Pay-Per-Call Rule Review: Response to Notice of Proposed Rulemaking: 16 C.F.R. Part 308, FTC File No. R611016 #39

Submission Number:
Pennsylvania Public Utility Commission
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
Washington, DC 20580

Pay-Per-Call Rule Review - Comment

FTC File No. R611016




The Pennsylvania Public Utility Commission (PaPUC) is the state agency responsible for regulating all public utilities, including telephone companies, within the Commonwealth of Pennsylvania. As such, it has a significant interest in the regulation of telephone-billed purchases at both the interstate and intrastate levels. In pursuit of that interest, the PaPUC offers the following comments in response to the Notice of Proposed Rulemaking addressing the Pay-Per-Call Rule.


In the above-captioned Notice of Proposed Rulemaking (NOPR), which was published in the Federal Register on October 30, 1998 (63 FR 210), the Federal Trade Commission (FTC) seeks to amend the Trade Regulation Rule (900-Number Rule or Rule), 16 CFR Part 308, pursuant to the Telephone Disclosure and Dispute Resolution Act of 1992 (TDDRA).(1) Congress enacted the TDDRA to curtail the unfair and deceptive practices engaged in by some pay-per-call businesses while still encouraging the growth of this industry. The NOPR requests public comment on the proposed changes to the 900-Number Rule which regulates the advertising and operation of pay-per-call services, and establishes billing dispute procedures for those services as well as for other telephone-billed purchases.

Generally, the 900-Number Rule requires that advertisements for pay-per-call services contain certain disclosures of material information, including the cost of the call, and establish procedures for resolving billing disputes for telephone-billed purchases, such as investigating and responding to billing disputes.(2) FCC regulations also implement TDDRA protections that prohibit disconnection of telephone service for failure to pay charges for a 900-number call and 900-number blocking.(3)

The Telecommunications Act of 1996 (TA-96) authorized the FTC, through its 900-Number Rule, to extend the 900-Number Rule's application to include certain audiotext services that may use a dialing prefix other than 900.(4) Although the 900-Number Rule, which was adopted in 1993, had an impact in curbing consumer abuses in the 900 number industry, telephone bill cramming -- unauthorized charges on phone bills -- has developed through 800 numbers, international numbers, and other non-900-number prefix dialing patterns.(5)

Pursuant to rule review requirements of the 900-Number Rule,(6) the FTC was required by Congress to initiate a rulemaking to evaluate the Rule's operation no later than four years after its effective date of November 1, 1993. On March 12, 1997,(7) the FTC published a notice seeking comment on the effectiveness of the Rule and on whether the Commission should extend the definition of "pay-per-call services" to cover other audiotext services provided through the telephone. The record developed convinced the FTC to revise the Rule since "many important consumer protections provided by TDDRA have been eroded" (63 FR 58526). According to the FTC, the "proposed modifications strike a balance between maximizing consumer protections and minimizing the burden on the audiotext industry" (63 FR 58527).

As an overview, the FTC recognized the practice of "cramming" and gave the following examples:

(1) Unauthorized charges billed to a telephone subscriber for a benefit received by someone else, such as entering a sweepstakes to win a prize; and (2) unauthorized charges to consumers who are unaware that by filling out a form, they are deemed to have authorized a telephone-billed purchase.

(63 FR 58527). The FTC further explained the role of billing aggregators, also known as billing clearinghouses, as "intermediaries between vendors and the local telephone companies" where those entities "process their client-vendors' billing data into the electronic format required by the LEC, contract with the LECs to have their client-vendors' charges appear on line subscribers' telephone bills, and act as conduits to the vendor for revenues collected by the LECs from consumers for the vendors' services" (Id.).

The proposed changes to the original 900-Number Rule address cramming with first proposing that any telephone-billed purchase that cannot be blocked (900 number blocking) must require express authorization of the person to be billed. The revised Rule will also create strong incentives for vendors and billing entities who bill these transactions to make sure they are authorized. Next, the proposed Rule would prohibit vendors from billing consumers for recurring charges for pay-per-call services unless the vendor had entered into a "presubscription agreement" with the person to be billed for the service and had sent the consumer a written copy of that agreement. Thus, a single call can no longer result in enrollment in a pay-per-call service with a monthly fee.

Thirdly, consumers would have legal recourse to dispute unauthorized charges "crammed" onto their phone bills, even if the charges for such purchases did not result from a telephone call. To sustain the charge, the billing entity must provide proof of an express authorization where the service cannot be blocked, or the valid presubscription agreement where the pay-per-call service involves a recurring charge. The consumer is not required to pay until the charge is documented. Finally, the dispute resolution procedures would apply regardless of whether or not the charges arose from a telephone call.

Additional revisions would, inter alia, impose liability on billing aggregators when they "know or should have known" the transaction was not authorized, and to prevent "passing the buck," a party must be designated (e.g., LEC, billing aggregator, or vendor) to bear ultimate responsibility for responding to billing disputes.


The PaPUC supports the proposals made in the subject NOPR. The basis for this support is the experience we have had with cramming complaints from local exchange residential customers. Over the last year, hundreds of residential customers have filed informal telecommunications industry-related complaints with the PaPUC regarding non-usage related charges on a telephone bill.(8) As a result of this situation, the PaPUC initiated a rulemaking and adopted interim guidelines to standardize local exchange company responses to customer contacts alleging unauthorized changes in telecommunications service providers and unauthorized billing charges. While we can support the proposals that may offer additional safeguards to the regulations we are proposing, we strongly oppose preemption of state regulation of billing and collection activities of local exchange carriers (incumbent and competitive) operating in Pennsylvania. Historically, state public utility service commissions have had primary jurisdiction over billing and collection activities of local exchange carriers. In comparison, the FTC is responsible for promoting competition and protecting the public from unfair and deceptive acts and practices in the advertising and marketing of goods and services." 16 CFR 0.1. Therefore, final FTC regulations should not in any manner preclude a state commission from enforcing billing format regulations already in place. Essentially, this is the same position we took in electronically filing comments on November 18, 1998, to the FCC's In the Matter of Truth-In-Billing and Billing Format, CC Docket No. 98-170 (Released September 17, 1998), which addressed the need to provide consumers with accurate and understandable bills, and protect consumers from fraudulent schemes.

