III. Authority for Rules

The Commission's authority to adopt these consumer protection rules derives in part from its general authority to regulate public utilities (see, inter alia, Section 701). Additional specific authority is found in Sections 2889.9, 2890, 2890.1, 2891, and 2896-2897.

A. Billing Agents and Vendors that are not Public Utilities

Although cramming does not necessarily involve multiple entities, experience has shown that it often occurs in the context of a billing chain involving one or more billing agents in addition to the billing telephone company and yet another entity responsible for initiating the process of placing a charge on a subscriber's bill. For this reason, the Legislature in enacting Sections 2889.9 and 2890 made the requirements of those sections applicable to billing agents and to other persons or corporations "responsible for generating a charge" on a subscriber's telephone bill, whether or not they are public utilities. Commission rules implementing this anti-cramming legislation apply to these entities as well. If persons or corporations subject to Sections 2889.9 or 2890 fail to comply with those statutes or the Commission's implementing rules, the Commission may impose penalties on them. (Section 2889.9(b).)

The term "entity responsible for generating a charge" in Section 2890 refers to a person, corporation, or other business entity that initiates the process of getting a charge placed on a subscriber's telephone bill. Some carriers, however, have argued in comments that the phrase is ambiguous because billing agents also play a role in "generating a charge" on a subscriber's bill. Accordingly, in these rules, we have used the term "vendor" to refer to a person or corporation that initiates the process of placing a non-communications charge on a subscriber's telephone bill. In the context of non-communications charges, vendors likely will not be public utilities in most cases; however, if a billing telephone company sells non-communications products or services directly to its own subscribers, it will be acting both as a billing telephone company and as a "vendor" within the meaning of these rules.

B. Wireless Telephone Service Providers

Wireless telephone service providers that choose to provide billing services for non-communications products and services are subject to these rules. Although Section 332(c)(3)(A) of the Federal Communications Act bars states from regulating wireless telephone rates unless specific authorization is obtained from the FCC, it allows states to "regulate the other terms and conditions of service." The Act also does not prevent states from requiring wireless service providers to comply with general consumer protection laws. (Spielhotz v. Superior Court (2001) 86 CA4th 1366; see also In re Wireless Consumers Alliance, Inc., FCC 00-292 (Aug. 14, 2000), reconsideration denied, FCC 01-35 (Jan. 31, 2001).) Wireless telephone service providers providing telephone service in California are "telephone corporations" as defined by the Public Utilities Code and are generally subject to the statutory provisions underlying the rules we adopt today.

Wireless customers, like land line customers, should be protected from unauthorized charges. They, too, need non-misleading information about their service options, protection of their confidential information, and a procedure for resolving billing errors. Complaints to the Commission related to wireless service are increasing: 3787 in 1999, 5243 in 2000, and 3486 in the first half of 2001. Most of these complaints are billing disputes.³ And as the Attorney General noted in his first set of comments on the Order Institution Rulemaking and first draft of the Telephone Consumers' Bill of Rights, "[I]t is well established that only a tiny portion of persons who believe they have a complaint about a business complain to a third party, such as a government agency or the Better Business Bureau. See, e.g., Best, Arthur, When Consumers Complain, Columbia University Press, (1981), p.118." And although the existence of competition among wireless service providers means that at least some subscribers have the option of switching to a different provider if dissatisfied with the service they are getting, long-term contracts and substantial fees for early termination of those contracts discourage customers from doing so.

It is becoming clear that the existence of competition among wireless providers does not obviate the need for consumer protections for wireless customers.