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Remarks
by
William E. Kennard, Chairman
Federal Communications Commission
Before the
FCC-FTC Truth-in-Advertising Public Forum
Washington, DC
Thursday, November 4, 1999

(as prepared for delivery)

"MarketĘSense"

Welcome.

In the past few years, the FCC and FTC have been cooperating with each other better than at any time in the FCC's 65-year history. I applaud Chairman Pitofsky for his commitment to such a close working relationship. We are here today joining forces on an issue, truth-in-advertising, important to millions of American consumers. The FTC has years of experience regulating advertising and marketing practices, while the FCC has years of experience judging the reasonableness of telephone carriers' practices. Together, we can be even more effective.

The FCC is strongly committed to serving and protecting consumers in the new competitive environment. As you know, we have created two new bureaus with an important focus on consumers--the Enforcement Bureau, which will have a division devoted to consumer protection enforcement, and the Consumer Information Bureau, which will provide one-stop shopping for consumer inquiries and informal complaints. This reorganization is part of a recognition by the FCC that we must change the way we do our jobs as communications markets evolve. And a key part of our job is going to be consumers.

In the last decade the trend in telecommunications has been unmistakable. We are rapidly moving from monopoly markets dominated by single-service providers to an open marketplace characterized by vigorous competition between companies of all sizes. I have devoted my entire career to telecommunications -- and never before have I seen the kind of fundamental restructuring now underway.

Large carriers are competing with smaller ones in everything from wireless phones and digital television to Internet services. New firms are springing up left and right, engaging with bigger companies in a fierce and healthy battle for American consumers--slashing prices, beefing up services and wooing customers in ways thought impossible a decade ago.

The short of it is that the communications market is exploding, in various sectors, for various reasons, and particularly in long-distance phone service.

The old days of Ma Bell may have been simpler, but they also brought higher prices and stifled innovation. Today we have hundreds of long-distance service providers and calling plans. Instead of having little or no choice in long-distance, consumers now have scores of options, with some companies offering package deals at competitive rates and others boasting everything from low-cost calling cards to inexpensive dial-around plans.

Consumers now have more choices than ever and long-distance calling rates that are the lowest in history. Today, virtually every American can find a calling plan, calling card, or 10-10 dial-around number that saves money -- no matter where they live, how many calls they make a month, or where they call.

What we need to do is help consumers find the deal that's right for them.

And so today I'm pleased to announce a new initiative I am launching called "MarketĘSense." Our MarketĘSense initiative will help consumers make sense of the marketplace so that they can save dollars and cents in their phone bills.

On our FCC website, we now have MarketĘSense Consumer Tips, where consumers can go to find useful tips in choosing a calling plan and service provider that saves them money.

We plan to join with consumer groups to get out the word that all consumers -- whether they make a lot of calls each month or very few -- can get good deals. We need to give consumers the tools they need to be smart shoppers. In the next several weeks we will be meeting with consumer groups to embark on an aggressive education and outreach strategy. And I'm pleased to report that AARP has already agreed to work with us in this important endeavor. I know we can count on others of you in the audience to share your expertise with us and join this effort.

I also know, however, that our MarketĘSense initiative--and savings for every American--can only succeed if consumers know the truth about what they are being sold and can tell what they have in fact bought. That's why we started our Truth-in-Billing rulemaking. We came up with basic rules to ensure that consumers can tell what they are paying for. We're glad that our Truth-in-Billing proceeding has inspired state and legislative action to help us make bills clear and truthful for consumers.

And what we are doing today takes another important, indeed critical, step towards arming consumers with MarketĘSense--to ensure that consumers obtain clear and truthful information about what service choices they have. Simply put -- Truth-in-Advertising.

These are prerequisites -- cornerstones, really -- to any healthy marketplace. Because when consumers are denied honest information about the services being offered, the result is consumer confusion, inflated phone rates, and a public increasingly weary of all long-distance offerings.

And it's unfortunate that confusing advertising has become an all-too-frequent feature of the long-distance landscape. Consumers feel bombarded with TV ads and direct-mail solicitations that promise big-time savings, and they sign up for plans that fail to disclose critical information about pricing and services. And they are growing so tired of sales pitches that they can't even tell which plans are right for them.

I'm particularly concerned about the advertisements for 10-10 dial-around plans. These 10-10 services are a growing and increasingly lucrative part of the long-distance market. According to one telecommunications research firm, approximately 20 percent of U.S. households used a dial-around service at least once in the past year. In 1993 dial-around plans made up about $96 million of the long-distance market; today such plans make up nearly $3 billion of the market, roughly 7.5% of the $40 billion long-distance industry.

Now, many consumers have reaped the benefits of dial-around numbers. Such calling options have provided consumers with more and better choices, which is a good thing for the telecommunications market and for American consumers.

But dial-around can be confusing. I have seen these ads. And, although I consider myself a sophisticated telecommunications consumer, I find some of these ads confusing, and I know that consumers are confused.

They are filing complaints with their elected representatives and they are writing to us saying they have been deceived by ads that promised them one thing and then delivered them something else. In the last six months of 1998, the FCC received 250 complaints about misleading advertisements for dial-around services. From 1998 through the middle of this year, the FCC received nearly 3,000 complaints about marketing and advertising for long-distance.

One woman in Augusta, Georgia, wrote to tell us that she had been paying nine cents a minute for long-distance through one dial-around company. Then she saw a TV ad promising an even better rate. She broke it down per minute, thought she had a great deal on her hands, but then received a $66 phone bill that she thought should have cost $18.97.

Then there's a man from California. He wrote to tell us that he had signed up for one 10-10 number after seeing an ad that promised customers great rates -- 10 cents a minute for state-to-state calls. Only the company ended up charging him 15 cents a minute --because the calls were within the state.

Under FCC precedent, misleading advertisements by carriers are unjust and unreasonable practices and thus violate the Communications Act. And we will not hesitate to step in and take strong enforcement action where warranted.

At the same time, all of us -- industry, government, consumers -- need to put our heads together and figure out some sensible guidelines - truth-in-advertising principles -- that will help carriers provide accurate information about the services being offered. Such guidelines, whether FCC-enacted or industry-sponsored, or both, can work and consumers and carriers will both benefit.

A good example is in the cramming area. Since industry responded to my call for voluntary anti-cramming guidelines, consumer complaints are down significantly, by an average of 65 percent per carrier. Once the FCC's new Truth-in-Billing rules take effect, consumers will have additional tools to identify and resolve cramming problems.

Whether through FCC enforcement, FCC guidelines, industry self-regulation, or a combination of all three, the time is now for consumers to get the kind of up-front, clear and honest information they deserve.

Before turning the microphone over to Chairman Pitofsky, first let me thank Lynn Vermillera, Ellen Blackler, Colleen Heitkamp, Dorothy Attwood, and Michael Balmoris of the FCC for helping make this conference a reality. And I'd also like to thank the FTC, the many members of Congress, PUC Chairwoman Marilyn Showalter and NARUC Consumer Affairs Chairman Bill Gillis, and everyone else who has worked to put truth-in-advertising on today's agenda.

Let me also say that I'm pleased to see such a strong turn-out from industry representatives and consumer groups. This forum gives everyone a chance to have their views heard, and I'm looking forward to listening to all sides involved in today's discussion.

Thank you, and now I'd like to turn it over to Chairman Pitofsky.

- FCC -