9. Discussion

We commend the parties for reaching settlements that hold great promise for reducing the alarming number of incidents in which California consumers open their monthly telephone bills and discover that they have been charged hundreds of dollars for dial-up access to the Internet that they thought would be free. The record in this case is replete with horror stories of consumers who, thinking they were making toll-free calls to the Internet, continued using the connection for several hours each day before receiving their telephone bill.

In the first month of its new program to monitor toll charges for AOL subscribers who used a dial-up access number, SBC sent letters to nearly 5,000 customers warning that toll charges for the access number had exceeded $50. The record shows that these customers had incurred toll charges totaling more than $300,000. While not all of this amount is being billed to customers (some telephone plans forgive local toll charges), it is clear that most of these charges will come as an unpleasant surprise to consumers signing up for Internet access.

Because they will receive early warning that their AOL dial-up number is not toll free, most of these customers will be able to switch to an Internet dial-up number that is toll free, as they probably intended in the first place, and cap their Internet toll charges before the charges get out of hand.

Meanwhile, in its settlement, AOL is seeking to further reduce the problem of unexpected toll charges for Internet calls. By requiring new subscribers to enter their area code and the 3-prefix local exchange number of their telephone, AOL will be able to provide a list of access numbers tailored to both the area code and prefix, and thus more likely to be toll free. New subscribers today supply only their area code, and the resulting list of access numbers frequently includes both toll-free numbers and toll numbers. AOL has agreed to have the 6-number program in place within 18 months. If it fails to do so, AOL has agreed to pay $75,000 into a consumer education fund and to be subject to a renewed complaint by UCAN.

Moreover, AOL has agreed to post more explicit warnings to subscribers to call their local telephone company to be sure that their AOL access numbers are toll-free. In California, customers of SBC can without charge dial "O" and ask the operator to confirm that up to three numbers are local calls, rather than toll calls. AOL will make quarterly reports to this Commission stating its progress in reducing the number of subscribers who unintentionally incur toll charges in their dial-up calls.

At hearing, AOL said that the steps that SBC and AOL are taking in this case, along with the increasing number of subscribers who are switching to high-speed DSL and cable access (where access to the Internet is through a permanent rather than dial-up connection), should significantly reduce the number of complaints of dial-up charges.

Since this complaint case was brought against only two defendants - SBC and AOL - other California local exchange companies and other ISPs are unaffected. Nevertheless, since SBC is the largest telephone company in California and AOL appears to have the largest share of Internet dial-up subscribers in the state (approximately 3 million), we would expect other telephone companies and other ISPs to note these efforts and review their own practices to avoid unintended toll charges for their subscribers.

Toward that end, our order today directs the Commission's Executive Director to serve by electronic mail a Notice of Availability of this decision on all certificated California local exchange service providers. The Notice of Availability is to briefly summarize this decision and provide a link to the decision on the Commission's website.

The proposed settlements here were made in compliance with Rule 51 of the Rules of Practice and Procedure. The parties have submitted sufficient information for the Commission to weigh the terms of the settlements. At hearing on April 27, 2004, the Commission received into evidence testimony of each of the parties, and the settling parties were questioned both by the Assigned Commissioner and the ALJ. There have been no objections to the settlements.

Pursuant to Rule 51.1, we conclude that the proposed settlement between UCAN and SBC and the proposed settlement between UCAN and AOL are reasonable in light of the whole record, consistent with the law, and in the public interest.