Implementation of the Subscriber Carrier Selection Changes Provisions of the Telecommunications Act of 1996

Federal Communications Commission

DA 05-1618

Before the

Federal Communications Commission

Washington, D.C. 20554

In the Matter of

Implementation of the Subscriber Carrier

Selection Changes Provisions of the

)

CC Docket No. 94-129

Telecommunications Act of 1996

Policies and Rules Concerning

Unauthorized Changes of Consumers'

Long Distance Carriers

LEC Coalition Request for Declaratory Ruling

Regarding Carrier Change Verification

DECLARATORY RULING

Adopted: June 8,2005

Released: June 9,2005

By the Acting Chief, Consumer &

Governmental Affairs Bureau:

1.

INTRODUCTION

1.

This Order denies a Petition for Declaratory Ruling regarding the Commission's carrier

change verification rules filed by a coalition of rural local exchange carriers ("LEC Petitioners") on

February 1, 2005.' Specifically, the LEC Petitioners ask the Commission to declare that certain carrier

change verification actions do not violate section 64.1120(a)(2) of the Commission's mles, which

prohibits executing carriers from verifying the submission of a change request by a submitting carrier or

causing an unreasonable delay in the execution of a change.^ For the reasons described below, we deny

the LEC Petitioners' request.

'

Petition for Declaratory Ruling, CC Docket No. 94-129, filed Feb. 1, 2005 (Petition), by 3 Rivers Telephone

Cooperative, Inc., Armstrong Telephone Company Maryland, Armstrong Telephone Company New York,

Armstrong, Telephone Company North, Armstrong Telephone Company Northern Division, Armstrong Telephone

Company Pennsylvania, Armstrong Telephone Company West Virginia, Calaveras Telephone Company, Inc.,

Chester Telephone Company, Chibardun Telephone Cooperative, Inc., Chickasaw Telephone Company, Citizens

Telephone Company of Higginsville, Concord Telephone Company, CTC Telcom, Inc., Darien Telephone

Company, DTC Communications, Egyptian Telephone Cooperative, Five Area Telephone, Hardy Telephone

Company, Horry Telephone Cooperative, Inc., HTC Communications, Lackawaxen Telecommunications Services,

Inc., Lockhart Telephone C

ibardun Telephone Cooperative, Inc., Chickasaw Telephone Company, Citizens

Telephone Company of Higginsville, Concord Telephone Company, CTC Telcom, Inc., Darien Telephone

Company, DTC Communications, Egyptian Telephone Cooperative, Five Area Telephone, Hardy Telephone

Company, Horry Telephone Cooperative, Inc., HTC Communications, Lackawaxen Telecommunications Services,

Inc., Lockhart Telephone Co., Margaratville Telephone Company, Mid-Century Telephone Company, Mid-Rivers

Telephone Cooperative, Nicholville Telephone Company, Inc., North Central Telephone Cooperative, Inc., North-

Eastem Pennsylvania Telephone Company, Peoples Telephone Company, Poka Lambro Telephone Cooperative,

Public Service Telephone Company, Ridgeway Telephone Co., Siskiyou Telephone Company, Smart City Telecom,

Smithville Telephone Company, Stayton Cooperative Telephone Company, TEC Services, Inc., Trumansburg

Telephone Company, Inc., United Telephone Company, Washington County Rural Telephone Cooperative, West

Plains Telephone.

^ See 47 C.F.R. § 64.1120(a)(2).

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II.

BACKGROUND

2.

Section 258 of the Communications Act of 1934 (Act), as amended by the

Telecommunications Act of 1996, prohibits any telecommunications carrier from submitting or executing

an unauthorized change in a subscriber's selection of a provider of telephone exchange service or

telephone toll service.^ This practice, known as "slamming," distorts the telecommunications market by

enabling companies that engage in fraudulent activity to increase their customer and revenue bases at the

expense of consumers and law-abiding companies

nications carrier from submitting or executing

an unauthorized change in a subscriber's selection of a provider of telephone exchange service or

telephone toll service.^ This practice, known as "slamming," distorts the telecommunications market by

enabling companies that engage in fraudulent activity to increase their customer and revenue bases at the

expense of consumers and law-abiding companies. A "submitting carrier" is defined as any

telecommunications carrier that (1) requests on the behalf of a subscriber that the subscriber's

telecommunications carrier be changed; and (2) seeks to provide retail services to the end-user

subscriber.^ An "executing carrier" is defined as any telecommunications carrier that effects a request

that a subscriber's telecommunications carrier be changed.' An executing carrier has actual physical

responsibility for making the change to the subscriber's service.® The Commission has stated that

submitting carriers should be responsible for verification of carrier change requests and, regardless of the

solicitation method used, should employ one of four verification options; written letters of agency

(LOAs), electronic authorization, Internet LOA or third party verification.' Executing carriers may not

engage in additional verification of the submitting carrier's initial verification of a change request, and

may not otherwise cause an unreasonable delay in the execution of the change.®

3.

