900-Number Rule Review; Request For Comment Regarding Possible Modification of Definition of ``Pay-Per-Call Services'' Pursuant to the Telecommunications Act of 1996

Federal RegisterMar 12, 1997

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SUMMARY: The Federal Trade Commission (``the Commission'' or ``FTC'')

is requesting public comment on the Commission's Trade Regulation Rule

Pursuant to the Telephone Disclosure and Dispute Resolution Act of 1992

(``the 900-Number Rule''). The 900-Number Rule governs the advertising

and operation of pay-per-call services, and establishes billing dispute

procedures for such services. The 900-Number Rule requires that the

Commission initiate a rulemaking review proceeding to evaluate the

Rule's operation no later than four years after its effective date of

November 1, 1993. Pursuant to this mandatory rule review requirement,

the Commission seeks comment about the overall costs and benefits of

the 900-Number Rule and its overall regulatory and economic impact.

In addition, the Telecommunications Act of 1996 1 granted the

Commission authority to expand the scope of the 900-Number Rule by

broadening the definition of pay-per-call services. Therefore, the

Commission is also seeking public comment on whether it should expand

the scope of its 900-Number Rule to ``audio information or audio

entertainment'' services provided through dialing patterns other than

900 numbers. These questions are published in a Request for Comment

which follows the rule review portion of this notice.

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1 Pub. L. 104, Sec. 701, 110 Stat. 56 (1996) (codified at

47 U.S.C. Sec. 228).

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This document invites written comments and sets forth a list of

specific questions and issues upon which the Commission particularly

desires additional information. This document also contains an

invitation to participate in a public workshop-conference, to be held

following the close of the comment period, to afford Commission staff

and interested parties an opportunity to explore and discuss issues

raised during the comment period.

DATES: Written comments will be accepted until May 12, 1997.

Notification of interest in participating in the public workshop-

conference also must be submitted on or before May 12, 1997. The public

workshop-conference will be held on June 19 and 20, 1997, from 9:00

a.m. until 5:00 p.m.

ADDRESSES: Five paper copies of each written comment should be

submitted to the Office of the Secretary, Room 159, Federal Trade

Commission, Sixth Street and Pennsylvania Avenue, N.W., Washington,

D.C. 20580. To encourage prompt and efficient review and dissemination

of the comments to the public, all comments should also be submitted,

if possible, in electronic form, on either a 5\1/4\ or a 3\1/2\ inch

computer disk, with a label on the disk stating the name of the

commenter and the name and version of the word processing program used

to create the document. (Programs based on DOS are preferred. Files

from other operating systems should be submitted in ASCII text format

to be accepted.) Individual members of the public filing comments need

not submit multiple copies or comments in electronic form. Comments

should be identified as ``900-Number Rule Review--Comment. FTC File No.

R611016.''

Notification of interest in participating in the public workshop-

conference should be submitted in writing to Marianne Kastriner

Schwanke, Division of Marketing Practices, Federal Trade Commission,

Sixth and Pennsylvania Ave., N.W., Washington, D.C. 20580. The public

workshop-conference will be held at the Federal Trade Commission, 6th

Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580.

FOR FURTHER INFORMATION CONTACT: Marianne Kastriner Schwanke, (202)

326-3165, Adam Cohn, (202) 326-3411, or Carole Danielson, (202) 326-

3115, Division of Marketing Practices, Bureau of Consumer Protection,

Federal Trade Commission, Washington, D.C. 20580.

SUPPLEMENTARY INFORMATION: The Commission has determined, as part of

its oversight responsibilities, to review rules and guides periodically

in order to obtain information about the costs and benefits of its

rules and guides, as well as their regulatory and economic impact. The

information the Commission obtains assists it in identifying rules and

guides that warrant modification or rescission. In accord with the

Commission's general policy to review periodically all of its rules and

guides, when the Commission adopted the 900-Number Rule, it included

Section 308.9, which imposes a requirement to undertake a review of the

Rule no later than four years after its effective date of November 1,

1993. Therefore, at this time, pursuant to Section 308.9 of the Rule,

the Commission is initiating this mandatory rule review, and hereby

solicits written public comments concerning the operation of the 900-

Number Rule.

Simultaneous with the Rule review, the Commission also is seeking

public comment on whether it should expand the scope of its 900-Number

Rule to information or entertainment services provided through dialing

patterns other than 900 numbers, as authorized by the

Telecommunications Act of 1996.

