NOTE: THIS DOCUMENT WAS FILED AS COMMENTS AS PART OF THE FCC's "TRUTH IN BILLING".THOUGH SOME OF THE ITEMS WERE DISCUSSED AND WITH THE SUPPOSED PLAN TOWARD MAKING PHONEBILLS MORE READABLE, VIRTUALLY NONE OF THE IMPORTANT ISSUES WE BROUGHT UP HAVE BEEN ADDRESSED BY THE FCC.
Comments Of New Networks Institute CC Docket No. 98-170
Before the
FEDERAL COMMUNICATIONS COMMISSION
Washington, D.C. 20554
CC Docket No. 98-170
COMMENTS OF NEW NETWORKS INSTITUTE
Bruce A. Kushnick
Executive Director
New Networks Institute
826 Broadway, suite 900
New York, NY 10003
212-777-5418
Dated: November 5th, 1998
Introduction
In 1993 and 1995 New Networks Institute (NNI) conducted
two independent, nationwide surveys of consumers to
ascertain what customers knew about the charges on their
telephone bills. (1) The findings were startling:
0% of consumers can correctly answer basic
questions about the charges on the phonebill,
including simple questions about the price of a
service, or whether they were even paying specific
charges, such as the FCC Subscriber Line Charge.
And the responses didn't change regardless of the
customers' income, age, where they lived, or even
if they "read the bill stuffer" (the information
with the bill) or "read the entire bill every
month".
The bottom line is that virtually no one in America
understands their telephone bill.
The FCC is currently examining ways to improve the
readability of telephone bills, with the hopes of increasing
customer awareness and curtailing what is now referred to as
"Cramming", (the charging of customers for services they
never ordered) and Slamming (when a customer is transferred
to a different phone company without permission). According
to the FCC, cramming is on the rise and will become more
significant with the addition of competitors.
It is our belief that, for too long, the telephone
bill has acted like a shield against consumer complaints of
their telephone services. With virtually no one being able
to figure out their bills, the consumer has been totally in
the dark about their phone charges. Giving the consumer new
information could be a powerful tool in changing
telecommunications. However, NNI questions if the FCC and
the states have the courage and tenacity to create
meaningful change. We applaud these new efforts, and hope
this filing is useful in your decisions.
However, our research clearly indicates that what needs
to be done is a great deal more than simply cosmetic changes
to the current phonebills. Another NNI report titled
"Telephone Charges In America" (2), found that in order to
fix the problems to help customers understand their bill and
be protected from wrongful charges, the FCC and the states
must also examine the root causes of the problem.
These include:
- Examining the serious lack of consumer education by the phone companies, even though many states mandate education by law.
- An examination of mislabeled or hidden charges that are nothing more revenues to the local phone companies.
- An Examination Of Current Bell And Local Phone Company "Cramming". While cramming has become a public issue, it is not a new phenomena, but a practice that the Bells and other local phone companies have been engaging in the practice over the last decade. Of course the recent rash of cramming and slamming by the long distance companies and other less scrupulous parties also must be stopped. (We will recommend what we consider to be viable, efficient options to these problems.)
- Examining Telecom Advertisements That Are Misleading Or The "Fine Print" Is Unreadable. From Cellular phone or the prepaid card offers which do not include all of the ancillary charges, or the "Fine Print", which is literally so small as to need a magnifying glass, many advertisements lead directly to consumer phonebill problems.
- The Current Phonebill Is A Regulatory Mess, allowing various legal entities to add charges without any ONE regulator examining All of the charges for Bell profits.
The rest of this document will discuss the issues we'veoutlined.
We Are Recommending:
- The FCC broaden its investigation to examine Consumer Education, including accurate information not currently supplied.
- The FCC should help institute a "One Page" bill (as described)
- The FCC should institute a "One Number to Call"for complaints, (as described)
- "Total Bill Analysis": One regulator should oversee the process of charges on the bill.
- The laws about cramming should be strengthened by using financial penalties and suspending company business licenses or using legal remedies in extreme cases.
