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Re: Report and Order and Further Notice of Proposed Rulemaking, In the Matter of Truth-in-Billing and Billing Format (CC Docket No. 98-170).

When we initiated this proceeding several months ago, I wrote separately to express my firm support for the Commission taking steps to ensure that customers have accurate, meaningful information in a format they can understand. I underscored that the proper functioning of a competitive market depends on consumers having such information. On those bases, I was pleased that we had initiated this proceeding, just as I am now pleased that we are taking additional steps in this Order to address the egregious problems of slamming, cramming and related consumer confusion. I also support our decision here that, to the extent we impose requirements in this area, they will for the moment be broad and flexible in form, so as to allow carriers to minimize compliance costs and to differentiate their billing practices for competitive purposes.

As a devout advocate of vigorous enforcement, I am convinced that the government - whether this agency, another federal agency or the states - can play a significant, beneficial role in protecting consumers from demonstrable harms such as slamming, even in the context of competitive telecommunications markets. Although policymakers may disagree about the extent, form or timing of consumer protection efforts, I believe it is entirely appropriate for government to become concerned if carriers engage in abusive practices, particularly where competitive choices by consumers and voluntary actions by the industry cannot effectively stem such abuses.

Some of These Requirements Seem Unnecessary or Ill-Suited to Achieve Their Stated Purposes

Regrettably, however, I am not fully convinced of the necessity or value of some of the rules we adopt in this Order. I fail to understand, for example, why we feel the need to require carriers to put their names on bills when the carrier bills directly for its own services, a practice that occurs among both wireline long distance companies and wireless companies. Is there any factual or logical reason to think that a carrier would send a bill to a consumer without indicating whom the consumer should pay? It is difficult to dispute the value of such information, but equally difficult to imagine the omission of such information in a commercial enterprise, absent this federal requirement.

I am similarly troubled by our proposal to adopt uniform labels for line items that carriers include on their bills to recover their federally-mandated payments, such as access charges and contributions to universal service. In contrast to the celebrated flexibility of most of the requirements adopted in this Order, the Commission proposes to require that specific words and phrases be used when a carrier chooses to recover its government-mandated universal service and other charges explicitly,(1)

as we allow them to do. The Order offers two justifications for diverging from the reasonable flexibility it permits with respect to the other rules, neither of which seems convincing. First, the Order states that the line item labeling proposal will enable consumers to use the labels to "comparison shop" among carriers, so as to obtain the best deal with respect to the recovery of those federal mandates.(2)

Yet our rules also allow carriers to recover their federal charges by burying the amounts passed on to consumers in their interstate rates.(3)

Thus, even if we adopt uniform labels for line items, consumers will remain powerless to compare the manner in which carriers that use explicit line items to recover their federal charges against carriers that essentially hide such recovery in their other rates.

Second, the Order states that the line item labeling proposal will prevent such labels from becoming false or misleading. Yet I fail to understand why, if the purpose of uniform line items is truly to avoid false or misleading characterizations of these charges, the Commission refuses to make clear that carriers may indicate that their own contributions to universal service and other federal requirements are mandatory, and that the Commission allows carriers to recover the amounts associated with these requirements directly from consumers. Although some may prefer that carriers simply conceal recovery of their required contributions in their rates, it is beyond question that the previous Commission expressly allowed carriers to do so, as we recently acknowledged.(4) In any event, I remain concerned that we avoid formalisms and semantic hair-splitting regarding the extent to which the Commission is or is not responsible for the appearance of politically-unpopular line items on consumers bills. Carriers would not be putting these line items on their bills if we were not requiring them to pay the underlying charges or if we did not allow carriers to recover these charges from end users. Thus, try as we might, we cannot escape the fact that these line items do result, at bottom, from actions taken by the government to preserve and advance universal service, and to achieve other valid goals pursuant to the 1996 Act.

The Order Relies on Flawed Premises Regarding the Role of Competition in Consumer Protection

But the strongest of my misgivings about this Order centers around the flawed premises justifying our imposition of these requirements. First, these premises include faulty, poorly supported assertions and implicit assumptions that competitive markets are categorically and in all circumstances unable to protect consumers from the types of harms we address in this Order.(5) Second, I fear that these underlying premises, when juxtaposed with Congress' mandate that the Commission eliminate and forbear from unnecessary regulation, are either inconsistent with the provisions and purposes of the 1996 Act or would require the Commission to adopt requirements from which we will almost immediately forbear, a result that I find nonsensical.

