IV. TELECOMMUNICATIONS MARKET RULES

Rule 1 Carrier Disclosure

Rules 1(a) and 1(b) Disclosures Required of All Carriers

Telecommunications carriers are required by law to provide consumers with sufficient and non-misleading information upon which to make informed decisions among telecommunications services and providers. In fact, there is a comprehensive statutory regime and voluminous body of law dedicated to enforcement of these obligations in the Public Utilities Code, the Business and Professions Code and the Code of Federal Regulations. ⁹ This decision seeks to clarify and strengthen Commission regulations that empower consumers to make informed decisions in this dynamic and complex market.

The first step is to ask "What problem are we trying to solve?" There is little evidence in the record that identifies a specific problem with current disclosure rules, and no evidence that further disclosure rules would produce benefits to consumers commensurate with the price increases that new rules would trigger. Proponents of increased disclosure requirements base their claims that additional rules are needed on customer complaint data. The primary customer complaint data cited in the record are five and six years old, and relate only to wireless carriers. Their usefulness today is questionable at best. More recent data furnished to the Commission show dramatic decreases in the level of wireless complaints. In fact, while the number of wireless subscribers in California increased 14% from 2002 to 2003, the rate of complaints decreased by 47%.¹⁰

Nevertheless, information in the record supports the idea that a persistent type of customer complaint is confusion about and between the various service offerings of telecommunications providers, their billing practices and early termination fees. However, it is unclear from the record whether the additional regulations proposed by parties to this proceeding would reduce customer confusion or make cellular phone bills easier to understand.

Several parties, including UCAN, ORA and the Attorney General, would mandate a detailed, one-size-fits-all set of instructions for disclosure, marketing, billing and contracts on all telecommunications carriers, regardless of technology, business model or differences in the degree of competition within a specific industry such as wireless. This elaborate disclosure approach applies the same prescriptive disclosure requirements to every conceivable interaction between a carrier and a customer, from television and radio advertising, web pages and telemarketing, to printed brochures, newspaper ads and billboard signs on buses.

Such elaborate disclosure mandates would have the opposite impact of their intended benefit by making the interaction with the customer more complicated and confusing, not less so. Additionally, the added time and ad space for reciting lengthy, specific disclosures and the attendant legal disclaimers that would surely accompany them, would just as likely exacerbate customer frustration while providing no additional protections or benefits.

Overly prescriptive rules that restate existing laws using expanded or inconsistent language undermine the enormous body of existing law governing contracts, marketing and advertising. Terms such as "solicitation," "misleading," and "clear and conspicuous" have been developed through statutes and decades of case law at both the federal and state level. Many of these terms form the bedrock of contract law and commercial speech, and are used, relied upon, and universally understood by contracting parties, other regulatory agencies, and the judicial courts. To expand or change those definitions by regulatory fiat, with the CPUC enforcing its own set of standards and definitions different from those used in every other context and venue would create regulatory chaos, to the extreme detriment of California industries and consumers. In addition, to the extent the rules adopt definitions that expand the scope of existing statutes, the Commission simply lacks the authority to adopt them.¹¹

Most carriers urge the Commission to impose no additional disclosure requirements, arguing that competition is forcing carriers to respond to customer needs far more effectively than additional regulations could, and citing significant reductions in consumer complaints in recent years to support these claims.¹² We agree.

However, while competition provides clear benefits to consumers, it also presents a unique challenge to this Commission. The changing telecommunications market makes it difficult to formulate uniform rules applicable to all telecommunications carriers. Part of this Commission's task is to adjudicate consumer complaints effectively. Uniform rules that don't fit the new market don't assist the Commission in this effort.

In this decision, we seek to

· strengthen areas of weakness in existing disclosure requirements

· provide a foundation for the future with clear and prioritized disclosure requirements designed not just for today's dynamic market, but for tomorrow's as well, and

· harmonize previous disclosure rules with this new regime.

The rules also recognize that the Internet has become a primary consumer information source and is able to provide the most convenient access to detailed information regarding service offerings. While mindful of the fact that many in the state are without access to the Internet, we seek to expand its use in place of more cumbersome disclosure requirements. Both tariffed and non-tariffed service offerings change frequently and it is both costly and inefficient to constantly modify printed materials to reflect those changes. By contrast, web published information can be readily modified as frequently as necessary, and consumers who make use of the Internet can be assured of having current information on hand when making choices among services and providers.

