III. FACTUAL ALLEGATIONS

A. Cramming Complaints

In March 2001, CSD staff began an investigation of billing complaints from consumers against Pacific Bell, Pacific Bell Internet Services, and SBC-ASI relating to DSL and Internet services. CSD staff has obtained consumer declarations documenting the consumers' experiences, and copies of these declarations are made public along with this OII, with telephone numbers and account numbers redacted, and will be placed in the Commission's public formal file for this proceeding⁶

Staff's investigative report states that Pacific Bell began providing DSL service to consumers in late 1998⁷. On October 15, 1999, SBC-ASI filed A.99-10-009 seeking authority to operate in California as a Non-Dominant Inter Exchange Carrier, and to provide ADSL, DSL, and other advanced services to California customers. A.99-10-009 was later amended to include a request for authority to operate as a Competitive Local Carrier. According to A.99-10-009, the Federal Communications Commission (FCC) in Decision FCC-99-272 required, as a condition of approving the merger of Ameritech and SBC Communications, that Ameritech and SBC Communications create one or more separate affiliates to provide all advanced services for the combined company. On May 4, 2000, the Commission approved SBC-ASI's application in D.00-05-021. In June 2000, provision and billing of DSL apparently transitioned from Pacific Bell to SBC-ASI.

According to CSD staff, Pacific Bell continues to market DSL as a Pacific Bell product. Print advertisements and Pacific Bell's web site show the service as a Pacific Bell service; consumers may place their order for DSL via Pacific Bell's web site or by calling Pacific Bell. CSD staff state that Pacific Bell print advertisements mailed to consumers do not refer to SBC-ASI as the provider of the service; typically, SBC-ASI is only identified in the fine print.

Staff investigated consumer complaints for 1999, 2000 and 2001. From 1999 to the present, the Commission's Consumer Affairs Branch (CAB) received 753 consumer complaints attributable to Pacific Bell, Pacific Bell Internet Services, and SBC-ASI relating to the inclusion of unauthorized DSL and/or Internet charges on a telephone subscriber's bill. CSD staff has reviewed these 753 consumer complaints, consumer letters and accompanying documents, and consumer declarations, and found the following: 298 of these complaints allege that Respondents billed consumers for DSL and/or Internet services that were neither ordered nor received; 174 of these complaints allege that Respondents billed consumers for DSL and/or Internet services that were ordered but not received; 148 of these complaints allege that Respondents billed consumers for DSL and/or Internet services after the consumer requested termination of the service(s); 59 of these complaints allege that Respondents, under different names, billed consumers twice for the same DSL and/or Internet service; and 74 of these complaints allege that Respondents billed consumers for services or products that Respondents promoted as free or as less expensive than the charges placed on the consumers' telephone bills.

The consumer declarations and letters obtained by staff document the consumers' frustration over calling Pacific Bell and inquiring about DSL service, being told it was unavailable in their area, and subsequently receiving a bill for DSL service although they had never ordered it. Consumers also expressed frustration over Respondents' DSL service because after installation it often did not work properly or at all, and thus many consumers cancelled their DSL service, only to be repeatedly billed by Respondents. Consumers also allege being transferred back and forth between Respondents' customer service representatives when inquiring about how to remove the charges from their bill, suffering through long hold times, and being disconnected before reaching a customer service representative.

Some consumers who complained to CAB also submitted written complaint letters to CAB documenting their experiences. CSD staff reviewed 203 written complaints documenting the consumers' experiences relating to cramming attributable to Respondents. These consumer complaint letters are included in an attachment to staff's investigative report. In addition, CSD staff conducted interviews and obtained written declarations from 35 consumers describing their cramming complaints against Respondents.

B. Failure to Report Customer Complaints Against Its Affiliates

Pacific Bell provides billing services for service providers, including its affiliates. D.00-03-020 as modified by D.00-11-015 requires Pacific Bell to submit quarterly reports to CSD indicating the number of cramming complaints it received each month for each service provider and billing agent for that quarter. D.00-03-020 requires that Pacific Bell include its corporate affiliates in its reports. The first quarterly report, for January, February, and March of 2001, was due April 30th, 2001. Staff has received and reviewed the quarterly reports for the first three quarters of 2001, and they are attached to staff's report. The quarterly report for the fourth quarter of 2001 is due January 31^st, 2002.

The quarterly reports indicate that for each month of 2001, Pacific Bell reported no complaints against its affiliate SBC-ASI. The quarterly reports submitted by Pacific Bell also show that Pacific Bell adjusted approximately $24 million to SBC-ASI customers' bills in the year 2001.

CAB staff tracks consumer contacts in its Oracle database, known as the Consumer Complaint Tracking System. According to CSD staff, review of CAB's database shows 283 consumer complaints against SBC-ASI for unauthorized billing for the year 2001 (through August 15, 2001).

Staff alleges that until mid-2000, when SBC-ASI took over provision of DSL services, CAB staff forwarded complaints regarding Pacific Bell's DSL service to Pacific Bell's executive office. CSD staff quote a Pacific Bell web page as follows: "Subject to regulatory approval, Pacific Bell DSL Service is provided by SBC Advanced Solutions, Inc. (SBC-ASI), an affiliate of Pacific Bell Telephone Company. Prior to such approval, Pacific Bell Telephone Company continues to provide such service." SBC-ASI's application was approved in D.00-05-021, and it appears that provision of DSL service was transitioned shortly thereafter. After mid-2000, many SBC-ASI DSL consumer complaints continued to be forwarded to Pacific Bell, and if a consumer had multiple complaints regarding both Pacific Bell and SBC-ASI, CAB would forward a copy of the complaint to each company.