- Also, the FCC and the state's Attorney Generals should consolidate cases to allow for multiple state investigations of one company.
- Fine Print advertising must be eliminated and all charges should be clearly shown.
Customer Confusion Over Phone Services is Universal: What
Do Customers Know About Their Phonebill Charges? Virtually
Nothing.
In our consumer surveys we tried to find out what
customers knew about the charges they were paying. And the
answer was clear. Virtually no one in America has a clue
about their phone bills, even if they stated they "read the
entire bill."
For example, we asked about the price of local
directory services and when the customers' answers were
compared to their actual charges, only 2 out of 1000 got the
correct results. Moreover, we found that almost half of the
population, 46%, believe that Directory Service is "Free"
or that their local service includes "free" calls.
How does this lack of education effect the customers?
In many cases, customers who thought Directory was free in
their states, were actually paying 30¢-50¢ per call. We
found numerous cases of customers making $3-$5 per month in
directory and NOT knowing it cost money!
And there are a number of reasons that causes customer
confusion about Directory charges.
First, Directory used to be free in most states before
the creation of the Bells in 1984. and since there has been
no consumer education, many, especially SENIORS, have no
idea that there are no free calls with local service.
Secondly, there is absolutely no rhyme or reason for
Directory prices --- In fact, there 50 states and over 50
prices for local Directory Assistance, which can vary 2000%
for the same service. For example, in New York City the
customer pays about 50¢ per call, counting tax, with no free
calls. Meanwhile, another NYNEX/Bell Atlantic state,
Massachusetts, found directory so profitable that in 1997,
customers still got 10 free calls, and the profits even
paid for paid for E911, which in New York City was an
additional 35¢. All told, counting taxes, the difference is
over 2000+% in directory pricing.
Our research indicates that it simply adding
information to the bill will not help this problem. Many
states do contain fine print about this today. The problem
is that there is no consumer education, even though it is
mandated in numerous states, and therefore, calling this to
the attention of the customer is the last thing phone
companies would care about. They make more money from those
who are not informed.
In order to fix this problem, the phone companies
should have fulfilled their monopoly obligations to tell
their customers of the costs as well as making the costs
policies clear on the phonebill.
The Names of Products And Most Information On The Bill Are A Cipher.
Other phonebill charges have different problems. There
is virtually no consistency with any names for almost any
service, or even why the charges exists. For example, take
the FCC Subscriber Line Charge. According to the FCC:
"The federal Subscriber Line Charge (SLC) defrays a portion
of local exchange costs that have been allocated to
interstate toll (long distance) services." FCC, 1993
However, you would never know it from the vague
definitions used by the phone companies on their telephone
bills or in their directories, highlighted in the exhibit
below. Notice how none of these definitions match either
the FCC's definition or each other's. Also notice that the
charges are "mandated", or "ordered" by the FCC.
EXHIBIT
"FCC Line Charge" Descriptions by Telephone Companies, 1993
- ¥"Line charge ordered by the Federal CommunicationsCommission" New York Telephone bill 1993
- "Mandated Charge Interstate Subscriber Line Charge" GTE bill, 1993
- "A monthly charge required by the FCC rules, for costs to connect your phone to the network" Detail, NYTelephone bill, 1992
- "Charges for Network Access For Interstate Calling, Imposed by Federal Communications Commission" Pacific Bell phone bill, 1993,
- "Access Charge Per FCC Order" Ohio Bell telephone bill 1993,
- "The Federal Subscriber Line Charge" is an access charge authorized by the Federal Communications Commission. This charge defrays a portion of the fixed cost of providing your access to the local network" C&P Virginia Telephone Directory, 1993
Sources: Telephone Bills & Directories, New Networks Institute., 1993
It is no wonder that the overwhelming majority of
customers state that they are either not paying this service
or do not know if they are, and virtually no one knows what
this service costs. This in contrast to the fact that every
customer pays this service and it cost $3.50 a month (in
most states).
