Congress to get tough on slammers

Slamming legislation will likely pass Congress this year after Republicans and Democrats iron out differences between their bills to outlaw the switching of customers' telephony providers without their knowledge or consent.

Reacting to both a growing number of complaints and foot-dragging on new rules by the FCC, legislators have introduced 14 bills to combat slamming. The leading contender is a bill sponsored by Rep. Billy Tauzin, R-La., chairman of the House telecommunications subcommittee.

"It's a reaction to the thousands of complaints from consumers," said a Tauzin spokesman. "It's an offensive practice and it should stop." The FCC received more than 20,000 slamming complaints last year, making it the single largest complaint category. The agency will hold off on long-awaited rules until the president signs an anti-slamming bill into law, a staff member said.

Tauzin's bill would establish new verification procedures for carrier switches, give states the right to sue slammers and allow the FCC to levy stiff fines-at least $40,000 for a first slamming offense and $150,000 or more for additional offenses. It's similar to a bill sponsored by Senate Commerce Committee Chairman John McCain, R-Ariz., which unanimously passed the Senate in May.

With popular support inside and outside Congress, observers predicted a bill will land on the president's desk by the time Congress adjourns in October and maybe as soon as its break in early August. A markup of the bill could come this week.

The main task is to reach a compromise with Rep. John Dingell, D-Mich., ranking minority member of the House Commerce Committee who has his own slamming measure.

"There aren't major differences. They're in the same church in different pews," said a Bell company lobbyist.

"The Dingell approach tends to rely more on empowering consumers," while the Tauzin/ McCain approach gives more authority to the FCC, said David Gusky, vice president of the Telecommunications Resellers Association. Dingell's bill would have the Federal Trade Commission, not the FCC, enforce slamming violations, with fines of $10,000 per incident.

It also would allow subscribers to sue in state court to recover the greater of $500 or actual damages, a provision not in the Tauzin and McCain bills.

"Mr. Dingell thinks the FTC has more expertise in protecting consumers from carriers" than the FCC, said Dingell legislative assistant Bill Anaya.

Republicans disagree and, despite their own frustrations with the FCC, are almost certain to let the agency retain its authority over slamming matters.

Although generally supportive of Congress's anti-slamming crackdown, industry groups object to details of the legislation.

"Stopping slamming now, before it can spread to the local exchange market, is critical," H. Russell Frisby Jr., president of the Competitive Telecommunications Association, testified recently before Tauzin's subcommittee.

However, Dingell's provision allowing consumers to sue slammers should be taken out of the final bill, said CompTel. Dingell argues that FCC enforcement so far has yielded "too little, too late," and that fines have gone to the U.S. Treasury while defrauded consumers recovered none of the charges they paid to slammers. But the provision could encourage "unscrupulous consumers and enterprising class-action lawyers to file questionable suits against carriers," Frisby testified. Victims of slamming currently can complain to the FCC or a state attorney general.

Meanwhile, the TRA opposed a part of Tauzin's bill that requires "switchless" resellers to buy surety bonds, a type of insurance that would ensure slamming penalties are paid if these carriers can't pay. The reasoning is that switchless resellers, which lease network facilities to resell phone service, are most likely to engage in slamming.

"We just think it's discriminatory. Most switchless resellers are small businesses who are least able to afford surety bonds," which could cost up to $10,000 a year, said Gusky. "It's overkill. There's no evidence that shows switchless resellers are the culprits."

SLAMMER FINED All American Telephone Co. Inc. is in line for a $1.04 million slamming fine by the FCC. The Fort Worth, Texas-based company apparently used falsified authorization forms, some with forged signatures, to switch 13 consumers' long-distance carriers without their knowledge or permission, the FCC says. All American, which told regulators it credited the wronged customers, has until Aug. 6 to appeal.

FCC TO STUDY ADVANCED TELECOM Federal regulators will begin to study the nation's deployment of advanced communications networks next month. The Bell companies are pressing the FCC to let them sell high-speed data services over new networks, but opponents say the telcos must first comply with legal requirements for selling in-region long-distance. The National Telecommunications Information Administration last week sent the FCC guidelines supporting the opponents' position.

TELCO TRIES AGAIN BellSouth is taking another stab at selling long-distance in Louisiana. After months of discussion with the FCC, which rejected its original bid in February, the RHC filed a new application and withdrew its appeal of the FCC's first denial. The telco cites more local competition, improved interconnection and better operations support systems.

Cramming-the billing of telephone customers for optional services they never intentionally ordered-is getting more attention from Congress and consumer advocates.

At least three bills in Congress take on this relatively new consumer fraud, which ranked as the No. 1 complaint to the National Consumer League during the first five months of 1998. The league's fraud hot line logged 1611 cramming complaints during that period. The FCC has received 2527 complaints since December. Neither organization tracked cramming complaints separately last year.

Experts say cramming is on the rise because of the ease of obtaining phone numbers and the complexity of phone bills, which many customers don't scrutinize. As with slamming, customers often don't detect the scam until after it's occurred.

Crammers are often third-party service providers or billing aggregators that submit charges to local telcos, which bill for them. The bogus charges, for services such as voice mail and call waiting, may total just $3 to $5 monthly, but the amounts add up over time.

While several local exchange carriers have adopted voluntary measures to combat cramming, "current law is inadequate to protect consumers," said John Dingell, D-Mich., who introduced a bill in early June to halt the practice.

Dingell's bill would give victims a full, immediate refund of crammed charges if they notify their LECs within 90 days. It also would require the Federal Trade Commission to write rules outlining specific unfair practices, ensuring that charges are easily identified on phone bills and letting consumers block the billing of extra services.

In addition, Dingell's bill would allow telcos to discontinue billing on behalf of known crammers-a step several carriers have taken already. BellSouth in May announced that it won't bill new services for other providers for three months, among other measures. It's too early to tell if the program has cut cramming, a spokesman said.

In the meantime, the FCC last week released a voluntary code of "best practices" to fight cramming. The guidelines include tighter screening of service providers, end user verification of billed services and dispute resolution procedures.

Penalties: The FCC can fine slammers $40,000 or more for a first offense, $150,000 or more for additional offenses; it can award victims greater of $500 or actual damages, treble damages are possible; states can file civil suits

Verification: Subscribers must affirm their intent to select a new provider and service; verify switch in oral, written or electronic form; carrier/reseller must notify subscribers of change in writing within 15 days of processing a request

Complaints: Carrier/reseller must resolve complaints within 120 days; FCC must resolve complaints within 150 days

State actions: States can sue for the same penalties as the FCC; federal law doesn't pre-empt state law

Other provisions: Victims can pay original carrier at original rates; switchless resellers must buy surety bonds; FCC must report to Congress; ISPs can sue senders of unsolicited e-mail for up to $15,000