Section A. Background

Telephone Disclosure and Dispute Resolution Act of 1992

Congress enacted the Telephone Disclosure and Dispute Resolution

Act of 1992 (``TDDRA''), 15 U.S.C. Sec. 5701 et seq., to curtail

certain unfair and deceptive practices perpetrated by some pay-per-call

businesses, and to encourage the growth of the legitimate pay-per-call

industry.2 Titles II and III of TDDRA required the FTC to

prescribe regulations governing pay-per-call services.3 TDDRA

directed the Commission to enact regulations governing the advertising

and operation of pay-per-call services. Among other things, TDDRA

required that certain disclosures appear in all advertising for pay-

per-call programs and in introductory messages (``preambles'') at the

start of the pay-per-call programs, prohibited pay-per-call providers

from engaging in certain practices (such as directing their services to

children under 12 years of age), and required that the FTC's

regulations establish procedures for correcting billing errors in

connection with pay-per-call services. TDDRA granted the FTC limited

jurisdiction over common carriers for purposes of the 900-Number Rule.

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2 This statement summarizes Congress' findings regarding

the 900-number industry at the time it passed the legislation. For

greater detail concerning the problems Congress found to be

associated with 900-number services, see 15 U.S.C. Sec. 5701(b).

3 Title I of TDDRA directed the Federal Communications

Commission (FCC) to adopt regulations defining the obligations of

common carriers with respect to the provision of pay-per-call

services. The FCC published its Notice of Proposed Rulemaking and

Notice of Inquiry at 58 FR 14,371 (March 17, 1993). The FCC's Rules

are at 47 CFR 64.228.

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900-Number Rule

Pursuant to TDDRA, the FTC adopted its 900-Number Rule, 16 CFR Part

308, on July 26, 1993, and it became effective November 1, 1993.4

The Rule requires

[[Page 11751]]

that advertisements for 900 numbers contain certain disclosures,

including information about the cost of the call. This information must

also be included in an introductory message (preamble) at the beginning

of any 900-number program where the cost of the call could exceed two

dollars. The Rule requires that anyone who calls a 900-number service

must be given the opportunity to hang up, at the conclusion of the

preamble, without incurring any charge for the call. In addition, the

Rule requires that all preambles to 900-number services state that

individuals under the age of 18 must have the permission of a parent or

guardian to complete the call.

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4 The Statement of Basis and Purpose and Final Rule was

published at 58 FR 42364 (August 9, 1993).

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The 900-Number Rule also establishes procedures for resolving

billing disputes for 900-number calls. 16 CFR 308.7. The Rule imposes

certain obligations on entities that bill and collect for 900-number

services, such as investigating reports by consumers of ``billing

errors,'' a defined term in the Rule.5

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5 Other protections were established by the Federal

Communications Commission (FCC) in their rules set out at 47 CFR

64.228. Under those rules, a consumer's telephone service cannot be

disconnected for failure to pay charges for a 900 number call, and

900 number blocking must be made available to consumers who do not

wish to have access to 900 number service from their telephone

lines.

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Initiation of Rule Review

Section 308.9 of the 900-Number Rule, 16 CFR 308.9, requires that

the Commission initiate a rulemaking review proceeding to evaluate the

Rule's operation no later than four years after its effective date of

November 1, 1993. Although the Rule review is not required until

November 1997, the Commission has determined that it would be more

efficient to conduct the evaluation at this time in conjunction with

its issuance of a Request for Comment regarding the possible expanded

definition of ``pay-per-call services'' as provided by the

Telecommunications Act of 1996.

Telecommunications Act of 1996 Authority to Expand the Definition of

Pay-Per-Call Services

On February 8, 1996, the President signed into law the

Telecommunications Act of 1996 to provide a regulatory framework for

telecommunications and information technologies and services. Section

701(b) of the Telecommunications Act provides that:

Section 204 of [TDDRA] (15 U.S.C. Sec. 5714(1)) 6 is

amended to read as follows:

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\6\ ``The term `pay-per-call services' has the meaning provided

in section 228 of Title 47.'' 15 U.S.C. Sec. 5714(1).

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``(1) The term `pay-per-call services' has the meaning provided

in section 228(i) of the Communications Act of 1934,7 except

that the Commission by rule may, notwithstanding subparagraphs (B)

and (C) of Section 228(i)(1) of such Act, extend such definition to

other similar services providing audio information or audio

entertainment if the [Federal Trade] Commission determines that such

services are susceptible to the unfair and deceptive practices that

are prohibited by the rules prescribed pursuant to section 201(a)

[of TDDRA].'' (Emphasis supplied.)

\7\ Section 228(i)(1) of the Communications Act of 1934, 47

U.S.C. Sec. 228(i)(1) provides that:

The term `pay-per-call services' means any service--

(A) in which any person provides or purports to provide--

(i) audio information or audio entertainment produced or

packaged by such person;

(ii) access to simultaneous voice conversation service; or

(iii) any service, including the provision of a product, the

charges for which are assessed on the basis of completion of the

call;

(B) for which the caller pays a per-call or per-time-interval

charge that is greater than, or in addition to, the charge for

transmission of the call; and

other prefix or area code designated by the [Federal Communications]

Commission in accordance with subsection (b)(5) [47

U.S.C.Sec. 228(b)(5)].''

