CONSUMER BILL OF RIGHTS DECISION

As is so often the case, the specific vehicle around which policy debate ebbs and flows takes on a life of its own. So, too, is the case of the so-called "Consumer Bill of Rights." Many viewed the alternate proposed decision as pro-consumer, while this decision is painted as opposed to consumer rights. It is a false proposition. Both decisions look to protect consumer rights while permitting the wonders of the marketplace to provide new, cheaper, and better consumer opportunities. Each reflects the conviction of its proponents as to the best way to achieve that common objective.

I have been spared the bitter rhetoric of past exchanges, but not the obligation to give the matter my deep and careful consideration. Let me make a few things clear with regard to this decision. We abdicate no responsibility to protect consumers from the possible predations by carriers or other market participants. We recognize the abusive possibility of unfettered competition. The Commission is not closing its doors, rolling up its mandate, or turning out the lights. Our duty continues, and there will be, no doubt, many succeeding examples of Commission intervention when consumers are abused or misled by inadequate disclosure of terms and conditions, predatory behavior, or unfair practices. Consumers will not be forever and unalterably abandoned to be abused, misled, slammed, crammed, or otherwise left adrift in the market. No matter the comments of our critics, this Commission has adopted an activist agenda for reform.

Furthermore, this decision does not in anyway lessen or concede our jurisdiction in the area of regulation of any telecommunications activity.421 We remain vigilant and proactive, and indeed pledge to enhance our efforts in enforcement and education in order to empower reasoned choice. While we may be criticized for not enacting a plethora of new rules, we have clearly articulated the standards of conduct and responsibility that we, and the citizens of California, expect from the carriers. Rules are the product of failed expectations. We will monitor complaints under new procedures and with increased resources. Bad practices will be exposed, violations investigated, facts adjudicated, sanctions levied, and the laws and rules protecting the consumer will be enforced. This Commission will not hesitate to enforce our standards and make public egregious examples of consumer abuse.

If a decision with extensive new rules had been voted out, carriers would not have flown California, gone broke, fired management or ceased to innovate or develop new services and products, though no regulation is without its costs. For those who might claim that carriers get off scott free, they have not, do not, and will not. This decision provides consumers with the right balance of protections and opportunity, allowing the marketplace to function under our watch. Our task in this decision was to artfully get out of the way and let the market work its magic, while at the same time protecting the consumer from abusive excess. We have done that here.

Our goal is prospective, and there are parts of the reasoning in this decision to which I do not fully subscribe. In addition, arguments about the validity of samples, surveys, and such talk miss the mark. The real question is, as a result of this decision, will conduct that is unfair to consumers be demonstrably reduced by our actions? The key to answering this question lies in carrier practice. The word practice implies regular or repetitive conduct, sanctioned or directed by the carrier, not just bad consumer service. Rules are appropriate for the former, publicity and consumer choice for the latter.

It is not just consumer protection with which we are concerned. We are also concerned with consumer benefit, and that includes the upside of new technology, choice, convenience, and price competitiveness. Our task is to balance both the legitimate needs of our constituents, the consumers, and their opportunities. Absolutes are often easier to argue than balanced judgment. What you have in this decision is the balanced judgment of three Commissioners sworn to do what is right for the consumer. There is no "right" answer on which all reasonable people will agree. Those in the dissent are every bit as sincere as the majority. They believe passionately in consumer welfare as we do, but would go down a different path into a different garden.

The Commission has a legislative and constitutional requirement to protect consumers from abusive, unfair and fraudulent behavior. I know each of my colleagues is committed to this mission. I assure you, I am. The question before us in this proceeding has been not whether to provide such protection to consumers but rather how best to provide that protection. I believe that the best ways for this Commission to protect consumers are:

We have a great many laws and rules governing consumer protection in telecommunications, and many of them are set forth in Appendix D to this decision.422 I carefully reviewed the breadth and substance of existing law, and I came to the realization that, on balance, we need more emphasis on the enforcement of existing laws, regulations, rules, and decisions rather than the creation of new, detailed, and more prescriptive rules. There are some areas where additional clarification was necessary, and I address those areas below.

I believe that this decision is significantly better than the proposed decision that was issued in December of 2005. Though there are twenty-three consumer initiatives set forth in this decision, there are five specific areas where I believed improvements were needed:

First, the inclusion of a rule that prohibits the placement of unauthorized charges on consumers' bills is a key component of this decision.423 This decision makes it clear that it is the billing telecommunications companies' responsibility to not allow unauthorized charges, and further clarifies that it is the responsibility of the billing carriers to immediately suspend collection of any charges that consumers say were not authorized. If the billing carrier cannot prove proper authorization, the billing carrier shall remove that charge from the bill or, if the consumer has already paid, refund the amount. Such a clear and simple responsibility means that the consumer's risk is minimized, and more closely aligns the consumer's interest with that of the carriers. We expect billing carriers to actively monitor the entities they provide billing services to in order to ensure that proper authorization is obtained and that their bills are not used to facilitate illegal cramming.

