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                                   Before the
                             Washington, D.C.  20554
                         PUBLIC FORUM ON LOCAL EXCHANGE
                         Room 856N
                         FCC Building
                         1919 M Street, N.W.
                         Washington, D.C.
                         June 24, 1997
                    JOHN MULETA
                    Chief, Enforcement Division
                    Common Carrier Bureau
                    ROBERT SPANGLER
                    Deputy Chief, Enforcement Division
                    Common Carrier Bureau
                    Panelists (Panel 1):
                    E.E. (Stub) ESTEY
                    Government Affairs - Vice President
                    AT & T Corporation
                    Washington, D.C.
                    RONALD F. EVANS
                    Vice President - Operations
                    OAN Services, Inc.
                    Van Nuys, California
                              APPEARANCES  (continued):
                    Panelists (Panel 1):
                    RAY LAWTON
                    Associate Director for Telecommunications
                    National Regulatory Research Institute
                    Columbus, Ohio
                    STEVE MERRILL
                    Assistant Vice President
                    WinStar Communications
                    Washington, D.C.
                    GREGG SAYRE
                    General Attorney
                    Rochester Telephone Corporation
                    Rochester, New York
                    Panelists (Panel 2):
                    CHARLIE DONALDSON
                    Assistant Attorney General
                    State of New York
                    New York, New York
                    MICHAEL POLANDICK
                    Director - Product Development
                    Consumer Markets
                    MCI Telecommunications Corporation
                    Arlington, Virginia
                    ALAN TAYLOR
                    Chief of Service Evaluation
                    Florida Public Service Commission
                    Tallahassee, Florida
                    CHRISTINE VAN SKYHOCK
                    Product Manager
                    GTE Telephone
                    Irving, Texas
                              APPEARANCES (continued):
                    Panelists (Panel 3):
                    PORTER CHILDERS
                    Executive Director 
                    Accounting and Financial Matters
                    United States Telephone Association
                    Washington, D.C.
                    ADAM COHN
                    Federal Trade Commission
                    Washington, D.C.
                    DAVID J. GILLES
                    Assistant Attorney General
                    State of Wisconsin
                    Madison, Wisconsin
                    KIM WILLIAMS
                    Area Manager - Product Management
                    Southwestern Bell Telephone Company
                    St. Louis, Missouri
                    LIONEL WILSON
                    Assistant General Counsel
                    California Public Utilities Commission
                    San Francisco, California
                    Audience Speakers:
                    BOB GULLADGE
                    JOEL VAN OVER
                    JOAN PIEROS
                    SHARON ADAMS
                    JAY NEWMAN
                                              I N D E X
                                 E X H I B I T S
           IDENTIFIED               RECEIVED       REJECTED
          Hearing Began:  9:00 a.m.           Hearing Ended:  3:33 p.m.
          Recess Began:  12:18 p.m.           Recess Ended:   1:40 p.m.


9:00 a.m.

MR. MULETA: Good morning, everybody. Thank you for coming to our public forum on LEC billing for other non-LEC services and businesses.

My name is John Muleta. I am Chief of the FCC's Common Carrier Bureau, Enforcement Division. I recognize a lot of people in the audience, and I appreciate you all being here. Today we have a group of panelists that are going to talk to us in three general areas concerning LEC billing for other businesses.

The goal of our forum today is to start a dialogue between industry, regulators, and the public about the method through which most consumers are billed for telecommunication and information services, the bills that are rendered by the local exchange companies on behalf of other carriers and companies.

This public forum is the last of a series of meetings between the staff of the Enforcement Division and industry representatives concerning this particular method of billing. Over the last two years, the staff has seen an increase in the number of non-LEC services that are being billed through the LECs, and commensurate with this increase, we have observed an increase in the number of complaints and also confusion about the bills and services being rendered in this fashion.

In February of this year, the staff met with the representatives of the information services industry, who related the critical importance of this mechanism to their industry. They suggested a number of actions that should be taken to improve the usefulness of the service to their particular industry. These representatives also related their concerns about the adequacy of the information they receive about the bills they issue through the LECs.

In April, the division organized two round tables. One for LEC representatives to give their viewpoint, and another for IXCs and IXBs and their representatives, mostly through the large billing consolidators, such as OAN, Integretell, Enhanced Billing Services, and so on. We discussed, in general, the pluses and minuses of this system as it exists today.

We learned a great deal about the mechanism and its effectiveness. And what we thought at the end of that was, we wanted to share what we learned with the public and solicit comments. We also wanted to hear from other regulators and public policy makers what their thoughts were on this general issue.

We have not formulated a specific position on this issue. What we're trying to here is, just again, start a dialogue with the people that are interested in the subject and give the viewpoints of a cross section of the industry. We want to pass on the information that we learned, and we also hope that some of the information that we are going to get today leads to a better understanding of the critical nature of this mechanism.

We also hope to identify, at the end of this process, what, if anything, needs to be changed or improved or added to the system to improve its efficiency, integrity, and usefulness, both for industry and for the consumers.

Before getting started with the first panel, I would just like to outline for you the rest of the day. We assembled three panels, as I said earlier, comprised of distinguished guests representing a broad section of industry, state and federal regulators, and public policy institutes. Each panel will be for approximately one hour and a half, and our first panel will start by discussing the role of LEC billing and its importance to the current structure of the industry.

The second panel will consider the technical issues that underlie the LEC billing system and discuss infrastructure and what its pluses and minuses are.

Finally, our third panel will consider sort of the safeguards that need to be added or enhanced in order to protect consumers. All of this we are doing, we realize, in the context of an industry that is changing significantly and dramatically. Every day there is news of consolidation, of new start ups, new types of services are coming on line. I think this would be an important time to discuss these issues.

What we will do now is, when we start with the panels, we will give each panelist an opportunity to introduce themselves to you and make a brief statement about what they think about this issue. Then we will open it up, having me as a moderator, or Bob Spangler, Deputy Division Chief of the Enforcement Division, acting as moderators, asking questions of the panels. After a period of time, we will open it up to the public and we hope to have some questions from the audience.

Before I turn it over to the panelists, I would like to note a few key people that have helped us arrange this public forum. Most of all, i would like to thank Gina Keeney, our Bureau Chief, as well as Mary Beth Richards, our Deputy Bureau Chief, who have strongly endorsed our attempt to understand more about this issue. Of course, I would like to recognize and thank Bob Spangler, who has been instrumental in organizing this, and also brings a wealth of knowledge into this area and deals with Congress and other people that are interested in this issue.

Darius Withers, who is in the back helping us out, one of our attorneys in the Enforcement Division, and Michael Carowitz, who is legal advisor of the division. All these people spent an inordinate amount of time preparing for this, and I want to thank them. I also want to thank Rochelle Cohen from the Bureau, who helped organize this, and also the staff of the Office of Public Affairs for help in setting this forum up.

With that introduction, I will turn it over to Stub Estey of AT & T Corporation, who will now speak on behalf of AT & T. Stub and I have gotten to know and like each other over the last couple of years, and I am glad that he is here. I will turn it over to Stub.

MR. ESTEY: Thank you, John. Thank you for that ringing endorsement. John said I could either speak from my place at the table or I could stand up, and usually if I'm standing up, people say, "Stand up, Stub." So I figured, if I'm sitting down they really can't see me, so I am standing up.

The heading for this panel asks the question, "Is LEC Billing for Others Important to Other Carriers and Consumers?" The answer, we think, is an overwhelming yes, for at least three reasons. Customer preferences for a single bill, the cost to consumers, and the continuing health of competition in the IXE industry.

My comments will address the question from the point of view of the paying customer, the end user of telecom services. First, the single bill issue. The research indicates that consumers want a single bill for their local and long distance services. A 1996 Yankee group study indicated that 80 percent of consumers prefer a single bill for telecommunications.

At AT & T we have our own market results, which demonstrate that the single bill issue can be important enough to consumers to impact their buying decision. In 1996, in Connecticut, 56 percent of the customers that left AT & T for SNET cited their interest in a single bill as the reason for leaving. So, LEC billing for others is extremely important as a factor in the provision of service by IXEs. Although AT & T typically bills our business customers directly for long distance services, we rely almost exclusively on billing collection contracts with LECs for consumer billing.

I think, the figures that were given to me are that industry wide, 90 percent or more of all consumer bills are generated by the ILEC.

Our competition has recognized that customers want one bill, and that a single bill provides competitive advantages. In October of 1996, NYNEX placed a full page ad in the New York Times with a question in large print, "Do you need another telephone bill?" And our view is, if a LEC takes that position in their advertising and then, as they plan for their entry into long distance, begin now to make it difficult for what will be their future competitors to provide billing for their service on the LEC bill, that would give the LECs an unjust competitive advantage.

Now, let's look at the cost issue. The cost to the paying customer. Today, telecommunications companies spend between five and ten percent of the revenues to generate bills and collect payments. Economies of scope and scale related to billing are limited, so it's doubtful that carriers could reduce their billing related costs by much more than, say, 10 percent.

The most effective way to minimize costs, and therefore to keep the costs of service down, is by sharing the envelope. Bundle billing provides billing for local and long distance service more economically than producing two separate bills and, as I mentioned, consumers prefer it. They prefer it for some of the same reasons that it provides economies in their own processing of the invoice. That is, one invoice instead of two.

And finally, how does all of this effect the health of IXE competition? Because the cost of establishing a stand alone billing system are so large, if LEC billing and collection services are curtailed, or if the cost of those services is increased dramatically, that would create an immense barrier to entry in this industry, and would threaten the ability of existing providers to compete with LECs as they enter the long distance business.

And although the commission's January, 1986, order that detariff billing and collection services anticipated competition in this area, so far that competition is not well developed. Carriers would have few options in the event LECs begin unilaterally to alter or cancel their contracts, because, as MCI's petition for rule making indicates, they are beginning to do.

Those are the reasons that AT & T says the answer to the question the FCC posed for this panel is an overwhelming yes. Thank you.

MR. MULETA: Before I introduce the next panel member, I just would like to remind everybody that we are going to include the transcript of this proceeding in the two petitions for rule makings which have been initiated, and we will get you the docket numbers at a later time.

The next panelist that will be speaking will be Mr. Steve Merrill, who is Assistant Vice President of WinStar Communications, a CLEC and also an IXE, I believe. You can come up or you can speak from there, whichever one you choose. Thank you.

MR. MERRILL: Good morning, ladies and gentlemen. It is certainly a pleasure to be here and have this opportunity to speak before you. I am Steve Merrill, Assistant Vice President of WinStar Communications. Unlike my friend from AT & T, perhaps most of you have not heard of WinStar as yet, though we are very aggressive in the marketplace. It may be helpful for me to explain, just for a moment, how WinStar is comprised, and then move through my discussion and my opinion on LEC and billing by the LEC.

WinStar is comprised of basically three subsets. One is the CLEC operation, Compatible Local Exchange Carrier, WinStar Telecommunications, Inc., which provides local dial tone and also has long distance services. We also have WinStar Wireless, Inc., which is a competitive access provider, and then we also have another subsidiary, which is WinStar Gateway.

To help with my discussion, perhaps you folks will identify me. I had kind of a winding trip to the telecommunications industry. I served for 13 years with NYNEX, in engineering and operations, and then decided I wanted to become a regulator. I then went and did two and half years with the New Hampshire Public Utilities Commission, where I got somewhat actively involved with billing issues from the consumer perspective, in regards to what consumers were wishing in their complaints that we heard up there in my brief time with the commission.

From there, I moved into the vendor community with DSC Communications, and was an applications engineer on their access product system, the Light Span 2000's fiber technologies, and from there, I wound my way to WinStar, a year ago. I am predominantly doing interconnect negotiations, and then general regulatory type activities.

From the outset, I would like to say that I agree with my colleague from AT & T, that yes, LEC billing is an absolute requirement in this emerging marketplace. Almost all of the, as I said, WinStar and subsidiaries use in house billing systems. Our CLEC operation is all in house billing systems. We are developing our own billing systems in concert with Perot Systems, and we are trying to do all of our billing in house.

Our long distance arm, however, the Gateway system, does use predominately LEC billing. Of course, the long term view is to have all billing in house, where we have control of the billing to our customers.

Customer wishes. And this is poignant to me for my time at the New Hampshire Public Utilities Commission. Sales feedback also indicates that most customers want a single, easy to read telecommunications bill. My experience with the New Hampshire PUC reinforces that. Call it one stop shopping, or at least the perception of one stop shopping. Customers like one bill, clear and concise to read and to understand.

WinStar, where it is marketing right now in the CLEC business, is dealing with the small to medium sized business customers. That is what we are trying to deal with right now, but also on the residence side, it is resounding. Experience indicates they want that clear, concise, one stop bill. They want to be able to read it. They want to be able to understand it.

At my time at the PUC, I was involved with all kinds of discussions concerning billing. I remember one very detailed, lengthy discussion of whether the bill should be one sided or on two sides. We went through quite a bit of debate and discussion, and had input from all parties, and we finally decided to do the environmentally correct thing and go with a two sided bill.

After that event, I recall there was some confusion initially by some consumers when they were looking at the bill and seeing that it wasn't straight forward in that type of approach. Also, such things as the appearances of surcharges, E-911, taxes, things like that. Consumers get very set in their ways. Billing has been going on for what, a hundred plus years. The consumer is somewhat set, and it is very difficult to educate and move them into a different environment.

As some IXCs have been moving over to doing their own billing, per se, there is a question of timing of bills, lag of the data coming in, out of sequence with what they have been traditionally used to as far as timely billing, and coming in on a regular monthly schedule. All this reinforced the idea that, for those telecommunications carriers who so desire to use LEC billing, it should be available in a quality manner.

Marketplace. Why do IXCs go to a LEC? The first thing is, and I am going to say it again, customers like a one time bill. They don't want to see multiple bills. It gets complicated for them. The whole perception of one stop shopping is very critical, and to have a competitive entry into the marketplace, you have to be on somewhat of a level playing field. I have 18 years in this business, and I haven't seen a level playing field, and perhaps in my lifetime I may never, but we like to move towards that direction.

Often in billing systems, our consideration is their availability. Take my company, WinStar. We are building our own in house billing system. Someday, we may go forth and try and offer that out into the general public also. It could be another business for us. But the bottom line for us is, right now, as we move into the marketplace, and as the local exchange carriers look forward to those days, the RBOCs in particular, are moving for the long distance arena to have somewhat of a level playing field. Absolutely, LEC billing, one stop shopping, is absolutely essential.

Those are my comments. Thank you.

MR. MULETA: Thank you very much.

Next, we will have Mr. Gregg Sayre, who is with the Rochester Telephone Company, and who will be giving his presentation.

MR. SAYRE: Thanks, John.

To introduce my company, we have 540,000 access lines in upstate New York. That makes us about one twentieth the size of New York Telephone, but is still leaving us the second largest independent LEC in New York state. We are a subsidiary of Frontier Corporation, the fifth largest, I think, right now in the United States on the long distance side. Frontier is really only a name change from Rochester Telephone.

We have had in region, inter LATTEL in Rochester, through a fully separate subsidiary, for the last 14 years. So, we are little bit used to that environment. We have had the open market plan in Rochester, which was a precursor to the Telecommunications Act, for about two and a half years now. Competition has developed on the local side, to the point where, our local cable TV company, entirely over its own facilities is providing dial tone to business and residence customers -- thousands of them across our service territory, including even single family residentials. Again, served entirely over cable TV facilities in three of our larger suburbs.

Also, of course, we have multiple resellers of the Rochester Telephone network on both the business and residential side.

Our billing and collection offerings right now, we do billing and collection on a One Plus pre-subscribed basis for two carriers. They allow us to do some of their products, but not all of their products. We do casual calling for anybody who is interested. Right now, we have contracts with four carriers, plus Illuminet, which clears a whole bunch more carriers.

We do operator service provider and information provider billing for five carriers and Illuminet. And, of course, like I think every other LEC in the country, we participate one way or another in the centralized message distribution system, the CMDS, if it clears intra LATA messages, when our customers are doing things like making an intra LATA call in California and billing it back to their home telephone number in Rochester. That comes back to us through that system.

If we don't have a billing and collection contract with a particular carrier, the question is, what are they going to do? The carrier can always block things like casual calling, or third number traffic, if they don't have an arrangement pre-existing with the end user. The carrier can always just let the message fall on the floor because there just aren't enough of them to make billing them worthwhile. I don't think either of those two alternatives are particularly acceptable to most long distance carriers, and probably not good business practice, and so I am not proposing either of them. But, they do stand out there as alternatives.

What happens on Rochester, when we don't have a billing and collection contract for any reason, or when we don't have the end user customer, is that we will reject the message back to the long distance carrier. In the open market plan, the typical situation for that is, if AT & T, which is reselling our local residential service, has a customer, and that customer makes a casual call over MCI, or accepts an incoming collect call from some other carrier, all that carrier knows is that looks like a Rochester telephone number.

So, they send it us, to bill and collect through the usual clearing process. We, no, that is AT & T. We don't have that customer. We can't bill it. We will reject it back to the carrier, but we will put on the rejection, in electronic format, the operating carrier number. So, MCI, which is trying to collect that collect call, will see that it is an AT & T customer, and it is to AT & T that they need to go to get either a billing and collection arrangement directly with them, or to get billing name and address.

Billing name and address is the second major alternative. It is available in Rochester for our own customers to all carriers and information service providers through the CARE clearing house process, which is pretty well understood, pretty well standardized automated process. The carrier sends us a request for BNA, we ship it back to them electronically.

What is interesting in Rochester is, we have convinced several of the resellers to participate in RTC's clearing house, so that for these carriers, if MCI has a message that they need BNA to bill directly, they send the BNA request to us, and with those participating carriers, including our own reseller affiliate, we will send the BNA request over to the reseller. The reseller will send it back to us, and we will ship it up to AT & T or MCI, or whoever requested it in the first place.

This works pretty well, because it saves the need for each interexchange carrier to have a clearing house interface with every reseller, or facilities based local exchange carrier in the market, and it saves the reseller something, in not having to have that carrier interface and build their own just to interface into our system.

We also have what is a little bit less usual, a home grown process that we call the toll clearing house process. The idea was fairly simple, and we set it up in an automated way in 1985, that if we have the kind of message that I've been talking about, collect call from AT & T reseller customer accepted from the MCI network, the interexchange carrier would simply sell the message to RTC, we would buy it, it's kind of a three way billing and collection agreement. We would sell it to the reseller, and the reseller bills it to the end user.

Very simple. We thought it would work. We thought it would be popular. But, it's not. We don't really know why, but interexchange carriers have so far declined to participate in that process. Some of the things that we've heard are, the interexchange carriers really don't want to be a step removed from the entity that is billing and collecting for them, because they don't have the control over the billing format or whatever it is they want.

We have also heard that maybe some of the resellers, who are carriers in their own right, may not be all that interested in billing casual calls that are carried over their competitor's networks. One way or another, that process isn't working too well yet, although it is set up and ready to go.

It works in a more limited way, where we have local messages to sell to resellers or facilities based carriers in Rochester. We use half of the toll clearing house process. For example, if we have a prison pay phone, and an inmate makes a collect call through the prison pay phone service to one of AT & T's reseller customers, AT & T will buy that message from us and bill it to their end user.

How we think we're doing in billing and collection, we think we are a fairly forward looking carrier. We're not afraid of a little competition. We were one of the first carriers to allow customer owned sets, and of course we have that open market plan. Our uncollectibles are very low. We believe that our carrier customers are pretty satisfied with the actions that we take to collect their bills, and while protecting customers, we mange to get a pretty good percentage of them.

We are willing to customize our systems. Of course, we expect to be paid for that if a carrier wants us to do that. But, we will try very hard to find solutions that don't require either us or our billing and collection customers to build huge systems to make things work. We view that relationship as a partnership, and although we realize that a lot of carriers in the long run really want to have their own billing system, and they really want to have that direct customer relationship -- we can understand that -- but we are looking for more business.

It is a good line of business, it's profitable, and we are in business to make money. This is one way to make money, and it is a service that we provide that we would like to continue to provide and have no plans to stop providing it.

A couple of things we won't do, that a number of carriers have asked us to do on a number of occasions in these lines. Several carriers want us to give them a list of the PLCs, which is the primary local carrier of each of those customers. We have declined to do that so far. We think it's proprietary to us. It is proprietary to the resellers who are reselling our network, and it is probably proprietary to the customers too.

Another thing that we won't do is, guarantee the performance and speed of resellers who participate in that CARE clearing house process. It is great for them to participate, but we are not going to guarantee to the carrier that the reseller is going to be responding within a particular period of time to a BNA request.

The future, in our view, is really a matter of incremental improvement. We are improving, probably of little interest to people outside of New York, but we hope to be dramatically improving the way we clear intra LATA third number type messages in New York state. We will replace CMDS, we hope, by a process that's not really a toll pool, it is using the New York state toll and access pool to clear these messages.

We plan to keep improving our billing and collection process. We want to bring in more B and C business. Thank you.

MR. MULETA: Thank you very much, Gregg.

The next speaker will be Mr. Ray Lawton, who is Associate Director of Telecommunications of the National Regulatory Research Institute in Columbus, Ohio. We appreciate his joining us today.

MR. LAWTON: Thank you. Good morning. In the packet that you received this morning, the last item in there, the stapled item, is my handout. I think you will also see them on the screen, but let me move ahead.

What I've done is, we were asked by the Ohio Commission, to do a survey on quality of service. One of the modules turned out to be a fairly large one on billing, so that is what I am speaking about. Perhaps before starting, I should say that, just before I was literally going out the door, we had a billing problem back home with my mother in law, and I thought I would share it with you.

She ordered caller ID, and her bill looked unusually large to her. So, she looked at it, and sure enough, there was a caller ID charge, but she didn't realize that there would also be an installation charge. At the same time, just through bad luck, she was also slammed. She had a carrier change. She used that same test. The bill was a lot larger than she thought it was going to be, but she couldn't understand the details. The details were, in fact, there, she just simply couldn't understand them.

You will see as I go through this, there is sort of a quality of service trilogy, that we find out that the customers that have had a repair experience, ask for new installation, or had a billing problem are drastically and significantly different than the rest of the customers in the survey. We did 400 business and 800 residentials.

I am going to start and just quickly go through some of the findings, and mostly make comments on them since they are before you, starting with page three. The two dot points on the top of this chart refer to the numbers at the bottom, and basically, you will see it shows that the business, non-residential customers consistently gave lower grades on understandability, detail, and accuracy, than residential. That is an interesting finding. We have people grade these attributes. If you went from accuracy to detail understandability, understandability is the lowest graded item, the one that received the fewest A grades.