Telephone Charges on the Phonebill Can Be Hidden Revenues
for the Bell And Local Exchange Companies
If the overwhleming majority (67%) didn't know that the
FCC Subscriber Line Charge was on their bill or even if
whether they were paying it, the other serious issue is that
almost all subscribers, when asked about the name, THOUGHT
THE REVENUE WAS GOING TO THE FCC. The truth is that this
charge is direct revenues to the phone companies. However,
because of the name, consumers thought that it was monies to
support the FCC's activities.
This is a serious, yet common problem with the name of
the service, or even where the money is going. For example,
many of the charges that sound that they are in the public
Interests are also revenues to the phone companies and this
can include E-911, or Deaf Relay.
The most blaring example comes from the New York City
area. On the phonebill is a tax called the "NYS/MTA" tax.
And though it appears every month, the definition has only
occurred a few times, for example, a bill stuffer from NY
Telephone, June 1991. However, on the last NYNEX bill it
never gave a definition and on the current Bell Atlantic
bill there it simply states "local and state taxes"
The "NYS/MTA" allows the Bell to have the customer pay
the company's taxes - a tax that adds 7% to the entire bill.
"New York Telephone pays taxes too. The company
must pay a New York State Gross Income Earnings
tax, which we are permitted to recover as a
surcharge to consumers and appears on your bill as
a 6.5% New York Surcharge. This surcharge applies
to monthly and one time charges and to most calls
made within the state".
In fact, the NYS/MTA surcharge is actually a 2 part
charge, the majority, 6.5% going directly to pay New York
Telephone taxes. However, there is also an "MTA" surcharge,
about 1%, which goes to the Metropolitan Transit Authority,
the organization that runs the buses and subways.
"A fee the company collects for New York State and
the Metropolitan Transportation Authority. It
helps pay State utility taxes and supports subway,
bus and commuter rail lines. The MTA portion
applies only if you have phone service in a county
served by the MTA."
We estimate that this costs the average customer $30
annually, about double that for businesses. Therefore, will
the proposed FCC telephone bill changes require accurate
information? Will it be pointed out that taxes and
surcharges are sometimes just more Bell revenues.
Unfortunately, Cramming Has Been A Common Problem.
Cramming has received a lot of attention recently,
especially since the number of easily identifiable problems
have made media noise. Unfortunately, cramming has been a
common problem for the last decade caused by a number of
factors.
First, NNI consumer studies clearly demonstrated this
for Inside Wire Maintenance charges, the monthly (optional)
charges for the wiring in the home. When consumers were
asked if they were paying for this services, and their
answers were cross-referenced with their actual phone bills,
Over one-third of those who were paying for Inside
Wire Maintenance Charges stated they never ordered it.
Numerous court cases have been taken over inside wiring
and the outcome of customer protections is hit and miss. The
main problem is simple - most do not understand of the home
wiring issue and do not understand the charges or why it
cost extra.
Secondly, there is mass confusion about the names ----
"Wire Maintenance", "Subscriber Line Charge", "local
subscriber line", "Line Backer", etc., are all just a blur
to customers.
Thirdly, even those paying it have no accurate data
about the service. No organization publishes the average
length of time the wire needs servicing. According to NYNEX
in 1980, the wire in the home usually lasts 16 years. This
obvious piece of data should obvious be told to customers,
but no phone company publishes this information.
There is also the current rash of Cramming and Slamming
going on that needs addressing as well. Most of these
problems could be solved with simple remedies, as we
discussed. However, the likelihood that anything simple in
telecom will be implemented is not in the foreseeable
future.
The Phonebill is a Regulatory Mess.
One of the most asked questions about phone service is
the simple question --- Why are there all these charges in
the first place and How much money does the phone company
make from all these charges?
For example, except for the details about phone calls,
the pre-divestiture phonebill had averaged only 9 line items
as compared to 21 items by 1993 - for the exact same
service. And with all these charges, the intrinsic problem
with the bill is that it is just too complicated for
customers to understand. Though not directly in the purview
of this Docket, NNI believes that FCC should examine the
deregulation of the phonebill and how the charges therein
have acted as a shell game for Bell profits. In our next
filing, CC Docket No. 98-166, we discuss the issue of Bell
profits and the application of rate of return to access
fees.
