6. 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.

6.1. 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, developed in October 1977, SBC⁶ noted that Pacific Bell's 1996 sales rate for Caller ID was 2% and set a goal of 30% for 1999.⁷ Among 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. In other words, with a greater share of lines having Selective Blocking, Caller ID customer would see fewer calls marked "private" or "anonymous." The specific plan to accomplish this included:

· "attempt to convert customers to Selective Blocking on all customer contacts associated with Caller ID (included telemarketing, sales agency, business office, ERIC, etc);

· "implement sales incentive program (prizes) to reward net increase in Selective Blocking and track on a monthly basis;

· "change positioning of Complete Blocking prompt on Starwriter and establish policy for Service Representatives to address service only at customer prompting or when addressing removal of existing Complete Blocking; and

· "train service representatives to provide customers a balanced perspective of Complete Blocking and a bias towards Selective Blocking."

(Exhibit 4.)

Pacific Bell also provided its service representatives with suggested language to use when talking with customers on this topic:

· "I noticed that you have Caller ID Complete Blocking. What are you using it for? I find that Selective Call Blocking gives me greater control over my privacy. Since it's free, shall I go ahead and change that for you?"

* * *

· "I see you have complete blocking for Caller ID. Do you know what that is? I'm concerned that your calls may go unanswered. Many of our customers don't answer calls that are marked private and may even block them from coming through. I recommend switching to Selective Blocking. Then you can just dial *67 when you really need to block your calls. Can I go ahead and take care of this for you? There is no charge."

(Exhibit 2, Attachments 66 and 67.)

After examining Pacific Bell's marketing plan and scripts for service representatives in light of the applicable statutory and regulatory disclosure standards, we conclude that Pacific's marketing scripts do not provide the customer with sufficient information on the full range of blocking options available. But we should note that Pacific's marketing efforts for Caller ID are not a part of the customer education requirements as defined by D.92-06-065 or a subsequent resolution that adopted the CNEP. The Commission ordered that the consumer education program should be most intense in the first six months and then ongoing for as long as the customer calling features were being offered. (See Ordering Paragraph 6(c) of D.92-06-065). However, the Commission did not establish specific requirements to dictate Pacific's marketing of Caller ID or what script it should follow to persuade customers to switch from Complete Blocking to Selective Blocking after the completion of the customer education program. Indeed, as Pacific Bell correctly points out, legislation was vetoed which would have required all telephone companies to include in Caller ID notification of all the options for blocking the caller's telephone number. (Pacific Bell Appeal of ALJ Opinion, dated January 21, 2000, p. 26.) We recognize that Pacific Bell is free to encourage customers to choose Selective Blocking as long as it continues to provide balanced information on Complete Blocking and, at minimum, refrain from undermining the public's ability to make informed choices regarding their privacy.

We note that Pacific's objectives to increase the penetration rate for Caller ID service is neither prohibited nor necessarily inimical to consumers' interest. We did not bar Pacific from persuading customers to switch from complete blocking to selective blocking. As we noted in D.92-06-065, it would be the "applicants' (Pacific, GTE California and Contel of California in Application 90-11-011) challenge to persuade the public not to block by providing cogent reasons why it is not in their interest to do so." (See D.92-06-065, 44CPUC2d713)

However, we find that Pacific's marketing of Caller ID does not give the customer a complete picture of the options available. This is particularly important for those customers who received Complete Blocking by default because their address and telephone number were unpublished. The information Pacific provides on Complete Blocking to these and other customers is deficient of important information about Complete Blocking. Although Pacific's marketing strategy for Caller ID states that it would provide a balanced perspective on Complete Blocking, the suggested talking points to customer representatives leave out a key aspect of Complete Blocking that allows the customer to unblock the display of telephone number on a per call basis by dialing *82, a technique to avoid call rejection from customers who have ACR. In contrast, in describing Selective Blocking, Pacific's suggested script informs that the customer can dial *67 on per call basis and selectively block the display of telephone number at the customer's choice. By doing this Pacific's marketing scripts are not only biased as Pacific planned them but unbalanced and incomplete. Pacific has not shown in this record that the customer that its CSRs solicit to switch to Selective Blocking is offered more information on his or her blocking options other than what is contained in the scripts. A customer's decision to switch from Complete Blocking to Selective Blocking based on the marketing script Pacific provides to its CSRs do not constitute a fully informed waiver of a customer's privacy rights, a precondition the Commission laid out for carriers to follow in selling Caller ID services. Thus we find Pacific has violated Section 2896 and D.92-06-065. We will address what remedies and sanctions to apply in a later section.