On the next page, the two top dot points are kind of interesting. Basically, the first one suggests that a fifth of all the customers out there reported, in the last 12 months, that they had a billing error. I don't have a good standard to bounce it off, but that seems awfully high from our perspective. Roughly, looking at it, it is two percent of all customers have billing error every month. But if you look at the second dot point, it suggests, or implies but doesn't prove, that if you look at that 31.8 percent number, it suggests that 31 percent of the business customers thought they had a problem, but when the dust cleared, only 23 percent had a problem.

The last dot point was, where were the errors? Again, these were mostly open ended questions, and we had to go back to encode the responses and they are kind of loose. But basically, it suggested that long distance charge errors were responsible for half of the mentioned errors in business, non-residential, and two thirds of the residential. We don't have a lot more information past that, other than what people actually told us.

On the next two pages, we asked some implementation questions. The first dot point tells you that 74 percent of residential and 81 percent of business found that the recorded voice instructions were easy to follow. That suggests to me that that part of life works well. But only 40 percent, and 44 percent of residential, found it difficult to reach a live representative.

That again strikes us as an unacceptably low number, but again, you've got the hard job of deciding if these numbers are good or bad. If this 81 percent number, which looks pretty high, the flip side is to say, would you be happy with a system that had 20 percent of business finding the recorded voice instructions not easy to follow?

We asked customers to give grades. It turns out that that was something they all understood, and it was something that worked out well in the survey. We asked, when they were done with the billing module, to give a grade about knowledge. With the repair module, to give a grade about repair and installation. It turned out that the lowest number of As was consistently given in the billing module, if you look at that first cluster. 31 percent gave As for billing, 34.9 for residential.

We flipped it around to make sure it just wasn't a grading thing, and asked, what was your satisfaction level? And again, in terms of the percentage of people saying they were very satisfied, billing came in lower than installation or repairs. We found that consistently throughout all of the modules. Somehow repair seems to go real well, and then installation and billing was much weaker.

The next page has an interesting one too, on optional billing payment plans. Nineteen percent of all respondents, residential respondents, because we didn't ask this of business, said they were aware of an alternative payment plan. Close to 90 percent of the people said they were comfortable with the explanation about it, and about a third of those who were aware, said they used a budget billing type plan in the last twelve months. And 96 percent, nearly all, said they thought it was actively credited.

I think we can say that that works well, and part of me says, should we have an outreach program to let more people know, because only 20 percent of the people said they were aware of alternative payment plans. Would you want to go out and say, hey, by the way you don't have to pay, or you can pay slower. But it turns out again, only about a third of people seem to use that. So again, I call that to your attention.

The last page, for at least numbers, about a third of our business customers indicate specific billing improvements that they thought were needed. None of them aggregated into anything that I could report to you, but again, I say to all of you, if you are interested, give me your calling card and I will get you a copy of the larger report.

One of the findings we had consistently across the repair, installation, and billing, was that the active users differed significantly from the average user. The way to understand that in this chart that is in front of you, this page eight, we divided residential into those that made three or less calls per day and active were those that made four or more calls per day. I forget the exact business number.

If you look at the understandable row, that meant that the percent giving As for understandability, the average was 45, but the active user, it dropped off to 31.6. So, you see a consistent drop off all the time. If you go to the bottom for errors, it's even more dramatic. Remember, I said that approximately 20 percent of the people had billing errors, but if you look at the average customer, for residentials, you would look at that 6.2 number. But look at the percentage in the active residential users, that said they had problems was 37.7. There were 37.7 percent who said they had a billing error in the last 12 months.

So again -- do you have the chart in the back, page 13, the one that has the circles? We do, all right. One interesting thing we found, and this applies to billing and everything else, is that the plain vanilla telephone user, the group at this top circle, 403 respondents, half of them had no repair, no installation, and no billing problems. When we did our survey, they also tended to have fewer services and were less active users.

So, kind of the leading edge of our telecommunications revolution, are the people that are in that central part. The people that had a repair, an installation, or billing. They are the ones that gave the lowest grades. They're the ones that had the most problems happen to them. They're the ones that had the greatest concerns. So again, you can either look at all our policies and say, should we be forcing people out of those three central circles? In other words, should the status quo be in that larger part of the circle?

That's one way to be looking at our billing rules and service rules, or to say no, actually the flow is going the other direction. If we are really expecting the system to be modernized, to have a different competitive profile, then really, it is a flow into those circles that we should be expecting to see in the future.

I will just simply conclude with my comments. I share with the comments from my predecessors, is LEC billing for others important? Yes, as long as we have what we call a Linchpin model, as long as most people, most of the time, have got to get to the last customer by resale or unbundling, it is important. The red flag for us was third party billing, that when we looked at it, it did not seem that the errors were directly related to billing for local services, perhaps because people are used to a flat number they see each month.

I will simply conclude by saying also, the other thing to notice is the budget billing plans appear to work, and I guess why we're all preoccupied with complaints and introspection, it is important to know that there are good parts of what we have out there that work. I will conclude there, and be open for questions later. Thank you.

MR. MULETA: Thank you very much. As we move westward, we have Ron Evans from OAN, which is a third party billing company, and he will be speaking next.

MR. EVANS: Thank you, John.

I am going to give you a little bit of background on OAN and its customers, because we may not be familiar to all of you, and move into a discussion on what, from our experience, happens when the LEC billing process breaks down and is either reduced or eliminated.

OAN is a billing and collections clearing house that specializes in billing calls for small carriers in the local exchange envelope. We have our own contracts with all of the Bells, with GTE, and most of the independent telephone companies across the country and in Canada. It means that the bill page has an OAN logo on it, and on the envelope. Over the call detail, the carrier we are billing for is identified, and generally, across the country, it is our 800 number that calls into our inquiry center to answer questions if there is confusion on the bill.

So, needless to say, we are as concerned about confusion as anyone here. Our contracts allow us to bill to both casual and pre-subscribed usage, and we do both. The casual is calling cards, shared use calling cards, collect calls, bill to third, 10 XXX, and we have the ability to bill for 900 services, though we don't, in fact. On the pre-subscribed side, we bill primarily for One Plus services, either casual 10 XXX, or true pre-subscription.

Generally, it is toll and occasionally there are monthly service charges or enhanced services associated with it, such as, voice mail and paging. We bill for roughly four to five hundred small to mid size carriers. Many of them are start up companies. Many of them are niche marketers, either specializing in sales to segments of the population or to other special interests.

They come to us and they use LEC billing because it is the most cost effective means to get their billing market. Most of the carriers that we bill for are heavily dependent on the service. I would say, the vast majority of them don't have alternative means of getting their bill out. Let me talk, just briefly, about what it means to them, and ultimately, the consumer, when there is a breakdown in this kind of system.

I mentioned to Gregg before we started, the example that I am going to use is, what happened when local competition opened on Rochester Telephone region. We bill into the Rochester area through Illuminet, which Gregg mentioned, and we were billing, needless to say, at the time this competition began. Our carriers continued to do business as usual. They, on their casual calls, went out to the line identification database, to be sure that the number that they were going to bill to was valid, and in fact, there was no screening to prevent billing of collect calls or bill for third, prior to completing the call.

They got signalling back that, in fact, they were good lines. They appeared to be Rochester lines, because they were in the Rochester database, and they were, according to Bellcore standards, within the line number range belonging to Rochester. They sent them to us for billing, and we sent them through Illuminet to Rochester, and about 30 days later began to get unbillable calls back.

This was fairly early in the process, and Rochester hadn't developed some of the mechanisms that Gregg talked about earlier, which have improved the situation, but certainly haven't totally done away with the problem. What we saw at first was, unbillables coming back that roughly associated with the market share that the new local competitors had taken in that marketplace. And, it was fairly small, and the carriers we billed for wrote those off as unbillable.

They couldn't find alternative means at the time to get them billed, and I mean by that, either they could not get them billed, period, because they couldn't get line number information, or if billing name and address was available, it was cost prohibitive. Ultimately, it was going to cost them more than the price of the calls to get them to consumers.

Things worsened, actually, from that point. We had several carriers who had some fairly heavy traffic being billed into the Rochester area, prior to line number portability and local competition confusing the situation. Those carriers not only got market share returns, they ended up, because of the type of subscription fraud, where some end users realized that they would not have to pay bills because they wouldn't receive bills by moving to certain of the new competitors who had not or would not make billing arrangements within the other carrier.

That grew to the point where one of the customers ended up filing bankruptcy. I don't know if it was solely because of the situation in Rochester, but it was coincidentally right at the same time that everything came to a peak for them.

I am playing this out just because it is important to understand what the consequences are. To carriers, it means either they need to have billing arrangements in place, or they start shutting down optional services, especially casual services such as 10 XXX, dialing which allows end users to have a choice, and test new long distance services. It shuts down collect calling, bill to third calling, simply because there is no guarantee that it is going to be cost effective to ever get it billed, if it can be billed.

We haven't seen a situation quite as bad as Rochester subsequent to that. We're very concerned that we haven't seen the end of it yet, in fact, just two weeks ago, in talking to one of my Bell representatives, I was told that there is at least one competitive local exchange carrier, who as part of their marketing plan has made it clear that by using their services, consumers can, by using 10 XXX dialing, only pay local calls and avoid long distance charges indefinitely. We see that as the death nail to

10 XXX, and we think it is a significant loss, not only to carriers, but to consumers.

MR. MULETA: Thank you very much, Ron.

I appreciate everybody's comments on this general issue, and what I would like next to do, is just sort of put on the overhead what we're talking about, and just use as an example -- if you could put, from the sample, the first bill example, which is part of the package that you got from outside. For those who came in while we had started, there are packages outside.

What we have been talking about, essentially would be a bill that looks like what is on the screen. Essentially, there is language that talks like this, after the account number, the date, and so on, it says, "this portion of your bill is provided as a contractor service to such and such company, which provides billing service for themselves or for carriers who offer toll calling or operator assisted telephone service, which may originate from residential telephones or from business phones. Charges for these calls are determined by the carrier whose network is used at the time you placed your calls, and are not set by --" the two different companies that are listed in there.

One of them would be a LEC, the other one would be either IXC or a billing company such as OAN.

Then we go down, there is a helpful number which says, billing inquiries call a certain company, with a number, some summary information, and then an itemized section with toll calls, and that's the message we have on there. So, I know this is not representative of all the carriers and all the carrier services, and this is not the way that itemized calls would show up, but one of the questions I would like to ask from the panelists is, if you were a consumer, and you received this bill, is this adequate in the first instance?

And also, then as you as a business matter, is this adequate information? And anybody who might want to take a start at this?

Mr. Lawton, if you want to take a crack at this, where does this fit in with your understanding?

MR. LAWTON: I guess I would look at what's marked as C, the paragraph, and say that one has to go through an awful lot of reading to get to the punchline there, so my sense is that all those extra words probably make more sense to us as insiders than to somebody else. I think if I was just reading the bill, I would want to know that below is your bill for messaging, period.

MR. MULETA: I guess from the carrier's perspective, when a lot of the carriers, AT & T, as well as WinStar and Frontier and OAN, have all come in and said, this is a very important process. This billing mechanism is an important process. I guess the question that comes to my mind is, do you believe any customer expectations are set, either for the customer who is receiving this bill as an in package bill from a LEC, are there any customer expectations that are set in terms of service quality and things like that?

I guess I would like to ask AT & T and then maybe OAN and WinStar.

MR. ESTEY: I don't have any data, John, but I think that customers are sophisticated enough today that they would understand this. I think we've had a number of years experience now with, for example, long distance charges appearing on the local bill, and there is a clear disclosure statement that says, when I get my Bell Atlantic bill at home, it says on the AT & T page -- in fact there is an AT & T logo if I recall -- it says, this is a billing service provided to AT & T. This is not Bell Atlantic's charges. If you want to question these charges, please call AT & T at this number.

Ii don't know if there are studies to the contrary, but it seems to me that it's pretty plain English. As to the carrier, I assume we have worked out, as part of the billing and collection contract with the LEC who is doing that billing for us, what the language will be and it is satisfactory to us. So, I am not aware of a problem in this area.

MR. MULETA: I guess maybe before we go on to the other folks, from the perspective of a Rochester Telephone, do you think any customer expectations are set about quality of service, customer service, and so on, and is this adequate from a consumer's perspective?

MR. SAYRE: Well, I'm not entirely sure about this particular one. I don't know what message it is, but the consumer might or might now know what it is, depending on what their relationship is for the third carrier. So, we would expect, if they've got a question, they are either going to call us if we're handling the inquiry, or call the carrier. And if we are getting too many calls, then it becomes a little bit cost prohibitive for us to have a confusing bill format, and that situation is going to correct itself, because time is money and people are money.

If the carrier is getting too many calls, they are going to us, look, you need to make some changes in our billing and collection arrangements, because it just doesn't make sense. I think it is a process that tends to correct itself.

MR. MERRILL: I also believe it's a self correcting process. I found, through experience, that the fewer words the better, and have it as succinct as possible. Taking a look at this, it seems relatively straight forward, and one thing about the consumers that have had telephone service for any period of time, if there's a problem, generally speaking, they'll reach out and make that call. If it needs correction, then sometimes, quite frankly, the state regulators get involved also.

If you are in any specific jurisdiction, the state regulators also take a look at the billing formats and so forth, but keep it as succinct as possible, and if you are getting a calls either to the company or to the regulators, then you need to address the specific language.

MR. MULETA: I guess, following up on that, Ron, if you have --

MR. EVANS: Just one or two comments. The part that on the surface seems the most confusing is single line messaging, and not being a subscriber, it's guaranteed to confuse us. We work with the carriers. Because there are very definite limitations as to the number of characters available in fields in order to populate this kind of message on a telephone bill, it's incumbent on a carrier when marketing and selling the particular service that they bill for, to make it clear to the consumer how it's going to appear on the bill.

In general, we don't tend to get a lot of inquiry if it is done properly. If it's not done properly, just like Rochester Telephone, because it is our inquiry number on the bill, we get a lot of calls and we're on the phone with the carrier talking to them about their marketing techniques and what needs to change.

MR. LAWTON: Plus I guess, following up on the same mode of reasoning, this 800 number up here is unknown to me. I am not sure who I'm calling. Am I calling a LEC or somebody else?

MR. MULETA: No, it could be the billing company. It would be the third party billing company.

MR. LAWTON: The third party billing company?

MR. MULETA: I guess the sort of point that I've gotten out of this discussion is, it's not just a matter of impact of the billing and essentially putting a bill in the envelope. It's a lot more than that. There's questions about, prior to the billing, there's a question about how well you have explained what service it is that you're selling. That is one question, I think, Ron just brought up.

The second question is, what happens after you send out the bill, and if you have questions. There seem to be two points of contact. One would be in this example, Rochester, and asking the LEC, how can you explain this to me, or what's going on here? And then calling whoever it is that is issuing the bill.

And interestingly enough, there could be a third person, which is actually the exact service provider, the person who actually provided the service. So, it seems to me that, what other arrangements -- can you give some examples of the arrangements that you do to handle these sorts of things? For example, the customer service aspects of it. Are there any specific requirements, are there any standards that are set by state regulators, or -- I don't believe there are any at the federal level -- but are there any industry guidelines for answering calls and et cetera, or are these just simply contract terms?

MR. SAYRE: If it comes to the LEC, that is a separate service that is an optional billing and collection service that a carrier can buy or not buy. If they buy inquiry from us, we will handle the inquiry, and the calls will come to our customer service center. They will go in the queue with every other call, and the answer time performance and the accuracy and the cheerfulness and helpfulness are all regulated pretty heavily by the state commission.

This kind of call, for instance, has got a measurable standard that 80 percent of those calls have to be answered within 20 seconds in order to meet the objective level performance at the New York Public Service Commission.

MR. MULETA: Is that a standard across the country?

MR. SAYRE: That's a New York state standard.

MR. LAWTON: I was going to say that too, you're a good mind reader. I went through the policies of all the state commissions, and nearly every single one of them basically has rules. The rules are different in every state, but they don't differ by a lot. There are clear rules established for the local exchange carrier.

The data set I was looking at was behind that, it's unclear what the rules are for the new entrants, or someone who is offering a unregulated detariffed service.

MR. MULETA: When you come up with standards for -- let's say that a carrier or ISB chooses not to take the LEC service for the customer services aspects of it. Are there any standards, or how are they developed in terms of the carrier's customer service? What are the expectations? Is it based on customer expectations or are they just developed as a rule of thumb out of years of experience? As a CLEC, or as a new entrant, what do you think?

MR. MERRILL: Let me take a stab at it. If we go around the country and get our authority to conduct business, we are a regulated local exchange telephone company. Call us a CLEC, call us an ALEC, call us a local exchange telephone company. And as we get our authority to conduct business in any given state jurisdiction, they have their criteria, their rules, their process. To be successful in the marketplace, beyond the rules and process, we either have to meet or exceed the incumbents that are operating there.

So, the regulatory commissions, from my experience, usually put you through a very similar process. It can be somewhat abbreviated, but it's pretty well known that they have established rules and procedures and objectives for various aspects of telephony that have been going on for a long period of time.

We are held to that standard, and generally speaking, we have to hold ourselves to a higher standard than that if we hope to be successful in the marketplace. So, it's a pretty well laid out process.

MR. MULETA: AT & T, do you --

MR. ESTEY: You mean about the customer service standards?


MR. ESTEY: I don't know to what extent they are mandated, but AT & T has a long history of having its own customer services practices and standards. I worked for a number of years in the operator services division, and it was mentioned earlier, answer time is one of the primary things that those units are measured on.

So, when these calls come in, and I guess it's on a separate page where you are talking about the long distance calls, and it will list on the bill to call the number if you want to talk about your AT & T charges. Those calls come in to an AT & T customer care center and that center, there are several of them around the country, has its own full set of measurements to insure that those customers are being treated promptly and with good service.

But, I don't know to what extent that is mandated by government. As far as we're concerned, I think it is mandated by competition and how we serve our customers.

MR. MULETA: I guess the general question is, there was a statement made earlier that, not only is this thing a necessity, but that it needs to be clear, concise, and easy to understand, and I just want to formulate, are we reaching those objectives? Everybody agrees that we should share the envelope, but the next question is, are we getting to clear, easy to understand and concise?

Let me ask, there were statements made about alternative arrangements, or alternative billing arrangements that are being considered or being developed. I would like to ask the competitors, or the third party billers, if you could describe what those are, or what they could be like. Any ideas about what those -- is it simply billing it on your own? Is that an alternative that's being considered? What are the limitations of that, other than the sort of competitive issue of customers want one bill or sharing the envelope concept? Ron?

MR. EVANS: The number one example of an alternative that's typically named is billing name and address. On casual calling, the carrier doesn't know the name and address associated with the billing telephone number. Consequently, either bills in the local exchange envelope and they handle the distribution, or purchases the name and address associated with that number from the local exchange carrier, and then directly bills the calls.

We've worked with a couple of billing name an address providers over the last few years, and actually, for a very short period, we experimented with it ourselves. Relative to the cost of billing telephone calls in the local exchange envelope on a per unit basis, it tends to be more expensive. But beyond that, when you're measuring total costs, it is just overwhelmingly more expensive.

Typically, consumers accept their telephone charges in the telephone company envelope, and have a very simplistic view of how they should be paying their telephone bill. And the collection rates, when they are combined, are much higher than when that's sent out separately, especially if it is a single collect call that someone accepted from their daughter who is away at camp, and the call comes in an envelope for $3.50. Typically, it gets thrown away rather than getting paid.

Consequently, the carrier ends up with all of the costs associated with purchasing the name and address, printing, stuffing, mailing, and then not collecting. So, we haven't found that it works well. When we worked with some of the B and A providers, there are actually one or two clearing houses out there who specialize in this, and talk to the carriers and see the results they've gotten. A 50 percent collection rate is considered very good, and that's obviously not something that could keep any carrier in business.

MR. MULETA: What is the collection rate in the industry today for these sort of services?

MR. EVANS: Depending on the type of services, it's high. It is in the 90s.

MR. MULETA: So, 90 percent of bills that go through the LEC billing system are collectible.

MR. EVANS: Absolutely.

MR. MULETA: At the round tables we heard figures, depending on the company, depending on the specific services, it could range anywhere from the low six to ten percent to 20 percent. What's the difference? Why do you have the range?

MR. EVANS: The low -- I don't have anyone collecting at six or ten percent. If I did, I don't think I would have them for more than a month or two. In fact, we've never -- I take that back. On one occasion, we had a carrier that had a billing error.

MR. MULETA: I'm sorry, I think I asked the question in reverse. I am saying that there is a range of uncollectibles of six to 20 percent, and I am trying to understand what the differences would be.

MR. EVANS: Uncollectibles, which is typically associated with bad debt, generally play into what socio economic group the carrier is selling into. I think, obviously, someone who has marketed primarily to mid size businesses, has a higher collection rate than someone who is providing collect call services out of a prison.

That's the kind of range that we end up seeing, and you're right, I did read you backwards. There is a range there because of the ability to pay on the part of the end users.

MR. MULETA: Can any of you describe sort of what the general principles of agreements that you enter with the local exchange companies would be in terms of the revenue sharing or how the payment structure works and things like that? Maybe Gregg, do you want to take a crack at that first?

MR. SAYRE: Well, they're all over the map, and in fact, we are trying to be a little more innovative with them. Whatever works from a business sense. It could be minimum usage, minimum revenue guarantees, X cents per message, or it could be X percent of the amount of billed revenue. Sometimes the LECs are responsible for a portion of uncollectibles if they exceed a certain threshold, sometimes not. Sometimes the LECs can freely recourse the bills back to whoever is feeding them to us, and typically that would be the case for information provider type bills. We're not willing to eat uncollectibles on those.

So, it's very much a business kind of decision, and whatever works for the two company works.

MR. MULETA: So, my understanding is, if a consumer disagrees with a bill statement, then there are different alternatives that could take place. One could be that the LEC handles the total collection issue.

MR. SAYRE: We may do an inquiry and we may not do inquiry. If we bill it though, we will attempt to collect it. I have to say there is a distinct advantage to doing collection through a LEC. We do not terminate local service for non-payment of toll in New York state, but if you don't pay your toll bill, you are going to get, eventually, toll restricted. If that bill comes through us, and it gets up above the treatable minimum and its gets to the point where your toll restricted, it's not just a bill you can throw away if you want to continue to have toll service.

MR. MULETA: This brings us to another issue, that was raised to us, which is the issue of secondary collection, and to what extent is the industry using secondary collection as a method of getting uncollectibles for bill disputes and things like that? Any thoughts on that?

