. International Telemedia Associates, Inc., 1-98-CV-1935 (N.D. Ga., filed July 10, 1998); Daniel B. Lubell, No. 3-96-CV-8200 (S.D. Iowa, filed Dec. 17, 1996).
20. In the TDDRA, Congress used the same definition of pay-per-call services for both the FCC and the FTC.
21. See Telecommunications Act of 1996 § 701, Pub. L. No. 104-104, 110 Stat. 56 (1996) (emphasis added).
22. See, e.g., id.
23. See, e.g., id.
24. See, e.g., id.
25. See, e.g., H.R. Conf. Rep. 104-458 (1996), reprinted in 1996 U.S.C.C.A.N. 124, 126.
26. See, e.g., id.
27. 15 U.S.C. § 5714.
28. Id. ("the Commission by rule may . . . extend such definition to other similar services")(emphasis added).
29. 47 U.S.C. §228(i)(1).
30. S. Rep. No. 102-190, at 2 (1991).
31. 15 U.S.C. § 5714 ("if the Commission determines that such [similar] services are susceptible to the unfair and deceptive practices that are prohibited by the rules prescribed pursuant to section 201(a) [of TDDRA]")(emphasis added).
32. ATN shows below (see Section V infra) that it would violate the First Amendment for the FTC to reclassify international audiotext services as a pay-per-call service under the TDDRA. Based upon the well-established precedent that courts and agencies should endeavor to interpret and implement statutes in a way that avoids constitutional infirmities, this is a further reason for the FTC to find that international audiotext services do not satisfy the three criteria for reclassification as pay-per-call services. See, e.g., Morrison v. Olson 487 U.S. 654, 682 (1988) ("[T]he duty of federal courts to construe a statute in order to save it from constitutional infirmities . . ."); Weaver v. United States Information Agency, 87 F.3d 1429, 1436 (D.C. Cir. 1996), cert. denied, 1175 S. Ct. 2407 (1997) ("A statute must be construed, if fairly possible, so as to avoid not only the conclusion that it is unconstitutional but also grave doubts upon that score.").
33. ATN submits that it is not sufficient for the FTC to rely upon mere assertions of consumer harm by organizations who participate in this rulemaking proceeding. Such organizations often are opposed to international audiotext services for content-based reasons, and thus may be prone to exaggerate the extent to which the public has experienced problems with the service requiring the massive regulatory response proposed in the NPRM.
34. ATN's efforts to review any complaints about international audiotext services on file with the FTC have been unsuccessful. ATN submits that the FTC cannot adopt the proposed rules without making such information available on the record and giving parties a reasonable time to comment upon such information. ATN is willing to enter into any reasonable arrangements designed to protect legitimate confidentiality interests.
35. The definition that Congress adopted in 1992 is identical to the current definition, except that tariffed services are no longer exempt. However, the exemption for tariffed services was repealed solely to close an inadvertent loophole in the law, not because Congress wanted to change the definition of pay-per-call services, as was explained in more detail above.
36. Consumers understand that such calls are billed as international long distance calls by their U.S. carriers.
37. Fuccella Aff. ¶ 9.
38. Fuccella Aff. ¶ 9.
39. Moreover, the rates for international audiotext services by definition cannot be exorbitant, because the tariff pursuant to which they are offered must be approved by the Federal Communications Commission.
40. See, e.g., H.R. Conf. Rep. 104-458 (1996), reprinted in 1996 U.S.C.C.A.N. 124, 126.
41. This conclusion is also supported by nature of the TDDRA's safeguards, which directly address the problems associated with traditional pay-per-call services, not international audiotext services. In fact, many of the TDDRA's safeguards are either technically inconsistent with international audiotext services or illogical when imposed upon such services, as explained in more detail below.
42. The FTC does not cite to any evidence that call prolongation is a major problem today, nor does it discuss the alleged ways in which audiotext providers are able to prolong calls against the will of consumers. It bears noting that all telecommunications carriers who charge usage-based rates, including common carriers such as AT&T, have an incentive to maximize revenues by prolonging the length of calls. This universal characteristic of services provided at usage-based rates does not justify regulating such services as pay-per-call services.
43. Fuccella Aff. ¶ 10. Competition exists not only from other international audiotext providers, but from alternative media, such as the Internet. Fuccella Aff. ¶ 10. Given the plethora of competing providers of audio and video entertainment services, providers of international audiotext service are effectively prevented from engaging in any practices on a systematic basis that consumers find to be unreasonable.
44. Fuccella Aff. ¶ 9.
45. 47 U.S.C. § 202(a).
46. 47 U.S.C. § 228(d)(4); 16 C.F.R. § 308.18(a).
47. Fuccella Aff. at ¶ 19.
48. Fuccella Aff. at ¶ 19.
49. 15 U.S.C. § 5711(a)(2); 16 C.F.R. § 308.5(a)-(b).
50. 15 U.S.C. § 5711(a)(2); 16 C.F.R. § 308.5(a)(2).