NNI believes that these problems are exacerbated by
the simple fact: There is no one regulator examining the
bill and multiple parties put charges on or the profits
paid. This regulatory mess not only effects the customer's
ability to can read the bill. It also clearly shows that the
phonebill charges reveal serious gaps in regulatory
coverage. One has only to look at a typical phonebill to
know that regulatory coverage is piecemeal. For example, a
typical telephone bill has some charges, such as the
Subscriber Line Charge, that is controlled by the FCC, while
some services, such as inside wiring, many have no regulator
examining the charges to customers or their profits.
Specifically:
- Basic Service is now only one of a few line items on the bill regulated anymore. It is controlled by the State PUCs.
- Toll Call Revenues are regulated by the state PUCs.
- FCC Subscriber Line Charge, on all business andresidential bills, is an FCC controlled service.
- FCC second line charge - on all second lines of business and residential bills, is an FCCcontrolled service.
- Calling Features, included Call Waiting to Caller ID have varying rules per state but mostservices are no longer examined by any state regulator for profits.
- Inside wiring is deregulated and no longer examined for profits.
- Long Distance Access Charges, which are not considered charges to subscribers, and are examinedby the FCC
- State & Local Taxes and Surcharges: Various government agencies, have added a wide variety of surcharges and these are almost all just more telcorevenues. - including:
- E 911 -Enhanced/Emergency 911
- Deaf Relay
- Universal Service Charges
And with all of these various state and federal
government agencies, the most surprising fact is that NO
agency actually looks at all of the charges and therefore
profits of the telephone bill. This jurisdictional morass
allowed for a serious revenue and profits shell game to have
taken place. Because each regulator only examines specific
charges on the phone bill, the Bells have been able to state
that they are "losing money" on "basic service" and even
today, are requesting rate increases. How can this be when
they are so profitable?
With an average of 21 line items, and no general
oversight, to fix the phonebill's unreadability, it will
take a great deal more than simple cosmetic touch ups. Our
research clearly shows that if the FCC and the states are
serious about reforming telecom to serve the customer, then
a series of steps should be immediately taken:
NEXT STEPS
The FCC Should Help Institute A "One Page" Bill Our
research shows that requiring the customer to wade through
phonebill details will never work. Therefore, in order to
slow cramming, slamming and protect customers, a complete
list of all services the customer is paying, as well as all
of the company(ies) that are requesting payments, should be
initiated.
This simple, clear first page would outline all charges
and companies and therefore hopefully revealing slamming,
cramming and all other charges.
The next page (s) should be a clear, concise page of
definitions, followed by details of all the expenses
including taxes applied.
The FCC Should Institute A "One Number To Call" For
Complaints. On the first page, in clear, large size print,
the customer should be given ONE contact point for all
complaints. Today, only those who go searching will find the
FCC's number. There are no advertisements by FCC or the
state Public Service Commission and consumers don't know who
or how to call. Whether it is the FCC or the states or both
that actually handle the call, a coordinated single contact
point should be arranged.
"Account Lock" should have already been implemented. In
,many states, the customer has a password that is used to
change information on their account. In many cases, these
passwords are used so that an angry girlfriend, boyfriend
neighbor or estranged spouse doesn't arbitrarily cancel the
customer's service. When a customer makes a major change,
such as changing a long distance or local phone company,
some mechanism, including the use of a password, should be
at least corroborated. This would deter or stop all
unwarranted changes to the bill. In combination with our
"One Page bill concept, any other companies who place
charges could be identified in one glance, without having to
search through the pages.
The FCC Should Broaden Its Investigation To Examine Consumer
Education, Including Accurate Information Not Currently
Supplied. Consumer education does not exist for phone
services. The Bells and other phone companies run hundreds
of millions of dollars of advertising exclaiming that
they're "All Connected" or the "Heart of Communications",
yet there has never been an add about knowing the price of
Directory Assistance, even though the phone companies have
all but eliminated free calls. Worse, many state laws have
mandated consumer education, but research clearly shows that
is was either never done adequately. And this information
should include whether the money is direct revenue to the
phone company, and also where to find out details about the
charges, including information such as "The inside wire
breaks once every 'X" years."
