Pay-Per-Call Rule Review: 900 Number #7

Submission Number:
Donna J. Sheridan
Alliance for Young Families
Initiative Name:
Pay-Per-Call Rule Review: 900 Number

Before the
Federal Trade Commission

Washington, D.C. 20580

In the Matter of

Rule Review Pursuant to the 900-Number Rule



The Alliance of Young Families (the "Alliance") is an association of families residing in California, Nevada and Arizona. Our common goal is providing the best possible life for raising children in the United States while balancing this with the protections and the freedoms that the United States Constitution affords its citizenry. These comments of the Alliance are made pursuant to the Federal Trade Commission's ("FTC") request for public comments regarding the regulations that govern the advertising and operation of pay-per-call services.

In the years leading up to 1992, pay-per-call services in the United States were subject to widespread abuse. During this time, pay-per-call services were usually carried over the (900) telephone prefix nationally or locally through the (976) telephone exchange. Telephone subscribers were subjected to losing their telephone service for their non-payment or disputing of these "pay-per-call" billings. Telephone subscribers were also not able to restrict access to these numbers. Prices and terms were not disclosed. No process for disputing charges was provided under federal law. Minors and the mentally handicapped were afforded no protections at all.

By its enactment of the Telephone Disclosure and Dispute Resolution Act ("TDDRA") in 1992, Congress attempted to define "pay-per-call" services in order to curb many of the abuses of the time and to provide consumers with certain basic protections. TDDRA was a direction from Congress to both the Federal Communications Commission ("FCC") and the Federal Trade Commission ("FTC") for these agencies to provide better consumer safeguards and also to require clear and conspicuous cost disclosures in the preambles for pay-per-call telephone services and in the advertising for these pay-per-call services. TDDRA was written by Congress with the mandate to "protect the public interest and the future development of pay-per-call technology by providing for the regulation and oversight of the applications and growth of the pay-per-call industry".

Around the same time that Congress enacted TDDRA, many of the adult-oriented pay-per-call services either moved their programs to the (800) telephone exchanges, or as in the case with many less reputable operations, dropped out of the business entirely. The (800) toll-free telephone exchange allowed the adult-services a legal avenue to provide their pay-per-call communications when these calls were charged with a credit card. The use of credit cards for payment in connection with the transmission of indecent communications had previously been deemed acceptable for the protection of minors in a federal law known as the "Helms Amendment" that passed Congress in 1989. When credit cards are used for payment purposes on these type of transactions, the provider of the service will deal directly with the credit card company for payment of a caller's pay-per-call charges. This process results in a telephone subscriber not being involved in the transaction unless the subscriber is the same party that incurs the credit card charge. The credit card user is provided the dispute protections afforded to all consumers with most major credit card transactions. Also with this type of arrangement, the telephone subscriber is not at risk of loss of their telephone service in the event that they dispute a charge. With the use of a major credit card for these adult-oriented pay-per-call services, it appears that minors and those who do not want indecent communications are provided the basic protections that were intended by TDDRA.

Following TDDRA's enactment, many adult-oriented pay-per-call services began to take advantage of some other approaches to telephone communications that were outside of what TDDRA had contemplated for the protection of consumers. Some of these other approaches included programs which had "(800) Calls re-billed to the consumer as international or 10XXX calls", "(800) calls billed as (900) calls", "Collect Callback" (these are calls where the caller called an (800) number and the caller is then called back and billed on the telephone subscriber's phone bill), "Local Collect Callback" (the same as Collect, but the caller called a local or long-distance number and was then called back), and "Instant Calling Cards" (which is where the caller could create an instant contract on behalf of the telephone subscriber). The attraction of adult-oriented pay-per-call services to these particular methods of pay-per-call communications was that the telephone subscriber could not control access to these types of phone services. Isn't this like a parking attendant being able to use your car in a bank robbery without your knowledge and then you going to jail for the crime? The telephone subscriber was always billed for these type of calls, many without their authorization or involvement with the call. Children had access to these advertised adult-oriented services without any effective way for their parents to block these communications. Businesses were also routinely abused by these programs. There was no procedure for disputing the charges without putting the subscriber's basic telephone service at risk. Since the FTC and the FCC set forth their respective rules for the implementation of TDDRA, together with many local carriers rejecting these approaches, many of the alternative types of programs used by some of the less reputable pay-per-call providers have subsided.