Rule 1(c) Responses to Customer Inquiries

This rule sets the minimum responses that service providers must give to customer inquiries regarding charges or other elements of a bill. Consistent with the consumer empowerment basis of these rules, this rule aims to ensure that customers receive the information they need from carriers regarding services for which they are being charged, whether that information is in the possession of the service provider or a third party.

Rule 1(d) Obligations of Basic Service Providers

The obligations of basic service providers are substantially greater than those of other providers because, even though the landscape is changing rapidly, basic local calling using the legacy wireline network is still considered, both legally and functionally, to be the "lifeline" that connects customers to vital services. Accordingly, this rule mandates a significant level of disclosure to be delivered to basic service customers by their providers, specifically including information about lifeline rates, and accessibility services for foreign language speakers and deaf and disabled customers. The rules incorporate the requirements of Public Utilities Code §§ 2889.6(a)¹³ and 2894.10 (b); ¹⁴ and mandate the inclusion of local prefix information in telephone directories, in response to customer comments and in line with our decision D.02-08-069, and the names under which the local exchange carrier operates in California. These types of information are already provided in the telephone books issued by the state's two largest ILECs and we see no reason that CLEC customers should be placed at a comparative disadvantage.

Rule 1(e) Required Information in Service Agreements

These rules are designed to ensure that customers receive complete information at the time of signing a service agreement and that all necessary information is supplied simultaneously. The exceptions provided are narrowly tailored to ensure that any material incorporated by reference does not alter the basic terms and conditions of the service agreement. Carriers and consumer representatives agreed that incorporation by reference to tariffs should be permitted, provided carriers provide ready access to the tariff actions referenced. These rules reflect that agreement.

Rule 2: Service Initiation and Changes

Rule 2(a) Rules for all Carriers

This rule incorporates verbatim the requirements of PU Code §2896(a), the general mandate to carriers to provide adequate information on the basis of which customers may make informed choices. We do not view incorporation of the statute into these rules as either enlarging or narrowing the statutory obligations of telephone service providers as they existed prior to enactment of these rules. Nor do we depart from the current practice of setting the standard that all carriers must meet with the expectation that individual carriers will determine the best method to meet those standards. It is the obligation of this Commission to enforce these standards, and the Commission retains all the authority it needs to do so, in conjunction with other law enforcement agencies as appropriate. By including the language of the statute in these rules the Commission exercises its prerogative under PUC § 2897 to clarify the application of these policies and supplement them as needed consistent with other provisions, orders, rules and applicable tariffs.

In these rules the Commission makes clear that the obligations of carriers to provide adequate information extends to potential, as well as existing, customers.

In addition, the Commission specifically directs that wireline carriers provide information regarding the least expensive service plans that are responsive to customer inquiries. In the case of wireless service providers, we require disclosure of information regarding the availability and cost of pay-as-you-go service plans, or other service plans that do not require entering into a term contract.

Rule 2(b) Obligations of Basic Service Providers

This rule incorporates certain existing practices and statutory requirements including the requirement of PU Code §2889.4 that local exchange carriers inform new residential customers of pay per use features during the order process. The rule extends this protection to all new customers, residential and non-residential alike, in recognition of the fact that small businesses wireless customers are as likely as residential customers to make use of pay-per-use features.

Rule 2(c) Plan Disclosure by Non-Tariffed Service Providers

Among the most significant concerns raised by several parties about wireless service is that customers are often locked into long-term contracts with no escape unless they pay an early termination fee.  This rule obligates wireless carriers to advise the customer of the availability and cost of service plans that do not require a long-term contract, if the carrier offers such plans.

Rule 2(d) Order Confirmations for Tariffed Services

We establish a simple uniform rule that orders for tariffed services must be confirmed within seven days of acceptance. We do not dictate the form or content of the order confirmation because there is little information in the record to suggest that existing order confirmation practices are inadequate or so varied as to require detailed regulation. Additional prescriptive rules regulating the form and content add materially to carrier cost without adding significantly, if at all, to consumer benefit.

