Part 5: Rules Governing Slamming Complaints

Background

Slamming, the unauthorized change of a telephone customer's preferred carrier, has been a problem for consumers ever since it became possible for telephone customers to choose among competing providers. It has been equally vexing for the state and federal regulators responsible for protecting them. The Commission in 2000 completed a consolidated investigation and rulemaking proceeding⁶⁸ into slamming and, after workshops and several rounds of comments, issued D.00-03-020, Final Opinion on Rules Designed to Deter Slamming, Cramming, and Sliding.⁶⁹ D.00-03-020 addressed certain limited aspects of slamming including record keeping, letters of agency, third-party verification, and removing the economic incentive for slamming. On the latter topic, our staff had recommended that we require carriers to refund all charges paid by customers who allege that they were slammed. In response, we observed,

In a recent proceeding, the FCC has adopted a rule similar to that proposed by Staff. On December 17, 1998, the FCC adopted its Second Report and Order and Further Notice of Proposed Rulemaking in its docket, CC No. 94-129, which is addressing unauthorized changes to consumers' long distance carriers. The FCC decision addresses many of the issues that have been presented in this proceeding in addition to removing the economic incentive for slamming.

On May 18, 1999, the United States Court of Appeals for the District of Columbia Circuit issued a decision partially staying the FCC slamming rules. Those rules remain pending before the court.

On June 27, 2000 the court lifted its partial stay, and the FCC subsequently issued its amended rules for handling preferred carrier changes, including remedies for slamming. We refer here to those rules⁷⁰ in their current form as the FCC slamming rules, or simply the federal rules.

In addition to slamming allegations, the federal rules cover carrier change order verification, letters of agency for changing carriers, preferred carrier freezes, and state administration of the unauthorized carrier change rules and remedies. It is this last topic we address here and in our new G.O. ___, Part 5, rules.

The FCC slamming rules give each state the option to act as the adjudicator of slamming complaints, both interstate and intrastate, and California has opted to do so.⁷¹ Under 47 CFR 64.1110, each state which opts to take on that responsibility must notify the FCC of the procedures it will use to adjudicate individual slamming complaints. Our staff prepared an initial set of proposed slamming complaint handling rules in late-2000, and in January 2001, the Assigned Commissioner issued a ruling in this proceeding sending them out for comments and reply comments. After considering the parties' input and making modifications, the Assigned Commissioner included them in his first draft decision mailed June 6, 2002. There followed several additional opportunities for parties to provide input through comments, workshops, and working groups, all as described in the Background section above. The results were reflected in the Assigned Commissioner's July 2003 revised draft decision and once again circulated for comments. All of this input has been considered in the new rules the Commission is now adopting as the Rules Governing Slamming Complaints included in G.O. ___, Part 5.

The FCC Slamming Rules

The FCC prefers that subscribers who believe they have been slammed go first to the state commissions in states that have elected to handle slamming complaints. However, subscribers also have the option of filing a complaint with the FCC for slamming involving interstate service. The FCC will use the federal rules for complaints coming to them, and state commissions handling slamming complaints may administer the FCC rules using their own procedures. Because the FCC rules are complex, we set forth here only a simplified overview to help understand their major elements.

When a subscriber first reports having been slammed, the alleged unauthorized carrier must remove any unpaid charges for the first 30 days from the bill. If the carrier contests the allegation and loses after the subscriber files a complaint, it must also remit to the authorized carrier 150% of any payments it has received from the subscriber. From that amount, the authorized carrier reimburses the subscriber 50%⁷² and retains the remaining 100%. The subscriber may also ask the authorized carrier to recalculate the bill using its own rates and attempt to recover from the alleged slammer on the subscriber's behalf any incremental amount in excess of the 50%. Any unpaid subscriber charges beyond the 30-day absolution period are to be recalculated and paid to the authorized carrier at the authorized carrier's rates.

