VI. Key Issues

A. Protection for Consumers and Businesses

These interim rules protect individual consumers and businesses alike. Although the Commission receives complaints primarily from individuals, businesses also have been victims of cramming. (See, e.g., Comments of California Small Business Association.) Extending the protection provided by these rules to businesses in California will benefit those businesses and further discourage the practice of cramming in this state.

B. Role of Billing Telephone Company

As discussed above, responsible billing telephone company practices are a crucial component of effective safeguards. These interim rules require billing telephone companies that choose to provide billing services to vendors of non-communications products and services to adopt certain practices, such as screening the vendors that bill through them directly or indirectly through billing agents, and requiring them to provide proof of authorization for all disputed charges. These practices and others set forth in the interim rules will effectively deter most cramming.

C. Authorization of Charges

1. Billing Telephone Companies Must Obtain Affirmative Consent from a Subscriber before Opening Up that Subscriber's Telephone Bill to Non-Communications Charges (the "Opt-in" Requirement)

Because billing for non-communications charges on telephone bills has been prohibited by statute, many subscribers initially will be unaware that as a result of a change in the law, they are now exposed to a risk of having unauthorized charges for non-communications products and services placed in their telephone bills. Consumers should not be exposed to this risk unknowingly. Accordingly, these interim rules require billing telephone companies to obtain express permission directly from a subscriber to include non-communications-related charges before any non-communications-related charges may be included on that subscriber's bill. Although some carriers objected to this requirement as onerous and unnecessary, we believe this "opt-in" approach constitutes a necessary safeguard at this time. It enables the billing telephone company to block all non-communications charges on the bills of subscribers who do not want to use their telephone bill for anything but their telephone service, greatly reducing the risk of fraudulent authorizations. The "opt-in" authorization need only be obtained once for each subscriber, unless a subscriber subsequently revokes authorization.

Once consumers in general become more widely aware that non-communications charges may be placed on their phone bills, it may be appropriate to move from an "opt-in" arrangement to giving subscribers instead a blocking option analogous to that currently available for Caller ID. The Commission, therefore, anticipates revisiting this provision after these rules have been in effect for approximately 18 months.

2. Charges Must Be Authorized By Subscriber at Point of Sale

The need to ensure that only properly authorized charges are included in subscribers' bills is non-controversial; however, parties differ on how the Commission should address that problem in its rules. Many carriers, in their comments to the first version of these rules, urged the Commission to refrain from imposing a particular method, such as use of a PIN number, because other security procedures are being developed that might be preferable. The interim rules require use of an authorization verification procedure at least as effective as a PIN number, but allow flexibility in the choice of a procedure. Billing telephone companies should require that the entities they bill for use security procedures consistent with this standard, and promptly suspend billing services for them if they do not.

3. Subscribers May Revoke Their Authorization

The rules enable subscribers to revoke consent to allow non-communications charges on their telephone bills at any time without charge. As with credit cards, this provision is necessary to protect consumers so that they can limit their liability in the event of loss, theft (for example of a cell phone), or unauthorized use.

D. No Disconnection Rule

The interim rules prohibit disconnecting, or threatening to disconnect, basic local telephone service for nonpayment of non-communications charges. This rule is consistent with the no-disconnect policy we announced in D.00-03-020 (as modified by D.00-11-015), which prohibits disconnection of basic local service for nonpayment of interexchange service.