It is our belief that without a consumer education campaign,
changing the telephone bills will not matter.
Enforce the laws about cramming and other crimes. Today,
Cramming and Slamming are accomplished because the laws to
stop it have been ineffective. One of the largest problems
is that the FCC and state jurisdictions require a state by
state battle against illegal practices, costing multiple
millions. Enforcement could be accomplished if:
a) the companies being investigated were attacked via
multiple state jurisdictions of one company.
--- For example. 900 Service scams are usually
perpetrated by one company in numerous states yet each state
must defend its constituency alone --- which is
costly and ineffective.
b) Cross-referencing of complaints against companies
was well co-ordinated.
c) The stakes were raised to get criminal charges and
serious penalties including suspension of service.
Without serious penalties and enforcement, these
companies just move from state to state without fear. Also
these penalties should be used as compensation to
the people who were slammed or crammed, as well as
pay for the continuance of the task force to enforce
the laws.
Fine Print Laws Need To Be Established. From the cellular or
the pre-paid cards adds that promise very low rates, or the
various caveats in local phone services, the FCC and the
states should set laws in place to remove these un-truths in
advertising. The three primary factors are:
a) All print about price must be in a readable size,
and prominently placed.
b) All prices for low rates should require that a
minimum 5 minute call is quoted, or that all
surcharges be prominent in the advertising. (including
surcharges and fees.)
c) All video, TV or cable media should make sure that
this information lasts as long as the price of the
services are shown and are also readable.
Total Bill Analysis --- One Regulator Should Oversee The
Process Of Charges On The Bill. Today, the Bells have
become some of the most profitable companies in America,
with profit margin 150% higher than other utilities. The
reason --- the gaps in regulation of the telephone bill has
allowed the different charges NOT to be included in a
comprehensive examination of profits
In our filing, CC Docket No. 98-166, we are
requesting the FCC and the states to administer a "Total
Phone Analysis for profits", meaning that ALL of the charges
a customer pays is examined for profits, not simply a part
of the bill, such as "access fees".
Secondly, as outlined in our NOI and NRPM filings, (98-
146 and 981-47) we found that the Bells may have
overcharged customers by $50 billion dollars by not
fulfilling their promises to deliver advanced networks. This
money is really pennies, nickels, dimes, and quarters
added to the various charges of the telephone bill.
Therefore, we request the FCC to investigate these claims in
relationship to truth in billing. If the Bells billed for
services that they never built, then the claim of "just and
reasonable" prices to consumers might in fact be an "untruth-
in-billing".
Respectfully submitted,
NEW NETWORKS INSTITUTE
By:____________________
Bruce A. Kushnick
Executive Director
New Networks Institute
826 Broadway, suite 900
New York, NY 10003
212-777-5418
(1) Two nationwide telephone surveys consisting of a total
of 2,000 randomly selected households were conducted by
FairField Research for New Networks Institute. The first was
published by Probe Research Inc. in 1993 as a research
report and computerized database and titled "Consumer
Attitudes Toward Telephone and Cable Companies". The second
was conducted in 1994-1995 and was published by New Networks
as a report titled "Telecom Turf Wars".
(2) "Telephone Charges In America, 1980-1993" was published
by Probe Research, inc. in 1993. This four volume set
includes a database of the prices for most services,
representing all 50 states, and therefore the Bell companies
and other prominent local phone companies. It includes the
prices for toll calls, (by distance and first and second
minutes), directory assistance prices, (including
'allowances"), installation fees, (for inside wiring, basic
installation, and manual installations) and operator
assisted calls, among others. The inputs for this database
consisted of information from Bell and other local phone
company state and federal tarriffs, and published
information from BellCore, National Association of
Regulatory Utility Commissioners, (NARUC), FCC, telephone
directories, and collections of actual phonebills.