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Thus, Section 701(b) of the Telecommunications Act authorizes the FTC,

for purposes of its 900-Number Rule, to extend the definition of the

term ``pay-per-call services''--and, in effect, the scope of coverage

of the Rule--without regard to whether a caller to the service in

question ``pays a per-call or per-time-interval charge that is greater

than, or in addition to, the charge for transmission of the call,'' and

without regard to whether a call to such service is ``accessed through

use of a 900 telephone number or other prefix or area code designated

by the FCC'' under 47 U.S.C.Sec. 228(b)(5) if the FTC determines that

such services ``are susceptible to the unfair and deceptive practices

that are prohibited by the rules prescribed pursuant to section

201(a)'' of TDDRA.

Therefore, at this time the Commission is publishing a Request for

Comment to determine whether audiotext services 8 that fall

outside the definition of ``pay-per-call'' in the original rule are

susceptible to the same unfair and deceptive practices that prompted

passage of TDDRA. In other words, the Commission seeks to determine

whether the definition of ``pay-per-call services'' should be extended

to other services similar to those presently covered by the Rule and,

if so, what such an expanded definition should be.

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\8\ The term ``audiotext services'' describes audio information

and entertainment services offered through any dialing pattern,

including services accessed via 900-number, as well as international

and other non-900-number, dialing patterns. In this notice, where

the Commission seeks comment on the effect of the 900-Number Rule on

the industry, we use the phrase ``900-number services'' to describe

those services currently covered by the Rule. Where we ask questions

regarding the larger universe of information and entertainment

services offered through the telephone, we use the term ``audiotext

services.''

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Section 701 of the Telecommunications Act also modified some

additional provisions in Section 228 of title 47, mandating that the

Federal Communications Commission amend its regulations regarding pay-

per-call services. The FCC took action to implement this statutory

mandate in July 1996.9 In that proceeding, the FCC also proposed

certain other modifications to its rules not expressly mandated by

statute to help reduce fraudulent practices in the pay-per-call

industry. The Federal Trade Commission thus seeks to determine whether

its rules should be changed to take account of these recent changes and

proposed changes in FCC rules regarding pay-per-call services. As noted

above, the Request for Comment follows the rule review portion of this

notice.

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\9\ Policies and Rules Governing Interstate Pay-Per-Call and

Other Information Services Pursuant to the Telecommunications Act of

1996, Order and Notice of Proposed Rulemaking, CC Docket No. 96-146,

11 FCC Rcd 14,738 (1996) (``FCC Pay-Per-Call Order and Notice'').

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Section B. Invitation to Comment

All persons are hereby given notice of the opportunity to submit

written data, views, facts, and arguments concerning the Commission's

900-Number Rule. The Commission invites written comments to assist it

in ascertaining the facts necessary to reach a determination as to the

costs and benefits of the Rule and its overall regulatory and economic

impact, and on whether to engage in a rulemaking to amend the 900-

Number Rule. Written comments must be submitted to the Office of the

Secretary, Room 159, Federal Trade Commission, Sixth Street and

Pennsylvania Avenue, N.W. Washington, DC 20580, on or before May 12,

1997. Comments submitted will be available for public inspection in

accordance with the Freedom of Information Act (5 U.S.C. Sec. 552) and

Commission Rules of Practice, on normal business days between the hours

of 8:30 a.m. and 5 p.m. at the Public Reference Section, Room 130,

Federal Trade Commission, Sixth Street and Pennsylvania Avenue, N.W.,

Washington, D.C. 20580.

[[Page 11752]]

Section C. Public Workshop-Conference

The FTC staff will conduct a public workshop-conference to discuss

the written comments received in response to the Federal Register

notice. The purpose of the workshop-conference is to afford Commission

staff and interested parties a further opportunity to openly discuss

and explore issues raised in the notice and in the comments, and, in

particular, to examine publicly any areas of significant controversy or

divergent opinions that are raised in the written comments. The

conference is not intended to achieve a consensus among participants or

between participants and Commission staff with respect to any issue

raised in the comments. Commission staff will consider the views and

suggestions made during the conference, in conjunction with the written

comments, in formulating its final recommendation to the Commission

concerning what action, if any, to take in regard to amending the 900-

Number Rule.

Commission staff will select a limited number of parties, from

among those who submit written comments, to represent the significant

interests affected by the issues raised in the notice. These parties

will participate in an open discussion of the issues, including asking

and answering questions based on their respective comments. In

addition, the workshop will be open to the general public. The

discussion will be transcribed and the transcription placed on the

public record.

To the extent possible, Commission staff will select parties to

represent the following interests: advertisers, third-party billing and

collection services, pay-per-call information providers, service

bureaus, local exchange carriers, long distance carriers, consumer

groups, federal and state law enforcement and regulatory authorities;

and any other interests that Commission staff may identify and deem

appropriate for representation.

Parties who represent the above-referenced interests will be

selected on the basis of the following criteria:

1. The party submits a written comment during the 60-day comment

period.