Holding the billing carriers responsible for what they allow to be placed on consumers' bills will enlist their support in protecting the integrity of consumers' bills and policing the behavior of their business partners. Excuses that it was a third party that caused an unauthorized charge to be placed on a consumer's bill does not relieve the billing carrier from its obligation to immediately remove the charge from the consumer's bill unless persuasive proof is offered that the charge was indeed authorized. Failure by billing carriers to adequately protect consumers by monitoring who the carriers performs billing services for can lead to enforcement action directly against the billing carriers.

Second, I ensured that this decision includes steps to make our informal complaint process more effective and responsive to consumers. Consumers with a complaint concerning their telecommunications provider can contact the carrier directly or they may contact the Commission's Consumer Affairs Branch (CAB). However, many consumers contact local community based organizations (CBOs) for assistance in resolving their complaints with telecommunications providers. This is particularly true in communities of limited or non-English speaking consumers. The CBOs will play an enhanced role in our complaint resolution process. CBOs are important in assisting consumers with their complaints and we applaud their efforts, in particular the Communities for Telecommunications Rights or CTR. CTR is a statewide network of over 40 non-profit, community based organizations that provide telecommunications consumer education and protection to limited English speaking consumers.

This innovative, practical, and effective consumer protection mechanism could provide great benefits to California consumers and significantly aid the consumer complaint activities of the Commission if the Commission could develop a process that:

To achieve this, the decision orders Commission staff to develop a program that creates a special relationship between these CBOs and the Commission. The objective is to create a framework that gives CBOs working with the Commission to resolve consumer issues greater access to CAB personnel and develop a true partnership between these CBOs and the Commission in assisting consumers with complaints.

Just as the Commission is developing relationships with these CBOs and formalizing roles that they could play in aiding the Commission's consumer protection programs, it is important to bring about such special relationships between CBOs and telecommunications carriers. The Commission will facilitate interaction between CBOs and carriers that will foster greater responsiveness by providers and quicker and more effective resolution of consumer complaints. I am convinced that such relationships will bring significant benefit to consumers, particularly limited English speaking consumers, and other vulnerable communities, who make up the constituencies of these CBOs. The Commission has already begun this process.

This decision calls for a significant increase in our capability to deal with complaints filed by calling for additional funding for updating our antiquated complaint database system and for the hiring of a significant number of new call center personnel. This budget augmentation is important and we will continue to advocate with the administration and the legislature for adequate funding. This decision also calls for greater responsiveness of the carriers to the Commission. It has specific sections that make it clear that carriers have an obligation to respond to information requests from Commission staff, as required under existing law.424

Additionally, in order to facilitate the cooperation of carriers with staff, this decision calls for the development of the ability for managers and supervisors in CAB to contact senior managers, within each company, so that particularly troublesome or timely complaints can be addressed manager to manager. We also seek to develop, if practicable, the ability for real time, three-way conversations with CAB staff, the carrier and the consumer, in order to seek immediate resolution of the complaint.

Third, we must have effective enforcement. The Commission has already had many successes with effective enforcement even in the absence of any new consumer protection rules. These are a few examples I gleaned from the Commission's annual reports since 2000.

As these cases demonstrate, the Commission can and has taken effective enforcement action against carriers. Such enforcement has resulted in real penalties and changed behavior to the benefit of consumers.

This decision calls for enhanced enforcement capabilities. This is no idle threat. Carriers are hereby on notice that our enforcement activities will be focused, effective, and, if necessary, severe, to stop abusive behavior by carriers. If it comes to the point where the Commission needs to take formal enforcement action to stop abusive behavior, we will do so with vigor and determination, and in any venue where we think we can get the best outcome for consumers. In addition, the Commission pledges to increase cooperation with local law enforcement personnel. We will use our expertise, experience, investigation, and information-gathering ability to work with law enforcement officials that are developing and prosecuting cases.

Federal agencies, such as the FCC and the FTC, enforce consumer protection laws and can pursue enforcement actions and remedies that are unavailable to the Commission. If the Commission finds that a carrier is violating a federal law, regulation, or rule, we can build a case and take that case, either informally or formally, to the relevant federal agency. We can be an advocate for California consumers at these federal agencies in the same manner that we filed complaints with the Federal Energy Regulatory Commission with respect to manipulation in the wholesale electric market.

