8. Marketing Specific Services

Below, we address each Pacific Bell service whose marketing is alleged by complainants to have violated one or more of the standards discussed above.

8.1. Caller ID and Blocking Service

Pacific Bell sells the Caller ID service as a tariffed service. This service provides the name and telephone number on a special box, screen phone, or audio box, that announces the caller. Pacific Bell has offered this service in California since July 1996. It costs $6.50/month for residences and $7.50/month for businesses when purchased separately. Approximately one million residential and 51,000 business customers subscribe to the Caller ID service.

As a prerequisite to authorizing Pacific Bell to offer Caller ID service, the Commission required Pacific Bell to enable callers to withhold ("block") the display of their name and telephone number. Pacific Bell has two Caller ID blocking options: Complete Blocking and Selective Blocking. Complete Blocking prevents a caller's name and number from appearing on the receiving party's Caller ID display unless the caller chooses to unblock the number on a per call basis by dialing *82. Selective Blocking displays the caller's name and number to the receiving party unless the caller chooses to block the number on a per call basis by dialing *67. Every telephone line has either Complete Blocking or Selective Blocking, and both options are free of charge. If a customer does not choose Complete Blocking, the default is Selective Blocking. If a customer has elected Complete Blocking, it is so indicated on the monthly telephone bill. The default, Selective Blocking, is not indicated on the customer's bill.

To educate consumers about these new options, the Commission ordered all California local exchange carriers to implement a ratepayer-funded Customer Notification and Education Plan. (See D.92-06-065, 44 CPUC2d 694, 716-9.) The purpose of that plan was to ensure that all Californians were aware of the Caller ID services and their implications, including understanding their options for maintaining their privacy as a calling party. The plan included individual letters to each customer; TV, newspaper, and radio advertisements; and community outreach to over 500 organizations. The campaign cost over $30 million and concluded in mid-1998.

Pacific Bell's marketing plan and scripts for service representatives set out its subsequent approach to offering Caller ID blocking options. In its Residence Caller ID Marketing Plan, SBC4 noted that one of the means for increasing the value of this product to customers was decreasing the number of lines that have Complete Blocking so that a greater share of numbers would be displayed. The specific plan to accomplish this included attempting to convert customers to Selective Blocking, awarding prizes to service representatives who switch customers, and instructing service representatives to only address complete blocking at customer prompting.

Examining these marketing practices in light of the applicable statutory and regulatory disclosure standards, we find no violation of the standards. Pacific Bell completed its Commission-mandated customer education program. With the completion of that program, we imposed no continuing duty on Pacific Bell to educate customers about the two blocking options. The statute, § 2893, imposes no such duty. Indeed, as Pacific Bell correctly points out, legislation was vetoed which would have required all telephone companies to include in Caller ID notifications all the options for blocking the caller's telephone number. (Pacific Bell Appeal of ALJ Opinion, dated January 21, 2000, p. 26.) We also recognize that Pacific Bell is free to encourage customers to choose Selective Blocking.

Pacific Bell contracted with Business Response, Inc. (BRI) to do outbound telemarketing to "downgrade nearly 2 million customers from Complete Call Blocking to Selective Call Blocking," and BRI stated that it "understands the urgency involved in removing Complete Call Blocking from as many lines as possible during the fourth quarter of 1998 and the first quarter of 1999." BRI promised to use its experience to implement a campaign that "not only meets but exceeds desired results." BRI was compensated on an hourly basis, with incentive compensation to be considered after a test period. (See Exhibits 101, 102.)

Pursuant to the contract, Pacific Bell supplied BRI with a list of customers whose telephone numbers were published and who had Complete Blocking. Using Pacific Bell - approved scripts, BRI's telemarketers were instructed to call the customers and inform them of new services like Anonymous Call Rejection which could interfere with their calls being completed and to recommend switching to Selective Blocking. The approved scripts specifically provided that the telemarketer was to acknowledge that the customer could choose between the two blocking options, and that *82 would unblock any call that was not being completed. A Pacific Bell manager trained BRI's agents and observed live calls in St. Louis on the first day of calling. That day, all observed agents used the approved scripts. BRI conducted its own subsequent monitoring.

After a few weeks and in response to customer complaints, Pacific Bell suspended this contract and initiated an investigation. The investigation revealed that BRI had used unapproved scripts in its calls; the unapproved scripts used the word "upgrade" several times and included other unapproved information as well. Pacific Bell determined that BRI had contacted 278,010 customers and that approximately 107,000 customers had been switched from Complete to Selective Blocking as a result of those calls. Pacific Bell contacted each switched customer to confirm the choice.