2. During the 60-day comment period the party notifies Commission

staff of its interest in participating in the workshop.

3. The party's participation would promote a balance of interests

being represented at the workshop-conference.

4. The party's participation would promote the consideration and

discussion of a variety of issues raised in this notice.

5. The party has expertise in activities affected by the issues

raised in this notice.

6. The number of parties selected will not be so large as to

inhibit effective discussion among them.

The workshop-conference will be held on June 19 and 20, 1997. Prior

to the workshop-conference, parties selected will be provided with

copies of the comments from all participants received in response to

this notice.

Section D. Regulatory Flexibility Act

The Regulatory Flexibility Act provides for an initial and final

regulatory analysis of the potential impact on small businesses of

Rules proposed by federal agencies. (5 U.S.C. Secs. 603, 604) The

Commission conducted such an analysis when the 900-Number Rule was

promulgated in 1993. In publishing the proposed regulations, the

Commission certified, subject to public comment, that the proposed

regulations would not have a significant economic impact on a

substantial number of small entities and, therefore, that the

provisions of the Regulatory Flexibility Act, 5 U.S.C. 605(b),

requiring the initial regulatory analysis, did not apply.10 The

Commission noted that any economic costs imposed on small entities

were, in many instances, specifically imposed by statute. Where they

were not, efforts had been made to minimize any unforeseen burdens on

small entities by making the proposed rule's requirements flexible. The

public comments and information received by the Commission did not

alter that conclusion.11

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\10\ 58 FR 13379.

\11\ 58 FR 42399.

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No analysis is required in connection with this document because no

new rule or amendments are being proposed. Nonetheless, the Commission

wishes to ensure that no substantial economic impact is being

overlooked that would warrant an initial and final regulatory

flexibility analysis. Therefore, this review of the 900-Number Rule

also requests public comment regarding the effect of the Rule on the

costs to, profitability and competitiveness of, and employment in small

entities. The Commission will revisit this issue in connection with any

Notice of Proposed Rulemaking that may result from this request for

comments.

Section E. Paperwork Reduction Act

In the 1993 Notice of Proposed Rulemaking on the 900-Number Rule,

the Commission solicited comments on the need for and scope of possible

record keeping requirements in provisions governing Commission access

to information and billing and collection for pay-per-call

services.12 Those requirements, had they been adopted, would have

constituted ``collections of information'' as defined under the

Paperwork Reduction Act, 44 U.S.C. 3501-3520. See 44 U.S.C. 3502 and 5

CFR 1320.7. However, the Commission determined not to include such

requirements in its final Rule.13 Accordingly, the requirements of

the Paperwork Reduction Act were not applicable to the final Rule.

Similarly, the requirements are not applicable to this document because

no collections of information are required. The Commission will revisit

this issue in connection with the publication of any subsequent Notice

of Proposed Rulemaking that might result from this request for

comments.

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\12\ 58 FR 13384.

\13\ 58 FR 42399.

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Section F. Questions and Issues for Comment Pursuant to Regulatory

Review of the Rule

The Commission is seeking comment on various aspects of the 900-

Number Rule, in conjunction with its Rule review. Without limiting the

scope of issues it is seeking comment on, the Commission is

particularly interested in receiving comments on the questions that

follow. Where commenters advocate changes to the Rule, please be

specific in describing suggested changes. With respect to suggested

changes to the Rule, please describe any potential costs and benefits

such changes might have on industry and consumers. The Commission would

also be interested in commenters providing any data that exist on

issues raised in the questions.

I. General Issues for Comment

1. Is there a continuing need for the 900-Number Rule?

(a) Since the Rule was issued, have changes in technology, industry

structure, or economic conditions affected the need for or

effectiveness of the Rule?

(b) Does the Rule include provisions that are unnecessary?

(d) Have the costs or benefits of the Rule dissipated over time?

(e) Does the Rule contain provisions that have imposed costs not

outweighed by benefits?

2. What effect, if any, has the Rule had on consumers?

[[Page 11753]]

(a) What economic or other costs has the Rule imposed on consumers?

(b) What benefits has the Rule provided to consumers?

the benefits to consumers?

(d) How would these changes affect the compliance costs the Rule

imposes on industry?

3. What impact, if any, has the Rule had on firms that must comply

with it?

(a) What economic or other costs has the Rule imposed on industry

or individual firms?

(b) What benefits has the Rule provided to the industry or to

individual firms?

any burden or cost imposed on industry or individual firms?

(d) How would the changes affect the benefits provided by the Rule

to consumers or industry?

4. How has the Rule affected small business entities with respect

to costs, profitability, competitiveness, and employment? What would be

the economic impact on small businesses if the Rule is left unchanged?

5. Are there regulatory alternatives that might reduce any adverse

economic effect of the 900-Number Rule, yet comply with the mandate of

TDDRA to curtail certain unfair and deceptive practices by some 900-

number providers, yet encourage the growth of the legitimate 900-number

industry?