Fourth, I want to turn to concerns raised by the Attorney General's office that the proposed decision hampers the ability of the Attorney General to build cases around violation of Commission rules. I point you to Conclusion of Law 14 which says that the rules and regulations contained in Part 2, 3 and 4 of General Order 168 may be utilized by law enforcement authorities to form the predicate for civil or criminal action in their enforcement of generally applicable consumer protection laws. This language is crucial in aiding in the Attorney General's efforts to bring cases against carriers for violations of consumer protection laws.

Fifth, I am concerned that folks with limited English proficiency and recent immigrants, who are unfamiliar with the U.S. telecommunications marketplace, are particularly susceptible to abusive practices. I am troubled by the evidence of Greenlining and the Latino Issues Forum that minority customers are targeted for fraudulent and deceptive communications in their own language by unscrupulous businesses that prey on this community. That is why it is essential that our consumer education efforts focus on consumers with limited or no ability to speak and read English. It is key that we develop more information on special problems faced by consumers with limited English proficiency. By the same token, we do not want to create barriers to deployment of advanced telecommunications services to these same consumers.

For those concerned that we are not dealing with the in-language requirement, I point to the extensive focus of the consumer education program on consumers with limited or no ability to speak and read English. The consumer education program will provide in-language materials so that these consumers are better able to protect themselves when dealing with telecommunications companies. It is also important to note that this decision directs Commission staff to analyze and create a report on in-language practices and any special disadvantages faced by telecommunications customers with limited English proficiency so that we can determine whether in-language needs are sufficiently met by our education and enforcement efforts, and whether any related rules should be adopted by the Commission.

At its heart, this decision is not about whether to protect consumers, but rather, the best way to protect consumers. All of the Commissioners are committed to protecting consumers. It is unfair and inaccurate to belittle anyone's commitment to the well-being of consumers because we differ about the means of ensuring that well-being. I am committed to consumer protection. I am committed to vigorous enforcement and, when carriers are found in violation, swift and immediate corrective action. Further, where necessary, I am committed to significant and effective punishment. I believe that this decision lays out a plan to best protect consumers in the area of telecommunications, and that is why I support it.

/s/ John A. Bohn

      John A Bohn

      Commissioner

Commissioner Rachelle B. Chong, concurring:

The general order adopted in this decision sets a new direction for this Commission. This direction is appropriate for a competitive telecommunications era.

For some time, the era of competition has been upon us. The Department of Justice broke up Ma Bell into AT&T and the seven Baby Bells in 1983 to foster competition. In 1996, Congress passed the Telecommunications Act mandating competition for local telecommunications. Over several years, the Federal Communications Commission licensed spectrum to permit many new wireless carriers to enter the telecommunications markets. As a result, a policy of open and competitive markets has been a cornerstone of national regulatory policy.

The decision of today's majority brings California consumer policies in line with these competitive markets and the resulting realities. It also rejects the extension of rules fashioned in the time of monopoly local service to the new and dynamic areas of the telecommunications such as wireless communications.

The decision of the majority offers a fair resolution to the many contentious issues before us today. This is a pro-consumer action, despite the sound and fury of those who would like to turn back the clock on telecommunications competition. I want to set the record straight about what today's revolutionary Commission order actually does.

This revised order sets forth a consumer bill of rights and freedom of choice. The order lets carriers know what is expected of them by this Commission. This decision commits the Commission to educate telecom consumers on their rights, to resolve consumer complaints in a timely way, and to root out fraud. These are urgently needed, important initiatives, which have my full support.

The minority claim that we are failing to put in place a host of new rules, and that therefore, there are no rules to protect consumers. This is wrong. The decision of the majority sets out in great detail the tremendous amount of laws, rules, and regulations that currently exist to protect consumers. The scope and breadth of these laws, rules and regulations make it clear that California does not need new rules. There are plenty of laws and rules on the major issues of concern.

In this decision, we carefully examine the data and evidence in the record to find out what were the real problems. We then carefully craft new rules where necessary. In no place do we strip consumers of any pre-existing rights. A reading of the decision will demonstrate that any allegation that this decision abridges consumer rights is untrue.

