6. Statutory and Decisional Standards Applicable to Pacific Bell's Duty to Inform Customers

Specific statutory and decisional standards apply to Pacific Bell's various marketing activities. We discuss, in the following order, Pacific Bell's marketing of specific services, its marketing programs and tactics, and finally its marketing to certain customer groups. Each issue is evaluated against the applicable statutory and decisional standards to determine whether the complainants have met their burden of proving a violation.

6.1. General Standard

Section 451 requires that all charges imposed for services rendered by a public utility, such as Pacific Bell, be just and reasonable. Similarly, that section requires that all rules that pertain to or affect a utility's charges or service to the public be just and reasonable.

This general standard has been supplemented by the Legislature and interpreted by the Commission to give Pacific Bell, and other public utilities, more specific guidance on the types of charges and rules that are permissible. We now turn to this specific guidance.

6.2. Sufficient Information to Make Informed Choices

With regard to providing customers information about different telecommunications services, § 2896 directs the Commission to require that Pacific Bell (or any other telecommunications corporation) provide its customers: "Sufficient information upon which to make informed choices among telecommunications services and providers. This includes, but is not limited to, information regarding the provider's identity, service options, pricing, and terms and conditions of service."

The Legislature passed this statute in 1993. The legislative history reveals a general intention to ensure that telecommunications corporations provide basic information to consumers to enable comparison of the service offerings of different providers:

"Assembly Bill 726 [codified as § 2896] sets forth minimum customer service standards for telecommunications corporations. These standards are very basic, including requiring the provision of information to consumers so that they may wisely shop among competing telecommunications providers."

Letter from Assembly Majority Whip Gwen Moore to Governor Pete Wilson (September 8, 1993) (noting that the bill has passed the Legislature and urging the governor to sign it, which he did).)

The reports from Senate and Assembly hearings similarly reflect an intention to protect consumers by requiring telecommunications corporations to provide consumers with a minimum level of information to foster competition among providers:

"The author believes that the customer service practices discussed in this bill - many of which are currently required by the PUC - should be codified because they represent basic consumer protection policies of the state and should not be subject to change by regulation. Both ongoing and future regulatory changes have and will inevitably continue to cause additional customer confusion. This bill is intended to address information requirements to alleviate such regulatory and marketplace confusion. Further, these policies are intended to help establish a level playing field among competing telecommunications providers."

Senate Committee on Energy and Public Utilities, Hearing Report on AB 726 (Moore), June 22, 1993; see also Assembly Committee on Utilities and Commerce, Hearing Report on AB 726 (Moore), April 19, 1993.) The Legislature thus made permanent the Commission's existing regulations for information disclosure.

The standard to be derived from § 2896 is a general directive to telecommunications corporations to provide consumers with sufficient information to allow them to make informed choices among telecommunications services and providers. The standard is based on both traditional regulatory concerns for consumer protection and emerging concerns for fair competition. The statute does not set out any specific script or presentation sequence that must be followed by utility sales personnel. Nor is there any requirement that Pacific Bell, or any telecommunications corporation, must explain to a customer in each transaction, each product, optional service, package of services, or promotion that the carrier has in its tariffs.

Thus, we rely on a common sense, plain meaning interpretation of "sufficient information" (§2896) and "just and reasonable" service. In today's competitive markets for enhanced services, customers are justifiably confused about what to expect from marketing of these services. We undertook a massive education effort on behalf of consumers in order to prepare them for electric restructuring. We did not make such efforts for telecommunications customers. The relationship between any telecommunications service provider and customers of basic exchange monopoly service is, and should be, different than the relationship between a provider of discretionary, competitive services and its customers. In recognition of that fact § 2896 (c) required the Commission to "require telephone corporations to provide customer service to telecommunications customers that includes, but is not limited to, ... reasonable statewide service quality standards including but not limited to, standards regarding ... customer service.... "Although this mandate became effective January 1, 1994, the Commission failed to act upon it until after this case was filed. On February 3, 2000, we voted out Order Instituting Rulemaking on the Commission's own Motion to Establish Consumer Rights and Consumer Protection Rules Applicable to all Telecommunications Utilities (R.00-02-004), known as the Telecommunications Bill of Rights proceeding. Issues we should have dealt with before this complaint was filed were included in this proceeding. It was cases such as this one, which finally spurred the Commission to take long overdue action. Therefore, we are compelled to assess Pacific Bell's actions against this backdrop where there were no clear guidelines or directions in the marketing of telecommunications services.

6.3. Tariff Rule 12 and Information Regarding "Packages"

Complainants allege that Pacific Bell's Tariff Rule 12 provides a sufficiently detailed standard for the marketing of optional services. Tariff Rule 12 governs the offering of optional services to a customer. It states that Pacific Bell may call a customer's attention to the fact that optional services are available, and that the customer may designate which services are desired. Tariff Rule 12 also requires that Pacific Bell disclose the applicable recurring rates and nonrecurring charges for each service designated by the customer:

"Where there are additional residence optional services (other than exchange access service) available, the Utility, or its authorized employees, may call applicant's attention, at the time application is made, to the availability of such optional services and the customer may designate which optional services they desire. The Utility shall provide a quotation of the applicable recurring rates and non recurring charges applicable to each service designated by the customer. The quotation of applicable rates and charges shall be stated separately for each optional service designated by the customer."