MR. EVANS: I can't speak beyond our own experience. We typically don't use secondary collections, and some of it relates to contract restrictions. For instance, just generically, when we are billing in the local exchange carrier envelope, if an account is written off for bad debt, we, nor can the carrier, go out and pursue collections. Typically, it is because it has been turned over to a collection agency by the local exchange carrier and processed continuous.

However, there is an option with post-billing adjustments. Say there is a dispute between the consumer and the carrier as to the proper amount that they've been billed, where the local exchange carrier might write off that entire account, and say this is a dispute between the carrier, take it and resolve it between the two of you. A carrier can, contractually still go out and collect it, I know from my experience in errors we work with, none of our carriers are doing that today. It is certainly, though, their right.

MR. LAWTON: Not that numbers do a lot for you, but 41 states have formal dispute resolution mechanisms, that the LECs must maintain and develop, and 34 of them are required to be published either on the bill or in the telephone directory. And then this last one, I'm not certain I understand completely, but in terms of non-payment recourses available to exchange companies for uncollectibles, 17 states permit the use of a collection agency.

But, in 21 of them, it appears that it is basically the responsibility of the third party. The local exchange company can say, fine, that will come out of our next month's payment to you. In other words, if there were say $10,000.00 floating around, we'll make that adjustment. It will be a true up in the next billing cycle.

MR. MULETA: It seems to me that there seems to be a dichotomy as we move further and further away from telecommunication services. For example, what you just mentioned is, when it comes to toll service and to local service, there are certain mechanisms that are in place, but as we go further out, there seems to be no standards or limited standards for dispute resolution and things like that. Coupled with the fact that there are no standards for presentation or the discussion of these bills, I think it adds to our concern, I believe.

Are there any major issues that you think the changing competitive landscape will bring about in terms of this billing mechanism, and any thoughts you might have that? I would just like to open it up. Stubb is shaking his head, so --

MR. ESTEY: Well, you mentioned in here somewhere changes in the landscape from the Telecom Act of '96, for example, and I mentioned in my remarks the concern of ours is that as LECs are today contemplating getting into long distance business. Because of that strategy, they begin to make it more difficult for us to have our billing and collection contracts with them. That's a big problem. It gives them, as I said, an unjust competitive advantage if they can either raise the rates extremely or cancel a contract for cause.

We were unable to come to agreement with SNET for billing and collection contract, so we're doing our own billing. That's fine, we can do it, but customers have this tremendous predilection for wanting to get a single bill. Initially, at least, it is the biggest customer dissatisfier to be getting two bills.

So to the extent a LEC chooses the strategy of making it difficult for the IXC to do business on their bill, it will give them a tremendous competitive advantage.

MR. MULETA: I guess one question to ask, then, is this part of the regulative service that -- I guess the sense I'm getting is it is an integral service to telecommunication service providers, and I am seeing a lot of heads shaking, so I guess I have my answer on that one.

MR. SAYRE: May I speak to that?

MR. MULETA: Please, please.

MR. SAYRE: I think the FCC and the New York PSC did a similar thing and cut the cake pretty well in detariffing it, but not totally deregulating billing and collection service. When it comes to negotiating a rate, it's something that the businesses can work out for themselves, but if it's a matter of discrimination -- if I were given a sweet deal at Rochester Telephone to Frontier long distance, leaving AT & T and MCI out in the cold, then I would expect the regulators to come down on me.

That degree of regulation, the FCC and the PSC have retained, so I don't think there is a major problem with where it is sliced right now.

MR. MULETA: One of the questions that is recurring in all of this, when other LECs were speaking about this at one of our round tables, it came up as an issue about brand identity and keeping brand identity essentially pure, or whatever you want to call it, and I would like to hear the opinions of the competitors as well as Rochester about those kind of issues. Since a single bill or a single package is important, where does brand identity play in all of this, and is it a real concern for the LECs, this issue about LECs brand identity and preserving it.

I would like you to start, Gregg, if you don't mind.

MR. SAYRE: Brand identity is certainly important to us and every other carrier, because as both long distance and local become a commodity, there is less and less to distinguish the service from one carrier or another. We understand that, and when we bill and collect for other carriers, we'll put their logo in their preferred color on their page of the bill.

MR. MULETA: But does that really get to the notion that I think the other carriers had mentioned, and I'm paraphrasing, but the fact that it is a single bill, that's what really creates a brand identity, and not necessarily the single page. I know there are some heads shaking, so if anyone else could address it.

MR. LAWTON: I think in a slightly different direction, you don't want to get in a situation, since we all regard non-cutoff of local services as kind of the basic right, and that the other things should be collected, but you can't get cut-off for the others, you don't want to have the incumbent local exchange companies somehow -- it's color make you think that its long distance services are also included in that. I think there has to be a clear understanding as to where that non-payment line lies, and by the logos being too big, or colors being the same, that might confuse that issue to the detriment of the challenger.

MR. MULETA: Steve or Ron?

MR. EVANS: Actually, just to echo what we just heard, we think two things. We respect the need to keep what's in the envelope clean so that it is in no way tarnishing the image of the incumbent local exchange carrier. However, when the line gets crossed and the incumbent carrier starts arguing beyond what's reasonable for what they need to do in order to maintain retail leverage in their marketplace at the expense of the carrier's we're billing for or AT & T or MCI, or any of the other interexchange carriers, we see that as just flat out anti-competitive.

MR. MULETA: I would like to now open it up to the people in the audience if you have any questions that you'd like to ask. We have someone with a microphone so you can raise your hand and they will come to you. Any questions?

Can you identify yourself when you are speaking, please.

MR. GULLADGE: My name is Bob Gulladge. The question is mainly for AT & T and WinStar. As you pursue CLEC activities, are you going to allow people to request BNA from you?

MR. ESTEY: We are billing for local service and long distance in a consolidated fashion in four localities throughout the country, now just getting started and getting our feet wet in this business. So far, frankly, we don't have the infrastructure to do what the LECs can do today, having built that infrastructure, in their case, over a number of years.

I think we would see ultimately that that would be a good thing for the industry, perhaps on some sort of clearing house basis as was alluded to earlier. Today we don't have the capability of doing it.

MR. GULLADGE: Thank you.

MR. SAYRE: You do in Rochester. You do participate in our clearing house in Rochester, so if MCI needs your local resold customer's BNA, MCI asks Rochester, Rochester asks AT & T, and it flows back. You're doing it now.

MR. ESTEY: Where we have our own billing, we are not doing it. But, where we are taking advantage of Rochester, we are doing it.

MR. MERRILL: From WinStar's perspective, again, we brought our first switch up in New York in November, and since then, we've brought up four or five more switches, and we're developing our systems as we go. I would say down the road, as we evolve, yes. As we've negotiated our general interconnector agreements across the country, and so forth, we have always tried to keep a balanced approach of what's fair. Our reciprocal, symmetrical, whatever it be in compensation, and down road that's how we see everything going.

Today, I can't speak specifically if we are doing that today, and where we are, but we do, we have a CMBS host, we have standard industry arrangements and so forth. So, as we move forward, yes, I would say that what is going to happen on one side is going to happen on the other as we move forward.

MR. TAYLOR: Thank you, John. I am Alan Taylor from the Florida Public Service Commission. I wanted just to back, and I'm not sure who to ask the question of, but to the example of the bill that we talked about with the messaging service.

Correct me if I'm wrong, but it appears to be billed as operator assisted toll calls, so I would have to assume these are deniable charges then, is that correct? Yet, there are no individual calls listed there. Would anyone comment on whether these are regulated or nonregulated charges?

MR. SAYRE: It looks to me like that's voice message service, at a flat rate of $25.00 per month. That's unregulated on the federal side as an enhanced service. Some states choose to regulate it, and some don't.

MR. TAYLOR: But on this bill, it would appear to be a deniable charge because it falls under operator assisted toll calls.

MR. SAYRE: Sir, I'm not sure what you mean by deniable charge.

MR. TAYLOR: That means if you don't pay it, your phone is cut off by Rochester Telephone Corporation.

MR. SAYRE: Yes, for voice mail -- I'm not sure we bill and collect any voice mail.

MR. MULETA: This is not a Rochester bill.

MR. SAYRE: There certainly would not be any cut off of local service. The only question is, whether there might be a cut off of toll service if the customer were buying voice mail from a long distance carrier. In New York state, voice message service is actually regulated, and so I think, if it were intrastate, it would go with the rest of the toll services. It's actually tariffed in a lot of companies.


MR. EVANS: All I was going to say is, I think probably the point has already been made, but a lot depends on which state this bill was in and whether or not it would effect disconnection or loss of services.

MR. DONALDSON: Charlie Donaldson, New York Attorney General's office. Using the same example the previous question brought up, I guess I am directing the question to Mr. Sayre and Mr. Evans.

How, based on this bill, is the consumer going to know who they're dealing with? If this is a billing aggregator, third party biller bill, and the reference is to a product, and I am assuming this is a product, not a company, then how is a consumer going to tell who they are actually dealing with?

MR. EVANS: If you don't mind, let me take the lead on this one. Only because I'm used to this.


MR. DONALDSON: Unfortunately, so am I.

MR. EVANS: If this were our bill page, and I don't know whether it is or not, the upper lefthand corner where it's blacked out, it would have our logo or the aggregator's logo, and our name would also probably be printed in the text at the top.

The part that's blacked out just above the summary on this bill page, I assume is the identification of the carrier associated with that product. So, it is all there. I'm not saying the type size is the best it could be or anything like that, but the information is there.

MR. DONALDSON: The problem I've got is, that you are making an assumption that in reality I don't think is followed out. We frequently will see bills which say, "Billed on behalf of 00402," or something like that. What does that mean to the consumer?

Another thing, that happens to be the subkick or whatever for a billing aggregator, not for a service provider.

MR. EVANS: You shouldn't be seeing that. Obviously --

MR. DONALDSON: We're seeing a lot of it. So, the other problem with the bill is, let's say you've got the ultimate service provider identified by letters. Let's say it's Mother Jones Voice Messaging Service. There is, however, nothing on this bill which allows the consumer to go straight to Mother Jones, nor is there anything in the bill which identifies whether the billing aggregator or the LEC has the authority to do any kind of bill adjustment or bill investigation.

The consumer is flying blind here. Typically what we see is, folks wind up peeling three layers of the onion. The first call goes to a LEC, the LEC says, we don't know anything about this. You have to call the billing aggregator. The billing aggregator says, we don't know anything about it, therefore, you have to call Mother Jones, who may or may not answer the phone.

Based on this bill, how is a consumer going to know who they are really dealing with and how to get in touch with the folks who can make the decision about whether or not to adjust the bill.

MR. MULETA: I think this is some part and parcel of what we have been talking about this morning, which is subject to the standards of each individual company, in each individual state, in each individual LEC. It is also a great preview for, I think, panel three, where we are going to try and address whether or not there should be some level of consistency.

This lady had a question right here.

MS. VAN OVER: Hi. Joel Van Over. I have a question that you, Mr. Evans, raised on the leveraging potential on billing and collections. Clearly, incumbents have an incredible power to leverage in the XXX area, casual calling area. If they stop billing and collections, a lot of people are out of business. But it seems to me, that could also impact, and I would like your comments on this, the subscribed calls for smaller IXCs, and the impact -- this is all an issue of cost and economics -- what would the impact be if incumbents raised their costs significantly in the billing and collections area, or if they entered into very short term agreements in billing and collections so that an IXC couldn't plan going forward what their costs are going to be over time.

I would like you to address some of the other leveraging issues that could come into play if an incumbent took aggressive action to leverage.

MR. EVANS: Actually, the carriers we bill for, the presubscribed carriers that we bill for, would probably be hurt the most by any significant change, either in pricing or in terms of contracts, simply because they are operating at the slimmest margin of any of the carriers we bill for.

They are in competition with much larger entities and are pricing very aggressively because the marketplace demands it. If they need to adjust their pricing to consumers in order to make up for increases in pricing on the billing and collection side, typically, they will no longer be competitive. A lot of them could very easily be driven out of the market altogether.

In a way, the example of Rochester I gave was extreme, however, the dangers of something like price changes, price shifts, short term contracts, are possibly even more of a threat on the current horizon. We are seeing, in our interactions with local exchange carriers today, demands made on us that we've never seen before. We're seeing local exchange carriers take positions which we consider outrageous, but when we go back to them to negotiate, we're being told that these issues are no longer negotiable, and take it or leave it.

We are very concerned, and that's, quite honestly, why personally I am here today, and why we have been talking to the Enforcement Division in other arenas, trying to shed some light on this, and at least bring it to the surface for discussion.

MS VAN OVER: Could I ask a follow up question, and I am happy for anybody to answer this, what is there at the state or federal level today to prevent the kind of conduct you're talking about. I just point out that, in some instances there may be a need for very quick action, and I'm not talking about --

MR. MULETA: Is this for the consumer?

MS. VAN OVER: Well, obviously consumers are the ultimate victims if small, competitive carriers are going out of business, and the rates are increased because billing and collection rates are increased. But what exists today, if anything, to address this issue at the state and federal level, and what is needed?

MR. SAYRE: Speaking from Rochester Telephone's perspective, are the anti-discrimination rules, such that we can't give a sweet deal to one carrier and not offer that to other carriers. But really, the main driver for my company, at least, is enlightened self interest. We raise our B and C rates, and drive carriers out of the marketplace, we are going to get less to bill and collect. We are going to lose money.

It's not our business either to lose money or to leave money on the table, and for the years in which this has already been detariffed, we have attempted to extract what profits we could out of this as a business. To the extent that we've raised that a little more, and that causes people to walk away from the table, well, that's bad negotiating for us, and bad business.

MR. LAWTON: Just as a quick point, the only real weak point out there, I think, is that it is a very reactive system. In other words, there is no proactive letting all the 1,000 small entrants out there know that, by the way, 675 of them out there have gotten a better deal in billing collection than you have. So it's a self enforcement kind of a situation. It works very well once you reach that point, but the ability of the underinformed challenge to know these things might not be as strong as it should be, and it's not really the mode of the FCC or the state commissions to reach out and be announcing to people what these better terms and conditions are.

MR. ESTEY: I think this is a very important question, because I think this is one of the most troubling aspects that this panel has talked about. In the federal arena, I am not aware of any rules and regulations that govern this, because in 1986, when the FCC detariffed billing collection, I went back and read that order, and it talks about the fact that it made an affirmative finding -- billing collection is not a communication service, so it will not be regulated under Title 2 of the act.

It went on to find that it is -- the commission would not relinquish regulation under Title 1 of the act, but chose not to formulate any rules at that time, because it felt competition had developed or would develop. As I said in my remarks, we don't see that competition in this area has developed.

People talk about, well, you could use Visa or Master Card or AT & T's Universal card billing system, and those are all very good billing systems, but it's very different from what you need as a communications company. And even though we have access to Universal card very directly, it so far is not part of the mainstream of our plan.

So, I think it may well be time for the commission to reexamine this, as MCI has requested in its petition as to casual calling use, and see if some rules are necessary to protect competition in this arena.

MR. MULETA: Well, with this preview for the discussion about the processes to follow in Panel 2, I would like to thank all the panelists for their statements in the discussion. I would like to summarize by saying, there seems to be three things that fall out of this issue. The first is the consumer protection aspects. Are consumers getting what they expect out of the LEC billing system?

The second issue, in my mind is, the competitive aspects of the LEC billing system, how it functions, how the arrangements are developed. And, the last issue is whether or not we need to do something in the future, both from the consumer protection aspects as well as from the business relationship aspects of this.

Again, I would like to thank the panelists. We will take a break until 10:50, since I have eaten up five minutes of your break, and we'll start with Panel 2 at that time.

(Whereupon, a short recess was taken.)

MR. MULETA: I would like to get started with panel two. I know we've eaten into a little bit of our time, but I think everybody needed to make a coffee run. I know there are some smiling and awake faces at this point.

Just a couple of minor points I want to talk about before we get started with panel two. There are two petitions for rule making that have been filed, of which the transcripts from here will be included as part of the ex partes in those rule additions. The first one is the ACTA petition for rule making, which is docket number ENF 97-05. The reply comment date closed on June 9. The comments here, again, will be treated as ex parte.

The second petition is MCI's petition for rule making, which the public notice should be going out very soon, in the next few days, hopefully tomorrow. Comment date is on July 25, and again, the comments that we elicit from the public, as well as from the panelists, will be included in that docket as well. I don't have a docket number for that, but the number is 9108. If you have any questions about either of these rule makings, please contact Darius Withers in the Enforcement Division. The number is 418-0960.

I would like to first thank the panelists that are appearing in Panel 2. Obviously, you have heard from the questioning, two tenacious defenders of the public interests. Charlie Donaldson, Assistant Attorney General for the state of New York in the first seat here. Mr. Alan Taylor from the Florida Public Services Commission in the third seat to my right. We also have two people from industry, Michael Polandick with MCI Communications, who is also a passioned defender of MCI's interest.


And also, we have from GTE, coming all the way from Irving, home of the Dallas Cowboys, would be Christine Van Skyhock.

MS. VAN SKYHOCK: Go Cowboys.

MR. MULETA: I had to plug that in as part of --

MR. DONALDSON: Go Redskins.

MR. MULETA: Charlie likes the Redskins, even though he is from Alabama and lives in New York.

It will be an interesting mix, and what we're talking about today, on this panel, is talking about some of the technical under pinnings of the LEC billing system, what it takes to make things happen, and also talk about what additional measures might be taken to enhance the integrity of these systems.

What I will do is, I will again turn it over to the panelists so that they can provide a few comments, ask questions as a moderator later on, and then open it up to the public.

So, first, Charlie. Thank you.

MR. DONALDSON: Thank you. If I understand what our task here is, we are supposed to talk about the accuracy of the billing process. Now like a good Baptist preacher, I'll take the word accuracy as a text, and then I will say whatever it is I want to say, and we'll somehow move it back around the word accuracy at the end.


But first, I want to give you the standard disclosure about who my office is and what we're up to. We are law enforcement, we are not regulators, and we are not telecommunication service providers. That means a couple of things. First, all we see is the problems. The company doesn't have any trouble -- and there's 500 some odd resellers licensed to operate in New York -- we don't get complaints about those folks, we get complaints about maybe a dozen.

When the complaint comes in, what we are seeing is the pathology, and not the help. That gives a somewhat jaundiced view of the entire industry, so some of you all may get, how shall we say, a look of suspicion or distrust whenever you're dealing with someone like a state AG's office. Hey, that's just how we are. Nothing personal, just business.

In terms of billing accuracy, I actually want to talk about four aspects of it. Let me run through them. They are going to be somewhat cryptic, and perhaps theological, but there is a reality behind it. The first question I have about bill accuracy, is there a physical event behind the charge? Was there an actual call made? Did something go on? Did somebody agree to accept a collect call? Did somebody agree to sign up for a voice mail service?

The second question I am going to have is, does the charge on the bill accurately reflect the physical event? Did somebody agree to pay for whatever they're being billed for? That's more of a problem with the sort of monthly service charges or access charges or whatever that we frequently see, than it is when there is an actual telecommunications event.

The third question I've got is, does the bill accurately reflect what the caller expected to get? Somebody, let's say, is being telemarketed for a discount calling card, and the next thing you know they have been signed up for voice mail. At least that is what the bill seems to say.

The fourth question about accuracy is, does the bill provide the essential information that the consumer really needs? This really is a continuation of my earlier question. Can you tell from the bill who is a real party in interest?

Let's go back to the first two points, and without identifying the long distance carrier, I want to tell you what happened. We got some bills from consumers saying, we're being charged several hundred dollars for a couple of dozen adult content calls. What we did then was, we issued subpoenas, we got the records from the information provider, who they were actually leasing their 900 number from, went to the facility based carrier, and said, okay, for these particular days and for that particular 900 number, we want your call detail.

What we got, when we put the two sets of documents side by side, was very interesting. The carrier showed that on the particular date, there were 27 calls originating from the consumer's number to the given 900 number. The consumer was billed for three. However, for the three calls the consumer was billed, there was no corresponding event in the underlying carrier's detail.

Let's say that the consumer was billed for a four minute call beginning at 11:01 a.m., on the date in question. You look at the underlying carrier's call detail, nothing happened in that hour. There was a call at 10:48. There was one at 1:15, but nothing occurred at 11:01. From that, I have been eternally suspicious as to any bill, as to whether or not it actually reflects reality. Was there an actual, physical event? Was there a call actually placed at the time that shows up on the bill?

Frankly, I have never had the time or the energy to follow up on that. I may be doing that shortly. I hope this is an isolated incident, because if it is not, then it calls into question the entire integrity of the billing process.

Does the charge reflect accurately what the consumer expected? Somebody calls you up and says, hi, how would you like to get a credit card? I use the term credit card, not calling card. And what you are going to be able to do, is we're not going to charge you anything for the credit card, and you're going to be able to order stuff from us, and maybe they're marketing folks that have had bad credit in the past.

The next thing they know, they've gotten a phone bill which says, messaging service, voice mail, or something like that. They also get in the mail a package of cents off coupons for grocery products, and they also get this catalogue saying, this is Happy Joe's discount house, and if you'll pay in front, we'll sell you this schlock merchandise. That's got nothing to do with the telemarketing event.

It is a very common complaint. And this winds up being billed to a telephone bill. I've got some real problems with that, and the phone bill says voice mail or personal service, or whatever, and clearly the consumer was marketed for one service, and they got something that they were not expecting.

Finally, does the bill provide the information the consumer needs to deal with the real party in interest? And I would submit to you, that the bills in New York, do not. Because frequently, all you are going to get is the billing aggregator's name. Actually, NYNEX does this pretty well, because they generally put the sort of incidental billing on a totally separate page. It's not buried in there with somebody else's charges.

So up at the top it will say, I'm not going to say OAN, but we see those from time to time, and then there would be -- I didn't say OAN. Okay, I'll say XYZ, right. There's a bunch of other out there, but I'm not going to pick on OAN. Then later on it will say, there should be a line that says, billed on behalf of, and you get some of the most god awful gobbledy gook in there you have ever seen.

Sometimes it's all zeros. Sometimes it's a bunch of letters which are totally unintelligible, and other times it's code numbers and in many instances, those code number are actually the identifiers for the billing aggregator. I see some heads shaking, I can show them to you. But, the typical round for the consumer is, I've got this bill in front of me. There are people out there that are perfectly capable of dealing with this on their own.

Again, the complaints we see are biased. We get the folks who don't know how to handle the system, who really don't understand that there's a difference between their local telephone company and long distance provider. And then you've got this host of other folks that provide telecommunication services. The standard question I get at least once a week is, why did the FCC break up Ma Bell?