Rule 2(e) Order Confirmations for Non-Tariffed Services

Non-tariffed services, especially wireless services, are delivered in a different manner from tariffed services. A typical wireless service initiation includes the purchase of a wireless device either through a carrier-owned outlet, a carrier agent or a retail store that sells consumer electronics and other goods in addition to wireless devices. The customer typically receives a variety of written materials at the point of purchase that may include a written contract, a summary of the wireless service plan, and general operating instructions for the device. This rule recognizes that the contract is the core document and that the customer is entitled to a copy of the contract at the time of purchase, or shortly thereafter, to allow sufficient time for the customer to review the terms in detail before the expiration of any trial period. The written contract, in conjunction with the wireless trial period mandated in the following Rule 2(e), provides the customer with the information required to determine if the service for which he or she has contracted will be satisfactory.

Non-profit interveners and the Attorney General urged us to require additional detailed disclosures in required formats with mandated type sizes and highlighted provisions (although which terms in the contract would need to be highlighted was left ambiguous). While an argument may be made for such a prescriptive approach in the absence of a trial period, the opportunity to take the contract home, try out the phone for a reasonable period of time, and return it within that period without incurring a penalty, other than paying for actual time used, eliminates the need for prescriptive disclosures.

Rule 2(f) Wireless Trial Period

The record established that the wireless industry, with some notable exceptions,¹⁵ operates on a business model that involves subsidizing the cost of the handset and amortizing that subsidy over time with a term contract. It is important to note that competitive forces are motivating some carriers to promote service plans that do not require term contracts. Other carriers are differentiating themselves in the market by offering "cheap," "no-frills" phones and services for customers more concerned with affordability than more complex features As handsets have become more complex and multi-functional, the level of subsidy and the average term of the associated contract have both increased. Information in the record established that the average new subscriber receives a subsidy of up to $150 in the form of a discounted price for the handset and the typical service contract is now two years. To ensure recovery of the initial subsidy, many carriers have adopted an early termination fee (ETF). (If a subscriber terminates the contract and returns the phone, the carrier cannot legally resell it except as a used phone.)

While the rationale for the ETF is thus quite understandable, when it is coupled with a contract that does not permit the customer to try out the phone to determine if it works under the customer's real world conditions, imposition of the ETF confronts the customer with an unreasonable choice: either take the phone without knowing if it works well enough to meet your needs or run the risk of paying a substantial ETF. It is both the company's choice and to the consumer's benefit to provide subsidies as inducements to customers; but we believe the company should bear the risk if the phone does not work to the customer's satisfaction. Accordingly, we adopt a rule that requires at least a 14-day trial period during which the company is at risk for loss of the subsidy (as measured by the ETF) should the customer return the phone.

It is important to note that the wireless industry on a national basis has voluntarily adopted a 14-day return policy as part of the CTIA Wireless Consumer Code¹⁶. This is a positive development that is beneficial to consumers resulting from both consumers exercising their influence in the marketplace, and the carriers' desire to avoid more prescriptive regulations. These actions should be recognized and encouraged by regulators and policymakers. We adopt this rule, consistent with this national voluntary policy, to ensure that all carriers in California, including new market entrants, adhere to this minimum standard.

We rejected a longer rescission period (30 days) for three reasons. First, there is little evidence to suggest that a longer rescission period provides any additional benefit to customers that outweighs the additional cost to carriers. There is little information that a customer will obtain in 30 days that he cannot reasonably obtain in 14 days. It is not unreasonable to expect that if a customer voluntarily signs a contract for services, he bears some responsibility for examining the terms of the contract and testing the product within the trial period.

Second, a 14-day trial period is consistent with or longer than contract rescission periods provided in other industries for products or services of significantly greater value than a cell phone. Automobiles, home equity loans, home appliances and consumer electronics are just a few examples of large purchases that often involve long-term financial contracts, some of which have no rescission period. There is no evidence in the record to support a longer rescission period for wireless service contracts.

Third, the record indicates that longer rescission periods add significant costs to carriers. These additional costs will force carriers to increase the price of handsets at the point of sale, or could make it more difficult for small carriers to enter the market if they do not have the economies of scale to mitigate this additional risk in recovery of their up front costs. Again, the benefit to consumers simply does not outweigh the potential cost of this policy.

Finally, in addition to a growing number of carriers offering service without term contracts, some carriers are also voluntarily offering 30-day trial periods and are touting that customer-friendly policy as a means of differentiating themselves from their competitors. It is unclear at this point whether customers care more about the rescission period or lower upfront purchase costs. If the longer trial period is important to consumers, other carriers will follow. There is no compelling reason for regulators to interfere with competitive forces beyond the basic requirement of a reasonable minimum trial period.