In terminating the contract with BRI, Pacific Bell was acting on complaints from its customers that these calls were "deceitful and dishonest." We agree. These calls violate the disclosure requirements because consumers received misrepresentations of fact. For example, Pacific Bell does not charge for either blocking option; both services are "free," not just Selective Blocking as the script implies. Selective Blocking was not developed as a "service upgrade" to Complete Blocking. Both types of blocking allow customers to decide on a call-by-call basis whether to block or unblock the number. We also contrast BRI's description of the blocking service change as an "upgrade" in the statements to customers, to its description of the same service change as a "downgrade" in its contacts with Pacific Bell.

We note that Pacific Bell took prompt action to terminate BRI's contract after discovering that BRI was not adhering to the approved scripts. Pacific Bell subsequently contacted consumers and confirmed their blocking choice. Thus, Pacific Bell corrected any wrong committed by BRI.

On balance, then, we compare Pacific Bell's conduct in contracting with BRI to "downgrade" subscribers and its remedial efforts. Pacific Bell apparently agrees that BRI's statements failed to meet the disclosure standards and that any blocking change authorization obtained by BRI is untrustworthy. Pacific Bell comprehensively addressed BRI's conduct, without action by this Commission. Self-enforcement of the disclosure standards is the best enforcement mechanism, and one that we wish to encourage. Therefore, while we find that BRI's actions violated the disclosure standards, BRI's actions have been adequately mitigated by Pacific Bell's remedial actions.

8.2. Anonymous Call Rejection

Anonymous Call Rejection is a service offered by Pacific Bell that allows called parties to refuse to receive calls from telephones that have the number blocked. This service terminates such calls at the central office such that no toll charge is assessed. The rejected caller instead hears a recording stating that the called party does not accept anonymous calls, and if the caller wishes to complete the call, the caller's line must first be unblocked by using the *82 code, and then redialing the number.

Greenlining's witness testified that the purpose of this product was to "punish consumers who have chosen to keep their numbers private - whether they use Selective or Complete Blocking," and that it invades rather than protects the caller's privacy. Rather than contending that this service violates the disclosure standards found in Tariff Rule 12 and the statute, Greenlining contends that this service violates § 2893. That statute requires that no charge be imposed for withholding a number. Greenlining reasons that to complete a call where the called party subscribes to Anonymous Call Rejection, the caller must incur the cost (and inconvenience) of calling from a pay phone to withhold the telephone number, thus incurring a charge to withhold the number in violation of the statute. In contrast, Intervenor Roberts states that he has found Anonymous Call Rejection to be invaluable in protecting and enhancing his and his family's privacy, and that the Commission should fairly balance both the calling and called parties' privacy interests.

On this issue, Greenlining has overlooked the privacy of the called party in its privacy balance. The Commission has previously determined that "Anonymous Call Rejection vindicates an important privacy interest of the called party, the interest in undisturbed solitude. [T]his feature merely automates a self-selected vindication of a privacy concern which might otherwise be defended on a call by call basis." (D.92-06-065, 44 CPUC2d 694, 719.) In short, the called party has every right not to answer the phone and to secure services from Pacific Bell to prevent certain calls from being presented to the phone. While the calling party who wishes to complete the call must unblock the number or use a pay phone, that decision is for the calling party to make. Greenlining has presented no legal or policy basis for an absolute right to place anonymous calls to a phone customer who does not wish to receive such calls. Section 2893 places no burden on called parties to receive anonymous calls. That statute only requires that telephone corporations provide a blocking service at no charge to the caller. Here, Pacific Bell has met that requirement of the statute.

8.3. Inside Wire Maintenance Plans

Pacific Bell is responsible for maintaining the wires that enter a customer's home up to the line of demarcation, usually a box on the outside of the structure. Wires inside the home are the responsibility of the customer, or the landlord, in the case of an apartment. Pacific Bell provides Inside Wire Service where, for a monthly fee, Pacific Bell maintains the customer's inside wire. Absent this service, the customer is responsible for any needed repairs to the inside wire.

Pacific Bell offers two types of inside wire maintenance plans. For 60 cents/month, Wire Pro covers the repair of phone wiring and jacks on the customer's side of the demarcation point. For $2.25/month, Wire Pro Plus adds a 60-day use of a loaner telephone to the services covered by Wire Pro.5 Pacific Bell instructs its service representatives to offer Wire Pro Plus, and to explain Wire Pro only if the customer is not interested Wire Pro Plus. Pacific Bell also does not inform apartment dwellers of the landlord's statutory duty to maintain inside wire and one jack.