It was so much better when I only had one company to deal with. Obviously, this reflects a great deal of misunderstanding on the part of the consumer, but that questions's still out there. Here we are, more than 10 years since 1984. But given all of these problems, again, I'm pointing out the problems, I think the system is going to have to be reformed. If nothing else, we need to have the identification of the real party in interest, so a consumer can go directly from the bill in front of him to the folks they really have to yell at to deal with the problem.

Among other things, I would like to see that identified in such a way that the folks can write them, because typically people will make a phone call, they'll get a person and the person will refuse to provide an address the consumer can write, or you get nothing but an answering machine and they may or may not call you back. It's really quite a wild goose chase in terms of the people we have to deal with.

Let me say one thing for the industry as a whole. On slamming, which is something we're all familiar with, and it has some billing aspects as well, such as the so called switch list resellers, which all of us are familiar with. We took a look at the slamming complaints against the major carriers, and what we're seeing is that, based on customer base in New York, you're looking at complaint rates that are less than a hundredth of one percent per unit time.

So, somebody out there is clearly doing their homework. No system is perfect, unlike our Public Service Commission, we don't expect the telephone company to have no slams. But then you look at some other folks out there, and you're talking about complaint rates of one, two, three, four percent of customer base. That tells you two things. There is a big difference between the facility based or the carriers in the major resellers, and the guys who are causing most of the trouble.

Actually, I lost my second point. Accuracy. We're for it.


MR. MULETA: Charlie, if anybody wants Charlie's card, you can get them a little later on, or he can give you a call. The second person would be Michael Polandick from MCI.

MR. POLANDICK: I'm glad to see that everybody's turned out for such an enormously exciting topic today, and keeping up with my track record with John, I will try to keep this as passionate as I possibly can, and also keeping with the track record, I will continue on the crusade for freedom for the preservation of casual billing. And of course, in this, I will have no self serving interest whatsoever.


A couple of things, and I had a more formal presentation put together, but as expected, we've covered a lot of ground already, and what I would prefer to do here is maybe touch on a couple of points and hone in on some things that have already been mentioned. The one that I think maybe needs to be brought to light a little bit more is that when we talk about this casual billing and LEC billing, I think a lot of people aren't real familiar with there are some distinctions within it that are kind of important to understand as we talk about the importance to the consumer environment.

There is a lot of this that is used for a subscribed customer, where a person is actually signing up for service with an interexchange carrier or another service provider, but there is also the non-subscribers and the things that Ron mentioned earlier in regards to collect calling kind of comes into play with this. Some of the other things that were discussed regarding tentracal LEC services comes into this, where people are collecting on a call by call basis, who do they use for service?

Just to go through a couple of statistics and some anecdotal information about how consumers view this, as you know, within this industry, the 80 billion dollars or so of long distance generated on an annual basis, eight to ten billion dollars of that currently makes up what we refer to as these non-subscribed calls. They aren't as incidental or casual as they may appear. They are a very, very important element of the telecommunications industry, and also within the world of consumers, they serve very important purposes.

If you look at the statistics in some of the stuff we provided to the FCC in our previous meetings, the collect calling without a doubt is used heavily towards the lower income household, and it is a very, very important telecommunication service to those callers.

The other thing that I think a lot of people -- we talked about this a little bit this morning in here, but it is important to bring out is, the tentracal LEC service, while it was barely a notion of an idea a year and a half ago, that industry is now generating over a billion and half dollars of revenue that is not associated with the big three telecommunications providers. It has become a very integral part of this business.

And, if you ask consumers why they do it, and why they use these services, and to a lot of people it may not make much sense, but to a growing number of the population, it makes a lot of sense. These are generally consumers who either can't qualify or for whatever reason, don't like to be put on calling plans. They like the ability to bargain. They like the ability to look at carriers on a call by call basis, and look for the best type of situation for whenever they need to make that telephone call.

So, while it is a small, growing business, orders of magnitude rise if you look at the growth rates. It is, without a doubt, for consumer voice services in this industry, probably the fastest growing segment of the industry.

As we also touched on, let's talk a little bit about what the world would look like without this casual calling, so as we need to keep balance, we obviously need to control abuses that may exist within the industry, and we have to keep it preserved and clean and fair to the consumer. We also have to keep balance that if these services were to go away, we could be talking about the true demise of collect calling.

And if you take some of the comments that Ron mentioned, that as casual billing goes away like it did in Rochester, New York, where certain LECs were no longer providing that service, what you were seeing was a breakdown in fundamental universal services like collect calling, where these services -- the carriers were being faced with either, I have to block these services to these terminating customers because I have no way of collecting them money from them, or I have to go without collecting, which usually means the rates are going to get raised on all the paying customers.

So, if Rochester Telephone is any kind of a snapshot of what the world could look like without casual billing, it would certainly be a good case study.

The other thing that you have here is, as this whole tentracal LECs area continues to grow, if you take away, as some of the panel members talked about earlier this morning -- without casual billing, a substantial part of the tentracal LEC business would just go away. So, that's a billion and a half dollars that pretty near overnight could begin to evaporate from this industry. And with that, consumer's choices actually begin to diminish.

In one fell swoop, you can take out 19 to 20 multi-hundred million dollar carriers, because they would not be able to face the substantial cost increases associated with having to find an alternative to the casual bill.

So, as we look at this, and to the topic at hand of our panel, what can we do from a quality standpoint? The abuse issue or the wrongdoings of some carriers, we can talk to towards the end of this, but I want to talk for just a few minutes. I think a couple of things need to be brought to light. When you look at the quality and the accuracy of casual billing, sometimes the bill is the last place where you should look for causes to quality issues. What you will generally find, quite frequently, is the bill is just the end result. The actual problem that occurred, occurred far upstream from when the bill was generated.

If you look at this, when you talk to consumers, there are some things that can help highlight you to these upstream problems. When they talk about things like they deny all knowledge of the telephone call happening, there is probably a small percent of the population that are into what we call in the industry, the gaming process, where they want their credits and that kind of thing, but that's usually the smallest part of the people out there that are making theses statements.

What you really start to find is, what are these deny all knowledge calls? It's either one of two things. Either the person doesn't understand what it is that they're being charged for, and we can talk about that when we get into the billing pages, but what it also is from our own research has found is that an enormous amount of telephone calls in this industry are the casual type of calls that are actually being mislabeled by the LECs themselves, in the interaction that goes on with the IXCs.

To articulate this a little bit further, and I'm going to get into a little bit of the technical layer here for just a second. I'll try to keep it as simple as I can. All billing in the industry, when you have this exchange going on back and forth between the local exchange carriers and the long distance providers, do offer these things called CICs or carrier ID codes. It's a little message in there, a three digit identifier, that says when this call is transporting through the local exchange network, whose network should it go to?

A lot of people think of it as 10 XXX where somebody has to actually dial those CIC codes to access the network, but believe it or not, those CIC codes also come into play on regular dial one calls. The consumer isn't actually dialing a 10 XXX number, but that CIC is still in the call record. From MCI's research, what we have found over the last nine months from the provisioning of services through the local exchange carrier is, that in the provisioning process, 19 percent of the traffic that is sent to MCI's network during the completion of the provisioning process, for about 60 days basically, until problems at the local exchange can be worked out, is that these calls are not even MCI's telephone calls coming into the network.

The carrier identification field on the call is being improperly loaded in the routing table, and when the call comes to the long distance carrier, it doesn't even belong to them. Now, what complicates the issue is, there is no field when the carrier does get the call, the carrier has to assume that it's theirs, because there's nothing in the call record. That carrier ID stops at the TELCO, and it doesn't get into the long distance network.

So, what you have is a lot of charges floating around this industry that, indeed, it can be a real telephone call that a consumer made, but it may not be the carrier that it so shows on the bill. You have this during the provisioning process, but you also have it downstream later, where it tends to trickle down as these problems get resolved in the provisioning process. But going forward, if you take any set of features for B trunks around the United States and do a survey of them, what you'll usually find is about one to two percent of the calls every month -- which, by the way, effects about three million consumers -- actually may not be calls truly designated for that carrier's network.

This is something that, obviously focused on that kind of a quality issue, can go a long way. You'll see this in these denies all knowledge. There is very definite tie to this type of quality management in the provisioning process with the billing aspect of this.

We have to keep this accurate and reliable because what we don't want to happen, I think by and large while we are dealing with some of these complaints and issues that are occurring, consumers still view telephone company billing from the local exchange providers, relatively clean and accurate and a convenient way to have services billed. But what we have to realize is, is what is also happening in this industry -- and this is where the industry has to step up to the plate, so to speak -- LEC billing has not kept up with the industry. It's very tired, it's old. If you look at it, a lot of the ways that this is done hasn't changed since the time of the vesture.

Meanwhile, you have hundreds of new services that are being offered out there, and more calling plans than anybody can count, and more types of ways the consumer can do business with the telephone company. But the billing system itself hasn't kept up. This is traditional with what you usually find in an anti-competitive environment.

Now, the Reform Act, as we know, is all about opening up the local exchange, and what we believe is, over time as the exchange opens up, so goes billing with that. Companies will be providing more flexible, better ways of providing billing to a consumer, which hopefully will help to drive down some of these complaints. In the window of time, as the exchange opens and as choices become available to local exchange providers, we have to also realize that in this new environment, where everybody's competing with everybody, the local exchange providers have to be managed not to their own devices, but to the industry devices.

And, we have this window that we have to deal with, where possibly regulation may be necessary to balance when free competition does open up in the local exchange, and making sure that they don't use billing in anti-competitive ways in the short run or in the way that they manage their clients.

In closing, what I would like to say is that as we go through this today, and as it sometimes looks like a cloak of darkness on some of these issues, try to keep in mind the incredible importance this has to the consumer arena of this industry. While we want to correct the problems, we have to make sure that the ability to do this casual billing on one local exchange bill stays in place.

Thanks, John.

MR. MULETA: Thank you, Michael.

Just to let Michael cool down, we'll have Alan Taylor, before Christine comes on.

MR. TAYLOR: Thank you John and bob for the opportunity to be here. Those of you in the audience, I appreciate their problem of knowing where to put me, since I will probably say what I'm going to say anyway, regardless of what panel I'm on.

First of all, let me say that my views are not necessarily those of the Florida Public Service Commission. In saying that, I want to go through the traditional dance that regulators always dow with industry, and that is, I will say I'm here to help you and Florida will say, we're glad to see you.

Then after those lies are put aside, let me just say that I do want to ask for the industry's help, and I do want to ask for the regulator's help. My concern is the integrity of the LEC billing system, especially the way third party billing occurs on the LEC billing system. I believe that regulators and the industry have failed to protect consumers.

Now, I know that it's been pointed out that many people are no doubt enjoying many innovative services, and they are very happy with them. But I have to tell you, from the complaints I look at, that many people are enjoying tremendous levels of frustration with their telephone bills and with the problems that come into their homes through their telephone bill, that they have no idea were going to happen to them.

How can all this happen? Well, I think one problem is -- there's no easy way to say it -- I think the LEC billing system is more open to fraud than any billing system in the world. Harsh words, but what other billing system regularly publishes the majority of its account numbers along with names and addresses? What other billing system will bill charges from around the world based on only a ten digit number and cut off your service if you don't pay for calls to Guyana, even if you don't know anything about it? What other system prohibits certain types of bills, but can't recognize when EMI records are masked to avoid those prohibitions?

I think there are problems there, and I'm not the only one that suggests that there are problems. I hope what all this means is that there will be a concerted effort to fix some of the problems, and that's why I want to ask for your help.

I want to just point out, in your handout, it's not an example that I provided, but it does mirror in some respects some of the bills I've seen. I believe it is number three, that purports to show a directly dialed call for teleconferencing services. This bill resembles very closely a bill that a lady in a nursing home in Florida had on her phone bill. Her phone was put in for the sole purpose of her son to be able to call her, but this lady was billed for some six or seven hundred dollars in teleconference calls to a 700 number. It is reflected on the bill as if they were direct dialed, and this particular lady, in the example I'm using, was not physically able to even hold on the line that long.

In our investigation, we found that A, the calls weren't really direct dialed, and B, that actually they were calling card calls, or allegedly calling card calls. I want to point out that calls such as these, there's no way that I know of that a consumer can block access to the 700 code without blocking access to all toll calls. I think that the dialing blocks that we're offering to subscribers today are inadequate in this environment.

Obviously, I think anybody that believes all information services are provided over the 900 service access code, they haven't been looking at the complaints I've been seeing, and so we have to recognize that all service access codes are used for what might be viewed as unregulated charges. We have to recognize that information providers may have other reasons for classifying those calls as regulated code. One benefit of doing that is that it improves their collection efficiency as opposed to showing it to some other service or to the 900 code -- well, I guess they have pretty good collection efficiency if they have the 900 number -- but that brings to mind the incident that I've discovered that you might be interested in.

That is, a subscriber who was billed for 900 calls. The problem is that the subscriber had 900 blocking from the LEC. So, I went to the LEC and said, was your block broke? No, it was working, it was effective. So, I went to the underlying carrier, who happened to be MCI. Where's this call in your records? We have no record of this call. Even though the 900 number is on the bill, MCI had no record of transporting that call. It didn't stop the bill from coming in, even though the subscriber had 900 blocking.

So, I think there are problems. I think work needs to be done. I ask for your help in getting the work done. And in saying that I was here to help, I want to put forth some proposals. One matter that John didn't bring up is Florida's petition to the FCC to adopt some additional safeguards. I believe action on that is still pending. What we propose should be looked at is a billing block option. I know that, for instance, the information industry is working to put together a database of non-payers.

And so to the information industry, I as that if you're going to do that, you also make provisions for consumers to opt out. If someone complains to me that they don't want your services, I want to be able to call you and ask you to put them on the list that members of your industry will access and know not to bill unauthorized services to those subscribers.

To the local exchange companies, I guess I'm thinking about, what would you do if your children, for instance, could look in the phone book and see the first ten digits of your Master Card number, and call any service in the world and just use those ten digits and order whatever they want, and you'd be billed for it? You would probably be very alarmed, but I think that is happening with the phone bills. I would like to make the point that I don't think that anyone -- children, or otherwise, and hotels have the right to obligate the telephone subscriber for teleconferencing or messages services and so forth.

Since we can't block all of the service access codes that are going to be used to access these types of services, I don't understand why the LECs could not have a LEC billing block option for their subscribers. As I would envision it, it would be the ability of a subscriber such as myself to call the local telephone company and say, I enjoy your bill each month, but I only want to be billed by you and I don't want any other charges on my bill. Why shouldn't I have the right to do that?

Where can information about this block be maintained so that in all fairness, information providers have access to it? Well, it could be in the LIDB system. Information providers can be on notice, and if they have to obtain authorization for charges to these particular numbers. How could they do that? They would have to get the LEC specific pin number, along with, when they accept the calls -- and the EMI format, I suppose, would have to be amended to let the additional pin number flow through the message system -- that would serve as basically the necessary authorization of calls.

But, absent that primary pin number that you would obtain only from your local telephone company, the bill record would be stopped by the LEC. I don't see why that wouldn't work. I don't see why that's not fair. I would urge LECs to consider this in light of the abuses that we are seeing.

I don't know of any rule that requires people to pay for these information type calls or other services outside of toll calls. As a regulator, I realize that years ago we said the system would work best if everyone was obligated to pay no matter who made the call from the phone number, but that's about regulated charges.

Another problem that we're seeing, that we don't know what to do with, is the international toll charges, the offshore environment. In thinking about this, obviously the carriers involved have probably many considerations for why they go offshore. Maybe they really are getting access from England and China as well as the United States, but the idea that much of the information industry is moving offshore is a concern to me, and I begin to think about the tariffs and the purpose for tariffs.

I guess historically, tariffs have protected consumers. But in the offshore environment, I'm not sure tariffs are continuing to protect consumers. I guess I would urge the FCC -- I know you're trying to do away with tariffs for interstate calls, and you didn't get away with that -- but, maybe you could consider doing away with tariffs for international calls, now that the World Convention has agreed to allow competition to occur all over the world. Maybe we need to think about whether tariffs continue to be necessary, particularly those tariffs that, when enforced, result in you getting your service disconnected for nonpayment of something you don't know about.

That does happen. I know a case in Florida that I'm familiar with, a subscriber got a phone bill from

AT & T, and they were very alarmed because the phone calls were allegedly made from their vacation home. They immediately called the police, assuming their home had been broken into, and they drove to their home to meet the police. No sign of forced entry, but nevertheless a police report was filled out. However, AT & T said, the charges came from here and your phone is going to be cut off if you don't pay them.

Now, I know AT & T has forgiven other charges, but in this particular instance, I know that these folks paid several hundred dollars rather than lose their telephone service. The fact that that happens gives me concern. I would ask your consideration in addressing those issues.

Thank you.

MR. MULETA: Thank you very much, Alan.

Christine from GTE.

MS. VAN SKYHOCK: Good morning. I was unaware this conversation was going to be timed. I'm watching this lady over here. She's holding up 10 second cards. I'm hoping you won't have to do that with me. And for those of you who know me from my ordering and billing forum days, you'll know that I love the microphone. So hang in there.

MR. MULETA: Do you want to do the Oprah thing?

MS. VAN SKYHOCK: I didn't know that was an option. John asked me if I wanted to do the Oprah roving reporter thing.


As John said, I'm Christine Van Skyhock from GTE. I am in the wholesale markets organization, and I am a billing and collections Product Manager. One of the things that I would like you to take away from today's meeting, is the fact that GTE's primary concern is consumer satisfaction. Our billing and collection agreements are such that we require a B and C agreement from anybody who wants to have their charges appear on our bill.

We have approximately 70 B and C contracts today. Most of them are without the service that we all know and love in the industry as inquiry. We won't sign and B and C contract with just anybody. You have to be as dedicated and as committed to customer satisfaction as we are, or we won't sign with you. And you have to be able to prove that.

Our B and C contracts are specific to the type of data that we will, versus what we will not accept for billing. Our contracts literally contain language that will tell you, if you are going to sign a contract with us, what we will not accept from you. Those are as follows. We don't take any message traffic unless it has been authorized and documented in the B and C contract. For example, we have a separate B and C contract document, if you will, if you want to do pay per call traffic. If you want to send us pay per call charges, we require a separate contract for that. If you don't have a pay per call contract with GTE, we'll reject that traffic up front. We don't bill it.

We don't bill 800 pay per call charges. We do not allow traffic into our system where there is a pay per call blocking in effect. If you were trying to circumvent that, we'll catch it. We don't allow any charges that are alternately billed, unless they have been validated through a line information database or a bill verification database. We don't allow any charges for messages whose content is sexually explicit, indecent, obscene or profane, or were otherwise prohibited by whatever applicable law is in place in that state.

There are several safeguards in place, but probably among the most important, and I alluded to the OBF in my opening comment. GTE is an active participant in the ordering and billing forum. We have taken the exchange message interface guidelines and implemented them as our standard. GTE takes part and great pride in participating in the OBF, and in fact, I am at this present time, the exchange carrier co-leader of the Message Processing Committee. It is my committee, and I take personal ownership of that committee -- it's my committee that develops the EMI.

For the records that use text phrases as an example, the EMI-4250 and the 4150, and that's probably a little more technical than you guys need to know about, we require that those text phrases be reviewed and approved before they are submitted to our table building processes. I, as a product manager, have responsibility for approving those text phrases. They don't get past me.

We have system edits in place as well, and again, only the data that we receive from a contracted B and C customer, and then only for the specific charges for which they are contracted, will we accept for billing. We do cross-relational edits, for example on the pay per call, there is a specific record type that's used for pay per call traffic. We cross check the terminating number to the record ID, and if the two don't match, you're out of here. We don't bill it.

I think it's very important for everyone in this room to understand, if you think about LEC billing as a journey, and you're on a train, the bill is the last stop. We can only control what we get. Information that we get. If it is disguised, we have no way of knowing, oftentimes. When we can determine, we reject it. When we cannot, we have no way to know that it's been disguised. We have no choice but to bill it. We're contracted to do so.

It is also important to note, that in the message processing world, the messages are recorded, rated, and translated onto the industry standard records, and when we get those records, we bill them. Again, we're dependent upon the data that we receive from our customers, and unfortunately, whether we like to admit it or not, there are some unscrupulous customers out there, who will send us 900 pay per call that's disguised as something else. An 800 pay per call that's disguised as something else. We heard several instances of it earlier today, I don't probably need to go into any more detail on that.

Within our contracts, GTE is getting very tough. As I have already mentioned, we're very dedicated to consumer satisfaction, and that is and will continue to be our primary objective. The consumer is not only GTE's customer, but that of our B and C partners as well, and we take that partnership very seriously.

In our initiative toward customer satisfaction, GTE, as I said, is taking a much more aggressive approach. We have modified our B and C contract language to incorporate an excessive complaint surcharge. All customer complaints that are escalated, to whomever, FCC, Better Business Bureau, Attorney General, State PUC, or our action line, we investigate every single one of those. Where necessary, we get our security department involved, and you would be surprised. I could tell you tales that would curl your hair or turn it white, whichever the case is.

If these complaints are found to be excessive, and excessive is defined as an expanded number based upon the number of bills that you actually render through GTE, then we contact that customer and we make them aware of the issue. We give them time to resolve it. If the problem continues, we assess a surcharge amount to that B and C customer, and if the problem continues beyond that, we terminate that contract.

If, during our investigation, we find that the

B and C customer is already in breach of their contract, we terminate their contract right away. All new B and C contracts contain the language that I just told you about, and we are not renewing any pre-existing contracts unless the new language is there.

GTE has asked most of our current B and C customers to sign a modified contract in order to allow us to incorporate the excessive complaint surcharge language. Of those customers that we've asked, most of them have been ready to sign right up. They belly up to the bar and say yes, GTE, we're glad you're doing this. We want to be your partner. We're in the business together and we're here for the long haul.

There are some, unfortunately, who don't appear to be as dedicated to customer satisfaction as GTE, and they've said they will not sign a new contract. We are in the process of reviewing those contracts and where we can, where we are legally allowed to do so, we are in the process of terminating those contracts.

Unfortunately, for GTE and the industry, there is also a group of B and C customers that we did not ask to sign revised contracts, and that is because during our investigation, again with our legal department and our security department, we found that they are already in breach of contract. As I said, we are terminating those contracts.

No time card. I'm doing well. In closing, what I would like to leave you with, the word is out. If you want to business with GTE, either you are as dedicated and as committed to consumer satisfaction as we are, and if you're not, if you are not willing to sign on the dotted line, and sign up for the same type of customer service that we take on ourselves -- even if you're doing your own inquiry -- you have to agree to say, these are the standards and I agree to abide by them. If you are not willing to do that, we would really prefer that you look for a billing services vendor elsewhere.

Thank you.

MR. MULETA: Thank you, Christine.