In April, 2004, MCI filed a series of individual informal complaints against the LEC

Petitioners regarding the rejection of carrier change requests.' MCI alleges that the LEC petitioners were

unduly impeding the carrier change process, and were engaging in a form of additional verification of

carrier changes submitted by MCI." Specifically, MCI asserts that the LEC Petitioners were rejecting

MCI's carrier change submissions when information in the submissions differed from that in the LEC

Petitioners' records." The LEC Petitioners do not dispute these facts

hat the LEC petitioners were

unduly impeding the carrier change process, and were engaging in a form of additional verification of

carrier changes submitted by MCI." Specifically, MCI asserts that the LEC Petitioners were rejecting

MCI's carrier change submissions when information in the submissions differed from that in the LEC

Petitioners' records." The LEC Petitioners do not dispute these facts. The LEC Petitioners, however,

deny that their practices are in violation of the Communications Act or the Commission's rules."

4.

In their Petition, LEC Petitioners set forth three main arguments that their practices do

not violate the Commission's rules. First, they argue that there is no basis in law, including agency law,

for the proposition that a third party (such as an executing LEC) should rely on a claim of authority of a

'

47 U.S.C. § 258(a).

^ See 47 C.F.R. § 64.1100(a); Implementation of the Subscriber Carrier Selection Changes Provisions of the

Telecommunications Act of 1996; Policies and Rules Concerning Unauthorized Changes of Consumers' Long

Distance Carriers, CC Docket No. 94-129, Second Report and Order and Further Notice of Proposed Rule Making,

14 FCC Red 1508, 1564-65, para. 92 (1998) (Second Report and Order).

'

See 47 C.F.R. § 64.1100(b); Second Report and Order, 14 FCC Red at 1565-66, para. 94.

® Id. The Commission also stated that, in the current environment, an IXC could also be an "executing carrier," e.g.,

if a facilities-based IXC resells service to a switchless reseller. See Second Report and Order, 14 FCC Red at 1566,

para. 94.

'

See Second Report and Order, 14 FCC Red at 1567, para. 97; Implementation of the Subscriber Carrier Selection

Changes Provisions of the Telecommunications Act of 19%, Third Report and Order and Second Order on

Reconsideration, 15 FCC Red 15996, 16000-16006, paras. 6-18 (2000) (Third Report and Order).

® See 47 C.F.R. § 64.1120(a)(2).

'

See Informal Complaint file nos. EB-04-MDIC 0003 through 0064, filed March 1, 2004.

See id.

"

See id.

"

Petition at 8

Implementation of the Subscriber Carrier Selection

Changes Provisions of the Telecommunications Act of 19%, Third Report and Order and Second Order on

Reconsideration, 15 FCC Red 15996, 16000-16006, paras. 6-18 (2000) (Third Report and Order).

® See 47 C.F.R. § 64.1120(a)(2).

'

See Informal Complaint file nos. EB-04-MDIC 0003 through 0064, filed March 1, 2004.

See id.

"

See id.

"

Petition at 8.

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person who the executing carrier believes to be without authorization.'^ Second, LEC Petitioners contend

that their actions do not constitute reverification in violation of section 64.1120(a)(2).''' Third, the LEC

Petitioners argue that carrier change rejections under these circumstances do not cause "unreasonable

delay" in violation of section 64.112(Xa)(2).'' The LEC Petitioners filed the Petition to clarify issues

related to those complaints.

III.

DISCUSSION

5.

Section 64.1120(a)(2) of the Commission's rules provides that "[a]n executing carrier

shall not verify the submission of a change in the subscriber's selection of a telecommunications service

received from a submitting carrier."'® Based on this rule, we conclude that an executing carrier's

rejection of carrier change submissions by a submitting carrier, based on the executing carrier's own

conclusion that the customer contacted by the submitting carrier was not authorized to make a long

distance carrier change, violates section 64.1120(a)(2) of the Commission's rules.