6.1.1. Pacific Bell's Contract With BRI

In 1998, 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:

"The special needs of our senior customers were considered during the development of this service upgrade. Many Californians are getting Anonymous Call Rejection and if you call anyone with that service, then your call will not ring through. With Selective Blocking your call will go through automatically, yet if you choose to block your number, then you can - to anyone, anytime, anywhere. That's the great idea of Selective Blocking. It gives you the choice of when to block your number. So, why don't we go ahead and get you started on this free upgrade?"

BRI Script, Hearing Exhibit 101.

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 were not presented information upon which to make a knowing waiver of the right to privacy, and further the consumers also 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.

In its report on its investigation, Pacific Bell notes that the BRI scripts were not the approved scripts. Although the exact scripts were unapproved, Pacific Bell hired BRI based on BRI's representations that it would "enter into a partnership with Pacific Bell in an attempt to downgrade nearly two million customers from Complete Blocking to Selective Call Blocking" by means of a campaign "that not only meets, but exceeds the desired results." (BRI Proposal, Hearing Exhibit 101.) Based on these representations, Pacific Bell should have done more than one day of monitoring to ensure that BRI's contacts with Pacific Bell customers did not deviate from the requisite disclosures.⁸

In mitigation of the failure to undertake adequate monitoring, 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 to 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.

6.2. 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.

6.3. 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.

6.3.1. Disclosure of Different Maintenance Plans

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.⁹ 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 agree with complainants. In the 1986 "cease and desist" decision, we found that Tariff Rule 12 prohibits Pacific Bell from selling packages of services in a way that "masks" the basic rate such that customers may unwittingly pay more for a service, and from selling a "loaded service" as basic service. (D.86-05-072, 21 CPUC2d 182.) Tariff Rule 12 requires Pacific Bell to separately state the charges for each optional service, including each service that may be included in a package. By offering Wire Pro Plus first and only discussing the alternative of Wire Pro upon the customer's rejection of Wire Pro Plus, Pacific Bell effectively "masks" the lower-priced alternative of Wire Pro. This tactic may cause customers unwittingly to pay more for inside wire service than they otherwise would have. This sales tactic violates Tariff Rule 12. Pacific Bell has also violated Tariff Rule 12 by failing to state that components of the Wire Pro Plus package may be purchased separately at a lower price.

Making an informed decision requires knowing about the alternatives. Unless customers are informed of the other inside wire plan, customers cannot choose between the two options. Pacific Bell's sequential offering does not provide customers with this information. As the Commission found in the 1986 marketing case decisions, such information is particularly relevant where the available options include the same core service, but at a substantially different price. In addition to being lower priced, Wire Pro would cover repairs for the more expensive components of the telephone facilities - the inside wire and jacks - all for 60 cents/month. In contrast, Wire Pro Plus costs $1.65/month more than Wire Pro, and the only additional benefit is the use of a loaner phone for up to two months. Some customers may see value in paying $1.65/month to insure the availability of a loaner phone for two months, but unless the alternatives are presented, Pacific Bell has not met the statutory standard of providing customers "sufficient information upon which to make informed choices among telecommunications services." Therefore, Pacific Bell's sequential presentation of inside wire maintenance options fails to meet the disclosure standards.

This conclusion is consistent with a recent decision in which we addressed Pacific Bell's service representatives' presentation to customers of inside wire service options. 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.)

6.3.2. Landlord's Responsibility

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 specific disclosure requirement having expired, it is no longer under any obligation to disclose that landlords and not tenants are responsible for inside wire repair.