One type of adult-oriented pay-per-call program that is still actively used today is the "International Dial-a-Porn" format. In fact, it appears that this format is the program of choice for those adult-services providers who want to avoid TDDRA rules. The reason this format is preferred by many providers is obvious: International Dial-a-Porn eliminates the risk of customer chargebacks to the provider (i.e., the carrier absorbs disputed charges from callers and passes these on to other or future callers in the form of higher toll-charge prices). With these international services, there are no price disclosures required, no TDDRA procedures in place for the caller to dispute the charges and there are no blocking controls in place to stop minors or the mentally handicapped from using the services. The threat of the loss of telephone service by the carrier in the event the telephone subscriber (either business or residential) refuses to pay for this type of international pay-per-call service is a powerful incentive to coerce payment. As many telephone subscribers are not fully informed of their rights or protections, they may often pay these bills under the belief that they cannot be credited.

The typical international dial-a-porn service in place today requires cooperation between the individual provider setting up the program and a foreign carrier willing to rebate the provider for a significant portion of the transmission charge for generating the call. The subscriber of the telephone line making the international call is charged for the transmission of the international call whether or not the subscriber is the party actually making the call. The information provider then receives a substantial portion of the charges paid by the telephone subscriber basically as a commission. For your reference, we have enclosed with these comments a news article recently released through the Scripps Howard News Service that provides further information on this subject matter.

Domestic carriers within the United States must have a responsibility to consumers in connection with this type of pay-per-call program. The FCC has previously ruled that these types of arrangements were expressly designed "to evade the consumer safeguards set forth in TDDRA and the Commission's rules." As a reference, see the letter from John B. Muletta, Chief of the Enforcement Division, Common Carrier Bureau of the FCC dated September 1, 1995 in connection with the informal ruling requested in FCC case number DA 95-1905. In his response, Mr. Muletta, stated directly on this issue that under TDDRA, carriers are required "to offer telephone subscribers the option of blocking access to pay-per-call services and prohibits the disconnection of basic telecommunications services for failure to pay pay-per-call charges." Mr. Muletta expanded on this by stating that the FCC "[was] committed to eliminating abusive practices which deprive consumers of their statutory rights concerning such servicesThe fact that the consumer does not directly pay the information provider does not exclude the service from the definition of pay-per-call if the payment is simply paid to the information provider by the carrier and then recovered from the consumer through the transport charge." The Alliance supports Mr. Muletta's position and we request that the FTC set forth its own set of regulations that will also enforce Congress's intent in connection with abuses found in this area and implement the consumer safeguards that were intended by Congress's enactment of TDDRA in 1992.

International calls directed to adult services cannot be specifically blocked by telephone subscribers as is the case with pay-per-call services available over the (900) exchange. If a telephone subscriber desires to block adult-oriented international programs from their residence or business, then the subscriber must block all international calling, not just the international pay-per-call services. Under rules implemented by the FCC following TDDRA, telephone service could not be disconnected based upon a subscriber's failure to make payment for disputed pay-per-call billings. However, disconnection is a real threat to a telephone subscriber who disputes international call charges, including the calls made to the international dial-a-porn lines. Most importantly to the Alliance's interests, there is no child-proofing available to consumers in connection with international dial-a-porn. Currently, the door is wide open for our children to have easy access to these international adult programs unless each family chooses to block all international calling. Even then, it is only after the first such occurrence that this information is possibly made available to the consumer. The FTC may want to review the possibility of requiring that all long distance carriers identify a policy in writing regarding international pay-per-call disputes and to provide blocking of the same at the time service is initiated.

In the case of businesses, telephone calls made to the international porn services can easily be mixed in with their legitimate international business calls and be difficult, if not impossible, to detect or control without eliminating all of its international business telephone access. In addition, international dial-a-porn is not subject to the same detailed pricing disclosures in either the advertising or preambles that are required of (900) pay-per-call services. Under current laws, there is no requirement for detailed disclosures as is the case with the permitted presubscription arrangements or using (900) telephone numbers.