Complainants contend that this marketing approach violates § 451 and § 2896 because Pacific Bell fails to provide customers sufficient information upon which to make an informed choice among inside wire plans. Complainants state that by only offering the two service options in sequence (higher priced option first), customers who order Wire Pro Plus are unaware of the lower-priced option.

Pacific Bell states that both services are authorized by tariffs and that complainants fail to point to any legal prohibition against offering one service plan before the other.

We need not agree with either party because we have previously addressed this issue in a different case. In D.99-06-053, we authorized Pacific Bell to re-categorize its inside wire services from Category II to Category III. We also noted that Pacific Bell's service representatives only present customers with the option of Wire Pro as a "fallback" when the customer rejects Wire Pro Plus. We found that this sequence "may be misleading to residential customers" and ordered Pacific Bell to clearly explain both options to residential customers. (D.99-06-053 at Ordering Paragraph 8.) We confirm our prior decision and will direct that Pacific Bell comply with it.

ORA takes up the related issue of disclosing the landlord's responsibility to maintain inside wire and one working jack. ORA notes that the Commission previously required Pacific Bell to make a specific disclosure, including the "following statement, which shall be in bold print and shall be underlined: You should be aware that, under state law, landlords, and not tenants, are responsible for repairs to and maintenance of inside telephone wire." (Revision of the Accounting for Stations Connections and Related Ratemaking Effects and the Economic Consequences of Customer-Owned Premise Wiring, (D.92-09-024, 45 CPUC2d 411 (headnote reported only).) The requirement that Pacific Bell make this specific disclosure expired on September 1, 1994.

Pacific Bell contends that the disclosure requirement having expired, and therefore it is no longer under an obligation to disclose that landlords and not tenants are responsible for inside wire repair.

Pacific Bell is correct insofar as this specific disclosure is concerned. The specific notice requirement expired in 1994. Hence, we find no basis for a violation.

Having determined that Pacific Belldid not violate D.92-09-024 because the notice requirement had expired, we note that the law regarding inside wire maintenance in apartment buildings has not changed. It is still state law that landlords, not tenants, are responsible for maintenance to and repair of telephone inside wire.

Renters, therefore, should still have the right to be informed that landlords have the same statutory duty as before. Notwithstanding this landlord duty, renters may still elect to purchase inside wire service from Pacific Bell for convenience and reliability reasons. To make an informed decision, however, the renter must be presented with all facts, known to Pacific Bell, which have a significant bearing on the decision. Here, the fact that the landlord, and not the tenant, is legally responsible for the inside wire and jack is a significant fact that may affect a tenant's decision to purchase inside wire maintenance services from Pacific Bell. Accordingly, as a prospective requirement , we shall direct that Pacific Bell show cause why it should not resume disclosing to its customers who are tenants that the landlord is responsible for inside wire maintenance. Pacific Bell shall file a written response to this show cause order within 30 days. We will not specify the precise details of the disclosure statement but will require that it be substantially similar to the earlier one. This disclosure requirement shall not expire, absent further order of the Commission.

Complainants also raised the issue of Pacific Bell disclosing that other vendors, or the customer, may repair inside wire. When discussing inside wire repair plans with a customer, service representatives may state that Pacific Bell charges $90/hour for its repair technicians. Complainants contend that Pacific Bell is violating the statutory standard by not disclosing that vendors other than Pacific Bell may provide inside wire repair services. Pacific Bell responds that it does make such disclosures when a customer calls to order repair service, and that it only quotes its hourly repair rate to provide the customer some sense of what a repair visit might cost.

In a recent decision, we addressed the interrelationship of Pacific Bell's inside wire services and the use of other vendors to perform the actual repair of faulty wires. (D.99-06-053.) That decision also addressed and resolved the disclosure issue the complainants raise.

The decision began by determining that residential inside wire repair is one "market" with two payment options - either on a per-month basis or on a per-visit basis because both payment options are designed to solve the same problem, faulty inside wire. (D.99-06-053, mimeo., at 54.) Thus, Pacific Bell inside wire service is related to the repair service that other vendors may supply. To inform customers of these service options, we clarified on rehearing the disclosure requirements by adopting the following revised Ordering Paragraph:


    "Pacific Bell's service representatives must clearly explain to its residential customers that they have options for the repair and maintenance of inside wire, including Pacific's Wire Pro plan which covers repair of the customer's inside wire and jacks, Pacific's Wire Pro Plus plan that covers the use of a loaner telephone instrument for up to 60 days. Customers may also use outside vendors to perform inside wire repair maintenance or may make repairs themselves."