6. Are there additional advertising, operating, or other standards

for the audiotext industry not included in the Rule that might now be

desirable or necessary to prevent deception or other abuses, or to

prevent evasion of the Rule's requirements and prohibitions?

7. The FCC and FTC share regulatory authority over the audiotext

industry.

(a) Are there any unnecessary regulatory burdens created by

overlapping jurisdiction? What can be done to ease these burdens?

(b) Are there gaps where neither agency has addressed a particular

abuse? For example, does such a regulatory gap exist where a entity

claims status as a ``common carrier'' for purposes of FTC regulation,

but claims that its actions are not those of a common carrier for

purposes of FCC regulation?

local government laws or regulations?

8. How does Section 701 of the Telecommunications Act of 1996

concerning the FCC's regulation of the pay-per-call industry, or the

FCC's recently adopted and proposed regulatory changes 14 under

that section, affect the FTC's Rule, if at all? How should the FTC's

Rule be amended to harmonize with these changes and proposed changes in

the FCC regulatory approach?

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\14\ FCC Pay-Per-Call Order and Notice, see supra note 9.

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9. What categories of audiotext services (e.g., sports, psychic,

chat, adult) are provided through 900 numbers?

(a) What percentage does each type constitute of all audiotext

services accessed through 900 numbers?

(b) How much gross sales revenue has each category generated in

each year since 1993?

providers using 900 numbers changed since the Rule was promulgated?

What impact, if any, has the 900-Number Rule had on the level of gross

sales revenues and/or profits?

II. Definitions

10. Are the definitions set forth in section 308.2 of the Rule

effective for the purpose of curbing unfair and deceptive practices

targeted by the Rule?

(a) If not, how have the definitions been inadequate?

(b) Are there additional definitions that should be added to the

Rule? Explain.

11. The current definition of ``service bureau'' states that the

term includes any person other than a common carrier.

(a) Is it appropriate to exclude common carriers, regardless of

activities, from the definition?

(b) Should entities engaging in service bureau functions be covered

by the Rule, even if they also engage in ``common carrier'' functions

at other times?

12. Has the Rule's definition of ``presubscription agreement''

affected the market for 900-number services? If so, in what way?

(a) Who uses presubscription agreements, and for what purpose?

(b) What opportunities for unfair and deceptive practices exist

under the current definition of ``presubscription agreement''?

these opportunities?

(d) Should the definition of ``presubscription agreement'' be

modified to harmonize with changes in FCC rules made pursuant to the

Telecommunications Act of 1996, or to harmonize with proposed changes

made by the FCC to the definition of ``presubscription agreement''?

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15 FCC Pay-Per-Call Order and Notice, see supra note 9.

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(e) Would any changes in the definition of ``presubscription

agreement'' be appropriate in light of Section 701 of the

Telecommunications Act of 1996? For example, should the Rule require

that a presubscription agreement be in writing?

III. Advertising

13. Are the advertising disclosure provisions in the Rule adequate

for regulating advertising on the Internet or on commercial online

services?

(a) Should the Rule be more precise regarding the definition of

``clear and conspicuous'' in the context of advertising on the Internet

or on commercial online services?

(b) Are there other forms of advertising in other media for which

the Rule should provide specific advertising disclosure requirements?

Explain.

14. Does the Rule provide adequately for disclosing the cost to

consumers prior to making a call to a 900-number service?

(a) Do the current size requirements ensure that the cost

disclosure is ``clear and conspicuous'?

(b) Are there other more effective means for ensuring that the

advertisements provide adequate cost disclosures to consumers?

15. Are the required disclosures for 900-number services that

advertise sweepstakes sufficient to ensure that consumers are informed

of all material information necessary to dispel deception? Have there

been abuses associated with sweepstakes advertised and offered through

the use of a 900 number that make it necessary to require additional

protections for consumers who respond to such sweepstakes offers?

16. Is the requirement governing ``telephone solicitations'' in

section 308.3(h) clear, meaningful, and effective?

(a) Is there additional information that such a solicitation should

include to ensure that consumers have sufficient information prior to

calling a 900-number service advertised in this manner?

(b) Is the Rule clear that it applies to messages left on telephone

answering machines or telephone numbers left on pagers?

Should these or other message delivery systems be explicitly included

within this provision?

[[Page 11754]]

(d) Should ``telephone message'' as used within section 308.3(h) be

defined and if so, how?

IV. Operation & Standards

17. In the Statement of Basis and Purpose describing the Rule,

16 the Commission recognized that at the time the Rule was

promulgated, time-sensitive billing involved in 900-number services was

``accomplished in one-minute increments, and that any portion of a

minute will be billed as full time.''

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\16\ 58 FR 42387 (August 1993).

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(a) Has the technology for calculating usage time for billing

purposes changed since the implementation of the Rule? If so, how?

(b) Is it possible using current technology to stop the assessment

of time-based charges immediately upon disconnection by the caller, and

therefore, bill consumers for fractions of minutes?