If the carrier decides to contest the allegation, it must still reverse all unpaid charges for the first 30 days and inform the customer of his or her right to file a complaint and the procedures for filing. If the customer fails to file a complaint within 30 days after both the notice has been given and the charges reversed, the carrier may re-bill the customer.

The alleged unauthorized carrier may also decide not to contest the allegation, and instead grant the subscriber what the subscriber would have obtained had he or she filed a complaint and prevailed (i.e., absolution for unpaid charges during the first 30 days, and 50% reimbursement or re-billing at the preferred carrier's rate for the period beyond 30 days and charges the subscriber has already paid). In that case, the subscriber need not file a complaint to be made whole unless he or she is dissatisfied with the outcome.

If the subscriber does file a complaint, the agency⁷³ will notify the allegedly unauthorized carrier and require it to remove all unpaid charges for the first 30 days if it has not already done so. The allegedly unauthorized carrier then has 30 days to provide clear and convincing evidence that the carrier switch was valid and properly authorized. The agency will make a determination based on evidence submitted by the carrier and the subscriber, provided that, if the carrier fails to respond or to furnish proof of verification, it will be presumed to have slammed the subscriber.

The CPUC Slamming Rules

The Rules Governing Slamming Complaints we adopt today are closely modeled on the federal slamming rules, so we will limit this discussion to recapping the comments and describing those elements that do not appear in the FCC slamming rules. The full text of our slamming rules may be found in Part 5 of new G.O. ___, Appendix A to this order

Our description above of the federal rules now applies in most ways as well to our new Part 5 rules for local exchange carrier slamming allegations, and for intraLATA, interLATA and interstate toll slamming allegations. While the slamming rules proposed in the Assigned Commissioner's June 2002 draft decision paralleled the federal rules in many respects, there were some key differences explained in that earlier draft decision. In response to the comments described in a following section, we have reframed Part 5, Sections B, D, E, F, and G to be very similar, and in most ways virtually identical, to the wording in the federal rules⁷⁴

A key point for both the federal rules and our rules is that they do not necessarily require subscribers who have been slammed to file a complaint to obtain relief; a subscriber who has not paid for service provided during the first 30 days after the alleged slam occurred is entitled to have the unauthorized carrier remove the charges for that period. Only after the carrier has removed the charges and notified the subscriber that it will challenge the allegation must the subscriber file an informal complaint with CAB within 30 days to avoid being re-billed. Likewise, our rules (but not the federal rules) provide that carriers who learn of slamming allegations against them may deter complaints by making mutually-satisfactory arrangements to compensate subscribers and return them to their preferred carriers even if charges have been paid, provided that the alleged unauthorized carrier has first informed the subscriber of the rights afforded under these rules.

When the subscriber is switched back to his or her preferred carrier, both sets of rules require the preferred carrier to re-enroll the subscriber in his or her previous calling plan.

When the alleged unauthorized carrier challenges the allegation and the subscriber then files an informal complaint, the matter will be decided by our Consumer Affairs Branch. If CAB decides against the subscriber, the subscriber may appeal to the Consumer Affairs Manager, and may file a formal complaint at any time.

Lastly, our rules state explicitly that they are in addition to any other remedy available by law. The FCC made a similar statement in its implementing order and included a limited provision to that effect in the text of its rules.⁷⁵

The Parties' Comments

Fourteen groups representing 29 named entities, some of which were in turn associations of many more members, took the opportunity to file comments or replies to comments in response to the first set of draft slamming rules distributed in January 2001. Three contributors represented consumers, one represented small business, and the remaining ten represented carriers of all types. Approximately ten more sets of comments relating to the proposed slamming rules were received following the Assigned Commissioner's June 2002 draft decision and the August 2002 workshops, and more still commented on the July 2003 draft. Most of the post-draft comments were from the wireline companies, both individually and as part of the wireline working group. All of those comments are grouped here for discussion purposes.

