Hearing on Slamming
Thank you, Chairman Burns and Senator Campbell, for inviting me to testify you today on the issue of telephone slamming -- the practice of changing a consumer's long distance carrier without the consumer's knowledge and consent.
Mr. Chairman, you mentioned that over the past few months your own family was slammed. I understand that the same occurred with a Congressman and a Committee staff member. May I add to this list my own secretary and the president of the dominant Mexican telephone company. They have all been slammed.
The Commission receives more complaints about slamming than any other telephone-related complaint. In 1996, complaints totalled 16,000. Already during the first nine months of this year over 15,000 were filed. I understand from Montana Commissioner Bob Rowe that our state colleagues are similarly besieged.
Because most slammed consumers grin and bear it, we don't know how many of the 50 million carrier selection changes each year result from slamming. If just 1% were changes due to slamming -- a very conservative estimate -- that would total over 500,000 slamming incidents each year.
Not only is slamming a growing problem, but it is also one about which consumers care passionately. For example, in complaints to the Commission, consumers use words like "abused," "cheated," "pirated," "hi-jacked," and "violated" to describe how they felt.
Slamming scenarios involve deceptive sweepstakes, misleading forms, forged signatures and telemarketers who do not understand the word "no."
Quite simply, consumers are furious that their carrier selections are being changed without their consent.
And now we're seeing complaints about slamming of intraLATA toll service in areas where carriers are competing for presubscription. Once local service competition is introduced, I'm sure reports of slamming won't be far behind.
The FCC takes slamming very seriously. We have a two-pronged approach to combat this problem: First, our rules make it harder for carriers to slam. Second, carriers who do not follow the rules are severely punished.
In crafting these rules, the Commissionc carefully balanced the twin goals of consumer protection and unfettered competition.
The Commission's current anti-slamming rules require long distance carriers to use one of four verification procedures to confirm carrier change orders resulting from telemarketing:
Thus, your service cannot be changed simply because you tell a telemarketer "okay;"-- there must be a subsequent verification of that authorization.
Another Commission rule regarding letters of agency (LOA) details the minimum form and content for written authorizations of carrier changes. These rules shut the door on misleading and deceptive marketing practices, such as having promotional material in one language and the form to authorize a change in carrier in another language.
Finally, under our current policy, carriers who provide unauthorized services must recompute the consumer's bill so that the consumer pays no more than would have been paid to the properly authorized carrier.
Enforcement is the second prong of our anti-slamming campaign. Since 1994, the Commission has imposed consent decrees and has assessed companies more than $1 million in forfeitures, with approximately $500,000 in additional penalties pending.
Also, the Commission recently has taken steps to revoke the operating authority of a group of companies accused of violating the Commission's anti-slamming rules.
The message is loud and clear: we will not tolerate slamming. But more needs to be done.
Through its Further Notice of Proposed Rulemaking, released in July, the Commission sought comment on how best to use the additional authority granted by Congress under Section 258 of the 1996 Telecommunications Act to combat slamming. We hope to complete that rulemaking by the end of January.
Section 258 requires the slamming carrier to disgorge any moneys it has received from the consumer and turn them over to the rightful carrier. In this fashion, the slamming carrier reaps no benefit from its illegal actions.
We propose to require the slamming carrier to reimburse the consumer for any premiums or frequent flyer miles that otherwise would have been earned with the chosen carrier.
We also ask whether a slammed consumer should have to pay at all for the service rendered by the slamming carrier. Here, we must weigh the deterrent effect against the possibility of encouraging bogus complaints.
We also ask whether the existing verification procedures are effective in deterring slamming -- for example whether a "welcome package" requiring the consumer to respond affirmatively to prevent a carrier change -- is adequate verification. I don't believe it is -- not all consumers read the mail they get from communications companies. I sure don't.
And we ask whether rules are needed to address preferred carrier freezes. In a freeze, local carriers get consumers to authorize the blocking of future carrier changes unless the consumer gives his or her written or oral consent to the blocking carrier -- not just to the requesting carrier.
As local competition arrives, the blocking local exchange carrier is poised to compete for long distance with the requesting carrier. Thus, the local exchange carrier may no longer be acting as a neutral third party, but may have instituted freeze procedures for anticompetitive reasons. In drafting our rules, we must be vigilant to avoid deterring lawful competition as we work to eliminate slamming.
The comment deadline for the further notice has passed and we received formal comments from over 50 parties and reply comments from 32 parties, amounting to in excess of 1200 pages of comments. Commission staff is currently poring over the comments and alternative proposals to determine what additional rules are necessary to further dissuade and penalize slamming practices.
We received comments from many sources, including consumers, state commissions, the National Association of Attorneys General, and local, long distance and wireless carriers.
Congress wisely provided the FCC with tools under the 1996 Telecom Act to combat this problem. I am also pleased that you are focusing attention on slamming by conducting this hearing.
Consumers still wishing to comment on this proceeding can reach us by the Internet at Slamming@Comments.FCC.Gov.
In conclusion, with tougher rules and vigilant enforcement, we will help restore the right of consumers to choose their local and long distance carriers -- and to have that choice honored in the marketplace.