blake@pro-party.cts.com (Blake Farenthold) (04/10/89)
{{{ This is the second of three special issues of the [TELECOM Digest] }}}
{{{ which are being posted in their original digest format. -chip }}}
TELECOM Digest Sun, 9 Apr 89 01:58:05 CDT Special: FCC/AOS Regs - II
Today's Topics: Moderator: Patrick Townson
FCC / AOS Regulations: Part 2 of 3 (Blake Farenthold)
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Date: Sun, 9 Apr 89 1:27:54 CDT
From: Blake Farenthold <blake@pro-party.cts.com>
Subject: FCC's AOS Order (Part 2 of 3)
IV. DISCUSSION
9. As an initial matter, we note that the defendant companies are
resellers as defined in _Competitive Carrier_ ^17 and as such, are classified
as non-dominant carriers under our current regulatory scheme. Our decision
to classify resellers as non-dominant was based on our finding that given the
low barrier of entry into the resale industry, resale carriers faced more
actual and potential competition than any other part of the
telecommunications industry. ^18 The policies adopted in _Competitive
Carrier_ are intended to enable resellers and other non-dominant carriers to
respond to the demands of a competitive marketplace without unnecessary
regulatory constraints. We deny the complaint to the extent that it requests
that we depart from the conclusions and policies established in _Competitive
Carrier_. The instant complaint, insofar as it seeks the reclassification of
certain types of resellers, is a request for modification of the Commission's
rules as developed in the _Competitive Carrier Orders_. We cannot, of
course, modify our rules in the context of this complaint proceeding. In any
event, consistent with the policies set forth in Competitive Carrier, we are
satisfied that our complaint process and the remedial actions set forth
herein fully redress the complainants' grievances.
10. We turn next to the issue of alleged unjust and unreasonable
rates. The complainants have relied solely on the assertion that the
defendants' rates are in excess of rates charged by AT&T, the assumed
underlying carrier. ^19 Complainants have cited no Commission authority to
support their implicit proposition that a carrier's rates can be found
"unjust and unreasonable" solely on the basis that they exceed the rates of
some other carrier. The quantity and quality of services vary among carriers
as do their underlying cost structures, all of which could support
significant differences in rate levels. Based on the record, we find no
facts or arguments which would be legally sufficient to sustain a finding
that the defendants' rates are unjust and unreasonable within the
contemplation of Section 201 of the Act. ^20
11. Finally, we address the complainants' allegations of unjust and
unreasonable practices on the part of the defendants in their provision of
AOS services. Part of the rationale underlying the Commission's decision in
_Competitive Carrier_ to relieve resellers and other non-dominant carriers
from unnecessary and counterproductive regulatory constraints was the
recognition that competitive forces in the marketplace would ensure
compliance with the Communications Act. ^21 The Commission found that, in
general, carriers with little or no market power were incapable of charging
rates or engaging in practices which contravene the "just and reasonable"
requirements of the Act. ^22 In relieving non-dominant carriers from tariff
filing requirements, the Commission acknowledged that Title II of the Act
serves as a primary means to ensure that consumers are provided access to
necessary information and to ensure that the Act's objective of just and
reasonable rates and practices were met. ^23 The Commission emphasized,
however, that in the event marketplace forces prove to be inadequate,
remedial actions as may be necessary to protect the public may be taken. ^24
12. Therefore, in addressing complainants' allegations regarding the
defendants' practices, we place particular importance on those statements in
the record which describe the nature and level of consumer information that
the respective defendant companies have provided to their caller/customers.
We are also aware of the volume of informal complaints the Bureau has
received that confirm the existence of many of the problems that are at issue
here. ^25 We are particularly concerned with the current practices of some of
the defendant AOS companies regarding consumer disclosure, call blocking and
call splashing. These practices distort and impede the operation of a fully
competitive operator services industry. After consideration of the arguments
and evidence advanced by the parties to this proceeding, we are persuaded
that the practice of call blocking, coupled with a failure to provide
adequate consumer information, is unjust and unreasonable in violation of
Section 201(b) of the Act. We recognize that some of the defendant AOS
companies deny engaging in such practices ^26 and find the record unclear
with respect to specific practices of each company. Nevertheless, we will
require that to the extent that the defendant AOS companies engage in the
practices we find unreasonable herein, they must adopt certain revised
procedures with respect to consumer notice and call blocking. Moreover,
compliance by any other operator service providers with the requirements set
forth below will constitute an absolute defense to complaints based on the
allegations addressed in this Order.
