8. Marketing to Customer Groups

In this section, we address two issues regarding the particular marketing approaches Pacific Bell used with minorities or recent immigrants, and with universal service customers.

8.1. Marketing Targeted at Minorities or Recent Immigrants

Complainants contend that Pacific Bell has improperly targeted its marketing efforts at ethnic minorities and recent immigrants. Pacific Bell responds that it commits significant resources to its customers that prefer to do business in a language other than English. Over 20% of Pacific Bell's service representatives handle calls at its foreign language centers. These representatives speak Spanish, Cantonese, Mandarin, Japanese, Korean, Vietnamese and Tagalog. Pacific Bell engages in marketing efforts to build awareness of its products and services by using print advertising, newsletters, other media, and telemarketing, in addition to customer initiated contacts with service representatives, to explain the benefits of its products and services to these markets. Pacific Bell retains experts in each of the languages to translate and review marketing and service representative scripts, and it also works closely with groups that represent these customers.

Complainant Greenlining contends that immigrant and language minority groups are particularly vulnerable to high-pressure sales tactics and are less likely than other consumers to report abuse: For example,

"For cultural reasons, Latinos are reluctant to complain if they feel they are receiving poor service. There is a cultural tendency to be polite, if not fatalistic about consumer abuses. Latinos like to pay in cash; they like to pay in person; they want to be good customers. Where there are problems, the lack of English language fluency is a barrier to lodging complaints. And this reluctance is increased by the fact that many Latinos come from countries where due process and consumer protections do not exist and where they may be persecuted for speaking out."

* * *

"With respect to telephone service, there are several things that make it difficult for Latinos to complain about the quality of service that they receive. Because many Latinos come from countries where the telephone service is identified with the government, the telephone company is viewed as an extension of government. To the extent Latinos view the telephone company as an extension of the government, they are reluctant to complain because in many Latinos' countries of origin, it may be a waste of time or even dangerous to complain about the government. Also, many Latinos come from countries where it takes a very long time to receive telephone service, and there is a fear that if they complain about their service, it may be disconnected and they must wait a long time to have it restored."

Exhibit 13, pp. 3-4.

As discussed previously in this decision, Greenlining also analyzed the translations of Pacific Bell's advertising of The Basics and The Essentials Saver Packs to Spanish and Vietnamese, and concluded that the translations tended to exacerbate rather than mitigate the misleading nature of those names.

In response to Greenlining's allegations that it "targeted" ethnic minorities for sale of optional products and services, Pacific Bell pointed out that it had conducted studies of various market segments. In the research Pacific Bell presented, "struggling city dwellers" and "income limited" households were identified as high potential Caller ID customer segments. On an ethnic basis, Field Research Corporation market research yields these data:

Ethnic Group	% Interested in Caller ID
White	23
Hispanic	39
African-Americans	37
Asians	42

Based on this research, Pacific Bell set in place a marketing program that would better get information on Caller ID to those customers who were most likely to be interested in the product in the fastest possible manner. This included marketing and selling to customers in the language they speak or prefer.

Greenlining does not suggest that Pacific Bell used advertising or other marketing efforts for ethnic minorities that was different from that which was directed at other customers. Greenlining challenges the package names - The Basics and The Essentials - as misleading both in English and in the other languages. Greenlining also does not dispute Pacific Bell's marketing research, from other areas of the country, which tends to show that ethnic minorities are more likely to purchase certain services, nor does Greenlining suggest that Pacific Bell had any motive in targeting its marketing to this particular segment, other than to increase sales.

The statutory standards applicable to Pacific Bell's marketing to ethnic minority customers are the same standards applicable to its other customers. Pacific Bell must provide all customers sufficient information upon which to make informed decisions. In this decision, we find that Pacific Bell's practices failed to meet this standard for all customers regardless of ethnicity.³⁰

The evidence shows that the market segment that Greenlining represents has a high interest in purchasing Caller ID. No evidence has been presented that Pacific Bell treated this market segment any differently from any other group of likely purchasers of Caller ID. Pacific Bell presented the same information, translated to the appropriate language, to each group of customers. To the extent that information fails to meet the statutory standards, as we find elsewhere in this decision, it does so in all languages.

8.2. Marketing to ULTS Customers

The Universal Lifeline Telephone Service (ULTS) is designed to promote the use of affordable, statewide, basic telephone service among low income households by providing a subsidy to low-income customers funded by a surcharge on all end-users' bills. (See generally Universal Service and Compliance with the Mandates of Assembly Bill 3643, D.96-10-066, 68 CPUC2d 524.) To accomplish this goal, all local exchange carriers charge qualified residential low-income customers a discounted installation charge of $10, and a monthly fee of $5.62 for flat rate service or $3 for measured service.³¹ For each ULTS customer served, the local exchange carriers are reimbursed from the ULTS Fund for the difference between the ULTS rate and the respective local exchange carrier's usual rate for residential basic service. The ULTS program is currently funded by a 3.2% surcharge on all end users' bills.

On new connects, Pacific Bell service representatives offer and explain ULTS. Eligibility is based on the number of persons in a household and income level, as well as residence and income tax dependency status. If the customer meets the eligibility criteria, the service representative explains the lower rates.

UCAN's witness contended that Pacific Bell used the lower rates provided to ULTS customers as a selling opportunity for optional features. UCAN provided a Pacific Bell document which appeared to be a Caller ID sales add and which stated: "when regarding a customer to Universal Lifeline, offer Caller ID and advise the customer that they will be paying roughly the same dollar amount they were paying before but enjoying the benefits of Caller ID." (Attachment MS-94 to Hearing Exhibit 2.) UCAN contended that such offers do not promote the purpose of ULTS service, that is, to provide access to low-cost telephone service.

Pacific Bell did not deny UCAN's factual allegations.

We find that the script Pacific Bell provided to its service representatives is sharply at odds with the purpose of the ULTS program. The purpose of the ULTS subsidy program is to provide affordable service to low-income consumers, not to provide Pacific Bell a cross-marketing sales opportunity. The Legislature established this program to achieve universal service by making basic residential service affordable to low-income citizens, see § 871.5. Attempting to undo the lower-priced service offering undermines the Legislature's, and this Commission's, universal service goals.

We do not go so far as to suggest that ULTS customers should not have the opportunity to purchase optional services. Nor do we forbid Pacific Bell representatives from offering optional services to individual ULTS customers. As with all customers, these individuals are best able to make their own purchasing decisions when presented with complete information. We will however, require Pacific Bell to drive home the difference between basic service and any particular option which might be offered in individual cases. Our required revision to Tariff Rule 12 will ensure that consumers are provided information identifying "basic telephone service" -- distinguished from optional telephone services. Further, our requirement that Tariff Rule 12 be rewritten such that Pacific Bell must complete a customer request transaction prior to marketing additional services will ensure that customers receive pricing information in relation to their initial request. Both Tariff Rule 12 revisions are integral to ensuring customers are informed clearly of service options.