Rule No. 12 - Disclosure of Rates and Charges and Information to be Provided to the Public, effective May 15, 1995.

According to Tariff Rule 12, Pacific does not have any obligation to quote applicable rates and charges separately for those optional service packages the customer has not designated. Nor does Pacific have to quote applicable rates and charges separately for each optional service not designated by the customer. Therefore, although Pacific's marketing practices at issue in this decision fall short of disclosure of all possible options available with a particular service unless the customer specifically requests all such information, we do not believe that such conduct rises to the level of a violation of Tariff Rule 12. Due to the myriad of options and packages of enhanced services now available, to require any provider to disclose each and every one, separately and as packages, is both impractical and time consuming for Pacific and its customers alike. Currently, Tariff Rule 12 does not require Pacific Bell to inform its customers of all rate options or alternatives for a particular optional service.

However, we believe that G.O. 96-A (the basis for Tariff Rule 12), directed the utility to devise a rule that would allow for "customers to exercise option" for optional rates and for "pertinent information regarding service [be] open for public inspection." In order for a customer to "exercise option," a customer must be aware that there are other choices available and to be given sufficient information regarding those choices. Tariff Rule 12, §451, and §2896 require, when Pacific offers packages of enhanced services, that it (1) offer basic exchange service apart from optional services, (2) disclose that optional package components can be purchased separately, and (3) itemize each optional service's price on a standalone basis if requested by the customer. Our review of Pacific's practices discloses that it failed to meet the second criterion. Pacific did not make customers aware that package components can be purchased separately.

Tariff Rule 12 also provides that "[t]he quotation of applicable rates and charges shall be stated separately for each optional service designated by the customer." (Emphasis added.) Despite the Commission's decisions in the 1986 marketing abuse case, discussed below, in which Tariff Rule 12 was in fact modified to prevent against marketing abuses regarding packages, the term "optional service" may seem vague as to whether it includes a package or the components of a package. We therefore direct Pacific to clarify Tariff Rule 12 to require Pacific to provide a quotation of applicable rates and charges for each individual component of a package as well as the package as a whole and inform the customer that each of the components can be purchased separately if the customer agrees to hear the information.

6.3.1. Application of Tariff Rule 12 to Packages With Local Exchange Service

The Commission has not previously addressed the requirements of Tariff Rule 12 in the context of marketing of optional services. In a series of decisions stemming from Pacific Bell's general rate case filed in 1985 (Application (A.) 85-01-034), the Commission addressed and prohibited the commingling of local residential exchange service and optional services in one package, the offering of untarriffed products, and other marketing issues. Here, in contrast, Pacific Bell has not commingled its local service with its optional services. Indeed, in Re Pacific Bell, the Commission observed that overzealous sales management "lost sight of Pacific's obligations as a monopoly public utility." (21 CPUC 2d 182, 188, Emphasis added.)) The Commission further noted that "Many of the abuses identified in this proceeding would not be tolerated in a competitive environment, where customers have recourse to alternative service providers and may express dissatisfaction in that fashion." (Id.) Unlike in Re Pacific Bell, in today's proceeding we do not deal with captive ratepayers for monopoly local exchange service. Instead we deal in a competitive environment where customers have alternative choices and may exercise them. Thus, the "marketing abuse" decisions that arose from the 1985 general rate case are not relevant to our consideration of Pacific's present conduct.

6.4. Information Regarding Caller ID Blocking

Section 2893 applies to providing Caller ID "blocking," i.e., withholding the display of the caller's telephone number. That section requires Pacific Bell to comply with the Commission's rules on blocking services which the Commission adopted in conjunction with its authorization of Caller ID service. The Commission directed that a caller have the capability to withhold display of the caller's telephone number, on an individual basis, from the telephone instrument of the called party. The Commission explained the linkage between Caller ID and blocking services in terms of the right to privacy of telephone subscribers:

"Our goal must be to ensure, to the greatest extent possible, that the decision to allow a calling party's number to be displayed is the result of informed consent and a knowing and intelligent waiver of the right to privacy. To this end, we will seek to maximize the ease and freedom with which a caller may choose not to disclose the telephone number from which he or she is calling."

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"So long as telephone subscribers are fully informed of the nature of the service and the nature of their blocking options, disclosure will be consensual and will manifest a waiver of the calling party's privacy rights." (D.92-06-065, 44 CPUC2d 694, 713-4.)

In approving the requested privacy related custom calling features (Call Return, Call Block, Cal Trace and Caller ID), the Commission ordered the applicants (Pacific included) to provide each telephone subscriber with a clear and easily understandable notice.⁴ To implement this notification of customers, the Commission directed Pacific Bell to undertake a substantial customer education effort, under the supervision of the Commission's staff, prior to offering the services. The details of that effort, the Consumer Notification and Education Plan, were revised in accordance with D.92-06-065 and approved by the Commission in Resolution No. T-15827 (December 20, 1995.) Pacific Bell has completed the customer education effort in compliance with T-15827. The customer education effort imposed on Pacific was ordered to be most intensive in the first six months and then ongoing for as long as the custom calling services were being offered. However, the Commission did not proscribe Pacific's efforts to persuade customers to switch to selective blocking; nor did it specify what specific information Pacific should provide if it decides to persuade customers to change blocking option.