The 1996 Telecommunications Act attempts to close the international "dial-a-porn" loophole by eliminating the tariff exception in defining what constitutes a "pay-per-call" service. This attempt by Congress to close a loophole has already been challenged. Carriers are fighting this because they benefit in having the large volume of international call minutes placed through their networks. In addition, carriers face the costs of new computer software for their networks in order to implement new consumer protection controls. Frankly, these are the same arguments that were made by the carriers regarding the (900) rules that are currently in place and the end result has been that the enhancements became very good for the (900) services, for the carriers, as well as to the ultimate consumers. The international dial-a-porn providers are fighting against the loophole's closure because they benefit economically from these abuses and they will need to transfer their services to the (900) or toll-free telephone exchanges where federal and state rules and regulations are in place to protect consumers and telephone subscribers in the event that overall access to these services is deemed illegal. All of these arguments are really taking place because the telephone subscriber must pay for these international toll charges or risk the loss of telephone service. The international dial-a-porn operators are earning millions of dollars annually under this current loophole of the federal law.

The Alliance has previously gone on record opposing an alternative proposal currently before the FCC requesting that the determining factor of what constitutes a pay-per-call service be whether the cost of the call exceeds, by more than a "de minimis" sum, an amount over the highest content-neutral charge from any of the major carriers. This proposed revision to the definition of "pay-per-call" would allow the continuance of international pay-per-call for adult-oriented services because that is how the information provider generates its money. Instead, the FTC could use the "de minimis standard" to judge the remuneration that can be paid by a domestic or foreign carrier to an information provider in this same situation. If the carrier desires to make payments to service providers to generate call volumes, the moneys paid to the service providers or the marketing agent for this benefit should be subject to a low maximum, such as a $0.05 per minute or a 5% maximum rebate. The international dial-a-porn providers are currently used to receiving a large percentage of the charge of the call as a rebate from the carrier and if the moneys allowed to be paid to service providers are required to be kept low, then this will drive the international dial-a-porn providers into the dialing patterns that provide consumers with better safeguards. The fact that a significant portion of a consumer's billings can be rebated through 2 or 3 profit-takers for this type of transaction shows the economic incentive that exists for these countries where these activities are condoned and profited, and most importantly, that the international rates being charged to United States consumers are flawed and inflated.

Without the FTC exerting its authority over international dial-a-porn at this time, the inaction will simply become the latest complaint problem for federal and state government agencies to deal with in connection with pay-per-call communications. As some service providers first abused the 900/976 dialing patterns, and then some abused 800 Presubscription and toll-free dialing patterns, and then some more after that abused the "tariffed" services loophole following TDDRA's enactment, the situation is now becoming the same with international programs. There are very high payoffs to the providers for getting United States citizens to make calls to countries that the average person in the United States has never heard of before. What is worse is that some of these countries involved in International Dial-a-Porn are called by dialing the same telephone numbers that we dial everyday to call friends and family. In the past year, many of us have been personally educated about this fact in connection with the (809) area code.

If the FTC does not aggressively enforce Congress's direction under the 1996 Telecommunications Act now, carriers will continue to bill International Dial-A-Porn calls directly on the telephone subscriber's bill whether or not the telephone subscriber made the call. Telephone subscribers will continue to be at risk of losing their phone service based upon their failure to pay international dial-a-porn charges and subscribers will be unable to protect themselves and their children with effective blocking options. There will be no price disclosure requirements in international dial-a-porn; no protections for minors from obscene materials; and no protections against credit and collections abuse.

What is needed now are strict rules and vigorous enforcement by both the FCC and the FTC. The United States consumer should be entitled to the safeguards that the United States Congress has intended. The United States consumer should be able to call internationally at fair rates without the threat or involvement of the pay-per-call industry. Our children need these protections. The time is right for the FTC to deliver on these safeguards and protections.


By ____________________________
Donna J. Sheridan
516 Keystone Avenue
Reno, NV 89503