Markets and Competitive Choice Provide the Most Fundamental Mechanisms for Protecting Consumers

It is axiomatic that one of the most important benefits of competition is that it gives consumers the ability to change providers to obtain the best rates, terms and conditions for their individual needs. As such, competition empowers consumers to leave their provider and find another if their current provider does not treat them fairly. Furthermore, the threat of consumer churn and the related downward pressure on profitability(6)

provides an important in terrorem effect that encourages providers to do everything possible to avoid losing customers to the competition, including avoiding inaccuracies and misleading information in their bills. Simply put, the risk to providers of engaging in fraudulent practices in a competitive market is that consumers will soon discover these practices and cease to generate revenues for those providers. Of course, some minority of providers may choose, nonetheless, to misbehave in a competitive market in ways that are not easily rectified through voluntary actions by the industry. It is for this reason that, even in a competitive market, government enforcement may be necessary to stop certain companies from continuing to engage in harmful practices.

Despite these truisms of competition, the Order suggests in a number of places that requirements like those we adopt here will always be needed in every market, no matter how competitive.(7)

These unsupported, blanket assertions are troubling for their unstated, paternalistic judgment that consumers are ill-suited to protect themselves even when they are empowered to escape harm by choosing a new provider. Indeed, these assertions ignore the likelihood that market forces may generally be more effective in eliminating harms to consumers than government intervention. Recent events suggest that this likelihood is indeed real. Several major carriers (including Ameritech, Bell Atlantic and Bell South) have unveiled or will soon unveil simplified new bills that will help them to retain customers and respond to the competitive pressures imposed by billing innovations introduced by new entrants.(8)

And these carriers are doing so for the most part without government mandate. I agree that we should celebrate these competitive benefits to consumers but, in the parlance of this item, it would not be "truthful or non-misleading" to suggest that these actions have resulted primarily from the actions of regulators. Rather, market forces are largely responsible for the improvements we are seeing and will continue to see.

Even worse, the Order's assertions that government intervention is always necessary to protect consumers ignore the clear evidence on the record indicating that the problems of slamming, cramming and consumer confusion may not be significant in certain telecommunications markets, such as wireless, and among certain carriers, such as those that bill consumers directly only for their own services. Although complaints on these issues from wireline customers number in the tens of thousands annually, for example, complaints from wireless customers number only in the dozens - an order of magnitude fewer even if one controls for the smaller number of total wireless customers relative to wireline customers. This record suggests that it is unnecessary to impose these requirements on some carriers in order to ensure that consumers have access to useful and accurate information.

The Order's Assertion That These Requirements Are Necessary in All Circumstances is Inconsistent With the Act's Mandate That the Commission Eliminate and Forbear From Unnecessary Regulation

Given the record evidence that market or other factors appear to be sufficient to protect consumers in some instances, the big question that remains is: whether and to what extent companies will provide useful information voluntarily or whether government intervention will become necessary. Unlike some, I believe that Congress has already answered that question for us. Specifically, Congress has commanded that we look in the first instance to the market to determine what carriers provide their customers, and only when it is clearly demonstrated that the absence of regulation will harm consumers should we intervene.

The statute makes clear (through mandatory section 10 forbearance, biennial review, and the "pro-competitive, de-regulatory national policy framework" of the Act) that Congress has decided that markets should replace regulation except where actually necessary to protect consumers or to maintain just, reasonable and nondiscriminatory rates, terms and conditions.(9)

As such, I feel strongly that we should only be imposing new regulations - however general or flexible - where necessary to correct well-supported, identifiable harms to consumers or "just and reasonableness" problems. Thus, I can support the application of these new requirements on certain wireline companies. I cannot, however, support imposing these same conditions on CMRS providers. Because CMRS carriers are excluded from equal access obligations, CMRS customers are less likely to experience slamming with respect to that service.(10)

Further, CMRS customers also are unlikely to experience cramming with respect to that service, because CMRS carriers generally only bill for their own services, thus making one of the requirements we adopt here largely inapplicable.(11)

In addition, the record clearly lacks substantial evidence that there are problems that need correcting in the CMRS context, as the Order also concedes. Although there appears to be some lack of clarity in how inquiries by CMRS customers are categorized, there is a huge magnitude of difference in the number of slamming, cramming and universal service complaints for wireless, relative to wireline.

I also reject any notion that we should allow enforcement to degenerate into imposing broadly rules with the understanding that we might forbear in the future. If the Act means anything, it means that we should not impose regulations just for the sake of uniformity or to enact some grand regulatory plan. Sure, we could impose regulations and then wait for parties to petition for forbearance, but why impose unneeded rules just so we can remove them later? Notwithstanding these shortcomings, I applaud the majority's thoughtful decision not to impose the requirement adopted here regarding descriptions of billed charges on CMRS carriers.(12)

Enforcement and Consumer Protection Should Not Provide an Excuse for Additional Regulation

Since taking office, I have spoken often about the importance, in promoting competition and deregulation, of shifting regulatory resources from drafting complex prophylactic rules to vigorous enforcement. The term "enforcement," like "competition" itself, has taken a prominent place in telecom regulatory rhetoric; no one would be caught dead saying that they did not support strong enforcement. It's like Mom and apple pie.

