ALJ/MAB/MOD-POD/abw *	DRAFT	H-2
		12/7/2000

Decision REVISED MODIFIED PRESIDING OFFICER'S DECISION OF ALJ BUSHEY (Mailed 11/20/2000)

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

The Utility Consumers' Action Network, Complainant, vs. Pacific Bell (U 1001 C), Defendant.	Case 98-04-004 (Filed April 6, 1998)
And Related Matters.	Case 98-06-003 (Filed June 1, 1998) Case 98-06-027 (Filed June 8, 1998) Case 98-06-049 (Filed June 24, 1998) Investigation 90-02-047 (Filed February 23, 1990)

FINAL OPINION ON PACIFIC BELL'S

MARKETING PRACTICES AND STRATEGIES

(Appearances are listed in Attachment B.)

TABLE OF CONTENTS

Title Page

1. Summary 2

2. Procedural History 4

2.1. Requests to Reopen The Record 6

2.1.1. Wallace Roberts 6

2.1.2. TIU 7

2.1.3. Resolution of Requests 7

2.2. Changes from the POD 8

2.2.1. Business and Professions Code 8

2.2.2. Customer Complaints 11

2.2.3. Consumer Education Fund 12

3. Disputed Material Facts 13

4. Witnesses Presented 13

4.1. UCAN 13

4.2. Greenlining 14

4.3. ORA 14

4.4. TIU 14

4.5. Pacific Bell 15

4.6. Wallace Roberts 16

5. Statutory and Decisional Standards Applicable to Pacific Bell's Duty to Inform Customers 16

5.1. General Standard 16

5.2. Sufficient Information to Make Informed Choices 17

5.3. Tariff Rule 12 and Information Regarding "Packages" 19

5.3.1. Basis of Tariff Rule 12 19

5.3.2. Application of Tariff Rule 12 to Service "Packages" 20

5.4. Information Regarding Caller ID Blocking 23

6. Marketing Specific Services 24

6.1. Caller ID and Blocking Service 25

6.1.1. Pacific Bell's Contract With BRI 29

6.2. Anonymous Call Rejection 32

6.3. Inside Wire Maintenance Plans 33

6.3.1. Disclosure of Different Maintenance Plans 34

6.3.2. Landlord's Responsibility 36

6.3.3. Disclosure of Competing Maintenance Providers 38

6.4. The Basics and The Essentials Packages of Optional Services 39

6.4.1. Background 39

6.4.2. State Law on Basic Service 42

6.4.3. The Basics Saver Pack and Commission Precedent 44

6.5. The Basics Plus Saver Pack 47

7. Marketing Programs and Tactics 49

7.1. Offer on Every Call 49

7.2. Sequential Offerings 51

7.3. Incentives and Sales Quotas 56

7.4. Providing Customer Information 63

8. Marketing to Customer Groups 67

8.1. Marketing Targeted at Minorities or Recent Immigrants 67

8.2. Marketing to ULTS Customers 70

9. Remedies 72

9.1. Caller ID Blocking 72

9.2. Inside Wire, Packages Offered Sequentially, The Basics, and ULTS 74

9.3. Sales Incentives to Service Representatives 75

9.4. Fine 76

ATTACHMENT A

ATTACHMENT B

FINAL OPINION

1. Summary

In this decision we address a number of Pacific Bell's techniques for marketing its optional services to residential customers. We find that some of these techniques violate statutory and decisional standards and that some do not. Although marketing is the overarching theme, each individual issue is fact intensive and we address each separately and in the context of the applicable standards. It is not our purpose in this decision to limit the means Pacific Bell chooses to market its products and services. Our only purpose is to apply the Public Utilities Code and Commission decisions to Pacific Bell's actions.

In this decision we find that Pacific Bell failed to sufficiently inform customers regarding (1) the number blocking options to prevent a caller's number from being displayed on a Caller ID device, and (2) the two inside wire maintenance plans it offers. We also find that Pacific Bell's marketing policy of sequentially offering packages of services in descending order of price fails to sufficiently inform customers because they are not told of the lesser priced package unless they refuse the more expensive option. We determine that unlimited potential sales commissions for service representatives is not consistent with the incentive compensation guidelines we have previously stated with regard to Pacific Bell. We hold that Pacific Bell may not use the Universal Lifeline Telephone Service subsidy program as a link to market other optional services. In its marketing of "The Basics," a package of optional services, we conclude that the name inaccurately suggests a relationship with basic telephone service.

We find in favor of Pacific Bell on several issues raised by complainants. First, no law or decision precludes customers who do not wish to receive calls from lines with numbers blocked from Caller ID from rejecting such calls and purchasing services from Pacific Bell to prevent such calls from being presented to their telephone. This service is called Anonymous Call Rejection.

Second, no law or decision prohibits Pacific Bell from requiring all service representatives to offer optional services on every call, so long as the call answering standards of General Order (GO) 133-B are met.

Third, we find that Pacific Bell's marketing efforts failed to meet statutory and decisional standards for all customers. Hence, we do not need to reach the question of marketing practices that are misleading to only certain customer groups but not others.

Finally, although Pacific Bell is subject to stringent federal and state regulations regarding the privacy of customers' information, those standards do not prevent Pacific Bell from providing customer information, subject to appropriate security measures, to its agents and affiliates for Pacific Bell marketing purposes.

Wide-ranging efforts by Pacific Bell are required to remedy the violations we find. Unfortunately, the record does not contain detailed remedial proposals, so we direct the parties to prepare such proposals for our further consideration. These proposals should address customer notification and refunds, including customer outreach plans to ensure that Pacific Bell reaches as many customers as possible. We direct Pacific Bell to make all necessary refunds directly to customers and to provide sufficient funds for the customer outreach effort.

Finally, we find that many of the marketing abuses complained of in this proceeding closely resemble the marketing tactics the Commission found violated statutes and regulations in Pacific Bell's 1986 marketing abuse proceeding. In light of the recidivist nature of Pacific Bell's actions, we also impose a fine of $49 million. The nature and scope of Pacific Bell's marketing abuses would justify an even larger fine, but we recognize in mitigation that Pacific Bell has generally shown candor and cooperation in this proceeding, and has already taken steps to correct some of the abuses. We will therefore stay $10 million of the fine, and may ultimately rescind that amount, depending on Pacific Bell's cooperation with the remedial steps ordered in this decision.