Indeed, today's decision includes new and revised rules in areas like cramming and slamming to combat some problems that were clearly identified. Our record shows that some customers are having problems involving unauthorized charges in phone bills, and that it has taken too long for consumers to get a satisfactory resolution. Today's decision addresses this problem first by noting that Section 2890 of the Public Utility Code already governs unauthorized charges on telephone bills. In addition, the decision adopts new cramming rules that make it clear that billing disputes relating to unauthorized charges should be resolved in 30 days. The rules clarify what carriers must do. These new rules apply to all charges, whether communications or non-communications charges. The rules ensure that any complaints will be addressed quickly, regardless of whether the service was provided by the carrier or by some other party. In summary, the rules implement Section 2890 and make its promised protections meaningful. Three-quarters of wireless complaints are about billing issues, so this rule will help us prevent complaints and resolve problems quicker.

In addition, the decision commits the Commission to a new proceeding to be completed in six months to address issues relating to marketing in a language other than English. This will give this important matter the serious and careful attention that it deserves.

Furthermore, today's decision undertakes twenty-three administrative initiatives to change our regulatory culture to make us more responsive to consumers. These initiatives address the real problems we found.

In addition, the decision commits the Commission to improve greatly our consumer affairs efforts to work down a serious complaint backlog.

The new Telecommunications Consumer Fraud Unit initiated in this decision will police any fraudulent actions by carriers or their representatives.

These are important measures that will protect consumers.

While I am new to this proceeding, I am not new to wireless issues, given my past service as an FCC commissioner and my 18 years of work as a telecommunications regulatory lawyer. This industry is competitive. It is vibrant. More people have wireless phones than ever before. Wireless phones have saved countless lives and made us more productive.

It astonishes me to find such a high degree of conflict within the Commission over this proceeding, which has lasted over 6 years. It astonishes me that so many rules were being proposed for a very competitive market in such a sweeping manner. While well-intentioned, these rules, if adopted, would result in many serious unintended consequences.

This decision merits support because of the systematic and rational approach it adopts to the issue of consumer protection. The decision asks: What exactly is the problem here? If there was a problem in 1998 when the proceeding opened, is there still a problem in 2006? If there is a problem, what is the least intrusive rule to fix the problem that keeps the market as regulation-free as possible?

The analysis contained in this decision show that complaint data do not demonstrate a problem. Between 2000 and 2004, the total number of wireless phones in California doubled. There are now more wireless phones than wireline phones. Despite the rapid growth of wireless, for every single wireless complaint, there were 2.8 complaints concerning the wireline telephone service.425 Complaints and inquiries to the Commission by wireless customers in 2004 are .04% of the entire universe of 23 million wireless customers in California. Why should we extend wireline regulations to wireless carriers if the complaint rate for them is almost three times lower? This makes no sense to me, and the decision of today's majority rejects this approach.

In particular, the wireless complaint rates do not show that there is a serious problem that warrants so many new rules, particularly in a period in which the number of California wireless phones has almost doubled.

There are, however, real problems, some that are very close to home. In one of my first briefings as a new Commissioner, the head of the complaint division told me that this Commission has a backlog of about 25,000 unresolved telecom complaints or inquiries. The staff is trying hard to work down the backlog, but has had to reduce the hours of our complaint hotline to 10 AM to 3 PM. As a result, it is difficult to reach the Commission; those who do must wait months to have their complaints resolved.

This backlog is a real problem. Eliminating it will truly accomplish something real for 25,000 consumers. The proposed decision makes this a top priority.

In looking at real problems, it is also important to look for the least intrusive regulatory solution. Consider, for example, the policy proposed in the alternate order that would set a 30-day period in which unsatisfied customers can terminate new wireless phone service. Such an order is not needed. Already, market forces have caused all carriers to allow a free return period, without an early termination fee.

The return policies, however, differ. Carriers have set return deadlines of 30 days, 15 days, 14 days, and 7 days for their free return periods. Metro PCS, a low-cost wireless carrier, has a 7-day return period.

Is this reason for concern? I don't think so. If one is a low cost carrier, consumers understand there may be tradeoffs for "no frills" low cost kind of service. If one flies standby economy status, you don't expect the filet mignon meal that another passenger gets in first class who paid a lot more. The government should not dictate this type of detail in a competitive market, and the order we adopt today declines to do so.

What would increasing the free return period to 30 days for all carriers do? The alternate does not discuss this. A uniform 30-day rule will surely drive up the costs of the low-cost carrier, and lead to an increase in prices for these wireless customers. Imposing this one-size-fits-all rule that pre-empts consumer choice is the type of intrusive regulation that I oppose. Moreover, it is not needed. If a customer values a 30-day test period, he can simply buy from the carrier that offers it. The decision we adopt today gets it right - no rule is needed where the market is working.

