I. INTRODUCTION

From 2002 to the present, the Commission has received hundreds of consumer complaints regarding MCI, WorldCom, or MCI WorldCom's, (U-5011, U-5378, U-5253, U-5278 - hereinafter, "MCI"¹) practice of billing non-customers for a type of monthly service charge that MCI refers to as a "minimum usage fee" (MUF)². The MUF charge is imposed as part of a basic default calling plan that MCI erroneously establishes for consumers, even though these consumers have not requested to be switched to MCI nor have they chosen to create a new account with MCI. The Consumer Protection and Safety Division's (CPSD) Enforcement Branch (Staff) began its investigation after noting the high number of MUF-related consumer complaints received by the Commission's Consumer Affairs Branch (CAB).

Staff reviewed the consumer complaints received by CAB and found that MCI billed consumers a monthly service charge after the consumers requested that MCI terminate their long distance service, or in instances when the consumers were never MCI customers. Staff discovered that MCI's practice began on June 1, 2002 and continues to date. Staff has determined that MCI relies upon certain codes that it receives from the Local Exchange Carriers (LECs), although Staff has good reason to believe that MCI is misusing the codes that it requests and receives. The codes MCI relies upon are not the proper codes to indicate that a subscriber intends to establish a new account. Nevertheless, MCI proceeds to establish accounts and bill non-customers for an MUF without: 1) first attempting to contact the customer to verify that the customer intends to subscribe to MCI; 2) checking its own records to determine whether the customer is no longer a customer because he or she previously terminated their service with MCI. Staff has determined that MCI continues this practice to the present day, in spite of Staff's March 2004 directive to cease, desist, and/or mitigate the harm caused by the practice.

Public Utilities Code section 2890(a) states "A telephone bill may only contain charges for products or services, the purchase of which the subscriber has authorized." This practice is commonly referred to as "cramming". Staff believes MCI's assessment of an MUF on non-customers may constitute an unauthorized charge on the consumer's phone bill, in violation of section 2890(a). Public Utilities Code section 2889.5 requires a telephone company to obtain confirmation from the prospective subscriber that he or she intends to switch telephone companies; any change in service provider that is accomplished without complying with the steps described in section 2889.5 constitutes a "slam". Staff believes that MCI may be engaging in "slamming" by switching service providers or establishing a new account for a consumer without confirming the consumer's intent to switch to MCI or establish a new account with MCI.

In addition, Staff has determined that it often takes several months for MCI to respond to consumer complaints and issue MUF refunds, and that consumers express a great deal of frustration with the time and effort it takes to contact an MCI service representative to have these charges removed from their phone bill. Staff has also determined that MCI has a practice of sending consumers to collection when they do not pay the MUF. Staff is deeply concerned by MCI's apparent disregard for the welfare of California consumers and by MCI's disregard of Staff's March 2004 directive to cease and desist, or to mitigate the harm cause by MCI's policies.

We hereby initiate this investigation to determine: 1) whether MCI has violated Public Utilities Code section 2890 by placing unauthorized charges on non-customers phone bills; 2) whether MCI has violated Public Utilities Code section 2889.5 by failing to confirm the consumer's intent to change service providers or establish a new account prior to placing the charge on the consumer's bill; 3) whether MCI should issue credits or refunds to consumers who have been billed for products or services they did not authorize; 4) whether MCI should be fined and/or sanctioned for engaging in a business practice that Staff alleges results in widespread "cramming" and/or "slamming"; and 5) whether, pursuant to Public Utilities Code section 761, MCI should change or modify its business practices that result in unjust, unreasonable, or improper charges being placed on a consumer's phone bill. We hereby order MCI to appear and show cause why it should not be ordered to cease its practice of billing minimum usage fees to non-customers.