6.

In the Second Report and Order, the Commission found that "executing carriers.

clude that an executing carrier's

rejection of carrier change submissions by a submitting carrier, based on the executing carrier's own

conclusion that the customer contacted by the submitting carrier was not authorized to make a long

distance carrier change, violates section 64.1120(a)(2) of the Commission's rules.

6.

In the Second Report and Order, the Commission found that "executing carriers.. .have

both the incentive and ability to delay or deny carrier changes."'^ The Commission expressed concern in

the Second Report and Order that executing carriers could use the verification process as a means of

delaying or denying carrier change requests in order to benefit themselves or their affiliates.'® While the

Commission agreed that allowing executing carriers to re-verify carrier change requests could help to

deter slamming, it ultimately concluded that the anti-competitive effects of re-verification outweighed the

potential benefits."

7.

In the Second Report and Order, the Commission was also concerned that re-verification

by executing carriers could function as a: de facto preferred carrier "freeze," even in situations where a

subscriber has not requested such a freeze.^ We believe that the LEC actions at issue here do just this;

they serve to restrict consumer control by eliminating the consumer's ability to designate someone as

authorized to change telecommunications service without first contacting the local carrier.

8.

The LEC Petitioners argue that there is no basis in law, including agency law, to hold that

the executing LEC "has any right to rely on the claim of authority of a person without authorization from

the subscriber and thus no obligation to its subscriber to make changes to the subscriber's account.

This argument fails. The executing carrier may not make an independent determination regarding

whether the person authorizing the switch was an authorized agent of the party identified on the executing

carrier's account

right to rely on the claim of authority of a person without authorization from

the subscriber and thus no obligation to its subscriber to make changes to the subscriber's account.

This argument fails. The executing carrier may not make an independent determination regarding

whether the person authorizing the switch was an authorized agent of the party identified on the executing

carrier's account. The Commission has already defined the role of both the submitting and executing

carrier in a carrier change request. The submitting carrier, in the course of verifying the intention to

"

Id. at 10-14.

"W.

at 14-16.

"W.

at 16-17.

'®47 C.F.R. §64.1120(a)(2).

"

Second Report and Order, 14 FCC Rod at 1568, para. 99.

'® See id.

See id.

^

See Second Report and Order, 14 FCC Red at 1568-69, para. 100. A preferred carrier freeze prevents a change in

a subscriber's preferred carrier selection unless the subscriber gives the carrier from whom the freeze was requested

his or her express written or oral consent (Second Report and Order, 14 FCC Red at 1574, para. 112, n. 348).

See id. at 1569, para. 100.

Petition at 12.

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change long distance service, is already required to elicit confirmation that the person contacted was

authorized to make the change (that is, an agent of the party identified on the account).^^ That the

name(s) contained in the executing carrier's local account information differs from that of the contact

person listed on the submitting carrier's change is not necessarily indicative of a lack of authority or

agency on the part of the person requesting the long distance change

person contacted was

authorized to make the change (that is, an agent of the party identified on the account).^^ That the

name(s) contained in the executing carrier's local account information differs from that of the contact

person listed on the submitting carrier's change is not necessarily indicative of a lack of authority or

agency on the part of the person requesting the long distance change. The Commission's rules require

that executing carries engage in "prompt execution of changes verified by a submitting carrier."^'*

Moreover, executing carriers are only allowed to use submitted carrier change information to effectuate

the provision of service by the submitting carrier to its customer.^' An independent determination by an

executing carrier of whether the person initiating a switch is an agent of the party listed on the account

goes beyond this limited role.

9.

LEG Petitioners also state that the Commission, in its Third Report and Order, noted

without disapproval that carriers maintain lists of customers authorized to make changes.^® In this vein,

the LEG Petitioners cite several other situations that can result in their return of a carrier change request to

the submitting carrier, such as when a customer is already presubscribed to the submitting carrier, when a

customer has a PIC freeze in place, or when PIC changes are not permitted (e.g., certain college

dormitory rooms).^' We recognize that carriers may access account information in the course of

effectuating carrier changes, and we do not believe that an executing carrier's return of a carrier change to

the submitting carrier, under the limited circumstances described above, constitutes reverification in

violation of our rules. Our objection to the LEG actions at issue is not related to their consulting account

information per se during the course of executing a carrier change. Rather, executing carriers may not

make an independent determination with respect to the ability of a person to authorize a carrier change.