This panel is very active and exciting and we're thankful that they are here. We have heard all of the perspectives. Charlie has told us what he sees from the complaints that he sees. He has told us that he deals with problems, and I don't think you get letters saying the carriers have done well.

MR. DONALDSON: Not one in 13 years.

MR. MULETA: Not one in 13 years, so that give you a perspective. Michael has told us a little bit about the problems that they face, MCI faces as a carrier, when the information is transmitted and where the problems might lie. Alan has told us from the public services point of view what issues he sees, and some solutions have been offered. And Christine has told us, from the LECs perspective, what actions can abe taken or are being taken right now.

I guess before we get on to the next stage of this discussion, I would like to put on a chart that we developed based on our round tables, that tries to explain what the relationships look like. That would be Chart B, which shows sort of a data flow of what happens during billing transactions. It's part of the handout package.

What we've done is, we have oversimplified what is undeniably a very complex industry. We appreciate all the LECs and billing companies that have helped us sort of simply this picture. Essentially, there are two planes on which billing data occurs. One, is what I call the physical level. Something that Charlie was talking about, did the call actually take place? A customer initiates a call, it goes to the central office, it goes to the POP, the ISC, or the IXE, whoever is providing the service, or it could also be the LEC itself. It goes into the terminating switch and back up to an end user.

On the lower plane is where the data and contractual arrangements exist based on our understanding, and we have several steps. If you have a billing arrangement or if you don't, that triggers a set of things to take place, and essentially you exchange data based on what you've collected in the physical plane. Then you send it out on a bill. This is an oversimplification, but I think it points out, as we look to the next page, which would be Chart C, there are four points at which all of these relationships come to the fore and where a lot of the billing integrity arise.

I am going to take it even out of the context of LECs, but as well as just any billing system, where you originate the information, where you collect it, and then where you bill it. And that is what the folks here have talked to us about, and I guess I would just like to open this up by saying, of all these issues that have been raised, is there a systematic way -- and I'll as Michael this -- is there a systematic way that we can insure that the data integrity of this data flow that takes place -- you raised it as an issue with casual calling. If you can answer the broader question of how we can do it for other types of calls, I would appreciate that.

MR. POLANDICK: Yes, I definitely think there are ways that the process can be improved. Obviously, as an industry, you have to live sort of within the capital expectations of the industry, and some of this stuff can economically be developed. Others may be more longer term. In the data processing world, there is a term that is generally referred to as closed loop systems, which is something that is very heavily used in the banking industry. When transactions occur, particularly between parties, that there are closed loops in the process that help to kick out things that might be a problem.

Things that start to go towards that means in this industry, which MCI is making a lot of noise about, in our contract negotiations with local exchange carriers, is that there is -- and they call it a new technology, it's really more of just an insertion of some characters in a message field -- this thing called CIP. This is where, when a call is sent to a long distance carrier's network, the actual CIC code that I talked about earlier is actually inserted in the call. It begins to create an audit trail through the network, so that you can quickly see whatever the dial digits were, so to speak, that the consumer dialed, like a 10 XX number. Even if they didn't dial the number, when the local exchange carrier decides to designate that call to a certain carrier, the CIP would actually keep that message stable through the calls that went through the networks.

This way, everybody can kind of see where the call was truly destined to. Today, the problem is, because it's not in there, the carrier's network gets a call they think is theirs, they don't know any different. So, that's an example of closing a loop off, where you can start to audit, if you will.

Another one, on the back end, has to do with the accounts receivable process that these contractual agreements between companies exist today. Again, they are old and tired systems that weren't really designed for what I will call electronic commerce between companies, as much as they were spinoffs of billing systems that were designed for themselves and have now been cloned to sell to other companies.

What happens in this is, while you get good accounts receivable from a standpoint of the two companies doing business together, the granularity at the consumer level is not always there. You have problems that result that aren't even intentional between the local exchange carrier or the long distance carrier, where you are getting the issues like when you have to apply credits to a call, it sometimes becomes very difficult from the information that you get from a local exchange carrier to know whether they've already credited it or not.

Sometimes the poor consumer gets caught in the continuous loop of where, everybody really wants to solve the problem, but the data changing hands doesn't necessarily give a clean cut way of doing that. Again, closing the loop on when a customer service call happens at the local exchange carrier, they applied the credit. While the carrier sees all those credits being applied, they don't always know all the reasons in where and why certain things are happening. The best way to isolate and troubleshoot is always, just show me where the problems are and I'll fix them kind of thing. It gets difficult.

MR. MULETA: And not really speaking for GTE, but if you could speak from the OBF perspective about some of the ideas that have been presented, for example the CIP code. What do you think, Christine?

MS. VAN SKYHOCK: I think it's a great idea. I do believe, one of the issues that we've been toying with is expanding the base EMI record -- don't you guys get up and shoot me. That issue has been around for quite some time. Our casual records are currently 175 bytes long, and we are using just about every doggone one of them.

The impact of, what my colleague from MCI is talking about, is quite large. The financial impact is quite large, in that we would need to regen our systems in order to accept an expanded record. There is no space in the record today to communicate that information, unless you are using modules. And, the modules, unfortunately, GTE is loving them, but not everybody is able to accept them or process them.

So, we would need new blood, literally, in the industry.

MR. MULETA: So, I know Michael has been saying things like it's an old and tired system. How old is this system? Pretty old?

MS. VAN SKYHOCK: CBSS is a customer billing services system, and no, it's not old. We believe that it is a state of the art billing system, and we can turn around requirements in a relatively short period of time. It's not just the billing system. You have to remember that there is recording that happens. There's switches involved. There is transmission involved. Billing, again, is the last stop on the train.

MR. MULETA: Right. But a lot of these changes, I guess, is a networking of a different set of systems to generate the record.

MS. VAN SKYHOCK: Absolutely.

MR. MULETA: And we need to rethink how all of these pieces fit to get a better information so that we can have better transactions.

MS. VAN SKYHOCK: Absolutely.

MR. MULETA: Charlie?

MR. DONALDSON: One observation that we've had is that the billing stream and the telecommunications stream are not necessarily connected. And the classic example is the switch to a reseller. When somebody has said, hey, I don't want to get switched away from AT & T, and they put a freeze in, but some switch reseller comes along which is reselling AT & T service, and all of a sudden, the person is being billed by some phone company they've never heard of.

They come in through the physical system. They do the checks and call the 700 number, and it says he is assigned to AT & T, and physically the calls are by AT & T, but somewhere in the accounting system, the call detail is being transferred over tot the reseller, and the reseller is using AT & T generated data or maybe they are enhancing that data to generate the bill. And, you have things going on the parallel, and if the industry folks can tell me how you can match those up --

MR. MULETA: Well, I think we are actually talking about something we really can't represent on a two dimensional world, but another issue that you are bring up, which is temporal separation, I don't know if anybody can talk about this, but the length of time it takes for a bill to process through the system -- Michael or Christine, do you have any idea about the time it takes?

MR. POLANDICK: For casual traffic --

MR. MULETA: If you could speak into the microphone.

MR. POLANDICK: For casual traffic, it has a lot to do with the embedded carrier and the local exchange sometimes being on different billing cycles. You can be fortunate enough to actually get a call billed within three or four days of when the call was actually made, but if you happen to be on the outside bookends of both parties' billing cycles, 60 to 80 days or more sometimes happens, not because anything is working incorrectly, but because the cycles aren't synched up.

MS. VAN SKYHOCK: I agree. I am hoping that it doesn't take 60 or 80 days, but 45 is outside the norm in a non-invoice billing environment. Where traffic is coming to us, the interexchange carrier sends it to us, and they don't know when that end user bills. They send it to us, we house it in our system, waiting for the bill cycle to pull.

MR. MULETA: To pull?


MR. MULETA: So we're talking about the total cycle from call to receiving a payment could be anywhere to around 90 days or something like that?

MS. VAN SKYHOCK: I wouldn't think that is outside the norm.

MR. POLANDICK: The general rule of thumb, most of the LECs and the carriers live by, is that after about 90 days, if it hasn't happened by that point, there are system checks that do audits and drop those records.

MR. MULETA: So there is a physical plane, sort of a data plane and then there is a temporal plane that we're dealing with. I think, I guess, the discussion is generally trying to focus in where the loopholes are where things could happen.

MR. DONALDSON: Can I make a comment on that?

MR. MULETA: Yes, please.

MR. DONALDSON: We frequently see on the temporal issue, that the problem companies will take a great deal longer than 60 or 90 days to get the bills in. We sometimes see them six months after the alleged event. Part of that is because the call detail has been taken from the physical carrier, and God knows where it's been. It's been sent off to some service to do the rating, or maybe the company is simply keeping all of its bills together so they can send them out in one flood, collect whatever they can, and before the complaints get to us, then they have departed to the Cayman Islands.

Again, we're dealing with a pathology here.

MR. MULETA: That explains all those calls to the Cayman Islands.


We finally figured that one out.

MR. DONALDSON: You all keep talking about the healthy part of the body, and I keep focusing on the sick part, but it's the same body.

MR. MULETA: Well, I guess one thing we want to make clear is, the system works and it is important. What we're trying to do is figure out ways we can make it better, and it's not a condemnation of any particular person or party. For example, one question I want to ask is, what actually happens when an IXC -- when you develop a record, based on the switch records, and then you essentially, what do you do, rate it yourself? Or is it rated at the LEC?

MS. VAN SKYHOCK: It's a contractual issue.

MR. MULETA: It's a contractual issue as to who rates the calls. And once that happens it's put on essentially a magnetic tape and that's how it's delivered. When you say you're warehousing it, that means --

MS. VAN SKYHOCK: It can be magnetic tape, it can also be direct transmission into my system.

MR. MULETA: Electronic interchange of information. The reason I'm doing this, it is a complex set of relationship that differ, there are no set standards in terms of the relationship. They're all contractually set issues.

Alan, do you have any thoughts on what you would do at the state level to close some of these gaps?

MR. TAYLOR: Well basically, I suppose there's no one here to answer who gathers the information for the information provider. I think that in many cases the underlying carrier might provide that, but in many cases the information provider develops that information independently. I suppose they have the ability, through service bureaus and others, to create an EMI format, and that's how some of these come through.

Again, I know that it's been my experience that we don't have much problem with MCI's bills or with GTE's bills or with AT & T's bills, except in the international environment, but we do have problems with some of the other aggregator bills. That's where most of our problems are. Again, there may be 80 or 90 percent of the industry that's operating without problem, but the only part I know about is that 10 percent that doesn't function properly.

MR. MULETA: Christine, what has been the reaction to -- first of all, let me ask you -- some of the practices, I think, you discussed in terms of setting audits and having a threshold and so on, are somewhat new. What has been the reaction?

MS. VAN SKYHOCK: Depending upon who you are talking to, the customers that have the same dedication as GTE does, they are gung ho. They are as ready to get going on it as we are. Unfortunately, that's the healthy part of the body. Unfortunately, because they are already in compliance, do you see what I'm saying?

The folks that are not in compliance are not happy. We've been threatened with lawsuits, with non-discriminatory actions, and our stand on that is, bring it on, baby. We're ready.


MR. MULETA: Okay. Michael, do you have any thoughts on --


MR. POLANDICK: I have a lot of thoughts. Let me paint a picture here for a second. As you listen to all of this, there's this feeling that consumers are being held hostage to somewhat of an extent. If they don't kind of take it as the way it shows up on this casual bill, then they can't have phone service. The carriers are somewhat held hostage in this thing because there aren't any competitive economic alternatives to the way this casual billing stuff works today.

You have sort of the ultimate distributor who wishes there was a different way to do it, and you have the consumer who wants to keep it on one bill, but there are certain aspects of it and certain things that they don't like about it. So, you're sitting here and you're saying okay, there's ultimately only one set of players that provide this, and they have the unilateral ability to decide what kind of quality levels, how much should they charge, what should they do about this. You can see what's happening is, as the industry is trying to grow around it, it's being confined and consumers are getting frustrated about it.

I guess the point I'm trying to make is that until some competitive alternatives arise from this thing, which I do believe will come through the natural growth of opening up the local exchange, there needs to be, aside from the unilateral decision that a local exchange carrier makes on this -- because quite frankly, if they are the one ultimately providing the service, and they're the one that is the go between the consumer and the carrier -- they are the ones held to these quality standards.

But at the same time, some of these providers, there has to be an eye on this stuff essentially.

MR. MULETA: Christine?

MS. VAN SKYHOCK: Thank you. A couple of comments. The problems that GTE is seeing -- why are you chuckling down there?

MR. DONALDSON: I'm just watching --

MS. VAN SKYHOCK: We'll go there later. One of the problems that GTE is seeing, and quite frankly it is not with MCI, or any of the items that MCI is billing -- we are not really seeing a problem in the complaint thresholds, if you will, with the escalation of complaints from customers for whom we're doing their inquiry. It is the customers doing their own inquiry that we're having a problem with.

You had mentioned the words, and I hope I captured them correctly, the unilateral ability to set quality levels. I disagree. The quality levels that GTE is imposing upon our B and C customers that do their own inquiry, are the exact same levels that are imposed upon us by the state PUCs. We are not asking for anything more than we are being asked of.

MR. MULETA: Charlie?

MR. DONALDSON: I'd like to make a comment that is not directly following what the last two folks have said. And that is, I don't think we should take any comfort in the current level of complaints. It is hard to get a handle on it, but the best data I have so far, not that -- they did some slamming in New York, and they slammed about 48,000 customers in about six months -- so far as we know, every single customer they had was a slam. We found no instance where any customer had legitimately asked for their service.

They apparently just grabbed numbers out of the phone book. We got about 250 complaints, some of which we had to actually go and look for based on the call detail we got out of the LEC. That looks like a complaint rate of less than five percent. Where you have a universe that is totally illegal. We are talking about certain complaint rates, and we're taking care of it, but I don't know whether the problem is really being brought to the regulators and to the companies to the level it should be.

MR. MULETA: One question for the regulators, I would like to ask Charlie or Alan, would a court or commission order, prohibiting an entity from using a billing system, be an effective way of assuring the integrity of the billing system? Essentially, if for some reason, we find a carrier to be -- or you find a carrier to be acting in a manner like the 48,000 slams that you talked about -- and if we were to prohibit their use of the LEC billing system for their malfeasants, would that send out an effective message?

I have to caution, this is a question coming from Bob. No, I take ownership, I just want to give credit where it's due.


MR. DONALDSON: The simple answer is yes, it would help a lot, but it's not going to take care of the problem completely. In the particular instance that I gave the data on, Sonic Communications which some folks have heard of, they filed for bankruptcy the day after we sued them, and they were out of business within a matter of two or three months. It was slamming the door after the horse had long since left the stable.

MR. MULETA: I hope that's a pun, slamming the door.



MR. TAYLOR: I certainly don't want to discourage that type of action on the part of the FCC, because I think it is important, but I would have to also point out that the ease with which the information providers that I'm concerned with today, go in and out of business and/or change their names or addresses. This is an industry that literally has no investment. They can operate out of this building today and another building tomorrow.

So, allowing for the fact that up to 45 days elapses between the call and the bill, and perhaps some additional time until the complaint is received, oftentimes 60 to 90 to 120 days have elapsed, and the folks have faded into the landscape by that time.

MR. MULETA: I know that we're getting to 12:15, if you all don't mind I would like to keep this going until about 12:30, so we can have some questions from the public. So with that, I would like to open it up and see if anybody has questions. Any questions?

MS. VAN OVER: I'm sorry, I have a very brief question. You mentioned, GTE, that you're involved in a billing and collections or an ordering and billing forum? Who are the members of the forum? What's the purpose of it? I just don't know anything about it.

MS. VAN SKYHOCK: We would be here all day if I told you each of the members participating. Members, I'm not supposed to use that word. Participants. At the last OBF, my committee only, and keep in mind that there are five committees at the Ordering and Billing Forum, the Message Processing Committee had 93 participants. Some companies, who won't be named -- MCI and AT & T -- tend to send multiples of people, because their interests are so vast and so varied that no one person can care for them all.

All of the major telecommunication companies are represented. Generally, the United States Telecommunications Association is represented, as is the National Exchange Carrier Association. All of the RBOCs attend, most of the independent companies attend. GTE obviously attends. It's an open forum. Anyone in the telecommunications industry is welcome, and I am encouraging you to attend.

MR. TAYLOR: How about folks like us?

MS. VAN SKYHOCK: If you're a member of the telecommunications industry, come on down.

MR. DONALDSON: That meeting is down the hall.


MS. VAN SKYHOCK: I missed something?

MR. DONALDSON: No, no. The point is, state law enforcement, you could almost say we're your partners.

MS. VAN SKYHOCK: I certainly hope so.

MR. MULETA: You'll just have to put the holster outside.

MR. DONALDSON: No, no, the question is does the check clear or not?

MR. MULETA: When people from the audience are asking -- some of the audience members have asked that you identify your name as well as the company that you're representing, just so that they can follow up and ask you questions on your question.

MS. PIEROS: Hi, my name is Joan Pieros from

AT & T, and my question is in regards to the resell environment, particularly pertaining to transport of usage where there are RBOCs and LECs out there who are reselling their services, and because of transport, whether they get those usage records and from CMDS or from daily usage feeds from other companies, and they instead belong to companies standing behind that particular incumbent LEC.

The concern I have here is that what we are experiencing is that those incumbent LECs will not retransport the usage to the appropriate billing company. I have seen impact regarding to the timeliness of that usage record appearing in the customer's bill, and I feel there is a need for some standards to be developed. And I also think the FCC also could certainly lend some support to CLECs out there who want to get these records in a timely manner.

MR. MULETA: Anybody want to comment to that?

MS. VAN SKYHOCK: Yes, I will. You have two really wonderful representatives on my committee, Susan Walsh and Ann Steiner. I would suggest that if you're really feeling that it is an issue, that we need to address that, today speaking as a LEC, one of the reasons that we disdain or refuse to transfer that usage on to the appropriate billing party, is because of our purchase process.

We don't want to be made responsible for purchasing that traffic from you, paying you for it to send it to somebody else where we may never see the revenue. That puts us in an upside down situation monetarily speaking. That's not a good way to run a business. What we will do for you is return that traffic to you with the appropriate bill for standard return code, number 50, and give you the operating company number of the party to whom you should send that traffic for billing. If we know it, and that's a two letter word, but it's really this big.

MS. PIEROS: And just to add further comments to that, you're right. If you know it, and also there is the issue where there are companies out there getting started in that industry who may not have the infrastructure there yet. Then it lends itself to negotiating numerous settlement agreement, numerous B and C agreements, and we all know we would need to have a building such as the one we're sitting in here, housed with negotiators, to support that process. There just isn't the time, especially when we all know we're trying to get to that last stop, as you had mentioned, Christine, to render the bill to the customer.

So, what can be done here that can support a fair and competitive environment?

MS. VAN SKYHOCK: I wish I had an answer. It's an excellent question, and it's certainly a question that is facing our industry today. Today, I sit here in front of you as an exchange carrier. When I walk out that door, I'm an interexchange carrier. None of us is just one anymore. We're all among the all. It is an industry wide issue, and I simply don't have any answers. I would love to participate in an answering session. If it is the OBF or whatever that is, speaking as GTE, we'll belly up to the bar and participate.

MS. PIEROS: Thank you.

MS. VAN SKYHOCK: You're welcome.

MR. MULETA: Any other questions at this time? One question that I have before we go on, is it a standard practice in the industry to sort of audit tapes and things like that that are submitted for billing purposes? Is that something that MCI experiences or is that something that GTE makes use of in its B and C arrangements?

MR. POLANDICK: Certainly, we conduct audits. This kind of ties back to the closed loop issue again, that we send tapes and there is actually a very good exchange between what the local exchange carrier receives from those tapes and what MCI sends. Once the exchange and the acceptance of the receivable, so to speak, has happened, at that point, you kind of have to wait until the back end of the cycle, where you kind of start to see more aggregate type information.

Once the handoff has happened, and the audit has been conducted, from there is where it loses some of its steam.

MR. MULETA: Yes, sir.

MR. DONALDSON: A major problem we keep encountering is tying the aggregate data. You've got X thousands of dollars for one particular information provider being protested by the consumers and getting back to an individual consumer bill. That is a recurring problem, because the aggregate numbers appear to be operating up here, and then we try to get down to the individual customer bill. You have to go through an entirely different system, and they're often quite far removed from each other.

MR. MULETA: Given that it's 12:18, and unless somebody from the audience has a question, I would like to close the second panel. Just to highlight some of the issues that were presented. We exist in the LEC billing world, there are sort of three planes. The data plane, the actual call transmission, the physical plane, and also the timing issues.

Any or one of these areas is prone to breaking down, and if all three break down in some instances, we get large problems that Charlie and Alan have described. There are also competitive issues. Every time we discuss these things, the competitive landscape and the new services landscape are all things that are impacted by this service. I greatly appreciate all the comments and all the great thoughts that our panel provided us, and with that, I would like to close for lunch.

We'll start with the third panel at -- it says 1:30 -- I think that's a sufficient amount of time, so we'll see everybody here at 1:30. Thank you very much.

(Whereupon, at 12:18 p.m., the forum was recessed, to reconvene at 1:30 p.m. this same day, Tuesday, June 24, 1997.)





















1:40 p.m.

MR. SPANGLER: Good afternoon. Even though my boss isn't here, I have given him enough time -- I understand that he's on his way.

Before we start, I just want to point out that we do have a handout. If you haven't received a copy, they are available in the back. It's two more examples of bills that either the panelists or the moderator may refer to during the presentation to give examples.

We're pleased that you are back with us this afternoon. I'm Bob Spangler, the Deputy Chief of the Enforcement Division in the Common Carrier Bureau, and I will be moderating Panel 3. We tried to describe Panel 3 in the news release as addressing in this manner. This panel will address the actions that LECs and government agencies have taken, or should take, to insure that consumers receive bills that clearly describe the services for which they are charged, and their right to dispute the charges and have them removed from the bill.

The panelists will describe other safeguards that now or should exist regarding potentially deceptive or abusive practices. We recognized, as we were setting up these panels, that there is some overlap among all three panels, but especially between Panels 2 and 3, so some of the issues that these panelists may address have been mentioned in Panels 1 and 2, but we are especially interested in seeing and hearing from this group of panelists on their perspective on LEC billing issues.

We are very excited that we have, what we think is a fairly good cross section of the industry and government agencies that are involved in these issues with us. Introducing the panel, first on my right, is Porter Childers, who is known to many people in the industry who have any dealings at all with LEC billing collection. Porter has been with United States Telephone Association since 1985, and among his primary duties, and there are a number, but among those is billing advisory issues and committees, and he has also had the responsibility for convening workshops and forums on billing matters. Before joining USTA, Porter was with the United Telecommunications Company and its affiliates for 18 years.