18. How have technological changes affected the way information

providers can and do set their rates?

(a) Is it now technologically possible to suspend charges during a

program, to provide a period (or periods) of programming free to the

caller? Explain.

(b) Is it now technologically possible to alter the rate at which a

caller is charged during a program, to provide a period (or periods) of

programming charged to the caller at reduced rates or at higher rates

than other portions of the call? Explain.

message longer than 18 seconds, which was the standard at the time the

Rule was adopted? Explain.

19. How has the requirement of a preamble affected the 900 number

industry?

(a) Have preambles conferred benefits on consumers who make 900-

number calls?

(b) How might the preamble requirements be changed to make the

preambles more useful or informative to the consumer? What costs would

likely arise from such changes?

compliance easier for information providers? Would such changes

diminish benefits to consumers and if so, how?

20. Are preambles effective in reducing unauthorized use of 900-

number services by minors or others? How is this properly measured?

(a) How might preamble requirements be changed to be made more

effective in addressing the problem of unauthorized calls?

(b) What further actions might be taken by industry or by the FTC

to reduce unauthorized calls to 900 number and other audiotext

services?

21. Section 308.5(a)(3) requires that the preamble state ``that

charges for the call begin, and that to avoid charges the call must be

terminated, three seconds after a clearly discernible signal or tone.''

If an information provider were to provide, for example, the first two

minutes of an audiotext call free, what should the preamble disclose to

inform callers when charges for the call begin?

(a) In the example above, should the information provider be

required to inform the caller, through a tone or other signal, when the

free time has expired?

(b) In the example above, at what point(s), if any, during the call

should the disclosures be made? At what point(s), if any, during the

call should a signal or tone occur?

preamble but immediately preceding the free time provide sufficient

information to enable consumers to avoid all or most charges from

remaining on the line after close of the free time?

22. Section 308.5(a)(2)(iii) requires that ``if the call is billed

on a variable rate basis, the preamble shall state * * * the cost of

the initial portion of the call, any minimum charges, and the range of

rates that may be charged depending on the options chosen by the

caller.'' Should this provision be construed to cover situations where

pay-per-call services charge different rates for different time periods

within a single call (e.g., no charge for the first two minutes after

the end of the preamble, $3.00 per minute for the third through the

eighth minutes, and $1 per minute for every minute thereafter)?

(a) Assume for purposes of questions 22(a) and (b) that calls to

such services described above are ``calls billed on a variable rate

basis'' covered by Section 308.5(a)(2)(iii). Should that Section be

modified to require something other than preamble disclosures of ``the

cost of the initial portion of the call, any minimum charges, and the

range of rates that may be charged depending on the options chosen by

the caller?'

(b) For example, in the scenario described above, should Section

308.5(a)(2)(iii) explicitly require a clearly discernible signal or

tone to mark the end of the free two-minute period? Should it

explicitly require a clearly discernible signal or tone to mark the end

of the six-minute period during which charges are $3.00 per minute?

23. What percentage of 900-number services fall into the category

of ``nominal cost calls'' as described in section 308.5(c) of the Rule?

(a) Do the data suggest that $2.00 is an appropriate threshold for

designation of ``nominal cost calls'' for which no preamble is

necessary? If not, what ``nominal cost'' threshold do the data support?

(b) Should the ``nominal cost'' figure be adjusted for inflation?

Explain.

24. What percentage of callers to 900-number services hang up the

telephone before the charges begin and how is this ascertained?

(a) Of these, what percentage are first time callers?

(b) Does this percentage correlate to the cost of the call? To the

nature of the service?

25. What impact, if any, has the 900-Number Rule had on the number

of complaints about, or requests for credits or refunds for, calls to

900-number services that allegedly were not authorized by the

subscriber of the telephone line from which the calls were placed?

(a) Has the percentage of such complaints or requests increased,

decreased, or remained the same since the Rule went into effect?

(b) What percentage of all requests for credits or refunds of

charges for 900-number services involve calls allegedly unauthorized by

the telephone subscriber?

unauthorized calls placed by minors?

26. What, if any, procedures are used by industry to ensure that

calls to audiotext services are authorized by the subscriber of the

telephone line from which the calls are placed?

(a) What, if any, procedures are used by industry to minimize or

eliminate unauthorized calls placed by minors to audiotext services?

(b) How effective have these procedures been in reducing the number

of complaints or the number of requests for credits or refunds

regarding allegedly unauthorized calls to audiotext services?

27. What percentage of telephone subscribers have chosen to block

access to 900 numbers from their telephone lines?

(a) Of those choosing to block access to 900 numbers, what

percentage choose to do so when initiating phone service?

(b) What percentage do so after phone service has been initiated?

about charges to audiotext services?

(d) What percentage of consumers who complain about charges for

[[Page 11755]]

audiotext services choose to block 900 numbers?

