CONTACT: Armando Rendón August 1, 1997 CPUC-072
415-703-1366 (A96-03-007)

CPUC SEEKS TO TOUGHEN RULES ON SLAMMING;

ISSUES 'ZERO TOLERANCE' WARNING TO TELCOS

Warning telephone companies it has "zero tolerance" for slamming, the unauthorized switching of a consumer's long distance service, the California Public Utilities Commission (CPUC) today opened a full-scale inquiry to fashion tougher rules that will better protect the state's consumers from such predatory practices.

A workshop and pre-hearing conference is set for Thursday, September 4, at 9:00 a.m. in the State Office Building, 505 Van Ness Avenue, San Francisco. A CPUC Administrative Law Judge will preside and issue a schedule for the rest of the proceeding.

In issuing today's order, the Commission stated: "we would like to make California the most hospitable place to do utility business, ...but entrants into this market ought to know, that we have zero tolerance for business strategies that are abusive of consumer rights." To protect customer choice and ensure a strong, competitive market, the order added, detection must take place earlier in order to trigger corrective action more quickly.

Today's order invites comments to a series of questions covering various aspects of the slamming issue. Pre-hearing conference statements noting issues that parties would like to address in the proceeding should be filed by August 28 with the CPUC Docket Office. The set of questions may be obtained by writing or calling 415-703-2669 or off the CPUC WebPage: http://www.cpuc.ca.gov.

The Commission cited four recent cases involving slamming allegations. Sonic Communications was prosecuted for numerous slamming violations in order to obtain refunds for customers but it filed for federal bankruptcy protection. In September 1996, Cherry Communications was ordered to cease operations for two years and pay $20 each to customers that had disputed their change of service.

In May 1997, the Commission suspended Communications Telesystems International (CTS) permit for three years, fined the company $2 million and ordered it to refund another $2 million to its customers. CTS had over 56,000 disputes filed against it, and apparently had targeted other-than-English speaking consumers. In December 1996, the Commission ordered Heartline Communications and its affiliate, Total National Telecommunications, to suspend retail operations for 40 months after more than 34,000 consumers alleged that their services were switched by TNT without their authorization.

Prosecuting these cases was expensive and time-consuming, largely due to the incomplete data available on the rate at which slamming was occurring. At present, customers who believe they've been slammed can be returned to their carrier of choice by a request either directly to their old carrier or to their local phone company. Only requests to the local phone company alleging an illegal switch are logged as instances of slamming, so only part of the problem is exposed.

The Commission seeks comment on the effectiveness of SB 1140, which became law January 1, and added new language in Public Utilities Code Section 2889.5, that requires independent third party verification of a change in long distance service. Some of the other key questions are:

Do any CPUC rules and policies need changing in order to assure the law is effectively and efficiently applied?
Should the Commission adopt rules specifically applicable to sales agents and marketers? Are specific rules needed for soliciting customers who are other-than-English speaking?
Also, exactly who may validly authorize a change in long distance carrier? and, in what way? Should a customer receive notice before a change becomes effective? If so, how?
Should the CPUC require local phone companies and long distance carriers to file standard dispute reports? If so, how often and in what form?
Should the fees charged to long distance carriers for disputed switches be increased to make slamming less attractive? Should rules adopted in this proceeding apply to local exchange carriers and competitive local carriers?

Several other questions deal with penalties and reporting duties.

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