Carrier representatives generally opposed and consumer representatives generally supported the Commission's California-specific rules. There were exceptions among both groups with respect to particular provisions.

The most frequent comment from industry representatives was that the Commission may not implement one provision or another in the proposed rules because it is preempted from devising any rules that vary from the federal rules. Further, they argue, even if California has the authority to enact and enforce its own rules differing from the FCC's, it should wait for some period of time to see how the federal rules work first. We disagree on both counts. In establishing the federal rules, the FCC granted states which elect to handle slamming complaints great latitude in fashioning their own procedures: "We note that nothing in this Order prohibits states from taking more stringent enforcement actions against carriers not inconsistent with Section 258 of the [Communications Act of 1934, as amended by the Telecommunications Act of 1996]."⁷⁶ In that First Order on Reconsideration, the FCC went on to explain that its determination to entrust primary slamming enforcement to the states was based on its belief that the states are close to the problem, experienced in addressing it, and have demonstrated that past state-devised slamming handling rules have been effective:

We agree with [the National Association of Regulatory Utility Commissioners] that the states are particularly well-equipped to handle complaints because they are close to the consumers and familiar with carrier trends in their region. As NARUC describes, establishing the state commissions as the primary administrators of slamming liability issues will ensure that "consumers have realistic access to the full panoply of relief options available under both state and federal law...." Moreover, state commissions have extensive experience in handling and resolving consumer complaints against carriers, particularly those involving slamming. In fact, the General Accounting Office has reported that all state commissions have procedures in place for handling slamming complaints, and that those procedures have been effective in resolving such complaints.⁷⁷

Thus, the FCC has expressed its confidence in the states' ability to fashion effective slamming rules and permits them to do so, so long as those state rules are not inconsistent with Section 258 of the federal Telecommunications Act. The rules proposed in the Assigned Commissioner's June 2002 draft decision met that test. Nonetheless, the Part 5 rules we adopt today are much closer to the federal rules than the earlier set, thus satisfying the great bulk of the concerns carriers expressed in their comments. The federal rules are so complex that everyone involved - the carriers, our staff, and most importantly, slammed subscribers - will find it challenging to understand and apply them. The modest benefit to be gained by our adopting a second, differing set of slamming rules would not justify the additional complexity they would generate.

A number of commenting carriers found the earlier proposed definition for "subscriber" too narrow, and we agree. The Definitions section of the federal rules initially did not define the term, so the June 2002 draft's proposed rules limited it to the person or persons named on the account. The federal rules, and our rules modeled on them, have now changed to define subscriber more broadly to include the person(s) named on the account, any adult the accountholder has authorized to change telecommunications services or to charge services to the account, and any person lawfully authorized to represent the accountholder.

When CLCs first became eligible for certification, we adopted a set of Consumer Protection and Consumer Information Rules for CLCs as Appendix B to D.95-07-054. Rule 11B, Unauthorized Service Termination and Transfer ("Slamming"), from those CLC rules set forth carriers' and subscribers' rights and responsibilities where the alleged slam was of a subscriber's local exchange carrier. That rule applied to slams of and by both LECs and CLCs. The Assigned Commissioner's June 2002 and July 2003 draft decisions proposed to retain that slamming rule for unauthorized changes of subscribers' local exchange carriers because it offered a greater level of protection, but that proposal has been dropped in response to comments. Today's Part 5 rules thus apply to slamming allegations of all types.

A consumer group suggested we require carriers to report their slamming statistics quarterly as a monitoring tool. In response, a carrier pointed out that the FCC already requires carriers to file biannual slamming reports. We have adopted the carrier's suggestion and adjusted our rule to call instead for copies of those FCC reports.

In addition to these substantive changes, the parties suggested numerous lesser revisions consistent with the federal rules and our proposed rules. We have accepted them where appropriate. Other suggestions, and some of the earlier draft proposals, do not appear in the final version because after consideration we found them unnecessary or inadvisable.