(e) To what extent, if any, has blocking been effective in reducing

complaints involving 900-number services?

(f) What, if any, are the costs to consumers or industry of

receiving or providing 900 number blocking services?

V. Billing and Collection

28. What services are provided to the audiotext industry by billing

entities other than the telephone companies (or ``alternative billing

entities'')?

(a) Do the types of services vary for different types of audiotext

services? Explain.

(b) What percentage of audiotext services are billed through

billing entities other than the telephone companies? Explain.

changed since the Rule went into effect in 1993? What impact, if any,

has the Rule had on the nature of these billing entities?

(d) What are the terms and conditions of the arrangements between

the alternative billing entities and other players in the audiotext

industry?

(e) What is the role of a ``billing aggregator''? What services

does a billing aggregator provide to members of the audiotext industry?

29. Does the definition of ``billing error'' in section 308.7 of

the Rule adequately reflect the range of billing errors occurring in

the 900-number marketplace? If not, how might the definition be

changed?

30. Is there any evidence suggesting that some (adult) consumers

are refusing to pay for audiotext calls or 900-number calls which they

purchased after hearing a preamble containing the disclosure of

material information currently required by the Rule?

(a) If such a problem exists, to what extent is it affected by the

dispute resolution provisions of the 900-Number Rule?

(b) If such a problem exists, to what extent is it affected by the

billing notice requirements set forth in section 308.7(n)?

incidence of this practice without weakening protections afforded

consumers by TDDRA and the 900-Number Rule?

31. Distinguished from billing for unauthorized calls, the problem

of ``phantom billing'' occurs when a telephone subscriber is billed for

an audiotext call that the subscriber asserts was never placed from the

subscriber's telephone.

(a) How does phantom billing occur?

(b) What procedures and safeguards currently exist or should exist

to ensure that telephone subscribers are billed only for calls which

were actually placed from that subscriber's phone?

records of calls are genuine?

(d) What percentage of consumers who complain about ``phantom

billing'' of audiotext services choose to block access to 900 numbers?

32. Section 308.7(i) places restrictions on the extent to which

adverse credit information can be reported to any person.

(a) How, if at all, has this restriction affected the creation of a

shared database of ``problem callers'' for the purposes of blocking

such persons from 900 or other audiotext transactions?

(b) Would such a database be useful to industry?

consumers? If so, how?

33. How is ``chargeback'' defined by the industry?

(a) Does the term include the situation where a consumer has

refused to pay for an audiotext service? Does it include the situation

where a consumer pays and then requests a refund?

(b) Are there data on chargeback rates for the 900-number industry?

For the audiotext industry as a whole? Do the data represent chargeback

rates for all types of ``pay-per-call services'' or only for services

provided through 900 numbers?

compare with other collection and payment systems, such as the credit

card collection and payment system?

(d) What are the current and projected future trends regarding

chargeback rates for the pay-per-call industry?

34. Do chargeback rates vary according to the category of audiotext

service?

(a) Do the providers of some types of services experience a greater

chargeback rate than other types of services? Are there data

demonstrating these differences?

(b) If certain kinds of audiotext services correlate with higher

chargeback rates, what is the explanation for the correlation?

certain age groups (e.g., minors) are more likely than others to result

in chargebacks?

(d) How do chargeback rates for non-900 audiotext services compare

to rates for 900 number services?

(e) How do chargeback rates for nominally priced calls (i.e., those

exempted from the preamble requirement) compare to the chargeback rates

for other calls?

35. Do chargeback rates vary according to the payment method?

(a) Do services that utilize a credit card billing system rather

than an Automatic Number Identification (``ANI'') billing system

experience fewer chargebacks?

(b) What about services provided according to oral presubscription

agreements?

presubscription agreements?

36. Has the advent of third party billers affected the chargeback

rates in the audiotext industry? If so, how?

(a) Is there any correlation between the type of billing entity

(e.g., a local exchange carrier or a third party biller) and the rate

of chargebacks? If so, why?

(b) Are chargeback rates affected by the amount of time a billing

entity gives to a consumer to complain about a bill? To what extent to

different billing entities follow the Rule's time limits on initiation

of billing review?

Section G. Request for Comment

As discussed above, the Telecommunications Act of 1996 gives the

Commission the authority to conduct a rulemaking on the issue of

whether to ``extend'' the definition of ``pay-per-call services'' to

cover other services not currently covered by the 900-Number Rule.

Thus, the Commission currently seeks comment on whether any expansion

should be made, and if so, how such an expansion should be implemented.

Commenters should pay particular attention to the fact that the

Commission's authority is to extend the 900-Number Rule to cover

services which are ``susceptible to the unfair and deceptive trade

practices that are prohibited by [TDDRA].'' Thus, commenters should not

limit themselves to discussing services which are currently associated

with unfair and deceptive practices; rather commenters should discuss

the broader topic of services which are susceptible to becoming havens

for unfair and deceptive practices addressed by TDDRA. Commenters

should attempt to address the questions listed below:

1. Are there ``audio information or audio entertainment''

(``audiotext'') services which are not currently covered by the

definition of ``pay-per-call service,'' but which are susceptible to

the same unfair and deceptive trade practices prohibited by the current

Rule?