13. In order to carry out the policies of the Commission's
_Competitive Carrier_ decisions and to eliminate the unreasonable practices
identified above, we order three specific forms of relief. First, the
defendant AOS companies must provide consumer information to their customers
in the form of tent cards, phone stickers, or some other form of printed
documentation that can be placed on, or in close proximity to, all
presubscribed phones. These materials shall set forth the company's identity
(name, address and a customer service number for receipt of further
information) as well as information to the effect the company's rates will be
quoted on customer request. Contracts with call aggregators must contain
provisions requiring aggregators to display these materials on, or in close
proximity to, all presubscribed telephones. In addition, the defendants must
amend existing contracts with call aggregators to reflect this requirement.
The defendants will bear primary responsibility for the implementation of the
above-specified form of notice, and must make reasonable efforts to assure
such implementation within sixty (60) days of the effective date of this
Order.
14. Second, we note that at least one of the defendants did not
specify the degree to which it engages in "call branding". ^27 We find,
however, that even the best examples of call branding practiced by the
defendants ^28 convey insufficient information as to the company's identity,
rates, practices, and range of services. This gap in consumer information
thwarts effective consumer choice and creates the opportunity for any AOS
company to charge excessive rates. For this reason, we find it an unlawful
practice for operator services providers not to identify the company before a
call is connected, including a sufficient delay period to permit a caller to
hang up and/or advise the operator to transfer the call to the customer's
preferred carrier. We order this procedure to be implemented by the
defendants immediately with the effective date of this Order.
15. While the defendant companies, with one exception, ^29 deny that
they block calls, it is clear from the information available to us that call
blocking in fact occurs. ^30 Frequently, contracts between an AOS provider
and its customer provide or permit call blocking by the customer. We find
that call blocking of telephones presubscribed to the defendant AOS providers
or other carriers is an unlawful practice. Accordingly, we order the
defendants to discontinue this practice immediately. The defendants must
amend their contracts with call aggregators to prohibit call blocking by the
call aggregator within thirty days of the effective date of this Order. ^31
16. Call splashing, the process of indirectly routing a call when a
caller requests that the call be handled by a different carrier, often
results in charges that are different than expected because the call has not
been properly rated. Since the transferred call is often billed from a point
other than its originating location, the consumer will often receive a bill
which appears to be incorrect, either as to the rate charged for the call, or
the location called from, or both. ^32 While the actual levels of call
splashing may vary among the five defendants, we are concerned that its
effects be minimized. One possible method of addressing this problem is
identified by Payline in its answer to the complaint. According to Payline,
it attempts to absorb any charges itself which result from call splashing.
^33 Even Payline admits, however, that it has not been able to successfully
address this problem in many instances. ^34
17. The problem of call splashing reflects the technological
characteristics of the network for which a solution can best be found through
the cooperation of service providers including the Bell Operating Companies
and AT&T on an industry-wide basis. Because we are concerned that this
practice may have an adverse economic impact on consumers, we are requiring
the defendant AOS companies to bring this matter before the Carrier Liaison
Committee of the Exchange Carrier Standards Association. We understand that
both hardware and software problems may need to be addressed in any ultimate
resolution of this matter and we require the defendants to provide a progress
report within sixty days. The defendants are required to eliminate
immediately any call splashing that is within their technical capability to
accomplish with their current networks. ^35 The Bureau's Enforcement
Division will closely monitor progress towards a resolution of this
networking problem. ^36
V. CONCLUSION
18. In sum, we find in this order that the practices identified in
the paragraphs above, namely, paragraphs 12, 13, 14 and 15 constitute
unreasonable practices in violation of Section 201(b) of the Communications
Act. To remedy these problems, we identify two mechanisms which will assure
that consumers are properly protected--the identification of the primary
carrier and related information on or in the vicinity of the telephone and a
specific identification of the company by the service provider on line prior
to connecting a call. Further, we order the defendants to give rate
information on request to consumers and declare the call blocking practices
identified in the complaint to be unlawful. Finally, we have put a mechanism
in place for dealing with the industry-wide technical problem of call
splashing. Implementation of the remedies identified herein by any other
carrier, including AT&T, constitute a defense against similar complaints.
