September 17, 1998
|Re:||Truth-in-Billing and Billing and Billing Format|
Even though competition is gradually spreading to residential areas, it seems that most consumers do not feel better off as a result of the Telecommunications Act of 1996. A chief cause of their displeasure is their monthly phone bill. The problem is not so much that consumers feel they are paying too much for telephone service, although some probably feel that way. It is that people can barely understand what they're paying for.
Today's Notice asks whether there is a useful role for the government can play here. I am convinced there is. With respect to lawful charges, consumers need to understand what they're paying for. With respect to unlawful charges, consumers need to be able to identify any changes in their bill quickly and easily so they can spot a charge for a service they didn't request.
The reason I believe that some rules are necessary is that there is widespread confusion about individual charges on phone bills, and the parties responsible don't necessarily have the incentive to fix the problem. This confusion is caused by two types of charges: (1) charges imposed as a result of a more efficient regulatory pricing model that ultimately will make subsidies explicit. (2) charges imposed for services the consumer did not request -- a practice known as "cramming."
First, I would note that carriers are not insulated from basic rules of fair dealing just because the new charge is related to a regulatory action. New charges with names like "line charge" or "connection charge" have appeared on millions of phone bills and tell the consumer nothing about what the charge is really for. So millions of consumers scratch their heads, wonder why the government decided to fix what wasn't broken, and grudgingly pay their bills. It's enough to give competition a bad name. In other cases, the new charge is not only vague but inaccurate, such as "FCC-mandated surcharge." In addition to being misleading, this type of description dissuades the customer from shopping around, since a customer is likely to think that all carriers are subject to the same charge.
In still other situations, while the charge itself may be described accurately, the amount may be unreasonably high. For example, the FCC allowed incumbent local telephone companies to impose a 53 cent monthly charge on long distance carriers for each primary residential line served by a long distance carrier. That charge helps offset the local carrier's cost of providing its customers with access to the long distance network.
However, some long distance carriers "pass through" that charge to their customers not as 53 cents per month, but as a dollar a month, and in some cases more. The reason, they claim, is that they are unable to differentiate primary residential lines from non-primary lines, so they "blend" the 53 cent charge with a higher monthly charge that the Commission intended only for non-primary lines. This produces a charge of a dollar or more in many cases. And while local and long distance carriers engage in a regulatory food fight over whose fault this is, millions of consumers pay a charge that exceeds what this Commission intended when it created a gradual, phased-in plan for removing subsidies from long distance telephone rates. The Truth-in-Billing proceeding will examine whether identifying the charge in this way is misleading.
The second category of charges addressed in today's Notice -- unlawfully imposed charges -- result from the practice of "cramming." Unscrupulous operators recently began capitalizing on the growing confusion associated with phone bills by paying local phone companies to add charges to bills that, unbeknownst to the phone companies, were for services the customer neither ordered nor received. Given the proliferation of charges on a phone bill, a fraudulent charge easily could be easily overlooked -- and paid -- for months.
Today's Notice asks whether we should require carriers to change the format of their bills to better expose fraudulent charges. One promising idea is to require carriers to have a single page that identifies any new charges in that month's bill. This and other ideas that we propose today are aimed at shedding light in an area where some would prefer darkness. I look forward to completing this proceeding expeditiously and taking the guesswork out of paying the phone bill.