Our interim guidelines referred to above propose that the LEC respond to a cramming complaint by (1) recoursing the charge, (2) instructing the billing clearinghouse, IXC, or the information service provider to prevent further billing of that charge or type of charge to this customer's account, (3) informing the customer that the billing entity may attempt to use other methods to collect the charges, including a collection agency, and (4) informing the customer of the right to pursue a complaint against the provider of the service or charges by contacting the Pennsylvania Office of Attorney General (OAG), the Federal Communications Commission (FCC), or the Federal Trade Commission (FTC), depending upon the type of service or charges under dispute. These interim guidelines focus on that portion of the consumer's complaint over which the PaPUC clearly has jurisdiction -- the billing and collection that the LEC provides on a contractual basis for the IXCs.(9) The procedures are intended to reduce the need for customers to seek PaPUC intervention to resolve cramming complaints. The responsibility for resolving the complaint is placed on the party (IXC, information service provider or billing clearinghouse) responsible for the charge, as well as on the LEC that inadvertently aided the cramming by placing the charges on the customer's bill. The procedures benefit the customer by requiring the LEC to immediately remove the unauthorized charges from the customer's bill, and by requiring the billing clearinghouse, IXC, or information service provider to take steps to prevent further billing of that charge or type of charge on the customer's account. The procedures also require notice to the customer about contacting the FCC and FTC. In cases where the charge is not a telephone charge and the complainant alleges the charge is fraudulent, the LEC would also instruct the complainant about how to contact the OAG.


Given our responsibilities over the LEC's billing and collection activities, we strongly support any additional measures that impose restrictions on pay-per-call services or telephone-billed purchases, other than telephone toll service, that result in monthly or other recurring charges on consumers' telephone bills. Although the FTC may have to consider an appropriate balance between maximizing consumer protections and minimizing the burden on the audiotext industry, our motives are not similarly constrained. We believe that stringent requirements should be prescribed to prevent abusive practices and enhance consumer protections. We are particularly interested in the express authorization requirement which should protect consumers from charges that result from another person accessing the service using their telephone.

The PaPUC has investigated hundreds of complaints from Pennsylvania consumers questioning how a charge "appeared" on their bill without their knowledge and being told by the vendor that it is a charge for a product or service that was ordered by the consumer simply because a call was placed from their phone. Express authorization as required in Section 308.17 would work towards eliminating company claims that the charges are legitimate and towards providing consumers with a means of verifying that the charges are in fact legitimate.

However, there may be customers who legitimately want the services and products offered through billing to the local telephone bill and would consider the requirement of express authorization as being too restrictive. For example, if the spouse of a customer in whose name the telephone account is held wishes to order a product or service to be billed to the local telephone bill, the spouse would be unable to do so because they are not the person to be billed for the service and therefore cannot give express authorization. The PaPUC believes that any inconvenience caused to these customers by the requirement of express authorization is offset by the protection given to other customers from abuse by companies claiming that products or services were ordered simply on the basis of a call being placed from their phone. Furthermore, local exchange company customers always have the option of adding another name to the account such as a spouse.

The proposed modification to the Rule will also require vendors to obtain presubscription agreements with billed customers for pay-per-call services that involve monthly or recurring charges. Given that we have also received hundreds of complaints where the consumer continues to be billed monthly charges for services never ordered, this requirement that a presubscription agreement be secured should simplify the verification problem and the dispute resolution process.

In order to sustain disputed charges, the proposed Rule will also require that when a customer disputes a charge for a service that cannot be blocked, the billing entity must establish the validity of the charge through actual proof of express authorization by the customer. For instances that involve presubscription agreements, the billing entity must provide evidence of the agreement. Unless the proof referred to above is established, the charges must be forgiven. We again agree that this proof requirement should simplify the dispute resolution process since a billing entity can only prevail if proof of the existence of a presubscription agreement is established.

Finally, we are in agreement with the dispute resolution protections where the customer has the ability to dispute transactions involving unauthorized charges on a telephone bill, even if the charges did not result from a telephone call. We do not see any reason to make a distinction based on the initiation of the charge as long as the charge ended up on the telephone bill.


The PaPUC respectfully requests that the FTC consider these foregoing comments in revising the rules governing the Pay-Per-Call Rule.

Respectfully submitted,

Terrence J. Buda
Assistant Counsel
Counsel for Pennsylvania Public Utility Commission
P. O. Box 3265
Harrisburg, PA 17105-3265
(717) 787-5755

Dated: March 10, 1999

1. 15 U.S.C. 5701, et seq.

2. 47 CFR 64.1501.

3. 47 CFR 64.1501, et seq.

4. 47 U.S.C. §228(i)(1)(c).

5. More specifically, cramming involves unexplained recurring charges on telephone bills for services that were never authorized, ordered, received or used.

6. 16 CFR 308.9.

7. 62 FR 11749.

8. These complaints involve the appearance of unclear, invalid, or possibly fraudulent billing charges. Customers allege that their telephone bills do not clearly state what service was provided and, in many cases, that they are being billed for services they did not order.

9. Our standards and billing practices for residential telephone service are contained in 52 Pa. Code, Chapter 64.