Last week, the Federal Communications Commission (FCC) released the fifth in a series of orders since 1998 modifying its rules relating to "slamming" (the unauthorized changing of a subscriber's telecommunications service provider). In the process, the FCC has—in the pursuit of greater consumer protection—significantly increased the responsibilities and burdens of providers of wireline local and long distance telecom services irrespective of whether the service provider is the unauthorized carrier ("slammer"), the authorized ("slammed") carrier, or the executing carrier that processes the change. Moreover, the FCC's orders have exposed carriers to potential liability for slamming in more than 35 states as well as at the Federal level.
The FCC's latest order (formally, the Third Order on Reconsideration and Second Further Notice of Proposed Rulemaking or the "Third Order") contains no fewer than 18 new rulings, and additionally asks interested parties to comment on several new proposals. While it is impossible to adequately summarize the FCC's new actions without a detailed discussion of the earlier rulings, here are the highlights:
In the Third Order, the Commission:
- Reaffirmed that an executing carrier (typically an ILEC or CLEC) may not re-verify a subscriber's intention to change carriers.
- Decided that the retail arm of an executing carrier may use carrier change information to engage in "winback" marketing efforts, so long as such activity takes place after the carrier change has been completed and the customer has been disconnected, and the information has been obtained by the retail arm through normal channels in a form available throughout the retail industry.
- Allowed carriers to exempt themselves from the FCC's rule requiring carrier sales representatives to "drop off" calls they initiate between a new customer and an independent third party verification (TPV) entity, by certifying to the FCC that their sales reps cannot drop off a call without disconnecting it. The certification, good for two years, is renewable.
- Modified the menu of information that must be elicited in a TPV to delete the requirement that the subscriber must identify the carrier that is being displaced through the carrier change.
- Extended its verification rules to carrier changes arising from calls initiated by a customer to a LEC.
- Clarified that the verification rules do not apply to first-time carrier selections on new lines, but that they do apply to new installations when the customer moves.
- Retained its rule that a customer's authorization by written or Internet Letter of Authorization (LOA) will be considered valid for 60 days, but clarified that this limitation will not apply to LOAs from multi-line or multi-location business customers who enter into agreements that pre-authorize the chosen carrier to add lines throughout the term of the agreement.
- Decided that a carrier contacted by a subscriber alleging a slam—whether it is the authorized, unauthorized, or executing carrier—must now advise the subscriber that he may contact the unauthorized carrier to seek resolution, and may also contact his authorized carrier, as well as direct the subscriber to the proper state agency (or the FCC, as applicable; see below) for resolution, and to inform the subscriber of all relevant filing requirements and of various other information.
- Changed its rules to require that, when the unauthorized carrier change is the result of a mistake or unauthorized act by the executing carrier, it is the executing carrier that must reimburse the subscriber for all charges and switch the subscriber back to the authorized carrier without charge; the authorized or (blameless) unauthorized carrier may seek further remedies against the executing carrier for lost profits or other damages; and, when the executing carrier has switched the subscriber to its own long-distance affiliate, the executing carrier must remit 150 percent of the charges to the authorized carrier.
- Clarified that it may resolve informal complaints regarding slamming by means of a written or electronic letter containing the information required by the slamming rules.
- Eliminated its requirement that carriers report slamming allegations on FCC Form 478.
- With regard to varying state slamming regulations, confirmed that the FCC verification requirements "constitute a ‘floor,' and the states may choose to impose more stringent requirements, so long as they are consistent with the federal requirements."
Finally, the FCC issued yet another Further Notice of Proposed Rulemaking to inquire whether it should add to its requirements for information to be conveyed and obtained during third party verifications (TPV), such as whether the verifier should explicitly: (1) state the date of the TPV; (2) state that if the customer asks questions of the carrier representative after the TPV has begun, it will cause that verification attempt to be terminated; (3) make clear that the TPV would change the customer's carrier, rather than retain or upgrade existing service; (4) specify that an interLATA service change would encompass international calls; and/or (5) define the terms "intraLATA toll" and "interLATA toll." Comments on these questions will be due 45 days after the publication of the FCC's order in the Federal Register.
We caution that these changes are merely the tip of the iceberg of FCC and state regulation of telecom companies regarding slamming and verification of carrier changes. Not only has the FCC over the past five years tremendously increased the regulatory burdens and administrative costs imposed on all telecom service providers, but by inviting states to both enforce the federal rules and to add their own more stringent (albeit consistent) regulations, the FCC has significantly increased carriers' financial exposure for noncompliance with this Byzantine set of requirements. To date, 36 states, the District of Columbia and Puerto Rico have opted to enforce these rules on their own. The following link to the FCC web site provides a current list of those jurisdictions that already have taken on these responsibilities; and other states likely to follow. http://www.fcc.gov/slamming/states.html
Davis Wright Tremaine stands ready to assist existing and new clients in complying with this complex maze of federal and state regulations. Depending on your company's unique needs, we can:
- Train company personnel and vendors regarding compliance with the rules.
- Audit a company's existing practices and procedures for compliance, recommending changes and additions where necessary.
- Defend the company's interests in the event of slamming complaints or agency enforcement actions.
Any questions about this Alert should be directed to:
James M. Smith, Washington D.C., (202) 508-6688, jamesmsmith@dwt.com
Michael van Eckhardt, Seattle, (206) 628-7632, michaelvaneckhardt@dwt.com