Contact: Kyle DeVine 213-897-4225 May 21, 1997
I96-02-043 CPUC 533

CPUC SUSPENDS AND FINES CTS; ORDERS REFUND

AND PENALTY TO BE PAID TO STATE

The California Public Utilities Commission (CPUC) today cracked down on Communications Telesystem International (CTS) for slamming:

• In-state long distance toll call service is suspended for three years,
• CTS is fined $2 million,
• CTS must pay $1.9 million in equal payments to the more than 56,000 consumers who filed disputes claiming CTS slammed them, and
• The company must reimburse the Commission $100,000 to cover costs to prosecute the case and manage mailing the refunds to customers.

CTS may resume business after its suspension is over, but will not be permitted to directly contact local service carriers, on behalf of its consumers, and switch the consumers' long distance companies. The Commission revoked this privilege because of CTS' failure to comply with statutory procedures and the high number of consumer disputes stating CTS had initiated changes without their consent. The amount of disputes exceeds the industry average by more than 309 percent.

The Commission determined that CTS could be fined $19.6 million because of its "Stay With Us" program which trapped customers by automatically switching them back to CTS after the customers chose other carriers. All but $2 million of the fine - which shall be paid to the State General Fund - will be stayed if CTS stops violating state laws or Commission directives. The Commission has authority to fine utilities between $500 and $20,000 for each offense. CTS indicated 70 percent, or 39,200, of the disputes were caused by the program. Therefore, the $19.6 million fine covers $500 for each of the 39,200 disputes.

-more-

CPUC Suspends and Fines CTS - page 2

CTS will notify its current in-state customers that it is not permitted to provide service in California and will reimburse all fees customers must pay to transfer from CTS to another carrier.

The CPUC, in rallying to its mandate to protect consumers, has taken further steps to see that the utility's abuses stop. The actions the Commission has taken against this company apply to any successor entities, and any requests to operate submitted by a company which employs current or former CTS officers or shareholders shall be carefully scrutinized.

The Commission is taking this action because its investigation discovered more than 56,000 consumers had filed disputes with Pacific Bell and GTE California claiming they had been slammed - switched without their authorization - by CTS from 1994 to March 1996. CTS did not respond to consumers' calls and letters, and consumers were further frustrated by CTS' "Stay With Us" program.

Previous actions the Commission has taken against this company include prohibiting CTS from submitting orders to local service providers to change customers' long distance services while the investigation was ongoing. Then in July 1996, the Commission censured CTS when its staff disrupted a press conference which the Greenlining Institute, a consumer advocacy group, held to announce their involvement in the CPUC proceeding and seek witnesses.

###