Next is Adam Cohn. Adam is an attorney with the Federal Trade Commission that we, at the FCC, have worked with in recent years because Adam has been involved in the rule making proceeding that the FTC is conducting in connection with their responsibilities under the 1996 Telecommunications Act. Adam is a graduate of Harvard Law School. He worked for a law firm in Washington for a year before joining the FTC, and his expertise apparently been devolved upon him to be involved in information services and 900 number issues.

Next is Dave Gilles. Dave is here, he is an Assistant Attorney General for the state of Wisconsin. He is a very active member of the National Association of Attorneys General and their telecommunications subcommittee. NAAG, and especially David, have been very active in some of the commission's rule making activities, and they have also followed our enforcement actions, because we have some fairly common interests and we have especially welcomed their participation in our rule making proceedings to give us the perspective of an Attorney General's office which has law enforcement responsibilities that the commission does not. Their perspective is very helpful.

Next is Kim Williams. Kim is no stranger to workshops on billing matters also. She is with Southwestern Bell Telephone Company as Product Manager of Billing and Collections. Kim has been with Southwestern Bell for 11 years. She started out as a Customer Service Representative, and now is responsible for the managements of billing and collection contracts with several of the carriers, including information services and miscellaneous charge billing.

Finally is Lionel Wilson. He is the Assistant General Counsel of the California Public Utilities Commission. Lionel has been with that agency for 25 years, and has worked most of the time, at least recently, in telecommunications related matters, both before the CPUC, directing staff attorneys, and also in FCC matters.

So with that, I think we'll follow the same format that we dealt with this morning. Each of the presenters will make a statement, and it will be followed by some questions generated by the moderator, and then we'll open it up for questions from the floor.

Before we start, I do need to mention, we had indicated this morning that the transcript or the tape of this proceeding would be entered in the file for two rule making proceedings, or one rule making proceeding and a declaratory ruling proceeding, the ones that John mentioned. We are also going to put the tape of this in RM 8783. That is a petition that was filed by the Florida Public Service Commission. Alan Taylor mentioned that this morning. Since some of the issues that are being discussed here touch on that petition, the pleading cycle, which is closed, by the way, we will put this tape in as a ex parte addition to that file.

With that, we proceed, from Porter.

MR. CHILDERS: Thank you, Bob.

As Bob mentioned, most of my work dealing with federal regulation is dealing with universal service and accounting and cost allocation, and sundry regulatory issues like that. My activities in USTA are associated with our annual billing forum, our annual billing conference, and sometimes we have some adjunct conferences. So, as this panel talks about safeguards, I thought the best thing for me to use to tee this up was to talk about our annual billing conference, our membership, and the size of our membership.

But before I get into it, if you still have the first handout from this morning, with a chart labeled number one, and this goes back to my experience working for the United Telephone System in the business office. I am looking at this, and in my opinion, no matter how this bill was characterized, the problem I see here, and is totally from experience -- I go down to the toll calls, and it looks to me like it was made on January 8. I go up to the billing period, and it's March 28 through April 27, so irregardless of how this is displayed or presented to the customer, based on my experience in the business office, we're looking at something that is probably 90 to 120 days old.

Generally, you would get a question on all of those. So, not only is how the bill laid out sometimes important, it's also the timeliness. I don't know what the problem in this particular situation is, but irregardless of how that's laid out, I could see that as being a question from the consumer.

For some of you that may not be familiar with the United States Telephone Association, we are located here in Washington, D.C. It is the National Trade Association of the local exchange carriers. We represent over 90 percent of the access lines and service of the local exchange carriers in the United States. Focus that in your mind. We represent companies with approaching 40 million or over access lines, down to companies that have less than 100 access lines.

Any time you start talking about rules and regulations, you hit the whole gamut of those companies. And if you draw a line somewhere around 40 or 50 companies, all the companies underneath that level are 50,000 access lines or less. So, a lot of the telephone companies in the United States are very small. Now, how do these companies deal with their billing and their billing and collection?

The larger companies have their own billing systems in place and do their own billing. But, the vast majority of the telephone companies in the United States use service bureaus to do their billing. That doesn't mean that they toss off their responsibility under any state regulation and rules and regulations on their billing. I know a guy that owns his own company out in the western part of the United States, and he hires a billing service to do his billing.

There are some options under these billing services. You can have them bill it, mail it, and then they send you a copy of the stuff so you can go through your collection process, or they can develop your bills, package them, and mail them to you and you drop them in your local post office. This guy chooses the latter. He wants the bills sent to him. It's a small company, so he actually goes through about one out of every ten bills, and manually calculates the V and H coordinates, to see if the bill was actually billed correctly.

So, just because these companies hire some billing agency to do that for them, there are still the checks, because these people are out there living with their customers, and the last thing they want is a complaint from their customers.

There is no incentive for the telephone companies, in my opinion, to have bills that are in error or wrong, or contain the wrong information. Historically, after the bill goes out in a billing cycle, within five or six days you'll get 80 to 90 percent of the cash. The cash flow is the lifeblood of this industry.

Now, I would like to take some of the time I have left to talk about USTA and our activities around our annual billing conference or annual billing forum. It's one of the things that could be categorized under safeguards that we provide our members. This year will be our twelfth annual billing conference. We changed the name this year from a USTA billing conference to Billing and Customer Care, because we're focusing more each year on customer care. What does the customer want? How do they want to see the bill?

A couple or three years ago, we started inviting consultants that go out and make surveys, and have focus groups and talk about their customer bill. What do they want to see on the customer bill? How do they want to see it displayed? These topics, the last two years, and especially last year, was one of the topics that was very highly rated. So we have this same consulting outfit coming back this year to talk about bill presentation and the information you put on there.

Also, we are spending more time in our breakout sessions on customer care. What does it take to satisfy the customer? The last thing we want to do is lose our customer, so we're focusing a great deal of our conference on bill presentment and customer care issues.

Historically, we've had state and federal regulators attend our conferences and make presentations, because this conference is not a LEC only conference, it is open to anyone that wants to come. Last year, we had Howard Davenport from the FCC, who was our very first speaker. This year I'm working with Catherine Power to come up with an FCC panel. The FCC is going to have their own breakout session at the USTA conference. They're putting together their own presentation of what they want to present to our attendees.

The conference started out 12 years ago with about 40 attendees, and last year, we were over 550. We are planning for 700 to 800 attendees this year.

In conclusion, I might add, before we jump and decide that we need rules and regulations or additional rules and regulations above what the state commissions already put on the billing process, I think we need to be careful to see what the target is. And listening this morning, from my opinion, the target seems to be -- at least two things popped out in my mind. We are talking about casual calling, I do realize that that is a fast growing area, and in the area with the aggregators.

It looks like, if I didn't miss anything, we're targeting a couple of issues there. The state commissions already have rules in place on how we present some of our bills and how we describe the information, our collection process, and the time it takes to answer calls and things like that.

Also, we need to look and see how many companies it is going to effect, because there are over 1,300 local exchange carriers out there, and other carriers that are in the same line of businesses, so the population is all sizes. It is numerous, and there is already a lot of activities going on around there to manage the bill process, and to make sure it is correct and timely.

Thank you.

MR. SPANGLER: Thank you, Porter. If we had been doing this event say in 1990, probably it would not have occurred to anyone in the Enforcement Division to look to the Federal Trade Commission to have a presenter. At that time, the FTC and the FCC had very little contact with each other. They had their sphere of operations and we had ours, and they generally didn't get involved with telecommunication matters or common carriers at all.

But it was probably the advent of 900 number services, when I came to the Enforcement Division in 1991, I heard that the Federal Trade Commission was very active in looking into some abusive practices, and it entered into consent decrees regarding 900 numbers. Then with the passage of the TDDRA, Telephone Disclosure and Dispute Resolution Act, both agencies found themselves with jurisdiction over 900 number service in general, and since then, we've had a lot of contact and benefitted from their approach to dealing with consumer issues.

So, I am very pleased that Adam is with us today to give his perspective, and the FTC perspective, on consumer safeguards that are necessary when you have LEC billing for other entities.

MR. COHN: Thanks, Bob.

A lot of changes have happened with the advent of 900 numbers, and some of them have been good and some of them have been not so good. One of the good ones, I think, has been my opportunity to talk to and learn a lot from the people at the FCC, including Bob. I have learned a lot, and it has been a good experience.

I wanted to preface my remarks by saying that these are my opinions, not the opinion of the Federal Trade Commission or of any particular commissioner. No commissioner has reviewed what I plan to say. Nothing has been approved, so you shouldn't look at it as anything else except for my opinion as an attorney practicing in the consumer protection field, who has come into contact with problems involved with pay per call issues, including 900 numbers, but also including some of the other things that we discussed today, such as messaging services and the international dialing.

Basically, the issues that concern the Federal Trade Commission concern me, actually, as a consumer protection interested attorney. The telephone is being transformed from a means for communication to something much more. An instrument of credit and a means to make instantaneous purchases. It is becoming more and more like a credit card and less like the traditional telephone that we've seen in the past. As the Internet and the telephone and cable begin to merge, I think this is going to be a tremendous potential for expanding electronic commerce.

Everyone has talked about the situation where you could be watching TV, press a button, and instantly buy something. We're not really too far away from that. One example of a case that I am still working on at the FTC, is a recent case where there was an Internet site that invited Internet surfers to download some adult oriented pictures for free, so said the site.

What the consumers did not know, in most cases, was that by downloading these pictures, you were actually instructing your computer to shut the modem off, turn down the modem speaker, and dial an international telephone number to Moldova. Until this case came, I had never of heard of Moldova, it's a former Soviet republic. People stayed on the line for a number of hours in some cases, and have tremendous phone bills, some way over a thousand dollars. As an added bonus, you could stop surfing the Internet and you would still be racking up the charges. It never disconnected your modem.

This is an example not only of the huge potential for fraud, but also the huge potential for legitimate commerce. Already we have the technology for instantaneous purchases on the Internet. You could arrange a system where your modem would dial a 900 number, and maybe make charges as you continue to surf on some sort of shopping channel.

From a consumer protection perspective, this potential for telephone commerce raises some important issues regarding the LEC billing situation. Number one, what is on the bill? I don't want to present any particular ideas about what should be on the bill. I rather want to raise some questions and some issues, and hopefully, other panelists in the audience and the FCC will decide what should be on the bill.

When consumers use a credit card, typically they understand what a credit card is, and they understand it is to make purchases, and they're used to seeing an itemization on the credit card. And if they don't like the particular itemization that they see, they go to another credit card company. I don't know if consumers understand fully in all circumstances that they can be billed for non-communication services in much the same way as a credit card is used on their phone bill.

As another issue about what's on the bill, do consumers know, in all cases, even when it's explicit, do they understand that their purchase of these non-communication services are not connected in all cases, to the telecommunication services. Do they know that they can't be terminated for failure to pay? Of course in some cases, including the Moldova case, you could be terminated for failure to pay, because the defendant's were utilizing an international pay per call system, where some customers did risk termination if they didn't pay their bill.

On the flip side of that, if you give consumers the information that they're not required to pay the bill in order to maintain service, some legitimate operators who want to use pay per call services, don't know how to convince the consumers to pay. How do they tell the consumers, you really have to pay this. I know they have run into a significant amount of difficulty when consumers get all these notices saying, you don't have to pay, you don't have to pay, and then they just decide not to pay, even though the knowingly incurred those charges.

I guess the major issue about what's on the bill, that concerns me as a consumer protection advocate, is the information on the bill accurate? In the Moldova case, the FTC alleged that the calls never actually went to Moldova at all, but that was merely a means of creating a bill. Basically, creating a bill out of nowhere and creating a false call that was never actually placed to Moldova, but in fact, as we alleged, went to Canada. Thereby, reducing the charges for telecommunication service on the part of the IP, and creating a greater potential for profit.

This issue of false information on a phone bill leads into the next problem that I see for consumers with LEC billing for non-communication services, and that is what was discussed in the previous panel. Are there adequate fraud protections in place? That is fraud on the part of the merchant and the consumer.

Alan Taylor raised some important issues about the telephone numbers that are now becoming more akin to credit card numbers, and everybody's number is published in a phone book. This creates a tremendous potential for fraud on the part of merchants, but also it creates a potential for fraud on the part of consumers, because it's becoming easier and easier for them to refuse to pay for charges which they did legitimately and knowingly incur.

We know about that 900 blocking is available, but are consumers able to block these other services? That's a serious problem. If consumers can't block it, they can't stop anyone from making the charges. Few consumers would tolerate this sort of thing in a credit card environment, if their credit card number was available to anyone that walked in their home.

Another issue raised by the LEC billing of non-communication services is whether consumers have recourse to correct errors. In the 900 number arena, there are specific procedures set up, basically based on the fair credit billing act, to help consumers correct errors and not risk, on the basis of that effort to correct the errors, risk injury to their credit.

In this environment, we have the problem of a consumer dealing with one party, the LEC, and perhaps another party billing them secondarily, and they often feel like they don't know what to do. They don't know who to go to to correct problems or errors on their bill.

The final issue, and I don't know if it's been raised by other panelists, is that with the LEC billing for non-communication services, you have the issue of the LEC giving credit, extending credit much like a credit card is extending credit to people in order to purchase things -- items, information, or entertainment. I think that in the future we are going to run into some serious problems, where information that the LEC has about a consumer may be used to deny credit for these information services or information transmitted by the LEC to an information provider may be used to deny credit by that information provider.

What if a consumer refuses to pay for a messaging service that they said they didn't make, and that information was somehow used to deny them access to other information services that they did want to purchase. This is another issue raised by LEC billing that I hope to hear some opinions on today.

Thank you.

MR. SPANGLER: Thank you, Adam.

Dave Gilles, do you want to give us your view on this from over twenty years in an Attorney General's office.

MR. GILLES: Thank you, Bob.

As Bob mentioned, I have worked in the Wisconsin Attorney General's office of Consumer Protection for exactly 23 years, in the interests of complete disclosure.

I have worked there long enough to remember the time when complaints about telecommunication services were very few and those that were received, were quickly resolved. Today, it's much different. Last year, a couple Attorney General offices reported that -- have I gone past my limit?


Last year, a couple state Attorney General's offices reported that telecommunication services was the source of more consumer complaints than most other industries. It ranked in the top ten according to a couple states' tabulation. We are seeing today that both state enforcement officials, as well as their federal counterparts are having to devote more and more enforcement resources to deal with problems associated with telecommunication services.

So, I come here today because I think it's very important that the Federal Communications Commission carefully consider issues associated with billing practices by local exchange companies for third parties.

In the next few minutes, I would like to cover three topics. I would like to address the factors that I see underlie, or give the commission reason to address and implement consumer safeguards for local exchange companies billing for third parties. Secondly, I would offer some suggestions of what could be done to implement these safeguards, or what approaches could be taken. And thirdly, I would like to highlight for you what's happening in some of the states to respond directly to these sorts of problems.

So, turning to the first point, I think that there are probably at least four factors that give reason for the commission to specifically focus on consumer safeguards to be implemented with respect to local exchange companies billing for third parties.

The first one is that many consumers still believe that the local phone bill is regulated, is the subject of close regulation by state and even federal agencies. That what appears on this phone bill is almost invaluable, either as a result of this being generated through sophisticated computer systems, or the result of careful scrutiny on the part of government overseers. As we all know, and as we heard this morning, that is something all too frequently is not the case. It's called into question in terms of the accuracy of some of the bills.

The second point is that, for consumers that receive a bill for charges that are included with their bill for local phone service, there is a real coercive effect that that combination has. I have had countless discussions with people who are concerned about disputing charges for 900 services. They are concerned because they feel they are going to be threatened with disconnection or will suffer disconnection if they don't pay these charges. That is notwithstanding the plain statement that appears on the bill, that your service won't be disconnected.

There is a real coercive effect, that in terms of obtaining payment from consumers, as a result of including charges for these other non-communication services in this bill.

I would submit to you that this effect is recognized by the industry, and after all, this is one of the reasons that local exchange companies are able to go to third parties and tell them that if you use our billing system, it's very effective. Our level of uncollectibles is low, our experience in this area is that we will be able to collect for the services that you render.

That is a result of many things. It's a result of people being satisfied or perhaps not having another alternative for local service, but there is a very real value that consumers have with local phone service, that they don't want to jeopardize by disputing or not paying related non-communication services.

The third factor that I think gives rise to the importance of consumer safeguards, is that consumers, for the most part, are unable to independently verify the charges that appear on the bill. Consumers attempt to do this. I've reviewed complaints where individuals say, I called in response to this add for this information service that said the first three minutes were free. And I timed it. And a month later, I had a bill that said I was on the line for 18 minutes. How can this be?

You know, the residential telephone doesn't produce call detail information for the consumer to verify what his local exchange company is billing him, and from the consumer's perspective, it is the local exchange company that's done the rating of the call, the timing of the call. I would suggest to you that many residential users are unaware that the actual rating of the call may be done by a company that's in effect providing them the information service.

So, the notion of having some independent verifier or audit of the usage of that particular third party service, as I understand it, isn't there unless you really get involved in analyzing a particular transaction. So the third point, again, consumers can't verify the charges that appear on the bill.

The fourth point I would make, as far as why you have to have consumer safeguards is, unlike the telecommunications industry before deregulation, today the opportunity for scam promoters, or people who are not interested in providing legitimate service in turn for the consumer's money is very great. By lowering the barriers to entry, you'd be surprised who can come through the door now.

To illustrate this point, I want to tell you a story about a case that we handled recently, that dealt with a long distance reseller that was promoting its calling card service. And the way it was promoting this calling card service, it was using a contest offer, where it was inviting people to enter and to obtain a prize. As I'm sure most of have seen, on the entry form it said, by entering the contest, I agree to subscribe to this calling card, and I agree to pay a $5.00 a month subscription charge for using the calling card.

Well, after the consumer, or his son who was interested in getting the Bronco or whatever it was, entered the contest, in a couple of months, if everything worked right, the residential user would get a pack at home that contained among other things, a description of the service and a plastic calling card. Frequently, we were told that people denied receiving the welcome packet or regarded it as some other junk mail solicitation, and it wound up in the wastebasket.

And then for some people, the next contact they had with the company was included in the charges on their local phone bill, there was a $5.00 charge that said something like, service fee. Some people picked it up and contacted their local exchange company, and were successful in getting the charge removed. We received enough complaints, and after some investigation, we filed a lawsuit, and eventually got into settlement discussions with the company. In the course of those, some information came to us that created some real concern.

We were asking the company, after you send them the welcome packet, what efforts do you make -- first of all, we asked the business of the company, and they said they were in the business of selling long distance phone service. We said, after you send the people the welcome packet, what efforts do you make to get people to use your service? And they said, we don't. We don't contact people.

There was no effort, other than collecting the $5.00 monthly charge from thousands of people in Wisconsin, for this company to promote its long distance service. The only thing that they were interested in, was acquiring that $5.00 fee. It is that sort of situation which may seem uncommon or unlikely to you, that all too often happens, and it's the prospect of literally millions of dollars that can be made through that sort of service on a short term basis, without any capital investment, that is going to continue to bring this type of operation and this type of business to the telecommunications marketplace. It is for that reason, that safeguards are necessary.

Now, let me turn to the second point I wanted to make, and that is a list of suggestions, if you will, about what could be done. The first thing would be that the bill should have clear, accurate, understandable information, and it should be easy for people to get to the seller. Oftentimes, when you have an information service, while it's very easy to access the number that provides the information, the blockage rate associated with the call inquiry number on the bill is exceptionally high, and people are put on hold forever. It seems to me, those are standards that could be put in place to deal with that problem.

Secondly, written pre-subscription agreements for recurring charges. There should be a blocking available for charges that customers don't want to appear on their bill.

Thirdly, serious consideration should be given to providing that third parties that use LEC billing systems should be bound by a LEC determination of whether the charges are appropriate or inappropriate, and not have the right pursue subsequent collection efforts after a LEC has in effect determined to remove the charge. The reason why I believe that's appropriate is if a third party is going to use a LEC to bill for its service, I think there is merit to having the LEC determine the validity of that charge.

Thirdly, I think there are procedures that local exchange companies can put in place to minimize fraud. First, they should undertake to pursue due diligence in who they are going to enter billing and collection agreements with. The SONIC example again, when SONIC entered into billing and exchange agreements with a number of local exchange companies, the principals of SONIC had previously been the subject of enforcement actions at both federal and state level. It seems to me that that should have caused some pause in entering into those contracts.

LECS can maintain holdbacks, monitor complaints, which they're doing, but in the SONIC case, again, the same time people were being switched to SONIC service, the corresponding area in the local exchange company that handled complaints was reporting a very high number of complaints. Yet, the two areas didn't communicate with each other.

Fourthly, I would suggest that there be standards regarding subscription services that are billed on LEC bills. We are seeing very long term contracts with early termination penalties, and practices of these sorts, that in other classic areas of consumer protection would be prohibited.

Then turning to the final point that I wanted to make, and that is to mention that the problem of consumer complaints, if it isn't being addressed at this level, is certainly receiving response at the state level. For example, this past year, the state of Idaho passed legislation that prohibits collection for all charges for adult entertainment services without a written agreement. The state of Minnesota has legislation in place that prohibits collection for information services obtained by minors or vulnerable adults.

Wisconsin has in place a billing and collection rule that requires all telecommunication service providers confirm the order with writing or something that can be downloaded from on online service. So there is action at the state level that's addressing and responding to these concerns.

In conclusion, I would say that it's critical that steps be taken to insure LEC billing is accurate and fair, and does not become a tool for unscrupulous providers to obtain money as a result of unlawful practices.

Thank you very much.

MR. SPANGLER: Thank you, Dave.

Next, we will hear from Kim, giving the LEC perspective on this. Kim has dealt with this issue for a number of years, and I'm sure that some of what has been said so far this morning, rings very familiar in her ears.

MS. WILLIAMS: Thank you, Bob.

As Bob knows, I've been involved in some of these issues for many years, as he said. I think I have always felt that in our contracts we have always had clear, concise guidelines. We are constantly trying to catch up with whatever services are out there and change our guidelines to keep up with them, but no matter what we do, the industry always seems to be a step or two ahead of us. So, my belief has been that it can't all be handled by the LECs, that somebody else has got to state what can and can't be billed to consumers, and what precautions have to be taken before a company can submit billing to a consumer.

In our contracts we have guidelines and always have had some about billing for things that might be deceptive, taking unfair advantage of the public, and I can go back to early stages of 900 billing, and say that no matter what we had in our contracts, these kinds of things came in to us all the time and we were constantly chasing down complaints. We had a committee of people who spent their time sitting around dialing 900 numbers and listening to them and trying to find out what was deceptive and what wasn't deceptive.