Rule 2(g) Service Cancellation

This rule protects a customer who has cancelled service from a carrier from being reconnected to that carrier's service without a new, independent authorization. "Independent authorization" means that the carrier cannot resume service based on a provision in the cancelled contract, even one that purports to allow such service resumption without affirmative customer action. The rule derives from our anti-slamming rules for wireline carriers. However, technical advances will shortly make it possible to port wireless devices from carrier to carrier, as telephone numbers are now ported, at which point wireless slamming will also become possible. Since fraud prevention is one of the two basic purposes of these rules, we are acting now to ensure that the wireless market does not replicate the experience of the wireline market.

Rule 2(h) Credit Denial

This rule tracks California Civil Code §1787.2 that require a creditor to inform a credit applicant within 30 days of the reasons for credit denial.¹⁷ Only if an applicant is given an explanation of the reasons for a credit denial is he or she able to challenge errors in credit files or other mistakes that may have led to the unavailability of service.

Rule 2(i) Disputed Charges

When a customer believes that a charge appearing on a bill is unauthorized, he or she typically informs the carrier and more often than not the carrier responds by removing the charge. However, that does not always happen, and the customer, who is dependent upon the carrier for information about an account, is usually at a disadvantage in proving that a charge was unauthorized. Weighing the competing interests of customers in not being forced to pay unauthorized charges and the company in not being forced to forego recovering legitimate charges, we come down on the side of the customers. If a customer disputes a charge, this rule assumes the charge is unauthorized unless the company proves otherwise. The rule also sets out three means by which the company can establish the legitimacy of the charge. Because the company has compiled and is in possession of the records on which both customer and company must rely in determining the validity of a charge, it is both fairer and more cost effective to place the burden of proof on the carrier to demonstrate that a charge was authorized by the customer.

Rule 2(j) Credit for Missed Appointments

This rule requires a carrier's representative to arrive and begin work within a scheduled four-hour appointment window at which the customer must be present. The missed appointment fee is designed both to compensate customers for the value of their time and motivate the carriers to make their scheduled appointments.

Rule 3: Clear and Accurate Bills, Late Billing and Back Billing

Both company and consumer representatives stressed the importance of clear rules governing the presentation of the various charges that appear on a telephone bill. The Federal Truth-in-Billing Act (47 C.F.R. § 64.240(a)(3)) requires all telecommunications carriers to comply with specific standards for bill presentation with the stated purpose being to prevent fraud and slamming, as well as to provide consumers with the information they need to make informed choices in the market.

Federally imposed rules for this purpose are important because most carriers, large and small, have national billing systems that do not adapt easily to state-specific requirements. For this reason, the Federal Truth-in-Billing Act specifically indicates that any state requirements and enforcement must be consistent with the Federal Act.¹⁸

The rules adopted herein are therefore consistent with the Federal Act but further clarify that certain types of charges must be clearly distinguished on the bill so as not to be confusing or misleading for consumers.

In general, charges fall into one of three categories:

(a) usage and/or service fees for which the customer has contracted;

(b) taxes and other governmental charges which the carrier is required to pass on to the customer; and

(c) taxes and other governmental charges or "regulatory recovery fees" that the carrier may elect to pass on to the customer.

TURN, UCAN, ORA and the Attorney General were most concerned that phone bills should clearly distinguish between required governmental charges and charges the carrier elects to pass on to customers. Carriers argue that so-called "discretionary" charges were no different from mandatory charges in terms of their obligation to remit the funds to government entities. The only thing "discretionary" is whether or not the company explicitly recovers the costs from consumers or recovers them in rates. The carriers further argue that a government charge is a government charge, and if the government specifically permits the carrier to recover the cost from consumers it is not unreasonable for the company to highlight the source of the charge on customers' bills, just like any other government-mandated charge. Further, they argue that they should not be forced to make it appear as if the carrier had a choice in collecting the charge in the first place by not allowing it to be listed among other mandated fees and taxes. We agree. Government should take responsibility for the costs of regulatory mandates and openly defend the consumer or societal benefit of those mandates.

However we find odious the practice of some carriers in identifying miscellaneous, undisclosed costs for compliance with statutes and regulations as "regulatory recovery fees" and making it appear as if these are mandated charges that are remitted to government entities. While carriers are free to recover their legitimate costs from customers in any manner consistent with the Federal Act and applicable tariff requirements, they should not be free to disguise their cost of regulatory compliance as "taxes."