19. These remedies, taken collectively, should assure that sufficient
information and options will be made available to consumers in order to
facilitate informed decisionmaking. The consumer should be the key
determinant of which companies in the operator services industry thrive and
which companies do not succeed. If the consumer concludes that some or all
of these companies provide services that they want, the industry will expand
and be financially sound. The steps taken in this Order will permit those
consumer choices to be made soundly and rationally.
20. Accordingly, IT IS ORDERED, pursuant to the provisions of
Sections 4(i), 4(j), 201(b), and 208 of the Communications Act, as amended,
47 U.S.C. sections 154(i), 154(j), 201(b) and 208, and pursuant to authority
delegated in Section 0.291 of the Commission Rules, 47 C.F.R. section 0.291,
that the "Complaint and Petition to Revoke Authority to Operate," filed by
Telecommunications Research and Action Center and Consumer Action on July 26,
1988, IS GRANTED TO THE EXTENT INDICATED HEREIN AND DENIED IN ALL OTHER
RESPECTS.
21. IT IS FURTHER ORDERED, that the "Petition to Intervene" filed on
behalf of the State of Connecticut Office of Consumer Action IS GRANTED.
22. IT IS FURTHER ORDERED that the policies and procedures set forth
and adopted herein shall become effective thirty (30) days from the release
of this Order.
FEDERAL COMMUNICATIONS COMMISSION
/S/
Gerald Brock
Chief, Common Carrier Bureau
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End of TELECOM Digest Special: FCC/AOS Regs - II
*****************************blake@pro-party.cts.com (Blake Farenthold) (04/10/89)
{{{ This is the last of three special issues of the [TELECOM Digest] }}}
{{{ which are being posted in their original digest format. -chip }}}
TELECOM Digest Sun, 9 Apr 89 02:12:49 CDT Special: FCC/AOS Regs - III
Today's Topics: Moderator: Patrick Townson
FCC / AOS Regulations: Part 3 of 3 (Blake Farenthold)
[Moderator's Note: This concludes the special three part mailing. You should
have received two prior sections, each dated about 30 minutes apart from
me Sunday morning. Now take the three parts in your editor; cut out this
additional header information, and paste the three parts together and save
them out for reference/reading at your leisure. PT]
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Date: Sun, 9 Apr 89 1:29:17 CDT
From: Blake Farenthold <blake@pro-party.cts.com>
Subject: FCC's AOS Order - Footnotes (Part 3 of 3)
Footnotes:
1. The defendants referred to herein are as follows: Central Corporation
("Central"); International Telecharge, Inc. ("ITI"); National
Telephone Services, Inc. ("NTS"); Payline Systems, Inc. ("Payline");
and Telesphere Network, Inc. ("Telesphere"). In addition to
defendants' answers, other pleadings filed in this matter include: a
Motion to Respond in Consolidated Manner and Clarify Pleading
Schedule, a Motion to File Late Pleading Schedule, a Motion to File
Late Pleading, a Reply to Answers to Complaint and Petition to Revoke
Authority to Operate, a Motion to File Corrected Copy, and a Corrected
Copy of the Reply to Answers to Complaint and Petition to Revoke
Authority to Operate filed by TRAC/CA; an Opposition to TRAC/CA's
Motion to Reply in Consolidated Manner and Clarify Pleading Schedule,
and a Motion to Dismiss filed by Telesphere. TRAC/CA's Motions were
granted on September 13, 1988. _Order_, DA 88-1432. Finally, the
State of Connecticut Office of Consumer Counsel filed a Petition to
Intervene on August 31, 1988 for the purpose of monitoring the
proceeding. We grant the motion.