Until there were actually regulations in place requiring certain things, like cost disclosure and a chance to hang up before you were charged for the call, there was nobody out there watching it. We could not keep up with the number of calls and the number of services that were out there.

We took a hundred people off their regular jobs, and just had them calling 900 numbers for about a month straight to try to clean up our bill. I think that's a good example of how difficult it is for the LEC to be the policeman in that area or in any area of billing.

With regard to the billing of monthly fees for different things, I know that's a big area of concern. Years ago, we implemented a policy or practice where before a company who had a contract with us could submit that particular type of billing, they had to first send in a request to do so. They would send in a complete description of the service, a phrase that they wanted to appear on the bill, and how the service was accessed, how the customer orders the service.

We then set up that service on a table so it's a table driven process. The B and C customer cannot actually submit a record, a 42 record, unless that preapproved records is on our table. That is part of my job, and I've seen that grow over the last few years to a tremendous amount of billing. What started out to be a few records here and there, has turned into many, many records coming across my desk every day of the week that somebody wants approved for billing.

What we find is, on the whole, when you look at these services and see what people submit to you, they look like legitimate services. A monthly fee for discounted long distance usage. Compared to AT & T's optional calling plans, compared to the LEC's optional calling plans. That's the way it's described to me all the time, and I even have scripts submitted to me of how it's sold to an end user. It looks very legitimate and it looks good.

What happens is, a lot of these end users have no idea what showed up on their bill. As we saw here, a messaging service or a monthly fee, I personally think that's okay if the customer knows what they bought. If they don't know what they bought, or if they never bought anything, then obviously it's not enough description, but I don't think any description would be enough at that point.

My own experience in this area, recently, I 10 XXX dialed this year over another carrier's network. Someone in my office said, I've been using this company for years and they're nine cents a minute. It's a great rate. I thought, that beats anything I can get anywhere else, and I asked him, do you charge you anything? I've seen some of the dime a minute promotions come in the mail that do have a monthly fee. He said no, I've never been charged a monthly fee. Best rate around.

So, I started using it and a couple of other people I work with starting using this 10 XXX dialing code. My first bill came in February, and there was nine cents a minute, and I thought, this is great. I'm beating any carrier I can get. I did it the next month. The third month comes, and I got a monthly fee on my bill also, and it was one of those monthly fees I approved that said it was going to give the customer discounted long distance rates. It was $5.99. My monthly charges don't even add up to $5.99, I'm not a real big user of long distance.

So, I called this company and said, what happened? I've been using you for a few months, and someone told me about your service. He said he was never billed a monthly fee, and now I am. She said, well, if you're going to use our service, that's what we do. But nobody asked me if I could be billed $5.99 a month. And her response was, it's not my fault that you heard about it from somebody else and didn't bother to find out about it first.

As you can imagine, I wasn't real happy with that answer, so I actually talked to her supervisor and got the charges removed from my bill. Here I am, four months down the road, using this service. The explanation was, the first month is free, so that's why I didn't see anything the first month. The second month usage, they see what I use, so the third month they bill me for a monthly fee for having used it the second month. And then on and on, so here I was already into my fourth month. I was going to be billed three months usage on this.

When I talked to that company -- as a matter of fact, I haven't taken any other action yet, other than to get it off my bill. It was just a few weeks ago. But my question back to that company is, who gave you the authority to do it? And their only answer so far is, well, I used their network and there is no rule out there that says how that kind of thing should be handled.

Unfortunately, I see that all the time. I have complaints for voice mail services. There are tons of voice mail services out there that I've approved, and that seems to be a growing area also. Customers don't apparently understand what they're being billed for when they come in, but from a LEC perspective, when we look at the description of that service, everything looks good and looks okay, and I don't see any rules requiring a presubscription agreement of any kind before this customer can subscribe to services.

What is usually thrown back to us is, well, how is your voice message service offer? As the LEC, we offer a voice messaging service, and if someone calls us, we sell it to them. I'm sure we have some telemarketing campaigns out there where we call out and get customers to use it. So, that's usually what these services are compared to. The LEC can do it, why can't we do it?

I don't have a good answer for why this is different, other than for some reason, these customers don't seem to understand what they're being billed for.

We do go out and investigate complaints when we receive them for services, and we have stopped billing for certain services because of the number of complaints, or because things appear to be deceptive. Recently, we stopped billing for monthly fees for information services all together. We found that was just a big area of complaints, and we didn't want to bill the monthly psychic fees any longer, or the other information services fees. We're still in the voice mail business and other messaging type service businesses, because our own affiliates are and we want to bill for our affiliates, so therefore, we have to bill for everybody. So that raises some problems for us.

Other actions, I know it's been brought up here that we could possibly set up some kind of billing edits or things to reject certain types of billing. We do have certain things in place today for customers who subscribe to certain services. For instance, if a customer has collect call blocking or third number blocking, we won't bill a collect or a third number call. That has been met with a lot of resistance in the industry, but we put it in place because we felt we didn't have any way to stop those services for a customer who has already asked for a block.

When we got into the information services business for 800, we found that to be such a problem, that we finally put an edit in our system to reject 800 billing if a consumer had already subscribed to 900 blocking. The assumption being, and the complaints we received backed it up, that most customers who subscribed to 900 were now being hit with all this 800 billing, and didn't have a way to block it. Our concern was that we couldn't do anything for them. We certainly didn't want to see toll free 800 services blocked. We implemented that billing edit, and also rejected 800 information services on all business customers.

The other service that we have in there is an aged message edit. I've heard a lot of discussion about how old some of these messages can be. We've always had an aged message edit of 90 days for domestic traffic and 120 days for international traffic. So, with some of the examples I've seen of anything older, I thought most LECs had similar edits. I can't speak for everyone.

We've also taken a lot of action with certain 900 programs or other programs that don't meet our policies. It seems whenever we put a rule in place, someone's trying to find a way around that rule, and we've seen a lot of this phantom billing that we've talked about in other meetings, and charges for calls that were never really made. That is a big concern for us. We've actually stopped billing for at least one carrier because that type of billing kept coming in. You know, three strikes you're out. We kept trying to work with them. As a matter of fact, we stopped billing once, and had a lawsuit filed against us, which I know is a concern for most LECs. We are always thrown back with the discrimination argument.

Finally, with at least one or two carriers that I know of, we have stopped billing all together because of certain problems with their billing.

When you get into third party billing, though, as I think Ron Evans pointed out, he may bill for four to five hundred different companies, and although we put in Ron's contract and in other contracts for other carriers or third party billers, that they're the ones that we hold responsible for the billing. We do have to work with them, or feel that we have to work with ONA and other companies when they do have a problem with a particular carrier.

ONA is trying to live up to their end of the bargain and keep other people in line and put certain things in their contract to require that other carriers live up to these rules, but certain companies aren't always going to do that, and instead of just canceling ONA's contract when they have a problem with one company, we certainly work with an ONA or another third party biller to try to correct that problem.

So, I think from a LEC perspective, our concern is we can't necessarily be the one to stop it. When I look at a billing tape or a printout of a billing tape, I see call records. One call record looks like another call record. I can't tell if one's been made up or if one doesn't truly reflect what was actually done when the customer picked up his phone and dialed a call.

Sometimes are obvious and really hit you that something doesn't look right, and you know to move forward and maybe do a little more investigation, and certainly based on complaints we do. But on the whole, it's already happened. The call has already been made or the company is already out there hitting a lot of customers for things before it actually gets to me and comes to my attention. We have already seen a lot of complaints before it works its way up to one person.

When I have thousands of service reps out in business offices talking to customers every day, one rep might get a complaint and not realize that everybody is getting the same complaint. It sort of takes some time for that to actually filter its way back up to one organization.

So, I guess what we would like to see is some help in regulation as far as what's provided out there. What does it take to bill a monthly fee? What does it take before a company can just submit a fee for service to a LEC? I think they need to first have a consumer's permission. Maybe if it's not the PIC carrier, and it's not the local exchange carrier, there has to be some other step to insure that a customer truly knows what they are going to be billed for.

But, I don't think regulation on a LEC is going to do it. We can't really be the enforcer for the whole industry.

Thank you.

MR. SPANGLER: Thank you, Kim. The final panelist is Lionel Wilson from the California Public Utilities Commission. We certainly, over the years, in dealing with these issues, have been aware that the CPUC is one of the state commissions that has been in the forefront of looking for carriers who, or entities that are abusing the system and taking advantage of consumers, and taking fairly swift enforcement action against them.

Not surprisingly, some of the people that they have been interested in are some of the people that we've been interested in when we've compared notes.

Lionel, we invite you to give us the perspective of consumer safeguards from the state regulator's point of view.

MR. WILSON: Thank you, Bob.

Let me also make the traditional disclaimer that I am speaking for myself and not for the commission or any member of our commission. As my introduction shows, I am a regulator by profession. Twenty five years of representing the consumers of California. I agree with Gary that when I first came to the California commission, we never heard of an enforcement action against a telecommunications company. That was just an unheard of thing.

In fact, the only enforcement actions that we had in California, were against truckers who charged less than the minimum rates in California. You laugh at that, but I think there are some analogies in the way in which we enforced against truckers, that can be used to help with respect to problems that we encounter with the third party billing situation.

About 10 years ago in California, I was involved in the first large scale marketing abuse case against our largest carrier, Pacific Bell. Pacific Bell had undertaken some abusive marketing practices that were widespread throughout California, and it was through activities of a small enforcement group out of our Division of Rapier Advocates that we, in fact, caught Pacific Bell. There was an order to show cause issue. Pacific Bell came in and said, yes, we agree.

From that, and talking about it from an enforcement perspective only now, Pacific Bell was required to go out and hire one of the most renowned sampling poll groups in California, to go out and determine just how effectively can they get out the message that they, in fact, were marketing abusers and to get that information to their customers, in case that customer had been abused by Pacific Bell so that customer could know that they might be entitled to refunds.

This process took place over a six month period with three separate notices going out to the consumers, that they may be entitled to receive refunds from Pacific Bell. Dollars that were left over from those refunds, that weren't paid back, were put into an education trust, whereby in California, for a period of three years, we funded consumer telecommunications education programs.

This whole program was just directed to Pacific Bell. We were only dealing with three companies at that time. After that, we have had one or two other major enforcement actions. But now with the emergence of telecommunications competition -- let me describe it to you this way. In California, we have the great seal of California, and the words that you see at the top of it, is Eureka. It means, I found it. I found the gold mine.

I think that those who look to the fraudulent type of practices think they have found the gold mine in California. We have over 600 IECs in California, and growing. Across my desk every day come four or five new applications to be certificated to operate in California. We have over 60 CLECs now registered in California.

Legislation, and in the last year we have had over six major slamming enforcement proceedings, which have led to decisions, and I think those decisions of the commission can be used as important guidelines to deal with the fraudulent LEC situation, where we have the type of situations of the -- we have one carrier, for instance, who just goes out and slams everybody.

We have carriers now, they don't slam people, they just go out and submit fraudulent billing tapes. They don't violate California's laws against slamming because they're not switching customers. They are just submitting bills to them, and hoping that people will pay them. This is the way that people try to get around situations in California.

It is interesting, to me anyway, my personal experience is that I haven't been personally involved in any of these, except for as I was preparing to come out here, I received two separate phone calls, both of them dealing with third party situations. One was a situation in which an individual -- the IEC had sent him a phone calling card, and somebody stole his pin number. There was $3,000.00 worth of calls on his bill. He called the commission, and of course, he gets handed off from person to person, and somehow it gets to the legal division and the secretary sent it to me because they know I'll answer the call.

He gives me his situation and I said, well, have you called our Consumer Affairs Bureau? He then starts off in a diatrod that leads off to the old wave off and forget you kind of thing and hangs up on me.


Well, you laugh at it, but it is a concern because he had no place and no remedy for the type of problems -- he's saying, I have $3,000.00 worth of phone bills, where do I go to remedy this situation or they are going to cut off my phone?

Another situation was a very savvy customer, who in fact could read his bill, and all of a sudden here shows up on his bill, a charge for call center, whatever that meant to anyone. He did not know. He knows he didn't make it. And, in fact, these calls were involved in -- he was a realtor who owned some apartments. And one of the charges was to a phone, and I don't know how it works with an intercom phone, in which the intercom phone was receiving collect calls. But anyway, he called us up and said, okay, I called up the phone company, they took it off the bill. Two days later he gets his own personal bill, and the same type of charges appear on it. It's a future case in which we may be undertaking enforcement in California.

What are some of the remedies? What can we do? I think they are pretty traditional kind of situations. For the most part, the remedies are ones of -- and I'm not talking about the fraudulent situations. We have many situations in California where they are just simple mistakes. There are errors in billing, and our Consumer Affairs Bureau deals with those well. I think they do, anyway.

The limits of their ability to deal with the situation, deals with the size of our staffing, the size of the state of California, the number of calls and complaints that we receive. But, for the most part, they deal well. The Consumer Affairs Bureaus have their contacts with the LECs. The LECs have a reputation to protect, and they want to keep that reputation.

Clear and definitive billing information, obviously. Everyone's saying it. What does that mean? I looked at the bill that was here today, messaging, $25.00. That means nothing to me. A bill that says call center on it. We have one of those coming in. What does that mean to you? It means nothing to me. I don't think that is clear information. I think that if a LEC is going to bill for third party, they have to say, let's look at what this service is that I'm charging for? How do you describe it? Do we agree with that? And if we do, then we'll put it on the bill.

I think that's simple. We're talking now about a situation in which we have a competitive market, with arm's length commercial dealings between a LEC and billing agents, or what we call billing aggregators in California. I believe the burden should be put on these entities to assure the proper correct billings occur. The LECs have a reputation to protect, and it seems to me that these billing aggregators also would want to assume the same type of situations. I agree with Gary. I think that the LECs should have the responsibility and the authority to discount an aggregator's billing situation.

If they get a bill and they agree that this is a false billing situation, they should be able to discount it and the aggregator should have no recourse. I think it's very simple. And that should be a condition as part of the billing. Aggregators should do everything they can do to make sure those billings are correct, and so should the LEC in terms of the types of contracts it enters into with the aggregator.

In California, we are presently moving into, very rapidly moving into the deregulated telecommunications market situation. Right now, pending before our commission, tomorrow, are two different proposed decisions. One dealing with the registration of non-dominant interexchange carriers, and that includes almost everybody. I don't know a dominant interexchange carrier anymore. And they are considering certain rules for adoption for consumer protection.

One of the things, though, that is required if you are going to be a registered carrier, is that we in California require that you certify to us that you have never been convicted of a fraud, and that we also inquire into whether you've had any bankruptcy situations. We also inquire into more issues as to any of the officers of the company or anyone acting in a situation as an officer, whether or not they have been convicted of any felonies.

We think this is a very simple kind of question to ask and require in terms of before certifying the company to come and operate in California. We think this is a consumer protection.

In California, with respect to the bills, the bills must include the names and numbers of the billing agents. My suggestion is that, in fact, if billing agents change without notification to the CPUC, that if a claim comes in and the customer can't reach the billing agent, the billing agent's number has changed, then that call should automatically be discounted. Those charges. It should be an automatic requirement that those type of notifications come forward.

Each bill must display a toll free number for billing inquiries. That's on the part of the LEC. There is no requirement, as far as I know in California, that a billing agent also include it's toll number for inquiries. We have a situation in California, OAN was involved in this particular case. Let me assure you that they had done nothing wrong, and tell you that. But in this situation, the carrier had hired a company, I believe it was MBE. MBE had hired OAN to do the billing for them, and, in fact, we had a collection agency also involved in this whole process. A fourth company that the consumer was being asked to deal with. An intolerable situation from the consumer's perspective.

This is why I think it's important that the contracts between the LECs and the billing agents set up certain standards and requirements that can alleviate the need for our intervention as a regulator, because we're trying to get out of the business in California of regulating. And we really do want out of the business. We recognize it's not going to happen, but that's what we want. We want out of the business of regulation. We think that the onus should be put on them.

You must show on the bill the following things. When to pay your bills, billing detail including the period of service, the late payment charge and when it is applied. There was a very large case in California dealing with Pacific Bell with respect to late payment charges. How you go about paying your bill. If you have any questions about your bill, who do you have to call? And then provisions and steps you may take if you have been billed incorrectly.

There is also a requirement in California that on your bill you place the name of the California Public Utilities Consumer Affairs Branch, how you can go about avoiding having your service disconnected, and I'm going to get to the dispute situation and how we deal with disputed bills in California.

In addition in California, we have a requirement that once a year, and forever thereafter, the LEC must notify the customer of one, the service that it's receiving from them, the correct rate information, the terms and conditions of the service, and any notice of major rate increases. This is a requirement that we put on the LECs and the non-dominant interexchange carriers.

Now, with respect to disputed bills, and I think similar steps probably occur throughout the country. First, the customer may make a request to the LEC, and the LEC must comply with the request to investigate a bill in dispute. However, the customer must pay any undisputed part of the bill. If, after seven days, the customer is dissatisfied with the results of the resolution provided by the LEC as to the bill, he can then bring that dispute to the California Public Utilities Commission, Consumer Affairs Branch. You have branches in Los Angeles and San Francisco.

Once again, however, in order to avoid disconnection, the customer must come forward and pay any portion of the undisputed bill. Here comes the rub. The situation of the gentleman calling me with the $3,000.00 bill. He wants to avoid disconnection. Where is he going to get the $3,000.00? I don't know. That's a real problem that we have, and I think we need to come with some answers to that.

After the Consumer Affairs Branch reviews the complaint, and that is usually in connection with the LEC, and many times with respect to these third party situations, especially enhanced service providers, come up with a joint agreement with them on how to deal with that bill. The Consumer Affairs Branch makes a decision and notifies the customers of that decision. If they agree with that decision, and I mean both the LEC and the customer, then they will then distribute the dollars to the company as deemed appropriate as a result of the resolution.

Finally, if they are unhappy, we will instruct the customer how to further appeal using the services of the California Public Utilities Commission's Public Advisor's office, who we have a very easy way to file a complaint before the commission to further state any kind of disconnect service and although you don't see many of these complaints, we do see them come through.

Now, with respect to the gold miners, if you will. The real diggers. The guys that are out there, the claim jumpers, I think. I think that our actions with the slamming rules provide some guidance of what we can do here with respect to making it expensive for persons to fraudulently use billing and collection as a means of revenue collection for their own enhancement.

In California, for instance, if a carrier has been found guilty of slamming, we require the CLECs and the IECs to contact all LECs to determine the exact amount of disputed charges. We require offending carrier to prepare checks for customers, the amount payable to each customer that they have. Those amounts would be approximately $20.00. In the case of some of these customers, we have had 10,000 checks come into the PUC. We require the major LECs to provide staff and the offending carrier with a list of a computer readable medium of designated billing disputes, and we require the offending carrier to reimburse the LECs for preparing that.

Finally, we have penalties established, public purpose trust funds for consumer education services. We do try to make it expensive for them to participate.

What do I think needs to happen? We need laws that make it clear that for fraudulent billing practices, billing agents fall within local commission jurisdiction. This takes me back to the situation of the undercharge situation we had with the trucker. I think in all situations in which we are going after a LEC for any kind of billing dispute, the billing agent should be included as a respondent in that proceeding. That way they would know, in fact, they have some responsibility with respect to the bills that they submit to the LECs and that the customer is expected to pay.

We need to be able to enforce rules without threat of being dragged into federal court. And by that I mean, with one of our slammers, the issue has come up in several instances, can we pick enforcement actions we want to take? In one case, the CTS case that we're presently in federal court in that matter, the issue came up of our ability to cut off the carrier's ability to connect to interstate calls.

Now, what happened in this particular situation is the carrier said, yes, we can distinguish between all our incoming calls, and we can distinguish our interstate calls and our intrastate calls. Bingo. That's all we needed to hear, and we then went out and pulled their certificate to operate in California. As soon as we issued that decision, we're off to federal court. This gets expensive for our commission, especially in California where we have a stingy legislature these days, and our staffing sizes haven't been increased to meet the needs of the present telecommunications market abuses that occur.

Other situation where the similar issue has come up, and a fraudulent situation, we have some wonderful pictures of a character who came into California as a wireless carrier. And of course all of you know that we can no longer prohibit entry of any wireless carrier that wants to come in to California and operate. Or anywhere in the United States. He is required to come to us and get a registration number, so that he can go to the LEC and get a billing CIDC code. He can't get a CIDC code without having his registration number.

What this guy did, he took off up to Reno. In Reno, he had set up in a room. He had his Master Card authorization billing box over here, he had his Visa Card over here, and he was calling people soliciting them, and telling them all the wonderful services that he was going to provide with a discount cost, never planning to provide any service whatsoever.

Do we have jurisdiction over that carrier? Can we, under federal law, disconnect and yank that certification that allows him to go out and bill? That's a real problem for us in California. Similar to the issue with CTS, can we just cut him off? We need a mechanism in California, for instance, with the CTS situation, if we have a fraudulent carrier in which we have taken through the hoops -- through our hearing process and due process, we need a way to be able to easily come back to the FCC and say, we have convicted this guy of a crime of moral interpretude, if you will, and we think his ticket needs to be yanked providing interstate calls. We think it can be easily done.

We lawyers face that type of problem all the time in terms of, if we are convicted of any crime of moral interpretude, our bar association yanks our license, and this is what should happen with respect to some of these carriers.

Finally, one of the things we're doing in California -- one of the proposed decisions coming up is an investigation into developing clear and more precise standards to assist the PUC and the local exchange carrier to determine when slamming is occurring, and when fraud is occurring. We haven't gotten to billings, actually, it's just slamming. But I think it could also be used to fraudulent billing practices.

What am I talking about? I am talking about, we depend on the LEC to help us understand when fraudulent slamming is going on. We don't know. But when it starts to reach certain levels, it seems pretty automatic that something is going on and that we need to act, and that, in fact, it should be some type of presumption that if slamming is occurring at a certain level, that that is conclusively slamming and we need to go after that carrier.

I think similar types of practices could occur with respect to fraudulent billing practices, and would help us immensely in going out and making sure that the crooked guy doesn't operate within our jurisdictions.

Thank you.

MR. SPANGLER: Thank you, Lionel.

Before we open up to some questions, both from the moderators and the audience, I would like to just make you aware and go over very briefly the handout that I have, and Darius if you are in the back, this is the time -- if anyone didn't get a copy of these, they are available in the back. What I did is the same thing that was done this morning. We just looked in our complaint files for some examples of bills that showed the problems that led us to, some months ago, think of having this forum.