[[Page 11756]]

(a) If so, should the Rule be amended to cover these services?

(b) If so, how should the Rule be changed?

(d) What characteristics of an audiotext service make it

susceptible to the unfair and deceptive trade practices prohibited by

the current Rule?

2. How can a definition of ``pay-per-call service'' be crafted so

that audiotext services which are susceptible to unfair and deceptive

trade practices are covered by the Rule, but any services that are not

susceptible to these practices are not swept into the Rule?

3. Should the Rule be extended to cover any audiotext transaction

where an information provider or service bureau receives a portion of

the fees paid by a caller? Explain.

4. Should the definition of ``pay-per-call service'' be extended to

encompass international audiotext transactions where the information

provider or service bureau receives a portion of the fees paid by the

caller? Explain. If so, are there other modifications to the Rule that

would be necessitated by such a change?

5. Are there technological differences between 900-number and non-

900-number audiotext services that would make it difficult to implement

the Rule in its current form with respect to non-900-number audiotext

services? Explain.

(a) For example, could free preambles (as required by section

308.5) be provided at the beginning of non-900-number audiotext

messages billed through arrangements with international long distance

carriers? How could accurate cost disclosures as required by the Rule

be made for these services?

(b) Must any changes be made to the Rule to accommodate these

differences?

utilizing 900 numbers?

6. In a Notice and Order 17, the Federal Communications

Commission (FCC) stated that ``regardless of whether the FTC extends

the scope of its pay-per-call regulations [pursuant to Sec. 701(b)(2)

of the Telecommunications Act of 1996], our pay-per-call rules continue

to be delineated by the statutory definition of pay-per-call services

contained in Section 228(i) of the Communications Act.'' Thus, if the

FTC extends the definition of ``pay-per-call services'' pursuant to its

authority under the Telecommunications Act of 1996, then the two

agencies would be regulating the audiotext services industry using two

different definitions of ``pay-per-call services.''

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\17\ FCC Pay-Per-Call Order and Notice, see supra note 9.

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(a) What impact, if any, would this result have on the audiotext

industry?

(b) What could be done to reduce any potential complications or

conflicts? Explain.

7. In light of the FCC's implementation of the Telecommunications

Act of 1996 as it relates to the audiotext industry, are there

additional changes the FTC should consider making to its own 900-Number

Rule?

8. Are there any audiotext services currently being provided over

the Internet or commercial online services? If not, is it likely that

these services will be available over the Internet or commercial online

services in the near future? If yes, how do these services work?

(a) Are there audiotext services provided over the Internet that

are susceptible to the same unfair and deceptive practices prohibited

by the current Rule? If so, should these services be encompassed within

an expanded definition of ``pay-per-call services''?

(b) What elements would a definition have to include to encompass

such services?

within the scope of the 900-Number Rule?

(d) If such audiotext services provided over the Internet or

commercial online services were included within an expanded definition

of this term, what, if any, changes to the Rule's provisions would be

necessary in order for the Rule appropriately and effectively to

prevent unfair or deceptive practices in the advertising, sale, and

operation of such services?

(e) How would preamble and other Rule requirements be met for

audiotext numbers which are used to connect a caller's computer to the

Internet or to commercial online services?

9. What steps can a consumer take to prevent his or her telephone

line from being used for unauthorized non-900-number transactions such

as international audiotext transactions?

(a) Is call blocking of international audiotext calls possible

without requiring the consumer to block access to all international

numbers?

(b) If not, what, if any, technology is under development that

would permit selective blocking of particular numbers, area codes or

international country codes?

10. What steps can a consumer take to obtain a credit or refund if

he or she believes that there has been a billing error or an

unauthorized use of his or her telephone for a non-900-number audiotext

transaction? What happens if, for whatever reason, a consumer refuses

to pay for a non-900-number audiotext call?

11. What was the gross sales revenue generated in the non-900-

number audiotext industry for each year since the promulgation of the

Rule in 1993?

(a) What explains the emergence and growth of non-900-number

audiotext services?

(b) What, if any, benefits do audiotext services accessed through

dialing patterns other than ``900'' confer on consumers or industry?

services that are not currently covered by FTC or FCC regulations?

Explain.

12. What categories of audiotext services (e.g., sports, psychic,

chat, adult) are provided through non-900 audiotext numbers?

(a) What percentage does each type constitute of all pay-per-call

information services accessed through dialing patterns other than

``900''?

(b) What was the gross sales revenue for each category in each year

since 1993?

By direction of the Commission.

Donald S. Clark,

Secretary.

[FR Doc. 97-6299 Filed 3-11-97; 8:45 am]

BILLING CODE 6750-01-P

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