2. As the AOS industry has grown, some participants have objected to the
term "alternative" since it implies, they argue, that their companies
are defined only in the context of being an alternative to AT&T. In
response, they have urged the substitution of the acronym "OSP" (for
"operator service provider") for AOS. While noting the concerns of
those members of the industry who prefer the term "OSP" industry, the
more prevalent AOS acronym will be used in this proceeding.
3. AOS providers may also provide operator services for other
interexchange carriers under contract.
4. While the complaints only address "O+" calls, the issues and remedies
are equally applicable to "1+" calls, which include calls from coin
operated telephones which are paid in cash, so-called "sent paid"
telephone calls.
5. Call splashing occurs when a caller requests a transfer from an AOS
company operator to his preferred interexchange carrier. Since the
call is handed off to the preferred carrier in the city where the AOS
company's operations center and switch are located, the point from
which the call will be billed will often be different from the
caller's originating location, and the call may be billed at a rate
different than the caller may have anticipated.
6. Call blocking refers to the process of screening the calls dialed from
the presubscribed telephone for certain predetermined numbers, and
preventing or "blocking" the completion of calls which would allow the
caller to reach a long distance telephone company different from the
AOS company.
7. _Policy and Rules Concerning Rates for Competitive Common Carrier
Services and Facilities Authorization_: _Notice of Inquiry and P
roposed Rulemaking_, 77 FCC2d 308 (1979) ("_Notice_"); _First Report
and Order_, 85 FCC2d 1 (1980) ("First Competitive Carrier Order");
_Further Notice of Proposed Rulemaking_, 84 FCC2d 445 (1981)
("_Further Notice_"); _Second Report and Order_, 91 FCC2d 59 (1982)
("_Second Competitive Carrier Report_"), _recon. denied_, 93 FCC2d 59
(1983); _Fourth Report and Order_, 95 FCC2d 55 (1983) ("_Fourth
Competitive Carrier Order_"); _Fifth Report and Order, 98 FCC2d 119
(1984) ("_Fifth Competitive Carrier Order_"); _Sixth Report and
Order_, 99 FCC2d 1020 _vacated and remanded sub nom._, MCI v. FCC, 765
F.2d 1186 (D.C.Cir.1985).
8. Section 214 provides in pertinent part:
No carrier shall undertake the construction of a new line or of
an extension of any line, or shall acquire or operate any line,
or extension thereof, or shall engage in transmission over or
by means of such additional or extended line, unless and until
there shall first have been obtained from the Commission a
certificate that the present or future public convenience and
necessity require or will require the construction, or oper-
ation, or construction and operation, of such additional or
extended line.
9. _First Competitive Carrier Order_ at 21.
10. Section 201(b) provides that:
All charges, practices, classifications, and regulations for and in
connection with such communications service shall be just and
reasonable, and any such charge, practice, classification, or
regulation that is unjust or unreasonable is hereby declared to be
unlawful.
11. _Complaint_ at para. 15.
12. The Complainants maintain that any suggestion that the informed
consumer can find another telephone is not feasible. The Complainants
state that it is virtually impossible for many consumers (hospitalized
patients, college students in a dorm where all telephones are
presubscribed to the AOS service, etc.) to gain access to a non-
presubscribed telephone. Complaint at para. 22.
13. _See_, _e.g._, ITT Answer at 16-17, Appendix A at pp. 20-21; Payline
Answer at 13; Telesphere Answer at 14; NTS Answer at 16.
14. _See_, _e.g._, Central Answer at 5; Telesphere Answer at 5-6; ITT
Answer at 7, 19; Payline Answer at 15.
15. NTS Answer at 11-12; Payline Answer at 17-19; ITT Answer at 20-21;
Central Answer at 4-5.