Application of Pacific Bell For Authority to Categorize Residential Inside Wire Repair as a Category III Service, D.99-09-036, mimeo., at 17.)

Our results in today's decision comports with the language quoted above. We see no reason to disturb our previous decision.

8.4. The Basics and The Essentials Packages of Optional Services

The Commission has approved Pacific Bell's tariff for Saver Packs of optional services.6 The tariff lists the name of the different Saver Packs, the monthly charge for each package, and the actual products included in each package. The names of the various Saver Packs are:

To display the myriad of service and pricing options which result from the five different packages with up to 11 services, Pacific Bell prepared a table with five lines corresponding to the five packages and 11 columns for the number of custom calling features. The boxes where the columns and lines intersect contained the price for that particular service offering. The table dated May 1, 1998, contained in Hearing Exhibit 57 showed 28 different packages and prices.

On June 16, 1998, Pacific Bell introduced a tariffed 90-day Basics Saver Pack promotion that offered nine custom calling features and The Message Center for $19.95/month.

The special promotion expired and the price for the Basics Saver Pack with nine custom calling features and The Message Center returned to $32.50/month. Pacific Bell also refers to The Basic Saver Pack (with any number of custom calling features) combined with The Message Center as The Basics Plus. Effective September 14, 1998, Pacific Bell changed the tariffed name of the Basics Saver Pack with nine custom calling features to The Works Saver Pack. Pacific Bell also lowered the price to $16.95/month. The Basics Saver Pack with three to eight custom calling features remained unchanged.7 Service representatives are now trained to first offer customers the Works Saver Pack and if rejected to then offer the Basics Saver Pack.

Pacific Bell served copies of its tariff filings on complainants UCAN and Greenlining. No complainant, nor any other entity, protested the filings.

Complainants now object to the names of "The Basics" and "The Essentials" Saver Packs. They contend that these names mislead customers into believing that these packages of optional features are standard local telephone service. They further contend that Pacific Bell knew that the name "The Basics" was misleading because its own market research showed that focus group participants found it to be so. See Attachment MS-12 to Hearing Exhibit 2.

Complainants state that § 17200 and § 17500 of the Business and Professions Code prohibit the use, in selling services, of names that are unlawful, unfair, and misleading. Complainants argue that the names "The Basics" and "The Essentials" violate these statutes. Pacific Bell responds that complainants have not proven by extrinsic evidence that the names were likely to mislead a reasonable consumer.8

In the first of the series of decisions in the "1986 Marketing Case" (see Section 5.3.2 above), we found that Pacific Bell was marketing its basic local exchange service in a package with expensive optional services. (D.86-05-072, 21 CPUC2d 182, 188.) Such marketing, we determined, contravened the Legislature's and this Commission's universal service directives because it masked the basic rate. The statutes and our decisions all focused on reducing the basic rate as the means of ensuring universal service.

Creating an association between local exchange service and packages of optional services was squarely at issue in 1986, when the Commission found that these "package selling abuses" violated Tariff Rule 12. (21 CPUC2d 182, Finding of Fact 2, Conclusion of Law 2.) The Commission also found that such an association "masks" the basic rate, which is the focus of the universal service subsidy program. (Id. at 188.)

In contrast to the 1986 Marketing Case, there is no allegation here that Pacific Bell is selling local exchange service as part of its packages of optional services. Each of the packages, as described above in detail, contain only optional services such as call forwarding and call waiting. Rather, complainants allege that the name "The Basics" creates an association with local exchange service that is prohibited by the earlier decisions.

Pacific Bell responds to complainants' allegations by stating that the order in which customers are presented with the service choices obviates any confusion. Customers first select their local service (flat rate or measured rate), and then discuss optional services. Pacific Bell explains that the optional services are offered to a customer only after the customer has been through the process to initiate local exchange service. In this way, Pacific Bell creates clear separation between its local service offerings and its optional services, as is required by the 1986 decision. Customers will have already gone through the detailed process for initiating local service and will be unlikely to be confused by the package name "The Basics" into believing that they are beginning the local exchange process anew. Consequently, this order of presentation clears up any confusion that might have been caused by the name of the package.