These rules require carriers to clearly distinguish between taxes, fees and other charges that are collected by the carrier and remitted to federal, state or local governments from any other charges or fees collected and retained by the carrier. Additionally, carriers are not permitted to label cost recovery fees or charges as "taxes."

The rules also prohibit late fees from being applied to a customer account after the carrier has received payment, impose a statute of limitations on back billing of three, four or five months, depending on the nature of the service being billed, and prohibit carriers from charging a higher price for a service than the price in effect on the date the service was actually used.

Rule 4: Slamming

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 proceeding¹⁹into 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.²⁰ 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 rules²¹ 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.

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.²² 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.

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%²³and 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 files a complaint, the agency²⁴ 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 Slamming Rules 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 as Rule 4 of new G.O. ___, Appendix A to this order

Our description above of the federal rules applies in most ways as well to our new 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 Rule 4, Sections B, D, E, F, and G to be very similar, and in most ways virtually identical, to the wording in the federal rules²⁵.

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.

If 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.²⁶

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 non-profit interveners and the Attorney General 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]."²⁷ 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 (NARUC) 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.²⁸

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 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 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.

Rule 5: Contract Changes

Predecessors of this rule were the subject of extensive comments and discussions with carriers and consumer representatives. While both groups agree that a unilateral materially adverse change in the terms of a contract should give the customer the right to cancel the contract, there is little agreement on how or whether to write a more specific statement of the events that would trigger that right. TURN, UCAN, ORA and the Attorney General either want triggering events spelled out in detail in the rule or want customers to have a right to cancel if the carrier made any changes at all in the contract.

Carrier representatives argue that, particularly in the wireless area, contracts incorporate many dynamic elements including regulatory changes, changes in federal or state statutes, service area changes, and modifications or additions to intercarrier agreements. These changes, which generally impose no significant or additional burdens on customers, are unavoidable and spelling out each possible change in the contract is impractical. Carriers also pointed out that allowing customers to cancel the contract in the event of any change at all would undermine the entire idea of a term contract. Additionally, they argue that most carrier contracts already contain provisions that ensure carriers will not modify a material term of their subscribers' contract in a manner that is adverse to the subscribers without providing reasonable advance notice of the modification and allowing subscribers a minimum of 14 days to cancel the contract without penalty.

There is no compelling information in the record that indicates carriers are routinely making material changes to customer contracts without giving the customer a reasonable opportunity to cancel the contract without penalty. Therefore there is little justification for making major, costly changes in current practice.

We also note that the wireless carriers have incorporated provisions guaranteeing 14-day notice with an opportunity to cancel in their voluntary Code of Conduct.²⁹ This ability to cancel is an important tool for consumers and to ensure that all carriers meet this minimum standard, we include in these rules a requirement that carriers shall not modify a subscriber's term contract in a manner that is materially adverse to the subscriber without providing reasonable advance notice of the proposed modification and allowing the subscriber at least 14 days after receipt of the notice to cancel the contract with no early termination fee.

Rule 6: Service Termination

This rule applies only to providers of basic services and details the steps they must follow in order to terminate service to a customer for non-payment of bills. The rule largely incorporates current practices and requirements set out in existing commission decisions which are here gathered together in a single rule for convenience. We find that there is no case made to change these current rules.

Rule 7: Reserved

Rule 8: Billing Disputes

This rule should be read together with the rebuttable presumption established in Rule 2(h) to provide for resolution of billing disputes. Because charges that the customer asserts are unauthorized are presumed to be unauthorized, the burden of investigation falls on the company that, as we have pointed out in connection with other rules, is in the best position to conduct the investigation. In general, the rule requires carriers to investigate promptly any disputed amounts and withhold any adverse action based on the disputed amounts during the period they are under investigation. The rule prohibits the carrier from disconnecting service in the 7 days following notification of the customer of the results of the investigation and further prohibits carriers from imposing inconvenient choices of law for the resolution of billing disputes. The rule allows time for a good-faith claim of non-responsibility to be investigated and resolved while still preserving the carrier's ability to disconnect service for a failure to pay legitimate charges or in case of fraud.

Rule 9: Reserved

Rule 10: Consumer Affairs Branch Requests for Information

No comment required.