But we should be careful what we mean by enforcement. To be consistent with the Act, enforcement cannot become a means of extending regulation, a sort of "full employment" regulatory approach for an agency concerned about making sure it continues to play an active role as we transition to competitive markets. Rather, enforcement must be targeted so that government intervenes - only when and only to the extent - the record demonstrates that there are real, identifiable harms that the market participants' voluntary actions will not correct.

It is critical to the process of regulators ceding control to the market that enforcement not become a solution in search of a problem that has not yet been identified. Neither should we suggest that we do not need a problem to solve in order to justify imposing additional regulatory burdens on market participants, simply because we believe those requirements may benefit consumers. If such an unprincipled approach were valid, there would be no limit to the requirements we could impose on carriers in the name of consumer protection. Indeed, the sad irony of imposing such unnecessary requirements is that doing so would thwart Congress' directive that we use competitive markets and deregulation to benefit consumers.

Having expressed these reservations, I look forward to working with my colleagues to ensure that consumers have access to knowledge that will truly help them make more informed buying decisions.

1. Order at 54.

2. Id.

3. See, e.g., Federal-State Joint Board on Universal Service, CC Docket No. 96-45, Report and Order, 12 FCC Rcd 8776, 9209, 851 (1997) (Universal Service Order)).

4. Virginia State Corp. Comm'n v. MCI Telecommunications Corp., 1999 WL 152543, FCC 99-42, File No. E-99-01 (rel. Mar. 22, 1999), 19 (allowing carrier to recover universal service contributions from end users via line items on bills because "[t]he Universal Service Order generally permits, but does not require, carriers to recover the cost of their universal service contributions from their 'customers of interstate services'") (emphasis added) (citing Universal Service Order, 12 FCC Rcd at 9209, 851).

5. See, e.g., Order at 7 ("Even in competitive markets, however, disclosure rules are needed to protect consumers.") (emphasis added); id. at 7 n.17 ("Because mature markets also require disclosure rules, we disagree with ALTS' argument that any confusion over billing formats that exists today is merely the result of the transition to fully competitive telecommunications markets."). The erroneous notion that competitive markets are unable to protect consumers is also implicit in our apparent decision to seek comment on whether to forbear only from the requirements the Order declines to impose on CMRS carriers, rather than forbearing from all of these truth in billing requirements with respect to these carriers. Order at 68 ("[W]e believe that all consumers expect and should receive bills that are fair, clear, and truthful. However, absent evidence that there is a problem with wireless bills, it might not be necessary to apply the remaining rules in the wireless context.") (emphasis added).

6. See generally Frederick F. Reicheld & Thomas A. Teal, The Loyalty Effect: The Hidden Force Behind Growth, Profits, and Lasting Value (Harvard Business School Press) (1996) (documenting quantitative research demonstrating that firms that retain customers dramatically improve their profitability by improving revenue growth, learning and productivity).

7. See supra note 5.

8. See, e.g., Kathy Chen, Miracle of the Bells: the Simplified Phone Bill, Wall St. J., Apr. 12, 1999, at B1.

9. Congress was unmistakably clear in its judgment that the Commission must rely on markets and competition, rather than regulation, to oversee the development of communications and information services markets. See 47 U.S.C. 160 ("[T]he Commission shall forbear from applying any regulation or any provision of this Act . . . if the Commission determines that . . . enforcement of such regulation or provision is not necessary to ensure that . . . charges, practices, classifications, or regulations . . . are just and reasonable . . . ; enforcement of such regulation or provision is not necessary for the protection of consumers; and forbearance . . . is consistent with the public interest.") (emphases added); 47 U.S.C. 161 (requiring the Commission to review "all regulations" every two years to "determine whether any such regulation is no longer necessary in the public interest as the result of meaningful economic competition between providers of such service"); Joint Manager's Statement, S. Conf. No. 104-230, 104th Cong., 2d Sess. 1 (1996) (conference report indicating that purpose of 1996 Act is "to provide for a pro-competitive, de-regulatory national policy framework designed to accelerate rapidly private sector deployment of advanced telecommunications and information technologies and services by opening all telecommunications markets to competition . . .") (emphases added).

10. Order at 16.

11. See cf. Order, Appendix A, 47 C.F.R. 64.2001(a)(2) (limiting requirement of clear and conspicuous notification of new service providers to situations "where charges for two or more carriers appear on the same telephone bill").

12. Order, Appendix A, 47 C.F.R. 64.2000(b). The Order also declines to impose the requirements pertaining to changes in service providers, as well as to "deniable" and "non-deniable" charges, on CMRS carriers. Id. These rules, however, would be largely inapplicable to CMRS carriers anyway, given the nature of the charges billed and the fact that CMRS carriers generally bill directly and only for their own services.