If we could have the bill that's entitled A on the sheet put on the screen, and also if you could turn to that. This is somewhat of an interesting bill because it appears on a page which, for all practical purposes, appears to be part of the basic communication services, the types of calls that in some states, non-payment can lead to disconnection of service. It shows that a collect call was made directly dialed, from a number in Miami. I did leave that number on there because if you dial that number, you don't get anything, and that was the consumer's complaint.

They were billed $75.00 for a 19 minute, 12 second collect call from Miami. They did not recall getting any such call. When they tried to call the area code 305 number, they and apparently many other people were told, the number was no longer in service. They were to call a different number. When they called that second number, the person, obviously a frustrated subscriber in another part of the country said, everybody keeps calling me and asking me about their phone bill.


I bring this up because it's really a very disturbing practice. I don't know how widespread this might be, but it shows that someone has submitted a billing tape to a local exchange carrier, and I've blocked out the names here, which would imply that this was a basic collect call, direct dial. There's nothing at all on there to give anyone information that it may have been some type of information service or something else.

I have blocked out the name of the company that submitted the bill. The purported carrier, we have no record of that company being an interstate carrier. There's no tariff on file, and they're not listed in our carrier locator. Of course, we might say that they are a registered carrier using a different name, but then that would bring up another issue. Should the name on the bill be the same name that we, or another regulatory agency can use, or in some way trace the call back?

I raise this as an example for someone, not just to put a disputed charge on the bill, but to get it on the page in such a way that it looks like a genuine collect call, although admittedly, there aren't that many $75.00 collect calls. To tell you the truth, I don't know of any carrier that bills in increments of one second, which apparently this company said that it did.

The second one, which is B, is simply another example of the types of calls that were discussed somewhat this morning, and again this afternoon. There's a standard format here that would appear to apply to direct dialed calls or to something else. It says service and number called, but the only thing that appears is a very brief description of the service. In this case, the person said that they had no idea what they were being billed for, and they are being billed for the same service on the same date, by two different -- the names that I blocked out there were two different entities.

As we go into the next phase here, I just offer these for you, either for any panelist to comment on these with respect to some of the issues that have been raised, or to use them as examples. If someone would prefer to use the morning examples, I guess they could do that too.

MR. MULETA: If I could ask a question for the panelists to consider, when we're thinking about these bills, it's on a regular billing cycle, depending on the size of the LEC, it could be up to a million or so bills that are going out at any one time. So, when you multiply $60.00 times that, or some portion of that, we're talking about big dollars. Have any of the people though about the issue of not just the consumers being defrauded, but also the LECs, and how does that play, and if you have any thoughts on that.

MS. WILLIAMS: I'll be glad to answer that. We're constantly looking at what we're purchasing as a LEC from other companies,a nd trying to make sure that we also aren't losing money on any of these types of services. And certainly, we are going after anybody who causes us a problem with an end user on a service. You're right, there is the real possibility, and we have lost money, or come close to losing a lot of money ourselves on some of these companies who bill certain types of services, walk away after several months of hitting customers with lots of charges that end up to be fraudulent charges.

Then they're gone, and we've paid them, and the end users are stuck with charges on their bill that hopefully they will study closely and call in about before they end up paying for them.

We certainly take steps to protect ourselves. That doesn't mean that it covers us completely. We're watching the money all the time. And then, on the end users side, looking to file complaints as fast as we can back to me, basically.

As far as the charges themselves, when you look at different options of voice mail services and things like that, in this record that we use to bill them on has this 12 position field to put the name of the service in. We've expanded that in our company to 37 positions, but very few companies make use of that 37 positions because they can't in all LECs, and for the sake of consistency, they try to name everything the same across all companies.

When I look at these services, I think, did the customer know what he ordered? Then you could look at these and say, well, if he understands the service, then it's not necessarily not a bad name. Again, back to where I was, if the customer doesn't know what's there or doesn't know about the charge, no matter what you name it, you're still going to get a complaint or a call.

MR. WILSON: One of the situations I was talking about, John, dealt with an ONA, and there were so many complaints that came in such a short period of time, that ONA, in fact, canceled their contract immediately with the carrier, because they realized the liability and risk that they were facing if they continued to bill for that carrier.

MR. SPANGLER: Is there any other comments along that line? One of the issues that has been raised, both this morning and this afternoon by two panelists, is the issue of the possibility of precluding secondary collection once the LEC makes the determination to remove something from the bill. I would be curious to hear from the other three panelists what they think about the idea of there being a requirement, at some level, whether it be by law or regulation, that LECs include in their billing contracts, the requirement that the person on whose behalf they bill may not try to recover a charge that the LEC has determined should be taken off the bill.

And especially, looking at that issue from the area of potential fraud and what the downside of that might be, and what the upsides are.

MR. GILLES: I can address the positive side, Bob.


MR. SPANGLER: We know your views. I know you recommended -- I would be interested, though, if Porter or Adam or Kim sees something that maybe should be taken into account that we haven't heard on that issue.

MR. COHN: Last week at the FTC we had a conference on 900 number issues and 900 number rule reviews that we're undergoing, and one issue that many information providers raised over and over was the fact that in many cases, LECs don't have an incentive to really take aggressive collection action on a legitimate, what they perceive as a legitimate charge. I think they feel trapped in the sense of the only economical way for them to bill is through the LEC, and then that the LEC is not pursuing, to the extent that they would like, those information charges.

And also, they complained about the fact that many consumers, who were sort of educated in this area, and know that their service is not going to be cut off if they don't pay the bill for 900 calls at least, can sort of play off the LEC and use the LEC's desire to gain consumer good will and get their charges forgiven by the LEC.

On the other hand, I do see significant advantages -- we've heard many times the problems with who does the consumer go to? If they have more than one party to go to, a lot of times it leads to consumer confusion. It doesn't seem fair to many consumers that they pursue redress from a LEC to try to get their bill credited for a charge that they don't think is fair, and the next thing they know they have a collection notice in the mail.

MR. CHILDERS: I think, Bob, the question is kind of akin to the first question you have here for the panelists. Should entities that use LEC billing be prohibited from initiating collection action for charges that the LECs excuse from the bill?

After I got this, I did a little research with some of the smaller companies and USTA members that are in billing and collection agreements with interexchange carriers and what have you. The feedback I got back from some of members are that their contract, the particular contract they may have with an interexchange carrier is, if the carrier says I didn't make the call, they just write it off without questioning it, because that's the way they want to operate their business. They're not a big company, and they don't want to spend a lot of time on this, so they just send it back to the interexchange carrier.

I think in that particular situation, it would be hard to deprive the interexchange carrier the right to go after the money, so it depends on how the contract with the parties is structured. If I was a small company out there, I wouldn't want to spend a lot of time trying to collect somebody else's money, because you're probably going to lose money trying to do it. But, you don't have any problems putting it on your bill and attempting to get it through sources such as that.

I think this may be something that one size doesn't fit all.

MS. WILLIAMS: I would tend to agree with that, for the most part, although there are certain charges -- and maybe it would be an issue of, if there were certain reasons for removing the charges, then in those cases the carrier couldn't go and pursue collections. I don't know if you would base it on the reason for the adjustment or not. In our case, when we talk about 900 and the concern that Adam raised, a lot of times you do have a consumer who simply knows the system and knows he can refuse to pay the bill. Well, I'm not going to let it sit out on my bill forever because he's not going to pay it, so I do take it off and send it back to the provider to try to pursue collection.

Going forward, we have tried to structure our contracts in the way that protects the consumer more than we have in the past. I think we've always had some language in our contracts that says we use judgement and do things based on certain determinations made by the LEC, but our newer contracts are even stronger in that area, that basically we're going to make the final decision. If we are in the middle of something and we don't want to be in the middle of it, we're going to take it off our bill.

I think in some cases, the carrier might have a legitimate reason to go out and try to collect, but not in every situation. So it might be based on the reason for the adjustment more than any adjustment.

MR. MULETA: I guess I just have one question for the regulatory folks on the panel. We sort of talked about all the things we can possibly do to add safeguard to what things are being done. I have two questions if you could address them, whichever one is applicable to you.

One is, what do you think about the competitive issues that have been raised? I think most of you sat in through the other panels, and there is not an undercurrent there, but I think a parallel issue of competition. The other issue is -- I know the Enforcement Division doesn't like for me to use this word -- is there any other paradigm that you can apply, or any experiences from the credit card world, any experiences from other types of services. I know we talked a little bit about transportation, but are there other kinds of things that you think we should draw upon for this emerging world of telecommunications that we're facing?

David, if you could start.

MR. GILLES: John, in response to your first question about the competitive concerns, I agree that you do not want to so regulate local exchange company billing as to provide a mechanism for the local exchange company to keep out potential new entrants to the marketplace, or make it very difficult for competing local exchange companies or interexchange carriers to bill.

That doesn't mean that we can't set up clear requirements for LEC billing processes that are enforced on a non-discriminatory basis that would promote consumer understanding and provide protections against fraudulent billings, or billings that consumers haven't authorized. I think it may take some effort, but I don't see the two as being opposite at all.

And I've forgotten your second question, John

MR. MULETA: Is there an alternative paradigm? Is there any examples outside of telecommunications that you would rely on?

MR. GILLES: I think that the credit card model is one that should be considered in terms of the consumer protections that are in place for people that dispute credit card charges, and provide limits on liability for unauthorized charges. It's a procedure that has evolved over time, and it is similar in that involves financial entity that is an intermediary between third party sellers, if you will, and the purchasers.

There are a lot of aspects of that which fit with what local exchange companies on behalf of third party providers. I think it's particularly true when you go into the area of non-telecommunications services. I think people expect, and probably would like to be billed on a single bill for long distance and local service. I don't think that people are as interested in getting a mix of things that Charlie referred to this morning, the opportunity to use dedicated credit card in some mail order magazine, to have that monthly subscription charge appear on your phone bill.

Those are the sorts of issues that I think ought to be addressed in approaching this matter.

MR. WILSON: Just in the context of -- those re enforcement issues. Someone this morning talked about moving LEC billing systems into the modern age. I get a bill for my Master Card, and everything is spelled out on there. I know what's on there, where the billing took place, the date, the whole bit. It explains it to me very clearly. It's difficult to understand why similar information can't be provided with respect to some of the LEC billing.

MR. MULETA: You describe, for the purpose of the industry's point of view, I think there is a fundamental change in the nature of the transaction. You're talking about minutes, and they are in the billions. I think that's one of the things that underlies the current, and I know Michael from MCI discussed that. Kim, do you want to talk about the implications of the difference in the underlying nature of the business?

MS. WILLIAMS: Well yes, I guess that's what I wanted to comment on. When I compare it to my credit card, there are sometimes charges on my credit card that I don't actually recognize right away too, and it takes me a while to figure out that the service I bought was -- when it's Lands End and I purchased a sweater, then I know, but sometimes it's not as clear, and I think with the date and time of a call, you can't get much clearer than that.

Was the call really made? That's really what we're talking about today. I think that there is no way to know that. We talked in the FTC meeting the other day about some things that our business offices have to do to really get down to that answer, but you're going out to the central office and trying to pull from the switch what was really dialed. It's not a system that really works to match up against a billing tape. It's not really possible to do that on every call.

What the consumer is getting, I think, is a clear statement of monthly fees and things. It's just that, does he understand what that monthly fee is? The LEC has always said, monthly service charge for their monthly service, and that was always a very clear statement, because everybody knows what their monthly service is. We got into some issues with PUCs where, at least once a year, we had to actually get into more detail about what was actually in that monthly service fee as far as custom calling features and things like that, but monthly service was always pretty easy.

Southwestern Bell simply says, Southwestern Bell voice messaging service. These should all ring a bell with the customer if they've truly ordered these services. I keep going back to that, but I think that is the issue. The bill is concise, it's just what's on there, and did the consumer really ask for it?

MR. MULETA: Lionel?

MR. WILSON: I was just going to say that there is the other side of the bill, and that is, it can become too complicated. It has been argued that it is too complicated in some situations in California. It is too lengthy, and too much information can be provided, confusing the consumer. You get a bill that is four, five, six pages long, we have had complaints on that side. That is a legitimate issue raised by consumers.

MR. COHN: I did have one comment about the usefulness of the credit card paradigm. I think it is useful to look at that, but I also think it's important to distinguish LECs from credit cards in two respects. One is competition. People can't easily choose between LECs as they can credit cards, and you don't really have to sign up for a credit card, where most people do want a telephone service.

The other thing that was discussed was technology. There has been some discussion that perhaps the LEC billing system was not created in such a way as to anticipate this kind of credit card use, and maybe there aren't as many fraud protections. I think that leads to the question, who bears the cost of that? Should the consumer bear the cost of having this potential that the system is easy for fraud to perpetuate on? Or should the merchant be aware, if they are going to use this system, they have to run the risk of consumers not paying their bills?

That's really the question, aside from whether the technology could be changed.

MR. SPANGLER: As we planned this out, and our schedule evolved over a period of a month or so, it was our desire to wind things up by 3:30, recognizing that a number of people have come in from out of town and they have flights to catch. And also, I don't want to say, beat a dead horse, but we've spent a lot of time talking about one issue. What we would like to do is hear questions from any members of the audience, and then conclude by 3:30.

When you raise your hand, a microphone will be handed to you. Please identify yourself and your affiliation.

MS. ADAMS: My name is Sharon Adams. I'm from WelCom. I am wondering at what point the commission is going to do an MPRM and look at this issue, because obviously, between the LECs and the IXCs, we're not going to come to any sort of an agreement on how this is going to be handled. And ultimately, the consumer is going to pay for it. I think, at some point, the commission may have to do that. I am wondering if that's something that's being considered at this point?

MR. SPANGLER: Sharon, we thought you were going to ask questions of the panelists, not of the moderators.


MR. MULETA: I've been dreading this moment all day.


MR. MULETA: Do you want me to take that? I don't think you might have been here in the morning, I think we don't have a conclusion yet. What we wanted to do, as far as my personal involvement for the last two years, this has been an issue we have been thinking about. What's the next step is the question. In 1986, the commission made some decisions regarding billing and collection, and what it's exact relevance is.

I guess at this point, the only thing I can say is that we appreciate the kind of dialogue that we're having, so at least the staff can say, look, the industry's interested in this issue, the public is interested, the state and federal regulators are interested, and if we were to consider doing something, it gives the staff's position some support. But at this point, we don't have a recommendation one way or another. We are trying to identify what the problems are, what the potential solutions are, and where people's heads are on this issue.

MR. NEWMAN: Jay Newman, outside counsel of the Interactive Services Association. The association's been very involved in this issue of billing and collection in connection with 900 number services for the past year or two years. Just last week, we participated in the FTC workshop on this issue and other issues involving 900 number services.

It is our view that the billing notice should clearly disclose the rights and responsibilities of consumers, and we feel there are other protections that the industry needs in certain abuse of consumers, which I'm not going to get into right now. I do have one question, though.

It is for you, Kim. It's a comment that I heard from the panelists about the difficulties that some consumers face in trying to track down the service provider or the appropriate entity to deal with in terms of resolving a billing dispute. My question is this. It's my understanding that, in many cases, the charges for a 900 number service appear on one page of a bill. On that page of a bill, also appears an 800 number for a long distance carrier, like AT & T. Presumably, it's that carrier that that person would call, and that's kind of a one stop shopping where they can get an answer.

What I'm hearing here and elsewhere is that that sometimes doesn't happen. That it's a lot of routing around and getting different numbers. I'm just wondering if you could give me a reality check as to what your experiences are in this area?

MS. WILLIAMS: What we see a lot of, is more in the case of a third party biller, where they're billing for several other entities. On our bill, the names of the other entities would appear. It would say, billed on behalf ABC company or XYZ company, and we even provide the option of including that company's inquiry number on the bill, although I don't think there are very many companies that take us up on that option.

It's that third party that I think the end user has trouble reaching. They might call the interexchange carrier or the billing house, and the billing house will attempt to sustain whatever charges are on the bill, but cannot provide them with further detail. Or if they do just simply sustain the charges, the end user wants to get to, who gave me this service? I want to talk to that company. That's where, I think, there is a little bit of a breakdown. They either can't be reached -- you give them a phone number, and when they try to call there is nobody there or they don't answer -- or sometimes we have consumers have been told that they can write to those companies.

I think that's where we really have some problems, and we do go back to our billing houses when we get those complaints and try to get them resolved on an end user basis, and then try to move forward and say, what can you do to get this company to comply? Our contracts require that they can be reached and that the company with the contract actually resolve the issue. So, we try to resolve that case by case.

MR. SPANGLER: My recollection is, and I'm not sure where this came about, that at least one LEC told us that if a consumer calls the LEC and says, I've called the number on the bill and not been able to get someone who wold discuss the legitimacy of the charge with me, the LEC will simply take it off the bill. IT's a matter of course if the consumer cannot reach a responsible person to talk about the charge with.

MS. WILLIAMS: We will do that in many cases also, and I think we've even taken steps before where we finally said, okay, send out the word to the world, that for this charge you're not going to get anybody. So, you handle the inquiry and take it of the bill if the customer doesn't want to pay for it. We have gone that far in some cases.

MR. SPANGLER: One of the ironies, I think, of the law that exists now is, if you get charged $2.00 for a 900 number call, you are entitled under the TDDRA to know the phone number of the information provider. But, for example, the person who is charged $75.00 for the purported collect call on the example that I gave out, has no right whatsoever to obtain the phone number of that company. In fact, if they had called us and we looked it up in the carrier locator, we wouldn't have been able to give them a number either.

MR. DONALDSON: Charlie Donaldson. New York Attorney General's office. This question is for Ms. Williams. I would like to confirm my understanding of the way the money travels in a billing for a third party. If I understand it correctly, under the billing and collection contract, what actually happens is -- you have a billing aggregator, you've got a service provider, you have a LEC. The billing aggregator purchases the claims from the service provider, and in turn sells those claims to the LEC. Both of these are subject to full recourse, and I assume that there is also a 60 or 90 day true-up on the aggregate amount of billing and collection for a carrier.

So, that in the very real sense, when the LEC presents a bill to the consumer, you are the real party in interest. Now, is there an alternative way of handling that? I understand the value of Article 9 and all that kind of good stuff, and that is the way that the industry does it, but by doing that, you guys are basically putting yourselves in the position of being the guarantor of the validity of the claim. That's when you're at risk.

MS. WILLIAMS: That's true, although when we do purchase the accounts receivables, we do it with a couple of exceptions. Number one, we purchase it on a delayed basis. It's usually 45 days after the fact, which is within our studies, about how long it takes a charge to be billed and collected from an end user.

MR. DONALDSON: That's in my hypothetical. I'm looking for an alternative way to be able to do this.

MS. WILLIAMS: Honestly, off the top of my head, I can tell you that we haven't ever looked at it, as far as I know, we aren't looking at any alternative way. That is not to say that we can't go back and do it, I'm just not sure what the best thing is, other than to delay payment even further. When we purchase, we purchase with some amount assumed to be uncollectible, and some amount assumed to be adjusted.

Our company, we actually have a person who looks constantly at what's being billed and what's being actually paid to us by the companies we have contracts with, and we've actually withheld payment on many occasions, and we hold payments until we know things are being paid for. As soon as somebody looks like they are getting in the hole with us, or that there is a problem, we withhold payment.

We also require that they put up a certain amount of money to be held before they even start billing with us, just to be held like a three month reserve requirement, that we hold onto in case that company does go bad. Then we, at least, still have some money there to cover any adjustments and uncollectibles and things.

So, I understand your question, I'm just honestly not sure of what a good alternative would be, other than to withhold payment even longer. And we do that on a case by case basis, where we see a problem.

MR. SPANGLER: It is now 3:29, I think we'll -- sorry Mike, you had your chance this morning.


John, do you want to close?

MR. MULETA: Somebody handed me, from a card, and asked me to tell anybody who is interested in the OBF organization -- tell me the acronyms. It is Ordering and Billing Forum. If they're interested there's a home page. It's, and after that, good luck.

This is an opportunity for everybody to learn -- maybe if we can hand her the mike.

MS. VAN SKYHOCK: It's, and from there you go to the carrier liaison committee, CLC, hot link. From there, you go to the Ordering and Billing Forum, and from there you go to the Messaging Processing Committee. If what you're interested in is what we've been talking about here today. There are four other committees, and I can't remember what they are. There's Ordering and Provisioning, and a bunch of stuff that's access related, and I should care but I don't.


MS. VAN SKYHOCK: You know what I mean.

MR. MULETA: And hopefully, nowhere near Moldova. I guess, if I were to tie it all, after listening to all of this, to title this public forum, I might say that, things that might kill the golden goose -- I might call this public forum, What Are Things That Might Kill the Golden Goose? We have something that has worked traditionally very well.

I believe around 1980, there were very few complaints to the FCC from common carrier services. Obviously, anybody who has dealt with me on a complaint level, there's a heck of a lot more. But, a lot of them sort of center around billing issues. Even if the underlying problem might be slamming, but it represents itself through a billing mechanism.

What we've done today is talk about all the issue that could impact this. There are competitive issues, certainly. There are consumer protection issues, certainly. There are technical issues, certainly. I believe that we might have to think, and this is a personal opinion, not from any commissioner or commission, but I think we might have to think about underlying technical issues about where the data is coming from. If we figure out that the data is right, then the next question is, how is it being applied, and then we can attack the problems on a step by step fashion.

I encourage anybody who is here and who is interested, talk to the OBF, talk to the carriers, let's communicate. Let's have the dialogue. I believe that the commission is seriously interested in this issue, or we would not have had the forum. I gave you the docket numbers for the petition for rule making as well as for the declaratory ruling.

Put in your comments. Give us the full flavor of what things concern you and what solutions you think are appropriate.

Again, I want to thank everybody who came here. All the panelists for the great thoughts and wise words, and also for the audience, who has sat through until 3:33. I appreciate everyone coming. Thank you very much.


(Whereupon, at 3:33 p.m., the forum was concluded.)











HEARING DATE: June 24, 1997

LOCATION: Washington, D. C.

I hereby certify that the proceedings and evidence are contained fully and accurately on the tapes and notes reported by me at the hearing in the above case before the Federal Communications Commission.

Date: _06/24/97_ _____________________________

Official Reporter

Heritage Reporting Corporation

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Shari R. Bowman-Acosta


I hereby certify that the proceedings and evidence were fully and accurately transcribed from the tapes and notes provided by the above named reporter in the above case before the Federal Communications Commission.

Date: _07/03/97_ ______________________________

Official Transcriber

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I hereby certify that the transcript of the proceedings and evidence in the above referenced case that was held before the Federal Communications Commission was proofread on the date specified below.

Date: _07/07/97_ ______________________________

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