Our 1986 decision prohibits packages that commingle local exchange service and optional services. There is no evidence in the record that Pacific Bell has violated this prohibition. Pacific Bell has provided us with a plausible marketing approach that could address any customer confusion caused by its choice of name for the package. The complainants have failed to counter Pacific Bell's explanation with a significant showing of customers who were actually confused by the name. Thus, on the record before us, we find that complainants have failed to meet their burden of proof. We caution Pacific Bell, however, that it must maintain careful marketing to remain in compliance with the statutes, Tariff Rule 12, and Commission decisions. Accordingly, we find that The Basics Saver Pack, as currently marketed, violates no statute or Commission directive. The complainants included the package named The Essentials in their arguments, but the evidence presented was only directed at The Basics. We find that the package named "The Essentials" requires the same level of careful marketing as does The Basics. Thus, Pacific Bell shall market The Essentials subject to the same heightened marketing standards as The Basics.

8.5. The Basics Plus Saver Pack

In addition to the tariffed Basics Saver Pack discussed above, Pacific Bell also offered customers a package of services named "The Basics Plus Saver Pack." This package included The Basics Saver Pack and The Message Center.9 The Message Center is a voice mail service provided by Pacific Bell Information Services (PBIS), a Pacific Bell affiliate. This service is tariffed with the Commission by Pacific Bell.10

In response to ORA's allegation that "The Basics Plus" is not a name of a Pacific Bell tariffed package, Pacific Bell stated that it has a tariff which allows it to group services together by distinctive phrases. Pursuant to this tariff, Pacific Bell stated that it trained its service representatives to inform customers that The Basics Plus Saver Pack is composed of The Basics plus The Message Center.

The tariff to which Pacific Bell referred states as follows:


"The Utility may refer to groups of products and/or services by distinctive, collective phrase(s). These phrases will be used when discussing the Utility's product line with customers and in advertisements. The Utility shall make available each product and/or service that make up these groups along with the rate and charge information for each individual product and/or service. The Utility shall inform its customers that the components of a product/service grouping may be purchased individually. (Group names will not be included in individual product tariffs.)" (Schedule Cal. P.U.C. No. A2, Rule 2.1.2(K), effective March 1, 1996.)

This rule allows Pacific Bell to assemble groups of tariffed services and to assign a distinctive name to the group. It does not, however, authorize Pacific Bell to charge other than the tariffed price of each component of the package. To charge a discounted price for the components, Pacific Bell must file a new tariff. Pacific Bell did so when it created The Works Saver Pack with discounted prices for both the custom calling features and The Message Center in September 1998.

Prior to filing The Works Saver Pack tariff, however, Pacific Bell was offering customers The Basics Plus Saver Pack, which was comprised of The Basics and The Message Center. As required by the grouping tariff, although this service was part of a saver pack, the charge for The Message Center remained unchanged. Customers were charged the same price for The Message Center whether or not they purchased it as part of the saver pack.

The parties did not raise the issue of whether customers might be misled into believing that The Message Center was being provided at a discount by a combination of The Message Center, at regular price, with a saver pack.11 Thus, we need not reach the propriety of creating an association between local (or basic) service and an affiliate's voice mail product in the name The Basics Plus Saver Pack.

4 In 1997, SBC merged with Pacific Bell's holding company, Pacific Telesis. The Commission approved SBC's control of Pacific Bell in D.97-03-067. 5 These rates were applicable during the time relevant to the complaint. The rates have since increased. 6 These services include but are not limited to: call forwarding, call return, call screen, call waiting, priority ringing, repeat dialing, select call forwarding, speed calling - 8, and three way calling. 7 As a practical matter, however, the reduced price for the Basics Saver Pack with nine custom calling features ($16.95) became equivalent to the price for the Basic Saver Pack with five such features. Thus, the price for five to nine features became $16.95/month. Although the record is not clear on this point, the price for 10 and 11 custom calling features apparently remained at $24.95/month. 8 Pacific Bell also states that the claims arising under the Business and Professions Code should be dismissed because that code does not apply to services provided by a regulated public utility such as Pacific Bell, citing § 17024. We disagree. The exemption contained in Business and Professions Code § 17024 applies only to Chapter 4 of Part 2 of Division 7. Section 17500 is included in Chapter 1 ("Representations to the Public") of Part 3 of Division 7, and § 17200 expressly applies to "any act prohibited by Chapter 1 (commencing with Section 17500) of Part 3 of Division 7 of the Business and Professions Code)." Accordingly, the exemption is inapplicable to the alleged violations. 9 Pacific Bell also apparently offered "Plus" versions of its other Saver Packs. These "Plus" Saver Packs were comprised of the named Saver Pack and The Message Center. 10 Tariff Schedule Cal. P.U.C. D3, effective September 10, 1997. 11 The price charged is also limited by the federal antitrust laws, and the California statute (§ 2282.5) on cross-subsidization of enhanced services by noncompetitive services. Competition for Local Exchange Service, (D.96-03-020, 65 CPUC2d 156,193-4).

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