Let's turn to the issue of whether to require all wireless carriers who market in a foreign language to offer marketing materials and the key terms and conditions of the contract in that language. The record is weak on this issue so we were not able to decide this matter today. The decision we adopt today decides that further study is necessary to see if there is a serious problem that can be fixed in the least intrusive way without unintended consequences.

Is this a reasonable thing to do? We currently apply an "in-language" rule to wireline phone carriers, including new entrants. What happens in real life because of this requirement?

Consider Comcast Cable. It offers TV packages of foreign language programs in California, including a package in Armenian. Comcast markets the availability of these video services in Armenian, even though the contracts and support information are available only in English. It reaches out to this community in its own language.

How does Comcast market its phone service in light of the regulatory requirements we now have? It markets only in Spanish and English. If it were to market in Armenian, it would have to translate all its support material into Armenian. In light of these costs, it declines to do so.

What will happen if we extend these "in-language" rules to wireless carriers? Some carriers have said that in response to such a requirement, they would impose English-only rules on their sales staff to avoid the costly translation costs. I want to make sure that such a rule in practice won't act as a gag order.

Let's not discourage wireless carriers from marketing in foreign languages to smaller communities like the Chinese, Russian, Vietnamese, Cambodian, Armenian and Hmong communities. I therefore support the 6-month study period included in today's decision. Let's get carriers, community-based organizations, and consumer groups into a room to hammer out sensible voluntary agreements - and rules if necessary -- that will encourage and not discourage carriers from reaching out to non English-speaking communities.

In conclusion, this Commission can best serve California consumers by acting on their complaints in a timely matter, educating them about their market choices, and stamping out consumer fraud. The decision of today's majority does this, which is why the decision merits support.

We have lived with the fiction that regulations automatically equal consumer protection. In a competitive world, overregulation can simply drive companies out of California. Carefully crafted rules for real problems make more sense, and today's decision adopts only such rules.

San Francisco, California

March 2, 2006

421 The Commission has broad statutory and constitutional authority, pursuant to Public Utilities Code § 701 and California Constitution, Article 12, § 6, to regulate both wireline and wireless carriers with regard to consumer protection matters. In addition to this broad authority, there are countless statutes, regulations, and rules that provide for specific regulatory authority of carriers. It is clear that the Commission has jurisdiction to regulate consumer protection in telecommunications to the extent that the Commission is not preempted by the 1996 Telecommunications Act, 47 U.S.C. 332 § (c)(3). The 1996 Telecommunications Act affirms that States may regulate wireless carriers to the extent that State requirements concern public safety and welfare, quality of telecommunications services, and consumer protection. (47 U.S.C., § 253 of the Telecommunications Act of 1996.) Under California's Constitution, the Commission may not declare a statute unenforceable or refuse to enforce a statute on the basis that it is unconstitutional, or declare that federal law or regulations prohibit the enforcement of such a statute, unless an appellate court has made such a determination. (Cal. Const., Art. III, § 3.5.)

422 My staff also compiled a comprehensive compendium of existing federal and state regulations and statutes that govern this aspect of our jurisdiction into a reference that runs in excess of 100 pages.

423 The cramming rule contained in this decision is in harmony with Public Utilities Code §§ 2889.9 and 2890.

424 The Commission and each Commissioner has the authority to " . . . issue writs of summons, subpoenas, warrants of attachment, warrants of commitment, and all necessary process in proceedings for contempt, in like manner and to the same extent as courts of records." (Pub. Util. Code, § 312.) Furthermore, "[t]he process issued by the commission or any commissioner, extends to all parts of the State and may be served by any person authorized to serve process of courts of record, or by any person designated by the commission or a commissioner." (Id.) Every employee of the Commission has the authority to " . . . at any time, inspect the accounts, books, papers, and documents of any public utility and to administer oaths may examine under oath any officer, agent, or employee of a public utility in relation to its business and affairs." (Pub. Util. Code, § 314(a).) This authority " . . . also applies to inspections of the accounts, books, papers, and documents of any business which is a subsidiary or affiliate of, or a corporation which holds a controlling interest in, . . . [a] telephone corporation with respect to any transaction between the . . . telephone corporation and the subsidiary, affiliate, or holding corporation on any matter that might adversely affect the interests of the ratepayers of the . . . telephone corporation." (Pub. Util. Code, § 314(b).) Existing law also requires the Commission to " . . . inspect and audit the books and records for regulatory and tax purposes . . ." of carriers. (Pub. Util. Code, § 314.5.)

425 In the last six years, the Commission received 145,818 complaints or inquiries concerning wireline phone service, and 52,121 complaints or inquiries concerning wireless phone service.

Previous PageTop Of PageGo To First Page