Industry Anxious Over, Consumer Advocates Eager For, Cramming Rules

It’s early in the process, but industry is worried -- and consumer advocates are hopeful -- that FCC Chairman Julius Genachowski is serious about implementing the rules he has laid out in the public notice, telecom and consumer lobbyists said Tuesday. Consumer groups were disappointed after Genachowski allowed industry to adopt “voluntary” guidelines to avoid bill shock (CD Oct 18 p1), but is more optimistic on this issue, Consumers Union counsel Parul Desai told us Tuesday. “I think this is a serious problem, so my expectation is that they will try to solve the problem,” Desai said. “There’s a lot of evidence that there’s a problem here and something needs to be done.” Genachowski has been given political cover by West Virginia Democratic Sen. Jay Rockefeller’s investigation and anti-cramming legislation, Desai said (CD July 14 p5).

The most effective solution would be to ban all non-telecom service providers from using wireline telephone bills to collect their fees, 17 state attorneys general told the FCC in a joint letter (http://xrl.us/bmgz6h). If the FCC is unwilling to impose a total ban, the only other option is to require phone companies to block all third-party charges for existing and future customers absent the customer’s affirmative assent to such charges, the letter said. Additionally, the attorneys general urged mandating all carriers implement a procedure by which no third-party charges may be added to a customer’s bill unless the customer affirmatively consents to pay for the service through the telephone bill by means of a call or text message made from the customer’s own wireless telephone device to their telephone company. Additionally, all customers should be offered free blocking of third-party charges on their devices, they said. The letter was signed by attorneys general from Alabama, Alaska, Arizona, Delaware, Georgia, Indiana, Iowa, Kentucky, Maryland, Mississippi, Nevada, New Hampshire, New Mexico, New York, Oregon, Tennessee and Washington.

It’s difficult to track cramming practices given a state’s limited resources, we were told by Carolyn Matthews, senior litigation counsel with Arizona’s attorney general. Arizona began tracking “cramming” complaints last year and has docketed 62 since, she said. More states have started tracking complaints due to increasing cramming problems, she said. Maryland received 183 complaints in 2009, 213 in 2010 and 102 so far this year, said Maryland Consumer Protection Counsel Steven Sakamoto-Wengel. Last year, Maryland’s General Assembly passed legislation that requires express authorization before third party charges may be placed on a telephone bill; allows consumers to block such charges from appearing on a telephone bill; and requires that the name and phone number of the third party vendor be provided to the consumer. The Georgia Public Service Commission received 36 complaints in fiscal 2009 and another 38 in fiscal 2010, Senior Assistant Attorney General Daniel Walsh said.

Frustrated with the volume of complaints, states have tried numerous remedial measures similar to the proposals pending at the FCC, such as improving disclosure and optional blocking, said the joint letter. But the measures are largely ineffective, the letter said. The FCC’s proposed rules don’t go far enough and would offer only minimal improvements, said the Virginia State Corporation Commission. The only way to eliminate cramming completely is to prohibit carriers from billing for third-party vendors, it said.

Industry, though, pushed back in its comments. Banning third-party billing would be “unlawful,” Search Engine Plus said in its comments (http://xrl.us/bmgz75). Proponents of regulations also ignore the benefits of third-party companies such as Search Engine Plus, the company said. “These services are targeted to small businesses that lack the expertise to manage an online presence effectively,” Kelley, Drye telecom lawyers Steven Augustino and Joshua Guyan wrote for Plus.

Verizon was more muted in its comments (http://xrl.us/bmgz8j). The company has “long employed safeguards to minimize instances of cramming,” Verizon said, but the FCC’s role should be limited: “Because various sectors of the Federal Government and certain states have been examining cramming and have a broader jurisdictional reach than the Commission, the most effective role for the Commission is to continue its aggressive enforcement efforts to identify and stop fraudulent third parties.” If the FCC “decides to pursue mandated disclosures by wireline carriers,” though, Verizon said, “the Commission should adopt one minor change. Specifically, the Commission should modify the proposed rule pertaining to ‘Bill Organization’ to avoid customer confusion that may arise when the same billing aggregator’s name appears in multiple sections of a bill.”