16. Central makes the additional claim that it is a carrier described in
Section 2(b)(2) of the Communications Act, 47 U.S.C. section 152(b),
and as such, is not subject to the Commission's Section 208 complaint
procedures. No support is provided for their claim that they are a
2(b)(2) carrier and we find it to be without merit.
17. The _Second Competitive Order_ defines resellers as those carriers
which do not own any transmission facilities but obtain basic
communications services from underlying carriers for resale purposes.
91 FCC2d at 70.
18. _First Competitive Carrier Order_ at 29.
19. We note that complainants have not placed any specific information
into the record regarding the identification of underlying carriers,
but have assumed in most cases that it is AT&T.
20. Contrary to complainants' contention, the Commission did not establish
a standard in the _Second Competitive Carrier Order_ which requires
that resellers price their services at a level no higher than the
underlying carrier's rates. Rather, the Commission noted that the
underlying carrier's rates, which are constrained by Sections 201-205
of the Act, would effectively discipline a reseller's rates because,
if "a reseller were to set its price above the rates of the underlying
carrier or competing carriers, its customers would be expected to
migrate to these other services." _Second Competitive Carrier Order_
at 69. We find that the basis of the "AOS problem" is not their rates
per se, but the practices involving lack of notice and blocking that
restrict a customer's ability to "migrate to these other services [of
competing carriers]", as we contemplated in the Competitive Carrier
proceeding. It is these restrictive practices that we proscribe in
this Order.
21. _First Competitive Carrier Order_ at 20.
22. _Id_.
23. _Second Competitive Carrier Order_ at 70-71. Section 203(a) of the
Act requires common carriers, with limited exceptions, "to file and
keep open for public inspection" schedules showing all charges for
interstate and foreign wire or radio communications.
24. _Id_. at 70.
25. The Bureau's Informal Complaints and Public Inquiries Branch has
received approximately two thousand complaints and inquiries regarding
AOS rates and practices since January 1988.
26. _See_, _e.g._, Central Answer at 5; ITI Answer at 5.
27. _See_ Central Answer at 5. Branding is the process or procedure used
by a carrier, in this case the AOS provider, to identify itself to every
person who uses its service.
28. See _e.g._, Payline Answer at 22; Telesphere Answer at 18.
29. _See_, NTS Answer at 20.
30. _See_, _e.g._, Telesphere's Answer at 14, where Telesphere states that
Telesphere "does not control the handling of calls by call
aggregators" and NTS' Answer at 16, where NTS states that "it does not
block calls that reach its network" and that it "does not request or
require call aggregators that are its customers to block calls made to
other carriers and divert them to NTS."
31. We note that some companies claim to use call blocking to prevent
fraudulent use of the network. Companies who wish to argue that such
blocking should be permitted are free to seek a waiver of the "no
blocking" requirement accompanied by the requisite showing that such a
waiver is warranted. Absent the grant of such a waiver, companies may
not engage in blocking.
32. See, NTS Answer at 18.
33. Payline Answer at 17-19.
34. Payline Answer at 19.
35. We note that NTS filed with the Commission a petition seeking a
Commission declaration that AT&T be required to establish through
rates for transferred calls and a division of charges as a solution to
call splashing. _See_ "Petition for Order to Require AT&T to
Establish a Through Rate and Reasonable Division of Charges," File No.
ENF-89-02, filed November 15, 1988. We are in no way prejudging our
review of the positions set forth in that proceeding.
36. Many of the problems associated with call splashing may be eliminated
when call blocking ceases, since customers will be able to dial their
carrier of choice directly.
=================================
[Moderator's Note: All the thanks for this effort belong to Blake, who can
be contacted at the addresses below if you wish to drop a note of thanks
to his attention. PT]
ty!blake
ARPA: crash!pnet01!pro-party!blake@nosc.mil
INET: blake@pro-party.cts.com
Blake Farenthold | CIS: 70070,521 | Source: TCX023
P.O. Box 17442 | MCI: BFARENTHOLD | GEnie: BLAKE
San Antonio, TX 78217 | BBS: 512/829-1027 | Delphi: BLAKE
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End of TELECOM Digest Special: FCC/AOS Regs - III
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