While Pacific Bell is correct insofar as this specific disclosure is concerned, the expiration of a Commission dictate as to the exact words, and whether those words need to be in bold print and underlined, does not leave Pacific Bell free to selectively release information in a manner which is most advantageous to its revenue goals. The statutory requirement for "sufficient information upon which to make informed choices" remains applicable to all telecommunications services provided by Pacific Bell, and all other telephone corporations in California. Pacific Bell has an affirmative duty, created by § 451 and § 2896, to disclose to customers including inside wire service to renters, those facts that are necessary to reaching informed decisions on services Pacific Bell offers. To accept Pacific Bell's contention that the expiration of a specific disclosure requirement means that no disclosure at all is required would put this Commission in the position of mandating each and every disclosure that each public utility must make. Such an outcome is not consistent with the law nor does it represent a workable policy.

Although Pacific Bell may now determine exact wording and whether printed materials will be in bold print or not, renters still have the right to be informed that landlords have a statutory duty to maintain the inside wire and a usable jack. Notwithstanding this duty on the part of the landlord, 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. In fact, customers may have in many, if not most, instances purchased a superflous service. Accordingly, Pacific Bell shall resume disclosing to its customers who are tenants that the landlord is responsible for inside wire maintenance. We will not specify the precise details of the disclosure statement but will require that it be substantially similar to the one we previously imposed. This disclosure requirement shall not expire, absent further order of the Commission. Furthermore, Pacific Bell is ordered to notify all customers who are tenants who have purchased Wire Pro that the landlord is responsible for inside wire maintenance.

6.3.3. Disclosure of Competing Maintenance Providers

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 that 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, and 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.

6.4. "The Basics" and "The Essentials" Packages of Optional Services

6.4.1. Background

The Commission has approved Pacific Bell's tariff for Saver Packs of optional services.¹⁰ 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:

· Classic - 2 custom calling services and calling card, $6.30




· Caller ID - 2 custom calling services, Caller ID and calling card, $12.




· The Essentials - 3 to 11 custom calling services and calling card, $ 9.50 to $24.95




· The Basics - 3 to 11 custom calling services, Caller ID, and calling card, $12.95 to $24.95




· The Works - 11 custom calling services, Caller ID, and calling card, $24.95

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.¹¹ 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 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:

"The fit between the name and package is the key issue with The Basics and is the primary reason it received a large number of last-place votes. Several respondents said the name implies plain old telephone service (`a phone that works') whereas the package includes bells and whistles they believe they can get along without:




· "It's misleading. `The Basics' is a phone, period. There's too many choices there to be `The Basics.'




· "It doesn't fit that package at all.




· "To me, that just represents the bottom-of-the-line package. `Premium Package' or `Best Sellers Pack' might get my attention."

(Nehring Marketing, Summary Report, Package Name Validation Study Qualitative Research, page 3 (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 shown that the names were likely to mislead a reasonable consumer.¹²

6.4.2. State Law on Basic Service

In the first of the series of decisions in the "1986 Marketing Case" (see § 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.

The Legislature has declared that "the offering of high quality basic telephone service at affordable rates to the greatest number of citizens has been a longstanding goal of the state" and that "the Moore Universal Service Act has been, and continues to be, an important means for achieving universal service by making basic residential telephone service affordable to low-income citizens through the creation of a lifeline class of service." (§ 871.5) (emphasis added; see also § 709(a).)

The Commission has adopted rules that govern the provision of universal service to California telecommunications users. (Universal Service, D.96-10-066, 68 CPUC2d 524, 671-82.) These rules include the following policies:

· "That high quality basic telecommunications services remain available and affordable to all California regardless of linguistic, cultural, ethnic, physical, geographic, or income considerations;




· "That customers have access to information needed to make timely and informed choices about basic service and [universal service]."

Id. at 672.

The rules also require that all carriers provide all the elements of basic service. The 17 elements of basic service are specifically defined and include, among other things: access to single party local exchange service, ability to place calls, one directory listing, free white pages telephone book, and access to operator services.

In sum, Commission precedent: (1) requires Pacific Bell to state its charge for basic service apart from any charges for optional services, and (2) relies on and defines "basic service" as the focus of the statutory universal service program.