Rule 11: Utility Employee Identification

No comment required.

Rule 12: Emergency 911 Service

Rule 12 is modeled after § 2883, which requires carriers provide residential telephone connections with access to 911 services, even if they have been disconnected for nonpayment. Section 2883 explicitly does not include wireless carriers. Section 2892, on the other hand, requires something very similar of wireless carriers. As drafted by staff, proposed Rule 12 covered both wireline and wireless and did not limit its applicability to residential telephones. About one-half of the initial industry commenters sought to have the rule more closely conformed to

§ 2883. The June 2002 draft decision did that by restating it in words more similar to those of § 2883, at the same time integrating into it requirements from § 2892. As explained in this order and in the new general order, our intent is that these rules apply where feasible to both residential and small business services. Although this is academic for wireless carriers because, as they have been quick to point out, they do not typically distinguish between residential and business service, it is not academic for wireline. We have acceded to the wireline carriers' request that we not go beyond the residential connection requirement that § 2883 places on them, and have revised Rule 12 accordingly. One other minor change was made to eliminate another possible source of ambiguity: Whether it is true or not that, as one commenter stated, wireless carriers don't provide "access services," we intend wireless carriers to be covered.³⁰ That term has been changed here to make it clear that the rule applies to carriers who provide end-user access to the public switched telephone network.

Non-profit interveners and the Attorney General generally agreed with Rule 12 as proposed. One suggested that we tighten the rule by eliminating the qualifier, "to the extent permitted by facilities." No carrier, the reasoning went, should have been certificated in the first place if it couldn't provide ubiquitous 911 access. However, the rule as drafted conforms to § 2883 in that respect and represents a very practical standard. We have retained the qualifier.

In response to comments from the wireless industry, we have modified the rule to clarify that a wireless carrier's obligation to provide 911 service is limited by applicable Federal Communications Commission orders.

In the initial comments, a carrier asked that we clarify whether we intend Rule 12 to be consistent with the existing rules for reseller CLCs. We do. In D.95-07-054, Appendix B, our Consumer Protection and Consumer Information Rules for CLCs, Rule 10.C. required continued 911 access to residential services even after disconnection for nonpayment. In D.95-12-056, we further interpreted Section 2883's applicability to CLCs by requiring them to provide 911 service (which we referred to there as "warm line" service) to residential customers disconnected for nonpayment for as long as the CLC maintains an arrangement for resale service to the end user's premises. When the resale arrangement is terminated, the obligation to provide 911 access reverts to the underlying facilities-based carrier. We decline to revisit that earlier-decided issue here.

Rule 13: Sunset Provision

The three-year sunset provision is included in the rules in recognition of the dynamic nature of the telecommunications industry and the rapid evolution of additional competing technologies, such as Voice Over Internet Protocol, as to which the commission has recently opened an investigation. Development of new, internet-based competitors for both wireline and wireless service providers will almost certainly change the regulatory landscape again in ways that will require approaches that are likely to be different from those we adopt in this order. The sunset provision guarantees that we will revisit these issues as those new technologies take root and spread and will have the opportunity to adapt the rules to the changed environment in a timely fashion.

(a) Include in their telephone directory information concerning emergency situations which may affect the telephone network. The information shall include the procedures which the corporation will follow during emergencies, how telephone subscribers can best use the telephone network in an emergency situation, and the emergency services available by dialing "911".

(1) A copy of a publication prepared by the Department of Consumer Affairs, the Public Utilities Commission, the Federal Trade Commission, or any other federal or state governmental agency that generally describes telephone subscribers' privacy rights, under state and federal laws, with respect to telephone solicitations.

4. Allow a Trial Period for New Service When a customer initiates service with a wireless carrier, the customer will be informed of and given a period of not less than 14 days to try out the service. The carrier will not impose an early termination fee if the customer cancels service within this period, provided that the customer complies with applicable return and/or exchange policies. Other charges, including airtime usage, may still apply."

(a) Within 30 days or at a later reasonable time specified in federal law or regulations, after receipt of a completed written application for credit, a creditor shall notify the applicant of its action on the application. (b) Each applicant denied credit shall be entitled to a statement of the reasons for such action from the creditor.

²⁸ CC Docket No. 94-129, First Order on Reconsideration, Corrected Version, at Paragraph 25, footnotes omitted.