51. Fuccella Aff. ¶ 11.
52. One other compliance issue deserves attention. International audiotext providers are technically incapable of complying with the free preamble requirement - namely, enabling callers to hang up at the end of the preamble without incurring a charge - except by the practice of having the terminating foreign carrier delay the return of answer supervision for the length of time (estimated to be about 18 seconds) that it takes to provide the required preamble. Fuccella Aff. ¶ 12. Therefore, in the event the FTC determines to impose this requirement on international audiotext services, the FTC should clarify that foreign carriers may withhold answer supervision for the limited purpose of complying with the free preamble requirement, and it should work cooperatively with U.S. carriers to make certain they will not interfere with this practice.
53. In particular, international audiotext numbers normally do not spell words that are easily remembered, nor do they usually repeat or sequence the same numbers in ways that makes them easy to remember. Fuccella Aff. ¶ 13. The result is that they are difficult to memorize or remember.
54. Fuccella Aff. ¶ 13.
55. In ATN's experience, due to marketplace forces as well as industry self-regulation, most international audiotext services already provide a preamble containing the types of disclosures mandated by the TDDRA and the FTC's rules. Fuccella Aff. ¶ 14. ATN is aware of no evidence in the record that such preambles systematically fail to provide sufficient information to consumers.
56. 15 U.S.C. § 45(a).
57. 15 U.S.C. § 53(b).
58. The express authorization requirement would also violate the First Amendment for the same reasons, as discussed further below.
59. 47 U.S.C. § 5701(a)(1).
60. 47 U.S.C. § 5701(a)(2).
61. Fuccella Aff. ¶ 15.
62. Fuccella Aff. ¶ 15.
63. Fuccella Aff. ¶ 15.
64. See, e.g., S. Rep. No. 102-190 (1991) ("The Committee [on Commerce, Science, and Transportation] does not endorse consumer fraud nor does it intend by this legislation to inadvertently encourage consumer fraud in this area. Therefore, it is the intention of the Committee that the FCC craft careful rules to omit potential abuses of this or any provision in the bill.").
65. Fuccella Aff. ¶ 16. Indeed, ATN is concerned that it has become so easy for consumers to avoid paying charges for international audiotext calls that some consumers seek to cancel charges for calls which they knowingly placed to international audiotext numbers. We believe the FTC should be concerned about the potentially fraudulent nature of such activities.
66. Fuccella Aff. ¶ 17.
67. Fuccella Aff. ¶ 18.
68. Fuccella Aff. ¶ 18.
69. ATN would note that parties make unauthorized calls over another person's telephone line in other contexts without apparent regulatory concern (e.g., child making long distance call to grandparent without parent's consent). It is ATN's experience that such calls are routinely billed to and paid by the billed party because they were made over a line controlled by the billed party. Particularly given the generous industry practices today regarding the cancellation of disputed audiotext calls, it is reasonable to expect subscribers to exercise as much control over the use of their telephone lines for audiotext calls as for other types of calls.
70. 15 U.S.C. § 45(a).
71. See, e.g., FTC v. International Telemedia Associates, Inc., 1-98-CV-1935 (N.D. Ga., filed July 10, 1998); Daniel B. Lubell, No. 3-96-CV-8200 (S.D. Iowa, filed Dec. 17, 1996).
72. As applied to international audiotext services, the proposed rules would effectively ban all types of speech, including information lines about weather, sports, health and concert and music information lines.
73. See, e.g., SBC Communications, Inc. v. FCC, 154 F.3d 226,
74. See, e.g., Workshop on Pay-Per-Call Rulemaking on June 19, 1997, Transcript, at 18; Comments of the Alliance of Young Families.
75. NPRM at 59-62. Even though it may now be possible to provide a preamble, the FTC did not know that when it proposed the rules.
76. See, e.g., Chesapeake and Potomac Telephone Company of Virginia v. United States, 42 F.3d 181, 190 (4th Cir. 1994).
77. Consolidated Edison Co. of N.Y. v. Public Serv. Comm'n of N.Y., 447 U.S. 530, 537 (1980).
78. See Turner Broadcasting System, Inc. v. FCC, 512 U.S. 622. 658 (1994) ("[S]peaker-based laws demand strict scrutiny when they reflect the Government's preference for the substance of what the favored speakers have to say (or aversion to what the disfavored speakers have to say).").
79. Time Warner Entertainment Co., L.P. v. FCC, 93 F.3d 957, 966 (1996) (quoting American Library Association Ass'n v. Reno, 33 F.3d 78, 84 (D.C.Cir. 1994)(quoting in turn Sable Communications, Inc. v. FCC, 492 U.S. 115, 126 (1989))).
80. 15 U.S.C. § 45(a).
81. See, e.g., FTC v. International Telemedia Associates, Inc., 1-98-CV-1935 (N.D. Ga., filed July 10, 1998); Daniel B. Lubell, No. 3-96-CV-8200 (S.D. Iowa, filed Dec. 17, 1996).
82. City of Ladue v. Gilleo, 512 U.S. 43, 55 (1994). The discussion of less restrictive alternatives in other sections of these comments also applies with respect to the First Amendment argument here.
83. City of Ladue, 512 U.S. at 55.