6.4.3. The Basics Saver Pack and Commission Precedent

In choosing to name a package of optional features "The Basics," Pacific Bell selected a word that is commonly associated with local exchange service and, at least in the context of universal service, is a term of art meaning local exchange service. By using the term "basics," Pacific Bell created an association between this particular group of optional features and basic service, an association that is not accurate.

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.)

Tariff Rule 12 requires that Pacific Bell offer local exchange service, which is more commonly referred to as "basic service," as a separate service from optional services. Selecting "The Basics" as a name for a package of optional services violates Tariff Rule 12 because it fails to maintain separation between local service and optional services. Applying a name that connotes local exchange service to a package of optional services intermingles local exchange service with optional services. It also creates the misleading impression that "basic service" is included in the monthly price. Customers who purchase "The Basics" pay $16.95 plus the monthly charge for local residential service of $11.25/month for flat rate service, $6.00/month for measured service, or $5.62/month for Universal Lifeline Flat Rate Service.

Pacific Bell's own customer research demonstrated the confusion this name causes. The quoted reaction to the name "The Basics" from the focus group sums it up nicely: "It's misleading." We agree.

The word "basic" is routinely used, even by Pacific Bell, to describe local exchange telephone service. Adding the additional words "Saver Pack" suggests a discount on basic services. Absent further explanation, no one would realize that this "Saver Pack" is a package of optional services that can triple a customer's monthly service charges.

The translation of "The Basics" to other languages carried through and in some cases accentuated the erroneous impressions created by the name. Nghia Tran testified for Greenlining on the effect of Pacific Bell's marketing practices on the Vietnamese community. He explained that Pacific Bell's translation of "The Basics" to "Chuong Trinh Can Ban" is misleading because "can ban" means fundamental phone service, even bare minimum, not a package of optional services. Similarly, Greenlining's witness Rodriguez pointed out that the name - "The Basics" - is particularly misleading when translated to Spanish because the translation of "Basics" and "basic" is the same - "basico"- not the plural as in English.

Pacific Bell states that the order in which customers are presented with the service choices obviates any confusion. It points out that customers first select their local service (flat rate or measured rate), and then discuss optional services. Under these circumstances however, Pacific Bell's selection of The Basics as the fallback to The Works exacerbates rather than mitigates any customer confusion.¹³

Pacific Bell should have known that transplanting the term "basic" from local service to what could be the most expensive group of optional services available created a potential for customer confusion that needed to be addressed through careful marketing to maintain compliance with the statutes, Tariff Rule 12, and Commission decisions. Pacific Bell has not demonstrated that its marketing practices dispel the potential for customer confusion caused by the package name "The Basics." Accordingly, we find that The Basics Saver Pack creates an association between local exchange service and optional services in violation of Tariff Rule 12, and that it also undermines our universal service goals.

We have refrained from including the use of the term "Basics" in our calculation of the fine, because the Commission approved Pacific Bell's tariff marking its option packages under that name. The remedial action must necessarily be prospective. Pacific Bell should file tariffs under less misleading and confusing titles.

The complainants included the package named The Essentials in their arguments, but the evidence presented was only directed at The Basics. We observe, however, that "essential" is virtually a synonym for "basic" and that the services included in The Essentials are not at all essential for telephone service. Neither name connotes an extensive and expensive package of optional features, although the term "basic" has been more closely associated with local exchange service. Accordingly, we find that the package named "The Essentials" suffers from a potential to mislead customers in a manner similar to The Basics. Thus, Pacific Bell shall include The Essentials in the remedial efforts set out elsewhere in this decision.

6.5. 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.¹⁴ 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.¹⁵

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 provides:

"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.¹⁶ However, because we find so many other deficiencies with "The Basics Saver Pack" 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.

It is obvious to us that Tariff 12 must be clarified and written in language that is unequivocal and gives the utility no excuse for obfuscation and deviation. Accordingly, we direct Pacific Bell to re-write Tariff 12 to provide:

1. a quotation of applicable rates for each component of a package as well as the package as a whole;

2. a separate quotation for the basic service apart from the package;

3. a quotation spelling out the combined cost of basic service and the packaging;

4. information to the customer that each component can be purchased separately if the customer agrees to listen to the information.