10

, under the limited circumstances described above, constitutes reverification in

violation of our rules. Our objection to the LEG actions at issue is not related to their consulting account

information per se during the course of executing a carrier change. Rather, executing carriers may not

make an independent determination with respect to the ability of a person to authorize a carrier change.

10.

We note that the Commission's preferred carrier change provisions give consumers the

option to "freeze" their choice of telecommunications carrier such that they must then contact their LEG

to lift the freeze before any carrier changes can be effectuated. The LEG Petitioners argue that it is

unreasonable to ask subscribers that wish additional carrier change protections to utilize a preferred

carrier freeze.^® LEG Petitioners state that their method of simply rejecting submitting carrier changes

that contain name(s) that differ from what is in the EEC's account information "poses less of an

impediment to consumers own desire to change carriers."^' We disagree. The Commission's preferred

carrier freeze procedures are not "complex" for subscribers.^ Unlike the "de facto" freeze actions of the

LEG Petitioners, the Commission's preferred carrier change provisions give consumers extra protections

without raising anti-competitive concerns. In addition, because we find that LEG Petitioners' actions

violate the prohibition on verification by executing carriers established in section 64.112(Xa)(2) of the

Commission's rules, we find it unnecessary to reach a conclusion as to whether these actions also result in

unreasonable delay by an executing carrier in violation of our rules.

11.

Finally, the LEG Petitioners request that we consider this petition in conjunction with a

See supra para. 2.

Third Report and Order, 15 FCC Red at 16022, para. 51

g carriers established in section 64.112(Xa)(2) of the

Commission's rules, we find it unnecessary to reach a conclusion as to whether these actions also result in

unreasonable delay by an executing carrier in violation of our rules.

11.

Finally, the LEG Petitioners request that we consider this petition in conjunction with a

See supra para. 2.

Third Report and Order, 15 FCC Red at 16022, para. 51.

See Implementation of the Subscriber Carrier Selection Changes Provisions of the Telecommunications Act of

1996, Third Order on Reconsideration and Second Further Notice of Proposed Rule Making, 18 FCC Red 5099,

5109, para. 25 (2003).

See Petition at 15-16, citing the Third Report and Order, 15 FCC Red at 16021, para. 50 n.l48.

Petition at 7.

Petition, at 17-18.

''Id.

See id. at n.

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petition filed by MCI (MCI Petition) regarding preemption of a state mle.^' The MCI Petition concerns

the question of permissible actions by a state regulatory agency. The Petition, in contrast, concerns the

actions of private companies. We therefore decline the LEC Petitioner's request to combine our

consideration of the Petition with the MCI Petition.

IV.

ORDERING CLAUSES

12.

Accordingly, IT IS ORDERED that, pursuant to the authority contained in Section 258 of

the Communications Act, of 1934, as amended, 47 U.S.C. § 258 , and sections 0.141,0.361,1.3,

64.1120(a)(2) of the Commission Rules, 47 C.F.R. §§ 0.141, 0.361, 1.2,64.1120(a)(2), the Rural LECs'

Petition for Declaratory Ruling IS DENIED.

13.

mS

FURTHER ORDERED that, pursuant to the authority contained in Section 258 of

the Communications Act of 1934, as amended, 47 U.S.C. § 258 ,

and sections 0.141, 0.361,1.3,

64.1120(a)(2) of the Commission Rules, 47 C.F.R. §§ 0.141,0.361, 1.2, 64.112(Ka)(2), this Declaratory

Ruling is hereby ADOPTED.

FEDERAL COMMUNICATIONS COMMISSION

Monica Desai

Acting Chief

Consumer &

Governmental Affairs Bureau

"

See Petition for Declaratory Ruling filed by MCI on Mar. 12, 2004

on 258 of

the Communications Act of 1934, as amended, 47 U.S.C. § 258 ,

and sections 0.141, 0.361,1.3,

64.1120(a)(2) of the Commission Rules, 47 C.F.R. §§ 0.141,0.361, 1.2, 64.112(Ka)(2), this Declaratory

Ruling is hereby ADOPTED.

FEDERAL COMMUNICATIONS COMMISSION

Monica Desai

Acting Chief

Consumer &

Governmental Affairs Bureau

"

See Petition for Declaratory Ruling filed by MCI on Mar. 12, 2004. See also Motion to Hold Proceeding in

Abeyance filed by the Public Service Commission of West Virginia on June 17, 2004.

10603